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Forex / European Session - 19/11/2008

Mataf — Wed, 19 Nov 2008 08:35:15 GMT

EUR/USD - Euro Dollar
1,2636. There is an horizontal range between 1,2585 and 1,2675. Support and resistance are given by Bollinger bands. EUR USD moves without trend and swings around exponential moving averages (EMA 50 and 100). The volatility is low. Bollinger bands are flat. ForexTrend 4H, daily (Mataf Trend Indicator) is in a bearish configuration. The price should continue to move in Bollinger bands. We won't take a position.

Resistances
1,2650 - 1,2850
Supports
1,2570 - 1,2390

more information on EUR/USD - Euro Dollar Click Here

GBP/USD - British Pound Dollar
1,4988. GBP USD is in an downtrend directed by 4H exponential moving averages. GBP USD is in a consolidation after the last bearish movement. The volatility is low. Bollinger bands are flat. ForexTrend 1H, 4H, daily (Mataf Trend Indicator) is in a bearish configuration. The price should find a resistance below 1,5060 (72 pips). The downtrend should continue to gather momentum. => We could take a short position at 1,4990. We will put the stop loss above 1,5100 (-110 pips). The targets are 1,4780 (+210 pips, risk/reward 1:1.9), 1,4600 (+390 pips, risk/reward 1:3.5) . Each trade is dangerous, take care and put your stop loss. Trade configuration (1 Speculative -> 4 Trend following): 3.

Resistances
1,5060 - 1,5190
Supports
1,4780 - 1,4660

more information on GBP/USD - British Pound Dollar Click Here

USD/CAD - US Dollar Canadian Dollar
1,2348. USD CAD is in a range between 1,2090 and 1,2420. USD CAD moves without trend and swings around exponential moving averages (EMA 50 and 100). Bollinger bands are flat. ForexTrend 1H, 4H, daily (Mataf Trend Indicator) is in a bullish configuration. The price should find a resistance below 1,2420 (72 pips). The price should continue to move in Bollinger bands. If the resistance is broken then the target will be 1,2800 (452 pips). We are waiting for a break of the resistance to take a long position.

Resistances
1,2420 - 1,2500
Supports
1,2290 - 1,2090

more information on USD/CAD - US Dollar Canadian Dollar Click Here

USD/CHF - Dollar Swiss Franc
1,2069. USD CHF broke 1,2000 resistance. USD CHF is in an uptrend supported by 1H exponential moving averages. The volatility rises. Bollinger bands are parallel and form the trend. ForexTrend 1H, 4H, daily (Mataf Trend Indicator) is in a bullish configuration. 1H, 4H ForexSto (Modified Stochastic) indicate a bullish pressure on USD CHF. The uptrend should continue to gather momentum. => We could take a long position at 1,2060. We will put the stop loss below 1,2010 (-50 pips). The targets are 1,2150 (+90 pips, risk/reward 1:1.8), 1,2200 (+140 pips, risk/reward 1:2.8) . Each trade is dangerous, take care and put your stop loss. Trade configuration (1 Speculative -> 4 Trend following): 4.

Resistances
1,2075 - 1,2150
Supports
1,2010 - 1,1970

more information on USD/CHF - Dollar Swiss Franc Click Here

USD/JPY - Dollar Yen
96,71. There is an horizontal range between 96,15 and 97,20. Support and resistance are given by Bollinger bands. USD JPY moves without trend and swings around exponential moving averages (EMA 50 and 100). The volatility is low. Bollinger bands are flat. ForexTrend daily (Mataf Trend Indicator) is in a bearish configuration. The price should continue to move in Bollinger bands. We won't take a position.

Resistances
97,40 - 96,40
Supports
96,15 - 94,50

more information on USD/JPY - Dollar Yen Click Here

INTRA-DAY EUR/USD OUTLOOK by AceTrader

AceTrader — Wed, 19 Nov 2008 07:35:59 GMT

INTRA-DAY EUR/USD OUTLOOK: 1.2627

Updating time :19 Nov 2008 06:30 GMT

Euro's nr term sideways trading is likely to
continue n although marginal gain to 1.2650/60 can
not be ruled out, as outlook remains consolidative,
res at 1.2701 shud hold fm here.

Below 1.2606 wud bring weakness twd 1.2566 but
sup at 1.2512 shud remain intact n yield rebound.
Stand aside for now n buy dips for day trade...

