Morgan Stanley identifies next wave of AI-linked "alpha"
I can’t say this has been a straight-forward market but perhaps I shouldn’t expect one. We are not a million weeks away from what looks to be quite a shake up to the recent status quo and indeed the long-term status quo. I do really think that by the end of the year we’ll look back and say, “Gosh, that was a year that was…” Let’s face it, we have EUR/USD that should move higher and GBP/USD lower. AUD/USD has been declining and USD/CHF subsiding into chaotic bouts of range trading. While all that’s been going on the Yen has gone into self-destruct mode. It’s pulling the Dollar Index this way and that but with the underlying direction being bullish.
So, as we come to the tail end of the moves in EUR/USD and USD/CHF in particular perhaps it’s not too surprising that we are witnessing such complex markets with “normal” correlations thrown to the wind and the market rapidly running hot and cold but also running into dead-ends.
It has certainly made me a lot more defensive as EUR/USD and USD/CHF have begun to push the Dollar bullish extremes that would begin to suggest the Dollar downtrend has lost its way could possibly turn. I can’t see any indications from the daily charts to suggest a reversal yet and thus I retain a Dollar bearish outlook for these two at least. However, it is rather concerning that the currencies making headway against the Dollar are very few and far between now.
So there appears to be a requirement for yesterday’s directional moves all round, whether currently bullish or bearish, need to extend further today. Much more on the Dollar upside in EUR/USD and USD/CHF will make my main outlook become quite shaky in foundation. This includes USD/JPY and EUR/JPY also. In particular I note USD/JPY is at a critical point although even if supports break I can’t envisage deep losses. In the larger picture we’re either talking about a stronger follow-through higher or a modestly deeper pullback before higher still. I don’t think we have seen the end of the USD/JPY rally from 75.57 quite yet…
So, as we come to the tail end of the moves in EUR/USD and USD/CHF in particular perhaps it’s not too surprising that we are witnessing such complex markets with “normal” correlations thrown to the wind and the market rapidly running hot and cold but also running into dead-ends.
It has certainly made me a lot more defensive as EUR/USD and USD/CHF have begun to push the Dollar bullish extremes that would begin to suggest the Dollar downtrend has lost its way could possibly turn. I can’t see any indications from the daily charts to suggest a reversal yet and thus I retain a Dollar bearish outlook for these two at least. However, it is rather concerning that the currencies making headway against the Dollar are very few and far between now.
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So there appears to be a requirement for yesterday’s directional moves all round, whether currently bullish or bearish, need to extend further today. Much more on the Dollar upside in EUR/USD and USD/CHF will make my main outlook become quite shaky in foundation. This includes USD/JPY and EUR/JPY also. In particular I note USD/JPY is at a critical point although even if supports break I can’t envisage deep losses. In the larger picture we’re either talking about a stronger follow-through higher or a modestly deeper pullback before higher still. I don’t think we have seen the end of the USD/JPY rally from 75.57 quite yet…
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