How to find out why the euro is strong or why the dollar is weak?

I started this thread wishing for an answer to a question.Where are the best places on the internet to find information about the key currencies traded in forex?Apart from patterns,trendlines,s/r,fibonacci,countless indicators,one must know a few things about the strength of one particular currency like:euro.gbp,jpy,chf,usd,aud,nzd,cad.Where can I find the best information that will lead me to a good knowledge of the strength of that currency? When I place one order to buy eurusd,apart from the technical motivation I'd like to know if euro has the fundamental strength to get me into profit.Where are from your experience the best places to look for that information ?

Links,videos,personal experiences will be appreciated.

Thank you and I wish you all a Happy Easter

Your question is loaded but I will attempt. First off there are several methods of valuation for currencies as there are theories of where value will be. The methods are not always exact hence the price inefficencies. Some currencies move in ways that seem to defy any logic. As far as where you can find out why the Dollar is weak and the Euro strong a good google search may help you as a search in the above box on the forum here. If you know how to filter the information you find even better. Bloomberg generally has good info, but if you can learn to sort it it's even better.

IMO There are loads of reasons.... The reasons get into the cliche concepts of safe haven demand and risk trade demand just to name a few. Learn the reasons people buy currencies. Learn the reasons central banks support and monitor currencies.

Once you know some of these reasons you can monitor economic information and find deviations. Currencies are tough because you can have the correct longterm bias but still loose big in the short term.

Let me add many people probably have various places on the web that they visit which fit best with their style of trading.

Yields!!

This is exactly what I want from this thread,filtered information that helped some of you understand why is one currency stronger than the other and in time you became a profitable trader and this info(I would call it valuable info) was a good chunk of your accomplishments. I'm kinda lost when it comes to this bit.A google search might get you into false assumptions and based on that you may find yourself on the wrong side of the barricade.Thanks for the answer.

i will attempt to help out the best i can:

the market structure is such that money is free floating, and since WW2 the victor, and sole super power of the world reserves the status as the reserve currency ( how this came about and the history behind it, is to long for me to discuss, research the bretton woods agreement and the book "paper money by adam smith")

anyway oil is priced in USD and so are commodities (hence the name petro-dollars) oil is the blood of the world , with out oil life as we know it would cease to exist due to the fact that we don't have a way of producing energy as cheaply and efficiently yet.

the FED are the keepers of the world market. everything is priced in USD, there are 6 majors
GBP/USD EUR/USD AUD/USD and USD/JPY USD/CHF USD/CAD there are exotics which are currencies that are not as liquid as these. and there are crossess
for example EUR/JPY which is really the relative value of EUR/USD vs USD/JPY.

if you dont believe me, research it for yourself, how currency pairs work.

so in esense we are always trading the USD one way or another.

you can check the USDX which is the relative value of usd against 6 major currencies. check interst rates, yields, gdp, employment, trade deficit, national debt. of a individual pair to assess if the economy is strong or weak which will reduce risks of correlation being out of step.

what do i mean by that?

if the USD is falling in price due to dovish monetary policy by the FED, such as low interest rate (encourages carry trade) quantitive easing which increases money supply, weak economic fudamentals of the USD. and you see the USDX chart in a bear market you will in turn see

the GBP/USD EUR/USD AUD/USD appreciate against the USD as they are quoted GBP VS USD, and the inverse correlating pairs should act in inverse fashion

USD/CHF USD/CAD USD/JPY should be depreciating because is the USD against them.

hope i explained well and answered your questions.

as far as where to find info. look around forex factory has news and anouncements, fxstreet has interest rates, marketwatch has yields and you can google for websites of your choosing

Good points,thanks.

The simplest answer to your question can be summed up in one word: Yields

A currency's Central Bank INTEREST RATE determine its buying/selling strength over another currency. The currency with the highest Interest Rate, is usually the Bullish currency you'd want to buy into.

G8 countries, AUD holds the highest interest rate which means AUD has the most buying power of the big 8. So, as a trader, it would be wise to be LONG any AUD pair as it has the highest chance of making you some money.

There are cases where the highest interest rate pair is bearish. When this happens, analyst views this as "the market correcting" itself. This is also usually when longterm investment/traders exit a pair, because its good practice to only bet on the highest interest rate currency, not against it. That is when investors scour the market, looking for other high rate bullish pairs to invest in.

Heres an example of what I'm talking about.


AUD has the highest interest rate of all the G8 currencies, so it would be wise to only be LONG AUD. By implementing this carry trade strategy, the trader would have been "Green" since 2009 as the market has been LONG AUD.

If the market experience any bearish moves, this will be seen as a retracement/correction/pullback and this is where most investors exit.

Take notice of the chart and you'll see, when the market is bullish AUD, it moves upwards in a vertical line, indicating investors going all-in (bullish) on the pair. When a retracement happens (bearish), the market get sloppy and choppy as this signals, investors exiting this pair because current market conditions doesn't line up with a country's economic condition.

Hope this helped answer your question.

This is more than helpful ,I must recognize that I,m pretty far away when it comes to economical debate,but I'm slowly learning.Thanks

You're welcome!

Unfortunately, many traders are pretty far away when it comes to the economic side of the market.

I personally believe, its the fundamentals that make successful traders not technicals.