Increased volatility sweeps through the foreign exchange market
Forex flash crash
The foreign exchange market experienced heightened market volatility this week, as a flash crash hit a number of currency pairs. The USDJPY pair plunged to trading levels not seen since March 2018, as the tech-giant Apple spooked financial markets by lowering its revenue outlook for China. The Australian dollar, another key gauge of risk-sentiment, was also hit by the flash crash in the foreign exchange market, as it plunged to its lowest trading level against the US dollar since 2009. A series of worse than expected global PMI manufacturing data releases this week and a lack of market liquidity also contributed to the wild moves seen in the currency markets.
∙ The USDJPY pair is strongly bearish while trading below the 108.10 level, key support is found at the 107.20 and 106.30 levels.
∙ If the USDJPY pair trades above the 108.10 level, further upside towards the 108.80 and 109.26 levels remain possible.
The price of spot gold continued to race higher this week as risk-off trading sentiment favoured safe-haven asset classes, with the yellow-metal pressing towards the $1,300 level. Gold has recently come back into favour, as investors increasingly worry about the slowing global economy and the ongoing trade war with China and the United States. The XAUUSD pair had slumped to levels not seen since December 2016 last summer before staging a stunning reversal just last month. Gold also benefitted from seasonal demand, as Asian investors traditionally buy gold during the months of January and February.
∙ The XAUUSD pair is bullish while trading above the $1,248 level, key resistance is found at the $1,300 and $1,328 levels.
∙ If the XAUUSD pair trades below the $1,248 level, sellers could test towards the $1,230 and $1,220 levels.
Ethereum led the pack amongst the best performing cryptocurrencies this week, while Bitcoin remained muted under the psychological $4,000 level. The ETHUSD pair traded towards the $155.00 trading level, as the third largest cryptocurrency regained recent bullish momentum and posted impressive double-digit gains. The ETHUSD pair had slumped towards the $80.00 level in early December, before recovering above the $100.00 level and finding renewed technical buying as the popular digital currencies fundamentals improved.
∙ The ETHUSD pair is bullish while trading above the $125.00 level, key resistance is found at the $180.00 and $200.00 level. ∙ If the ETHUSD pair declines below the $125.00 level, sellers may test towards the $107.00 and $94.00 levels.
Pound selling resumes
The British pound resumed its recent downtrend against the US dollar this week, with sterling hitting trading levels not seen since April 2017. The GBPUSD pair started the week on strong footing as it briefly traded above the 1.2800 level before succumbing to heavy technical selling. The GBPUSD pair broke a number of key technical barriers below the 1.2500 level before eventually hitting, 1.2424, as traders moved into the safety of the US dollar. The UK economy also posted stronger than expected PMI manufacturing data this week, although the uptick was largely due to stockpiling amidst increasing fears of a hard-Brexit scenario.
∙ The GBPUSD pair is bearish while trading below the 1.2660 level, key support is found at the 1.2424 and 1.2350 levels.
∙ If the GBPUSD pair trades above the 1.2660 level, buyers could test towards the 1.2700 and 1.2730 levels.