The US dollar defied expectations in 2018, rising by over 10.5% against a trade-weighted basket of competitors. Forecasts that the ‘rest of the world’ (RoW) would catch up proved misguided. In the end, RoW fell even further behind, and the dollar surged ahead.
Trading USD: The right time
The first boost came after the US Congress approved an extension of the US debt limit in February. The approval of a further $300bn in government spending, suggesting substantial stimulus, further supported the greenback. The dollar shrugged off so-called ‘twin deficit’ fears and rallied higher as markets took the view that increased growth would offset the cost of borrowing.
XAUUSD and other metals
In March the dollar took a temporary hit as the first salvo of the tariff war began with duties on aluminium and steel. Gold, being the usual safe bet, had to step back as fearful investors chose the USD as their safe-haven of choice.
Economics and the USD
The dollar motored higher in April as the US economy really started 'cooking’. Growth in Q2 rose 4.2%. US interest rates surged on expectations of higher inflation. A major landmark moment was when the 10-year US Treasury bond yield rose above 3.0%. The dollar Index rose over 2.0% in April alone.
USD vs emerging markets
In May, the dollar continued to rise after the collapse of the Turkish lira began a backslide for other fragile emerging markets (EM). Not long after, the Indian rupee, South African rand, and Indonesian rupiah had all joined the list of EM casualties. The currencies most at risk were those with high dollar-denominated debts which grew more expensive to service as their currencies devalued against the buck. This began a vicious cycle of increasing unaffordability, devaluation and even less affordability. The trade-weighted dollar extended its lead over the pack, rising over 2.2% in May.
USD Interest rates
Midyear the dollar paused for a rest. It further eased in August and September on the view that the US economy had peaked and everything would be downhill from here. A rise in short-term interest rates made hedging US assets more expensive in the Autumn further weighing on the dollar.
As Q4 began the dollar ‘got its act together again’ and recovered. Growth continued to surge higher, registering a 3.5% rise in Q3. Expectations interest rates - the main driver of currencies - would also rise, further fuelled the rally. Fed Chairman Powell poured gasoline on the fire by saying the Fed would raise base interest rates to beyond 'neutral'.
The Democrat victory in the US-midterms sent the US dollar lower but only temporarily. Safe-haven flows from trade war fears triggered a recovery but then eased in November after China and the US signed a ceasefire at the G20 summit.
The dollar ended the year mixed as fears of economic slowdown weighed. Trade tensions re-emerged after the arrest of a high-profile Chinese business executive in Canada on charges of defying US trade sanctions, raised the prospect a return to a diplomatic standoff between the two superpowers.
Interested to get access to the global forex markets through Exness?
Your 4-step guide to opening a trading account
Step 1: Getting registered
It's very easy to open an account with Exness. Click here to open the sign-up page in a new tab. If you want to get everything done in the next 10 minutes, be sure to have a credit card, ID, and, proof of address by your side. You can choose to open a demo account without these things. Either way, everything you need to know is here in this two-minute video. Pause the movie as you go through the first three steps.
Tip: Account type depends on the amount you wish to deposit. Leverage is effectively an interest-free loan that the broker offers. It allows you to make a large investment from a small deposit. If you are looking for high profit with high risk, a higher leverage might be right for you. If you prefer slow-burning safety with lower results, then keep your leverage low. You can never lose more than you have, but higher leverage means faster results... both good and bad.
Step 2: Prove who you are
Exness takes security very seriously, and they check every client signing up. Just like opening a bank account, you'll need to prove who you are before getting access to the global markets. Watch this one-minute video to see how.
Tip: While you're waiting for your real account to be approved, open up a demo account and start getting to know the trading platform.
Step 3: how to get access to the market
Trades are made using the award-winning MT4 trading platform. Inside the box of the demo or real account you'll see a gear cog. Click the gear cog to make a deposit. Use the passwords provided in the email. Click the gear cog again and select SIGN IN TO MT4 WEBTERMINAL then follow this one-minute video. You're about to make your first virtual trade on the real markets.
Step 4: making a trade
As a default, the top currency pair on the list will have an open chart. Right click on the chart and select the “close” option.
As a professional trader, selecting the right pair requires some research. For a first-time test, any pair will be sufficient. Drag a pair from the list of currencies on the left side of the trading terminal. The old saying goes, “what goes up, must come down.” Obviously, this principle goes the other way too. Your mission is to find a moment when the price direction is going to swing or reverse. If you feel the price is about to go up (bullish), then BUY, if it looks like it’s been trading high and the price has started a downward (bearish) trend, then SELL.
Open a trade
There are many ways to open your trade. You can select from the buy and sell options on the top left of the chart. Preferably, double-click the currency pair on the list. Right click on the chart when you’re ready to make your first trade. Time to set the volume depending on how confident you are in the direction you are forecasting. This is the perfect time to set your stop loss and take profit. Click the arrow to the right of the stop loss and take profit prices.
Note how the blue and dark red lines in the popup graph sit above and below the buy(ask) and sell(bid) price. In the example, we traded long (buy) and got a message confirming the order was successful. If you get an error, your volume was too high for your balance, or your stop loss/take profit was too close to the spread. Remember, every order starts as a negative because of the spread. Be patient. Your take profit will activate when the time is right, and your stop loss is protecting you. To close an order, you have three options. Click the X on the right or right-click the order. If you double click the order, you can close or modify the order.
You now know how to make a trade. Forex trading can be an exciting way to spend your free time, and you'll actually learn some real-world skills that will serve you well throughout your lifetime. Be patient, learn, and who knows, you might one day be one of the lucky few full-time traders. How will you spend your day?
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This article is a marketing communication and does not constitute investment advice or research. Its content represents the general views of our experts and does not consider individual readers’ personal circumstances, investment experience, or current financial situation.
This article is not prepared in accordance with legal requirements promoting independent investment research, and Exness is not subject to any prohibition on dealing before the release of the article. Readers should consider the possibility that they may incur losses. Therefore, Exness is not liable for any losses incurred due to the use of its articles. Please note that past performance of an asset is not a reliable indicator of future results.