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Market Sentiment Nearly Turns Septic; USD, EUR, JPY and GBP in Flux

Market Sentiment Nearly Turns Septic; USD, EUR, JPY and GBP in Flux

John Kicklighter,

Talking Points:

• Equities, Yen crosses and other risk-sensitive assets pulled up from a severe tumble late Wednesday

• There are key levels still below, but fundamentals and positioning can drag the markets lower

• Event risk is stirring the Euro and Pound, but FX sentiment watchers should keep the Dollar and Yen in focus

See the DailyFX Analysts' 1Q forecasts for the Dollar, Euro, Pound, Equities and Gold as well as our favorite 2016 trading opportunities in the DailyFX Trading Guides page.

Though the markets collected themselves before things fell apart this past session, the threat to years of monetary policy and complacency-bought buoyancy is at clear risk. Intraday volatility of the magnitude experienced by the S&P 500, oil and Yen crosses is as endemic of a deteriorating foundation as the outright selling and correlation we have seen gain ground in 2016. There are levels to break and milestones to hit before fear reaches a point of no return, but that shouldn't be seen as evidence of a reversal nor assurance of a near-term breakdown. Patience amid such volatility becomes even more important. Amid these systemic concern, event risk is moving the majors. The Dollar responded to US CPI, the UK to the next indicator in its recent economic string (jobs) and the Euro awaits the upcoming ECB decision. We look at what matters most fundamentally and what levels to watch going forward in today's Trading Video.

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DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.