The trading axiom "the trend is your friend" has held many traders in good stead, but the caveat "except when it is at an end" has also held true. One of the most important challenges for the forex trader is to detect the end of trends. While trends are measured by price and are essentially technical in nature, there is the economic trend, which is the fundamental basis imbedded in price action and the psychological trend, which is the expectation of future direction. The current situation shows a policy conundrum. Slow economic growth usually is remedied by interest rate cuts, but rate cuts would, in general, risk inflation. The lesson for the forex trader is to watch the "hawks" on the central banks.
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