Tokyo, We Have a ProblemBank of Japan raising rates may be too little too late to escape this devaluation.
Inflationexpectations
Yen edges lower, Kuroda says no exit plannedWith most financial markets closed on Monday, trading will be thin. Japanese markets are open and USD/JPY has edged higher, trading at 132.82, up 0.34%.
The Bank of Japan announced a policy change last week, and the ramifications were massive for the Japanese yen, as USD/JPY jumped as much as 4.8% following the move. The BoJ widened the yield curve on long-term bonds from 0.25% to 0.50% but maintained the yield target at 0%. The tweak to the yield curve caught the markets napping, and the shocking move now has the markets buzzing as to whether the BoJ is planning further policy changes to its ultra-low monetary policy.
Investors heard from the man himself earlier today, as BoJ Governor Kuroda gave a speech where he stated that last week's move was not a prelude to withdrawing its massive stimulus programme. In fact, he said the widening of the yield curve would enhance the Bank's ultra-easy policy. Kuroda reiterated his well-worn theme that the BoJ wants to see wages rise in order to hit its 2% inflation target in a "sustainable and stable manner" and plans to continue monetary easing through yield curve control. The key question is whether the markets are buying what Kuroda is selling. Prior to last week, the markets were expecting an uneventful end to Kuroda's decade at the helm of the BoJ, which ends in April. That view has been turned upside down after the yield curve tweak, and I would expect the markets will be on guard for additional tightening moves, despite Kuroda's insistence that it is business as usual at the BoJ.
Last week wrapped up with further signs that inflation is falling in the US. The Fed's preferred inflation gauge, the PCE Price Index for November dropped to 5.5% y/y, down from 6.1%. As well, UoM inflation expectations slowed to 4.4% y/y in December, down from 4.6% a month earlier. UoM Consumer Sentiment rose to 59.7, up from 59.1, as consumers are more confident about the economy. Although there is evidence that inflation is easing, strong wage growth and a robust labour market likely mean that the Fed is unlikely to change its view that interest rates will rise above 5% before peaking.
USD/JPY is testing resistance at 132.70. Above, there is resistance at 133.62
There is support at 131.72 and 130.15
Aussie slides on Fed hawkishnessThe Australian dollar is sharply lower on Thursday. In North American trade, AUD/USD is trading at 0.6755, down 1.58%.
Australia's robust labour market continues to impress, with a stellar performance in November. The economy created 64,000 new jobs, above the October reading of 32,000 and blowing away the consensus of 19,000. The unemployment rate was unchanged at 3.4%.
There was more good news as the Melbourne Institute's Inflation Expectations fell to 5.2%, down from 6.0% previously and below the consensus of 5.7%. The reading has been overshadowed by the employment report and the Fed rate meeting, but is an indication that stubborn inflation is falling. The Reserve Bank of Australia doesn't meet until February and a lot can happen until then, but as things stand now, we can expect a fourth straight hike of 25 basis points at the next meeting.
The Federal Reserve has been talking hawkish for months, but the markets haven't been listening all that well. Soft inflation reports and a better-than expected nonfarm payrolls had the markets convinced that the Fed was poised to wind up its current rate cycle, which sent equities higher and the US dollar sharply lower. Investors were subject to a cold shower on Wednesday as the Fed sounded much more hawkish than the markets had anticipated. Policy makers shrugged off the recent declines in inflation, instead focusing on strong job gains and the high level of inflation. The Fed plans to maintain a restrictive policy into 2023 in order to continue the battle with inflation, and it's clear that the current tightening cycle will continue for some time. The hawkish performance sent risk apprehension higher and boosted the US dollar.
AUD/USD is testing support at 0.6772. The next support level is at 0.6693
There is resistance at 0.6875 and 0.6954
Taf's Gun to the HeadTrade Idea: Sell Gold at Market
Reasoning : Looking at bullish momentum to continue on DXY on the backdrop of strong support at ichimoku SSB zone.The hourly shows a potential bullish head and shoulders pattern as well. So on that looking to sell Gold at resistance zone 1711-1714. CPI figures could give volatitly so be careful on stop loss.
