Over the last several trading sessions, the foreign exchange and commodities markets have experienced unprecedented volatility. This trend is largely driven by politics and changing investor appetite. The EUR/USD currency pair rode on the coattails of these impressive gains of more than three-quarters percent in the opposite direction during the previous session. On Tuesday during the Asian day, it was trading closer to 1.1630. It ended up reeling in some of those gains, moving back below the 1.1650 level.
The recent volatility in the EUR/USD pair has traders attentive and on their guard. This change comes on the heels of US President Donald Trump’s historic decision to fire Federal Reserve Governor Lisa Cook. This action has understandably raised alarm about the Federal Reserve’s independence. What some analysts see as the euro bottoming out to make its potential downside limited against dollar.
The EUR/USD has continued to grind down. As the dust settles, market participants are still trying to understand the implications of Cook’s dismissal. The pullback still shows no signs of abating. It’s exacerbating the weakness that began Sunday as well as creating a massive wipeout of retail leverage in the perct (“derivatives”) boom. At the same time, GBP/USD has made a move lower, slipping to around 1.3450 in early European trade on Tuesday.
Gold continues to be a go-to haven for investors during this changing market landscape. The yellow metal is on track to probe strong resistance at $3,400, finding support as it trades above $3,350. The daily bullish Relative Strength Index (RSI) indicates building positive momentum for gold. It has recently shot up, thanks to a resurgence of worries about the independence of the Fed, following Cook’s firing.
Market participants are understandably watching these developments with keen interest as they determine how they can and should affect investment strategies.
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On the crypto side, the market has experienced massive liquidations, $935.44 million in the past 24 hours. Bitcoin is down sharply under the $110,000 mark, with Ethereum now below $4,500 as of Monday. Fartcoin, OKB, CRV and a host of other cryptocurrencies have taken comparable massive falls.
As the markets begin to react to these exciting developments, it is critical for investors to stay on their toes and stay informed. Today, the dynamic relationship between political developments and market reaction still drives trading strategies in all asset classes.