Daily thread to exchange ideas and to share your thoughts
Good day, everyone! Hope you’re all doing well as we get things going here in the European morning session. It’s been a lively start in terms of price movements so far but little headlines to really drive market direction.
Nonetheless, traders aren’t waiting for that as they are already settling on a more “risk-off” narrative in the currencies space. The yen is leading gains across the board as yen pairs are dropping off heavily following a selloff in AUD/JPY earlier after the aussie crumbled on the back of RBA Lowe’s hint that the central bank is turning more neutral.
The aussie is the major laggard as a result as it continues to slump heavily against the likes of the dollar and the yen.
It looks like markets will be looking to settle on the narrative of the chicken and the egg theory in the sessions ahead. What I mean by that is market participants will be debating whether the selloff in AUD/JPY is more to do with renewed risk-off flows (not just the RBA itself) or is it a byproduct of waning risk sentiment with US-China trade talks still seen in limbo (that should’ve been priced into risk assets in the first place)?
In the case of the former, there’s still the possibility that equities could brush that aside and turn risk sentiment around but that remains more hopeful than convincing at this point.
Either way, things aren’t looking too bright as we begin European trading and even if markets decide on which should be the case, risk assets aren’t going to win today. I would expect the yen to stay underpinned ahead of US trading so be wary of extensions of the moves we’re seeing in the session ahead.
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