Global markets: buy the hope, sell the rebound

The growth of financial markets has stalled, with American indexes losing more than 1% on Tuesday. On Wednesday morning, most Asian markets were at a small minus (about 0.2%). Currency markets confirm these sentiments, showing a slight slope towards the protective franc and the dollar.

The Japanese yen has been avoiding strong movements in recent days. It is also interesting that except for periods of a surge in volatility, the USDJPY is around 107.50 for the fifth consecutive month. However, this balance was achieved due to the simultaneous and proportionate easing of monetary policy by the Fed and Bank of Japan.

The other safe-haven currency Swiss franc is in high demand. USDCHF actively declined for the seventh week in a row, falling to the levels that we saw for a short time in the midst of the market storm in March. For the last four weeks, the franc has been rising steadily against the euro. Earlier in May, the SNB interventions stopped the EURCHF from falling below 1.05, but as soon as the central bank of the small mountainous country weakened its grip, the strengthening trend resumed. The pair’s return to 1.05 will signal that the market is selling risk assets. The pressure in the U.S. market has increased at the end of the session when retail investors and funds executed their orders and market professionals entered the stage.

Separately from that, gold updated its 9-year highs, rising above $1,800 per ounce on the spot market.

Such market dynamics once again confirms that against the background of optimism of retail investors and stronger macro data, professional traders are taking profits and closing positions.

Right now the mood on the markets can be described as selling on growth. But a switch to the next stage, a total sell-off, can happen without warning and with the same force as it occurred in February.

During a period of increasing concerns in the markets, the demand for dollars often increases. However, in this case, the initial interest of investors may focus on other safe-havens, whose economies have already recovered from the coronavirus and where the printing of money is not expected to work so widely. If so, the euro, the pound and the Swiss franc may become a more reliable means of capital preservation than the dollar in the coming months.

The FxPro Analyst Team