Talking Points:
- Risk trends continue to stalk unwary traders, S&P 500 tally without 1 percent decline reaches 85 straight trading days
- UK Parliament votes to back Brexit, China circles Bitcoin crackdown, oil follows OPEC jawboning once again
- New Zealand drops despite RBNZ's turn from dovish to mildly hawkish, but how long will this drive carry?
See the DailyFX Analysts' 1Q forecasts for the Dollar, Euro, Pound, Equities and Gold on the DailyFX Trading Guides page.
Another day passes with isolated sparks of volatility across the financial landscape without the true blaze necessary to reset conditions to productive trend. Keeping tabs on where the greatest potential resides, risk continues to show its weight in the system; but complacency is the leading sentiment behind the theme. From deflated volatility to the choppy high-yield fixed income ETF, caution outpaces opportunity. Keeping its lead of this uneasy quiet, the S&P 500 has now upped its tally of consecutive trading days without a 1 percent decline to 85. That is the second longest run with 2006's 94-day string the next milestone. Whether it is trade policy, a universal monetary policy shift, animal spirits or a simple indicator that instigates the change; traders should mind their strategy and keep ready for the eventual and inevitable return of volatility.
While the universal theme still looms over speculators, there was plenty to occupy traders in certain corners of the global markets. The biggest move through the past 24 hours would come on behalf of the New Zealand Dollar (Kiwi). The Reserve Bank of New Zealand (RBNZ) held its benchmark rate unchanged at its extremely low 1.75 percent floor, but the outlook has changed significantly. The central bank's governor announced the dovish bias has been removed and a hike is likely on the menu through the next two years. Despite this unique position in global monetary policy, the Kiwi still tumbled as speculation had positioned for even more hawkish traction. The question now is whether key moves like those from NZD/USD, NZD/JPY and AUD/NZD will turn from impressive drive to sustained trend. It may be difficult to keep a bear trend running on even an underwhelming
hawkish development.
Meanwhile, the big picture themes continued to develop; but price action wouldn't respond in kind. For the Pound, the UK Commons moved Brexit even further along which offer critical clarity for the path the country's backdrop is taking. There was little evidence of conviction however from the GBP/USD or other Sterling crosses. For the Dollar, the bullish break Tuesday was not furthered as a lack of data promoted the trade policy consideration for dominance. A story that President Trump called his National Security Advisor on policy for the US currency won't find confirmation, but it adds to verifiable remarks suggesting the administration will target the strong Dollar policy championed for so long. For more drammatic developments, the PBoC called Bitcoin exchange representatives to discuss mundane regulation in a thinly-vieled move towards lock down of an open door on its capital controls. Oil was another big mover with OPEC's ruminations of an extension on output cuts offsetting a sharp rise in DoE inventory figures. The docket ahead offers few high profile events, so themes and surprises will remain the threats to a short-term and congestion-oriented strategy. We discuss what's developing in the markets in today's Trade Video.
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