Don’t Sleep on Sideways Moves
It would be easy to dismiss the lack of movement in markets on Monday but it's worth a closer look. The Swiss franc was the top performer while the commodity bloc lagged although overall moves were small. Australian housing data is the focus of Asian trading.
The market had very little new information to digest on Monday and with Yellen testifying Tuesday, few were surprised by the lack of moves. The euro climbed to 1.3652 but stalled at the downtrend since the late-December high. USD/JPY traded in a 30 pip range.
In a way, the stability in the market was good news for risk trades. The S&P 500 climbed 2.6% on Thurs and Fri so a modest retracement would have been normal. Instead, the market shook off early gains and moved higher before it stalled at 1799.
Another metric to watch is NZD/JPY, which is a classic measure of market risk. The pair has been an early bellwether for sentiment and is challenging a confluence of resistance with the 21 and 55-day moving averages along with the 61.8% retracement of the recent selloff.
Early in Asia, one headline that grabbed attention was from the China Securities Journal which said the economy will be 'very difficult' this year. Markets are still skittish about emerging market hiccups and any headline could rekindle fear.
The calendar is focused on Australia later with fourth quarter home prices due out at 030 GMT and it's expected to show a hefty 8.6% y/y gain.
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