Many economists and financial experts are saying that a double dip recession is inevitable. In response many forex traders are looking for ways to alter their forex trading strategies in the event this happens. Here is what the USD might do in the event of a double dip.
First of all, the term double dip refers to the fact that the US economy might be going back into a recession. We’ve had 4 quarters of positive GDP growth which technically should signal an official economic recovery. But there are many reasons experts don’t think it’s real.
The main reason is because all of the government stimulus money that was injected into the economy is now waring off and there was no sustained change. People are still unemployed and that is the big issue. You can’t have a jobless recovery according to many economists.
In any case, if we do see a double dip, look for the USD to decline in value against other currencies. I guess the big question you might have is, when the 2008 financial crisis hit, the USD skyrocketed. So why would it decline this time?
Well, the answer is that the first time the entire world went into a recession. So investors fled to the safest assets in the world, which was the US dollar and gold. Now most of the world, especially the Asian market, is on an economic recovery that is real and growing fast.
So if the US economy goes into a double dip recession, the other economies will generally be fine. It’s just us. That means the USD in respect to other currencies will lose value. Look for the forex indicators to reflect this trend.
Look for gold to rise as well. When the world investing community gets nervous, they turn to gold. It’s the last resort asset because it is the safest. Gold has always been a solid asset since the beginning of history.
