euro

Market echoes

The US dollar index ticked higher yesterday, as the euro fell across board during ECB Lagarde's presser. But any further weakness in today's PCE numbers could limit the upside move in the dollar index and throw a floor under the EURUSD's weakness around the 200-DMA.

It would sure be absurd if the Fed started cutting the rates with such a strong underlying US economy before the ECB, which, in opposition, deals with a serious economic slowdown across the euro area. But the Fed doesn't (need to) decide based on other central banks' actions. As such, a possible earlier Fed cut could slow down the euro depreciation but should not stop it.

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Intraday Market Analysis – USD Struggles For Support

Jing Ren Jing Ren 18.10.2021 12:08
EURUSD attempts a bullish breakout The US dollar retreated after retail sales fell below 1% in September. The euro’s rally above 1.1570 has led some short interests to close their positions. The pair is testing the key resistance at 1.1640, which coincides with the 20-day moving average and the first resistance on the daily chart. A bullish breakout could pave the way for recovery to 1.1750. However, buyers could be hesitant to commit after an overbought RSI caused profit-taking. In case of a pullback, 1.1540 is fresh support to keep the current rebound relevant. NZDUSD tests key resistance The New Zealand dollar rallies as Q3 inflation beats estimates. After a few days of sideways action, the indecision ended with a break above 0.7020, the origin of the last sell-off. In turn, this set the kiwi on a bullish course. Sellers would scramble to get out after their failed attempts to push lower. An overbought RSI may cause a temporary pullback. 0.7040 is the immediate support, then 0.6980 is the second line of defense in case of a deeper correction. A close above 0.7110 would lift the pair towards the previous peak at 0.7170. GER 40 heads towards major hurdle The Dax 40 bounces higher as the market bets on a prolonged low-interest environment. The major floor at 14800 has seen strong buying interest as traders bought the dip. A bullish close above 15200 has put the short side under pressure. Then a rally above the 30-day moving average indicates further commitment from the buy-side. The momentum could slow down momentarily as the RSI shows an overbought situation. 15300 would be the first support. A break above the daily resistance at 15700 may resume the uptrend.
Sideways drifts and targets hit

Sideways drifts and targets hit

Jason Sen Jason Sen 28.10.2021 12:21
AUDUSD trades sideways after we warned last week that the rally has ended with Thursday's bearish engulfing candle. We keep holding good support at 7465/55 & held just below strong resistance at 7555/65. We can trade the range while we wait for a breakout. NZDUSD longs at 7140/30 work perfectly again yesterday hitting the target of 7180/90 for profit taking as we remain in the sideways trend. This could be the case for an extended period after Thursday's bearish engulfing candle. AUDJPY also likely to trade sideways for a while after Thursday's bearish engulfing candle for a sell signal. Today's Analysis. AUDUSD longs at good support at 7465/55 work again on the bounce to 7500/05 for profit taking before a high for the day yesterday exactly at the next target of 7530/35. Strong resistance at 7555/65 should be a big challenge. Try shorts with stops above 7580, looking for a double top sell signal. Longs at 7465/55 again today stop below 7445 (so the risk is very small). A break lower is a sell signal targeting 7410/7390, perhaps as far as 7360/50. NZDUSD longs at first support at 7140/30 could work again re-targeting 7180/90 for profit taking & as expected this was a high for the day. If we retest 7200/7220, try shorts with stops above 7240, looking for a double top sell signal. BUT be ready to sell again at very strong resistance at 7255/75. Stop above 7300. Longs at first support at 7140/30 must stop below 7120 so the risk is very small. A break lower is a sell signal targeting 7090/80 probably as far as 7040/30. AUDJPY I would sell at 8620/40 (unfortunately yesterday's high was 8605) with stops above 8660 looking for a double top sell signal. A break higher kills the bearish engulfing candle for a buy signal. First support at 8460/40 in the sideways trend. A bounce targets 8500 perhaps as far as 8540/50. A break below 8420 however is the next sell signal targeting 8370 & 8345/35. To subscribe to this daily report please visit daytradeideas.co.uk or email jason@daytradeideas.co.uk USDJPY longs at support at 113.40/30 were offered 50 pips yesterday. as we topped exactly at first resistance at 113.80/95. EURJPY buying opportunity at at 131.60/40, stop below 131.30. CADJPY shorts at first resistance at 9240/60 keep working this week. https://www.youtube.com/watch?v=wASlHvMEN6g Update daily at 06:30 GMT Today's Analysis. USDJPY meets minor resistance at 113.85/95. Strong resistance at last week's high at 114.50/70. Shorts need stops above 114.80. A break higher is a medium term buy signal. Good support again at 113.40/30. Longs need stops below 113.20 so the risk is very small. A break lower target 113.00/112.90 & 112.60/50. EURJPY buy at 131.60/40, stop below 131.30. A break lower is a sell signal targeting 130.90 then an important buying opportunity at 130.40/20 with stops below 130.00 Longs at 131.60/40 target 131.90 & 132.10 for profit taking. Strong resistance at 132.20/40. Shorts need stops above 132.60. CADJPY shorts at first resistance at 9240/60 work again as we target 9200 & 9175, hit as I write this morning. A buying opportunity at 9120/00 with stops below 9090. Gains are likely to be limited with first resistance at 9240/60. However on a break higher sell at 9280/9300 with stops above 9320. To subscribe to this daily report please visit daytradeideas.co.uk or email jason@daytradeideas.co.uk EURUSD breaks support at 1.1620/00 so this is now working as resistance. It is difficult to trade the pair as the daily ranges are small & we are mostly trading sideways. USDCAD shorts at first resistance at 1.2420/40 this trade worked perfectly on the collapse to 1.2370  & as far as first support at 1.2300/1.2280. Longs here also this trade worked perfectly on the bounce to 1.2370 for an easy 120 pip profit on the day. GBPCAD shorts at first resistance at 1.7050/70 handed a quick & easy 150 pip profit yesterday. Update daily at 06:30  GMT Today's Analysis. EURUSD holding below first resistance at 1.1610/20 targets 1.1580 & 1.1540/30. A break below 1.1520 is an important medium term sell signal. A break above 1.1620 however can target resistance at 1.1665/75.  Next we look for a test of minor resistance at 1.1690/99. Exit longs & try shorts with stops above 1.1720. USDCAD same levels apply for today with first resistance at 1.2420/40. Shorts here stop above 1.2450. Be ready to buy a break above 1.2450 targeting 1.2510/30. Shorts at 1.2420/40 target 1.2370 then support at 1.2300/1.2280. Longs here need stops below 1.2270 for a sell signal. GBPCAD shorts at first resistance at 1.7050/70 worked perfectly on the collapsed to our targets of 1.6950/40 & 1.6910/1.6890 for an easy 150 pip profit yesterday. Ultimately we are looking for the target of 1.6870/60, perhaps as far as support at 1.6800/1.6780. We can try shorts again at first resistance at 1.7050/70 but must stop above 1.7090. A break higher is a buy signal targeting a selling opportunity at 1.7155/75 with stops above 1.7195. To subscribe to this daily report please visit daytradeideas.co.uk or email jason@daytradeideas.co.uk GBPUSD high for the day exactly at resistance at 1.3835/55 so far this week followed by a test of support at 1.3740/30, but we over ran to 1.3707. EURGBP longs at important 200 week moving average support at 8405/8395 worked perfectly on the bounce to first resistance at 8455/65 for profit taking. Shorts here are also working as I write. GBPNZD breaks important support at 1.9180/70 for a sell signal. Update daily at 07:00 GMT Today's Analysis. GBPUSD first support at 1.3740/20 but be ready to sell a break below 1.3700 targeting 1.3670/60, perhaps as far as strong support at 1.3600/1.3580. Any longs at support at 1.3740/20 target 1.3770/80, perhaps as far as strong resistance at 1.3835/55. This remains key to direction in severely overbought conditions. Try shorts again with stops above 1.3875. A break above here is a medium term buy signal. EURGBP longs at important 200 week moving average support at 8405/8395 work on the bounce to first resistance at 8455/65 for profit taking. Shorts need stops above 8475. A break higher targets 8500. Shorts at first resistance at 8455/65 are working as we target 8440 before a retest of important 200 week moving average support at 8405/8395. Longs need stops below 8380. A break lower is a medium term sell signal. GBPNZD break below support at 1.9180/70 is a sell signal targeting 1.9110/00. First resistance at 1.9170/90. Shorts need stops above 1.9210.
Intraday Market Analysis – EUR Builds Up Bullish Reveal

Intraday Market Analysis – EUR Builds Up Bullish Reveal

John Benjamin John Benjamin 29.10.2021 08:55
EURUSD cuts through resistanceThe euro surges as the market prices in inflation pressure despite the ECB’s dovish message.Bullish candles have pushed the single currency above the triple top (1.1665) which sits on the 30-day moving average, paving the way for a reversal. Strong momentum is a sign of short-covering from those caught on the wrong side of the market.An overbought RSI could temporarily limit the range of the rally. However, renewed optimism may send the pair to the daily resistance at 1.1750. 1.1620 is the support in case of a pullback.USDJPY tests demand zoneThe Japanese yen recouped losses after the BOJ sees a weak yen as positive for Japan’s economy. And the US dollar has come under pressure near a four-year high.An overbought RSI on the daily chart points to an overextension. On the hourly level, the pair has found bids around 113.30 near a previous consolidation range.A bearish breakout would test the round number at 113.00, which lies on the 20-day moving average and is critical in safeguarding the uptrend. The bulls need to lift 114.30 before they may resume the rally.US 30 pulls backs for supportThe Dow Jones consolidates as investors digest earnings near the all-time high.A breakout above the August peak at 35600 and a bullish MA cross from the daily timeframe indicate an acceleration on the upside as the rally continues.Pullbacks could be an opportunity to buy low. An overbought RSI has triggered a minor sell-off below 35600, shaking out weaker hands in the process. A drop below 35450 would lead to the psychological level of 35000. 35830 is now a fresh resistance.
Intraday Market Analysis – USD Grinds Key Resistance

Intraday Market Analysis – USD Grinds Key Resistance

John Benjamin John Benjamin 01.11.2021 09:31
USDCHF bounces off demand zoneThe US dollar inched higher after a solid core PCE reading in September. The pair is testing the major demand area from last August’s lows (0.9100).A bearish MA cross on the daily chart has dented buyers’ optimism. An oversold RSI may attract a ‘buying-the-dips’ crowd while short-term sellers take some chips off the table.However, 0.9190 could be a challenging hurdle to lift as the bears would be eager to fade the rebound. A new round of sell-off would send the greenback to the daily support at 0.9020.EURGBP attempts to reboundThe euro found support from better-than-expected growth and inflation data. A bullish RSI divergence suggests that the downtrend may have lost its momentum.A break above 0.8470 has prompted sellers to cover some of their bets. But the RSI’s overbought situation has so far tempered the optimism.The bulls will need to lift offers around 0.8485 which sits on the 30-day moving average before they could turn the tables. Failing that, a drop below the demand zone between 0.8400 and 0.8420 would deepen the correction.GER 40 finds supportThe Dax 40 bounces back thanks to upbeat European stock earnings.A bullish MA cross on the daily chart is a sign of recovery. Though the index has hit a speed bump at 15775 which is a major resistance from last September’s sell-off.The drop below 15630 has led intraday buyers to bail out, driving short-term price action downward. As the RSI ventured into the oversold zone, the pullback attracted dip-buying interest at the lower range of the previous consolidation (15400). This is a congestion area along the MA cross.
Intraday Market Analysis – USD Hits Resistance - 02.11.2021

Intraday Market Analysis – USD Hits Resistance - 02.11.2021

John Benjamin John Benjamin 02.11.2021 08:42
USDCAD consolidates at 4-month lowThe US dollar retreats ahead of this week’s FOMC as traders await further catalysts. Price action has stabilized above 1.2300, a major demand zone from last summer.1.2430 from the latest sell-off is a key resistance as it coincides with the 20-day moving average. The current consolidation suggests the market’s indecision, though overall sentiment remains bearish.A deeper correction would send the greenback to 1.2150. A bullish breakout on the other hand may challenge the supply area around 1.2550.EURJPY tests key supportThe euro struggles to bounce higher after Germany’s lackluster retail sales in September.The pair has come under pressure at 133.45 near June’s peak. The subsequent retracement has met some bids at 131.60 when the RSI dipped into the oversold territory.The triple test of the support level indicates solid buying interest. However, the bulls will need to push above 132.80 before the uptrend could resume.On the downside, a bearish breakout would extend the sideways action towards 130.80 which sits on the 30-day moving average.US 100 falls back for supportThe Nasdaq 100 surges to a new all-time high as investors expect the strong growth trend to continue. The break above the previous peak at 15700 has put the index back on an upward trajectory.A bullish MA cross on the daily chart is a confirmation of the market’s optimism. However, a brief pullback is necessary to let the bulls catch their breath.15620 is the immediate support. Further down, 15280 is key daily support on the 20-day moving average. The psychological level of 16000 would be the next target rebound.
The US dollar retreats ahead of this week’s FOMC as traders await further catalysts

The US dollar retreats ahead of this week’s FOMC as traders await further catalysts

FXMAG Team FXMAG Team 02.11.2021 10:19
EURJPY tests key support. USDCAD consolidates at 4-month low 1.2430 from the latest sell-off is a key resistance as it coincides with the 20-day moving average. The current consolidation suggests the market’s indecision, though overall sentiment remains bearish. A deeper correction would send the greenback to 1.2150. A bullish breakout on the other hand may challenge the supply area around 1.2550. EURJPY tests key support The euro struggles to bounce higher after Germany’s lackluster retail sales in September. The pair has come under pressure at 133.45 near June’s peak. The subsequent retracement has met some bids at 131.60 when the RSI dipped into the oversold territory. The triple test of the support level indicates solid buying interest. However, the bulls will need to push above 132.80 before the uptrend could resume. On the downside, a bearish breakout would extend the sideways action towards 130.80 which sits on the 30-day moving average. US 100 falls back for support The Nasdaq 100 surges to a new all-time high as investors expect the strong growth trend to continue. The break above the previous peak at 15700 has put the index back on an upward trajectory. A bullish MA cross on the daily chart is a confirmation of the market’s optimism. However, a brief pullback is necessary to let the bulls catch their breath. 15620 is the immediate support. Further down, 15280 is key daily support on the 20-day moving average. The psychological level of 16000 would be the next target rebound.
Fed Game Plan

Fed Game Plan

Monica Kingsley Monica Kingsley 02.11.2021 14:54
S&P 500 hesitation against weakening bonds – what gives? The yield curve keeps flattening, but long-dated Treasury yields seem again on the verge of another upswing, which hasn‘t propped up the dollar yesterday much. The only fly in the ointment of a risk-off atmosphere, was value outperforming tech. Overall, stocks haven‘t made much progress, and are vulnerable to a quick downswing attempt, which probably though wouldn‘t come today as the VIX doesn‘t look to favor it. Wednesday, that could be another matter entirely. Still, there is no imminent change to the stock bull run on the horizon – the focus remains on ongoing Fed accomodations, which s why: (…) The bears haven‘t thus far made any serious appearance, and 4,550s held with ease in spite of the dollar reversing Thursday‘s losses. All the more encouraging is the relative strength of both gold and silver when faced with one more daily decline in inflation expectations – as if balancing before the Fed act changes anything. I ask, how serious can they be about delivering on taper promises when prices increase relentlessly (look at Europe too), these are being blamed on supply chain bottlenecks without acknowledging their persistent and not transitory nature, and the real economy is markedly slowing down (not in a recession territory, but still)? Tomorrow‘s Fed taper announcement wouldn‘t change a lot – so much can (and will) happen in the meantime, allowing them to backpedal on the projections, making rate hikes even more of a pipe dream. The Fed isn‘t taking inflation seriously, hiding behind the transitory sophistry, and that‘s one of the key drivers of rates marching up, rising commodities, and surging cryptos. Look for more oil and natgas appreciation while copper goes up again too. Precious metals are still waiting for a catalyst (think dollar weakening when even rising rates won‘t provide much support, and inflation expectations trending up faster than yields) – a paradigm shift in broader recognition of Fed obfuscation and monetary policy being behind the curve. Let‘s move right into the charts (all courtesy of www.stockcharts.com). S&P 500 and Nasdaq Outlook S&P 500 is entering a brief consolidation, with 4,590s being first support, followed by the high 4,550s (if the bears can make it there). Given though yesterday‘s sectoral rotation, that‘s not likely happening today. Credit Markets HYG keeps acting really weak, volume is picking up, and buyers aren‘t able to force at least a lower knot. Rising yields aren‘t reflecting confidence in the economic recovery, but arrival of stagflation bets. Gold, Silver and Miners Gold indeed swung higher, but needs more follow through including volume, otherwise we‘re still waiting for the catalysts mentioned at the opening part of today‘s analysis, which would also help the silver to gold ratio move higher. Crude Oil Crude oil keeps going up again,and is likely to extend gains above $84 even as this level presents a short-term resistance. Copper Copper buying opportunity is still here, and the red metal is primed to play catch up to the CRB Index again. Probably not so vigorous as before, and taking more time to unfold, but still. Bitcoin and Ethereum The Bitcoin and Ethereum upswings can and do go on – as stated yesterday, it was a question of a relatively short time when cryptos are done with the sideways correction. Summary S&P 500 is likely to pause today, and the bond market performance would be illuminating. Ideally for the bulls, some semblance of stabilization would occur, tipping the (bullish) hand for tomorrow. That‘s the big picture view - the very initial reaction to taper announcement would likely be disappointing, and eventually reversed. Cryptos, commodities (first oil, then copper) would react best, with precious metals figuring it out only later. Thank you for having read today‘s free analysis, which is available in full at my homesite. There, you can subscribe to the free Monica‘s Insider Club, which features real-time trade calls and intraday updates for all the five publications: Stock Trading Signals, Gold Trading Signals, Oil Trading Signals, Copper Trading Signals and Bitcoin Trading Signals.
What Might it Take for the Fed to Deliver a Hawkish Tapering Announcement?

What Might it Take for the Fed to Deliver a Hawkish Tapering Announcement?

Marc Chandler Marc Chandler 03.11.2021 14:43
Overview: With the FOMC's decision several hours away, the dollar is trading lower against nearly all the major currencies.  The Antipodeans and Norwegian krone are leading.  The euro, yen, and sterling are posting minor gains (less than 0.1%).  Most of the freely liquid and accessible emerging market currencies are also firmer.  The Turkish lira is a notable exception.  The decline in the core inflation and a smaller than expected rise in the headline pace embolden officials for another rate cut when the central bank meets on November 18.  The JP Morgan Emerging Market Currency Index is rising for the second consecutive session after falling in the previous four sessions.  Equities are lower.  The MSCI Asia Pacific Index fell for the fifth session in the past six.  Among the large markets, Taiwan and Australia bucked the trend.  The four-day advance of the Stoxx 600 in Europe is at risk, and US futures are weaker.   Benchmark 10 year yields are mostly two-four basis points lower across most high-income countries today.  That puts the US 10-year Treasury yield near 1.52%.  Australia's two-year yield fell almost 10 bp to 0.55%.  It had peaked above 0.71% last week.   The three-year yield is off nearly 30 bp in recent days.  Gold continues to chop within the range set last Friday (~$1772-$1801).  Ahead of the OPEC+ meeting tomorrow amid talk that the US may seek to coordinate sales for a coalition of strategic reserves and a build of US inventories reported by API weigh on oil prices.  December WTI has approached the 20-day moving average (~$82), which has not closed below since late August. Base metals are higher as iron ore snapped a five-day slide during which it lost over 20%.  Copper is also recovering after forging a base in the $432-$433 area.  It is up around 1.5% today.  If sustained, it would be the largest gain in three weeks.   Asia Pacific China's Caixin services unexpectedly rose to 53.8 from 53.4 in September.  Recall that the manufacturing reading had improved to 50.6 from 50.0.  The net effect was that the composite edged up to 51.5 from 51.4.  The composite has converged with the "official" PMI, which stands at 50.8.  Separately, note that China is experiencing a broad spread of the virus into a dozen provinces, and the number of new cases is the highest in a couple of months. Inter-provincial travel has been restricted, and new social protocols are being introduced.  According to reports, the government advised households to stock up in necessities and ensure adequate food supplies for local authorities.  Australia's service and composite PMI shows the recovery was not quite as strong as the preliminary data suggested.  The service PMI rose to 51.8, not 52.0  from 45.5.  The composite stands at 52.1 rather than 52.2.  It was at 46 in September.   Tomorrow Australia reports Q3 real retail sales, but it will still be picking up the weakness of the lockdown.  September trade figures will also be reported.  Weaker exports and stronger imports are expected to have narrowed the trade surplus by almost 20% to A$12.4 bln. Ahead of the weekend, the central bank will make its Monetary Policy Statement.  The swaps market is pricing in 70 bp, down from 80 bp, of tightening over the next 12 months.  The dollar has been confined to a narrow quarter yen range through the Asian session and most of the European morning.  Softer yields and equities would be expected to give the yen a bit of support.  The 20-day moving average is near JPY113.65, and the greenback has not closed below it since the September FOMC meeting.  In the bigger picture, we have suggested the dollar-yen rally from mid-September through mid-October puts the dollar in a new range.  We suspected JPY114.50-JPY115.00 marks the upper end and JPY113.00 may be the lower end.  The Australian dollar fell almost 1.4% yesterday, its largest decline since May.  It reached $0.7420 yesterday, just above the $0.7410 (38.2% retracement objective of last month's rally).  It has stabilized today and has (so far) been capped near $0.7450.  Resistance is seen in the $0.7460-$0.7470 area.   For two weeks, the Chinese yuan has been alternating between advances and declines, and net-net little changed over the period.  Yesterday, the yuan slipped (0.04%), and today it is firmer (0.06%).  The PBOC has consistently set the dollar's reference rate above model projections, and today's fix was at CNY6.4079 compared with median expectations (Bloomberg) for CNY6.4068.  The PBOC was unexpectedly generous in its open market operations, injecting CNY50 bln. As a result, the overnight repo rate fell 12 bp to 1.99%.   Europe Norway's central bank meets tomorrow.  It was the first of the high-income countries to raise rates this year, so far, followed only by New Zealand.  We overstated the case for Norway to hike rates at the meeting, but don't be mistaken. The case for a rate hike exists, but the pattern is not to move at these "off-meetings" (without updated formal policy path guidance).  Instead, officials will likely confirm their intentions to raise rates in December. The swaps market is pricing in almost three hikes next year.   The dollar trended lower against the Nokkie since August 20. The downward momentum stalled in late October.  Yesterday it rose above NOK8.50 for the first time since mid-October.  The momentum indicators have turned up.  The 200-day moving average is slightly below NOK8.55 and near NOK8.60 is the (38.2%) retracement of the down move.  The UK is emerging from the economic soft patch in the June-August period.  The final service and composite PMI report today showed stronger activity than the preliminary estimates.  The service PMI rose to 59.1 from 55.4 in September.  The flash estimate had put it at 58.0.  The composite stands at 57.8, up from the preliminary projection of 56.8 and September 54.9.    The Bank of England meets tomorrow.  There does not seem to be much conviction, and the market appears divided. In the Bloomberg survey, 22 out of 45 economists expect a hike that seems to have been largely discounted by the markets (15 bp).  Three of the largest UK banks do not expect a hike.  Some observers argue that what is the point of stopping now when it would end next month. We often think the signaling channel of QE is under-appreciated.  Stopping the bond-buying now adds to the seriousness of the moment if it does not lift rates. Sterling has retreated by 2.3 cents since last week's high to approach $1.36 yesterday in the US. The euro reached its lowest level against sterling since March 2020 in late October near GBP0.8400, and yesterday rose to above GBP0.8500 for the first time since October 12.   Poland's central bank is expected to hike the base rate 25 bp today to 0.75%.  Recall that it hiked 40 bp last month to begin the cycle.  It started later than Czech and Hungary.  Preliminary October CPI rose 1% on the month, accelerating the year-over-year pace to 6.8% (from 5.9% in September.  It was at 5% as recently as July.  The Czech central bank meets Friday and is expected to hike the repo rate 75 bp to 2.25%.  After two quarter-point hikes (June and August), it hiked by 75 bp in September. Inflation (CPI) rose to 4.9% in September from 4.1% in August.  It is the highest since 2008.  Turkey's CPI rose by 2.39% last month to bring the year-over-year rate to 19.89% (19.58% in September), slightly lower than expected.  The core rate slipped slightly to 16.82% from 16.98%.   The euro has been confined to about a quarter of a cent range above $1.1575 so far.  It stalled yesterday near $1.1615, the (50%) retracement of the pre-weekend slide from almost $1.1700 to $1.1535.  It is making session highs in the European morning, but we look for a less friendly North American session.  There are options for about 530 mln euros at $1.16 that expire today.  A hawkish Fed (see below) could bring option expirations tomorrow at $1.1525 (~825 mln euros ) and $1.1550 (~900 mln euros) into play.  Sterling tested $1.36 yesterday, the lowest level since October 13.  It has hardly managed to distance itself from the lows.  It found new offers near $1.3635.   There is a GBP675 mln option expiring today at $1.3650.  A larger one (~GBP820) is at $1.3615 also expires but has liked been neutralized.   America It seems well appreciated that the Federal Reserve will announce it will begin slowing the bond purchases. Most expect a reduction of $10 bln of Treasuries and $5 bln of Agency MBS.  Investors appear to be anticipating the monthly reduction of these amounts through June 2022.  Even with yesterday's upticks, the June Fed funds futures contract continues to discount a rate hike then.  If the effective Fed funds rate is steady in the first half of June at eight basis points and then rises to 33 bp for the second half of the month (25 bp rate hike on June 15), the average effective rate is about 20.5 bp.  The contract settled at an implied rate of 20 bp yesterday.   Since this is already in the market, the tapering announcement itself may not be hawkish.  There are two steps the Fed could take if it wanted to drive home the point.  First, the FOMC statement has been referring to inflation as largely "transitory."  It could simply drop this qualifier or modify it.  The Chair has already acknowledged that it will likely persist longer than initially anticipated.  Indeed, next week's CPI report is expected (Bloomberg survey median) is expected to have risen by 0.5%, which, given the 0.1% increase in October 2020, means the 12-month rate will accelerate to around 5.8%.   Second, after the last press conference, Powell was asked about needing to reduce monetary stimulus while the Fed was still engaged in QE.  The Bank of England said it would hike if necessary while it was still buying bonds.  Powell said in that situation, the Fed would not send contradictory signals but accelerate the tapering process.  Quicker tapering would be a hawkish signal, and reaction by the market would likely bring forward the first hike.   The Democratic Party lost the Virginia gubernatorial context.  Biden had carried the state by 10 percentage points last year, and the preliminary results suggest a loss of suburban voters, a key part of the new Democratic coalition.  New Jersey's governor contest is very close, and the Democratic incumbent is trailing. The results play on ideas that the Democrats are likely to lose both houses of Congress in next year's mid-term election, in which it is common for the party in the White House to lose seats.  Some in the press have been critical that Xi and Putin are not attending COP-26, but their leadership was always in doubt.  The election results may undermine US leadership because Biden's commitments may not get legislative support, and executive decisions could be reversed in 2024.   Today could be the first day since October 13 that the US dollar does not trade below CAD1.2400.  Still, note that the greenback remains in the CAD1.2300-CAD1.2435 range set last Wednesday when the Bank of Canada turned more hawkish.  Yesterday, the US dollar closed above its 20-day moving average for the first time since late September.  We suspect corrective forces could lift the exchange rate toward CAD1.2475, where the (38.2%) retracement of last month's decline is found, and the 200-day moving average (~CAD1.2485).  However, in its way stands the $920 mln option at CAD1.2450 that expires today.  The greenback reached almost MXN20.92120 yesterday, a new eight-month high. Sellers emerged, and the dollar closed lower to snap a five-day advance.  It is softer today but holding above yesterday's low (~MXN20.71).  Ahead of the FOMC outcome, the market may be cautious about taking the dollar below the MXN20.66-MXN20.70 area.   Disclaimer
Lip Service to Inflation, Again

Lip Service to Inflation, Again

Monica Kingsley Monica Kingsley 03.11.2021 14:54
S&P 500 quick downswing attempt indeed didn‘t come – fresh highs were confirmed by bonds. Even if just on a daily basis, that‘s where the bias is – long stocks still, but with a wary eye as Treasuries and corporate bonds need to kick in on a more than daily basis. I‘m taking it as that the bullish expectations for today are really high – so much so that better than expected non-farm employment change resulted in a sell the news reaction. So, how does that line up with today‘s FOMC? Dovish undertones are obviously expected – at least in attempting to sweep the hot inflation under the rug, spinning it somehow else than with the tired transitory horse. Discredited one too. So, how would the taper message be delivered, and could it go as far as $15bn a month asset purchase reduction while avoiding rate hike mentions as much as possible? Even if $15bn is indeed the announced figure, I‘m looking for the Fed to soften it before it can run its course, i.e. before 2H 2022 arrives – the economy isn‘t in such a great shape to take it, and the fresh spending bill (whatever the price tag), needs central bank‘s support too. Let‘s recall my yesterday‘s words about how that‘s likely to translate into market moves: (…) Overall, stocks haven‘t made much progress, and are vulnerable to a quick downswing attempt, which probably though wouldn‘t come today as the VIX doesn‘t look to favor it. Wednesday, that could be another matter entirely. Still, there is no imminent change to the stock bull run on the horizon – the focus remains on ongoing Fed accomodations. Tomorrow‘s Fed taper announcement wouldn‘t change a lot – so much can (and will) happen in the meantime, allowing them to backpedal on the projections, making rate hikes even more of a pipe dream. The Fed isn‘t taking inflation seriously, hiding behind the transitory sophistry, and that‘s one of the key drivers of rates marching up, rising commodities, and surging cryptos. Look for more oil and natgas appreciation while copper goes up again too. Precious metals are still waiting for a catalyst (think dollar weakening when even rising rates won‘t provide much support, and inflation expectations trending up faster than yields) – a paradigm shift in broader recognition of Fed obfuscation and monetary policy being behind the curve. The Fed turning even more dovish than expected, would light the fireworks – they‘re likely to pay lip service to inflation similarly to Jun, but it won‘t pack the same punch. Inflation expectations haven‘t peaked, and the yield curve is about to steepen again as rates would mostly be moving higher. Let‘s move right into the charts (all courtesy of www.stockcharts.com). S&P 500 and Nasdaq Outlook S&P 500 keeps rising, and is setting itself up for a brief disappointment. We aren‘t though making a top with capital t. Credit Markets Universal risk-on move in the credit market, on volume that didn‘t disappoint, which just confirms the bulls‘ overall technical advantage. Gold, Silver and Miners Gold downswing left a lot to be desired – we aren‘t likely staring at a true slide next. I actually look for silver (and the cyclically sensitive commodities such as copper, and also oil) to outperform gold in the wake of the Fed move. Crude Oil Crude oil didn‘t move much on a closing basis, but the bulls need more time to retake the reins. Copper Copper really doesn‘t want to decline, and remains slated to play catch up to the CRB Index again. The improving bullish outlook requires just time now – selling volume is drying up, tellingly... Bitcoin and Ethereum Bitcoin and Ethereum bulls haven‘t yielded, and keep the overall technical advantage. Should prices dip below $58K in BTC without solid buying materializing, now that would make me wary. But the Fed won‘t be hawkish., no. Summary Potential S&P 500 bear raid is approaching, and the more dovish the Fed would be, the shallower dip in stocks can be expected. Yes, the bulls keep having the upper hand – credit markets have behaved. As mentioned yesterday, that‘s the big picture view - the very initial reaction to taper announcement would likely be reversed higher. Cryptos, oil, copper would react best, with precious metals figuring it out only later – unless the Fed negatively surprises, in which case cryptos would be prone to wilder swings (but not downside reversal in earnest). Thank you for having read today‘s free analysis, which is available in full at my homesite. There, you can subscribe to the free Monica‘s Insider Club, which features real-time trade calls and intraday updates for all the five publications: Stock Trading Signals, Gold Trading Signals, Oil Trading Signals, Copper Trading Signals and Bitcoin Trading Signals.
November Monthly

November Monthly

Marc Chandler Marc Chandler 03.11.2021 15:17
Three main forces are shaping the business and investment climate:  Surging energy prices, a dramatic backing up of short-term interest rates in Anglo-American countries, and the persistence of supply chain disruptions.  The US and Europe have likely passed peak growth.  Fiscal policy will be less accommodative, and financial conditions have tightened. Japan appears to be getting a handle on Covid and after a slow start.  Its vaccination rate has surpassed the US.  The lifting of the formal state of emergency and a hefty dose of fiscal stimulus is expected to be delivered in the coming months. Many developing economies have already lifted rates, some like Brazil and Russia, aggressively so.  They will likely finish earlier too.      US light sweet crude oil rose nearly 12% last month, even though US inventories rose last month for the first time since April.   The price of WTI rose almost 10% in September.  Statistically, the rise in oil prices is strongly correlated with the increase in inflation expectations.  OPEC+ will boost supplies by another 400k barrels a day at the start of November and is committed to the same monthly increase well into 2022.   At the same time, new Covid infections in several Asia-Pacific countries, including China, Singapore, and Australia, warn of the risk of continued supply-chain disruptions.  In Europe, Germany and the UK recently reported the most cases since the spring. Belgium is tightening curbs.  Bulgaria is seeing a rise in infections, and Romania was at full capacity in its intensive care facilities.  The fact that Latvia lags the EU in vaccination at about 50% leaves it vulnerable.  The US may be lagging behind Europe, and the next four-six weeks will be critical.  Roughly 40% of Americans are not fully vaccinated.   The rise in price pressures and the gradual acknowledgment by many central bankers that inflation may be more persistent have helped spur a significant backing up of short-term rates in the Anglo-American economies. The ultimately deflationary implications of the surge in energy prices through demand destruction and the implications for less monetary and fiscal support still seem under-appreciated. Yet, the market has priced in aggressive tightening of monetary policy over the next 12 months.   The focus of the foreign exchange market seems squarely on monetary policy.  From a high level, the central banks perceived to be ahead in the monetary cycle have seen stronger currencies. The likely laggards, like the Bank of Japan, the Swiss National Bank, and the ECB, have currencies that underperformed.  Norway and New Zealand have already raised rates and are expected to do so again in November.    Of course, as you drill down, discrepancies appear.  In October, the Australian dollar was the top performer among the major currencies with a 4% gain.  It edged out the New Zealand dollar and the Norwegian krone, whose central banks are ahead of the Reserve Bank of Australia.  The RBA has pushed against market speculation that has 90 bp of tightening priced into 12-month swaps.  The Australian dollar outperformed sterling by about 2.5% in October even though the Bank of England has been so hawkish with its comments that the market had little choice but to price in a high probability of a hike as early as the November meeting.  In fact, the market has the UK's base rate above 50 bp by the end of Q1 22.  This is important because in its forward guidance that BOE has identified that as the threshold for it to begin unwinding QE by stopping reinvesting maturing issues.  Interestingly enough, when the BOE meets on March 17 next year, it will have a sizeable GBP28 bln maturity in its portfolio.   In an unusual quirk of the calendar, the Federal Reserve meets before the release of the October jobs report.  All indications point to the start of the tapering process.  It is currently buying $120 bln a month of Treasuries ($80 bln) and Agency Mortgage-Backed Securities.  The pace of the reduction of purchases is a function of the duration, and the Fed has clearly indicated the tapering will be complete around mid-year. That suggests reducing the purchases by about $15 bln a month.  Chair Powell indicated that unlike the Bank of England, the Fed will stop its bond purchases before raising rates. A faster pace of tapering would be a hawkish signal as it would allow for an earlier rate hike.  The gap between when the tapering ends and the first rate hike does not appear predetermined. Powell has talked about the economic prerequisites, which emphasize a full and inclusive labor market in the current context. The Fed funds futures entirely discount a 25 hike in July, with the risk of a move in June.  Comments by several officials hint that the Fed may drop its characterization of inflation as transitory, which would also be understood as a hawkish development.   Partly owing to the extended emergency in Japan, it is marching to the beat of a different drummer than the other high-income countries. Inflation is not a problem.  In September, the headline rate rose to 0.2% year-over-year, the highest since August 2020.  However, this is a function of fresh food and energy prices, without which the consumer inflation stuck below zero (-0.5%).  In December 2019, it stood at 0.9%.  In addition, while fiscal policy will be less accommodative in Europe and the US, a sizeable supplemental budget (~JPY30 trillion) is expected to be unveiled later this year.   After expanding by 1.3% quarter-over-quarter in Q2, the Chinese economy slowed to a crawl of 0.2% in Q3, which was half the pace expected by economists. Some of the decline in economic activity resulted from the virus and natural disasters (floods). Still, some of it stemmed from an effort to cut emissions in steel and other sectors.  The problems in China's property development space, accounting for a large part of its high-yield bond market,  unsettled global markets briefly.  Talk of a Lehman-like event seems a gross exaggeration. Still, given the sector's importance to China's economy (30% broadly measured) and the use of real estate as an investment vehicle, it may precipitate a structural shift in the economy.   The Communist Party and the state are reasserting control over the economy's private sector and the internet and social network.  It has also weighed in on family decisions, like the number of children one has, how long a minor should play video games, the length of men's hair, what kind of attributes entertainers should have, and appropriate songs to be played with karaoke.   It seems to be reminiscent of part of the Cultural Revolution and a broader economic reform agenda like Deng Xiaoping did in the late 1970s and Zhu Rongji in the 1990s.  At the same time, Beijing is wrestling with reducing emissions and soaring energy prices, which also dampen growth. Even though consumer inflation is not a problem in China (0.7% year-over-year in September), Chinese officials still seem reluctant to launch new stimulative fiscal or monetary initiatives. Moreover, new outbreaks of the virus could exacerbate the supply chain disruptions and delays fuel inflation in many countries.  The aggressiveness in which investors are pricing G10 tightening weighed on emerging market currencies in October.  The JP Morgan Emerging Market Currency Index fell by almost 0.8% last month after falling 2.9% in September, the largest decline since March 2020.  The continued politicization of Turkey's monetary policy and the aggressive easing saw the lira tumble nearly 7.5% last month, which brings the year-to-date depreciation to 22.5%.   On the other hand, Brazil's central bank has aggressively hiked rates, and the 150 bp increase in late October brought this year's tightening to 575 bp and lifting the Selic to 7.75%.  Yet, it is still below the inflation rate (10.34% October), and the government has lost the confidence of domestic and international business.  The Brazilian real fell nearly 3.5% last month to bring the year-to-date loss to almost 7.8%.   Our GDP-weighted currency basket, the Bannockburn World Currency Index, snapped a two-month decline and rose by 0.35%.  The rise in the index reflects the outperformance of the currencies against the dollar.  The currencies from the G10 countries, including the dollar, account for about two-thirds of the index, and emerging markets, including China, the other third.  The yen was the weakest of the majors, falling 2.3%.  It has a weighting of 7.5% in the BWCI.   Among the emerging market currencies in our GDP-weighted currency index, the Brazilian real's 3.4% decline was the largest, but its 2.1% weighting minimizes the drag.  It was nearly offset by the Russian rouble's 2.5% advance.  It has a 2.2% weighting in our basket.  The Chinese yuan, which has a 21.8% share, rose by 0.6%.      Dollar:   The market is pricing in very aggressive tightening by the Federal Reserve.  As recently as late September, only half of the Fed officials anticipated a hike in 2022.  The December 2022 Fed funds futures are pricing in a little more than two hikes next year. More than that, the market is discounting the first hike in June next year, implying a transition from completing the bond-buying to raising rates with no time gap.  The disappointing 2% Q3 GDP exaggerated the slowing of the world's largest economy.  We note that the supply-side challenges in vehicle production halved the growth rate.  Growth is likely to re-accelerate in Q4, but we continue to believe that the peak has passed.  While inflation is elevated, the pace of increase slowed in Q3.  Consider that the PCE deflator that the Fed targets rose at an annualized rate of 4.0% in Q3 after a 5.6% pace in Q2.  The core rate slowed to an annualized pace of 3.3% last quarter, half of the speed in the previous three months.  The infrastructure spending plans have been reduced, and some of the proposed tax hikes, including on corporations, appear to be dropped as part of the compromise among the Democratic Party.   Euro:  For most of Q3, the euro has been in a $1.17-$1.19 trading range.  It broke down in late September, and was unable to recapture it in October.  Instead, it recorded a new low for the year near $1.1525.  A convincing break of the $1.1500 area could signal a move toward $1.1300. The single currency drew little support because growth differentials swung in its favor in Q3:  the Eurozone expanded by 2.2% quarter-over-quarter while the US grew 2% at an annualized pace.  The ECB is sticking to its analysis that the rise in inflation is due to transitory factors while recognizing that energy prices may prove more sticky.  That said, news that Gazprom may boost gas sales to Europe after it finishes replenishing Russian inventories after the first week in November, natural gas prices fall at the end of October.  After the Pandemic Emergency Purchase Program ends next March, decisions about the asset purchases next year will be announced at the December ECB meeting along with updated forecasts.   (October indicative closing prices, previous in parentheses)   Spot: $1.1560 ($1.1580) Median Bloomberg One-month Forecast $1.1579 ($1.1660)  One-month forward  $1.1568 ($1.1585)    One-month implied vol  5.1%  (5.1%)         Japanese Yen:  The dollar rose 2.3% against the yen in October to bring the year-to-date gain to nearly 9.5%.  The Bank of Japan will lag behind most high-income countries in the tightening cycle, and the higher US yields are a crucial driver of the greenback's gains against the yen.  Japan's headline inflation and core measure, which only excludes fresh food, may be rising, but they are barely above zero and, in any event, are due to the surge in energy prices. In response to the weakening yen, Japanese investors appear to have boosted their investment in foreign bonds, while foreign investors increased their holdings of Japanese stocks.  The LDP and Komeito maintained a majority in the lower chamber of the Diet. A sizeable stimulus supplemental budget is expected to help strengthen the economic recovery now that the formal emergencies have been lifted.  In Q3, the dollar traded mainly between JPY109 and JPY111.  It traded higher in the second half of September rising to nearly JPY112.00.  The dollar-yen exchange rate often seems to be rangebound, and when it looks like it is trending, it is frequently moving to a new range.  We have suggested the upper end of the new range may initially be the JPY114.50-JPY115.00.  The four-year high set last month was about JPY114.70.  A move above JPY115.60 could target the JPY118.50 area.     Spot: JPY113.95 (JPY111.30)       Median Bloomberg One-month Forecast JPY112.98 (JPY111.00)      One-month forward JPY113.90 (JPY111.25)    One-month implied vol  6.4% (5.6%)   British Pound:  Sterling rallied around 4 1/3 cents from the late September low near $1.34.  The momentum stalled in front of the 200-day moving average (~$1.3850).  After several attempts, the market appeared to give up.  We anticipate a move into the $1.3575-$1.3625 initially, and possibly a return toward the September low. The implied yield of the December 2021 short-sterling interest rate futures rose from 22 bp at the end of September to 47 bp at the end of October as the market.  It was encouraged by Bank of England officials to prepare for a hike at the meeting on November 4, ostensibly while it is still providing support via Gilt purchases.  If there is a surprise here, it could be that, given the unexpected softening of September CPI and the fifth consecutive monthly decline in retail sales, rising Covid cases, that the BOE chooses to take the more orthodox route.  This would entail ending its bond purchases, as two MPC members argued (dissented) at the previous meeting and holding off lifting rates a little longer.        Spot: $1.3682 ($1.3475)    Median Bloomberg One-month Forecast $1.3691 ($1.3630)  One-month forward $1.3680 ($1.3480)   One-month implied vol 6.8% (7.1%)      Canadian Dollar:  The three drivers for the exchange rate moved in the Canadian dollar's favor in October and helped it snap a four-month slide against the US dollar.  First, the general appetite for risk was strong, as illustrated by the strength of global stocks and the record highs in the US.  Second, the premium Canada pays on two-year money more than doubled last month to almost 60 bp from 25 bp at the end of September.  Third, commodity prices in general and oil, in particular, extended their recent gains.  The CRB Index rose 3.8% last month, the 11th monthly increase in the past 12, to reach seven-year highs.  The Bank of Canada unexpectedly stopped its new bond purchases and appeared to signal it would likely raise rates earlier than it had previously indicated.  The swaps market is pricing 125 bp of rate hikes over the next 12 months, with the first move next March or April.  Still, the US dollar's downside momentum stalled near CAD1.2300.  There is scope for a corrective phase that could carry the greenback into the CAD1.2475-CAD1.2500 area.     Spot: CAD1.2388 (CAD 1.2680)  Median Bloomberg One-month Forecast CAD1.2395 (CAD1.2580) One-month forward CAD1.2389 (CAD1.2685)    One-month implied vol 6.2% (6.9%)      Australian Dollar:  The Aussie's 4% gain last month snapped a four-month, roughly 6.5% downdraft.  Despite RBA Governor Lowe's guidance that the central bank does not anticipate that the condition to hike rates will exist before 2024 is being challenged by the market.  Underlying inflation rose above 2% in Q3. The central bank's failure to continue defending the 10 bp target of the April 2024 bond spurred speculation that it would be formally abandoned at the November 2 policy meeting.  The RBA's inaction unsettled the debt market.  The two-year yield soared almost 70 bp last month, and the 10-year yield rose nearly 60 bp.  Although the RBA could have handled the situation better, New Zealand rates jumped even more.  Its two-year yield jumped 80 bp while the 10-year yield surged by 58 bp.  Last month, the Australian dollar's rally took it from around $0.7200 to slightly more than $0.7550, where it seemed to stall, just in front of the 200-day moving average.  We suspect the October rally has run its course and see the Aussie vulnerable to a corrective phase that could push it back toward $0.7370-$0.7400.  The New Zealand dollar has also stalled ($0.7220), and we see potential toward $0.7050.       Spot:  $0.7518 ($0.7230)        Median Bloomberg One-Month Forecast $0.7409 ($0.7290)      One-month forward  $0.7525 ($0.7235)     One-month implied vol 9.1  (9.0%)        Mexican Peso:  The peso eked out a minor gain against the dollar last month.  However, the nearly 0.4% gain understated the swings in the exchange rate last month.  The dollar's recovery seen in the second half of September from almost MXN19.85 to nearly MXN20.40 at the end of the month was extended to a seven-month high around MXN20.90 on October 12.  It then proceeded to fall to almost MXN20.12 before the greenback was bought again.  A move above the MXN20.60 area now would likely signal a test on last month's high and possibly higher. Recall that the dollar peaked this year's peak set in March was near MXN21.6350. The economy unexpectedly contracted in Q3  by 0.2% (quarter-over-quarter).  Nevertheless, with the year-over-year CPI at 6% in September, Banxico will see little choice but to hike rates at the November 11 meeting. The market expects a 25 bp increase.  A 50 bp hike is more likely than standing pat.       Spot: MXN20.56 (MXN20.64)   Median Bloomberg One-Month Forecast  MXN20.42 (MXN20.41)   One-month forward  MXN20.65 (MXN20.74)     One-month implied vol 9.6% (11.0%)      Chinese Yuan: Our starting point is the yuan's exchange rate is closely managed.  The fact that the yuan rose to four-month highs against the dollar and a five-year high against the currency basket (CFETS) that the PBOC tracks imply a tacit acceptance.  While it is tempting for observers to link the appreciation to securing an advantage as it secures energy supplies and other commodities, we note that the yuan's gains are too small (0.6% last month and less than 2% year-to-date) to be impactful.  We suspect that the dollar's recent weakness against the yuan will be unwound shortly.  The US government continues to press its concerns about the risk for investors in Chinese companies listed in the US and American companies operating in China. At the same time, the FTSE Russell flagship benchmark began including mainland bonds for the first time.  China's 10-year government bond is the only one among the large bond markets where the yield has declined so far this year (~16 bp).  On the other hand, Chinese stocks have underperformed.  That said, some investors see this underperformance as a new buying opportunity.  The NASDAQ Golden Dragon Index that tracks Chinese companies listed in the US fell by 30% in Q3 and gained 5% in October, its best month since February.  Lastly, the Central Committee of the Chinese Communist Party meets November 8-11 this year, a prelude to the important National Party Congress in 2022 that is expected to formally signal the third term for President Xi.     Spot: CNY6.4055 (CNY6.4450) Median Bloomberg One-month Forecast  CNY6.4430 (CNY6.4470)  One-month forward CNY6.4230 (CNY6.4725)    One-month implied vol  3.5% (3.4%)    Disclaimer
Intraday Market Analysis – USD Struggles To Bounce Back

