Congress just passed the long awaited financial reform bill that has been hotly debated for the last few months.  It was a response to the 2008 market crash that sent financial institutions spiraling down, inciting the US federal government to providing bailouts to the largest banks in America to keep them from failing.

With the revelation that a lot of the risky investments and trading that was going on could have been prevented by tougher regulation, at the very least a little oversight, Congress was moved to write this bill.  There are still many in Congress who believe that free market capitalism should be free to reign.  There are still others who believe that regulation is needed but not the way it is written in the bill.

This new financial reform bill has had an affect on the markets and here is how you can adjust your forex trading strategies accordingly.  It sent the Dow Jones Industrial Average plummeting over 250 points.  This simultaneously sent the USD on the rise.

As an aside, you probably already know about the inverse price relationship between the US stock market and the USD.  It started in the 2008 crash and will likely continue until a recovery is confirmed.  So indices like the S&P 500 and the Dow Jones Industrial Average have always been significant forex indicators for the USD and it’s trading pairs.

The rising value of the USD from this news is probably going to be short lived.  It was an emotional response to a bill that is making a lot of investors around the world nervous about how it will affect the US economy.

I say short lived because the bill is a little scant on concrete details.  In essence, most of it is just giving new powers and new mandates to existing financial regulators.  It’ll be up to federal government regulators like the SEC and the courts to decide how this bill actually plays itself out in reality.

In addition, much of the impact of this bill won’t be seen for several years at best.  The only concrete thing we see is a simplified disclosure language requirement for all mortgage contracts, which won’t happen for another 2 years.

Here is the thing about Wall Street.  They are very smart people who are motivated by an intense greed.  While not making any moral judgements about their motivations, money is probably the strongest motivator in existence by far.

This means that the geniuses on Wall Street will always stay ahead of the regulators.  They always have and have always made money doing so.  That doesn’t mean I believe that the financial reform bill is unnecessary.  I actually think they need some regulation.  I think it’ll definitely work as a deterrent to a lot of the fraud we say during this past downturn.

I’m not saying the bill won’t be effective.  I’m just saying that everyone assumes that the bill will be bad for the economy.  What I’m saying is that Wall Street will find a way to make money regardless of the bill.