triangle breakout on GOLDhello traders this happened today it is possible to catch this moves almost all the time on gold it works on gold pretty much all the time if you wann learn keep following
CPI
Gold Shines amid Global Financial DistressCOMEX: Micro Gold Futures ( COMEX_MINI:MGC1! )
Gold prices surged Friday as a wave of banking crises shook global financial markets. Spot gold climbed 3.1% to $1,977.89 per ounce, its highest level since April 2022. Gold price is now within $100 of its all-time high of $2,074.88.
In the futures market, the nearby April contract of COMEX gold futures settled at $1,973.5, where the far-month June 2024 contract closed at $2,076.9.
The year-long Fed rate hikes cracked the US banking system. Within two weeks, we have witnessed the collapses of Silvergate Bank and Silicon Valley Bank in California and Signature Bank in New York. First Republic Bank, a mid-sized bank in California, received $30 billion emergency injection from 11 largest American banks, led by JP Morgan.
Interestingly, it was J.P. Morgan who organized a $30 million rescue plan to avert the collapse of Wall Street in 1907. That crisis led to the creation of Federal Reserve System.
A century later, the cost of bank bailout increases by 1,000 folds. However, bank runs have already spread. Credit Suisse, a prestigious investment bank, is under distress. On Sunday evening, fellow Swiss bank UBS announced that it is acquiring Credit Suisse.
Gold Price Rises in Times of Major Crises
In the past two decades, gold price peaked in times of market turbulence.
• The 2008 financial crisis
• The 2010 European debt crisis
• The 2018-19 US-China trade conflict
• The outbreak of COVID pandemic
• The Russia-Ukraine conflict
• The March 2023 bank run
Gold price is also negatively correlated with the US dollar. Last year, when Dollar rose on the back of Fed tightening, gold took a beating. Now, as investors expect the Fed to slow rate hikes, gold shines through the chaos.
Investing in Gold: what in there for you?
• Diversification: Gold helps reduce the overall risk of your portfolio by providing a hedge against inflation and currency devaluation
• Tax efficiency: Long-term capital gains on gold investments are taxed at a maximum rate of 28%, which is lower than 37% for other long-term capital gains
• Protection against rising prices: Gold has historically been a good hedge against inflation, and it can help protect your purchasing power
• Liquidity: Gold ETFs and Gold Futures are highly liquid financial instruments. Many brokers also buy and sell gold bars and gold coins, with a commission.
• Hedge against difficult economic conditions: Gold is a global store of value, and it can provide financial cover during geopolitical and economic uncertainty
• Portfolio diversifier: Gold can act as a hedge against inflation and deflation alike, as well as a good portfolio diversifier
In a previous writing, I showed that gold did not work well as a hedge against inflation.
However, gold holds up extremely well during major crises where other assets lost value.
Hedging against Known and Unknown Risks
Risk on, gold goes up. Risk off, gold declines. Some risks are expected, while others come as a surprise.
Fed rate actions are scheduled events and can be considered known or expected risk. CME FedWatch Tool shows the likelihood that the Fed will change the Federal target rate at upcoming FOMC meetings. It analyzes the probabilities of changes to the Fed rate and U.S. monetary policy, as implied by 30-Day Fed Funds futures pricing data.
As of March 19th, FedWatch estimates a 38% chance of Fed keeping the current rate unchanged at 450-475 bp, and 62% odds of increasing 25 bp to 475-500 bp.
By providing $300 billion in emergency lending to member banks, the Fed has effectively put Quantitative Easing at work. In my opinion, the Fed has switched its priority from fighting inflation to crisis management. Managing the systemic risk in the US banking system outweighs the battle against inflation at this time. It’s a matter of priority.
What’s unknown is the potential failure of any bank not yet exposed in the news. US banks are estimated to sit on unrealized loss in hundreds of billions of dollars in their bond portfolio, largely consisted of Treasury and US agency bonds. As the “held-to-maturity” asset will be sold or marked down, these banks could run into trouble by a run of depositors and investors. In this unusual time, no news is good news.
