Traders are always trying to decipher the underlying risk appetite of markets. So, if several gauges of sentiment all turn at once, it’s worth paying attention.
BoJo’s Brexit setback has certainly dampened spirits for traders, although it remains unclear whether it’s a mere blip in the road or the beginning of a broad reversal of risk appetite. For that, only time will tell (and Brexit and trade deal developments, or lack-off, are likely drivers going forward) but for now, we should pay attention to how risk appetite flipped in the U.S. session.
US Indices produced bearish candles near key resistance levels:
Several JPY pairs printed reversal candles to suggest exhaustion:
It’s worth noting that price action on the above crosses are in an uptrend, so any reversal from these levels points towards a correction and, therefore, a temporary bout of risk-off. Besides, gold has hardly budged and remains anchored to the 1490 area in a minuscule range. However, in the case of NZD/JPY, there is a case to be made for a larger downside move.
NZD/JPY remains within a broad, bearish channel. Admittedly, there is still upside potential for it to retest the upper trendline, yet the rally from recent lows has been the weakest compared with its peers. And through the yes of a bear, wondering whether history will repeat, or at least rhyme.