Good Day Traders.
Now that the dust is settling after a VERY wild week of trading, it’s time to survey the landscape and get a handle on what might be coming next.
As I have mentioned in previous updates, charts alone do not often provide enough insights to gain an edge. Do not get me wrong, charts remain my primary indicator from a timing perspective however they rarely tell the whole story. Quantitative and fundamental analysis will often highlight key data points that either refute or confirm what the charts show.
Inverted yield curve: the longer a yield curve stays inverted, the higher the likelihood of a recession within one-year. While this does not mean that returns (mainly equity) will be lower, it does (historically) mean that price action across all asset classes will be very volatile.
US data such as the unemployment rate, ISM Manufacturing and Consumer Confidence are at levels where ‘perfection’ is priced in. This is a bit dangerous because ….. and lends itself to the markets being disappointed going forward.
Based on these above data points and the technical backdrop, we see a weaker Dollar Index (DXY) looking ahead. Naturally this would mean a higher EUR/USD.
The charts below highlight where prices are likely to be heading looking in the days/weeks ahead.
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