Short-term Trading Strategies
The upcoming FOMC meeting on March 22nd make a compelling reason for event-driven trades on Micro Gold Futures.
Here is my logic:
• If the Fed keeps the rate unchanged, stock market would rally. As a major risk is removed from the financial system, gold price would fall
• If the Fed raises 25 bps, stock market would fall, and gold price would rally, potentially breaking the current record high
Micro Gold Futures (MGC) contract has a notional value of 10 troy ounces. At $1,993.4, an April 2023 contract (MGCJ3) is valued at $19,934. Initiating a long or short position requires a margin of $800. This is approximately 4% of contract notional value.
If gold price moves up to $2,050, a long futures position would gain $566. Relative to the initial margin, this would equate to a return of +70.8%, excluding commissions.
If gold price moves down to $1,900, a short futures position would gain $934, a theoretical return of +116.8%.
Unexpected market event could be a trigger for gold price to rally. An event-driven trade idea could be constructed around it. In my opinion, comparing to the distress of regional banks, the systematic risks triggered by a Big Bank failure could send global market in shock at ten times the magnitude. If the Fed raises rate next week, I expect more bank failures to coming in the next few months.
Happy Trading.
Disclaimers
*Trade ideas cited above are for illustration only, as an integral part of a case study to demonstrate the fundamental concepts in risk management under the market scenarios being discussed. They shall not be construed as investment recommendations or advice. Nor are they used to promote any specific products, or services.
CME Real-time Market Data help identify trading set-ups and express my market views. If you have futures in your trading portfolio, you can check out on CME Group data plans available that suit your trading needs www.tradingview.com
DXY Outlook 20th March 2023Through last week, the DXY traded with significant volatility due to not only the Silicon Valley Bank (SVB) collapse but also the slowdown in US inflation growth, with US CPI being released at 6% (Previous: 6.4%).
As the downward pressure continues on the DXY, a brief retracement to the upside could be anticipated however, the 23.60 and 38.20 Fibonacci levels are likely to provide strong resistance.
Look for the DXY to possibly trade lower toward the 103.50 support level after the current retracement/consolidation. If the price breaks beyond 103.50, the next key support level is at 102.60.
Price could trade in a consolidation manner with some choppy action with the FOMC rate decision due this week (25bps rate hike expected)
nas100 weekly analysis hello traders new week new opportunity this is for Nas100 weekly analysis i will also update if there is some scalp setups on a daily basis just keep following lets make money
Happy CPI day! (AUDUSD Trade idea)Happy CPI day! (AUDUSD Trade idea)
Hello...Another day, another trade opportunity!
Today we have the CPI, I spoke about banks over the weekend and how they will become under pressure to rates increase, it's part of debt cycle - I will recommend you watch it as well research into what a debt cycle is and what assets get affected. Now, headlines bring in fear, in my person opinion, technically JPM was bearish pattern and it break to down side, that's when I use the classic line ' Trade what you see, not what you think'. Ignoring the noise everyday is key! It wasn't major deal we not going back to 2008! The Feds have improved as time goes by there are tools! That's another aspect you should research into! Now that's all over done with and was sorted on the weekend Sunday evening. Now we did see dollar decline and GBP, EUR, NZD headed higher AUD is lacking the momentum, there are several factors why as we see copper range bound, AUD this week unemployment rate but today we do have CPI which could edge this certain pair either direction. A good set up to trade would be AUDNZD.
Estimated to be CPI y/y: 6.0% Banks has there view of it being in-line. Now, if we look at CME rate basis %, the risk of 50 basis point is declining and 25 maybe priced in but for the feds to hike even further that's declining as well.
Technically AUD: RANGE for now.
Within range, at key trendline resistance a break above I expect 200 EMA to be target areas. If we break below the key support areas of 0.65750 areas then I expect 0.64700 areas.
Trade Safe!
Trade Journal
DXY:The dollar seems to gain it original value after a mix CPIHey Traders, DXY was trading in a downtrend, but after a mix CPI the dollar managed to breakout massively the trend and now seems to form a bull flag. in today's trading session i will be monitoring DXY for a potential retrace of the trend around 104 Supply and Demand zone.
Trade safe, Joe.
CPI Should've taken us Above 1.07371 Daily Level ?My expectations for EU Bulls and CPI data missed. Even though my bias is still Bearish on EU as long as we hold below 1.07371 on the 4hr, I Would've liked to see Bulls prove me wrong and take us up to the next 4hr level at (1.07625) This did not happen.
AUD/USD falls ahead of employment reportThe Australian dollar, which has posted strong gains early in the week, has run into a wall on Wednesday. In the European session, AUD/USD is trading at 0.6638, down 0.66%.
Australia releases the February employment report on Thursday (Australia time). Job growth is expected to rebound, with a consensus of 48,500 after a soft January read of -11,500. The unemployment rate is expected to tick lower to 3.6%, down from 3.7%. The Reserve Bank of Australia will be watching closely, as a robust labour market has enabled the central bank to continue its tightening - the Bank raised rates last week by 25 basis points, a 10th straight hike which brought the cash rate to 3.60%. The good news is that the end of the tightening cycle could be near, with the markets pricing in a pause at the April meeting. Consumers and businesses are weary of rising interest rates and confidence indicators do not paint an optimistic picture.
Along with the job data, Australia releases consumer inflation expectations for March. The markets are braced for the indicator to rise to 5.4%, after a 5.1% gain in February. Inflation expectations is a key inflation gauge as it can set the direction of actual inflation, and the RBA will not be happy if inflation expectations accelerate.
There is an uneasy calm in the air as the dust begins to settle after the Silicon Valley Bank collapse. The sky is not falling, not even above US bank towers, as regional bank stocks have rebounded. The US inflation release on Tuesday delivered as expected, with both the headline and core CPI readings matching the estimates. Headline CPI fell to 6.0%, down from 6.4%, while the core rate ticked lower to 5.5%, down from 5.6%. Inflation is cooling but we're not seeing the disinflation process that the markets were celebrating only a few weeks ago.
AUD/USD is testing support at 0.6639. Below, there is support at 0.6508
0.6713 and 0.6844 are the next resistance lines
BTC CPI 14/03/23 continued pt.3CPI came in as expected and so the orange path line played out almost perfectly.
BTC on the HTF just printed a swing fail structure and therefor in theory should be bearish, however it's not so simple with everyone feeling that way about it we could get one last push up towards 28k beforehand.
EURUSD after CPIEURUSD after ICP
The news has passed but there were no good entry opportunities.
No new trades at the current levels as well.
Pullback from the support level at 1,0600 is needed in order to get into buys.
No grounds for sell trades too, at the moment!
That’s why it’s better to wait for the development and to look at another instruments meanwhile.
Tomorrow the interest rates from the ECB will be published, which will also have an impact.
XAUUSD Potential Forecast | 15th March 2023Fundamental Backdrop
1. Market sentiments has shifted bearish for the USD
2. With the ongoing Silicon Valley Bank crisis, USD has been very volatile and there has been plenty of fear with the USD.
3. This sets the path for further bearish pressure on the USD.
Technical Confluences
1. Extremely strong bullish pressure can be noticed on the GOLD chart.
2. Price has already came up >800 pips since the lows.
3. Previous bearish structure has all been shifted bullish.
4. Price can potentially break the previous high at 1959.6.
Idea
Anticipating price to form a new higher high at 1959.6.
NOT FINANCIAL ADVICE DISCLAIMER
The trading related ideas posted by OlympusLabs are for educational and informational purposes only and should not be considered as financial advice. Trading in financial markets involves a high degree of risk, and individuals should carefully consider their investment objectives, financial situation, and risk tolerance before making any trading decisions based on our ideas.
We are not a licensed financial advisor or professional, and the information we are providing is based on our personal experience and research. We make no guarantees or promises regarding the accuracy, completeness, or reliability of the information provided, and users should do their own research and analysis before making any trades.
Users should be aware that trading involves significant risk, and there is no guarantee of profit. Any trading strategy may result in losses, and individuals should be prepared to accept those risks.
