The ending of bond buying matters and its effects on markets will play out over the next year &ndash...
5 Reasons for Trading Forex Now
08/01/2013 9:00 am EST
So far, 2013 has been an exciting year in forex trading, with much more volatility than beforehand. This volatility creates more opportunities for traders and volumes have been on the rise, writes Yohay Elam of ForexCrunch.
It could be just the beginning: things could get more exciting in the autumn. If you are thinking of forex trading, here are five reasons to dive into it, and it’s not only volatility.
1. Septaper: The Federal Reserve has already made a significant contribution to market volatility, and this is likely to become more intense. The Shakespearean question: to taper or not to taper will come to climax in September’s Fed meeting. The markets will rock for a long time afterwards, regardless of the outcome. The expectations towards the first tapering move will likely be followed by speculation about the next moves. In addition, the nomination of the next Fed Chairman is also due in the fall, and there is a huge difference for the dollar between Yellen and Summers.
2. Crisis comeback in the Eurozone: It seems as if Germany is keen not to “rock the boat” before the September 22 elections, but nothing has been really resolved. We could certainly see a comeback of the debt crisis and a worsening of the situation after Merkel wins the elections. And if Merkel doesn’t win? Volatility could be very high not only for the euro. Italy’s opposition already talked about a default and riots.
3. Stock market worries: recent US data shows that institutional investors are dumping stock and retail investors are buying it. Is the smart money fleeing from stocks? Stocks have risen without a corresponding rise in earnings. After reaching new peaks, could we a decline from here? If so, history shows that it also contributes to higher volatility.
4. Commodity carnage: Quite a few commodity prices are sliding: from copper to corn to coffee and cocoa. Not all commodities are falling: gold managed to recover after the previous crash, and oil prices are relatively high. However, with the Chinese slowdown, there is scope for more drops. Even if China makes an effort to keep growth going, it will be hard for them to do so after the huge stimulus programs of the post-crisis years. Chinese demand has been one of the main drivers of commodity prices, and the lack of Chinese demand can further push prices down. Similar to stocks, falling commodity prices make investment in them less attractive and makes forex more attractive.
5. Technology: Forex traders need markets to move for opportunities, but trades don’t depend solely on the markets, but also on the tools. Despite some heavy handed regulation in the past, technology hasn’t stopped. Copy trading is becoming more mature, mobile applications provide more and more features and also sophisticated EAs are becoming much more accessible than ever before. This trend will likely continue.
By Yohay Elam, Founder, Writer, and Editor, ForexCrunch.com
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