Intraday Market Analysis – USD Struggles To Bounce Back

John Benjamin John Benjamin 04.11.2021 08:38
EURUSD claws back lossesThe US dollar fell after the Federal Reserve called for patience on raising interest rates.The pair has met strong resistance at 1.1690, a previous demand zone on the daily chart that has turned into a supply one. The latest sell-off has been contained by 1.1535, near the base of the recent rebound as an oversold RSI attracted some bargain hunters.A surge above the intermediate resistance of 1.1620 would bring in more momentum traders. Then a break above 1.1690 could kickstart a bullish reversal in favor of the euro.XAUUSD tests resistanceGold recovers as the US dollar softens across the board following a neutral FOMC.Price action had previously struggled to clear the supply area around 1810, the origin of the September correction. The subsequent fall below the support at 1785 has prompted buyers to take profit.However, the RSI’s repeated oversold situation has caught buyers’ attention at the daily support at 1760. 1785 is the hurdle ahead and a bullish breakout would resume the recovery. Failing that, the bears may push towards 1740.USOIL falls back for supportWTI crude slipped after the EIA reported a larger increase in US inventories. The psychological level of 85.00 has been an effective hurdle so far.The previous fall below 81.00 has put the bulls on the defensive, especially after their failure to achieve a new high above 84.70. This is a confirmation that sentiment has grown cautious after the price’s recent vertical ascent.The RSI’s overbought situation on the daily chart could call for a pullback. 79.50 is the closest support. Its breach may send the price to 76.50.
Inflation Is Not The Only Consequence Of The Russian Invasion

And the Dollar Bounces Back, While BOE is in Focus

Marc Chandler Marc Chandler 04.11.2021 11:30
Overview:  The Federal Reserve announced tapering and, like the Reserve Bank of Australia earlier in the week, did not validate expectations for an aggressive rate hike.  Now the focus is on the Bank of England, where several officials seemed to goad the market into lifting short-term rates. The S&P 500 and NASDAQ rallied to new record highs yesterday and helped raise global shares today.  Among the large markets in the Asia Pacific region, only Taiwan and India did not participate in today's dance.  In Europe, the Stoxx 600 is extending its advance for the sixth consecutive session and nine of the past ten.  US futures are trading firmer.  The market is trimming yesterday's 5.5 bp rise in the US 10-year yield. It is about 3 bp lower near 1.57%.  European yields are 1-3 bp lower. The dollar, which slipped lower after the FOMC meeting, is back with a vengeance today.  It is gaining against all the majors, with the euro bearing the brunt, off about 0.5% to return toward the week's lows below $1.1550.  The yen is the most resilient and is flattish.  Emerging market currencies are also mostly lower.  The Chinese yuan is the strongest emerging market currencies today with about a 0.15% gain, recouping its losses of the past two sessions.  The Polish zloty is the weakest, off 0.6%, despite the larger than expected 75 bp hike yesterday.  Gold was tarnished by 1% yesterday, its biggest loss since mid-October, but is steadied today, up around 0.4% near $1777.  December WTI extended its pullback from $85 seen at the start of the week to dip briefly below $80.  It has firmed back above $81 in the European morning ahead of the OPEC+ meeting outcome.  Cooper prices have stabilized after tumbling 1% yesterday.   Asia Pacific  The final reading of Japan's service and composite PMI was unchanged from the preliminary estimate, with both at 50.7. The services component was the first above the 50 boom/bust level since January 2020.  The composite is at the highest since April.  The virus and formal emergency hobbled the economy, but the economy is on the mend, though out of sync with the other major economies.  Japan intends to use fiscal policy in a pro-cyclical fashion.  Prime Minister Kishida is preparing a large stimulus budget, and it is expected to be unveiled around the middle of the month.  Australia is also emerging from a soft economic period.  Real retail sales fell 4.4% in Q3, faring a little better than economists expected.  Separately, it reported its September trade surplus in line with expectations of about A$12.2 bln.  However, how it got, there was a bit different than anticipated.  First, the August trade surplus was shaved to A$14.7 bln from A$15.1 bln as imports were revised to show a 2% gain instead of a 1% loss. Second, exports fell 6% in September, twice the decline expected, but this was offset by a 2% decline in imports, rather than a 1% gain.  First thing tomorrow, the central bank issues its monetary policy statement, which is hoped to shed more light on the RBA's intent.  The US dollar is straddling the JPY114.00 area.  It reached a three-day high slightly below JPY114.30 and has held above JPY113.90.  Two large options expire today, but they have likely been neutralized.  The first is for nearly $2 bln at JPY114.00, and the other is for $1.8 bln at JPY114.30.  The Australian dollar extended yesterday's recovery to reach $0.7470 before meeting a wall of sellers, which drove it back to almost $0.7425.  Yesterday's low was set near $0.7410.  A break of $0.7400 could signal a test on the $0.7365 area.  The greenback finished yesterday at its best level against the Chinese yuan in almost three weeks, but it continues to be sold on moves above CNY6.40.  Today's yuan gain has nearly recouped the past two session's decline.  Meanwhile, the PBOC continues to set the dollar's reference rate slightly above where bank models project.  Today's fix was at CNY6.3943, while the median (Bloomberg) had it at CNY6.3926.  The PBOC has been relatively generous with its money market provisions.  New fiscal spending this month and next is expected to provide more liquidity.   Europe Before the Bank of England's last meeting (September 23), the December short-sterling interest rate futures implied a yield of 13 bp.  It is now yielding 46 bp.  The market appears to have a 15 bp hike discounted, but economists are split.  A hawkish hold could be delivered if the BOE signaled its intention to raise rates shortly while ending its bond-buying operations early.  With weak retail sales (down five months in a row through September), softer than expected September CPI, and no employment data since the furlough program, is the urgency exaggerated?   The eurozone flash services PMI was shaved lower to 54.6 from 54.7, and this led to the paring of the composite reading to 54.2 from 54.3.  It was the third consecutive decline in the composite PMI.  German and French preliminary estimates were confirmed.  Spain surprised on the upside with a service reading of 56.6.  Economists had expected a 55.8 report after 56.9 in September.  The smaller than expected decline saw a 56.2 composite, down from 57.0, but not as soft as expected.  Italy disappointed.  The services PMI fell to 52.4 from 55.5.  The median forecast was 54.5.  The composite stands at 54.2, down from 56.8.   Germany's September factory orders showed a muted response after August's revised 8.8% drop (initially reported as a 7.7% decline).  The 1.3% gain was less than expected and solely a function of foreign orders (6.3%).  Moreover, the foreign orders were from outside the euro area.  They rose by 14.9%, offsetting August's 14.7% fall.  Domestic orders fell by 5.9%.  It is the third consecutive month domestic orders declined.   The euro has been pushed below $1.1550, where a 1.1 bln euro option expires today.  It initially tried extending yesterday's post-Fed gains but stalled a little above $1.1615.  That area now looks like formidable resistance.  Support is seen in the $1.1525-$1.535 area, but note that the $1.1490 level corresponds to the (50%) retracement objective of the euro's rally from March 2020 lows.  A break of that targets the $1.13 area.  Similarly, sterling's advance yesterday was marginally extended but stopped in front of $1.3700, which is also below the 20-day moving average.  It has been sold in the European morning ahead of the BOE outcome. It has found support in front of $1.3600. Below there, the $1.3575 area marks the (61.8%) retracement target of the rally from the late September low near $1.3410.  Sterling's retreat has left the intraday momentum indicators stretched, warning of the risk of a bounce after the BOE.   America By announcing it would reduce its bond-buying starting this month by $15 bln (a month), the Federal Reserve delivered as expected. The Fed's statement was modified slightly, saying that the elevated prices are "expected" to be transitory.  There was no hawkish surprise, and Chair Powell's tried to thread the proverbial needle by acknowledging that price pressures are likely to continue well into next year.  Treasury Secretary Yellen suggested a similar scenario recently.  The dollar softened, and stocks rallied on the news.   Separately, we note that recently President Biden said he would soon make an announcement about the Fed Chair, whose term expires next February.  Yellen has defended Powell on two issues--financial market regulation and the officials trading/investing--suggests that if Biden does not re-nominate Powell, he would likely have to overrule his Treasury Secretary.   Powell cited the dramatic rise in the Employment Cost Index at yesterday's press conference.  Today, the US reports a more holistic measure of labor costs:  unit labor costs, which incorporates productivity.  The fact of the matter is that unit labor costs fell in H1. However, they are volatile quarter-to-quarter, and unit labor costs likely rise sharply in Q3.  It appears that many employers thought to get by over the summer, waiting for the end of the extra federal unemployment compensation and the re-opening of schools to free up labor without having to pay up for it.  Indeed, Q3 non-farm payroll growth averaged 488k a month, the lowest three-month average since February. This is because the employers preferred to have the existing workers do more overtime than hire.  However, the end of the benefits and re-opening of schools so far proved insufficient.  Another factor that Powell could have cited was the loss of immigrant workers. Pre-pandemic immigrants accounted for one-in-five manufacturing workers and closer to one-in-four in some industries like semiconductors, medical equipment, and food processing.  This squeeze end around November 8 as the border will be re-opened with work visas.  The US has lobbied OPEC+ to boost output faster.  Part of the problem is that some OPEC+ members, like Nigeria and Angola, have been unable to increase production, leaving OPEC+ short of the 400k barrels a day they were going to add last month.  Separately, the US reportedly will join new talks with Iran later this month.  The prospect of Iranian oil also weighed on prices.  In addition, some of the large shale producers have indicated plans to boost output. The US also reports the September trade balance.  A record shortfall is expected of a little more than $80 bln.  Weekly jobless claims pale in comparison to tomorrow's national employment report.  Canada reports September's merchandise trade balance.  Through August, Canada has reported an average monthly surplus of $700 mln.  In the first eight months of 2020, the average deficit was a little more than C$3 bln and in the same period, in 2019 recorded an average deficit of C$1.5 bln. The US dollar spiked to almost CAD1.2460 yesterday but reversed lower and settled on its lows near CAD1.2390.  It is consolidating and straddling CAD1.2400 today.  There is an option for nearly $800 at CAD1.2420 that expires today and one for $515 mln at CAD1.2375 that expires tomorrow.  The intraday momentum indicator suggests limited upside in early North America.  The greenback posted a potential key reversal against the Mexican peso yesterday by first making a new high for the move (~MXN20.98) and then selling off to close below the previous session's low.  Yesterday's low (~MXN20.5150) has held so far today as the dollar consolidates mostly below MXN20.60.  An option for $430 mln at MXN20.55 expires today.  A break of MXN20.50 sees nearby support around MXN20.47 (the 20-day moving average ) and MXN20.44 (the 6.18% retracement objective of the dollar's rally from late last month).  Disclaimer
Meaning Of The Bull Market - The Opposition To The Bear One

Where‘s the Beef?

Monica Kingsley Monica Kingsley 04.11.2021 15:18
S&P 500 embraced the dovish taper - $10bn a month pace gives the Fed quite a breathing room without having to revisit the decision unless markets force it to. The taper is as dovish as can be, with rate raising escaping attention. Talk of no rocking the boat, for the markets, economy and fiscal policy initiatives just can‘t do without. The more dovish scenario of my yesterday‘s presentation came true: (…) So, how would the taper message be delivered, and could it go as far as $15bn a month asset purchase reduction while avoiding rate hike mentions as much as possible? Even if $15bn is indeed the announced figure, I‘m looking for the Fed to soften it before it can run its course, i.e. before 2H 2022 arrives – the economy isn‘t in such a great shape to take it, and the fresh spending bill (whatever the price tag), needs central bank‘s support too. The initial reaction has been very positive in stocks, and overly weak in precious metals and commodities. The real assets downswings are though being reversed in line with my Tuesday‘s expectations – and in today‘s premarket tweets on the unfolding price moves. Let‘s move right into the charts (all courtesy of www.stockcharts.com). S&P 500 and Nasdaq Outlook S&P 500 rose without any brief disappointment – the top with capital t clearly isn‘t in, so don‘t think about standing in the bulls‘ way much. Credit Markets Universal risk-on move in the credit market continues, and the sectoral reaction to rising Treassury yields is a very positive one. Bonds and stocks are obviously seeing through the taper fog. Gold, Silver and Miners Gold was afraid of the hawkish outcome, which had zero real chance of happening – and miners spurted higher decisively first. Let‘s see the initial and misleading weakness in real assets being reversed, one by one – and silver do great again. Crude Oil Crude oil has likewise flashed extraordinary weakness – one to be reversed with vengeance. The Fed can‘t print oil, and the energy crunch goes on as nothing has changed yesterday for black gold. Copper Copper gyrations don‘t change the fact the red metal is ready to swing higher next. Just wait for its reaction when broader strength returns to the CRB Index – we won‘t have to wait too long. Bitcoin and Ethereum Bitcoin and Ethereum haven‘t been jubilant about the dovish news, but haven‘t come down beforehand either. Stabilization followed by slow grind higher is what‘s most likely next. Summary S&P 500 benefited the most from the taper message delivery, and the bulls keep having the upper hand – with increasing confirmation from the credit markets. The very initial reaction to taper announcement – namely its bearish anticipation – is indeed being reversed higher within commodities and precious metals. No tantrum, no rocking the boat – and asset prices are going to love that. Get ready for rising yields that would gradually stop underpinning the dollar – patience with the latter. Thank you for having read today‘s free analysis, which is available in full at my homesite. There, you can subscribe to the free Monica‘s Insider Club, which features real-time trade calls and intraday updates for all the five publications: Stock Trading Signals, Gold Trading Signals, Oil Trading Signals, Copper Trading Signals and Bitcoin Trading Signals.
Here We Go Again - Gold Simply Can’t Stand $1,800!

Here We Go Again - Gold Simply Can’t Stand $1,800!

Arkadiusz Sieron Arkadiusz Sieron 02.11.2021 15:05
  The yellow metal couldn’t face the downward pressure and declined abruptly on Friday. What happened, and why did it fail? Friday was a brutal time for gold. The price of the yellow metal dropped sharply from around $1,795 to $1,775 in the early morning hours in the US. Am I surprised? Not at all. In Thursday’s edition of the Fundamental Gold Report, I wrote that “gold may struggle until the Fed’s tightening cycle starts. You have been warned!”, and, as if on cue, gold wasn’t able to maintain its position around $1,800 and declined. Actually, gold prices have been testing and failing to hold this key psychological level for the last three weeks. What exactly happened on Friday? Well, the Bureau of Economic Analysis published the report on personal income and outlays in September 2021. The publication shows that U.S. nominal consumer spending increased 0.6%, while the disposable personal income declined 1.3%, reflecting a decrease in government social benefits. Additionally, the annual rate of change in personal consumption expenditures price index accelerated from 4.2% in August to 4.4% in September (see the chart below), the highest pace since January 1991. Wait. Inflation rose, but gold prices declined? Exactly. Inflation is fundamentally positive for gold in the long run, but so far – as I explained last week – “inflationary worries have been counterweighted by the expectations of the Fed’s tightening cycle”. The relationship is simple: higher inflation translates into higher expectations of a more hawkish Fed. The odds of an interest rate hike in June 2022 increased from 23.1% - recorded at the end of September - to 61.6% on October 22 and 65.7% on October 29, 2021. As a result, the bond yields increased, while the greenback strengthened. There is also another possible driver of rising interest rates and an appreciating US dollar. CPI inflation in the euro area accelerated to 4.1% in October from 3.4% in September, reaching the highest value since July 2008. However, the ECB kept its monetary policy unchanged last week despite quickly rising prices. Moreover, it’s not signaling any tightening of its stance, maintaining that high inflation is transitory even though Christine Lagarde acknowledged that the decline in inflation would take longer than the central bank had initially expected. The point here is that the ECB remains an outlier among central banks, which either have already tightened or signaled tightening of their monetary policy. This means that the US dollar is likely to appreciate against the euro, which should be another headwind for gold. Having said that, this scenario will occur if the markets believe in a dovish stance of the EBC. The rising yields on German bonds indicate that the markets don’t entirely trust Lagarde’s rhetoric and expect a more hawkish stance of the ECB, which would be fortunate for gold.   Implications for Gold What does higher US inflation imply for the gold market? Well, not so much in the short run. Even though I’ve seen some signs of a bullish revival in the gold market, the bulls remain too weak to challenge the $1,800 level. That’s too much, man! Luckily, better times are coming for gold. Have you seen the advance estimates of the durable goods orders (0.4% decline in September) or of the GDP in the third quarter of this year? According to the BEA, real GDP increased at an annual rate of 2.0% (annualized quarterly growth), much below the 6.7% reported in Q2 and much below the expectations of 2.8% growth. When it comes to the annual percentage growth year-over-year, real GDP rose 4.9% compared to 12.2% in Q2, as the chart below shows. So, the pace of growth remains historically fast, but it’s decelerating quickly. Given that the economy has already reopened and energy and transportation crises are hurting growth (not to mention inflation wreaking havoc), we should expect a further slowdown on the way. And this brings us closer to… yes, you guessed it, stagflation. To be clear: we are still far from stagnation, but the economic slowdown after a spectacular post-pandemic recovery is already unfolding. When we add it to high inflation, we should get an environment supportive of gold prices. However, supportive factors won’t be able to fully operate until the Fed starts hiking interest rates and gold prices bottom out. Sometimes one needs to hit rock bottom to succeed later; perhaps that’s also the case with gold. Time will tell. If you enjoyed today’s free gold report, we invite you to check out our premium services. We provide much more detailed fundamental analyses of the gold market in our monthly Gold Market Overview reports and we provide daily Gold & Silver Trading Alerts with clear buy and sell signals. In order to enjoy our gold analyses in their full scope, we invite you to subscribe today. If you’re not ready to subscribe yet though and are not on our gold mailing list yet, we urge you to sign up. It’s free and if you don’t like it, you can easily unsubscribe. Sign up today! Arkadiusz Sieron, PhDSunshine Profits: Effective Investment through Diligence & Care
USD Index: Are New Milestones in the Cards?

USD Index: Are New Milestones in the Cards?

Przemysław Radomski Przemysław Radomski 08.11.2021 16:54
While the greenback's failed breakout on Nov. 4th may seem bearish, it faced a similar situation in August and October, only to recover and achieve new highs. After the USD Index’s negative response to the ECB’s monetary policy meeting on Oct. 28, I warned on Oct. 29 that dollar bears were unlikely to celebrate for much longer. I wrote: Based on the rather random comment during the conference, the traders panicked and bought the EUR/USD, which triggered declines in the USD Index (after all, the EUR/USD is the largest component of the USDX). Was the breakout to new 2021 lows invalidated? No. The true breakout was above the late-March highs (the August highs also served as a support level, but the March high is more important here) and it wasn’t invalidated. What was the follow-up action? At the moment of writing these words, the USDX is up and trading at about 93.52, which is just 0.07 below the August high in terms of the closing prices. Consequently, it could easily be the case that the USD Index ends today’s session (and the week) back above this level. You’ve probably heard the saying that time is more important than price. It’s the end of the month, so let’s check what happened in the case of previous turns of the month; that’s where we usually see major price turnarounds. I marked the short-term turnarounds close to the turns of the month with horizontal dashed blue lines, and it appears that, in the recent past, there was practically always some sort of a turnaround close to the end of the month. Consequently, seeing a turnaround (and a bottom) in the USD index now would be perfectly normal. And after the forecast turned into reality, the USD Index surged above 94 and remains poised to resume its uptrend over the medium term. To explain, if we zoom in on the four-hour chart, it highlights the importance of the price action on Nov. 5. During the session, the USD Index hit a new 2021 intraday high before a small reversal occurred. This might seem bearish at the first sight (it’s a failed breakout, after all)… However, similar developments were also present in August and October. After the dollar basket attempted to make new highs and failed, the greenback eventually regained its composure and achieved the milestones. As a result, another 2021 high should occur sooner rather than later. Please see below: The first failed attempt to break above the previous highs triggered sizable short-term declines. This happened in August (marked with red). The second – September – attempt triggered only a small correction (marked with green) that was then followed by a bigger rally. Similarly, the – marked with red – October invalidation was followed by a sizable decline, and the current one (marked with green), is relatively small. And it’s likely to be followed by a short-term rally, just like the September correction was. On top of that, as you can see on the below chart, the current setup for the USD Index and gold mirrors what we witnessed in early August. Following its sharp summertime rally, the USD Index moved close to its 50-day moving average without reaching it. And after buyers stepped in, the USD Index resumed its uptrend and made a new 2021 high. Moreover, with a similar pattern and a similar reading on the USD Index’s RSI (Relative Strength Index) present today, the greenback’s outlook remains robust. I marked both cases with red, vertical, dashed lines below. More importantly, though gold, silver, and mining stocks’ upswings concluded once the USD Index bottomed close to its 50-day moving average in August and sharp drawdowns followed. Moreover, while gold, silver, and mining stocks’ recent rallies were likely underwritten by expectations of a weaker USD Index (it did fail to move to new highs, right?) , technical (as described above and below) and fundamental realities contrast this thesis. As a result, the 2021 theme of ‘USD Index up, PMs down’ will likely resume over the medium term. Please see below: Equally bullish for the greenback, the Euro Index remains overvalued and should suffer a material drawdown over the medium term. For example, the index’s previous lows, its 50-day moving average, and its declining resistance line combined to create major resistance and the Euro Index is now retesting its 2021 lows. As a result, the next temporary stop could be ~1.1500 (the March 2020 highs, then likely lower). For context, the EUR/USD accounts for nearly 58% of the movement of the USD Index, and that’s why the euro’s behavior is so important. Please see below: Adding to our confidence (don’t get me wrong, there are no certainties in any market; it’s just that the bullish narrative for the USDX is even more bullish in my view), the USD Index often sizzles in the summer sun and major USDX rallies often start during the middle of the year. Summertime spikes have been mainstays on the USD Index’s historical record and in 2004, 2005, 2008, 2011, 2014 and 2018 a retest of the lows (or close to them) occurred before the USD Index began its upward flights (which is exactly what’s happened this time around). Furthermore, profound rallies (marked by the red vertical dashed lines below) followed in 2008, 2011 and 2014. With the current situation mirroring the latter, a small consolidation on the long-term chart is exactly what occurred before the USD Index surged in 2014. Likewise, the USD Index recently bottomed near its 50-week moving average; an identical development occurred in 2014. More importantly, though, with bottoms in the precious metals market often occurring when gold trades in unison with the USD Index (after ceasing to respond to the USD’s rallies with declines), we’re still far away from that milestone in terms of both price and duration. Moreover, as the journey unfolds, the bullish signals from 2014 have resurfaced once again. For example, the USD Index’s RSI is hovering near a similar level (marked with red ellipses), and back then, a corrective downswing also occurred at the previous highs. More importantly, though, the short-term weakness was followed by a profound rally in 2014, and many technical and fundamental indicators signal that another reenactment could be forthcoming. Please see below: Just as the USD Index took a breather before its massive rally in 2014, it seems that we saw the same recently. This means that predicting higher gold prices (or the ones of silver) here is likely not a good idea. Continuing the theme, the eye in the sky doesn’t lie. And with the USDX’s long-term breakout clearly visible, the wind still remains at the dollar’s back. Please see below: The bottom line? With my initial 2021 target of 94.5 already hit, the ~98 target is likely to be reached over the medium term, and the USDX will likely exceed 100 at some point over the medium or long term. Keep in mind though: we’re not bullish on the greenback because of the U.S.’ absolute outperformance. It’s because the region is fundamentally outperforming the Eurozone, the EUR/USD accounts for nearly 58% of the movement of the USD Index, and the relative performance is what really matters. In conclusion, the USD Index remains in the driver’s seat and new highs should materialize over the medium term. And while gold, silver and mining stocks have rode the S&P 500 higher recently, history has been unkind when the precious metals ignore technical and fundamental realities. Moreover, with gold, silver, and mining stocks’ strong negative correlations with the U.S. dollar standing the test of time, it’s likely only a matter of time before investors realize this as well. Thank you for reading our free analysis today. Please note that the above is just a small fraction of today’s all-encompassing Gold & Silver Trading Alert. The latter includes multiple premium details such as the targets for gold and mining stocks that could be reached in the next few weeks. If you’d like to read those premium details, we have good news for you. As soon as you sign up for our free gold newsletter, you’ll get a free 7-day no-obligation trial access to our premium Gold & Silver Trading Alerts. It’s really free – sign up today. Przemyslaw Radomski, CFAFounder, Editor-in-chiefSunshine Profits: Effective Investment through Diligence & Care * * * * * All essays, research and information found above represent analyses and opinions of Przemyslaw Radomski, CFA and Sunshine Profits' associates only. As such, it may prove wrong and be subject to change without notice. Opinions and analyses are based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are deemed to be accurate, Przemyslaw Radomski, CFA and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Radomski is not a Registered Securities Advisor. By reading Przemyslaw Radomski's, CFA reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Przemyslaw Radomski, CFA, Sunshine Profits' employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.
Intraday Market Analysis – GBP Seeks Support

Intraday Market Analysis – GBP Seeks Support

John Benjamin John Benjamin 09.11.2021 09:01
EURGBP sees a temporary pullback The sterling inched higher as traders took profit after the BOE’s dovish shift last week. The rally above the supply area of 0.8570 is a sign of commitment from the buy-side. Strong momentum has forced the bears to rush for the exit door. 0.8620 is now the next resistance. Its break would bring the euro to September’s high at 0.8660, where a breakout may lead to a bullish reversal in the medium-term. In the meantime, an overbought RSI is causing a pullback. The base of the latest surge at 0.8465 is an important support. NZDUSD tests key resistance The New Zealand dollar recoups losses as risk appetite recovers. The pair has met buying interest at 0.7070 along the 20-day moving average. A bullish RSI divergence is a sign that the bearish momentum has waned. When this happens in a demand zone, it makes a rebound of greater significance. 0.7180 is a major hurdle ahead following a previously botched bounce. Its breach may resume the kiwi’s uptrend above 0.7220. The RSI’s double top in the overbought area may briefly limit the bullish impetus. GER 40 consolidates gains The Dax 40 continues to rally in hopes of a prolonged low-rate environment. The bulls are pushing towards 16200 after the index reached the milestone at 16000. However, the RSI’s multiple ventures into the overbought area and a bearish divergence indicate that the rally may have overextended. A temporary pullback would be necessary to let the bulls catch their breath. 15920 is the immediate support. Further down, 15730 on the 20-day moving average would be an area of interest.
Intraday Market Analysis – Euro Attempts To Bounce

Intraday Market Analysis – Euro Attempts To Bounce

John Benjamin John Benjamin 10.11.2021 08:58
EURUSD meets resistance The euro finds support from an upbeat economic sentiment from across the block. The pair has met buying interest in the demand zone around 1.1520. A bullish RSI divergence suggests that sellers may have taken their feet off the pedal. Subsequently, a break above 1.1560 prompted the short side to cover. 1.1615 is a key supply zone from last week’s sell-off, after which the bulls need to lift offers near 1.1690 before a reversal could gain traction. On the downside, a fall below 1.1550 may call the rebound into question. XAGUSD awaits breakout Bullions rise as the US dollar retreats ahead of the release of inflation data. A bullish MA cross on the daily chart is a sign that sentiment could be turning around. Silver is testing the September high of 24.80. A bullish breakout would trigger an extended rally towards 26.00. However, the RSI’s double top in the overbought area has held buyers back as the market awaits new catalysts. A combination of profit-taking and fresh selling could drive the price lower. The base of a previous breakout at 23.70 would be a support. US 500 seeks support The S&P 500 consolidates gains over strong corporate earnings and improved economic outlook. The divergence between the 20 and 30-day moving averages indicates an acceleration in the rally. Though there is a chance of a pullback after the RSI shot into the overbought area. The bullish bias means that buyers may be eager to jump in during a correction. The index is hovering above 4660. 4625 on the 20-day moving average would be the second line of defense. On the upside, a rebound would lead to 4750.
Profiting on Hot Inflation

Profiting on Hot Inflation

Monica Kingsley Monica Kingsley 10.11.2021 16:08
S&P 500 pause finally went from sideways to down, and might not be over yet. Credit markets aren‘t nearly totally weak – tech simply had to pause, so did semiconductors, and the Tesla downswing took its toll. Value though recovered the intraday downside, and VIX retreated from its daily highs – that may be all it can muster. I‘m looking primarily at bond markets for clues, and these reacted to the PPI figures with further decline in yields.At the same, inflation expectations are moving higher – the more you shorten the maturity, the higher they go, let alone RINF, their key ETF. Markets will be proven very wrong about the transitory inflation complacency – inflation rates aren‘t going to decline if you just leave them alone. And taper coupled with rate hikes hesitancy won‘t do the trick either.S&P 500 is still primed to go higher – the only question is the shape of the current consolidation. Liquidity is still ample, the banking sector is strong, and the Russell 2000 isn‘t really retreating. As stated yesterday:(…) The correct view of the stock market action is one of microrotations unfolding in a weakening environment – one increasingly fraught with downside risks. To be clear, I‘m not looking for a sizable correction, but a very modest one both in time and price. It‘s a question of time, and I think it would be driven by tech weakness as the sector has reached lofty levels. It‘ll go higher over time still, but this is the time for value and smallcaps in the medium term.Precious metals are consolidating – it‘s almost a pre-CPI ritual, but under the surface, the pressure to go higher keeps building. I‘m looking for a strong Dec in gold and silver, with unyielding oil and copper gradually waking up. Cryptos aren‘t taking prisoners either.Let‘s move right into the charts (all courtesy of www.stockcharts.com).S&P 500 and Nasdaq OutlookS&P 500 finally declined, and the very short-term picture is unclear – is the dip about to continue, or more sideways trading before taking on prior highs? It‘s a coin toss.Credit MarketsHYG recouped some of the prior downside, but the LQD and TLT upswings give an impression of risk-off environment. Sharply declining yields aren‘t necessarily positive for stocks, and such is the case today.Gold, Silver and MinersGold and silver look like briefly pausing before the upswing continues – miners are pulling ahead, and the ever more negative real rates are powering it all.Crude OilCrude oil bulls continue having the upper hand, and oil sector is also pointing at higher black gold prices to come. Energy hasn‘t peaked by a long shot.CopperCopper went at odds with the CRB Index, but that‘s not a cause for concern. It‘ll take a while, but the red metal would swing upwards again.Bitcoin and EthereumBitcoin and Ethereum are briefly consolidating, and a fresh upswing is a question of shortening time. SummaryS&P 500 remains momentarily undecided, but the pullback shouldn‘t reach far on the downside – the bears are having an opportunity to strike on yet another hot inflation numbers. This isn‘t transitory really as I‘ve been telling you for almost 3 quarters already. Needless to say, the fire under real assets is being increasingly lit – more gains in commodities, precious metals and cryptos are ahead as inflations runs rampant on the Fed‘s watch.Thank you for having read today‘s free analysis, which is available in full at my homesite. There, you can subscribe to the free Monica‘s Insider Club, which features real-time trade calls and intraday updates for all the five publications: Stock Trading Signals, Gold Trading Signals, Oil Trading Signals, Copper Trading Signals and Bitcoin Trading Signals.
Half a Dozen Things You Should Know about FX

Half a Dozen Things You Should Know about FX

Marc Chandler Marc Chandler 12.11.2021 13:11
1.  The market is still digesting the implications of Wednesday's CPI shock. The dollar has strengthened, yields have risen, the stock market wobbled after a long advancing streak, and in any event, stabilized in light trading during the US and Canadian holidays. However, given the low year-ago reading, there is a significant risk that inflation (including the core rate) will accelerate over the next few months. As a result, the Federal Reserve needs greater flexibility to raise rates sooner than it has envisioned.   The main restraint now is the pace of tapering.  The FOMC committed to reducing its bond-buying by $15 bln in November and December.  Its statement indicated that it anticipated maintaining the rate afterward, but the FOMC also reserved the right to adjust the pace if necessary. Thus, accelerating the tapering is the most likely course of action.  Bullard had suggested completing the tapering by the end of Q1.  If this is to become the majority view, there may be some effort to prepare the market.   Recently a rally in US bonds was attributed to talk that Governor Brainard could replace Powell as Fed chair.  The argument was that Brainard was more dovish.  Is this really relevant now?  Does it count as a strike against her?  With Yellen's apparent support, Powell is most likely to get re-appointed, and given that CPI is at 30-year highs, conventional thinking favors maintaining a stable hand at the helm. 2.    The dollar's gains accelerated since the higher than expected CPI report.  The euro was in a $1.15-$1.17 range last month and broke out on Wednesday.  Follow-through selling Thursday brought to about $1.1445.  We have suggested the next target is a little below $1.1300.   The jump in yields helped lift the greenback from below JPY112.80 above JPY114.00.  The five-year high set on October 20 was around JPY114.70, while we project the upper end of the likely range closer to JPY115.00. 3.  Disappointing economic data contributed to the losses of sterling and the Australian dollar.   Economists (Bloomberg survey) expected Australia to have created 50k jobs in October, but, instead, it lost 46.3k jobs for the third consecutive monthly decline.  The bulk of the loss (40.4k) were full-time positions, which reversed the 26.7k increase reported in September.  The unemployment rate jumped to 5.2% from 4.6%, the highest since April.  The Australian dollar peaked near $0.7550 in late October and fell below $0.7300 on Thursday, for the first time in a month.  The next target is around $0.7240-$0.7260.   The UK reported a significant slow down in Q3 GDP to 1.3% from 5.5% in Q2. Expectations for a 1.5% quarter-over-quarter expansion  (Bloomberg survey) seemed on the high side.  However, the September monthly GDP rose 0.6%, and the better than expected rise was offset but a reduction in the August GDP to 0.2% from 0.4%. The industrial output contracted in September. The trade deficit deteriorated after a dramatic revision in the August balance (to -GBP1.880 bln from -GBP3.716 bln, while services accelerated (0.7% from a revised 0.1% gain that had initially reported at 0.3%).  Sterling, which had been pushing near $1.36 before the Bank of England's meeting and slipped to a marginal new low for the year on Wednesday but still held above $1.34 (barely).  It fell to $1.3360 on Thursday. The next chart support area is seen around $1.3165-$1.3185. 4.  The joint US-China statement at COP-26 is promising.  It was the key to the Paris Agreement in 2015.  There was a commitment to boost efforts to cut emissions and illegal deforestation.  The gap between current policies and what is necessary was acknowledged, and there appeared to be an agreement in principle to reach an agreement on climate finances and rules for a carbon market.  The joint statement must have been in the works even as Biden criticized Xi for the lack of commitment for not attending COP-26.  There is still much speculation about a "virtual summit," which is supposed to signal something more than two phone calls the leaders have held this year.  The environment was also recognized where cooperation was possible.  Still, Beijing refused to join the US-EU commitment to cut methane admissions and opted for its own plan.   The geopolitical competition is unaffected by the joint statement. Meanwhile, the more pressing geopolitical threat is coming from the movement of Russian forces to the Ukraine border.  Reports suggest the US has briefed Europe on a possible Russian invasion of Ukraine.  Hostilities are said to have escalated recently.  Recall that Russia had amassed forces (~100k soldiers, tanks, and aircraft) in the Spring too.  It triggered a flurry of talks, and Moscow removed (redeployed) its forces.  Russia defended the troop movement within the country as an internal affair but has accused the US of provocation for sailing warships into the Black Sea, close to its territory last week.  Putin also reportedly was critical of Ukraine's alleged use of drones, which violated a previous agreement.  Meanwhile, tensions on the Polish-Belarus border remain tense.  Merkel sought Putin's help recently to defuse the situation, but he refused.   Belarus is thought to be instigating a migration crisis and has threatened to shut down a critical gas pipeline to the EU if Poland keeps its border closed.  These developments may have contributed to some pressure on the euro.   5.  The Mexican peso fell by around 0.5% after the central bank lifted the overnight rate to 5.00%. It is the third quarter-point move in the cycle that began in June.   The swaps market has nearly 90 bp of tightening discounted over the next three months and almost 220 bp in the next 12 months.  Banxico lifted its Q4 inflation forecast to 6.8% from 6.2%.  The one dissent (Esquivel, again) was to stand pat.  There was no vote for a 50 bp move, which contributed to the dovish read of the rate hike.  October CPI, reported earlier this week, is at 6.24% year-over-year,  6.   Friday's economic calendar is light.  Little new data from the large Asia Pacific and European countries.  The North American calendar is minimal.  The US JOLTS report on job openings and the University of Michigan's preliminary estimate of November sentiment and inflation expectations.   NY Fed's Williams is the lone speaker from the central bank and may not address monetary policy directly.  There are three sets of chunky options that expire tomorrow that may be relevant:  1.23 bln euros at $1.1460, $1.75 bln at JPY114.00, and GBP690 mln at $1.3320.   Disclaimer
Intraday Market Analysis – USD Seeks Consolidation

Intraday Market Analysis – USD Seeks Consolidation

John Benjamin John Benjamin 15.11.2021 08:53
USDJPY hits temporary resistance The Japanese yen pulled back after a larger-than-expected GDP contraction in Q3. The US dollar is looking to hold onto its gains after a rally above 114.00. Sentiment has recovered and a surge above 114.45 around the October peak would resume the uptrend. However, the current rebound may lack the strength to clear the supply zone right away. An overbought RSI has held the bullish fever back. A breach below 113.70 would lead to a deeper correction towards 112.80, which is a key level to keep the rebound relevant. EURCHF struggles for support The euro bounced higher after the bloc’s industrial production beat expectations in September. The RSI’s oversold situation on the daily chart has attracted bargain hunters’ attention around 1.0530, a demand area from May 2020. Price action had three failed attempts to lift offers at 1.0600, a sign of strong selling pressure to keep the downtrend going. A bullish breakout may trigger a runaway rally as sellers seek to exit a crowded short bet. A bearish one would send the single currency to 1.0490. UK 100 tests support The FTSE 100 edged lower after active job postings in the UK hit a record high. The index came under pressure at the psychological level of 7400. A combination of an overbought RSI and its bearish divergence suggests that the rally was losing momentum. Sentiment remains upbeat and a pullback could be an opportunity to get filled at a better price. Trend followers may be waiting to buy the dip near the first support at 7315. A deeper correction would send the price to 7255 along the 30-day moving average.
CPI Shocker Lifted the Greenback, which now needs to Take a Breath

CPI Shocker Lifted the Greenback, which now needs to Take a Breath

Marc Chandler Marc Chandler 15.11.2021 10:14
The jump in US headline CPI above 6% crossed some Rubicon and injected dynamic into the process.  The dollar rallied, and new highs for the year were recorded against the euro and sterling.  The dovish tapering announcement by the Fed on November 3 was completely unwound as the December 2022 Fed funds futures returned to the high-yield mark of 66 bp ahead of the weekend.   The two-year yield rose from about 39 bp at the start of the last week to almost 55 bp.  The volatility of the bond market (the equivalent of the VIX for the S&P 500) surged back to the year's high (above 78%).   Ultimately, the idea that R-star, the real short-term interest rate when the US economy is at full capacity and inflation stable, has continued to trend lower will likely cap nominal rates.  Equities wobbled, and the S&P 500 snapped an eight-day advance, and the NASDAQ's 11-day rally stalled.  US equities stabilized and posted modest gains in the past two sessions.   The rise in price pressures requires the Federal Reserve to be more flexible to address a range of possible outcomes.  The pace of the tapering is the main constraint on policy.  The FOMC statement committed the Fed to reduce the bond-buying by $15 bln in November and December.  While it anticipated that the pace would continue, it reserved the right to adjust the rate.  This is likely to be the focus in the run-up to the mid-December meeting.  To finish QE in March, as St. Louis Fed's Bullard, a noted hawk, has argued, the Fed would need to double its pace of tapering to $30 bln a month starting in January.  What is at stake is when the Fed's rate hike cycle can begin, not the terminal rate, which is expected to be below 2%.   Dollar Index:  The CPI saw the Dollar Index surge to convincingly surpass the (38.2%) retracement target of the decline from the March 2020 high (~103) to the January 6 low (~89.20).  That retracement (~94.55) had been penetrated briefly before, but it did not stick.  This time, the Dollar Index rose to new highs for the year, slightly above 95.25.  The next retracement (50%) is found a little above 96.00, and the (61.8%) objective is almost 97.75.   The momentum indicators suggest a high is not yet in place, but the move since the mid-week CPI shocker, above the upper Bollinger Band (~95.00) warns against chasing it.  That said, initial support is likely in the 94.60-94.75 area.   Euro:  The euro was driven below $1.15 after the US CPI report and failed to resurface above this previous floor, which now acts as resistance.  A low near $1.1435 was recorded ahead of the weekend.  Neither the MACD nor Slow Stochastic is over-extended, but, as we saw with the Dollar Index, the exchange rate is outside the Bollinger Band (slightly below $1.1465) and settled below it for the third consecutive session ahead of the weekend. There is little chart support until the $1.1290-$1.1300 area is approached.  Moreover, if the euro has carved out some kind of topping pattern, the risk may extend toward $1.10.   Japanese Yen:  From around mid-September through mid-October, the dollar broke out of the old JPY109-JPY111 range to reach JPY114.70 on October 20.  It consolidated at lower levels and approached JPY112.70 on November 9.  The jump in the US CPI reported the following day lifted the greenback to JPY114.00, and it reached JPY114.30 before the weekend.  We often experience the dollar-yen exchange rate as a pair often rangebound.  We had anticipated a JPY113-JPY115 range and would allow about a half a yen range or so violation. The MACD has flatlined, while the Slow Stochastic has turned higher.  Although the fit is not perfect, we still look at US yields for directional cues.   British Pound:  Sterling had been turned lower on November 4 from $1.37 by the BOE, who caught the market leaning too far over its skis, arguably encouraged to do so by official rhetoric.  Its attempt to recover was stalled near $1.36, and the US inflation jump set it to new lows for the year.  The low ahead of the weekend was slightly below $1.3355.  The MACD is entering oversold territory, while the Slow Stochastic, which leveled off, seems to be slipping into over-extended territory as well.  After closing for two sessions below the lower Bollinger Band, it finished the week back above it (~$1.3355).  A close above $1.3400 would suggest a consolidative phase lies ahead.  Last December, sterling recorded lows $1.3135-$1.3185, and the risk is for this area to be tested.   Canadian Dollar:  Since the US CPI surprise, the Canadian dollar has been the weakest of the major currencies, falling around 0.75% against the greenback.  It was the third consecutive weekly decline for the Loonie, which was preceded by a five-week advance.  The US dollar posted an outside up day in the middle of last week on the back of the CPI news.  It rallied from slightly below CAD1.2390 to a little above CAD1.25.  On Thursday, when US and Canadian banks were closed for holidays, the dollar rose to almost CAD1.2600 and made a marginal new high ahead of the weekend.  This met the (50%) retracement of the US dollar's decline since the CAD1.29 level was approached a couple of days before the September 22 FOMC meeting.  The Slow Stochastic is over-extended, though the MACD has more scope to run.  Here too, the market moved quickly, and the greenback settled the past two sessions above the Bollinger Band (~CAD1.2555). The CAD1.2480 area may offer initial support.   Australian Dollar:  The Australian dollar recorded the low for the year on August 20, near $0.7100.  It recovered into early September (~$0.7480) before being turned back to $0.7170 by the end of the month. The Aussie launched another advance last month that carried to around $0.7555 and the 200-day moving average.  It has come under new pressure this month and fell to nearly $0.7275 ahead of the weekend, meeting the (61.8%) retracement target of the overall rally since August 20.  It closed on a firm note above $0.7300.  The Slow Stochastic is over-extended and could turn up next week.  The MACD is still pointing lower.  After settling out the Bollinger Band on Wednesday and Thursday, the Aussie moved back into it (~$0.7300) ahead of the weekend.  Initial resistance is seen in the $0.7335-$0.7355 band.   Mexican Peso:  The US CPI boosted the dollar by nearly 1.6% against the peso, the most in five months.  It was the only advance of the week, but it was sufficient for the greenback to close around 0.6% stronger.  The high for the week (~MXN20.7225) was recorded in the hours after the central bank delivered its fourth quarter-point rate hike.  Banxico showed no appetite to increase the pace, unlike other regional central banks, even though CPI is still accelerating.  Still, the greenback slightly exceeded the (61.8%) retracement target (~MXN20.70) of its decline from the November 3 high (~MXN20.98) to the November 9 low (~MXN20.2515) before retreating ahead of the weekend.  Support is seen around the 20-day moving average (~MXN20.42).  Among emerging market currencies, the Brazilian real (~2.3%) and the Chilean peso (1.6%) fared best.  The Hungarian forint (~-2.9%) and the Turkish lira (-2.75) saw the largest losses.  The JP Morgan Emerging Market Currency Index fell by about 0.40% last week, the eighth weekly decline in the past ten.   Chinese Yuan:  One would not know it by reading much of the free financial press, but the Chinese yuan is the strongest currency in the world this year.  Its 2.3% advance eclipses the Canadian dollar, the only major currency stronger against the US dollar on the year (~1.3%).  The tensions in Europe and the pullback in oil prices saw the Russian rouble tumble almost 2.3% last week.  It was knocked from its perch as the top performer, allowing the yuan to pull ahead.  The dollar settled last week, slightly under CNY6.38, its lowest close since May 31, when it recorded a three-year low (~CNY6.3570).  The trend line connecting the 2014 dollar-low and 2018 low is frayed in May and June but essentially held.  It is now being violated more convincingly.   Sentiment toward investment in China has become in fashion again.  The NASDAQ Golden Dragon Index that tracks Chinese companies that trade in the US rallied nearly 7% last week.  China's 10-year yield of 2.80% may not sound particularly exciting, but it is the only benchmark that has not sold off this year.  The yield has fallen 20 bp.    Disclaimer
The Greenback Slips at the Start the New Week