OlympusLabs and its affiliates are not responsible for any losses or damages that may result from the use of our trading related ideas or the information provided on our platform. Users should seek the advice of a licensed financial advisor or professional if they have any doubts or concerns about their investment strategies.
EURUSD Potential Forecast | 15th March 2023Fundamental Backdrop
1. Market sentiments has shifted bearish for the USD
2. EURUSD has more room to continue bullish
3. Market is leaning towards a 25bps rate hike but FOMC may still hike by 50bps considering the minimal slow down in CPI yesterday.
Technical Confluences
1. Price recently bounced off the H4 support level at 1.06903 and we can potentially see bullish continuations from there.
2. Bullish pressure is waning, a retracement can occur for the bulls to continue heading up.
3. Market structure has shifted bullish.
Idea
If price closes below 1.069, that would be a good area to look for longs position on the lower timeframe. Ultimately, anticipating EURUSD to continue bullish.
NOT FINANCIAL ADVICE DISCLAIMER
The trading related ideas posted by OlympusLabs are for educational and informational purposes only and should not be considered as financial advice. Trading in financial markets involves a high degree of risk, and individuals should carefully consider their investment objectives, financial situation, and risk tolerance before making any trading decisions based on our ideas.
We are not a licensed financial advisor or professional, and the information we are providing is based on our personal experience and research. We make no guarantees or promises regarding the accuracy, completeness, or reliability of the information provided, and users should do their own research and analysis before making any trades.
Users should be aware that trading involves significant risk, and there is no guarantee of profit. Any trading strategy may result in losses, and individuals should be prepared to accept those risks.
OlympusLabs and its affiliates are not responsible for any losses or damages that may result from the use of our trading related ideas or the information provided on our platform. Users should seek the advice of a licensed financial advisor or professional if they have any doubts or concerns about their investment strategies.
DXY Potential Forecast | Pre-CPI | 14th March 2023Hi everyone, back with a pre CPI forecast.
Today's CPI release will be wild and will be the determining factor to solidify the general direction and bias on the USD.
There has been very bearish sentiments on the USD since last Friday after NFP's release.
Fundamental context
1. Employments was good, well above the forecasted or what the market has been pricing in.
2. This shows the strong labor market in the US economy.
3. However, average hourly earnings increased at a decreasing rate to 0.2% from 0.3%.
4. This shows the slowing down of the wage inflation, which is directly correlated with the inflation print and numbers, showing an important signal/sign that inflation could be worse off.
5. In addition, unemployment rate increased by 0.2% compared to previous months.
6. The average earnings and unemployment rate prints showcases the effect of the continuous rate hikes that the Fed has partaken in.
7. This directly discourages the Fed from taking on a more hawkish stance in the market, upon seeing the fruition of the restrictive policy the Fed has performed.
CPI
1. If CPI were to be worse off than forecasted, this really solidifies the bearishness of the USD as it confirms that the Fed policy has been coming to fruition and there might not be a need to hike interest rates anymore.
2. However, if CPI print continues to be resilient and strong or greater than expectations, there is a marked chance that the Fed will hike interest rates by 50bps in the upcoming FOMC meeting, in which this hawkish stance will continue to drive the market bullish for the USD.
3. All eyes will be on the CPI print tonight.
Regards,
Chern Yu
PPI Data, Rate Hikes, QQQ / SPX Support and Resistance- CPI data came in expected today, excpet core is 0.1% hotter market didn't really care since we need something really hot to not get a 0.25bps
- PPI data likely will come in expected as well today, since CPI was pretty aligned so technical matter more now
- SPX came close to 200 MA today rejected the 3940 area but QQQ is above 200 MA
- QQQ and SPX reject resistance at the same time
- QQQ broke 294.5 support (yesterdays triple top resistance) in the afternoon and bears didn't follow through bulls V shaped into close
- KRE and XLF both still in daily bear flag territory.
KEY QQQ & SPX BOTH is still under resistance even though we V shaped we closed right under it, so still in the chop range, I am neutral now yesterday i was bull lean and played the bull move this morning as i mentioned when we broke the triple top resistance at 294.5 QQQ I am going long. Now at this range its anyone's game since there are both bear thesis and bull thesis that are both correct at these levels. currently all cash took profit this morning likely scalping depending on which side we break tomorrow.
