“Risk-on” Trading Environments

Alan Penny

12 November 2019

3 min read

hands trading USD/CHF

  • S&P 500 still at all-time highs
  • Crude oil continues to find buyers
  • Gold crushed
  • Bond markets sold off

Lately, we have seen more of a “risk-on” type of trading environment. The marketplace tends to move in highly correlated fashions, so keeping an eye on this can help trading, regardless of which market one specializes in.

For example, the USD/JPY pair is a highly sensitive currency pair when it comes to risk appetite. It tends to rise when traders are willing to take a bit more risk, as the Japanese yen is considered to be a major “safety currency”.

Stock markets

The global markets, as far as equities are concerned, have been doing quite well. It’s no secret that the United States stock markets have been very positive for some time, but we are starting to see some signs of hope in Asia as well.

the S&P 500, one of the major benchmarks for traders around the world, is still close to the all-time highs

In China, it looks as if the stock market is getting ready to break out, which would be a major boon for a “risk-on” type of trade going forward. That being said, the S&P 500, one of the major benchmarks for traders around the world, is still close to the all-time highs. Therefore, it has to be looked at through the prism of healthy earnings through that index.

Crude oil

The crude oil markets are all over the place, but when seen from a longer-term perspective, they are simply consolidating. Using the West Texas Intermediate Crude market as a benchmark, it’s plain to see that the market is hanging about between the $50 level on the bottom and the $60 level on the top.

This is typical behavior for the crude oil market as it does tend to be very technically driven. But at the end of the day, what it does show is that there are numerous headwinds and tailwinds at the same time out there for the global economy.

While the market is somewhat consolidating, what it tells us is that there isn’t exactly panic out there. Considering the oversupply of crude oil, that’s pretty significant as we are treading water.


The gold market has been sold off rather drastically. This is probably the biggest “risk-on” type of signal that has been shown in the marketplace lately. By selling off the way it has, it shows that traders aren’t trying to find as much in the way safety as they had been previously.

Granted, gold markets are still in an uptrend, but they certainly have taken quite a bit of a break recently, reaching as low as the $1450 level again.


Bond markets in the United States have sold off quite drastically recently too. That, of course, is a very good sign for risk appetite as well. Bonds are considered to be the “de facto risk-free asset” for the world, as as long as the US treasury market continues to find sellers, that’s an excellent sign of potential “risk-on” trading.

Written By
Alan Penny

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