Many people ask themselves, "What moves the Forex market?" As with most economic markets, the key forces behind Forex are demand and supply, and this is a good thing. When you learn about the driving forces, you'll know which assets will do well and which are likely to fall.
Central banks often control the interest rate of an economy via the US dollar. If you buy an asset at a low interest rate you can earn higher returns on your investment. In a strong economy, low rates lead to more growth and higher rates to attract investors who want to make more money. Conversely, in a weak economy, low rates to attract investors who are looking to save.
The US dollar is the world's currency and is used in all major economies. The US is always seen as the engine of the global economy and there are a number of reasons why it is so important to understand what moves the Forex market. The US has long been considered to be the driver of the global economy and if the United States economy is weakening, the global economy is suffering, too.
In a currency market, currencies are bought or sold based on the value of one currency against another. When the value of one currency drops relative to another, it indicates that a person is investing money, while when it rises it indicates that a person is trying to sell their currency.
For example, if a US dollar loses value against a Japanese yen, this means the dollar is weak and could be a good time to buy. On the other hand, if the value of the Japanese yen increases, this means that the dollar should be sold. The reason is that there are many traders of currencies around the world and the price will move in different directions depending on the local interest rates.
Another way to look at what drives the Forex market is to consider the supply side of things. Because Forex trades are done via brokers and banks, there are lots of brokers and banks involved in trading. This means the supply is very large and prices can increase and decrease very quickly.
The supply of currencies in circulation is the largest factor in determining what moves the Forex market, because it dictates the speed of changes. Because of the size of the supply, a big change can sometimes have a big effect on the prices.
Central banks are the biggest force in controlling the supply because they set the interest rates of currencies and, which determine the supply. If the central banks are not doing their job, the value of the currency will fall and vice versa.
The central bank may try to stimulate the economy through interest rate increases and cuts in spending. The Federal Reserve in the US can also change the policy by printing more money, which lowers the value of a currency. Central banks, including the Bank of England, the Bank of Japan, the Bank of Canada, the Central Banks of the Netherlands, Swiss National Bank, and many others, have their own currencies. so they all have a say on what moves the market.
If you want to find out what moves the Forex market, you need to know who is buying and selling the currencies. By tracking the buying and selling activities you will be able to see when the supply and demand for currencies are changing and how that changes as the value of one currency moves against another.
There is a simple explanation for why traders need to know this information. During economic recessions, when the value of a currency is going down it is often a good time to sell. This is called a bear market because the economy is slowing. This means it is better to sell before the value of the currency falls.
However, in a bull market it is always a good time to buy because the economy is accelerating and the market is bullish. It is a good time to buy because the economy is going up. The two opposite poles of this are called a bearish market and an uptrend.