The Forex market gave us another incredible week of unbelievable volatility and tremendous trading opportunities. The amplitude of each move was dramatic, creating huge moves to both the up and down sides. The entire month of May has really been a massive chance to bolster (or destroy) ones trading statistics with parabolic moves back and forth. One aspect that has been a boon to many traders is the apparent clarity of direction. With risk aversion reigning supreme and the carry trade unwinding rapidly, investors cleared out open positions quickly and decisively. The market plummeted this week with a very tempered relief rally ending the week on Friday. The Euro, GBP and even the previously semi-resistant AUD were all punished as investors sold them to multi-month lows. With so much negative information crowding the news wires, the only question that really remains is how long this will last?

The economy is giving some mixed signals. There are statistics that do show some relief in the negative sentiment. House sales, retail spending and other economic gauges have been returning some positive news, however, especially with the jobs market continuing to be sluggish the market was unable to overcome the much more powerful overlying theme of sovereign debt risk. Even gold was sold off for five sessions in a row. Funds, banks and high net worth investors moved back into cash favoring the USD and the JPY. With the integrity of the Euro Zone and its single currency in question rumor-mongers, pundits and propagandists seemed to put more oil on the fire. Clearly, the unnerving concept of out-of-control Government debt from all of the world’s major economies was in the back of everyone’s mind. Could a paper currencies’ integrity be so undermined and government debt (and the burden of financing it) be so great as to cause a run on it ultimately bankrupting that nation? The possibility was being sub-consciously mulled over by anyone with even a baby toe dipped in the market pool.

With all this chaos and uncertainty there is one exciting reality that Forex traders can take solace in, and that is the currency market is so vast and volatile that anyone with a minimum amount of capital can become their own best personal asset manager (possibly) taking advantage of the very large, clear trends that have been manifested recently. With a properly tested rules-based trading strategy, a suitably capitalized equity trading account, correct money management techniques and risk to reward ratios average folks around the world are making money (and losing to be fair and balanced) in the Forex market and wresting control over their hard earned nest eggs from the clutches of some unscrupulous brokers, investment advisors, funds and banks.

Going forward the market looks to stay in a mostly negative bias for the near future at very least. Some collection of factors may ultimately bring an end to the bearish behavior but barring any clear signs the shorts and sellers will stay in control. This is never a bad thing if you are a short term scalper or swing trader. With most currencies at yearly or multi-month lows one might be asking if the time to place counter trend trades is upon us. The USDJPY in the 80’s, GBPUSD at 1.43, and even the Euro and Australian Dollar pairs could turn out to be major buying opportunities now. This should be approached with an abundance of caution and taken with proper account equity, a hefty stop loss and a longer term outlook. Whatever your attitude, chances in the Forex market abound. Remember to always stay nimble, stay alert and do your technical analysis. Happy Trading!

This entry was posted on Sunday, May 23rd, 2010 at 4:31 pm and is filed under Uncategorized. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.