The last day of what has been an intriguing week. US equities continue to shrug off coronavirus concerns to make new record highs.

Meanwhile, EURUSD has broken several key levels to register one of the sharpest moves for the single currency in recent years. AUD has been struggling to hold above 10-year lows in the aftermath of the bushfire crisis as well as the potential contagion effect of China’s economy being crippled by the ongoing coronavirus crisis.

GBP has bucked the trend of USD strength as a change of Chancellor of the Exchequer seems to please the FX markets. So what would Friday bring? More fireworks or a stuttering end to the week ahead of a Holiday weekend in the US?

One word would ultimately sum up Friday. Consolidation. US retail sales data would be the one hope for some volatility, but a headline number of +0.3% for January was bang in line with expectations.

Many of the major currency pairs would drift in 20-30-point ranges. EURUSD had one quick pop up to 1.0861 but would slowly drift back to 1.0832. USDJPY would fail to challenge 110.00 and GBP would spend the day dancing around on a 1.3000 handle.

Not much I can do to jazz that up – it is what it is. Equity markets in Asia, Europe and the US would be mixed. The DJ would close down a meagre 25 points while the S&P and Nasdaq would both close higher by no more than 0.2%. If you’re looking for a winner on the day, look no further than XAU which closed at its highs around 1,584.

The yellow metal continues to benefit from both coronavirus concerns as well as low US yields. The new week will no doubt have a similar focus, so keep an eye on those headlines.

As mentioned EURUSD has had one of its sharpest moves in quite a while. As you can see from this hourly chart, the number 1 traded FX pair has been in sharp decline since the beginning of the month and now sits in a well-defined channel.

Overall USD strength plus concerns over Euro-zone economic growth have fuelled much of the move. Looking at Friday’s CFTC Commitment of Traders report, EURUSD shorts continue to build. So an interesting week lies ahead and the boundaries of this channel should be respected. As of Sunday afternoon EST, the top of that channel lies around 1.0860 so keep an eye on that in the coming sessions.

David Hannigan

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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