US Dollar: Sept USD is Down at 96.570.

Energies: Aug '19 Crude is Up at 60.73.

Financials: The Sept 30 year bond is Down 14 ticks and trading at 153.04.

Indices: The Sept S&P 500 emini ES contract is 28 ticks Higher and trading at 3011.00.

Gold: The Aug Gold contract is trading Up at 1409.30.  Gold is 26 ticks Higher than its close.

Initial Conclusion

This is not a correlated market.  The dollar is Down-- and Crude is Up+ which is normal and the 30 year Bond is trading Lower.  The Financials should always correlate with the US dollar such that if the dollar is lower then bonds should follow and vice-versa. The S&P is Higher and Crude is trading Higher which is not correlated. Gold is trading Higher which is correlated with the US dollar trading Down.   I tend to believe that Gold has an inverse relationship with the US Dollar as when the US Dollar is down, Gold tends to rise in value and vice-versa. Think of it as a seesaw, when one is up the other should be down. I point this out to you to make you aware that when we don't have a correlated market, it means something is wrong. As traders you need to be aware of this and proceed with your eyes wide open.

Currently all of Asia is trading Higher at this time. All of Europe is trading Higher as well.

Possible Challenges To Traders Today

  • PPI is out at 8:30 AM EST.  This is major.

  • Core PPI is out at 8:30 AM EST.  This is major.

Treasuries

We've elected to switch gears a bit and show correlation between the 30 year bond (ZB) and The YM futures contract.  The YM contract is the DJIA and the purpose is to show reverse correlation between the two instruments.  Remember it's liken to a seesaw, when up goes up the other should go down and vice versa.

Yesterday the ZB made a major move at around 9 AM EST.  The ZB hit a Low at around that time and the YM hit a High.  If you look at the charts below ZB gave a signal at around 9 AM EST and the YM was moving Lower at the same time. Look at the charts below and you'll see a pattern for both assets. ZB hit a Low at around 9 AM and the YM was moving Lower at the same time.  These charts represent the newest version of MultiCharts and I've changed the timeframe to a 15 minute chart to display better.  This represented a Long opportunity on the 30 year bond, as a trader you could have netted about 10 ticks per contract on this trade.  Each tick is worth $31.25.  Please note: the front month for both the ZB and YM contract is now September, 2019 and I've changed the format to Renko bars such that it may be more apparent and visible.

Charts Courtesy of MultiCharts built on an AMP platform

ZB

 

YM

Bias

Yesterday our bias was Neutral as none of the instruments we use showed any sign of correlation. The Dow gained 228 points and cracked the 27,000 mark, the S&P gained 7 however the Nasdaq dropped 6.  Today we aren't dealing with a correlated market and our bias is to the Upside.

Could this change? Of Course. Remember anything can happen in a volatile market. 

Commentary

It appears as though Fed Chair Powell does it again as the Dow cracked the 27,000 mark and yesterday the S&P cracked the 3,000 with each index hitting all time highs.  The Fed Chair led everyone to believe that a rate cut could happen as early as the July 30-31 FOMC Meeting.  Whether or not this does happen is of course yet to be seen but it was all the market needed to propel forward.  Today we have PPI and Core PPI for economic news.

 

Trading performance displayed herein is hypothetical. The following Commodity Futures Trading Commission (CFTC) disclaimer should be noted.

Hypothetical performance results have many inherent limitations, some of which are described below. No representation is being made that any account will or is likely to achieve profits or losses similar to those shown.

In fact, there are frequently sharp differences between hypothetical performance results and the actual results subsequently achieved by any particular trading program. One of the limitations of hypothetical performance trading results is that they are generally prepared with the benefit of hindsight.

In addition, hypothetical trading does not involve financial risk, and no hypothetical trading record can completely account for the impact of financial risk in actual trading. For example, the ability to withstand losses or to adhere to a particular trading program in spite of trading losses are material points which can also adversely affect actual trading results.

There are numerous other factors related to the markets in general or to the implementation of any specific trading program which cannot be fully accounted for in the preparation of hypothetical performance results and all of which can adversely affect actual trading results.

Trading in the commodities markets involves substantial risk and YOU CAN LOSE A LOT OF MONEY, and thus is not appropriate for everyone. You should carefully consider your financial condition before trading in these markets, and only risk capital should be used.

In addition, these markets are often liquid, making it difficult to execute orders at desired prices. Also, during periods of extreme volatility, trading in these markets may be halted due to so-called “circuit breakers” put in place by the CME to alleviate such volatility. In the event of a trading halt, it may be difficult or impossible to exit a losing position.

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