Are You Prepared For A Recession In The U.S.?

Since the start of the year we have seen a major economic slowdown with the global equity markets. The U.S Dollar depreciated against the EUR by almost 25% since 2006. A weaker U.S dollar is highly correlated to higher commodity prices, i.e. $100 barrels of oil. So before stocking your bunker with durable foods and preparing for the worst, I would first like you to ask yourself these three questions!

The main reason why investors should seriously consider the Forex Market in these extremely uncertain times is diversification. The Forex Market is a separate asset class and is often times a nice hedge against economic short falls in other markets. There exists a strong history of currency trading; ever since the world has been set in motion, we have been using currency or some form of it, to barter and trade with each other, “I’ll trade you my goat for your rice". This type of interaction is never going to go away.

The Forex Market may be just the answer you are looking for. In the foreign exchange markets, one currency is always strengthening in relation to another. Therefore currency traders can always find a bull market and the trading opportunities it offers.

Another reason to consider the Forex market now, is because by in large, currencies are also linked to interest rates. The Fed recently had an emergency rate cut of 75 basis points. Moreover the last time the fed cut the rate by 75 basis points was 24 years ago in 1984. This had an immediate impact on the U.S Dollar, causing the dollar to fall by nearly 300 pips against the Euro and other major currencies. Most analysts are expecting the FED to cut the rates again in the near future, possibly as low as 2.75%, making the U.S Dollar one of the lowest yielding currencies in the developed world.

For many currency traders this has “opportunity” written all over it.

Posted in: Forex