News Column

Forex: At the Beginning of a Dollar and Risk Reversal

February 19, 2014

John Kicklighter

Talking Points:

** The S&P 500 posted its first decline in 10 trading days while the USDollar advanced a third day

** Risk trends are starting to show greater traction on equities, yen crosses and Emerging Markets

** Monetary policy trends have shifted for the Pound, and the US outlook may further veer on CPI

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A stalled rally for the S&P 500 and tumble for the USDollar has started to evolve into reversals for both. On the back of such remarkably consistent drives with limited participation, a correction is to be expected. Yet, the scope of this turn - from mild breather to full-scale risk reversal - will be determined by the development of meaningful fundamental themes. There are many potential catalysts to disrupt sentiment, but nothing that promises the sway to single-handedly change our bearings on the global financial system. Instead, we much look at our benchmarks and barometers like volatility readings. Meanwhile, monetary policy expectations are offering another proactive theme to develop trend on. GBPUSD epitomizes the recent shift in these forecasts. We discuss these themes and their trade opportunities in today's Trading Video.

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Source: DailyFx

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