More Upside for #USDJPY near term?Hello Traders!
After last weeks NFP expect more upside for the us dollar against the Japanese yen as BoJ keeps rates low.
Have a great week!
Vitez
US10Y
Macro - Reading The CurveForecast for Macro:
- Falling Wedge Breakout must be re-tested.
- Bear Flattener coming as short-term rates rise with Fed tightening expectations:
- 2x ATR spike in US02Y:
- The Fed members will probably all have their turn to make comments, leaning hawkish. This should cause a rally in the US02Y.
- Bonds Volatility Technically Bullish:
- However, this will be followed by a steepener, respecting the Falling Wedge Breakout, as the Fed implements monetary policies to control Deflation, creating a Stagflation environment.
- US30Y, this is bearish and deflationary:
- USOIL, deflationary. The US economy depends on Oil:
- US Manufacturing Employment Index, looks to be at the top of the range, and on a decline:
- Capital goods are the heart of every economy. Without manufacturing employment, no capital goods. No capital goods, no innovation.
- CN30Y, also bearish and deflationary:
- China's Credit Impulse, and consequently - global credit impulse turns negative.
- No more credit flows means no more liquidity to flow into risk assets.
- M2V declining, if the economy was booming and growing, money velocity should be increasing:
- Business destruction cannot be inflationary. Thriving tech businesses lead the recovery, but Tech is inherently deflationary.
- Reading the curve will be critical to see the macro turns coming!
GLHF
- DPT
XAUUSD / GOLD : Ready to BUY SIGNAL - ALL the Factor are on BUY
OANDA:XAUUSD
In the last session on Friday, we saw a massive Sell Off in Gold due to the NFP number over the estimates.
But the price failed to breakout the IMPORTANT LEVEL 1760, and closed above it. THIS IS A VERY IMPORTANT SIGNAL !
In the graph you can see that in this level we got a lot of Support for GOLD:
1)We got the previous Lower Bottom of July (and at the moment we are forming a Double Bottom)
2)We got the Trending Line from the past Lower Low that the price had already touched and reversed twice
3)We also have another big Resistance at 1750
4)The RSI it's already in OVERSOLD condition, like in April when we had a huge reversel till 1920
5)As you can see in the graphic below , of US10Y ( the Yield of the 10Years Bond USA) that has an inverse correlation with Gold, We are in a Bearish Trending channel and we are near 2 important Resistences , 1 of the trending Line and the 2nd of the past July High, that formed a Double Top.
Also we are in Huge OVERBOUGHT condition so a retracement it's very likely
CONCLUSION
I think that next week we could see a retracement at least to the past Finobacci Level 0.23 , at 1788
Then we will see how the price will react to that level, but I won't be surprised if it also touched the 1800
This is only an idea , This is not a Signal of Trading but a personal view-
US10Y testing the 1D MA200. Another rejection ahead?The US10Y is about to hit the 1D MA200 again (orange trend-line) where last time failed to convincingly close a candle above it and eventually got rejected. That also happened to be on the 0.382 Fibonacci retracement level, which is a symmetrical level as it previously was a Support (July 08) turned into Resistance.
There is also a potential 1D Death Cross (when the MA50 crosses below the MA200) to keep an eye on. The last 1D Death Cross was back in January 2019 and was devastating for the yields. Equally the November 17, 2020 Golden Cross (opposite of Death Cross) initiated a very strong rally.
If the price gets rejected again inside the Channel Down, I expect the next target to be near the 0.618 Fibonacci retracement level in the form of a Lower Low.
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Bond yields keep fallingBonds all across the world, across all different spectrums (from gov bonds to junk bonds) have been rising (their yields falling). This is a signal that there are deflationary pressures and that people are searching for yield in an environment with few opportunities. There are other reasons too, but overall this isn't the best signal. Clearly big corporations and governments are benefiting from the situation, but this is also a fragile situation. Although the current conditions benefit some stocks and risk assets due to the highly negative real rates, this doesn't mean that everything is perfect. Personally I believe equities haven't topped and they have much more room to grow from here, but I also think a big correction isn't far away (10-20%).
In my opinion bond bulls are in control (bearish on yield) and yields could fall even lower.
Futures Sink as ADP Pukes, Data in FocusGood morning, folks! As of 8:45AM on Wednesday morning, US Futures are seeing some light weakness with the Dow down -0.33% to 35,003, the S%P down -0.27% to 4,411, the Nasdaq down -0.10% to 15,046, the the Russell down -0.82% to 2,202.80. The ADP Employment Change came in moments ago at 330k vs the 650k expected, and the weak print has erased some of the overnight gains, but we're still holding on to most of yesterday's gains, so nothing to write home about.
