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Yields Hold Steady After GDP

September 28, 2023
Frank Cabibi

GDP numbers came in lower than expected in the US, marking the third straight drop in economic output. This is usually good news for the stock market indices and gold, however, bond yields continue to hold up above 5.1%. Here are some potential trade setups for both dollar and index longs depending on how the market performs the rest of the week:

EdgeFinder Analysis

AU is sitting at a -10 strong bearish score on the EdgeFinder. In the historically bearish month of September, the pair has well underperformed as risk-off sentiment looms. Recent lower GDP in the US has caught investors' eyes as this could mean a lesser anticipation of Fed interference.

However, yields are still higher and have maintained above 5% for some time. Higher yields is going to continue to put pressure on the risk appetite for now, and AU may continue to form lower lows going into the end of this week.

NAS100 is resting on support as we start the morning off in the NY session. This looks like a strong level of support that price will have to break under if sentiment is still strongly bearish. Otherwise, it could serve as a potential long opportunity post GDP optimism from a lower than expected number.

However, if price were to break this level, we may be looking at another low towards the $14,200s. It's still not a very bullish market right now, and lower lows seem more likely than not. But in case of a switch in sentiment, this index could show resilience at the falling trend line.

EU is another strong bearish reading on our scanner. At -12, the pair is the most bearish. With COT moving starchily against the euro and into the dollar, price doesn't look bullish any time soon. With retail majority long, we can anticipate further bearishness from the pair.

Although on support, optimism from GDP may not be strong enough going forward. The trend and seasonality indicators suggest more downside for the next few months as well. Overall, the USD is sweeping the euro in every sense.

Retail Spotlight

Retail is majority risk-on as they are shorting the USD and buying AUD, NZD and GBP. The indices are mostly mixed with a slight lean to the bearish side.

Smart Money Spotlight

It's important to look at all the data the Smart Money Tracker provides because what looked like a bullish bias on gold this week was actually negative. The table shows how many gold positions were open long to short. The bottom chart shows the number of long contracts between gold and USD added. Because the dollar saw an incredible rise in long contracts, it took the reins against the metal and pushed price lower.

Fundamental Spotlight

Although outpacing the rest of the world, the US is still seeing declines in GDP overall. Seeing this is optimistic for risk-on traders who are looking for less Fed hikes in the future. Outside of inflation itself, the Fed is looking for lower GDP and labor numbers. So, a lower GDP is good for NAS100, but it's unclear if this will be enough to boost morale.

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