What Happens When Both Currencies on a Pair Take a Hit?

So right now we have the E/U still working through the problems with Greece and now Spain has joined in the fray.

On our side of the point, the Fed has decided to start buying up mortgage debt because they're concerned that things are so bad.

If investing in Forex is essentially placing a bet that the economy backing one side of the currency pair is going to impact the price and cause it to go up or down as compared to the other currency on the pair, what happens when things go bad on both sides?

That is, if the value of the dollar should fall because of the Fed's actions but the Euro should fall due to their own little set of problems, do the two situations cancel each other out and bring the pair into a state of harmony?

The phrase "should fall" (or even "should rise", for that matter) shouldn't be anywhere within your vocabulary when it comes to trying to tie fundamental analysis to ACTUAL price action.

I don't dispute your analysis, which is valid, by the way.

But "should" implies a value judgement, which is not helpful given that the market is bigger than the individual armchair analyst.

The market will move to wherever there is least resistance, regardless of your value judgement.

My two cents.

Have a good one!

Yep, who would imagine when all the Greek troubles started 3 years ago that today the EURUSD would be at about the same rate it was back then ? With all the hammering of Eurozone you would expect it would had plummeted at least to parity, yet there it is still dancing around.

Soros imagined that )))

The main reason I don't trade USD/JPY is for that exact reason.

Global events cause similar reactions to both currencies. Makes it tough for me to rationalize directions on the pair. That same dynamic I'm sure is right in some people's wheelhouse though haha.