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Truss Resigns, Stocks rally on earnings, US Data, NatGas declines, Bitcoin rebounds but still locked into range


Despite political tumult in the UK and growing pressure on Japan to defend the yen, risk appetite is running wild as US stocks rally as some investors become more upbeat about this earnings season. ​ Mega-cap tech is starting to look attractive again after IBM posted robust sales results despite the currency headwinds. If IBM was able to have a good quarter and raise their outlook, a lot of investors are hopeful that Apple, Amazon, Alphabet, and Microsoft should be able to do the same. ​


The British pound rallied after UK PM Truss announced her resignation. ​ Truss ran on a campaign that had a vision for a low-tax, high-growth economy that would take advantage of the freedoms of Brexit. That plan backfired on her, and she will go down in the history books as the UK’s shortest-ruling premier. ​

Betting markets are already pricing in former chancellor of the exchequer, Rishi Sunak as the frontrunner. ​ Finance Minister Jeremy Hunt is a key figure that has signaled he won’t stand in the UK leadership contest, but he might just be waiting until he can find the right partner to ensure his ticket has a chance of surviving. ​

Britain’s political scene is looking more like what we see over in Italy. ​ The political tumult in the UK is not going away anytime soon until we have a clear understanding of who will lead and what will be their agenda. Other questions will now surface and that includes how Scotland will proceed in attempting another referendum. ​

US data mixed

The labor market is still strong after jobless claims came in better-than-expected at 214,000, which suggests corporate America is not having a lot of layoff announcements yet. ​ Labor market strength supports the idea that the Fed can remain in aggressive tightening mode beyond the winter. ​

The Philly Fed business outlook was soft but not as bad as the Empire survey we saw at the beginning of the week. ​ Manufacturing activity is weakening and that trend should continue as the economy weakens. ​

The housing market continues to cool. ​ Existing home sales have declined for eight consecutive months and a weaker consumer and surging mortgage rates suggest that trend will continue. ​ Sales of previously owned homes dropped 1.5% to an annualized pace of 4.71 million in September, roughly in line with the 4.70 million consensus estimate. The housing market still looks vulnerable to further downside and that should eventually at some point next year provide some relief with shelter prices. ​ ​ ​


After tentatively breaching below the $19,000 level, bitcoin is bouncing back as Wall Street decides to go back into mega-cap tech stocks. ​ Bitcoin has been stuck in a consolidation pattern since the summer and that seems like it will continue until investors can confidently believe the Fed will stop hiking once rates get to 5%. ​ ​

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