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The events of the global equity markets are making it necessary for investors and traders to become skilled in Bear Market trading strategies. There are few better than trading the correlations between the S&P and the USDJPY. This edition explores this important Phenomenon.

Most forex traders select the EURUSD as their favorite currency pair. That is reasonbable because it the Euro is the most liquid of all of the pairs. Its very popular. But it is not the most correlated to the US Stock market. The best Currency pair to trade is the Dollar /Yen pair or the USDJPY. Why?

Think of it this way: The Yen is the most leveraged currency in the world. It can be borrowed at 0.05% and that means that nearly 1 trillion dollars in Yen are borrowed to be placed elsewhere. Borrow at 0.05% and place the funds in the US equity market or another currency, or another asset. The appeal for profits, also known as a “risk appetite” is insatiable. So when the US market is up, its up because money flow is going into it and buying US equities. A great deal of money is coming from borrowed Yen. This means the USDJPY pair goes up when the S&P goes up. The charts below show this synchronicity on a 1 minute by 1 minute basis.

Currency fluctuations don’t occur in a vacuum. They occur due to changes in a number of different economic and geopolitical factors, which in Forex market lingo is termed fundamental analysis. Factors such as interest rate changes, the housing market situation, gross national product numbers, and the unemployment level all influence foreign exchange rates at one time or another. The interest rate factor is one of the stronger influences of currency changes, and those interest rate decisions are determined by the Central Banks throughout the world.

What is a central bank?

Central banks are responsible for determining monetary policy in a particular country or even in a grouping of countries, like the European Union. The central bank is a completely independent body so it’s not influenced to make any decisions based upon political favor. The most well known central bank is probably the U.S. Federal Reserve, where any changes in interest rates or other monetary policy actions are closely followed by the world. The relatively new central bank (created in 1998), the European Central bank, also yields great importance and influence. It reigns over the 15 European countries that have adopted the Euro as its base currency. Some other central banks include the Bank of England, Bank of Canada, and the Reserve Bank of Australia.

The central bank influences monetary policy through a number of means, two of which are interest rate changes and control of the money supply. Interest rate changes refer to changes to both the discount rate (interest rate charged to banks for overnight loans) and the Federal funds rate (the rate that banks charge each other for overnight loans). These two rates then in turn influence the rates that banks charge their customers (prime lending rate), from mortgage loans to car loans to credit card rates. These rate changes then usually affect a country’s exchange rates.

As far as controlling a country’s money supply, the central bank can choose to either increase or decrease the amount of money in circulation. If the money supply is increased (more attractive interest rates), demand increases, which results in more spending and higher exchange rates. If, on the other hand, the money supply is tightened, then demand decreases (higher interest rates), which results in less spending, and can eventually result in less attractive exchange rates if demand levels drop too much.

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OVERVIEW
This series provides a unique and powerful get-started course on how to trade forex.
It covers fundamentals, technical analysis for forex, as well as strategies and tactics.
You will learn how to scan the markets,evaluate positions, identify high probable trades,
when to put on the trade, as well as managing risk.
You will learn more in this DVD than in seminars costing thousands of dollars!
It will take you to your next level!