Forex Training | GFT Forex

Divergence Trade in Forex Trading

Fri, 26 Feb 2010 09:06:30 -0500

Using economic divergence as part of a currency trading strategy

One of the ways you can enhance your currency trading strategy is to consider incorporating economic divergence. This is the idea that you can benefit from the impact that different recovery paces in different countries can have on currencies on the FX market.

GFT's Kathy Lien explains a bit about the divergence trade in FX360:

Economic divergence is one of those long term factors that can have a big impact on currencies, equities and bonds but usually take a long time to pan out. At the beginning of a recovery, the market pays particular attention to economic divergence as they try to figure out who will raise interest rates first. In the current recovery, economic divergence is even more important because not only are different countries growing at a different pace, but each part of the world is dealing with different issues.

If you are careful about it, you can find good forex trading success with a little help from economic divergence.

Use Equities to Find Trends for EUR/USD in Forex Trading

Tue, 09 Feb 2010 09:33:21 -0500

Currency trading tools

One of the things you can do to help find trends for EUR/USD in forex trading is to look at equities. The way that equities perform often correlates to how well the euro does in forex trading against the U.S. dollar.

Indeed, there is a high correlation, reports GFT's Kathy Lien in FX360:

In the meantime, currency traders should continue to keep their eyes on equities. Over the past year, there has been an 88 percent positive correlation between EUR/USD and S&P 500. This correlation has increased to 92 percent since the beginning of the year which suggests that if there is no catalyst to move currencies, forex traders will most likely to take their cues from equities. The following chart illustrates the strong correlation between the EUR/USD and S&P 500 over the past few years - there is no reason why the relationship will change this week.

Is It Time to Buy the Euro?

Tue, 02 Feb 2010 09:04:28 -0500

Is the euro ready to turnaround in forex trading?

Today, the euro is showing some fight, struggling its way toward 1.4000 in forex trading. That level still remains a ceiling, but the euro is doggedly headed toward getting through it.

However, there are a number of issues standing in the way, since there are reasons that the euro is the worst performing G10 currency right now. But that could be changing. GFT's Kathy Lien looks at the promise -- and the perils -- of the euro in FX360:

Since the beginning of December, the euro has fallen over 7 percent or more than 1,000 pips against the U.S. dollar. Such a sharp decline in the currency will certainly attract bargain hunters. However, in the forex market, trends can last far longer than most of us can anticipate. Forex trading is an expectations game and until traders or investors expect things to change, it probably won’t.

Clearly, in order for the euro to make solid gains, it will be necessary for forex traders to change their view of the 16-nation currency. However, issues with Greece will need to be resolved, and the euro zone will have to show that it will not be lagging behind the U.S. in an economic recovery.

Forex Training | GFT Forex

Divergence Trade in Forex Trading

See Also

Use Equities to Find Trends for EUR/USD in Forex Trading

See Also

Is It Time to Buy the Euro?

See Also