Dollar Whips and Wipes Out Both Longs and Shorts

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Market Drivers January 30, 2018
Markets seesaw on risk aversion
German inflation data lower
Nikkei -1.43% Dax -0.20%
Oil $64/bbl
Gold $1338/oz.
Bitcoin $10800

Europe and Asia:
EUR GBP 2.6% vs.2.6%
GBP UK Mortgage Approvals 61K vs. 63.5K

North America:
No Data

Major reversal in currency market today with both EURUSD and GBPUSD making V shaped spikes in London session as late dollar longs were squeezed mercilessly on pure price flows.

There were no major fundamental drivers today and in fact, economic data from the region was negative with German regional CPIs all printing deeply below 0% as higher exchange rates are clearly having a deflationary impact in the region.

In UK the data also disappointed with mortgage approvals dropping to 61K from 63,5K eyed, but markets shook off the news and drilled cable higher through the 1.4100 figure after breaking the 1.4000 just an hour before.

The prior moves in the market were driven by risk aversion flows as a sharp selloff in the Nikkei sent traders scurrying for safe-haven bid in the buck. But flows completely reverse in London as European equities recovered.

Still the seesaw action in the market may continue when US traders come online. If US stock markets begin to sell off the risk aversion flows in the dollar could return. We have been noting for a few days that the dollar remains grossly oversold and some sort of a sustained bounce is due. Tonight’s price action may have been the one last surge the dollar bears, but if the US trade fails to follow through, EURUSD and GBPUSD could quickly return to the lows of the day.

Boris Schlossberg
Managing Director

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