Forex Strategy

A US Dollar breakdown led to impressive gains in several of our trend-following forex trading systems, and continued dollar tumbles would bode well for these strategies’ performance. Yet the Greenback’s tumbles did not produce a noteworthy shift in forex options market volatility expectations—suggesting that few expect strong continuation in US Dollar weakness. Record-high correlations to the S&P 500 and other key risk barometers suggests market conditions outlook will greatly depend on the trajectory of financial market risk sentiment.

Given great uncertainty surrounding near-term forex market conditions, we will maintain our bias towards Range and Breakout systems. If nothing else, our Breakout strategies' relative consistency through varied market conditions give us confidence that they may continue to trade well. To partially hedge against risks that currencies will return to broad trading ranges, we will watch for any worthwhile Range system opportunities. Yet risk on said trades should be kept tight in case of continued trending conditions in the US Dollar and Japanese Yen.