Currency Characteristics - US Dollar, Euro, Pound, And Yen

Currency Characteristics - US Dollar, Euro, Pound, and Yen

Executive Summary about USD to by Eric Stout

Each of the major currencies has its own personality. Some currencies are heavily influenced by changes interest rates, other currencies not so much. Some currencies are really sensitive to changes in commodity prices or even the winds of political change.

USD - U.S. dollar
The USD is the world’s reserve currency. This makes the USD incredibly sensitive to changes in interest rates. Increase in oil prices typically result in a weaker USD. The U.S. is a politically vulnerable country. This exposes the USD to political risks such as changes in government and taxes.

EUR - Euro
The EUR is awfully sensitive to changes in interest rates. The EUR is equally sensitive to economic growth. The EUR is supported by a vast group of countries that oftentimes have differing monetary and political views. These differences often manifest in weakness in the EUR.

GBP - UK Pound
The GBP is one of the most highly valued currencies in the world because of the U.K.’s stable and reliable financial policy. The GBP typically carries a relatively high interest rate. The U.K. economy relies heavily on consumer spending, which means the labor situation, retail sales, and housing data are all important statistics to consider when trading the GBP.

JPY - Japanese Yen
The JPY is sensitive to changes in exchange rates because the rate is a huge exporter of manufactured goods. The Bank of Japan is notorious for managing the JPY because the country relies so deeply on exports to drive growth.

Currency Characteristics Summary
There are innumerable instances in which understanding a currency’s characteristics can help you to spot opportunities in the Forex market.

Dollar Short Strategy
Executive Summary about USD to by Joe Gelet

Massive Dollar Short Opportunity
Recent interventions in commodity markets, which has been a combination of short selling in the Gold market, and large institutions taking revenue in a multi-year bull market in hard commodities such as Oil, has caused a short uptick in the dollar. Fed raises interest rates ECB cuts rates (unlikely because unlike the Fed, the ECB only mandate is to contain inflation) US Economy not only bottoms but shows signs of rapid growth (a bottom would not cause the dollar to increase without an increase in rates)

Euro weakness does not necessarily make a strong dollar, world markets are desynchronized and interest rate parity theory has stopped working years ago.

How to short the dollar?
Long term close your eyes trade; sell now with no stop loss and take profit at USD Index 65. Short term automated trading systems with Sell USD bias. Tweak your systems to find USD short trends and take profits (systematic day trading) Non-USD portfolio (European/Asian bonds / equities) Long Swiss Francs or CHF based bonds.

Other posts you may be interested in reading: Euro Rate, Option Trading

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