NY Open: Soundbites and headlines keep traders on their toes
FX Trader, Loonieviews.net
Summary: FX markets are skittish. Top-tier US economic data is hard to find, and lingering effects from the late December equity market melt-down has seen currencies test both sides of recent ranges in the past week
GBPUSD is the posterchild for headline and soundbite-driven price action, although USDJPY is giving it a run for its money. The commodity currency bloc gave up overnight gains since New York opened, while sterling added to them. EURUSD is flat, with traders awaiting Thursday’s European Central Bank meeting.
GBPUSD is probing (and poking through) resistance from the downtrend line from May. It is at 1.3030 The 50% Fibonacci retracement resistance from May 2018-January 2019) is at 1.3040, which if decisively broken targets the 61.8% level of 1.3170. Short GBPUSD positions are getting squeezed by headlines suggesting that UK politicians finally realise that a “no-deal” Brexit may not be a good thing.
Traders are starting to believe that this gaggle of MPs will succeed in achieving in just 65 days, what two- plus years of negotiations failed to accomplish – a workable Brexit. EU chief negotiator Michel Barnier is ramping up the pressure. He said that the EU is open to several models of future trade while warning that time is running out. He also said that the UK is still on the hook for a sizable breakup fee, even if it is a non-deal.
USDCAD rallied on the back of weaker than expected retail sales data and the drop in WTI oil prices.
USDJPY climbed in a choppy fashion since January 14. The uptrend line from 108.00 is intact while prices are above 109.20. Today’s move above 109.64 snapped the mid-December downtrend with a move above 110.00 opening the door to a retest of 110.60. The Bank of Japan’s downgrade of 2019/2020 inflation expectations opened the door to possible easing at some point this year, although most economists believe such a move is unlikely.
Wall Street’s yo-yo-like price action continues. The three major US equity indices are well on their way to recouping yesterday’s losses. The DJIA is almost there, but the S&P 500 and NASDAQ still have a long way to go. Traders are optimistic that US politicians will shortly put an end to the government shutdown. White House Economic Advisor Larry Kudlow’s affirmation that US/China trade talks are continuing, helped sentiment.
Latest Market Insights
Quarterly Outlook Q3 2022: The Runaway Train
- Central banks' attempts to kill inflation is a paradigm shift, which could end in a deep recession.
Tangible assets and profitable growth are the winnersWith US equities officially in a bear market, the big question is where and when is the bottom in the current drawdown?
Understanding the lack of investment appetite among oil majorsThe everything rally seen in recent quarters has become more uneven, as its strength is driven by commodities in short supply.
The pressure is on as the wind leaves the sailsWith cryptocurrencies in sharp decline, are we entering a crypto winter or is the bear market a healthy clean-up of the crypto space?
Why the Fed can never catch up and what turns the US dollar lower?Many other central banks are set to eventually outpace the Fed in hiking rates, taking their real interest rates to levels higher than the Fed will achieve.
Bank of Japan: Swimming against the tideThe Japanese economy has gone from the age of deflation to rapidly rising prices in no time, leaving the Bank of Japan in a pickle.
Green transformation detour and bear market hibernationWith the impending risk of global econonomic derailment, we share the five things investors need to consider in this new half year.
Crisis redux for the eurozone?Whether there's going to be a recession in Europe or not, the path towards a stable economy will be agonizing.
Technical Outlook: Gold, Oil and a remarkable multi-decade perspective on EquitiesThe Nasdaq bubble pattern, USDJPY resistance, crude oil uptrend losing steam and the technical outlook for USD.
China: the train of new development paradigm left the station two years agoChina is transiting to a new development paradigm, as they are hit by deteriorating terms of trade, a slower global economy and an uncertain future while continuing attempts to contain the pandemic.