The USDHKD is a currency pair made up of the US dollar and the Hong Kong dollar. The US dollar, abbreviated as USD, is the country’s official currency. The Hong Kong dollar, abbreviated HKD, is the country’s official currency. They come together to form the currency pair USDHKD. This currency pair is deemed exotic since Hong Kong is still viewed as a developing country and is paired with the US. It is also among the forex market’s most popular exotic forex pairs. The USDHKD currency pair is quite popular since both currencies are highly correlated. The USDHKD has high interest yields making it great for the purpose of carry trading.
The United States Dollar
Although the presentation of the dollar is not needed, it would be inconsiderate not to do so. The US dollar, abbreviated as USD, is the most actively traded currency in the world. It is the most widely used currency and is frequently used as a reference currency for all monetary evaluations. The Federal Reserve Bank, or “Feds,” as they are more often known, issues this money.
The first paper dollar was made in 1862 after they ran out of coinage to pay for the Civil War. The USD is now extensively recognized as a form of payment in many financial markets worldwide. In order to better relations with this big powerhouse, several nations have changed their currencies to become dollars as well. New Zealand, Canada, and Australia are among these countries. Because the US dollar is the most commonly used currency in the world, it is affected by any big economic event that occurs anywhere around the globe.
The Hong Kong Dollar
The Hong Kong dollar goes by HKD in the forex space. It is the national currency of Hong Kong. It is among the most popular currencies in Asia. This valuable currency is issued by the Hong Kong Monetary Authority. Over the years, the quality and markings on the Hong Kong notes have significantly changed in order to become more secure and harder to replicate to prevent fraud. The Hong Kong notes are known for being quite vibrant in color and rich in history as it displays some of the most important historic sites.
Why Trade USDHKD
The USDHKD is one of the most popular exotic currency pairs in the forex industry. They are quite popular due to the unique market conditions they present to traders. Here is why you should trade the USDHKD:
Hong Kong is known for its high interest rates provided by the Hong Kong Monetary Authority. These high interest rates are even greater than some of the market leaders such as the U.S., U.K., or even Japan. Due to these high interest rates, traders are attracted to the USDHKD currency pair due to its high interest yields. The reason this pair has high yields is due to the fact that their interest rates have a great difference between them. The USD has significantly lower interest rates than Hong Kong. Due to these high yields, a carry trade is the popular move used by traders when trading this currency pair. Carry trading refers to selling a currency with a low interest rate to buy one with a higher interest rate.
Exotic Currency Pair
The USDHKD is an exotic currency pair in the forex market. An exotic currency pair consists of the US dollar and the currency of a developing or less popular country. In this scenario, the US is joined by Hong Kong in establishing the USDHKD currency pair. An exotic currency pair adds additional trading opportunities to the forex market. Major and minor currency pair market fluctuations may become boring and repetitive to track all of the time. Traders diversify their portfolios by trading uncommon currency combinations. The USDHKD is one of the market’s most popular exotic currency pairings, as well as one of the most fascinating to trade.
A compelling reason to trade currency pairs like the USDHKD is their high correlations with other market assets. This is seen in the Hong Kong dollar, which has significant connections to commodities like petroleum and jewelry. This is due to the fact that Hong Kong is a big exporter of these items. This is also true for the US Dollar, which is tied to commodities like airplanes and ships. As a result, trading this pair becomes even easier since if we understand the direction of the commodities market, we can easily comprehend the direction of the USDHKD market. We’ll go into how these commodities will affect the movement of the USDHKD in more detail later.
USDHKD Trading Tips
As discussed above, the USDHKD presents some unique market conditions which make most traders eager to trade this pair. But unique market conditions also need some great trading strategies in order to trade successfully. Here are some top tips for trading USDHKD:
Trend trading is the use of market movement patterns to determine when to place the order. Trends are easily noticeable, especially when looking over longer durations. The most typical patterns to watch for are when the market moves steadily higher or even downwards. An upward trend may be observed when the highs are rising and the lows are rising as well. Similarly, a downward trend may be observed when the highs are falling and the lows are falling as well. As a result, you may spot trend patterns in USDHKD and hence do trend trading in this manner.
Pullback trading occurs when the market temporarily deviates from its trend, allowing you to enter the market at a low cost. When trading a pullback, you must first determine when the market will pull back. If USDHKD is in an uptrend and momentarily breaks and falls little, you have a chance to join the market at a reasonable price with a BUY transaction. Similarly, if the market is in a downtrend and temporarily breaks and climbs significantly, you have an opportunity to enter the market via a SELL trade at a decent price. As a result, this is a basic yet successful approach for the USDHKD currency pair.
