We use a range of cookies to give you the best possible browsing experience. By continuing to use this website, you agree to our use of cookies.
You can learn more about our cookie policy here, or by following the link at the bottom of any page on our site.

Free Trading Guides
EUR/USD
Bearish
GBP/USD
Mixed
USD/JPY
Bearish
Low
High
of clients are net long.
of clients are net short.
Long Short

Note: Low and High figures are for the trading day.

Data provided by
Gold
Bullish
Oil - US Crude
Bearish
Bitcoin
Bearish
More View more
Real Time News
  • The $AUD is pressuring four-month trend support against its US counterpart as sellers fight to reassert the dominant, long-term downtrend. Get your market update from @IlyaSpivak here: https://t.co/Bup64Arva9 https://t.co/OLpavqPOVA
  • RT @globaltimesnews: A total of 1,052 cases of #coronavirus have been reported as of Jan 25 in #Hubei Province, with 129 in critical condit…
  • RT @FactSet: $SPX is reporting revenue growth of 2.9% for Q4, led by the Health Care (11%), Utilities (9%), and Communication Services (9%)…
  • The AUD has been hit by the risk-appetite pullback occasioned by the spread of Wuhan-strain coronavirus. This week may see domestic focus return, if headlines allow, with key inflation data due. Get your $AUDUSD market update from @DavidCottleFX here: https://t.co/UIpwno0pSq https://t.co/kib4d1mA0q
  • RT @anilvohra69: USD inverted (red) is correlated to Excess Reserves (blue) and Reserve Balances (green). 1/2 https://t.co/bbO1pPWY4F
  • RT @FactSet: $SPX is reporting a decline in earnings of -1.9% for Q4, led by the Energy (-42%), Consumer Discretionary (-14%), and Material…
  • Becoming a forex trader means living and breathing the excitement, risk and reward of trading in the biggest and most liquid market in the world. Do you have what it takes? Read here to discover the qualities and processes it takes to build consistency: https://t.co/EfWEACQ6Cz https://t.co/6iMyDFqnqe
  • Knowing how to accurately value a #stock enables traders to identify and take advantage of opportunities in the stock market. Find out the difference between a stock's market and intrinsic value, and the importance of the two here: https://t.co/QszmdZFxlk https://t.co/2mjzvYvgSn
  • Previewing the Texas Rangers new home! https://t.co/WITZGSQPlc
  • Thanks for having me on @MartinSEssex https://t.co/fg8uOe16wr
Trades for Current Market Conditions and Expectations

Trades for Current Market Conditions and Expectations

2014-07-19 02:46:00
John Kicklighter, Chief Currency Strategist
Share:

It is important to distinguish taking a trade founded on current conditions and one that is dependent on future developments. When you do the former, the probabilities of the trade playing out increase dramatically - though some of it see it as being 'late to the game'. Alternatively, positioning for something that we expect may happen can offer deeper value but it also increases the risk that the circumstances have not fully developed to support the trade.

Investing and trading is about taking calculated risks. That means we have to find that equilibrium where we are confident enough and the return potential is sufficient enough to take a trade. I have been following the underlying current in risk trends for months - if not years. The most recent bout of volatility has caught my attention, but I'm not ready to call it evidence of a systemic change. Then again, I do not want to be asleep when the tides to change.

This is the thinking behind the EURJPY short (137.20, Stop 138.70) I've taken this past week. This is pair that is highly tuned to risk aversion specifically. If sentiment does turn, the yen crosses will offer many different trades, but this one has additional fundamental pressure to retreat even if markets level off.

I am looking at both EURUSD (below 1.3500) and USDJPY (below 100.50) with a similar mind. Should we take further steps towards a full-scale 'risk aversin' these are pairs that will readily lead the way. And, they could also retreat in a 'status quo' scenario - EURUSD because of monetary policy deviations and USDJPY due to the BoJ's moderation on stimulus policy.

There is also something to be said about pairs that are minimally reliant on risk trends - as prominent a driver as it can be. GBPUSD will be one to watch as the focus is on interest rate expectations, and UK 2Q GDP and BoE minutes this week can stir the pound. US 2Q GDP, NFPs and the FOMC decision the following week can do the same for the dollar.

My existing long USDCHF and AUDNZD trades (my Top of 2014 set) fall outside of the traditional risk environment as well. My intentions are further and more distant for these, so I will keep an eye on them.

What kind of Trading best suits you? Technical or Fundamental? Short-term or Long-term? Take our Trader Survey and find out.

Sign up for John’s email distribution list, here.

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

DISCLOSURES

News & Analysis at your fingertips.