Entry:1707.85
TP:1678.83
SL:1719.55
RR: 2.48
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New Zealand dollar flies after US NFPThe New Zealand dollar is steady today, after ending the week with huge gains. NZD/USD is trading at 0.5934 in the North American session.
The US dollar was broadly lower on Friday, after the nonfarm payroll report sent mixed signals about the strength of the labor market. The October reading of 261,000 was stronger than the consensus of 200,000, but it marked the smallest gain since December 2020. The unemployment rate rose to 3.7%, up from 3.5%, while wage growth rose to 5.5% YoY, up from 5.2%. The latter release is likely to keep the Fed concerned about inflationary pressures.
The mixed numbers left investors in a dovish mood and the US dollar paid the price. NZD/USD climbed a remarkable 2.7%, as investors gave a strong thumbs-up to risk currencies like the New Zealand dollar. The job data has led to the markets raising the likelihood of a 50 basis points hike in December - the CME's Fed Watch has pegged a 50 bp increase at 56% and a 75 bp move at 34%. Still, with the Federal Reserve expected to raise rates to 5% or even higher next year, I would not be surprised to see the US dollar quickly recover from Friday's tumble. Investors were looking for anything to send the equity markets higher, and the mixed NFP report was their excuse, even though US job creation was stronger than expected.
New Zealand will release Inflation Expectations on Tuesday. The Reserve Bank of New Zealand will be watching carefully, as it continues its titanic battle with inflation. Last week's employment numbers indicated that the labour market remains tight - unemployment is very low and wage growth is moving higher. This makes the RBNZ's battle with inflation will continue and we can expect another oversized rate hike at the November 23rd meeting - perhaps as high as 75 bp. The risk of a wage-price spiral is a key concern for policy makers, and if the upcoming Inflation Expectations accelerates, it would be a worrisome signal that inflation is still on the upswing.
There is resistance at 0.5906 and 0.5999
There is support at 0.5782 and 0.5689
Inflation not going to slow down for the US until 2028In the short term - like today!
8:30 EST 13 Oct 2022
If the CPI (measures inflation) comes out at above 8.2% this could lead to a market crash as the Fed would likely raise interest rates by another 100 bps on 2 November to curb inflation.
If the CPI comes out below 8.2 this could spark a market rally as they will believe inflation is starting to cool down.
In the long term. Price broke out of the W Formation and is showing major upside to come for Inflation.
This could go on until 2028... If this happens, there is a potential Depression that could kick in world wide.
This depression would then last for another 10 - 20 years (if they can get it under control).
We need a government and quantitative reset...
Sorry for the doom and gloom but it's not looking good technically.
Time To See If Elliott Wave Can Predict This RecessionIf we are beginning wave 3, I have us in Sub-Millenial wave 1, Grand Supercycle wave 5, Supercycle wave 2, Cycle wave A, Primary wave 5, Intermediate wave 3. I alphanumerically refer to this wave as 152A53
Intermediate wave 2 met all of its targeted movement and it bounced perfectly off of the median wave 1 retracement. With all goals met, the major drops are scheduled next. It all begins with the inflation numbers pre-market tomorrow and then followed by a week of speculation on what the Fed will do.
I have both of these events occurring in Intermediate wave 3 and each event is a catalyst for the pending 700 points, Elliott Wave Theory is hinting at dropping over the next month. If this movement does not occur, my wave count is wrong or EW is complete $#*&^#%$.
I have highlighted potential extension points based on historical movement for waves ending in 53 and A53.
For waves ending in 53:
75% of the time (the first quartile of data) wave 1's movement is surpassed by 147.99%
50% of the time (the median) wave 1's movement is surpassed by 166.31%
25% of the time (the third quartile) wave 1's movement is surpass by 209.7%
all of these levels are indicated by the yellow extension lines
For waves ending in A53:
Quartile 1 is 161.34% (near the "perfect ratio")
Median is 193.26%
Quartile 3 is 267.24%
all of these levels are indicated by the light blue extension lines.
