Trading Video: Could the ECB Leverage a EURUSD Similar to USDJPY?
• The ECB and BoE rate decisions are on tap as today's top event risk
• After the strong market responses to the BoJ and Fed last week, FX traders are on edge
• Tail risk is not more likely because of last week's fireworks, but trends are still at stake
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While the seas look calm for equities, tension continues to build up in the FX market...and for good reason. This past week's surprises - the BoJ increasing stimulus, Fed keeping its hawkish tack and the ECB facing internal dissension - has put traders on edge and suspicious of 'unlikely' outcomes. For now, the focus remains on monetary policy with the ECB and BoE on deck as well as Friday NFPs rekindling burgeoning rate speculation for the FOMC. Yet, the real risk (hope) of volatility rests with the theme that is receiving less attention. With the current balance, the under-appreciated risk falls back to investor sentiment. We look at the FX market's exposure to monetary policy and 'risk trends' as well as setups that fall further off the beaten path in today's Trading Video.
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