* Dollar Recovers Early Losses but Doesn't Offer Trend as Risk Mixed
* Euro Still Jostled by Headlines but Traders Less Susceptible this Time Around
* British Pound Slide after BoE Minutes Only Temporary, Market was Prepared
* Australian Dollar Still the Most Volatile Under Sentiment-based Volatility
* Swiss Franc: Watching Trade Figures for Evidence of Burdensome Exchange Rate
* Canadian Dollar Traders Look Forward to Friday CPI, Next Week's BoC Decision
* Gold Slides for a Third Day, Finally Some Direction from the Metal
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Written by: John Kicklighter, Senior Currency Strateigst
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| Dollar Recovers Early Losses but Doesn't Offer Trend as Risk Mixed |
| When trading ranges narrow but correlations are still very strong, volatility within the constricting channels very often increases. This is both the situation we are facing with the US dollar and the broader capital markets. Looking across the dollar-based majors, we would note that there were no efforts to break from the congestion that has set in over the past week. This shouldn't surprise given the lack of a genuine catalyst from the economic docket or the financial headlines. Rumor and conjecture can stir speculation while former top-tier indicators still carry some of their historic influence; but when the markets are showing this level of correlation, it suggests investors and traders are waiting for a meaningful driver that can shift an underlying fundamental trend. To give a sense of how locked in these markets are to the deeper currents, it is worth noting that the EURUSD (a pair rooted in fundamentals and liquidity) maintains a 96 percent correlation to its more risk-sensitive AUDUSD counterpart over the past 20 days. Looking outside the asset class, there is a similar 96 percent correspondence between the AUDUSD and the S&P 500. This suggests that the catalyst that finally does awaken a new trend will have to carry a lot of weight. On the other hand, when that spark is found, it will be easier to spot as a true trend generator considering the entire market will be on the move... |
Best regards,
DailyFX Research Team
research@dailyfx.com |
18:41
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