We use a range of cookies to give you the best possible browsing experience. By continuing to use this website, you agree to our use of cookies.
You can learn more about our cookie policy here, or by following the link at the bottom of any page on our site.

Free Trading Guides
EUR/USD
Bullish
Low
High
of clients are net long.
of clients are net short.
Long Short

Note: Low and High figures are for the trading day.

Data provided by
GBP/USD
Mixed
USD/JPY
Mixed
Gold
Bullish
Oil - US Crude
Mixed
Low
High
of clients are net long.
of clients are net short.
Long Short

Note: Low and High figures are for the trading day.

Data provided by
Bitcoin
Mixed
More View more
Real Time News
  • EUR/USD has been weakening since the start of 2020 and the decline has accelerated this month. At some point there will be a correction but further losses are still likely as the year progresses. Get your $EURUSD market update from @MartinSEssex here: https://t.co/ieJUBNeAIf https://t.co/Dw4f7DQocg
  • The $AUD has risen in anticipation of a deal Washington and Beijing. But the Australia-China trade relationship has not suffered much and may even have been helped by China’s spat with the US. Get your market update from @DavidCottleFX here:https://t.co/An7h5X0Zcz https://t.co/Rn7mLbS1EF
  • How can traders avoid #FOMO in trading? Start by implementing a well-heeled plan taking only four hours per week. Get your insight from @JStanleyFX here: https://t.co/vwUShQPc27 #tradingstyle https://t.co/0Wn4xBL0AY
  • Do you know which type of stock is the right investment for you? Stock types help investors decide on specific #stocks to trade or assist with valuation methods either fundamentally or technically. Learn more about stock types here: https://t.co/yO3JalkqUU https://t.co/RoNdExHAdt
  • The status of the US #dollar as the safe-haven asset of choice remains untouched and any weakness in the greenback is likely to be short-lived. Get your $USD market update from @nickcawley1 here: https://t.co/LO2u38jpUT https://t.co/ctgCJSOeTH
  • #FTSE 100 testing key support as the index lacks a directional bias. #DAX reverses off channel top. Get your indices technical analysis from @JMcQueenFX here: https://t.co/IHF2dgMfg9 https://t.co/2fMTFlOeTR
  • With knowledge of price action, traders can perform a wide range of technical analysis functions without the necessity of any indicators, including management of risk. Build on you knowledge of price action here: https://t.co/9hQA0bsYtt https://t.co/5KQowxuiBf
  • The term ‘Ichimoku,’ literally means ‘one glance,’ in Japanese. Ichimoku, or the one glance indicator, is considered to be a self-contained system in the fact that no additional indicators are necessary. Learn more about the 'one glance' indicator here: https://t.co/T7o7W9C0Ro https://t.co/7bhBfWvEkR
  • Support and resistance are the cornerstone of technical analysis, making it the foundation that you build your knowledge on. Build a stronger foundation here: https://t.co/yXLaRpl90I https://t.co/85JHunf2Xf
  • Many traders ask how a trading method that is 77 years old is applicable today. Learn about the Gartley pattern and see how you can incorporate it into your trading style here: https://t.co/2yPmGH0XvT https://t.co/rtqUKZSdn1
S&P 500 Posts Fourth Gap Higher on China Tariff Cut, NFPs a Dollar or Dow Spark?

S&P 500 Posts Fourth Gap Higher on China Tariff Cut, NFPs a Dollar or Dow Spark?

2020-02-07 03:56:00
John Kicklighter, Chief Currency Strategist
Share:

S&P 500, Dollar, Dow Talking Points:

  • S&P 500 led top US indices to a fourth consecutive gap higher - pushing record highs, carrying other risk assets and still scrutinized
  • China's Finance Ministry announced it would halve tariffs on $75 billion in US imports in a reciprocal move that ease a flexibility request
  • Top event risk to end the week is the US-based NFPs, but the theme I am watching most closely is the state of growth expectations

Establishing the Quality of Risk Trends Via S&P 500 Gaps

Risk appetite continued to run through this past session with a bid showing through in US indices alongside a generally positive course for the breadth of sentiment-leaning assets. I prefer to establish a systemic overview of bullish/bearish sentiment via a correlation of generally dissimilar asset types that broadly align most often when there is a groundswell of greed of fear. The general bullish lean was present in US and global indices, emerging market assets, high-yield assets, carry and even some of the recently-divergent commodities. That said, the week’s peak tempo and correlation seemed to be flagging as a ‘relief rally’ perspective starts to make the transition into a determined fundamental evaluation. Relief from the concern related to the coronavirus is one thing. Seeing higher returns and more robust to justify a sustained climb – particular record highs in US equities – is another matter entirely.

