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Threat Temper Improves as US Bond Yields, US Greenback Take a Breather: Russell 2000, USD/JPY, GBP/USD


Market Recap

Wall Avenue gained for the second straight day (DJIA +0.62%; S&P 500 +0.63%; Nasdaq +0.84%), as US Treasury yields took a breather regardless of a hawkish takeaway from the Jackson Gap Symposium. Each the US 2-year and 10-year yields cooled by round 5 basis-point (bp) in a single day after touching their current highs. The VIX has additionally hit its two-week low, doubtlessly as hedging bets unwind from higher readability on Fed’s coverage outlook. Amid the quiet financial calendar to start out the week, market focus will now flip to a sequence of macro knowledge forward to justify whether or not a November price hike from the Fed is warranted.

Right this moment’s schedule will go away Germany and US shopper confidence knowledge on watch, together with the US Job Openings and Labor Turnover Survey (JOLTS), the place additional moderation in US July job opening numbers is predicted (9.465 million forecast versus 9.582 million prior). The US S&P/Case-Shiller residence value index might be in focus as effectively, with US residence costs anticipated to mark its fourth straight month of year-on-year decline (-1.3% forecast versus -1.7% prior).

Maybe one to look at often is the Russell 2000, which has been making an attempt to defend its 200-day transferring common (MA) over the previous week. Additional upside could validate a bullish crossover on its transferring common convergence/divergence (MACD) on the each day chart, with instant resistance to beat on the 1,900 degree. On the broader scale, the index stays caught in a long-ranging sample since April 2022, with any transfer above the 1,900 degree doubtlessly leaving its higher sure on the key psychological 2,00Zero degree on look ahead to a retest subsequent.


Supply: IG charts

Asia Open

Asian shares look set for a optimistic open, with Nikkei +0.50%, ASX +0.45% and KOSPI +0.34% on the time of writing. Decrease Treasury yields, a barely weaker US greenback and the optimistic handover from Wall Avenue present room for some reduction within the area, regardless of lingering reservations surrounding Chinese language equities.

Beijing’s newest efforts to spice up markets has been met with a lukewarm response, with good points in Chinese language equities fizzling into the shut yesterday. The Grasp Seng Index was up as a lot as 3% at one level, however closed solely 0.9% larger. Related measure in 2008 ultimately noticed the CSI 300 transfer to type a brand new low, suggesting {that a} turnaround in financial situations stays the important thing driving drive for longer-term upside in Chinese language equities.

This morning noticed Japan’s July unemployment price head larger to 2.7% from earlier 2.5% (forecast 2.5%), with the sharper moderation in Japan’s labour market probably to supply extra room for dovishness for the Financial institution of Japan (BoJ) by having a taming impact on wage pressures. For now, the USD/JPY has breached the 145.00-145.80 degree, the place earlier yen-buying intervention was executed again in September 2022. Whereas the general development stays up with a rising channel sample in place, some near-term exhaustion appears to be in place, with a flat-lined MACD and decrease highs on its RSI from the each day chart. The 145.00 degree might be an instantaneous help to carry, failing which can pave the way in which to retest the 141.60 degree subsequent.


Supply: IG charts

On the watchlist: GBP/USD retesting neckline of head-and-shoulder formation

The GBP/USD has retraced by near 4.5% since mid-July this yr, additional weighed by weaker-than-expected PMI knowledge out of the UK and a few firming within the US greenback final week to retest its 1.260 degree. On the broader scale, the 1.260 degree appears to mark the neckline of a head-and-shoulder formation, with an try to stabilise after current sell-off. Its weekly RSI continues to commerce above the 50 degree for now, which might nonetheless put an upward development in place, however any failure to defend the 1.260 degree over the approaching days could doubtlessly pave the way in which to retest the 1.231 degree subsequent.


Supply: IG charts

Monday: DJIA +0.62%; S&P 500 +0.63%; Nasdaq +0.84%, DAX +1.03%, FTSE +0.07%

DailyFX gives foreign exchange information and technical evaluation on the developments that affect the worldwide foreign money markets.

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