Range Forecast
1.2610 / 1.2641

Resistance/Support
R: 1.2641/1.2701/1.2742
S: 1.2566/1.2546/1.2512

AceTrader - Forex - Real-time FX Forecasts, Commentaries and Trading Signals

DAILY ANALYSIS FOR USDCAD

FX-Forecaster.com — Wed, 19 Nov 2008 03:18:30 GMT

Bias: I suspect a dip to maximum 1.2177-92 but from there a rally is indicated

The 1.2365-96 provided a barrier as expected and this seems to imply that we are in the last decline before the uptrend resumes. So far this has reached 1.2273 and I see risk of a dip as far as 1.2230 and 1.2177-92 maximum. While this supports I feel that a reversal higher is possible. An earlier break above 1.2340 and yesterday's 1.2384 high would generate this earlier. This should quickly pass through the 1.2445 high and then to 1.2498, 1.2530 and 1.2583. Take care - only above sees direct follow-through.

For full analysis please open today's full report in PDF format.

Attached Files

The Brief Daily Forecaster.pdf (114.2 KB, 3 views)

GBPUSD is in consolidation to down trend

ForexCycle.com — Wed, 19 Nov 2008 01:10:19 GMT

GBPUSD is in consolidation to down trend, further rally is still possible to 1.5300 zone later today. However, the next short term cycle top is nearing, pullback below 1.4557 could be seen after consolidation.

Daily Forex Analysis

Looking For a Reason to Invest

greenfaucet.com — Tue, 18 Nov 2008 23:51:04 GMT

By Jim Farrish, greenfaucet - Global Stock Market and Investment Commentary

There is plenty to be concerned about when you read the headlines from Wall Street. However the cry continues to be this is a great opportunity to benefit from cheap prices. My question remains if we can't see the E (earnings) portion of P/E how do we know thing are cheap? We don't, but remember Wall Street makes money by managing your money and if they tell you to hold cash they make less money. Seems logical they would think things are cheap. Personally I am tired of hearing "it's a buying opportunity?" Without a strategy behind what you are buying it is an opportunity to potentially lose more money.

The following are my primary concerns heading into 2009:

America's credit rating. We are considered to be the most sought after debt to hold in time of crisis. Therefore, we must have highly rated debt. That could change near term. The $10.6 trillion could be part of the reason. The fact the new administration is looking at adding an additional $1 trillion to that number early next year could play on that rating change. Not to mention the $2 trillion plus the Fed has added to their balance sheet from the bailouts, excuse me discount window purchases of bad bonds. Then there is the $700 billion CRAP plan (oops TARP). How this money will be distributed is still being debated. All of this adds up to a potentially lower quality debt ratings. In fact the credit default swaps on US Treasury bonds has increased. The cost to insure our debt is rising showing the growing concern over where we stand as a debtor nation.

Unemployment could hit double digits. There are more job losses to come from Wall Street the Citigroup cut of 52,000 is just the beginning. With continued cut backs, how will this change course anytime soon? The Jobs Report for October showed the only growth sector for jobs to be the US government! Can you say France? This is a big concern to the consumer credit market which now stands at $2.5 trillion. The domino effect could be exacerbating to the credit markets which are already in trouble. Throw in the auto industry's woes right now and this problem will magnify in the coming months.

The exiting administration has handicapped the incoming administration with a huge financial mess. Regardless the spending will continue as the cry for a new infrastructure stimulus package is already being developed. Not to mention a new healthcare plan for everyone. Need I add insult to injury and include the Social Security and Medicare balloon that is getting bigger by the day? We haven't dealt with that mega problem and we going to add more burden to the system? This is going to break the backs of the current tax structure. That means potentially higher tax rates and those are never good for the economy.

These issues alone will handicap the economy in 2009. There are so many other potential issues that have been swept under the rug we can't even begin to do justice here. How do we resolve all that faces this country and it current economic dilemma? Face reality would be a good start. If we are going to amass all this debt bailing everything out, why not let the old fail and spend money on the new. There are so many positive things we could do with $150 billion other than bailout AIG. Yes, I understand the ripple effect to the financial systems. Do you really think we have resolved them by propping up AIG? We still face the ripple effects of their stupidity anyway we have just delayed the process. Put the billions and trillions of dollars into new industries that will benefit the US and the world in the coming years not dinosaurs that we are trying to keep alive instead of letting them become extinct so they will provide better resources in the future. Alternative energy would be a great start for spending. Healthcare improvement and research would be another. There are so many positive things we could do as nation other than this current path we are on. Stop holding onto the old and let's invent a new way of growing our economy.

