As Wednesday came to a close, it was another chapter in the recent tale of volatility. Tuesday was fairly muted on the FX front, although EURUSD once again rejected a move lower, holding the 1.1065 area. 

GBP had a quick move higher from 1.2090 to 1.2160 as it appeared German Chancellor Merkel might be willing to discuss the Irish border backstop. It remains to be seen if anything will come from the meeting between Ms. Merkel and PM Boris Johnson. 

For the crypto world it was a largely positive day with BTC rallying to $10,800 and ETH to $203.50. There was no real reason for the moves but BTC’s continued inability to sustain any move under $10,000 certainly didn’t hurt. So what did today bring?

Well sticking with crypto it was a pretty miserable start to the day with BTC falling back to $9,900 and ETH down to $180. The only real catalyst I could see was a comment from Ethereum founder, Vitaly Buterin who said ETH adoption was limited due to the increased cost of transacting on the Ethereum blockchain. 

Nothing like find a way to make your coin lose 10% of its value in 24 hours. 

For FX, a fairly quiet day with AUD and CAD both beneficiaries of a pullback in stocks. Canadian CPI data also came in stronger than expected to boost the ‘looney’. 

Tuesday’s move lower in equities is almost entirely reversed as US stocks opened higher, the DJ up more than 250 points to start the day. As the day progresses it’s all rather quiet and rangebound. No market moving tweets from Mr Trump. 

Finally, we get a little movement courtesy of a headline from the Fed minutes, stating July’s rate cut was a ‘recalibration’ not part of a ‘pre-set course’ for more easing. This saw the USD gain a little ground as EURUSD fell from 1.1100 to 1.1080 and GBPUSD from 1.2140 to 1.2120. 

Stocks were unmoved and even the bond market only saw a minimal reaction. Clearly the Fed is just confirming what we all probably knew. As the day comes to an end, the DJ closes +240 points. The US 10Y yield is at 1.59% and XAU is trading around $1,502. And once again a BTC dip below $10,000 is short lived, rallying back to $10,150 by days end. 

Given the recent volatility in equity markets, FX has been reasonably subdued. With the exception of the Brexit-driven GBP, the other major currencies have been rangebound. 

Today I want to take a quick look at AUDUSD, which has been surprisingly stable in the face of the ongoing rollercoaster in equities. Looking at this hourly chart, we can see a short-term wedge or flag formation as the ranges remain tight. 

As the two lines converge, we would normally expect an explosive move one way or the other. Keep in mind we still have strong resistance at 0.6832 to the topside. So while tight ranges persist, it seems like a matter of time before we break one side or another.

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.

Write A Comment