Financial markets had a strange day yesterday. On the one hand, the dollar declined and gave back most of its gains in recent days. As such, the AUDUSD regained 0.78, and the EURUSD got very close to 1.21. In the case of the EURUSD, we may say that Tuesday reversed Monday’s price action, so we are at the same spot as when the trading week started. This being the NFP week, such price action is not unusual.
On the other hand, the stock market in the United States declined. Nasdaq 100 fell almost 2% while the S&P 500 dropped close to 1%, but the move lower in equities failed to trigger a rally in the dollar.
Cryptocurrencies had a bad day – Bitcoin declined close to 5% and Ethereum over 6%. Because of recent investments from publicly listed companies, the decline in the cryptocurrency market triggered a similar decline in the share price of such companies (e.g., Tesla).
Oil holds close to $60 ahead of the OPEC+ meeting this week, and gold recovered some $20 from the recent lows. All in all, a mixed trading day, with market participants waiting for more relevant data to be released in the days to follow.
Today’s economic calendar is packed with important data. Besides the European Final Services PMI, the ADP Non-Farm Employment Change (i.e., private payrolls) is closely watched by traders. GBP traders know that the Annual Budget Release is a significant event able to create volatility in the GBP markets. Finally, ISM services and US crude oil inventories will round the day ahead of the new Asian trading session.
Markets to Watch
FTSE, EURJPY, AUDUSD – markets in focus today.
FTSE 100 looks interesting here. Bears kept pushing against the neckline of an inverted head and shoulders pattern, with little or no success so far. In fact, the market bounced four consecutive times from the level and now it threatens the highs. Ahead of the Annual Budget Release in the United Kingdom, bears should be careful as the recent price action looks bullish.
After last week’s vertical drop, the AUDUSD pair recovered some lost ground. The Reserve Bank of Australia (RBA) intervened by purchasing more bonds to stem the rise in the long yields, and that supported the AUD pairs – just the opposite of what we should expect under normal market conditions. A break below the rising trendline spells troubles for the Aussie pair, as traders may interpret it as the break of a rising wedge pattern.
Speaking of a rising wedge, the EURJPY cross formed an interesting one. In fact, the rising wedge is confirmed only by a clear break of the lower edge – which is not in place yet. However, such a move should trigger more downside as traders like to place a stop at the highs and target a minimum 50% retracement of the entire pattern.
Winners and Losers
EUR, AUD – the winners of the day yesterday, while the USD is back declining.