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.

DXY

EURUSD

Any reviews, news, research, analysis, prices or other information contained in this article is provided as general market commentary, does not constitute investment advice and may undergo changes from time to time. Trading the Financial and Currency Markets on margin carries a high level of risk and may not be suitable for all investors. The high degree of leverage can work against you as well as to your favor. Before entering trading Financial and Currency Markets, you should carefully consider your investment objectives, level of experience and risk appetite. There is a possibility that you could sustain a loss of some or more of your initial investment and therefore you should not invest money which you cannot afford to lose. You should be aware of all the risks associated with Financial and Currency Markets trading, and in case you have any doubt, rather seek advice from an independent financial advisor. Scandinavian Capital Markets AB, its owners, employees, agents or affiliates do not give investment advice, therefore Scandinavian Capital Markets AB assumes no liability for any loss or damage, including without limitation to, any loss of profit, which may be suffered directly or indirectly from use of or reliance on such information. Scandinavian Capital Markets AB strongly encourages consultation with a licensed representative or financial advisor regarding any particular investment or use of any investment strategy.

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