Markets have no morals. The Dollar, Gold and Bonds were heavy bid yesterday and 24h later all moves are fading away albeit not to previous levels. So, once again, the brave are rewarded, but we won't judge that any further.
Vols came much higher yesterday, of course, but are also already weaker again at this point in time. Lower delta short-term puts are particularly expensive. That makes sense with regard to yesterdays big time reversal in EURUSD which made a new multi-year low at 1.1106 and closed the day a fair bit higher just below the 1.12 mark. But the week is not over yet and overnight insurance prems are accordingly expensive.
The 7% vol level for tenors above 3 mth has held for the time being but in the longer term, the Ukraine crisis just joins a series of other risks (inflation, economic growth) that justify the current levels. I wrote several times that Vols below 7% are still comparatively low and I still think so.
(source: cme group, own representation)
Weekly closing levels to watch:
EURUSD -- A clear close above 1.1200 is necessary for bulls to go into weekend with a better feeling. Next week the pair should regain 1.1300 soon to declare the dip over for now
GBPUSD -- The pair looks quite weak and a weekly close below the previous 1.3358 support confirms that view
USDJPY -- The pair trades around the 115.52 resistance. Anyway the weekly skew is to the upside and a close above yesterdays high at 115.70 would be a bullish sign
AUDUSD -- As a high-beta currency the Aussie has been rocked back and forth this week. But 0.7224 keeps the treshold for now and a close above/below could provide clues
Have a good weekend!
Sebbo