Volatility is low in the
Forex markets at present, and most pairs are essentially directionless. This is
a periodic phenomenon that will correct itself but in the meantime care must be
taken to ensure that one is not in the market purely for the sake of having a
position.
A good example of a stalled
trend is Cable, or the GBPUSD pair. This instrument recently reached
levels that have not been seen for many years, so it is reasonable to
expect that there would be some consolidation before it moves higher still, if
indeed that is its destiny. In the meantime it is in the middle of a trend
channel, whereas we would prefer to enter long when it approaches and rejects the
bottom of said channel. On top of that, the rate has bounced off the
psychologically important 1.70 price point (a nice round number), so that is
clearly a level of significant resistance.
A time to keep our powder
dry. We will, however, be monitoring the
situation in this, and all other currency pairs, very carefully.
We have only ever been
sellers of gold, and would like to be on the short side now too. However, the
situation in Ukraine, while largely ignored by many other market sectors, most
notably equities, seems to qualify as a geopolitical crisis of the sort that
makes many investors seek out the traditional “safe haven” that has been gold.
The idea here is that if
there is a meltdown in the global economy as a result of the resumption of the
cold war (or even the start of a hot one) between Russia and the West then gold is
the one commodity that is expected to keep its value. At least, that is the
theory of the thing. Why this should only apply to gold, at time when it is not
even the basis of the value of the world’s currencies any more, is hard to
figure.
In any event the end result
has been a firming of the gold price leading to a technical situation where a
short position in the precious metal would involve unacceptable risk at the
present time.
But that could change.
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