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Forex: Post-FOMC Dollar and S&P 500 Runs Cool Quickly, Risk Reversal

Forex: Post-FOMC Dollar and S&P 500 Runs Cool Quickly, Risk Reversal

2013-09-20 01:58:00
John Kicklighter, Chief Strategist

Talking Points:

• The 'surprise' element of No Taper seems to have passed quickly

• Risk positioning is still acutely sensitive to the premium vs yield imbalance

• A move to deleverage is still a tremendous risk - and not even more an afront to monetary policy

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Rather than find a hearty US equity and 'risk on' rally in the markets the day after the Fed shocked the majority of traders by holding off the Taper, we have found hesitation. The S&P 500 put in for a mild correction while the USDollar posted a sizable rebound in a price development historically associated to reversals. While there is still Taper premium that can be worked off for the market, playing down a moderation in stimulus is also a vote on risk trends. With the knowledge that support will inevitably be moderated and backdrop investment conditions have not materially improved; we may be seeing the true salt of sentiment trends. In today's video, we discuss how reversals are a material threat - though we should keep the powder dry until that fear erupts.

Find out what event risk can threaten the trade setups discussed in today's video with the DailyFX Economic Calendar.

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