Safe havens falter as risk sentiment improves

9 May, 2017

Markets have so far been quite bullish over the past few weeks, as there is renewed optimism that the US economy can progress after the recent bill passing in congress, and also unemployment continues to drop with strong labour market readings. Adding further to the mix is the current VIX reading, a measure of market volatility which has dropped to its lowest point since 2007 showcasing the market's expectations that we are going to see growth and no sudden shocks or spikes. Some of the big winners of this have obviously been traders short on safe haven currencies as they continue to be unwound by many players in the market. USDJPY and USDCHF have all been very bullish today compared to previous months where they have suffered.

The USDJPY has been a key pair to focus on recently with the unwinding of safe haven trades. After falling through the 200 day moving average briefly it looked like the bears could run away with the USDJPY, but strong employment figures coupled with the US economy looking to pick up the pace have paved the way for further changes and the bears to take control again of the market. USDJPY bulls are now pushing higher on the charts and it looks likely they will target strong levels of resistance at 113.754 and 114.846. Fibonacci levels have also been quite strong for UDSJPY day traders and the 23.6 level is likely to be a key level of resistance as well for the USDJPY as it looks to extend higher.

Crude oil has also been one of the major movers in the market as OPECs jawboning has had little effect to sway the market and move it higher. Previously in the past the Saudi oil minister need only open his mouth to shift the market higher, but it seems the market is gripped by US shale oil and continues to believe that any market uplift is unlikely to occur. Certainly Chinas economic data last week has had a large impact, as many are looking to the Asian giant to help power oil demand. But it would seem the focus is squarely back on the US to drive demand at this stage and into the future.

If oil markets are likely to climb back higher they will need to push through strong resistance at 47.75 and 49.32. This seems like a probable scenario that we may see some bullish action as a booming economy generally drives oil demand. However, if that fails to eventuate and market data, and a strong USD hammer oil, we could see another strong push down to support levels at 45.78 and 44.02 as the bears to look assert themselves and take control yet again.ВВ 


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