Posted on: 11 February 2016, by: Pepperstone Support, category: Market Review
There are two main takeaways from Wednesday’s session and one relevant “sentiment” update:
Fed Chair Janet Yellen sounded less confident during her Congressional Testimony. This helps to explain why USDJPY has traded as low as 113.10 and US equities traded firm for most of the session. EURUSD consolidated, settling 1.1290/80.
WTI price action is increasingly concerning investors. This kept pressure on “risk” FX currencies and likely explains why equities couldn’t hold post-Yellen gains. Despite a surprisingly positive DoE report, oil could not regain its footing above $29. DoE inventories fell by -0.754mn versus a gain of 3.177mn expected. WTI has traded and settled in the $27.20/30s. The cycle low is in clear view at $26.19.
Concerns over the European banking sector abated somewhat. Sentiment was likely part short-covering and part Street speculation regarding how lenders might respond to the market’s concern. The SX7E Index rebounded by nearly 6.9%.
Volumes surged during the Yellen testimony and even moreso on the DoE inventory report. Yet, market liquidity remained very thin, with continued deterioration having an impact on price action.
Overall focus remained on pairs such as USDJPY, USDCAD, USDCHF, EURUSD and AUDUSD. This interest was largely balanced but we did see net selling in USDCAD; demand in USDJPY; and demand in AUDUSD.
In EM, USDMXN market volumes also remained above average, as the pair traded to a high of 18.9587. Our MXN trader in NY noted stops and leveraged demand driving the spike. However, he prefers to sell rallies in the pair, thinking MXN is oversold.
Oil spillover effects also brought considerable interest to USDNOK and USDRUB. The pairs settled near 8.52 and 78.8750 respectively.