The dollar (DXY) is holding steady just under a 92 handle (91.91), while the US10Y yield is also seeing persistent pressure as we continue to see heavy bond inflows. The Treasury has announced that they will begin reducing the size of bond auctions at the Nov 2021 meeting. That's going to make it tough for the Biden Administration to maintain current spending levels, and so with a reduction in Treasury supply ahead, monetary conditions are going to tighten as early as November, maybe even earlier if the Fed decides to taper purchases/hike rates at Jackson Hole.
Clearly the bond market knows something the stock market doesn't, and if the crashing US10Y yield is mimicking last years drop, we're likely about to see a major correction in markets. Having said that, we still have room to the upside in stocks (based on the technicals), particularly considering we're holding on to key supports like it's a religion, and money is still free. Every dip is being bought without hesitation, and that really hasn't changed (yet). Yesterday was a perfect example of how easy it is for the bulls to achieve new ATH's.
Gold is seeing some solid flows here as Powell continues to punish the Ctrl + P buttons on his keyboard. But, while Gold rallies, Bitcoin (BTCUSD) is seeing persistent pressure at 40k and has been unable to breakout since we lost this level in May 2021. Bitcoin and Gold do not trade in tandem - Gold trades as a safe haven along with the JPY, Dollar, Treasuries, to name a few, while Bitcoin trades like a risk asset. When markets correct and money flows out of risk, crypto gets hit the hardest as it carries the most risk/highest beta across most asset classes.
Let's see how the day shapes up as more data rolls in. At 9:45AM we'll see the IHS Markit Services PMI for July, then at 10:00AM we'll get the ISM Non-Manufacturing Index, and then finally at 10:30AM we'll see the latest EIA Crude Oil Inventories for last week. Good luck out there today, my friends, and see you all at the opening bell for our Live Analysis. Cheers, Michael.
* I am/we are currently long UVXY, HUV
The Finish Line Is In SightGood morning, folks! For those of you in Canada, I hope everyone had a great holiday to start the week. Let's get right into today's analysis. After rolling sell programs yesterday to kick-off the month of August, US Futures are drifting higher on Tuesday with the Dow up 0.25% to 34,808, the S&P up 0.22% to 4,389.50, the Russell up 0.46% to 2,221.10, and the Nasdaq up 0.14% to 14,973.50 as of 8:30AM. SPY saw yet another rejection at wedge resistance, but the 21EMA (w) around 419.33 has been successfully defended since it was recaptured in May 2020, and as long as this support holds, we're going to continue to melt higher. Having said that, we just saw 6 months straight of gains on the SPY, and imo we're unlikely to see a 7th given the macros, low liquidity, heavy geo-political risks, and policy risks that are looming this month. I believe the finish line is (finally) in sight.
The US10Y yield continues to slip after the 200DMA rejection at 1.41%. We've now lost weekly MA supports as well, including the 100MA (w) at 1.1988%, and the, 50MA (w) at 1.1961%, and absent a recapture by EOW, we could to be on the verge of a massive puke toward the August 2020 lows around .50%. The last time this happened, of course, was February 2020 just before the 35% market crash. Let's see if history rhymes.
After a solid rejection at wedge resistance, the dollar (DXY) saw notable support at the 50MA (w) around 91.70, and is hovering just above around 92 as we approach the open. If sentiment is in fact about to shift negative, the dollar may be in the midst of a technical retest of the 50MA (w), before setting up for a retest of the wedge once again. Let's see if the bulls can defend the 50MA (w) into the weekend.
In volatility, the Vix has been making higher lows for 6 weeks in a row, and is sitting at a 19 handle ahead of the cash open. The descending trendline is still holding as resistance for now, but judging by the stochastic RSI on the weekly time frame, and the PA off recent multi-year ascending trendline support, we're likely at the onset of another major spike in the Vix. First, we'll need to see the 25 level captured on the weekly candle, which would set us up for a second leg higher toward the upper band of the ascending channel around 50.
Have a great day of trade, my friends, and let's see how the cookie crumbles this week. Cheers! Michael.
* I am/we are currently long UVXY, HUV.
How Central Banks Are Stealing Your MoneySince the merger between the Fed and the Treasury (kidding, kind of), I've had so many conversations with individuals outside of the financial industry who struggle to fully grasp how central banks are stealing their money. Today, I'm going to share a short and simple post which I hope will help explain the direct effect of "money printing," on the working class. Let's jump right into it.
