A Strange Shift in the Markets – Fundamental Analysis

Posted Friday, June 30, 2017 by
Skerdian Meta • 2 min read

Over the last several months we have seen the financial markets shift from being on the defense to going on the offensive. By this I mean that the sentiment in the financial markets has been shifting from negative to being ready to take more risks.  

The markets have been trading in a defensive manner for a long time, approximately since the 200 GFC (global financial crisis). But this year, the markets started feeling better.

Although, that didn't officially begin until recently. In the last 5-6 weeks, things have accelerated and market sentiment has improved immensely.

The economic numbers have improved and inflation expectations have picked up, so major central banks started turning hawkish, particularly over the last couple of weeks.  

This has led to a substantial appreciation in risk currencies and a decline in safe heaven ones. The Euro, GBP, AUD and the CAD have gained around 200-300 points against the USD over the last few days, while JPY has lost around 200 pips. Imagine how much it has lost against the Euro? About 500 pips. It usually doesn´t work by adding gains of two forex majors to figure out the gain of a forex cross, but this time it did.    

As my colleague Arslan pointed out, even crude oil has gained quite a lot this week, despite the build up in US oil inventories.

This makes the turnaround in market sentiment official. The global economy has finally left behind such times when another massive crisis was just around the corner.  

As I mentioned above, this has changed things for risk currencies and the Euro in particular. We are looking to buy EUR/JPY for the long run. But, we will have to pick an entry point which requires a thorough technical analysis.

We will come back to this topic soon and by that time, I hope that this forex pair will have completed a correction lower, so we can have a better risk/reward ratio.

EUR/JPY is in the second leg of the uptrend now

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