First, the US government shutdown happened. Then the price of the dollar saw a brief spike, before tanking at an alarming rate. Now, America could be poised to grind to a halt once more, and forex traders everywhere are preparing to capitalize on potential market volatility.
Savvy forex traders were not surprised by the impact of the first US government shutdown in December 2018. There can be only one outcome for a nation’s currency when you announce to the world that your government is closed for business. For traders, to buy or to sell USD was not the question; they focused solely on how much they should invest and for how long. The volume of ‘Sell’ orders increased exponentially and generated profits day after day for over a month. Traders everywhere rode the stormy market sentiment, and what a ride it was.
When the price reversal finally happened 35 days later, ‘Sell’ positions were quickly closed. The dollar steadily strengthened and transitioned into a bullish phase. Recently, there has been speculation that a second US government shutdown is on the horizon. If it were to become a reality, we could see another USD price crash. As a forex trader, are you ready to capitalize?
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Hard times don’t necessarily have to be bad times. Ask yourself:
- Will there be another government shutdown?
- How will it affect 2019 USD prices?
- What can you do to capitalize on volatility?
You might not be personally driving the economy, but you are a passenger on the bus; being ready for bumpy conditions only seems sensible.
Will there be another government shutdown?
On January 25, Trump agreed to allow the federal government to resume normal operations for a period of three weeks. Federal agencies are up-and-running once more and USD is on the rise. Unfortunately, with the respite set to end on February 15, there are already signs that this positive sentiment may be short-lived. Yes, Trump agreed to sign a short-term spending agreement with Congress, but that deal will only keep the government running until mid-February. Trump was very vocal on what will happen if things don’t go his way, which has salted fresh wounds and stirred market fears.
“If we don’t get a fair deal from Congress, the government will shut down on February 15, again, or I will use the laws afforded to me by the Constitution and the United States to address this emergency.” President Donald Trump.
While Trump’s statement doesn’t constitute a guarantee of another government shutdown, such comments can affect market sentiment and should be taken seriously.
How will another government shutdown affect the forex market?
Firstly, even if Trump could reach a deal with Congress for a $5.7 billion border wall, a positive outcome for USD would be unlikely. While massive construction would create jobs, the nation would not reap the benefits in the near future, if at all.
On the flip side, another government shutdown could have a devastating effect on USD’s already fragile sentiment and cause yet another steep fall for the currency. But that doesn’t have to be bad news for you.
What can you do to capitalize on the volatility?
Weather forecasts and market forecasts are similar in many ways. Both can predict approaching storms, and both are open to a certain margin of error. The fact remains though that forecasts are right more often than they are wrong.
In the world of trading, if foresight were as exact as hindsight, we would all have acted on a myriad of profitable market forecasts. With the threat of a second government shutdown on February 15 firmly on the horizon, traders are now in a position to anticipate and act on USD trading opportunities. As happened in December, another government shutdown would likely provoke the price of USD to tumble. Such a drop would mean that a buy order would result in losses, and a sell order would yield profit.
Events like this don’t happen every week, so having a fully activated account and waiting for an opportune moment is wise. In today’s competitive times, being able to identify an opportunity and get ahead of a price curve is definitely a good start.
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