The news was negative for the US! Why did the USD strengthen?

"For being a good Trader: Work like a dog. Eat like a horse. Think like a fox. And play like a rabbit."

“The news was negative for the US! Why did the USD strengthen? "

I feel sad when I see this, because after all, in the Forex Market it is very difficult to make money and very easy to lose. (I have lost money during such news)

To explain the above in simple terms, Here is one of the theories which I believe work well during such news.

In all markets, SENTIMENTS are the reason behind all movements. (That is why candlestick chart pattern is my best tool to analyze the market)

You feel that currency A will go bullish, you buy.

You feel that currency B will go bearish, you sell.

Prior to the current crisis, say before 2008, markets were doing well in Properties, equities, business…..

Everyone was ready to take risk and investments were made all over the world. Everyone was a risk seeker but in mid 2008 when the crisis started everyone was risk aversive that is why equities, EUR, GBP, CHF, properties etc were following an uptrend and dollar index was following downtrend. You can simply apply the Demand- Supply rule

USD >>>>> Foreign Exchange >>>>> Equities,EUR,GBP,CHF,Properties

By the above flow it is very clear why the value of USD was going down prior to the crisis.

But after mid July 2008 ( when current crisis began )

People thought:

"Hmm, the market is collapsing. My money is in danger? I better shift my funds out and park them in safe assets in the meanwhile"

And what are the safe haven for investor during the crisis.

• Gold
• US government treasury bonds (The US government won't go bankrupt right?)

The above diagram reversed in this condition and looks like….

Equities, EUR, GBP, CHF,Properties >>>> Foreign Exchange >>>> USD >>>>> Gold, US government bonds, T-bonds….

So by the demand-supply rule, value of USD began to rise.

So I think now confusion about relationship between USD and stock market index would be clear upto some extent, but regarding FOREX trading keep one thing in mind “Always try to understand sentiments of the market”

I think now you will not complain market, if negative news about USD gives strength USD. Folks, I wish to say that forex trading is not an easy "game". You have to employ proper money management and catch up with developments in the world.