My target bottom is somewhere around 3595, but we will see how intense the selling is. This could also look like capitulation selling, but I think that will actually occur in 2024. I will continue to re-evaluate as we work our way through this.
FED Fund Rate, US Bonds and Inflation PredictionThe blue line area shows the historic and current FED's Fund Rate.
Looking back in the past it appears the US10Y (yellow line) is predictive of FED's fund rate upper target (orange arrows).
The US3M (turquoise line) seems to be a good indicator to get a feeling for the FED's fund rate short-term up or downward trend.
In the FOMC Summary of Economic Projections Jun 15 '2022 the FOMC had the midpoint of target range or target level for the federal funds rate at around below 4%
2022: 3,39% midpoint, 2023: 3.78%, 2024: 3.01% and >2024: 2,24% (ghost feed in the red box on the right).
So all that noted it would appear the FED Funds rate is to be expected at just below 4% at around 3.8%.
The next FOMC meeting will give as an update on that from the perspective of the FED.
And as a general indicator you need to know the FED uses the 10 Year- 3 Month Treasury Yield Spread (white line) as follows:
The 10 Year- 3 Month Treasury Yield Spread is the difference between the 10 year treasury rate and the 3 month treasury rate.
This spread is widely used as a gauge to study the yield curve. A 10 year-3 month treasury spread that approaches 0 signifies a
"flattening" yield curve. Furthermore, a negative 10 year-3 month spread has historically been viewed as a precursor or
predictor of a recessionary period. The New York Fed uses the rate in a model to predict recessions 2 to 6 quarters ahead (white arrows).
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NZD slides, employment report nextThe New Zealand dollar has reversed directions today and recorded sharp losses. NZD/USD is trading at 0.6285, down 0.75% on the day. Risk appetite has fallen, with US Speaker of the House Nancy Pelosi's controversial trip to Taiwan sending risk appetite lower. The New Zealand dollar has followed the Aussie, which has plunged around 1.5% today. As well, NZD/USD is under pressure from NZD/JPY, which is down 1% today due to safe-haven flows to the Japanese yen.
New Zealand releases the employment report for Q2 on Wednesday. The labour market has been solid but unspectacular - in each of the last two quarters, Employment Change climbed by a negligible 0.1%, while the unemployment rate remained steady at 3.2%. Employment Change is expected to rise to 0.4% and the unemployment rate is forecast to tick lower to 3.1%. With the markets expecting only a slight change in the second quarter, I don't expect the New Zealand dollar to react unless the forecasts are wide off the mark.
The Reserve Bank of New Zealand continues to grapple with soaring inflation, which rose to 7.3% in Q2, up from 6.9% in Q1. The central bank has raised rates to 2.50%, but with inflation well above the inflation target of around 2%, rates will have to keep rising in order to reel in inflation. The RBNZ is also concerned about inflation expectations, which if left unchecked will strengthen inflation and exacerbate the Bank's efforts to curb inflation. Inflation Expectations accelerated for eight straight quarters and hit 3.29% in Q1, up from 3.27% and a 31-year high. We'll get a look at Inflation Expectations for Q2 next week, and if the current trend continues and the reading accelerates, it will put further pressure on the RBNZ to respond with a large rate hike at the August 17th meeting.
NZD/USD is putting strong pressure on support at 0.6271. Below, there is support at 0.6213
There is resistance at 0.6350 and 0.6408
$DBA - We are at key area (PAY ATTENTION) $DBA - We are at key area (PAY ATTENTION)
What is this index?
Agricultural commodities ETF - Includes: Wheat, Corn, Soybeans, Coffee and much more.
Is food inflation over or this a minor dip?
Keep an eye!
Aussie eyes RBA minutesIt was a roller-coaster week for the Australian dollar, with much of the volatility driven by central bank rate moves. AUD/USD ended the week with a huge decline of 1.62% but has started the week in positive territory.
Last week's releases indicate that the labour market remains robust and that inflation expectations are accelerating. Australia's employment report for May, released on Thursday, indicated that the labor market remains strong. The economy created 60.6 thousand jobs, crushing the estimate of 25.0 thousand (4.0 thousand prior). The unemployment rate remained unchanged at 3.9%. On the inflation front, inflation expectations rose sharply to 6.7% in June, up from 5.0% in May.
Will RBA reveal its hand in the minutes?
The RBA is undoubtedly carefully monitoring employment and inflation data, and both of these releases lend support for the central bank to continue raising rates - the employment market is strong enough to handle tighter policy, while the spectre of unanchored inflation expectations is a red flag that the RBA cannot ignore. Policy makers are willing to take the risk that higher rates could tip the economy into recession if that is the price to pay for lower inflation, which is seen as a huge danger to the economy. The RBA will be in the spotlight on Tuesday, with the release of the minutes from the meeting earlier in June. At that meeting, the RBA shocked the markets with a rate increase of 0.50%, bringing the cash rate to 0.85%. Most analysts had expected a 0.25% hike.
Even with the super-size hike, the RBA has some catching up to do, with a cash rate still below 1.0%. The markets will be hoped to glean some insights from the minutes as to the direction of RBA rate policy. Any signals that the RBA plans to hike again by 0.50% should result in gains for the Australian dollar.
AUD/USD is testing resistance at 0.6952. Above, there is resistance at 0.7052
There is support at 0.6834 and 0.6734
Pound slides as US inflation outperformsThe British pound is taking a beating today from the US dollar, following back-to-back losing sessions. In the North American session, GBP/USD is trading at 1.2378, down 0.94% on the day.
US inflation continues to accelerate. The May inflation report showed that headline inflation rose to 8.6% (8.3% prior). Core CPI ticked lower to 5.9%, down from 6.0%. With no sign of inflation peaking, the Fed is expected to remain aggressive and this has sent the US dollar sharply higher. It will be interesting to see how Fed officials respond to the inflation release, with a Fed policy decision coming up on Wednesday.
It was a light data calendar this week out of the UK. One release that was noteworthy was Inflation Expectations, released earlier today. The BoE survey found that inflation expectations for the next 12 months had risen to 4.6%, up from 4.3% n February. Inflation expectations for 2 years and 5 years were also higher, which is clearly a worrying trend. The danger of inflation expectations becoming unanchored could manifest into actual inflation continuing to accelerate. CPI hit 9% in April, up from 7.0% in March, and the BoE has stated that we could see double-digit inflation.
Asides from inflation, there are plenty of worries for investors with regard to the UK economy. Prime Minister Johnson may be on his way out after a disappointing showing at a non-confidence vote and there is trouble brewing with the EU over the Northern Ireland protocol. This points to a bumpy road for the British pound in the short term.
GBP/USD faces resistance at 1.2537 and 1.2614
GBP/USD is testing support at 1.2413, followed by support at 1.2336
DXY USD Index : Greatest dive of USD on the way? 23.5Friday & today we can clearly see recovery of metals & crypto -But not stocks.
Meaning, inflation hedging instruments are on the rise while the USD is diving.
Makes a lot of sense.
What makes much less sense is the rally of USD between March to last week, the last 9-10 weeks.
It was pushed by rate hike news and overall panic/investment liquidation.
But this is obviously a very temporary phase.
What happens when the dust settles? Investment will be resumed.
Where will the money go? Where every news article you see daily suggests. Inflation hedging instruments. Gold, Silver, Bitcoin, Ethereum, etc..
Now let's look at the technicals :
1) Trend-line since the beginning of March 2022 rally is broken down. Suggesting immediate down-trend in potential.
2) Head & Shoulder pattern with a 102.20 neck-line is suggesting a possible bounce as retest of the trend-line breakout at around 103.
