(Ipek Ozkardeskaya – Swissquote Bank Ltd)
We had a bearish start to the week on Monday and the price action across several asset classes remains volatile and chaotic – and that’s especially true for the FX markets shaken by the freefall in sterling.
The US dollar remains king, on the back of a heavy sterling meltdown due to irresponsible UK government/lazy Bank of England (BoE), and euro selloff on the back of Italy turning right cautious European Central Bank.
The USDJPY spiked at yesterday’s dollar rally as if the Bank of Japan (BoJ) never intervened last week. The BoJ head says that he supports intervention in the yen. In vain.
Equities sell off, as investors expect a deeper downside move due to pressured earnings. Tech stocks remain on the chopping block. To reverse sentiment, Amazon throws the second Prime Day sale this year, and Apple hurries out of China.
While outlook for equities remains bearish, the rising yields make sovereign markets increasingly appetizing, and an eventual inflows in global sovereign markets could be the first sign of healing from the actual financial crisis.
The big picture of the major markets – Elliott Wave [Video]
(Gregor Horvat – Wavetraders)
Cable broke sharply down at the start of the week after British finance minister Kwasi Kwarteng’s announced tax cuts on energies. The plan is for households to save some money and to expand the supply side of the economy, but investors seem pessimistic about that, at least for the short-term period. BOE was expected to stabilize the currency by repeating the hawkish look. The pound however somehow stayed sideways,
If you want to see out longer-term look for the pound check our video below in which we will also cover SP500, DAX, US YEILDS and EURUSD.
EUR/USD Forecast: Additional recovery gains likely as long as 0.9600 holds
(Eren Sengezer – FXStreet)
– EUR/USD clings to modest daily gains above 0.9600 early Tuesday.
– Mixed ECB commentary makes it difficult for the euro to gather bullish momentum.
– The pair could extend its technical correction in case 0.9600 support holds.
EUR/USD managed to erase a portion of its daily losses late Monday but ended up registering its lowest daily close since June 2002. The pair seems to have gone into a consolidation phase early Tuesday above 0.9600 and additional recovery gains are likely in the near term as long as this support stays intact.
Mixed comments from European Central Bank (ECB) officials don’t allow the shared currency to gather strength against its rivals in a convincing way, suggesting that EUR/USD gains are likely to remain as technical corrections.
“The ECB must maintain the basic principles of gradualism and flexibility as the problem it faces is different than that faced by the Fed in the US,” ECB Governing Council member Yannis Stournaras argued on Monday. ECB President Christine Lagarde acknowledged that the euro’s depreciation adds to the buildup of inflationary pressures but added that they will decide whether or not further policy action is needed once they reach the neutral rate.
On a hawkish note, Bundesbank President Joachim Nagel reiterated that decisive ECB rate hikes are needed amid heightened risks of inflation expectations getting de-anchored in the euro area.
Although the market positioning suggests that investors are fully pricing in a 75 bps ECB rate hike in October, EUR/USD’s action shows that participants look for a more aggressive policy-tightening outlook before betting on further euro appreciation.
Later in the day, August Durable Goods Orders, New Home Sales and September CB Consumer Confidence data will be featured in the US economic docket. During the European trading hours, US stock index futures are up between 0.9% and 1.3%. A strong rebound in Wall Street’s main indexes after the opening bell could hurt the dollar and help EUR/USD stretch higher and vice versa.
EUR/USD Technical Analysis
The near-term technical outlook shows that EUR/USD is still technically oversold despite the rebound witnessed during the Asian trading hours. In case 0.9600 holds as the end-point of the one-week-old downtrend, the pair needs to flip 0.9650 (descending trend line) into support before targeting 0.9700 (Fibonacci 23.6% retracement level, 20-period SMA).
On the downside, 0.9600 (psychological level, static level) forms initial support before 0.9550 (September 26 low) and 0.9500 (psychological level).
Read No letting up