It becomes a tradition to post a performance review of the top currencies vs. gold at the beginning of the new year.
Fiat money is represented by 7 currencies: The US dollar (USD) and 6 components of the US dollar index (DXY) placed by weight: euro (EUR), Japanese yen (JPY), British pound (GBP), Canadian dollar (CAD), Swedish krona (SEK) and the Swiss franc (CHF).
Chart 1. Year-To-Date Dynamics Of Top 7 Currencies Versus Gold: No Comment
Diagram by Aibek Burabayev; Source: tradingview.com
The Euronews agency has a special rubric called “No comment” where they show video news without commentary as the picture speaks for itself when something dramatic, awful or really amazing is shown. I think the above diagram also speaks for itself and it shows the drama where the gold just smashed all of the fiat currencies as none of them could escape. None! Continue reading "Top Fiat Money Vs. Gold: What Shines Brighter in 2016?"→
The much-anticipated OPEC deal to cut oil production has finally been reached. Brent and WTI Oil futures were not too late to react and jumped more than 7% with Brent Oil futures surpassing the $50 mark. And if momentum continues we could very well be looking at $60, perhaps rather soon. If that is the case, this can change the picture, not only for Oil futures and Oil companies but for currencies of Oil exporting countries, many of which were hit hard when Oil prices took a nose dive and could benefit now that oil prices are taking off.
The question is how exactly would an Oil rally play in petro-currencies in the current macro environment? Is it a good opportunity to buy into the battered Ruble? Or maybe a Norwegian Krona rally against the Euro? The options are numerous, but once we delve into the economic dynamics of each currency, the options narrow fast. Continue reading "How The OPEC Deal Impacts The FX Arena"→
In my earlier posts I showed you how gold and crude oil broke out of their trends. Gold moved higher amid an oil break down. The simplest trade here is the purchase of gold on the dip and the sale of oil on pullbacks. Today I want to share with you some other options. We can use oil related currencies instead of oil as they tend to lag and overreact to oil moves.
Chart 1. Gold Vs. Russian Ruble Weekly: Say Hi To A New High!
Chart courtesy of tradingview.com
The currency of the world largest country stopped strengthening only last Friday despite that oil reversed much earlier. I call this an overreaction of the currency to the oil move. I guess it’s all about the mechanical reaction of retail USDRUB sellers to the ruble and oil strength which was gone long before they started to act. Usually, non-professional players tend to sell bottoms and buy tops on market panic. Another good thing in this market is that while the ruble was strengthening gold pulled back down, giving potential buyers extra bonuses (falling gold + overreacting ruble).
A year ago I wrote a post to compare the top currencies dynamics against Gold inside of the year. Today I want to repeat the experiment to see which one could beat the safe haven and which one couldn't. This time, you will see a modified version of the chart where the inverse metal crosses show not Gold's (last year version), but the currencies' dynamics for easier eye perception.
As many countries there are that have their own currency, there are currency pairs to trade. This does not mean you should start off studying the movements of the Guatemalan Quetzal. New traders need to stick to those currencies whose indicators and movements have been well documented.
The three major currency pairs are the EUR/USD, GBP/USD and USD/JPY. If you didn’t already notice, the US dollar is listed in each one. That’s because this it the most traded currency in the market, and the one that has been studied at length.
There are three very good reasons why you should stick with these three currency pairs:
• All of them are well established currency pairs that are traded widely. This type of liquidity guarantees that you are going to profit from price changes.
• They all have the US dollar, which means that the most amount of activity will be during the New York trading hours. This adds to the liquidity as this is typically when the highest amount of Forex trading is taking place.
• Since they are so popular, a new trader is going to find a wealth of Forex trading systems online that can help them in trading these pairs successfully.
Which Ones Should You Avoid?
Any currency that is considered to be exotic or uncommon should be avoided by new traders. In some instances the financial state of the country is too unstable to be able to read the charts properly. For others, there just is not enough information available to you. A new trader needs to use as many resources as possible before placing a trade. Unless you have some first hand knowledge of Guatemala and its future financial state, you should stay far away from trading the uncommon currencies.