MACD

As any gold bug would tell you, last year’s fourth quarter was a strong one, with the yellow metal gaining nearly 8% from October through New Year’s Day. The good times carried over into mid-February, when gold peaked near $1350, but the price action over the last two months suggests that a major top may have formed.

Post-Fed, the Doves are on parade, treasury yields have fallen and bets for a cut in 2019 have increased. Certainly not a bad day in the office if you’re bearish USD.

Despite a weak-but-still-better-than-expected retail sales report out of the UK and a smattering of second-tier US data, yesterday’s global market trends have generally carried over into today’s trade: the US dollar is edging higher, commodities (prominently including oil) are falling, and global equities are edging lower once again.

By now, you’ve no doubt heard about today’s horrifying events in Brussels, and we wanted to start by saying that our thoughts go out to the bombing victims and their families. Not surprisingly, today’s events have overshadowed the traditional day-to-day movements of the markets and are leading to a big risk-off move in global equities, as well as safe haven demand for assets like gold, as my colleague Fawad Razaqzada noted earlier.

With markets essentially trapped in near-term stasis as traders wait for higher impact data, it’s a good time to take a step back and look at the longer-term technical picture on AUD/USD. For more than a year, from mid-2014 to mid-2015, the Aussie consistently lost value against the greenback, dropping more than 2,500 pips in the process.

Markets are off to a ponderous start to the week as theres been essentially no new data to digest over the weekend. Global equities, fixed income, and currencies are all essentially unchanged across the board and with no major economic releases on tap for today’s US session (beyond the second-tier Existing Home Sales report at 14:00 GMT), the slow trade could continue throughout the day.

At the start of the week, we highlighted today’s Swiss National Bank meeting as a potential under-the-radar event risk that many traders were overlooking. As we suspected, the central bank did not make any changes to monetary policy, but did take the opportunity to reiterate its review that the Swiss franc is “still significantly overvalued.” For Switzerland’s heavily export-oriented economy, the value of the currency is one of the most important economic indicators, and the lack of upward pressure on the franc after last week’s ECB easing allowed the SNB to remain on hold. Indeed, in more plain language than many other central banks, the SNB vowed to continue intervening in the currency market if the franc should start to strengthen again, noting, that it, “will remain active in the foreign exchange market, in order to influence exchange rate developments where necessary.”

The theme of today’s European session trade was undoubtedly risk aversion, with every major European equity bourse losing ground, bond yields generally rising, and oil losing another 2+%  thus far. As often happens in markets though, the big catalyst for today’s trade is not what most traders were expecting.

It’s a busy time of the month for central bankers, and the BOJ will be the first major central bank to draw traders’ attention this week.

It’s been a quiet start to what promises to be an extremely active week for global traders. As of writing ahead of an all-too-early, post-daylight-savings-time US open, European equities are trading generally higher, bond yields are edging lower, oil is off by over 2% from Friday’s close, and the US dollar index is regaining some of last Thursday’s losses. In case you haven’t checked your calendar, this week will feature a number of top-tier central bank meetings including the latest updates from the Bank of Japan (tonight), Federal Reserve (Wednesday), and Swiss National Bank (Thursday), so market participants may be somewhat hesitant to put on large positions in the early part of the week.

As I return to the desk after a much-needed vacation, I’m struck by the big risk-on move markets have seen over the last couple of weeks: US equities are up nearly 10% from the mid-February lows, Oil prices (WTI) have surged by over 40% in the last month, and the (relatively) high-yielding currencies have seen strong bullish moves of their own. While the economic data of late has been mixed, prominently featuring a strong US jobs report on Friday and a shockingly weak Chinese trade balance figure in yesterday’s Asian session, investor sentiment has nonetheless improved markedly.

My, what a difference a couple of hours makes. As US traders trudged into their offices this morning, it seemed as though the sky was falling: continued fears of Brexit were driving GBP/USD to 7-year lows, major equity markets were trading down by about 2% across the board, and oil (WTI) was falling back toward the widely-watched 30.00 level. Since then, each of those moves has been unwound to some extent, and in fact, both US equities and oil have turned positive on the day as of writing.

At the beginning of the week, we highlighted the massive market uncertainty surrounding the upcoming vote on “Brexit” (UK exit from the European Union), concluding that, “While it’s difficult to handicap the near-term price action, we’re inclined to look for more downside in GBP/USD given the ongoing uncertainty and bearish momentum. A close below 1.4080 would likely open the door for a run down to psychological support at 1.40, if not lower.” With the pair hitting a low near 1.3880 this morning, you could argue that even that bearish view was too conservative.

It’s been a rough month for the Bank of Japan. In an effort to inject some much-needed inflationary pressures into the world’s third-largest economy, Japan’s central bank opted to join the negative interest rate club in late January, likely anticipating that it would lead to continued to depreciation in the Japanese yen as a side benefit. As it turns out, that hope couldn’t have been further from the market’s actual reaction.

Mark you calendars for June 23^rd! Beyond representing one of the first days of Summer in the Northern hemisphere, that’s the date scheduled for the long-awaited “Brexit” vote on whether the UK will remain part of the European Union.

After getting clobbered in the first two weeks of February, last week’s recovery in the US dollar was hardly surprising. What was more surprising though was the fact that it was actually driven by decent US economic data.

After residing in traders’ doghouses throughout all of last year, everyone’s favorite yellow metal has been on much better behavior thus far in 2016.

US traders are off to the races once again, and just like every other day this week, there’s a risk-on tone to early trade. Today’s bullish catalyst for risk-on data was some good old-fashioned solid economic data.

Markets have predictably calmed down this afternoon as European traders clock out and US traders enjoy their President’s Day holidays, giving us a good opportunity to reevaluate the prospects for the world’s most widely-traded currency pair, EUR/USD.