Serving the Quantitative Finance Community

 
EdwinB
Topic Author
Posts: 11
Joined: February 12th, 2018, 10:58 pm

Attentive to the Market this week

February 20th, 2018, 5:43 am

With U.S. markets closed for Presidents Day and most of Asia off for Chinese New Year, it was no surprise to see quiet trading yesterday in the FX market. The U.S. dollar, which was hit hard last week rebounded against the Japanese yen and consolidated against other major currencies. At the start of the NY trading session the dollar saw some positive traction but quickly gave up those profits into the London close. This left pairs like EUR/USD, GBP/USD and AUD/USD right where they ended Friday trade. While there’s not much in the way of market moving U.S. data, there are 3 things that I’m watching this week.

First and foremost, currencies will take their cue from equities. Last week’s recovery in stocks took the S&P 500 to 2,750, which is a very important level. If the index manages to break above 2,750, which is one of the main levels that it broke down from in early February, the 20-day SMA and the 100-SMA on the 4 hour chart, the dead cat bounce will turn into a stronger rally that could take the index back to 2,800. In forex exchange liveHowever if Friday’s rejection holds and the S&P 500 drops below 2,715 we should see a stronger reversal down to 2,650. This is important for currencies because in this current environment, nothing matters more than risk appetite. Therefore, a continued recovery in stocks means a continued rally for EUR/USD, GBP/USD, AUD/USD and even USD/JPY now that the questions surrounding Japan’s next central bank Governor have been resolved. However if Friday’s fizzled rally turns into a deeper correction, all of the major currency pairs will extend their losses, so USD/JPY could take another trip below  106.

By Kathy Lien