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US Dollar Taking Off Against the Yen

Trading the US DollarEarly on Friday morning, the U.S. dollar hit a five year peak against the Japanese yen in Asia’s trading market. This might not last long, though. The Fed is set to make some major decisions before the end of 2013, and this could have a powerful affect on the direction of the USD over the coming weeks. This meeting is taking place next week and it will likely be decided how the bond buying stimulus should be treated in the future. It is currently thought by experts that this process will be scaled back, but nothing is yet set in stone.

The fact is though, the U.S. economy is doing much better right now than it was even a couple months ago. Changing the Fed’s policies at this point might have a bad effect upon the rest of the markets at this point. Current retail sales data out of the U.S. indicates that numbers are consistently going up.

For short term traders, the answers on what to do might be a bit more complicated than this, however. The Christmas holiday is quickly approaching, and every year at this time, retail sales do tend to go up. So while the data indicates that markets are healthier now than in the recent past, the numbers backing up these facts will probably prove to be just temporary. The U.S. dollar, although moving in a strong fashion right now, will probably not keep up this action past the New Year. The Fed’s actions next week might change this, of course, so if you are trading the USD in any pair–whether it be in the Forex market or through binary options–you do need to proceed with caution. Odds are for the next several days the dollar will keep improving as long as relative conditions remains the same. But you do need to account for the holiday boost in sales and the decisions that have yet to be made by the top U.S. fiscal policy makers.
Price is pushing to highs
There is another school of thought that the dollar is being overbought right now, and even if the Fed does nothing, the JPY/USD pair will correct itself in the very near future. This is a valid concern, and it should be a very good prompting for you to rethink your position on the dollar. A lot of buying of the dollar means a lot of selling the yen, and this type of action rarely lasts for long before things start to move back in the other direction. It’s typically bad advice to trade against a prevailing trend, but in this case, you need to at least consider the possibility since there are so many factors indicating that it might happen soon.

Position traders–those looking at a trade lasting a couple weeks or longer–have an interesting dilemma at this time of the year. Sales are going up right now as people rush around to prepare for the end of the year, but it’s pretty obvious that this is temporary. So while businesses are seeing more income, the odds are that will begin to taper off very soon. Stock prices of retail companies might jump up for a few days, but you should be prepared for a sell off very soon. This means that although prices might be currently going up, you should still be preparing for upcoming short sales. The majority of traders will avoid these, but this only means that binary traders will be getting the best of things in the near future since there are almost no barriers to entry within this particular marketplace. Instead of needing several thousand dollars to execute a trade, most brokers will allow you to have worthwhile trades for as little as $10.
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