How to Trade 3 Key Currency Pairs in September
We are finally at the summer’s end. I say “finally” because the currency markets have been unusually active this summer. So I can tell you that this fall will be quite exciting.
We are now in the pre-election sentiment period, where the world markets will focus on U.S. elections and possible shifts in fiscal policy. As you know, it makes this a perfect time to start thinking about currency plays on the election. I will soon have a very direct focus on this matter.
In the meantime, let’s turn to three key currency markets I have focused on and see what is on the forex horizon as the fall begins. Notice how basic patterns give us very good insight on price direction.
The dollar–yen remains a major part of global fundamentals on the world economy. And the last few weeks it’s been all about the yen, with the Japanese currency hitting a 15-year high against the U.S. dollar the last week of August – and more significantly the Bank of Japan’s intervention to devalue the currency and keep export demand high.
Now a bottom looks like it is forming. The upside potential is large, and as you already know, I think there is a lot of action in this pair. I’m betting that the yen will continue to fall in the short-term.
The Canadian dollar is clearly a prisoner of U.S. economic expectations. While parity with the U.S. dollar looked probable in May and July, it is now far away. The key thing to look for in the coming weeks will be whether the USDCAD can get even weaker.
We will watch this one for breakout potential.
The EURUSD is coming into a breakout period, and the technical conditions are now commanding our attention. With the German economy doing very well, can the EURUSD pair be far behind?
Europe’s sovereign debt woes continue to drive direction in this currency pair – and will likely continue to for some time. Last week’s relatively successful (read less bad) Portuguese bond auction should bring some optimists back to this currency pair in September – you can bet I’ll be watching this one closely.
It’s still too early to tell whether this fall will bring with it the kind of forex trading volume that we’ve seen this summer – but if this month is any indication already, we could see continued interest in these markets. With world economies teetering on the brink of major news on any given day, forex traders should be presented with plenty of opportunities to rake in gains…
And as always, I’ll be here to fill you in on how to trade them.
September 17, 2010
P.S.: If you’re not familiar with trading currencies, there are plenty of ETF options out there that can give you exposure to currency moves without having to deal with the nuances of the currency market. For investors who want to make more direct plays, I’ll have more details very soon…
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