Good morning folks. Fall is in the air here in Bend, OR - crisp temperatures (50's) and blue skies will make for a great way to finish the weekend. Naturally, with Fall in the air, one starts to think about what is in store for the notoriously volatile months of September and October. I have been pleasantly surprised with the price action this Summer with equities and FX currently on the precipice of another significant move - let's get right to it.

Weak equities continue to be the driver for all asset classes right now and with the developments as of the close last week, that seems likely to continue.

S&P 500 - 60 min chart remains weak and may well trade towards 1003 in the days/weeks ahead.

Adding to this bearish scenario was last weeks bullish reversal in the VIX. Based on past instances of this technical development, this adds further weight to my forecast for weaker equities.

VIX vs. S&P 500

And what would my analysis be without some fundamentals too?

"1) This week delivered another string of disappointing data. First, sharp declines in the key components of both the Philadelphia Fed and Empire manufacturing surveys overshadowed the only bit of good news—a stronger-than expected increase in industrial production in July. The industrial sector thus appears set to slow substantially in coming months.

2) Second, Thursday’s jobless claims numbers underscored the dire state of the labor market. Initial claims rose to a level not seen since late 2009, while the total number of people receiving jobless benefits rose back towards its all-time high set earlier this year.

3) Finally, the housing market continues to languish. Although housing starts rose in July, data for June were revised down and permits declined. The National Association of Home Builders reported that builder sentiment dropped further this month."

Source: Goldman Sachs

Technically speaking, there is no real reason to alter my outlook for lower levels in the likes of EUR/USD, NZD/USD and GBP/USD. AUD/USD is also likely to continue lower based on the head & shoulders pattern noted here on Friday.

I had noted on Thursday that the 4th wave triangle in GBP/USD was complete and lower levels were in store - that has begun to play out, and I see 1.5493/1.5380 as the downside target(s).

GBP/USD

Once again, 10-year yields consisting of a basket of Eurozone countries relative to German 10-year rates (i.e. the spread), may well widen further. You might recall that back in early May the spread widened to 4.20% and EUR/USD was trading at 1.2500 and continued lower. Currently the spread is at 3.47% and a break above 3.58% could assist in sending EUR/USD lower again.

When you combine the technical backdrop with the spreads scenario, EUR/USD seems likely to remain weak.

For more from Dave, visit Aspen Trading for more updates.