Watch for those larger corrections in the trend!

Thursday, May 10, 2012

The risk off environment may be taking a breather and if it does a near-term floor in the Dow and ceiling in the U.S. dollar will be put in place as both these markets are in a chop.

Mind you, shifts in psychology often come in phases and this one will have to begin with a slow down in the RISK OFF attitude in the equities markets. If the Dow respects the previous support area, then the bearish exhaustion could lead to momentum higher, but there must be respect for support first to even attract bullish attention.

Past performance is not indicative of future results

The sell-off into the European close corrected the Dow’s early gains and with a post-Europe low in place, the markets can now determine if risk is going to be able to stay on the table as the Dow’s daily range lows are tested.

 

The yen becomes an interesting currency to then watch during this important session as the strength could begin to see a slowdown as the currency is borrowed/sold in an environment where the Dow to move higher of the range floor and encourage more risk taking. The yen has already lost intraday ground to the Australian dollar, Canadian dollar, and euro.

Past performance is not indicative of future results

The move higher in the AUD/JPY shows that there is some risk appetite returning to the market but notice that the pair is still trading below the 200DMA and has retracted from this level.

 

The tricky part of this market is now whether or not the “risk on rally” can continue. Bad news from Europe will have to quiet down and tomorrow’s data will have to 1) confirm that traders are in the “right” for rallying and 2) keep the optimism going into the weekend.

SOURCE FOREXFACTORY.COM

 

The idea that many of the trends on the daily time frames that I have patiently been waiting for corrections to swing entries on may be reached – only on a more sustained risk on rally – is inviting. It’s the opportunity many longer-term risk OFF traders are waiting for: A more substantial correction to trade into. Realize that the outlook of such a strategy is near-term optimistic and longer-term pessimistic.

 

As an active forex trader and Chief Currency Analyst for InterbankFX.com I do write for a number of sites all over the web and I am happy to say that I will be posting updates at www.IBFXconnect.com. My Activity Board will feature the trades from my trading account as well as intraday commentary.

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Posted By: 

Raghee Horner

Raghee Horner, chief currency analyst for IBFX, provides her personal daily trading tips and insights through Dailyforextradingedge.com. An experienced trader with over fifteen years in the markets, Raghee is the co-founder of EZ2Trade Software and has taught her brand of technical analysis and charting strategies to students all over the world. She is an international author and has taught currencies, futures, and equities trading for over a decade.