Interesting Week in Forex Trading Arena

This week has been a strange and yet interesting week on the Forex Trading arena. The volume has been incredibly light, due to end of summer festivities in the US and Canada and Western Europe, however the flow of data and information has not ceased.

We have seen officials declaring the recession is over, and yet only a few hours later a piece of data comes out that contradicts that idea. And we have seen the Dollar getting bounced around.

September in the stock market is normally the worst month, about an average of 3% loss are recorded each year since 1929. While October is the “crash month” (last year alone the market fell 13% in October) the downfalls are few and far between – so September is the hard month.

A reason for this is that people come back from vacation and pull back their investments to gage the market and see what has happened – a portfolio reshuffle is how brokers define it.

In the Forex though, it is different: A down market typically means a stronger currency and although this works out most of the time, this year, 2009, we are not seeing this trend.

The worries that investors have now are no longer just about which company will do better next year, or which company is poised for a breakout, the concern is based on governmental activities and it is affecting the Forex’s relationship to stocks.

As currency is a true indicator of how strong a country is economically, traders have begun translating this into their stock holdings as well. Which company will be most affected by government legislation or which organization will fall under a new law or which bank will need money?

The Dollar has been falling this month – in tandem with the US stock markets. The question remains for Forex traders, will this trend continue and if so, how low can it go?