The average rate of the most popular US home loan took a plunge last week after the drop in yields on Friday, alongside signals from the Fed to cut rates. The massive plunge is enough to get mortgage applications back up with both purchasing and refinancing activity also climbing.
This article was written by Justin Low at www.forexlive.com.
The weak US NFP report last Friday triggered risk-off flows.
Things got dire on Monday as the Japanese Nikkei dropped 12% overnight and we
saw a general selloff in global stock markets.
At one point, the markets
saw the Fed cutting rates by 136 bps by year-end and some chances of an
emergency rate cut. Although the volatility calmed down a bit and markets
recovered the Monday’s losses, the expectations haven’t changed much as the
market is still pricing a higher probability for a 50 bps cut by the Fed in
September and a total of 103 bps by year-end.
The GBP gained against the
USD on Friday due to the aggressive rate cuts pricing for the Fed but
eventually gave way to the greenback as the risk-off intensified on Monday
morning. We had another selloff on Tuesday morning although there wasn’t any
clear catalyst. The sentiment is still fragile, and flows are dominating the
price action.
GBPUSD
Technical Analysis – Daily Timeframe
On the daily chart, we can
see that GBPUSD dropped below the major trendline and extended the selloff into the
1.2677 level as the bearish momentum increased. The natural target for the
sellers should be the swing low level at 1.2615.
If the price gets there, we
can expect the buyers to step in with a defined risk below the level to
position for a rally into new highs. The sellers, on the other hand, will want
to see the price breaking lower to increase the bearish bets into the 1.25
handle next.
GBPUSD Technical
Analysis – 4 hour Timeframe
On the 4 hour chart, we can
see that we have a downward trendline defining the current bearish momentum.
The sellers will likely keep on leaning on it to position for further downside,
while the buyers will want to see the price breaking above the trendline to
regain some control and pile in for new highs.
GBPUSD Technical
Analysis – 1 hour Timeframe
On the 1 hour chart, we can
see that we have a decent resistance
around the 1.2720 level where the price got rejected from several times. The
buyers will want to see the price breaking higher to position for a rally into
the downward trendline. The sellers, on the other hand, will likely lean on it
to position for a drop into the 1.2615 level. The red lines define the average daily range for today.
Upcoming
Catalysts
This week is basically empty on the data front. The only notable economic
releases will be on Thursday when we get the latest US Jobless Claims figures.
The market will also pay close attention to Fed members’ comments given the
latest developments in the markets.
This article was written by Giuseppe Dellamotta at www.forexlive.com.
The idea of the dollar smile theory is pretty much this:
But amid the unwinding of the carry trade since Friday, there is something worth noting about the dollar under these circumstances. The global selloff proved that even with risk aversion in markets, the dollar struggled for the most part. So, what gives?
As the boom meets a bust, traders are getting a reality check. The carry trade mostly depended on this one thing. Traders were borrowing yen at low interest to buy risky assets i.e. US stocks mostly. That’s the simplest way to put it. So, the BOJ hiking rates plus the yen surging led to a double whammy which shook markets since Friday.
That is not to mention with all the panic surrounding the state of the US economy with markets suddenly wanting to believe that the Fed has to step in with emergency rate cuts. Pfft.
So, looking at the state of things, markets are now figuring out the one thing that can really hurt it the most. And that is when leverage gets out of control and come back to bite at investors.
A flight to safety during such an event typically should bolster the dollar’s standing but considering the circumstances, the dollar seems to be the one caught on the opposite side of the unwinding too. It doesn’t help when the solution for investors is to go kicking and screaming, and asking help from the Fed.
Taking that as a case in point, the dollar smile theory may yet have changed to a dollar frown theory – at least for now:
That being said, with the Fed poised to cut rates, it will also keep a lid on any outsized dollar rally from hereon. But a more robust economy in general will at least keep the dollar in good standing and not exercise the Fed put too quickly.
But if other parts of the economy start to show more warning signs like the labour market, the dollar might quickly find itself in hot water once again.
And to pile on the misery, it will also trigger worries about the outlook for US stocks. In turn, that might bring us back to the episode from last Friday and this Monday again. That especially if USD/JPY also continues to plunge alongside a declining equities market.
In the normal case of risk aversion, the dollar is a comfort for traders in general. But when we’re now caught in the storm of the carry trade unwind, the dollar really needs a strong economy to work for it in order to stand its ground.
This article was written by Justin Low at www.forexlive.com.
The big question circulating in investors‘ minds must probably be whether the recent market moves are just a foretaste of a larger downturn or simply a temporary correction.
The answer delves into the reasons for the sudden change in market sentiment. Once the latter is understood, it may become clear whether the same scenario will repeat itself.
Let’s start by saying that a prevailing theory is that investors suddenly fear that the US is headed for a recession, given the continued weakening of the labor market.
Similar news in the past would have sparked optimism by suggesting that the Federal Reserve might tighten monetary policy. But now, fears of a hard landing have surfaced.
However, Monday’s ISM services PMI data, which showed an increase of 2.6 points to 51.4 in July, cast doubt on the worst-case scenario (a deep recession).
