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Risk-On Flows Continue Driving Markets

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An array of positive political developments yesterday and overnight have sparked some risk-on flows that seem to be carried over to today’s session. All FX majors, including EURUSD, GBPUSD, AUDUSD, NZDUSD, and USDCAD have been affected by positive events.

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Euro Trouble-Free Above 1.10, But Stuck Near 10 SMA

The European currency remains bid against the US counterpart. Currently above the psychological handle of 1.10, trading near a fresh weekly high. With the Italian coalition forming a new government, it is unlikely that EURUSD is going to fall below the said level, even after the NY open. Unless NY markets take the positive US/China trade-talk developments to heart.

Yesterday, Lagarde’s message for a longlasting accommodative policy didn’t seem to bother euro bulls much. This suggests a stronger eurodollar. That will, of course, also depend on fundamentals. Investors are eying the ADP and ISM NMI releases later today. Whether the 10 SMA on the daily weakens or not will impact also.

Cable Pierces Through 1.22, Investor Eye 1.23

Without a win on the no-deal Brexit vote, Boris Johnson’s strategy to leave the EU by October 31st failed. This is “good news” for the pound. BoJo’s attempt to lock parliamentarians out with a Queen’s Speech finally backfired. This allowed market participants to take a breather and ‘long’ cable.

GBPUSD is currently trading near the psychological 1.2270 level. Without any UK-based data, the pound is likely to remain strong. Otherwise, a pullback can be seen in the short-term in the form of a rejection.

Commodity Assets Up On Carrie Lam’s Move

Aussie, kiwi and perhaps the loonie also keep moving higher this morning on the back of Carrie Lam’s move to withdraw the somewhat catastrophic extradition bill. With risk improving and the dollar falling, AUDUSD crossed above the 68 cent barrier. Furthermore, NZDUSD is also nearing 64 cents, and USDCAD only just received a rejection at the 1.32 mark.

The Canadian dollar is also supported by a rather dauntless BoC and a bid crude oil owed to yesterday’s API report. API reported a small build of 400k compared to 3.5 million barrels expected. This result drove oil nearly $3 higher. BoC on the other hand, held rates unchanged yesterday, citing strong economic growth and a clear path to hit their inflation target.

Equities Soar Again on Risk, Yen and Gold Down

With the market’s appetite shifting, SPX reversed course once again to the upside. However, in the medium-term, the picture is still unclear. Prices are reaching a strong psychological level at 3000.

USDJPY, USDCHF, and Gold are currently taking a beating as capital inflows on riskier assets outweigh the safe-haven demand in large blocks. The Swiss also reported somewhat stagnant GDP figures earlier in the morning (0.3% as expected but lower than 0.4% last), so the weakness could be partially attributed to that set of economic data too.

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