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Dollar Growing Stronger on Global Uncertainties

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August 4, 2014 By: , No Comments

Forex markets have had an interesting week, as the Dollar strengthen were seeing previously against the Euro has now spread to other areas of the market, as well.  There are some important questions for forex traders going forward, and it is not entirely certain how the summer will play out in terms of the dominant trends that are seen in the forex markets most

commonly traded pairs (ie. the EUR/USD, USD/JPY, and the GBP/USD).  So there are a few different factors that will need to be analyzed in order to get a better sense of where the best trading opportunities can be found.

 

Last week, we wrote that “The main question that traders are asking as this stage is whether or not there is anything that can actually save the Euro, as the economy is highly fragmented and showing major signs of wear when we look at the long term unemployment numbers.”  These are still important issues that have not been resolved, as the Euro is still trading convincingly under the 1.35 level.  If we add to this the chances that the Dollar will continue to benefit from safe haven buying, there is little reason to start expecting a major rebound in the EUR/USD any time soon.

 

The Week Ahead in Forex Markets:  Jobs VS Potential For Military Conflicts

 

In the week ahead, forex traders will need to assess which factor is more important:  Global macro data, or the global potential for heightened military tensions.  If we start to see the negative news headlines recede from the front page, it would also be a positive for currencies like the AUD and NZD, as it would signal that optimism is starting to return to the market.   This makes it much easier for traders to start heading back into carry trades, which is still one of the most popular strategies in forex trading.

 

When looking at the potential for successful carry trades, the USD/JPY is often one of the first forex pairs that is analyzed.  The USD/JPY has been trading at the lower end of its recent range and we’ll have to wait for next week to see which will be the next move because the price broke the descending trendline but hit the broken ascending channel.  There are two scenarios: the price will continue to grow, will resume it’s uptrend or the price will decrease and will remain in range.  If the USD/JPY is moving higher, it is an implied signal that traders will have better chances with carry trade strategies.

 

The other asset to watch here is gold.  There I expect to see some bullish signs, we must remember that the price broke the downtrend line and now we have a retracement. The highest level of this week was 1312.00, the lowest 1280,51.  A clear break of 1300 would signal that risk aversion is still present in the markets.

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