Sometimes, markets are just hard to follow. Or rather, some doesn't share the same analysis of the same fact. I think we talk about everyday this interest hike, but here it is more relevant than in any other part of the markets: it will directly affect the dollar value, given Federal Reserve is "printing money". If we talk about the USDJPY rate, it got lower than it could be few weeks ago, but are raising mainly because of the hopes that hike will happen, and of the Japan policies. It is at 119.37 yens for $1. If we talk about USD/EUR, currently, you can get €0.88 for $1. It confirms once a gain a stronger dollar trend, comparison to the €0.8716 value at October 14.
Currencies are pretty difficult to track. New trends are consistently emerging. But you're definitely correct, you can't truly predict how a currency will react to new information, moreover, currency intervention by central banks can throw an additional curve ball into that equation. In efforts to curb currency volatility, the intervention may cause further distortion to prices. What I have witnessed lately is general normalisation of currency prices, currencies that experienced major sell-offs as a result of the news out of China a couple of months ago, are slowly gaining ground. I do feel that currencies have a tendency to overreact in general.
Yes in fact not easy to indentity the trend market, many pair move very dynamic and sometime unpredictable, so because this reason hence forex business included in speculative investment, which as trader might losing money in forex market. Experienced trader I think they already knows this matter and in trading will always use money management and risk management to manage these risk, but as trader also will learn the market behaviour and trying strategy to catch profit in forex trading activity.
I think you'll have hard time to invest in FOREX by predicting, especially in the short term. Maybe in the long term, and you couldn't even be sure when you think about years ahead. After all, there was a time where $1.4 = €1. Well, the market allows more themselves to overeact because it affects much but also it is one of the least regulated market I know. It is regulated, but if you had the same privileges you got on FOREX, the Wall Street and European markets wouldn't look the same at all. There would be more speculative behavior. But another difference is that the numbers itself only changes a little compared to other indexes or stocks with many dollars.
Because forex trading included as speculative investment, which many market participant come from speculator trader which they want to getting profit from difference price movement, many trader also understand about risk appetite in forex, but in fact still many from them hardwork to make good strategy catch profit.
But it is the real nature of FOREX to be speculated? Sometimes I wonder. But that does not change much the fact it is now. The problem is that usually, speculative assets shouldn't reflect something much global than can be currencies. After all, currency exchanges should be done on purpose, maybe by investment, but the general movement is normally tied to the normal economical exchanges of money and of currencies between countries. You import $100 of goods, you pay them with your € balance, so you exchange € for $. That's how I see the main currency exchange factor. But FOREX is the exception on this rule and I don't get it much. About strategies, I wonder if it's not more based on statistics.
So many market participant in foreign exchange, maybe not only certain company that buying goods to another country, but in forex market also many market participant like as financial institution, many bank around the world, sometime also central bank can make intervention currency because certain expectation to exchanger rate to support economy condition, but I think the market forex also many speculator which they want take profit from difference price movement.
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