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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?

Report Portends Changes to Forex Reserve Currencies

This week’s Bank of International Settlements (BIS) quarterly report came with some interesting revelations (most of which I’ll discuss in a later post). Below, I’d like to focus on one particularly interesting section entitled, “Foreign exchange trading in emerging currencies.” This section carries tremendous implications for the future of reserve currencies and is a must read for fundamental analysts.

Interview with Action Forex: “The New Zealand Kiwi is the Most Undervalued Currency”

Today, we bring you an interview with Ben Wong (Head of Trading Strategies) and Yan Tse (Head of Research) at Action Forex, a forex information portal. I chatted with them about upcoming Central Bank rate hikes, economic indicators, and their intriguing Trading Ideas.

Forex Blog: I would like to begin by asking you to briefly explain your team’s approach to analyzing the forex markets. Do you prefer technical or fundamental analysis, or a combination of both?

G20 Pressures China, Despite Yuan Appreciation

Since the People’s Bank of China (PBOC) unfixed the Chinese Yuan in June, it has appreciated 4.5%. Moreover, for a handful of reasons, it looks like China will continue allowing the RMB to appreciate at the same steady pace for the foreseeable future. And yet, the international community continue to use China as a scapegoat for all global economic ills, and are pressuring it to stop trying to control the Yuan altogether.

Fed Mulls End to Easy Money

Forex traders have very suddenly tilted their collective focus towards interest rate differentials. Given that the Dollar is once again in a state of free fall, it seems the consensus is that the Fed will be the last among the majors to hike rates. As I’ll explain below, however, there are a number of reasons why this might not be the case.

Retail Forex: Lower Corporate Profits = Lower Spreads for Traders?

In December 2010, both GAIN Capital and FXCM became public companies. This was thought both to signal the maturing of an industry and to herald the start of a period of explosive growth. Since then, the share prices for both companies have fallen dramatically, even while the S&P 500 has continued to rise. Trading volume has remained flat, and revenues have declined. As a result, analysts (myself included) are starting to question not only the operations of these two firms, but also of the entire industry.

Can the Australian Dollar Hold on to Record Gains?

The volatility of the last couple weeks has manifested itself in some unbelievable outcomes. In this post, I want to focus specifically on the Australian Dollar. When the Japanese disasters struck, the Aussie immediately tanked, as investors jettisoned risk and moved towards safe haven currencies. Only days later, it inexplicably rose 5%, en route to parity and a 28-year high against the US Dollar. The question is: will the Aussie hold on to these gains, or will it return to earth as soon as the markets come to terms with the misalignment with fundamentals?

Japan’s Earthquake Brings Yen Carry Trade Back

The yen carry trade is back! In carry trades, traders sell currencies with low yields to invest in currencies with higher yields. Carry trades work best when the funding currency is stable or weakening. The recent earthquake in Japan has created the perfect conditions for the return of the yen carry trade.

Because of the disaster in Japan, Central Banks around the world coordinated an intervention in the forex market, essentially creating a floor on USD/JPY. In other words, the yen has limited upside potential because of those interventions. That makes the yen a good candidate for funding currency.

Forex Volatility Rises from Multi-Year Lows

In the last month, volatility in the forex markets touched both a two-year low and a one-year high. In the beginning of March, volatility essentially returned to pre-credit crisis levels. One week later, when the earthquake and inception of the nuclear crisis in Japan, volatility surged 40%. While it has since resumed its downward path, investors are still bracing themselves for continued uncertainty.

Why the Dollar is Here to Stay

In a recent piece published in the WSJ (“Why the Dollar’s Reign Is Near an End“), Berkley Professor Barry Eichengreen declared that the Dollar will soon cease to be the world’s reserve currency. According to Dr. Eichengreen, within 10 years and for various reasons, the Dollar will become one of many reserve currencies, competing for preference with the Euro, Chinese Yuan, Japanese Yen, and Swiss Franc. While Dr. Eichengreen makes some good points, however, I don’t think most of his arguments stand up to scrutiny.

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