Interpreting The Future Of The With The Oil Marketplace And How It Affects Trading Forex
Why should you worry about the worth of oil if you are not trading oil?
If you're trading currencies, there's one very good reason. Many of the most important currency trading pairs rise and fall on the price of a barrel of oil. The price of oil has been a leading indicator of the world economy for years, and experts predict that that will not be changing any time soon. The connection between the price of oil and the economy of many countries is based on a couple of simple facts:
1. Countries with healthy supplies of crude oil benefit economy-wise from higher oil prices.
2. Countries who depend on imports for their energy needs benefit from lower oil prices and lose when oil prices rise.
3. When the economy status of a country is strong, its currency is also strong in the forex trading industry.
4. When the economy in a country takes a downturn, its currency loses value in the forex rate.
Remember from basic economy courses that higher oil prices act to put the brakes on consumer spending. This will be true as long as the major source of oil for industrialized countries is petroleum based. The price of all goods produced hinges on the price of a barrel of oil. Experts who watch the oil market are split on which way oil prices are headed, and just how long. At the year's beginning, oil had already broken that point, and was selling at $42.50 a barrel And while prices dropped for a short period, at the end of the year, they were still 45% higher than at the beginning of the year. The conservative predict a price of $80 per barrel. The more aggressive are calling it at $100.
What will this mean for the forex market?
In the foreig exchange market, exchange rates are often predicated on the health of a nation's economy. If the economy is robust and growing, the exchange rates for their currency reflect that in higher value. If the economy is faltering, the exchange rate for their currency against most other currencies also stumbles. Knowing that, the following makes sense:
1. The currency of countries that produce and export oil will increase in value.
2.The currency of countries that import most of their oild and rely on it on their exports will drop in relative rate.
3. The most profitable trades will involve a country that exports oil vs. a country that depends on oil.
Based on those 3 ideas, the masters are keeping their eye on the CADJPY pairing for the most profitable trades.
Article Source: FxTradingStock.com
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Learn more about Forex Trading Success . Stop by Devon Reyes's site where you can find out all about how to trade forex successfully and what it can do for you.
by: Devon Reyes
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Word Count: 447
Date: Fri, 24 Sep 2010
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