US Dollar Index tightly wound between: US Bond Yields down on safety flows
Stock-Markets / Financial Markets 2019 Jul 23, 2019 - 02:05 PM GMTBy: QUANTO
As markets begin a new week, there are interesting opportunities. SPX ended the week in a state of uncertainty. Weekend news from Iran seem to suggest there is no truce visible as Iran has not yet let go of the Oil tanker captured. It was flying a UK flag. US has not fully involved itself in the spate and thus market are waiting on a US response. However bond market seem to have made up its mind that they will not wait for a strike but rather exercise caution before its too late.
USDJPY has opened the week above 108. Above 108.4 the pair may look to extend gains to 109.2. The lack of impetus suggest we will fall to 105 on USDJPY.
CME Data can be studied here: CME for JPY, EUR, GBP Latest trade on EUR, GBP, JPY
Dollar charts
Dollar weekly charts are tightly wound between 97 and 97.5. THe QUANTO live trade copier does not depend on direction as it is mainly market neutral and hence can trade in all market conditions.
On the 4 hr charts, there seem to be a reluctance to move higher. Bulls are not yet very keen. The Long shadow seen shows an attempt higher was met with selling
SPX Charts
SPX ENDED BADLY ON FRIDAY GIVEN IRAN US SPAT. We could fall dramatically if there is a escalation. The SPX has hit its 3000 mark and now 25 handles belows which would confirm that it is a fake breakout. So the odds are stacked against it. The bulls need to confirm the breakout. The uptrend line has been broken and hence I expect a downward move to 2960. If SPX falls under 2950, it could be carnage and it could fall very quickly.
Junk : Not keeping pace
JNK (high yield ETF is far below 2017 highs even with SPX above 3000. This is a worrying sign as flows seem to be moving into lower yield stocks.
Small cap
The 10-day EMA of AD Percent triggered bullish in early January and this signal has yet to be reversed (bullish breadth thrust). High-Low Percent triggered bearish in October and this signal has yet to be reversed because new highs are lagging (not many strong uptrends). The %Above 200-day EMA turned bullish in mid February, but flipped back to bearish in mid March (not enough uptrends). Thus, two of the three indicators remain on active bearish signals.
Russell 2000
Russell 2000 is inside the ascending triangle. Whichever way they break, it could move more than 10%. We prefer the long bias here but anything can happen.
US Spread with Japanese bonds
The spread between US and Japanese yields continue to be sluggish at the lows. Flows are still chasing safety and this bodes bad for risk.
Canadian 10y spread with US 10Y
Canadian yields have started fall with respect to US counter parts. We will be watching for a USDCAD base pattern as we look to see for signs of USDCAD uptrend to commence.
Australian 10 y spreads to US 10Y
Australian yield have contracted to US yields and have primarily been the cause of AUDUSD downtrend not showing much signs of a bounce. Traders are still of positive The contraction paused which has allowed AUDUSD to stabilise at 0.7000
AUDUSD charts
AUDUSD will fall back to 6900 to find further buyers if at all. A failure of 6900 will lead it down it further,. Weak RSI levels might trigger the Aussie pair’s pullback from short-term important support-line. 50% of Fibonacci retracement offers additional support during the pair’s further declines. Even if immediate descending trend-line and trading below 23.6% Fibonacci retracement portray the AUD/USD pair’s weakness, it still needs to slip beneath key support as it makes the rounds to 0.7040 during early Monday. Gradually declining levels of 14-bar relative strength index (RSI) might trigger the pair’s U-turn from 8-day old trend-line support, at 0.7035, failing to which can drag the quote to 200-hour moving average (HMA) level of 0.7010. In a case where prices fail to respect 0.7010 mark, 50% Fibonacci retracement of an up-move since July 10, at 0.6995, could be on the bears’ radar. On the upside, 0.7050/55 comprising adjacent resistance-line can keep the buyers away whereas 0.7065 and 0.7085 could follow the breakout of near-term key resistances.
EURUSD charts
21-DMA limits near-term EUR/USD upside, highlights 4-week old support-line for sellers. Steady RSI and sustained trading below 23.6% Fibonacci retracement favor declines. In addition to remaining below the 21-day moving average (21-DMA), the EUR/USD pair’s decline below 23.6% Fibonacci retracement of January – May south-run also portrays the quote’s weakness as it makes the rounds to 1.1216 on early Monday. However, a daily closing below an ascending trend-line since June 18, at 1.1203, becomes necessary for the pair to lure the sellers. Should the 14-day relative strength index (RSI) also support the downside, current month low surrounding 1.1193 and June month bottom close to 1.1181 seem to be on bears’ radar ahead of watching over 1.1130 and 1.1100 key supports. On the contrary, 1.1240 can entertain short-term buyers while 21-DMA figure of 1.1270 and the 1.1300 round-figure may question further upside.
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