Forex Strategy Video: Dollar and the Debt Crisis - Don't Trade What it Deserves
• Many people believe that the US debt standoff should earn the dollar and S&P 500 a collapse
• However, market-wide risk aversion is a key fundamental strength for the greenback
• It is important to trade how the market will position rather than what we think 'should' happen
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'How is this currency not collapsing when its fundamental situation is such a mess?' That is one of the most common questions I receive - and it is applied to all currencies and all conditions. It is important to remember above all else that we are trading a market that is the collective opinion of many traders across the world. All currencies, assets, markets have their strengths and weakness; but whether they rise or fall depends on its fundamental mix compared to its global counterparts. With the US dollar and debt ceiling impasse, we have an unusual situation where a greater portion of the market can agree on the trouble. However, there is still the issue of viable alternatives for reserves should risk trends truly degrade. We discuss the concept of the 'Judgment Trade' in today's Forex Strategy Video.
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DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.