Marks Investing Blog

The above image is of the latest EUR/USD slide down (week ending May 15th 2011).

As a newbie to the world of Forex I am starting to realize that Technical Analysis is not enough to analyze where the market could be heading. The drop above is related to bad news coming out Eurozone about Greece and the other PIGS.

I think the movement of the Forex market is based a lot on how people interpret the news. This “discovery” made sound like an absolute give-in to more experience Forex traders but for newbies I think this is might be of interest.

Additionally there seems to be an important correlation between the other markets such as commodities. For example if the price of a barrel of oil keeps going up for a sustained period of time then a countries economy suffers (if they are deeply reliant on oil) as less people drive to the shopping mall to buy stuff in the weekends and the price of imported goods increases as the cost of transport increases.

And how is inflation impacted by this? More expensive products that people cannot afford because they have lost their jobs as businesses cannot absorb or pass on the increase in fuel (e.g transport businesses).

Its all a bit fuzzy to me right now but this makes sense. If oil goes up then business suffers and the government has to do something about it – maybe reduce the interest rate to spark the economy up – and doesn’t this in turn cause the currency to drop as traders sell the currency?

I now look at the economic news both at the world level and at the country level of the currency pairs I trade (EUR/USD and AUD/USD). With this in mind will the arrest of IMF chief Dominique Strauss-Kahn for possible rape affect the EUR/USD? I am also looking further at Fundamental Analysis as well.