Should you buy Euros and sell American dollars? Or vice versa?
We haven’t yet looked much into foreign currency trading (also called Forex trading), so I thought to make this the subject of our post today. I’d like to take a peek at what some expert traders have to say about our beloved US currency, in order to gain some perspective. After all, having a weak or strong US dollar may give some indication about where inflation is headed, through some roundabout analysis that I’m going to attempt to make here:
In my earlier article on how the US dollar index and crude oil market were related, I quoted a report stating that when the US dollar drops (thereby making foreign currencies stronger), this affects the price of crude oil around the world. Demand around the world for oil will then affect crude oil prices, which can foster an inflationary environment.
If you agree with this argument, then being able to forge an intelligent guess about where the USD is headed may assist us in preparing ourselves for changes in the economy. Of course, if you don’t buy my logic, please feel free to refute what I’ve just said backed by your own analysis. 😉
Given this, I was highly interested in the following new video from INO.com, from where I receive regular reports, videos and prognostications about where the markets are headed, all based on the tenets of stock technical analysis.
Click on this link or the image below to watch the video on Euro vs the US Dollar:
Incidentally, the market trading tool in use in this video is INO.com’s MarketClub software. This is predictive software for active traders, and used to make analytical predictions about where the markets or certain stocks are going. Let’s see what this tool is telling us right now, about the Euro and USD relationship (as seen in the video). To summarize, here are some noteworthy points from the video:
- The chart for the Euro vs the US dollar shows that the Euro is on an upward long term trend, suggesting that this currency is getting stronger (which of course implies that the USD is weakening).
- Check the 6 month chart for the Euro, where a couple of upward swings in the market were registered. I found it interesting that the analysis made here was simply an extrapolation of how high the next surge in the Euro was going to be, based on the proportional moves it made over the last quarter. Is it really that simple? So if the Euro rises by X pips over one rally, and another X pips on a second rally, we can actually expect that it would go up by approximately the same number of X pips on yet another rally?
- The MarketClub’s technical trading indicators (proprietary indicators called “Trade Triangles”) are all flashing green for the Euro, suggesting a positive upward move in the near future. Again, this points to the USD consequently faltering based on its inverse relationship with the Euro.
- As of this review, the conversion rate for $1 Euro is around $1.42 American dollars. A short term target for this exchange appears to be 1.4957 (or $1 Euro for $1.49 USD) as seen in the Euro chart. If this holds true, the chart analysis strongly hints at a previous double bottom and a new target potentially set at a higher 1.65 in the longer term. The “target” here is simply the point which traders expect the Euro to reach.
All in all, this doesn’t bode well for the US dollar, if these speculations are to be believed (the art and science of technical analysis attempt to make intelligent guesses, not outright guarantees). Based on probabilities offered by technical analysis, could we be in store for a more pronounced inflationary environment ahead?
Additional Resources For Stock Traders
For those interested in checking out MarketClub, you can get more details about them here. This is a paid subscription service that allows you the use of a market analysis / charting tool (which we demonstrated in the video above). For free investment tools from INO, you can sign up for their free trend analysis tool, which sends you daily stock market reports and alerts on the stocks you follow, and allows you to track your portfolio. You can also sign up for a free investment video channel that offers educational investment and trading videos at no cost, courtesy of INO.com.
For additional articles on the MarketClub tool and how it is used to analyze the markets, check out these other articles: