Equities retreated overnight with the S&P down 3.5%.

There appears to be no particular driver of that other than a reversal of the substantial gains seen over the past two weeks on the surface.

Indeed, the losses overnight were driven by the same tech stocks that had underpinned the recent heady rises.

So, this is leading to suggest we’re amid a “healthy correction,” but I see little health when Apple shares, which are one of the heavyweight champions of the tech sector and market leadership stalwart, can drop 8 %in a session.

This sell-off looks an awful lot like a retail meltdown, similar to what we see in China markets as a lot of weak retail longs getting taken to the cleaners by the aggressive short seller on the street in a vast momentum style clean out, but I think there is more than meets the eye.

While I don’t think it’s a healthy meltdown, getting rid of some of the short-term speculator froth will offer up better levels for the Wall of Money to indulge as we know the Fed is going anywhere soon, although probably holding back the big guns for a possible rainy day in the future if the winter months prove to be explosive for the virus.

US dollar recovers some gains

The forex market caught up very quickly to the evolving narrative is the European Central Bank (ECB). The EUR remains defensive this morning amid further suggestions of unease among ECB members about currency strength.

Indeed, things are getting a bit jittery on Forex land as the long EURUSD is still a heavily subscribed view as I would expect longs to pare tangentially to more ECB members dominos falling into place.

But what is holding things in check for the EURO is the fact never once has the ECB been proactive to currency strength. Instead, they remain historically reactive, suggesting we may need to see a sustained move above 1.2000 for the Lagarde’s alarm bells to sound off.

The upside surprises on US economic data have continued consistently. The surge in US COVID-19 cases during July seems to have abated for now, although university re-openings may see case counts rise afresh.

For now, the FX market seems to be moving back towards growth differential, but certainly, the focus will soon pivot around to the US fiscal cliffs that are arguably holding the dollar back at this stage.

The Ringgit

There is a tinge of risk-off in the air triggered by the US tech sector sell-off. But I think the dollar is trading less risk on risk-off these days, and its more about idiosyncratic divergences in currency markets. In that regard, the ringgit passes the eye candy test as yields look attractive, and coronavirus resurgence remains low, which should encourage more service sector reopening’s. For today, however, I expect a range trade mentality to dominate ahead of NFP.

Gold falls as the US dollar recovers

Gold fell again on US dollar strength and some liquidation to cover losses as equities fell. Other longer-term holders could be rotating out to buy the tech dip but pare losses into the close.

Much of the reason for lower gold lay in a stronger USD.

The US non-farm payroll (NFP) data for August will be necessary. If the number disappoints, as the ADP number on Wednesday did, gold could rally if it comes in strong look out below as the dollar should slice through 1.1780-1.1800 support.

Longer-term support remains from the inflation targeting, but we need inflation to pick up, and as you can see by the sell-off in commodities, that is not happening right now. So that remains a longer-term view.

Geopolitical concerns will continue to support the longer-term need for gold, but possibly not at these levels.

On balance, I see minimal upside for gold in the short term with especially with positive vaccine news in the air and short of an abysmal jobs number.

International markets analysis and insights from Stephen Innes, Chief Global Market Strategist at AxiCorp