Forex

maheshkarnam · #1 (**permalink**) 08-02-2008, 12:00 AM

It’s never easy to identify the type of market you are in, such as
trending or carry trade, breakout or sideways, so make sure to look
not only at your favorite currency or currencies against the dollar,
but also at crosses.
With the uncertainty from the subprime and the risk of recession, the
carry trades have been losing luster among the risk-conscientious
traders (see Figure 7). China is not going to lose its interest in
commodities any time soon, but speculators may shy away from the
AUD/JPY and NZD/JPY for a while if risk adversity spreads.
Interest rate differentials should provide at least some guidance.
The pound may be a high-yielding currency, but the Bank of England
may be forced to cut rates, while the European Central Bank may
be less inclined to cut rates. Thus, the lower yielding euro surged
against the pound, so traders may choose to hold on to long-term
long positions in the EUR/GBP while the cross holds above the
21-day exponential moving average — while using a tight stop-loss
order. However, there is significant short-term downward risk for this
overbought cross

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