In today’s video analysis, I note that the Forex market is set to ramp up its depressed levels of vol as normalcy in order flow returns. The first sign that opportunities will be coming back is the resolution of the current tight consolidations observed across the board.

The underlying risk appetite conditions won’t go away that easy. Even if a setback in the risk dynamics came about, it is still far from posing a serious technical threat in the overall daily bullish trends in those markets most sensitive to risk flows, namely the S&P 500 or Aussie.

The buoyancy in risk appetite continues to be the name of the game. This is well expressed through an Aussie breaking higher against the US Dollar or Japanese Yen with further congruence found via the S&P 500 recording its highest close since March 6th, marginally breaking its multi-week range with the 3,000.00 mark just a whisker away. The price action in WTI, up in the tune of 5%, is also supporting this narrative.

The groovy mood dominating the equity space failed to extend as the S&P 500 continues to struggle taking out a key decision point in the form of the upper bound of its daily range. This topside failure led to an intraday suppression of ‘risk on’ late on Tuesday, yet there are a number of currency charts off a 4-hour angle still supporting the idea that buyers will have more goes. 

The combination of vaccine hopes as Moderna published promising results of its phase 1 trial, progress made to fund the rebuilding of the economic fabric in Europe, as well as the predisposition of Fed’s Powell to deploy more momentary ammunition if/when needed, were all contributing factors sending risk through the roof on Monday. 

As I crack open and dissect the latest market flows, my attention goes to two markets finally coming to life such as the Pound or Gold. The re-emergence of USD bids could soon put on a compromising position other markets that so far have traded in quietest conditions such as the EUR/USD or the AUD/USD…

The overall risk sentiment, taking the temperature via the S&P 500, is one characterized, as per the last 24h, by a marked improvement as reflected by the failure of the bottom-side delimitation of the index daily range.

In the last 24h, the deterioration in risk sentiment has taken yet another hit as the S&P 500 averages nearly 2% losses back-to-back. This deleveraging in equity bets has led to the usual suspects (USD, JPY) to outperform the rest of the G8 FX complex.

An important update today. As I weigh in the preponderance of evidence through equities, bonds, currencies, it looks as though we might be nearing an inflection point in risk dynamics if my analysis of structures and momentum is anything to go by.

We had an interesting shift in dynamics in the last 24h, where low vol in the S&P 500 has not been an impediment for the Aussie and Kiwi to see consistent follow through supply. A currency that is definitely recovering some of its lost mojo is the US Dollar.