When interest rates remain low for an extended period of time (historically), risk assets become more prone to rampant speculation (lucky for those holding assets outside of cash), leading to massive distortions in the underlying fundamentals of those assets, and historical valuation deviations from the mean (which is mathematically unsustainable). The rapidily rising prices of both assets, and goods & services, which is not being stimulated by an actual increase in the velocity of money, but rather from central banks artificially flooding the monetary system with liquidity (while interest rates are near zero), contributes to a lower standard of living for those holding cash as their primary asset.
For example:
If you have $100 in your bank account, and perhaps this is your only asset, then the central bank increases the money supply by 25%, what they've just done is increase the denominator which underpins the value of that $100.
Here's a simple logical demonstration:
100/100 = 1 (baseline purchasing power.)
100/125 = 0.80 (a 25% increase in the money supply in this example, as a result of central bank money printing, results in a 20% loss in purchasing power.)
In essence, in this hypothetical situation, you've just lost 20% of your purchasing power. With CPI in the US running at 5.4% YoY vs the Fed's 2% "target," we're currently looking at an inflation rate almost triple the Fed's goal. The US10Y yield trades at 1.25% while CPI is 5.4%, and the Fed continues to print $1.44 Trillion on an annualized basis, with no end in sight. Welcome to the wonderfully horrific world of Modern Monetary Theory (MMT). Anyone looking for a hedge?
GOLD : NEW POSSIBLE BULLISH LEG Gold broke last high on 4H chart and move in a back-testing correction channel. I think if it break the channel up, i'll long it till 1875. But if it broke the support downside, we have to reanalyse gold again.
Keep following for updates. Good Luck!
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Growth expectations falling as real yields are dropping?With inspiration from the Financial Times:
www.ft.com
10-year inflation expectations(T10YIE) are stable while the US 10 yield (US10Y) and 10-year TIPS (treasury inflation-indexed security, DFII) are falling. This means that real rates are dropping as they are calculated as the nominal rate (US10Y) minus inflation expectations(T10YIE).
The Financial Times argue though that as Gold is strongly inversely correlated to 10-year TIPS it should rise to 2100 from 1800 where it is now and that real yields therefore are somewhat imaginary.
Bonds - TLT BullishIdea for TLT:
- Price is in quite an elegant ML Channel (upperbound).
- Rising Volume and Volatility.
- Over key MAs (holding trend).
Bonds too, only go up in time, and can be interchanged with equities when there is a bear market in stocks. Smart money already piling in (hedge or predicting a stock bear market). We can play the bonds game soon.
GLHF
- DPT
US10y and JPY correlation?we could see YIELD US 10 Year is go down and make JPY suffer in the future cause of DELTA Corona virus
SPY VS US10Y Yield: This Isn't Going to End WellSimilar to last year March when markets crashed 35%, the US10Y yield is crashing today, with the majors bearly off the ATH's. Will this divergence end the same way - with bonds as the safe haven of choice? Something tells me we're very close to finding out...
Global Futures Extend Friday's Losses, Vix up 17%Here we go, folks! After an ugly opex on Friday which saw 30% of SPY, QQQ, IWM, and SPX options expire, leading to heavy selling across the board, futures are extending losses on Monday morning. As of 9AM, the S&P is down -1.21% to 4,266.12, the Dow is down -1.44% to 34,067, the Nasdaq is down -0.95% to 14,532, and the Russell is down -2.22% to 2,113.
European and Asian markets are also taking it on the chin with the Dax down -2.62%, the CAC40 down -2.44%, the FTSE 100 down -2.13%, the Nikkei 225 down -1.28%, and the CSI 300 down -0.39%. It doesn't look like anyone can hide from the risk off theme today.
As you can imagine, risk protection is in high demand with the Vix up 16.86% to 21.56. We're back at the 200DMA around 22, and we look poised to test trendline resistance around 24 as early as today on a break above the 200MA. Based on recent Vix price action after seeing solid support at the multi-year ascending trendline (around 15), we may be looking at the beginning of a larger repricing of risk off the back of higher than expected COVID infection rates last week, as well as growing inflation fears. Here's hoping logic works it's way back into the market going forward (finally).
The US10Y yield is puking to 1.225% - we just lost the 200DMA at 1.275% and we're racing toward the 100MA (w), where the 50MA (w) is about to converge, around 1.20%. We should get support here, however, investors seem to be flocking into bonds as a safe haven against downside. The more shaky equity markets become, the more we may see yields crash, at least initially.
