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NZD/USD - BUY SET UP AS INTEREST RATES IN NEW ZEALAND RISE We are highly likely to see a strong recovery in the New Zealand Dollar Against the U.S Dollar as interest rates in New Zealand continue to rise. Markets expect the Reserve Bank of New Zealand to raise the cash rate to 3.50% by year-end, which will be a premium 0.75% to 1.00% Interest rate over the U.S. This means any investors holding short positions in NZD/USD will lose money holding the position open overnight. The U.S Dollar has been strong in recent weeks as stock markets have fallen due to the Federal Reserves' commitment to raising interest rates aggressively to contain inflation running at 8.30%. When stock markets fall globally, investors historically sell international currencies and flood into the safety of the U.S Dollar, as its the worlds reserve currency. However, when stocks recover as they always do, investors will quickly sell dollars and move back into international currencies as they invest globally in equities again, causing the dollar to weaken in exchange rates and push up NZD/USD.
Long
by KayansMarkets
EUR/JPY - BUY SET UP ON ECB RATE HIKES The Euro is now highly likely to catch a strong bid against the Yen after the European Central Bank President Christine Lagarde said the Central Bank is likely to start raising interest rates in July and exit sub-zero territory by the end of September 2022. Interest rate differentials on Government Bonds will support the EURO higher. In this video I breakdown the historical relationship between the difference in Japan and Europe's interest rates and how the currency pair follows the negative or positive change in European Bond Yields relative to Japan.
Long
by KayansMarkets
Bonds Pick UpBonds have found support and made a run for higher levels. The ten year dipped 119'23 into the 118's, finding support just above our level at 118'04. We then saw a rebound to 120'14, which we have been identifying as the next target after 119'23. It will take some momentum to break this level however, since this is a relative high from back in April. We are already seeing steep resistance here confirmed by a red triangle on the KRI. The Kovach OBV is gradually trending up, but is a oscillating with the dips, suggesting we need to see more momentum to come through to sustain the rally. If we selloff further, then we should see support at 119'01 then 118'04.
CBOT:ZN1!
by quantguy
A Fork in the Road: How Will the Recession Affect Crypto?The more positive way of looking at LUNA, and other crypto disasters in general, is that these sorts of systemic problems eventually all get caught as the foundation falls underneath. In fiat, these sorts of issues get covered up, bailed-out, and hidden behind tools like quantitative easing as people get pushed out into the streets through inflation and housing scarcity and such. It's a more socially acceptable form of exploitation in a way - with the worst of them actually dipping into taxpayer money and public funds. Just ask the exploited classes about this stuff - they know all about it. Keep in mind that Bernie Madoff was able to get away with his racket for 17 years because the market generally always kept on going up. When the recession hits, we're going to start seeing the ugly undersides of what's been going on in fiat, too. Ponzi schemes are not exclusive to crypto, and there's a lot of pot calling the kettle black arguments floating around, especially in finance. The guilty conscience often attacks what they themselves are doing. The big question for crypto holders is what happens when the recession hits - there's primarily two different types of outlooks in the space right now. The pessimistic outlook is that when fiat goes down, so does crypto, as it has typically done for most of its runs. The optimistic outlook is that Bitcoin itself was born out of the recession and controversy of 2008, where it has experienced the biggest of its returns. Both are true, but how 2022 turns out will largely depend on how secure people are feeling about their money in general. A couple of things that make the economy of the US today unprecedented, compared to recessions in the past: - A historic 8%+ inflation rate which has not yet shown signs of slowing down. - Interest rates will likely be raised to the highest it's been in recent history (possibly 3%, but likely higher). - A massive 36% increase in money supply since 2020, mostly gone to government spending relating to COVID. - High costs of living and new remote work options driving record amounts of people out of the cities (where the housing prices are the most inflated). - The US government has been in massive debt for a while and have been using "fixes" like quantitative easing to kick the can down the road. It's been relying on money printing and taxing capital gains in order to pay off its bills but if the economy goes into a recession, that will no longer be an option. Some people say that this is the "day of reckoning" for the US economy coming that has long been overdue. Which way will the tides swing for crypto and Web3? Time will tell.
