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Daily Fundamental ForexTime ( FXTM )

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Re: Daily Fundamental ForexTime ( FXTM )

Postby FXTM Official » Wed Feb 07, 2018 5:04 am

Daily Fundamental ForexTime ( FXTM )

Equity markets shake of the bears



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Markets have been hot and cold today as equities saw some intense volatility. For most, it was the beginning of the end at the start of the week, but the close of Tuesdays bell in the US has been so far fairly bullish. Many in the market had been expecting further falls, but so far most investors have been quick to push back on the basis that macroeconomic indicators are still strong, and there is no deterioration compared to 2008 which saw heavy falls as a result. I'm inclined to agree at this statement given the history of the markets and of course that for most economies they're looking to lift rates and cut back QE. There has been of course some minor wobbles with the US economy and Europe in the past, but so far it's full steam ahead and yields are looking good.

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The S&P 500 had a crazy day today and it would not have been for the faint hearted as the market looked to dive deeper, pushing all the way down to the 200 day moving average before starting to make a solid recovery. The 100 day moving average was ignored on the way up, but that's not surprising given the aggressive nature of these moves, but nonetheless technical's did come into play with the market hitting resistance at 2698 to pause and breath. The next level up for the bulls if they get to continue will be at 2743. Support levels if the market were to turn can be found at 2628 and 2564, but the major one will be the 200 day moving average which has so far managed to beat back the bears on such an aggressive day of volatility. I would be surprised to not see the same sort of aggressive volatility tomorrow as markets prepare for another big day again.

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Across the Atlantic in European markets the FTSE has been hammered in the previous week, but finally clawed back some major gains in line with the rest of the globe in the evening. For a while it looked like a bullish trend line may come into play, but the Monday sell-off put that out of the question and the bears took full control. The recovery today, however, was very strong and saw the market climb back up to support at 7278 as traders looked to breath - much like the S&P 500. I would be surprised to see further gains here for the FTSE as UK equities have not been as impressive on the back of Brexit. So we could see resistance levels really push back bulls in the market. On the other hand sharp drops to 7205 and 7100 are not off the cards if the bears can really get there claws back into the equity markets at present.

All in all, at present the global equity markets present a unique opportunity, but a lot of risk when it comes to the amount of volatility. Movements like these are rare and powerful, but for traders they can come with heart palpitations.



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Re: Daily Fundamental ForexTime ( FXTM )

Postby FXTM Official » Mon Feb 19, 2018 10:10 am

Daily Fundamental ForexTime ( FXTM )

Global shares extend recovery; dollar remains weak


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Asian equity markets continued to build on last week’s gains, after U.S. stocks capped their best week since 2013. Investor sentiment has gradually improved after fears of rising inflation sent most global indices into correction territory. The Cboe’s Volatility Index (VIX) ended Friday’s session below 20, suggesting that indictments from Special Counsel Robert Mueller against 13 Russian nationals for alleged interference in the 2016 elections did little to impact investor decisions. With the U.S. markets closed on Monday for President’s Day and the Greater China region remaining offline for the Lunar New Year, expect trading volumes to be below average.

The U.S. Dollar’s weakness remained a bit of a mystery for many currency traders, as it is supposed to follow differential in yields. The gap between U.S. and German 10-year yields widened to 217 basis points, and had gained 28% since mid-July 2017. Similarly, U.S. – Japan 10-year yields widened 285 basis points, the highest increase since 2007. Still, the Dollar declined against the Euro, Japanese Yen and all other major currencies.

One explanation for why the correlation between the Dollar and yield differentials has broken recently, is that financial market participants are forward-looking. Investors believe that rising inflation in the U.S. will spread to other economies, leading to tighter monetary policies elsewhere. When major central banks such as the European Central Bank, Bank of England and Bank of Japan begin normalizing policies, rate differentials will narrow at a fast pace, given that they are starting from a very low base.

Yields in the U.S. are not just rising because of higher inflation expectations, but also due to rising twin deficits – the fiscal and current account. This should make U.S. debt less attractive, and gold will likely become the primary beneficiary as it continues to benefit from inflationary pressures and budget deficit worries.

However, this view may change if the Fed decides to take a more aggressive approach in fighting inflation. Wednesday’s FOMC minutes will likely reveal fresh hawkish insights, but for the dollar to make a U-turn, it requires the Fed to tighten policy faster than previously estimated. Any indication of four rate hikes instead of three in 2018 will do the trick, but this is unlikely to appear in Wednesday’s minutes, and investors will probably need to wait until the March meeting.



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