Increasing Market Volatility

As prices swings in both directions.

We have mentioned in our previous market view report as of the 17-22nd of May's updated analysis; that the market prices would have to be giving up its gains / losses and would create a consolidation pattern for the month of May. Please refer to our "USDJPY & USDCAD still taking lead' review which the market prices has been persistently been swinging in both directions.

Although, the strengthening USD has been more influential, the up and down swings were more reflected on the foreign currencies rather than the US Dollar index as it maintains it levels at the current 75.95 from a registered high at 76.36 basis points.

While the EURUSD made a slight recovery back to the 1.4091 from a low of 1.3968 which apparently so did the GBPUSD from a low of 1.6056 and is currently working at 1.6145 as of this writing. This has indeed influenced the cross EURGBP from an unexpected low of 0.8662 and is currently at 0.8723 recovery levels. this would prompt some re-positioning as it may now have some legs to continue its directional movements higher from the lower extension. at least an average of 125-200pips on the average wide fluctuations on both directions. Giving up gains/loss has been a norm for the prices. And this may go on for the rest of the month regardless of any dramatic report.

Although, one thing is for certain that such wide fluctuation would not be suitable for retail traders not unless a bigger tolerance levels with the right amount of trading funds would be utilize. If not we do advice to stay out of the market place if such appropriations would not be met. Currency correlations and cross trading amongst majors, cross rates and options are the best known and open strategy to be able to be success in this type of market conditions. Again, as we mentioned that the degree of trading difficulty should be measured well as increasing volatility would always be present at this point in time.

For the time being, the EURGBP, EURUSD may tend to fluctuate in a wider corrective mode as market shifts and position adjustment towards month end and new month opening prices would contribute more to this volatile market. As the EURGBP has a more northernly direction as it continues to have apositive tone due to the recovery but not of the USD but more of the EUR vs. the GBPUSD. Remember, that major financial institutions use other foreign currencies to do their transactions other than the US Dollar by itself. As major banks have international currency exposure vs. the US dollar with varying rate differentials.

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Have a good trading week ahead!