The demise of the carry trade and its associated components is
without parallel in the history of modern currency trading.But the extraordinary rise and fall of the carry
did not take place in the isolation of the currency markets.It was part of the worldwide search for
trading profits fueled by cheap credit, leverage and the ability to flash money
around the world in an electronic instant.The same factors that propelled the carry higher and then wrote its
collapse drove the commodity markets, the mortgage industry and equities to
success and distraction.
Instead of looking at the carry trade in light of
traditional parameters for the currency markets--interest rate differentials
and the competitive economic conditions of the currency countries--let us consider
it from a credit and leverage point of view. What effect did the tremendous
increase in available credit for currency market participants have on trading
in the yen crosses? What will be the effect of its sudden and probably
Credit availability in the cross currency market had a two-fold
impact.First, it encouraged
participation in the currency markets for traders and non-bank organizations.The seemingly permanent rise in the yen
crosses was at least partially fueled by players seeking the sure return of the
carry trade.Not only was there positive
carry or interest earned on the trade but buying the crosses drove the cross
rates and the value of the positions ever higher. It was a double benefit:
interest rate carry and position appreciation.
Whether participation in the carry trade stemmed from the
need to exchange funds borrowed at very low rates in Japan for use elsewhere or
for differential interest return and speculative profit, the effect on the
cross rates was the same; they were pushed relentlessly higher.The Euro, the Pound Sterling, Australian
Dollar and New Zealand Dollar were all propelled to historic highs against the
US Dollar at least partially as a side effect ofthe carry trade and what is called â€˜over
dollarâ€™ covering of cross positions.
For example, when traders want to take a long euro/yen position
they can directly buy the cross in the currency market, or they can buy the
euro against the US dollar and sell the yen against the US dollar and combine
the position into a long euro/yen position. The reason for this slightly more
complex transaction is price, sometimes you can obtain a better rate â€˜over dollarâ€™
that you can in the cross itself.This
procedure works with all the yen crosses.
The second effect was, and pardon the use, derivative.The availability of credit encouraged
increased participation in the carry trade, and this heightened participation served
to decrease volatility which in turn increased the predictability of profits. It
may seem counterintuitive that the more interest there is in a specific market the
lower the volatility. But the effect is a function of the available
In general, the more liquidity there is in a market the more
stable the pricing. Liquidity means that at most price levels traders will want
to do deals.It takes a liquid market
longer to traverse a price range and a shorter amount of time to dissipate news.
Smaller currencies, smaller in terms of trade volume, are inherently more
volatile. As the market moves in response to news or deal flow they have fewer deals
to absorb the selling or buying. A much smaller amount of volume can move the
market. Other factors being equal volatility rises as liquidity falls.
Volatility is, of course, not only a fact of low market
liquidity.External events are of equal
or greater importance.As we have seen
so dramatically over the past eight weeks, fear can propel markets far beyond
what would have once been considered rational prices levels.
One of the ways external factors influence price movement is
that they can limit liquidity. Players may choose to curtail their risk by not
participating in trading. This is certainly one of the factors that have given
all markets such a violent aspect in the past two months. Many potential new buyers have stayed on the
And that leads us back to the yen crosses. The daily ranges
of the crosses over the past two months are much greater that the average of the
previous five years.It is not only risk
aversion that has slammed into long yen cross positions causing so much
liquidation. The cessation of credit has contracted participation in the
market. As credit lines have been withdrawn from market players and yen loans
liquidated the participation rate and the trading volume in the crosses has
dropped.The sellers have been under
compulsion, the buyers are voluntary and absent.
The credit crash has affected participation rates in all
markets.Many speculative players who
depended on credit and leverage to fuel their trading have withdrawn. They will
not return anytime soon.In the
currency markets this permanent drop in liquidity may keep price movement
volatile long after calm has returned to other markets.It has substantially diminished liquidity in
the yen crosses which were, for so long, the speculative favorites of currency
Forex Trading News
Daily Forex Market News Forex news reports can be found on the forex research
headlines page below. Here you will find real-time forex market news reports
provided by respected contributors of currency trading information. Daily forex
market news, weekly forex research and monthly forex news features can be found
Forex News Real-time forex market news reports and features providing
other currency trading information can be accessed by clicking on any of the
headlines below. At the top of the forex blog page you will find the latest
forex trading information. Scroll down the page if you are looking for less
recent currency trading information. Scroll to the bottom of fx blog headlines
and click on the link for past reports on forex. Currency world news reports
from previous years can be found on the left sidebar under "FX Archives."
Elevate Your Trading With The Amazing Trader!
