What 2016 Looks Like for Forex Trading

This is a question that has started to resonate among market watchers. 2016 is looking like it is going to be an interesting year for trading forex. So let’s quickly look at what 2016 will look like for forex trading.

a)      US Dollar Volatility

We may see the much anticipated interest rate hike by the Federal Reserve Q1 2016 if it has not been carried out in Q4 2015. This may spur some volatility on the USD. Therefore, it is expected that there is going to be a lot of trading activity on the greenback. With so much pressure on the Euro, 2016 may also usher in the era of parity between the single currency and the USD. This is a view that has also been echoed by Goldman Sachs. When you consider that banks like Goldman Sachs and ING also trade forex and are very successful institutional investors, such long term views should not be ignored. It is left for traders to know how to trade the period in between these expected moves using technical plays.

b)      Advances in Trading Technology

Every year that passes by sees developers and programmers pushing the envelope when it comes to forex software. It is expected that in 2016, we will see even more advanced forex trading software coming into the market.

c)      Changes in Forex Laws in Several Countries

Following the disastrous effects the de-pegging action of the Swiss National Bank had on forex companies and traders, many countries and forex trading jurisdictions are considering changes to their forex laws to cut down on such occurrences. There are also moves by certain countries to ensure that participation in retail forex is restricted to those who have more professional knowledge. Russia is one country which has recently introduced a new forex bill that is expected to fully kick in by 2016. This law is providing for the first time, a standard regulatory protocol for the forex market in Russia. One of the provisions of this law is that the word “forex” can only be used by forex dealers operating as such with a license. Companies which are involved in forex in anyway and use the word “forex” in any of their websites or promotional material without the requisite license will have their websites blocked by January 1^st, 2016.

d)      Stricter Forex Trading Laws

As a follow-up to the last point, there are going to be stricter laws governing retail forex. For instance, the Bank of England recently released its “Fair and Effective Markets” report, set for full implementation in 2016. Some of the conditions spelt out in this report are a direct response to the embarrassing insolvency of Alpari UK, which had been widely seen as one of the strongest players in the retail forex industry. In Russia, the authorities have responded to this event by mandating that traders of insolvent firms will have no limits on claims that they can make in the event of insolvency of such affected firms. The provisions of this new rule in effect mean that all forex brokers in Russia are expected to join and contribute to a Compensation Fund, starting with an entry fee of 2 million rubles.

These events are just part of what 2016 may look like for forex trading.

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This article is a guest blog written by easy-forex