Talking Points:
- Risk-based market correlations are tightening to start the week as risk aversion starts to find a foot hold
- The IMF labeled China and emerging markets among its most profound risks moving forward
- Another Fed dove suggested rate hikes are possible this year, and the Dollar's tumble seems to be struggling
See the DailyFX Analysts' 2Q forecasts for the Dollar, Euro, Pound, Equities and Gold as well as our favorite 2016 trading opportunities in the DailyFX Trading Guides page.
There weren't many serious trends developing to start the week, but conditions are ripe for volatility and the cultivation for bigger moves with the motivation. The most remarkable and pressurized shift though the opening session of the trading week was the slide from 'risk assets'. The S&P 500 led US equities lower with global shares, Yen crosses and other more intensive risk markets following suit. This is a tentative move backed by a five week bullish swing, so conviction should be weighed by merit. There are plenty of technical levels to track, but not a lot of fundamental concentration to motivate a definitive sentiment view. Perhaps the IMF's warnings will finally shake things lose. Meanwhile, the Dollar was on the fundamental list with another Fed official (a dove) suggesting there will be hikes this year in contradiction to the market's anticipation. This has further helped curb the Dollar's dive, but it hasn't motivated a reversal. We have further event risk on the docket (Fed talk, IMF warnings, rate decisions) and the themes should be monitored; but market conditions are still more conducive to the short-term and tactical participant. We discuss conditions and levels in today's Trading Video.
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