Market Panic Spreads to Safe Havens, US Dollar Remains King

By Learn To Trade

March 19 2020
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Promoted by Learn To Trade

With one of the wildest weeks we have ever experienced in financial markets unfolding right now, those who know the secrets to trading the forex market stand a good chance to make massive profits.

Market Panic Spreads to Safe Havens, US Dollar Remains King

While the overwhelming majority of traditional stock investors now lose huge amounts of money as the stock market is selling off heavily, forex traders have a secret weapon: they know the power of short-selling.

By being able to trade the market profitably both up and down, there are now unprecedented opportunities in the forex market. Among these are of course the opportunity to short-sell certain stock indices, for those of you who have access to those instruments, as well as going long on the ultimate safe-haven of the past couple of weeks: the US dollar.

US dollar is the safe-haven

To start of this weekly update, we will therefore take a closer look at the US dollar to try to understand what’s going on and where we are likely going from here.

As you can see from the chart below, the recent US dollar rally can clearly be seen in the unusually large and V-shaped chart of the US Dollar Index (DXY). Although this index is not a forex pair per se, and isn’t much traded, it does provide a good representation of dollar strength by comparing the greenback to a basket of currencies from the US’ biggest trading partners.

https://www.tradingview.com/x/rP2MgL6M/

After the latest price action in DXY, we have to look all the way back to April of 2017 to find similar prices. This also means that there is currently very little resistance holding the price back, and we may very well see an even stronger US dollar in the time to come.

USD/AUD soars

The US dollar strength is also evident in many other forex pairs, and perhaps most significantly in terms of so-called “commodity currencies” like the Australian dollar. The USD/AUD pair is really surging to an extent that we very rarely see in the forex market.

https://www.tradingview.com/x/B2a0IZOH/

The pair has now broken up above of the upwards pointing trendline, which by itself suggests an even stronger uptrend. At current levels, however, it’s difficult to say when the surge will reverse, as we are already above all recent highs in this pair. To find similar levels as we’re seeing now, we need to go all the way back to early 2003, when the rate was also 1.7 AUD for each USD.

But although the current levels are extreme, and the move has also happened exceptionally fast, we are certainly in unchartered territory now with both an oil price war and global “shutdowns” posing a major threat to the world economy. If this is a situation that continues for much longer, we will most likely see even more extreme moves in both forex and the broader financial markets in the time ahead.

Join our new trading seminar series

To learn more about how you can take advantage of the opportunities that now exist in the forex market, don’t hesitate to join one of our free forex trading seminars around Australia. As the global leader in forex trader education for ordinary people with no prior background in finance, we have already trained thousands of people how to profit from the markets, and we would love for you to be the next one!

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