2016 will certainly prove to be a busy year in terms of Forex trading. As a result of an increased global connectivity and a growing number of investors now entering into the lucrative sector, it is important to appreciate some of the main trends which are predicted to emerge in the coming months. Will 2016 represent a boom, a bust or a mixture of both? Let us take a closer look.
Commodities and the Dollar
Thanks to the Federal Reserve raising its benchmark interest rates in reference the the dollar, we should fully expect this American-based currency to strengthen during 2016. In fact, some have observed that this may be a factor in the precipitous fall of oil prices alongside a decreased demand. In relation to other dollar-pegged commodities such as gold and silver, the bears have taken precedence over the bulls. As certain analysts believe that a parity with the euro is not far off, it could be wise for online Forex traders to take up short-term positions to capitalise on any volatility.
The Falling Renmibi
The slump witnessed within the Asian markets is expected to continue during 2016. Much of this revolves around the fear that the sector may be experiencing a soon-to-burst bubble. As mentioned previously, this rend has some investors worried due to the interconnectivity between the Asian markets and other portions of the world. Any stagnation within this powerhouse could trigger a global slowdown; detrimental to economies that have only recently emerged from protracted recessions.
Less Liquidity?
As the Forex markets are defined by their unparalleled sense of liquidity, this next topic is naturally important to examine. There seems to be two driving forces behind this paradigm shift. First, many day traders are wary about becoming involved in a market that is seen to be so volatile. Secondly, authoritative sources have pointed to the fact that tighter regulations may soon be coming into place. Should the markets begin to function differently, the prices themselves may be placed under greater scrutiny. Similarly, will modern electronic trading platforms have to adjust their strategies to adhere to such regulations?
The Quandary of the Middle East
With continued tension throughout the Middle East, one must wonder the impact that any major geopolitical events will have upon the global markets (and thus, currency pairs). We have already seen substantial fluctuations in the value of the dollar and the price of oil per barrel after recent terrorists attacks. Should this situation continue, many risk-averse investors are likely to search for currencies and assets that are more stable in their nature. The dollar could once again come into play here.
Of course, these are only very generalised predictions. Appreciating where any financial market is headed is just as much of an art form as it is a science. One of the best ways to stay abreast of the latest news is to follow CMC Markets. 2016 should indeed be an interesting year.
By Taylor Wilman
