The whole world is at war right now… and most people don’t even know it.
You see, this isn’t a traditional “hot war” like the one in Ukraine. There are no guns, tanks, or missiles on this battlefield.
Instead, currencies are the weapon of choice. And the entire global financial system is at stake.
It all started when Russia was heavily sanctioned for invading Ukraine…
In retaliation, the U.S. was able to instantly freeze half of the Russian central bank’s $630 billion in holdings. That’s about 35% of Russia’s Gross Domestic Product (GDP).
While this action was meant to cripple Russia’s economy, it was also a wake-up call to the rest of the world.
A Wake-Up Call
America’s sanctions on Russia have made China, India, and other large global economies very nervous.
It was a not-so-gentle reminder that the dollar is still the king, and America still calls the shots on the global stage.
But that’s just half the story…
The other half has to do with inflation reaching 40-year highs and the Fed’s aggressive raising of interest rates to cool an overheated economy.
The dollar has steamrolled almost every other currency in its path this year.
This has forced central banks around the world into their own defensive postures, because a surging dollar can be a death blow to an unprepared nation.
And it’s all due to the dollar’s status as the reserve currency of the world…
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Oil, natural gas, and other essential commodities are all priced in U.S. dollars, and a stronger dollar makes those other commodities more expensive.
By fighting inflation within its own borders, America has effectively worsened inflation everywhere else around the world.
Whether they want to or not, central banks have had to scramble to raise their own interest rates. This provides their currencies with some support to keep their inflationary problems in check.
A central bank will raise interest rates to cool down an economy that’s been running a little too hot. This tends to strengthen a country’s currency.
On the other hand, lowering interest rates is meant to stimulate an economy. This tends to weaken a country’s currency.
Essentially, low-interest rates mean low energy and low volatility in currency markets… while higher interest rates mean higher energy and higher volatility.
This Market Is on Fire
All of this volatility has set the foreign exchange market (forex) ablaze. There hasn’t been a better time to trade forex in over 14 years.
Let me explain…
Many countries are trapped with inflationary pressures, forcing them to raise interest rates… which can create extreme volatility in currencies.
As a result, multiple major currencies are trading at levels no one has seen in decades.
Right now, trading forex is the best way to take advantage of the volatility caused by all these central banks, while simultaneously insulating your portfolio from risks.
That’s because forex is entirely uncorrelated from the stock market.
Whether stocks are going up or down, there’s going to be a separate and unrelated trade in the forex market.
Lately, we’ve been in an environment where stocks, bonds, and cryptocurrencies have all come crashing down together. When that happens, there’s only one place to turn…
Forex is the best diversifier you’ll find out there.
That’s why next week, I’m going to break down exactly how forex trading works and how you can profit from what’s going on in the world right now.
So, stay tuned. This is a market you don’t want to miss out on.
Happy trading,
Imre Gams
Analyst, Market Minute
Reader Mailbag
In today’s mailbag, Currency Trader members thank Imre for his recent recommendations…
Awesome. I was the one that asked about the three-wave correction and more than anything, I was really just prompting you to walk us through it and you’re doing that just fine. Thanks so much!
– Tony C.
I’m one of your charter subscribers to Currency Trader and want to share my initial success. I invested in the subscription, then funded my Trading.com forex trading account with $1,000.
Trade No. 1 was a timid 2000-unit size – made a few bucks.
Trade No. 2 was a less timid 5,000-unit size – took a medium size haircut. Leaving me with about a 10% equity drawdown.
Trade No. 3 was the USD/JPY recommendation. I sold 5,000 and watched it draw down as soon the recommendation came out. I watched the price action of the USD index and how it was doing against other pairs, and I began to feel confident we were on the right side of that trade.
So, when the one-hour chart hit the 100 MA, I sold 6,000 additional and hung on. Now my average sell was 146.55 with 11,000. This morning the USD tanked, and your recommendation surged. I took off 6,000 at a nice profit as you recommended this morning, plus the balance of 5,000 dropped down to the pre-set 142.00 TP.
That was a great trade and shows the value of sticking with the program on every trade. Nice work. Thanks!
– David W.
Thank you, as always, for your thoughtful comments. We look forward to reading them every day. Keep them coming at [email protected].