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A Look at Some of the Biggest Events in the FX Market

FX Market

Forex trading has become incredibly popular in the last few years. As harder times hit, people are looking to make money. The faster they can do so, the better, and forex trading offers them this opportunity. High gains and high liquidity, plus the fact the forex market is available online around the clock, make trading immensely appealing.

But what is forex trading? Basically, it’s the process of speculating on currency prices to make a potential profit. The currencies are traded in pairs, which means that when you’re trading one currency for another, you’re speculating on whether the value of one rise or fall against that of the other. Below is a look at some of the biggest events to have occurred in forex, how they have come about and what the future may hold for the currencies.

The Euro fightback to parity with the dollar experiences major blow

The Euro has been struggling for some time now against the dollar, having been in decline for about a year, but had begun to mount a comeback to parity with the US currency. Things were starting to look grand.

Now, however, the single currency has returned to its value-shedding ways. Risk aversion is allowing the dollar to go from strength to strength against its across-the-water counterpart. The war in the Ukraine, rising inflation, supply chain issues and a general tightening of monetary policy have persuaded investors to seek comfort in the reliable US dollar and soothe their fears.

The increase in interest rates has pushed the value of the dollar up and, as long as the Fed continues to raise them, the dollar will continue to be a force to contend with in the currency market.

Pound drops against the dollar

The Euro isn’t the only currency to have fallen in value under the weight of events in the US economy. A decline in the rate of inflation hasn’t turned out as expected in May, prompting eyes to look to the Fed to step in again with a policy revision.

The British pound’s woes aren’t being helped by an economy about which there is serious worry. Inflation is at a 40-year-high in the UK and consumer confidence has plummeted to record lows amid a worsening cost of living crisis. The Bank of England warned in May that GDP could slump toward the end of the year and that inflation could be as high as 10% by the end of the year.

If there’s any good news, especially for the pound sterling, it’s that, despite the decline in the pound’s value and the fact it’s one of the very worst performers, experts don’t expect to see the currency devaluing to the point of collapse. There are, however, fears about the impact tightening monetary policy could have on an economy that has already been severely weakened.

Dogecoin continues to decline in value

If you think cryptocurrencies might be faring better against the US dollar, you might have to think again. Cryptocurrency is experiencing a bearish trend right now and the decline in value of the Dogecoin continues as speculators’ enthusiasm for the cryptocurrency versus the dollar disappears. Traders who have continued to place their faith in the DOGE/USD pairing and were hoping for a reversal in their fortunes have not seen their loyalty rewarded the way they’d like to.

There was a time when some influencers predicted DOGE could hit $1. That was just over a year ago. Those predictions have far from come to fruition. A quick look on Reddit forums would reveal more than just a few speculators are feeling disgruntled.

According to predictions in the daily Forex forecast today, if the cryptocurrency was to break below five and a half cents in the short term, fears that this it could drop below five cents aren’t unfounded. They warn that speculating on DOGE could be a worthwhile bet, but that the bearish conditions of the market mean buying DOGE now could be spitting in the wind. Buy with caution.

USD/JPY stays bullish

Then USD/JPY has remained on the front foot for a 20 year high now but has been taking it easy around the 135 point for several days now. The yen itself has experienced a drop in value as rate differentials make their presence felt and yen holders sell up. Firmer oil prices have compounded the bleak future for the yen. Even though it remains vague on potential action, Japan has expressed that it will be willing to act on movements in the FX market.

Events on the options market also suggest support for the bullish activity of the pairing. The weekly risk reversals, the spread between put and call options, has increased for the third consecutive week recently. A slight drop at one point, however, has tested buyers’ confidence.

It might not all be bullish boom times for USD/JPY. A lack of activity could challenge the pairing’s upside momentum. That being said, China struggle with COVID and recent disputes between China and America over Taiwan could underpin the upside momentum.

The dollar has been performing strongly as ever, with interventions by the Fed, as well as external events such as the war in the Ukraine and investor jitters, helping to drive the currency’s value. As the dollar grows stronger, other currencies are beginning to flounder slightly, down but definitely not out.

 


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