Bond Yields Move Lower, Stocks Too

This follows on from US equities, that snapped a three-day win streak after capping their best month since 2020 last week. Trading volumes are typically thinner during summer as European traders especially are running flat trading books during the holiday season.

This means volumes will be a fraction of the size of normal trading activity which can exacerbate price action and swings. These were certainly seen intraday yesterday as the broad S&P500 index moved between gains and losses.

Yesterday’s falls across the pond followed on from a gain of more than 9% for the blue-chip S&P500 in July and a 12.3% increase in the tech-heavy Nasdaq that marked the tech benchmark’s strongest month since April 2020. Easing expectations for interest rate rises and positive earnings updates from several big tech and energy companies were the two key drivers of this summer rally. The question on many investors’ lips has been if the low is now in place, or if this is a bear market rally in a broader downtrend?

On the technical side, the S&P500 has hit the 100-day simple moving average at 4121 in a resistance zone with the February low at 4114. The halfway point of the March to June move is also near at 4137.

Data dependent traders

Market participants are now watching data more closely too, after Fed Chair Powell, and President Lagarde, and the ECB, bailed out of offering forward guidance to investors and markets. Probably this is an honest admission that policymakers don’t know what the economy is going to do next. Instead, they are now data dependent and yesterday’s main economic indicator painted a cloudy picture at best.

The US ISM slipped to 52.9 in July, its lowest level since June 2020. Any figure above 50 indicates an expansion, but the latest result points to a slowdown in growth.  But the ISM’s index did provide an encouraging gauge that cost pressures may be easing on companies. The sub-index fell to a near two-year low, well below the estimates of economists.

Falling bond yields take down USD/JPY

The high in USD/JPY seems a distant memory today from when it was posted in mid-July above 139. The major is correlated with US 10-year rate differentials, mainly due to the Bank of Japan’s commitment to yield curve control. This effectively means where the US 10-year Treasury yield goes, so to does USD/JPY.

And those yields have fallen sharply as markets have scaled back their expectations of how much the Fed will tighten policy to curb red-hot inflation. From a high close to 3.5%, the US 10-year yield is now nearing 2.5% after dropping below the lower bound of the recent sideways trading range around 2.7%. This is a mighty fall in bond markets and has weighed heavily on USD/JPY.

The major is back below 135 and smashed down through the next major support at 131.34 overnight. The latest US wage and inflation data may slow the descent of US yields. But the yen may retain a small bid on growing odds of a US recession as the Fed hiking cycle continues.

This week’s bid for safe haven assets as US House Speaker Pelosi gears up to visit Taiwan is also helping the yen. The 100-day simple moving average could offer support at 130.12 as prices go into overbought territory.

For more information visit FXTM.

ACY Securities Webinar for August 11: Live Forex Market Review – Identifying High Probability Trading Levels

In this webinar, Duncan Cooper will analyse the trend, support and resistance, and use Fibonacci retracements to identify high probability trading levels on the major currency pairs. Plus, a live Q & A on your favourite charts.

Date: August 11, 19:00:00 Sydney Time

REGISTER FOR FREE

ACY Securities Webinar for August 17: Trading the 79% Fib Retracement Pattern Across Different Time Frames

Duncan Cooper will teach you how to trade the 79% Fib retracement pattern across different time frames. He will take you through the entry criteria, stop loss, and profit target levels, and show you how to create risk to reward targets greater than 1:4. Finishing with a specific live chart exercise to cement your learning.

Date: August 17, 19:00:00 Sydney Time

REGISTER FOR FREE

ACY Securities Webinar for August 3: Introduction to Price Action Trading – Understanding Market Structure

Learn how to identify the market structure correctly on the higher time frame charts. This introduction to price action trading will help you determine key trading levels for trade entries and profit targets. Finishing with a specific live chart exercise.

Date: August 3, 19:00:00 Sydney Time

REGISTER FOR FREE

ACY Securities Webinar for August 10: How To Trade The Head & Shoulders Pattern

Duncan Cooper will teach you how to trade the head and shoulders pattern using the Fibonacci tool. He will take you through the entry criteria, stop loss, and profit target levels, and show you how to create risk to reward targets greater than 1:3.

Date: August 10, 19:00:00 Sydney Time

REGISTER FOR FREE

ACY Securities Webinar for July 27: Identifying High Probability Trading Levels Using the Monthly & Weekly Candlesticks

Discover how to identify key trading levels for both intraday and position trading using the monthly and weekly candlestick highs and lows. Finishing with a specific live chart exercise to cement your learning.

Date: July 27, 19:00:00 Sydney Time

REGISTER FOR FREE

ACY Securities Webinar for July 28: Live Forex Market Review – Identifying High Probability Trading Levels

In this webinar, Duncan Cooper will analyse the trend, support and resistance, and use Fibonacci retracements to identify high probability trading levels on the major currency pairs. Plus, a live Q & A on your favourite charts.

Date: July 28, 19:00:00 Sydney Time

REGISTER FOR FREE

ACY Securities Webinar for July 6: Live Forex Market Review – Identifying High Probability Trading Levels

In this webinar, Duncan Cooper will analyse the trend, support and resistance, and use Fibonacci retracements to identify high probability trading levels on the major currency pairs. Plus, a live Q & A on your favourite charts.

Date: July 6, 19:00:00 Sydney Time

REGISTER FOR FREE

ACY Securities Webinar for July 7: Trade Setups – Limit Order at a Support or Resistance Zone

Building on what we have learnt, Duncan Cooper will teach you how to use a Limit Order at a Support or Resistance Zone. He will show you how to identify and use this trade setup correctly on your charts and apply it to your trading.

Date: July 7, 19:00:00 Sydney Time

REGISTER FOR FREE

ACY Securities Webinar for July 13: Risk & Trade Management – First Trading Tool Understanding Risk to Reward

During this webinar, Duncan Cooper will teach the important topics of money management and calculating the correct trade size. He will discuss risk to reward, trade management, important news announcements, and managing your trading day.

Date: July 13, 19:00:00 Sydney Time

REGISTER FOR FREE