Technical analysis is a crucial part of successful trading, whether in stocks or commodities. An important part of technical analysis is staying abreast of the news. Both stocks and commodities tend to react to the daily news, looking for information that will push the asset either up or down. Such events have been occurring in the Forex trade world due to current events and the Japanese yen has been the hot topic.
The Japanese yen is a widely traded and held currency. It is regularly one of the most active in currency trading and the yen is frequently held in reserves by other governments as part of their investment strategies. This has been the case in New Zealand and recent events there underscored the need for successful Forex traders to regularly monitor the news. Such an effort can help protect the value of current holdings and contracts as well as helping to identify upcoming acquisitions.
Economic Events In Japan
The Japanese economy has been growing at a brisk pace, allowing the government to raise interest on Japanese government bonds in an effort to draw investment back to Japan. The result of this increase in bond rates has a double-edged effect. Investors are drawn to invest in Japanese bonds as hedge funds and the Japanese yen experiences a continued strengthening. This strengthening of the Japanese yen is also has an effect on the Forex markets as the stronger Japanese yen has been making advances against various other currencies.
On The Currency Front
Nowhere is the effect of a strong Japanese yen on commodities trading more evident than in New Zealand. The Federal Reserve of New Zealand sold its holdings of Japanese yen on June 11, 2006 in order to slow down an investment rally that has been created by people borrowing cheap Japanese yen in New Zealand in order to buy New Zealand's bonds and bills. This tactic offers an extra yield over the borrowing costs in Japan.
The result of this technique has been a strong run by the Japanese yen against the New Zealand dollar, with the Japanese yen increasing by 26% over the past year against the dollar. The Reserve claimed that this sustained rally had been costing New Zealand jobs as exporters shifted manufacturing opportunities overseas. While the entire process is about governmental policy, the importance of these events should not be lost on those starting to learn Forex trading.
A Common Occurrence
Successful traders understand one thing. The events that transpire should have an effect on the strategies of investors. It is impossible to trade profitably without having an understanding of the dynamics in the Forex market. This strengthening of the Japanese yen should have investors researching the possibility of continued growth and searching for other potential currencies to pair with the Japanese yen in order to implement more successful investment strategies.
Is The American Dollar Next?
In addition to the Japanese yen, another currency starting to make it back into the Forex news is the American dollar. After a sluggish period in the economy, indications are that the economy has rebounded, jobs are being created and that the dollar will continue a recent period of growth. Again this merely underscores the importance of understanding that following the news can have a positive effect on your commodity investing.
Conclusion
The actual news about the Japanese yen isn’t the most important aspect of this in Forex currency trading for beginners. The key thing to understand is that whether it is the Japanese yen or the American dollar, it is very important to follow the news for information. Whether it is today’s Japanese yen or a different currency tomorrow, the news is a great source for helping the investor find trades.
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