Range trading is the practice of determining when to initiate a trade by using support and resistance levels. The resistance levels are represented by the highest points on a given chart. Similarly, the lowest points on a specific chart are the support levels. Understanding where these highs and lows are located is crucial to the range trading strategy. For instance, if the price is approaching a resistance level and you believe it will hold, you may make a SELL transaction. If, on the other hand, the price is reaching a level of support that you believe will hold, you may execute a BUY transaction. If the price falls below support, you can start a short position because the support level will no longer be legitimate. Similarly, if the price continues to rise over the resistance level, you may go long since the resistance level will be invalidated.
Factors Affecting USDHKD
Since the USDHKD currency pair contains the USD it has quite a lot of factors that could impact its trading conditions. But since it also contains the HKD, it is an exotic pair that has a low trading volume. Here are the top factors impacting the USDHKD:
Gross Domestic Product
Gross Domestic Product, or GDP, is a measure of a country’s total economic performance. It has a significant influence on the volatility of the USDHKD pair. A positive GDP figure indicates that the economy is prospering.
This, in turn, would encourage investors to invest in the country’s economy, enhancing the country’s currency’s worth. If the US has a strong GDP, the US Dollar will rise, causing the USDHKD to rise as well. However, in the case of the Hong Kong dollar, the reverse is true. If Hong Kong’s GDP grows, the HKD will rise, causing the USDHKD to fall in value.
The Gold Industry
Hong Kong is among the largest producers and exporters of valuable commodities such as gold. Therefore their economy greatly depends on the export of these energy resources in order to thrive and increase in value. Any changes to the market for these commodities such as demand or prices will have a direct impact on the USDHKD pair.
If the demand for crude oil increases, Hong Kong will export them more often, and therefore, USDHKD will decrease in value. If the demand for gold decreases, Hong Kong will suffer as they wouldn’t be able to export them as much, and therefore, USDHKD will increase in value. This can be seen during an economic crisis like the war in Ukraine where the world was facing a shortage in crude oil supply.
The Aerospace Industry
The United States is a large producer and exporter of aircraft and aircraft parts. As a result, in order to develop and expand in value, its economy is primarily dependent on the export of these commodities. Any changes in the aviation market, such as supply or demand, will have an immediate impact on the USDHKD pair. If demand for planes grows, the US will export more of them, leading the USDHKD to appreciate in value. If demand declines, the United States suffers since it will be unable to export as much, leading the USDHKD to lose value.
The Unemployment Rate
Unemployment is a significant contributor to a country’s economy. When a person is jobless, the government bears the task of providing basic essentials for their existence. As a result, the greater the number of jobless individuals, the greater the responsibility on the government to spend its reserves to care for the unemployed.The greater the unemployment rate in the United States, the worse the country’s economy will be. This, in turn, would lead the USDHKD to lose value. Similarly, if the unemployment rate is low, the economy will thrive, and the USDHKD will rise in value.
The Electrical Industry
Hong Kong is among the largest producers and exporters of valuable commodities such as electrical products and equipment. Therefore their economy greatly depends on the export of these energy resources in order to thrive and increase in value.
Any changes to the market for these commodities such as demand or prices will have a direct impact on the USDHKD pair. If the demand for electrical products increases, Hong Kong will export them more often, and therefore, USDHKD will decrease in value. If the demand for gold decreases, Hong Kong will suffer as they wouldn’t be able to export them as much, and therefore, USDHKD will increase in value. This can be seen during an economic crisis like the war in Ukraine where the world was facing a shortage in crude oil supply.
The Ships Industry
The United States is a significant exporter and manufacturer of boats, ships, and ship parts. As a result, in order to remain and expand in value, its economy is strongly reliant on the export of these important items. Any changes in the market for these products, such as price or demand changes, will have an instantaneous impact on the USDHKD pair. If demand for ships increases, the US will export them more frequently, leading the USHKD to improve in value. If demand for boats falls, the United States would suffer since it will be unable to export as many, leading the USDHKD to lose value.
Both the Federal Reserve Bank and the Hong Kong Monetary Authority are majorly responsible for any instability in the USDHKD marketplace. The FRB and HKMA release monthly reports and statements regarding updates to any policy changes. These reports also display the economic and monetary forecasts for the upcoming short-term. Any positive results from the FRB will have a positive impact on the USDHKD currency pair. However, any positive results from the HKMA will have an inverse impact on the USDHKD currency pair. The representatives of these individual banks also hold speeches frequently where they explain these results in more detail. These speeches are just, if not more, important in determining the direction of the USDHKD market. From FRB, Jerome Powell who is the President of the institution is highly looked upon for his speeches. From HKMA, Eddie Yue who is the Governor of the institution is highly looked upon for his speeches.