US Dollar is Safe...For Now

The Dollar is Crashing! The Dollar is Crashing! Such is the perennial claim of doomsday predictors, conspiracy theorists, gold bugs, etc. Those of you who read my blog regularly know that I often come to the defense of the Dollar. Given that it has risen by more than 5% over the last month and is currently hovering around its average value of the last five years, I think this position is worth reiterating.

In the months leading up to the expansion of the Fed’s Quantitative Easing Program (QE2), investors took an especially bearish view on the Dollar, precipitating a rapid and steep decline against most currencies. Analysts argued (somewhat contradictorily) that QE2 would be ineffective in the short-run and inflationary in the long-run, and that most of the new cash would be invested abroad – where returns are higher – rather than in the US.

Since the unveiling of QE2, however, the Dollar has rallied strongly. On the one hand, most economists remains skeptical that it will do much to lift GDP and boost employment. However, a parallel thread holds that this was only the ostensible motive for QE2, and that the real motive was to prevent the outbreak of another financial crisis and consequent economic downturn. Given that housing prices are headed downward and banks’ balance sheets are still weak, the Fed’s move reads more like a preemptive move to further shore up the financial system than an economic stimulus program.
At the very least, this probably won’t hurt the Dollar, and certainly not to the extent that the market had priced in prior to QE2. While the stock market rally has stalled, the rise in Treasury Yields has not. The 10-Year rate is close to 3% for the first time in months, making it more attractive (and less costly) to hold capital in Dollar-denominated assets. The Dollar was also helped by the release of GDP data for Q3, during which the US economy beat expectations and grew by 2.5%.

As a result, traders are reducing their Dollar-short positions. Analysts have revised their forecasts to reflect a stronger Dollar, based on the notion that “The dollar has found a bottom.” At this point, the main naysayers are “overwhelmingly found in the ranks of  opposition Republican party,” perhaps part of a cynical ploy to hurt both the economy and Barack Obama’s chances of being reelected.

On a purchasing power parity (ppp) basis, the Dollar is starting to look cheap. If the opinions of Europeans, Canadian, Australian, and Japanese tourists are to be taken at face value, the US is cheaper than it has been for years. As one commentator summarized, “If the PPP figures are right, the U.S. dollar has more upside than the negative sentiment around it would indicate. If the greenback were to decline further, it

Forex Trading System

You can find lots of websites online which offer advice on the newest and the best trading systems that you can use in the Forex market. New traders are often fooled into purchasing these trading systems in the hope of earning more profits. Don’t make the same mistake. You have to check these trading systems before you finally decide to employ them.

Most Forex traders are looking for the best trading systems available online and perhaps you’re looking for it too. You have to be realistic when looking for an efficient system and so you will need to consider several factors. Some systems are very hard to understand. You must ensure that you understand the system’s logic before purchasing it. Only by understanding the logic of the system can you effectively use it to your advantage. By checking the trading system thoroughly, you will be able to determine if the whole system is intuitive and logical from your own point of view.
Having a good trading system in the Forex market is vital. You must exert extra effort in your researches and conduct some trials. How can you identify a good system? A good system is one that can be used over the long-term and it has a sustained earning potential. For starters, it is advised that you have a secondary plan just in case you encounter a downturn. By doing so, you can stay afloat despite the financial struggles. You should be emotionally ready and once you earn big money, you should be wise in using or spending it.
When using a certain trading system in the Forex market, you should not expect immediate results. True enough, you can earn big money in Forex trading but there is also the possibility of losing your investment. You have to be patient and very careful in making your trading decisions. Give the system enough time to work out; for example, a couple of months to a year may be enough to determine if the system is profitable or not. Within this period, you need to ensure consistent and logical trading transactions.
Most of today’s trading systems provide near-real time
The Forex market is rapidly changing or shifting. Your trading system should be able to easily adjust to these changes and shifts. Complicated systems do not guarantee better performance and it would be better to choose a system that is intuitive and user friendly. Study the major trends in the Forex market and after that, you can already choose a good trading system that can work for you. Select the system that is rational and disciplined

Tips and tricks for forex trading

Stepping onto the forex arena ,keep these currency trading tips in mind and you’ll soon find yourself running with the pack.

• Casinos are for gamblers. The forex markets are for traders who are interested in the investment, not the big win. Study and analysis will prove a far better ally than long odds or luck.