The Greenback Slips at the Start the New Week

Marc Chandler Marc Chandler 15.11.2021 12:19
Overview:  While the Belarus-Poland border remains an intense standoff, there have been a couple other diplomatic developments that may be exciting risk appetites today.  First, Biden and Xi will talk by phone later today.  Second, reports suggest the UK has toned down its rhetoric making progress on talks on the implementation of the Northern Ireland Protocol.  Equities in the Asia Pacific region were mostly firmer, with China a notable exception among the large markets, even though the October data was generally stronger than expected.  Europe's Stoxx 600, which has fallen only once this month, is edging higher to new records, while US futures are enjoying a firmer bias.  Benchmark 10-year yields are 1-2 bp lower, which puts the Treasury yield near 1.55%.  The European periphery is outperforming the core.  The dollar is soft.  The Scandis and Antipodeans lead the move, while the euro, yen, and British pound are little changed.  Emerging market currencies are also mostly stronger.  Here the Philippine peso is notable as it falls the most in seven weeks as corporates bought dollars.  After falling by 0.65% last week, the JP Morgan Emerging Market Currency Index is edging higher today.  Gold is snapping a seven-day rally, stalling near $1868.  Support is seen in the $1842-$1845 area.  January WTI  was sold again as it poked above $80.  It is pinned near last week's lows (~$78.65) as the US response is awaited.  European natural gas futures are firm as the capacity auction results are awaited, and Europe faces its first cold snap of the season.  Iron ore and copper prices are posting small losses.   Asia Pacific Japan's Q3 GDP disappointed, but it is old news and will likely spur Prime Minister Kishida to support a large supplemental budget, which could be unveiled by the end of the week.  Economic growth in the world's third-largest economy contracted for the fifth quarter in the past eight.  The 0.8% loss of output in Q3 was more than the 0.2% expected by the median forecast in Bloomberg's survey.  Consumption (-1.1%), business spending (-3.8%), and public investment (-1.5%) did the most damage.  The GDP deflator was unchanged from Q2 at -1.1%.  The Japanese economy is recovering here in Q4.  Talk of the size of the supplemental budget has increased to around JPY40 trillion (~$350 bln) from JPY30 trillion.  It is expected to include a cash payment for 18-year olds and younger, a tax break for companies that boost wages, a new subsidy for domestic travel, snd pay hikes for caregivers. China's October data was stronger than expected but does not shake off concern that the world's second-largest economy is struggling.  The year-over-year pace of retail sales rose for the second consecutive month in the face of expectations for a decline.  The 4.9% increase follows the 4.4% gain in September and 2.5% in August. In October 2020, it rose 4.3% year-over-year.  Industrial output rose 3.5% from a year ago. It was the first increase since March. Last October, it had increased by 6.9%. The surveyed joblessness was steady at 4.9%.  Fixed asset investment and property investment slowed.  Chinese officials have not addressed the economic slowdown with large-scale fiscal or monetary initiatives.   We have suggested that the dollar-yen exchange rate has entered a new range after trending higher from mid-September through mid-October.  That new range is likely JPY113-JPY115, and to find the floor, the dollar briefly traded below JPY112.80 last week. After spiking back to JPY114.00 on the US CPI surprise, the greenback continues to hover around there, the middle of the range.  Tomorrow's expiring options ($830 mln at JPY113.40 and $1.6 bln at JPY114.30) may mark the near-term range.  The Australian dollar is building on its pre-weekend recovery.  It saw a low slightly above $0.7275 on Friday and settled on its highs (a little above $0.7330).  It has risen to $0.7365, and the intraday momentum is getting stretched.  Look for resistance near $0.7375.  The greenback edged slightly lower against the Chinese yuan to record a new six-month low (~CNY6.3785) before recovering within a narrow range.  It is trading slightly above CNY6.3830 in late dealings. The PBOC set the dollar's reference rate at CNY6.3896, a little below the median forecast of CNY6.3896 (Bloomberg survey).  The PBOC rolled over in full the policy loans (CNY1 trillion) coming due this month, and the overnight repo rate fell by seven basis points to 1.78%, the lowest in three weeks.   Europe Tensions between the UK and EU appear to have taken a step away from the brink.  A deal on medicine supplies from other parts of Great Britain to Northern Ireland may have been the critical catalyst.  Reports suggest a de-escalation of UK rhetoric threatening to invoke Article 16, which allows for unilateral over-riding of the Northern Ireland Protocol under certain circumstances of serious economic, environmental, or societal risks.  Separately, two polls have begun showing Labour is edging ahead of the Tories. The Opinium poll (published in the Guardian) gave Labour a one percentage point lead, the first since January.  The Savanta Com Res poll (for the Daily Mail) put Labour ahead by six percentage points at 40%.  The main issue appears to be Prime Minister Johnson's handling of several ethics issues.  His personal support has also waned.    The US was warning at the end of last week that Russian may be preparing to invade Ukraine. Moscow seems to be acting out of fear, fear of the US and Europe creeping presence in Ukraine.  If Ukraine is going to remain independent, Russia insists it can only be a (weak) buffer state.  US rhetoric seemed aggressive in Moscow.  Last month US Defense Secretary Austin argued that no third country [i.e., Russia] has a veto over NATO membership decision[i.e., Ukraine].    Poland, Lithuania, and Latvia are considering formally requesting NATO consultations, while the EU is expected to announce new sanctions on Belarus later today.  Separately, we note reports that India has begun taking delivery of the S-400 air defense missile system from Russia (part of a $5.5 bln deal), which is the same that earned Turkey American sanctions.   The euro edged above the pre-weekend high, but the tone remains fragile, and for the third consecutive session has been unable to resurface above old support at $1.1500.  Since the US CPI report in the middle of last week, it has fallen, and the sideways movement could alleviate the overextended technical condition.  Sterling extended its pre-weekend recovery to reach $1.3440 before sellers reemerged to knock it to the session low of almost $1.3400.  We suspect it can move higher in North America today and target the $1.3480 area.   America The US seems more eager for the Biden-Xi call than Beijing  Expectations should be low, and with no actionable outcome likely (not even a statement), there appears to be little reason to spin it as a virtual summit. The top officials and the senior staff of the two largest economies should talk.  Previously, there were high-level meetings regularly.  Since their last call, a new US-UK-Australian alliance was announced that will result in Australia acquiring nuclear-powered submarines, and it was confirmed that the US has had military personnel in Taiwan since last November.  China continues with its intimidation campaign of repeatedly entering Taiwan's air-identification zone. China's assessment of the US is unlikely to have changed.  Beijing sees the same thing many others do.  Biden's approval rating has fallen to near 41%, and less than that has a favorable view of his handling of the economy.  At the end of last week, the Univerity of Michigan's consumer sentiment measure (preliminary November) fell to its lowest in a decade.  Surveys continue to point to the likelihood that the Democratic Party will lose both houses of Congress in next year's mid-term.  And to underscore the pressure on Biden, the US Court of Appeals (5th Circuit) sustained a block on OSHA's ordered vaccine mandate (or weekly test).  With the sixth plenum over,  Xi has, by all accounts, confirmed his ascendancy and domination of Chinese politics for years to come.   The week's economic calendar for the US begins off slowly.  The November Empire State manufacturing survey is on tap.  It has been in a sawtooth pattern, alternating between gains and losses for the past five months.  It fell sharply (19.8 from 34.3) in October and is expected to have turned up in November.  The US reports October retail sales and industrial production figures tomorrow. Fed officials begin taking to the public stage starting tomorrow.  Over the course of the week, around 11 officials are scheduled to speak.  In addition to US bills, the Treasury Dept sells 20-year bonds, whose auctions have been among the most challenging for coupons, and 10-year TIPS at the end of the week.   Canada reports September manufacturing and wholesale sales today, but the October existing home sales may be more important.  Tomorrow Canada reports housing starts, but the highlight of the week is Wednesday's October CPI.  Price pressures are accelerating in Canada, and the headline CPI is likely to move toward 5% (4.4% in September).  The swaps market is pricing in about 65 bp of tightening in six months.  This week, Mexico has a light economic diary after last week's higher than expected CPI (6.24%) and Banxcio's 25 bp rate hike (to 5%).  Brazil also has a light economic calendar this week.  Last week featured a further rise in (IPCA) CPI (10.67% vs. 10.25%) and weak September retail sales (-1.3% vs. -0.6% median forecast in Bloomberg's survey after a revised -4.3% fall in August). Last week's US CPI shocker saw the greenback jump from around CAD1.24 to slightly above CAD1.26, roughly the 50% retracement of the slump from CAD1.2900 on September 20.  It settled last week on a soft note, and some follow-through selling has seen the US dollar eased to about CAD1.2525.  A break here sees CAD1.2500 and then possibly CAD1.2470.  Since last September, the greenback has moved into a new and higher range against the Mexican peso.  It has not traded much below MN20.12.  Nor has it spent much time above MXN20.90.  It is in the pre-weekend range (~MXN20.45-MXN20.72).  Look for the consolidative day to continue through the local session.  The Brazil real was the strongest emerging market currency last week, rising almost 1.6% against the US dollar.  The US dollar found support around BRK5.40. Trendline support (from June, August, and September lows) and the 200-day moving average are near BRL5.36.   Disclaimer
Getting Real on PMs and Inflation

Getting Real on PMs and Inflation

Monica Kingsley Monica Kingsley 15.11.2021 15:47
S&P 500 indeed rose but bond markets couldn‘t keep the encouraging opening gains. Can stocks still continue rallying? They look to be setting up for one more downleg of maximum the immediately predecing magnitude, which means not a huge setback. The medium-term path of least resistance remains up – the Fed is still printing a huge amount of money on a monthly basis, and it remains questionable how far in tapering plans execution they would actually get – I see the risks to the real economy coupled with persistently high inflation as rising since the 2Q 2022 (if not since Mar already, but most pronounced in 2H 2022).Stocks are still set for a good Dec and beyond performance – just look at VIX calming down again. It‘s that the debt ceiling drama resolution would allow the Treasury to start issuing fresh debt, and that would weigh heavily on the dollar. That‘s a good part of what gold and silver are sniffing out, and if you look at the great white metal‘s performance, it‘s the result of inflation coming back to the fore as the Fed itself is now admitting to high inflation rates through the mid-2022, putting blame on supply chain bottlenecks. Oh, sure. The real trouble is that inflation expectations are starting to get anchored – people are expecting these rates to be not going away any time soon.Precious metals are going to do great, and keep scoring excellent gains. Surpassing $1,950 isn‘t out of the realm of possibilities, but I prefer to be possitioned aggressively while having more conservative expectations. Not missing a dime this way. Copper is awakening too, and commodities including oil would be doing marvels. If in doubt, look at cryptos, how shallow the corrections there are.A few more words on yields – as more fresh Treasury issued debt enters the markets, look for yields to rise. Coming full circle to stocks and my Friday‘s expectations:(…) TLT though is having trouble declining further, and that means a brief upswing carrying over into stocks, is likely.TLT downswings would be less and less conducive to growth, so if you‘re still heavily in tech, I would start eyeing more value.Let‘s move right into the charts (all courtesy of www.stockcharts.com).S&P 500 and Nasdaq OutlookS&P 500 bulls are on the move, and let‘s see how far they make it before running into another (mild, again I say) setback.Credit MarketsCredit markets opening strength fizzled out, but the weakness is getting long in the tooth kind of. I view it as a short-term non-confirmation of the S&P 500 upswing only.Gold, Silver and MinersGold and silver are on a tear, and rightfully so – I am looking for further gains as both gold and silver miners confirm, and the macroeconomic environment is superb for PMs.Crude OilCrude oil bulls keep defending the $80 level, with $78 serving as the next stop if need be – after Friday, its test is looking as an increasingly remote possibility – the two lower knots in a series say. Anyway, black gold will overcome $85 before too long.CopperCopper ran while commodities paused – that‘s a very bullish sign, for both base and precious metals. The lower volume isn‘t necessarily a warning sign.Bitcoin and EthereumBitcoin and Ethereum are still consolidating, and the relatively tight price range keeps favoring the bulls – and they‘re peeking higher already.SummaryS&P 500 bulls are holding the short-term upper hand, but the rally may run into headwinds shortly. Still, we‘re looking at a trading range followed by fresh highs as a worst case scenario. Yes, I remain a stock market bull, not expecting a serious setback till probably the third month of 2022. Precious metals are my top pick, followed by copper – and I am definitely not writing off oil, let alone cryptos. Inflation trades are simply back!Thank you for having read today‘s free analysis, which is available in full at my homesite. There, you can subscribe to the free Monica‘s Insider Club, which features real-time trade calls and intraday updates for all the five publications: Stock Trading Signals, Gold Trading Signals, Oil Trading Signals, Copper Trading Signals and Bitcoin Trading Signals.
Biden-Xi "Summit" Leaves Markets Unmolested, While Bailey Continues to Blame Investors for Misunderstanding Him

Biden-Xi "Summit" Leaves Markets Unmolested, While Bailey Continues to Blame Investors for Misunderstanding Him

Marc Chandler Marc Chandler 16.11.2021 14:03
Overview: The much-heralded Biden-Xi meeting left little impression on the capital markets.  Equities in the region were mixed, and China's main markets fell, alongside Australia, South Korea, and India.  European equities continue their upward market, with the Stoxx 600 gaining for a fifth consecutive session. US futures are softer.  The bond market is quiet, with the US 10-year yield softer slightly below 1.60%.  European benchmark yields are 1-2 bp lower and the periphery is outperforming the core.  Encouraged by a strong employment report, sterling is the strongest of the majors, gaining about a third of one percent.  Most major currencies are trading with a heavier bias, and the euro is pinned near 19-month lows.  The dollar is gaining against most emerging market currencies.  The Turkish lira is off more than 1.5% as the market prices in a 100 bp cut on Thursday.   Hungary's disappointing Q3 GDP (0.7% vs. 1.0% forecasts) may limit the aggressiveness of the central bank today.  A 30 bp hike after two 15 bp moves was expected.  Gold is extending its rally and has taken out the downtrend drawn off the January and June highs (found ~$1872 today).  The next target is around $1900.  Oil is firm, and the January WTI contract is straddling the $80-level.  European natural gas is rising as new supplies are low, and there is a further delay in the certification process of the Nord Stream 2 pipeline.   Yesterday's 9% advance has been extended by another 8% today.  Iron ore has steadied, while copper is struggling after falling 1% yesterday.   Asia Pacific There is not much to say about the Xi-Biden "virtual summit."  The call reportedly lasted three hours.  The one concrete thing to emerge is that US business executives will have an easier/quicker time entering China.  Separately, Hong Kong's Chief Executive used her regular briefing to justify the decision to allow JP Morgan's CEO to skip the city's 21-day hotel quarantine because of the size of the bank's operations.  This speaks to the difference between the rule of law and the rule by law that some observers make.  Returning to regular meetings between the senior officials from both countries seems to be the logical way forward, but both sides appear to draw domestic benefits from demonizing the other.  In the US, the Biden administration uses the threat of China to justify building a 21st-century infrastructure. At the same time, Beijing plays the nationalistic chords to strengthen the loyalty to the Communist Party even as its delivery of improved living standards slows or stalls.   The minutes from the recent Reserve Bank of Australia meeting contained no surprises.  The exit from the yield curve control policy seems clumsy, but the RBA seems adamant that a rate hike next year is unwarranted.  The market remains convinced officials are wrong.  The swaps market has about 75 bp discounted over the next 12 months, with the hikes and risks increasing beginning in late H1 22. In a speech after the minutes were released, Governor Lowe referred to a hike in 2024 as "still plausible," but this seemed like a slight climb down from it being the "central case."  On the other hand, elevated price pressures and border controls have driven the unemployment rate to 3.4%, its lowest level since 2008, and lifted the participating rate to match record highs. The Reserve Bank of New Zealand will likely hike rates again next week.  The swaps market is pricing in nearly 50 bp of tightening by the RBNZ over the next three months and almost 140 bp in the following nine months.  It is difficult to see a more hawkish outlook.  The five basis point jump in the US 10-year yield helped lift the greenback to JPY114.30, matching its best level since November 1 (JPY114.45).  There is an option for $1.6 bln at JPY114.30 that expires today.   The four-year high was set on October 20 near JPY114.70.  The Japanese economy is recovering after a larger than expected contraction in Q3.  A large supplemental budget is expected as early as the end of the week but before month-end in any event.  As if confirming the lack of new insight from the RBA minutes, the Australian dollar is trading within yesterday's range (~$0.7320-$0.7370).  A break of the $0.7300 area would weaken the technical tone, while a move above $0.7380 signals a stronger recovery after finishing last month near $0.7550.  The Chinese yuan rose to new five-month highs today before pulling back.  The dollar fell to CNY6.3670 and rebounded to a new session high slightly above yesterday's high near CNY6.3850.  The PBOC set the dollar's reference rate at CNY6.3924, a little above the (Bloomberg survey) median projection of CNY6.3920. Ironically, the yuan's high was recorded as the Biden-Xi call got underway.  It trended lower through the rest of the session.   Separately, the PBOC boosted its liquidity injection via seven-day repos to CNY50 bln from CNY10 bln on Monday and rolled off its full medium-term lending yesterday, easing technical pressure in the money market.   Europe The UK's employment data is especially important in light of the BOE concerns about the labor market now that the furlough program has ended.  Around one million workers were on the program when it ended. The BOE surprised the market by not raising rates at the meeting earlier this month. Governor Bailey continues to blame the market for misconstruing his remarks and expressing his unease with the "inflation situation."  He said he wanted to see what happens now that the furlough program ended before hiking, but it is not clear that today's data is sufficient.  However, the preliminary indications suggest the UK labor market is normalizing quickly.  October payrolls rose by 160k. Jobless claims fell by nearly 15k after a revised decline of almost 86k in September (initially estimated at -51.1k).  In the three months through September, the UK employment rose by 247k, and the ILO measure of unemployment fell to 4.3% from 4.5%.  Of note, the next employment report will be issued two days before the next MPC meeting (December 16).     Governor Bailey acknowledged that his decision not to hike rates earlier this month was close.  The swaps market has a little more than a 55% chance of a hike in December and has it fully priced it in for the first meeting next year (February 3). The central bank's chief economist, Pill, said there was no evidence yet that higher inflation was seeping into general pay levels.  Starting salaries appear to be increasing, but it may not be lifting the pay for existing workers.  Separately, a technical glitch with an internet-based order system caused the BOE to postpone a bond purchases operation until Thursday.  The QE operations take place three times a week at a pace of slightly more than GBP3 bln a week, with an eye toward finishing them by year-end.   There is another twist to the saga of the controversial Nord Stream 2 pipeline.  Hopes that the completed pipeline could become operational soon were dealt a fresh blow by the German regulator, who suspended the certification process.  The technical issue was a change in the legal form of the operating company.  Nord Stream 2 AG established a subsidiary that would own and operator the German section of the pipeline.  There is some thought that after this delay, the corporate reorganization could expedite the eventual approval.   Coronavirus deaths spiked in Germany to the six-month highs, and the government is debating how to control the fourth pandemic wave. Ironically, Japan now has the highest inoculation rates among the G7. It reported the lowest number of new infections in 18 months. The euro was sold below $1.1400 yesterday and has been unable to resurface above there.  Since the $1.15 level broke, we have suggested the next target is near $1.1290-$1.1300. The ECB's dovish rhetoric contrasts with the prospect of a more hawkish posture by the Federal Reserve.   We continue to see an acceleration of the Fed's tapering as the most likely outcome of the December FOMC meeting, while next month's ECB meeting is more about extending the bond-buying after the Pandemic Emergency Purchases Program ends next March.  The prospects of a rate hike next month lifted sterling to four-day highs near $1.3475, but there does not look like there is the interest to test the $1.35 area, which holds a GBP407 mln option that expires today.  Initial support is now seen in the $1.3400-$1.3420 area. The euro is sliding for the third consecutive session against steering and looks poised to test the year's low near GBP0.8400 in the coming days. The UK reports October CPI figures tomorrow, and they are expected to have accelerated.    America The US economic growth is improving this quarter after the disappointing 2% annualized pace in Q3.  It will be reflected in the consumption and production data.  Today sees October retail sales, a little more than 40% of overall consumption, and industrial production, including factories and utilities, mining, and drilling.  Headline retail sales will likely be lifted by the first increase in auto sales in six months.  The core components, which exclude autos, gasoline, building materials, and food services, are forecast (Bloomberg, median) to rise a solid 0.9%.  It would be the third consecutive monthly gain, the first since Q3 20.  Consumer spending rose 2% at an annualized rate in Q3 and is expected to grow closer to 5% this year, having peaked in Q2 at 6.7%.  Industrial production fell in August and September but is expected to have snapped back in October as the recovery from Hurricane Ida took hold.  The median forecast (Bloomberg survey) is for a 0.8% gain.  The rig count rose by 23, matching the most since January.  According to the recent jobs report, manufacturing employment rose by 60k in October.  Few have noted it, but if confirmed, it would be the largest monthly increase since August 1998.  That said, the Markit manufacturing PMI and ISM manufacturing index fell.   The Biden administration's $1.75 trillion "Build Back Better" bill is in the balance.  Some argue that the surge in inflation has been spurred by the government's spending and transfer payments and are opposed to new large-scale spending.  However, the bill's defenders argue that it has been scaled back, and much of the expenditures will be covered by new revenue.  The non-partisan Congressional Budget Office, the arbiter of such scoring, will publish its full cost estimate on Friday.  Meanwhile, expectations that an announcement will be made shortly on the Fed's leadership were fanned by comments from the Senate Banking Chairman (Brown), who said he was told a decision was "imminent."  It was widely expected before the end of next week.  Reports suggest that Treasury Secretary Yellen has opined that Brainard would be a credible pick, but she is recommending Powell, emphasizing continuity and avoiding the politicization of the post.   Meanwhile, the Fed's Bullard, Barkin, and Daly speak today.  Note that Daly was interviewed for a Board of Governor slot but appears to have turned it down. Canada reports October housing starts today ahead of the October CPI figures tomorrow.  The headline rate is expected to approach 5% though the underlying measures are lower.  The market is positioned for a hike in the March-April period next year.  Recall that the jump in US CPI sent the greenback up from just below CAD1.2400 to slightly above CAD1.2600 at the end of last week.  It reversed lower before the weekend and slipped briefly below CAD1.2500 today, roughly the (50%) retracement of the CPI-inspired gains, before rebounding. Initial resistance is seen in the CAD1.2535-CAD1.2560 area.  Mexico's economic diary is light, and the movement of the peso may reflect broader forces.  For the past three sessions, the dollar has been consolidating in a broad range against the peso (~MXN20.45-MXN20.72). Within that range, initial support may be in the MXN20.55 area.   Disclaimer
The Elephant in the Room

The Elephant in the Room

Monica Kingsley Monica Kingsley 16.11.2021 15:42
S&P 500 is starting to run into a setback even if VIX doesn‘t reveal that fully. Credit markets going from weakness to weakness spells more short-term woes for stocks – a shallow downswing that feels (and is) a trading range before the surge to new ATHs continues, is likely to materialize in the second half of Nov. We may be in its opening stages – as written yesterday: (…) Can stocks still continue rallying? They look to be setting up for one more downleg of the immediately predecing magnitude, which means not a huge setback. The medium-term path of least resistance remains up – the Fed is still printing a huge amount of money on a monthly basis, and it remains questionable how far in tapering plans execution they would actually get – I see the risks to the real economy coupled with persistently high inflation as rising since the 2Q 2022 (if not since Mar already, but most pronounced in 2H 2022). Stocks are still set for a good Dec and beyond performance. The elephant in the room is (the absence of) fresh debt issuance lifting up the dollar, making it like rising yields more. Not only that these are failing to push value higher, but the tech resilience highlights the defensive nature of S&P 500 performance. Crucially though, precious metals are seeing through the (misleading dollar strength) fog, and are sharply rising regardless. Make no mistake, with the taper reaction, we have seen what I had been expecting (or even better given that I prefer reasonably conservative stance without drumming up expectations either way) – I had been telling you that the hardest times for the metals are before taper. And the magnitude and pace of their upswing casts a verdict on the Fed‘s (likely in)ability to follow through with the taper execution, let alone initiate the rate raising cycle without being laughed off the stage as markets force these regardless of the central planners. The galloping inflation expectations are sending a very clear message: (…) if you look at the great white metal‘s performance, it‘s the result of inflation coming back to the fore as the Fed itself is now admitting to high inflation rates through the mid-2022, putting blame on supply chain bottlenecks. Oh, sure. The real trouble is that inflation expectations are starting to get anchored – people are expecting these rates to be not going away any time soon. Precious metals are going to do great… Copper is awakening too, and commodities including oil would be doing marvels. TLT downswings would be less and less conducive to growth, so if you‘re still heavily in tech, I would start eyeing more value. Let me add the Russell 2000 and emerging markets to the well performing medium-term mix. Let‘s move right into the charts (all courtesy of www.stockcharts.com). S&P 500 and Nasdaq Outlook S&P 500 bulls didn‘t make it too far before running into another (mild, again I say) setback – so far, a sideways one. Credit Markets Credit markets renewed their march lower, and unless they turn, the S&P 500 upswings would remain on shaky ground (if and when they materialize). Gold, Silver and Miners Gold and silver remain on a tear, and even for the breather to unfold, it takes quite an effort. The bears clearly can‘t hope for a trend change. Crude Oil Crude oil bulls keep defending the $80 level, with $78 serving as the next stop if need be – these consecutive lower knots keep favoring the bulls, just when the right catalyst arrives. Whether that takes one or two days or more, is irrelevant – it will happen. Copper Copper ran into an unexpected setback, which however doesn‘t change the outlook thanks to its relatively low volume. I‘m still looking for much higher red metal‘s prices. Bitcoin and Ethereum Bitcoin and Ethereum are seeing an emerging crack in the dam that doesn‘t tie too well to developments elsewhere. The bulls should step in, otherwise this yellow flag risks turning into a red one. Summary S&P 500 bulls are now holding only the medium-term upper hand as the rally is entering a consolidation phase. Anyway, this trading range would be followed by fresh ATHs, which would power stocks even higher in early 2022. Precious metals have quite some catching up to do, and the long post Aug 2020 consolidation is over. Copper, base metals, oil and agrifoods are likely to keep doing great as inflation expectations show that inflation truly hasn‘t been tamed in the least. Thank you for having read today‘s free analysis, which is available in full at my homesite. There, you can subscribe to the free Monica‘s Insider Club, which features real-time trade calls and intraday updates for all the five publications: Stock Trading Signals, Gold Trading Signals, Oil Trading Signals, Copper Trading Signals and Bitcoin Trading Signals.
Gold – USD Relationship Status: It’s Complicated

Gold – USD Relationship Status: It’s Complicated

Przemysław Radomski Przemysław Radomski 17.11.2021 13:27
  If the dollar goes through a corrective downswing, it’s more bullish for gold? Not if a decline in the euro caused gold to rise in the first place. Another day, another new yearly high for the USD Index. The U.S. currency soars just like it has since the beginning of the year, in tune with what I said at that time, (and against what almost everyone else said about its outlook). The rally accelerated recently, with the USD Index soaring by 0.78 this week – and it’s only Wednesday today. So, surely that’s bullish for the USD Index? - one might ask. No. “Bullish” or “bearish” relates to the future, not to the past. In fact, the rally in the USD Index might need a breather as all markets – no matter how bullish or bearish the situation is in them – can’t rally or decline in a straight line, without periodic corrections. The USD Index, gold, silver, mining stocks, and practically all the other markets are no exception from this rule. Even the real estate prices don’t increase over the long run without periodic downturns. As you can see on the above chart, the U.S currency index soared to almost 96 yesterday and it’s after an almost straight-up rally. This rally caused the RSI indicator to move above 70, and this has been a quite precise short-term sell signal this year. In fact, in all cases when we saw it, some kind of short-term correction followed. Based on the size of the current rally, it seems that the current situation is most similar to what we saw in early March and in late June. That’s when we saw short-term declines that took the USDX approximately a full index point lower. In the current case, it could mean a decline back to 95. This would be a perfectly natural thing for the USD Index to do right now, given that the previous resistance (which now serves as support) is located slightly below 95. The support is provided by the late-2020 high and the March 2020 low (not visible on the above chart). So, surely this corrective downswing in the USD Index would cause an even bigger rally in the precious metals sector, right? That’s where things get complicated. You see, the biggest (over 50%) part of the USD Index (which is a weighted average) is the EUR/USD currency pair. Let’s take a look at it. The Euro Index moved sharply lower last week and just like the RSI based on the USD Index flashed a sell signal, the RSI based on the Euro Index flashed a buy signal. Also, the Euro Index just moved to the lower border of its declining trade channel, which is likely to indicate some kind of rebound. Why am I discussing the euro here? Because that’s what’s complicated about the current USD-gold link. The euro recently declined and the prices of silver and gold recently rallied shortly after dovish comments from the eurozone. Namely, while the expansionary nature of fiscal and monetary decisions in the U.S. might be after its peak (with the infrastructure bill signed even despite high inflation numbers), the eurozone is far from limiting its expansionary (i.e., inflationary) policies, and it was just made clear recently. That was bearish for the euro and bullish for the gold price – as more money (euros in this case) would be chasing the same amount of physical gold bars. The point here is that it might have been the decline in the value of the European currency that caused gold to rally, and it had little to do with what happened in the USD Index. Don’t get me wrong, most of the time, the gold-USD link is stable and negative. In some cases, gold shows strength or weakness by refusing to move in tune (and precisely: again) with the U.S. dollar’s movement. But in this case, it seems that it’s not about the U.S. dollar at all (or mostly), but rather about what happened in the Eurozone and euro recently. I marked the recent decline in the euro and the rally in gold with a golden rectangle. The usual link between gold-USD would have one assume that lower USD Index values (due to higher EUR/USD values) would trigger a rally in gold. However, given how things worked and the fact that we saw/heard the news coming from the Eurozone, it seems like this “temporary” and “bearish for the PMs” interpretation would actually prevail. It could also be the case that we see some kind of mixed reply from the precious metals sector when the USD Index and the Euro Index correct. The PMs could for example fall only after the situation regarding the gold-USD link gets back to normal – that is perhaps after both currencies correct. Thank you for reading our free analysis today. Please note that the above is just a small fraction of today’s all-encompassing Gold & Silver Trading Alert. The latter includes multiple premium details such as the targets for gold and mining stocks that could be reached in the next few weeks. If you’d like to read those premium details, we have good news for you. As soon as you sign up for our free gold newsletter, you’ll get a free 7-day no-obligation trial access to our premium Gold & Silver Trading Alerts. It’s really free – sign up today. Przemyslaw Radomski, CFAFounder, Editor-in-chiefSunshine Profits: Effective Investment through Diligence & Care * * * * * All essays, research and information found above represent analyses and opinions of Przemyslaw Radomski, CFA and Sunshine Profits' associates only. As such, it may prove wrong and be subject to change without notice. Opinions and analyses are based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are deemed to be accurate, Przemyslaw Radomski, CFA and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Radomski is not a Registered Securities Advisor. By reading Przemyslaw Radomski's, CFA reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Przemyslaw Radomski, CFA, Sunshine Profits' employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.
European Gas Jumps, while the Euro and Yen Slump

European Gas Jumps, while the Euro and Yen Slump

Marc Chandler Marc Chandler 17.11.2021 15:31
Overview: The prospects that the 6.2% CPI will prompt the Fed to move quicker continue to underpin the dollar.  The euro fell to about $1.1265, its lowest level since last September, and the Japanese yen slumped to a fresh four-year low.  The JP Morgan Emerging Market Currency Index tumbled 1% yesterday, the largest decline since February.  A more stable tone is evident in Europe, as the euro has recovered above $1.13, and the JP Morgan Index is paring yesterday's losses.  The dollar is holding just below JPY115.00.  Asia Pacific equities did not fare well.  Only China and Taiwan markets, among the large regional markets, managed to rise.  Europe's Stoxx 600 is edging higher for the sixth consecutive session.  Recall it has fallen only once since October 27.  US futures are narrowly mixed. The bond market is quiet, with the US 10-year hovering around 1.62%.  European yields are a little softer.  Gold slid below $1850 yesterday but has snapped back today to test the $1860 area.  Crude oil is heavy, with the January WTI contract around $78.80, unable to resurface above $80 amid talk that the US and China may coordinate the release of strategic holdings.  Gas prices are up another 7% in Europe today after surging 16% yesterday and 9% on Monday. Due to "unplanned maintenance," a Belarus pipeline to Poland has been shut down, which may last three days.  Iron ore prices are giving back around half of yesterday's 1.2% gain, for the third loss in four sessions.  Copper is off for a third session, losing after dropping 2.2% in the past two sessions.   Asia Pacific Japan's October trade data disappointed.  Exports and imports were weaker than expected, and this resulted in a smaller deficit. Exports slowed to 9.4% year-over-year, down from 13% in September, defying expectations for a small double-digit increase.  Imports were up 26.7% from a year ago, off the heady 38.2% pace seen in September and below the 31.8% projected.  The resulting trade deficit of JPY67.4 bln was about a fifth of what economists anticipated (Bloomberg survey).  It is the third consecutive monthly deficit.  In the first seven months of the year, Japan recorded two deficits.  A year ago, Japan recorded a JPY840 bln surplus.   Reports suggesting that the possibility that the US and China coordinate the drawdown of strategic oil reserves are light on details, but the suggestion itself is enough to weigh on prices.  Still, the International Energy Agency yesterday echoed the broad assessment of America's EIA in anticipating that the tightness of the oil market could ease shortly.   Increased output in the US, Saudi Arabia, and Russia may account for half of the 1.5 mln barrel a day anticipated increase in supply. Nevertheless, the acting head of the EIA warned tapping the US Strategic Petroleum Reserve would have a short-term impact, for which other dynamics would quickly overshadow it.  Separately, note that the API estimated a slight build of 655k barrels in US stocks this past week, while gasoline inventories fell.   In other regional developments, Australia's wage price index rose a modest 0.6% in Q3 for a year-over-year pace of 2.2%.  This was in line with expectations.  It would seem to support the RBA's argument that it need not be in a hurry to raise rates.  The June 2022 T-bill yield settled last month at 69 bp and is now near 40 bp.  Separately, China appears to be allowing "high quality" property developments to return to the asset-backed securities market to raise capital after a three-month hiatus. Lastly, reports suggest Beijing is moving ahead with its import substitution plans to reduce dependency on foreign technology.    The dollar approached JPY115.00, where an option for almost $610 mln expires today.  The dollar has not traded above there since March 2017.  Since the dollar broke above JPY112.00, we have suggested that JPY114.50-JPY115.00 may mark the top of the new range.  While this has worked for the past month, the risk is on the upside.  A convincing break of around JPY115.50 would target the JPY118.00 area.  Initial support is now seen near JPY114.70.  Note that the upper Bollinger Band is slightly below JPY114.80.  The Australian dollar is trading near its lowest level since October 6, near $0.7265.  It is holding above a trendline connecting the August and September lows, which is found near $0.7250 today, but little stands in the way of a test on the $0.7200 in the coming days.  An option for a little more than A$800 mln at $0.7300 is set to expire today.  After posting a key upside reversal yesterday, the US dollar consolidated against the Chinese yuan today, and no follow-through buying materialized.  Instead, it seemed that the local market took advantage of the pop above CNY6.39 to sell the greenback, which is straddling CNY6.38 in late dealings.  The reference rate was set at CNY6.3935, just below the bank projections (CNY6.3936, according to the median in the Bloomberg survey).  We note that the yuan is also at its best level since 2015 against the trade-weighted CFETS basket the PBOC uses.   Europe On the heels of a strong employment report, the UK reported a larger than expected increase in the October CPI.  The preferred measure, which includes owner-equivalent housing costs, jumped to 3.8% from 2.9%.  The older measure rose to 4.2% from 3.1%.  On the month, consumer prices rose 1.1% rather than the 0.8% economists forecast (Bloomberg median). Flattered by increasing gas and electricity prices.  Core prices rose 3.4% year-over-year, accelerating from 2.9% in September and defying forecasts for a 3.1% pace.  Separately, producer prices, both input and output, also rose more than expected.  Lastly, UK house prices rose 11.8% year-over-year in September, up from a revised 10.2% in August.  The recent peak was 12.6% in June, which was the highest since 2004.    European gas prices are at one-month highs.  Belarus has stopped its pipeline to Poland, claiming unplanned maintenance issues, while the border tensions and earlier threats raise suspicions of a political move.  Separately, the German regulator suspended the certification process of the controversial Nord Stream 2 pipeline as corporate assets are rearranged.  Separately, a German court yesterday dismissed an environmental challenge to the pipeline.  Lastly, we note that the virus flare-up continues in Europe, and Germany and the Czech Republic reported a record number of cases. The euro surpassed our $1.1290 Fibonacci target and did not find bids until the $1.1265 area in Asian turnover.  The single currency has been in a tight range in Europe, holding above $1.1300.  Initial resistance is seen around $1.1330 now.  A move above yesterday's high, near $1.1385, is needed to lift the tone. We suspect the near big target is closer to $1.10.  Sterling slipped to a three-day low, slightly below $1.34, but shot up to the session high near $1.3375 on the inflation news. However, the momentum was not sustained, and sterling is little changed in late morning European turnover near $1.3430. The euro briefly traded below GBP0.8400 for the first time since March 2020 but snapped back.  An 840 mln euro option at GBP0.8445 expires today and another for about 620 mln euros at GBP0.8450 expires tomorrow.   America US retail sales surged last month, and the 1.7% rise was the best since March.  After slowing in Q3, consumption is off to a strong start in Q4.  Industrial production was also much stronger than expected, rising 1.6% compared with the 0.9% gain anticipated by economists (median, Bloomberg survey).  The US reports October housing starts today, and they are expected to have recovered from the 1.6% decline seen in September. Housing starts fell in Q3 but are seen rising in Q4, encouraged by an easing of some supply chain issues.   In fact, on several fronts, there are preliminary signs that the disruptions are dissipating.  Some reports suggest that the shortage of semiconductor chips may be passed, and US auto sales rose in October for the first time in six months.  Both the EIA and IEA have forecast a more balanced oil market, and some measures of shipping costs have moderated. The Los Angeles port has reportedly reduced the number of empty containers by around a quarter this month as six new sweeper ships have been brought into operation.  In addition, we note that the re-opening of US borders means immigrant workers may begin returning.  There is still much debate, of course, on the extent that the elevated price pressures are the result of supply chain disruptions.  A report by the Bank for International Settlements estimates that without the supply problems, US inflation would be closer to 2.5% and eurozone inflation near 1.5%. President Biden is expected to make his Fed announcements in the next few days, according to reports, but it could slip into early next week.  Powell is still the favorite, and he has Treasury Secretary Yellen's in support.  Yellen warns that action is needed soon on the debt ceiling.  Her efforts may be exhausted early next month.  Lastly, San Francisco Fed President Daly opined she was more bullish on the economy than a year ago.  This seems backward to us.  A year ago, the vaccine was announced, and fiscal stimulus was anticipated after the US election. Going forward, there will be less monetary and fiscal stimulus.  The pent-up demand ("excess savings") is projected to be exhausted by early next year, and, as we have noted, the doubling of the price of oil has preceded the last three recessions in the US. We suspect that there is sufficient stimulus and need to rebuild inventories to sustain reasonably strong growth for the next few quarters, but by the second half of next year, sub-3% growth will return as the norm.  Canada reports October CPI figures today.  The headline is likely to rise to 4.7% from 4.4% in September (Bloomberg median).  However, the base effect points to a further rise this month and December, when in 2020, the CPI rose 0.1% and fell 0.2%, respectively.   The underlying core rates are also increasing.  The Deputy Governor of the Bank of Canada cautioned about the high degree of uncertainty around potential structural shifts in the labor market that make it challenging to gauge full employment with any degree of confidence.  He pointed to economic areas that still show slack.  The market is expecting the first hike next March/April.  Note that tomorrow, the "Three Amigos" (Biden, Trudeau, and AMLO) meet in the US amid concern that the US "Build Back Better" has strong nationalistic elements, including for electric vehicles.     The US dollar posted an outside up day against the Canadian dollar yesterday, and follow-through buying has lifted it to around CAD1.2585.  At the end of last week, the high set was slightly above CAD1.2600, which close approximates the (50%) retracement of the greenback's decline since the September 20 high near CAD1.29.  The next retracement (61.8%) is found by CAD1.2665.  Still, we expect that a firm CPI report will lend the Loonie some support.  The session low, set in late Asia, near CAD1.2540, may be protected a CAD1.2545 option for $600 mln that expires today.  The greenback is consolidating against the Mexican peso today after rallying yesterday from about MXN20.56 to nearly MXN20.85.  The high from earlier this month was near MXN20.98.  It has not been above MXN21.00 since March.  Initial support is seen around MXN20.60.   Disclaimer
COT Currency Speculator Sentiment rising for Euro & British Pound Sterling

Forex: US dollar takes the lead after the jump in inflation

Capital Capital 17.11.2021 16:01
Forex: US dollar takes the lead after the jump in inflation The US dollar rallied against all other currencies on Thursday, after US Consumer Price Index (CPI) rose more than expected in October, reviving speculations about faster interest rate hikes next year.  The US Dollar index (DXY) hovers around new 52-week highs at 95.00 level, gaining 0.8% since the CPI release. US Treasury yields also rose after the inflation surprise, with a 7 basis points (bps) increase in the 2-year yield and 9 bps on the 10-year benchmark.   EUR/USD and GBP/USD both slipped by nearly 0.7% from yesterday’s midday London trading, while they edged down around 0.1% from previous close.   The Swiss franc (CHF) and the Japanese yen (JPY) have lost 0.7% of their value against the greenback since the CPI was out, while the Aussie (AUD) and the Kiwi (NZD) weakened 1.2% and 1.9% respectively.  Elsewhere, emerging market currencies sold-off after the inflation print, with the South African rand (ZAR) and the Mexican peso (MXN) both down 1.4% against the dollar, while the Turkish lira (TRY)  hit new all-time lows by weakening 1% versus the greenback.  US dollar As of writing, the US Dollar index (DXY) was last at 94.98 level, up 0.21% on the day. In October, US inflation was substantially higher than market forecasts and not only confined to COVID-related items but broad based across the main items in the index, as the cost of services is also rising. Core CPI inflation, which excludes food and energy prices, increased by 0.6% points to 4.6% on the year, well above consensus (4.3%). Core inflation in the US reached the highest level since 1991. Headline inflation rose by 0.8% points to 6.2% on the year, hitting the highest level since 1990 and again above expectations of a 5.8% year-on-year rise. Markets are now pricing in a 71% probability, up from 56.5% yesterday, Fed starts hiking interest rate in June next year. DXY technical levels: 52-week high: 95.03 52-week low: 89.212 50-day moving average: 93.59 200-day moving average: 92.08 14-day Relative Strength Index (RSI): 64.83 Euro As of writing, the euro is down 0.15% from previous close versus the US dollar (EUR/USD) and flat against the British pound (EUR/GBP). Yesterday, ECB Governing Council member Robert Holzmann said that asset purchases (QE) could end next in September or December next year, depending on the inflation dynamics. Today, ECB Chief Economist Philip Lane will speak at the 2nd joint ECB-FED New York conference, while ECB executive board member Isabel Schnabel will take part at a Q&A organized by Ludwig-Maximilians-Universität. EUR/USD technical levels: 52-week high: 1.2349 52-week low: 1.1455 50-day moving average: 1.1662 200-day moving average: 1.1882 14-day Relative Strength Index (RSI): 35.72 British pound GBP/USD is down 0.15% to 1.3532 as of writing. On the data front, UK gross domestic product (GDP) preliminary figure came in at 6.6% year-on-year in Q3 (1.3% quarter-over-quarter), disappointing market expectations by 0.2%. Manufacturing production increased 2.8% year-on-year in September, missing market forecast of 3.1%, while business investment was up 0.8% quarter-over-market in Q3, disappointing market expectations of a 2.6% increase. GBP/USD technical levels. 52-week high: 1.4248 52-week low: 1.3091 50-day moving average: 1.3684 200-day moving average: 1.3845 14-day Relative Strength Index (RSI): 33.39
Euro Bounces Back, but The Turkish Lira Remains Unloved

