Tiomarkets Daily Commentary 19 Feb 2020

I summarized Tuesday’s session by noting the USD was the standout performer on the day. I will ultimately do the same for Wednesday. A day that saw strong US PPI data as well as much better than expected Building Permit and Housing Start numbers in the US. A day when the FOMC minutes revealed a Fed now ‘sidelined’ with US interest rates going nowhere fast. A day when the S&P and Nasdaq would both make new highs despite warnings from such powerhouses as Goldman Sachs, that the Coronavirus effect was not being priced in. A day when the Atlanta Fed actually raised its Q1 US GDP estimates from 2.4% to 2.6%. As traders used to say when I first started to trade FX many moons ago, buy USD and wear diamonds.

If yesterday was about EURO’s continued demise, today would be the day of the JPY. No, that’s not a new James Bond movie. It’s what happens when a currency that sits in such tight ranges against the USD suddenly explodes higher. 109.90 to 111.59 in 24 hours. That’s impressive and something I will touch on in my technical piece at the end. EURUSD had another attempt to break 1.0780 but failed and would ultimately close a little higher at 1.0810. GBPUSD got an early boost from stronger than expected GBP data rallying to 1.3024. But USD strength would take over and the early gains turned to sharp losses as 1.2910 would trade. AUD and NZD would also languish against the USD despite global equities returning impressive gains. As mentioned, the S&P and Nasdaq would make records closes. The DJ and DAX would both close higher by over 100 points. And the mighty yellow metal (gold) would continue it’s march higher making a high of 1,613 but just shy of multi year highs over 1,616. What will be interesting now is to see whether pairs like USDJPY can hold on to such impressive daily gains.

As USDJPY would take the title for major mover of the day, lets take a closer look. A while back I put up this daily USDJPY chart, showing a very long term flag formation. The top line goes back to June of 2015. As we know when we get breaks out these types of formation they can often be sharp and today would fall into that category. A break above that line and it was 160 points in short order. As mentioned above, it now remains to be seen if these gains can hold.