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Risk warning: Losses could exceed deposits.

Morning Review by CMTrading’s Top Analyst Fred Razak.

Starting this last week of January, no one can deny that the year got off to a wild start for the markets. From China’s shutdowns to oil prices bottoming at just $28 to stock crashes around the world, investors have had to deal with high volatility in every trading sector.

Markets seem to have calmed a bit, and returned to a more normal status since the end of last week. Starting with oil, analysts believe that last week’s trough, just below $28 per barrel, may have represented a bottoming out, and that oil is now going to start climbing again. Prices have moved up about $4 since then, with the US trading price (WTI) now at $32.72 per barrel and the global Brent price at $32.76. Cold winter weather in the US is helping to support oil prices, as demand for heating oil is higher. Still, as we have reported before, the market fundamentals of supply and demand have not changed and continue to point toward low prices.

The European Central Bank, as well as several others around the world, have started to respond to the steep stock declines and market gyrations by hinting at further monetary easing, perhaps as early as March. The hints may have helped to calm investors; they certainly helped the gold markets. Gold has broken above $1,100 again, and is now trading at $1,101.02 as investors, fearing that currencies will move lower, look for a stable store of value in which to park their money. It’s a traditional role for gold. Silver is also up, at $14.11 per ounce, and platinum, which is strongly sensitive to industrial demand, has also risen on its precious metal status to trade at $838.69.

Turning to currencies, we see that the US dollar remains strong, although it has eased against the European currencies. The EUR/USD pair is trading at 1.0812 and the GBP/USD pair stands at 1.4304. The dollar is steady against the Swiss franc, and the USD/CHF remains above parity at 1.0144. Against the Japanese yen, the greenback has edged up. Weak import/export reports hurt the yen, although the currency’s safe-haven reputation has provided some support. The USD/JPY pair is trading at 118.71. The rise in oil prices helped commodity linked currencies over the weekend, and the Aussie and Canadian dollars both rose. The AUS/USD pair edged up to 0.7017 while the USD/CAD eased to 1.4149. Don’t look for much better than that from loonie, however, as long as oil stays low.

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