Some analysts have set forth the notion that the United States is currently in the midst of currency war. All over the world, currencies are becoming more volatile. That is, all of them except the U.S. dollar. It’s happening for a number of reasons, but the big one is the ongoing Greece debt issue. It has weakened even the euro, which was only recently the world’s strongest currency; even stronger than the U.S. dollar.
What’s more, some of these people say that the Fed is unable to play competitively in this currency war with its current methods. In a way, this is true. The dollar is so strong, the stock markets are doing so well, and inflation is right where it should be. With all of these factors in place, the Fed cannot really do much as other countries get their currencies lined up to become stronger. When the U.S. economy was down, the Fed used many of the methods that are currently ongoing elsewhere. It doesn’t make sense for them to stymie other countries for doing exactly what they did.
The big issue is, if other countries are setting themselves up to have a stronger currency, then, because currencies are always compared to one another, the most likely candidate to drop in value would be the dollar. It might not happen today or tomorrow, but the stage is being set for it to happen eventually, and there’s not too much that can be done to stop it.
Traders that have been bullish on the dollar need to take this into account as they move forward. Going long on the dollar might not be the best long term idea here because of this reason. And as the Fed gets ready to raise rates in the last half of the year, there’s a chance that the dollar’s decline could come suddenly. Ups and downs happen all the time, just as you go about your day, keep an eye out for the fundamental indicators effecting the dollar as well was the typical technical ones that you use on a daily basis.
There’s a beauty to Forex trading in that there are a few built in features that reward short term trading. It keeps you active, and it keeps you aware of things. It also forces you to want to avoid long term plans. While many see the fact that some brokers will charge you interest if you hold a position open overnight as a negative feature, it really is, for the most part, a good thing. The one negative feature is the fact that when a long term shift in price becomes clear, it is very difficult to profit off of it.
And when a clear sign that something like this is going on, it is only natural to want to take action. Forex brokers charge too much to make this worthwhile for you, unless you are making trades every day (which is a legitimate and profitable way to trade this), so many people, in an attempt to simplify their lives will go and begin trading long term binary options. Short term binaries have been very popular over the past few years, but long term trades are under utilized. However, many brokers will allow you to trade options that have an expiry set at the end of the month or year. Some go longer. Either way, this is a good choice for those traders that do see a long term opportunity here, but want to avoid Forex trading. Both are helpful, but some people prefer one over the other.
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