Key Levels and US Market Review for the Asian session open 15/03A review of the price action from the European session and the US session.
European markets moved higher once US CPI was released and ended with gains to reverse some of the previous move down. The US was under pressure for a large part of the session only ending in green after a late rally into the close. US Data out showed inflation remains a problem and it is too early to think the Fed will pause rate rises.
I remain of the view that sticky inflation is the big issue and will weigh on share markets if the Fed, and other major central banks, can not get it under control....this all points to more 'risk off' into major share markets.
I look at some key levels to watch and the price action setups I expect to see play out on the major markets below.
Markets covered :-
DOW
Nasdaq
DAX
FTSE
ASX200
Hang Seng
USD Index
Gold
Oil
Copper
XAUUSD No trade range!!!Good evening gold gang!
well cpi didnt provide us with tonnes of volume! weird. I managed to get the small scalp on the strong down move with a 15m candle close but other than that .. price has ranged as i thought it might (see previous analysis)
Asian session .. my trade levels remain the same. Im looking to take the breaks above and below the range. No clear direction as yet. DO NOT trade the range, its too risky.
Thanks again for all the love on my posts. Im very much enjoying it as trading is a pretty lonely game .. and chatting to you guys and sharing my ideas is keeping the spark alive for me.
Catch you for London session.
tommyXAU
BTC CPI 14/03/23 continued...As the data came in, CPI at 6.0% YoY as estimated means that we get a priced in result.
As I previously stated this result is priced in and is ultimately neutral. The orange path followed nearly perfectly, I did predict more of a bearish swing after breaking the previous swing high at 25.5k.
We're back within range currently, maybe we get some late longers that drives up price once more but I could see BTC cooling off for a bit. Any further loses would look quite bad on the daily timeframe.
British pound's rally fizzles as markets settle downThe British pound has reversed directions after an impressive rally that saw GBP/USD climb 370 points. In the European session, GBP/USD is trading at 1.2154, down 0.24%.
The collapse of the Silicon Valley Bank (SVB) on Friday sent the financial markets into turmoil on Monday. US bank stocks declined sharply, while safe-haven gold powered higher. The US dollar retreated against the major currencies and the 2-year Treasury yield fell almost a full point. Tuesday has brought better news, as the markets appear to have settled down. The US dollar has regrouped and is higher against the majors.
There is an uneasy calm in the air, but that doesn't necessarily mean that this latest crisis is behind us. Investors are on alert and will be very sensitive to new developments and any negative news could renew market volatility. The Fed and Treasury Department acted quickly to protect depositors and President Biden sent a reassuring message at an impromptu television address, but the collapse of the 16th largest lender in the US means it's unlikely to be "business as usual" for some time.
It was just a week ago that Fed Chair Powell's hawkish testimony on the Hill raised expectations of the Fed delivering a 50-bp increase at the March 22 meeting. Those expectations have vanished into smoke, with the markets now expecting a 25-bp hike, with an outside chance of a pause. We could see further market repricing after today's CPI report, with headline CPI expected to fall to 6.0%, down from 6.4%.
In the UK, the employment report was within expectations. The unemployment rate remained at 3.7%, shy of the estimate of 3.8%. Hourly earnings fell to 5.7%, as expected, down from an upwardly revised 6%. The pound hasn't reacted to the release and the data is unlikely to change minds at the Bank of England, which is expected to raise rates by 25 bp at the March 23 meeting.
GBP/USD tested resistance at 1.2113 earlier in the day. Above, there is resistance at 1.2294
There is support at 1.1984 and 1.1854
SVB: Understanding and Managing Interest Rate Risks CBOT: 10-Year Treasury Futures ( CBOT:ZN1! )
Last Wednesday, Silicon Valley Bank (SVB) NASDAQ:SIVB announced that it incurred $1.8 billion loss in the sales of its bond portfolio and sought to issue new shares. Within 48 hours, a bank-run induced by panic customers brought down the legendary bank.
