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Video: Trading the Dollar, Euro, Pound and Yen Going Forward

Video: Trading the Dollar, Euro, Pound and Yen Going Forward

John Kicklighter, Chief Strategist

Talking Points:

  • USDollar has carved out a remarkably consistent channel despite heavy swings in investor sentiment
  • US equities rose for a third straight week to record highs, but a coup attempt in Turkey unsettles the weekend
  • EUR/USD will face existential themes, risk sensitivity and the ECB rate decision amid a string of events

See the DailyFX Analysts' 3Q forecasts for the Dollar, Euro, Pound, Equities and Gold in the DailyFX Trading Guides page. See the DailyFX Analysts' 3Q forecasts for the Dollar, Euro, Pound, Equities and Gold in the DailyFX Trading Guides page.

Few people are confident in the prominent ranges that have set up for key FX currencies and pairs. The Dollar Index (ticker = USDollar), EUR/USD, USD/JPY, even GBP/USD have established boundaries that seem to provide comfortable and low-risk trading conditions. Yet, market participants are too aware of the Brexit complexities, the growing fundamental imbalances behind EUR/USD and the desperation of the BoJ to be placated into belief of quiet seas ahead. There are tumultuous conditions ahead for the major currencies and traders must keep tabs on those things that are likely to shatter the peace.

Among the most liquid currencies, the most at-risk from a volatility perspective is arguably the Japanese Yen. The recent rebound in USD/JPY and among the other Yen crosses to test the moxie longer-term bear trends still fits within the context of normal market fluctuations. Yet, the threat of erratic volatility that blows through technical boundaries is troublingly easy to ignite. An asymmetrical correlation to 'risk trends' and a desperate BoJ with a new Abe mandate sets the stage for explosive price action. Less volatile but more decisively bearish is the backdrop from the Euro. An abundance of systemic fundamental threats makes a minefield that is difficult to traverse without tripping a lasting change.

For the Pound, a post-Brexit world ensures at least two-years of difficult negotiation to make for a soft landing for when the UK is officially out of the European Union. That is lasting uncertainty that is likely to keep volatility near-at-hand for the Pound. In these conditions of volatility, protectionism, uncommitted but over-leveraged risk and systemic ambiguity; the Dollar will look increasingly commendable for its perception of stability - though that won't be a continuous influence and is underappreciated when general conditions seem calm. In today's Strategy Video, we look at what shape trading in the world's most liquid currencies - Dollar, Euro, Yen and Pound - will take going forward.

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DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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