Quick Take
The underlying risk appetite phase we’ve transitioned into flared up on Monday, this time assisted from the early hours in Asia by the euphoria to keep buying Chinese stocks in mass, where the Shanghai Composite index soared over 5% to a 2-year high, driving global risk sentiment higher as financial markets remain oblivious to COVID-19 resurgence.
Quick Take
The main take-away from Tuesday’s price action was an explosion in the price of Gold, hitting its highest level since 2011, alongside the eruption in buy-side flows in the Sterling amid speculation of a revival in Brexit talks, all in the context of a very weak Canadian Dollar and faltering US equities, unable to keep up the momentum but still bullish.
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What stood out through a Wednesday session vacant of market-moving fundamental news was the continuous fragility of the US Dollar, by far the worst performer, while on the other side of the spectrum, Gold added over 0.8% and convincingly broke $1,800.00.
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We’ve gone through a setback in risk sentiment as depicted by the out performance of the Yen and the US Dollar across the board, closely followed by the mighty Pound (judging by this week’s results), while the Aussie, the Euro and the Canadian Dollar were the main laggards as a wave of selling hit the S&P 500 early doors in the US.
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We enter a new week of trading with US equities charging higher following a late rally on Friday, Gold trying to hold above the $1,800.00 mark, the Pound still an out performer in the currency space, while the USD and Yen keep heading in opposite directions.
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The market swiftly transitioned from ‘risk on’ vibes dominating proceedings for most of Monday to an abrupt change of heart, leading to the erosion of gains in the commodity-linked currencies and US equity indices in favor of the Japanese Yen and the US Dollar.
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The Euro keeps charging higher as it retains its dominance this week in anticipation that European leaders will manage to make progress with regards to the COVID-19 economic rescue package. The market consensus appears to be of a final agreement in August or September.
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The main take away from Wednesday was the revival of risk sentiment as hopes keep building up around vaccines, allowing European and US equities to push higher and with it commodity-linked currencies.
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The waxing and waning in equities kept on going with the S&P 500 and the Nasdaq falling back down (-0.34% and -0.73% respectively) unable to gather the momentum desired to jolt risk-on currencies all the way to the final closing bell.
Quick Take
If we take a look back to the last week of trading, long Euros definitely paid dividends as the market got busy pricing in a positive outcome out of this weekend’s EU recovery fund talks. However, for now, after three days debating the size and design of the European Recovery Plan, EU leaders are yet to strike an agreement.
Growing Number Of Instruments Trending
Quick Take
We enter Tuesday with risk-off currencies (USD, JPY) trending down in the 4h and daily timeframes against either European, Oceanic currencies or even metals, both charging into fresh highs. Similarly, the US equities have too transitioned to bullish territory.
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There has been some very punchy movements in financial markets. In the currency space the Australian Dollar has been the clear outperformer while in the metals complex, Silver takes the spotlight once again with its parabolic-type ascend that defies gravity.
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Currencies, metals and equities keep all trending for the most part. Crosschecking the 4-hour and daily time scales to find concordance in the directional biases remains a thing of beauty with over 20+ markets to choose from qualifying for intraday swing trading opportunities.
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A setback in risk flows took place as portrayed by the sell off in stocks, bond yields and the Oceanic currencies (AUD, NZD). The likes of the Yen, the US Dollar or Gold were given a boost amid the shift in dynamics, while quite noticeably, the Euro kept enjoying follow through demand on the back of the historic EU recovery fund deal.
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In the last couple of trading days the market has deflated its groovy mood towards the solid bid in all risk assets as equities and the Oceanic currencies rollover. Interestingly, even in this type of environment, there are still some ongoing trends paying lofty dividends.
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The demise of the USD keeps on going. It has been and continues to be a bloodbath for the world’s reserve currency with EUR/USD breaking into its highest in 21 months circa 1.1750, Gold ballooning into all-time highs, Bitcoin taking out $10k, you get the picture.
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Aside from the perky metals, in a league of their own, the Sterling was the top performer in the currency space, while the USD, no surprise here, keeps lagging behind as the US heads for the fiscal cliff with no agreement yet between Dems and Reps on the next stimulus package.
## Record Number Of Pairs In Trending Mode
Quick Take
The FOMC is now behind us, and as technically-oriented traders, while respecting an event that we know is going to inject volatility, we know that our job is to trade what’s in front of us via price action. The message by the Fed via its policy statement and in the subsequent press conference by Chairman Powell sounded dovish enough to keep the status quo of a weaker US Dollar and a catalyst to pump equities.
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It was a lively day in the markets with the European FX complex (EUR, GBP, CHF) once again taking the spotlight as the euphoria to accumulate further long inventory at the expense of the obliterated North American currencies (USD, CAD) continues mercilessly.
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There has been a slight reduction in the number of trending markets as the Asian markets open this Monday. Still, as intraday swing traders looking to exploit directional biases in higher timeframes, we are still provided with just under 20 markets that qualify.