Wednesday saw some dramatic swings in US equities eventually leading to a 600-point rally off the lows for the DJ index. Thursday would be a little more ‘one direction’ as bond yields stabilised. 

For crypto it was a quiet day with a slow drift lower. BTC dropped to $11,600 and ETH to $218.  Not too much to report other than the technical headwinds maybe a step too far for now. And if there were crypto buyers as a safe haven play, the turnaround in equities may see some profit taking in crypto.

For FX, it was a choppy day. 

USDJPY ended mid-range around 106.10, EUR ended at the lows of 1.1180 having once again failed above 1.1230. AUD, NZD, and CAD all benefitted from stocks rallying with AUDUSD back to 0.6800, although was unable to get past the previous major support level around 0.6832. 

GBP had one brief dip under 1.2100 but snapped back to end the day at 1.2135. But the real story here was equities. Futures had pointed to a higher opening in the US on the back of gains in Asia and Europe. 

And from the opening bell, it was one-way traffic to the close. Amazing what a day of no ‘trade related’ Tweets from President Trump can do! Although his one Tweet about unwanted USD strength did provide a momentary spike lower in the USD, although if you blinked you would have missed it. 

The DJ closed at its high, up 1.44% or 374 points with S&P and Nasdaq closing up 1.8% and 2.2% respectively. The US 10Y yield rose to 1.72% and Gold chopped around either side of $1500. With the rally in equities and yields, XAU performed well. Where we go from here is anyone’s guess. The S&P is in positive territory for the week now, almost an impossible thought at one point on Wednesday.

Technicals can be tough during particularly volatile markets, but our highlighted level in XAU at 1488 provided good support. Today, a very simple chart and a reminder of the all important level in AUDUSD – 0.6832. 

We had a number of attempts to break here and failed. Finally through down to 0.6760 before the NZ rate cut sent it plummeting to 0.6678. Today’s high 0.6821. Has to be a trade there somewhere – expect that 0.6832 to be pivotal.

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David Hannigan
Author

A graduate of the Cass Business School, Dave's career began with Credit Suisse as an Equity Options Trader on the London Stock Exchange, before moving into the world of FX with Chemical Bank and Citibank. 1994 saw him join National Australia Bank, first as a Senior Dealer, then Senior Vice President and Chief Dealer.

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