how does the stock market effect forex trading?

deejay1 · #1 10-24-2008, 09:50 AM

with news that the us market was gonna open low i opened up forex to see what happens...i couldnt really track it...but 15 minutes into the low trading the eurusd spiked up.

does a bad market in the us make the eurusd go up?

alan · #2 10-24-2008, 11:11 PM

Quote:

Originally Posted by deejay1

with news that the us market was gonna open low i opened up forex to see what happens...i couldnt really track it...but 15 minutes into the low trading the eurusd spiked up.

does a bad market in the us make the eurusd go up?

Not necessarily. There isn't a strong correlation between the stock markets and a particular currency pair. What does move the forex markets are things like macroeconomic news releases, interest rate changes, massive buying/selling of t-bills, political events.

Just think about it this way, why is it that even though the US stock markets are tanking the USD still goes up like a rocket? Ask yourself that question. Tell me where is the correlation between stock market performance and EUR/USD. Yep, there isn't any at the moment. The USD is moving due to the "flight to safety" Investors are running like scared chickens into T-Bills and the Japanese Yen. This explains the astronomical appreciation of the USD and the JPY. The USD economy is weak and the interest rate is really really low yet it still rises.

mystikdragon7 · #3 10-27-2008, 07:30 PM

Quote:

Originally Posted by alan

The USD economy is weak and the interest rate is really really low yet it still rises.

Just imagine if the feds drop the rate down to %1 like they've been talking about.

alan · #4 10-28-2008, 02:21 AM

Quote:

Originally Posted by mystikdragon7

Just imagine if the feds drop the rate down to %1 like they've been talking about.

Yep, then things start to get mysterious and interesting. If that were to happen common trading wisdom would tell you that the USD should fall, but with so many panicked investors buying up t-bills and with the poor performance of the Eurozone I don't think the dollar would tank that much. It may lose a bit of its ground against the Euro, but against the Yen it would drop further. This is just my 2 cents. We will have to wait and see what happens.

Interesting bit is that after a ton of sell orders my FAP just closed one profitable buy order and just opened another one a few min ago.

mystikdragon7 · #5 10-28-2008, 07:59 PM

Quote:

Originally Posted by alan

Yep, then things start to get mysterious and interesting. If that were to happen common trading wisdom would tell you that the USD should fall, but with so many panicked investors buying up t-bills and with the poor performance of the Eurozone I don't think the dollar would tank that much. It may lose a bit of its ground against the Euro, but against the Yen it would drop further. This is just my 2 cents. We will have to wait and see what happens.

Interesting bit is that after a ton of sell orders my FAP just closed one profitable buy order and just opened another one a few min ago.

I agree with you on that one! But I believe against the yen that it would totally tank.

Oh by the way, did you read about how the government is talking about bailing out the automotive industry now?

mystikdragon7 · #6 10-29-2008, 10:54 PM

Well what do you think Alan, the feds just dropped the rate to %1?

kevins · #7 11-04-2008, 01:31 AM

[QUOTE=alan;800]Not necessarily. There isn't a strong correlation between the stock markets and a particular currency pair. QUOTE]

I have been curious about the correlation between the Dow Jones Industrial Index and EUR/JPY. They really seem to move in sync together, and would love to hear others thoughts on this.

thanks.
Kevin

alan · #8 11-05-2008, 02:03 AM

Quote:

Originally Posted by mystikdragon7

Well what do you think Alan, the feds just dropped the rate to %1?

Yep, but concerns about a slowdown in global economies still looms large, so I don't think it will have much of an impact. Even the typical inflationary pressures such a move would normally generate have been dampened by the astonishingly large drop in commodity prices. I mean I never would've thought I'd see oil dive so much. What can I say, the markets have been on a pretty wild rollercoaster ride.

alan · #9 11-05-2008, 02:04 AM

[QUOTE=kevins;1215]

Quote:

Originally Posted by alan

Not necessarily. There isn't a strong correlation between the stock markets and a particular currency pair. QUOTE]

I have been curious about the correlation between the Dow Jones Industrial Index and EUR/JPY. They really seem to move in sync together, and would love to hear others thoughts on this.

thanks.
Kevin

Hmm, interesting theory. Have you backtested it? That would be only sure-fire way to know if its true or not.

tradingfan · #10 11-11-2008, 02:53 AM

Its pretty hard to believe but its a fact that US market has been hot hard. Upcoming days might get tougher, but thank god we have Forex here. as fgar my observation says Although the situation might get worst, Forex is going to help just for releasing some extra bucks.