25 January 2009
Forex View of 2009
Posted by selfprofit under: Forex; Investment; Personal Finance .
All traders can profit in the face of 2009’s violent economic upheaval, if they keep an eye on a few key developments that could impact the foreign currency markets — and have trading strategies in place to take advantage of them.
“The good news about forex trading is that good opportunities are available in today’s falling market caused by our ailing economy. However, traders have to be alert to what will happen globally when the markets improve and be ready to act when key fundamental developments occur,” says Wayne McDonell , Chief Currency Coach of FX Bootcamp ( www.fxbootcamp.com ), a live forex training organization, and author of The FX Bootcamp Guide to Strategic and Tactical Forex Trading (Wiley Trading, September 2008).
Likely 2009 Events
According to Mr. McDonell, forex traders need to watch — and have strategies in place — for these major events likely to happen in 2009:
Treasuries crashing. They’re artificially high right now — the way oil was in mid-2008. This “Bond Bubble” will likely burst.
U.S. stock market rally — if the bond market falls. This will increase investors’ confidence and their appetite for risk.
The U.S. Dollar will lose value. As international investors seek higher rewards, money will flow out of the low yielding, but safe haven of U.S. Treasuries, and back to growing economies such as China. Therefore, the current demand for USD will diminish, its value will fall and inflation rises.
Dropping Yen. Like U.S. treasuries, the value of the Yen is unsustainably high. Investors, such as hedge funds, seeking higher returns will leverage their trades using the Japanese currency. They will use the Yen to purchase high risk/reward assets, such as foreign indexes or hard assets, such as gold. This creates a huge supply of the Japanese currency on the global market, so its value falls.
Rising Australian Dollar. Australia is a major gold exporter and benefits from higher prices. Gold is the traditional “anti-inflation” hedge, and investors may drive prices up as inflation increases. Australia is also rich in clean coal deposits — and China wants clean coal to meet green energy demand. China will buy Australian coal — and will need Australian Dollars to do it. “That means you can buy the Australian Dollar as a China play or a U.S. inflationary hedge,” Mr. McDonell says.
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