News & Analysis

Global market sell off becomes a crash – Dow Jones Nikkei lose 1000+ points; Japanese Yen surges GBPJPY down 317 pips

Feb 6, 2018 | Daily Market Outlook

Upcoming high impact news:

▸14:30 AUD RBA Rate Statement
▸00:30 CAD Trade Balance
▸08:45 NZD Employment Change – Unemployment Rate

Global market crash – last night selling escalated into a crash, global markets plunged. The Dow Jones closed 4.60% lower losing 1175 points. The S&P500 closed 4.10% lower losing 113.19 points. Europe fared better last night but have really extended their downtrends. The UK100 CFD lost 269 points last night, 462 points since the start of the month. The DAX fell by 97 points last night but has lost 1039 points since the start of the month. The US30 has lost 2000 point in two trading sessions! The Nikkei joined the Dow in the 1000 club last night dropping over 1000 points. The ASX200 is trading 166 points lower this morning! The Nikkei open won’t be a fun one. “We’re not used to getting washouts like this anymore,” said Quincy Krosby, chief market strategist at Prudential Financial. “The buy-the-dip mentality that has taken over hasn’t allowed for that.” “This sell-off, in the bigger scheme of things, is not that big. But it is very important in psychological terms,” Krosby said. A reason? Your thoughts are as good as any. Fear is a powerful motivator, we’ve seen a very stable run up with little to no volatility once the masses start moving to the door at once panic breaks out. Value buying could be the next step but things could get volatile at this bottom point while buyers and sellers work it out. There will be a lot of confusion after last night, as we haven’t seen moves like this since 2008. This morning analyst are still describing this as a correction and the overall trend remains in play. That should be confirmed in time to come. From a Fibonacci retracement measurement from 2015’s low ton the US30 to its Jan 2018 high the current move down has just reached the 23.6 retracement point.

Oil continued to fall, following global markets lower. Oil lost a further 155 cents on Monday dropping back to $63.20 a barrel. Rising U.S. output, a weaker physical market and recent dollar strength weighed on crude futures. Price has made a new lower low. If we see a new lower high price is suggesting a new downtrend is in place.

Forex – the USD continued higher last night, U.S. bond market stabilizes after 10-year yield hits a 4-year peak. U.S. services sector strongest in over 12 years, according to ISM. The USD rallied to the CAD and other majors, apart from the Japanese Yen. The USDJPY fell by 114 pips overnight as the JPY jumped knocking the majors to heavy loses. The GBP, EUR and AUD hit hard. The GBPJPY lost over 300 pips! ECB’s Draghi sees risks from currency market volatility, this added to EUR/majors weakness last night. The EUR did have good sessions on the crosses, EURGBP added a further 41 pips, making it 91 pips for the week. Price is trading back at .8866 this morning mid-January levels. Bitcoin sellers continued to hold sway overnight as it’s price fell a further 820 to the USD, hitting a low of 6487. Price has not traded below 700 since November 2017.

US30 – saw a price drop in calibre to the moves in the GFC last night. Looking at the daily chart with a Fibonacci retracement measurement we can see just how amazing the Bull Run was.  We can also see that price still sits at a fast retracement level. 38% and 50% are still viewed as normal retracement points in a trend. Take from that chart what you want……. : )

 

Good trading from Eightcap.

 

Sources; CNBC.  All times are AEDST

* The information provided here has been prepared by EightCap’s team of analysts. All expressions of opinion are subject to change without notice. Any opinions made may be personal to the author and do not reflect the opinions of EightCap.

In addition to the disclaimer on our website, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. EightCap accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently, any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication.

Please note that past performance is not a guarantee of or prediction of future performance. This communication must not be reproduced or further distributed without prior permission.

Follow Us