Why's USD so strong - will Fed raise interest rates? | Forex Factory

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Why's USD so strong - will Fed raise interest rates?

  • #1
  • First Post: Edited 2:34am Oct 15, 2014 2:18am | Edited 2:34am
Yesterday i had a conversation with an well educated professor about the current market situation.
Mostly regarding to the fact that the usd is getting stronger and stronger. He claims that the strong usd is the outcome of an ongoing sentiment fearing the fed could raise interest rates in the near future.
So that the people now buy the usd because after the raise the usd will be too expensive.
This could also explains the downfall at the indices, because when fed will raise rates stocks will decline so people now sell stocks to get themself a good cut.
  • #2
  • Oct 15, 2014 5:23am Oct 15, 2014 5:23am
Fed will almost certainly start raising rates next year - if it doesn't it will face the threat of rising inflation.

Before it hikes rates it needs to end QE, which has been winding down for some time now. Reducing bond purchases has the effect of increasing yields, which makes bonds a more attractive investment for big money meaning investment flow into fixed income assets and away from equities - hence the downturn in the indices.
si hoc legere scis nimium eruditionis habes
  • #3
  • Oct 15, 2014 7:25am Oct 15, 2014 7:25am
Quoting greed
Yesterday i had a conversation with an well educated professor about the current market situation. Mostly regarding to the fact that the usd is getting stronger and stronger. He claims that the strong usd is the outcome of an ongoing sentiment fearing the fed could raise interest rates in the near future. This could also explains the downfall at the indices, because when fed will raise rates stocks will decline so people now sell stocks to get themself a good cut.
//----

hey greed..... overlay a chart of interest rates onto the s&p 500 for say the last 70 years...... you will see the s&p very often will rise the most during periods of rising rates..... and markets quite often fall the most during periods of falling rates...... rates are often just a reflection of the situation......

the usd is getting stronger, subject to change, due to the economy here in the states getting stronger..... as it gets stronger the need for dollars here increases..... that demand will pull dollars from every source, ie carry trades, oil, gold, eur, aud, jpy, gbp, foreign investments, and on and on..... which makes the usd appear stronger compared to those sources.....

5 years ago we had 1 dollar in our pocket..... today we have 2..... demand has doubled...... and tomorrow we have,,,,,.......h
to trade and code, keep both simple... no call to impress....h
  • #4
  • Oct 15, 2014 10:01am Oct 15, 2014 10:01am
I think it's a bubble.

In the other side of the world countries are starting to replace the USD for their own currencies... and the US are severely worried about how the CNY it's seducing Europe.

Let's see what happens.


Kind regards,
MarketFox.-
Trade, don't bet.
  • #5
  • Oct 16, 2014 10:56am Oct 16, 2014 10:56am
It's strong because when markets are in turmoil people rush to safe assets. USD is seen as a safe asset by the big boys.
I would not get too hung up on analysing this stuff too much. Just knowing the basics of how things work are enough, the rest is finding areas of supply and demand and trading accordingly.
  • #6
  • Oct 16, 2014 11:20am Oct 16, 2014 11:20am
Quoting greed
Why's USD so strong - will Fed raise interest rates?
USD is stronger because Asian currencies are weaker. It is just that simple. And, no. The Fed will not be raising rates right now as our economy is still in recovery and still very fragile. We still have not recovered anywhere near the level of Middle Incomes necessary to support strong economic growth and will not, until U.S. companies either repatriate former lost U.S jobs, or until there is a spark of new innovation here at home (similar to the former enterprise technology boom of the Clinton years) to light the fire under new Middle Income Growth.

We have a fundamentally changed economic model today and most U.S. participants are completely unaware of it. Gone are the days of strong Middle Incomes to withstand economic recession and provide the foundation for rapid recovery. Any economic hit we take today, will be just like the human body taking a hit with the typically flu, where its immune system is severely weakened. That flu will last a long time and keep the body weaker for extended periods. Our Middle Class is suffering and has been since we teleported their jobs, income, security and savings off-shore during the 80s and 90s.

The Fed knows that we have a fundamentally different economic model, but is not telling anyone about it. We have an unfunded pension problem as well as a student loan debt problem. Both of those problems will be coming home to roost on our economy as well. We need more infrastructural manufacturing and materials processing growth. We also need new energy technology innovation that we can patent and then sell to other countries who depend on that technology.

The stronger USD will provide lower oil prices and better purchasing power abroad. Enjoy it while it lasts and while China, undergoes is much needed pull-back in growth before it revs up for its next big move to the upside in its economy. As far as Japan goes, those guys have had some serious infrastructural issues of their own to deal with for quite some time. I think Japan, as a whole, needs a Think Tank Regime Change on how to best move its economy forward into he future. But, I'm just a dumb American - so what do I know about Japan's problems.