Euro Bounces Back, but The Turkish Lira Remains Unloved

Marc Chandler Marc Chandler 18.11.2021 15:17
Overview:  The US dollar's sharp upside momentum stalled yesterday near JPY115 and after the euro met (and surpassed) a key retracement level slightly below $1.1300.  Led by the Antipodean currencies today, the greenback is mostly trading with a heavier bias.  Among the majors, helped by a steadying of US yields, the yen is soft.  In the emerging market space, the Turkish lira continues its headlong plunge while the yuan softened and the Mexican peso is off.  Hungary's central bank surprised with a 70 bp hike in the one-week deposit rate.  The JP Morgan Emerging Market Currency Index is posting a small gain through the European morning.  Disappointing tech results in China (Baidu and Bilibili) weighed on Chinese shares, but most markets in the region fell but Australia and Taiwan.  Europe's Stoxx 600 is struggling to extend the six-day advance.  US futures are also a little firmer.  After yesterday's four basis point pullback, the US 10-year yield is little changed near 1.58%.  European yields are 1-2 bp lower.  Gold remains within Tuesday's range (~$1850-$1877), but the moment seen earlier last week has faded, and the yellow metal is trading choppily in a consolidative phase.  The prospect of a coordinated sale of oil after China's announced it would tap its reserves for the second time saw the January WTI contract fall to $76.45, its lowest level since early October. Still, the price has stabilized in the European morning around $77 a barrel.  The benchmark European natural gas contract (Netherlands) has extended yesterday's pullback.  It settled a little below 75 euros last week, and after two days of declines, it is above 92 euros.  Iron ore is also falling for a second session and is now lower on the week.  Note that it settled October a little above $104 and is now around $86.40. Copper is lower for the fourth consecutive session.  It is trading around $424, off $20.5 this week.   Asia Pacific  Japan is expected to unveil the much-awaited supplemental budget tomorrow.  Prime Minister Kishida will get one bite of the proverbial apple, and he is expected to go big.  Talk of the size of the overall package has risen in recent days.  The Nikkei seemed to suggest a JPY79 trillion (~$690 bln) effort, while others report something on the magnitude of JPY56 trillion.  Still, it is recognized that part of the budget will include funds that were earmarked under previous budgets, which have not been spent.  The clear water is seen around JPY32 trillion.  Japan is one of the few countries that will provide new fiscal support.   New Zealand's central bank meets next week.  It is widely expected to hike rates for the second time in the cycle.   The swaps market has 200 bp of tightening priced in for the next 12 months.  The cash rate stands at 50 bp.  Earlier today, the central bank reported that the two-year inflation expectations (business survey)  rose to 2.96% in Q4 from 2.27% in Q3.  It is the highest in a decade.  The one-year expectation rose to 3.7% from 3.02%.  Still, with other countries slower to raise rates, a 50 bp move may not be necessary.  The Kiwi rose almost 4% last month and has given back nearly half so far in November.  Separately, the Philippines and Indonesia central banks met and left rates steady as expected.   The dollar posted a key reversal against the yen yesterday.  It made a new high for the move, a few pips below JPY115.00, and proceeded to sell-off and close (slightly) below Tuesday's low.  However, follow-through selling has been limited, and the greenback is trading firmly but may be absorbing sales related to the $1.34 bln in options in the JPY114.20-JPY114.25 area that expire today.  The Australian dollar initially extended its losses to almost $0.7250, where a A$575 mln option expires today. However, since early in the Asian session, it has posted corrective upticks and looks set to challenge yesterday's high and five-day moving average a little above $0.7300.   The Chinese yuan appears to have begun consolidating.  It remains in the range set on Tuesday that saw the dollar trade roughly between CNY6.3670 and CNY6.3965.  The small gain is the third this week.  The PBOC fix was at CNY6.3803, a bit firmer compared with expectations (CNY6.3786 in the Bloomberg survey) than seen recently.  Note that there is a $1 bln option at CNY6.3830 that expires today.   Europe The auto industry in Europe remained under pressure last month, though the US reported its first increase in sales in six months.  New car registration in Europe, including the UK, is a proxy for sales.  They tumbled by slightly more than 30% year-over-year in October.  This is considerably weaker than expected and is the poorest since May 2020.  The shortage of semiconductors is the likely culprit, and there are some signs of improvement.  The EC will propose modest tweaks in rules about how funds outside of its borders (UK) can be managed while avoiding more dramatic changes.   Draft proposals call for at least two full-time senior managers in the EU and for regulators to be notified when most of their assets are managed outside the EU.  These seem quite minor and unlikely to disrupt the UK fund business.  Earlier this month, the EU Commissioner for Financial Services indicated that temporary waivers would be granted to allow EU banks and money managers to clear trades in the UK. Meanwhile, the dispute over fishing appears to be worsening (Denmark complaining, not just France), and the UK continues to threaten to invoke Article 16.  Former Prime Minister Blair says he will propose a solution to the dispute over the Northern Ireland Protocol in the coming days.  Hungary delivered a 30 bp hike in the base rate earlier this week, which now stands at 2.10%.  It warned that it could make a separate decision on its one-week deposit rate.  It did so today, hiking it 70 bp to 2.50%.  It is a hawkish move that sent the forint higher.  Separately, as widely expected, the Central Bank of the Republic of Turkey cut the one-week repo rate 100 bps to 15%. As a result, the lira is weaker for the eighth consecutive session.  The lira's weakness not only fuels inflation but also will challenge companies and banks with foreign exchange exposure.  The dollar finished last month near TRY9.60 and after the rate hike, pushed above TRY10.97 before stabilizing.   The euro overshot the (61.8%) retracement target of the rally that took it from near $1.0640 in March 2020 to high on January 6, around $1.2350.  That retracement target was about $1.1290, and the euro fell to around $1.1265 yesterday. It recovered to new session highs early in North America yesterday (~$1.1330), leaving bullish hammer candlestick, and follow-through buying lifted it to $1.1345 today.  The combination of higher inflation and stronger retail sales this week have helped sterling to recover.  It had traded near $1.3350 at the end of last week and has barely traded below $1.34 this week.  Indeed, sterling is rising today for the fifth consecutive session, the longest advance in nearly seven months.  It poked above $1.35, where an option for about GBP345 mln will expire today.  A convincing move above $1.3515 could signal another cent advance.  The euro slipped to below GBP0.8385 today before recovering.  It is testing the GBP0.8400, which holds options for 1.1 bln euros that also expires today.   America Leave aside the gaffes by President Biden over Taiwan.  Bloomberg counts four such verbal blunders that have required official walk back or explanation or clarification.  Reports indicate that Biden probed Xi about oil sales.  China has intervened in the commodities (industrial metals) and crude oil market recently.  Today it indicated it will provide more oil from its strategic reserves.  The September is action 7.1 mln barrels, according to reports, and privately sold more.  It is unclear whether today's sales were planned or grew out of the "virtual summit."  Still, it puts the ball back into the US court.  If the US does not sell or lend oil from its strategic reserves, it will look bad after China's move.  On the other hand, its own agency (EIA) projects that it may not be needed as oil will be in oversupply shortly.  Moreover, the pain for consumers is coming from gasoline prices, not oil per se.  Drawing down strategic reserves may not help the gasoline market.  Apparently, Japan has been approached by the US about coordinating the release of oil, though Europe was not.  The US reports weekly initial jobless claims today.  They have fallen for six consecutive weeks, and at 267k, it is the lowest since the pandemic struck.   That said, at the end of 2019, there were below 220k.  The Philadelphia and Kansas City Feds publish their November survey results.  Both surprised last month, with the former on the downside and the latter on the upside.  This time it may be the other way around, with the Philly survey showing strength and the KC survey softer.  Canada reports its monthly portfolio flow data ahead of tomorrow's retail sales report.  Mexico and Brazil have light economic calendars.   Canada's Prime Minister Trudeau and Mexico's President AMLO visit Washington today for the North America's Leaders Summit.  There is tension among the "three amigos."  The Build Back Better US initiative contains several elements that favor American producers. A key one is that substantial tax break for Americans buying electric vehicles if they are made in the US.  This would seem to put Canada and Mexico at a disadvantage, given the integration of the auto sector on a continental basis. Mexico and Canada are also concerned that the Biden Administration's interpretation of the domestic content requirement in the USMCA treaty is also narrow and puts them at a disadvantage.   Canada is also concerned about the pipelines after Biden nixed the Keystone Pipeline in one of his first acts in office, and the Line 5 pipeline is being challenged by Michigan.  The US, and to a less extent, Canada, is worried about the efforts by AMLO to increase the power of the state sector energy companies (oil and electricity), deterring private sector efforts.  The US may try pressing against this on environmental grounds.  Climate and immigration are reportedly on the top of today's agenda.  The US dollar reversed higher against the Canadian dollar on Tuesday, posting an outside up day.  Follow-through buying yesterday lifted the greenback a little above CAD1.2620.  It ticked ever so slightly higher today but has come back offered.  Support is seen in the CAD1.2555-CAD1.2575 area.  The $1.04 bln option at CAD1.25 that expires today is too far away to be impactful. Meanwhile, the US dollar remains within Tuesday's range against the Mexican peso (~MXN20.56-MXN20.85).  This range looks set to hold today.   Disclaimer
Time to take off some risk

Time to take off some risk

Saxo Bank Saxo Bank 18.11.2021 16:05
Summary:  Today we issue another general note of caution on the status of global equity markets, which look stretched even if there are rational (real yields) and especially seasonal narratives in support of recent developments. Elsewhere, we dive into Amazon's broadside against Visa, whether that company and Mastercard could see eventual pressure on margins, other key equity stories and earnings, the dire potential supply situation for European natural gas, the very weak euro and a weak German 30-year bond auction, US treasuries and more. Today's pod features Peter Garnry on equities, Althea Spinozzi on fixed income and John J. Hardy hosting and on FX. Listen to today’s podcast and have a look at today’s slide deck. Follow Saxo Market Call on your favorite podcast app: Apple Spotify Podbean Sticher If you are not able to find the podcast on your favourite podcast app when searching for Saxo Market Call, please drop us an email at marketcall@saxobank.com and we'll look into it. Questions and comments, please! We invite you to send any questions and comments you might have for the podcast team. Whether feedback on the show's content, questions about specific topics, or requests for more focus on a given market area in an upcoming podcast, please get in touch at marketcall@saxobank.com.
Monthly Macro Outlook: The transitory narrative continues to fall apart

Monthly Macro Outlook: The transitory narrative continues to fall apart

Christopher Dembik Christopher Dembik 19.11.2021 09:25
Summary:  The economist consensus anticipates inflation will start falling from early next year. We disagree. We consider the market to be too complacent regarding upside risks to the inflation outlook. The great awakening of workers and the steady rent increase (for the United States) are two of the factors which are likely to maintain inflation uncomfortably high into 2022, in our view. October CPI figures released earlier this week confirm that inflationary pressures may last longer than initially expected. Inflation reached levels which have not been seen for decades in the United Kingdom (+4.2% YoY), in the eurozone (+4.1% YoY) and in Canada (+4.7% YoY). In Canada, the jump in inflation is the strongest recorded in 18 years. For now, investors are confident. They believe the U.S. Federal Reserve and European Central Bank’s narrative that inflation will start to fall from early next year. This is far from certain, in our view. From supply chain bottlenecks to energy prices, everything suggests that inflationary pressures are far from over. Expect energy prices to continue increasing as temperatures will drop in Europe from next week onwards. This will weigh on November CPI data which will be released next month. The peak in inflation has not been reached. We fear investors are too complacent regarding upside risks to the inflation outlook. Every economic theory says inflation will be above 2% next year : ·         The Phillips curve is alive and well : workers are demanding higher salaries, amongst other advantages and their expectations are rising. ·         Monetarism : the global economy is characterized by large deposits, desire to spend and to convert cash into real assets. ·         Commitment approach : the U.S. Federal Reserve (Fed) and the European Central bank (ECB) have a dovish bias. This is confirmed by their new inflation strategy (symmetric 2% inflation target over the medium term for the ECB and inflation of 2% over the longer run for the Fed). ·         Fiscal approach : high public debt and fiscal dominance (central banks need to remain dominant market players in the bond market to avoid a sharp increase in interest rates). ·         Supply-side approach : supply bottlenecks due to the zero Covid policy in China and central banks’ trade off higher inflation for a speedier economic recovery (the ECB especially). ·         Green transition : this is basically a tax on consumers. What has changed ? The wage-price spiral has started. In countries where the labor market is tight, workers are asking for higher salaries. In the United States, the manufacturer John Deere increased salaries significantly : +10% this year and +5% in 2023 and in 2025. It also agreed to a 3% bonus on even years to all employees, for instance. But this is happening in countries where the unemployment rate is high too. In France, the unemployment rate is falling. But it remains comparatively elevated at 7.6% in the third quarter. Earlier this week, the French Minister of Economy, Bruno Le Maire, called for higher salaries in the hospitality industry. A survey by the public investment bank BPI and the pro-business institute Rexecode show that 26% of small and medium companies are forced to propose higher salaries to find employees. Those which are reluctant choose to reduce business activity. The pandemic has fueled a great awakening of workers, in our view. They are demanding more : better job conditions, higher wages, more flexibility and purpose from work. This is more noticeable in countries facing labor shortage. But it is also visible in all the other developed economies to a variable extent.   U.S. steady rent increase is a game-changer. Until now, supply bottlenecks were the main driver behind the jump in prices. Now, housing costs (which represent about a third of living cost) and prices in the service sector are accelerating too. The rental market is tight, with low vacancy rates and a limited stock of available rentals. Expect rents to move upward in the coming months. According to official figures, owner’s equivalent rent, a measure of what homeowners believe their properties would rent for, rose 3.1% YoY in October. This certainly underestimates the real evolution of rents. Based on data reported by real estate agents at national level, the increase is between 7% and 15% YoY. All in all, this reinforces the view that inflationary pressures are proving more persistent than expected. The moment of truth : Expect investors not to question much the official narrative that inflation is transitory, for now. But if inflation does not decrease from 2022 onwards, investors will have to adjust their portfolio to an environment of more persistent inflation than initially anticipated. This may lead to market turmoil. In the interim, enjoy the Santa Claus rally which has started very early this year. The new inflation regime in the United States
Covid Wave Knocks Euro Down and to new 6-year Lows Against the Swiss Franc

Covid Wave Knocks Euro Down and to new 6-year Lows Against the Swiss Franc

Marc Chandler Marc Chandler 19.11.2021 13:58
Overview:  Concerns about the virus surge in Europe cut short the euro's bounce and sent it back below $1.1300 and are also weighing on central European currencies, including the Hungarian forint, despite yesterday's aggressive hike of the one-week deposit rate.  Austria has reintroduced a hard 20-day lockdown.  Germany's health minister warned that the situation deteriorated and vaccines were not enough to break the wave.  He was explicit that a lockdown cannot be ruled out.  The US dollar is trading broadly higher.  Only the yen is resilient on the day, but sterling is the only major currency that has edged higher this week.  The Scandis and euro are off more than 1%.  Speculation that Turkey may announce measures over the weekend to stabilize the lira may be helping to deter new sales today after yesterday's rout.  In the nine-day drop through today, it is depreciated by almost 15%.  The JP Morgan Emerging Market Currency Index is off for the fourth consecutive session to bring this week's loss to more than 2%, the most in five months.  Equities do not know of the consternation in the foreign exchange market.  Disappointing Alibaba results weighed on the Hang Seng (~-1%), while most other large regional bourses but Taiwan and India closed the week on an up note.   Europe's Stoxx 600 snapped a six-day advance yesterday. It was only the second loss since October.  It began firmer today but has reversed lower, putting at risk the six-week rally.   US futures are mixed, with the NASDAQ outperforming.  Bond markets are in rally mode as well.   The US 10-year yield is off three basis points to approach the week's low near 1.53%.  European bonds are off mostly 3-5 basis points, even in the UK, where retail sales surprised on the upside.  Gold is steady, finding support near $1850.  Oil initially extended yesterday's recovery but is reversing lower, leaving the January WTI contract set to test yesterday's low near $76.45.  This is the fourth consecutive weekly fall in crude oil.  European natural gas (Netherlands benchmark) is off 4.4% today, the third drop in a row, and pares the week's gain to almost 19%.  In Singapore, iron ore prices jumped 5.7% to break a five-week slide that saw prices tumble by about 28%.   Copper is firmer and paring this week's loss to around 2%.   Asia Pacific There were two developments in Japan to note.  First, October CPI was largely in line with expectations.  Surging gasoline prices (seven-year highs) helped keep the headline rate positive for the second month (0.1% year-over-year).  Excluding fresh food, the core rate was steady at 0.1%.  However, the deflationary forces are evident when fresh food and energy are removed.  The measure deteriorated to -0.7% from -0.5%, the most since June (-0.9%).    Second, Prime Minister Kishida unveiled an overall package of JPY78.9 trillion (~$690 bln). It is larger than the previous two pandemic packages. "Fiscal measures" refer to spending, investment, and loans, and this is seen worth about JPY55.7 trillion.  It is not clear yet, how much represents new spending as opposed to the reallocation of funds from earlier budgets that were not used. However, it appears to be about JPY32 trillion of new spending.   The Chinese yuan, up a modest 2.1% for the year, is the strongest currency.   Against a trade-weighted basket (CFETS), the yuan is pulling back from a six-year high set earlier this week as the euro recovers a cent.  Consider that the yuan has appreciated by more than 9% against the euro and 11.5% against the yen this year.  That means that investment in China has the same tailwind as the dollar and is compensated a bit for the relative lack of transparency and liquidity.  The Financial Times estimates that foreign holdings of Chinese bonds and stocks rose to around $1.1 trillion at the end of September, about a 13% increase this year.  China's stock market has underperformed this year, and the CSI 300 is off around 7% this year.  On the other hand, China's bonds have fared well.  It is the only 10-year bond that has not weakened this year.  China's figures show foreign direct investment has risen by almost 18% this year through October to nearly $142 bln.   The dollar is posting an outside down day against the Japanese yen by first rising above yesterday's high before reversing and taking out yesterday's low. It is approaching the week's low near JPY113.75 in the European morning.  Below there, support is seen around JPY113.60.  A break would warn of a return to JPY113.00.  The Australian dollar has been sold to its lowest level since October 6, when it recorded a low of almost $0.7225.   It has broken the trendline that connected the August and September lows (~$0.7250).  The September low was around $0.7170 and maybe the next important technical target.  The dollar is trading with a firmer bias against the Chinese yuan, but the greenback remains in the range set on Tuesday (~CNY6.3670-CNY6.3965).  The dollar gained on the yuan four sessions this week, the most since July, but the net gain of less than 0.2% still shows an extraordinarily steady exchange rate.   With the yuan near six-year highs against its trade-weighted basket (CFETS), the PBOC warned against one-way moves and encouraged financial institutions to bolster fx risk management.  It set the dollar's reference rate at CNY6.3825, slightly above expectations (Bloomberg survey) for CNY6.3822.   Europe The stronger than expected October retail sales capped the week's data that points to a rebounding economy and boosts the chances of a rate hike next month.  A strong jobs report was followed by a larger than expected rise in CPI and PPI.  Retail sales jumped 0.8% in October, and the September series was revised to flat from -0.2%. It was the first increase since April.  Pre-Xmas sales were reported.  Separately, the UK government reported that the cost of servicing the national debt has risen more than three-fold over the past year, leaving the budget deficit higher than anticipated.  It appears that the swaps market is pricing in a 15 bp hike at the December 16 BOE meeting, though some are talking about a bigger move.    Several ECB officials, including President Lagarde, have successfully pushed back against expectations of a 20 bp rate hike next year that had appeared discounted by the swaps market earlier this month. The market has pushed it into early 2023.  The implied yield of the December 2022 Euribor futures contract has fallen 20 bp this month.  The December 2022 Eurodollar futures contract is moving in the opposite direction.  The implied yield has risen by about 4.5 bp this month.  The net result is the US premium has increased to over 125 bp, the highest since last March.  In late 2019, the premium was around 180 bp.  This is recognized as a factor helping lift the dollar against the euro, and it appears to have become more salient recently.   The euro's bounce yesterday, its first gain in seven sessions (since the US CPI shocker), stalled near $1.1375, where a 780 mln euro option expires today.   The euro traded quietly in Asia before being sold aggressively as news of the virus hit the wires.  The euro traded through $1.1285 before catching a bid.  Resistance now will likely be encountered around $1.1320.  The euro is posting its first back-to-back weekly of more than 1% since March 2020.  Sterling is also sliding back toward the week's lows, just above $1.3400.  A break could signal a test on the $1.3350 area, but it appears stretched on an intraday basis.  While the euro-sterling cross is practically flat, the euro has punched below CHF1.05 for the first time in six years.  It would not be surprising to learn that the SNB has been intervening.  There appears to be little chart support until closer to CHF1.0250. America The nonpartisan Congressional Budget Office offered its evaluation of the Biden administration's Build Back Better initiative.  It sees $1.636 trillion in spending over the next decade and almost $1.27 trillion in revenue.  That leaves a deficit of $367 bln.  A notable difference between it and the administration is how much more revenue will be generated by increasing the number of IRS agents.  Even if it passes the House of Representatives, it will likely be marked up in the Senate.  The jockeying for position and spin around it will likely dominate the session, which sees no US economic reports outside of the rig count later today.  The Fed's Clarida and Waller speaker today.  It seems that most market participants still see the Fed behind the curve and disagree with our idea that to secure the ability to respond to a wide range of possible outcomes, the Federal Reserve may accelerate its tapering starting in January.   It is not clear exactly when the debt ceiling will be reached, but it is being played.  The Democrats do not want to lift it through the reconciliation process, though they have forced the Republicans to do so in the past.  The Republicans appear to have the discipline and will to oppose.  No one seems to think the US will really default, and getting even this close seems undignified.  Yet, the desire to avoid being caught out encouraged investors to demand a high yield on the four-week bill sold.  Yesterday's auction saw the yield more than double to 11 bp (annualized).  It is the highest yield since July 2020.  In contrast, the eight-week bill, which is thought to be beyond the shenanigans, yield slipped to 4.5 bp from six previously and a higher bid-cover ratio.   Canada reports September retail sales figures today.  After a 2.1% rise in August, some weakness is expected.  Ahead of it, the Canadian dollar is trading at new lows for the week, though it is faring better than the other dollar-bloc currencies.  The US dollar is approaching the (61.8%) retracement objective of the decline since the CAD1.29 level was tested on September 20.  The retracement level is near CAD1.2665, and a break would target CAD1.2700-CAD1.2750.  The upper  Bollinger Band is found near CAD1.2655 today.   The Mexican peso is also under pressure.  It, too, has fallen to a new low for the week today.  The greenback looks set to test the eight-month high set earlier this month near MXN20.98.  Note that the central bank's Deputy Governor warned that inflation was accelerating, and it could rise to 7% this month and 7.1%-7.3% next month.  In October, the CPI stood at 6.24% year-over-year.  Banxico meets next on December 16, the day after the FOMC meeting.  Lastly, we note that the Brazilian real is off for four consecutive sessions coming into today.  The dollar closed above its 20-day moving average against it yesterday and looks poised to probe above BRL5.60 today. The high for the month was closer to BRL5.70.   Disclaimer
Market Quick Take - November 19, 2021

Market Quick Take - November 19, 2021

Saxo Bank Saxo Bank 19.11.2021 10:43
Summary:  Equity markets charged higher in the US session to close at new record highs, and the upside extended further in the futures market overnight. In FX, the recent USD strength eased slightly, while oil prices are creeping back higher despite the recent fears of strategic reserve releases. Markets are nervously awaiting the announcement of who US President Biden will nominate to head the Fed after the current Powell term ends in February. What is our trading focus? Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) - US equities pushed to new all-time highs yesterday led by technology stocks and strong macro figures across manufacturing surveys and job market data such as jobless claims. Nasdaq 100 futures are trading around the 16,560 level in early European trading with the 16,500 being the intraday day support level. A recent survey among institutional investors shows that a majority is believing in the transitory inflation narrative which can help explain why investors in equities are looking through the latest inflation pressures. EURUSD and EURGBP – the beleaguered euro finally bounced back a bit after its recent remarkable slide, although it is tough to see what could engineer a reversal of the move below the 1.1500 level, which is the key chart resistance now, although Biden announcing Brainard as his pick to head the Fed next February could drive considerable short-term volatility. To stop the euro from a persistent slide, we would need a very different tone from the ECB than it has delivered recently, with no real opportunity to do so until the December 16 ECB meeting. With power prices and a new Covid wave weighing on the outlook, the ECB will very likely be happy to stay firmly dovish. USDJPY – the highs for the cycle near the psychologically important 115.00 look safe as long as US treasury yields at the longer end of the curve remain rangebound, but trading above that level could get volatile if it is broken, as some options structures may be linked to its breaking or not breaking. The next test for the price action is clearly the Fed Chair nomination that appears imminent – possibly today or over the weekend (more below in What are we watching next?). Gold (XAUUSD) has spent the week trading within a relatively narrow range between $1850 and $1870 as it awaits a fresh catalyst following last week’s breakout. The impressive rally that occurred despite headwind from a stronger dollar has stalled with bond yields picking up and the market wondering how the US Federal Reserve will manage the current inflation spike. Silver and especially platinum have both struggled to keep up with gold while ETF investors have yet to show any interest in accumulating exposure. All developments raising the risk of a retracement towards the $1830-35 key area of support. Crude oil (OILUKJAN22 & OILUSDEC21) managed to recover yesterday after the market brushed aside the potential negative price impact of a US SPR release. US attempts to attract wider support from other major importing countries seems to have fallen flat, except for China who is “working” on a release. Having dropped more than five dollars since speculation began, the market has concluded for now that the price impact of a release could be limited. The market, however, may still have to deal with the recent updates from EIA and IEA, in which they both forecast current tight market conditions could start to ease early next year as well as renewed Covid-related reductions in mobility. US Treasuries (IEF, TLT). Yesterday’s 10-year US TIPS auction stopped through, pricing at a record low yield at -1.145%. It is a signal that investors are ever more concerned about inflation risk.  The Treasury also sold 4-week and 8-week T-Bills. While the latter was priced in line with the Reverse Repurchase facility, 4-week T-Bills priced with a yield of 0.11%, more than double the RRP rate. As we approach the day in which the Treasury will run out of cash, we expect volatility in the money market to increase, while long-term yields will remain compressed as they will serve as a safe haven. In the meantime, the move index continues to rise indicating that the bond market remains on the hedge. What is going on? Central Bank of Turkey cut another 100 basis points from the policy rate, lira plunge extends. The Turkish lira has lost more than 10% versus the US dollar this week and trades well over 11.00 after Turkish President Erdogan earlier this week declared himself once again against high interest rates, which he believes cause inflation. Central bank chief Kavcioglu, who is seen as doing Erdogan’s bidding, cut rates for a third time by 1.0% to take the policy rate to 15%, but with the Turkish lira losing over 10% this week alone and more than 30% since Erdogan fired the prior more hawkish central bank head in favour of Kavcioglu, inflation will run far beyond the rate. Not even some guidance that the easing cycle may conclude in December was enough to halt the lira’s slide. US Nov. Philly Fed survey hits 39.0, a very hot reading and fourth highest ever - with Prices Paid at 80 and just missing the 42-year high of 80.7 in June, although the Prices Received was at 62.9, the highest since 1974. Special survey questions in the Novemer  survey included one on inflation expectations, with firms expecting a median 5.3% increase in their own prices, and an increase in wages of 4.8%. The median forecast for 10-year inflation was 3.5%, up from the 3.0% the last time the question was asked in August. The Bloomberg Agriculture Index hit a fresh five-year high this week with food prices likely to stay high in 2022 with labor shortages, La Ninã weather impacts, surging cost of fertilizers being the common denominator across the sector. Recent gains being led by coffee, which we highlighted earlier in the week as a commodity currently seeing multiple price supportive developments. Wheat is heading for a nine-year high in Chicago while hitting record highs in Europe with inventories tumbling amid strong demand from importers and now also a rain threat to the soon-to-be harvested Australian crop. Soybeans have seen a strong bounce after the latest WASDE report showed a tighter than expected outlook for the coming year, and following a recent rush of Chinese buying from the US and South America. Apple doubles down on self-driving cars. The company is aiming to develop fully autonomous driving capabilities for cars by 2025 under the project name Titan. Apple has developed its own chip and is aiming to soon have a car on the roads for testing. However, delivering self-driving cars is a difficult endeavor with Uber Technologies having sold its unit and Waymo (Google’s unit) has been struck by fatigue and key people leaving the project. Tesla is also still struggling to deliver self-driving cars. What are we watching next? Who will US President Biden nominate to head the Fed next February? Powell is still seen as more likely to get the nod that Brainard by roughly two to one, and this Fed Chair nomination issue is hanging over the markets, as the current Fed chair term ends in early February and from comments made earlier this week, an announcement could be made any day now. One uncertainty that would come with a Brainard nomination is the potential difficulty of having her nomination approved by the Senate. The nomination news could generate significant short-term volatility on the choice of the nominally more dovish Lael Brainard over current Fed Chair Powell, though we see little difference in the medium-longer term implications for monetary policy, and the Fed is likely to get a prominent new regulatory role either way (under Brainard or someone else if she is nominated to replace Powell). Vote on $1.7 trillion US fiscal bill today in the House of Representatives after the Congressional Budget office said the bill, which focuses on social spending and climate initiatives, would add some $367 billion to the US Federal deficit (around 1.5% of current US nominal GDP) over the next 10 years. Earnings Watch – there are no important earnings today and this earnings week has been good in the US and Europe, while a bit more mixed among Chinese companies. The list below shows earnings releases next week. Monday: Sino Pharmaceutical, Prosus, Zoom Video, Agilent TechnologiesTuesday: Xiaomi, Kuaishou Technology, Compass Group, Medtronic, Analog Devices, Autodesk, VMWare, Dell Technologies, XPeng, HP, Best Buy, Dollar TreeWednesday: DeereThursday: AdevintaFriday: Meituan, Pinduoduo Economic calendar highlights for today (times GMT) 0830 – ECB President Lagarde to speak1200 – UK Bank of England Chief Economist Huw Pill to speak1330 – Canada Sep. Retail Sales1715 – US Fed Vice Chair Clarida to speak on global monetary policy coordination Follow SaxoStrats on the daily Saxo Markets Call on your favorite podcast app: Apple Spotify Soundcloud Sticher
We Might Say Next FED Moves Are Not Obvious As Some Factors Differentiate Circumstances

Silver, shrugging off attacks

Korbinian Koller Korbinian Koller 20.11.2021 13:32
Weekly chart, Silver in US-Dollar, strong along gold: Silver in US-Dollar, weekly chart as of November 20th, 2021. The weekly chart illustrates price behavior over the last 15 months. Silver prices are trading near the center of the sideways range. Gold in US-Dollar, weekly chart, rumors shrugged off: Gold in US-Dollar, weekly chart as of November 20th, 2021. The weekly chart of gold isn’t much different from where prices stand. In short, there is no evidence that gold has lost its luster. Otherwise, we would see silver trading in a relationship much lower. Rumors are just that – rumors! Silver is shrugging them off. Silver in US-Dollar, quarterly chart, room to go: Silver in US-Dollar, quarterly chart as of November 20th, 2021. A historical review with a quarterly chart over the last eighteen years reveals that silver prices can sustain extreme extensions from the mean (yellow line) for extended periods. Using the extreme of the second quarter in 2011 as a projective measurement (orange vertical line) for an upcoming target would provide for a price target more than 10% above all-time highs at US$56. In addition, the chart shows that we find ourselves in a strong quarter so far, which is in alignment with cyclical probabilities. Silver in US-Dollar, weekly chart, prepping the play: Silver in US-Dollar, weekly chart as of November 20th, 2021. Trade setup Let us return to the weekly time frame for a possible low-risk entry scenario with this target in mind.We find a supply zone based on fractal transactional volume analysis near the price of US$24.11 and US$22.65. Both attractive entry zones for excellent risk/reward-ratio plays.   Phase 1 drilling program at Guigui discovered not only the largest intrusive ever found in the district, but it’s the first mineralized skarn ever seen in Guigui! Silver, shrugging off attacks: It will not be rumors, doubts, and speculations that will be the catalyst for silvers’ success or failure. It isn’t a question of “if,” but just a question of “when” we will see the next massive price advance in this precious metal. The odds are stacked too much in favor of a continued price movement up that the long-term investor should let doubts allow for diverging from a splendid opportunity to partake in wealth preservation and a very profitable way to participate in a chance rarely presented this prominent. Feel free to join us in our free Telegram channel for daily real time data and a great community. If you like to get regular updates on our gold model, precious metals and cryptocurrencies you can also subscribe to our free newsletter. This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision. The views, thoughts and opinions expressed here are the author’s alone. They do not necessarily reflect or represent the views and opinions of Midas Touch Consulting. By Korbinian Koller|November 20th, 2021|Tags: Crack-Up-Boom, Gold, Gold bullish, Gold/Silver-Ratio, inflation, low risk, Silver, silver bull, Silver Chartbook, silversqueeze, technical analysis, time frame, trading principles|0 Comments About the Author: Korbinian Koller Outstanding abstract reasoning ability and ability to think creatively and originally has led over the last 25 years to extract new principles and a unique way to view the markets resulting in a multitude of various time frame systems, generating high hit rates and outstanding risk reward ratios. Over 20 years of coaching traders with heart & passion, assessing complex situations, troubleshoot and solve problems principle based has led to experience and a professional history of success. Skilled natural teacher and exceptional developer of talent. Avid learner guided by a plan with ability to suppress ego and empower students to share ideas and best practices and to apply principle-based technical/conceptual knowledge to maximize efficiency. 25+ year execution experience (50.000+ trades executed) Trading multiple personal accounts (long and short-and combinations of the two). Amazing market feel complementing mechanical systems discipline for precise and extreme low risk entries while objectively seeing the whole picture. Ability to notice and separate emotional responses from the decision-making process and to stand outside oneself and one’s concerns about images in order to function in terms of larger objectives. Developed exit strategies that compensate both for maximizing profits and psychological ease to allow for continuous flow throughout the whole trading day. In depth knowledge of money management strategies with the experience of multiple 6 sigma events in various markets (futures, stocks, commodities, currencies, bonds) embedded in extreme low risk statistical probability models with smooth equity curves and extensive risk management as well as extensive disaster risk allow for my natural capacity for risk-taking.
COT: Solid gold buying raising short term concerns

COT: Solid gold buying raising short term concerns

Ole Hansen Ole Hansen 22.11.2021 11:35
Summary:  This summary highlights futures positions and changes made by hedge funds across commodities, forex and financials up until last Tuesday, November 16. The report shows the reaction to the US inflation shock on November 11 which among others drove strong demand for gold and more surprisingly a reduction in the dollar long. Also another strong week for most agriculture commodities with positions in coffee and KCB wheat hitting fresh multi-year highs Saxo Bank publishes weekly Commitment of Traders reports (COT) covering leveraged fund positions in commodities, bonds and stock index futures. For IMM currency futures and the VIX, we use the broader measure called non-commercial. Link to latest report This summary highlights futures positions and changes made by hedge funds across commodities, forex and financials up until last Tuesday, November 16. A week where the market responded to the US inflation shock on November 11 by sending  the dollar up by 2% to fresh high for the cycle while 10-year breakeven yields jumped 20 basis point a decade high. While bond market volatility jumped, stocks held steady with the VIX showing a small decline. The commodity sector was mixed with gains in precious metals and not least grains and soft commodities helping offset weakness across the energy sector.  Commodities Hedge funds raised their total commodity exposure, measured in lots, across 24 major futures contracts by the most since July. Driven by continued strong price action across the agriculture sector and more recently also precious metals in response to surging inflation. These sectors saw all but one market being bought while the energy sector were mixed with continued selling of crude oil only being partly offset by demand for gasoline and natural gas. Energy: Crude oil’s four week slide resulted in the biggest weekly reduction since July, and this time, as opposed to recent weeks, it was WTI that led the reduction with a 10% cut to 307k apart from a deteriorating short-term technical outlook also being driven the prospect of a US stockpile release to dampen domestic gasoline prices. Brent meanwhile saw its net long slump to a one-year low at 221.5k lots, and during the past six weeks the net length has now slumped by one-third, a reduction which gathered momentum after the late October failure to break the 2018 high at $86.75, now a double top. Crude oil comment from our daily Market Quick Take: Crude oil (OILUKJAN22 & OILUSDEC21) opened softer in Asia after Friday’s big drop but has so far managed to find support at $77.85, the previous top from July. The market focus has during the past few weeks shifted from the current tight supply to the risk of a coordinated reserve release, fears about a renewed Covid-driven slowdown in demand and recent oil market reports from the EIA and IEA pointing to a balanced market in early 2022. Having dropped by around 10% from the recent peak, the market may have started to conclude that a SPR release has mostly been price in by now. Metals: Another week of strong gold buying has now raised the alarm bells given the risk of long liquidation should the yellow metal fail to hold onto its US CPI price boost above $1830. Last week the net long in gold reached a 14-month high at 164k lots and the speed of the accumulation, especially the 70% jump during the past two weeks alone carries, will be raising a red flag for tactical trading strategies looking for pay day on short positions should support give way.  Gold extended Friday’s drop below $1850 overnight, before bouncing ahead of key support in the mentioned $1830-35 area. The risk of a quicker withdrawal of Fed stimulus supporting real yields and the dollar has for now reduced gold's ability to build on the technical breakout. However, the price softness on Friday helped attract ETF buying with Bloomberg reporting a 10 tons increase, the biggest one-day jump since January 15. A second week of silver buying lifted the net to a four-week high at 35.9k lots, but still below the May peak at 47.8k lots. Copper’s rangebound trading behavior kept the price and the net long unchanged. The latter due to an even size addition of both new long and short positions. Agriculture: Broad gains across the grains market lifted the combined long across the six most traded contracts to a six-month high at 560k lots. Buyers returned to soybeans after the net long recently hit a 17-month low, the corn long was the biggest since May while the KCB wheat long at 60.6k lots was the highest since August 2018. Supported by an increasingly worrying supply outlook, coffee speculators lifted their net long by 16% to a five-year high at 55k lots. Cotton and sugar longs also rose while short-covering helped halve the cocoa net short. More on the reasons behind the current strength in wheat and coffee, and agriculture in general can be found in may recent update: Agriculture rally resumes led by coffee, wheat and sugar ForexIn a surprise response to the US inflation shock on November 11 speculators ended up making a small reduction in their overall dollar long against ten IMM futures and the Dollar index. Selling of euro in response to the 2.4% drop and a 161% increase in the sterling short to a 17 month high ended up being more than off-set by the buying of all other major currencies, most notably JPY and CHF. The result being a fifth weekly reduction in the dollar long to $21.3 billion, now down by 17% reduction from the near 30-month high reached during October. What is the Commitments of Traders report? The COT reports are issued by the U.S. Commodity Futures Trading Commission (CFTC) and the ICE Exchange Europe for Brent crude oil and gas oil. They are released every Friday after the U.S. close with data from the week ending the previous Tuesday. They break down the open interest in futures markets into different groups of users depending on the asset class. Commodities: Producer/Merchant/Processor/User, Swap dealers, Managed Money and otherFinancials: Dealer/Intermediary; Asset Manager/Institutional; Leveraged Funds and otherForex: A broad breakdown between commercial and non-commercial (speculators) The reasons why we focus primarily on the behavior of the highlighted groups are: They are likely to have tight stops and no underlying exposure that is being hedged This makes them most reactive to changes in fundamental or technical price developments It provides views about major trends but also helps to decipher when a reversal is looming
COT Speculators drop British pound sterling bets to lowest level in 76-weeks

