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Trading Video: A Swell In Volatility Threatens Long Overdue Reversals

Trading Video: A Swell In Volatility Threatens Long Overdue Reversals

2014-07-18 01:14:00
John Kicklighter, Chief Currency Strategist
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Talking Points:

• Volatility soared this past session as tensions in Ukraine and the Gaza Strip flared

• A correction in equities, Yen crosses and other risk-bearing assets reflects the market's attention

• Given a significant duration or scope, this could prove the catalyst for a systemic sentiment reversal

See volume behind the majors during the NFPs and ECB rate decision to gauge your trading approach using the free FXCM Real Volume and Transactions indicators.

Global headlines have generated a heavy swell in volatility, leading traders to run a threat assessment for a more systemic shift in speculative positioning. Market conditions are both durable and fragile. Complacency and contentedness has proven these past months and years the most enduring features of the financial system. However, the extremes of positioning (long risk, use of leverage) and severe lack of a safety net (hedging) poses an exceptional risk to the stability of the system. As this is a consideration of 'when' rather than 'if', news of a downed plane on the border between Ukraine and Russia and a ground offensive in the Gaza Strip can pose a greater risks to the financial markets than many suspect. I have taken a EURJPY short, but additional trades depends on the extent of the speculative turn. We discuss what to watch and trade opportunities in today's Trading Video.

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