Is a Year End Rally in Risk Markets Coming ?
Stock-Markets / Financial Markets 2017 Nov 01, 2017 - 12:41 PM GMTBy: Submissions
The Bank of Japan left its massive monetary stimulus program unchanged even as it trimmed its inflation forecasts, signaling further divergence ahead from its global peers.
S&P
The large cap index has been on sustained uptrend this year. There are no signs of any weakness despite news flow contrary to that. Neither North Korea nor Trump falling ratings have dented the uptrend. Earnings have gen erally supported the rally. We expect the trend to continue into the year end unless news or other factors come into play at which point we will update. We are suggesting clients to be 60% invested into the rally.
Bond market
The 10 year yield differential between US and japanese 10 year bonds seem to be narrowing which explains the tepid movement in USDJPY. However the differential is stil near its 3 month highs and hence dollar index is expected to move higher.
Oil
Oil prices have bucked the long term trend of downtrend. Prices above 60 will have an impact on shorts and thus give way to covering rallies. The higher Oil prices can be explained by cutting oil supplies. For the second consecutive month, a group of non-OPEC oil producers led by Russia and Mexico in September bested OPEC itself in efforts to end a global crude glut. The secret to their success: field maintenance. With at least six more months of output cuts left in their agreement, OPEC and its allies face the question of what to do when the work ends.
GBPJPY
The pair has made a high in September which has not been surpassed in October. The pair is in a long term downtrend and hence the price action in October can be veiwed as corrective and offering a chance to go short.
USDJPY
usdjpy is at an important support zone at 113. The pair uptrend line is at 113. Sustained break below could see it fall to 111.8/111.5 which is where important support in form of 200 DMA can be seen.
EURUSD
EURUSD has broken below the uptrend line at 1.171. This line had been the symbol of its uptrend since July. However the pair has not fallen further ...yet! If the pair finds itself back above 1.1710, we expect the uptrend to resume else it could slowly move to 1.14.
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