Trading the US Dollar

The most profitable activity for many traders at times is trading the US dollar. Recently, the dollar out-performed stocks which fell. And out-performed gold futures which dropped $300 an ounce from their high. Selling gold has been more the order of the day than buying the shiny stuff ever since the dollar started to rise as the Fed trims its stimulus program. In trading the US dollar traders use fundamental and technical analysis of currency pairs such as the EUR/USD, USD/YEN, or USD/GBP. With Candlestick patterns as a guide currency traders buy and sell one foreign currency versus another in search of profits.

Trading the US Dollar in Business

Trading the US dollar in the Forex market is primarily the business of companies doing business internationally. If a US company purchases machine parts manufactured in Germany they will typically need to convert their dollars and pay with Euros. In order to reduce the risk of changes in currency companies often engage in trading currency options. For example, the US company will often hedge their currency risk by buying calls on the Euro with US dollars. If the Euro falls in value the company need not execute the contract and will simply pay less in dollars for their purchase. If the Euro recovers the company will execute the contract in order to pay the expected price in dollars for their purchase. Trading the US dollar in this case is a matter of hedging currency risk and is a necessary aspect of foreign trade. However, not all traders of foreign currencies do business internationally. Anyone willing to learn the ropes of trading Forex can profit from trading the US dollar or other currencies. Traders familiar with Candlestick analysis will find this technical analysis tool just as valuable in trading the US dollar versus the Yen, British Pounds, Swiss franc, Euro, Australian dollar or Canadian dollar as it is in trading stocks and commodities.

Trading the US Dollar in Eighty-five Percent of All Forex Trades

Currency trading is not limited to pairs including the US dollar. However, the greenback is used in roughly 85 percent of all Forex transactions. It is the de facto world reserve currency. In fact, many minor currencies are not traded against each other. To convert one minor currency into another one trades the first currency to purchase dollars and then uses the dollars to buy the second currency. Trading the US dollar has been profitable as the dollar has risen against all major, and virtually all minor, currencies. Fundamental analysis tells part of the story. There is a general concern that the European Union will not solve its sovereign debt dilemma and that Greece, followed by Italy and others will default on national debt. Industrial production is down across the world. In times of economic turmoil there is generally a flight to safe haven currencies including the US dollar. The Swiss franc and Yen might be options but both nations are selling their currencies in order to avoid having their currencies become overpriced. Technical analysis with Candlestick charts helps tell the rest of the story. In the currency market there are waves of trader sentiment that may, at times, seem to be at odds with fundamentals. Using Candlestick pattern formations and Candlestick trading tactics, currency traders can successfully anticipate and profit from changes in rates when trading the US dollar or other currencies. If you are undecided about which Forex currency to trade, remember that trading the US dollar has been profitable of late.