Almost everyone believes that the Federal Reserve will raise interest rates in the United States next month. At least that’s how the market is acting right now. U.S. bond yields had their biggest two week increase in over 15 years by the time Friday, November 18th rolled around. The U.S. dollar was at its highest point in more than 13 years against several currencies at the same time.
Another key perception is that Donald Trump will strengthen U.S. financial policy when he becomes President in January. This is a smaller, and more long term view, then the anticipated move by the Fed, but it is still weighing on the minds of investors all over the world and cannot be ignored. Theoretically, President-elect Trump is regarded as being a strong force for businesses, too. The stock market has already responded strongly to Trump’s election, so it will be interesting to see what develops here in the coming months.
As far as currency pairs go, it seems like the ride is just beginning. For short term and day traders, this is something that will need to be nuanced, especially that high points have been established. Whether or not these will be surpassed or simply act as new points of resistance is something only time can decide.
But while the USD is at high points against the euro, the British pound sterling, and others, there are two currencies where there hasn’t been much movement for the dollar. These are the Australian dollar and the New Zealand dollar. While closely related because of their proximity to each other, both of these currencies represent strong economies that are independent of the financial issues that have been plaguing Europe over the last decade. They are immune from the effects of the Brexit, and they have remained central forces in the Eastern economy. And as of the time of writing this, both currencies were almost exactly in the middle of their 52 week ranges. For those looking for the currency pairs with the most amount of potential for change, the AUD/USD and NZD/USD seem to have the most amount of room for growth of the secondary currency pairs.
Paying attention specifically to a market event that could be the catalyst for movement in the coming days or weeks is the best way to take advantage of quick growth. The Fed’s upcoming announcement could be that event, or it might be something else. However, thanks to the steady consistency and lack of volatility here, it may take something big to move these pairs out of their current state of sideways motion. Paying attention to fiscal policy in this part of the world will also be a helpful tool for figuring out what movement will be likely to occur, and how you should be reacting to it in real time.
As a trader, knowing these basics about fundamental data is important, if only because it gives you a framework that you can operate in. For example, we know that the global market is anticipating Fed action in December. If that action doesn’t occur, then there will be a violent reaction, with the dollar losing a ton of momentum. If we know this, we can be prepared to act quickly, positioning our Forex and binary options trades so that we can profit off of the markets as they correct themselves. Knowing the public’s perception of what is happening plays a large role in our success, like it or not. It gives us a basic overall look at how the technical data that we should be relying heavily upon should be interpreted.