3 Important Factors Affecting The Us Dollar

3 Important Factors Affecting The Us Dollar

When it comes the decision whether you should buy or sell dollars, it all boils down to the economy activity is occurring. Why? Because a strong economy will attract investment all over the world. Safety factor of funding and the ability of the return on investment will be the choice of the investor.

On the other hand, American consumption to the needs of import goods and services from other countries has caused the dollar to flow out of the country. Although the U.S. become the engine for the world economy, currently the us has become the country's largest pengutang for consumption.

The U.S. was able to attract foreign capital to offset the trade deficit (if imports are greater than exports then the balance sheet transactions running will experience a deficit).

Factors that affect the value of the Dollar

The bottom line is that when going to take positions in the dollar, forex traders actually need to know the various factors that affect the value of the dollar.

This methodology can be divided into the following three factors:

Supply and demand factors
Market sentiment and psychology factors
Technical factors

Supply Versus Demand For Dollar

When we do export product or service then the activity will create demand for the dollar because the exporter requires a payment for goods and services in the form of the dollar should be converted from local currency into dollars. Therefore, exporters will sell currencies and buy the dollar so they can make the payment.

Another example is when the u.s. Government or the large American exporters published bonds to raise capital when bonds bought by foreigners, once again the payment will be made in the form of dollars.

Likewise, if economic growth occurred in the u.s. will bring foreigners to own shares of the u.s. company then again stock investors will sell the local currency to buy dollars to pay for the stock purchase.

Market sentiment and psychology

Also note if the u.s. economy weakened, slowing consumption and unemployment on the rise? and then the US was faced with the possibility that foreigners will sell bonds or stocks where investors again want the cash from the sale of stocks and bonds. This activity will make dollar for sale and purchase on the local currency investors.

Technical and Fundamental factors

As a trader, we must measure whether the supply of the dollar will be greater or smaller associated demand for dollars. To help determine this, we need to pay attention to various news and events released by the Government economic data such as salary, GDP data and measurement of the information economy that can help us to determine what is happening in the economy and predict whether the economy strengthens or weakens (read well Do you know your GDP economic Data to trade?).

In addition, we need to determine public sentiment about what the market thinks. To add to the mix of estimate, then the historical patterns generated on the level of support and resistance, technical indicators and so forth will be important.

Many traders are confident that these patterns will be repeated and can therefore be used to predict movements in the future.

The recession of 2007

Economic conditions during the recession that began in 2007 has forced the us Government to play a role that is unprecedented in the economy. Due to the receding economic growth resulting from major financial assets are deleveraging going on.

The us Government should take a policy to increase government spending and keep the economy running. The purpose of their spending is to create jobs so that consumers can get money and increase consumption thereby encouraging growth needed to support economic growth.

The Government took this position at the expense of the deficit and the national debt will increase. This increases costs by essentially printing money and by selling government bonds to foreign Governments and investors that resulted in an increase in the supply of dollars. Therefore as a result the dollar depreciates.

Conclusion

With an eye on the Dollar Index chart will give you an idea of how the price of the dollar against other currencies. By looking at the patterns on the chart and listen to the sentiment in the market as well as monitor the major fundamental factor affecting supply and demand the traders can develop the big picture flow of dollars.

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