Bitcoin is back at 30k support, but we're down over -3% on the day, and may be about to lose support, taking us toward 20k, which I believe is the 100MA (w). As risk is repriced, of course we'll see crypto sell off. It's only a matter of time before debt starts to pull flows away from assets, and those with the highest beta, and weakest value proposition, will be hit the hardest.
Finally, the dollar (DXY) is retesting wedge resistance again for the 5th time in a month. We're sitting at 92.88 and we're fast approaching the March 2021 high's around 93.30 opening the gates to the upper band of the wedge around 95-96. Things are getting interesting so stay tuned for our live analysis at 9:30AM.
Black Swan - Transitory InflationIdea for Macro:
- I present to you a counterargument for the media blaring inflation narrative.
- Speculate that the interest rate hikes (Jackson Hole, etc.) are just red herrings. In fact rates may go negative.
- The real shocker is that everybody is positioned for inflation when inflation is at its peak and is indeed transitory. The reflation trade was debt driven and is supported by nothing but hot air.
“Inflation - A continuing rise in the general price level usually attributed to an increase in the volume of money and credit relative to available goods and services” - Merriam-Webster
Actually global credit impulse is rolling off.
- There are 3 types of inflation that are relevant: Monetary, Consumer Price, Asset. (Lyn Alden, www.lynalden.com)
Monetary Inflation:
"In highly indebted economies, additional debt triggers the law of diminishing returns. This fact is confirmed when the marginal revenue product of debt (MRP) falls, where MRP is the amount of GDP created by an additional dollar of debt. In microeconomics, when debt is already at extreme levels, a further increase in debt leads to an increase in the risk premium on which a borrower will default suggesting that the bank or other lender will not be repaid. As the risk premium rises, banks are often unable to price this additional cost through to their private sector borrowers thus the loan to deposit ratio of the banks falls. Combining both the falling MRP with a declining loan to deposit (LD) ratio, results in a reduction in the velocity of money. In terms of the impact on monetary activities, a drop in the LD ratio means that more of bank deposits are being directed to the purchase of Federal, Agency and state and local securities in lieu of private sector loans. The macroeconomic result is that funds are shifted to sectors that are the least productive engines of economic growth and away from the high multiplier ones." - Too Much Debt, Hoisington Investment Management Co.
- Yes, you have M2 skyrocketing, but compare it with Debt and adjust for inflation. Wow, It did nothing to debt levels. GDP adjusted for inflation barely recovered:
- M2 doesn't exist in a vacuum, but needs to be balanced for deflationary forces. Debt is winning.
- Yes, you have consumer price inflation and asset price inflation, but these are largely driven by speculative bubbles. They are not driven by fundamental factors nor underlying conditions. They will regress to the mean by Reflexivity.
- Yes, there are supply chain issues due to COVID + political tensions, but how long will it last? Are the political tensions even necessary? What happened to lumber even with supply chain issues?
- What is even the reason for continued asset purchases by CBs?
IMO, asset purchase tapering is done to engineer a crash in the speculative asset bubbles, so that more extreme monetary policies can be enacted to try to stop the tidal wave of debt.
Once the speculative asset bubble collapses, consumer price inflation will be controlled as well. In fact there will be a dollar shortage, as each dollar is leveraged 50x+ vs. debt.
- CBs don't care about speculative asset inflation okay? Not a big deal. Bubbles even pop by themselves. Price of Big Mac and used car goes up a little bit, boohoo.
- Evidence to support my thesis is falling inflation expectations. Inflation expectations are what drives asset prices up. If inflation is expected to decrease, then the prices of assets are expected to decrease. Why would anyone hold an asset expected to depreciate in price?
Signals of falling inflation expectations:
Inflationary yields:
Inflationary currency pairs:
FRED inflation expectation rate:
fred.stlouisfed.org
Gold - you might see something crazy happen here. This can be the end of a distribution pattern:
Inflationary Commodities:
- The stock market is one of the last markets to receive liquidity trickling down from the source. Currencies, bonds, commodities lead them and stocks should not be used as an indicator for future inflation expectations over them.
- Right now, the world is positioned for inflation and are looking for interest rate hikes as the signal, but that won't be catalyst.
- Inflation and liquidity flows have been cut off at the source, and now we are at the cliff of the debt driven sugar rush. There must be great suffering in order to justify more extreme monetary policies. Then and only then will you have sticky inflation in a stagflationary environment.
