News & Analysis at your fingertips.

We use a range of cookies to give you the best possible browsing experience. By continuing to use this website, you agree to our use of cookies.
You can learn more about our cookie policy here, or by following the link at the bottom of any page on our site.

0

Notifications

Notifications below are based on filters which can be adjusted via Economic and Webinar Calendar pages.

Live Webinar

Live Webinar Events

0

Economic Calendar

Economic Calendar Events

0
Free Trading Guides
Subscribe
Please try again
EUR/USD
Bearish
Oil - US Crude
Mixed
Wall Street
Bearish
Low
High
of clients are net long.
of clients are net short.
Long Short

Note: Low and High figures are for the trading day.

Data provided by
Gold
Mixed
GBP/USD
Bearish
Low
High
of clients are net long.
of clients are net short.
Long Short

Note: Low and High figures are for the trading day.

Data provided by
USD/JPY
Bullish
More View more
Real Time News
  • The US 10-Year Treasury yield has advanced for four consecutive weeks for the longest such stretch since September 2018. Yet this isn't just a US issue. Yields are up globally. Perhaps most impressive is Japan's 10yr adv... https://t.co/78deo7rOa8 https://t.co/SjXYClItFC
  • Rising Treasury yields inspired a broad selling in global equities last week. The longer-term outlook remains positive however on the back of the reflationary theme, strong earnings and vaccine progress. Get your market update from @margaretyjy here: https://t.co/LLlhEpmJxI https://t.co/bJebULtjLG
  • Dealing with the fear of missing out – or FOMO – is a highly valuable skill for traders. Not only can FOMO have a negative emotional impact, it can cloud judgment and overshadow logic. Learn how you can control FOMO in your trading here: https://t.co/lgDf5cVYOn https://t.co/kuqShllQFp
  • Although the longer-term technical outlook for AUD remains skewed to the topside, recent developments suggest the commodity-sensitive currency could lose ground against USD and JPY. Get your market update from @DanielGMoss here: https://t.co/Rl1h8WdXwp https://t.co/49RKx86FzG
  • ECB policymakers were out in force last week, saying they were watching Eurozone government bond yields, but yields rose anyway, and that’s positive for $EURUSD and the Euro crosses. Get your market update from @MartinSEssex here: https://t.co/nJdh9dA1HM https://t.co/peLh7zTTiz
  • The Federal Reserve System (the Fed) was founded in 1913 by the United States Congress. The Fed’s actions and policies have a major impact on currency value, affecting many trades involving the US Dollar. Learn more about the Fed here: https://t.co/ADSC4sIHrP https://t.co/vs7ypHHwya
  • The GBP rally vs USD came to an abrupt end and reversal; this sets cable up for more selling in the week ahead. Get your market update from @PaulRobinsonFX here: https://t.co/Ee9PSppnd2 https://t.co/uaiCiEHBMs
  • What are some trading takeaways from 2020, as we jump into the new year? Find out with your free guide here: https://t.co/e7udCTJlmf #DailyfxGuides https://t.co/OXUgYIl2ru
  • Key levels in forex tend to draw attention to traders in the market. These are psychological prices which tie into the human psyche and way of thinking. Learn about psychological levels here: https://t.co/8A1QhwMVKo https://t.co/xncree8XaW
  • Becoming a forex trader means living and breathing the excitement, risk and reward of trading in the biggest and most liquid market in the world. Do you have what it takes? Read here to discover the qualities and processes it takes to build consistency: https://t.co/EfWEACQ6Cz https://t.co/gGOU1RVQzq
S&P 500 Works Its Way into Breakout Range, Dollar Slide Persists After Trade Gaff

S&P 500 Works Its Way into Breakout Range, Dollar Slide Persists After Trade Gaff

John Kicklighter, Chief Strategist

S&P 500, Dollar, USDJPY, Gold Points:

  • Following volatility spurred by a US trade representatives evaluation of the US-China trade status, risk appetite extended further than otherwise would have been expected
  • The US Dollar spent a second day under serious pressure, but is this a charged bear trend backed by issues like a localized pandemic resurgence or mere range restriction?
  • After PMI data warmed the growth forecast, the next scheduled theme will be monetary policy as a range of banks (ECB, BOE, BOJ, SNB) offer non-monetary policy updates before the Fed’s stress test results

Risk Trends Fail to Clear Range Even with a Charge

Whether or not you felt the fundamental backdrop was absolutely favorable – to bulls – or not, there was nevertheless a charge to capital market performance this past session. Between the unlikely impact that the US-China trade headlines affected to the more straightforward support of the global PMI updates, risk appetite trends had a foothold to find in the markets. For me, the most indicative reading for speculative appetite – one that is as flawed as speculative appetite itself – was the S&P 500. The US index would again lead the charge symbolically with a gap to the upside Tuesday, but it would lose traction before the popular index would clear the range it has fleshed out the past week. With extended submission to the range (3,155 to 3,080), we are left with the most restrictive trading range since early February, before the Pandemic volatility began.

