Weekly Forex Update- The Fiscal Cliff Meltdown

As we seen over the past two weeks with equities selling off like over 300 points on the dow after the USA presidential election.  Yes,  allot had to do with the shock factor of Obama being re-elected and the markets really wanted Romney but allot more had to do with ECB President Mario Draghi saying that the outlook for the European economy is weak, and will not be improving any time soon.  The markets tanked,  and the selling hasn't looked back from that point.

Allot of traders in Forex, Options and even stocks thought we would see some bounce and some solid retracement to test this plunge down but it just hasn't happened.  Even from the beginning of this week markets are not happy about this weeks "Fiscal Cliff" uncertainty and the hope of some bipartisan participation between the House Speaker Boehner and new re-elected president Obama.  And so far what we are seeing isn't looking good for any deal to be made fast, hopefully this will end with something agreeable on both sides to avoid default and also improve markets.

If you've noticed yesterdays market there's been allot of Yen weakness including watching the Aussie sell off for a nice short if you were like me and trading the London Session.   But the better trade was really the buy for the USD/JPY which made a strong push up with allot of volume which is more of a rare thing for this pair.  But in light of how markets have been reacting lately, anything is possible right now.  "Sow bean" futures have been taking money off the table and taking profits before we get close to end of year slow down. And with this much fear and uncertainty about a continued sell off the longs are taking their profits while they still can.

I remain bearish on the markets right now but be very careful in these types of uncertain markets trading.

have a great week----
and for all you traders, "sleep with one eye open!"

-david