Volatility dominates in risk off environment

The risk off theme has dominated the FX markets since last Friday following the spectacular fall in precious metals, which saw the biggest daily decline yesterday since 1980. The yellow metal was off 9.7% on the day, with silver having a larger daily decline of 12%. JPY has seen some solid strength following the comments made by the US Treasury on Friday that Japan should stick with domestic instruments and targets and refrain from currency devaluation which I guess means that buying JGBs is fine but buying foreign bonds is not, which I guess is a warning ahead of the G20 meeting as currently this is exactly what Japan are doing.

The commodity currencies have taking a solid beating following the demise in metals and poor Chinese data with the RBA minutes last night revealing no change with their ‘wait and see policy’ reminding the market that they have room to cut whilst they gauge the positives from the last cut sighting the AUD remains strong.

The shocking scenes from Boston overnight sent the market into freefall, with the JPY being traded as the safe haven currency and USD/JPY making an overnight low of 95.77 but with the equity markets finding a base, we have seen a decent retracement as we trade back to 97.80 as I type.

Today is all about CPI day in the UK and US, along with industrial production and housing data from across the pond, with the ZEW survey from Germany at 10am this morning.

EUR/USD

Supports 1.3020-1.3000-1.2910 | Resistance 1.3120-1.3170-1.3250

USD/JPY

Supports 95.80-95.20-95.00 | Resistance 98.30-99.10-100.00

GBP/USD

Supports 1.5250-1.5180-1.5025 | Resistance 1.5385-1.5450-1.5500