EUR/USD starting the day around 1.1375 rocketed over the 1.1700 handle on Monday as Euro was strong across the board (click to enlarge).
Monday has started off with a bang in the currency markets, while relative quiet started the Asian session, when European markets were set to get under way the market just dissolved in a bunch of crazy directions. Emerging market currencies and currencies tied to Chinese growth melted versus the dollar while the Euro (which has been much maligned during the Greek crisis) rocketed above the 1.17 handle, while a few weeks ago it sat below 1.10. The biggest mover on the day so far has been USD/JPY which declined by over 3% during trading today. The pair took on a parabolic crash down to earth as Japanese officials stated that the BoJ inflation target of 2% is not so much a worry with oil prices being stuck below the $50 dollar a barrel mark. This has people questioning whether The Bank of Japan will further ease monetary policy at the moment.
USD/JPY declining into the 116’s after starting the day above 121 (click to enlarge).
Japanese Prime Minister Shinzō Abe, who has knocked the hell out of the yen since 2012 to jump start Japan’s fledgling export market stated: “Oil price falls are positive for Japan’s economy. We accept the BoJ’s explanation that hitting its price target has effectively become difficult.” While the Bank of Japan has missed it’s 2% inflation target set out a few years ago, Abe expressed confidence that Japan’s economy remained on a solid recovery path, confirming that with oil prices continuing to decline, the BoJ missing it’s two-year deadline could not be helped. As such, along with the dollar’s brief selloff made today’s USD/JPY one day fall the largest since 1998. The average daily ranges experienced today were simply remarkable with currency pairs moving 25-50 pips in a matter of minutes back and forth and moving 100’s of pips on the dollar selloff spike for an extended period of time before some calm took over the markets as traders and investors look to digest all of the recent economic developments.
Oil sliding below 38 today….
On the commodity front, oil continued it’s slide which continues to weaken the Canadian dollar and ruble and other resource rich currencies to multi-year record lows. The black gold slid below the 38 handle briefly before attempting a recovery. Brokers should fare well in this environment as this trading environment is extremely confusing for your average retail trader and many of the moves experienced today were opposite of popular positioning.
Moreover, the ranges experienced today made for a lot of opportunity for intraday moves and brokers should have raked in the commissions today while also experiencing some busted accounts should they warehoused the orders. Make sure to stay tuned to LeapRate for followups on today’s volatile session as markets were on edge to start the week. Hopefully some calm ensues and this was just some sort of repricing based on recent developments. The go-to measure for market volatility the CME VIX Index had been creeping up in recent days and now sits at year-to-date highs (as you can see in the chart below).
VIX VOLATILITY Index looks to have foreshadowed rocky markets during the past couple of weeks, and Monday has seen it now shoot to new highs for the year.