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Forex: EURUSD and S&P 500 Traders Should Watch Risk Like a Hawk

Forex: EURUSD and S&P 500 Traders Should Watch Risk Like a Hawk

John Kicklighter, Chief Strategist

Talking Points:

• Both the world's most liquid currency and recognizable equity index have pushed to new highs

• Fundamentals remain a curb on the risk run and stand ready to amplify corrections into reversals

• Ukraine and China offer possible risk catalysts; but there is also event risk for USD, NZD, AUD and GBP

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EURUSD has finally surpassed 1.3800 and thrown in with other prominent financial benchmarks to support a 'risk on' theme. But how convincing is this signal? With the S&P 500 scaling record highs, the yen crosses surging forward this past week and volatility measures sinking back towards their natural historic lows; it would seem that all signals are green. Then why are these markets plagued with chop and tepid participation figures? A patch work of indicators and preoccupations may be keeping these markets afloat, but the weight increases as we move higher. Meanwhile, we have significant headline risk to general sentiment trends (Ukraine, China) and important regional sparks (BoJ decision, RBNZ expected rate hike, Fed confirmation hearings and BoE policy discussions) ahead. We discuss the precarious conditions of our markets and what is needed to turn volatility into trend in the weekend Trading Video.

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