Risk aversion markets

Midday Update

It has been a quiet Friday European session, with a big sense of uneasiness as equities stayed on the retreat due to the ongoing tensions between Russian and Ukraine heading into the weekend.

A classic case of risk aversion trade is in play in FX has been the CHF/NZD moving high. While the Yen and the Franc are notable gainers in European morning trade.

The USDJPY pair has kept around 113.80-90 heading into the US session, with large options expiries perhaps taming price action. But USDCHF fell from 0.9150 to 0.9120 as the Franc outperforms every other currency during the EU session.

Meanwhile, USDCAD kept above its 200-day moving average at around 1.252, while the AUDUSD is stuck around 0.7180-90 levels, which is strange as the Aussie is a risk-off proxy currency.

The FTSE100 continues to reverse from a multi-year high under the 7,500 level, while the CAC40, ESP35, and Ger40 are heavily in the red on a weekly basis.

A big miss was seen on UK retail sales earlier.  The drop in December was a brutal -3.6% year-on-year, and 0.6% month-on-month. This is less encouraging for UK economic recovery signs as the omicron wave impacted activity for the most part.

Non-food UK store sales fell by 7.1% after a solid performance in November, with a fall observed in each of its sub-sectors i.e. department stores, clothing stores, other non-food stores and household stores.

However, markets are forward looking, always remember that. And with Boris Johnson easing restrictions on the 27^th it could be time to look more optimistically towards the UK economy.

The US 10year is the biggest driver of the markets going into the US session, and is down 4 basis points, at 1.79%. Do keep an eye on the 10-year, as it is instrument that can hugely effect FX pairs.

Gold is down 0.3 % on the day. I am not sure how long this can last and do remember that the $1,830 level is the big level to watch this week. It could be a technical retest rather than anything more ominous.

And finally, Bitcoin is down 6% over the last twenty-four hours. The brutal drop has seen BTCUSD falling down towards the $38,800 area, with stops triggered under $40,000.

Bitcoin has a huge head and shoulders pattern on the daily and weekly time frame right now. Don’t be surprised to see BTC testing close to $30,000 sometime this quarter.