All of this comes down to a challenging 2009. The fuel that drives the economic engine of this country is in trouble. Our economy has shifted to one driven by the financial sector and it is in crisis mode. This calls for dramatic change and bold leadership to get there. The question is will anyone be willing to lead and more importantly are we as a nation willing to change.

The Pound is Losing Weight

Ed Ponsi — Tue, 18 Nov 2008 22:29:27 GMT

The Pound is Losing Weight
By Ed Ponsi

Hello from New York! It seems that one of my comments from last week's article confused the heck out of a few folks, and that's not surprising because it goes against conventional Forex trading wisdom. Please take a look:

Q) Hi Ed, just a quick question regarding your newsletter, I found it great. You explained in the last few lines that 'When the ECB and the Bank of England get serious about growth and cut rates more deeply, expect to see these currencies recover'. Is it not true that currencies get weaker if the interest rate is lowered? Can you explain what I am missing? Look forward to reply.

Q) It has always been my understanding that when there are rate cuts, the currency tends to weaken, not recover. It seems that the UK and EU have a lot farther to go with regards to rate cuts and therefore, the currency has more potential to weaken than the US dollar. Is this still the case?

Ed Ponsi) Thank you for your questions, it's nice to know that someone is paying attention! You're both right, conventional wisdom would say that higher rates would support the Euro and the British Pound, yet I stated that rate cuts were needed to improve the weakness we've seen in these currencies. Have I lost my mind? Not completely, but that's a question for another newsletter.

In a normal market, I'd agree that conventional wisdom would apply, and that lower rates would hurt the Pound and Euro � but the situation we find ourselves in is anything but normal. The fact that the Euro and Pound have higher interest rates than the U.S. Dollar has done nothing to prevent them from being crushed over the past three months, and currencies with even higher yields, like the Australian Dollar and the New Zealand Dollar, have been equally bad (unless you're short). In the current Bizzarro World of Forex trading, it is the low yielding currencies that have taken center stage as the strongest currencies, and the high yielders that have fallen the hardest � the exact opposite of normal Forex activity. Here is the current interest rate environment for the major currencies:

Currency

Interest Rate
New Zealand Dollar 6.5% Australian Dollar 5.25% Euro 3.25% British Pound 3.00% Canadian Dollar 2.25% Swiss Franc 2.00% U.S. Dollar 1.00% Japanese Yen 0.3%

Consider this; the two best performing currencies of the major currencies during the third quarter have also been the two with the lowest yields � the U.S. Dollar and the Japanese Yen. In the U.S., the Fed Funds Rate sits at 1.00%, and is expected to fall to as low as 0.5%. Meanwhile, the Bank of Japan has lowered rates to 0.3%. Yet the greenback and the Yen have been crushing everything in sight - it's the carry trade in reverse!

Here's the way I see it � all of the above countries are going into or are already in a recession, and the policy of keeping rates relatively high in Europe and Great Britain is going to lead to an even deeper recession in those places. Mervyn King and Jean Claude Trichet, the respective leaders and chief policy makers of the Bank of England and the European Central Bank, seemed unduly concerned about inflation at a time when growth should've been the major concern. But as we will see next, that view is changing...

Q) Hi Ed. Wow exactly it happened!

"If the entire civilized world is falling into a recession, why is the Pound taking it on the chin? The Bank of England's Monetary Policy Committee has simply been too slow to cut the U.K.'s benchmark interest rate, which remains at 4.5%. The MPC's reasoning is that it must control inflation, but with world markets collapsing and crude oil falling below $70 per barrel, the pendulum has shifted and the time for action has come. In my opinion, the MPC should immediately be cut by another 150 basis points, but that's highly unlikely. I'm looking for more downside on the Pound."

You know what I feel today, I think King Mervyn has signed up for your newsletter and he's simply following you. Just kidding, anyway what is your opinion now on GBP after their rate cut? Thanks, keep up the good work.

