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Why USD news affecting other currency?

Discussion in 'Beginners Bootcamp' started by Azlan00IM, Jul 2, 2015.

  1. Azlan00IM

    Azlan00IM Private

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    I found out that even if the currency pair is not related to USD, EUR AUD for example, it is still somehow being affected by USD news. My position was suddenly reached stop loss in a few minutes. Why is that?
     
  2. WatanFX-Rep

    WatanFX-Rep WantanFX Representative

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    Most currencies are ultimately hedged against the reserve currency which is the US dollar.

    It is mostly in the form of receivables/debt instruments, such as the treasury bills, notes and long term bonds.

    Every commerce related trade in the world is directly or indirectly, technically or fundamentally, linked to the US dollar.

    Please study the bond markets, specifically how credit rating of government bond eventually impacts its respective country's national currency.
     
  3. Pharaoh

    Pharaoh Colonel

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    As the dollar whipsaws against other currencies, it's not uncommon to see a quick doji on some unrelated pairs during a major USD news release.
     
  4. AmanK

    AmanK Recruit

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    First of all as we know there are hundreds of currency pairs that are interconnected to each other. Like taking your example we have a pair of EUR/AUD on the other hand we also have a pair of EUR/USD and AUD/USD. Thus any news on USD will make changes with some percentage on the latter currency pairs; the amount of change depends on the type of news. Thus the effect on the latter two currency pairs will automatically affect currency pair of EUR/AUD.
    Suppose, due some news on USD the Currency pair of EUR/USD appreciated by 2% and AUD/USD appreciated by 1.5%. Now mathematically cross multiplying the pair EUR/USD = AUD/USD, we cancel the common term i.e. USD. So the net effect on apperception of respective currencies will thus effect remaining pair EUR/AUD.
    At the end you should also be concerned about different factors like type of news, country economy, globally affecting factors. We should also look technically and fundamentally what that pair is predicting.
     
  5. nahiyar

    nahiyar Private, 1st Class

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    USD is major currency all over the world that is why changes in its trend affect on other currencies too. All major currency look like they are interrelated . You can see their daily charts to see effects of one currency to other currencies. USD Is mostly traded currency ,Its low or high positions determine fundamentally and technically other pairs.
     
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  6. Leeminho

    Leeminho Recruit

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    Is that the power of US?
     
  7. bigdolly

    bigdolly Sergeant Major

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    It's because financial system is a closed circle and such big player as USD will always affect other currencies in case something wrong goes with it. Studying this correlations is one of the most profitable trading strategies you can develop.
    So you're on the right way.
     
  8. Ty_jowe

    Ty_jowe Recruit

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    USD influence on each currency in the world indirectly. And I think depending on the news situation in pair can change. That means that on some currency that influences more and on some less.
     
  9. arigoldman

    arigoldman Recruit

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    Thank you!
     
  10. margin

    margin Private, 1st Class

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    USD is the main currency in the world. So the rate of USD determines the rates of many currencies all around the globe. For this reason any major news event related to USD cause a massive moves in several pairs.
     
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