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The Daily Edge is authored by Ivan Delgado, Market Insights Commentator at Global Prime. The purpose of this content is to provide an assessment of the market conditions. The report takes an in-depth look of market dynamics, factoring in fundamentals, technicals, inter-market in order to determine daily biases and assist one’s decisions on a regular basis. Feel free to follow Ivan on Twitter & Youtube.
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There is a clear winner as the week gets underway, and that’s the Aussie, boosted by the friendly outcome of the Australian national election, where the incumbent coalition govement won with what appears to be a parliamentary majority. On the other side of the spectrum, we find the Yen, losing value even as the US-China trade rhetoric worsens, which is why the current hefty levels in JPY crosses look quite rich if one accounts for such an unsettling backdrop. Another commodity-linked currency, as the AUD, recently enjoying a lift is the Loonie (CAD), as the US agreed to lift the steel and aluminum tariffs as part of the US-Mexico-Canada trade agreement. The USD performance, partly driven by the consistent selling on the heavily traded European currencies, especially the Euro, continues to show no signs of abating. The overall risk profile in financial markets has relaxed quite a bit even if judging by the levels the Chinese Yuan trades at, the fundamental backing to justify such a recovery in risk is dubious at best.
* The Information is gathered after scanning top publications including the FT, WSJ, Reuters, Bloomberg, ForexLive, Institutional Bank Research reports.
The strong depreciation in the Yen index looks set to be limited in nature if one judges the soggy price action seen in equities and bonds in the last 24h. For the Yen to sustain its current losses and risk to substantially improve, a lot more work needs to be done in reverting back to bullish micro slopes in both the S&P 500 and the US 30y bond yields.
It’s quite rare to witness the JPY index move into bearish territory from a micro perspective, yet both equities and bonds trade in a rather suppressed manner by failing to extend last Thursday’s gains. Something’s got to give, and judging by the market disparities, it’s the Yen that looks out of whack here.
Meanwhile, the DXY ascent continues at a slow but steady pace, printing 5 days of gains in a row. The poor performance in Chinese equities, using the Shanghai Composite as a reference, alongside the hefty levels in the USD/CNH, will do little to soothe the nerves of investors.
Overall, the RORO model is far from offering reassuring metrics that the ‘risk on’ profile is set to expand much further. This view is also anchored by the notion that the latest rhetoric in the US-China trade front has, if anything, has taken a tu for the worse, with China re-considering what’s the point of having more talks near term.
EUR/USD: Bears Dominant Force, Watch Compression At The Lows
GBP/USD: Consistent Selling Respecting the 25HMA
USD/JPY: Set To Reach An Interim Top Intraday
AUD/USD: Emboldened by Aus election outcome, clear target overhead