Another factor cited by the media was the pullback in technology companies due to downbeat earnings reports and a generally uncertain outlook.
But there could be another element at play: a global margin call.
The trigger was the sudden strengthening of the Japanese yen, driven by the Bank of Japan’s more hawkish stance, which recently raised its interest rate to 0.25%.
In addition, the BOJ pledged to halve its bond purchases, reducing them to about 3 trillion yen ($19.9 billion) by the first quarter of 2026. In other words, goodbye Abenomics…
As a result, USD/JPY fell sharply to 150. It seemed that this was precisely the Bank of Japan’s target. So, how could this move have impacted international markets?
The problem is that investors have long been borrowing in the Japanese yen because of its lower rates, investing in assets in countries with higher rates, and engaging in carry trades.
With the Bank of Japan’s policy change, those borrowed in yen suffered losses, leading global investors to liquidate their positions in foreign assets and buy yen instead.
This led, on the one hand, to a massive sell-off of risky assets and, on the other, to a further strengthening of the yen. In other words, we witnessed a global margin squeeze.
Interestingly, the strengthening of the yen has had very adverse effects on other major markets worldwide in the past. So, such a phenomenon has occurred before.
What is the verdict?
Beyond macroeconomic indicators and geopolitics, investors will now closely monitor the yen. Thus, we can see a more emotional move in the coming days or even weeks.
The big question now is whether the Fed could call an emergency meeting or whether the recent improvement in market confidence will make them hesitate to take urgent action.
This article was written by FL Contributors at www.forexlive.com.
In an interview he
was asked about what made him so successful in the markets and his answer was:
“Having an open mind.
I never get married to a position. I’ve had positions where I was sure I was
going to hold them for 2 years and a week later I didn’t have a position and I
was short. Because conditions change. If conditions change, you have to move immediately.
That was true 20 years ago and it is 10x now with the internet and everything.”
To explain this
concept better, I will use a recent example with the Nasdaq (this is of course hindsight analysis but it’s good for educational purpose).
Last Wednesday, after
a strong selloff caused by the deleveraging of the Yen carry trades, the market
started to bottom out going into the BoJ decision. At one point it looked
like the worst was behind us as the Nasdaq broke through key technical levels
and rallied almost 5% in a single day.
Unfortunately, the following day we got an ugly ISM Manufacturing PMI which
sent the market into risk-off and defensive positioning into the NFP report. The
US Jobs report worsened everything as the data surprised to the downside with
unemployment jumping to a totally unexpected 4.3% rate. The losses extended and
eventually we got a strong overnight selloff yesterday as the Nikkei crashed 12% in
a single day causing a global market rout.
In the bigger picture, there were certainly good reasons to expect a rally last week and eventually even a new
all-time high. But we can see from the chart above that the ISM Manufacturing
PMI was the catalyst for the selloff, and once the price fell back below the key
19400 zone, the bearish momentum increased.
In that case, conditions changed.
This is when you should take countermeasures to protect your capital.
You
could have closed out a long position altogether or you could have reduced your
risk if the conviction in your trade remained strong. In any case, it was the time to adjust and not getting married to your original idea.
This article was written by Giuseppe Dellamotta at www.forexlive.com.
The weak US NFP report last Friday led to a key breakout in
the USDJPY pair which eventually triggered another deleveraging in the Yen
carry trades. Things got dire yesterday as the Nikkei dropped 12% overnight and
we saw a general selloff in global stock markets.
This led to risk-off flows
and at one point, the markets saw the Fed cutting rates by 136 bps by year-end
and some chances of an emergency rate cut. Although the volatility calmed down
a bit, the markets are still expecting a 50 bps cut by the Fed in September and
a total of 110 bps by year-end.
The NZD got pressured by
the risk-off sentiment but bounced back pretty quickly erasing all the losses
since last Friday. On the monetary policy front, the last RBNZ policy decision weighed on the Kiwi as the central
bank changed slightly its language to a more dovish leaning which increased the
rate cuts expectations.
Tomorrow, we get the New Zealand
Jobs report and if we get weak data, the market will likely increase the
chances of a rate cut at the upcoming meeting which at the moment stands at 35%
probability.
NZDUSD
Technical Analysis – Daily Timeframe
On the daily chart, we can
see that NZDUSD spiked back lower to the April’s lows at 0.5850 yesterday but
eventually erased all the losses. The buyers are clearly stepping in around the
0.5850 level to position for a rally back into the 0.6050 resistance.
The sellers will need the price to break below the 0.5850 level to increase the
bearish bets into the 0.5770 level next.
NZDUSD Technical
Analysis – 4 hour Timeframe
On the 4 hour chart, we can
see that we have a minor resistance zone around the 0.5980 level where the
price got rejected from several times. The buyers will want to see the price breaking
higher to increase the bullish bets into the 0.6050 resistance next. The
sellers, on the other hand, will likely continue to lean on that minor
resistance with a defined risk above it to keep pushing into new lows.
NZDUSD Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can
see that we have mostly a rangebound price action with the price now trading in
the middle of the two key levels. There’s not much to do here other than
waiting for the breakouts or some catalyst. The red lines define the average daily range for today.
