Strategy Video: Distinguishing Correction and Reversal on EURUSD, SPX
• Typically trading with the trend offers higher probability, but when does pullback turn to reversal?
• Technicals set the stage for evaluating bearings, but fundamentals and conditions bolster probabilities
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The S&P 500 is three day off a record high and EURUSD is testing a 7-month descending trend channel. Are these the beginnings of more substantial reversals or another round of short-lived corrections in more prolific trends? Rather than evaluate this situation on 'a feeling', we can use analysis to better determine probabilities for the ultimate outcome. Technicals help establish milestones for benchmarking probabilities. Fundamentals are critical for reinforcing or draining conviction. Market conditions determine whether a high profile shift is even possible. We use this analysis to evaluate the tantalizing market moves from the S&P 500, EURUSD and other Dollar-based majors.
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DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.