A considerable amount of effort goes to creating an essential analysis for any market, but this usually implies that the information has an extended shelf-life. The information from an analysis of technicals however, could be invalidated after the end of the next candle (depends on the timeframe you use). At the close of the trading week we received the most recent US GDP data. Market participants were keeping an eye out for the report as it was likely to become the 2nd consecutive quarter with negative GDP which is considered to be a rough estimation of the time when an economy is considered as being in recession. The GDP report was negative, however not as anticipated, financial markets moved forward on a broad basis. risk-on mood.
In the main, the US economy is slowing down because consumers in the US customer is hit by both the high rate of inflation and the increasing interest rates intended to combat the high inflation. The ripple effect will result in an economic downturn for countries which export goods and services to US and, eventually, capital flight out of those countries as the mood of investors deteriorates. Naturally, markets’ reaction after the recent Fed rate hike, and then the negative GDP numbers surprised me to the core. It was the first time I’ve put money where it’s at which means that I was forced to take losses this week. I took a last-minute turn on Friday night to take a Risk-On in my investment, however, it only allowed me to make up a small part of my loss.
In this week’s trading session, I needed to set new goals So I started with a broad view, then increased the zoom from there. Beginning by looking at The 15 Year Chart (right panel) We have an fibonacci extension, with the 50.0 percent mark that is highlighted with blue. The chart illustrates how, since the year 2017 in the year 2017 the 50.0 percent threshold of the fibonacci extension has been acting as a barrier against the value of the Dollar Index. There was a break from the resistance zone in the month of June, and it happened again in July of in the current season (see the 1 year chart). The final indicator that would be a confirmation that this Dollar Index had a breakout and not just a break could be the price treat and the previous resistance level as an incoming support level.
First of all, if the Risk-On momentum we concluded last week , persists into this week, I am expecting the dollar to move lower to the 50.0 percent on the extension of fibonacci. Additionally, if the support level is held, the breakout will be confirmed and I’d be more comfortable to take on more risk in the event of a increase in the dollar. A shift upwards in the dollar could be a sign of a shift in the investor’s sentiment towards the risk-averse. This would bring markets in line with my basic analysis that is the reasons for a desire to be safe in a volatile economy.