Ed Ponsi) Thanks for your email and your kind words. The big rate cut by the Bank of England shows that King and the Monetary Policy Committee now "get it", however belatedly, and that the problem is not inflation, it is growth. In a complete about-face, King now says he is ready to reduce rates to 'whatever level is necessary' to counter the economic storm. Some even believe a zero percent rate is possible in the U.K. next year. That's a far cry from his "fight inflation" mantra from earlier this year. Don't be surprised to see the BoE cut by another 100 basis points as they try to get on top of the growth problem � a problem that would've been less damaging if they hadn't fallen behind the curve earlier. The damage is reflected in the daily chart of GBP/USD, which continues to spiral downward (see figure 1).

Figure 1: GBP/USD continues to probe new lows, crossing below 1.5000. Source: Saxo Bank

How low will it go? Nobody knows for sure, but I certainly wouldn't recommend stepping in front of this freight train. A look at the monthly chart shows big support at 1.4000, formed way back in the early part of this decade, which could come into play (see figure 2).

Figure 2: GBP/USD monthly chart shows a major support near 1.4000. Source: Saxo Bank

Last but not least, the GBP/JPY currency pair, one which we've been bearish for months, continues to plumb the depths and is also threatening to reach new lows (see figure 3).

Figure 3: Descending triangle on GBP/JPY suggests new lows are coming. Source: Saxo Bank

Once again, don't fight the trend. Good luck!

EUR/USD still a short on moves higher

Roland Campbell — Tue, 18 Nov 2008 20:48:06 GMT

Technical Analysis: EUR/USD is currently in a long term down trend on the daily and 4 hr chart. It continues to make lower lows and lower highs which gives confirmation to our belief the pair will remain weak. The moves higher in this pair appear to be institutional short covering and give us an opportunity to enter short positions.

Fundamental Analysis: The data out of the US continues to be weak, but has beat analyst expectations. The Empire State Manufacturing Index came in stronger as well as month over month Industrial Production.

Psychological: COT reports confirm traders are very bullish dollars. In general this is a contrarian indicator, but in this case we feel most traders have covered these shorts searching for a bottom in the pair. FXPT continues to believe the dollar is undervalued at these levels.

Mentoring Lesson #4 - Trend Trading

Mentoring Lesson #6 � Reading COT reports

Mentoring Lesson #8 � Psychology of the trade

Best of Luck,

Roland L. Campbell

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Bull Market Somewhere?

greenfaucet.com — Tue, 18 Nov 2008 20:36:42 GMT

By Roger Nusbaum, greenfaucet - Global Stock Market and Investment Commentary

Earlier this week Justin and Paul over at Bespoke noted that the Shanghai Composite was now in a bull market because it was 20% above the low. Since then Shanghai came back down a little and I'm not sure if they still think of it as a bull market but the preciseness of that comment is not the point.

China was one of the first markets to roll over. Using simple logic China might be one of the first to come back and to Bespoke's point maybe it has already started. The point though is that when markets do start to recover and they each will at different times there might be very little notice paid to the initial recovery. It is not uncommon for bull phases to start very quietly much the way they end; quietly.

Regardless of whether China or any other market is now starting to recover they are not going out of business. If you were lucky enough to take defensive action early on and you do not think this is the second coming of the great depression you need to start to think about getting back in now that many of these places are down 50-60%. Those sorts of bear market declines do not happen that often (twice in a decade for the US is an anomaly) and they should not be missed entirely.

China is going to be what stirs the drink for a while. That does not mean there will not be excesses and cyclical declines but the declines are more likely cyclical in nature than the potentially secular or structural problem in the US.

I believe this thinking can be applied to many different countries. How many places do you know where either the story on the ground is really happening or places that have a lot of what the world needs? Where do you think those places willbe five or ten years from now?

Anyone who is a long term investor and has cash built up needs to start building toward their target allocation in emerging markets if they have not already done so. Start building does not mean buy them with both hands, this is a time of uncertainty and there is nothing wrong with some dry powder but buying a little down here will not be the dumbest thing you ever do.

Still Holding USD Long Positions

Penrich Capital — Tue, 18 Nov 2008 12:39:40 GMT

The US dollar has been one of our favoured long currencies for more than a year. For the first few months after we had entered the position, the USD continued to fall, reaching levels that were close to the lowest since the current system of floating exchange rates was introduced in the early 1970s. We used this period as an opportunity to increase our position. In the middle months of this year the dollar rebounded somewhat and, in the past two months, it has risen rapidly.

After the rapid appreciation of the past month, the dollar is no longer clearly low against the other major currencies. Whereas the USD was 15%-25% below its historical norms against most other majors at the start of October, it is now above �normal� against as many currencies as it is below �normal�.

