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Dollar uptrends or higher ranges?
Just when it looked like the dollar was set to generate downward trends. has reversed direction to test its rise. This follows failures to stay above 1.20 EURUSD and 1.1 GBPUSD, as well as commodity currencies corrected downwards. It has also changed its focus from the EURUSD 2021 high of 1.2350 to its annual low of 1.1704.
So the question is whether this is one more bipolar episode or the start of new dollar uptrends?
This comes in a year to the point where those bets have been rewarded for limited ranks and tracking rather than strong, sustainable trends. It is also consistent with my view, as I explain in the AT Strategy Guide, that the forex market tends to operate more frequently than in episodes rather than trends.
What is slowing down currency trends?
So traders should ask themselves what is holding back the forex market in trying to build sustainable trends?
As I explain in Do Fundamental Matter Driving Forex Trends ?, what complicates current efforts to build strong trends is that economies are currently in sync, at least for expectations that growth will improve in the post-pandemic period as there is more people in industrialized countries. it is vaccinated and restrictions are removed. One of the reasons why markets are trading more on expectations than current relative growth spreads is that most central banks, led by the Fed, have made it clear that there is no rush to tighten monetary policy in response to the increase in inflationary pressures they consider transitory.
So far, attempts to force the Fed’s hand by raising bond yields have failed, as the market has pushed rates down in ranks, supporting risky assets and keeping the dollar in ranks.
These are not normal times
These are not normal times when markets would already anticipate central bank changes in fundamentally based monetary policy. The pandemic has distorted the typical economic cycle and its exit is causing major economies to move in the same direction. However, central banks are in no hurry to close the liquidity gap, leaving those seeking to negotiate with traditional foundations wary of advancing too far as the flood of liquidity continues to flow into world markets.
Trapped in ranks
Currently, the foreign exchange market is caught by technical operators, hungry for strong trends, apparently better served to find a way to identify the flows of “real money” by creating episodes instead of looking for ranges to break. Hopefully, that will change, but in the meantime, this is the hand that receives us.
FOR there is hope. I can only suggest one way to identify when there are “real money” flows and strategies for using this information to operate. The way to do this is by accessing:
The Amazing Trader and its strategies
Feel free to contact me for any questions or comments.
Jay Meisler, co-founder of global-View.com and creator of The Amazing Trader
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