Here Are Some Signs Sentiment is Deteriorating


JUST A SPLASH - Good to be back on the desk after the day off. There have been some changes over the past 24 hours, though they have been quite mild in nature and at this point, only something to flag. The changes that I've noticed in the price action have been on the global sentiment front, with a clear bout of risk off flow kicking in. US equities have pulled back, while the VIX volatility index has ticked up, helping to confirm the latest wave of uncertainty. Meanwhile, on the FX front, USDJPY and EURCHF have come under pressure, offering added confirmation for the risk off flow. The catalyst however is less clear, with the move certainly not coming from any ramped expectations the Fed will actually follow through with two more rate hikes this year given ongoing downside pressure on the Buck. 

WEIRD USD ACTION - Again, at this point, it's only worth flagging the risk off development as it really has been nothing more than a blip. But as far as the US Dollar goes, data has been on the right track overall since last week's Feed Minutes that outlined the central bank's need to see data was in fact transitory before moving forward with two more rate hikes this year. And this should be more supportive of the Buck than it probably has been. It feels like the market just isn't ready to buy into the prospect the Fed will actually follow through given the track record of consistently letting down any such expectations in recent years. But let's keep an eye on data today and tomorrow as more positive results will probably get the Buck going. Today it's about ADP employment, initial jobless claims, and ISM manufacturing. 

Wednesday's Euro and Pound strength in question. Via @joelkruger

STRATEGY - As far as the trading goes, remarkably, AUDNZD and EURGBP are still on the radar and waiting to trigger. AUDNZD is so close to setting up and I'm excited to see if Thursday is finally the day. EURGBP isn't far away either and one more jump up towards 0.8800 should do the trick and get us short there. We have been doing a lot of sitting around in recent weeks but it does feel like everything could get crazy again super fast. I have done some analysis that actually warns of a major volatility surge in June and it will be exciting to see if we get that jolt in the days ahead. But first things first, let's see what happens today. 

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