Keep an eye on USDCNH and USDJPY as a guide, and the fact we see both pairs in a sideways consolidation is keeping broad G10 FX volatility subdued and a factor that is holding the USD from moving freely on a broad FX basis.Īs many try and pick a turn in equity markets, a bounce in risk this week can’t be ruled out, and we need to be open-minded to all possibilities.

We also regress and understand that the CHF acts more like Gold in times of geopolitical tensions, and after a 7.8% rally between July and October (in the DXY), consolidation in the USD index was always a possibility. One factor is that we’re seeing a rise in EU and Chinese growth momentum, so the rest of the world is looking less bad. The USD hasn’t performed as well as some had hoped through this period of equity drawdown and rise in long-end bond yields. With bonds offering no defence in the portfolio, traders continue to manage drawdown risk through volatility, Gold, and the CHF as the pre-eminent hedges. The macro matters though, and we continue to focus on geopolitical headlines, moves in the US 10- and 30-year Treasury, volatility, and energy markets. Traders head to Gold and CHF on Middle East uncertainty

With 43% of the S&P 500 market cap reporting this week, this is the week it could happen, and guidance and outlooks from CEOs can play a more important role. We’ll have to assess the news flow as it could lead to a lively open in our equity indices and underlying futures. Perhaps those who hedged into the weekend will want to part unwind those hedges. Maybe corporate earnings can have a more positive effect and stabilise sentiment.

Podcast: What next for Commodities with Nitesh Shah, WisdomTreeĬan corporate earnings stabilise sentiment?.

Investors buying physical gold as Middle East crisis ratchets up.

But the risk to reward trade-off hasn’t shifted enough just yet.

The time for contrarianism is approaching, and who doesn’t love a tradeable V-bottom. The CNN Fear and Greed Index can do a good job capturing the mood across markets and this says a similar message. On current standings we’re not yet near a point of maximum bearishness.

The contrarians have started to look at sentiment and throw out a range of charts, including deteriorating market breadth and the number of stocks (in an index) below the 20-, 50- or 200-day moving average, that have an RSI below 30, or resides at 4-week lows.

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