Reasons To Expect A Forex Blowout

Market mechanics have historically worked in a fashion that at the end of a trend, or at a reversal swing point, a surge of momentum and an increase in volume hits the market. These blow-out tops or bottoms create a lot of volatility as old price points get re-tested, and sentiment accepts or rejects the reasons for creating a new trend. It seems as though a blow-out may be on its way.
Recent trade may have completed the consolidation phase, where forex pairs have set solid looking 4-hour channels to sell resistance and buy support, at least until such time that institutional volume increases and drives price action at a sustainable pace. The previous session highs and lows really are the focus of trader attention, and are creating reversal plays that seem to be reliable.
The latest session of global risk trade, for whatever reason is not important, saw equity markets initially hold support and then attract buyers, albeit in small numbers.  The forex valuation frame-work that  is in place at the moment hinges around global risk and equity markets holding 9500 on the Japanese Nikkei, 5700 on the German Dax, and 1035 on the S/P, as institutional interest is forced to play out the inverse Equity/Usd daily correlation in the quest for forex fair value.
There seem to be many reasons for the main components of the dollar index- Eur, Gbp, Aud, Chf, Cad, Jpy- to be sold in the near-term, not least of which is the shadow of fiscal imbalances in some regions. Add in the lower global growth story, and the lower demand for commodities- which are priced in Usd denominations- and the reasons start to multiply.
That is why the 86.00 area looks to be a solid support base that may struggle to get broken, just so long as global investor attention stays away from the $13 Trillion debt mountain that just broke a new U.S. economic record overnight.
The last week of May looks to be drawing in institutional interest to balance books and possibly snap up month-end positions that look relatively inexpensive compared to just two weeks ago. How long that investor appetite can last is another question, but so long as equity markets are holding 9500 on the Japanese Nikkei, 5700 on the German Dax, and 1035 on the S/P the inverse Equity/Usd daily correlation will remain.
Crude oil trade was sent lower in May trade, as global growth questions, and the impact of the Gulf of Mexico oil spill were absorbed. The test of $65 a barrel support looks to have formed a solid area to work higher from. The long break of $70 looked fairly easily, but was probably made so by the fact that crude oil is dramatically oversold.
The need to hedge the long-Usd environment allowed gold trade to move higher and stake a claim to be a stand-alone asset class that seems to have few peers when global expansion is in doubt. The GLD/USD correlation is holding strong as both Usd and Bullion reserves are seen as a near-term safe haven.