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The Daily Edge is authored by Ivan Delgado, Head of Market Research 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, futures and options, in order to determine daily biases and assist one’s decisions on a regular basis. Feel free to follow Ivan on Twitter & Youtube.
For the last 2 days, micro USD+ flows have made their way back, even if the macro structures in USD/US30Y don’t yet manifest analogous conditions. Regardless, the rude health in the S&P 500 keeps the overall environment a USD-centric affair in a context of rising equities, hence prevailing ‘risk on’ conditions are still in place, which should keep the JPY on the back foot.
The US and the Canadian Dollar are the currencies benefiting the most from the exodus in fixed income since the upbeat economic data in the US last Friday. Both countries’ govement bonds are exhibiting bear steepener dynamics, which sets out a short-term positive backdrop. However, the macrostructure in both countries still carries negative connotations since the FOMC dovish tu. There has definitely been some decent recovery by both the USD, CAD as the market tus slightly more constructive short-term. Out of a bad neighborhood, looks like they are the best houses. New Zealand bond yields, by any measure (short or long term), remain largely depressed. It’s also interesting to note that macro-wise, all countries remain in negative yield curve phases, in other words, the outlook towards tighter monetary policies is nowhere to be found.
Wonder what the heck is the yield curve in a bond? Lea the basics in this article.
According to vol skews, option traders are expecting further downward pressure in the EUR/USD, GBP/USD, and a continuation of the upside bias in USD/JPY. Meanwhile, the commodity currencies (AUD, CAD) are facing a slightly better outlook judging by the reduction in put premiums.
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