Today, as I was scanning through my charts, I noticed that the U.S. Dollar Index traded through its uptrend line and has now closed below it. 

The Dollar broadly breaks its Uptrend! 

 Why would this be happening now? In the past week, we’ve had the G-7, Bernanke and Volcker all come out and basically say that the worst is behind us.

On top of this, the “fear gauges” VIX, TED spread, LIBOR rate, etc., all point to the same thing. Fear is diminishing as markets stabilize. Therefore, there’s no incentive to stay in the defensive play of the greenback.

Also, commodities have stabilized and risen lately. For instance, oil is no longer at its $33 low but now it’s holding around $55 a barrel. 

Coast is Clear…time to Flee the Dollar!

 So now that the “coast is clear” for the most part, traders are starting to inch back into foreign currencies that have had a history of higher yields. While many of these currencies aren’t “high yielding” now, they will be the first to be this way once the first wave of inflation returns (and traders know it). Therefore, they are positioning themselves ahead of the wave, like a surfer. 

Who’s the obvious beneficiary of this USD Index Breakdown?

The U.S. Dollar Index is weighted heavily in the euro (57.6%).

Therefore, when this index breaks, the first place we should look to is the EUR/USD pair. This is the first obvious beneficiary of “dollar weakness”.

The EUR/USD is breaking higher even with its interest rate announcement just around the corner (on Thursday) as rates are expected to go from 1.25% down to 1.00%. 

EUR/USD breaks higher as the U.S. Dollar Index breaks its Uptrend! 

I think we could see some consolidation above the breakout while the market awaits the ECB’s rate decision. However, once that “unknown” is behind the market, I see the EUR/USD heading higher out of this 6 month consolidation!

Once we get past the rate announcement and Trichet’s press conference, then the EUR/USD will be free to head higher overall.

Sean Hyman

Contributing Writer

MyWealth

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If you are looking for ways to increase your monthly profits, then you should definitely consider online investing. Whether this is the first time you are considering this opportunity or you have some previous experience in trading, it is a good idea to go online and find out more about transacting virtually. You can discover a wealth of online resources, discover Forex advantages and take advantage of some pretty interesting opportunities.

The advent of the Internet technology has helped a lot of people, that is certain. They’ve learned how to rely on the Internet technology and earn nice sums of money through online investing. Fortunately for them, there are specialized companies that make it easy for anyone to enter the trading market. Beginners are recommended to take things slow and learn how to appreciate the balance between risk and reward. Trading is not something that has immediate results and it is highly important that one understands that. As for the rewards, they may come at a later point and only after a series of informed decisions. There may be many Forex advantages to benefit from but they will not appear as benefits unless you do a little bit of research at first.

Why go with online investing and not resume to traditional methods? There are numerous benefits when it comes to trading over the Internet, starting with the fact that you can do it right at home. It does not take too much of your time, thus being both free of complications and convenient. Thanks to the World Wide Web, you can do as many transactions as you desire, without being worried that you are not safe or secure. Your privacy is completely respected and you can always find out more details on the subject from a professional broker.

You may be wondering about the Forex advantages everyone keeps on talking about. First of all, you should know that Forex stands for the Foreign Exchange Market. This is the place where trading happens continuously, where foreign currencies are bought and sold at various prices. It does not matter where you are from, as Forex is open to all people from various time zones. You may be from Austria, South Africa or any Asian country for that matter. If you have a high-speed Internet connection and a small amount of knowledge regarding online investing, then you are all set. So, you see, one of the major Forex advantages is related to it being open all the time and to anyone who desires to enter the world of foreign currency trading.

There are many things you should know about Forex before actually going through with trading. This is the sort of online investing that guarantees valuable rewards but only if done right. Many Forex advantages are not known by those who trade and thus they end up losing important points. For example, one of the most attractive things about Forex is represented by its being one of the most liquid markets in the world. What does this means? Liquidity is an essential attribute, meaning that you are at complete liberty to modify the trades you make at any moment. Other Forex advantages include enhanced access (thanks to the Internet technology), no-commission trading and instant trade execution. You will have to discover them one by one, enjoying the advances made in today’s technology.

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Many people, particularly in the present economic climate, think that a quick and easy way to make some money is to trade on the Forex market. However, trading currency is a high risk strategy and unless you know exactly what you are doing, it is a fast way to lose capital.

Forex is the buying and selling of foreign currencies. Originally this was the domain of the big banks, but now anyone with a fast internet connection can trade from their home. The idea is to buy another currency that you think will increase in value in order to make a profit. However for every trader who makes a profit there is another who makes a loss and on the Forex market a small trader is competing against the experience of the big institutions. 95% of all new traders lose money. In order not to be a loser you need to really know what you are doing and this is why a dummy trading platform is so important.

There is a Forex money market open somewhere in the world around the clock, as one market closes another opens. When the markets are busy the value of a currency, particularly the most actively traded, can change rapidly. Trading on the market is done through a broker, similar to a stock broker although no commission is paid, instead there is a difference between the buying and selling price. Buying a currency means paying more than the selling price and the currency has to increase in value by that amount before you can start to make a profit.

It is vitally important that you understand the trading platform you are using. Beginners are advised never to simply open an account and start trading. It takes time, months in fact, to fully understand the market and even the most experienced traders do not make 100% profits. Fortunately brokers do not expect you to start trading immediately, the majority offer dummy platforms where you can practise until you are confident enough to commit your cash!

Platforms can be very confusing to a newcomer and it is essential to understand exactly what you are doing. When you feel competent open a mini Forex account with a few hundred dollars and start trading small amounts using stop/loss orders to prevent losing all your investment if the market moves against you.

Forex currency trading is not for everyone. Never invest what you cannot afford to lose. This article is for information only and the author accepts no liability for any action taken.

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