Global indices are increasingly vulnerable to a correction lower after stunning returns over the last 12+ months. The question that investors are asking is, ‘when will the inevitable correction in stocks come?’ Ultimately, the answer to that question is unknown. However, at times like this investors can use trendlines, percentage loss limits, and key technical barriers to place stop behind to limit risk. The one mistake investors must avoid is being over-leveraged at the very end of a bull market. Next month begins the weaker half of the year for stocks, so be aware of any deeper correction lower.

Other key events from the past week

USD: Interest Rate Statement, Apr 28: The Federal Reserve left policy unchanged and pushed back on early tapering expectations. Jerome Powell however did say that the recovery has occurred far quicker than expected. Watch out for possible further USDJPY strength over the next few weeks.

Bank of Japan: Interest Rate Outlook, April 27: The BOJ changed nothing at the latest meeting. Although they increased the GDP projections for this year, they also reduced inflation expectations. In conclusion, the BoJ is on hold for the foreseeable future and this should keep the JPY weak medium term.

AUD: Inflation data, Apr 28: The inflation data out of Australia was amiss at 0.6% q/q vs 0.9% expected. This sent AUDNZD lower through 1.0750 and the AUDNZD bond yield spread lower too.

Key events for the coming week

AUD: Interest Rate Statement, May 04: The last RBA meeting saw an abundance of caution. The latest employment data was a disappointment as full-time workers fell, so will the RBA maintain a cautious stance? Most likely they will.

GBP: Interest Rate Statement, May 06: The last BoE meeting was hopeful and last weekend Deputy Governor Broadbent signalled a ‘fast economic recovery’ for the UK. Will the BoE announce bond tapering next week and boost the GBP further?

Learn more about HYCM

High Risk Investment Warning: Contracts for Difference (‘CFDs’) are complex financial products that are traded on margin. Trading CFDs carries a high degree of risk. It is possible to lose all your capital. These products may not be suitable for everyone and you should ensure that you understand the risks involved. Seek independent expert advice if necessary and speculate only with funds that you can afford to lose. Please think carefully whether such trading suits you, taking into consideration all the relevant circumstances as well as your personal resources. We do not recommend clients posting their entire account balance to meet margin requirements. Clients can minimise their level of exposure by requesting a change in leverage limit. For more information please refer to HYCM’s Risk Disclosure.

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