Forex Blog: Currency Trading News & Analysis.

April 7th 2011

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?

Ben: Undoubtedly fundamental factors are the driving force behind long and medium term trends, therefore whenever we are making long term forecasts, fundamental analysis is clearly our core approach. Having said that, as I have been analyzing the FX market and providing real time trading recommendations for over 15 years, I must say that when it comes to short-term especially intra-day trading, technical analysis is definitely the key to success. Only by applying various technical analysis techniques, one can identify objectively the entry and exit (both profit and stop-loss) levels which fundamental analysis is not able to provide.

Forex Blog: Which Central Bank do you think will be the first to raise interest rates? Do you think that forex markets have already priced this in? What will be the ultimate impact on exchange rates?

Ben: I tend to think the ECB will raise interest rates sooner than other major Central Banks, like the Fed and BOE.  It may come as early as 7 April by 25 basis points. Actually, many large financial institutions and investors already priced in this potential hike in view of the release of recent CPI data which reached a 29-month high of 2.6%. This rate hike cycle may last until the rate reaching ECB target rate of 1.75-2% by end of 2011. While this hike may give the euro an initial boost, when other major economies follow suit and raise rates, the single currency may come under pressure by end of the year.

Yan: ECB will be the next to raise interest rates, and yes, they have already priced this in. A series of rate hikes will widen yield differentials and may send the euro higher against the US dollar. However, Trichet said a rate hike in April does not imply the tightening cycle has begun. Therefore, the ultimate impact in uncertain.

Forex Blog: What is your short-term forecast for the Japanese Yen? Do you think it will rise further, like it did after the 1995 earthquake? Do you think that any additional intervention is likely/necessary?

Ben: Technically, after forming a ‘hammer’ candlestick reversal pattern on the monthly chart, the greenback should continue to edge higher against the Japanese yen, above first obstacle at 85.00, price may head north towards 89-90 yen where next resistance is likely to locate. I do believe the currency pair may react similarly as it did back in 1995, surged initially after the quake, then tumbled on joint intervention, however, it will definitely need additional intervention to show the G7 commitment for not letting the yen to rise above 80 against the dollar.

Forex Blog: In your opinion, what is the single most important factor affecting the Dollar right now?

Ben: QE policy.

Yan: Fed rate hike.

Forex Blog: Is their a particular currency that you think is especially undervalued/under-appreciated? If so, what do you think is holding it back?

Ben: Kiwi, mainly due to the 50 basis points rate cut after the Christchurch earthquake.

Forex Blog: Can you explain the thought process / philosophy behind your “Trade Ideas?” How frequently do you update these ideas, and how long are they valid for?

Ben: Mainly technical analysis approaches, including Candlestick charting techniques, Ichimoku Kinko Hyo and Elliott Wave Theory. We categorize our trade ideas section with different time frames and different analysis approaches.

As we believe there are no one single technical analysis approach is good enough to cope with current volatile market condition, we tend to combine several charting techniques in our day to day market analysis. Since we consider Ichimoku Kinko Hyo a very effective short-term analytical tool, we use it together with Candlestick chart which is very power in identifying market turning points. At the same time, in our approach we also include some traditional use of technical indicators and oscillators such as MACD, slow stochastic, DMI and RSI in order to assess market momentum.

We have different time frames on our “Trade Ideas” updates, from the shortest intra-day time frames, daily trade ideas and finally weekly trade ideas. For intra-day trade ideas on the 4 majors, we make 4 rounds of updates starting from European opening (06:00GMT) to European closing 15:00GMT) with the interval of around 3 hours between each update. Clear entry level, profit target and stop-loss levels are provided, the updates are valid until the next update is published

We also have daily Elliott wave trade ideas updates on AUD, CAD, EURJPY and EURGBP, each currency pair has one update within the European trading session, the updates also come with clear entry, target and stop-loss levels, plus commentaries of Elliott wave analysis.

Weekly trade ideas updates are also provided, covering major currency pairs including JPY, EUR, CHF, GBP, AUD, NZD, CAD, EURJPY, EURGBP, EURCHF, EURCAD, AUDJPY, GBPJPY and GBPCHF. Each update comes with a weekly forecast plus a medium term outlook, again clear entry, target and stop-loss levels are offered.

Forex Blog: Which economic indicators do you think are most worth paying attention to? In the same vein, which “endpoint” (i.e. inflation, interest rates, GDP growth, etc.) are you trying to predict when analyzing such indicators?

Yan: Inflation, GDP, US payrolls and employment rate. These indicators affect monetary policies and increase near-term volatility of currencies.

Forex Blog: What is your advice for forex traders that want to beat the market during these uncertain times?

Ben: Discipline is the key especially in current volatile market conditions. Be extra careful when setting your stop-loss level and stick to it, though one should be brave enough to let your profit runs. Be aware of any important market event, speech from key officials, important economic releases and try not to hold any position ahead of such kind of events. Try to gather market flow information, such as the order board where large size bids, offers or stops are placed, locations of option barriers are also very important information one must not neglect.

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Posted by Adam Kritzer | in Interviews | No Comments »

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© 2004 - 2023 Forex Currency charts © their sources. While we aim to analyze and try to forceast the forex markets, none of what we publish should be taken as personalized investment advice. Forex exchange rates depend on many factors like monetary policy, currency inflation, and geo-political risks that may not be forseen. Forex trading & investing involves a significant risk of loss.