Understanding whether the market is in a risk on or risk-off state is a BIG help when trading currencies, commodities & indicies.

This was supposed to be a quiet week, and Mr Trump put paid to that with the Syrian missile attack at the weekend. What has ensued is potentially a dangerous political ‘dead-end’. A stalemate between Russia and the US over Syria is being tackled by US diplomat, Tillerson. The outcome is unknown but it is not seen as going too well and so far there is no agreement, although there is now ‘room’ for one.

With the North Korean situation and the so-called US Armada heading their way, it is little surprise to see the market rattled. Then Trump spoke, a different tone was struck, some say more presidential,  but there was little in the way of policy. But it was when he spoke about the USD that the currency started to fall, the US10 broke upwards pushing the yield down to 2.29% . He spoke of the of the need for a lower USD and lower rates and the market was listening.

If you want the picture of a risk-off environment we had it today.

Gold broke out and has rallied strongly

Risk-off

The US10 year has also rallied:

risk-off

 

This has pushed down the yield and the USD has suffered as a consequence.

It was not just geopolitics and politics today. The BOC left rates unchanged but were much more hawkish and the CAD move against the USD was supported not only by Greenback weakness, but by oil inventories falling much lower than the estimate. We have seen the rally in oil, mostly on OPEC promises of further cuts in production and export difficulties in Libya. The inventories was another upside surprise though the 53.50 level has seen the sellers again. With rumours of war and the potential of further attacks, there is plenty of potential to support the shift into rally mode at least in the short term

Equities also sold off as part of the fear theme:

and the VIX broke above resistance ...this is highly significant.

Risk-off

risk-off

image courtesy of www.stockcharts,com

We are fast approaching the Easter break, and Friday is a holiday in the UK, Europe and Canada so the volumes will be muted.

The Watch list

This is now a list in preparation for next week due to the vacation.

Gold

The place to buy was at the break of the H4 EMAs and the WPV. The conviction was not strong as the risk environment was mixed and it was before the geopolitics warmed up. There is plenty of time to get in o any pullbacks to support. We shall be using the pivots and market profile for entries, and we always check the Earth and Sky chart, (chart above)

AUDUSD

We had a limit order here at 0.7530, but on the big move down in the index and the failure to fill by Wednesday evening we have removed it and shall reassess on Monday.

S&P500

A short on the break of support, (chart above)

AUDJPY

Any pullback is a short opportunity:

EURGBP

Bias is still long, but watch the European election scene..this is a tricky one despite a good pattern:

AUDCAD

Another wait for a decent pullback, but again we need the oil rally to hold its own:

The USD is still looking weak as we saw so we will be very selective and really only have the AUDUSD on the list. If there is some geopolitical settlement that will change the risk environment again, and the longer term effects of Trump’s comments as well as how the Fed respond:  there is plenty to monitor. The effect of volatility on our trading accounts can be devastating so care should be taken with risk and reward management, and also we should bear in mind that volatility can be enhanced in low volume scenarios. The best approach is to wait for the holiday to finish and the excitement to abate. there will be plenty of opportunities next week, and the market goes away!

If you have any questions please post them below and we will happily answer them. These are, as always, our trading ideas and not recommendations.

Judith Waker

Robbie Stephenson

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