On Friday, US banking regulators seized control of SVB. By Sunday, the Treasury Department, the Federal Reserve, and Federal Depository Insurance Corporation (FDIC) jointly announced a rescue plan that would make whole all depositors. However, SVB shareholders are not protected.
Why has happened to the well-respected and once well-capitalized bank?
Opportunity and Risk Go Side-by-Side
Traditional banks seldom extend credit to startups, which are mostly under-collateralized, with little or no profit and big uncertainties about their future survival.
SVB developed a niche competitive edge to provide banking services to companies funded by venture capitals. In the past 40 years, it nurtured many high-profiled tech startups through their entire life cycle, from early-stage to IPO and to Big-Tech giants.
If Sequoia Capital invested in your firm and you apply for a loan from a commercial bank, you can expect the loan officer to ask: “Sequoia Who?” But if you go to SVB, they would say: “$10 million will be in your account tomorrow.”
VCs are exceptionally good at spotting future technological trends, and they follow a rigorous due diligence process to pick investing targets. By working with VCs and startups closely, SVB created an ecosystem that foster technological innovations, and grew to become the 16th largest US bank by deposit.
However, SVB’s concentration in the high-tech sector also make it vulnerable to a boom-and-bust cycle. Last year, bear market hit the industry hard. Publicly traded firms couldn’t raise money with falling share prices. Private companies found the path to IPO got blocked. As startup clients withdrew deposits to keep their companies afloat, SVB is short on capital. It was forced to sell most available-for-sale bonds at a huge loss.
Bad news travelled fast in close-knit tech investing community. VCs urged their portfolio companies to get the hack out of SVB. All told, customers withdrew a staggering $42 billion of deposits on Thursday. By the close of business day, SVB had a negative cash balance of $958 million, according to the filing, and this triggered the government takeover.
A Commercial Bank with a Failing Grade
In fiscal year 2022, SVB earned $4.5 billion in Net Interest Income (NII) and $1.7 billion in non-interest income. When you take away the bells and whistles, SVB is by large a commercial bank. About 73% of its revenue comes from taking in deposits at a low interest rate and making loans at a higher interest rate.
Based on its 2022 10K filing, SVB managed $209.2 billion in total interest-bearing asset and earned $5.7 billion. This represented an effective yield of 2.73%. During the same period, SVB paid out $1.2 billion in funding cost, which equated to 0.57%.
• Therefore, in 2022, its NII = 2.73% - 0.57% = 2.16%
• In comparison, its NII for year 2021 was 2.02% (=2.09% - 0.07%).
• On the surface, SVB was doing well, with NII spread increasing by 14 basis points year-over-year.
What has gone wrong then? Dive deeper into SVB’s balance sheet, we see the long-dated Treasury bonds and illiquid mortgage-backed securities it held got hammered by the rising interest rates. Simply put, SVB got its interest payment back, but the value of its investment principal eroded in a huge way in a rate-hiking environment. All in all, managing interest rate risk is at the core of banking business.
A Naked Bond Portfolio
In its 10K, SVB puts its investment portfolio in Available-For-Sales (AFS), Held-To-Maturity (HTM) and Non-marketable securities categories.
AFS balance was $26.1 billion as of December 31st, including:
• U.S. Treasury securities $ 16,135m (61.9%)
• Agency-issued MBS $6,603m (25.3%)
• Agency-issued CMBS $1,464m (5.6%)
• Foreign government debt securities $1,088m (4.2%)
• Agency-issued CMO—fixed rate $678m (2.6%)
• U.S. agency debentures $101m (0.4%)
• Total AFS securities $26,069m (100%)
Last week, SVB sold $21 billion in the AFS portfolio and incurred a loss of $1.8 billion, or -8.6%. AFS assets are marked to market every quarter. My understanding is that the loss figure was based on selling price vs. year-end fair market value.
Total loss calculated from purchasing price could be much bigger, as these bonds may have been marked down multiple times during previous quarters. Evidence: Since March 2022, CBOT 10-Year Treasury Futures (ZN) price went down from 124 to 109 (-12%) and 30-Year Treasury Bond (ZB) fell from 152 to 118 (-22%).
