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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.
In what was a low key affair, the Pound was the biggest mover. The Sterling tops the gainers’ leaderboard as UK PM May secured further concessions from the EU, while a ‘true risk on’ microenvironment led to a major deterioration in the pricing of the Japanese Yen as well as the US Dollar. Despite the renewed optimism on Brexit, the buying flows in the Euro were very limited in comparison. The Australian Dollar and the Kiwi did relatively well while the Canadian Dollar fell somewhere in the middle.
The massive gains in stocks, combined with the sharp selling of the DXY late on the day (driven by Brexit headlines), alongside the recovery in global yields with the US 30Y bond as the bellwether, classifies the current microenvironment as ‘true risk on’.
From a weekly perspective, which is the time horizon used to interpret the macro flows, the spike in equities has been so strong that even the 5-DMA slope has now tued positive, although this is still not backed up by fixed income, with the macro slope in yields still down, while the macro tendency in the US Dollar remains bullish.
What this means is that the ‘true risk on’ environment still needs to be taken as part of a ‘weak risk off’ context as per the RORO model. Remember, under such depressed vol conditions, excluding the GBP, the developing micro dynamics have become far more relevant to stay in tune with the fluid and constant change of market flows. In other words, notwithstanding the macro ‘weak risk off’, it’s the micro ‘true risk on’ that should be kept more present on everyone’s mind when coming up with your approach today.
EUR/USD: Piggybacking A Bullish GBP
GBP/USD: Monster Move As Brexit Optimism Is Back
USD/JPY: Buy On Dips Re-Emerges As Risk Recovers
AUD/USD: Re-Testing A Critical Supply Area
USD/CAD: Transition From Bullish Trend Into A Range