We’re waiting, patiently, through this consolidation over the past few days as the markets look for some key decisions on the US bailout plan. Equity markets and commodities have been drifting lower, pushing USD slightly higher over this time.
We’re expecting a breakout; short term looking lower on EUR/USD and related pairs, USD/JPY pretty much the same. Over the longer haul, however, looking for EUR/USD longs. If the Fed needs to keep cutting rates and the stock market bounces you’ll see the risk-related trades start to pile on again.
But for now, we need to see what happens with the bailout, and/or any other government plans. Market reaction, initially, will view as positive, with impending fears weighing everything down. If the market starts tanking again, and is realized on a global scale, risk related pairs are likely to start tanking right along with it.
My focus as of lately has been on carry pairs because we are in an environment that’s concentrating on risk. These buys and sells have been dictating a lot of what’s going on in the majors. The Fed took out about 30 billion in cash out of the market last night at 1am, trying to keep the current rate as steady as they can. The US is clearly doing everything they can to keep the situation at bay.
Technically speaking, this current window of time is a good time to play bounces in line with any trends. The basics hold true as always; I’ll post what I can and when I can, but in the meantime, stick to the fundamentals; they’ve been working well in this market lately.
Also, this time of consolidation has me thinking a lot about trading volatility. I realize most of you are solely spot FX traders, but good money can be made during downtimes like this trading options. I’m putting together a little lesson plan that can help out with this and will let you know when its finished.