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Forex: Between the Fed's Taper and BoJ Stimulus Upgrade

Forex: Between the Fed's Taper and BoJ Stimulus Upgrade

2013-12-20 01:41:00
John Kicklighter, Chief Strategist
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Talking Points:

• Though the Fed announced a serious shift in policy just a day ago, volatility is quickly fading

• The last major event this week is the morning BoJ decision, but expectations for impact are limited

• Looking for medium-term swings on pairs like EURUSD is dangerous with volatility at a 6 year low

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Volume and volatility are dropping off quickly in the wake of the Fed's taper announcement. While the fundamental backdrop for risk trends and the stimulus wars has changed significantly this week, the repercussions are unlikely to be realized until liquidity fully returns and market participants are more willing to make serious changes to their portfolios. This curb on volatility and trend development has a distinct influence on FX trading. Where traders may be anxious to jump on a short-term EURUSD trendline break, await a completed GBPUSD head-and-shoulders pattern or drive AUDUSD after its break to multi-year lows; expectations must be set by reasonable assumptions. We discuss these majors, USDJPY and gold in today's Trading Video.

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