Wealth Builder FX Blog

Federal Reserve Chairman, Ben Bernanke acknowledged in a recent speech that the US economy is recovering more slowly than expected.

As the US economy recovers from the worst financial crisis and the most severe housing downturn since the Great depression of the 1930’s, it also now faces future challenges from the fallout of the Japanese Disasters and global pressures on commodity prices which also includes uncertainty over China’s demand.

Bernanke added that the US economy looks to be continuing its recovery at a moderate pace, but also said that “Until we see a sustained period of stronger job creation, we can not consider the recovery to be truly established.”

So just when will we see a sustained period of growth in the US ? at the moment there are approximately 5 unemployed for every 1 job opening. Sustained, stronger growth looks to be a while away yet !

Added to all of this is the continuing saga of the ever growing sovereign debt problems in Europe and the prediction that Japanese economic growth will be non existent in the immediate future as it recovers from the March tsunami and earthquakes.

But before you get too depressed over the above scenarios… there is good news !!

As technical traders, we rely quite heavily on what we see in the price chart patterns.

Chart patterns are extremely reliable in showing human behaviour (in our case, currency pair behaviour) as all this behaviour is built into the patterns we see in the charts.

By way of illustration… if we were to make a chart of someone’s everyday habits, we would see certain patterns and we would have a good idea of where that person was going at any given time by looking at those habit patterns...of course there are things that can occur to make you break pattern (data events, speeches, in our case) but otherwise it can be a fairly accurate predictor.

Socionomics - The Wave Principle of Human Social Behavior is a very interesting study ...these patterns can be applied to just about everything humans are involved in especially the buying and selling of foreign currency. Since there is so much data in each chart purely because of the size of the market, these charts tend to be more reliable than in analysis charts of other asset classes.

The title says... “US Economy Slower than expected… A good time to use Technical Analysis” but in reality, it’s always a good time to use technical analysis when one is trading Foreign Currency pairs.

For more info on Socionomics, see  http://en.wikipedia.org/wiki/Robert_Prechter