Yesterday, I was at an event where Ashraf Laidi, chief market strategist of CMC markets, shared his insights on the market.

The session started at 8pm and lasted all the way till 11pm. If there were more questions from the audience, I think Ashraf could have gone on till the next morning as he always had lots of comments on every chart that he showed us.

Surprisingly, I saw that many people in the audience actually stayed right to the end. Perhaps some of them are regular currency traders who were used to the late nights.

Ashraf Laidi spent a lot of time analysing the movements of the EUR/USD currency pair, as well as its volatility chart.

Below is the monthly chart of EUR/USD.

Ashraf was able to link the movements of this currency pair from 2006 to the interest rate movements of USD and EUR, and subsequently to the start and end of QE1 and QE2.

Generally, QE1 and QE2 were negative on the USD, and the end of quantitative easing also coincided with the subsequent strengthening of the US dollar.

Everything looked so logical on hindsight.

To cut a long story short, his current view on the Euro is quite pessimistic and Ashraf expects it to break below 1.30 by the end of the year, if not sooner.

You can have a meeting every few days but nothing is going to change the fact the Greece will have to default.

Barely two months after the USD had fallen to historical lows of 1.20 against the SGD, it has recovered and rallied more than 5% in the past two weeks to reach 1.27.

In just two weeks, the price has gone back to the rate we last seen six months ago (see USD/SGD weekly chart shown below).

In times of market turbulence, the USD has always been a safe haven asset, with investors moving funds from riskier assets to US treasuries.

And how often have we seen an overly-crowded trade with wide consensus views often proved to be wrong?

Just about everyone has been bearish on the USD, from the institutional investors to the man in the street. There were also many funds that launched SGD hedged class in the past couple of years, so as to hedge away the currency risk of the USD. In order to do so, they had to take a short position on the USD (versus the SGD).

So now we see some of them being caught out.

Overall, I still think the long term fundamentals of the USD is rather weak. However, do note that long term trends in the currency markets are always combined with plenty of short term counter-trends.

In the short term, we could see some resistance at the 1.284 and 1.30 levels if the USD/SGD rate continues to go up.

In one of the most stunning moves in its history, the Swiss National Bank (SNB) announced that it would buy euros in “unlimited quantities” whenever the single currency fell below 1.20 Swiss Francs (CHF).

The news took the market by surprise and sent the Euro spiraling up from 1.10 to 1.22 versus the Swiss Francs, an almost 10% increase, in less than fifteen minutes.

The appreciating CHF has been hurting Swiss exporters, and the central bank has responded with a drastic action. Recently, the CHF had continued to appreciate as the currency was traditionally viewed as a safe haven in volatile market conditions.

Can SNB keep to it’s promise of buying unlimited quantities of Euro?

The last time SNB tried to prevent the CHF from appreciating in 2010, it had to drop its position eventually as the currency continued to appreciate. It was left holding massive amounts of Euro and USD, which amounted to SFr 20bn of losses as the Euro and USD devalued.

In announcing an artificial floor for EUR/CHF, it has shown its hand and could prompt retaliatory action from other central banks, such as Japan.

If everybody wants to devalue their currency, which currency will be the one that gains?

The USD broke through the 1.20 barrier briefly yesterday, before recovering to close slightly above 1.20.

The fall in the USD has been relentless as it was trading at around the 1.30 level at the start of the year.

Those who have invested into USD denominated assets would have to earn a return that is in excess of this currency depreciation before they can see any return on their money.

The currencies market tend to be a very long term trending market in nature with bouts of short term volatility. Trying to bet against a long term trend can be quite sucidal, as losses will pile up higher and higher.

This applies especially to those who have bought into certain currencies at a higher price and want to wait for a pullback into their purchase price before they sell their currencies.

Remember, that day might never come. Just look at the 30-year chart price chart of GBP/SGD as one good example.

A recent newspaper report highlighted a trend of more retail forex traders in Singapore.

One of the reasons of the rising popularity is the growing number of forex instructors in Singapore.

Everyday, you will be able to see advertisements in the newspapers promoting forex training sessions. Some of their advertisements lure newbies by promising high returns.

“Turn $10000 into $1 million within three years!”
“XXX has been trading forex for the last three months and he has been making $10000 per month”.

Thanks to some of these irresponsible advertisements, many new traders have the unrealistic expectations that they can generate a lot of wealth through forex trading. They think that their pathway to the “Road to Millions” is set just by attending a 3-day trading course.

How wrong can they be.

If someone comes to you and tells you he can train you to be half as good as Tiger Woods in three days, I am sure you will laugh at him.

Yet when someone claims he can make you a profitable trader just by attending a 3-day workshop (with the results that would put many hedge fund managers and bank proprietary traders to shame), many people rush to fork out thousands of dollars to sign up for the workshop.

Learning to be a successful trader involves hard work over a long period of time.

Also, it is not how much you can make in a single trade (as some of the advertisements like to portray). Humans like to extrapolate a win and then salivate at the potential earnings. Hmm, if I can make $100 a day, then I can make $2000 a month.

Wins will always be accompanied by losses and it is about how consistent your results are over the long term.

Many traders are able to generate small wins over a few months (or even years), but one fine day, they will blow their account and lose all that they have made and more.

It is not easy to be a good trader. Statistically, out of every ten traders, nine will lose money.

The good news is that if you happen to fall into the ten percent, you can make a lot of money (9 times of what the other traders lose).