COT Speculators drop British pound sterling bets to lowest level in 76-weeks

Invest Macro Invest Macro 22.11.2021 11:46
November 20, 2021 By InvestMacro | COT | Data Tables | COT Leaders | Downloads | COT Newsletter Here are the latest charts and statistics for the Commitment of Traders (COT) data published by the Commodities Futures Trading Commission (CFTC). The latest COT data is updated through Tuesday November 16th 2021 and shows a quick view of how large traders (for-profit speculators and commercial entities) were positioned in the futures markets. All currency positions are in direct relation to the US dollar where, for example, a bet for the euro is a bet that the euro will rise versus the dollar while a bet against the euro will be a bet that the euro will decline versus the dollar. Highlighting the COT Currency data this week is the second straight decline in British pound sterling speculative positions. The pound sterling speculator contracts dropped sharply for the second consecutive week this week and have now fallen by a total of -46,646 contracts over just this two-week time period. These declines have pushed the overall speculative position into a bearish sentiment level of -31,599 contracts which marks the lowest standing of the past seventy-six weeks, dating back to June 2nd of 2020. The GBPUSD currency pair has been under pressure since the middle of October and fallen from around 1.3800 exchange rate to just above the 1.3435 level currently, a drop of almost 400 pips. Data Snapshot of Forex Market Traders | Columns Legend Nov-16-2021 OI OI-Index Spec-Net Spec-Index Com-Net COM-Index Smalls-Net Smalls-Index EUR 705,698 86 -3,826 34 -26,985 68 30,811 25 JPY 252,897 91 -93,126 10 115,758 94 -22,632 1 GBP 207,099 43 -31,599 51 41,182 54 -9,583 36 MXN 170,102 33 -47,655 2 46,127 99 1,528 50 AUD 166,688 57 -61,153 27 69,858 71 -8,705 31 CAD 148,955 30 8,709 62 -26,717 35 18,008 74 USD Index 59,387 88 34,908 86 -40,455 7 5,547 77 RUB 52,624 58 22,625 67 -23,936 31 1,311 70 CHF 49,320 27 -8,889 54 18,767 52 -9,878 34 NZD 42,945 30 13,965 95 -15,521 6 1,556 70 BRL 31,767 32 -15,698 48 15,743 54 -45 66 Bitcoin 13,648 78 -1,478 69 357 0 1,121 23   US Dollar Index Futures: The US Dollar Index large speculator standing this week was a net position of 34,908 contracts in the data reported through Tuesday. This was a weekly lowering of -540 contracts from the previous week which had a total of 35,448 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish-Extreme with a score of 86.0 percent. The commercials are Bearish-Extreme with a score of 7.4 percent and the small traders (not shown in chart) are Bullish with a score of 77.2 percent. Free Reports: Top 5 Companies Added to Our Stock Watch List this Quarter - Here are the Stock Symbols that stood out so far in the fourth quarter of 2021. Get our Weekly Commitment of Traders Reports - See where the biggest traders (Hedge Funds and Commercial Hedgers) are positioned in the futures markets on a weekly basis.   US DOLLAR INDEX Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 80.8 3.4 12.8 – Percent of Open Interest Shorts: 22.0 71.5 3.5 – Net Position: 34,908 -40,455 5,547 – Gross Longs: 47,959 2,000 7,621 – Gross Shorts: 13,051 42,455 2,074 – Long to Short Ratio: 3.7 to 1 0.0 to 1 3.7 to 1 NET POSITION TREND:       – COT Index Score (3 Year Range Pct): 86.0 7.4 77.2 – COT Index Reading (3 Year Range): Bullish-Extreme Bearish-Extreme Bullish NET POSITION MOVEMENT INDEX:       – 6-Week Change in Strength Index: 5.0 -2.7 -13.6   Euro Currency Futures: The Euro Currency large speculator standing this week was a net position of -3,826 contracts in the data reported through Tuesday. This was a weekly reduction of -7,599 contracts from the previous week which had a total of 3,773 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 33.8 percent. The commercials are Bullish with a score of 68.1 percent and the small traders (not shown in chart) are Bearish with a score of 25.4 percent. EURO Currency Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 28.1 57.3 12.8 – Percent of Open Interest Shorts: 28.6 61.1 8.4 – Net Position: -3,826 -26,985 30,811 – Gross Longs: 198,181 404,266 90,261 – Gross Shorts: 202,007 431,251 59,450 – Long to Short Ratio: 1.0 to 1 0.9 to 1 1.5 to 1 NET POSITION TREND:       – COT Index Score (3 Year Range Pct): 33.8 68.1 25.4 – COT Index Reading (3 Year Range): Bearish Bullish Bearish NET POSITION MOVEMENT INDEX:       – 6-Week Change in Strength Index: 5.7 -5.2 -0.0   British Pound Sterling Futures: The British Pound Sterling large speculator standing this week was a net position of -31,599 contracts in the data reported through Tuesday. This was a weekly lowering of -19,506 contracts from the previous week which had a total of -12,093 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish with a score of 51.2 percent. The commercials are Bullish with a score of 54.0 percent and the small traders (not shown in chart) are Bearish with a score of 35.8 percent. BRITISH POUND Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 24.4 61.4 11.3 – Percent of Open Interest Shorts: 39.6 41.5 15.9 – Net Position: -31,599 41,182 -9,583 – Gross Longs: 50,443 127,197 23,322 – Gross Shorts: 82,042 86,015 32,905 – Long to Short Ratio: 0.6 to 1 1.5 to 1 0.7 to 1 NET POSITION TREND:       – COT Index Score (3 Year Range Pct): 51.2 54.0 35.8 – COT Index Reading (3 Year Range): Bullish Bullish Bearish NET POSITION MOVEMENT INDEX:       – 6-Week Change in Strength Index: -8.3 9.2 -8.1   Japanese Yen Futures: The Japanese Yen large speculator standing this week was a net position of -93,126 contracts in the data reported through Tuesday. This was a weekly increase of 12,225 contracts from the previous week which had a total of -105,351 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish-Extreme with a score of 10.4 percent. The commercials are Bullish-Extreme with a score of 93.7 percent and the small traders (not shown in chart) are Bearish-Extreme with a score of 0.8 percent. JAPANESE YEN Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 9.7 80.5 8.6 – Percent of Open Interest Shorts: 46.6 34.7 17.6 – Net Position: -93,126 115,758 -22,632 – Gross Longs: 24,635 203,468 21,790 – Gross Shorts: 117,761 87,710 44,422 – Long to Short Ratio: 0.2 to 1 2.3 to 1 0.5 to 1 NET POSITION TREND:       – COT Index Score (3 Year Range Pct): 10.4 93.7 0.8 – COT Index Reading (3 Year Range): Bearish-Extreme Bullish-Extreme Bearish-Extreme NET POSITION MOVEMENT INDEX:       – 6-Week Change in Strength Index: -18.4 15.5 -4.1   Swiss Franc Futures: The Swiss Franc large speculator standing this week was a net position of -8,889 contracts in the data reported through Tuesday. This was a weekly rise of 8,154 contracts from the previous week which had a total of -17,043 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish with a score of 54.4 percent. The commercials are Bullish with a score of 52.0 percent and the small traders (not shown in chart) are Bearish with a score of 34.3 percent. SWISS FRANC Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 11.2 64.2 24.4 – Percent of Open Interest Shorts: 29.2 26.1 44.5 – Net Position: -8,889 18,767 -9,878 – Gross Longs: 5,502 31,663 12,048 – Gross Shorts: 14,391 12,896 21,926 – Long to Short Ratio: 0.4 to 1 2.5 to 1 0.5 to 1 NET POSITION TREND:       – COT Index Score (3 Year Range Pct): 54.4 52.0 34.3 – COT Index Reading (3 Year Range): Bullish Bullish Bearish NET POSITION MOVEMENT INDEX:       – 6-Week Change in Strength Index: 11.9 -12.2 11.8   Canadian Dollar Futures: The Canadian Dollar large speculator standing this week was a net position of 8,709 contracts in the data reported through Tuesday. This was a weekly rise of 3,605 contracts from the previous week which had a total of 5,104 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish with a score of 62.3 percent. The commercials are Bearish with a score of 34.9 percent and the small traders (not shown in chart) are Bullish with a score of 74.0 percent. CANADIAN DOLLAR Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 29.6 42.1 27.1 – Percent of Open Interest Shorts: 23.8 60.0 15.0 – Net Position: 8,709 -26,717 18,008 – Gross Longs: 44,147 62,689 40,389 – Gross Shorts: 35,438 89,406 22,381 – Long to Short Ratio: 1.2 to 1 0.7 to 1 1.8 to 1 NET POSITION TREND:       – COT Index Score (3 Year Range Pct): 62.3 34.9 74.0 – COT Index Reading (3 Year Range): Bullish Bearish Bullish NET POSITION MOVEMENT INDEX:       – 6-Week Change in Strength Index: 29.6 -26.4 10.0   Australian Dollar Futures: The Australian Dollar large speculator standing this week was a net position of -61,153 contracts in the data reported through Tuesday. This was a weekly gain of 2,271 contracts from the previous week which had a total of -63,424 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 27.1 percent. The commercials are Bullish with a score of 71.0 percent and the small traders (not shown in chart) are Bearish with a score of 31.2 percent. AUSTRALIAN DOLLAR Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 18.5 67.2 11.8 – Percent of Open Interest Shorts: 55.1 25.3 17.1 – Net Position: -61,153 69,858 -8,705 – Gross Longs: 30,760 112,044 19,744 – Gross Shorts: 91,913 42,186 28,449 – Long to Short Ratio: 0.3 to 1 2.7 to 1 0.7 to 1 NET POSITION TREND:       – COT Index Score (3 Year Range Pct): 27.1 71.0 31.2 – COT Index Reading (3 Year Range): Bearish Bullish Bearish NET POSITION MOVEMENT INDEX:       – 6-Week Change in Strength Index: 27.1 -29.0 24.4   New Zealand Dollar Futures: The New Zealand Dollar large speculator standing this week was a net position of 13,965 contracts in the data reported through Tuesday. This was a weekly boost of 1,083 contracts from the previous week which had a total of 12,882 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish-Extreme with a score of 94.7 percent. The commercials are Bearish-Extreme with a score of 6.5 percent and the small traders (not shown in chart) are Bullish with a score of 69.7 percent. NEW ZEALAND DOLLAR Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 61.4 24.1 11.5 – Percent of Open Interest Shorts: 28.9 60.2 7.8 – Net Position: 13,965 -15,521 1,556 – Gross Longs: 26,388 10,349 4,923 – Gross Shorts: 12,423 25,870 3,367 – Long to Short Ratio: 2.1 to 1 0.4 to 1 1.5 to 1 NET POSITION TREND:       – COT Index Score (3 Year Range Pct): 94.7 6.5 69.7 – COT Index Reading (3 Year Range): Bullish-Extreme Bearish-Extreme Bullish NET POSITION MOVEMENT INDEX:       – 6-Week Change in Strength Index: 9.9 -11.8 19.8   Mexican Peso Futures: The Mexican Peso large speculator standing this week was a net position of -47,655 contracts in the data reported through Tuesday. This was a weekly gain of 752 contracts from the previous week which had a total of -48,407 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish-Extreme with a score of 1.5 percent. The commercials are Bullish-Extreme with a score of 98.8 percent and the small traders (not shown in chart) are Bearish with a score of 49.5 percent. MEXICAN PESO Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 41.1 55.3 3.1 – Percent of Open Interest Shorts: 69.2 28.2 2.2 – Net Position: -47,655 46,127 1,528 – Gross Longs: 69,984 94,074 5,245 – Gross Shorts: 117,639 47,947 3,717 – Long to Short Ratio: 0.6 to 1 2.0 to 1 1.4 to 1 NET POSITION TREND:       – COT Index Score (3 Year Range Pct): 1.5 98.8 49.5 – COT Index Reading (3 Year Range): Bearish-Extreme Bullish-Extreme Bearish NET POSITION MOVEMENT INDEX:       – 6-Week Change in Strength Index: -5.5 5.6 -1.5   Brazilian Real Futures: The Brazilian Real large speculator standing this week was a net position of -15,698 contracts in the data reported through Tuesday. This was a weekly decrease of -240 contracts from the previous week which had a total of -15,458 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 47.6 percent. The commercials are Bullish with a score of 54.4 percent and the small traders (not shown in chart) are Bullish with a score of 66.3 percent. BRAZIL REAL Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 26.7 64.6 8.0 – Percent of Open Interest Shorts: 76.1 15.0 8.2 – Net Position: -15,698 15,743 -45 – Gross Longs: 8,468 20,507 2,545 – Gross Shorts: 24,166 4,764 2,590 – Long to Short Ratio: 0.4 to 1 4.3 to 1 1.0 to 1 NET POSITION TREND:       – COT Index Score (3 Year Range Pct): 47.6 54.4 66.3 – COT Index Reading (3 Year Range): Bearish Bullish Bullish NET POSITION MOVEMENT INDEX:       – 6-Week Change in Strength Index: -17.9 19.3 -12.9   Russian Ruble Futures: The Russian Ruble large speculator standing this week was a net position of 22,625 contracts in the data reported through Tuesday. This was a weekly advance of 1,922 contracts from the previous week which had a total of 20,703 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish with a score of 66.9 percent. The commercials are Bearish with a score of 30.7 percent and the small traders (not shown in chart) are Bullish with a score of 70.2 percent. RUSSIAN RUBLE Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 57.7 37.7 4.6 – Percent of Open Interest Shorts: 14.7 83.2 2.1 – Net Position: 22,625 -23,936 1,311 – Gross Longs: 30,357 19,849 2,418 – Gross Shorts: 7,732 43,785 1,107 – Long to Short Ratio: 3.9 to 1 0.5 to 1 2.2 to 1 NET POSITION TREND:       – COT Index Score (3 Year Range Pct): 66.9 30.7 70.2 – COT Index Reading (3 Year Range): Bullish Bearish Bullish NET POSITION MOVEMENT INDEX:       – 6-Week Change in Strength Index: 5.2 -3.3 -20.9   Bitcoin Futures: The Bitcoin large speculator standing this week was a net position of -1,478 contracts in the data reported through Tuesday. This was a weekly reduction of -11 contracts from the previous week which had a total of -1,467 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish with a score of 68.7 percent. The commercials are Bullish with a score of 71.4 percent and the small traders (not shown in chart) are Bearish with a score of 22.9 percent. BITCOIN Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 63.4 5.0 14.7 – Percent of Open Interest Shorts: 74.2 2.4 6.5 – Net Position: -1,478 357 1,121 – Gross Longs: 8,649 678 2,008 – Gross Shorts: 10,127 321 887 – Long to Short Ratio: 0.9 to 1 2.1 to 1 2.3 to 1 NET POSITION TREND:       – COT Index Score (3 Year Range Pct): 68.7 71.4 22.9 – COT Index Reading (3 Year Range): Bullish Bullish Bearish NET POSITION MOVEMENT INDEX:       – 6-Week Change in Strength Index: 0.9 -20.8 4.5 Article By InvestMacro – Receive our weekly COT Reports by Email *COT Report: The COT data, released weekly to the public each Friday, is updated through the most recent Tuesday (data is 3 days old) and shows a quick view of how large speculators or non-commercials (for-profit traders) were positioned in the futures markets. The CFTC categorizes trader positions according to commercial hedgers (traders who use futures contracts for hedging as part of the business), non-commercials (large traders who speculate to realize trading profits) and nonreportable traders (usually small traders/speculators) as well as their open interest (contracts open in the market at time of reporting).See CFTC criteria here.
The Telegraph Publishes Misleading Story about Omicron

Covid Surge Compounds Monetary Divergence to give the Euro its Biggest Weekly Loss in Five Months

Marc Chandler Marc Chandler 22.11.2021 09:39
Strong US consumption and production figures kept the greenback well supported last week on the heels of the jump in CPI to 6.2%.  Meanwhile, the surge of Covid cases in Europe underscores the divergences with the US, sending the euro to new lows for the year.   At the same time, oil prices headed south for the fourth consecutive week, matching the longest decline in more than two years.  It did not favor the Norwegian krone, the weakest of the majors, with a 2.15% drop.  It brought this year's loss to almost 3.5%, despite it being the first G10 central bank to hike rate, with another likely next month.   The prospects of a Bank of England rate hike next month were lifted by the strong inflation and retail sales figures.  Sterling was the best performing major currency, rising a little more than 0.25% against the dollar.  It also traded at its best level against the euro since March 2020.  At the end of the week, the euro also broke down against the Swiss franc, trading below CHF1.05 for the first time since July 2015.   Japan's October CPI showed that excluding fresh food and energy, the world's third-largest economy has still not broken free of deflation's grip (-0.7% year-over-year).  A weaker yen is not a problem for Japanese policymakers or corporates.  Japan has averaged a monthly trade surplus this year through October of about JPY7.8 bln a month, hardly the stuff that should excite protectionists.  The BIS estimates that eurozone inflation would be closer to 1.5% than the 4.1% reported in October without the supply chain disruptions. The weakness of the euro does not appear problematic for the ECB either.  With the Fed already slowing the pace of its monetary accommodation, a stronger dollar reinforces the policy thrust. Even though net exports shaved Q3 growth by about 1.1 percentage points, it has yet to spur criticism, and September was a record shortfall.   Dollar Index:  The Dollar Index rose for the fourth consecutive week.  It met the (50%) retracement objective of its slide from March 2020 (~103.00) to the January 6 low (~89.20), which is found near 96.10.  DXY stalled ahead of the weekend, just shy of the high set in the middle of the week near 96.25. A move above there targets the next retracement (61.8%), which is close to 97.75.    The MACD is over-extended but still headed higher, while the Slow Stochastic appears to be turning lower.  Support is seen around 95.50.  The market seems to have discounted much of the good news for the dollar and Fed policy.  We note that the US 2-year yield fell almost six basis points last week.  That leaves it off about 4.5 bp this month, despite the strong CPI reading, robust retail sales, and industrial output figures. Euro: The divergence of monetary policy has been the critical weight on the euro, but at the end of last week, it seemed that surge in Covid cases in Europe helped drive the single currency to new lows. It fell to $1.1250 ahead of the weekend to take out the mid-week low near $1.1265.  The weekly loss of about 1.3% is the biggest in five months.  Recall that the $1.1290 area represented the (61.8%) retracement of the rally that began in March 2020.  The momentum indicators are stretched, but a possible bullish divergence is appearing in the Slow Stochastic. A cap seems to be forming around $1.1375.  After repeated tests, and much to the chagrin of the Swiss National Bank, the euro was sold through CHF1.05 ahead of the weekend for the first time since July 2015.  Given its modus operandi, the SNB is likely resisting.  There is little on the charts ahead of CHF1.0250.  In the second half of last week, the euro found support near GBP0.8385, its lowest level since March 2020.  Support is seen close to GBP0.8275-GBP0.8300.  Lastly,  the euro found support near JPY128.00, which has more or less withstood several tests since moving above there in February.   Japanese Yen:  The greenback recorded a new four-year high against the yen, less than a handful of pipis from JPY115 in the middle of last week.  It reversed lower and settled ever so slightly below the previous session's low to leave a key reversal in its wake.  It recorded the week's low ahead of the weekend near JPY113.60.  Since the dollar pushed above JPY112 early last month, we have suggested a JPY113-JPY115 trading range.  It did trade to about JPY112.75 on November 10 and 11 but snapped back into the range.  The US 10-year note futures (December contract) posted a key reversal in the middle of last week, too, and also ended the week at eight-session highs, which, of course, means lower yields.  The dollar-yen exchange rate still seems to be a range-bound creature, more the most part, and heavily influenced by external factors, like US 10-year yield and broader risk appetites.  British Pound:  Sterling outperformed the other major currencies last week, but the 0.3% gain is nothing to write home about.  It remained within the previous week's range. It was unable to sustain the upside momentum after approaching the (50%) retracement objective of the decline since the month's high and outside down day on November 4 (BOE meeting).  That retracement stands at $1.3525.  The strong CPI report on November 17 helped lift sterling to the week's high near $1.3515.  However, the underlying strength of the dollar proved too much, and ahead of the weekend, sterling traded a little below $1.3410.  The momentum indicators have turned higher, and as long as $1.3400 holds, sterling looks attractive.  However, the market appears to have a 15 bp hike at next month's meeting fully discounted.  While it remains a distinct possibility, if not a likelihood, but 100% confidence may leave sterling vulnerable to a reassessment.  Canadian Dollar:  The US dollar rose for the fourth consecutive week against the Canadian dollar, matching the longest advance since early last year.  With the pre-weekend gain, the greenback met the  (61.8%) retracement objective of decline since CAD1.29 was approached on September 20, found near CAD1.2665. The US dollar's broad strength, coupled with the stock market wobble (a proxy for risk), and the drop in crude prices by around 4.25%, the fourth consecutive weekly decline shaved about 0.75% off the Canadian dollar.  The implied yield of the June 2022 Banker Acceptances fell last week and is now about 10 bp lower than at the end of last month.  The MACD is headed up though over-extended, while the Slow Stochastic has flatlined at extreme levels and has not yet confirmed the new highs.  The US dollar continues to hug the upper Bollinger Band, which will begin the new week near CAD1.2650. Australian Dollar:   The Aussie fell for the third straight week, and ahead of the weekend, approached $0.7225, last seen in early October.  As seen with some of the other currency pairs, the MACD is still warning of currency weakness, while the Slow Stochastic is flatlining but over-extended.  The trendline connecting the August and September lows initially held last week. It (~$0.7240) yielded ahead of the weekend, but the Aussie managed to close back above it.   It needs to resurface above $0.7300 to be anything meaningful.  Softer than expected, wage growth may have reinforced the RBA's message to the markets, and the yield of the June 2022 T-bill futures fell seven basis points last week and is now down 31 bp on the month.   Mexican Peso:  Emerging markets currencies remain out of favor in a strong dollar environment.  The JP Morgan Emerging Market Currency Index slumped by more than 2% last week, the most since June.  The Turkish lira collapsed by nearly 11%.  The Indian rupee rose by 0.3%, the strongest in the EM space.  The greenback made a new marginal high in two-and-a-half weeks before the weekend, slightly below MXN20.89.  The momentum indicators are constructive for the dollar, but it is at the upper end of its recent range (~MXN20.12-MXN21.00).  The high for the year was set in March near MXN21.64, and it will come into view when the greenback rises above MXN21.15.   Chinese Yuan:   By shadowing the dollar so tightly, the yuan is dragged higher on a trade-weighted basis in the stronger greenback environment. The yuan is at six-year highs on the basket the PBOC tracks (CFETS).  The PBOC reportedly stressed the importance of exchange risk management ahead of the weekend, and it may be a warning that its willingness to tolerate a stronger yuan is limited.  The yuan slipped an inconsequential 0.12% against the dollar last week.  For nearly the past five weeks, the exchange rate has been mostly confined to a CNY6.38-CNY6.40 range.  It is a fuzzy range and allows for around a big figure in both directions. The index of Chinese companies listed in the US (NASDAQ Golden Dragon Index) fell about 5.7% last week.  The major benchmarks in China, including the CSI 300, posted small gains.  The Hang Seng fell 1.1% last week, and most of that was before the weekend on disappointing earnings from Alibaba (-10.3% in HK).     Disclaimer
Like the Latest Bond Flick, the US Dollar Has No Time to Die

Like the Latest Bond Flick, the US Dollar Has No Time to Die

Przemysław Radomski Przemysław Radomski 22.11.2021 15:11
While the dollar is on a tear, precious metal stocks have gotten away with it lately. But how long will their resistance last? The USD Index (USDX) After the USD Index’s negative response to the ECB’s monetary policy meeting on Oct. 28, I warned on Oct. 29 that dollar bears were unlikely to celebrate for much longer. I wrote: Based on the rather random comment during the conference, the traders panicked and bought the EUR/USD, which triggered declines in the USD Index (after all, the EUR/USD is the largest component of the USDX). Was the breakout to new 2021 lows invalidated? No. The true breakout was above the late-March highs (the August highs also served as a support level, but the March high is more important here) and it wasn’t invalidated. What was the follow-up action? At the moment of writing these words, the USDX is up and trading at about 93.52, which is just 0.07 below the August high in terms of the closing prices. Consequently, it could easily be the case that the USD Index ends today’s session (and the week) back above this level. You’ve probably heard the saying that time is more important than price. It’s the end of the month, so let’s check what happened in the case of previous turns of the month; that’s where we usually see major price turnarounds. I marked the short-term turnarounds close to the turns of the month with horizontal dashed blue lines, and it appears that, in the recent past, there was practically always some sort of a turnaround close to the end of the month. Consequently, seeing a turnaround (and a bottom) in the USD index now would be perfectly normal. And with the USD Index making quick work of 94, 95, and now 96, the greenback’s rally continues to gain steam. What’s more, the USD Index also surged above its late 2020 resistance and 98 should be the next bullish milestone. More importantly, however, gold, silver, and mining stocks are sensing that something is amiss. For example, while they largely ignored the USD Index’s recent ascent, their negative correlations resurfaced last week (on a very short-term basis, so far, but still). Moreover, while the precious metals’ recent rallies were likely euro-weakness-driven and not USD Index-strength-driven, the dollar basket’s uprising should elicit more pain for gold, silver, and mining stocks over the medium term. To explain, I wrote on Nov. 17: The euro recently declined and the prices of silver and gold recently rallied shortly after dovish comments from the eurozone. Namely, while the expansionary nature of fiscal and monetary decisions in the U.S. might be after its peak (with the infrastructure bill signed even despite high inflation numbers), the eurozone is far from limiting its expansionary (i.e., inflationary) policies, and it was just made clear recently. That was bearish for the euro and bullish for the gold price – as more money (euros in this case) would be chasing the same amount of physical gold. The point here is that it might have been the decline in the value of the European currency that caused gold to rally, and it had little to do with what happened in the USD Index. Don’t get me wrong, most of the time, the gold-USD link is stable and negative. In some cases, gold shows strength or weakness by refusing to move in tune (and precisely: again) with U.S. dollar’s movement. But in this case, it seems that it’s not about the U.S. dollar at all (or mostly), but rather about what happened in the Eurozone and euro recently. As a result, with the USD Index likely to take the lead in the coming months, the precious metals should suffer along the way. For context, the USD Index is approaching overbought territory and a short-term decline to ~95 isn’t out of the question. However, it’s more of a possibility than a given. Moreover, the greenback’s medium-term outlook remains robust, and any short-term pullback is likely a corrective downswing within a medium-term uptrend. Circling back to the euro, I’ve been warning for months that the Euro Index was materially overvalued and that a sharp re-rating would likely unfold. I wrote previously: The next temporary stop could be ~1.1500 (the March 2020 highs, then likely lower). For context, the EUR/USD accounts for nearly 58% of the movement of the USD Index, and that’s why the euro’s behavior is so important. And after the Euro Index sunk to a new 2021 low last week, the European currency has officially fallen off a cliff. To that point, after breaking below the declining support line of its monthly channel, a drawdown to ~111 is likely next in line (which is signaled by the breakdown below its bearish head & shoulders pattern). The Euro Index is near oversold territory and a short-term bounce may ensue, but the bearish medium-term implications remain intact. Please see below: Adding to our confidence (don’t get me wrong, there are no certainties in any market; it’s just that the bullish narrative for the USDX is even more bullish in my view), the USD Index often sizzles in the summer sun and major USDX rallies often start during the middle of the year. Summertime spikes have been mainstays on the USD Index’s historical record and in 2004, 2005, 2008, 2011, 2014 and 2018 a retest of the lows (or close to them) occurred before the USD Index began its upward flights (which is exactly what’s happened this time around). Furthermore, profound rallies (marked by the red vertical dashed lines below) followed in 2008, 2011 and 2014. With the current situation mirroring the latter, a small consolidation on the long-term chart is exactly what occurred before the USD Index surged in 2014. Likewise, the USD Index recently bottomed near its 50-week moving average; an identical development occurred in 2014. More importantly, though, with bottoms in the precious metals market often occurring when gold trades in unison with the USD Index (after ceasing to respond to the USD’s rallies with declines), we’re still far away from that milestone in terms of both price and duration. Again, the recent move higher in the USD Index doesn’t necessarily apply in the case of the above rule, as it was not the strength of the USD but weakness in the euro that has driven it. Likewise, with the USD Index now approaching its long-term rising support line (which is now resistance), a rally above the upward sloping black line below would invalidate the prior breakdown and support a move back above 100. However, with the dollar basket’s weekly RSI (Relative Strength Index) now above 70, a short-term consolidation may ensue. Conversely, please note that the recent medium-term rally has been calmer than any major upswing witnessed over the last 20 years where the USD Index’s RSI has hit 70. I marked the recent rally in the RSI with an orange rectangle and I did the same with the second-least and third-least volatile of the medium-term upswings. The sharp rallies in 2008 and 2014 were of much larger magnitudes. And in those historical analogies, the USD Index continued its surge for some time without suffering any material corrections. As a result, the short-term outlook is more of a coin flip. However, the medium-term outlook remains profoundly bullish, and gold, silver, and mining stocks may resent the USD Index’s forthcoming uprising. Just as the USD Index took a breather before its massive rally in 2014, it seems that we saw the same recently. This means that predicting higher gold prices (or the ones of silver) here is likely not a good idea. Continuing the theme, the eye in the sky doesn’t lie. And with the USDX’s long-term breakout clearly visible, the wind still remains at the dollar’s back. Please see below: The bottom line? With my initial 2021 target of 94.5 already hit, the ~98 target is likely to be reached over the medium term, and the USDX will likely exceed 100 at some point over the medium or long term. Keep in mind, though: we’re not bullish on the greenback because of the U.S.’ absolute outperformance. It’s because the region is fundamentally outperforming the Eurozone, the EUR/USD accounts for nearly 58% of the movement of the USD Index, and the relative performance is what really matters. In conclusion, while the USD Index’s 2021 surge caught the consensus by surprise, I’ve been sounding the bullish alarm for many months. And with more strength likely to materialize over the medium term, the ‘death of the dollar’ narrative has been grossly over-exaggerated. Moreover, while gold, silver, and mining stocks recently ignored the greenback’s fervor, history implies that their relative strength won’t last. As a result, more downside will likely confront the precious metals over the next few months. Thank you for reading our free analysis today. Please note that the above is just a small fraction of today’s all-encompassing Gold & Silver Trading Alert. The latter includes multiple premium details such as the targets for gold and mining stocks that could be reached in the next few weeks. If you’d like to read those premium details, we have good news for you. As soon as you sign up for our free gold newsletter, you’ll get a free 7-day no-obligation trial access to our premium Gold & Silver Trading Alerts. It’s really free – sign up today. Przemyslaw Radomski, CFAFounder, Editor-in-chiefSunshine Profits: Effective Investment through Diligence & Care * * * * * All essays, research and information found above represent analyses and opinions of Przemyslaw Radomski, CFA and Sunshine Profits' associates only. As such, it may prove wrong and be subject to change without notice. Opinions and analyses are based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are deemed to be accurate, Przemyslaw Radomski, CFA and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Radomski is not a Registered Securities Advisor. By reading Przemyslaw Radomski's, CFA reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Przemyslaw Radomski, CFA, Sunshine Profits' employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.
More And More Universities Are Including Metavers In Their Education Program

Fixed income market: the week ahead

Althea Spinozzi Althea Spinozzi 22.11.2021 14:23
Summary:  This week it's all about a surge of Covid-19 cases and inflation. The debt ceiling issue will keep long-term yields in check in the United States while spurring volatility in money markets. Lack of collateral and new lockdown measures are also compressing spreads in the Euro area. Yet, policymakers' engagement to the idea of less accommodative monetary policies on both sides of the Atlantic indicates that yields will not remain rangebound for long. Once the lid is lifted, inflationary pressures will push yields higher. Therefore, it's safe to assume a continuous bear flattening of yield curves. US Treasuries: volatility in money markets will keep long-term yields in check. Yet, inflation concerns continue to grow, pointing to higher rates once the debt ceiling issue is resolved. This week, investors will need to focus on the Fed Minutes released on Wednesday, inflation numbers, and the White House's announcement concerning the Federal Reserve Chair nomination. The Fed’s minutes might unveil details regarding the decision that led to tapering this month and whether FOMC members begin to fret about inflationary pressures. Last week, several Fed’s speakers opened up about accelerating tapering and hiking interest rates in 2022. Among them, Fed Vice Chair Richard Clarida called for a discussion to expedite tapering to enable the central bank to hike interest rates sooner. At the same time, if Biden nominates Leal Brainard as Fed Chair, it could advance inflation worries. Brainard is known to be more dovish than Powell. In the case of her nomination, the market could anticipate interest rates to remain low for longer, implying stickier inflation, provoking a selloff in bonds. The Personal Consumption Expenditure Index, one of the inflation data most looked at after the Federal Reserve, will be released on Wednesday. The PCE core deflator index YoY is expected to rise to 4.1%, the highest in more than 31 years. As we mentioned in earlier editions of “Fixed income market: the week ahead”, we expect inflationary pressures to continue to rise and higher rents, housing and wages to make inflation stickier, putting at odds policymakers’ transitory narrative. Therefore, although the US yield curve has already flattened substantially, we cannot expect anything else than more flattening. The only difference is that once the debt ceiling issue is resolved, long term yields will need to rise together with short term yields, putting at risk weaker credits. The debt ceiling will be a crucial topic for December. Janet Yellen has said that the US Treasury will run out of cash soon after the 3rd of December if an agreement over the debt ceiling is not found. However, money markets have started to price a default during the second half of December. Indeed, last week's 4-week T-Bills auction was priced with a yield of 0.11%, more than double the Reverse Repurchase facility rate. We expect volatility in money markets to continue to remain elevated until the debt ceiling is lifted or suspended. Until then, the long part of the yield curve will serve as a safe haven causing yields to remain compressed. Yet, once the debt ceiling hurdle has cleared, long-term rates will resume their rise. European sovereigns: lack of collateral and a surge in Covid-19 cases will keep yields compressed. Yet, something is changing among policymakers. In Europe, governments are imposing new lockdown measures due to increasing Covid-19 cases, causing yields to drop significantly. Yet, inflationary forces have already been set into motion. Another lockdown might exacerbate inflation further as consumption will switch from services to goods, putting more pressure on prices. Meanwhile, policymakers have started to open to the possibility that upside inflation risk might remain throughout winter. Therefore, near-term hikes expectations are unlikely to reverse despite new lockdown measures. Yet, lack of collateral in the euro area contributes to keeping short-term yields compressed across the euro area, including the periphery. At the same time, swaps with the same maturity have widened as the market prices earlier interest rate hikes. Demand for collateral will remain strong until the end of the year. However, 2022 opens up to widening risk, as demand for bonds will start to wane, and the front part of the yield curve will shift higher according to interest rate hikes expectations. Source: Bloomberg and Saxo Group. However, it looks too early to call for higher yields in the Euro area, as a lot still depends on yields in the US and December's ECB meeting. Suppose more governments across the euro area impose lockdown measures. In that case, the central bank might look to extend the PEPP bond-buying program after March, compressing yields further. The next few weeks preceding Christmas are going to be critical to set direction in European sovereigns. Economic calendar: Monday, the 22nd of November  Spain:  Balance of Trade United States: Chicago Fed National Activity Index, Existing Home Sales (Oct),  2-year Note Auction, 5-year Note Auction Eurozone: Consumer Confidence Flash (Nov) Tuesday, the 23rd of November Germany: Markit Composite, Manufacturing and Services PMI Flash (Nov) Eurozone: Markit Composite and manufacturing PMI Flash (Nov) United Kingdom: market/CIPS Composite, Manufacturing and Services PMI Flash (Nov) United States: Markit Manufacturing PMI flash (Nov), NY Fed Treasury Purchases TIPS 7.5 to 30 years, 2-year FRN Auction, 7-year Note Auction Wednesday, the 24th of November New Zealand: Interest Rate Decision, RBNZ Press Confidence France: Business Confidence Germany: Ifo Business Climate (Nov), 15-year Bund Auction United States: Durable Goods Orders (Oct), GDP Growth Rate QoQ 2nd Est (Q3),  Continuing Jobless Claims, Corporate Profits QoQ Prel (Q3), Durable Goods Orders (Oct),  Goods Trade Balance (Oct), Initial Jobless Claims, Jobless Claims 4-week Average, retail Inventories Ex Autos (Oct), Core PCE Price Index (Oct), Michigan Consumer Sentiment Final (Nov), PCE Price Index (Oct), Personal Income (Oct), Personal Spending (Oct), FOMC Minutes, 4-week and 8- week bill auction Thursday, the 25th of November New Zealand: Balance of Trade Japan: Foreign bond Investment, Coincident Index Final, Leading Economic Index Final (Sep) Germany: GDP Growth Rate YoY Final (Q3), GfK Consumer Confidence (Dec) Sweden: Monetary Policy Report, Riskbank Rate Decision France: Unemployment Benefit Claims Canada Average weekly earnings YoY Friday, the 26th of November Australia: Retail Sales MoM Prel (Oct) South Korea: Interest Rate Decision France: Consumer Confidence Switzerland: GDP Growth Rate YoY (Q3) Italy: Business Confidence (Nov)
Inflation Risk: Milton Friedman Would Buy Gold Right Now

Inflation Risk: Milton Friedman Would Buy Gold Right Now

Arkadiusz Sieron Arkadiusz Sieron 19.11.2021 16:50
Powell maintains that inflation is transitory, but the monetary theory of inflation suggests otherwise. So, elevated inflation could stay with us!, Some economists downplay the risk stemming from elevated inflation, saying that comparisons to the 1970s style stagflation appear unfounded. They say that labor unions are weaker and economies are less dependent on energy than in the past, which makes inflationary risks less likely to materialize. Isabel Schnabel, Board Member of the European Central Bank, even compared the current inflationary spike to a sneeze, i.e., “the economy’s reaction to dust being kicked up in the wake of the pandemic and the ensuing recovery”. Are those analysts right? Well, in a sense, they are. The economy is not in stagnation with little or no growth and a rising unemployment rate. On the contrary, the US labor market is continuously improving. It’s also true that both the bargaining power of workers and energy’s share in overall expenditure have diminished over the last fifty years. However, general inflation is neither caused by wages nor energy prices. Higher wages simply mean lower profits, so although employees can consume more, employers can spend less. If wages are set above the potential market rates, then unemployment emerges - not inflation. Similarly, higher energy prices affect the composition of spending, but not the overall monetary demand spent on goods and services. It works as follows: when the price of oil increases, people have to spend more money on oil (assuming the amount of consumed oil remains unchanged), which leaves less money available for other goods and services. So, the overall money spent on goods won’t change. As a consequence, the structure of relative prices will change, but widespread prices increases won’t happen. In other words, Milton Friedman’s dictum remains valid: “Inflation is always and everywhere a monetary phenomenon in the sense that it is and can be produced only by a more rapid increase in the quantity of money than in output”. It’s quite a simple mechanism, even central bankers should be able to understand it: if the stock of goods remains unaltered while the stock of money increases, this, as Frank Shostak put it, “must lead to more money being spent on the unchanged stock of goods – an increase in the average price of goods” Let’s look at the chart below, which displays the annual growth rates in the broad money supply (M2, red line) and in the CPI (green line). We can notice two important things. First, in the 1970s, the pace of broad money supply growth was relatively high, as it reached double-digit values at some point. As a consequence, inflation accelerated, jumping above 10% for a while. In other words, stagflation was born. Since then, the rate of growth in the money supply never reached double-digit numbers on a prolonged basis, including the Great Recession, so high inflation never materialized. And then the pandemic came. In March 2020, the money supply growth rate crossed the 10% threshold and never came back. In February 2021, it reached its record height of 27.1%. The pace of growth in the M2 money aggregate has slowed down since then, dropping to a still relatively high rate of 13%. This is a rate that is almost double the pre-pandemic level (6.8% in February 2020) and the long-term average (7.1% for the 1960-2021 period ). So, actually, given the surge in the broad money supply and the monetary theory of inflation, rapidly rising prices shouldn’t be surprising at all. Second, there is a lag between the money supply growth and the increase in inflation rates. That’s why some analysts don’t believe in the quantity theory of money – there is no clear positive correlation between the two variables. This is indeed true – but only when you take both variables from the same periods. The correlation coefficient becomes significant and positive when you take inflation rates with a lag of 18-24 months behind the money supply. As John Greenwood and Steve Hanke explain in opinion for Wall Street Journal, According to monetarism, asset-price inflation should have occurred with a lag of one to nine months. Then, with a lag of six to 18 months, economic activity should have started to pick up. Lastly, after a lag of 12 to 24 months, generalized inflation should have set in. If this relationship is true, then inflation won’t go away anytime soon. After all, the money supply accelerated in March 2020 and peaked in February 2021, growing at more than four times the “optimal” rate that would keep inflation at the 2-percent target, according to Greenwood and Hanke. In line with the monetarist description, the CPI rates accelerated in March 2021, exactly one year after the surge in the money supply. So, if this lag is stable, the peak in inflation rates should happen in Q1 2022, and inflation should remain elevated until mid-2022 at least. What does it mean for the gold market? Well, if the theory of inflation outlined above is correct, elevated inflation will stay with us for several more months. Therefore, it’s not transitory, as the central bank tells us. Instead, inflation should remain high for a while, i.e., as long as the money supply growth won’t slow down and go back below 10% on a sustained basis. What’s more, the velocity of money, which plunged when the epidemic started, is likely to rise in the coming months, additionally boosting inflation. So, I would say that Milton Friedman would probably forecast more persistent inflation than Jerome Powell, allocating some of his funds into the yellow metal. Gold is, after all, considered to be an inflation hedge, and it should appreciate during the period of high and rising inflation. Although so far gold hasn’t benefited from higher inflation, this may change at some point. Actually, investors’ worries about inflation intensified in October, and gold started to show some reaction to the inflationary pressure. My bet is that the next year will be better for gold than 2021: the Fed’s tightening cycle will already be inaugurated, and thus traders will be able to focus on inflation, possibly shifting the allocation of some of their funds into gold as a safe-haven asset. Thank you for reading today’s free analysis. We hope you enjoyed it. If so, we would like to invite you to sign up for our free gold newsletter. Once you sign up, you’ll also get 7-day no-obligation trial of all our premium gold services, including our Gold & Silver Trading Alerts. Sign up today! Arkadiusz Sieron, PhDSunshine Profits: Effective Investment through Diligence & Care.
Betting on Hawkish Fed

Betting on Hawkish Fed

Monica Kingsley Monica Kingsley 23.11.2021 15:46
S&P 500 reversed from fresh ATHs as spiking yields sent tech packing. Value didn‘t soar, but held up considerably better – still, stock bulls are getting on the defensive. Markets have interpreted the Powell nomination as a hawkish choice. I‘ve written the prior Monday:(…) the Fed is still printing a huge amount of money on a monthly basis, and it remains questionable how far in tapering plans execution they would actually get – I see the risks to the real economy coupled with persistently high inflation as rising since the 2Q 2022 (if not since Mar already, but most pronounced in 2H 2022.Inflation hasn‘t moved to the Fed‘s sights, and yesterday‘s rection in yields and precious metals is a bit too harsh. While rates are on a rising path as I‘ve written yesterday, precious metals overreacted. True, the bullish argument for the dollar stepped to the fore as yields differential between the U.S. and the rest of the world got more positive, and at the same time, various yield spreads keep compressing. That‘s a reflection of less favorable incoming economic data. Just as much as Friday‘s reaction was about corona economic impact projections, yesterday‘s one was about monetary policy anticipation.Inflation expectations though barely budged – the decline doesn‘t count as trend reversal. CPI isn‘t done rising, and the more forward looking incoming data (e.g. producer prices) would confirm there is more to come. All in all, it looks like precious metals (and to a smaller degree commodities), are giving Powell benefit of the doubt, which I view to be leading to disappointment over the coming months. Should Powell heed the markets‘ will, the real economy would weaken dramatically, forcing him to make a sharp dovish turn – and he would, faster than he flipped since getting challenged in Dec 2018.We‘re experiencing an overreaction in real assets – as stated yesterday:(…) the Fed would have to reverse course once the tapering effects start biting some more – not now, with still more than $100bn monthly addition. Cyclicals and commodities that had massively appreciated vs. year ago (oil doubled), are feeling the pinch of fresh economic activity curbs speculation in spite of the polar shift of U.S. strength in energy of 2019 and before. Begging the OPEC+ to increase production might not do the trick, and with so much inflation already in (and still to come), the key investment theme is of real assets strength.Precious metals have broken out, are no longer an underdog, and the inflation data will not decelerate for quite a few months still. And even as they would, it would come at a palpable cost to the real economy, and the resolute fresh stimulus action wouldn‘t be then far off. As I wrote in Apr 2020, it‘s about the continuous stimulus that‘s the go-to response anytime the horizon darkens, for whatever reason. Wash, rinse, repeat.Let‘s move right into the charts (all courtesy of www.stockcharts.com).S&P 500 and Nasdaq OutlookS&P 500 bulls lost the momentary upper hand, and value recovery isn‘t yet strong enough to carry it forward. A less heavy move in bonds – temporary yields stabilization – would be needed to calm down stock market nerves.Credit MarketsTreasuries held up best, and that‘s characteristic of a very risk-off sentiment. The low volume in HYG isn‘t a promise of much strength soon returning.Gold, Silver and MinersPrecious metals turned sharply lower, and haven‘t stabilized yet. Bond market pressures are keenly felt even though inflation expectations didn‘t follow with the same veracity. The next few days will be really telling.Crude OilCrude oil bulls have made a good move, and more strength needs to follow. The fact that it would be happening when the dollar is strengthening, and many countries are tapping their strategic reserves, bodes well for black gold‘s recovery.CopperCopper springboard bulding goes on, and the CRB Index isn‘t tellingly yielding – the hawkish Fed bets better be taken with a (at least short-term) pinch of salt.Bitcoin and EthereumBitcoin and Ethereum are still going sideways, and today‘s resilience is a good omen – across the board for risk assets.SummaryS&P 500 bulls need tech to come alive again, and odds are it would with a reprieve in spiking yields. While bond markets are getting it right, yesterday‘s fear in corporate bonds was a bit too much – the Fed isn‘t yet in a position to choke off the real economy through slamming on the breaks. Markets are prematurely speculating on that outcome, which would be a question of second or third quarter next year. Treasuries have though clearly topped, and stocks do top with quite a few months‘ lag – we aren‘t there yet. Enjoy the commodities ride, and confidence gradually returning to precious metals.Thank you for having read today‘s free analysis, which is available in full at my homesite. There, you can subscribe to the free Monica‘s Insider Club, which features real-time trade calls and intraday updates for all the five publications: Stock Trading Signals, Gold Trading Signals, Oil Trading Signals, Copper Trading Signals and Bitcoin Trading Signals.
Article by Decrypt Media

More Public Debt Is Coming. Another Gold’s Rally Ahead?

