In the past month, we have seen that equities have all pushed very high and their respective currencies have also gone up drastically. For example, the FTSE100 has gone up 300 points since the 15th December and correspondingly, GBPUSD reached almost 1.6580 before being pushed down a bit by sellers. We have also seen the DAX increase almost 600 points from the same time the FTSE went up. Not surprisingly, EURUSD jumped from around 1.3700 to almost 1.3900.
From these observations, we can see that equities and currencies are positively correlated and one or the other will give clues as to which way the other will move.
In this coming week, we may see a sell off in equities as they have risen to previous highs and more sellers may start having the courage to start placing positions. If this happens, I will wait to see if the current uptrend is breached. If the uptrend becomes invalid, then I will proceed to sell. If the market pushes them higher then I will simply remain in my long FTSE100 position.
One very important piece of trading wisdom, that I have picked up through experience, is to always let the market CONFIRM your opinion before you place a trade. It is no use having the opinion that the FTSE is going to go down and acting on it when the market continues to push it higher. Only act when the market says that you are right.
Price is king.
Good luck with your trading,
The Trainee Speculator
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