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NO QE3: What are the Implications for the Dollar?

The verdict is nearly in; there will be no QE3. The second round of quantitative easing (“QE2”) will expire at the end of this month, and while it will not be unwound for quite some time, the Fed has indicated that it will not be followed by yet another round. The question on the minds of forex traders, of course, is what does this mean for the Dollar?

Introduction to Technical Analysis: “Morning Fake-out”

As regular readers of this blog are probably aware, I rarely post about technical analysis. Simply, I’m not well-acquainted with its nuances, and I would probably sound like a dilettante if I tried to offer some serious advice on the subject. That being said, I read an interesting overview of a particular technical strategy (in the San Francisco Gate, of all places…please hold your laughter), that appealed to me on a number of levels, and that I would like to to share below.
Contrary to popular belief, the forex market is not a 24-hour market.

Interview with Mike Kulej of FXMadness: “Trading the News is Akin to Gambling”

Today, we bring you an interview with Mike Kulej of FXMadness. Below, Mike shares his thoughts about the effectiveness of technical analysis, volatility, leverage, and more!

Forex Blog: I am intrigued by the fact that your blog is deliberately focused on “the exciting world of Forex outside the dollar.” Is there a strategic reason  for this choice?

Latin America Enters Currency War

A few years ago, I wouldn’t deign to discuss such obscure currencies as the Chilean Peso and the Peru New Sol. But this is a new era! These currencies – and their Central Banks – are being thrust into the spotlight as they join more established Latin American countries in the fight to contain currency appreciation.

Forex Volatility Remains Abnormally High

If you look at a chart of currency volatility over the last five years, two major spikes immediately jump out. The first took place in the wake of the collapse of Lehman Brothers in late 2008, while the second occurred earlier this year during the height of the EU sovereign debt crisis. While volatility has gradually subsided since then, it is still well above its historical average, and many analysts forecast that it will remain at an elevated level through at least 2011.

War = Good News for South Korea?

South Korea was in the midst of figuring out what to do with its appreciating Won when disaster struck, in the form of an unprovoked attack from North Korea. Combined with a worsening of the sovereign debt crisis in Europe, the news was enough to send the Won down 5% over the course of a couple weeks. From the standpoint of managing its currency, it looks like the (distant) prospect of war is actually a blessing in disguise.

Currency War: Who are the Winners and Losers?

On September 27, Brazilian Finance Minister, Guido Montega, used the term “currency war” to describe the series of recent Central Bank interventions in forex markets. While he may not have intended it, the term stuck, and financial journalists everywhere have run wild with it.

Euro Rally: Temporary or Permanent?

Since the beginning of June, the Euro has rallied by an impressive 8% against the US Dollar, and by comparable margins against other currencies. The question on every one’s minds, of course, is whether this represents a temporary pullback or a permanent correction.

Australia Hikes Rates; How about the Carry Trade?

Following up on my last post, I want to use this post to write about the long side of the carry trade- specifically the Australian Dollar. The Bank of International Settlements (BIS) observed in a recent report that, “The role of short-term interest rate differentials in both the deprecations and their reversal has grown over time.” When you consider that the benchmark interest rate in Australia is now 4% and that interest rates in every other industrialized country (including Japan) or close to 0%, it’s not hard to connect the dots.

Forex in 2009: A Year in Review

In some ways, 2009 was a wild year in forex markets. Compared to 2008, however, it was relatively tame. And that is all I have to say about forex in 2009.

Ah, if only it were that simple…

The year began as a continuation of 2008. Global capital markets were still in the throes of the credit crisis, and risk aversion was in vogue. Investors continued to remove funds en masse from virtually every economy – with an emphasis on emerging markets – and parked the proceeds in the US. More specifically, they put the proceeds in US Treasury securities. US corporate bonds and equities declined, as did interest rates, to such an extent that short-term rates briefly dipped below zero.

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