On the back of previously unnerving headlines, news around Ukraine shifted to reports that some Russian forces were retreating from the border and the US would not have soldiers fight
So long as the Ukraine pressure remains in remission, the focus and turn back to interest rate speculation with the FOMC minutes, key earnings, UK and Canadian inflation figures on tap
THE MARKETS ARE HIGHLY TUNED TO HEADLINES AND TRADING STRATEGIES SHOULD REFLECT THE FLIPPANCY
There was a bounce in risk assets like the S&P 500 and US indices this past session that aligned neatly to relief measured in the headlines around the risk of an imminent Russian invasion into Ukraine. Moving forward, so long as this diplomacy persists between the West and Russia, the markets will draw direction and activity level from more traditional fundamental themes – like interest rate speculation which will find significant fuel through Wednesday’s trading session. However, should the clouds darken around the geopolitical threat, the markets will immediately reprioritize with a reshuffling of what markets represent haven and what stands as a ‘risk’ asset. This is not a particularly conducive backdrop for trades meant to play out over a few days up to a few weeks – unless you have rock solid conviction in your outlook, and I can’t say that I do. Short-term, event associated options or longer-term ‘positions’ seems more aligned to the market conditions as they currently stand.
USDJPY seems better positioned. While this severe contrast in policies (very hawkish Fed and very dovish BOJ) is still not generating a like-for-like in the exchange rate that marginal rates would suggest, it is further tuned to risk trends. So, if risk aversion happens to cut down inflation rate forecasts (disproportionately on the Dollar), there will be two forces working to pull the pair lower. Technical lines in the side to contemplate alongside the fundamental evaluation are 115 and 114 breaks.
So long as the Ukraine pressure remains in remission, the focus and turn back to interest rate speculation with the FOMC minutes, key earnings, UK and Canadian inflation figures on tap
THE MARKETS ARE HIGHLY TUNED TO HEADLINES AND TRADING STRATEGIES SHOULD REFLECT THE FLIPPANCY
There was a bounce in risk assets like the S&P 500 and US indices this past session that aligned neatly to relief measured in the headlines around the risk of an imminent Russian invasion into Ukraine. Moving forward, so long as this diplomacy persists between the West and Russia, the markets will draw direction and activity level from more traditional fundamental themes – like interest rate speculation which will find significant fuel through Wednesday’s trading session. However, should the clouds darken around the geopolitical threat, the markets will immediately reprioritize with a reshuffling of what markets represent haven and what stands as a ‘risk’ asset. This is not a particularly conducive backdrop for trades meant to play out over a few days up to a few weeks – unless you have rock solid conviction in your outlook, and I can’t say that I do. Short-term, event associated options or longer-term ‘positions’ seems more aligned to the market conditions as they currently stand.
USDJPY seems better positioned. While this severe contrast in policies (very hawkish Fed and very dovish BOJ) is still not generating a like-for-like in the exchange rate that marginal rates would suggest, it is further tuned to risk trends. So, if risk aversion happens to cut down inflation rate forecasts (disproportionately on the Dollar), there will be two forces working to pull the pair lower. Technical lines in the side to contemplate alongside the fundamental evaluation are 115 and 114 breaks.
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Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.