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Trading Video: S&P 500 Drop Not a Risk Move, Dollar Pairs Ready to Break

Trading Video: S&P 500 Drop Not a Risk Move, Dollar Pairs Ready to Break

John Kicklighter,

Talking Points:

• US equities tumbled this past session and the Nasdaq even suffered its biggest daily drop since April

• Yet, the stumble from the torch bearer for moral hazard does not necessarily cue broad 'risk aversion'

Yen crosses are hesitant to follow the false risk drive, and the Majors are lining up for tech breaks

Want to develop a more in-depth knowledge on the market and strategies? Check out the DailyFX Trading Guides we have produced on a range of topics.

A sharp drop in US equities has raised the market's attention as traders look for volatility amid a long-simmering fear of an eventual 'risk reversal'. Was this past session's slip - the Nasdaq suffered its biggest drop in 11 months - the cue for a lasting, market-wide shift in sentiment? Looking at other assets sensitive to the currents in speculative appetite, there was little confirmation to be found of a fundamental drive. The S&P 500's 1.5 percent drop fell well within the broad range it has carved out for the past six years. As we monitor risk, FX traders should remain on high alert for an impending Dollar break. USDollar has struggled near the support of its eight-month channel for the past week, but the currency is running out of room quickly amongst its major crosses (EURUSD, GBPUSD, USDJPY, etc). A break is coming, but will it be bullish or bearish? And, just as important, will it have follow through. We take a look at market opportunities 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.