Short-Term Flows Primarily USD Negative

USD/JPY: Conflicting Signals As SP500 Offsets DXY/US30Y

Whenever equities surge the way they did last Friday, under the current market regime, that’s always going to create a supply imbalance detrimental to the JPY. That’s precisely the reason why even if the DXY and the US long-dated yields keep dropping, the pair could find a floor around 110.25–30.I’d argue that as long as the weakening trends in DXY + US30Y stay the course, it’s going to take a lot of buying power in the S&P 500 as the barometer of the equity flows to prevent further cracks in the pair’s technicals. However, if we assume that the S&P 500 is safe to be ticked as a near-term supportive factor for the pair, any intraday recovery in either the DXY and/or US yields may see the propensity for trend followers to jump on the pair’s bullish bandwagon. If the S&P 500 doesn’t show abrupt moves in either side, this is a market where the most reliable cues will be obtained from the behavior of both the DXY and the US long-dated yields. Wait for both to align in the same direction. On the upside, the 50% fib retracement at 110.65–70, the retest of a prior support-turned-resistance at 110.85–90 ahead of 111.00–111.05 (round number + prior trend highs) are the key levels to watch. On the downside, 110.25–30 followed by 110.00–05 are the immediate hourly support areas.

AUD/USD: Bullish Outlook Near-Term Still Justified

I am going to reiterate what I wrote yesterday. This is the market with the clearest buy-side bias out of the majors analyzed, only challenged by the downside potential available in USD/CAD. The technicals are looking bright from a cycle’s standpoint, with higher highs and higher lows achieved since last Friday. The slow stoch has now come into oversold conditions. But what makes it compelling is to cross-check the status of the intermarket flows to realize the current levels make for an interesting proposition to consider long-side campaigns on the basis of a rising inverted DXY+Yuan (red line), a bullish mood in equities (orange line) while the AU-US 5-yr yield spread stays relatively subdued. The upward slope in the 25-HMA of these correlated instruments is a testament that we are in a discounted opportunity. These are the times when the risk-reward can be the most attractive, that is, whenever intermarket flows still point higher yet the pair can be, in this case, bought at oversold conditions based on the slow stoch measures. At the most granular level, it is down to each individual to decide what strategies are best suited to exploit what I perceive a buy-side opportunity.

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The Daily Edge is authored by Ivan Delgado, Head of Market Research at Global Prime. The purpose of this content is to provide an assessment of the market conditions. The report takes an in-depth ...

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