If no bounce up from neck-line happens and it continues lower - The next target is likely to be 101.20 - 100.80 very quickly and continued escalation up of metals and crypto.
3) 103.80-104.50 was key horizontal resistance of many, many years. It makes a lot of sense that it would stretch up to test it and would settle for highest point.
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New Zealand dollar sinks after US CPIThis week has gone from bad to worse for the New Zealand dollar, as NZD/USD has taken a tumble on Thursday. In the North American session, NZD/USD is trading at 0.6248, down 0.74% on the day. The currency has dropped 2.66% this week and is trading at lows not seen since June 2020.
The US inflation report for April showed that CPI eased, but the decline was much smaller than expected. US CPI dropped from 8.5% to 8.3%, above the estimate of 8.1%. This chilled any speculation of an '"inflation peak", as the markets digested the fact that even if inflation is moving lower, it could do so at a very slow pace.
For the Fed, the high inflation reading confirms that its hawkish stance is justified, but now there are calls for policy makers to be even more aggressive in tightening the monetary screws. The Fed has signalled that it plans to deliver 50-bps increases in June and July, but the markets aren't dismissing the possibility of a massive 75-bps hike. Fed member James Bullard said on Wednesday that 50-bps moves were his base case and this appears to be the majority view.
Still, inflation was higher than investors or the Fed had expected, and the May inflation report, which will be released just a few days prior to the Fed's next meeting on June 14-15th, will be critical in determining the size of the next rate hike. The Fed has embarked on a rate-hike cycle primarily because of soaring inflation, so it stands to reason that inflation will be a key factor in rate policy. Fed member Mester said on Tuesday that she supports raising rates by 50-bps at the next two meetings and then speeding up or slowing down the pace of increases based on inflation levels.
The RBNZ is also under pressure to tighten more aggressively after Inflation Expectations for Q2 crept upwards to 3.29% (3.27% prior). Inflation Expectations have now risen for an eighth successive month, and the RBNZ is looking to reverse this trend. At the April meeting, the RBNZ said it would act to ensure that "current high consumer price inflation does not become embedded into longer-term inflation expectations.” With Inflation Expectations not showing any signs of easing, the RBNZ is widely expected to raise rates by 50-bps at the May 25th meeting.
NZD/USD is down sharply and has broken below support at 0.6281. Below, there is support at 0.6169
There is resistance at 0.6344 and 0.6456
Can traders trust inflation data forecasts this week?Can traders trust inflation data forecasts this week?
07 Feb – 12 Feb, 2022
This week’s trading takes place in the shadow of last week’s Non-farm Payrolls number, out-doing analysts’ expectations by a considerable margin. Non-farm Payrolls recorded 467K jobs added to the US economy in January vs an expected 150K gain. Investors will be cautious of this week’s predictions, especially as it applies to inflation data.
Thursday, February 10:
Brazil Inflation Rate YoY JAN
Mexico Inflation Rate YoY JAN
Russia Inflation Rate YoY JAN
Inflation data across three emerging economies should draw investor interest on Thursday. In order of appearance, Brazil, Mexico, and then Russia’s results will be rolled out through the morning.
Brazil and Russia’s readings are expected to keep rolling onto new multi-decade highs. In contrast, Mexico’s reading is expected to cement the idea that inflation has peaked in the country as it records its second straight decline in its reading.
Brazilian inflation is expected to rise from 10.06% to 10.40%
Mexican inflation is expected to fall from 7.36% to 7.00%
Russian inflation is expected to rise from 8.4% to 8.8%
Friday, February 11:
US Inflation Rate YoY JAN
The Federal Reserve’s prediction that inflation will return to 2.6% sometime this year is unlikely to be encouraged by January’s reading of US inflation YoY. The market is predicting an increase in the inflation rate from its current 7.0% to 7.3%.
January’s reading is due this Friday morning.
Something to consider in relation to the inflation rate is that its biggest contributor, energy, has recently hit 7-year highs, with WTI and Brent crude both trading above US $90 per barrel.
