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NZD/USD for long? There is a potential inverted head and shoulders pattern on the nzd/usd chart. So it all depends on the CPI numbers; if we see a price drop to the 0.6060 area, and if the CPI numbers come in lower than expected, we can consider the scalp long position relatively safe at that point. Higher CPI numbers are very likely to extend USD strength (in which case you can wait for the bullish pattern to fail and go short), so don't anticipate the numbers and wait for clarity.
by merjemascerija
Commodities: Tug of War between Tight Supply and Weak DemandThis is the 2nd installment of “The Great Wall Street Repricing” series. The price of a commodity is determined by the interaction between the demand and supply of its market. This year, such interaction acts like a Tug of War. On the one hand, tight supply pushes commodity price upward; on the other hand, weak demand pulls the price back down. Commodity prices swing wildly as each side battles for supremacy. News that signals supply disruption sends prices flying. It could be geopolitical tension, bad weather, restrictive government policy, or an oil tanker stuck in the Suez Canal. Meanwhile, high inflation, weak housing market, disappointing retail sales, and Fed rate hikes all raise worry of a global recession and the consequential demand reduction. Not all commodities are created equal. I have made some interesting observation: Commodities primarily used as a production input hold up much better than those being consumed by end users. To prove my point, let’s review the price data at market close on September 2nd. In the energy market: • WTI crude oil ( NYMEX:CL1! ) is settled at $86.4 per barrel, down 11.9% month-to-date (MTD) • RBOB gasoline ( NYMEX:RB1! ) closes at $2.38 a gallon, down 23.3% MTD • Oil Supply: There is no elasticity. Crude oil production capacity is capped in any given year • Demand elasticity: Consumers could adjust their driving habit in response to inflation American Automobile Association (AAA) reports today that national average retail price of regular gasoline is $3.809, down 9.1% MTD, but diesel, at $5.067 a gallon, is down less than 4% MTD. Why? Diesel is mainly used for highway transportation of goods by trucks. Delivery routine has less flexibility to change comparing to consumer driving behavior. In the food market: • Corn ( CBOT:ZC1! ), a main ingredient in livestock and poultry feed, closed at $6.58 per bushel, up 6.7% MTD • Lean hog ( CME:HE1! ) is settled at $0.919 per pound, down 3.7% MTD • Corn price is vert sensitive to supply factors such as plant acreage, weather, and yield • Hog price is more correlated to demand factors, including export of US pork, and consumer seasonal changes of dietary habit • Pork has substitutes. When it gets expensive, consumers could switch to cheaper meat. People in poorer countries could simply reduce meat consumption On August 2nd, I expressed my view in a trade idea titled “Short the Hog Margin if You Expect Lower Pork Price” In the metals market: • High Grade Copper ( COMEX:HG1! ) closed at $3.408 per pound, down 4.2% MTD • Silver ( COMEX:SI1! ) is settled at $17.655 per troy ounce, down 12.6% MTD • Both copper and silver are industrial materials. They declined in response to economic slowdown, but there is a significant difference • About 50% of silver supply is used in industrial applications, with the other 50% being used as a previous metal or for daily use • Consumers will buy less silver jewelry in tough times. This explains why silver declined three times as much as copper. In the credit market: • 2-Year Treasury yield ( CBOT_MINI:2YY1! ) closed at 3.514%, up from 2.950% last month • 10-Year Treasury yield ( CBOT_MINI:10Y1! ) settled at 3.272%, up from 2.727% last month • Both went up in response to Fed’s rate hikes, but there is a difference • 2-Year Note has a direct relationship with Fed Funds rate. It reflects the cost of money (rate hike) and the supply of money (quantitative tightening) • The yield of 10-Year Note also reflects money demand in addition to money supply • In an economic downturn, businesses and consumers will reduce borrowings. The spread between deposit interest and lending rate will be tightened • This makes sense – with lower loan volume, banks are willing to make less What about High Interest Rate and High Inflation In the first installment, we discussed the impact of high rate and high inflation from the perspective of discounted cash flow valuation model. • High interest rate increases the discount factor, the denominator of the equation • High inflation increases production cost and reduces sales, which results in smaller free cash flow, the numerator of the same equation • The combined effect is a lower stock valuation Aligning with what we discuss today, we may find the inflationary impacts differ depending on whether the commodities are industrial materials or bulk consumer products. Inflation means higher price. It is generally good for those commodities primarily used as production input, such as natural resources. Energy producers, metal dealers and mining companies have all made record profit this year. However, if persistent inflation eventually leads to a recession, commodity price would fall due to lower demand. It’s an entirely different story for companies producing bulk consumer products. As we discussed earlier, hog farmers get squeezed by higher feed cost and lower meat price. Jewelers would find customer traffic significantly reduced due to higher prices of gold and silver jewelry. The impact of higher interest rates is more uniform for most commodities. It increases the borrowing costs on anyone engaged in producing, processing, transporting, and using the commodities. Higher cost results in lower usage, which would depress commodity price. In addition, a strong dollar raises the price for overseas consumers when they pay with a weaker foreign currency. I think we have covered a lot today. Let’s take some time to digest and identify market opportunities with these observations. Financial market is extremely volatile this year. Getting an information edge increases your odds of success in managing risk. I suggest leveraging real-time market data for a better gauge of market situation. TradingView users already have access to delayed data. A Pro user could upgrade to real-time CME market data for only $4 a month, a huge discount at the time of high inflation. 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.
NYMEX:CL1!Short
by JimHuangChicago
2
The Only Chart That Matters for The Next DecadeConsumer Price Index Year over Year (CPI YOY) vs 2 Year Yield (2YY) vs Fed Funds. To even begin to arrest inflation, the Fed has to get Fed Funds above the 2YY. To break the back of inflation, the Fed must get Fed Funds above CPI YOY. Does the most recent drop in CPI YOY mean that peak inflation is already in? People forget that when inflation runs hot, so does its volatility. For lasting inflation reduction, the Fed has to get to the real neutral rate. And consider that the CPI formula you are seeing in this chart has been altered numerous times, proponents would say to better reflect productivity gains, critics would say to mask real inflation to benefit the government. Whatever you believe, if we calculated CPI the way we did in 1980 it would be nearing 18% . So it's much, much worse than this. This is the only chart that matters for the next decade.
FRED:FEDFUNDS
by UnknownUnicorn1334230
Euro inflation rises, but euro yawnsThe euro continues to have a calm week. In the North American session, EUR/USD is showing little movement as it trades a whisker above the parity line. Inflation in the eurozone continues to move higher. In August, CPI rose to 9.1%, up from the July gain of 8.9%, which was a record high. Core inflation climbed to 4.3%, up from 4.0%. With both the headline and core readings exceeding the forecast of 9.0% and 4.1%, respectively, there will be additional pressure on the ECB to tighten policy more at an accelerated pace. The central bank has been slow to shift its accommodative policy, which was in place for years in order to support the eurozone economy. The ECB now finds itself playing catch-up with inflation, and is also far behind in the tightening cycle compared to other major central banks, with a benchmark rate of just 0.50%. Inflationary pressures remain broad-based, which means inflation is well-supported and unlikely to decline anytime soon. The eurozone inflation report comes just a day after Germany, the largest economy in the bloc, reported that August inflation jumped to 7.9%, up from 7.5% in July and nudging above the forecast of 7.8%. The central bank meets next on September 8th, and there is a strong possibility that the ECB could come out with guns blazing and deliver a super-size 75 basis point increase. A potential energy crisis in Europe continues to hover like a dark cloud, and the uncertainty over whether Moscow will weaponise energy exports remains a massive concern. The Nord Stream 1 pipeline has been shuttered for a scheduled three-day maintenance, but there are fears that Russia will find some excuse and not renew gas flows on Saturday. Any disruptions would likely push European gas prices even higher. In the meantime, the waiting game is on, with Western Europe on edge while it anxiously waits for the gas taps to be turned back on. EUR/USD has support at 0.9985 and 0.9880 1.0068 is a weak resistance line, followed by 1.0173
by OANDA
Hawkish FED Keeps USD In UptrendUnfortunately, stock markets are where they are, and we cannot force them to move in a particular direction. We see a neutral status at the end of the summer, but this volatility may come back in September. We may see some interesting price action already this week when US will release its important jobs data. Fed watches this data closely, but what’s important is that they were very clear lately and said that they will stay hawkish even if FED’s actions will cause some harm to the US economy . So for now, the USD remains in uptrend because of US yields. From an Elliott wave perspective, we see US yields trying to break higher into a fifth wave now, so this can cause even more weakness XXX/USD pairs. But when the fifth wave will hit a new high on yields, that’s when we should be aware of a new change in cycle, ideally later this year. But any major reversals in cylce will not happen that easily, especially now with current FEDs actions and potential bad data. Bad or good data; it doesn’t really matter; the stock market will have a hard time turning back to the highs. Yes, stocks can stabilize if we see bad data, but if we will start seeing bad data week after week then this means a big economic slowdown and a potential recession. Expensive capital, inflation, and economic downturn is a bearish case for stocks. There is simply no "free" cash available to be invested in the stock market.
TVC:US10Y
by ew-forecast
4
Is it almost time for Bitcoin to fly again?Hey Traders. I'm bringing you a mid-week update for a couple of reasons: 1. I will be OoO (Out of Office) the remainder of the week. 2. Many indicators are showing me we are getting very near a bottom here. 3. I want to prepare you to move when the market moves. This could happen while I am OoO. 4. I want to show you the trades I am still in and what I am looking at next. For the record, I closed my Matic short for profit. And I am still long Doge, Gods, NWC. The spreadsheet has been updated with all of the most recent data. And if you don’t have time to watch it, basically, the short and skinny is that we are drawing near to that Sept 13 date when new CPI data is released and the FED makes further commentary on it. All the charts and indicators point to some big moves happening around that time frame. Could go either way but I am fairly optimistic about what the charts are showing me. Take a look at Bitcoin for instance: Here is our longer-term (10 months plus) bullish descending wedge which we are nearing the end of. And inside of this bullish wedge is another bullish wedge: More and more signals are beginning to show green lights soon. Let’s pay attention here. Stew
COINBASE:EOSUSDLong
by stewdamus
2
Why Crude Oil is Trending Higher Again, Breaking Above US$100In this tutorial, I will explain both its fundamental and technical reasons for crude oil likely to break above and stay above US$100. I am having two portfolios at all times, one for long-term investing and the other for short-term trading. For the long-term I am mindful the current global inflationary pressure is real and it may last many months or even years ahead. Therefore, my current investment mandate: • U.S. stock markets – To trade them • Commodities – To buy them Disclaimer: • What presented here is not a recommendation, please consult your licensed broker. • Our mission is to create lateral thinking skills for every investor and trader, knowing when to take a calculated risk with market uncertainty and a bolder risk when opportunity arises. For your reference: NYMEX Crude Oil $0.01 = US$10 Example: From $94.00 to $100.00 (10000-9400) x US$10 = US$6,000
NYMEX:CL1!Education
by konhow
1