247 Currency Trading Online Spot
Use Gold Prices and Oil Prices as Benchmarks
Today, we shall discuss two innovative ways of making it big in foreign exchange. Traditionally speaking, when traders forecast currency prices, they use historical data of the currency and plot it over to project its strength. The use and comparison of currencies is the usual way. This time, versatile traders may use other benchmarks for currency trade analysis, and it gives right signals for the trader when and where to buy and sell.
We shall highlight two precious land resources as a means to help traders make the right decision. First is gold.
Before the US Dollar became the benchmark currency for most countries in the world today, gold was lording over as a yardstick in international trade in the economic system called Gold Standard. Today, the gold reserve measure of a country may be used as a barometer for forex traders. And why not? Gold is an unbiased alternative to the US dollar and historically speaking, the use of gold is the grandfather of foreign exchange.
The US dollar and gold have an historic inverse role. Given this volatility, you may use, as said, gold prices in other unique techniques. Let us illustrate an example: Gold prices have good bearing over major currencies. Australia ranks third in the world as the largest seller abroad for gold and likewise, Canada ranks third in the world in producing this precious metal. Thus, if you see that gold prices are moving upward continuously, then you may establish now better positions with the Australian Dollar and the Canadian Dollar. Moreover, you can also monitor the same with the Japanese Yen and the Euro - two currencies that are highly affected by gold standard.
Now, let us tackle changes in oil prices as a means for traders to decide their strategies in currency moves. We know that increasing oil prices have negative effect on the stocks of companies that are dependent on oil because this increases their expense and lessens their profit. In this same way, a country's dependency to oil determines the movement and strength of its currency. This is the experience of the oil-dependent US dollar where a mere increase means negative effects. Moreover, any sharp increase in oil price sends the US dollar into a shock.
However on the contrary, rising price of oil may be viewed as positive to the economies of Australia and Canada. Hence, if you forecast that in the short run oil price will continue to increase, then you can bank on the said currencies to deliver in foreign exchange.