Forex signals may go from famine to feast.
The block movement of currency trade that has the major pairs trading in lock-step with each other for months may be about to change.
Interest rates, forward growth, regional strength; these three components made up the halcyon days of forex values, that were put through the economic wringer over the course of time that the new world order has spent re-writing the financial rule-book. Trading forex has been akin to trading equity futures markets over the last eighteen months, as the global risk tolerance levels went into hibernation and the cornerstones of forex values were dismantled and replaced with the daily, and even hourly, revaluation of risk tolerance in each regional traded market.
That was then, and it has been widely reported on, but this is now. The question for tenured forex market participants is easy; how much more time do global markets require before an element of stability is back, in enough strength, to allow a trend to form, and a flow of orders to start?
The consolidation of dollar index valuations since May 21st has been heavy, and to a degree that the near-term 4 hour charts have been unable to do too much in regard to holding breaks. That scenario however, may be coming to an end, judging by the reads that we are starting to see on order flows in specific pairs.
The global markets, (equity, commodity, and bonds), are holding valuations that have them at yearly highs, however the Usd has not shown an inclination to move lower, in-line with the global market reads, as yet. The reason may be in the separation and divergence between the eighteen month rules of the game, and a recently seen move to regional valuations.
The two pairs that we have potentially seen lead the change are Usd/Cad and Aud/Usd, and interestingly, they are not moves that correlate to oil and gold market momentum. It seems that Canadian and Australian economics, interest rate valuations, and growth, (the previous foundation stones of forex valuations), may be back in vogue. If so, the Euro-zone, U.K., Swiss, and Japanese outlooks on economics and interest rate levels may start to build movement in the currency charts.
The last eight weeks of price consolidation may turn towards distribution in individual pairs in the coming months, and from a forex trader perspective, it will be refreshing to trade pairs on their individual merits, either technical or fundamental merits, rather than the ‘en-bloc’ trading of the dollar index that has recently been seen.
To get away from a trade only being justified if the whole dollar index is moving in the same direction will be refreshing, and to be able to plot a course of potential movement without worrying too much about the regional open and close of the Asian, European, and U.S. equity markets will get us back towards traditional forex valuations.
We have had the signal famine; we may just be starting the feast. Long dollars, or short dollars, makes no difference, forex traders will be happy to see a sustained move that lasts just a little while longer than has recently been the norm.