Think Globally, Trade Forex

Next up is wheat. Without going into a discussion of its setup, let's just say that it's a carbon copy of corn.

The Australian dollar/dollar weekly view shows that we have a similar bar formation as seen in the commodities markets. At the same time, the dollar/Swiss franc is showing support near the parity level, and that adds to the technical long-dollar potential.

All of the above scenarios are technically set up for dollar strength and appear to be waiting for a fundamental driver to instigate that strength. Having the setups in place doesn't mean we'll see the dollar rise. But knowing that they're there prepares us to react when that fundamental driver appears.

In our example, is it possible there is no demand for corn? Is wheat suddenly not as useful? How about the Swiss franc or the Australian dollar? Are they losing strength? Many traders may be asking these questions separately, without realizing that the common denominator in all of them is the dollar. These technical plays may be the start of a near-term reversal in dollar direction.

Take a look at the coming week's economic calendar. It is as red as a matador's cape and is signaling that the fundamental spark may soon be lit, one way or another. If economic news leads to dollar strength, we know the momentum will be strong. If, on the other hand, the news leads to dollar weakness, we can adjust our expectations about that weakness, because we'll know it's at extended levels.

Many traders, new and old, easily miss these things. They go ahead and put a position on without adjusting expectations, they get stopped out, and then they watch the television shows for reasons "why" they lost money.

The truth is we can only make trades that are more likely to go our way than not. Understanding how the global markets are interconnected and recognizing how technical setups are likely to react to fundamental news makes it much easier to identify those winning trades.

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