CBOT Treasury futures market, with its sheer size and liquidity, makes it the marketplace of choice to manage interest risk in times of uncertainties. Each ZN contract has a notional value of $100,000.
• On Monday March 13th, daily trading volume is 3,760,911 lots, which translates into total notional of $376 billion. Open interest (OI) stands at 4,311,338, or $431 billion in notional.
• Volume and OI for ZB are 719,518 and 1,209,881, respectively. Notional value for each is $72 billion and $121 billion, respectively.
What’s Next
On Friday, Signature Bank customers spooked by the SVB collapse withdrew $10 billion. That quickly led to the bank failure. Regulators announced Sunday that Signature was being taken over to protect its depositors and the stability of the U.S. financial system.
Despite government intervention over the weekend, fear ran contagious through the financial industry this Monday. San Francisco’s First Republic Bank, which had $212 billion in assets at the end of 2022, saw its stock price plunge as much as 70% when the market opened Monday morning.
By market close, US stock market stabilized. Investors wonder if a banking crisis could be the final punch to end the year-long Fed rate hikes.
Lessons Learnt
As investors, we usually allocate our financial assets across various instruments, such as stocks, bonds, and derivatives. The 60 (stock) / 40 (bond) portfolio is the most popular advice from Wall Street.
People generally pay more attention to what stocks to buy and hold, but we may not think twice about managing interest risk in a rising rate environment. The SVB fallout shows that even the safest, risk-free Treasury bonds, if not actively managed, could fall prey to interest rate changes and liquidity risk, resulting in loss of market value.
For me, this is a wake-up call and a good time to review my bond holdings. Some may be hidden in a 401K retirement plan. Hedging interest rate risk with CBOT Treasury futures and Micro Yield futures could go a long way to stay solvent.
A View on Interest Rate Trajectory
Today, the Bureau of Labor Statistics reports that the consumer price index rose 0.4% in February and 6% from a year ago, in line with market expectations. This is the most recent data the Fed will consider before it makes interest decision on March 22nd.
Inflation is cooling, but still too high. A bank run shows how damaging rising interest rate is to the economy. Whether the Fed will continue its rate hikes, pause them, or end them altogether, I think all options are open.
In my view, interest rate is in an uncharted territory once again. With investors in panic mode, they will likely overreact to the Fed decision. This may be a good time to place an order of out-of-the-money options on CBOT 10-Year Treasury Futures (ZN).
On March 14th, the June ZN contract is quoted at 113’220. Quoting convention in Treasury market is 100 and 1/64th. The quote reads as (113 + 22.0/64), or $113.34375 on $100 par value.
If the Fed slows or pause the hike, Treasury price will likely go up. Call options would be appropriate in this case.
• The 115-strike call is quoted 0’20 (=20/64). This is converted into $312.5 premium on the $100,000 contract notional for each contract.
If the Fed stays its course on fighting inflation, Treasury price could fall. And put options would be a way to express your view.
• The 112-strike put is quoted 0’14, or $218.75 premium per contract.
Happy Trading.
Disclaimers
*Trade ideas cited above are for illustration only, as an integral part of a case study to demonstrate the fundamental concepts in risk management under the market scenarios being discussed. They shall not be construed as investment recommendations or advice. Nor are they used to promote any specific products, or services.
CME Real-time Market Data help identify trading set-ups and express my market views. If you have futures in your trading portfolio, you can check out on CME Group data plans available that suit your trading needs www.tradingview.com
XAUUSD NY Trade Ideas Whats up gold gang!! hope you're well
as suspected, price is ranging. DO NOT trade in the range .. thats how you lose accounts!!
I have marked my 2 areas im waiting to break for gold. Anything else is not valid!
Lets see what we get!! Please like and follow along for more
tommyXAU
EURUSD 4H: 14/03/2023: CPI will affect... !
Well, you can see all the possible scenarios on the chart.
Personally, I see this chart as bearish.
Let's see.
💡Wait for the update!
🗓️14/03/2023
🔎 DYOR
💌It is my honor to share your comments with me💌
