Daily Market Insight

Here are some insights from the strategists at FXStreet. They cover the fundamentals and technicals of key Forex pairs and other key markets along with some of the key economic news of the day. Here is a review of the ECB decision and the outlook for some key commodity markets:

Brexit is Official - Big Downside Ahead

We now know the Fed is on hold for the foreseeable future. Markets are now focusing on Brexit. The referendum has gone decisively in favor of a Brexit. This is all set to rock risk assets with some significant downside. A set up very similar to August 2015 and January 2016 is developing. Lets look at some key drivers:

1) The Vix:

Volatility has begin to surge yet again with the Vix eclipsing the 20 mark. The Vix has not made new lows with each of the recent highs in the S and P 500 and could eclipse its February highs soon:

2) The Yen:

The Yen has just made new highs for 2016 and is looking to head to the 100 mark as risk aversion and carry trade liquidation become the game in town:

3) Gold:

Gold is also benefiting from its safe haven status as paper assets go out of favor. Gold is sitting very close to its 2016 highs:

4) Commodities:

Economically sensitive commodities like copper and oil have resumed major break downs and are likely to head much lower as global economic weakness takes center stage:

5) Stock Markets:

European markets are already sporting big break downs along with emerging markets and the trend is likely to continue and spread to markets in the US and else where:

Chart of the Day - Commodities

The chart of the day is from James Quin via the Market Oracle that shows short term break outs in several key commodities. Is there a hint of future inflation here or is it yet another false alarm?

Update on Those Predictions for 2015

At the beginning of 2015 I made some predictions for grins. Here's how they played out:
The original post containing the predictions can be found here: 

1) Dollar strength continues after a brief pause against all major currencies except the yen. With the Euro decisively breaking the long term support of 1.20.
This indeed was the year of dollar strength with the Euro below 1.10 and the trend may continue well into 2016.

2) Yen strength should result in a bout of carry trade liquidation that is a major negative for risk assets such as emerging market currencies and commodities.
While the dollar was broadly strong against the yen, the Yen was relatively strong against most other majors and 2016 promised to be year of Yen strength. This year saw a massive down move in commodities as expected.

3) Despite slowing growth in most emerging economies, policy makers have their hands tied and spend a whole lot of resources defending their weak currencies unsuccessfully with higher interest rates.
Emerging market currencies saw major take downs ( The Real & Rand being notable examples) across the board and the trend is set to continue in 2016.

4) This in turn sparks a major exodus of FII money flows out of emerging economies like the BRIC countries which causes their stock markets to significantly under perform despite their terrific performance in 2014 and greedy analysts calls for more.
BRIC stock markets under performed significantly in 2015 except China and more weakness is likely in 2016.

5) Volatility surges in 2015 as the Vix index doubles following a major take down of stock market indices across the globe.
The Vix crossed 50 briefly in August before retreating. A big up move in the Vix is likely in 2016.

6) Risk free assets will be among the safer bets in 2015 as risk appetites significantly wanes with treasury yields continuing to plummet with QE forever still continuing but without the desired outcomes.
Risk free assets outperformed risky assets globally but US long term yields rose as the FED began tightening Monetary policy. Risky free assets will continue to outperform in 2016.

Happy New Year!

Predictions for 2015

Dollar strength continues after a brief pause against all major currencies except the yen. With the Euro decisively breaking the long term support of 1.20.

Yen strength should result in a bout of carry trade liquidation that is a major negative for risk assets such as emerging market currencies and commodities.



Despite slowing growth in most emerging economies, policy makers have their hands tied and spend a whole lot of resources defending their weak currencies unsuccessfully with higher interest rates.


This in turn sparks a major exodus of FII money flows out of emerging economies like the BRIC countries which causes their stock markets to significantly under perform despite their terrific performance in 2014 and greedy analysts calls for more.



Volatility surges in 2015 as the Vix index doubles following a major take down of stock market indices across the globe.

Risk free assets will be among the safer bets in 2015 as risk appetites significantly wanes with treasury yields continuing to plummet with QE forever still continuing but without the desired outcomes.