Arkadiusz Sieron Arkadiusz Sieron 23.11.2021 15:13
  Democrats are not slowing down - the social spending bill follows the infrastructure package. Will gold benefit, or will it get into deep water? Will the American spending spree ever end? On Monday last week (November 15, 2021), President Biden signed a $1 trillion infrastructure package, and just a few days later, Biden’s social spending bill worth another $1.75 trillion passed the US House of Representatives. Apparently, $1 trillion was not enough! Apparently, we don’t already have too much money chasing too few goods. No, the economy needs even more money! Yes, I can almost hear the lament of American families: “we need more money, we already bought everything possible, we already own three cars and a lot of other useless crap, but we need more! Please, the almighty government, give us some bucks, let your funds revive our land”. Luckily, the gracious Uncle Sam listened to the prayers of its poor citizens. Given the above, one could think that the US economy is not already heavily indebted. Well, it’s the exact opposite. As the chart below shows, the American public debt is more than $27 trillion and 125% of GDP, but who cares except for a few boring economists? Of course, neither infrastructure nor spending bill will increase the fiscal deficits and overall indebtedness to a similar extent as the pandemic spending packages. These funds will be spread over years. Additionally, the fiscal deficit should narrow in FY 2022 as pandemic relief spending phases out (this is already happening, as the chart below shows), while the economic recovery combined with inflation tax bracket creep increases tax revenues. However, both of Biden’s bills will increase indebtedness, lowering the financial resilience of the US economy. What’s more, the overall debt is much larger than the public debt I focused on here. Other categories of debt are also rising. For instance, total household debt has jumped 6.2% in the third quarter of 2021 year-over-year, to a new record of $15.2 trillion.   Implications for Gold What does the fiscal offensive imply for the precious metal market? In the short run, not much. Fiscal hawks like me will complain, but gold is a tough metal that does not cry. Both of Biden’s pieces of legislation have been widely accepted, so their impact has already been incorporated into prices. Actually, the actual bills could be even seen as conservative – compared to Biden’s initial radical proposals. In the long run, fiscal exuberance should be supportive of gold prices. The ever-rising public debt should zombify the economy and erode the confidence in the US dollar, which could benefit the yellow metal. However, the empire collapses slowly, and there is still a long way before people cease to choose the greenback as their most beloved currency (there is simply no alternative!). So, it seems that, in the foreseeable future, gold’s path will still be dependent mainly on inflation worries and expectations of the Fed’s action. Most recently, gold prices have stabilized somewhat after the recent rally, as the chart below shows. Normal profit-taking took place, but gold found itself under pressure also because of the hawkish speech by Fed Governor Christopher Waller. He described inflation as a heavy snowfall that would stay on the ground for a while, rather than a one-inch dusting: Consider a snowfall, which we know will eventually melt. Snow is a transitory shock. If the snowfall is one inch and is expected to melt away the next day, it may be optimal to do nothing and wait for it to melt. But if the snowfall is 6 to 12 inches and expected to be on the ground for a week, you may want to act sooner and shovel the sidewalks and plow the streets. To me, the inflation data are starting to look a lot more like a big snowfall that will stay on the ground for a while, and that development is affecting my expectations of the level of monetary accommodation that is needed going forward. So, brace yourselves, a janitor is coming with a big shovel to clean the snow! Just imagine Powell with a long-eared cap, gloves, and galoshes giving a press conference! At least the central bankers would finally do something productive! Or… maybe shoveling is not coming! Although the Fed may turn a bit more hawkish if inflation stays with us for longer than expected previously, it should remain behind the curve, while the real interest rates should stay ultra-low. The December FOMC meeting will provide us with more clues, so stay tuned! If you enjoyed today’s free gold report, we invite you to check out our premium services. We provide much more detailed fundamental analyses of the gold market in our monthly Gold Market Overview reports and we provide daily Gold & Silver Trading Alerts with clear buy and sell signals. In order to enjoy our gold analyses in their full scope, we invite you to subscribe today. If you’re not ready to subscribe yet though and are not on our gold mailing list yet, we urge you to sign up. It’s free and if you don’t like it, you can easily unsubscribe. Sign up today! Arkadiusz Sieron, PhDSunshine Profits: Effective Investment through Diligence & Care
Tech Sell-Off Continues

Tech Sell-Off Continues

Marc Chandler Marc Chandler 23.11.2021 22:41
November 23, 2021  $USD, EMU, Federal Reserve, Oil, OPEC+, SPR, UK, US Overview:  The markets are unsettled.  Bond yields have jumped, tech stocks are leading an equity slump, and yesterday's crude oil bounce reversed.  Gold, which peaked last week near $1877, has been dumped to around $1793.  The tech sell-off in the US carried into the Asia Pacific session, and Hong Kong led most markets lower.  The local holiday let Japanese markets off unscathed, though the Nikkei futures are off about 0.4%.  Australia and India managed to post minor gains as the MSCI Asia Pacific Index fell for the fourth time in five sessions.  Europe's Stoxx 600 has slid around 1.5% today, its fourth consecutive decline, but has clawed back nearly half the gains.  It is the longest retreat in two months.  US futures are lower, with the NASDAQ leading the move.   Near 1.64%, the US 10-year yield is at the upper end of this month's range.  Last month it reached 1.70%.  European bond yields are mostly 4-6 bp higher, and peripheral spreads have widened a little.  The dollar is sitting in the middle of the major currencies.  The dollar bloc, sterling, and the Norwegian krone, which are the risk-on, levered to growth currencies, are weaker.  The euro, yen, and Swiss franc are little changed but firmer.  The dollar briefly traded above JPY115.00 in Asia, without Tokyo,  before being pushed back. The steady euro has taken some pressure off most of the regional currencies.  The Turkish lira has been in a virtual freefall following President Erdogan's spirited defense of his efforts to drive down rates.    There was around 10 lira to the dollar in the middle of November.  Today, at its peak, there is about 12.48 lira to the dollar.   Asia Pacific Over the weekend, Japan expressed willingness to cap its strategic reserves.  Press reports indicated yesterday that India is amenable to coordinating a release of some of its oil stocks.  South Korea may also participate.  It has been under consideration for a couple of weeks, at least, in the US, and China appears willing to repeat September's release of crude from its reserves.  However,  it seems naive to have expected OPEC+ to simply standby.  January WTI posted a bearish outside down day ahead of the weekend by trading on both sides of the previous day's range and settling below the previous session's low.  Follow-through selling yesterday took it down about $1.20 from the close, but when OPEC+ announced that a coordinated release of the oil could prompt it to reconsider its own plans.  It is to meet next week to review its strategy. Through yesterday's low, January WTI had retreated by nearly 11% from the October 25 higher near $83.85.   A band of resistance is seen between $78 and $80.   OPEC+ had previously agreed to boost output by 400k barrels a day per month to restore pre-pandemic output levels.  That said, not all the members can produce their quota, leading to a shortfall.  OPEC+, the IEA, and EIA all seem to agree that supply-demand considerations shift in next year, and the market will once again be in oversupply.  Moreover, OPEC+ argues that the real dislocation is not with oil as its with gas.   The US imports about 2.9 mln barrels a day, India, about 4.2 mln, and Japan, about 3.1 mln barrels a day.  South Korea imports around 2.5 mln barrels a day.  Together it is around 12.7 mln barrels a day of imports.   If together, 100 mln barrels are released, about eight days of imports would be covered.  This is a high estimate.  India, for example, has indicated it may release 5 mln barrels.   Australia's flash November PMI was better than expected.  Manufacturing edged up to 58.5 from 58.2, while services rose to 55.0 from 51.8.  This produced a 55.0 composite reading, a gain from 52.1 in October.  Recall, the pandemic and lockdown led to weakness in the economy in the May-August period.  The composite PMI bottomed in August at 43.3.  It has risen for three months but remains well off the peak in April of 58.9.  Separately, New Zealand real retail sales were hit in Q3 by the social restrictions, but the drop was not quite as bad as feared.  Reall retail sales fell 8.1% after a 3.3% increase in Q2.  Economists (Bloomberg median) had anticipated a 10.5% pullback.  The RBNZ meets the first thing tomorrow and is widely expected to hike 25 bp, to lift the cash rate to 0.75%. There is still a slight bias toward a larger move in the swaps market.   The dollar briefly traded above JPY115.00 for the first time since March 2017.  We note that Japanese dealers were on holiday and did not participate in the move.  As risk-off sentiment took over, the dollar was sold back to JPY114.50.  Resistance in Europe has been found near JPY114.80.  Note that there is an option for about $980 mln at JPY115.50 that expires tomorrow.  The Australian dollar initially edged lower to almost $0.7210, its lowest levels since October 1 before steadying. A break of $0.7200 signals a retest of the late September low near $0.7170.  Initial resistance is seen in the $0.7230-$0.7250 area.  The PBOC is sending plenty of verbal signals that it does not want to see strong yuan gains, and today's fixing underscores that point.  The dollar's reference rate was set at CNY6.3929, wider than usual above the market expectation (Bloomberg) for CNY6.3904.  The greenback is firm inside yesterday's range.  Caution is advised here as the PBOC could escalate its disapproval.   Europe The flash EMU November PMI was better than expected.  The aggregate manufacturing PMI rose to 58.6 from 58.3.  The market anticipated a decline.  The service PMI rose to 56.6 from 54.6, also defying expectations for a sequentially weaker report.  The composite snapped a three-month slide and rose to 55.8 from 54.2.   The cyclical peak was in July at 60.2.    A flash release is made for Germany and France.    German manufacturing slowed slightly (57.6 from 57.8) and held up better than expected (Bloomberg median 56.9).  Services actually improved (53.4 from 52.4).  The composite rose to 52.8 from 52.0 to end a three-month downdraft after peaking in July at 62.4.  French numbers were even better.  The manufacturing PMI rose to 54.6 from 53.6.  The service PMI rose to 58.2 from 56.6.   The composite improved to 56.3 from 54.7 to snap a four-month fall.  Recall that yesterday the Bundesbank warned that the German economy may practically stagnate this quarter and that inflation may approach 6% this month.   The UK's flash PMI was more mixed.  The manufacturing PMI had been expected to have slowed but instead improved for the second consecutive month (58.2 from 57.8).  Services were nearly as weak as anticipated slipping to 58.6 from 59.1.  The composite eased slightly to 57.7 from 57.8, ending a two-month recovery from the June-August soft patch.  Meanwhile, Prime Minister Johnson's rambling speech yesterday hurt people's ears, and in terms of substance,  the changes to social care funding that may result in lower-income people having to sell homes to pay for support did not go over well.  It is spurring talk of a possible cabinet reshuffle.  The euro has edged to a new low for the third session today, slipping to almost $1.1225 before catching a bid that lifted it back to $1.1275.  There is an option for around 765 mln euros at $1.1220 that expires today.  The nearby cap is seen in the $1.1290-$1.1310 area.   The euro may struggle to sustain upticks ahead of tomorrow's US PCE deflator report (inflation to accelerate).    Sterling met new sellers when it poked above $1.3400. It has ground lower in the European session, and sterling fell to almost $1.3355.  Note that the low for the year and month was set on November 12, slightly above $1.3350.  We see little chart support below there until closer to $1.3165.   America We suspect many pundits exaggerated the link between the renomination of Powell for a second term and the sell-off in US debt and technology shares.  First, it was not a surprise.  Second, it assumes a substantive difference in the conduct of monetary policy between Powell and Brainard.  There isn't.  The difference was on regulatory issues and on the role of climate change.  Third, the idea that the Fed may accelerate its bond purchases next month was sparked by the high CPI reading on November 10.  Yesterday, Bostic joined fellow Fed President Bullard.  Two governors (Clarida and Waller) also seem to be moving in that direction (Waller may be faster than Clarida). The fact or the matter, nearly all of the high-frequency data for October, including employment, auto sales,  retail sales, industrial production, and inflation, came in higher than expected.  The US sees the preliminary November PMI today.  It is expected to have risen for the second consecutive month after fall June-September.   The reception to yesterday's US two- and five-year note auctions was relatively poor.  The higher yields (compared with the previous auctions) did not produce better bid-cover ratios.  Today the Treasury comes back with $55 bln seven-year notes and re-opens the two-year floater.  Many observers see the debt ceiling constraint being likely an early 2022 problem rather than this year.  Still, tomorrow's sale of the four-week bill may be the test.  Recall that at last week's auction, the 4-week bill yield doubled to 11 bp.   Europe's virus surge and social restrictions became a market factor last week.  Many think that the US is a few weeks behind Europe.  The seven-day infliction rate in the US rose 18% week-over-week.  Several states, including Colorado, Minnesota, and Michigan, are being particularly hard hit.  Nationwide 59% of Americans are reportedly fully vaccinated. However, it leaves about 47 mln adults and 12 mln teens unvaccinated.  The risk-off mood and the drop in oil prices are helping the US dollar extend its gains against the Canadian dollar.  The greenback, which started the month below CAD1.24, is now pushing close to CAD1.2750 to take out last month's high.  A move above here would target CAD1.28 and then the September high near CAD1.2900.  Still, the market is getting stretched, and the upper Bollinger Band is slightly below CAD1.2730.  The risk-off mood does not sit right with the Mexican peso either.  The dollar settled above MXN21.00 yesterday, its highest close in eight months.  The same forces have lifted it to MXN21.1250 today. However, the anticipated gain in September retail sales (0.8% Bloomberg median after a flat report in August) may not give the peso much support if the risk-off continues. The high for the year was set on March 8 near MXN21.6360.   Disclaimer
Intraday Market Analysis – EUR Stays Under Pressure

Intraday Market Analysis – EUR Stays Under Pressure

John Benjamin John Benjamin 24.11.2021 09:15
EURUSD struggles to rebound The euro bounced back after PMI readings in the eurozone exceeded expectations. The pair is testing July 2020’s lows around 1.1200. The RSI’s oversold situation on the daily chart may limit the downward pressure for now. We can expect a ‘buying-the-dips’ crowd as price action stabilizes. Sentiment remains fragile though and sellers may fade the next rebound. The bulls will need to lift 1.1360 before a reversal could take shape. Failing that, a bearish breakout would trigger a new round of sell-off towards 1.1100. NZDUSD lacks support The New Zealand dollar softened after the RBNZ met market expectations and raised its cash rate by 25bps. The downward pressure has increased after 0.6980 failed to contain the sell-off. The pair has given up all gains from the October rally, suggesting a lack of interest in bidding up the kiwi. An oversold RSI caused a rebound as short-term traders took profit and the bears were swift in selling into strength. The directional bias remains bearish unless 0.7010 is cleared. The September low at 0.6860 is the next support. UKOIL bounces back Brent crude recovers on speculation that OPEC+ may lower production to counter a release of strategic reserves. A break below 79.30 has shaken out the weak hands. The price has met buying interest over the daily demand zone around 77.70, which coincides with last July’s peak. A surge above 82.00 puts the bears on the defensive. Short-covering would exacerbate short-term volatility. An overbought RSI may cause a brief pullback. Then 85.50 is a key hurdle before the uptrend could resume.
Market Quick Take - November 22, 2021

Market Quick Take - November 22, 2021

Saxo Bank Saxo Bank 22.11.2021 10:04
Summary:  Equity markets closed last week somewhat mixed, but the Asian session was mostly strong on indications that the Chinese PBOC is shifting its attitude on monetary policy toward easing. Elsewhere, the difficult wait for the Fed Chair nomination news continues this week ahead of the US Thanksgiving holiday on Thursday. Crude oil bounced after finding support overnight, but the risk of SPR release and Covid demand worries still linger. What is our trading focus? Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) - a new week following a new all-time high in US equities on the close on Friday, which is starting with Nasdaq 100 futures opening up higher trading around the 16,610 level in early European trading. Last week showed that investors and traders are utilizing the Covid-19 lockdown playbook selling off physical companies while buying online companies that are better equipped to navigate new lockdowns in Europe. With the US 10-year yield remaining in a range around the 1.55% there is nothing from preventing equities from extending recent gains. EURUSD and EURGBP – new Covid restrictions across Europe, which has become the center of the latest Covid wave, have crimped sentiment for the euro, as has the still very elevated power and natural gas prices. EURUSD has traded back down toward the lows of the cycle near 1.1265 overnight, with the next psychological magnet lower likely the 1.1000 area as long as the big 1.1500 break level continues to provide resistance. In EURGBP, last week saw the break of the prior major pivot low near 0.8400, with the next objective the post-Brexit vote low near 0.8275. USDJPY – threatened support on Friday on a spike lower in long US treasury, but a reversal of much of that action by this morning in late Asian trading is likewise seeing USDJPY trying to recover back into the higher range, with a focus on the recent top just short of 115.00. We likely need for long US treasury yields to sustain a move higher to support a major foray above this huge 114.5-115.00 chart area, which has topped the market action since early 2017. Meanwhile, if risk sentiment worsens further in EM and darkens the outlook for JPY carry trades there, while US treasuries remains rangebound or head lower, the JPY could squeeze higher as the speculative interest is tilted heavily short. Gold (XAUUSD) extended Friday’s drop below $1850 overnight, before bouncing ahead of key support in the $1830-35 area. The risk of a quicker withdrawal of Fed stimulus supporting real yields and the dollar has for now reduced gold's ability to build on the technical breakout. However, the price softness on Friday helped attract ETF buying with Bloomberg reporting a 10 tons increase, the biggest one-day jump since January 15. Gold’s biggest short-term threat remains the tripling of futures long held by funds during the past seven weeks to a 14-month. Most of that buying being technical driven with the risk of long liquidation now looming on a break below the mentioned support level.   Crude oil (OILUKJAN22 & OILUSDEC21) opened softer in Asia after Friday’s big drop but has so far managed to find support at $77.85, the previous top from July. The market focus has during the past few weeks shifted from the current tight supply to the risk of a coordinated reserve release, a renewed Covid-driven slowdown in demand and recent oil market reports from the EIA and IEA pointing to a balanced market in early 2022. Speculators who for the last six weeks have been net sellers of crude oil futures cut their combined WTI and Brent long to a three-month low in the week to November 16. Focus on SPR and Covid risks this week US treasuries (SHY, IEF, TLT). Government bond yields worldwide dropped as new lockdown measures were imposed in Austria on Friday. Ten-year yields tumbled to 1.55%, and they are likely to continue to trade range-bound as the debt ceiling issue will continue to compress long-term yields as volatility peaks in money markets. Investors will focus on this week’s PCE index, FOMC minutes and any news regarding a change of leadership of the Federal Reserve. If Brainard is appointed as Fed chair, the market will expect low rates for longer, thus inflation expectations will advance putting upward pressure on yields. Thus, it is unavoidable to continue to see the 5s30s continue to flatten. German Bunds (IS0L). We expect European sovereigns, in general, to continue to benefit from news related to a surge of Covid cases and lack of collateral as the year ends. Yet, the perception of inflation is changing among ECB members with Isabel Schnabel last week saying that the central bank will need to be ready to act if inflation proves more durable. Therefore, as we enter in the new year, and collateral shortages will be eased, we anticipate spreads to resume their widening. What is going on? Fed Vice Chair Clarida suggests faster Fed taper - in comments on Friday, suggesting that the December FOMC meeting could speed the pace at which the Fed will reduce its asset purchases. “I’ll be looking closely at the data that we get between now and the December meeting...It may well be appropriate at that meeting to have a discussion about increasing the pace at which we are reducing our asset purchases.” China’s central bank signals that it may ease policy. In a monetary policy report from Friday, the PBOC dropped language from prior reports, including phrase suggesting that the bank will maintain “normal monetary policy” and a promise not to “flood the economy with stimulus”. This comes in the wake of considerable disruption in the property sector as the government cracks down on an overleveraged property sector. Asian equities were mostly higher on the news, especially in Korea, although the Hang Seng index was slightly in the red as of this writing. Ericsson to acquire cloud provider Vonage in $6.2bn deal. This pushes the Swedish telecommunication company into the cloud communication industry seeking to add more growth to the overall business. Vonage has delivered 11% revenue growth in the past 12 months hitting $1.4bn with an operating margin of 10.4%. Global proceeds from IPOs hit $600bn in record year. This is the biggest amount since 2007 and almost 200% above the level in 2019 highlighting the excessive risk sentiment in equities. More confusing signals from Bank of England. Governor Bailey said in an interview for the Sunday Times that risks to the country are “two-sided” at the moment as growth slows and inflation rises, and that the cause of inflation problems is supply side constraints and that “monetary policy isn’t going to solve those directly.” Similarly, BoE Chief Economist Huw Pill said on Friday that the Bank of England said that the weight of evidence was shifting in favour of rate hikes but that he has not yet made a decision, encouraging observers to focus on the longer term rather than meeting-to-meeting decision. US shared intelligence with allies suggesting potential for Russia to invade Ukraine - according to Bloomberg sources. The intelligence noted up to 100,000 soldiers could be deployed in such a scenario, and that some half of that number are already in position.  Russian president Vladimir Putin denied Russia intends to invade, but seemed to pat himself on the back for “having gotten the attention of the US and is allies, which he accused of failing to take Russia’s ‘red lines’ over Ukraine seriously”, as the article puts it. What are we watching next? Who will US President Biden nominate to head the Fed next February? Powell is still seen as more likely to get the nod that Brainard by roughly two to one, and this Fed Chair nomination issue is hanging over the markets, as the current Fed chair term ends in early February and from comments made last week by President Biden, an announcement could come any day. One uncertainty that would come with a Brainard nomination is the potential difficulty of having her nomination approved by the Senate. The nomination news could generate significant short-term volatility on the choice of the nominally more dovish Lael Brainard over current Fed Chair Powell, though we see little difference in the medium-longer term implications for monetary policy, and the Fed is likely to get a prominent new regulatory role either way (under Brainard or someone else if she is nominated to replace Powell). Will Germany announce a Covid lockdown? - Friday saw some volatility on Austria’s announcement of a full Covid lockdown, with Germany’s health minister saying that a similar move in Germany could not be ruled out. Later that day, that was contradicted by comments from another minister. Meanwhile, resistance against Covid restrictions has turned violent in Netherlands. Earnings Watch – the number of important earnings is falling rapidly, but this week Tuesday is the most important day with key earnings from Xiaomi, XPeng and Kuaishou, both important Chinese technology companies. Also on Tuesday, US companies such as Medtronic, Autodesk and Dell Technologies are worth watching. Monday: Sino Pharmaceutical, Prosus, Zoom Video, Agilent Technologies Tuesday: Xiaomi, Kuaishou Technology, Compass Group, Medtronic, Analog Devices, Autodesk, VMWare, Dell Technologies, XPeng, HP, Best Buy, Dollar Tree Wednesday: Deere, Thursday: Adevinta Friday: Meituan, Pinduoduo Economic calendar highlights for today (times GMT) 0900 - Switzerland SNB weekly sight deposit data1330 – US Chicago Fed Oct. National Activity Index1500 – US Oct. Existing Home Sales1730 – ECB's Guindos to speak2145 – New Zealand Q3 Retail Sales2200 – Australia Nov. Flash Services & Manufacturing PMI0105 – Australia RBA’s Kohler to speak Follow SaxoStrats on the daily Saxo Markets Call on your favorite podcast app: Apple Spotify Soundcloud Sticher
FX Update: USD remains firm, RBNZ taps brakes on expectations

FX Update: USD remains firm, RBNZ taps brakes on expectations

John Hardy John Hardy 24.11.2021 13:44
Summary:  The US dollar remains firm after the news of Fed Chair Powell getting the nod for a second term on Monday, but a more aggressive extension of its recent strength is avoided as US yield rises were tempered yesterday. Elsewhere, a less hawkish than expected RBNZ saw the kiwi sharply weaker as the market removed a chunky bit of forward rate hike expectation on the latest guidance. FX Trading focus: USD follows US yields higher in the wake of Powell getting nod for 2nd term The US dollar strengthening in the wake of President Biden’s announcement that he would tap Jay Powell for a second term as Fed Chair extended modestly yesterday and into this morning, somewhat tempered by a strong US 7-year treasury auction taking the steam out rises in yields yesterday – with the 7-year benchmark actually notching new highs for the cycle before retreating in the wake of the auction. The more widely tracked 10-year US treasury yield benchmark is still rangebound below the October pivot high of 1.7% and the post-pandemic outbreak high of 1.75%  from the end of March. This has kept USDJPY from extending notably above the sticky 115.00 area of the moment. Elsewhere, the euro remains relatively weak despite ECB Vice President de Guindos out speaking and hinting some concern on inflation rises: “the ECB is continuously pointingout that the inflation rebound is of a transitory nature....However, we have also seen how in recent months these supply factors are becoming more structural, more permanent.” But just this morning we also have the ECB’s Holzmann out saying that inflation is likely to slow from next year. Later today we will get the expected German government coalition deal (SPD’s Scholz as Chancellor with Green’s Baerbock reportedly set for the foreign minister post and importantly, the liberal LDP’s Lindner set to lead the finance ministry), with a press conference set for 3 p.m. EURJPY and EURUSD are heavy this morning and note that  the 128.00 level in EURJPY is a well-defined range low, while EURUSD doesn’t have notable  support until well below 1.1200 and arguably not until psychological levels like 1.10. With covid spiking and a galloping energy crisis, I don’t envy the new German leadership. Overnight, the Reserve Bank of New Zealand waxed a bit more cautious than was expected by the market, and not only by raising the rates 25 basis points rather than the 50 basis points that a minority were expecting to see. In the central bank’s new statement, the bank strikes a more cautious tone: yes, clearly further rate hikes are set for coming meetings, but the bank is clearly in a wait and see mode, given the tightening of financial conditions already in the bag and that which the market has already priced in: “the Committee expressed uncertainty about the resilience of consumer spending and business investment....(and) also noted that increases in interest rates to householdsandbusinesses had already tightened monetary conditions. High levels of household debt, and a large share of fixed-rate mortgages re-pricing in coming months, could increase the sensitivity of consumer spending to these interest rate increases.” Later today, we have a stack of US data releases crammed into today because of the Thanksgiving holiday tomorrow (and for most, Friday as well). The most important of these is the October PCE Infation data print. Not expecting much from the FOMC minutes later as all eyes are on whether we are set for an acceleration of the QE taper at the December FOMC meeting, with some arguing that Powell and company have more room to move and administer a bit more hawkish message, if they so desire, as the nomination news is out of the way and this reduces hyper-sensitivity to bringing any message that could risk cratering market sentiment. Chart: AUDNZDThe 2-year yield spread between Australia and New Zealand has risen sharply in recent days and especially overnight, where the more cautious than expected tones from the RBNZ inspired a 14 basis point drop in 2-year NZ yields. The price action in AUDNZD was sympathetic with the rally back toward local resistance near 1.0450, though the rally needs to find legs for a move up to 1.0600 at least to indicate we may have put a structural low in with a double bottom here. A brighter relative outlook for  Australia could be in the cards if China is set to stimulate and raise steel output, the anticipation of which has already sharply lifted iron ore prices this week, a key indicator for the Aussie. No notable expectations for the Riksbank tomorrow – as the central bank is expected to wind down its balance sheet expansion next year, while the policy forecast is thought to be in play (perhaps a late 2024 lift-off built into expectations, though the market is ahead of that as 2-year Swedish swap rates have risen close to 30 basis in recent weeks. This is the area where the Riksbank can surprise in either direction relative to expectations). The EURSEK rally has now reversed the entirety of the prior sell-off leg and double underlines the very weak sentiment on Europe, which remains “non-existential” in nature, i.e., so far the market is keeping this about policy divergence and dark clouds over the economic outlook, not about the longer term viability of the EMU, etc…, which in the past 2010-12 crisis inspired SEK upside as a safe haven. Table: FX Board of G10 and CNH trend evolution and strengthA bit of a relative pick-up in petro-currencies in the wake of yesterday’s oil rally, as the market bought the fact of US President Biden announcing a release of barrels from strategic reserves. Elsewhere, the NZD is losing relative altitude and the USD and especially CNH reign supreme. Table: FX Board Trend Scoreboard for individual pairs.Here, note AUDNZD flipping back to positive - a move that would be “confirmed” by a close solidly above 1.0450. Also note NOKSEK trying to flip positive on the latest oil rally, although beware the Riksbank meeting up tomorrow there. .Upcoming Economic Calendar Highlights (all times GMT) 1330 – US Weekly Initial and Continuing Jobless Claims 1330 – US Oct. Advance Goods Trade Balance 1330 – US Q3 GDP Revision 1330 – US Oct. Durable Goods Orders 1430 – UK BoE’s Tenreyro to speak 1500 – US Oct. PCE Inflation 1500 – US Final University of Michigan Sentiment Survey 1500 – US Oct. New Home Sales 1900 – US FOMC Meeting Minutes
Turkey gets a Reprieve before US Thanksgiving, but Capital Strike may not be Over

Turkey gets a Reprieve before US Thanksgiving, but Capital Strike may not be Over

Marc Chandler Marc Chandler 24.11.2021 14:28
November 24, 2021  $USD, Currency Movement, Germany, Japan, Mexico, RBNZ, Turkey Overview:  The dramatic collapse of the Turkish lira was like an accident one could not help look at, but it was not an accident, but the result of a disregard for the exchange rate and compromised institutions.  The lira was off around 15% at its worst yesterday, before settling 11.2% lower.  After falling for 11 sessions, it has steadied today (~2.7%)  but the capital strike may not be over.  On the other hand, the Reserve Bank of New Zealand delivered the 25 bp rate hike and seemed to give hawkish guidance, and yet the New Zealand dollar was sold and the worst-performing of the major currencies, off 0.65% through the European morning.  The tech losses on Wall Street yesterday weighed on Asia Pacific equities today, where the large markets fell but in China.  Europe's Stoxx 600 is less tech sensitive and is trying to snap a four-day air pocket, but early gains have been reversed. The US futures point to around a 0.5% lower opening.  The greenback has a firmer bias ahead of the full economic calendar ahead of tomorrow's holiday.  The yen is the notable exception.  The greenback rose to a new multi-year high near JPY115.25 but has come back offered and is straddling the JPY115 level in late morning turnover in Europe.  Emerging market currencies are mixed, though the JP Morgan Emerging Market Currency Index is firmer after six consecutive down sessions.  Gold is steadying after a four-day drop that took it from around $1870 to about $1782. Oil extended yesterday's recovery after the concerted agreement to release strategic reserves from six countries but is struggling to sustain the upside momentum.  The market was unimpressed with the new supply and had it (and more?) discounted.  European (Dutch) gas rose 8% yesterday and remains firm today.  Iron ore prices are higher for the fourth session, during which time it has risen by around 20%.  Copper is also firmer for the second session.  It is up about 4.5% from the middle of last week's low.   Asia Pacific The Reserve Bank of New Zealand hiked its cash rate 25 bp to 0.75%.  It was widely expected, and many had leaned to a 50 bp move.  The forward guidance saw the cash rate at 2.0% at the end of next year.  The swaps market had this nearly priced in as well.  This might help explain the profit-taking on the New Zealand dollar.  The 2-year yield fell 14 bp, and the 10-year yield eased by 5.5 bp.  New Zealand stocks defied the regional pressure and rose by about 0.6%.   Japan's economy is recovering. The economy contracted by 0.8% in Q3, but after a slow start, the vaccination program has been successful.  It has allowed a re-opening of the economy.  This is evident in the flash PMI report.  The manufacturing PMI rose to 54.2 from 53.2, and the services PMI improved to 52.1 from 50.7.  The composite new stands at 52.5 (from 50.7) and represents a new cyclical high.  Recall that it bottomed in August at 45.5.  The fiscal support being offered by the supplemental budget is pro-cyclical; it will accelerate the recovery.   The break of JPY115.00 has seen limited follow-through dollar buying.  It peaked near JPY115.25 in Asia and fell to around JPY114.80, where it has found a bid in European dealing.  The nearly $950 mln option that expires today at JPY115 has likely been neutralized (hedged/offset), and the one at JPY115.50 for $1.2 bln may be too far away to be impactful.  Our idea of a JPY113.-JPY115 range is being tested, but recall that earlier this month, the dollar has slipped to almost JPY112.70.  The range is not carved in stone, and some fraying is inevitable.  Still, a move above JPY115.50 would suggest that this consolidation since mid-October is over, and a new and higher range is likely.  Next:  JPY118-JPY120, maybe.  The Australian dollar leaked lower and briefly dipped below $0.7200 for the first time since October 1.  There is an option that is expiring today there for about A$355 mln.  It steadied after early Asia Pacific trading and approached the nearby cap near $0.7230.  A move above here would help the technical tone.  Officials appear to have broken the one-way trading in the yuan.  It has been alternating between gains and losses this week, but the movement has been small, and the yuan is virtually unchanged this week.  The reference rate was set at CNY6.3903, slightly more than the market expected (Bloomberg) of CNY6.3898.   Lastly, we note that South Korea is widely expected to hike the seven-day repo by 25 bp tomorrow, following a similar hike in August.   Europe It has taken the better part of the two months, but the new German coalition appears to have been agreed upon.  However, what the soon-to-be Chancellor Scholz is inheriting is a mess.  The Bundesbank warned recently that the economy may be stagnating this quarter (though the flash PMI yesterday did not confirm this), and inflation may be approaching 6%.  Moreover, the covid infection rate has reportedly doubled in the past two days.  The US CDC put Germany (and Denmark) on a heightened travel advisory.   As one would expect, this is taking a toll on sentiment.  The IFO investor survey showed this.  The current assessment fell to 99.0 from 100.2.  The expectations component eased to 94.2 from 95.4.  The assessment of the overall business climate stands now at 96.5, down from 97.7. After falling for the fifth consecutive month,  it is at the lowest level since April.   The euro's losses were extended to almost $1.12.  The weakness seems most pronounced in Europe, which lends credence to ideas that European financial firms are key sellers, which some related to year-end adjustments.  However, the three-month cross-currency basis swap has steadied since Monday, and pressure on the euro remains.   We note that the two-year US-German interest rate differential rose for the fourth consecutive session yesterday to reach 135 bp, the most since last March, but is steadying today.  Since the convincing break of $1.13, we do not see strong chart support until closer to $1.10.  Sterling made a margin new low for the year yesterday near $1.3345.  It remains stuck near there in quiet turnover.  The $1.3400 area offers nearby resistance.  Here we see little technical support until around $1.3165.  America The US holiday tomorrow is forcing a heavy data release schedule today.  Not all the data is of equal importance.  Of the first set of reports, the weekly jobless claims will command attention.  They have fallen for the past seven weeks and are at their lowest level since the pandemic (268k).  The November national employment report is due at the end of next week, and another 500k jobs were thought to have been filled.  The October trade balance and durable goods orders are notable.  Nearly all the October data has been reported better than expected.  Growth differentials warn of the risk of a wider trade shortfall.  The revisions to Q3 GDP (likely higher) are unlikely to capture much attention as it is too backward-looking.   The second batch of data may see a bigger market reaction, especially in the debt market.  The US is expected to report a jump in personal spending (consumption needs to accelerate if the economy strengthens this quarter).  Income is likely to recover a bit from the 1.0% drop reported in September.  The market may be most sensitive to the deflators.  Here inflation is set to accelerate.  The headline is projected to rise above 5%, while the core should peak above 4%.   Lastly, new homes sales surged 14% in September and maybe lucky to sustain those higher levels in October.  Late in the session, when many in the US may be winding down ahead of the holiday, the FOMC minutes from this month's meeting will be released.  The current focus is on the possibility that the Fed accelerates its tapering next month, and anything that sheds light on this could shape the market's reaction.    The US dollar reversed lower yesterday after reaching CAD1.2745.  It settled near its lows (~CAD1.2670), but there has been no follow-through selling, and the five-day moving average, which it has not closed below since November 15, held (~CAD1.2660). Initial resistance is seen now around CAD1.2700-CAD1.2720.  We note that Canadian bonds are under some pressure, and the 10-year yield is above 1.80%, the highest level since April 2019.  The dollar rose to MXN21.30 yesterday and remains firm, even if off the high today.  News that Mexico's President pulled the nomination of Herrera, the former finance minister, as the next central bank governor, injected some volatility into the peso.  Reports suggest that Herrera's nomination was retracted a few months ago but was kept confidential.  It is not clear what happens next.  Some suspect Herrera may still get the nomination.  It does not appear that any official statement or clarification has been provided.  The median seems to be playing up the likelihood of some announcement in the coming days.  Meanwhile, Mexico reports its bi-weekly CPI figures, and inflation is still accelerating.  Tomorrow's final Q3 GDP is expected to confirm that the economy contracted.  The dollar recorded the high for the year against the peso in March near MXN21.6360.   Disclaimer
Ahead Of The US CPI, Speaking Of Crude Oil And Metals - Saxo Market Call

Market Quick Take - November 26, 2021

Saxo Bank Saxo Bank 26.11.2021 09:25
Macro 2021-11-26 08:30 6 minutes to read Summary:  Fears linked to a new and different covid variant discovered in South Africa helped send a wave of caution over global markets overnight. Stocks in Asia and the US slumped, Treasuries rallied while the dollar traded near a 16-month high. Crude oil shed 3% and gold rose with the detection of the new covid strain. US markets will have a shortened session today as many are still away for the holiday, aggravating liquidity concerns ahead of the weekend. What is our trading focus? Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) - US equity futures shot lower from the moment they opened overnight on the new Covid variant news, a jolting development after Wednesday’s pre-Thanksgiving holiday closed seemed to show risk sentiment trying to make a stand after some early last week, and perhaps in part in anticipation of the traditionally strong seasonal run into the winter holidays in late December. Given poor liquidity today in the US as many are away from their desks for a long holiday weekend and the market is only for a half session, any significant flows by traders looking to reduce risk could mean significant volatility. Stoxx 50 (EU50.I) - the main European equity futures contract is down 3.2% on the news of a new more infectious Covid strain as it increases the probability of new lockdowns to safeguard hospitals. We observe the pandemic playbook in equities with technology and online companies falling less than physical companies such as miners, energy, and retailers. Stoxx 50 futures have broken below the 50% retracement level measured on the recent runup since early October. The next critical support levels are at 4,125 and 4,058. As this is a Friday, the liquidity situation could be significantly worsened and exacerbate intraday moves. USDJPY and JPY crosses – The huge shift in market mood overnight saw risk aversion sweeping across global markets driving US treasuries back higher and US yields lower, and triggering a huge jolt of JPY buying, as the JPY trading up against all of its G10 peers. USDJPY is well back below the 115.00 level that was broken overnight and the classic “risk proxy” AUDJPY was blasted for steep losses, with GPJPY also in particularly steep retreat. Another pair worth watching is EURJPY, where there is a well-defined range low near 128.00. Further risk aversion and falling yields could support a significant extension of the JPY rally if we are seeing a sustained change of mood here. Gold (XAUUSD) traded higher overnight as renewed Covid fears spread to financial markets with US Treasuries trading sharply higher, thereby reducing the threat that earlier in the week helped send gold crashing below $1835. A combination of high inflation and the economic risks associated with the new virus strain could provide renewed demand following the recent washout. US ten-year real yields slumped to –1.09% while the nominal yield dropped to 1.54% just days after threatening to break above 1.7%. From a technical perspective, a break above $1816 would signal renewed strength and a possible fresh challenge towards the $1830-35 resistance area. Crude oil (OILUKJAN22 & OILUSJAN21) slumped on renewed Covid concerns ahead of next week’s OPEC+ meeting. The market got caught up in a wave of caution overnight with Brent falling 3% as the new and fast mutating virus variant drives worries about renewed restrictions on mobility at the time when the existing delta is already triggering renewed lockdowns in Europe. Next week’s OPEC+ decision on production levels for January has suddenly been made extra hard with the risk of weaker Covid-related demand coming on top of the SPR release announcement earlier this week. US treasuries (SHY, IEF, TLT). A new Covid wave is leading investors to fly to safety provoking yields to drop roughly 10bps across the whole US yield curve. However, we expect the bond rally to be short-lived for several reasons. First, the market has learnt through earlier new strains that Covid is temporary. Secondly, a renewal of lockdown measures would make supply chain bottlenecks worse, introducing even more inflationary pressures to the economy. Therefore, it’s necessary for central banks to stop stimulating demand, keeping intact the recent Fed’s hawkish tilt. We expect more aggressive monetary policies beginning with an acceleration of the pace of tapering in December, followed by earlier interest rate hikes expectations. It will be inevitable for yields to resume their rise and the yield curve to bear flatten. Today investors will find poor liquidity in markets due to the Thanksgiving holiday, cautious will be needed. German Bunds (IS0L). The new German government unveiled a governing coalition deal. Among the extensive list of policies, bond investors should focus on the accommodative fiscal policies for 2022 and 2023, the beginning of a “decade of investment” and the rejection of a new lockdown amid a record rise of Covid cases. More spending translates to higher Bund yields. However, yields remain muted as Europe becomes the new epicenter of Covid-19 infections. With news of the new South Africa strain, yields might fall until we’ll have a full picture of what is happening. Italian BTPS (BTP10). Italian government bonds remained in check as governments in Europe move forward to impose new restrictions due to a rise Covid-19 infections. Yet, investors should remain vigilant as the PEPP program will still end in March. To weaken sentiment in BTP’s further is also the news that President Mattarella is going to vacate his position in January leaving a political vacuum. Parties are pushing Draghi to il Quirinale to get rid of him and go to early elections. If that were to happen, the stability that Italian BTPS enjoyed since Draghi entered in Italian politics will vanish provoking a fast widening of the BTPS-Bund spread. What is going on? What we know about the new Covid virus variant that’s hurting markets. The new Covid virus variant, with a scientific description of B.1.1.529 but with no Greek letter yet designated, has been identified in South Africa and observers fear that its significant mutations could mean that current vaccines may not prove effective, leading to new strains on healthcare systems and complicating efforts to reopen economies and borders. Researchers have yet to determine whether it is more transmissible or more lethal than already known variants. As of Thursday, 90% of 100 positive PCR tests in a specific area of South Africa were of the new variant. The South Korean central bank raised its policy rate 25 bps to 1.00% as expected and signaled further rate hikes to come, saying that rates are still accommodative after now having hiked twice for this cycle. The Swedish Riksbank kept rates at 0%, sees lift-off by the end of 2024. This is the first time the bank has indicated a positive rate potential in their policy forecast horizon. SEK tried to rally yesterday, but is stumbling badly overnight, with EURSEK is soaring this morning in correlation with the decline in global market sentiment, as the Swedish krona is very sensitive to the EU economic outlook and a weaker euro and to risk sentiment more generally. The 2021 EURSEK high near 10.33 is suddenly coming into view after the pair traded south of 10.00 less than two weeks ago. Australia Retail Sales leap 4.9% month-on-month versus 2.2% expected, as lockdowns ended across the country, but with the market is not in the right place to celebrate the news as new Covid strain fears elsewhere dominate the news flow and the Aussie traditionally trades weaker when risk sentiment tanks as it has done since last night. What are we watching next? This is a remarkable and violent shift in mood at an awkward time for markets - as the most liquid global market, the US, was out yesterday for a holiday and the Friday after Thanksgiving (today) usually sees the vast majority of traders and investors still on holiday, with the US equity market only open for a half session. Ahead of the weekend and with the new virus news afoot, markets may have a hard time absorbing new trading flows and the risk of gap-like moves rises. Black Friday consumer spending – retail sales during Black Friday today and over the weekend is often a good barometer on consumer confidence and causes big moves in retailers the following week as their weekend sales are announced. Earnings Watch – the new Covid-19 virus strain observed in South Africa is obviously overshadowing the two important earnings releases from Meituan and Pinduoduo, but they are important for investors investing in Chinese technology companies. Despite Chinese companies at the margin have fared better than expected on earnings in Q3, estimates for Q4 and beyond are still coming down. Friday: Meituan, Pinduoduo Economic calendar highlights for today (times GMT) 0800 – ECB President Lagarde to speak0830 – Sweden Oct. Retail Sales1300 – UK Bank of England Chief Economist Huw Pill to speak1330 – ECB Chief Economist Lane to speak   Follow SaxoStrats on the daily Saxo Markets Call on your favorite podcast app: Apple Spotify Soundcloud Sticher
Santa preparing to take back the reins of the market! | MarketTalk: What’s up today? | Swissquote

Silver on Christmas gift list

Korbinian Koller Korbinian Koller 26.11.2021 11:06
Monthly chart, Silver in US-Dollar, favorable timing: Silver in US-Dollar, monthly chart as of November 26th, 2021. Timing for a physical acquisition is in alignment as well. The monthly chart shows a high likelihood for November’s candle closing as an inverted hammer. Consequently, it provides for silver prices approaching the low end of the last 17-month sideways range near US$22. The white line assumes a potential price projection for 2022. Even if we are wrong with our assessment, a gift of silver for a long-term horizon is highly likely to appreciate from momentary levels to a much higher price target. Silver in US-Dollar, weekly chart, silver on Christmas gift list: Silver in US-Dollar, weekly chart as of November 26th, 2021. The value of a gift like this doesn’t stop there. Numismatics provides for children and teenagers a way to study history. Beautiful coins and bars inspire us to hold on to value for future times and encourage saving. The weekly silver chart shows in a bit more detail possible price expansion from a time perspective. This would be our most conservative picture of the future. The green bordered box is an entry zone for a potential reversal to the upside. With a high likelihood of an interest rate change by the Federal Reserve Bank in the second quarter of 2022, the inner yellow curve supersedes in probability for the expected time frame for a price increase. Silver in US-Dollar, daily chart, physical only, spot to risky: Silver in US-Dollar, daily chart as of November 26th, 2021. If you look at the daily chart above, you will find that we have seen a swift downward move in the past. Under our beauty principle, there is a good likelihood that this might occur again. If so, reaction times are much longer with a physical purchase than with spot price trading. Meaning there is no need to precision trade (precision purchase) physical silver, but be not spooked if a swift, extended decline might happen. Consequently, we are pointing this purchase out for physical acquisition only but do not advise taking a spot price position based on the risk.   Phase 1 drilling program at Guigui discovered not only the largest intrusive ever found in the district, but it’s the first mineralized skarn ever seen in Guigui! Silver on Christmas gift list: In this bargain hunting season around Black Friday, we find it is especially sensible to refocus and ask different questions. The human psyche is prone to give in to instant gratification, especially after the hard time the last two years provided. But with this much at stake for 2022, possibly being a year that sets a mark in history, it might be more prudent to look for wealth preservation in a longer time horizon to invest one’s fiat currencies rather than short-lived pleasures. After all, a careful look for generations to come, your children, is a view most valuable in general. Feel free to join us in our free Telegram channel for daily real time data and a great community. If you like to get regular updates on our gold model, precious metals and cryptocurrencies you can also subscribe to our free newsletter. This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision. The views, thoughts and opinions expressed here are the author’s alone. They do not necessarily reflect or represent the views and opinions of Midas Touch Consulting. By Korbinian Koller|November 26th, 2021|Tags: Crack-Up-Boom, Gold, Gold/Silver-Ratio, inflation, low risk, Silver, silver bull, Silver Chartbook, silversqueeze, technical analysis, time frame, trading principles|0 Comments About the Author: Korbinian Koller Outstanding abstract reasoning ability and ability to think creatively and originally has led over the last 25 years to extract new principles and a unique way to view the markets resulting in a multitude of various time frame systems, generating high hit rates and outstanding risk reward ratios. Over 20 years of coaching traders with heart & passion, assessing complex situations, troubleshoot and solve problems principle based has led to experience and a professional history of success. Skilled natural teacher and exceptional developer of talent. Avid learner guided by a plan with ability to suppress ego and empower students to share ideas and best practices and to apply principle-based technical/conceptual knowledge to maximize efficiency. 25+ year execution experience (50.000+ trades executed) Trading multiple personal accounts (long and short-and combinations of the two). Amazing market feel complementing mechanical systems discipline for precise and extreme low risk entries while objectively seeing the whole picture. Ability to notice and separate emotional responses from the decision-making process and to stand outside oneself and one’s concerns about images in order to function in terms of larger objectives. Developed exit strategies that compensate both for maximizing profits and psychological ease to allow for continuous flow throughout the whole trading day. 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Covid Strikes Back

