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How is Your Trading This Year?30Y Micro Yield ( CBOT_MINI:30Y1! ), Micro Nasdaq ( CME_MINI:MNQ1! ), Chinese Yuan ( CME:CNH1! ), Live Cattle ( CME:LE1! ) On January 2nd, I published an idea titled “Year of the Rabbit: ‘Short-tailed’ Trading”. My outlook for the new year was: “In the new year, uncertainties will remain the key price drivers of global stock markets: central bank policy, inflation, economic growth, geopolitical crisis, and China reopening. Depending on the specific outcome, the impact of a given factor could range from very positive to very negative, and anything in between.” Eight months into 2023, we have witnessed some extraordinary events playing out: • US regional bank crisis shocked the global financial markets. However, swift government actions helped starve off a chain reaction that could trigger systemic risk; • Decades-high US inflation has quickly come down. Fed tightening policy does work, even though it usually has a 10-month lag; • The US debt ceiling has found a resolution. Instead of raising the debt limit, Congress suspected it for two years. In a matter of two months, the national debt has increased by $1.3 trillion. This helped push Fitch to downgrade the US sovereignty rating; • China reopened after three years of Zero-Covid policy. While the economy rebounded in Q1, it quickly deteriorated in Q2. The economic engine seems to lose steam quickly. Trading Strategies Revisited Under these macro backdrops, it’s a good time to revisit some of my own trade ideas. I write on TradingView weekly and have published 31 ideas so far in 2023. Of these ideas, TradingView selected 13 to be featured on “Editors’ Picks”. Below are recaps of four ideas published in July and August. July 10th: Housing Cost Jumps Amid Falling Inflation Trade Idea: Long CBOT 30-Year Micro Yield Futures ($30Y) My theory: • The decline in home sales countered the effect of rising funding cost, putting the mortgage rates in sideway moves. • Now that the housing market recovers, 30-year Fixed could be on the way up. • July FOMC meeting could provide a boost if the Fed raises 25 bp as as indicated by the Fed Watch tool? . Hypothetical Result for Illustration Purpose Only: • Changes in market prices: August contract (30YQ3) was quoted 4.012 on July 7th and 4.381 on August 18th, an increase of 369 points; • Gain (Loss): Each point is worth $1. Therefore, 1 long 30YQ3 would gain $369; • Return: Using the $290 margin as cost base, this trade would have a return of 127%. Where are we now? It’s my long-held belief that the negative yield curve environment would reverse back to normal. Yield spread is finally narrowing. 30Y yield is now higher than 10Y yield. July 24th: Implications of Nasdaq 100 Rebalancing Trade Idea: Spread trade – Buy S&P Technology Select Sector Futures ($XAK) and Sell Micro Nasdaq 100 Futures ($MNQ) My theory: • The Nasdaq 100 rebalancing is a unique issue with the Nasdaq 100 index. It has nothing to do with the fundamentals of these companies and has no impact on other Tech sector stock indexes which also include the same component companies; • In the long run, Nasdaq 100 rebalance will dilute the impact of the largest stocks. Strong growth in Big Tech will be fully represented in XAK but capped in MNQ. Hypothetical Result for Illustration Purpose Only: • Market prices: MNQ and XAK were quoted 1,786.60 and 15,555 respectively on July 21st. On August 18th, they were settled on 1,665.20 and 14,744, respectively. • Trade setup: 1 XAK - 6 MNQ = (1 * 1786.6 * 100) - (6 * 15555 * 2) = 8,000 • Initial margins: 9500 + 1680 * 6 = $19,580 • New Spread value = (1 * 1665.2 * 100) - (6 * 14744 * 2) = 10,408 • Gain (Loss):10,408 – 8,000 = $2,408; • Return: Using the $19,580 margin as cost base, this trade would have a return of 12%. Where are we now? As expected, XAK held up better than MNQ even though both were trending down. August 7th: What Disinflation: Beef Price Went Up 64% in 5 Years Trade Idea: Short Cattle-Hog Spread – Sell Live Cattle ( NASDAQ:LE ) and Buy Lean Hog ( NYSE:HE ) My theory: • In my opinion, the cost factor pushing pork prices up in the short run is greater than the supply-demand force that drives up beef prices in the long run. • There may be room to short the cattle-hog spread, until pork prices stabilize in a new equilibrium. Hypothetical Result for Illustration Purpose Only: • Market prices: LE and HE were quoted 183.10 and 83.25 respectively on August 4th. The cattle-hog spread was 99.85; On August 18th, the new spread was 96.41 (LE 178.53 vs. HE 82.13) • Gain (Loss): The cattle-hog spread was narrowed by 3.44. Since we short the spread, we would gain $1,378 (=3.44 x 400); • Return: Using the $3,200 margin as cost base, this trade would have a return of 43%. Where are we now? Cattle futures were down 2.5% while hog lost 1.4%, which helped narrow the spread. August 14th: CNH – Hedging Currency Risks Trade Idea: Long USD/Offshore RMB Futures ( FWB:CNH ) My theory: • The key drivers in the US/China currency exchange rate: relative interest rates; relative stock market performance; relative economic strength; and the dynamics of the US-China relations. • Yuan could break out of the recent range with USDCNH going above 7.50, if there are more headwinds ahead Hypothetical Result for Illustration Purpose Only: • Market prices: September contract (CNHU3) was quoted 7.2646 on August 11th and 7.2921 on August 18th, an increase of 275 points; • Gain (Loss): Each point is worth 10 yuan. The gain would be 2750 yuan, or $377 at current market price; • Return: Using the $21,100 margin as cost base, this trade would have a return of 1.8%. Where are we now? • Since I published this idea a week ago, the CNH exchange rate broke critical support levels of 7.27, 7.28, 7.29 and 7.30 sequentially; • In my opinion, the government would prioritize stabilizing the economy and monetary easing policies over the task of defending its currency; • A weaker Yuan may be even preferable as a policy tool to support China’s export. 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
CBOT_MINI:30Y1!Long
by JimHuangChicago
3
KOG - JACKSON HOLE Part 1Jackson Hole Symposium: What is the Jackson Hole Symposium? The Jackson Hole symposium (Economic Policy Symposium) is held in Jackson Hole, Wyoming USA. It is an event attended by the worlds top financial professionals including ministers, bankers and academics. It is a closed event so no press are allowed access to the meetings or talks. Instead, press conferences are held throughout the event where any comments from financial professionals usually move the markets and cause extreme volatility. This is not the usual analysis we provide. Instead, what we wanted to show you is the last 3-4yrs of market data illustrated on the charts, giving you an idea of what this event can do and cause on the markets. In this example, on Gold. So, lets start with last year, 2021. We can see the price was at a similar price point to where we are today, just slightly higher at around the 1780 level. The early sessions were quiet, however, after a retest of the low look at the aggressive move to the upside! Price started at 1780 and the move completed at 1836. 500+ pip move in a matter of days. Lets look at the top right chart, 2020. Again, look at the choppy price action, the whipsaw up and down, then the rested of the low before an aggressive move to the upside. Price started at 1904 and the move completed at 1994. 900pip movement in a matter of days. Now 2019, a slow start in the early sessions, all of a sudden, a rested on the low and then another aggressive move to the upside. Price started at 1491 and completed the move 1557. Over 500pip movement in a matter of days! What we’re trying to show you here is that its going to be a very difficult event to trade for new traders. Its going to be choppy, its going to be volatile, its going to whipsaw and its likely to move. If you’re caught the wrong side of it its going to kill your account. Best practice here is to let the market make the moves it wants to, wait for the price to settle in whatever level they want to drive it to, once this has happened then look for the setup to get in to the trade. Hope this helps. As always, trade safe. KOG
FOREXCOM:XAUUSDEducation
by KnightsofGold
32
Weaker China Data and Fed Interest Rate Rumors Trigger Oil PriceIntroduction: In recent weeks, the global oil market has experienced significant turbulence, with oil prices plummeting due to weaker-than-expected economic data from China and mounting rumors surrounding the Federal Reserve's interest rate decisions. As traders, it is crucial to exercise caution and carefully evaluate the potential risks associated with oil investing in light of these developments. 1. Weaker China Data 2. Fed Interest Rate Rumors Call-to-Action: Pause Oil Investing and Assess Risks Given the current market conditions and the uncertainties surrounding both China's economic performance and the Federal Reserve's interest rate decisions, it is prudent for traders to exercise caution when considering oil investments. Here are a few steps to help you navigate this challenging environment: 1. Evaluate Your Risk Tolerance: Assess your risk appetite and consider the potential impact of further oil price drops on your investment portfolio. Diversify your holdings to mitigate potential losses and explore alternative investment opportunities that may be less susceptible to oil market volatility. 2. Stay Informed: Stay abreast of the latest developments in the Chinese economy and the Federal Reserve's interest rate policies. Monitor vital economic indicators, such as China's GDP growth, industrial production, retail sales figures, and any official statements or actions from the Federal Reserve. 3. Seek Professional Advice: Consult with financial advisors or industry experts who can provide personalized guidance tailored to your investment goals and risk tolerance. Their insights and expertise can help you make informed decisions in this uncertain market environment. Conclusion: The oil market is facing considerable volatility in light of weaker China data and the ongoing speculation surrounding the Federal Reserve's interest rate decisions. As traders, it is crucial to exercise caution and carefully assess the potential risks associated with oil investing. By pausing and reevaluating your investment strategy, diversifying your portfolio, staying informed, and seeking professional advice, you can navigate this challenging environment more effectively and safeguard your investments.
TVC:USOIL
by bryandowningqln
📈MY TAKE ON THE FED, INFLATION AND CREDIT📊 TLDR: I think the price increase we are seeing is not inflation, the economy is going from bad to worse and the FED's actions don't make any sense. At the peak of the great inflation of the 70s in USA while both long and short term interest rates were going up together with inflation, so was the aggregate credit. In fact loans to businesses were growing faster than inflation. Whereas now, while the short term rates are going up the aggregate credit is going down. Businesses aren’t borrowing and the banks aren’t lending. And as it was established by Milton Friedman, inflation is exclusively a MONETARY phenomenon. Therefore price increase followed by unchanged or decreased aggregate credit in not inflation. Which is exactly what we are seeing right now. It might be attributed to the ongoing effects of the Covid era supply shock which created long lasting bottlenecks, the war in Ukraine or some other fundamental systemic economic problem but it’s not conventional inflation which means that raising interest rates will do nothing but further damage the already weak economy (which is reflected in the unprecedented drop in demand for credit) So, the further rate hikes that were hinted yesterday by the FED don’t make any sense and we should be expecting a fast race to the zero with more QE when the economic sh*t hits the political fan. But, let’s wait and see.
OANDA:XAUUSDShort
by TopTradingSignals
4
XAU USD | GOLD | DECRYPTERSGREETINGS people Welcome to "TEAM DECRYPTERS" Lets Get to the ANALYSIS AND DECODE THE MARKETS ;) FEW TECHNICALS TO CONSIDER :- 1- ELLIOT WAVE CORECTIVE STRUCTURE 2- DECEDNING TRAINGLE 3 - POSSIBLE H & S ON DAILY / WEEKLY 4- BEARISH ORDER FLOW 5 - SMC INDICATIONS FOW DOWN SIDE AS WELL 6- WE Expecting MONTHLY AS BEARISH FOR GOLD FUNDAMENTALS IN FAVOUR :- 1- DXY TARGET 105 -107 ( So we Are Expecting Gold to Be Consolidating or Bearish ) 2- We Are Expecting 1 MORE RATE HIKE OF 25 BPS So gold seems Bearish 3- Rate cuts Surprise Matter will Add Additional Fuel to it ( AS We Expect Rates to be Held MUCH longer At least MARCH - JUNE 2024) 4- Banks Still Need to Book profits on Their positions and also to get GOLD On Cheaper prices In order to USE As collateral 5- Risk of Recession Getting Lower can *PRICED OUT* The effect of Gold bullishness FUNDAMENTALS FROM COUNTER BIAS :- 1 - BANKS RUNS / COLLAPSE CAN MAKE Counter Move- 2- "Margin call" ( No Data posting on this Matter)- 3 - Any Sort of Geopolitical Dis Order ( EXP :- WAR)- NOTE :- We Can Retrace 300 - 400 PIPS ON Upside But it still Will be Valid (considering 1900 ISH level ) Hope it Helps you all in Your long Term view and Analysis
OANDA:XAUUSDShort
by DECRYPTERS
GBP/USD steady ahead of jobs dataThe British pound is quiet at the start of the week. In the European session, GBP/USD is trading at 1.2701, up 0.05%. The UK releases key employment numbers on Tuesday and the data is expected to show that the UK labour market remains tight. The economy is expected to have created 50,000 jobs in the three months to June. That number is down from 125,000 previously, but unemployment claims are expected to drop by 7,300, down from a gain of 25,700 previously. Most importantly, wage growth including bonuses is expected to jump to 7.3% in the three months to May, compared to 6.9% in the previous three months. A jump in wage growth will not be welcome news for the Bank of England, which has had limited success in its battle to rein in inflation. Wage growth has been elevated due to high inflation and the tight labour market and an acceleration in wages will support a rate hike at the September meeting. The BoE has raised rates to 5.25%, but inflation has fallen more slowly than expected and is currently at 7.9%, the worst in the G-7. Over in the US, the markets are widely expecting the Fed to pause at the September 20th meeting. That will allow the markets to focus on key releases and try to determine if the economy is too strong, which could mean further rate hikes late in the year. Retail sales, which will be released on Tuesday, will provide a snapshot of whether consumers are still spending despite inflation and rising interest rates. Both the headline and core rates are expected to rise by 0.4% in July after a 0.2% gain in June. GBP/USD is putting pressure on resistance at 1.2726. The next resistance line is 1.2787  1.2634 and 1.2573 are providing support
by OANDA
GBP/USD dips lower as US inflation risesThe British pound showed some strength earlier on Thursday but reversed directions and lost ground after the US inflation report. In the North American session, GBP/USD is trading at 1.2725, up 0.05%. The US inflation report was somewhat of a mix, but most important was that both headline and core inflation were within expectations. This meant that the reaction of the US dollar was muted following the inflation release. Headline CPI climbed to 3.2% y/y in July, above the June reading of 3.0% but shy of the consensus estimate of 3.0%. This marked the first time in 13 months that headline CPI accelerated, but the upswing isn't all that significant, as it was due to base effects. Core CPI ticked lower to 4.7% y/y in July, down from 4.8% in June. The Fed will be encouraged by the fact that on a monthly basis, both headline and core CPI posted a very modest gain of 0.2%, matching the estimate and unchanged from June. Inflation has fallen sharply in recent months, but the Fed will find it more difficult to bring core inflation down to the 2% target. The sharp drop in energy prices has sent headline CPI lower, but the core rate excludes food and energy prices. Inflation is being driven by services and wages, which explains why core CPI is so much higher than headline CPI. The inflation report has cemented the Fed holding rates in September, barring a huge surprise. The odds of a pause have risen to 90%, up from 86% prior to the inflation report, according to the CME FedWatch tool. The Fed may well be done with the current rate-tightening cycle, but don't expect to hear that from anyone at the Fed, which does not want the markets to become too complacent about inflation. The UK will post preliminary GDP on Friday. The consensus estimate stands at 0.1% q/q for the second quarter. If GDP misses the estimate and falls into negative territory, investors could get nervous and send the pound lower. Conversely, if GDP beats the estimate, the pound could gain ground. The Bank of England will be watching carefully, as it digests key economic data ahead of the next meeting on September 21st. GBP/USD is testing resistance at 1.2747. The next resistance line is 1.2874  1.2622 and 1.2495 are providing support
by OANDA
GOLD (XAUUSD): Expecting a strong reaction from hereIn my view we're getting to the end of Gold's sell-off, testing the weekly support, testing the daily descending fall line, coming to the end of a falling wedge. We're oversold on the lower timeframes, what's not to like about this buying opportunity! DXY is hanging on in there, with CPI tomorrow, like the news on Friday, I still don't expect DXY to break the falling resistance line, this should catapult gold. So, I'm waiting to get in on gold for a big move up!!
OANDA:XAUUSDLong
by Finchcliffe
5
Australian dollar edges higher after mixed confidence dataThe New Zealand dollar is showing limited movement on Wednesday, trading at 0.6060 in the European session. Like most major central banks, the Reserve Bank of New Zealand has been waging a long and tough battle against inflation by raising interest rates. CPI fell to 6.0% in the second quarter, down from 6.7%. That's certainly good news, but let's remember that inflation is still rising sharply and is much higher than the RBNZ's 2% target. The central bank is also concerned about inflation expectations, which can become embedded when inflation is high and translate into even higher inflation. Wednesday's 2-year inflation expectations release showed a rise to 2.83% in the third quarter, up from 2.79% in the second quarter. One-year inflation expectations fell to 4.17% in Q3, down from 4.17% in Q2. The data indicates that inflation expectations remain high, and that perception could make the life of policy makers more difficult in the fight to bring down inflation. The RBNZ has a long way to go before inflation falls to the 2% target, and that will likely mean further rate hikes unless inflation levels fall sharply. The RBNZ held rates at 5 .50% in July and meets next on August 16th. China is experiencing a bumpy recovery, and that is bad news for the global economy. Commodity currencies such as the New Zealand dollar are sensitive to Chinese economic releases and a soft Chinese trade release on Tuesday sent NZD/USD lower by as much as 80 basis points. The bad news continued on Wednesday as China's CPI for July declined by 0.3% y/y, down from 0.0% in June and just above the consensus estimate of -0.4%. This marked the first decrease in CPI since February 2021 and points to weakness in the Chinese economy, which will likely mean less demand for New Zealand exports, a negative scenario for the New Zealand dollar. NZD/USD continues to put pressure on support at 0.6031. Below, there is support at 0.5964 0.6129 and 0.6196 are the next resistance lines
by OANDA
GBPUSD: The beginning of the end?I'm expecting full on GBP weakness over the coming weeks, regardless of what happens with the dollar. We've broken below the months of ascending trendline and so far failed to break back above, we have a beautiful bearish engulfing candle on the 4hr close from Friday. I get this pair wrong a lot (because I live in the UK and can see a car crash happening in slow motion...), so will definitely not be jumping in. We have big US CPI data on Thursday at 13.30 GMT, if inflation figures are worse (lower) than forecast then this will be good for the GBP in the short term - however I'm thinking that the best will happen is a failed retest of the trendline and I'm thinking we're starting the move back down - just deserts for how the BoE have performed imho.
Short
by Finchcliffe
EURUSD: Still seeing some strength hereEven writing this I’m thinking it could be a crazy idea with USD strength in play, but let’s see... I think we’ll see some early weakness from the USD before a momentum shift that will see DXY reverse up (maybe by end of the week). I think the EURO is still looking strong, bouncing back from the falling following the ECB rate hike pause. ECB are hawkish around further hikes and USD CPI numbers this week may indicate a pause is coming from the FED, this idea may have played out by then. I’ll be tightening my SL at 13.30 GMT this Thursday. So for now looking to go long provided we breakout and retest the falling trendline on the daily from the 1.275 high. We’ve been in a strong uptrend for months and I think the moves in the next few weeks could start to show reversal back down, but for now we still have higher highs and higher lows, support held nicely last week and had confluence to not break the 100 and 200 EMA on the daily, so I'm still bullish with this one for now. I’ll hopefully be tp’ing around 1.124 to see if we get a double top or continuation up, which would bring the 1.14 centre line of the rising channel quickly into play (which could well happen if the US CPI is better / lower than expectation).
Long
by Finchcliffe
Weekend trade reportLast week we achieved the following results. 3% overall. The automatic trades did not do as well. The manual trades closed with profit. At the moment only this trade is open: Open Date Symbol Action Open Price SL (Price) 08.04.2023 15:02 EURCHF Buy 0.96149 0.95489 In the coming weeks, fewer trades will be introduced due to the holiday period. News that stood out this weekend: Container company AP Møller-Maersk is gloomy about the outlook of the global economy. The company expects global demand for containers to fall by 1 to 4 percent this year. Previously, the company expected a contraction of between 0.5% and 2.5%. The demand for containers is seen as a good indicator of the health of world trade. Maersk warns that a possible recession in the West and China's struggles since the pandemic will have an impact on container shipping in the second half of this year. Industrial companies are reluctant to purchase new stocks, which means there is less to ship. This will take place in the autumn at the fair. But with this news, the increase in metals will also increase again. Risks must be avoided. We will take a fixed position in gold or silver in the autumn where we will hedge our currency risks. Our rationale is supported by the FED meeting. In it, the fed governors stated that US interest rates may not yet reach their highest point, now that figures on the economy in the United States do not yet show a clear effect. Michelle Bowman, governor of the Federal Reserve, said this at a meeting in Kansas on Saturday. Last month, the Fed raised interest rates to an all-time high of 5.25%-5.50%, the highest level in 22 years. Since then, the question has been how the Fed will proceed. Fed boss Jerome Powell himself indicated that he would mainly look at the economic data in the coming period, before a choice is made. There may be a pause before interest rates are raised further. Governor Bowman added on Saturday that the recent lower inflation figures were positive, but she still wants to see "consistent evidence" that the price level is indeed on its way to the desired 2%. "I will also look for signs of lower consumer spending and signs that the labor market is becoming less tense." In addition to positions in metals, it will also be examined whether a position against the Dollar can be taken given the economic figures that will have a negative impact on the Dollar. As we started our holiday season, so did the news. For the coming week, these are the news items: Mon Aug 7 Tue Aug 8 Wed Aug 9 3:30 CNY CPI y/y -0.5% 0.0% 5:00 NZD Inflation Expectations q/q 2.79% Thu Aug 10 14:30 USD CPI m/m 0.2% 0.2% USD CPI y/y 3.3% 3.0% USD Core CPI m/m 0.2% 0.2% USD Unemployment Claims 231K 227K Fri Aug 11 8:00 GBP GDP m/m 0.2% -0.1% 14:30 USD Core PPI m/m 0.2% 0.1% USD PPI m/m 0.2% 0.1% 16:00 USD Prelim UoM Consumer Sentiment 71.7 71.6 Basically only Thursday and Friday news to keep an eye on. CPI and PPI.
PEPPERSTONE:XAGUSD
by Probeleg
Crunch time for DXY - Big Day Friday!I never trade DXY but I always have a tab open, I find this really useful when trading many pairs. My current take on the Fed and the US economy is: They were the first to respond to growing inflation Their tightening has led to interest rates of 5.5% (only matched by BNZ) They've hawkishly indicated more hike(s) Consumer confidence numbers this week were strong, in spite of this Jobless claims continue to beat target GDP for June smashed target (2.4% up from 2%, despite forecasted reduction to 1.8%) Inflation is now 2.97%, really low compared to others It's looking very much like a soft landing Whilst at the same time: ECB interest rate held at 4.25% with inflation at 6.4% BoJ interest rate held at -0.1% with inflation at 3.3% Swiss inflation is 1.7% with interest rates at 1.75% BOA interest rate held at 4.1% with inflation at 6% BNZ interest rate held at 5.5% with inflation 6.7% BoE decision this week, currently 5%, +0.25% priced in, but Dovish talk and highest inflation (7.95%) So, I can't fail to see positive fundamentals from the USA, in comparison with almost everyone else? I also think that because they moved fast and got a grip of things, unlike anyone else, they can still afford to hike without screwing their economy, unlike BoE and BNZ for instance who I believe are heading into big recessions - high interest will get to a point where it's as harmful as high inflation and will make the situation worse for the economy. That all said, until the news this week, DXY has been on huge downtrend from it's highs, and it will take something special to break through the descending trendline around 102. If it breaks this could be the start of a reversal if positively retested. Like I say I don't trade DXY, but I've learned to always have it in my sights, you have to be mindful of big DXY shifts as it has an impact on many other crosses (not just USD ones). For instance the big move this week with the Thursday data had a huge effect across the board, fortunately I was expecting it... We have a big indecision doji candle for Friday, however, off the back of last week being positive for the USD and negative for other currencies that make up the basket, I do think the dollar will court the trendline for this week, and we'll probably see a false breakout! On the 4hr I'm seeing short term bullishness, bounce up off the 50% fib for the last bullish move: Whatever, Friday will be a huge day, with NFP and Average Earnings released - I'm expecting DXY will have dropped back a bit by then, I'm expecting good data on Friday, but I don't think it will matter, good or bad it will lure us into a false sense of security and DXY will bounce down, hard with bad data, less so with good data, but regardless - I can't see it punching through on this juncture. As always this is just an opinion, let's see what happens!
TVC:DXYShort
by Finchcliffe
Crunch time for DXY - Friday will be a big day!I never trade DXY but I always have a tab open, I find this really useful when trading many pairs. My current take on the Fed and the US economy is: They were the first to respond to growing inflation Their tightening has led to interest rates of 5.5% (only matched by BNZ) They've hawkishly indicated more hike(s) Consumer confidence numbers this week were strong, in spite of this Jobless claims continue to beat target GDP for June smashed target (2.4% up from 2%, despite forecasted reduction to 1.8%) Inflation is now 2.97%, really low compared to others It's looking very much like a soft landing Whilst at the same time: ECB interest rate held at 4.25% with inflation at 6.4% BoJ interest rate held at -0.1% with inflation at 3.3% Swiss inflation is 1.7% with interest rates at 1.75% BOA interest rate held at 4.1% with inflation at 6% BNZ interest rate held at 5.5% with inflation 6.7% BoE decision this week, currently 5%, +0.25% priced in, but Dovish talk and highest inflation (7.95%) So, I can't fail to see super positive fundamentals from the USA, in comparison with almost everyone else? I also think that because they moved fast and got a grip of things, unlike anyone else, they can still afford to hike without screwing their economy, unlike BoE and BNZ for instance who I believe are heading into big recessions - high interest will get to a point where it's as harmful as high inflation and will make the situation worse for the economy. That all said, until the news this week, DXY has been on huge downtrend from it's highs, and it will take something special to break through the descending trendline around 102. If it breaks this could be the start of a reversal if positively retested. Like I say I don't trade DXY, but I've learned to always have it in my sights, you have to be mindful of big DXY shifts as it has an impact on many other crosses (not just USD ones). For instance the big move this week with the Thursday data had a huge effect across the board, fortunately I was expecting it... We have a big indecision doji candle for Friday, however, off the back of last week being positive for the USD and negative for other currencies that make up the basket, I do think the dollar will court the trendline for this week, and we'll probably see a false breakout! On the 4hr I'm seeing short term bullishness, bounce up off the 50% fib for the last bullish move: Whatever, Friday will be a huge day, with NFP and Average Earnings released - I'm expecting DXY will have dropped back a bit by then, I'm expecting good data on Friday, but I don't think it will matter, good or bad it will lure us into a false sense of security and DXY will bounce down, hard with bad data, less so with good data, but regardless - I can't see it punching through on this juncture. As always this is just an opinion, let's see what happens!
PEPPERSTONE:USDXShort
by Finchcliffe
Is the Market Deluding Itself with a Soft Landing Fantasy?As markets surge against expectations, many are starting to believe that the impossible might unfold. The unusually low fund allocation to equities reflects a market sentiment plagued by fear, yet mega caps are continuing to rise against expectations, making some investors feel left behind. With GDP figures beating expectations and headline inflation plummeting, markets are now starting to believe the soft landing narrative. Can the Federal Reserve, after decades of economic engineering, finally dodge a recession? The bond market remains skeptical. When the yield curve inverted, everyone thought a recession was imminent. However, many overlook the lag between the onset of the inversion and an actual recession. Depending on historical context, a recession can either hit while the yield curve remains inverted or much later, once it has normalised. Thus, relying solely on the yield curve as a recession indicator can be misleading. Nevertheless, history has consistently shown that a recession follows the inversion at some point. However, the human psyche is notoriously impatient. If a predicted event doesn't manifest promptly, the market tends to discount its possibility. Remember, most people buy at tops and sell at bottoms. So, the real question isn't whether a recession will happen, but rather when. Why and When Could a Recession Happen? The Federal Reserve holds significant influence over this timeline. As long as interest rates hover around 5.5%, the recession clock ticks faster. With headline inflation plummeting (orange line) and inflation expectations paralleling this descent (blue line), we must understand what caused inflation initially to gauge where it's headed. The inflationary surge was mostly driven by the excessive expansion of the money supply. Examining the first derivative of the US money supply (M2) shows a rapid expansion followed by a subsequent decline. Comparing the growth rate of the money supply (yellow line) with the CPI year-over-year (orange line) reveals a 16-month lag. If this lag remains consistent, there's significant potential downside to inflation. Yet, the Fed continues to hike rates, despite projections of disinflation and deflation. This is because the Fed's job isn't to predict the future, but to respond to current data. Indicators showing a robust labor market and elevated Core PCE caution against prematurely reducing rates. It would be wise for the Fed to await signs of weakening in these indicators before contemplating rate cuts. This could potentially take a while to materialise, especially since unemployment doesn't seem poised to weaken in the immediate future. Unlike previous business cycles, the current situation stands out due to the Job Openings and Labor Turnover Survey (JOLTS) data. There remains a significant number of job openings for every unemployed individual. This bolsters the resilience of the labor market, making rate cuts less probable. Furthermore, the Core Personal Consumption Expenditure (PCE) - a lagging indicator - remains historically high and resilient. Powell has emphasised the Fed's intent to avoid repeating the same mistakes made in the '70s, suggesting we should expect higher rates for longer in order to permanently get Core PCE to 2%. He's also highlighted the relative ease of stimulating the economy out of a recession compared to raising rates, implying it might be more straightforward for the Fed to rein in Core PCE by inducing a recession. Similarly, the government can't afford the risk of the Fed raising rates later on. Considering the government's dependency on low-cost borrowing to manage interest payments on existing debts, higher future rates could pose a big challenge. Fortunately, the Fed uses the Reverse Repo (blue line) as a strategic tool to bypass any potential liquidity crisis until they are able to finance the government's balance sheet (orange line) with cheap debt once again. Given that interest expenses are nearing 1 trillion USD, the Fed will inevitably have to cut rates to zero and initiate Quantitative Easing (QE) in the future. Remember, the sole limitation to Keynesian economics is inflation. Hence, it's logical for the Fed to avoid risking a resurgence of inflation. In essence, a recession might be essential for the Fed's future assistance to the government. Deciphering the Stock Market's Puzzle Despite Powell's frequent emphasis on a 'higher for longer' stance, the market remains skeptical. This is alarming, especially as the full implications of a 5.5% rate haven't been fully experienced by the economy. Once they manifest, job openings will plummet, unemployment figures will surge, and the 'soft landing' illusion might crumble. Historically, such scenarios are common when real rates reach unsustainable levels. Fortunately for investors, there seems to be room for the AI bubble to continue. Markets typically peak about a month before a sustained increase in unemployment. Hence, forward-looking unemployment indicators like job openings, initial claims (blue line), and continued claims (orange line) are crucial for those wishing to divest before a potential market downturn. In the current scenario, it might be wise for investors to stay away from higher-risk assets like small caps and cryptocurrencies. Historically, these haven't performed as well as mega caps during liquidity crunches. Investors might want to reconsider taking on additional risks unless there's a sustained surge in global liquidity (yellow line). Conclusion: A Time for Caution and Opportunity In conclusion, even though a recession seems inevitable, mega caps may continue their upward trend until the labor market reveals signs of distress. Therefore, it's crucial for investors to closely watch leading unemployment indicators and central bank balance sheets to ensure they're well-positioned for both the upcoming market downturn and the subsequent recovery. Disclaimer: This article is intended for informational purposes only. It is not intended to be investment advice. Every investment and trading move involves risk, and you should conduct your own research when making a decision. Past performance is not indicative of future results.
NASDAQ:NDX
by ingeforberg
EURJPY in Focus: ECB Hikes and the BoJ’s Yield Curve ControlChristine Lagarde's remarks about an open-minded ECB, coupled with a robust labor market and persistently high inflation in the eurozone, continue to provide the ECB with reasons to lean towards hiking. While headline inflation may be trending downwards, core inflation remains steadfast in the eurozone. Following the meeting on July 27, the ECB raised interest rates by 25 basis points, elevating the key interest rate to 4.25%—its highest level since 2008. Interestingly, the U.S. seems to be leading the way in this regard. Inflation and core inflation peaked earlier in the US, and the Federal Reserve has been raising rates more rapidly than the ECB. Given that the EU's inflation rates remain higher than those in the US and that the unemployment rate in the EU is still low, further hikes by the ECB appear plausible—especially considering that the U.S. continues to hike, albeit at a more advanced stage. Last week, the Bank of Japan (BoJ) garnered attention by widening its yield curve control band, signaling a move towards policy normalization. Yet, markets remain skeptical. The subsequent whipsaw move placed the USDJPY pair at levels higher than those before the announcement. The yield differential between the EUR and JPY interest rates exhibits a positive relationship, with the EURJPY appreciating as the yield gap widens. With the previous yield differential increase resulting in a 21% rise in the EURJPY, the currency pair's current 14% ascent seems to have room to grow further, particularly given the larger yield difference compared to past instances. However, it's worth noting the 1999 – 2000 period, where the yield differential increased, but market reactions lagged significantly. From a technical perspective, we observe the EURJPY breaking out of a 30-year symmetrical triangle, often interpreted as a bullish continuation signal. Upon closer examination, the Relative Strength Index (RSI) indicates that the market is not yet oversold, and the moving average cross still favours upward trajectory. In conclusion, the ECB's potential inclination towards continued hikes, combined with market skepticism over the BOJ's recent moves, could lead to a stronger EUR and a softer JPY. A suitable strategy to capitalize on this view might be to take a long position in CME EURO/JAPANESE YEN Futures, quoted as Japanese Yen per Euro Increment. Entering at the current level of 156 with a stop at 152.5, and a take profit at 168, would provide a reasonable risk-reward ratio. It's worth noting that each 0.01 Japanese yen per Euro increment move equals 1250 yen. The charts above were generated using CME’s Real-Time data available on TradingView. Inspirante Trading Solutions is subscribed to both TradingView Premium and CME Real-time Market Data which allows us to identify trading set-ups in real-time and express our market opinions. 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 Disclaimer: The contents in this Idea are intended for information purpose only and do not constitute investment recommendation or advice. Nor are they used to promote any specific products or services. They serve as an integral part of a case study to demonstrate fundamental concepts in risk management under given market scenarios. A full version of the disclaimer is available in our profile description. Reference: www.cmegroup.com
Long
by inspirante
XAUUSD (Gold): Feel confident selling nowBeen watching Gold for days, trying to work things out. I think we'll see another push up from DXY following FOMC hawkishness last night, it's dancing around the 50% Fib retracement from the last move, this would be positive for gold. With gold, I think we just got a local double top, but generally struggling at current levels, after failing to make a new high, AUD export data not great, also linked to gold. I'm expecting an initial fall down to around 1937 (then could move further back to 1910 / 1900), but does need monitoring closely, as has been super volatile and overall direction still unclear to me atm from here. I think a DXY push will see me hit this initial TP and then let's see what happens from there... I'll wait for NY session to give me more clues
OANDA:XAUUSDShort
by Finchcliffe
12
🔥 Bitcoin FOMC Bullish Reaction: Wait For ConfirmationThe FOMC meeting has just concluded, and the FED has raised the interest rates with 25 basis points. Since the initial reaction is bullish, I'd like to explore the idea that we're going to see a strong switch in trend from this point onwards. The dotted diagonal resistance is currently the main area that BTC has to break through. Be patience for the break out before considering a bullish entry. Target at the July highs, stop just below the resistance line.
COINBASE:BTCUSDLong
by FieryTrading
11