US 500 BEARISH
Data provided by
of clients are net long. of clients are net short.
Change in Longs Shorts OI
Daily 3% -3% 0%
Weekly 22% -23% -6%
What does it mean for price action?
Get My Guide

Chart of the S&P 500 with 100 and 200-Day Moving Average and 6-Day Range (Daily Chart)

S&P 500 Works Its Way into Breakout Range, Dollar Slide Persists After Trade Gaff

Chart Created on Tradingview Platform

The restraint on range for the likes of the S&P 500 is reassuring for some that speculation is not running rampant, but I believe the indulgence is still showing through. While the SPX and Dow are still a short distance from their respective record highs, the tech-heavy Nasdaq 100 managed to push record highs yet again. The ratio of the Nasdaq to the blue-chip Dow reflects the errant speculative reach in the market. The same concentration is present in the FAANG grouping performance which also pushed a new peak, one that I believe is fostered by sheer market-building momentum rather than a sense of value.

Chart of the Nasdaq to Dow Ratio Overlaid with FAANG Index (Daily Chart)

S&P 500 Works Its Way into Breakout Range, Dollar Slide Persists After Trade Gaff

Chart Created on Tradingview Platform

Another Short-Term Fundamental Boost

For those that believe the markets are stretching to increasingly irrational heights, there is nevertheless a fundamental line that is guiding expectations forward. The question is: how long these unlikely motivators can keep the market bolstered? The most remarkable driver into Tuesday was the walk back from officials that the US-China trade deal was falling through. White House adviser Peter Navarro offered remarks that insinuated exactly that, which led to a rally for USDCNH and drop for risk assets overnight. Yet, this quick walk back would do more than encourage the markets back to their original balance point; risk appetite seemed to reach further in the recovery than it would have had no initial issue been present. This is not an uncommon ‘manufactured resolution’ motivator for optimism that we have seen these past years, but I am skeptical on how far it will carry us.

Chart of USDCNH with Size of Daily ‘Wicks’ or ‘Tails’ (Daily)

S&P 500 Works Its Way into Breakout Range, Dollar Slide Persists After Trade Gaff

Chart Created on Tradingview Platform

More traditional a fundamental motivator this past session was the run of better-than-expected readings from the June global PMIs reported by Markit. These timely proxies for economic activity showed the major developed world centers were tracking out robust recoveries from the trough signaled through the April. For the optimists, readings so close to 50 (the tipping point of contraction to growth) reinforces the expectation that we are course for a ‘V-shaped’ recovery, but I still believe that to be overindulgent an outlook. I don’t think this round of support – as global as the story may have been – will be what extends global risk appetite higher.

Chart of US Composite PMI Overlaid with Quarterly GDP (Monthly)

S&P 500 Works Its Way into Breakout Range, Dollar Slide Persists After Trade Gaff

Chart from Markit Economics Website

The Fundamental Milestone and Charged Market Movers Ahead

On the fundamental side, I still see the persistent updates in the form of global coronavirus cases the most capable tipping point for the speculative masses. It is always possible that there be a sudden reversal in trend of cases such that they permanently head lower, but that does not seem likely given the reopening of key economies the world over. More likely, the new cases continue to push to record high led by key countries like the United States. It is interesting however that we heard White House economic adviser Larry Kudlow stated that there ‘absolutely, definitely’ would not be a second nationwide lockdown. That may be seen a boon to averting a return to forced recession, but the public fear and private business response to a second wave of the pandemic could bring economic contraction without the order of a clear government guideline.

Graph of Worldwide Cases of Coronavirus (Daily)

S&P 500 Works Its Way into Breakout Range, Dollar Slide Persists After Trade Gaff

Chart from Google with Data from Wikipedia

Looking over Wednesday’s docket, there is another theme on tap that will likely draw our attention; but which I do not think will have its proper traction until the following trading day. Monetary policy will have its time in the sun starting with the Reserve Bank of New Zealand rate decision. The most recognizable, traditional policy update from a ‘major’ central bank this week; this event is good for a possible Kiwi response, but not a global promotion of risk trends. Meanwhile, non-monetary policy updates from the likes of the ECB, BOE, BOJ and SNB will offer important insight into growth and financial assessments. As important as these updates are, they are unlikely to stray far from what we have heard from each these past weeks.

Chart of Major Central Banks Aggregate Balance Sheet and S&P 500 (Monthly)

S&P 500 Works Its Way into Breakout Range, Dollar Slide Persists After Trade Gaff

Chart Created by John Kicklighter with data from Bloomberg

The real impact on the monetary policy theme will not likely come into play until Thursday when the Federal Reserve is due to drop the results of its bank stress test effort. With the added evaluation of the pandemic and recession, there are scenarios that will spur the imagination. The Dollar is already under pressure with a strong retreat from DXY which has short circuited breaks from the likes of EURUSD, AUDUSD and NZDUSD. For dollar-based Gold, the boost has pushed a new multi-year high; but this anti-Greenback proposition is likely as fraught as the failed bullish move as markets are broadly struggling for conviction.

Gold MIXED
Data provided by
of clients are net long. of clients are net short.
Change in Longs Shorts OI
Daily 1% -23% -2%
Weekly -7% -7% -7%
What does it mean for price action?
Get My Guide

Chart of Gold (Daily)

S&P 500 Works Its Way into Breakout Range, Dollar Slide Persists After Trade Gaff

Chart Created on Tradingview Platform

Building Confidence in Trading
Building Confidence in Trading
Recommended by John Kicklighter
Building Confidence in Trading
Get My Guide

If you want to download my Manic-Crisis calendar, you can find the updated file here.

.

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

DISCLOSURES