The Forex Nitty Gritty

The Forex Industry’s Nasty Secrets Finally Revealed!

Forex Trading and Economic News

Posted by TFNG Admin On June - 8 - 2010  
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To understand the recent rise of the dollar, Swiss franc, and Yen in connection with the fall of the Euro one needs to understand the connection of Forex trading and economic news. The Euro dropped again the other day and it was not the PIIGS and Forex, Forex and sovereign debt issue this time. It was a poor US jobs report! On the face of it one might expect to see the dollar go down and the Euro go up if there are economic problems in the USA. However, Forex trading and the economic news can be more complicated. In this case the poor US jobs report is seen as evidence that the global recession is not really on the mend. Thus traders did what they always do when there is economic uncertainty. They flee to the strongest currencies at the time. This meant a flight to the Yen, Swiss franc, and US dollar this last week.

An obvious fact, but something that bears remembering, is that when traders are selling Euros to buy dollars, Yen, and Swiss francs someone else is buying all of those Euros, but at a lower price than the day before. A lot of traders think that the Euro is priced at the bottom of its range or they would not have bought when they did. In understanding the Forex markets it is wise to remember that there are always two sides to every currency exchange. Nevertheless in today’s Forex trading and economic news the pressure is on the Euro to the benefit of three, currently, stable currencies.

It was only a couple of months ago that traders seeing Forex double bottoms correctly anticipated a halt to the drop of the Euro. In Forex trading and economic news there is information to guide the trader in choosing to buy or sell a given currency at a given price. However, minute by minute trading is based upon technical factors as all traders acting individually serve to make minute corrections in exchange rates. A firm knowledge of technical trading patterns is essential for the trader to take advantage of breaking economic news and the reaction of the Forex market.

For those who have purchased dollars, Swiss francs, and Yen with their Euros the question is if these currencies will continue to go up or if they will reverse when the Euro gains strength. Certainly the fact that the US is still having employment problems does not bode well for continued strength of the dollar. The Japanese economy has never regained its fabled strength of the 1980’s for that matter. An interesting twist on the Swiss franc has to do with the surfacing of debt problems in Hungary. Apparently Hungary faces debt problems that may be as severe as that of Greece. However, it turns out that many mortgages in Hungary are denominated in Swiss francs! Thus, if Hungary tries to borrow or print money to pay its way out of its debt crisis inflation of its currency will only hurt instead of help homeowners. Forex trading and economic news has a totally different meaning for homeowners in Hungary. Other economies that are more strongly tied to exports, such as Australia, also lost ground last week based on the reading of US jobs data. Good Forex advice for the day, and for always, is to keep track of the news as Forex trading and economic news go hand in hand.

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