Covid Strikes Back

Marc Chandler Marc Chandler 26.11.2021 12:44
November 26, 2021  $USD, Covid, Currency Movement, Hungary, Mexico, South Korea Overview: Concerns that a new mutation of the Covid virus has shaken the capital markets.  Equities are off hard, and bonds have rallied.  In the foreign exchange market, the Japanese yen and Swiss franc have rallied.  While there may be a safe haven bid, there also appears to be an unwinding of positions that require the buying back of the funding currencies, which is also lifting the euro.  The currencies levered from growth, the dollar-bloc and Scandis are weaker.   Oil has been knocked back by around  6.7%, with January WTI trading near $73. Led by 2%+ losses in Japan, Hong Kong, and India, and 1%+ losses in South Korea, and Taiwan, the MSCI Asia Pacific Index has slumped to its lowest level since July.   Europe's Stoxx 600 gapped lower and is off around 2.4% near midday.  US futures are sharply lower (1.25%-2.5%).  The US 10-year yield has dropped around 12 bp to nearly 1.50%.  While UK Gilts have kept pace with US Treasuries, continental benchmark yields are off 6-8 bp.  The US 2-year yield is about 15 bp lower (~0.49%), while European 2-year yields are mostly 2-5 bp lower.  The 2-year Gilts yield has shed about 12 bp, as the market unwinds some of the chances of a rate hike next month.   Key Development: A new variant of the Covid virus was found.  It is thought to have the most mutations to date.  The EU, UK, Israel, and Singapore have quickly banned travel from South Africa and five neighboring countries.  This is coming on top of and is separate from the outbreak in Europe, where Germany has reported a record number of new cases and several other countries have introduced new restrictions.  Almost a third of Shanghai flights were canceled as three local cases were found.  US infections are also on the rise.  Asia Pacific  As widely expected, South Korea hiked its key 7-day repo rate by 25 bp to 1.0% yesterday.   It follows a 25 bp hike in August.  Consumer inflation rose 3.2% year-over-year in October, while the core rate rose 2.8%.  Growth in Q3 was 4.0%.  With today's roughly 0.3% decline, it brings this year's loss to almost 9%.  Only the yen (~-9.4%) and the Thai baht (~-11%) have performed worse in the region.   Australia reported stronger than expected October retail sales.  The 4.9% month-over-month surge was more than twice the Bloomberg median forecast (2.2%) and follows September's 1.3% gain.  It underscores the recovery that is taking place. The preliminary PMI showed the recovery continuing into November.  The composite rose to 55.0, its highest reading since June.   The dollar was fraying the upper end of the range we anticipated against the yen, pushing against JPY115.50.  The momentum looked to have been at risk of stalling when the news struck.  The dollar was sold to almost JPY113.65.  An option for $710 mln at JPY113.70 expires today.  The price action appears to be stabilizing a bit in the European morning, and the greenback is hovering around JPY114.00.    The trendline connecting the September and the previous two November lows comes in today near there today.  The JPY114.50 area looks to offer initial resistance.  The Australian dollar had been leaking through $0.7200, and the risk-off move sent it slightly through $0.7115, just above the low for the year set on August 20, closer to $0.7105.  A break could spur a move toward $0.7050, which is the (38.2%) retracement of the Australian dollar's recovery since March 2020, when it hit a low near $0.5500.  The $0.7140 area may provide the initial cap for the bounce.   The Chinese yuan is a rock.  It has hardly moved despite the broader developments.  The greenback is slightly (less than 0.05%) firmer and still a little below CNY6.39.  The PBOC set the dollar's reference rate at CNY6.3936, a touch above the CNY6.3934 median projection (Bloomberg survey).   Europe Part of the limited reaction short-end of the European debt market derives from the fact that investors had not expected a change in ECB's monetary policy until the very end of next year, at the earliest.  The surge in the delta strain had already emerged as a weight on the euro.  We had put emphasis on the divergence with the US and saw it captured in the two-year interest rate differential between the US and Germany.  The US premium had risen from around 90 bp in mid-September to 140 bp in the middle of this week.  It has fallen back to about 128 bp today.  Some observers had focused on the year-end adjustments of European banks and the shifting of liquidity through the cross-currency swap basis.   The new German coalition has been announced, and it will have its work cut out.  A record number of new cases have been reported in Germany, and many countries are introducing new social restrictions.  Portugal will try something a bit different.  It is set to require people to work from home in early January for a week to avoid a spike in the virus after the holidays.   Hungary was more aggressive than expected yesterday.  It raised its one-week deposit rate by 40 bp to 2.90%.  Recall that on November 18, it had hiked the one-week deposit rate 70 bp to 2.50%.  Two days earlier, it lifted the base rate 30 bp to 2.10%.  The forint had fallen to a record low against the euro on November 23.   The euro's high was just shy of HUF372, and it fell back to about HUF364.80 yesterday before jumping back to almost HUF369.50 today.  It has steadied around HUF368 in the European morning.   The euro's downside momentum had begun easing as bids below $1.12 were being filled.  The virus developments have spurred what appears to a be short-covering rally that has lifted the single currency thought $1.1280, where a 460 mln euro option expires today.  Nearby resistance is seen near $1.1300 and then last week's high near $1.1375.  Sterling recorded a new low for the year near $1.3280 in late Asian turnover before finding support.  It recovered to about $1.3335 so far.  A move above yesterday's high (~$1.3355) could spur a move to $1.3400-$1.3425.    America The dollar's rally has been fueled by the prospect of a divergence of monetary policy that favored the Fed over the ECB and BOJ.  Indeed, since the November 10 surprise jump in the October CPI to above 6%, we had emphasized the likelihood that the Fed would have to taper quicker to give it the flexibility to lift rates earlier if needed.  Since then, 4-5 Fed officials and several large banks have also underscored this possibility. However, this scenario is being called into question today, which is evident in the swaps markets and the Fed funds futures.  The implied yield of the June 2022 Fed funds futures contract is 7.5 basis points lower, and the December 2022 contract implied yield is down 14.5 bp.  The US dollar rallied to CAD1.2775, its highest level since late September.  It tests a downtrend line connecting the August (~CAD1.2950) and September (~CAD1.2900) highs. A convincing break of the trendline would signal a test on those earlier highs.   We are inclined to see it hold but cannot be confident until CAD1.2720 yields.   The Mexican peso was trampled before today amid concerns about the implications of President AMLO pulling Herrera's nomination for central bank head.  Herrera is a seasoned hand, and although he worked closely with AMLO from the finance ministry, his appointment did not seem to jeopardize the independence of the central bank.  Perhaps the market has been influenced by developments in Turkey, but the nomination of a less experienced and less known candidate has weighed on sentiment.  The dollar, already bid, jumped to MXN22.1550, at its best level since September 2020.   It has pulled back to around MXN21.83, which leaves it up around 1.2%.  This would be the seventh consecutive decline in the peso.  Support is seen around MXN21.60.  Disclaimer
FX Update: Position squaring in FX as new covid strain roils markets

FX Update: Position squaring in FX as new covid strain roils markets

John Hardy John Hardy 26.11.2021 14:30
Forex 2021-11-26 14:05 5 minutes to read Summary:  The contagion across asset markets triggered by new covid strain concerns has hit FX in the form of classic deleveraging, as euro and yen shorts are squeezed on a reversal of recent US yield rises and safe haven seeking, while the US dollar gets a pass elsewhere because it is still safer than smaller, less liquid currencies, particularly in EM. The timing is terrible for this wave of risk aversion as we have thin trading conditions over the US Thanksgiving holiday.   FX Trading focus: Position squaring hits heavy euro- and yen shorts Risk contagion across the board overnight on the news of a new covid strain in South Africa with significant mutations and signs of overtaking as a percentage of cases in regional outbreaks. There may a sudden “straw that broke the camel’s back” angle to this, given the covid concerns elsewhere, particularly in Europe. The timing is worse than unfortunate, as the liquidity backdrop of particular concern as the news has hit with the US out on holiday yesterday and only open for half a session today, with few likely anticipating until last night or this morning that they would even need to bother showing up for work today. The sense of whiplash has been particularly acute as we have just had a look at US President Biden nominating Powell for a second term and many highlighting the focus on inflation in his acceptance speech for the nomination, with Brainard’s acceptance speech also highlighting inflation as a major concern. This had jolted Fed expectations for next year to new highs for the cycle at the outset of this week, and now just a few days later we get covid mutation concerns that have sent a deleveraging wave across markets. In US treasuries, this has mean a sharp drop along the entire US yield curve, giving the euro and the yen a strong boost, as the euro in particular was headed south and fast on the policy divergence theme of the ECB seen likely to maintain zero rates and even some level of QE out over the horizon while the market had priced in three full Fed rate hikes by the end of next year before this sudden reversal. On the weak side, while the US dollar has fallen within the G3 and is approximately flat against sterling, the smaller currencies are sharply lower against all of the above, and EM generally doubly so. Meanwhile, a chunky new drop in oil prices on the anticipation of widening international travel restrictions and even domestic lockdowns in places is adding to the NOK woes just after that currency was trying to recover versus the single currency last week, sending EURNOK up through its 200-day moving average and above 10.20 at one point today after trading below 9.70 barely over a month ago. Chart: AUDJPYAUDJPY is doing its usual job of capturing a wave of risk aversion as the lurch lower in risk sentiment was reflected here, and the clearly important 200-day moving average gave way with a bang. This is beginning to demolish the longer-term bullish hopes as it is a hold below the 200-day moving average here is a kind of confirmation of the rejection of the next cycle highs above 85.00 that were attempted last month. Theoretically, if the last gasp support of the 61.8% retracement of the local rally wave can avoid falling, there is shred of hope, but that would likely depend on a full reversal of everything we have just seen overnight. As we emphasized in this morning’s Saxo Market Call podcast, it is impossible to know how the virus situation shapes up here until further details emerge, but the market appears poorly positioned here for a more difficult global growth outlook at a time was just on how much the Fed is going to have to course correct and end QE and hike rates because US Q4 GDP is running incredibly hot. And that was in turn driving the predominant focus on relative policy divergences, with especially Europe being singled out for its particularly weak outlook, given the energy crunch and it being at the epicenter of the latest covid wave. If I am to poke around at places where moves are getting a bit overdone here in the short term, the EURSEK squeeze move looks a bit excessive, but that isn’t to say that poor liquidity and the usual market correlations can’t send it squeezing higher still. Yesterday, the Riksbank brought a rate hike into its forward guidance (late 2024) for the first time for the cycle at a time as the market is front running that and even pricing the ECB to achieve lift-off next year. Trading a market move like the one has developed overnight is tricky business as anything can happen and either direction. Concern may deepen and dramatically so that nations will scramble to limit the spread of this new variant until more is known, and we still know little about its virulence. And in the very short-term, a self-propelling position squaring can extend aggressively ahead of the weekend as risk managers force adjustments linked to the blow-up in volatility. Then the gap risk can move in the other direction over the weekend. Impossible to know, only to limit risk and exercise patience and a couple of weeks or more of headline risks before we know the lay of the land better. Table: FX Board of G10 and CNH trend evolution and strengthAs noted above, the big direction change here is in the euro and the JPY, which have pulled sharply higher in most crosses, with the Swiss franc happy to continue higher as well (suggesting that the USDCHF pair was increasingly important positioning-wise recently?). Elsewhere, SEK downside is beginning to look extreme, and CNH upside likewise if commodity prices continue to crater. Table: FX Board Trend Scoreboard for individual pairs.Far too early to talk trends when what we have here is a sudden positioning wipeout – but we will have to see how the next few days develop. Most “flips” as of this update are linked to the oil move (NOKSEK, CAD crosses etc.) although note the euro ripping higher against AUD and NZD.
Focusing On US CPI, Fed, Commodities and Bank Of Japan - Saxo Market Call

Market Quick Take - November 29, 2021

Saxo Bank Saxo Bank 29.11.2021 09:48
Macro 2021-11-29 08:40 6 minutes to read Summary:  The market is trying to brush off fears that the new omicron covid variant may significantly disrupt the global economy, with only partial success as cases of the variant have been discovered in multiple countries outside of the original outbreak area. Equities and crude oil markets have erased a portion of the enormous losses from Friday, but the Japanese yen strength actually accelerated at times overnight as Japan will move to halt entry by all foreign visitors. What is our trading focus? Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) - US equity futures with especially Nasdaq 100 futures are charging ahead trading above the 50% retracement level based on Friday’s price action. The new Covid variant has for now made the market put monetary tightening on pause for a while until we get a better picture of the new variant and its impact. This is supporting US technology stocks as it puts less upward pressure on interest rates. Stoxx 50 (EU50.I) - European equities were down the most on Friday logically bouncing back the most in today’s session with Stoxx 50 futures trading at the 50% retracement level of Friday’s selloff at the 4,151 level. The next big resistance level on the upside is 4,189. If the new Covid variant ends up restricting mobility and travelling we expect Europe and emerging markets to perform worse than US equities. USDJPY and JPY crosses – The Friday meltdown in risk sentiment saw the Japanese yen rallying strongly, with a classic risk proxy pairing like the AUDJPY suffering its worst single day draw-down since the pandemic outbreak in March of 2020. While other markets tried to put on a hopeful face at the start of the week in Asia today, it is notable that the JPY strength has actually accelerated, perhaps in part as Japan is taking the remarkable step of banning all inbound travel from foreign destinations starting tomorrow. In USDJPY, we watch the important pivot low of 112.73, a fall through which could set up a challenge of the 111.50-111.00 zone that supports the trend from the lows of early 2021. Speculative positioning is quite short the JPY, so there is considerable potential fuel for an extension of this JPY rally. EURJPY has broken down through the important 128.00 area support overnight. EURUSD – the squeeze higher in EURUSD on Friday appears linked with the market moving quickly to remove expectations of Fed rate hikes in the wake of the news of the new omicron covid variant, which improves the equation for the euro from a “yield spread” perspective. For EURUSD to trade to new cycle lows from here, we would likely either need to see a return to new highs for the cycle in Fed expectations or some new meltdown in sentiment that would reward the US dollar more as a safe haven. Resistance is perhaps 1.1350-1.1385. Gold (XAUUSD) failed to attract a strong safe haven bid on Friday to push it through resistance at $1816. This despite multiple tailwinds emerging from the omicron-driven carnage after bond yields slumped while the dollar and the VIX jumped. Instead, a slump across industrial metals spread to silver and platinum, thereby curtailing golds potential upside. Gold trades lower today with other markets making a tentative recovery in the belief Friday’s selloff was overdone. However, until we have more details about the virus (see below) the markets will remain nervous as can be seen in fresh yen strength this Monday (see above). Four failed attempts to break below $1781, a key Fibonacci level, may also offer returning bulls some comfort. Crude oil (OILUKJAN22 & OILUSJAN21) suffered one of its largest one-day crashes on Black Friday in response to worries the new omicron virus variant could drive renewed demand weakness caused by widespread lockdowns and travel bans. Equally importantly was probably the very bad timing with the news hitting the markets on a low liquidity day after the Thanksgiving holiday. The market traded higher in Asia as buyers concluded the selloff was overdone while also speculating OPEC+ may act to support prices when they meet on Thursday. The group may decide to postpone the January production increase or if necessary, temporary cut production into a period that was already expected to see the return of a balanced market. Ahead of the meeting and until we know more about the new strain and its associated risks, the market will remain very volatile. US Treasuries (IEF, TLT). The omicron strain will be in the spotlight this week as well as monetary policies expectations and the non-farm payrolls on Friday. Jerome Powell’s speech tomorrow and on Wednesday will be key as the Coronavirus and CARES act will be discussed. It’s likely that rates will remain compressed across the yield curve as there continue to be uncertainties surrounding the omicron strain. Yet, we expect the Federal Reserve to stick to their hawkish agenda and accelerate the pace of tapering in December as inflation will continue to be a concern. It implies, the yield curve will continue to bear flatten, and could even invert as economic expectations dive, pinning down long-term yields. If the White House looks to add more stimulus, that would imply more bond issuance, putting further pressure in the front part of the yield curve. German Bunds (IS0L) and Italian BTPS (BTP10). This week’s focus will be the Eurozone CPI flash numbers and news concerning Covid lockdowns and restrictions. Friday’s flight to safety provoked yields to drop across the euro area, including among sovereigns with a high beta such as Italy. The reason behind it is that German Bunds are tightly correlated to US Treasuries and that the market was anticipating more accommodative monetary policies from the ECB, which have been benefitting mostly the periphery. Investors should remain cautious. Indeed, inflation remains a big focus and could drive towards less accommodative policies rather than more. What is going on? Market is grappling with what to do about the omicron covid variant. The worst impact so far is from the speed with which countries are moving to halt inbound foreign travel, with many countries stopping all flights from South Africa and other countries in the region, while Japan has taken the dramatic step of halting all inbound foreign travel from tomorrow. More hopeful indications from virologists in the virus origin area are anecdotally that this variant is not particularly virulent, although others point out that too little is known about the virus’ effects on more vulnerable patients. Weak Black Friday spending in the US, particular in-store sales. While up strongly from last year’s virus impacted activity at physical stores, US Black Friday spending in-store was down some 28% from 2019 levels and the online shopping on Friday was at $8.9 billion vs. $9.0 billion in 2019, rather disappointing totals, although some suggest that Americans have brought forward their holiday shopping this year because of widespread fears of shortages of popular products. What are we watching next? Whether market can quickly recover from fresh wave of virus concerns. The virus concerns triggered by the new variant were a jarring development, given the prior focus recently on inflation and central banks having to bring forward tightening plans to stave off inflationary risks. US stocks have been the quickest to try to put a brave face on the situation and there is some support for equities as rate hike expectations from the Fed have dropped sharply and long US treasury yields are also sharply lower, but it will take time to learn how transmissible and virulent this new omicron virus strain is, as well as how much damage will be done to growth and sentiment by new limitations on travel and other restrictions. We also have to recall that prior to this news, Europe was the epicenter of the latest wave of the delta variant and was already trading somewhat defensively. US President Biden is set to speak this evening on the new virus variant. The UN FAO will publish its monthly World Food Price Index on Thursday, and another strong read is expected, although the year-on-year increase look set to ease from 31.3%. November has been another strong month for the grains sector led by wheat due to strong demand and worries about the Australian harvest. Elsewhere Arabica coffee trades near a ten-year high on increased concerns about production in Brazil. Before Friday’s carnage across markets the Bloomberg Agriculture Spot index had reached a 5 ½-year high after rallying by 40% during the past year. Earnings Watch – earnings this week are light with the key ones to watch being Li Auto, Snowflake, Crowdstrike, Elastic, and DocuSign. Monday: Sino Biopharmaceutical, China Gas, Acciona, Li Auto Tuesday: Bank of Nova Scotia, Salesforce, Zscaler, NetApp, HP Enterprise Wednesday: Trip.com, Royal Bank of Canada, National Bank of Canada, Snowflake, Synopsys, Crowdstrike, Veeva Systems, Okta, Splunk, Elastic, Five Below Thursday: Canadian Imperial Bank of Commerce, Toronto-Dominion Bank, Cooper Cos, Marvell Technology, DocuSign, Ulta Beauty, Asana, Dollar General, Kroger Friday: Bank of Montreal Economic calendar highlights for today (times GMT) 0830 – Sweden Q3 GDP 0830 – ECB's Guindos to speak 0930 – UK Oct. Mortgage Approvals 1000 – Euro Zone Nov. Confidence Surveys 1130 – ECB's Schnabel to speak 1300 – Germany Nov. Flash CPI 1330 – Canada Oct. Industrial Product Prices 1530 – US Nov. Dallas Fed Manufacturing Survey 1715 – ECB President Lagarde to speak 2000 – US Fed’s Williams (voter) to speak 2005 – US Fed Chair Powell gives opening remarks at conference 2350 – Japan Oct. Industrial Production 0030 – Australia Oct. Building Approvals 0100 – China Nov. Manufacturing and Non-manufacturing PMI 0200 – Australia RBA’s Debelle to speak  Follow SaxoStrats on the daily Saxo Markets Call on your favorite podcast app: Apple Spotify Soundcloud Sticher
The Dollar Moves Back to the Fulcrum between the Funding and Higher Beta Currencies

The Dollar Moves Back to the Fulcrum between the Funding and Higher Beta Currencies

Marc Chandler Marc Chandler 29.11.2021 10:46
November 28, 2021  $USD The new covid variant injected a new dynamic into the foreign exchange market.  The World Health Organization cautioned against the need to impose travel restrictions, but policymakers, by and large, do not want to be bitten by the same dog twice.  To err on the side of caution is to minimize one's biggest regret.  The risk is that the uncertainty is not lifted quickly but lingers, which would likely unpin volatility.   US and European benchmark 10-year yields fell sharply ahead of the weekend.  In the US, the market unwound some of its aggressive pricing in of Fed policy.  This is reflected in the commensurate drop at the short-end.  In Europe, the decline in 10-year yield reflected a slowing of growth/inflation as its short-end was largely unchanged.   There are three areas in which market participants cannot be as confident as they were in the middle of last week.  First, the odds of a Bank of England hike next month were diminishing and fell further at the end of last week.  Second, an acceleration in the Fed's tapering seemed increasingly likely given the strength of recent data and the jump in price pressures.  However, the emergence of this new strain makes an aggressive rate hiking campaign less likely.  Third, the prospects for stronger world growth diminished on the margins.  This undermines risk appetites and weakens those currencies that often appear to do better in robust growth phases (e.g., dollar bloc, Scandis, and most emerging market currencies).   Dollar Index:  The Dollar Index put in a new high for the year on November 24, slightly below 97.00. It was confined to a narrow range when the US markets were closed on November 25 and sold off on news of the new variant and imposition of travel controls by several countries.  The setback was sufficient to turn the MACD lower from over-extended territory, though the Slow Stochastic hasn't and remains stretched.  If we assume a correction has begun, a key question is what move is being retraced.  A conservative but logical assumption is that the last leg up, since the November 10 CPI, is in play.  The first (38.2%) target is near 95.75, and then the (50%) retracement is around 95.40.  A break of 95.00 could signal another cent decline.  Euro:  Interest rate differentials and the surge in delta variant cases had sent the euro to almost $1.1185 in the middle of the last week, the lowest since July 2020.  When news of the new variant broke, what appears to be a short-covering rally lifted the euro to almost $1.1325.  The (38.2%) retracement of the leg down since November 10 is near $1.1340.  A more formidable resistance area is in the $1.1375-$1.1400 band.  As was the case with the Dollar Index, the MACD is turning, but the Slow Stochastic is lagging.  Initial support now is seen near $1.1260. With the old and now new variant, the surge accelerated inflation expected to be reported next week may not be the fodder for the ECB has that some anticipated.   Japanese Yen:  We have suggested that the dollar was in a JPY113-JPY115 range.  Earlier this month, it had dipped briefly below JPY112.75 and snapped back.  Indeed, in the first part of last week, it was fraying the upper end of the range and traded slightly through JPY115.50.  However, the pre-weekend turmoil saw the greenback drop back to the lower end of the range (~JPY113.05).  The trendline connecting the August low and the two November lows, found near JPY114.10 ahead of the weekend, was taken out with determination. The MACD is turning down but never recovered from the mid-October-mid-November decline.  The Slow Stochastic is edging back into over-extended territory. British Pound:   As the December short-sterling futures contract rallied, implying a less likely chance of a BOE hike before year-end, the pound fell.  The interest rate futures contract will begin next week with a seven-day rally intact.  Sterling, itself has fallen for six sessions, and a new low for the year was set near  $1.3320 before the weekend.  Here, both the MACD and Slow Stochastic are falling while being over-extended on the downside.   A move above $1.3350 would help stabilize the tone,  but it requires a push above $1.3400 to be notable.  On the downside, we continue to see a risk of a test on the  $1.3165, the first retracement (31.8%) of sterling's rally since Mach 2020.     Canadian Dollar:  Talk about trending currencies; the Canadian dollar fell for the fifth consecutive week following a five-week rally.  Net-net,  it is little changed.  The US dollar settled near CAD1.2765 on September 17, which was between the Bank of Canada meeting and the FOMC.  The greenback reached CAD1.28 ahead of the weekend before settling back near CAD1.2760.  There is little chart resistance until closer to CAD1.29.  As one would expect, the momentum indicators are stretched and frayed the upper Bollinger Band (~CAD1.2770).  It requires a break of the CAD1.2630-CAD1.2640 area to be meaningful.   Australian Dollar:  In the pre-weekend carnage, the Australian dollar came within a whisker of the year's low set in August near $0.7100.  The Aussie, like the Canadian dollar, has been streaking.  Its four-week decline comes are a four-week rally.  The move was underway before the new variant was announced.  The next target is around $0.7050, the (38.2%) retracement of the rally from the March 2020 low (~$0.5500).  Below there is the $0.7000 area, which caught the lows in September and October 2020.   The MACD continues to fall, while the Slow Stochastic has begun to flatline in the trough.  The 25 bp hike by the Reserve Bank of New Zealand, which was fully expected, and disappointed those that looked for a larger move, did little to support the New Zealand dollar.  Indeed, it was the worst-performing major currency last week, losing about 2.5%, more than twice as much as the Canadian dollar and two-thirds more than the Australian dollar.  It also tested the year's low set in August (~0.6800). A break would open the door to steeper losses, but the next area of support may be found in the $0.6760-$0.6780 area.   Mexican Peso:  The peso was the second weakest currency in the world last week (after the Turkish lira), falling around 4.3% to a new low for the year.  It had three strikes against it last week.  First, emerging market currencies broadly are out of favor.   The JP Morgan Emerging Market Currency Index has fallen for 10 of the past 12 weeks.  Second, the new variant and the dramatic risk-off saw the peso's losses accelerate.  Third are domestic considerations.  AMLO's nomination to head the central bank starting next year did not bolster the market's confidence, which was on the heels of the Turkish debacle.  Also, domestic economic conditions have worsened.  The data have been softer than expected, including a downward revision in Q3 GDP showing a contraction of 0.4% rather than 0.2%. At the same time, the bi-weekly CPI rose above 7%.   Ahead of the weekend, the dollar rose to MXN22.1550, and although it pulled back, it found support above the previous session's high (~MXN21.60).  Nearly all the emerging market currencies fell against the dollar (The Brazilian real was a notable exception.  It eked out ~0.5% gain).  However, Mexico seems particularly vulnerable.  The credibility of the central bank may be called into question.  The economic challenge of surging inflation and weak economic activity would seem to require fiscal support, for which AMLO shows little interest.  In April 2020, the greenback reached nearly MXN25.7850, and the MXN22.47 area corresponds to the halfway mark of its subsequent decline.   Chinese Yuan:  Chinese officials appear to have expressed mild displeasure with the foreign exchange market, cautioning against a one-way market and checking prop positions.  Officials would seem to think that the banks are short dollars, while many outside observers, trying to reconcile the large current account surplus with little currency movement and stable reserves, think the large banks are accumulating dollars ostensibly on behalf of officials (hence the talk of stealth intervention). In fact, the one-way market has been broken.  On November 16, the dollar traded between CNY.3670 and CNY6.3965 and has not moved out of that range.  We suspect the risk is for an upside break for the dollar and initially see a move toward CNY6.42.   Disclaimer
Sentiment Remains Fragile

Sentiment Remains Fragile

Marc Chandler Marc Chandler 29.11.2021 14:08
November 29, 2021  $USD, Covid, Currency Movement, Federal Reserve, Inflation, Japan Overview: The fire that burnt through the capital markets before the weekend, triggered by the new Covid mutation, burned itself out in the Asian Pacific equity trading earlier today. A semblance of stability, albeit fragile and tentative, has emerged. Europe's Stoxx 600 is up about 1%, led by real estate, information technology, and energy.  US index futures are trading higher, with the NASDAQ leading.  Benchmark 10-year yields are firmer.  The US 10-year Treasury yield has risen about six basis points to 1.53%.  European yields are mostly 1-2 basis points higher, while the UK Gilt yield is up four basis points. The dollar remains, as we say, at the fulcrum of the major currencies, but in an opposite way, with the funding currencies that rallied strongly before the weekend seeing their gains pared today, while the dollar bloc and Scandis trade firmer.  Among the emerging market currencies, the liquid and freely accessible currencies, such as the South African rand, Russian rouble, and Mexican peso are leading the recovery.  The Turkish lira and central European currencies, perhaps dragged down by the softer euro, underperform.  The JP Morgan Emerging Market Currency Index is slightly firmer after falling around 0.4% before the weekend.  Gold held support near $1780 but has been unable to resurface above $1800.  January WTI jumped by about 5% after the 13% drop at the end of last week.  Iron ore surged 6.5%, recouping in full the 5.6% decline in the last session to approach its recent highs.  Winter weather is beginning to be experienced in Europe, and natural gas (Netherlands) is up 7.75% after falling 4.8% ahead of the weekend.  Copper is recouping a little less than half of last Friday's nearly 4% fall.   Asia Pacific Faced with much unknown about the new mutation, several Asia Pacific countries are opting to close their borders to foreign travelers.  Initially, countries limited the travel ban to a handful or so of countries from Southern Africa.  It does appear that the omicron variant has been around before being sequenced in South Africa, and it is has been found in several countries. However, the origin is still not clear.  While some reports from South Africa suggest mild symptoms, there is good reason for the World Health Organization's caution.  If a new vaccine is needed for the variant, reports suggest it could take around 100 days.  Recall that Japan has lifted its formal emergency in late September, and the economy is rebounding as anticipated.  Today's data showed retail sales rose for a second month in October.  The 1.1% increase lifted the year-over-year rate to 0.9%.   Purchases of clothing and food surged by 9.2%.  Auto sales, still hampered by supply chain disruptions, was the only category that fell.  After a frustratingly slow start, Japan's inoculation efforts have been successful, and the vaccination rate is above 75%.   Before news of the new variant broke, the dollar was around JPY115.50.  It fell to nearly JPY113.00 before the weekend.  It recovered in early dealing to almost JPY113.90 before the weakness of the regional equities contributed to its push lower.  Bloomberg pricing data showed it recorded a JPY112.99 low near midday in Tokyo.  It bounced to almost JPY113.65 in late dealings and has been consolidating in the European morning.  The option for $350 mln at JPY113.40 that expires today has likely been neutralized.  The market appears to be waiting for a new development to push it out of the JPY113-JPY114 range.  The Australian dollar held the pre-weekend low slightly below $0.7115 and is making session highs late in the European morning near last Friday's high (~$0.7155).  Nearby resistance is seen in the $0.7180-$0.7200 area. Recall that last week's 1.55% decline was the fourth consecutive weekly loss and the largest in three months.  The greenback gave up its pre-weekend gain against the Chinese yuan and a bit more today.  It did not even trade above CNY6.39 today, settling above it at the end of last week.  As we have noted, it remains within the range set on November 16 of roughly CNY6.3670-CNY6.3965. The PBOC set the dollar's reference rate at CNY6.3872 and continued to set it above expectations (CNY6.3858, via Bloomberg).   Two issues seem to be receiving attention today.  First are the prospects of easing by the PBOC in the face of continuing weakening of the economy. The November PMI will be released starting first thing tomorrow.  Second, China's property developers have an estimated $1.3 bln in debt servicing next month, following $2 bln this month.   Europe Outside of the virus, two issues dominate investors' attention in Europe today.  First are the November inflation reports from Spain and Germany ahead of the preliminary aggregate figures tomorrow.  The other is the increasingly bellicose rhetoric between the UK and France over the channel crossings and fishing.   Spain's harmonized November CPI rose by 0.3% to lift the year-over-year rate to 5.6%.  It is the fastest pace since 1992.  It follows October's 1.6% increase and 5.4% 12-month rate.  Food and energy were the main drivers.  The increase was in line with forecasts.  In September, the central bank's chief economist had anticipated that November could be the peak in inflation and anticipated it falling back below the 2% target in 2022.  German states are reporting their November CPI figures, and the country's measure will be reported late today.  The states' measures are consistent with forecasts calling for the nation's harmonized measure to fall around 0.2%.  However, the year-over-year pace is projected to accelerate to 5.5% from 4.6% due to the base effect.  The EMU aggregate preliminary CPI is forecast (Bloomberg median) to be flat on the month for a 4.5% year-over-year pace (up from 4.1% in October).  The core rate is projected to climb to 2.3% from 2.0%.  The euro poked slightly above $1.1330 at the end of last week and settled just above $1.1315.  It traded near $1.1260 in late Asia/early Europe and caught a bid that brought it back to about $1.1290.  There is a 1.7 bln euro option at $1.13 that expires today.  The intraday momentum indicators are getting stretched, warning of the downside risk in early North American activity.  Sterling recorded a new low for the year ahead of the weekend, near $1.3280. It is trading in about a quarter-cent range today, around $1.3335, and staying within last Friday's range.  The pre-weekend high was closer to $1.3365.   After an eight-day rally, the December short-sterling interest rate futures contract is trading slightly heavier today.  The market expectations have shifted from a good chance of a hike next month to a bit more than a third of a chance.   America The US auto sales and jobs highlight this week, but Fed officials are out in force too.  Today Powell, Williams, and Hasson speak at an innovation conference, and Bowman discusses the central bank and indigenous economies. Tomorrow, Powell and Yellen testify before a Senate committee on the CARES Act.  Their prepared remarks are expected to be released later today that may also work for the testimony on Wednesday on the same topic before a House committee.    Tuesday, Clarida discusses the Fed's independence, while Williams will speak on food security.  The Beige Book, in preparation for next month's FOMC meeting, is due Wednesday too.  No fewer than five Fed officials speak in the second half of the week.  Our initial bias continues to be for faster tapering at the December FOMC meeting. It still seems to be the prudent course to maximize the Fed's ability to respond to a broad range of probable economic outcomes.  The US pending home sales and the Dallas Fed manufacturing survey, due today, are not typically market movers.  And today is unlikely to be an exception.  Canada reports its Q3 current account surplus (expected to be around C$5.7 bln, up from C$3.6 bln in Q2.  It also reports raw material and industrial prices for October.  The week's highlight is tomorrow's September and Q3 GDP, followed by Friday's employment report.  Mexico reports October unemployment figures (median forecast in Bloomberg's survey calls for a 4.07% rate, down from 4.18% in September). Concerns about President AMLO's appointment to the central bank lingers even though the peso may benefit from the correction to the 1.6% pre-weekend drop.   The US dollar spiked to almost CAD1.28 before the weekend.  It fell to nearly CAD1.2720 today.  The pullback was seen in Asia, and it has been consolidating since then.  Still, the greenback looks vulnerable to a further retracement of the pre-weekend gains. Initial potential extends toward CAD.2680-CAD1.2700.   The broader risk appetites may be the key today for both the Canadian dollar and Mexican peso.  The greenback jumped to MXN22.1550 amid the pre-weekend turmoil.  This now marks the high for the year.  It pulled back initially to MXN21.6850 in Asia, but the selling pressure eased, and it traded in an MXN21.7630-MXN21.9000 range in Europe.  We suspect the combination of the trajectory of US monetary policy plus the concerns about the central bank of Mexico boosts the chances that the peso underperforms generally.  Moreover, rising price pressures and a weak economy put officials in a difficult position, especially given AMLO's reluctance to deploy fiscal measures to support the economy.   Disclaimer
Feeling the Quickly Changing Pulse

Feeling the Quickly Changing Pulse

Monica Kingsley Monica Kingsley 30.11.2021 16:15
S&P 500 rebound still ran into selling pressure before the close – the bulls lost momentum however well the government and Fed‘s words were received. Credit markets hold the key – specifically, how corporate bonds and Treasuries perform compared to each other. This would be also reflected in the yield spreads, dollar moves, or cylicals vs. stay-at-home stocks.Today‘s analysis will be shorter than usually, so let‘s dive into the charts to fulfill my title‘s objective (all charts courtesy of www.stockcharts.com).S&P 500 and Nasdaq OutlookS&P 500 is still far out of the woods, and the bulls have to decidedly repel any selling pressure - a good sign of which would be a close in the 4,670s.Credit MarketsAs encouraging as the HYG upswing is, it‘s too early to call a budding reversal a done deal. LQD to TLT performance is a good start, which however needs to continue. The worst for the bulls would be renewed rush into Treasuries, sending other parts of the bond market relatively down.Gold, Silver and MinersPrecious metals retreated again, but the bullish case is very far from lost. As discussed in the caption, the upswing appears a question of time – gold and silver are ready to turn on soothing language of fresh accomodation.Crude OilCrude oil upswing left a lot to be desired and as I tweeted yesterday, remains the most vulnerable within commodities. The dust clearly hasn‘t settled yet within energy broadly speaking.CopperCopper held up considerably better than many other commodities, and gives the impression of sideways trading followed by a fresh upswing as having the highest probability to happen next.Bitcoin and EthereumBitcoin and Ethereum marching up today, is a positive omen for gradual and picky return of risk-on trades. The overall mood is still one of catious optimism.SummaryFriday‘s rout hasn‘t been reversed entirely, and markets remain vulnerable to fresh negative headlines. The degree to which current ones (relatively positive ones, it must be said) helped, is a testament of volatility being apt to return at a moment‘s notice. I‘m certainly not looking for the developments to break inflation‘s back – CPI clearly hasn‘t peaked. Precious metals are well positioned to appreciate when faced with any grim news necessitating fresh monetary or fiscal activism.Thank you for having read today‘s free analysis, which is available in full at my homesite. There, you can subscribe to the free Monica‘s Insider Club, which features real-time trade calls and intraday updates for all the five publications: Stock Trading Signals, Gold Trading Signals, Oil Trading Signals, Copper Trading Signals and Bitcoin Trading Signals.
COT: Speculative positioning ahead of Fridays omicron dump

COT: Speculative positioning ahead of Fridays omicron dump

Ole Hansen Ole Hansen 30.11.2021 18:42
Commodities 2021-11-30 10:30 Summary:  Futures positions and changes made by hedge funds across commodities, forex and financials up until last Tuesday, November 23. While a lot of water has flowed under the bridge since last Tuesday, it is nevertheless interesting, not least considering the report encapsulated the market reaction to last weeks renomination of Fed chair Powell which helped send both treasury yields and the dollar sharply higher, as well as the oil market reaction to the coordinated SPR release announcement. Finally, it also gives us an idea about the level of positioning ahead of Friday's omicron related sell off Saxo Bank publishes weekly Commitment of Traders reports (COT) covering leveraged fund positions in commodities, bonds and stock index futures. For IMM currency futures and the VIX, we use the broader measure called non-commercial. Link to latest report The below summary highlights futures positions and changes made by hedge funds across commodities, forex and financials up until last Tuesday, November 23. The report normally released on Friday's was delayed due to last weeks Federal holidays, and while a lot of water has flowed under the bridge, its nevertheless interesting. Not least considering the report encapsulated the market reaction to last weeks renomination of Fed chair Powell which helped send both treasury yields and the dollar sharply higher, as well as the oil market reaction to the coordinated SPR release announcement. Also it gives a good idea about how funds and speculators were positioned ahead of the sharp risk off to the new omicron virus variant. Commodities The commodity sector saw sizable shift out of energy and metals into the agriculture sector where all 13 futures contracts covered in this update saw net buying. During the week the energy sector lost 2.1% while precious metals dropped 4.3% after gold broke below key support at $1830. A 1.5% rise in copper was not enough to convince speculators who cut their net long by 20%. Most noticeable however was the strong buying seen across the agriculture sector, with strong demand and weather worries more than offsetting the headwind caused by the stronger dollar. Energy: Crude oil, both Brent and WTI, were sold ahead of the coordinated SPR release announcement last Tuesday. The combined net long dropped by 14k lots to a one-year low at 514.6k lots. The loss of price momentum during the past few months has, despite an overriding bullish sentiment in the market, been driving the reduction, and following Friday's 10% price collapse these traders have been rewarded for sticking to the signals the market was sending instead of listening to bullish price forecasts. Hedge funds are not "married" to their positions hence their better ability to respond to changes in the technical and/or fundamental outlook.Metals: Having increase bullish gold bets by 65k lots during the previous two weeks, funds were forced to make 45k lots reduction last week in response to the Powell renomination sending gold sharply lower and below support in the $1830-35 area. Speculators have been whipsawed by the price action in recent weeks and it helps to explain why they are in no mood to reenter in size despite renewed support from Covid19 angst. Silver's 6% sell off during the week helped trigger a 17% reduction in the net long to 30k lots while in copper a small price increase was not enough to stem the slide in net length. Following seven weeks of selling, the net length has dropped by 64% to 19.5k lots, a 13-week low. Months of rangebound behaviour has reduced investor focus, and until we see High Grade Copper make an attempt to break its current $4.2 to $4.5 range, the level of positioning is likely to remain muted. Agriculture:  More concerned with other drivers such as weather, strong demand and supply chain disruptions helped trigger across the board buying of all 13 futures contracts split into grains, softs and livestock. The combined long held across these contracts reached a six-month high at 1.13 million lots, representing a nominal value of $43.5 billion. Buying was broad with the top three being corn, sugar and soybeans. Elsewhere the net long in Arabica coffee reached a fresh five-year high at 58k lots and KCB wheat a four-year high at 65.6k lots. UPDATES from today's Market Quick TakeCrude oil (OILUKJAN22 & OILUSJAN21) turned sharply lower in early European trading as the mood across markets soured on renewed concerns about the omicron virus strain. This after Moderna’s head told the Financial Times that existing vaccines will be less effective at tackling omicron and it may take months before variant-specific jabs are available at scale. The news come days before the OPEC+ group of producers meet to discuss production levels for January. Brent crude oil already heading for its biggest monthly loss since March 2020 trades below its 200-day moving average for the first time in a year, a sign that more weakness may lie ahead, thereby raising the prospect for OPEC+ deciding to pause or perhaps even make a temporary production cut. Gold (XAUUSD) received a muted bid overnight in response to the omicron virus comments from the head of Moderna (see oil section above). In addition, comments from Fed chair Powell helped reduced 2022 rate expectations from three to two after he said the omicron virus posed risks to both sides of the central bank’s mandate for stable prices and maximum employment. Despite this development together with softer Treasury yields and a weaker dollar, gold continues to struggle attracting a safe-haven bid. Silver (XAGUSD) looks even worse having dropped to a six-week low on weakness spilling over from industrial metals. Forex:Broad dollar buying following Fed chair Powell's renomination helped drive a 20% increase in the greenback long against ten IMM currency futures and the Dollar index to $25.4 billion and near a two-year high. All the currencies tracked in this saw net selling with the biggest contributors being euro (12.6k lots), CAD (11.8k) and JPY (4.1). The net short on the latter reached 97.2k lots or the equivalent of $10.6 billion, a short of this magnitude helps explain the strength of the sell off in USDJPY since last Thursday when safe haven demand picked up as the omicron news began to spread. Despite hitting a 16-month low last week the euro short only reached 12.6k lots, a far cry from the -114k lots reached during the panic month of February last year when the pair briefly traded below €1.08. What is the Commitments of Traders report? The COT reports are issued by the U.S. Commodity Futures Trading Commission (CFTC) and the ICE Exchange Europe for Brent crude oil and gas oil. They are released every Friday after the U.S. close with data from the week ending the previous Tuesday. They break down the open interest in futures markets into different groups of users depending on the asset class. Commodities: Producer/Merchant/Processor/User, Swap dealers, Managed Money and otherFinancials: Dealer/Intermediary; Asset Manager/Institutional; Leveraged Funds and otherForex: A broad breakdown between commercial and non-commercial (speculators) The reasons why we focus primarily on the behavior of the highlighted groups are: They are likely to have tight stops and no underlying exposure that is being hedged This makes them most reactive to changes in fundamental or technical price developments It provides views about major trends but also helps to decipher when a reversal is looming
Ahead Of The US CPI, Speaking Of Crude Oil And Metals - Saxo Market Call

