+109 pips - USDCAD Short Execution Update | 12/21-12/29
Updated
This week's gains in the DXY Index for the US dollar have been wiped out because other currencies have regained some of their losses due to a rise in risk-adjusted risk-taking. As posted earlier in the Uk session, we've executed long on various confluences. As posted, When the Bank of Canada kept its previous forward guidance in place earlier this month, it didn't surprise anyone. It said that it would start to raise interest rates in early 2022. Over the last few days, the central bank has said a little more about the omicron variant, but it still doesn't think it will have a big impact on interest rate policy in 2019. People are still worried about KeyEventRisk because of the effects of global lockdowns on risk sentiment and because of rising geopolitical tensions. Price action has been forced into a range between important technical levels from the past. Even though the spread of the omicron variant is possible, the bigger problem is what it could do to the supply chain. This has already caused inflation to rise to uncomfortably high levels. Trading volumes are going down and volatility is also going down in the run-up to the holidays. This is one of those weeks when it's best not to pay too much attention to market movements.
The reason might be that this is a good time to think about how you did last year and see if there are any patterns. Are you more successful at a certain time of the day or when you're trading a certain type of asset, for example? When you keep a trading journal, it makes it easier to look at your performance over a long period of time. The way that I see it, the number of people buying and selling things is going down, which has led to a drop in prices. Markets aren't moving as much today as they did on Tuesday, and this is likely to continue for the rest of the week because there aren't many good stories to trade. It's important to keep in mind, though, that there are some risks in the current Russian-Ukraine tensions. When it comes to currencies, the cross-JPY has turned a corner because bond yields have risen and stocks have stabilized. As I said yesterday, the Canadian Dollar , on the other hand, doesn't seem to be keeping up with the rest of the world, as I said yesterday during the rise in both stocks and oil prices. There has been a recent rise in oil prices and a recent shift in the spreads on the 5-year bonds between Canada and the United States. This means that the loonie may be undervalued. Better still, you could use this time to look over our educational materials, which will help you become a better trader. People thought there was a 100% chance that the Bank of Canada would raise interest rates in March by 25 basis points. They thought there was a 13% chance that it would raise rates by 50 basis points. As a result of the sharp drop in oil prices since late November, overnight swaps for Canada's 10-year government bond are now predicting that the first 25-basis point rate hike will happen in March 2022. Energy accounts for 11 percent of Canada's GDP. As for the first half of 2022, if the Bank of Canada doesn't raise interest rates in March, April has already priced in a 100% chance that rates will rise by 25 basis points and a 66% chance that rates will rise by 50 basis points. There is a key level of resistance at $72. If the bulls can break through this level, oil could move up to about $80.00. On the other hand, fears of higher wage inflation in the United States could make people think the Fed will be more likely to raise interest rates. As a result, more people might be willing to sell crude oil , which could keep the bear market going. WTI could come back to psychological support at $70.00 per barrel of crude oil . In the short term, it looks like demand is going to outstrip supply in the near term.
The British pound has 11.9 percent of the weight of the DXY Index, and the euro has 57.5 percent of the index's weight. Because new data shows that the new strain is less dangerous, currencies that have been hit by the virus can now relax before the holidays. Since early November, the DXY Index has been stumbling along support in an ascending triangle that has been forming ever since. As a result, many indicators of Fed rate expectations remain low, as does the general seasonal tendency for the US dollar to fall. Rate hike odds can be compared to the 2s5s10s butterfly, which shows how the bond market reacted when the Fed said it was going to start cutting back on its QE program in 2013 and 2014. Because of how things have worked out in the past, long-term rates are likely to rise faster than intermediate-term rates in the future. Rate increases of 139 basis points aren't expected until the end of 2023, and the 2s5s10s spread has come back to where it was in early November. For example, if inflation and economic growth slow down, the market thinks that the Fed may not have to raise interest rates as much in 2023 because the market thinks that inflation will stay low and economic growth will also slow down. If these indicators keep going down from their November highs, it will be hard for the US dollar to get strong soon. In the future, we can use eurodollar contracts to figure out whether commercial banks are already paying more for borrowing money over a certain period of time. This way, we can see if the cost of borrowing has already been factored in.
