On the day, many are returning to being USD bears, with the euro (EUR/USD) and British pound (GBP/USD) leading that charge – but the chart would suggest that buying USD here with a tight stop makes more tactical sense, writes Bob Savage, CEO of Track Research Monday.
Mondays can be foreboding as many wait for more important headlines and news before trading, leaving anxiety and doubt in the wake of lighter volumes and month-end mechanics. The quiet of markets today reflects the urge to listen to Powell on Tuesday and Thursday and Draghi as they continue to lead the volatility of all asset classes.
This forced silence doesn’t mean no volatility – rather it’s the pause and the technical correction before renewed positioning.
The balance of losses for February in equities favor some buying of risk back with modest selling of bonds to follow if you just track previous positioning. Overnight price action has focused on weaker USD, higher gold and iron ore, lower U.S. yields as BOJ Kuroda dismissed talk of another comprehensive review on monetary policy – sending the Japanese yen (JPY/USD) stronger below 107 – and as the Bank of England Dave Ramsden, a dove from the last minutes, sounded hawkish in a UK Sunday Times interview – sending GBP higher. This may unwind as the Corbyn speech later today leads to more Brexit fear.
Focus in commodities reveals some larger macro issues – as some of the price action in metals revolves around President Trump considering a 10% duty on aluminum and a 24% on steel imports as recommended by the Commerce Department two weeks ago.
Oil is a bit lower – despite the weaker USD and a Libyan El-Feel oilfield disruption after the Saudi Oil Minister Al Falih hopes for some easing of output limits in 2019.
The problem for today is that the U.S. gets more Fed speakers, more housing data and more noise before Jerome Powell and that puts the inconsistencies of higher equities, lower oil, lower rates, lower USD into a sound tunnel that likely will make more screeches than music for investor ears.
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