Inversion: hope for the best but prepare for the worst

Trading 15 août 2019 Donner votre avis

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Market sentiment worsened after data from China and Germany showed the extent of damage caused by trade wars. Risk-appetite fell, throwing the gold to new heights. There is also the inversion of the yield curves of 2-year and 10-year US government bonds. Traders and investors perceive this news as a signal of an almost imminent recession in the coming months. It is worth noting that the inversion of the yield curve affected the UK government, which also increased pressure on the stock markets.

The worst thing about this situation is that market concerns about the recession may eventually fuel further demand for safe havens, further exacerbating the anxiety of stock markets.

However, as we can see, financial market participants avoid sharp dynamics. The EUR/USD pair fell from 1.12 to 1.1150 in the previous two days, while the stock markets walked on a rather bumpy road with big shocks. The GBP/USD exchange rate is almost in place for the fifth session in a row. The growth of the Japanese yen was less impressive than its previous decline, although the pair is closely correlated with the dynamics of the stock markets.

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An ounce of gold rose to $1.520, but the precious metal failed to cover the highs of the environment. Oil went below $59 but continues to record a series of higher intraday lows.

It seems that outside the stock and debt markets, the sentiment is far from panic. Investors have hopes that the World Central Bank, and especially the Fed, will take the necessary measures to mitigate monetary policy.

Stock indices in Hong Kong and Shanghai moved away from local lows, gaining about 1.4% intraday. Futures on the S&P 500 also come to life, showing an increase of 0.7%. Market participants take themselves together and in the absence of new disturbing news, may well return to cautious purchases, "digesting" the news about the inversion of the yield curve.

Euro

The main currency pair does not show a trend. The forces of the "bulls" and "bears" are constantly balanced, which leads to already rather fed up "laterals". But it is worth noting that the euro is the only currency that gives signals to the exit. On Wednesday, EUR/USD quotes left the range in which they were from August 5. Since the output was very calm, without strong impulses, the risk of returning to this range remains, unless, of course, the minimum of the last session is rewritten. If the main pair is returned to the range, you can look at the sales.

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Pound

In the forex market, the GBP/USD pair is dominated by balance. On the one hand, there is a strong resistance for GBP at 1.2096, on the other hand, there is good support at 1.2050.

The risks of disorderly Brexit may again outweigh all available factors and the British pound will go out of range. The probability of a "hard scenario" has increased to 60%. This should add pessimism to the market. Despite the fact that there is a mark of 1.10 for the GBP/USD pair in many forecasts of the world's leading banks, the quotes have a chance of recovery, although not this year.

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The material has been provided by InstaForex Company - www.instaforex.com

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