Never miss a story from Christopher Vecchio

Subscribe to receive daily updates on publications
Please enter valid First Name
Please fill out this field.
Please enter valid Last Name
Please fill out this field.
Please enter valid email
Please fill out this field.
Please select a country

I’d like to receive information from DailyFX and IG about trading opportunities and their products and services via email.

Please fill out this field.

Your Forecast Is Headed to Your Inbox

But don't just read our analysis - put it to the rest. Your forecast comes with a free demo account from our provider, IG, so you can try out trading with zero risk.

Your demo is preloaded with £10,000 virtual funds, which you can use to trade over 10,000 live global markets.

We'll email you login details shortly.

Learn More about Your Demo

You are subscribed to Christopher Vecchio

You can manage your subscriptions by following the link in the footer of each email you will receive

An error occurred submitting your form.
Please try again later.

Talking Points:

- The Japanese Yen is the top performer today as global equity markets have quickly moved back to or through their early-October lows, a sign that risk appetite is receding once again.

- Progress made around Brexit - UK PM Mays says the deal is "95% done" - helping keep the British Pound afloat while concerns over Italy's budget and the US-China trade war are hampering other major currencies.

- Retail trader positioning is bearish on the US Dollar, which bodes well for price action in the coming days.

Looking for longer-term forecasts on the US Dollar? Check out the DailyFX Trading Guides.

The US Dollar (via the DXY Index) has advanced to but has been thus far unable to break through its early-October high, even as global risk appetite takes a hit once again. Unlike the selloff in stocks earlier in the month, this time US Treasury bond yields are moving lower, a combination that has favored the Japanese Yen (which entered the week on strong footing).

With respect to the concerns influencing price action on Tuesday, there's no new story to tell: Brexit continues to dominate trading in the British Pound; the Italian budget saga is dictating movement in the Euro, even as the European Central Bank meeting approaches this Thursday; and perception of the US-China trade war is driving bond, currencies, and stocks all across Asian markets.

While there haven't been any significant developments to report, that in and of itself may be seen as problematic: considerable time has passed without any readily available solutions having presented themselves. It seems like market participants are getting to the precipice of throwing in the towel.

All in all, an environment in which stocks are weak, bonds are strong (yields down), and the US Dollar is lower, both Gold and the Japanese Yen stand to outperform. With respect to Gold prices, it's worth noting that 1236.37 is being tested today, the December 2017 low that has been resistance ever since the breakdown in mid-July. That's as significant a flashing red light that market conditions have changed as one could hope for at this juncture.

DXY Index Price Chart: Daily Timeframe (January to October 2018) (Chart 2)

DXY Index Advance Checked by Early-October High

Despite the DXY Index advance being checked by the early-October high near 96.16, the improved technical posture still points higher into the second half of this week. Price remains above its daily 8- 13-, and 21-EMA envelope, and the moving averages are still in sequential fashion. Both daily MACD and Slow Stochastics are trending higher in bullish territory. Such price action suggests that today may be merely a pause before a bullish breakout opportunity ahead.

Read more: FX Week Ahead: BOC on Wednesday, ECB on Thursday, Q4’18 US GDP on Friday


Whether you are a new or experienced trader, DailyFX has multiple resources available to help you: an indicator for monitoring trader sentiment; quarterly trading forecasts; analytical and educational webinars held daily; trading guides to help you improve trading performance, and even one for those who are new to FX trading.

--- Written by Christopher Vecchio, CFA, Senior Currency Strategist

To contact Christopher Vecchio, e-mail

Follow him on Twitter at @CVecchioFX