Long
by RyanTanaka
1
Bond - Equity Correlation: The Most Important Question?TVC:US10Y TVC:NYA A reminder that falling bond yields are synonymous with higher bond prices. In other words, a downtrend in yield equates to a bull market in bonds. In January, bonds were still in a technical bull market as defined by the broad declining channel that had contained the 40 year bull market. In March the break of that downtrend turned the macro trend from bullish to neutral. Now, all that is left to define a bearish trend is a substantive violation of the 3.25% pivot zone. More recently, after testing the major macro pivot in the 3.25% zone, ten year Treasury yields have fallen sharply. The decline begs the question: Is the decline the result of the decades long negative correlation between equity and fixed income reasserting itself on the back of equity weakness or is it simply the beginning of a relief rally created by the combination of major support and a deeply oversold condition? While it is too soon to answer the question with any degree of certainty, it is clear that the outcome will have vitally important macro/portfolio implications. My guess is that if equities continue to weaken, that the bonds will continue to do better, but that without the bid provided by flight-to-quality that the outlook for bonds will quickly deteriorate as the oversold condition is alleviated. In future posts I will provide a deeper dive into the shorter term technical and fundamental outlook for bonds, but the posts from January 2, 11, and February 9 should provide adequate background for now. Early in the year I published a five part market overview detailing my macro technical and fundamental views of the "Big 4" asset classes: Equities, Rates, Commodities and the Dollar. As part of that series I discussed the importance of the correlation between equities and bonds and the central role falling inflation played in creating the relationship. This inverse correlation is a historical anomaly, yet it drives much modern portfolio construction. The idea is that when equities decline sharply, flight to quality in bonds pushes rates lower (bond prices higher). In other words, gains in the bond portion of the portfolio partially hedge losses in the equity portfolio. Variations of the 60/40 portfolio construction (60% equities and 40% bonds) and risk parity strategies are intended to shield investors from the worst of equity declines and indeed have had an admirable track record of reducing return volatility. After decades of success, the amount of assets devoted to this strategy, both overt and passive, is staggeringly huge. If the historic positive correlation is reasserting itself due to a change in the trend of inflation (stocks down and bonds down), the subsequent unwind has the potential to create massive dislocation. In my view, the combination of extremely negative real rates (nominal rates less inflation), an inflation cycle that has turned from virtuous to vicious, and equity markets, that at least at the index level, are extremely overvalued, may be setting the stage for a polarity switch in which bond prices and equity prices fall and rise together. That has clearly been the case so far this year. Year-to-date (YTD) the bond composite has returned approximately -12% while the S&P has returned approximately -1%. In other words, both sides of 60/40 and risk parity portfolios have lost considerable value. If the year were to end now, it would be a historically bad year for the strategy. Is the switch in correlation a short term phenomenon or the start of something much larger? To my mind, this is the central question for the remainder of this year. I think the next few months will be telling. There is also the tension between high inflation and the growing odds of a significant recession. Not only does high inflation serve as an inhibiter to real economic growth, but so will the Federal Reserves (Fed) effort to return inflation to its long term trend. Paul Volcker had to create twin recessions to beat the great inflation. I doubt very much that this Fed will escape without having to make a similar choice. Notes: It is worth remembering that in an economy that is overly financialized and debt burdened, rising rates often break the weakest link in the economic chain. Weak links can be systemically important institutions, sectors or simply a dramatic sell off in the equity markets. That markets are currently in distress is clear. What isn't clear is that the distress is enough to create a systemic risk event. Bonds and equities frequently move into and out of positive and negative correlation in shorter time frames. When I talk about historical correlation I am referring to the very long term. Good Trading: Stewart Taylor, CMT Chartered Market Technician Shared content and posted charts are intended to be used for informational and educational purposes only. The CMT Association does not offer, and this information shall not be understood or construed as, financial advice or investment recommendations. The information provided is not a substitute for advice from an investment professional. The CMT Association does not accept liability for any financial loss or damage our audience may incur.