Treasury yields are still good for now, even though the Fed plans to raise rates next year. In particular, this is true at the end of the curve. In our opinion, it's important to know how much of the rate hike has already been taken into account. The first 25-basis-point rate rise by the Fed has already been built into the prices of Fed fund futures for May of next year. During this time, eurodollar futures suggest that the move will happen in May or June. At the very least, we can expect to see a first rate rise next year. So has the bond market. There is a good chance that Treasury yields will keep going up as long as the economy allows it and more rate rises come after that, though. On top of that, the Fed's tapering will make people less likely to buy bonds in general. On the supply side, Yellen and her colleagues may still have to make a lot of money in order to pay for government projects. Rising yields can be shown this way.
The reason might be that this is a good time to think about how you did last year and see if there are any patterns. Are you more successful at a certain time of the day or when you're trading a certain type of asset, for example? When you keep a trading journal, it makes it easier to look at your performance over a long period of time. The way that I see it, the number of people buying and selling things is going down, which has led to a drop in prices. Markets aren't moving as much today as they did on Tuesday, and this is likely to continue for the rest of the week because there aren't many good stories to trade. It's important to keep in mind, though, that there are some risks in the current Russian-Ukraine tensions. When it comes to currencies, the cross-JPY has turned a corner because bond yields have risen and stocks have stabilized. As I said yesterday, the Canadian Dollar , on the other hand, doesn't seem to be keeping up with the rest of the world, as I said yesterday during the rise in both stocks and oil prices. There has been a recent rise in oil prices and a recent shift in the spreads on the 5-year bonds between Canada and the United States. This means that the loonie may be undervalued. Better still, you could use this time to look over our educational materials, which will help you become a better trader. People thought there was a 100% chance that the Bank of Canada would raise interest rates in March by 25 basis points. They thought there was a 13% chance that it would raise rates by 50 basis points. As a result of the sharp drop in oil prices since late November, overnight swaps for Canada's 10-year government bond are now predicting that the first 25-basis point rate hike will happen in March 2022. Energy accounts for 11 percent of Canada's GDP. As for the first half of 2022, if the Bank of Canada doesn't raise interest rates in March, April has already priced in a 100% chance that rates will rise by 25 basis points and a 66% chance that rates will rise by 50 basis points. There is a key level of resistance at $72. If the bulls can break through this level, oil could move up to about $80.00. On the other hand, fears of higher wage inflation in the United States could make people think the Fed will be more likely to raise interest rates. As a result, more people might be willing to sell crude oil , which could keep the bear market going. WTI could come back to psychological support at $70.00 per barrel of crude oil . In the short term, it looks like demand is going to outstrip supply in the near term.
The British pound has 11.9 percent of the weight of the DXY Index, and the euro has 57.5 percent of the index's weight. Because new data shows that the new strain is less dangerous, currencies that have been hit by the virus can now relax before the holidays. Since early November, the DXY Index has been stumbling along support in an ascending triangle that has been forming ever since. As a result, many indicators of Fed rate expectations remain low, as does the general seasonal tendency for the US dollar to fall. Rate hike odds can be compared to the 2s5s10s butterfly, which shows how the bond market reacted when the Fed said it was going to start cutting back on its QE program in 2013 and 2014. Because of how things have worked out in the past, long-term rates are likely to rise faster than intermediate-term rates in the future. Rate increases of 139 basis points aren't expected until the end of 2023, and the 2s5s10s spread has come back to where it was in early November. For example, if inflation and economic growth slow down, the market thinks that the Fed may not have to raise interest rates as much in 2023 because the market thinks that inflation will stay low and economic growth will also slow down. If these indicators keep going down from their November highs, it will be hard for the US dollar to get strong soon. In the future, we can use eurodollar contracts to figure out whether commercial banks are already paying more for borrowing money over a certain period of time. This way, we can see if the cost of borrowing has already been factored in.
Treasury yields are still good for now, even though the Fed plans to raise rates next year. In particular, this is true at the end of the curve. In our opinion, it's important to know how much of the rate hike has already been taken into account. The first 25-basis-point rate rise by the Fed has already been built into the prices of Fed fund futures for May of next year. During this time, eurodollar futures suggest that the move will happen in May or June. At the very least, we can expect to see a first rate rise next year. So has the bond market. There is a good chance that Treasury yields will keep going up as long as the economy allows it and more rate rises come after that, though. On top of that, the Fed's tapering will make people less likely to buy bonds in general. On the supply side, Yellen and her colleagues may still have to make a lot of money in order to pay for government projects. Rising yields can be shown this way.
Note
Related publications
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.