Forex: Establishing Trades Around Risk Trends, US Debt Standoff
• The US government shutdown is a lasting risk that will ramp volatility one way or the other
• A lingering risk will increasingly weigh risk trends while a resolution would offer short-term rally
• With a focus kept on risk trends, we must remain vigilant with equities, the dollar and yen
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There has been a material risk adjustment this past week, but the US Dollar and S&P 500 retreat we've seen to this point don't reflect the full scale impact we face. Moving forward, the US government standoff on the budget will present the most effective catalyst to market-wide speculative positioning. Should the impasse persist, the implications for a more pervasive market impact will grow with the October 17 debt ceiling breach date closing in. Alternatively, a resolution can offer temporary lift to both modestly depressed 'risk' assets and the US dollar. Working through this haze, though, there is still an unfulfilled sentiment shift to account for. In the weekend video, we discuss risk trends and other fundamental conditions to position around as well as appealing trades with the likes of GBPUSD, USDJPY, EURJPY and others.
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