Enjoy the lower unleaded prices at the pump - for now.
F-X-C-M | A Classic Retail Bucket Shop Scam Artist Who Manipulates Prices
  • #7
  • Oct 16, 2014 8:19pm Oct 16, 2014 8:19pm
no & simple
its stronger then others..........

Quoting greed
Yesterday i had a conversation with an well educated professor about the current market situation. Mostly regarding to the fact that the usd is getting stronger and stronger. He claims that the strong usd is the outcome of an ongoing sentiment fearing the fed could raise interest rates in the near future. So that the people now buy the usd because after the raise the usd will be too expensive. This could also explains the downfall at the indices, because when fed will raise rates stocks will decline so people now sell stocks to get themself a good...
My Best Trade is Next Trade!
  • #8
  • Oct 17, 2014 6:56am Oct 17, 2014 6:56am
And to bring it all together: how do you use all of that info to trade profitably?
  • #9
  • Oct 23, 2014 9:38am Oct 23, 2014 9:38am
Quoting iDoubleStoch
{quote} USD is stronger because Asian currencies are weaker. It is just that simple. And, no. The Fed will not be raising rates right now as our economy is still in recovery and still very fragile. We still have not recovered anywhere near the level of Middle Incomes necessary to support strong economic growth and will not, until U.S. companies either repatriate former lost U.S jobs, or until there is a spark of new innovation here at home (similar to the former enterprise technology boom of the Clinton years) to light the fire under new Middle...
I mostly agree. Just now the jobs numbers in US were released; initial jobless claims were slightly lower but more pronounced was Markit PMI expected 57 actual 56.2 - big difference yet that just spurred dollar higher. The reason being is US is the best of the worst. Some call it flight to safety or risk off environment. Before money would flow in Yen and dollar now everyone is doing so bad they all come to the mother ship for safety: USA.

Gas is cheaper because the demand is down. I get why demand is down in the Europe and USA but it completely escapes me why demand is down in China as well. Unless....They must have it way worse than reported. But we all know China has always been fudging numbers, but commodity prices don't lie, so here it is.

This won't end well. Politicians all talked about structural changes and everybody was screaming Minsky moment on Wall Street back in 2009 but with these arrogant and selfish politicians it won't happen until structural changes are the last and only way out of this mess. Keynes and Hayek both were disproved by Minsky and they are still fighting who had it right Keynes or Hayek. Well neither! Wake up Washington and Brussels, and come on Tokyo get your head out of your ass.



@keabwan1 When you figure it out how to trade fundamentals let me know! I still can't figure it out. Stop losses can't be placed like that because it is impossible to nail the timing. The reversal has started already - look at the weekly chart of majors - dollar pairs. So do you go in now? How about stop loss? Where is it - above the reversal even though it won't probably go up that much. Probably! and there it is. Probably will wipe 25% of my account - I am not willing to risk it, are you?
Back to the drawing board and draw some lines - or funny looking rectangles @iDoubleStoch! No other way exists except knowing to trade with the trend which is clear as day. The good thing is this trend may go lower than the one in 2012 July did IMO.
  • #10
  • Oct 25, 2014 11:16am Oct 25, 2014 11:16am
Quoting iDoubleStoch
{quote} USD is stronger because Asian currencies are weaker. It is just that simple. And, no. The Fed will not be raising rates right now as our economy is still in recovery and still very fragile. We still have not recovered anywhere near the level of Middle Incomes necessary to support strong economic growth and will not, until U.S. companies either repatriate former lost U.S jobs, or until there is a spark of new innovation here at home (similar to the former enterprise technology boom of the Clinton years) to light the fire under new Middle...
Hello iDoubleStoch,

i hope saudi riyal is more stronger then USD.Because it has remain in one place. but USD is fluctuate then saudi riyal...
  • #11
  • Last Post: Mar 17, 2015 9:46am Mar 17, 2015 9:46am
Quoting numbnuts
Fed will almost certainly start raising rates next year - if it doesn't it will face the threat of rising inflation. Before it hikes rates it needs to end QE, which has been winding down for some time now. Reducing bond purchases has the effect of increasing yields, which makes bonds a more attractive investment for big money meaning investment flow into fixed income assets and away from equities - hence the downturn in the indices.
When the price is increasing against other currency, we can speak about deflation, not inflation!

If the price will continue grow in long-term USA may face to deflation spiral, like Japan did. It means, because the USD will worth more in the future, people postpone their investments and will consume only the neccesary daily goods. They wait with bigger consumption and investment, so the country's inner consumption decrese while the USD value increase. And because the thriving value of USD, the balance sheet, or foreign consumption will not expand, it can happen US meet with deflation spiral. The interest rate right now 0,25 whitch is really close to zero. After a while the country wont be able to decrease its rate to urge the inner consumption.
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