Chart of Risk Sensitive Assets Benchmarked to Feb 1, 2019 (Daily)

Chart of S&P 500, Global Equities, Carry Trade, Commodities, High Yield, Carry Trade

Chart Created by John Kicklighter with Data from Bloomberg Terminal

Once again, an important check on enthusiasm for value-stretched risk appetite comes from the benchmark US indices. The S&P 500 and Dow put in for a fourth consecutive gap higher on the open Thursday. For both, that would push us into the stratosphere of record highs. The 10 trading days since the last record high for the S&P 500 was the same count as the period through December 12th. There haven’t been many lasting segues from the overriding bull trend over these past four months. And yet, the rally from this top performing asset class is itself facing elements of uncertainty. While Wednesday found some footing for follow through after the gap, there has been rather little progress made when the local markets were actually open. For both the indices Thursday, the candles we were left were definitely dojis and could qualify as ‘hanging men’. That alone doesn’t doom the climb, but it does suggest there is hesitation to this otherwise impressive climb.

Chart of S&P 500 with Daily Gaps (Daily)

Chart of S&P 500

Chart Created with TradingView

NFPs is Top Event Risk and USDJPY Faces the Most Potent Scenario

Starts in:
Live now:
Feb 23
( 22:02 GMT )
Join Analyst Richard Dvorak as he covers NFPs live!
Key News Trading Events for the Week Ahead
Register for webinar
Join now
Webinar has ended

In terms of influential event risk this past session, there were noteworthy highlights. The poor showing in a run of Australian data and the sharp drop in German factory orders speaks to a poor update on economic activity. While there was a measurable response from the Australian Dollar and Euro, the potency pales in comparison to what is traditionally expected from the US employment data. The monthly change in NFPs (nonfarm payrolls) is perhaps one of the most significant market movers for the US Dollar through history. Yet, the potential in this report is likely skewed. With five years of net additions to the payrolls and a five decade low in the jobless rate, leveraging enthusiasm is difficult even with a default bullish bias. Alternatively, a significant shortfall can both weigh on risk trends and further rate cut speculation for the Dollar. That would be an interesting scenario for the likes of USDJPY at a multi-year congestion pattern top.

USD/JPY MIXED
Data provided by
of clients are net long. of clients are net short.
Change in Longs Shorts OI
Daily -4% -11% -9%
Weekly -14% 4% -3%
What does it mean for price action?
Get My Guide

Chart of USDJPY with 200-Day Moving Average (Daily)

Chart of USDJPY

Chart Created with IG Trading Platform

While the US employment stats will draw our attention over the final 24 hours of trade this week, the focus this past session was on something more thematic: the general state of global growth. With a favorable bearing on risk trends, the perspective was seemingly one of optimism, a view supported by the reports that the Chinese Finance Ministry was prepared to halve the tariff rates on $75 billion in US imports come February 14th as a response to the reciprocal efforts to deescalate world’s most costly trade war. This effort may help to soften the White House to requests from China to offer flexibility on the Phase 1 trade deal as the country fights the coronavirus. AUDUSD seems to show limited enthusiasm for the efforts…and the ebb in virus headlines.

Chart of AUDUSD with 100-Day Moving Average (Daily)

Chart of AUDUSD

Chart Created with IG Trading Platform

Sentiment and Themes to Usher US Into the Next Week

In the week ahead, traders should not forget the toll that the coronavirus has exacted in volatility over the past few weeks. Market-based fear over the spread of the virus seems to have subsided significantly but the growth in cases certainly has not. In the familiar routine of acclimation, it would seem that complacency is evolving to account for this familiar headline moving forward, but market participants would do well not to totally write off its potential. Whether or not a troubling headline sinks the market seems to be more a function of the underlying bias than the actual material of the news itself. That baseline is my principal focus at the moment.

Looking further into next week, the hierarchy of systemic fundamental themes would seem to put growth at the top of the list for immediate concern. Trade wars have stirred with the request of flexibility and the preparations for tariff reductions but the market seems to consider this a more establish path of de-escalation. Monetary policy is another matter, but the curbs on effectiveness for extreme easing are unlikely to register for a market that is unmistakably dependent on the external support. Rate implications from data like the NFPs and direct surprises from lower-profile currencies like the Brazilian Real after its unexpected hold are unlikely to register on a grander scale. This leads my attention to more traditional growth concerns. There are lingering recession risks from measures like the US Treasury yield curve, high profile updates from the likes of UK and Eurozone 4Q GDP as well as more ancillary updates from the likes of NFIB US small business sentiment and UofM consumer confidence. Presence of event risk is not a guarantee to market movement, but it is a risk.

How to Use IG Client Sentiment in Your Trading
How to Use IG Client Sentiment in Your Trading
Recommended by John Kicklighter
Improve your trading with IG Client Sentiment Data
Get My Guide

Chart of US 10-Year to 3-Month Treasury Yield Curve to S&P 500 with 60-Day Correlation (Daily)

Treasury Yield Curve Over S&P 500

Chart Created with TradingView

If you want to download my Manic-Crisis calendar, you can find the updated file here.

.

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

DISCLOSURES

News & Analysis at your fingertips.