For most – this market makes absolutely no sense.
For forex traders we’ve been given a “tiny little gift” here as of yesterday with The Australian Dollar ( AUD ) finally taking out the last of the short-term bulls, rolling over “hard” – and rewarding our patience and fundamental approach.
This before “global appetite for risk” takes a total nose dive, all the while SP 500 “still” clinging to the highs. I’m up 652 pips in just the last few days alone…and the SP500 hasn’t even budged……..yet.
Gold and U.S Treasuries next to “take it on the chin” in an environment where many must be asking “how can all these things move lower at once”?? Where “is” the safety play if gold, bonds, stocks and “everything” head for the basement?
Cash. That’s where.
The “endless slosh” of Japanese Yen as well American Dollars used to “buy all this crap” is now finding its way “back into bank accounts” as safety is sought.
If you’ve no interest / knowledge of foreign exchange then I can fully understand the confusion but….consider something so basic, so rudimentary, so straight forward as this:
Stocks are purchased with cash, gold is purchased with cash, bonds are purchased with cash!
It’s the “cash” that dictates the value of these assets! Not the other way around!
When I have someone ask me “Kong – gold is going lower, what does that mean for the U.S Dollar?” or “Are bonds “sniffing out” a low in USD?
It’s the other way around!
As the largest, most liquid, most widely traded market on the planet it’s the “currency market” that dictates movement in all others “below” it, so when you see “risk related currencies” being sold, and “safe haven currencies” being bought – there it is.
It’s the largest piece of the puzzle and for the most part – the least understood.
You’ve got a fantastic opportunity here – to add something new to your toolbox. Watch how this unfolds and look to consider currency movement as a “major leading indicator” ( if not “the” leading indicator ) when trading in other markets / assets.
We’re in a wonderful position here with active trades well in profit before the fireworks really even get started. I invite “any and all” to have a poke around the Members Site and consider adding “forex” to the list of things you follow / track on a day to day basis.