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Video / 17 January 2018 at 8:23 GMT

From the Floor: US equities turn over as volatility returns

   • US yields rise, placing 'strong JPY' trade at risk
   • New EURUSD highs rejected at 1.2325
   • US economic surprise index rolls over
   • Gold falters as dollar, yields tick higher
   • Brent crude struggling to hold $70/barrel

By Michael McKenna

Tuesday's US equities session was hardly an all-out plunge, but it did potentially represent the coming of some long-awaited weakness to stocks in 2018.

"I wouldn't be surprised to see some fatigue enter [the equities space] over the next few sessions," says Saxo Bank head of equity strategy Peter Garnry; "we need a few more data points to confirm that we are beyond the peak, but we can already see that the US economic surprise index has turned over".

Saxo head of FX strategy John Hardy confirms that a broad uptick in volatility was felt across all asset markets Tuesday with rising US yields putting the "strong yen" trade at risk of a reversal while EURUSD faltered at the 1.2325 line.

"Today's key release for FX markets is probably the Bank of Canada interest rate decision... markets are largely pricing in a hike but what matters here is the guidance," Hardy says.

Source: Saxo Bank

Saxo Bank head of commodity strategy Ole Hansen reports that the correction trend spread to gold Tuesday with the precious metal pausing ahead of resistance at $1350-57/oz.

"Silver led the weakness in the precious metals space with a 3% 'mini-crash' Tuesday, with traders focusing on the potential for a US government shutdown Friday".

Hansen adds that he sees support in gold at $1,330 and $1,326.50/oz.

Finally, Saxo's commodities head reports that Brent crude prices are struggling to hold the $70/barrel line on a combination of factors, most notably a projected slackening in Chinese demand growth this year as well as an expected surge in US shale production next month.

For more on equities, earnings, metals, and more, view Saxo's Morning Call in full.

Canada is widely expected to hike rates today, but the CAD move 
depends on the BoC's guidance. Photo: Shutterstock 

Michael McKenna is head of editorial content at Saxo Bank
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