"Inflation is transitory" - Jerome Powell
GLHF
- DPT
P.S. Disclaimer - I am relentlessly selling risk assets, long volatility and bonds.
Credit - US10Y to DeclineIdea for US10Y:
- US10Y will decline - institutional fear > buy safe bonds.
- Positive correlation in yields/equities right now (extreme periods)
- Markets are topped, this will cause a decline in equities.
- UST signaling deflationary shock.
Yes, you will have inflation win out in the end, but you can have deflationary shock to get Fed to enact more extreme monetary policies.
You can have negative growth during price inflation.
Reminder that major crashes are preceded by capitulation in yields:
GLHF
- DPT
US10Y Medium-term sellThe US10Y has confirmed the shift from bullish to long-term bearish as last week it broke below the Higher Lows Zone that has been holding since the August 07, 2020 bottom. The bounce however on the 1D MA200 (orange trend-line on the left chart) is something to keep an eye on, but for the moment that is viewed as a Lower Lows rebound within a Channel Down (right chart).
The last Lower Highs were made at or close to the 4H MA200 (orange trend-line on the right chart). Since the 4H RSI has just entered its Resistance Zone, it may be a good time to start selling the US10Y. The target is 1.1600, above the 0.5 Fibonacci retracement level (as seen on the left chart).
Most recent US10Y idea:
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USDJPY Short term JPY strength !!!Hello Traders!
This is a short term usdjpy short trade trend line already broken.
I recommend placing a sell stop order at the bottom of the break.
Take profit labelled.
Have a great week!
Vitez
Dollar Rejection (Again) at Wedge ResistanceAfter this morning's insane inflation print (YoY CPI of 5.4%), the Dollar (DXY) is being heavily bid (again). We just saw a rejection at the wedge this morning for the 4th time in a month. It's been a bumpy ride, but if the wedge is recaptured on broader market weakness, our 2H target remains 95+...
US Futures Slip After CPI Explodes 5.4% YoYUS Futures are trading marginally lower on Tuesday morning with the Dow down -0.16% to 34,821, the S&P down -0.21% to 4,369, the Russell down -0.37% to 2,268 and the Nasdaq down -0.4% to 14,865 as of 8:50AM. We saw June CPI come in extremely hot moments ago at 0.9% vs the 0.5% expected, while Core CPI also came in at 0.9% vs the 0.5% expected. We're talking YoY CPI of 5.4%, folks. Ouch! Good luck with the transitory narratve now DJ Powell.
PepsiCo beat earnings estimates this morning and is up around 1.6% in pre-market trade, while JP Morgan and Goldman Sachs also released strong earnings which showed a slip in FICC and trading desk revenue for JP Morgan (but a beat on earnings), while Goldman reported their "second best quarter in history," according to ZeroHedge.
The US10Y yield is down around -0.75% to 1.35%, and is falling fast after the hot CPI print as investors flee into USTs. The Dollar caught a strong bid - we're up around 0.25% and sitting at 92.47. Gold is trading relatively flat - we're up 0.6% to 1,807.4, while WTI rose 0.18% to 74.27. Vix is holding on to a 16 handle for dear life after a light rebound yesterday after Friday's massacre.
Finally, Bitcoin (BTCUSD) is down around -1.80% to 32,522, and looking incredibly bearish as we approach 30k support. This is playing out like a dead cat bounce which looks poised to resolve itself in the very near future. I may be a buyer of Bitcoin at the 20k level, depending on the state of the equity market, and of course, the policy outlook.
Today should be a doozy after this morning's insane CPI print. Let's see how things shake up. Cheers, Michael.
* I am/we are currently long HUV, UVXY.
US10Y - Strategy WeeklyA couple of things to note here as the chart clearly shows the attempt of a break on the log-chart.
We now know Sellers are attempting the strategical and important pin on their opponent. It is clear the inflation trade is deteriorating, and in the most profound sense looks rather like a deeper mission that is underway. On the technical side, the next levels in play with a break on the chart here are at 1.00% and 0.50%.
The next charts is clearer as to what we were tracking, firstly the US10Y has completed the full retrace back towards 1.5%/1.75%, and secondly, a lot of unwinding has begun in Commodities and Cyclicals as Oil retreats from the key 75 resistance.
With a break in the log-chart, these larger areas of the chart are now rendered useful for freer manoeuvring and can trigger a sharp uptick in volatility for those who are becoming quite rigid. We need to keep an eye on the state of affairs in inflation and wages in particular, although when looking at the headings cooking for the US via fiscal tightening and etc, it looks like the inflation trade as a lot further to unwind yet.
