On the heels of the reversal signals highlighted yesterday, markets continue to stabilise and take a breather. The pattern in the DAX is encouraging, as it is broadly holding up above lows of a Bullish Reversal week from mid-September and is also threatening to complete a basing pattern. The confluence of longer-term moving averages in the US Dollar Index has stemmed the bid in the USD for the time being, although we note that momentum is at risk of posting a more sustainable bullish warning.
For the time being, however, the pro-risk corrective bounce seen yesterday likely has not run its course, given the broad nature of the signals from earlier this week. In the near term, we prefer buying risk dips rather than chasing moves higher.
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