Trading Video: Why are the Dollar and Equities Dropping in Tandem?
• Risk aversion is digging in as most asset classes align to their 'risk' position and volatility soars
• Yet, in the broad decline, we have seen both the Dollar and Yen driven to retreat
• Conviction takes time to switch from greed to fear, and abnormalities arise in the interim
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Another day of tangible risk aversion has driven many asset classes into deeper retreat. The S&P 500, only a few days removed from a critical channel brake, has built volatility into its tumble. Meanwhile, the equity-based VIX volatility index has climbed to a multi-year high. Yet, through this move, neither the Dollar nor the Yen threw into the mix as safe havens. Instead, yield forecasts - also sensitive to investor sentiment - led to general declines for the Greenback and the British Pound. As the risk theme entrenches itself, these sidetracks will evaporate and the trends for the Dollar, Euro and Yen will become distinct and momentous. In this transitional period, though, traders need to be able to gauge what is moving the markets and how it drives price. We discuss this in today's Trading Video.
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DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.