• Practice makes perfect. Before you start throwing your money into an account, practice with one or more of a variety of demo accounts. This the most critical of all forex tips for the new trader. Get good at analyzing and actual trading before you start plunking down our own funds.

• Find a good broker. Do your homework and find a broker that fits your trading style and philosophy and offers the features and services you want.

• Don’t buck the trend. Trends mean that more of the same is up ahead. Keeping with a trend will help you continue to make a profit. when the trend is up don’t sell; when the trend is down, don’t buy.

• Check your emotions at the door. Forex is about methodical analysis of the market trends, not about searching for the next hot trade. The trader who lets his or her emotions take control is the one who will watch profit drop and losses skyrocket.

• Overwhelmed traders make mistakes. If you find the data sitting in front of you is too much to handle, stand up, walk out and take a break. Then, back up a few steps and go to a place in the process where you feel comfortable.

• Guarantees are like unicorns and leprechauns – they don’t exist in this world.

• Patience really is a virtue. Of all currency trading strategies, this last tip is one of the most important. Don’t expect to make your money all at once.

Trading pegged currencies

A fixed or pegged currency is one where the currency’s value is matched to that of another. The asset may be a single currency, or it may be a basket. The fixed rate will be determined by central banks.
Fixed exchange rate mechanisms can be introduced for a number of reasons,  offer a number of advantages or disadvantages for the economy of nation which utilizes them. A pegged currency can be very useful in combating inflation in an environment where the public has lost confidence in the nation’s economic policies, and prices keep rising uncontrollably as a result. The peso was pegged to the US dollar by Carlos Menem to stop rampant inflation in 90’s Argentine. It may be temporarily introduced to protect an economy from currency volatility that is caused by speculators or event shocks.
In response to the Asian Crisis of 1998,  speculator attacks, Malaysia had to keep the ringgit pegged to the dollar for seven years.. Another reason for maintaining a fixed currency is to defend the profits of exporters in a nation against normal currency fluctuations which make predictions difficult. Hong Kong was one of the nations that maintained such a peg until 2008. Since then the currency floats in a band. A peg may be implemented to facilitate convergence between the financial systems of two nations where increased cooperation, or even ultimate merger is desired. This has been the case in Denmark, and various small Balkan nations which aspire to join the Euro eventually. Finally, the peg may be maintained for political reasons and this is the case with most Gulf Arab States.
The advantages of the fixed exchange rate systemborn of its clarity and simplicity. By pegging the currency, the central bank of the nation is declaring its intention to limit its expansion of the money supply by adhering to policies of the other, more credible central bank. It gives up its independence in setting policy rates and following its own currency policies in response to domestic needs, but in return gains the ability to rapidly suppress inflation expectations that are otherwise uncontrollable.
The problems with fixed exchange rate systems arise out of the inability of the system to adapt to changing conditions. For instance, a currency peg adopted  time when the nation possessed ample forex reserves is unlikely to function well when the current account surplus evaporates and all that defends the rate is the intervention promise of the central bank. Market participants are unlikely to regard such a promise seriously, and this lack of credibility has the potential to create currency crises

Forex Signals

A forex signal is a trade alert for currency market. Forex signals can be obtained from companies that specialize in this service, also from number of brokers who provide them for traders of standard or V.I.P accounts. The price of this service can be anywhere from free if you receive it from your broker, to a daily average of $5-10 and higher depending on the individual or company providing it. In this case the floor is at around $100-150
Services that you receive upon signing up with a forex signals provider differ from firm to firm. You may expect to receive anything from performance trackers, email, and online alerts, to customer support via email or phone, and advanced analysis in some of the more sophisticated offers. Since signals providers must protect their strategies.
The credibility of the many choices on the web varies widely, as it is often the case with anything related to the lucrative forex market. It is perhaps a good idea to approach any claims about 90 percent success rates with a pinch of salt, in spite of their ubiquity in the world of online trading.

Technical analysis

We will first study the main categories of forex technical analysis, and then examine some of the most popular indicators used in this type of analysis, in order to help you decide on the best tools for your approach.
Neither a great understanding of the markets, nor exceptional skills in mathematics is a necessity for being a successful technical analyst. Since the tools have been refined through decades of trial and error, we have all the principles laid out for us by the past wizards of this trade. Many scenarios have been examined, countless situations have been explored with technical tools, and what is more, the ways in which our technical schemes can be employed are practically limitless. With all this automation, the knowledge and experience that is readily available for students of technical analysis, all that is needed is patience and hard work.