Despite the week starting with a holiday in the United States, there’s plenty of activity across various financial markets. It all started with the crypto-world, as a sea of red marked the beginning of the most severe correction.
To put things into perspective, bitcoin slumped over 50% from the historical highs. Sigh…
The Forex market enjoys unusual volatility levels. And, once again, the Euro holds the key to everything.
It is no secret here I like Euro for quite some time now as the patterns it forms on various currency pairs look like continuation ones. And the price did continue.
The previous Asian session saw the EURUSD printing highs above 1.23 level. One could have only dreamed about such values twelve months ago. Yet, here we are.
The rise has been nothing but remarkable. Negative interest rates didn’t matter, like the Fed hiking the federal funds rate on the dollar didn’t matter either.
Traders chose to focus on expectations, and everyone now looks at the ECB to end the bond buying program and, even to start thinking at some hikes.
Before getting too enthusiastic, let’s step back a bit. The Euro can’t continue at the same pace, without disrupting some other markets.
Inflation is a worry. However, it shouldn’t be.
A steady rise in the Euro will have a negative effect on the inflation level the ECB considers. However, there’s an ally for Euro bulls. That’s oil.
With oil prices above $70, any rise in the common currency’s value will be offset.
Bank of Canada Hiking Rates
Bank of Canada followed the Fed and hiked the rates today. Again.
The USDCAD did dip on the news, but it was highly expected. So, it bounced back and now sat middle of 1.24 range.
The thing is that the move in oil barely mattered for the CAD. The conditions aren’t the same as when the oil price dropped from $100 to $30.
In the meantime, world’s economy got better, Bank of Canada got used with the situation and the interest rate levels aren’t the same either. Look for this correlation to deteriorate in the future still.
Being only the second trading week of the year, it is too early to draw any kind of conclusion. With no critical release until the end of the week, chances are technical levels will influence trading.
Out of everything on the Forex dashboard, the EURJPY cross seems to be positioned for yet another leg higher.
Also published on Medium.