We use a range of cookies to give you the best possible browsing experience. By continuing to use this website, you agree to our use of cookies.
You can learn more about our cookie policy here, or by following the link at the bottom of any page on our site.

Free Trading Guides
EUR/USD
Bullish
GBP/USD
Mixed
USD/JPY
Bearish
Gold
Bearish
Low
High
of clients are net long.
of clients are net short.
Long Short

Note: Low and High figures are for the trading day.

Data provided by
Oil - US Crude
Bearish
Low
High
of clients are net long.
of clients are net short.
Long Short

Note: Low and High figures are for the trading day.

Data provided by
Bitcoin
Bullish
More View more
Real Time News
  • European Opening Calls From IG: #FTSE 6975 -0.62% #DAX 12714 -0.60% #CAC 5653 -0.48% #AEX 580 -0.49% #MIB 22966 -0.54% #IBEX 9206 -0.49% #STOXX 3555 -0.49%
  • #AUDUSD accelerating lower as Chinese stocks benchmarks (#Shanghai Composite, #HangSeng Index) drop. US index futures (#SP500, #DowJones) are pointing higher however, so follow-through is in question. https://t.co/dEgNjn7gDu
  • GBP/CAD has broken below the September uptrend while EUR/CAD may be ending its consecutive 12 day decline with EUR/CHF approaching key resistance as NZD/CAD aims at November lows. Get your currencies update from @ZabelinDimitri here: https://t.co/GpRB7IKhTA https://t.co/uC8RCBwLW9
  • IG Client Sentiment Update: Our data shows the vast majority of traders in Ripple are long at 96.72%, while traders in USD/CAD are at opposite extremes with 70.31%. See the summary chart below and full details and charts on DailyFX: https://www.dailyfx.com/sentiment https://t.co/9ytjuGRTBC
  • Recession risk is back on the rise and largely attributable to expected economic impact from the #coronavirus outbreak. Get your market update from @RichDvorakFX here:https://t.co/NhzJHEqwj6 https://t.co/0XVIiOWjID
  • Forex Update: As of 05:00, these are your best and worst performers based on the London trading schedule: 🇨🇦CAD: 0.01% 🇳🇿NZD: -0.04% 🇨🇭CHF: -0.09% 🇦🇺AUD: -0.12% 🇬🇧GBP: -0.12% 🇯🇵JPY: -0.22% View the performance of all markets via https://www.dailyfx.com/forex-rates#currencies https://t.co/GtO4ITHwT0
  • Indices Update: As of 05:00, these are your best and worst performers based on the London trading schedule: US 500: 0.71% Wall Street: 0.67% France 40: -0.18% Germany 30: -0.46% View the performance of all markets via https://www.dailyfx.com/forex-rates#indices https://t.co/4ZVogLkGM6
  • My trading video for today: 'S&P 500 and #Dow Suffer Sharpest Tumble Since August 2015, Closer to Self-Sustaining Risk Off' https://www.dailyfx.com/forex/video/daily_news_report/2020/02/26/SP-500-and-Dow-Suffer-Sharpest-Tumble-Since-August-2015-Closer-to-Self-Sustaining-Risk-Off-.html?ref-author=Kicklighter&QPID=917719&CHID=9 https://t.co/tMmopEmE64
  • The $GBP recoiled from chart resistance against the US Dollar, setting the stage for prices to resume a bearish trend reversal triggered mid-January. Get your market update from @IlyaSpivak here:https://t.co/lVpyZkIfJt https://t.co/oQs8Ty4Eau
  • The Japanese #Yen may rise as the #SP500 outlook risks shifting more bearish on signals in trader positioning. What is the road ahead for $USDJPY given the outbreak of the #coronavirus? - https://www.dailyfx.com/forex/fundamental/article/special_report/2020/02/26/Yen-Outlook-Bullish-USDJPY-May-Fall-as-SP-500-Sees-Dip-Buying.html?CHID=9&QPID=917702&utm_source=Twitter&utm_medium=Dubrovsky&utm_campaign=twr https://t.co/ynFwtuzd6P
Best Options for a Dollar Collapse: Always Have a Plan B

