Trade ideas

Risk assets may be on the rise, but it is more due to a pause in risk off as opposed to buyers rushing back in. Still, it could still allow for some bullish wriggle room on AUD/USD and bitcoin if sentiment allows.

It’s been a tough period for the S&P 500 and Nasdaq 100. But substantial moves in one direction rarely last long, especially when they occur quickly. With bulls successfully defending Monday’s lows despite significant selling pressure, and with price signals hinting we may have seen a near-term bottom, long setups may be worth pondering.

After starting the day well in the green, the major US indices were coming under a bit of pressure again at the time of writing, with investors unable to shake off the recent turmoil impacting financial markets. For now, the Nasdaq 100 forecast remains mildly bearish after the recent breakdown. More evidence of a bottom is needed to excite the bulls again even if there is a sense of calmness observed in price action over the past two days or so.

The absence of new bearish news and a light economic calendar have helped improve risk appetite somewhat. While not completely out of the woods, the market's realignment with fundamentals offers a more optimistic outlook. Stay tuned for further updates as the DAX tries to establish a base around its 200-day average.

We’re seeing signs of market stability after a volatile and bearish start to the week. Wall Street indices clawed back some of Monday’s losses. And that could see support for metals such as gold, silver and copper. At least over the near term.

New Zealand’s jobs report beat across the board in the June quarter with unemployment undershooting forecasts while wages growth, employment, participation and wages growth topped expectations. However, the details were not as impressive, keeping the prospect of an August rate cut from the Reserve Bank of New Zealand in play.

With USD/JPY holding above key support after the daily RSI reached its most oversold level since 1996, the 1-hour bull flag could tempt bulls. The ASX 200 also shows the potential for another leg higher, even if small.

New Zealand’s Employment report may drag on NZD/USD as the update is anticipated to show another decline in job growth.

So far, we have only seen the euro show any signs of strength apart from those where interest rates are lower – JPY, CHF and CNH. The broader US dollar forecast should turn more negative once the equity markets shown signs of stabilisation light of the sharp repricing of US interest rates.

Wall Street’s post-NFP selloff was fully embraced in Asia, with the Nikkei plunging double digits, dragging USD/JPY to a 7-month low and AUD/USD falling over 2% in less than an hour.

There are few FX pairs with a greater sensitivity to US interest rate expectations than USD/CHF, making it an excellent candidate for traders to look at ahead of the key US ISM services PMI report that will be released later in the session.

It looks like the United States may be entering recession. For EUR/USD traders, whether incoming data solidifies or weakens that view will likely determine how the pair performs this week. The tone will be set early with the most important piece of information arriving Monday.

On Friday, we saw bond yields dip sharply post a disappointing US jobs report. Surprisingly, this did not bolster gold prices as expected. Despite climbing to a weekly high, gold then reversed and dropped.

It’s been a busy and messy week across global macro markets. The push points behind the tumult are parsed through in this piece.

There is one more macro even left that could provide even more volatility in the markets, namely the ISM services PMI on Monday. I reckon once the equity market volatility settles, the recent weakness in US data should translate into a more widespread dollar weakness. So, I maintain a bearish dollar forecast for the week ahead, especially now that we have seen a weaker jobs report today.

Thursday’s Wall Street selloff has been fully embraced by the Nikkei in today’s Asian session, which sank to a 5-month low due to risk-off trade and a stronger yen.

A weak ISM manufacturing report a day after a dovish Fed meeting (and on the eve of NFP) was just the ticket for risk off on Wall Street. GBP traders ignored the BOE's cautious stance on rate cuts.