Iowa Electronic Markets

Never heard of the Iowa Electronic Markets? Not surprised! Few have. But, the Iowa Electronic Markets can give you a valuable peek into the future direction of the foreign exchange market.

Here's what the Iowa Electronic Markets' homepage says about it's mission;

"The Iowa Electronic Markets are real-money futures markets in which contract payoffs depend on economic and political events such as elections. These markets are operated by faculty at the University of Iowa Tippie College of Business as part of our research and teaching mission." (Go to www.biz.uiowa.edu/iem/)

What's most interesting about Iowa Electronic Markets is that it's the only legal place to make predictive bets on the outcome of the upcoming mid-term elections. In past elections, with real money at risk, punters placing real money bets on the Iowa Electronic Market have proven to be accurate predictors of important election outcomes ... which gives traders a crystal ball to gaze into and ponder.

What does this mean for forex traders?

Kathy Lien, Chief Strategist for FXCM, writes that gridlock may not be good for the US dollar. "Following the Republican's win of the House and Senate in early November of 1998, the EURUSD fell from 1.1900 to 1.1450 for 450 points in only three weeks time. In the following twelve months, the extended move accounted for 1500 points."

So, you might wonder ... what outcome does the Iowa Electronic Market predict in next week's election? By overwhelming odds, 70%/30%, the Iowa Electronic Markets peer-to-peer exchange predicts the Dems will take the House ... giving us a divided Legislative branch.

With that forecast, traders, you're now in possession of important statisitical information that should be used as you cobble together next week's USD trading strategy!