US Indices US Dollar Buy the Dip

For anyone who was upset about lack of volatility in 2019, they must be ecstatic about 2020! Between the tensions earlier in the Middle East and the Coronavirus, different asset classes have been all over the place. For the last 2 weeks, markets have been in risk-off mode due to the unknowns of the Coronavirus. However, given the stimulus pumped into the market and the unsubstantiated stories that vaccines for the Coronavirus have been developed (or are being developed), traders seem to have forgotten about the tragic virus are back to their normal “buy the dip” mentality we have seen over the course of the last year.

Look at a daily chart of the Dow Jones Futures. Price ended 2019 at 28508 and proceeded to move to all time highs on January 17^th at 29362, a move of almost 3% in 2 weeks. As fears of the spread of the Coronavirus spread the Dow Jones Futures traded down to 28105, a move of 4.3% lower and giving up all the 2020 gains. This move low included Friday’s bearish engulfing candle and 595-point selloff. Price moved lower despite stellar earnings from Amazon on Thursday. Clearly fear was in the driver’s seat.

Source: Tradingview, CBOT, FOREX.com

Clearly something has changed over the last 3 days, right? Not really. As mentioned earlier, except for some unsubstantiated stories of new vaccines for the coronavirus, traders just bought the dip. The low on Friday was 28105. Today’s high so far is 29166….a 3-day rally of over +1000 points, or 3.6%!

Check out USD/JPY. The USD/JPY is thought to be a risk indicator, just as stocks are. When stocks move lower, USD/JPY tends to move lower as traders buy the safe haven Yen. USD/JPY closed 2019 at 108.62. Just as with stocks, USD/JPY traded to new highs (NOT ALL TIME HIGHS) on January 17^th at 110.29, a move of 1.5% in 2 weeks. As stocks sold off, so the USD/JPY. Last Friday, the pair put in a low of 108.31, again giving up all 2020 gains. This move included at 58 pip selloff on Friday alone. After the weekend and over the last 3 days, price has rallied from Friday’s low of 108.31 to today’s high so far of 109.84….a 3 -day rally of +153 pips, or 1.4%.

Source: Tradingview, FOREX.com

That leads us to ask the question: What will be the next catalyst to drive market prices? Friday, we see US Non-Farm payrolls. Today’s ADP data was much better than expectations, however this isn’t typically a market driver. Also, the next Fed meeting isn’t until March 18^th, so we will get another round of jobs data before then. Things seem undisturbed in the Middle East, for now. The Coronavirus is seemingly being ignored for now as traders bought the dip. The New Hampshire primary is next week. Perhaps the outcome of the primary may help steer the market. An OPEC cut to drive crude prices higher? Regardless of what the next catalyst, traders have stepped in and bought the dip, which obviously has been working, until it doesn’t!

The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex, commodity futures, or digital assets, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to FOREX.com or GAIN Capital refer to StoneX Group Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.

Please note that foreign exchange and other leveraged trading involves significant risk of loss. It is not suitable for all investors and you should make sure you understand the risks involved, seeking independent advice if necessary.

The products and services available to you at FOREX.com will depend on your location and on which of its regulated entities holds your account.

FOREX.com is a trading name of GAIN Global Markets Inc. which is authorized and regulated by the Cayman Islands Monetary Authority under the Securities Investment Business Law of the Cayman Islands (as revised) with License number 25033.

FOREX.com may, from time to time, offer payment processing services with respect to card deposits through StoneX Financial Ltd, Moor House First Floor, 120 London Wall, London, EC2Y 5ET.

GAIN Global Markets Inc. has its principal place of business at 30 Independence Blvd, Suite 300 (3rd floor), Warren, NJ 07059, USA., and is a wholly-owned subsidiary of StoneX Group Inc.