EUR/USD hits 1.20 again after a weekend cryptocurrencies flash-crash, and Thursday’s ECB meeting will drive the week’s volatility
The trading week began with a bang after the cryptocurrency market had a rough weekend. Bitcoin lost over 15% in a flash crash on Saturday, triggering a similar move on all other coins. Some volatility spillovers led to gaps appearing on some markets such as the USD/JPY and EUR/USD on Monday.
Safe-haven currencies are in strong demand at the start of the trading week, with the Japanese yen and the Swiss franc leading. The EUR/USD is also bid, starting the week on a strong note as it pushes over the 1.20 level a few days ahead of the ECB meeting on Thursday.
Stock markets in Europe and the United States remain well bid. The Dow Jones index closed the previous week above 34,000 points, signaling more strength in the upcoming week.
Crude oil bounced from below $60 in line with the weak dollar. Commodities, in general, are on a bullish ride as gold threatens to break back above $1,800.
The economic calendar today and tomorrow is pretty light, with technical traders set to run the show. The Canadian housing stats are of interest to Canadian dollar traders today, but most market participants will likely focus on Thursday’s ECB meeting.
Markets to Watch
The crude oil, USD/JPY, and EUR/USD markets are in focus today.
The technical picture reveals the importance of the $60 level on the crude oil price. The market has hovered around it since February this year, finding support on any attempt to break lower.
The wild card for the crude oil price comes from ongoing negotiations on the new Iran nuclear deal. Should a deal be reached, the market will have to accommodate the new Iranian oil, so the demand and supply balance will change.
The USD/JPY started the week on a bearish tone. After it was rejected above the 110 level, traders started to bid for the JPY in search of safety. The safe-haven currency also benefits from the Bank of Japan’s recent decisions. By allowing a wider range of yields, the BOJ signals its willingness to let the Japanese yen rise.
This is one chart to remember this week. The EUR/USD is back above the 1.20 a few days ahead of the ECB meeting. EUR/USD traders took the ECB’s failure to significantly increase asset purchases (as was promised at the last meeting) as a hawkish sign, so the pair reversed from 1.17. The market will likely remain bid until Thursday, with the 1.20 playing a pivotal role.
Winners and Losers
The Japanese yen is the winner at the start of the trading week; cryptocurrencies are the main losers.