The most negative factor for the USD in recent years has been the sizeable external deficit. When the deficit was $800bn in 2005/06 (near 7% of GDP), it was easily the largest international deficit that had ever been incurred by any country. But, since then, the external deficit has been declining, helped in part by the competitiveness gains bestowed by the low currency. The current account deficit, whilst still very large, has declined to around 5% of GDP. If domestic demand remains weak and oil prices settle at the new lower levels, the current account deficit could decline towards 3% of GDP in 2009.

The appreciation of the USD has caused us to substantially reduce the size of our long position. However, given the prospect of a further sizeable decrease in the current account deficit, we do not wish to exit our position just yet. We will continue to hold USD against EUR, CHF and CAD. Our targets for exiting the position are about 10% from current levels.

The attached pdf file provides additional charts and figures. Further information can be found on our website - www.penrich.com

Attached Files

Penrich FX Note 2008 11 18.pdf (20.6 KB, 3 views)

INTRA-DAY EUR/USD OUTLOOK by AceTrader

AceTrader — Tue, 18 Nov 2008 06:15:41 GMT

INTRA-DAY EUR/USD OUTLOOK: 1.2623

Updating time :18 Nov 2008 04:17 GMT

Euro's recovery after finding buying interest at
1.2601 suggests further consolidation abv there wud
be seen n gain to 1.2660/65 cannot be ruled out b4
decline fm 1.2742 (y'day's high) resumes later.

Stand aside n look to sell on further recovery.
Below sup at 1.2601 wud extend marginal weakness
but reckon 1.2560/65 wud hold fm here...

Range Forecast
1.2605 / 1.2645

Resistance/Support
R: 1.2665/1.2703/1.2742
S: 1.2601/1.2546/1.2512

AceTrader - Forex - Real-time FX Forecasts, Commentaries and Trading Signals

DAILY ANALYSIS FOR AUDUSD

FX-Forecaster.com — Tue, 18 Nov 2008 03:25:27 GMT

Bias: Mixed waiting for breaks

Yesterday saw most of the day generating steady gains that stalled at 0.6594. From there we have seen a fairly deep pullback and the depth concerns. However, while this morning's low at 0.6428 remains intact I still feel that the argument for a direct rally is possible. We shall need a quick break above 0.6468 followed by 0.6506 to provide the lift needed to extend the upside through 0.6534 and to the 0.6560-94 highs. Take care as this could cause a small correction. Above maintains gains for 0.6627 and 0.6662-92..

Please open the PDF file for the full report.

Attached Files

The Brief Daily Forecaster.pdf (111.0 KB, 3 views)

USDCHF stays in a rising price channel

ForexCycle.com — Tue, 18 Nov 2008 01:12:16 GMT

Unchanged in our short term out look, USDCHF stays in a rising price channel on 4-hour chart. Further rally is still possible to 1.2200 zone in a couple of days. Initial support is at the lower border of the price channel, now at 1.1900. Key support is located at 1.1825, below this level will indicate that a short term cycle top has been formed, pullback could be seen to follow, and next short term target would be at 1.1500 zone.

Daily Forex Analysis

Daily currency analysis for Friday, November 14, 2008

TradingEducation.com — Mon, 17 Nov 2008 23:42:12 GMT

Daily currency analysis for Friday, November 14, 2008

EUR/US$

The Euro was unable to sustain gains above the 1.28 level on Friday and weakened to lows near 1.26 as European equity markets struggled to sustain initial gains.

The US data maintained a weaker tone on Friday with a particular focus on retail sales. There was a headline sales drop of 2.8% for the month while there was also a 2.2% underlying decline. Although there was a sharp fall in gasoline sales as prices dropped, there were also declines across all the major categories.

The weak data was certainly expected, but the sharp decline in sales will reinforce fears over the economy, especially as the ECRI leading index deteriorated at the fastest rate for 60 years according to the latest release. The University of Michigan consumer confidence index offered some relief with a marginal rise as gasoline prices fell, although it was still at historically very weak levels.

The European data also maintained a weaker tone with Euro-zone GDP growth contracting by a provisional 0.2% for the third quarter. This economy was also technically in recession after the second-quarter decline. The French economy grew marginally, but there was a sharp 0.5% decline in Italian GDP.

The data will reinforce expectations of lower interest rates and ECB officials continued to hint that rates could be cut again at the December meeting.

