STATE OF THE MARKETS

Bonds & stocks sold off, Dollar jumped. US stocks tumbled on Monday together with bonds across the board, sending yields higher, after speculation running high that the Federal Reserve remains on course to aggressive hikes as it prepares for the summit at Jackson Hole this Thursday. Nasdaq (-2.55%) fell the most, followed by S&P (-2.14%), Russell (-2.13%) and Dow (-1.91%) as the 10Y benchmark jumped back above the 3% mark. The Dollar index continued its upward trajectory to retest the 109 handle after six weeks.

In the commodity markets, crude rebounded and settled above $90.40/bl after OPEC leader Saudi warned that it’s ready to cut production shall Iran return to supply as the nuclear deal is finalized. Gold continued to drift lower amid Dollar strength and settled around $1,736.10/oz as New York closed. Similarly, iron ore tumbled further to $105.50/tn on Dollar strength and demand concerns amid global recession fears.

In the FX space, sentiments seemed mixed as demand for Aussie and Loonie remained elevated in the long and medium term accounts alongside the safe-haven trio of Dollar, Swiss and Yen. Short term traders, however, continue to bid Yen, Dollar and Loonie while sending Euro, Swiss and Sterling to offer.

On Tuesday, markets expect a cautious trading as the Federal Reserve geared towards the Jackson Hole summit this week while looking for earnings reports from Medtronic (MDT), JD.com (JD), Intuit (INTU), Bank of Nova Scotia (BNS), Advance Auto Parts (AAP), JM Smucker (SJM) and Macy’s (M) as well as the latest numbers on US new home sales and Markit PMIs.

OUR PICK – USD/JPY

Long term remains bearish. Our sentiment model showed that long term accounts remain bearish on the pair and short/medium term rally is only temporary as markets await the outcome of the Jackson Hole summit this week. Should the Federal Reserve show signs of backing off its hawkishness in rates hike, we might see a rally in commodity currencies, commodities and equities.

Disclaimer:

This article is for general information purpose only. It is not an investment advice or a solicitation to buy or sell any securities. Opinions expressed are of the authors and not necessarily of MFM Securities Limited or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.