If you have decided to trade with currency, then you probably know that the news of the world is likely to have an impact on your profit. When the American President, Donald Trump, decides to enter a trade war with China, there will be a significant impact on the value of the Australian dollar. Even Christine Lagarde, head of the International Monetary Fund, has warned about the trade war hurting world economics.
So, knowing this while trading with currency, you should familiarise yourself with some common forex strategies. We will give you a quick overview of the two most common strategies, where the latter seems to be of utmost importance in today’s market.
Carry Trade Forex Strategy
The first strategy is the “Carry Trade Forex Strategy”. This is where you buy a currency with a higher interest rate than the one you are selling. The profit will, therefore, come from the difference in the interest rate. AUD/USD, as well as NZD/USD, AUD/JPY and EUR/JPY, are popular currency pairs for traders using this strategy. The reason is that these are representatives of a stable economy with little risk attached.
Trading the News Strategy
“Trading the News” is another strategy, and this one takes the world news into consideration. Significant events in one country, especially the likes of America and China, may have a considerable impact on your forex trading and the profit you may or may not make.
Since the forex market operates as a 24-hour market, news with the power to change the market also has an impact 24 hours a day. If your currency pair is AUD/USD, then you must keep a close eye on what’s going on in America. The news you should be particularly aware of is national economics and inflation reports.
Mr Trump and the Australian Dollar
Mr Trump, the American President, is undoubtedly having an impact on many things. Not only in his own country, but globally. After a period with a weak AUD against the USD, the two currencies have finally consolidated around the 0,7100 mark.
The reports point to the risk coming from overseas, more precisely from America and the trade war with China. The President’s new plan is to ensure tariffs on everything China sells to America. This will undoubtedly affect China, and since China is one of the largest importers of Australian natural resources, this will in the end also have a considerable impact on the Australian economy and the worth of its currency.
The news that the American President is going to meet with China’s President in November this year might have been one of the contributing factors as to why the AUD consolidated against the USD.
The ground rule must be to know your forex trading strategy is, and not forget to follow the news of the world every day.