Talking Points:
- The most liquid and heavily-traded markets tend to have influence over related and complementary counterparts
- We have seen the GBP/USD set the stage for major Pound cross moves and AUD/USD undermine a broad Aussie rebound
- USD/JPY is offering technical guidance for the broad Yen crosses while the S&P 500 stages global equities and 'risk'
See the DailyFX Analysts' 2Q forecasts for the Dollar, Euro, Pound, Equities and Gold as well as our favorite 2016 trading opportunities in the DailyFX Trading Guides page.
With an avalanche of a market move - one that spans crosses or an entire asset class - there is often an impetus from one of the benchmark currencies or indexes. That was the case with the remarkable bullish breakout for the Pound across its pairings this past week. Dominant GBPUSD and EURGBP would lead the way with a reversal at a 200-day moving average and tremendous head-and-shoulders neckline break respectively.
Following liquidity and average trading level, we can often identify the most capable sparks for many of our favored trades. And, the winds often start outside of the target pair or market. We have this concept play out in both the Pound and Aussie Dollar pairs over the past few weeks. Both continue to offer a path led by their respective, top liquidity pairings. However, more pressing conditions may be arising elsewhere.
While the levels may not seem so distinct for many of the Yen crosses, its most liquid cross (USD/JPY) is showing a very clear technical setup. Meanwhile, the S&P 500 may be setting the stage for global equities with a high-profile head-and-shoulders pattern - though many indexes are carving out remarkable patterns. This same benchmark may further shape a bigger shift in the broader field of 'risk' assets. We look at the staged conditions from these important leader in today's Strategy Video.
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