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Currency Trading: Who is Offering Imports?

Currency Trading

Learning what is being imported is a part of the entire discussion on imports. It can also help you see which currencies might be affected by the current import movements since more than one currency can be affected. In currency trading looking at the global picture is paramount to your success. Oil is always a good lesson for this import topic because it involves three currencies. The first is the country requesting the import. They have to switch their currency for USD. The payment for oil is in USD, thus the country receiving the USD has a choice to make. They can repatriate money meaning they can bring the USD to their shores and exchange it or they can keep the USD. If they exchange it the demand for the USD goes down while the home currency increases.

From Country to Currency Trading

Currency trading is all about the relationship of two currencies at least. Depending on the situation as described above you might need to focus on other things like a third currency. In general though you can look at what is being imported to one country, examine the country it is coming from and form an opinion on how both of those currencies are going to trade.

Another example to look at is the close relationship between the USA and Canada. Australia has a similar relationship with New Zealand, but the USA/Canada relationship is a better example simply because of the shared border. Half the goods and services Canada has are imported from the USA. The Canadian economy and dollar are very sensitive to any modification in the USA. For currency trading if Canada sees the USD go up then it will take more CAD to switch to USD for the purchase. If the USD goes down then it is a good time to buy for Canada since their currency will go further to get USD. Of course everything has a balance.

Currency Trading Balancing Out

Typically there is a checks and balances system to currency trading for countries. When a currency is in demand it is eventually going to increase to a value other countries are not going to trade in. It leaves the unnecessary goods and services behind. The currency starts to lower while the home currency gains, and then it is time to import again. If you can look at the export and import relationships along with the currency values, it will be easier to see when there are movements in either camp.

For currency trading purposes you should only look at the countries that are affected by the imports. You do not want to have too much information to cull through as you make a decision. There are rare cases in which you need to watch other countries like the oil situation. You also want to have a pulse on the USA since their news and economic reports can switch trends even when the country has nothing to do with the current imports. China is another country, especially when trading AUD, to pay attention to.

 

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