The Daily Edge is authored by Ivan Delgado, 10y Forex Trader veteran & Market Insights Commentator at Global Prime. Feel free to follow Ivan on Twitter & Youtube weekly show. You can also subscribe to the mailing list to receive Ivan’s Daily wrap. The purpose of this content is to provide an assessment of the conditions, taking an in-depth look of market dynamics – fundamentals and technicals – determine daily biases and assist one’s trading decisions.
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.
The market is set to come back to life after the respective holidays in the UK and the US. Currency movements have been quite subdued, with the Sterling and to a lesser extent the Euro, finding minimal extra stimulus on the back of the fragmented election results out of Europe. The risk dynamics remain quite suppressive, an environment that tends to benefit the likes of the Japanese Yen, while flows into the USD remain largely limited as the market comes to terms about the risk of a US economic slowdown on recent poor data.
* The Information is gathered after scanning top publications including the FT, WSJ, Reuters, Bloomberg, ForexLive, Institutional Bank Research reports.
Risk-averse dynamics have prevailed as we transition away from a slow Monday. The retracement in the S&P 500 after Trump’s attempts to talk up equities on Friday is still very corrective in nature amid a clear bearish context as per momentum and structure metrics. When it comes to the other heavyweight to evaluate risk dynamics, the US 30y bond yield has pushed slightly lower again, and as I reported during yesterday’s report, the latest round of selling pressure on yields comes as “the market discounts a more dire outlook for global growth, with tentative evidence that it is starting to feed through sectors of the US economy after the soft data in manuf & goods orders.”
In the currency front, the high balance area found by the equally-weighted Japanese Yen index is clear communication that the environment is risk unfriendly. As I stated yesterday, there are 2 key takeaway from the elevated Yen levels and the subdued USD valuation since last week. Firstly, we are in a highly uncertain period with deleveraging dynamics dominant as the Yen pricing indicates. Secondly, the major performance disparity between the JPY and the USD indicates that the market is assigning significantly higher chances of a slowdown in the US economy, as reflected by the slide in US yields and the DXY in tandem (USD weakness across the board).
Also, I reiterate not to misread the retracement in the USD/CNH as a sign of RMB strength (higher chances of a trade deal). If you assess the RMB vs G10 FX, flows still communicate no bets on an eventual US-China trade deal.
Overall, with the US-China trade dispute intensifying, Brexit uncertainty peaking, and an EU parliament more fragmented than ever before, the fundamentals are unlikely to underpin risk. Against such backdrop, prevailing risk-off dynamics should continue to be prevalent.
EUR/USD: Structure Remains Favorable
GBP/USD: POC Keeps Acting As Bouncing Area
USD/JPY: Bearish Outlook Stays Intact
AUD/USD: Bullish Structure Continues Undeterred