Forex Video: A Dip in Volatility in a Far More Volatile Market
- A rapid rebound in equities and drop in volatility measures should draw suspicion
- Holiday conditions further contribute to a lull in the market's general concern for the broader outlook
- Comparing short-term volatility measures to general measures of conditions suggests caution and preparedness
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Over the past weeks, fear has subsided and risk appetite has recovered lost ground. However, opportunity and the fear of missing out (FOMO) in a rebound shouldn't cloud our appreciation of the market's broader condition. In fundamentals, the curb on Fed rate hikes has distracted from ineffective accommodative policy globally. A lull in data has taken the general slowdown in global growth off the top headlines. And, a rebound in capital market benchmarks papers over genuine concerns of liquidity, debt and exposure. Since we so frequently cover the fundamentals, this weekend Strategy Video focus more on the technical side of the 'short-term cheer, long-term concern' contrast. Where we have certainly seen a rebound in the SPX and drop from the VIX volatility index - indicative of improved sentiment - in the short-term, the general conditions with which this is occurring suggest it is mounted on unstable foundation.
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DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.