Forex Trading can be broken into two main types: spot forex trading and options trading. In my opinion, options are the most interesting because they make trading so much more interesting. There are many variables that go into deciding whether or not the price of the US Dollar is going to move up or down and both of these factors can drastically affect whether the US Dollar rises or falls. In this article we will discuss what really affects the forex trading. We will use five factors that effects the forex trading:
1. The Price of Gold
Gold is a rare and valuable metal that no one can really make themselves, so the price of gold changes with the gold mining industry. It is the most sought-after metal because of its combination of characteristics that makes it ideal for storing value such as its scarcity, durability, and anti-counterfeiting qualities. The most commonly traded form of gold is the 99.99% pure gold bullion, but is also very highly valued in trade. Hence, price of gold effects the forex trading in south africa and all over the world.
2. The Inflation Rate
The rate of inflation in the United States affects the US Dollar as well as the prices of goods and commodities traded around the world. This is because inflation affects the purchasing power of the US Dollar and also the goods and services available for purchase in the US.
3. Global Oil Prices
Oil is the key to the prices of all other products and commodities because oil is used in the production of almost all consumer goods. If the oil prices rise, the cost of producing the goods and commodities we buy also rises. The price of the US Dollar usually follows the oil prices when oil is an input for a good and vice versa.
4. The Global Central Bank Policies
Some central banks actually control the supply of the US Dollar while other central banks control the demand for the US Dollar. This makes it hard to predict the direction of the US Dollar because of the huge amounts of dollars held by governments around the world. As an example, the People’s Bank of China, has $3 trillion of the $14 trillion in US dollars on its books while the European Central Bank is not above $1.4 trillion.
5. Geopolitical Events
All economic decisions are ultimately based on money. Therefore, geopolitical events such as the rise of any strong-armed power like Russia or the Soviet Union can change the price of the US Dollar. The U.S. Dollar is currently the world’s reserve currency, which means the US is the primary export base for a large number of other countries. It’s hard to ignore the fact that if anyone got a hold of the reserve currency status, they could have a devastating effect on the global economy.
In conclusion, you can see that there are a large number of factors that effects the value of the US Dollar. Despite all of these factors being fluctuating, the US Dollar usually moves in the same direction. So make sure you do your research before placing any trades and always keep an eye on the five major factors that effects the US Dollar.
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