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Amid Trade War Talk, Risk Barometer Today Includes Euro, Japanese Yen

03/05/2018 12:00 pm EST


Robert Savage

Partner & CEO, CCTrack Solutions

The risk barometer will be the euro today though many will be watching the euro/Japanese yen (EUR/JPY) as a larger example of the pain trade risks (130 to 125 looming). The euro 1.2225-1.2270 support is at risk today, writes Bob Savage, CEO of Track Research Monday.

Monday morning numbness – for some it’s comfortable - as markets battle for mood control – trying to ignore a worse than expected rise in populist parities in Italy and ongoing trade war fears, all mixed with bad weather from the U.S. to Europe.

The tit-for-tat battle over trade continues with Trump threatening an EU tariff on autos should they retaliate to a U.S. steel tariff.

As most expected, the Italian election result points to a hung parliament bit with both the center-right and left doing worse than expected, chances for a grand coalition are lower.

These two stories dominated overnight trading despite the Service PMI reports and the China Congress opening with promises of 6.5% GDP.

The BOJ Kuroda rate exit talk reversed with two BOJ nominees sounding extra-dovish and the Composite PMI pointing to lower prices. The Service PMI in Europe was weaker and the sharply lower Sentix Investor Survey points to larger concerns about mood as the political noise and U.S. tariff threats take their toll, including Canada and Mexico.

Measuring the swing of moods is important work but more for a psychologist than a trader. Shrugging off the Italian result because Merkel gets a fourth term as chancellor seems too easy an explanation. More to the point, the ECB Thursday has a key role in stabilizing markets with easy money – but that requires a different battle with hawks and doves pointing to the euro (EUR/USD), U.S. rates and a cloudy outlook on global trade.

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