TVC:US10YEducation
by CMT_Association
26
Gold Returns to a Value AreaGold has rejected $1836, and has made its back down to the value area we identified earlier. Recall that $1795 to $1815 was a range held by gold in the past. We suggested that if it did not have the strength to break out into the upper $1800's or the $1900's, it was likely to return to this range. After rejecting $1836, we fell straight through $1826, and broke through $1815, currnetly finding support somewhere in the middle of our expected range. We should have further support from $1795, but if not, there will be further support in the $1780's. We anticipate $1851 to hold as a ceiling if we catch another burst of momentum.
COMEX:GC1!
by quantguy
Interest Rates vs Everyone - How Crypto Can Bounce BackA pretty rough week for the markets - especially crypto. The recent dips are a result of mainstream money (crypto curious, but not necessarily dedicated) leaving the space as a response to inflation woes and the Federal Reserve planning to increase interest rates over 2022. The US housing markets are also set to slow down as well, possibly leading to a recession in the US markets and the global economy as a whole. What's the silver lining? Well, the last time the housing market dipped was in 2008-2012, which coincides directly when Bitcoin itself was invented by Satoshi Nakamoto. Will the same sort of sentiment emerge as a result of fiat money crashing this time around? Time will tell.
ECONOMICS:USINTRLong
by RyanTanaka
2
DOLLAR UP // EURO ( CRASH )The strength of the dollar as a currency is increasingly present against other currencies, if the FED continues to raise interest rates in this way and the rest of the countries do nothing with their currencies, we would be talking about an increase in strength for the dollar currency (at least temporarily). An increase in the strength of the dollar, would make a large number of assets and currencies, such as the SP500, Bitcoin, Euro, etc... fall sharply. We are at a critical point, as we have already observed in the previous Euro analysis. If the strength continues to increase, there is a high probability that it could reach the levels of 120. After that level. We would be faced with a new scenario. Where the dollar will ultimately decide the future strength or weakness of the rest of the assets. It would not be surprising that we are facing a final sprint for the dollar where before falling the dollar itself, it will take everything ahead. Good luck to all !
TVC:DXYLong
by javieralcazarono
Bye Bye EURO !! ( CRASH )The levels on the euro's chart against the dollar are highly worrisome. If the European Union does not quickly raise interest rates more aggressively, we could see the Euro fall to levels of €1=$1 or even lower at €0.8=$1. We note that it has been in a bearish channel since about 2005, which it has been respecting in a demanding manner. At the same time we have no nearby supports that can hold the price, so the HIGHEST probability is to fall. The market structure predicts an abrupt and rapid fall towards these levels, probably without giving us any retracement, as happened in the past. We have already broken the bullish guideline within the bearish channel and this is not good news, since there is no " REAL SUPPORT " by market structure ( I REPEAT ) The area where it is right now, is NOT a SUPPORT !!! . Europeans can be affected by this, losing 20% of their wealth added to inflation added to the uncontrolled growth of taxes. :( . Best of luck to All, hope it helps to get a clean picture of the future of the EURO.
Short
by javieralcazarono
1
Bearish Reversal in play for the VIX! After reaching the resistance zone of the upward expanding megaphone pattern just as we forecasted back in April, the Volatility index (VIX) has formed a strong intra-day reversal head and shoulders pattern on the 1H chart. This coincides perfectly with the positive divergences we are seeing on some of the benchmark US indices like the SPY and QQQ, which we believe is signaling for investors that the worst in terms of market declines might be behind us. The sentiment for risk assets in general has reached max levels of fear and negativity and usually this is a good moment to start adding back some risk exposure to your portfolio. We will be releasing a more detailed report and analysis in the coming week on what we expect from the markets moving forward and how we are positioning our portfolio. Good luck out there!
TVC:VIXShort
by DowExperts
The Bond Selloff ResumesAs anticipated the bond rout continues. We saw a brief relief rally after the FOMC, as the hikes were largely priced in. However, 119'01 provided prohibitive resistance, and ZN immediately rejected it. We found brief support at 118'04, but have broken through this level, and are currently clinging onto 118'00 by a thread. The next target is the level below at 117'19. The Kovach OBV is extremely oversold, so watch for a relief rally, which could test 119'01 again.
CBOT:ZN1!Short
by quantguy