The Amazing Trader includes:
Actionable trading levels delivered to YOUR charts in real-time.
Mon 18 Dec
10:00 EZ- final HICP Tue 19 Dec
09:00 DE- IFO Survey
13:30 US- Housing Starts/Permits
13:30 US- Current Account Wed 20 Dec
15:00 US- Existing Homes Sales
15:30 US- EIA Crude Thu 21 Dec
03:00 JP- BOJ Decision
13:30 CA- CPI & Retail Sales
13:30 US Weely Jobless
13:30 US- GDP Fri 22 Dec
09:30 US- GB- GDP
13:30 US- core PCE Deflator & Presonal Income
15:00 US- New Homes Sales
15:00 US- final University of Michigan
17:00 US- early Closes Mon 25 Dec
00:00 Christmas Holidays
looking for your first broker or do you need of a new one? There are
more critical things to consider than you might have thought.
We were trading long before there were online brokers. Global-View
has been directly involved with the industry since its infancy. We've
seen everything and are up-to-data with recent regulatory changes.
The Global-View Forex Forum is the hub for currency trading on the web. Founded in 1996, it was the original forex forum and is still the place where forex traders around the globe come 24/7 looking for currency trading ideas, breaking forex news, fx trading rumors, fx flows and more. This is where you can find a full suite of forex trading tools, including a complete fx database, forex chart points, live currency rates, and live fx charts. In addition, there is a forex brokers directory where you can compare forex brokers. There is also a forex brokers hotline where you can ask for help choosing a forex broker that meets your individual fx trading needs. Interact on the same venue to discuss forex trading.
The forex forum is where traders come to discuss the forex market. It is one of the few places where forex traders of all levels of experience, from novice to professionals, interact on the same venue to discuss forex trading. There is also the GVI Forex, which is a private subscription service where professional and experienced currency traders meet in a private forex forum. it is like a virtual forex trading room. This is open to forex traders of all levels of experience to view but only experienced currency tradingprofessionals can post.
Currency trading charts are updated daily using the forex trading ranges posted in the Global-View forex database. You will also find technical indicators on the fx trading charts, e.g. moving averages for currencies such as the EURUSD. This is another forex trading tool provided by Global-View.com.
The forex database can be used to access high, low, close daily forex ranges for key currency pairs, such as the EURUSD, USDJPY, USDCHF, GBPUSD, USDCAD, AUD, NZD and major crosses, including EURJPY, EURGBP, EURCHF, GBPJPY, GBPCHF and CHFJPY. Data for these currency trading pairs dating back to January 1, 1999 can be downloaded to an Excel spreadsheet.
Forex chart points are in a currency trading table that includes; latest fx tradinghigh-low-close range, Bollinger Bands, Fibonacci retracement levels, daily forex pivot points support and resistance levels, average daily forex range, MACD for the different currency trading pairs. You can look on the forex forum for updates when one of the fx trading tools is updated.
Global-View also offers a full fx trading chart gallery that includes fx pairs, such as the EURUSD, commodities, stocks and bonds. In a fx trading world where markets are integrated, the chart gallery is a valuable trading tool. Look for updates on the Forex Forum when the chart gallery is updated.
Global-View.com also offers a forex blog, where articles of interest for currency trading are posted throughout the day. The forex blog articles come from outside sources, including forex brokers research as well as from the professionals at Global-View.com. This forex blog includes the Daily Forex View, Market Chatter and technical forex blog updates. In additional to its real time forex forum, there are also Member Forums available for more in depth forex trading discussions.
WARNING: FOREIGN EXCHANGE TRADING AND INVESTMENT IN DERIVATIVES
CAN BE VERY SPECULATIVE AND MAY RESULT IN LOSSES AS WELL AS PROFITS. FOREIGN
EXCHANGE AND DERIVATIVES TRADING IS NOT SUITABLE FOR MANY MEMBERS OF THE
PUBLIC AND ONLY RISK CAPITAL SHOULD BE APPLIED. THE WEBSITE DOES NOT TAKE
INTO ACCOUNT SPECIAL INVESTMENT GOALS, THE FINANCIAL SITUATION OR SPECIFIC
REQUIREMENTS OF INDIVIDUAL USERS. YOU SHOULD CAREFULLY CONSIDER YOUR FINANCIAL
SITUATION AND CONSULT YOUR FINANCIAL ADVISORS AS TO THE SUITABILITY TO YOUR
SITUATION PRIOR TO MAKING ANY INVESTMENT OR ENTERING INTO ANY TRANSACTIONS.