This weekend I attended the FXCM Expo in Dallas, Texas. There were a lot of new traders there, and I am surprised to see how fast currency trading is still growing. I met a lot of the good people from the Dallas office of FXCM, too, and I am continually impressed.
Anyway, my favorite presentation at the Expo was from Boris Schlossberg. He gave a run-down of some of the most important things to remember when trading currency cross pairs (pairs that do not include the USD; for example, the GBP/JPY is a currency cross pair, as well as being a completely insane currency pair). Here are some highlights from what Boris said (and if you want a copy of his slides, you can write to him by clicking here and asking for his "currency cross" presentation):
1. He gave an overview of the dovishness (propensity to lower interest rates) to hawkishness (propensity to raise interest rates) from central banks. It's not surprising that the Bank of England ranks high on the scale towards hawkishness, with recent rate hikes and a strong economy. The US was somewhere in the middle. The Bank of Japan was about as dovish as you can get. He mentioned that there is a good possibility that the Swiss National Bank is going to have to raise rates in the near future.
2. He mentioned that there is possibly a mis-valuation of the AUD, especially as compared to the NZD. Australian economic news, he said, hasn't really been that hot recently and it appears that the AU economy just isn't as stellar as it was a year ago. Meanwhile, NZD is shipping all the lamb they can raise to China, among other things, and the New Zealand economy is on fire. Could mean that we see in the near future a drop in the AUD/NZD (but this was not a trade recommendation).
3. Boris gave one of the best overviews of the carry trade that I've seen from anywhere. He mentioned: London is becoming the center of the world's monetary deal flow -- tons of money from the middle east is flowing through London for investments all over the world; it's hard to imagine the carry trade exploding until the Bank of Japan signals it is willing to raise rates every 3 months instead of every 6 months; and that the EUR/JPY is an excellent proxy for understanding the world's appetite for risk (watch how the Dow Jones Industrial average and the EUR/JPY seem to be more correlated than ever).
All good stuff. For good measure, I also want to mention three things about FXCM, who does not pay me anything (in any way) to say any of this. I do appreciate the invitations to speak at the Expos, where I get to meet a ton of good people.
1. FXCM is giving free access to DailyFX Plus for the next week. It's a pretty cool service.
2. FXCM just launched its own Forum. I'm more interested in blogging these days than forums, for reasons that I will talk about later, but you might want to take a look.
3. FXCM moved just about everyone on their platform to a "no dealing desk" system.
