21:00 GMT- February 5 (global-view.com) We do not apologize for our fundamental bias. Many professional traders use the fundamentals in conjunction with their technical studies. Many pure technical traders assert that the fundamentals are already in the prices when they are Forex Trading. Well sometimes they are and sometimes they are not. The end of this past week saw a price move that caught most traders unawares. What happened was that credit issues suddenly erupted in Portugal. They came on the heels of worries about the Greek budget and triggered worries about Spain and then some other nations.
This evolving story triggered a wave of liquidations in a broad range of markets. Both the USD and JPY gained against many instruments for flight to safety reasons as the two have extensively been used as funding currencies for all manner of carry trades. When institutions sell equities they use the proceeds of those sales to pay back the USD or JPY they had to borrow to buy them. The same goes for commodities, gold, oil, commodity currencies, etc. This process can set off a self-reinforcing cycle as the funding currencies become more expensive and carry trade investments fall in value.
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