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The Week Ahead in FX
By Dave Floyd   
July 05, 2011

Traders, if there were ever a market ripe with contradictions - this one is it. A mere week ago the bulls were packing their bags while the bears were fully in control. This week, the tables are turned. So which camp has it correct? While it is certainly true that no real solutions have been created for the myriad of problems facing the US and global economies the market is forward looking and perhaps sees some silver lining. We try very hard to avoid trading on 'what if's' and focus on what we feel is the only objective approach - price action.

There is a fair degree of clarity emerging from the charts presently although we expect another week or so of price action will be needed before we can definitively state that the outlook for stocks is bullish and bearish for the dollar.

S&P 500 - running triangle

7/5/2011
Click on image to enlarge!

Given the inverse relationship between the S&P 500 and the Dollar Index (DXC), our DXC count also suggests a sustained push higher in equities.

DXC - terminal thrust lower

7/5/2011
Click on image to enlarge!

‘Risk on’ currencies like AUD/USD also align with the bullish equity/weak dollar outlook.

AUD/USD - looking to buy pull-backs

7/5/2011
Click on image to enlarge!

For more from Dave, visit Aspen Trading for more updates.

 

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