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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.
If there was any doubt that we are fully entrenched in a broad-based dovish outlook for Central Banks around the globe as trade disputes intensify and inflation is nowhere to be found, the official commencement of the RBA easing cycle is yet further evidence of such well-telegraphed thesis. Moreover, judging by the violent selloff in the DXY, the market is clearly growing convinced of the premise that the Federal Reserve might be the next Central Bank to bite the bullet. Remember, sellers in risky assets are still exerting complete control in fixed income and equity valuations, which makes the recent pullback in the Japanese Yen an attractive proposition upon one’s strategy agreeing. The hammering of the US Dollar has, by default, led to the Euro capitalizing the most, while the performance of the Sterling continues to underwhelm. The Aussie, meanwhile, has managed to navigate the RBA rate cut with a firm stance, as there were no signs of a dovish cut, with the Central Bank hinging its next call on rates to labor conditions.
* The Information is gathered after scanning top publications including the FT, WSJ, Reuters, Bloomberg, ForexLive, Institutional Bank Research reports.
The thematic of broad-based USD weakness in the context of an ongoing deleveraging is without the shed of a doubt the dominant profile ruling market dynamics. And even if the Yen index does not reflect a deterioration in financial conditions in the last 24h, judging by the performance of fixed income assets, equities or the VIX clinging onto the 20.00 mark, the risk-averse conditions argue for buying weakness in the currency.
It really is a bloodbath in the DXY and US yields at the moment, as the perception has rapidly permuted from a Fed with room to hold onto its neutral stance to no longer in a position to justify such thesis as the market comes to terms that a protracted trade war with China, alongside low inflation, are the prerequisites to move the needle in lower rates. The US 2-yr yield has come down below 1.9% while the benchmark Fed funds stay at 2.25%-2.5%, a clear declaration of intentions by market forces, no longer ignoring that the backdrop is very unfavorable for the Fed to allow a prolonged period of neutral policy settings. Overall, stay vigilant as the risk-off is well, alive and justified.
EUR/USD: Overstretched Bullish Run Finds Equilibrium At Hefty Prices
GBP/USD: Bullish Structure Maintained With High Acceptance
USD/JPY: Sell-Side Bias Remains Intact
AUD/USD: Bullish Stepping Formation Despite RBA Rate Cut