Early signs suggest that after last weeks volatility, we could be settling down

Last week was one of the most volatile in a long time and with so much going on it was hard to get a definitive read on anything

The usual new year flows were mixed in with China throwing a wobbly, and stocks took the brunt of it

If the start of this week is anything to go by, it could be that on this side of the world China worries aren't going to cause that much of a stir. The fact that European stocks are now holding gains despite the rout in Chinese stocks suggests that we know there's problems but we're at a point where the shock factor has worn off

By no means am I suggesting that the volatility has suddenly disappeared but that it's probably going to take more than Chinese stocks falling to see Europe following. Big China news yes, a simple fit in stocks, no

Yen pairs have shown that for now, risk aversion may have waned. It's still early doors but today's price action is one signal that we might start seeing a less edgy market

The US open will be another big clue as to whether that is the case

For currencies, the pound still looks like the weak link but the test of 1.4500 has seen cable recover, which could be a good sign for a bottom. If we test and hold again then longs can feel more confident

All said and done, EURUSD is still knocking around the ranges it was prior to the ECB and Fed decisions last month. That tells me that that traders still have no interest to really take the pair on a trip out of the range

USDJPY has made a range break and has held that break. The 118.80 level held a test over NFP and the fall through 117.00 overnight keeps the bearish bias in place for now. 118.00 holding late Friday, after the break back through, and today helps confirm that view

AUSUSD is another that has broken a sizeable range. The 0.7400-0.7000 range played out through the last quarter of 2015. However, we haven't broken the wider boundary at 0.6910. That keeps the edges intact

Before I even think about trading I need to be able to "feel" the market. Knowing its mood and its reactions helps me decide how to treat risk. The end of an old year and the start of a new one is always a difficult time and so risk needs to be managed with greater focus. If we do settle down now then we'll get greater clarity on the markets mood and can adjust our risk to suit.

If you can get into that groove of being in touch with the market then you have a great edge on how to trade it