If strong economic data comes out of Australia, you might want to look at buying the AUD. Your first reaction might be to buy AUD/USD. But what if at the same time, recent data also show the United States experiencing strong economic growth? The price action of AUD/USD may be flat. One option that you have is to… Continue reading How to Trade Fundamentals With Currency Crosses
Be Careful Trading Obscure Currency Crosses
While the euro and yen crosses are the most liquid crosses, more currency crosses exist that don’t even include the U.S. dollar, euro, or the yen! We’ll call these the “Obscure Currency Crosses”! If we were in school – come to think of it, we actually are in school! – the major pairs would be… Continue reading Be Careful Trading Obscure Currency Crosses
Trade Interest Rate Differentials
By selling currencies whose country has a lower interest rate against currencies whose country has a higher interest rate, you can profit from the interest rate differential (known as a carry trade) as well as price appreciation. That’s like being able to get a frosted cupcake with sprinkles on top! That talks to you! Imagine how delicious that… Continue reading Trade Interest Rate Differentials
Currency Crosses Are Trend-y
Since a majority of the forex market will deal with the U.S. dollar, you can imagine that many of the news reports will cause U.S. dollar-based currency pairs to spike. The US has the largest economy in the world, and as a result, speculators react strongly to U.S. news reports, even if it doesn’t cause… Continue reading Currency Crosses Are Trend-y
Why Trade Currency Crosses?
Over 80% of the transactions in the forex market involve the U.S. dollar. This is because the U.S. dollar is the reserve currency in the world. You may be asking yourself, “Why the U.S. dollar and not the sterling, or euro?” Most agricultural and commodities such as oil are priced in U.S. dollars. If a country needs to… Continue reading Why Trade Currency Crosses?
What is a Currency Cross Pair?
Back in the ancient days, if someone wanted to change currencies, they would first have to convert their currencies into U.S. dollars, and only then could they convert their dollars into the currency they desired. The U.S. dollar was known as a “vehicle currency” since the currency was used as the medium of exchange for… Continue reading What is a Currency Cross Pair?
Market Expectations of News and Their Impact on Currencies
There’s no one “All in” or “Bet the Farm” formula for success when it comes to predicting how the market will react to data reports or market events or even why it reacts the way it does. You can draw on the fact that there’s usually an initial response, which is usually short-lived, but full of… Continue reading Market Expectations of News and Their Impact on Currencies
Where to Find Forex News and Market Data
A quick Yahoogleing (that’s Yahoo, Google, plus Bing) search of “forex + news” or “forex + data” returns a measly 30 million results combined. 30 MILLION! That’s right! No wonder you’re here to get some education! There’s just way too much information to try to process and way too many things to confuse any newbie forex trader.… Continue reading Where to Find Forex News and Market Data
Fundamental Factors That Affect Currency Values
There are several fundamental factors that help shape the long-term strength or weakness of the major currencies and will affect you as a forex trader. We’ve included what we think are the most important for your reading pleasure: Economic Growth and Outlook We start easy with the economy and outlook held by consumers, businesses, and… Continue reading Fundamental Factors That Affect Currency Values
Hawkish vs Dovish: Differences Between Monetary Policies
We just learned that currency prices are affected a great deal by changes in a country’s interest rates. We now know that interest rates are ultimately affected by a central bank’s view on the economy and price stability, which influence monetary policy. Central banks operate like most other businesses in that they have a leader, a president,… Continue reading Hawkish vs Dovish: Differences Between Monetary Policies