EURUSD - 1 hour callShort EURUSD as it breaks pivot. Fundamental news expected data - US Inflation data. Market is expected to be volatile , good for trading with cautious SL. All Bulls and Bears point mentioned.
The Economic Cycle: Painting The Full Picture. This is a very complex topic but I will try to keep it as simple as possible.
This whole story began when the US government printed money to help the economy going and the reserve bank infused money into the market by buying back bonds. These actions did help for a while and the stock market recovered from March 2020 mini-crash, but that printed money caused the dollar index to drop significantly. Consequently, the price of commodities kept rising.
After a while, people started to worry that all those printed money are going to cause huge inflation. Therefore, they started dropping bonds showing their lack of confidence in the economy causing the yields to go up. They instead bought Bitcoin to maintain the value of their money and hedge against a possible crash. That was a good choice because with a limited supply and a high demand Bitcoin acted like gold and went straight up beating other asset classes in returns.
After the election and reopening of the economy, the feds persisted that this inflation is transitory. There are many reasons why they say that including stable inflation expectations, disinflationary technologies, and so on. Due to a phenomenon called “cultural lag” investors believed the feds after a while and when June’s CPI report came out, they almost didn’t react to a whopping 3.5% inflation rate.
This week at the FOMC meeting everyone expects to hear the same thing because Jerome Powell has been pretty consistent with what the feds are going to do in the case inflation got out of hand. They see economic growth in such good health that they are going to start tapering. Unlike, 2013, this tapering is expected to be a relief and lead to a massive bull market.
That said, inflation is going to be around for a couple of years but in the long run, it should go down. And feds are going to stay consistent with their plan to help the economy stabilize over the tapering period.
But what does it all have to do with Bitcoin? A stable economy doesn’t need gold or bitcoin because people would rather have a stable ROI in a productive economy than having their funds held in a volatile asset with a risk of losing 40% of it in a matter of a month.
Of course, the economy won’t stay stable forever and new struggles will come along our way. Whether it’s due to presidential cycles or bitcoin halving or other events, there will be a day that bitcoin will worth 400k.
There is still much to be discussed here, so please feel free to share your thoughts and comment your analysis.
How do you think FOMC meeting is going to affect the market? Are we going to have another Taper Tantrum?
Thanks
Aussie slides on soft consumer confidenceThe Australian dollar has reversed directions on Wednesday and recorded considerable losses. In the European session, AUD/USD is trading at 0.7750, down 0.52% on the day.
Investors gave the Aussie a thumbs down on Wednesday after Westpac Consumer Sentiment fell 4.8% in May. The trend of improving consumer confidence over the past three months was broken. Still, a review of the Westpac report shows a "glass half full" approach, as the report notes that the index dropped from 118.8 to 113.1, its second-highest print since April 2010.
The RBA will hold a policy meeting on June 1, and the central bank will announce its plans for Yield Curve Control (YCC) and QE. The Westpac report says that the bank remains committed to monetary stimulus and this means that QE will be extended for a further A$100 billion in September, and YCC policy will shift from April 2024 to November 2o24. The bank has repeatedly said that it has no plans to tighten policy prior to 2024.
The market will be treated to a dump of Australian data on Thursday. Consumer Inflation Expectations is first up (1:00 GMT), with a consensus of 3.6%, up from 3.2%. This indicator is closely watched as inflation expectations can translate into actual inflation, so a strong gain would be a signal that inflationary pressures are growing.
The highlight will be Employment Change (1:30 GMT), with a small gain of 15.0 thousand expected, down from 70.7 thousand. Australia also releases Manufacturing and Services PMIs (23:00 PMI). Both sectors are in good shape, a testament to the strong Australian economy. Manufacturing PMI is projected at 59.8 and Services at 58.9, which are well into expansionary territory. The 50-level separates contraction from expansion.
AUD/USD faces resistance at 0.7887 and 0.7990. On the downside, there are support levels at 0.7684 and 0.7584.