Best Options for a Dollar Collapse: Always Have a Plan B

2018-05-03 03:00:00
John Kicklighter, Chief Currency Strategist
Share:

Talking Points:

  • We do analysis - technicals, fundamentals, conditional - to come to a level of confidence in a possible market outcome
  • Fully evaluating the 'alternative' scenario can deepen conviction, better establish timing and prepare us for the unexpected
  • My bias on the Dollar is bullish with a preference for EUR/USD and GBP/USD, but an unexpected drop suits NZD/USD and USD/CHF

What makes for a 'great' trader? Strategy is important but there are many ways we can analyze to good trades. The most important limitations and advances are found in our own psychology. Download the DailyFX Building Confidence in Trading and Traits of Successful Traders guides to learn how to set your course from the beginning.

No Trade is Certain so No Trade Plan Should be Without Plan B

If you are 'certain' that a trade is going to work out, you are deluding yourself. There is no absolutes when it comes to the markets, only probability. When we think in terms of potential, we evaluate a market and our approach far more thoroughly. That includes assessing what can lead to alternative outcomes. In some cases, there are markets that offer appealing trade opportunities whether the ultimate bearing is bullish or bearish. These ambidextrous markets are rare; but if we came across such a situation, it would make sense to spend as much time working out a trading opportunity to exploit an upside move as one that benefits a decline. More often, the probabilities are not so evenly split. Further, it is not always the case that the alternative to a preferred outcome supports a straightforward trade opportunity. The Euro and equities are good examples of this. If the Euro retreats with a deflated rate forecast or shares collapse after years of stimulus leveraged gains, the well of potential would be deep. For the alternative, a rebound from currency or asset class would struggle against an already stretched valuation. Certainly a possibility, but not one with the same potential for traders.

Thinking About the Alternatives Deepens Our Understanding

Even if you don't intend to consider an alternative outcome with the degree of intent as your primary market view, it can still deepen your overall appreciation of the market you are navigating. When you thoroughly vet the alternate outcomes for a market or setup, the full scope of how and why your favored trade may not work out becomes clear. If you didn't believe it probable/possible a market will decline for example, you may miss a wealth of contradictory evidence to your prevailing - but thoroughly under-vetted - market thesis that would otherwise give you reason for pause. Furthermore, when you appreciate both sides of a market, you can better establish when to enter. Rather than acting on a technical break, a full accounting of the elements that can work against a trade from gaining serious traction can create a better checklist for qualifying entry. And, perhaps the most valuable by-product of evaluating the alternatives is preparation for a trade should it be warranted. Many traders scramble to place a trade when the market moves in the opposite direction as anticipated with limited analysis as speed is a priority in fast moving markets. There may not always be viable trades for different outcomes, but it is good to have them ready when available.

My Bullish View of the Dollar and its Counter Case

To put this concept into practice, I think it is worthwhile to consider the US Dollar. From my analysis, I consider its greatest potential carrying out a bullish recovery. That is predicated on a technical observation that 2017 drove the currency into a significant retracement for which the fundamentals don't offer strong support. Considerations of growth, monetary policy, real yield and even political risk don't project the degree of weakness the Greenback's slide has suffered. Yet, a recovery requires some recognizable catalysts to spark recognition of the distorted positioning behind the currency. The recent collective retreat in monetary policy anticipation for the ECB, BoJ and BoE is that effective lever. The best options to pit a nascent strength for USD against are the fundamentally (bullishly) stretched Euro and Pound. On the other hand, the Dollar could readily falter after its recent multi-week charge should concentrated political risks flare up. In such a scenario, the retreat would most likely center on the intensity of the buildup and subsequent retreat. There have been remarkably strong moves against counterparts for NZD/USD, AUD/USD and USD/CHF. We discuss the value of fully analyzing probabilities through alternative trade scenarios in today's Quick Take Strategy Video.

US Dollar Index

US Dollar Index Daily Chart

NZD/USD

New Zealand Dollar vs US Dollar Daily Chart

To receive John’s analysis directly via email, please SIGN UP HERE.

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

DISCLOSURES

News & Analysis at your fingertips.