In the wake of the Fed's warning that it is considering slowing its stimulus pace, speculative confidence has instantly evaporated. This has led to the largest weekly rally for the safe haven dollar in three years and sharpest S&P 500 slide in 18 months. Hearty moves along with the realignment of key fundamental correlations are strong indications that an underlying trend is developing. However, the relation between ultimate reserve and speculative favorite is made through risk trends. Stimulus withdrawal has certainly shaken risk positioning, but a full scale effort to deleverage over-exposed assets and flee to liquidity represents an escalation that we have yet to see. We discuss the level of risk aversion in the market, the benchmarks for reading its escalation (Treasury yields and yen-crosses tumbling) as well as the trade opportunities surrounding this theme in the weekend video.

Market conditions change, and our strategy should reflect those changes. We have coded the DailyFX-Plus strategiesfor Breakout, Range and Momentum to adapt to these market shifts.

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