The US Dollar Index is trading sideways now that the Fed has already signaled that it may raise rates at its next meeting in a matter of weeks. However, that decision is coming up just a few weeks after the very worst financial and economic crisis since the Great Depression. This is indeed cause for concern as the USD/CAD falls further.
The Russell Landes/Dow Jones Industrial Average, which is based on a different index than the USD/CAD has already tumbled by over 500 points. This means that the USD/CAD which is still roughly pegged at the Euro is fast losing ground as investors pull out of the market.
If the rest of the world economy continues to recover then this is the ideal time to take advantage of a currency rally and enter the forex market. Unfortunately, the dollar has lost much of its strength, which is why investors are hesitant to make money trading in the markets.
The benchmark index has been boosted by a large increase in the supply of gold and other precious metals, which is in turn boosting the value of the USD as well as the Russell Index. As mentioned earlier, the Fed is moving up the timing for raising interest rates in order to support the economy and inflation.
It is not too early to be concerned about the effect of these rises on the USD/CAD. This is particularly true since the next move will be announced shortly. There are some subtle shifts going on in the market that is likely to be interpreted by both traders and investors in an opposite way from how they are currently being viewed.
One of the most significant changes is the fact that large investors such as the Rockefeller Brothers Fund and others are now reportedly heavily investing in the U.S. dollar. In fact, they are making no money at all in the stock market, which is very unusual for them.
The same is true for large hedge funds and private investors such as George Soros and others who were placing their bets on oil, gold and other commodities. These people appear to be taking their profit positions in the opposite direction than the forex market, which is showing signs of weakness as a result of the current economic turmoil.
It is likely that these people are actively trading on foreign exchanges in order to profit from the impact of the rally in the Forex market. These traders could well be putting lots of money into the Dollar as well as the Euro, but they will certainly be missing out on making any money trading in the USD/CAD and the S&P 500.
Investors are also being encouraged to buy gold and other commodities because of huge increases in supply. For example, the price of oil was up almost 30% yesterday and is likely to rise even more as the supply-demand situation remains unresolved.
As stated above, the move by the Fed is going to have some negative repercussions on the Forex market, but it should actually benefit the USD/CAD as well as the S&P 500. This is because of the pressure applied by the central banks, which will help improve conditions in the world’s largest market.
Those conditions will most likely mean that the domestic factors affecting the currencies are eventually going to end and that the break down of major barriers will occur. Then, we should expect to see the USD/CAD as well as the S&P 500 gain in value.
As stated above, these events will impact all investors, including those who try to trade in the domestic markets, but it is certainly going to be beneficial for those who invest in the forex market. It may even be that the USD/CAD is going to make a recovery as the world recovers from the current crisis.