The dollar is weak across the board this Monday as risk-off sentiment dominates trading. Markets are particularly jittery after Chinese stocks dropped some 8% in Asian trade. Saxo Bank's Head of FX Strategy, John Hardy, looks at how you could be
trading in this difficult environment.
Hardy: It started off on Friday. We had a very weak equity session in US and we had China shares in biggest one day loss in 8 years and authorities have tried to stem losses. European Stock markets have all opened lower. EUR/USD was up around 1% last time. The pattern is when we have really strong off signal then Euro is the strongest currency. EUR/USD is close to 1.11 on Monday and USD/JPY down to 123.50. The Euro is stronger vs. USD, GBP, JPY and CHF.
We have a tough trading environment because the moves are driven by sentiment and less of fundamentals because markets are currently influenced by emotions. However I am bearish longer term on EUR/USD. For Japanese Yen, we have less support from risk off tone than Euro. We have Fed meeting this week which is the highlight of this week. The question is will it have much impact this week and we just had a major testimony from Janet Yellen. We have Fed Policy decision out on Wednesday. Markets looking for hints on rate rise.