ECB Chairman Trichet did warn that a globally-unified policy stance was undesirable. Comments and actions by officials at the G20 meetings will still be watched very closely over the weekend and a broadly unified stance on fiscal policy would tend to support the Euro while discord would unsettle the Euro. The Euro pushed back towards 1.28 in US trading as Wall Street looked to recover.

Yen

The Nikkei index rallied on Friday after three successive daily declines, but underlying sentiment was still very cautious given fears over economic trends.

The dollar was also undermined by exporter selling as companies took advantage of the yen retreat. The G20 meetings will be watched closely and any evidence of a concerted and unified approach to boost the international economy would tend to weaken the yen. In contrast, a lack of progress would tend to strengthen the Japanese currency early next week.

Comments on currencies will also be watched very closely amid speculation of measures to stabilise markets following another period of very high volatility. The dollar weakened back towards the 96.10 support region in Europe on Friday before rallying to near 97.50 in New York.

Sterling

Sterling dipped to fresh record lows against the Euro on Friday with a move to 0.8635 before a recovery to 0.8565. The UK currency also tested levels below 1.47 against the dollar as markets look to trigger stop-loss Sterling selling before a recovery back to 1.49.

There were no further UK data releases during the day while Prime Minister Brown stated that there was room for further interest rate cuts. If there is clear evidence of political pressure on the Bank of England to cut interest rates aggressively further, then there would be a further serious loss of confidence in the currency.

The growth and inflation data will be monitored next week and a faster than expected decline in the headline inflation rate would reinforce expectations of a further sizeable rate cut at the December meeting.

Swiss Franc

The dollar was unable to test resistance levels close to 1.20 against the Swiss currency on Friday and fluctuated around the 1.19 level. The franc retained a weaker tone against the Euro, but found support close to 1.52.

There will be further concerns over the Swiss economy, especially given the impact of weakness in the financial sector and a downturn in key export markets.

The franc moves will still be influenced strongly by trends in risk appetite and the currency will lose support if there are sustained gains in global stock markets.

Australian dollar

The Australian dollar drifted weaker in local trading on Friday as caution prevailed. There was some support from industrial commodity prices, although there was a decline in oil prices and selling pressure was still reduced from recent levels.

International market trends will tend to dominate in the short term with the G20 meetings watched closely Any disappointment over the outcome would tend to weaken the Australian currency early next week. The Australian dollar managed to rally back to above 0.66 against the dollar in New York as Wall Street rallied from lows.

11 17 08 Spanton Forex Recap

GlobalFXRadio.com — Mon, 17 Nov 2008 23:25:59 GMT

11 17 08 Spanton Forex Recap

Click Here to listen to the most recent full broadcast

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The NABE Forecast is Bad for US Stocks

LearningMarkets.com — Mon, 17 Nov 2008 23:23:13 GMT

The NABE Forecast is Bad for US Stocks

Written by John Jagerson, Forex Technicals

The National Association of Business Economists released today that 48 of 50 surveyed economists believe that the U.S. economy is currently in recession and that 2009 GDP is likely to come in at .7%. That is pretty low and, if accurate, could indicate that times are still going to be rough economically in the US through the next year.

The NABE has not been traditionally very accurate in their forecasts. In fact, if you used the prior GDP number as your "best guess" for GDP in the subsequent quarter, you would outperform the NABE estimates. That throws the estimates into doubt. It is one more example for why there is more value in looking at the market indicators today rather than forecasts about tomorrow.

Most of the economists surveyed also pointed to the currency credit crisis as a primary cause of problems in the US. In light of that "revelation" I wondered what we might use to determine when the credit crisis has abated. Are there indicators that we could use as retail traders for to tell when things are getting back to normal so we can change our strategies.

In today's video I will propose that the relative performance between the yield and price performance of low quality (junk) debt and high quality commercial debt could be a good real time indicator for how severe the credit crisis on any given day. That information is readily available to any trader though bond ETFs like HYG and LQD. You can see a chart of HYG with a comparative relative strength indicator for LQD applied to it in the chart below.

If you need some help understanding how relative performance or relative strength works, click here.

HYG - iShares High Yield Bond Strategy

If traders begin moving towards higher risk debt for higher yields then we know that risk has begun to change. That means traders will need to shift strategies as well. Until that time, the current trends should stay in play and investors in a strong USD, short equities and long JPY positions are likely to benefit.