Will risk aversion be the trend of 2014?

Risk aversion for currency trading
In this week’s recent Forex trading developments, it seems that risk aversion is on the minds of most investors.

There are several factors to consider when examining how online Forex markets may respond in the weeks ahead.

First and foremost, the next few days will be rather quiet in the United States. However, the presidents of the Chicago and Richmond subsidiaries of the Federal Reserve are said to be speaking soon. Many online Forex traders feel that they may hint that the latest round of QE asset purchases will be slowing.

This signals a slight shift away from the dollar as a safe haven due to the fact that investors may be presented with a higher amount of risk-profit opportunities.

However, many European Forex trading analysts are more concerned with the recent instability in global markets. Factory and manufacturing data from both the United States and China have shown signs of weakening. This has rattled a number of investors that fear a profound bearish market trend may be on the horizon. It has indeed been difficult to find any tangibly positive news and some Forex investors view these recent events as the signs of a slowdown.

While this may be marginally bearish for equities markets, there is perhaps an opportunity for online Forex traders to capitalise on such gloom. Although some feel that investors may move out of their dollar-based positions, others are content to remain firmly in place; their presumption being that fears in global market volatility may drive the price of the dollar higher.

Although the Federal Reserve news conferences are certain to cause a reaction across online Forex trading platforms, it is a relatively safe assumption that in the short- to medium-term, all eyes will be pinned to market data. Should benchmark indicators such as the S&P 500 and the FTSE 100 continue to post losses, dollar-based risk aversion strategies may very well continue.

Leave a Reply