FXstreet.com

FX Technical Strategy

5

0

Risk appetite is reduced

Wed, Apr 8 2009, 06:39 GMT
by Lloyds TSB Financial Markets Economic Research Team

Lloyds TSB Financial Markets


Market overview

The coming weeks look set for a range-bound market. A few weeks ago, I suggested that FX volatility was too high and could even trade in single digits by May when looking at one month Euro dollar vol (below). This has favoured an oversold bounce in sterling and is likely to continue for now against selective currencies. Whilst the dollar may well weaken further in the medium term, the 'grand sell off' for the dollar remains a long term story (as proposed in the last release). This, in my view, is tied together with inflation and a collapse in bonds.

Euro US Dollar

The reason for this 'delay' is simple. Equities are unlikely to have hit the ultimate low. A correction in a bear market can look exactly the same as long term base which is why there are many proponents expressing bullish views.

However, whilst this is a short term scenario, the technical set-ups in the major equity markets still imply further downside, which will keep the dollar in demand for a while yet.

The stock rebound we have seen so far is encouraging and started with out performance of Chinese equities and reversing commodity prices that the broader market has only just picked up on. But it is fair to say that the occassions when risk appetite does return (as it has now) it will remain vastly reduced, so dollar weakness has to be viewed with caution.



Related reports

FX View - Headline unemployment rate creates dollar shocker by Interactive Brokers LLC
Fri, Nov 6 2009, 18:41 GMT

Forex Daily Overview - USD mixed, unemployment rises to 10.2% by Easy Forex
Fri, Nov 6 2009, 18:31 GMT

Forex Daily Analysis - USDJPY is moving towards support level at 89.55 by Investija.com
Fri, Nov 6 2009, 14:35 GMT

Forex Technical Report - U.S. Markets Brace for Jobs Data by ForexHound.com
Fri, Nov 6 2009, 13:29 GMT

Forex Technical Report - Dollar Trading Lower Ahead of U.S. Jobs Data by ForexHound.com
Fri, Nov 6 2009, 13:19 GMT

eurusd, bonds, equities

View All

Related content


Interested in forex trading? forex brokerage firms!


FOREX.com
Contact the broker/FDM
Open a demo account
FX Solutions LLC
Contact the broker/FDM
Open a demo account
Alpari (UK) Limited
Contact the broker/FDM
Open a demo account
Alpari (US), LLC
Contact the broker/FDM
Open a demo account
MF Global FXA Securities Ltd.
Contact the broker/FDM
Open a demo account

GET CASH BACK FOR YOUR TRADES!   Learn more about the Pip Rebate Program

Note: All information on this page is subject to change. The use of this website constitutes acceptance of our user agreement. Please read our privacy policy and legal disclaimer.

Trading foreign exchange on margin carries a high level of risk and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to trade foreign exchange you should carefully consider your investment objectives, level of experience and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with foreign exchange trading and seek advice from an independent financial advisor if you have any doubts.

Opinions expressed at FXstreet.com are those of the individual authors and do not necessarily represent the opinion of FXstreet.com or its management. FXstreet.com has not verified the accuracy or basis-in-fact of any claim or statement made by any independent author: errors and Omissions may occur.

Any opinions, news, research, analyses, prices or other information contained on this website, by FXstreet.com, its employees, partners or contributors, is provided as general market commentary and does not constitute investment advice. FXstreet.com will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information.

©2009 "FXstreet.com. The Forex Market" All Rights Reserved.