Market Turmoil Intensifies With Deepening Recession Fears
| Action Insight Weekly Report 8-3-24 |
| Market Turmoil Intensifies With Deepening Recession Fears |
The financial markets were marked by significant turbulence this last week again, dominated by risk aversion. Evidence are surfacing that the US economy is heading for a recession, or even hard landing. Speculation is mounting that Fed might be compelled to implement aggressive rate cuts, totaling 75 basis points or even a full percentage point by year-end, in response to the worsening economic outlook. However, there's a palpable lack of confidence among investors that even such decisive action could prevent further economic deterioration. The ongoing steep selloff in U.S. stocks has evolved beyond previous discussions of mere sector rotation or pre-election repositioning. Instead, it's increasingly viewed as a flight to safety, with investors moving capital into traditional safe havens. This shift has resulted in a surge in U.S. bonds, which pushed the benchmark Treasury yield below 4%, and bolstered Yen and Swiss Franc, which emerged as the week's strongest performers. Conversely, commodity currencies and British Pound faced additional selling pressure, except for the New Zealand Dollar, which paradoxically benefited from the broader selloff in Australian Dollar. While Euro and Dollar are both positioned in the middle of the performance chart, Euro has clearly outperformed the greenback. |
EUR/USD Weekly Outlook While the dip to 1.0776 was deeper than expected, EUR/USD's subsequent strong rebound suggests that pullback from 1.0947 has completed already. Initial bias stays on the upside for retesting 1.0947 first. Firm break there will target 100% projection of 1.0665 to 1.0947 from 1.0776 at 1.1056. For now, risk will stay on the upside as long as 55 4H EMA (now at 1.0839) holds, in case of retreat. | |
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