Market Quick Take - December 1, 2021

Saxo Bank Saxo Bank 01.12.2021 09:27
Macro 2021-12-01 08:45 6 minutes to read Summary:  Even more whiplash for global markets yesterday as Fed Chair Powell has clearly set an entirely different tone ahead of his new term as Fed Chair, saying that it was time to retire the word transitory when discussing inflation and pointing to accelerating the slowing of Fed asset purchases, among other comments. This led to a sharp repricing of Fed expectations higher just after they had been taken sharply lower by the news of the omicron covid variant. What is our trading focus? Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) - the initial reaction to Powell’s statement about retiring “transitory” inflation was lower equities and higher interest rates, but the subsequent price action has not followed through. Nasdaq 100 futures, which are the most interest rate sensitive, are trading at the high end of the recent trading range around the 16,380 level with the obvious resistance level at 16,438. Short-term the price action way be confusing with low signal-to-noise ratio, but our view has been clear for over a year, and that is, that inflation is coming and in size not seen in many decades. This will have a negative effect on the most richly valued equities such as our bubble basket on stocks. Stoxx 50 (EU50.I) - one would think that Powell’s comments on inflation would lift value stocks and interest rates, and thereby creating a bigger rebound in European equities, but that is not what we are observing this morning. Stoxx 50 futures are trading around the 4,100 level with an important resistance level at 4,125; if this level can be overcome then our view is that Stoxx 50 futures could go to 4,200 and test the 200-day moving average. USDJPY and JPY crosses – whiplash for JPY cross traders yesterday, as the hawkish comments from Fed Chair Powell on inflation took Fed expectations for next year sharply back higher. Longer US yields, to which USDJPY is normally more sensitive, were less impacted, somewhat muting the impact on USDJPY, but the development came at a critical time, just after USDJPY had dipped below 112.73 range support yesterday. The reversal is a tentative sign that the pair will avoid pushing lower, but we would likely need to see the entire US yield curve lifting to have support for a renewed rally focusing on the 115.00+ recent top. EURUSD - will the ECB be forced to change its tune? Christine Lagarde’s insistence that inflation is a temporary phenomenon is under severe strain, even as she has been out this week defending this viewpoint, as was the ECB’s Schnabel, who boldly claimed that the November CPI data (more below) would prove the peak of the cycle. EURUSD churned sharply yesterday from a high of 1.1383 to a low of 1.1236 on the Fed Powell comments (below) before rebounding to 1.1336. The resilience later in the day despite a sharp repricing of Fed expectations is an interesting development, but the price action would need to threaten above 1.1500 to point to a technical reversal of the recent large sell-off. Crude oil (OILUKFEB22 & OILUSJAN21) trades sharply higher after hitting a three-month low on Tuesday in response to omicron related demand worries and general weak risk sentiment following Fed chair Powell’s comments on inflation. The market attention now turns to tomorrow’s OPEC+ meeting where the group may decide to pause production hikes while signaling a willingness to cut production should the demand suffer from fresh initiatives to curb mobility, especially for overseas travel. As a sideshow, the EIA will release its weekly inventory report later with the API reporting a 0.7m barrels draw in crude oil stock while fuel stocks rose. Gold (XAUUSD) trades higher after once again recovering from a Powell statement. Yesterday the Fed chair confirmed his recent change in focus away from creating jobs towards increasing efforts to curb elevated inflation. Risk appetite took another setback on the news but has recovered overnight as traders weighed positive regional economic data and divided views from drugmakers over how effective existing vaccines are against omicron. Overall, gold chart looks increasingly messy with no clear signal to be found at present. A break above the 21-DMA at $1820 is needed to spark fresh momentum interest while support continues to be found below $1780. US Treasuries (IEF, TLT). Powell’s testimony in front of the senate put things in perspective: inflation is not transitory, and the Federal Reserve will use its tools to stop it. These words provoked a fast bear-flattening of the yield curve where short term yields rose faster than log-term yields were dropping. We expect this trend to continue throughout winter as a new wave of covid will pin down the long part of the yield curve, but the Fed is likely to accelerate the pace of tapering. An inversion risk cannot be excluded. The 20s30s part of the yield curve is already inverted, while the 7s10s is just 7bps to get inverted. Although the 2s10s and 5s30s spreads are much wider, any flattening can pose a threat to next year’s Fed’s interest rate hike agenda. Powell and Yellen will testify again in front of the Senate today. Job numbers remain a big focus for Friday. US junk bonds (HYG, JNK). According to Bloomberg Barclays indexes, junk bonds’ OAS widened by 30bps to 330bps amid Friday’s selloff reflecting the lack of liquidity in markets. Despite negative real rates continuing to support corporate bond valuations, it’s safe to expect junk bond spreads to widen throughout the end of the year amid poor liquidity. If the volatility in rates remains sustained, the widening of spreads could accelerate, posing a threat also for stocks. German Bunds (IS0L) and Italian BTPS (BTP10). Inflation accelerated more than expected in the Eurozone during the month of November setting the yearly figure to 4.9%. Inflation figures together with the new German government adds to the catalysts of higher Bund yields. However, covid distortions are keeping yield in check. We exclude Bund yield to rise to test 0% until the new wave of covid eases. However, as soon as the worries concerning covid ease, they will resume their rise. What is going on? Fed Chair Powell confirms that Fed emphasis has shifted to inflationary risks. In testimony before a Senate committee yesterday, Fed Chair Powell waxed far more hawkish than the market anticipated on inflation concerns, saying outright that it is time to retire the word “transitory” regarding the description of inflation, that “the risk of higher inflation has increased” and that “the risk of persistent high inflation is also a major risk to getting back to such a labor market.“ (referring to the pre-pandemic labor market). Powell also pointed to the likelihood that the Fed would wind down Fed balance sheet expansion more quickly than previously anticipated: “perhaps a few months sooner”. In response, expectations for Fed rate hikes next year were jolted back higher, just after they had been jolted lower by the omicron covid variant news. Hot EU CPI numbers for November. Preliminary headline November EU CPI was out at 4.9% year-on-year, far above the 4.5% expected and the 4.1% in October and by far the highest inflation print since the launch of the euro. Core CPI rose to 2.6% year-on-year, above the 2.3% expected and the October level of 2.0%. This is also the highest level since the launch of the euro in 1999. Germany’s incoming chancellor Scholz speaks on inflation, compulsory covid vaccination. The political pressure on the ECB to act is ratcheting higher after incoming German chancellor Scholz said that action must be taken if inflation fails to drop, though he seemed now to accept the notion that inflation is linked to covid measures and the spike in energy prices. He also spoke yesterday in favor of mandatory covid shots. Salesforce shares down 6% on Q4 guidance. Investors are used to being spoiled by Salesforce with consistently beating analyst expectations, but last night the cloud application software company disappointed on Q4 guidance with revenue in line and adj EPS at $0.72-0.73 vs est. $0.82. The company also announced that Bret Taylor will become co-CEO next to founder Marc Benioff in a sign that the founder may soon step down like so many other technology founders in recent years. What are we watching next? Markets adjusting to new reality of a more hawkish Fed. In particular if the omicron variant of the covid virus proves a temporary distraction, global markets will need to adjust the major adjustment in the Federal Reserve’s focus and what that could mean for the US dollar and asset valuations ahead. Fed Chair Powell’s rhetoric yesterday likely mean a heightened reactivity to incoming data from here on out, all modulated in the very near term by headline risks in either direction on the omicron variant. The first major data points are the ISM Service index and November jobs report up on Friday. The Average Hourly Earnings could take over in importance from the payrolls change number if it shows more aggressive rises, as it seems clear that labor supply is the chief problem US companies face, as seen in record job availability and “quits” as workers leave jobs for greener pastures. ADP employment figures for November. With the US economy operating at full capacity according to estimates from CBO, continued strong job gains will add fuel to the “inflation fire”, so today’s ADP figures could more interest rates and equities. Economists are looking at 525K vs 571K in October which would be a significant two-month change for an economy that has closed the output gap, but on the other hand, the US economy is still short around 8.5mn jobs from current levels to where employment would have been if we did not have the pandemic. Earnings Watch – growth investors will have their eyes on Snowflake set to report after the market close with analysts expecting FY22 Q3 (ending 31 Oct) revenue growth of 92% y/y. Crowdstrike, being one of the fastest growing cyber security companies in the world, will also be key to watch today. Wednesday: Trip.com, Royal Bank of Canada, National Bank of Canada, Snowflake, Synopsys, Crowdstrike, Veeva Systems, Okta, Splunk, Elastic, Five Below Thursday: Canadian Imperial Bank of Commerce, Toronto-Dominion Bank, Cooper Cos, Marvell Technology, DocuSign, Ulta Beauty, Asana, Dollar General, Kroger Friday: Bank of Montreal Economic calendar highlights for today (times GMT) 0730 – Switzerland Nov. CPI 0815-0900 – Euro Zone Final Nov. Manufacturing PMI 1315 – US Nov. ADP Employment Change 1330 – Canada Oct. Building Permits 1445 – US Nov. Final Markit Manufacturing PMI 1500 – US Fed Chair Powell, Treasury Secretary Yellen to testify before House panel 1500 – US Nov. ISM Manufacturing 1530 – DOE’s Weekly Crude Oil and Fuel Inventories 1900 - Fed Beige Book 0030 – Australia Oct. Trade Balance   Follow SaxoStrats on the daily Saxo Markets Call on your favorite podcast app: Apple Spotify Soundcloud Sticher
Dogecoin price could see 400% gains if DOGE holders band together

Dogecoin price could see 400% gains if DOGE holders band together

FXStreet News FXStreet News 30.11.2021 17:39
Dogecoin price is moving sideways after a breakout from a descending triangle pattern. A potential 400% move to $1.08 will face obstacles up to $0.35, beyond which, DOGE should rally swiftly. On-chain metrics are hinting at an increase in large transactions and a paradigm shift in the nature of holders. Dogecoin price is at a crucial tipping point in its evolution with the potential for it to trigger a massive volatile move. Hurdles exist, however, that will make it difficult to reach its intended target, of a new all-time high. Dogecoin price at make or break levels Dogecoin price has set up three lower highs and two higher lows, which when connected using trend lines reveals a descending triangle. This technical formation forecasts a 361% upswing to $1.09, obtained by adding the distance between the first swing high and low to the breakout point at $0.24. DOGE breached the triangle’s hypotenuse on October 18 at $0.24. Since this point, the meme coin has struggled to move higher but failed. Interestingly, Dogecoin price has been moving sideways and has retested the $0.193 support level thrice since August 3 with the latest revisit on November 26. This created a triple-tap setup, a bullish technical formation that forecasts a reversal in the trend. Since Shiba Inu has stolen DOGE’s spotlight, things have been calm and consolidative for the original meme coin. If the buying pressure increases, however, pushing Dogecoin price to pierce through the $0.29 level to $0.35, and it produces a daily close above it, it will trigger an uptrend. In this scenario, it will allow market makers to collect the sell-stop liquidity resting above $0.35. This development will allow DOGE to create a platform for the next leg-up at $0.44. Clearing this hurdle will open the path to retest the current all-time high for Dogecoin price at $0.74. According to this prediction, DOGE could extend its bull rally to tag $1.09, its intended target. Due to the recent downswing, this upswing will represent a 400% gain from the current position at $0.22. DOGE/USDT 1-day chart As mentioned earlier, Shiba Inu seems to have siphoned off the hype, investors, and capital from Dogecoin, affecting its price, but things seem to be reverting, with some on-chain metrics suggesting a flip of the narrative is possible. On-chain metrics predict a bright future Looking at the transaction data tells a story about the nature of investors. Large transactions track transfers that are $100,000 or more. An increase in this metric serves as a proxy for institutions and their investment thesis. Over the past six months, the number of such transactions has increased by 70.7% from 1,570 to 2,680. This uptick in the metric suggests that high networth investors are starting to take interest in DOGE at the current price levels. DOGE large transaction chart While the above metric provides an insight into the potential investments, IntoTheBlock’s Global In/Out of the Money (GIOM) model shows where significant blockades are present. This fundamental index reveals that the DOGE will face formidable challenges ranging from $0.30 to $0.34. Here roughly 500,000 addresses that purchased 47 billion DOGE are “Out of the Money” and are likely to sell to breakeven, increasing the selling pressure. If buyers overcome this uptick in sell-side momentum and produce a daily close above $0.35, however, it will clear the daily demand mentioned above. This move will also open the path up for market makers to collect liquidity. All in all, this on-chain metric also promotes a bullish idea for DOGE with a contingency that the bullish momentum pushes the meme coin above $0.35. DOGE GIOM chart While the on-chain metrics described above serve as a tailwind for the bullish thesis, the new addresses joining the network add a dent to it. This metric shows that new users joining the Dogecoin network over the past six months have declined by 34.7% from 34,320 to 22,380. This reduction indicates that despite the capital inflows observed in the large transaction metric, a majority of investors are not yet interested in DOGE. Hence, this divergence between the new addresses and the large transaction chart paints indecision. DOGE new addresses chart The discrepancy noticed above can be explained in the holders’ chart which shows a paradigm shift. In November 2020, the composition of DOGE investors was 74.2% holders (1+ years), 18.6% Cruisers (1 month to 1 year) and 7.2% traders (less than a month). As of November 2021, this composition has changed and shows that cruisers are currently dominating with a 50.7% stake, while holders have dropped to 42.1%. This drastic decrease in the long-term holders suggests that these investors have been distributing their holdings over the past year ie., indicating increased sell-side pressure, which adds credence to DOGE’s lackluster performance over the period. In summary, if long-term holders stop offloading their DOGE holdings, investors can expect Dogecoin price to start inflating. DOGE Ownership chart On the other hand, if the selling pressure increases, knocking Dogecoin price below the $0.193 support level, it will lead to a retest of the descending triangle’s base at $0.16. If the bears produce a daily candlestick below this crucial barrier, it will open up DOGE to a massive 45% crash to $0.09, with a potential pitstop at $0.12.  
Intraday Market Analysis – Yen’s Rally Gains Traction

Intraday Market Analysis – Yen’s Rally Gains Traction

John Benjamin John Benjamin 29.11.2021 10:01
EURJPY breaks double bottom The safe-haven Japanese yen soars on news of a vaccine-resistant covid variant. A bearish MA cross on the daily chart indicates weakness in the euro’s previous rebound. The pair has closed below last September’s low at 127.90, a major floor to keep price action afloat in the medium term. This is a bearish signal that the sell-off is yet to end with 127.00 as the next support. The RSI’s double bottom in the oversold area may attract some buying interest. However, the bulls will need to lift 129.50 before a reversal could take shape. GBPUSD struggles to bounce back The pound continues on its way down against the US dollar over divergent monetary policy. The pair is hovering near a 12-month low around 1.3280. Sentiment remains bearish after a failed rebound above 1.3420. A bullish RSI divergence suggests a deceleration in the downward momentum. 1.3390 is the first hurdle ahead. Its breach would prompt the short side to cover and open the door to the daily resistance at 1.3510. Otherwise, a bearish breakout would send the price to 1.3200. GER 40 to test major floor The Dax 40 plunged as investors fret that new lockdowns could wreck the recovery. The gap below 15760 has forced leveraged buyers to bail out, stirring up volatility in the process. The momentum is typical of a catalyst-driven sell-off. Below 15150 the index is testing the psychological level of 15000. The RSI’s oversold situation has attracted a ‘buying-the-dips’ crowd in the demand zone. Further down, 14820 is a key floor to maintain the uptrend. 15530 has become the closest resistance in case of a rebound.
Fragile Calm Returns and Powell's Anti-Inflation Rhetoric Ratchets Up

Fragile Calm Returns and Powell's Anti-Inflation Rhetoric Ratchets Up

Marc Chandler Marc Chandler 01.12.2021 14:08
December 01, 2021  $USD, China, Currency Movement, EMU, Federal Reserve, Japan, PMI, South Korea, UK Overview:  Into the uncertainty over the implications of Omicron, the Federal Reserve Chairman injected a particularly hawkish signal into the mix in his testimony before the Senate.  These are the two forces that are shaping market developments.  Travel restrictions are being tightened, though the new variant is being found in more countries, and it appears to be like closing the proverbial barn door after the horses have bolted. Equities are higher.  The MSCI Asia Pacific Index, led by South Korea, and India, rose for the first time in four sessions, and Europe's Stoxx 600 is recouping more of yesterday's loss.  US futures are trading more than 1% higher.  Benchmark yields are higher.  The 10-year US Treasury yield is up four basis points though is still below 1.50%.  European yields are mostly 3-5 bp higher, though Italy's benchmark is 8 bp higher near 1.05%.  The dollar remains the fulcrum of the see-saw, but the funding currencies (yen, Swiss franc, and euro) are lower, and the dollar bloc is higher.  The dollar is pulling back against the Turkish lira after approaching TRY14 yesterday, even though President Erdogan's rhetoric about pushing for even lower rates seemed to have ratcheted up.  Emerging market currencies are more broadly mixed, but the JP Morgan Emerging Market Currency Index is up for the third consecutive session to match the longest advance in nearly three months.  Gold posted an outside down day yesterday, but there has been no follow-through selling today, and the yellow metal is consolidating inside yesterday's range.  January WTI slipped below $65 yesterday and is pushing above $69 today ahead of the OPEC meeting.   Dutch natural gas prices are firm, recouping most of yesterday's loss.  Iron ore and copper prices are also retracing yesterday's weakness.   Asia Pacific China's Caixin manufacturing PMI unexpectedly slipped below the 50 boom/bust level, albeit barely (49.9).  It was expected to be unchanged at 50.6.  It had eased below 50 in August (49.2).  Recall that the world's second-largest economy nearly stagnated in Q3 (0.2% quarter-over-quarter), and it appears to be accelerating here in Q4. Still, many look for the PBOC to provide more stimulus, perhaps in the form of a cut in reserve requirements, as it did this past July.  Separately,  officials seem to be cracking down harder on the "variable interest entity" structure that characterizes offshore listings, especially in the US.   Japan's November manufacturing PMI was revised to 54.5 from 54.2.  It stood at 53.2 in October.  The world's third-largest economy is recovering.  Australia reported Q3 GDP contracted by 1.9%, less than the 2.7% contraction economists had projected (Bloomberg median).  Its economy also is recovering.  The November manufacturing PMI was confirmed at 59.2, up from 58.2 previously.  House prices in Australia and New Zealand rose last month but sequentially at a slower pace.  To round out this regional overview, note that South Korea's exports in November were stronger than expected, pointing to robust foreign demand.  Exports rose 32.1% year-over-year.  Economists (Bloomberg median) expected a 27.2% pace after 24.1% in October.   It is the strongest pace since August.  Imports jumped 43.6% year-over-year, which was also more than expected, and follows a 37.7% increase previously.   The dollar is firm after being sold to its lowest level against the yen yesterday since October 11 (~JPY112.55).  It stalled near JPY113.60 in late Asia, which is slightly lower than the high seen in the US yesterday in response to the Fed's Powell hawkish pivot. However, barring fresh negative impulses, the JPY113 area may offer support again.  The Australian dollar is firm near yesterday's highs after falling to a new low for the year yesterday.  That low (~$0.7065) approached the (38.2%) retracement objective of the Aussie's rally from the March 2020 low near $0.5500.  A move now above $0.7080 would lift the technical tone and target the $0.7120-$0.7150 area.  The greenback initially fell to nearly CNY6.36, just ahead of the year's low recorded in May near CNY6.3570, before recovering to around CNY6.3720.  Resistance may be seen in the CNY6.3750-CNY6.3800 area.  The PBOC set the dollar's reference rate CNY6.3693.  The market (Bloomberg survey) had anticipated CNY6.3682.   Europe Covid was surging in several parts in Europe, including Germany, before the sequencing of the Omicron variant, and things have gotten worse.  The economic impact is beginning to be evident.  Germany's October retail sales, which economists had expected to recover after falling by 1.9% in September, disappointed with a 0.3% decline. The final November manufacturing PMI was revised to 57.4 from the flash 57.6 (and 57.8 in October).  It is the fourth consecutive decline.  The French manufacturing PMI was revised to 55.9 from the preliminary estimate of 54.6 (53.6 in October).  It is the first gain since May.  Economists hoped that Spain's manufacturing PMI was going to rise after falling for two months through October.  Instead, it fell again (51.1 vs. 57.4) to stand at its lowest level since March.  Italy is the standout.  Its manufacturing PMI was stronger than expected, jumping to 62.8 from 59.7, representing a new cyclical peak.  The aggregate for the eurozone as a whole edged up to 58.4 from 58.3 in October, but slower than the 58.6 flash estimate.  Still, it managed to eke out its first gain since June.  The UK's November manufacturing PMI stands at 58.1, down slightly from the preliminary estimate (58.2).  It was at 57.8 in October.  It is the second consecutive monthly gain after falling from June through September.  The UK economy grew by 1.3% in Q3 and is expected to slow to 1.1% this quarter.  The implied yield of the December 2021 short-sterling interest rate futures fell for eight sessions coming into this week.  It has been choppy so far this week, and net-net, the yield is about 1.5 bp higher than at the end of last week.  The overnight index swaps imply about a 40% chance of a hike next month.   The euro traded on both sides of Monday's range yesterday and closed above Monday's high.  However, there has been no follow-through buying today, and a consolidative tone has emerged.  A move above $1.1400 is needed to lift the tone, and it most likely won't happen today.  A 1.2 bln euro option is struck there that expires today.  The focus is on the downside. So far, it has held above $1.13, and support is seen around $1.1290.  Sterling recorded the low for the year yesterday, a little below $1.3200.  It stopped shy of our $1.3165 target, the (38.2%) retracement of cable's recovery from the March 2020 low. Its bounce off yesterday's lows fizzled out near $1.3330. Note that there is a GBP600 mln option at $1.33 that expires tomorrow.   America We have argued that the US October CPI surprise (6.1%) was a pivot point for Fed officials, even a reputed dove like San Francisco's Daly.  We also detected a change in rhetoric, and this point was driven home by Fed Chair Powell yesterday.  He clearly brandished his anti-inflaton credentials. Powell declared that the Fed would use its tools to step inflation from becoming entrenched.  At the same time, he recognized that it cannot assess Omicron now, though it clearly poses a risk.  Still, the next FOMC meeting is two weeks away, and by then, more information will be known.  Powell confirmed that the Fed would discuss the pace of tapering.  While the Fed will stop referring to inflation as transitory, Powell echoed Yellen's recent assessment that price pressures are projected to ease in H2 22.  Of note, the short end of the coupon curve sold off, but the long end remained firm.  The 30-year bond yield slipped to its lowest level since January, and the 2-10 year curve flattened 13 bp to below 90 bp, the flattest in 10 months.   The North American economic calendar is jammed today.  The US sees ADP's private-sector jobs estimate. Around 525k jobs are expected to have been filled, down from 571 in October.  In the last three months, the ADP estimate has undershot the official measures by an average of 23k.  Year-to-date, the average under-estimate is a little more than 50k.  November auto sales are expected to have risen for the second consecutive month after falling from May through September.  The final manufacturing PMI will also be reported.  The flash reading was the first increase since July.  The ISM manufacturing survey will also be published.  It has been a bit more resilient than the PMI.  Late in the session, the Beige Book will be released.  Canada reports October building permits (expected softer after the 4.3% gain in September) and the manufacturing PMI (57.7 in October).  Mexico reports its manufacturing PMI and IMEF surveys.  The central bank's inflation report is also due.  Mexico reports October worker remittances today.  They have averaged $4.15 bln a month this year through September.  The average for the same period in 2020 was $3.33 bln, and in 2019 $3.03 bln.  Note that the average trade deficit this year (through October) is almost $1.2 bln.   After reaching almost CAD1.2840 yesterday, its highest level since the September FOMC meeting, the greenback has come back offered today. It briefly and marginally traded below yesterday's CAD1.2730 low.  It needs to convincingly break below CAD1.2720 to be of any technical significance.  Initial resistance now may be seen near CAD1.2780.  The dollar peaked against the Mexican peso at the end of last week near MXN22.1550.  It is moving lower for the third consecutive session, and found initial support around MXN21.27 today.  The MXN21.20 area is the halfway mark of last month's range.  A move above  MXN21.40 may signal the dollar's downside correction is over.   Disclaimer
FX Update: Powell is now an inflation fighter, not a punchbowl spiker

FX Update: Powell is now an inflation fighter, not a punchbowl spiker

John Hardy John Hardy 01.12.2021 16:30
Forex 2021-12-01 15:25 4 minutes to read Summary:  Fed Chair Powell cemented recent evidence that the Fed has changed its stripes from a punch bowl refiller for the economy and the labor market to an inflation fighter at large. The market is finding it tough to absorb this message, given the recent market choppiness and virus distractions, but interesting that the US dollar has not found more strength on this momentous pivot. FX Trading focus: Hawkish broadside from Powell Fed Chair Powell cemented the impression that the Fed has shifted firmly into inflation fighting mode with an appearance yesterday before a Fed panel. The rhetoric was direct and of a make-no-mistake variety. Powell said that the end of balance sheet expansion would likely wind down a few  months sooner than originally foreseen, even with the current omicron variant of covid concerns. He also spelled out that it is probably time to retire the word “transitory” when discussing inflation, ad said that the risk of higher inflation has increased. Perhaps most interesting was a comment that persistent higher inflation brought a risk to getting the labor market back to where it was pre-covid. It is crystal clear at this point that the Fed has pivoted to inflation-fighting and tightening and will move in that direction as quickly as it can until the inflation numbers improve markedly. Of course, the market was already adjusting to clear signs that the Fed is moving into a far more hawkish stance early last week, only to be sidelined viciously by the omicron variant worries in recent days. Were it not for that interlude, Fed expectations would likely be at new cycle highs as yesterday’s signals from Powell make the Fed shift as clear as day. As it is, we have only clawed back a majority of the 2022 hikes priced in pricing of Fed rate hikes, still some 8 basis points to go for end of year Fed pricing (the “omicron discount” being perhaps 15 basis points or more?). The two curious things are that the US yield curve continues to viciously flatten and the market continues to price the terminal Fed rate for the coming hiking cycle at 2.00%. The inability for the longer yields to lift higher recently may be reining in the USD upside for. The other indicator besides yield-curve shifts that is making waves here on my radar screen of financial conditions is the measure of corporate credit, where spreads have blown wider, as discussed over the last couple of episodes of the Saxo Market Call podcast. The bluntness from the Fed yesterday may have driven the particularly bad day for junk bonds as the new style from the Fed could lead investors in the riskiest debt to conclude that they may be allowed to twist in the breeze down the road if inflation levels stay high, rather than receiving endless bailouts that keep zombie companies in business and able to forever roll forward their debts. We are set up for an interesting 2022 that will likely look very different from 2021. The shift in Fed rhetoric will make the market extra-sensitive to US data and developments that impact inflation, from energy prices, to the CPI/PCE data itself and the average hourly earnings data perhaps even more than the usual nonfarm payrolls change focus. Today’s Beige Book could be interesting for anecdotal evidence from interviews with companies on their impression of supply constraints, wage adjustments and issues finding qualified workers, etc. Today’s November ADP Payrolls was another strong 500k+ as expected. Chart: USDJPYUSDJPY was handcuffed by developments yesterday – on the one hand with the USD supported by a rise in Fed expectations, but on the other hand, JPY traders finding no fresh reason to bid up the JPY as the long end of the US yield curve remains pinned at quite low yields and there has been no shift in the Fed’s “terminal rate” – where the market sees the Fed rate hike cycle peeking out. So the price action bobbed well back above the 112.73 range pivot level that was broken yesterday, but has a steep wall to climb to threaten the 115.00+ cycle highs again, something that would likely require the entire Fed yield curve to lift, and more aggressively than expectations for policy normalization elsewhere. Source: Saxo Group Table: FX Board of G10 and CNH trend evolution and strengthAgain, the market is finding the reaction function increasingly difficult to the recent jolts in inputs. Note the huge momentum shift in SEK, where the market overdid the recent squeeze, but the strength there will likely only improve once the euro bottoms and the outlook for EU yields and fiscal improves. Table: FX Board Trend Scoreboard for individual pairs.Well entrenched trends are few and far between, but the EURCNH and EURCHF downtrends stand out, with the latter’s lack of volatility after recent direction changes remarkable. The Swiss franc does well as a safe haven and does well because the SNB can’t be seen weakening the currency when inflation pressures are rising. Upcoming Economic Calendar Highlights (all times GMT) 1500 – US Fed Chair Powell, Treasury Secretary Yellen to testify before House panel 1500 – US Nov. ISM Manufacturing 1530 – DOE’s Weekly Crude Oil and Fuel Inventories 1900 - Fed Beige Book 0030 – Australia Oct. Trade Balance
December Monthly

December Monthly

Marc Chandler Marc Chandler 02.12.2021 15:00
December 01, 2021  $USD, Macro The pandemic is still with us as the year winds down and has not yet become endemic, like the seasonal flu.  Even before the new Omicron variant was sequenced, Europe was being particularly hard hit, and social restrictions, especially among the unvaccinated, were spurring social strife.  US cases, notably in the Midwest, were rising, and there is fear that it is 4-6 weeks behind Europe in experiencing the surge.  Whatever herd immunity is, it has not been achieved.  Moreover, despite plenty of vaccines in high-income countries, inoculation efforts in many low-income countries won't begin in earnest until next year.   That said, the new variant has injected a new element into the mix, and it is with a heightened degree of uncertainty that we share our December outlook.  Given the unknowns, policymakers can choose the kind of error they are willing to make. They are trying to minimize their maximum regret.  The utmost regret is that the mutation is dangerous and renders the existing vaccines and treatment significantly less effective.  This will leave them vulnerable to accusations of over-reacting if the Omicron turns out to be a contagious but less deadly variation.   Meanwhile, there has been some relief to the supply chain disruptions.  Covid-related factory closures in Asia, the energy shortage, and port congestion are easing. Large US retailers have stocked up for the holiday shopping season, some of which chartered their own ships to ensure delivery. There are also preliminary signs that the semiconductor chip shortage may be past its worst.  Indeed, the recovery of the auto sector and rebuilding of inventories will help extend the economic expansion well into next year, even though fiscal and monetary policy are less supportive for most high-income countries.  The flash November US manufacturing PMI saw supplier delivery delays fall to six-month lows.   We assume that the US macabre debt ceiling ritual will not lead to a default, and even though it distorted some bill auctions, some resolution is highly probable.  The debate over the Build Back Better initiative, approved by the House of Representatives, will likely be scaled back by moderate Democratic Senators and Republicans.  Besides assessing the risks posed by the new variant, the focus in December is back on monetary policy.  Four large central banks stand out.  The Chinese economy has slowed the People's Bank of China quarterly monetary report modified language that signals more monetary support may be forthcoming.  Many observers see another reduction in reserve requirements as a reasonable step.  Unlike in the US and Europe, which saw bank lending dry-up in the housing market crisis (2008-2009), Beijing is pressing state-owned banks to maintain lending, including the property sector.   The Federal Reserve meets on December 15.  There are two key issues.  First, we expect the FOMC to accelerate the pace of tapering to allow it to have the option to raise rates in Q2 22.  The Fed's commitment to the sequence (tapering, hikes, letting balance sheet run-off) and the current pace of tapering deny the central bank the needed flexibility.  The November CPI will be reported on December 10.  The headline will likely rise to around 6.7%, while the core rate may approach 5%.  Second, the new "Summary of Economic Projections" will probably show more Fed officials seeing the need to hike rates in 2022.  In September, only half did.  The rhetoric of the Fed's leadership has changed.  It will not refer to inflation as transitory and is signaling its intention to act.  The European Central Bank and the Bank of England meet the day after the FOMC.  The ECB staff will update its forecasts, and the key here is where it sees inflation at the end of the forecasting period.  In September, it anticipated that CPI would be at 1.5% at the end of 2023.  Some ECB members argued it was too low.   It may be revised higher, but the key for the policy outlook is whether it is above the 2% target.  We doubt that this will be the case.  While the ECB will likely announce that it intends on respecting the current end of the Pandemic Emergency Purchase Program next March, its QE will persist. The pre-crisis Asset Purchase Program is expected to continue and perhaps even expand in Q2 22.  The "modalities" of the post-emergency bond-buying program, size, duration, and flexibility (self-imposed limits) will be debated between the hawks and doves.  With eurozone inflation approaching 5% and Germany CPI at 6%, the hard-money camp will have a new ally at the German Finance Ministry as the FDP leader Linder takes the post.  On the other hand, the Social Democrats will name a Weidmann's replacement at the head of the Bundesbank, and nearly anyone will be less hawkish.   While we correctly anticipated that the Bank of England would defy market expectations and stand pat in November, the December meeting is trickier.  The decision could ultimately turn on the next employment and CPI reports due 1-2 days before the BOE meeting.  The risk is that inflation will continue to accelerate into early next year and that the labor market is healing after the furlough program ended in September.  On balance, we suspect it will wait until next year to hike rates and finish its bonds purchases next month as planned.   Having been caught wrong-footed in November, many market participants are reluctant to be bitten by the same dog twice. As a result, the swaps market appears to be rising in about a 35% chance of a 15 bp move that would bring the base rate up to 25 bp.  Sterling dropped almost 1.4% (or nearly two cents) on November 4, the most since September 2020 when the BOE failed to deliver the hike that the market thought the BOE had signaled.   The combination of a strong dollar and the Fed tapering weighed emerging market currencies as a whole.  The JP Morgan Emerging Market Currency Index fell by about 4.5% in November, its third consecutive monthly decline, bringing the year-to-date loss to almost 10%.  It fell roughly 5.7% in 2020.  Turkey took the cake, though, with the lira falling nearly 30% on the month.  It had depreciated by 15% in the first ten months of the year.  This follows a 20% depreciation last year.  Ten years ago, a dollar would buy about 1.9 lira.  Now it can buy more than 13 lira.  The euro's weakness was a drag, and the geopolitical developments (e.g., Ukraine, Belarus) weighed on central European currencies. The central bank of Hungary turned more aggressive by hiking the one-week deposit rate by 110 bp (in two steps) after the 30 bp hike in the base rate failed to have much impact.  The forint's 3.1% loss was the most among EU members.   Colombian peso was the weakest currency in Latam, depreciating by almost 5%. It was not rewarded for delivering a larger than expected 50 bp rate hike in late October.  Bannockburn's GDP-weighted global currency index (BWCI) fell by nearly 1% in November, the largest monthly decline since June.  It reflected the decline of the world's largest currencies against the dollar.  Three currencies in the index proved resilient  On the GDP-weighted basis, China has immense gravity, with a 21.8% weighting (the six largest EM economies, including China, account for a 32.5% of the BWCI). It appreciated by about two-thirds of a percent. The Brazilian real managed to rise (~0.25%) too.  Since the day before the Omicron variant was sequenced, the Japanese yen gained a little more than 2%, reversing the earlier decline that had brought it to four-year lows.  It rose by  0.7% in November, making it the strongest currency in the index.  Among the major currencies, the Australian dollar fell the most, declining about 5.2%.  The Canadian dollar was next, with around a 3% loss.   As it turns out, the dollar (Dollar Index) recorded its low for the year as shocking events were unfolding in Washington on January 6.  The bottomed against the yen and euro the same day.   The greenback did not bottom against the Australian dollar until February, but it took it until early June to put in a low against sterling and the Canadian dollar.  The BWCI peaked in early June and, by the end of last month, had retreated by about 2.7%.  We suspect it may decline by another 2%, which would return it the levels of late 2019.  That, in turn, implies the risk of a stronger dollar into the first part of next year.     Dollar:  The jump in US CPI to above 6%, and a strong sense that it is not the peak, spurred speculation that the Federal Reserve would likely accelerate the pace of tapering at the December meeting. Several Fed officials seemed sympathetic, including San Francisco President Daly, who is perceived to be a dove. The minutes of the November meeting underscored the central bank's flexibility over the pace of tapering.  At the same time, most of the high-frequency data for October came in stronger than expected, lending credence to ideas that after a disappointing Q3, the world's largest economy is accelerating again in Q4.  The divergence of monetary policy and the subsequent widening interest rate differentials is the primary driver of expectations for dollar appreciation against the euro and yen.  The market had been leaning toward three rates hikes in 2022 before news of the new Covid mutation emerged and trimmed the odds.  Powell was renominated for a second term at the helm of the Federal Reserve, Brainard was nominated to be Vice-Chairman.  There is still the Vice-Chair for supervision and an empty governor seat for President to Biden to fill.  In addition to the changes in leadership, the rotation of the voting members of the FOMC brings in a somewhat more hawkish bias next year.   Euro:  In contrast with the US, eurozone growth is set to slow in Q4. After two quarters that growth exceeded 2% quarter-over-quarter, growth is likely to moderate to below 1% in Q4 21 and Q1 22.  Food and energy are driving inflation higher.  The EC continues to negotiate with the UK over changes to the Northern Ireland Protocol.  The dispute over fishing licenses and migrant crossing of the channel are also unresolved sources of tension with the UK. Tensions between the EC and Poland/Hungary over the rule of law, judicial independence, and civil liberties have also not been settled.  As was the case in the spring, Russia's troop and artillery movement threatened Ukraine, though the tension on the Poland/Belarus border has eased.  The ECB's leadership continues to maintain the price pressures are related to the unusual set of circumstances but are ultimately temporary.  Its December 16 meeting, the last one before Bundesbank President Weidmann steps down, is critical. In addition to confirming the end of the Pandemic Emergency Purchase Program in March 2022, and the expansion of the Asset Purchase Program, the ECB staff will update its inflation forecasts.  The focus here is on the 2023 CPI projection of 1.5%.  There was a push back against it in September, and a slight upward revision is likely. Nevertheless, it will probably remain below the 2% target.  The swaps market is pricing in a 25 bp hike in 2023.   (November indicative closing prices, previous in parentheses)   Spot: $1.1335 ($1.1560) Median Bloomberg One-month Forecast $1.1375 ($1.1579)  One-month forward  $1.1350 ($1.1568)    One-month implied vol  7.1%  (5.1%)         Japanese Yen:  Japan has a new prime minister who has put together a large fiscal stimulus package that will help fuel the economic recovery that had begun getting traction since the formal state of emergency was lifted at the end of September.  After a frustratingly slow start, the inoculation efforts have started bearing fruit, with vaccination rates surpassing the US and many European countries.  Unlike most other high-income countries, Japan continues to experience deflationary pressures.  Food and energy prices may be concealing it in the CPI measure, but the GDP deflator in Q2 and Q3 was  -1.1%. However, the BOJ does not seem inclined to take additional measures and has reduced its equity and bond-buying efforts.  The exchange rate remains sensitive to the movement of the US 10-year note yield, which has chopped mostly between 1.50% and 1.70%. With a couple of exceptions in both directions, the greenback has traded in a JPY113-JPY115 range.  The emergence of the new Covid mutation turned the dollar back after threatening to break higher.  A convincing move above the JPY115.50 area would likely coincide with higher US rates and initially target the JPY118 area.    Spot: JPY113.10 (JPY113.95)       Median Bloomberg One-month Forecast JPY113.30 (JPY112.98)      One-month forward JPY113.00 (JPY113.90)    One-month implied vol  8.2% (6.4%)   British Pound:  Sterling never fully recovered from disappointment that the Bank of England did not hike rates in early November.  Market participants had understood the hawkish rhetoric, including by Governor Bailey, to signal a hike.  The implied yield of the December 2021 short-sterling interest rate futures plummeted by 30 bp by the end of the month, and sterling has not seen $1.36, let alone $1.37, since then.  Indeed, sterling chopped lower and recorded new lows for the year in late November near $1.3200.  Growth in the UK peaked in Q2 at 5.5% as it recovered from the Q1 contraction.  It slowed to a 1.3% pace in Q3 and looks to be slowing a bit more here in Q4.  The petty corruption scandals and ill-conceived speeches by Prime Minister Johnson have seen Labour move ahead in some recent polls.  An election does not need to be called until May 2024, but the flagging support may spur a cabinet reshuffle.  The next important chart point is not until around $1.3165 and then the $1.30 area, which holds primarily psychological significance.       Spot: $1.3300 ($1.3682)    Median Bloomberg One-month Forecast $1.3375 ($1.3691)  One-month forward $1.3315 ($1.3680)   One-month implied vol 7.5% (6.8%)      Canadian Dollar:  The Canadian dollar appreciated by almost 2.4% in October and gave it all back, plus some in November.  Indeed, the loss was sufficient to push it fractionally lower for the year (-0.4%), though it remains the best performing major currency against the US dollar.   The three major drivers of the exchange rate moved against the Canadian dollar last month.  First, its two-year premium over the US narrowed by 17 bp, the most in four years.  Second, the price of January WTI tumbled by around 18.2%.  Commodity prices fell more broadly, and the CRB Index snapped a seven-month rally with a 7.8% decline.  Third, the risk appetites faltered is reflected in the equity markets. The Delta Wave coupled with the new variant may disrupt growth.  Still, the swaps market has a little more than two hikes discounted over the next six months.   The government is winding down its emergency fiscal measures, but the spring budget and election promises mean that the fiscal consolidation next year will be soft.     Spot: CAD1.2775 (CAD 1.2388)  Median Bloomberg One-month Forecast CAD1.2685 (CAD1.2395) One-month forward CAD1.2770 (CAD1.2389)    One-month implied vol 7.2% (6.2%)      Australian Dollar:  The Australian dollar fell by more than 5% last month, slightly less than it did in March 2020.  It did not have an advancing week in November after rallying every week in October.  Australia's two-year premium over the US was chopped to less than 10 bp in November from nearly 28 bp at the end of October.  The Reserve Bank of Australia pushed back against aggressive rate hike speculation.   The unexpected loss of jobs in October for the third consecutive month took a toll on the Australian dollar, which proceeded to trend lower and recorded the low for the year on November 30, slightly below $0.7065.  A break of $0.7050 would initially target $0.7000, but convincing penetration could spur another 2-2.5-cent drop.  The 60-day rolling correlation between- changes in the Australian dollar and the CRB commodity index weakened from over 0.6% in October to below 0.4% in November. The correlation had begun recovering as the month drew to a close.       Spot:  $0.7125 ($0.7518)        Median Bloomberg One-Month Forecast $0.7195 ($0.7409)      One-month forward  $0.7135 ($0.7525)     One-month implied vol 9.7%  (9.1%)        Mexican Peso:  The broadly stronger US dollar and the prospects of more accelerated tapering weighed on emerging market currencies in November, but domestic considerations also weighed on the peso.   The Mexican peso fell by around 4.1%, the most since March 2020.  The economy unexpectedly contracted by 0.4% in Q3.  There is little fiscal support to speak of, while monetary policy is becoming less accommodative too slowly compared with some other emerging markets, such as Brazil.  Price pressures are still accelerating, and the bi-weekly CPI rose above 7% in mid-November. The swaps market discounts nearly a 25 bp hike a month for the next six months.  The government's policies, especially in the energy and service sectors, are not attractive to investors.  President AMLO dealt another blow to investor confidence by retracting the appointment of former Finance Minister Herrera for his deputy to head up the central bank starting in January.  This is seen potentially undermining one of the most credible institutions in Mexico.  Lastly, Mexico's trade balance has deteriorated sharply in recent months and through October has recorded an average monthly trade deficit of nearly $1.2 bln this year.  In the same period, in 2020, it enjoyed an average monthly surplus of almost $2.5 bln, and in the first ten months of 2019, the average monthly trade surplus was a little more than $150 mln.     Spot: MXN21.46 (MXN20.56)   Median Bloomberg One-Month Forecast  MXN21.23 (MXN20.42)   One-month forward  MXN21.60 (MXN20.65)     One-month implied vol 14.9% (9.6%)      Chinese Yuan:  The Chinese yuan has been remarkably stable against the US dollar, and given the greenback's strength, it means the yuan has appreciated sharply on a trade-weighted basis.  Going into the last month of the year, the yuan's 2.6% gain this year is the best in the world.  Chinese officials have signaled their displeasure with what it sees as a one-way market.  At best, it has orchestrated a broadly sideways exchange rate against the dollar, mainly between CNY6.37 and CNY6.40. The lower end of the dollar's range was under pressure as November drew to a close.   Even though the Chinese economy is likely to accelerate from the near-stagnation in Q3 (0.2% quarter-over-quarter GDP), it remains sufficiently weak that the PBOC is expected to consider new stimulative measures.  It last reduced reserves requirements in July, and this seems to be the preferred avenue rather than rate cuts.  Yet, given the interest rate premium (the 10-year yield is around 2.85%), record trade surpluses ($84.5 bln in October), portfolio inflows, and limited outflows, one would normally expect a stronger upward pressure on the exchange rate.    Spot: CNY6.3645 (CNY6.4055) Median Bloomberg One-month Forecast  CNY6.38 (CNY6.4430)  One-month forward CNY6.3860 (CNY6.4230)    One-month implied vol  3.5% (3.5%)    Disclaimer
Hawks Triumph, Doves Lose, Gold Bulls Cry!

Hawks Triumph, Doves Lose, Gold Bulls Cry!

Arkadiusz Sieron Arkadiusz Sieron 02.12.2021 17:20
The hawkish revolution continues. Powell, among the screams of monetary doves, suggested this week that tapering could be accelerated in December! People live unaware that an epic battle between good and evil, the light and dark side of the Force, hard-working entrepreneurs and tax officials is waged every day. What’s more, hawks and doves constantly fight as well, and this week brought a victory for the hawks among the FOMC. The triumph came on Tuesday when Fed Chair Jerome Powell testified before Congress. He admitted that inflation wasn’t “transitory”, as it is only expected to ease in the second half of 2022. Inflation is therefore more persistent and broad-based than the Fed stubbornly maintained earlier this year, contrary to evidence and common sense: Generally, the higher prices we’re seeing are related to the supply and demand imbalances that can be traced directly back to the pandemic and the reopening of the economy. But it’s also the case that price increases have spread much more broadly and I think the risk of higher inflation has increased. Importantly, Powell also agreed that “it’s probably a good time to retire that word.” You don’t say! Hence, the Fed was wrong, and I was right. Hurray! However, it’s a Pyrrhic victory for gold bulls. This is because the recognition of the persistence of inflation pushes the Fed toward a more hawkish position. Indeed, Powell suggested that the FOMC participants could discuss speeding up the taper of quantitative easing in December: At this point the economy is very strong and inflationary pressures are high and it is therefore appropriate, in my view, to consider wrapping up the taper of our asset purchases, which we actually announced at the November meeting, perhaps a few months sooner, and I expect that we will discuss that at our upcoming meeting in a couple of weeks. What’s more, Powell seemed to be unaffected by the Omicron coronavirus strain news. He was a bit concerned, but not about its disturbing impact on the demand side of the economy; he found supply-chain disruptions that could intensify inflation way more important. That’s yet another manifestation of Powell’s hawkish stance.   Implications for Gold What does the Fed’s hawkish tilt imply for the gold market? Well, gold bulls get along with doves, not hawks. A more aggressive tightening cycle, including faster tapering of asset purchases, could boost expectations of more decisive interest rates hikes. In turn, the prospects of a more hawkish Fed could increase the bond yields and strengthen the US dollar. All this sounds bearish for gold. Indeed, the London price of gold dropped on Wednesday below $1,800… again, as the chart above shows. Hence, gold’s inability to stay above $1,800 is disappointing, especially in the face of high inflation and market uncertainty. Investors seem to have once again believed that the Fed will be curbing inflation. Well, that’s possible, but my claim is that despite a likely acceleration in the pace of the taper, inflation will remain high for a while. I bet that despite the recent hawkish tilt, the Fed will stay behind the curve. This means that the real interest rates should stay negative, providing support for gold prices. The previous tightening cycle brought the federal funds rate to 2.25-2.5%, and we know that after an economic crisis, interest rates never return to the pre-crisis level. This is also what the euro-dollar futures suggests: that the upcoming rate hike cycle will end below 2%. The level of indebtedness and financial markets’ addiction to easy money simply do not allow the Fed to undertake more aggressive actions. Will gold struggle in the upcoming months then? Yes. Gold bulls could cry. But remember: tears cleanse and create more room for joy in the future. If you enjoyed today’s free gold report, we invite you to check out our premium services. We provide much more detailed fundamental analyses of the gold market in our monthly Gold Market Overview reports and we provide daily Gold & Silver Trading Alerts with clear buy and sell signals. In order to enjoy our gold analyses in their full scope, we invite you to subscribe today. If you’re not ready to subscribe yet though and are not on our gold mailing list yet, we urge you to sign up. It’s free and if you don’t like it, you can easily unsubscribe. Sign up today! Arkadiusz Sieron, PhDSunshine Profits: Effective Investment through Diligence & