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USDJPY: What to expect for the upcoming days?Hello there! So after the Q3, and the decisions that has been taken by the BOJ concerning the interest rate, in addition to the 0.4% rise in the CPI. As well as the decrease in the DXY during the last month -4.79% and in the last 5 days a decrease that resulted -3.13%. Those factors alone can picture the path of the USDJPY. Going now into the technical part, too many indicators said the way now is bearish, but let's take things more friendly and talk about the structure. Now in lower time-frames, we can see that there was an order block that indicated that the currency will go bull to reach approx. (141.600 - 141.800). But it seemed that it reached something of 140.800, and went bear. So what we could exepect after this small hike? Well, according to some indications and order blocks, taking into consideration the supp. and res. areas, the currency could reach (133.300). But, following the news and the decisions that could be taken will be the ones who decide if the USDJPY will rally down more, or go for a reversal. But in the mean time, nothing indicates at all a reversal based on decisions from the federal reserve or the BOJ, as well as the technical analysis.
Short
by JawadShoukeir
Market Impacts: from Midterms to Second HalfCME: Micro E-Mini Nasdaq 100 ( CME_MINI:MNQ1! ) On August 17th, I published “Market Impacts of US Midterms Elections”. Thanks to your support, it made it to “Editors’ Picks” and was featured in TV Digest newsletter in an email themed “Midterms are Coming” to all subscribers. With the midterm elections coming to an end, it’s a good time to reassess the situation, exploring potential changes in economic policies which may give rise to trading opportunities. In the August 17th story, we have discussed 3 potential outcomes of the midterm election: • Party Government: The President, the House and the Senate are controlled by the same political party • Divided Government: Only one chamber of Congress aligns with the President • Opposing Government: The President and the Congress are from different political parties Before the elections, the Democratic Party controls the White House and both chambers of the Congress. It was clearly a “Party Government” under our definition. As of this writing, Democrats clinched 50 seats in the Senate. With the tiebreaking vote from Vice President Harris, Democrats retain Senate majority. Meanwhile, Republicans lead 212:204 in the House race but has not reached the magic 218 required to flip controls. GOP represent half of the voters in this election. They hold on to at least 49 seats in the Senate, gain more seats in the House, and are likely to retake control. They also have governorship in half of the 50 States. So, why the Midterms are being perceived as a landslide victory for Democrats? It’s all about expectations. Historically, midterms are bad for the ruling party. Whichever party in the White House usually loses seats in the Congress. In the 2018 midterms, Nancy Pelosi led the Democrats to recapture the House of Representatives. With Biden’s approval rate hovering at 40% low, and inflation rate flying high, GOP was widely expected to have a stunning victory at both chambers of the Congress. To the Democrats, the absence of “Red Waves” is a vindication of their political agenda. While a “Divided Government” is still possible pending final results, Biden and Senate Majority Leader Chuck Schumer already claimed election victory. Conclusion: the emboldened Democrats will go full speed with “Build Back Better” in the second half of President Biden’s presidency. Bigger Spending In the last two years, the Biden Administration passed legislations with budget over $4 trillion. These include: • American Rescue Act in March 2021, $1.9 trillion • Infrastructure Investment and Jobs Act in November 2021, $1.2 trillion • U.S. Chip and Science Act in August 2022, $280 billion • Inflation Reduction Act in August 2022, $757 billion Also in August 2022, the Administration announced a Student Loan Forgiveness Plan that is expected to cost $400 billion. The plan is currently on hold by court orders. In the First Half, new budget items averaged $2 trillion a year. I expect more big budget items to come in the Second Half. If Republicans are not there to slow down the legislative ambitions, it’s hard to tell how big the spendings will be. Bigger Deficit and Bigger Debt According to USDebtClock.org, the 2022 Federal Tax Revenue is estimated at $4.92 trillion, and the Federal Spending Budget will be $5.98 trillion. The shortfall is Federal Budget Deficit, at $1.06 trillion. The largest federal budget items are: • Medicare/Medicaid, $1.490 trillion, (24.9%) • Social Security, $1.231 trillion, (20.6%) • Defense/War, $770 billion, (12.9%) • Interest on Debt, $481 billion, (8.0%) I notice that debt interest has risen by $39 billion from previous estimate, and its share in the federal budget grows from 7.4% to 8.0%, thanks to the Fed rate hikes. US National Debt is estimated at $31.3 trillion. Budget deficit needs to be financed by debt. Therefore, national debt would rise to $32.5 trillion next year at a minimum. While many bonds were issued before 2022 and carried low yields, new Treasury bonds must pay current market rates. Considering Fed Funds already at 4%, I put 3% down as my estimate for weighted-average federal debt service rate in 2023. This would price the annual debt interest at $975 billion, which is 103% higher than this year, and $205 billion more than the Defense budget! With Democrats in control, I expect Medicare, Medicaid, and Social Security to get favorable budget allocation next year. Heightened geopolitical tensions in multiple fronts justify a bigger Defense budget. Assuming all of them goes up by 5% and there is no change in other budget items, my baseline forecast for 2023 federal budget is $6.65 trillion, an 11% annual increase. Assuming tax revenue goes up by 10%, we will have a budget deficit of 1.23 trillion, a 24% jump from 2022. Big spending legislations could add $1 trillion more on top of this. Sticky High Inflation The US economy is caught between restrictive monetary policies and expansive fiscal policies. When trillions of dollars are flooding the economy and the financial system, prices of goods and services tend to go up. Raising interest rates alone is not sufficient to bring the price level down. This is why inflation is still uncomfortably high after six consecutive rate hikes. Cathy Wood recently flowed an idea claiming inflation could turn negative next year, citing similarity from the Roaming Twenties. I peg to differ. The Federal Government is pumping $6-7 trillion in a $26 trillion economy. Every year, federal agencies and contractors get bigger budget, government employment grows, and federal employees get higher wages. Regardless of the business cycle, one quarter of the US economy is expanding. Industries benefiting from government spending will strive, even if the country may slip into a recession. Higher Taxes Big spending comes with bigger taxes. Government needs more tax revenue to pay for its ambitious agenda. • Higher tax rate on people earning $400,000 or more. New taxes on investment carry interest, translating into headwinds for hedge fund, private equity, and venture capital. • The 15% minimum corporate tax will affect multinational corporations which frequently use offshore tax haven. Potential Winner Unlike political elections, it is tricky to find a clear winner in the financial market. Comparing the performance of major US stock market indexes, the Dow has a year-to-date return of -7.18% as of November 11th, while S&P 500 and Russell 2000 yield -15% and -14.14%, respectively. Nasdaq 100 falls 25.10% and is the worst performer. Big Tech is laden with bad news these days, with missed earnings and widespread layoffs among them. As stock prices are beaten down, valuations become more reasonable. In my opinion, advanced technologies that align with government priorities would benefit in the next two years. Clean energy, artificial intelligence, biotechnology, space technology and electric vehicles are on the receiving end of major government funding. While I was bearish with the Nasdaq at 13,500, I think it could find price support at 10,500. However, impacts from the Midterms interact with business fundamentals, the ever-changing investor sentiments, and major global events. The next Fed meeting is only two weeks away. Let’s wait for the next rate decision, as it is the overarching factor that guides market direction right now. We can put CME Micro E-Mini Nasdaq 100 Futures ( CME_MINI:MNQ1! ) on the watch list today. MNQ has a notional value of $2 times the index. At 11,792, each contract is valued at $23,584. Opening a Long or Short position requires initial margin of $1,500. While the S&P 500 is trending down, certain sectors may outperform the broad market. CME recently launched E-mini S&P Biotechnology Select Industry Futures ( CME:SXT1! ) and E-mini PHLX Semiconductor Sector Futures ( CME:SOX1! ). They each offer more precise trading opportunities tailored to industries benefiting from increased government funding. 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 trade set-ups and express my market views. If you have futures in your trading portfolio, check out on CME Group data plans in TradingView that suit your trading needs www.tradingview.com
CME_MINI:MNQ1!Long
by JimHuangChicago
5
Fed unfazed by softened inflation dataEUR/USD 🔼 GBP/USD 🔼 AUD/USD 🔼 USD/CAD 🔽 USD/JPY 🔽 XAU 🔼 WTI 🔼 Last week’s speech from Federal Reserve officials indicated the US central bank is still leaning towards using aggressive rate hikes to control inflation, though remains open to slowing the pace. Meanwhile, the stock market extended its rally, with the Nasdaq 100 adding over 210 points 11,817 being the best-performing index out of the three, the Dow also enjoyed a weekly gain of 4.15%. Improved GDP reading in the UK led major currencies to recover against the greenback, GBP/USD climbed more than 120 pips to 1.1835. EUR/USD surged to 1.0352, gaining almost 150 pips, as Germany’s annual inflation reached 10.4% - aligning with marketing projections. USD/JPY plunged below the key level of 140.00 to 138.79, losing over 230 pips, and USD/CAD declined to 1.3254. AUD/USD closed higher at 0.6702, the meeting minutes from the Reserve Bank of Australia will be announced tomorrow morning. Spot gold increased to $1,771.42 an ounce, the highest level in over two months. WTI oil futures gained slightly to $88.96 a barrel, currently at $89.22.
by Mitrade_official
Fertilizer Industry As An Alternative S&P 500Greetings. S&P 500 Technical Analysis From a technical point of view, S&P 500 continues to move in wave 5 of diagonal A. Due to lower inflation in the US, there is a high probability that the Fed will slow down the rate hike and, as a result, investors will start buying assets with a higher level of risk. However, historically, after the Fed started to lower the interest rate, the price of the S&P 500 corrected by 30-50% before continuing its upward movement. The fertilizer industry as an alternative to the S&P 500 The fertilizer industry continues to be one of the most attractive in the stock market. In February 2022, Russia invaded Ukraine, which led to massive disruption in global commodity markets, including fertilizers. Before this event, the balance between fertilizer consumption and supply was determined by two factors, namely production incentives and also price competitiveness. I estimate that in the coming quarters, the balance between supply and demand for one of the most important commodities will be determined by the ability of farmers to buy fertilizer that has become very expensive. The increase in the price of fertilizers led to a significant increase in the margins of companies such as Nutrien, The Mosaic Company, and CF Industries Holdings, traded on the New York Stock Exchange, and the subsequent increase in dividend payments. Source: IFA, IFDC, market news sources Several reasons led to a sharp rise in the price of potash, phosphorus, and nitrogen fertilizers. The first and main reason is the sanctions against two key producing countries, namely Russia and Belarus. According to an IFA study, Russia accounts for about 25% of the world's supply of nitrogen fertilizers needed to increase crop yields. In addition, the share of Belarus and Russia in the sales of potash fertilizers is about 41%, which puts these countries in the top 3 in terms of production volumes. Source: IFA Fertilizer prices continue to be significantly higher than in previous years. For example, the price of potassium chloride amounted to $562.5 per ton in the 3rd quarter of 2022, which is 161.9% more than in the 3rd quarter of 2021. Source: Author's elaboration based on data from the World Bank Group In addition, the military conflict in Eastern Europe continues to be in an active phase and, as a result sanctions from Russia and Belarus will not soon be withdrawn. As a result, I believe that fertilizer stocks are still attractive assets for long-term investors and can become an alternative to investing in companies from the S&P 500. Disclosure: This article may not take into account all the risks and catalysts of the assets described in it. Any part of this analytical article is provided for informational purposes only, does not constitute an individual investment recommendation, investment idea, advice, offer to buy or sell securities, or other financial instruments. The completeness and accuracy of the information in the analytical article are not guaranteed. If any fundamental/technical criteria or events change in the future, I do not assume any obligation to update this article.
CME_MINI:ES1!
by NathanLive
3
S&P 500: Lessons from HistoryYesterday’s CPI report was a reminder that, despite how it feels, the inflation crisis might not last forever. This raises the question of how to think about the Federal Reserve, and makes us look back to previous moments in history. The most relevant precedent could be 1994 and early 1995, when policymakers doubled their target rate from 3 percent to 6 percent. The chart below recaps this period nearly three decades ago. Not surprisingly, the S&P 500 started falling as the hikes began. But it also turned higher in mid-December, 2-1/2 months before the last increase. (The great 1995-2000 bull run followed that historic pause.) Another key fact is that the process lasted almost exactly one year. Fast forward to the present and some interesting parallels may arise. The current hiking cycle began in March 2022. The most recent dot plot and CME’s FedWatch tool both suggest it will end in March 2023 – also one year in length. (As noted on the initial chart.) Next, stocks have been advancing for the past month. That’s earlier than the previous moment, when the final rally began just five weeks before the pause. However 1994’s pullback was much more shallow (just 10 percent peak to trough). This year’s bear market, with a 28 percent drop, could mean there is more space for a rebound. Next is a weekly chart of the S&P 500. Aside from the extreme crash of March 2020, prices have remained within with a parallel channel that began in 2011. Notice how October’s low occurred at the bottom of this rising trend. Second, the October low represented almost exactly a 50 percent retracement of the surge between March 2020 and January 2022. Finally, returning to the daily chart you have the 3910 level. This was resistance and support at various times since the summer, but yesterday’s rally tore straight through it. That could also limit the depth of pullbacks, at least in the near term. TradeStation has, for decades, advanced the trading industry, providing access to stocks, options, futures and cryptocurrencies. See our Overview for more. Important Information TradeStation Securities, Inc., TradeStation Crypto, Inc., and TradeStation Technologies, Inc. are each wholly owned subsidiaries of TradeStation Group, Inc., all operating, and providing products and services, under the TradeStation brand and trademark. You Can Trade, Inc. is also a wholly owned subsidiary of TradeStation Group, Inc., operating under its own brand and trademarks. TradeStation Crypto, Inc. offers to self-directed investors and traders cryptocurrency brokerage services. It is neither licensed with the SEC or the CFTC nor is it a Member of NFA. When applying for, or purchasing, accounts, subscriptions, products, and services, it is important that you know which company you will be dealing with. Please click here for further important information explaining what this means. This content is for informational and educational purposes only. This is not a recommendation regarding any investment or investment strategy. Any opinions expressed herein are those of the author and do not represent the views or opinions of TradeStation or any of its affiliates. Investing involves risks. Past performance, whether actual or indicated by historical tests of strategies, is no guarantee of future performance or success. There is a possibility that you may sustain a loss equal to or greater than your entire investment regardless of which asset class you trade (equities, options, futures, or digital assets); therefore, you should not invest or risk money that you cannot afford to lose. Before trading any asset class, first read the relevant risk disclosure statements on the Important Documents page, found here: www.tradestation.com .
SP:SPX
by TradeStation
4
BTC apocalypse is nearI'm back with another warning and yes I know I have been repeating myself so here's the latest update... Bitcoin and the overall crypto market are playing a game of ping pong with the market makers actively sourcing liquidity from the futures market. This creates choppy price action without a real direction within the local range between 45K and 34K. These types of environments are far from ideal for day trading and it is this type of price action that has blown up many accounts over the past months. In my opinion you should stay away from such plays and focus on the long term - at least that's what I'm doing. Currently Bitcoin is inside a pennant or symmetrical triangle and should be continuing its trend down next week. With the FOMC opening the next trading week we could see some high volatility incoming soon. With inflation through the roof (and no that's not just geopolitical pressure but mostly policy or lack thereof) the Fed WILL TAPER and RATE HIKE AGGRESSIVELY. The Fed has been sitting about for too long hoping for transitory inflation (what a joke), fading supply chain issues (wasn't the real problem to begin with) and aiming for a soft landing. By doing so, they left too much time on the table doing absolutely nothing, that now they are forced to act decisively or completely lose credibility. This means there is no bullish narrative for the risk-on market (in the mid / short term) regardless of what some "experts" are trying to tell you. Market makers have been preparing for next week since last October so my suggestion is you come prepared as well (whatever that means for your portfolio and your situation). We got some simple levels here that will tell you what will happen: confirmed break of 45K > 56K (very unlikely but never say never), confirmed break of 37K > 30K. Be ready and good luck. Ps. don't get into risky trades, take the outmost caution, you don't need to make money now, you should make money in the long run. For more info check the links below.
Short
by cryptobullethbtcxlm
243
Treasuries After CPIToday’s cooler readings on inflation and jobless claims were welcome news for stock-market bulls. They could be even more important for the Treasury market. Today we’re considering the yields of the of two-year (US02Y) and 10-year (TNX) notes. The two-year shot to a 16-year high above 4.8 percent on November 4 after non-farm payrolls but failed to hold: a shooting star. It’s also noteworthy that the data had a touch of “Goldilocks,” with total jobs and unemployment both higher than forecast. Those headlines, and subsequent lows, potentially confirm the shooting star as a reversal pattern. There’s also a rising trendline along the lows of August and September that was broken on Thursday. Both events may suggest two-year Treasury yields have peaked. Next is the weekly chart of 10-year Treasury yields. They touched 4.33 percent in mid-October, the highest level since June 2008. Two inside weekly candles followed, potentially indicating a halt to the uptrend. These patterns together, combined with the Euro solidly back above parity, could mark a change from the kind of price action that’s characterized most of 2022. It could have a positive impact on broader sentiment if it continues. TradeStation has, for decades, advanced the trading industry, providing access to stocks, options, futures and cryptocurrencies. See our Overview for more. Important Information TradeStation Securities, Inc., TradeStation Crypto, Inc., and TradeStation Technologies, Inc. are each wholly owned subsidiaries of TradeStation Group, Inc., all operating, and providing products and services, under the TradeStation brand and trademark. You Can Trade, Inc. is also a wholly owned subsidiary of TradeStation Group, Inc., operating under its own brand and trademarks. TradeStation Crypto, Inc. offers to self-directed investors and traders cryptocurrency brokerage services. It is neither licensed with the SEC or the CFTC nor is it a Member of NFA. When applying for, or purchasing, accounts, subscriptions, products, and services, it is important that you know which company you will be dealing with. Please click here for further important information explaining what this means. This content is for informational and educational purposes only. This is not a recommendation regarding any investment or investment strategy. Any opinions expressed herein are those of the author and do not represent the views or opinions of TradeStation or any of its affiliates. Investing involves risks. Past performance, whether actual or indicated by historical tests of strategies, is no guarantee of future performance or success. There is a possibility that you may sustain a loss equal to or greater than your entire investment regardless of which asset class you trade (equities, options, futures, or digital assets); therefore, you should not invest or risk money that you cannot afford to lose. Before trading any asset class, first read the relevant risk disclosure statements on the Important Documents page, found here: www.tradestation.com .
TVC:US02Y
by TradeStation
1
GBP/USD rockets as US inflation dipsThe British pound has soared today, following the US inflation report. GBP/USD is trading at 1.1661, up a massive 2.7%. The October inflation report was lower than what everyone had expected, which has triggered strong volatility in the currency markets. The US dollar is sharply lower against the majors, as the markets are expecting the Fed to ease up on interest rates after today's favourable inflation data. Headline CPI dropped to 7.7%, down from 8.2% in September and below the consensus of 8.0%. Core inflation slowed to 6.3%, down from 6.6% and lower than the forecast of 6.5%. The surprisingly low numbers have turned rate pricing on its head. Prior to the inflation release, the markets had priced in 55% for a 50 bp increase and 45% for a 75 bp hike. This has changed to 80-20 in favor of a 50 bp hike, which has sent the US dollar into a broad retreat. The Fed may end up delivering a 50 bp move in December, but investors should remind themselves that this doesn't mean the Fed is going soft. It wasn't too long ago that a 0.50% hike was considered 'supersize'; it's only in comparison to 0.75% or full-point moves that a 0.50% increase can be considered dovish. Secondly, Fed Chair Powell said at last month's meeting that the terminal rate would be higher than previously expected, a clear sign that the Fed remains hawkish. The UK releases key data on Friday, and the markets are braced for soft readings. GDP for the third quarter is expected to slow to -0.5% QoQ, down from 0.2% in the second quarter. Manufacturing Production for September is expected at -0.4%, which would mark the third decline in four months. If these releases are weaker than expected, the pound could give back some of today's huge gains. There is resistance at 1.1767 and 1.1844 1.1609 and 1.1505 and providing support
by OANDA
GBPUSD....SELLS ACTIVATED (1450 PIPS-12.7%)This sounds crazy in response to the UK governement coming up with ways to raise the british pound and all.....one thing we need to take into consideraion is that GBP is an asset currency......tecnically, i expect GU to close below the all time low of 1.0365 and form a new low at 1.000 We should be expecting GBPUSD in parity soon until the FED pivots anytime soon (probably in JAnuary or so)..... I expect a complete ( clear) breakout at 1.11450 NB: i expect not less than 15 massive moves and turning points on GU, any move is a generating asset. WATCHOUT ON GU!!!
Short
by DAdepa
Euro backtracks after strong rallyEUR/USD has reversed course today and is in negative territory. In the North American session, the euro is trading at 1.0043, down 0.30%. The US dollar has rebounded after a 3-day slide against the major currencies. The dollar downswing started on Friday after a lukewarm employment report raised expectations that the Fed will deliver a "modest" 50-basis point, rather than a 75 bp move at the December meeting. This was followed by a short covering move on Monday which sent the dollar sharply lower, as risk appetite jumped ahead of the US midterms and Thursday's inflation report. The euro made the most of the dollar's weakness, rising 250 points in an impressive 3-day rally. The US dollar has rebounded against the majors today, including the euro. With the Federal Reserve remaining aggressive, even a 0.50% should be enough to give the dollar a boost, as rate differentials continue to widen. Inflation is running at a double-digit clip in the eurozone, but it's doubtful that the ECB will keep pace with the Fed, as the eurozone economy remains weak and higher rates are likely to tip the economy into a recession. The markets are keeping an eye on the US midterm elections, which are tighter than expected, as the Democrats are fighting to retain control of both the House and the Senate. Investors are focussing on Thursday's October US inflation report, which will be a key factor in Fed rate policy. Inflation is expected to have eased slightly, with headline inflation dropping to 8.0% (8.2% prior) and core inflation slowing to 6.5% (6.6%).  A drop in the October reading will raise expectations for the Fed to raise rates by 0.50% at the December meeting. EUR/USD faces resistance at 1.0134 and 1.0293 There is support at 1.0047 and 0.9888
by OANDA
7
Land of Rising Sun and Falling YenCME: Micro USD/JPN Futures ( CME_MINI:M6J1! ) On September 21st, the Fed raised interest rate for the fifth time. The very next day, Bank of Japan decided to keep the country’s short-term interest rate at -0.10%. On November 3rd, the Fed raised another 75 bps, and the Fed Funds rate is now 3.75-4.00%. Interest rate spread between the two countries now reaches 4%. With Japan determining to stay accommodative, the rate spread could be over 500 basis points by early 2023. This is show time for carry trade, a popular and time-honored forex strategy. What is Carry Trade? A currency carry trade is a strategy that involves borrowing from a low yielding currency to fund the purchase of a currency that provides higher interest income. This strategy attempts to capture the rate spread, which can be substantial with the use of leverage. Carry trade is one of the most popular trading strategies in the forex market. In essence, it is as simple as "buy low, sell high”. Popular carry trades involve buying currency pairs such as AUD/JPY and NZD/JPY, since they have decent rate spreads over time. Profit of carry trade largely comes from its ability to earn interest. Income is accrued every day for holding long carry positions. Below is a typical daily interest accrual formula: Daily Interest = (IR(long) – IR(short)) * NV / 365 where: IR = interest rate NV= notional value Another source of profit results from the exchange rate changes from the time a trade is initiated to the time it is closed, which could be illustrated by the following example. DIY Guide for A Synthetic Carry Trade Assumptions: 1. You have built up $100,000 in home equity from your $500,000 house 2. Foreign currencies can be bought and sold with your bank, without restrictions 3. Home equity loan costs 7.2% annually 4. Borrowing rate for Japanese Yen is 2.2% Home equity loan rate rose sharply due to the Fed rate hikes. However, since your bank acquires cheap Yen from Japan, they could charge 2.2% and still make money. When you pledge your home as collateral, your yen loan is low risk from the bank’s perspective. Trade Initiation: • At USD/JPY rate of 115 (using rate at the end of last year), you borrow 11,500,000 yen from the bank for 1 year, and immediately exchange it into USD 100,000. • You buy a 1-year Jumbo CD (certificate of deposit) from the bank, which yields 4.2% with a minimum purchase of $100,000. Trade Closing: • One year later, unwind the trade. • Turn your CD in and get $104,200 from the bank. • You exchange Dollar back to Yen at 150 (recent rate) and get 15,630,000. After paying back 11,500,000 in principal and 253,000 in interest, you net 3,877,000 yen. • One-year return is 33.7%. Just 2% comes from rate spread (4.2%-2.2%). The rest derives from yen depreciation, which allows you to pay back the loan with fewer dollars. In this example, we do not use leverage as home equity is in place to fully guarantee the loan. By borrowing with yen, we effectively lower the home equity loan rate from 7.2% to 2.2%. Instead of putting it in CD, you could find more productive use of this low-cost capital, such as paying down a 20% credit card debt. Usually, interest rate spread is the main income source for carry trades with exchange rate gain as a bonus. With yen dropping to 32-year low, the latter becomes very prominent this year. Borrowing yen from the bank is equivalent to shorting the yen futures. Hedging the Carry Trade Most traders work with a forex broker to take on carry trades. Their trades are usually unhedged. Large leverage is used to amplify the returns from small interest rate spreads. In today’s volatile markets, naked carry trades could be very risky. Trades using 50- and 100-time leverage could easily blow up if exchange rate moves against you. In my opinion, sizable USD/JPY interest rate spread could stay for a considerable period of time, at least throughout 2023. However, Yen may have already bottomed at 150. Bank of Japan has intervened the market by emergency bond buying. It is a good time to do USD/JPY carry trades. However, it would be wise to protect your positions in the event of a yen rally. Yen lost some 25% against the dollar so far this year. If it rebounds just 5%, it could wipe out all the returns from interest rate spread. CME Micro USD/JPY futures contract ( CME_MINI:M6J1! ) has a notional value of $10,000. At settlement price of 144.71 last Friday, each December contract is worth 1,447,100 yen. Initial margin is 45,000 yen per lot, or approximately $311. If you expect yen to appreciate, consider shorting the futures. As it is quoted yen per dollar, rising yen will result in each dollar exchanging for fewer of it. Happy trading. *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 trade set-ups and express my market views. If you have futures in your trading portfolio, check out on CME Group data plans in TradingView that suit your trading needs www.tradingview.com
MShort
by JimHuangChicago
8
The Power of PowellCME: E-Mini S&P 500 Futures ( CME_MINI:ES1! ) If the characters of Game of Thrones were on the financial markets, who would be the unchallenged “King of Wall Street” in your eyes? Since Federal Reserve set sail on tightening monetary policy, all markets fell under the spell of Fed rate hikes. Federal Open Market Committee meetings are major market-moving events. Investors around the world not only watch what the Fed does, but also listen closely to what it says and does not say. The Fed raised 75 basis points last Wednesday. It is bad news for households and businesses alike. The cost of living and the cost of running a business both went up at the same time. The cumulative effect of +3.75% in eight months has been extraordinary. Interestingly, US stock markets jumped upon the release of Fed statement. Rate hike of 75 bp was expected, but investors thought they found some signs of Fed softening, which sparked the “Fed Pivot Trade” and pushed the Dow up 400 points and the S&P up 1.5%. However, when Chairman Powell delivered his speech half an hour later, the market immediately headed to a 4% plunge. His words, “it’s premature to think about pausing”, ditched any hope of easing in the foreseeable future. What Economic Data? I have an interesting observation: major economic data has mostly been reduced to a data point for interpreting future Fed decisions. Discussion of CPI data is not focused on how much food and rent cost went up and why, but whether the decline from 9.1% to 8.2% is sufficient to alter the rate-hike trajectory. Good non-farm payroll data and low unemployment rate are not celebrated for a strong employment market but being interpreted as the Fed needs to do more. Corporate profit may be good for a stock, but not for the stock market. If inflation is stubbornly high and six consecutive rate hikes have not cooled down the economy, more tightening is needed. When interpreting Fed’s policy decision, good could be bad and bad could be good. That is absurd. Repricing with the Gordon Growth Model On August 29th, I launched a series on “The Great Wall Street Repricing”. As high interest rate and high inflation rate become the new fundamental assumptions in investing, all financial products would go through repricing. Based on the Discounted Cash Flow (DCF) Model, a company’s valuation is the present value of its future cash flows. High interest rate raises its cost of capital. High inflation raises its cost of good sold and reduces its sales volume, resulting in lower cash flows. The combined effect is a decline in the stock price. Since high interest rate and high inflation affect all companies, this devaluation applies to stock market indexes as well. How much will the market decline? This is a $1 trillion question. I use Gordon Growth Model (GGM) to come up with a more quantitative estimate of stock index valuation. The formula for Gordon growth model: P = D1/(r-g) Where: • P = stock price • g = constant growth rate • r = rate of return • D1 = value of next year's dividend Like DCF, GGM states that the stock's value equals the sum of the present value of future dividends. However, GGM assumes that there is a constant growth in dividends. Free cash flow in the Terminal Period determines the intrinsic value of a company. Let’s see how GGM values $1 dividend per share under various assumptions. First, we use Year End 2021 data as a baseline case: • Given that BBB corporate bond rate was below 3%, I assume r = 4% • Perpetual growth rate g = 2.5%, which is very reasonable • P = 1.025 / (0.04-0.025) = $68.33 • S&P 500 closed at 4,766.18 on December 27th, 2021 Now, let’s make a forward-looking estimate based on what we know today: • Fed Funds rate is 4% now, and I expect it to go up to 5% next year • BBB corporate bond rate is now 6.34%. Adding the expected increase in risk-free rate, I assume the new r = 7.5% • With a pending recession, dividend growth rate will be reduced to g = 2% • P = 1.02 / (0.075-0.02) = $18.55 • S&P 500 settled at 3,770.55 last Friday, down 20.9% year-to-date Based on our GGM calculations, the fair value of S&P 500 index should be at 1294 points, or 73% below its 2021 year-end value. This indicates that the index could fall 2,477 points further from here, or -65%. GGM is by no means an accurate stock market pricing model. You could twist the assumptions to your liking and come up with very different values. It’s okay that you disagree with the logic behind GGM and prefer a different valuation model. However, our illustration is a shocking revelation of how vulnerable stock prices are to rising interest rates and slowed growth . There is a lagging effect in monetary policy. We have not seen the full extent of the impact from rising rates. Companies are partially insulated with fixed-priced costs negotiated from prior year, such as office lease, supplier contract, business loan interest, and wages of existing workforce. However, they will all go up when the contract is up for renewal. There is another reason for a downward trend in stocks – year-end selling. Many investors have taken a hit of -20% or more this year. They would sell the losers before the end of the year for tax purposes. Institutional investors will also need to rebalance their portfolio at this time. They are highly unlikely to take on new risks. The bear market is far from over. And the worse has yet to come. Shorting the E-Mini S&P futures ( CME_MINI:ES1! ) is still a viable strategy. Meanwhile, as long as Fed continues tightening the money supply, we’d better buckle up the seatbelt for a bumpy ride. Happy trading. *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 trade set-ups and express my market views. If you have futures in your trading portfolio, check out on CME Group data plans in TradingView that suit your trading needs www.tradingview.com
CME_MINI:ES1!Short
by JimHuangChicago
25
XAUUSD potential movement and entry1) NEWS TO NOTE: THE FEDERAL RESERVE AND THE BANK OF ENGLAND INCREASED INTEREST RATES BY 0.75% EACH WHICH STRENGTHENED USD AND GBP WHICH IS BAD NEWS FOR GOLD. JEROME POWELL (CHAIRMAN OF FEDERAL RESERVE GAVE A VERY HAWKISH SPEECH A COUPLE DAYS AGO IN WHICH HE AFFIRMED THAT INTEREST RATES WILL BE RISING WHICH ALSO STRENGTHENED USD) TODAY (FRIDAY 4TH) US NONFARM PAYROLLS CAME OUT WITH BETTER THEN EXPECTED DATA ABOUT US EMPLOYMENT MORE EMPLOYMENT →MORE PEOPLE IN ECONOMY →MORE MONEY IN CIRCULATION →MORE INFLATION → MORE REASON FOR FED TO INCREASE INTEREST RATES → STRONGER USD → WEAKER XAUUSD 2) UPCOMING NEWS TO NOTE: THURSDAY 10TH NOVEMBER CPI (upcoming September US inflation report) →THIS WILL EFFECT GOLD BECAUSE IT EFFECTS USD Stubborn readings could translate into sustained elevation in Feds rate hike odds (sustained higher interest rates). While this would be good news for the US Dollar, it will likely be bad news for US stocks and gold prices. 3) TECHNICAL ANALYSIS I expect the price to have a short drawback towards the primary resistance line, however, the primary resistance line (top resistance line) is unlikely to be tested (touched by price) due to the bullish momentum of gold. Then I expect gold to continue on its uptrend. If the primary resistance line is tested, it would be an excellent entry with a risk to reward of 1:2. If it is not tested, i wouldn't advise a buy order, unless there is candle patterns and chart patterns which suggest a strong bullish momentum (for example a engulfing candle or a 3.82 candle or a close above candle. In the past couple of days there has been higher lows and higher highs however this is only intraday, and over a bigger time-frame gold is bearish. Notes: PlEASE GIVE ME FEEDBACK I WOULD APPRECIATE IT SO MUCH TRADE WITH CAUTION HAVE A GOOD DAY THANKS SNIPER
FXOPEN:XAUUSD
by haadimilli
2
The aftermath of the feds fourth 75bps hike; DXY and DOW JONESIt's now official; the US Federal Reserve has enacted its fourth consecutive 75-basis-points rate hike, bringing its benchmark rate to the 3.75% - 4.00% range, which is the highest it has been since January of 2008. The markets reacted quite mildly to the rate hike at first, due to it aligning with exactly what the market was expecting for the past few weeks. Expectations strengthened for another 75-basis-points (typically an outsized hike) after September's hotter-than-expected inflation reading that arrived in October. The mild reaction soon gave way to volatility, as US Federal Reserve Chairman Jerome Powell began to deliver his address that customarily follows an interest rate decision. Investors were intensely curious about this address as it is an opportunity to glean information about why the decision was made and how the bank is thinking about future hikes. What they were specifically looking out for included statements concerning the intensity and pace of rate hikes moving forward, concerns held for the state of the US economy, and responses to recent data drops. What we learned from Powell’s address Stocks actually spiked at the onset of Powell’s address, buts quickly gave up gains when it became apparent that Powell is not seriously considering a slowdown in the pace of its rate hikes just yet, like that which has been seen in Canada and Australia. It will be interesting to see where US stocks head in November after recording huge bumps in October, which in part has been attributed to an expectation that the Fed might slow its pace. For one, The Dow Jones Industrial Average recorded its best month since 1976, climbing more than 13%. Powell noted that he expects to start talking about slowing the pace with his colleges within the next two meetings. The special note that it could be within the next ‘two’ meetings is what lent it a veil of non-urgency. Perhaps the most important note of the address, Powell confirmed that the bank has revised up its expectation for peak interest rates from 4.6% to 5.0% after digesting the data that had been released in October. This note has helped put the US dollar index (DXY) back on track to its 20-year high of 114.00 recorded in September. Much like stocks, the DXY’s reaction reversed its direction drastically after the market caught wind of the Feds revised terminal rate. Before the reversal, the DXY was on its way down to 110.00, before spiking to almost 112.00.
BLACKBULL:DX.F
by BlackBull_Markets
DXY Parabolic Curve Pattern RetestThe parabolic curve pattern DXY has been forming for over 16 months was broken on October 21st. DXY bounced at the 109.53 level and now appears to be retesting the curve. I see the following support levels if DXY is rejected at the curve. 1) At the previous bounce level (109.53) 2) Near the 105 level. 3) Near the 101 level. Thoughts: 1) The hawkish FED continues to fuel the dollar. 2) Next weeks CPI numbers will be very important. If there isn't a significant drop, that will strengthen the FED's resolve to remain hawkish. 3) A strong labor market also emboldens the FED's hawkish stance. Until there is a significant sign of labor market weakness, the FED will remain hawkish. 4) With every FED meeting and rate hike, the likelihood of the FED overshooting increases. 5) Everything here is just my opinion and may be flawed.
TVC:DXY
by Bigsky_Crypto
GBP/USD plunges on Powell, BOE warningThe British pound is sharply lower today. In the European session, GBP/USD is trading at 1.179, down 1.83%. It has been a dreadful week for the pound, which has declined by 3.7%. The Bank of England delivered as advertised, raising rates by a super-size 75 basis points today in a 7-2 vote. This was the sharpest rate hike since 1989 and brings the cash rate to 3.0%. The jumbo rate hike comes at a delicate time, with the BoE warning that the UK is in a "prolonged recession". The BoE is projecting inflation will hit 11% before the end of the year and estimates that the recession could last two years. The Bank said that further rate hikes would be needed, but the terminal rate would be lower than what the markets have priced in, which is 5.2%. The BoE has not only witnessed a tumultuous period since the last meeting in September, but had to make its rate decision and forecasts without knowing government policy. A budget was supposed to be released last week but has been delayed until November 17th. Former Prime Minister Liz Truss' ill-fated mini-budget led to a near financial crisis and forced the BoE to buy massive amounts of bonds. Thankfully, stability has returned and the BoE began selling bonds earlier this week. The BoE's message to lower expectations about future rate hikes runs contrary to what Fed Chair Powell said at the Fed meeting on Wednesday. Powell warned that there were no signs that inflation had peaked and said that rates will peak at a higher level than previously expected. This hawkish message sent equity markets sharply lower and boosted the US dollar against all the major currencies.  The double-barreled punch of a hawkish Fed and grim warnings from the BoE have sent the pound reeling close to 2% today. There is resistance at 1.1346 and 1.1506 1.1118 and 1.1045 and providing support
by OANDA
Sell position on USOIL after Fed ConferenceFundamental: 11/02/22 | 14:00 “The Fed is expected to proceed with another large rate hike of 75 basis points,” said Susannah Streeter, investment and market analyst at Hargreaves Lansdown. = Upcoming rate increase "There are high hopes indicating that there may be some easing in the US central bank's aggressive approach to tackling inflation," she said. = Possible “slowed down” by the Fed on interest rates Traders expect a rise of just 50 BP in December, after three consecutive increases of 75 points. These are mainly supported by the luxury sector and the health sector thanks to speculation on an easing of health restrictions in China and the solid results of Novo Nordisk. = Luxury sector in power + economy slow down In the United States, ten-year (US10YT=RR) and two-year (US2YT=RR) US Treasury bond yields are also flat, at 4.046% and 4.528% respectively. = Stagnant bond markets Oil prices are broadly stable pending the Fed. A possible drop in crude inventories in the United States, the upcoming European sanctions against Russia and speculation of an easing of sanitary restrictions in China offer some support, however. Brent rose 0.05% to 94.70 dollars a barrel and US light crude (West Texas Intermediate, WTI) 0.03% to 88.40 dollars. = Temporization of oil but there's a hope of falling Total crude oil inventories fell 5 million barrels in the week ending October 28, with commercial oil inventories down 3.1 million barrels and U.S. Strategic Petroleum Reserve inventories down 1.9 million barrels. Gasoline inventories fell last week while distillate petroleum inventories edged up. = Oil scarcity 11/02/22 | 20:00 Fed Chairman Jerome Powell began his press conference after the meeting at 7:30 p.m. The decision itself was in line with market expectations, but the changes to the accompanying statement were seen as accommodating. So the US dollar fell, while gold and indices gained ground. = The Fed intends to slow the rise in rates, the ultimate level of rates will be higher than expected. EURUSD remains high + Fed decisions affect markets with lag. Technical : H4 : Eliott waves (1,2,3,4,5), 5th wave ended, beginning of the correction (A,B,C,...), High sell volume under 88$, Momentum bearish divergence, Low ADX on past trend, increasing ADX on decreasing trend
FX:USOILShort
by thefrenchsniper
2
Gold to target $1660 Gold price is the recent recovery gains at $1650 on the US Federal Reserve day. XAUUSD bulls could target $1660 - $1670 on Fed’s dovish rate hike. On a hawkish surprise, xauusd price could result its broader downtrend, the demand area seen at $1637 - $1642. After the break $1620 and October low at $1617 could be threatened. Yellow metal price to remain firmer but the smaller moves are likely to be seen ahead of the FOMC tonight. We are looking to buy gold with a target of $1660.
FOREXCOM:XAUUSDLong
by GOLDPIPSMAKER
4
XAUUSD - KOG REPORT - FOMC!This is our view for FOMC today, please do your own research and analysis to make an informed decision on the markets. It is not recommended you try to trade the event if you have less than 6 months trading experience and have a trusted risk strategy in place. The markets are extremely volatile and can cause aggressive swings in price. Really short FOMC Report today as we're already taking advantage of the range and shorting from above. Illustrated on the chart are the key levels to look for if there is an FOMC move! Its likely to be priced in, however, the press conference with Powell after the statement may move the market. We'll be looking again for extreme levels to long or short the market, anything in between we'll leave for intraday trading as we don't really want to get caught mid-move. From Camelot this morning: XAUUSD 02/11/22 1H Support: 1639 / 1635 / 1630 / 1624 / 1620 / 1613 Resistance: 1645 / 1654 / 1667 / 1670 / 1675 / 1681 KOGs Bias for the day: Bearish below 1655 with targets below 1630 and below that 1613 Bullish on break of 1655 with targets above 1665 and above that 1680 Summary: Excalibur target above which we said yesterday was likely. Let’s see how the price reacts around the 60-65 region if it gets there. Plan remains the same until we break and hold above the key level. FOMC today so please take it easy on the markets. Don’t risk your accounts for one hit wonder trades! Please do support us by hitting the like button, leaving a comment, and giving us a follow. We’ve been doing this for a long time now providing traders with in-depth free analysis on Gold, so your likes and comments are very much appreciated. As always, trade safe. KOG
FX:XAUUSD
by KnightsofGold
12