Risk aversion reigns supreme in markets

24 August, 2017

Risk aversion reigns supreme in markets

Markets continue to be risk off today, as commodity currencies took a beating - no more so than the NZD. Recently markets had been piling into fixed interest rate currencies as economic optimism boomed, however that has recently turned as Trumps allure has worn off, and the markets remain more cautious than ever.  The Reserve Bank of New Zealand has not helped as they attempted to jawbone the NZDUSD last week as well; this is not really much of a surprise though anymore as the governor tends to every chance he gets. However, it's not all doom and gloom for the pair with trading balance data due out shortly and markets expecting to see -200M (NZD) as a reading, which will certainly be negative compared to the previous surplus. A fall here would be bearish signal, however trade balance data has shown in recent times to be quite resilient and could easily surprise the markets here as well. Exports will also be a key focus for traders, as a jump here would also boost the case for a stronger NZD.

So far the NZDUSD has had a very rough day with a sharp fall on today's attack on anything risky. At present it's held up on support at 0.7219 ahead of today's trade balance data reading. If we see a negative result, I would expect it to drop down to 0.7157 over the course of the evening. If we do see a positive result them a jump higher to 0.7323 would not be far off and even the possibility of further extensions to resistance at 0.7400. A push past the 74  cent mark may be a bit of a struggle though with the current conditions and the Jackson Hole meeting giving the potential to cause surprises in the markets.

Crude oil I touched on yesterday and for good cause as Department of Energy data came through and showed another drawdown of -3.33M barrels, just under expectations of -3.48M. However, it also showed a drawdown in gasoline reserves of -1.22M barrels as well, so the market has taken this as a positive. It's likely that analysts will take this as a positive sign and that OPEC which has imposed production cuts efforts are likely to be working. I am inclined to agree, but at the same time US production is increasing, and if it does taper off then we could see markets naturally relax a little more and the bulls take control.

For crude bulls resistance at 48.82 is the target to look to break with further extension at 50.21 likely to be the strong point and key area to break into going forward. If we do see USD strengthening however this could slow things down and even force oil down lower. In that event support levels at 46.50 and 45.47 are likely to be the key targets here and would most likely be the line in the sand for bulls with the recent trends. 


Source link  
Global equities hit by bearish pressure

Global markets took a sharp U-turn as the markets were in turmoil on the back of large crypto currency sell offs caused by regulation fears and a crackdown...

Dollar stabilizes after four days slide

The greenback’s sell-off paused early Tuesday after touching its weakest level since January 2015. Traders have been selling the buck across the board...

US equities hit another record high

The US markets have continued their hectic pace this year as the S&P 500 reached new highs on the back of economic figures. These figures showed...


Fixed income markets to dominate FX

The outstanding performance for equities which sent many major indices to record highs may have just paused. Asian stocks were trading broadly lower...

How longer the tired bull will keep running?

Led by Wall Street, global equity markets continued to enjoy one of their best starts in eight years. The Japan’s Nikkei 225 marched to a new 26-year high...

Critical week for dollar after a fragile start

After having the worst annual performance since 2003, the dollar continued to struggle in the first trading week of 2018. The dollar index fell to...


Robust economic growth

Equity investors across the globe are finding no reasons to take profits after an excellent performance in 2017. Asian stocks are trading at record highs after...

FOMC minutes - Will dollar bulls attack?

Investors kicked off 2018 on a positive note sending U.S. stocks to fresh highs on the first trading day. The optimistic approach on day one was...

Equities reaction on tax breakthrough

Asian markets woke up on Thursday to the news that Republicans had passed the long-awaited tax bill. President Trump is now just a pen...

  


Share: