Forex Trading Blog | Strong vs Weak Dollar

Forex Trading Blog | Strong vs Weak Dollar

This Forex Trading Blog is going to talk about one of the most widely used terms in Forex Trading. When talking about the Dollar, most traders associate the dollar to either be weak, or strong in that given time. For most beginner traders, this does not make too much sense.

The obvious definition that most traders come up in their head is: “Weak Dollar means it is not doing good, Strong Dollar means it is doing good.” In a sense you are correct, however we are going to define it a little better for you.

Let’s say for example that that you are going to inspect a currency pair and one of them will be the US dollar. We will use this forex trading blog ‘s most popular fake currency, the XYZ currency. There is a strong historical background of the XYZ/Dollar having an exchange rate between .3-.8. When the exchange rate is .3 XYZ/Dollar, this will signify that the dollar has gotten weaker since the exchange rate has dropped in favor of XYZ.

This means that the dollar has lost some of it’s buying power and is not looked at as being too strong since it is hovering around the exchange rate’s low. However, on the flipside, if the exchange rate changed to .8 XYZ/Dollar, then that is a slamdunk for the dollar. If it is trading around .8, that means that it is bouncing off of the historical highs, and the dollar looks very bullish.

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