US treasury securities have been selling well at recent auctions. Foreign investors are still buying US debt. For those involved in Forex trading it is instructive to note that foreign US debt buyers are not all that concerned about a huge fall in the value of the dollar. The recent prediction is that the US debt, total national US debt as opposed to the debt entailed in individual US treasury securities, will climb by several trillion dollars. One would think that investors would be predicting that the climbing US debt would eat away at the dollar’s long term as well as short term value. Looks like a lot of foreign buyers of US treasury securities are betting the other way.
In Forex trading it is obviously useful to have an accurate sense of which way the relative values of various currency pairs are heading. The US dollar being a, if not the, major player. The direction of the dollar is paramount. One would think that with the mounting US debt that each of the major currency pairs including the US dollar would gradually move to decrease the dollar’s value. However, the betting of medium term investors in US treasury securities, read US debt, are betting that the interest they will gain will outdistance any drop in the dollar’s buying power.
Despite the devastating collapse of the stock market and the near collapse of the US economic system last year, the US is still seen by many as the best bet for medium and long term investment. The US dollar is still seen as a better alternative to holding assets denominated in other world currencies. It is hard to believe that many people can be that wrong.
Thus, in Forex trading, one can trade the ups and downs of the Forex market but probably not place medium term bets against the dollar. The US treasury securities that are selling well are for two, five, and seven year US debt. No one said that the thirty year US treasury securities are that great of a seller.
Nevertheless, Forex trading is in the here and now. As a lot of folks are betting on near term stability of the dollar one should take that fact into account in Forex trading. As your trading software will direct you in most of your trading, the news about US treasury securities will not be all that important for most of the day. The question will be what to do when you sold dollars and now the dollar is going up. Do you ride it out figuring that the dollar is generally going to correct downward anyway? If that is your choice be aware that a lot of foreign investors with a lot of money are betting on US dollar stability in the next few years.
No one knows who the winners or the losers will be in tomorrow’s Forex trading but those who are better prepared, more knowledgeable, and who stick to their Forex trading plan will generally succeed. Knowing about US treasury securities is only part of keeping up with important information relating to trading any currency pair that includes the dollar.