Markets take a more strongly risk-off approach, with stock markets declining almost everywhere. The US Dollar is falling on fears of a recession which will force the Fed to cut rates faster.
- There is a growing fear in the markets that the US is approaching an economic recession as economic data continues to show a slowing economy. This is pushing US Treasury Yields lower, and for the first time in two years, the 2-year and 10-year yields have become dis-inverted. This in turn pushes the US Dollar lower, with the Japanese Yen gaining as both a safe haven and as a policy bet on the Bank of Japan’s continuing move away from its old ultra-loose monetary policy.
- Stock markets have continued to decline, although at a slower pace. The Nikkei 225 Index stands out as it is down by more than 1.5% on the day. A recovery is possible, but it is likely that markets will await tomorrow’s US non-farm payrolls data before making any firm bullish move, so consolidation today is quite likely to happen in US stock markets.
- In the Forex market, the Japanese Yen has again been the strongest major currency since today’s Tokyo open, while the Euro has been the weakest, although the numbers are small so perhaps not significant. Traders wishing to follow the Yen higher will likely do well trading either the AUD/JPY currency cross or the USD/JPY currency pair which is close to new long-term lows and falling with strong bearish momentum. The EUR/USD currency pair remains in focus as trend traders will still be interested in being long of this currency pair above $1.1035.
- Most commodities fell strongly yesterday. Crude Oil stands out as it fell to reach a new 9-month low price yesterday.
- Trend traders who can access the 2-year US treasury yield should consider a short trade, as we are seeing the price fall near its long-term low.
- US JOLTS Jobs data released yesterday was notably lower than expected, reinforcing pessimism over an economic hard landing in the USA.
- The Bank of Canada cut its interest rate yesterday from 4,50% to 4.25%, which was widely expected.
- There will be three important data releases in the USA today which could affect market sentiment:
- The ADP non-farm payrolls forecast.
- ISM Services PMI
- Unemployment Claims
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