It seems that Congress is alowly but surely coming to some form of compromise on the issue of the Big Bailout of the US financial sector. Regardless of what concessions the US government will make, it is clear that the staggering amount of 700 Billion Dollars will be poured into the market in an attempt to bulster the crippled financial firms and to help them survive the financial storm we’re experiencing.
For us, as Forex traders, a significant occasion such as the Bailout cannot go unnoticed. The truth is that we must prepare ourselves to what will happen.
What will happen to the value of the USD in the short term?
I believe it will lose value for the simple reason that there will be more of it. The administration will have to print more dollars to feed the hungry and desperate markets. The law of supply and demand apply to the Forex market just like they do in any market. The more of something there is the less valuable it is. The Dollar is no different.
There is no way that something as big as a 700 Billion bailout will not result in a depreciation of the value of the USD. There is simply no way this will happen.
What will happen is that in the short term, we are likely to see the dollar going down. In the long term, if the Bailout proves successful, we may see a recovery.
In these fluctuating market, timing will be the key. I recommend arming yourself with some form of signal generating software like Forex Killer to help you prosper in this period of time.