Upcoming
Catalysts
This week is basically empty on the data front. The only notable economic releases
will be the New Zealand Jobs report tomorrow and the US Jobless Claims figures
on Thursday. The market will also pay close attention to Fed members’ comments
given the latest developments in the markets.
This article was written by Giuseppe Dellamotta at www.forexlive.com.
Predominant
Instruments and Assets
During
Q2 2024, Nasdaq
emerged as the predominant instrument attracting the highest trading volumes
among easyMarkets clients, with a 51% increase. This surge underscores its
continued relevance and appeal in the current market environment.
Main
Market Shifts: Crypto Trading Declines
With
the conclusion of the bull market came a significant 45% decrease in crypto trading volumes
compared to Q1. This shift indicates a strategic realignment by traders in
response to evolving market conditions.
Notable
Spikes and Crashes
In
Q2 2024, several instruments experienced remarkable price movements compared to
the same period last year, with a 125% surge in Cocoa,
a 20% increase in Gold
and a 6% appreciation in USDJPY.
Stable
Sector Activity and Central Bank Impact
Throughout
Q2, trading activity across sectors remained stable. Interest rate
announcements from central banks worldwide created volatility, boosting trading
volumes. However, the interest rate trajectories were largely anticipated,
resulting in no noticeable shift in market sentiment.
Expert Insight: Resilience and Adaptability
Thomas
Tsaloupis, Head of Risk Management at easyMarkets, commented on the quarter’s
performance, stating: „The second quarter of 2024 demonstrated our
clients‘ adeptness at navigating complex market environments. Despite the end
of the crypto bull market, the strategic focus on an instrument like Nasdaq
highlights their ability to adapt and capitalize on prevailing trends. Our
clients‘ engagement in intraday trading and sophisticated analysis techniques
speaks volumes about their commitment to informed trading decisions.“
As
we move into the second half of the year, easyMarkets remains committed to
providing our clients with the tools and insights needed to navigate the
evolving financial landscape successfully.
ABOUT easyMarkets
easyMarkets, founded in 2001, is an
award-winning global broker. One of the first to offer an online experience
with innovative risk management tools, including free guaranteed stop loss,
easyTrade, Freeze Rate, and dealCancellation, easyMarkets provides its sizeable
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This article was written by FL Contributors at www.forexlive.com.
Many forex traders have experienced positives from basic automated robots, but advanced ‚bots take profits to another level. This guide explains powerful algorithms and strategies and how combining top automated solutions boosts success.
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Develop Strategies for Any Environment
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Balance Risks Between Manual and Automated Strategies
Advanced automated techniques carry risk from undiscovered drawdowns or market shifts. Balance this by also applying tried-and-true manual strategies as a hedge against technology risks.
Diversifying sources of potential profit smooths drawdown effects while testing innovations. For example, manually trading breakouts during low-volatility provides downside protection if automated strategies enter choppy periods.
Stagger Automated Strategy Deployments
Rather than deploying all capital behind new strategies simultaneously, implement them gradually using small position sizes over several months.
This reduces exposure if initial backtests don’t translate perfectly, and allows making adjustments before larger commitment. Staggering also identifies strengths and weaknesses sooner at smaller risk.
Continually Monitor Live Trades
Despite rigorous backtesting, unexpected market nuances may affect performance differently live. Advanced systems require time commitments to monitor trades, update profitable strategies, and identify issues early.
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In Summary
Advanced automated forex robots using cutting-edge technology streamline volatility trading. Combining powerful algorithms enhances strategies adapted for any market. Continuous self-optimization keeps you ahead of constantly-shifting conditions. With diligent research and practice, automation evolves your trading exponentially.
This article was written by FL Contributors at www.forexlive.com.
Here’s a snapshot of things:
At one point, Nasdaq futures were down over 6% so the rout in tech shares is at least not getting much worse for now. It’s a full-fledged flight to safety mode with traders chasing the usual safe havens. Bonds are bid and so is the Japanese yen and Swiss franc. Besides that, it’s pretty much a sell everything else case in broader markets to start the week.
From earlier:
This article was written by Justin Low at www.forexlive.com.
The VIX has more than doubled in value today, rising to hit the 50.00 mark now. That’s the highest level since the pandemic and this is the biggest daily jump since February 2018, when there was the whole fiasco involving the XIV and a broader market selloff amid a rout in the bond market at the time.
In any case, the heightened reading we’re seeing above speaks to the fear and angst that is gripping markets right now. For a while there, it looked like we might’ve settled into a period of low volatility. The VIX had before this touch its lowest since before the pandemic as investors were feeling rather confident about broader market sentiment.
How quickly the tables have turned in just one week, eh?
Emotions are running high now and this is a testament to that. The rout in equities will stop when it stops. However, the renewed volatility means that it will at least take a while for the nerves to settle down again. As for market players, it means needing some time to regain their grit and vigour in the short-term.
That translates to a likelihood that we’ll see a more bumpy road in equities moving forward. At least definitely not the one-way traffic in the first seven months this year.
This article was written by Justin Low at www.forexlive.com.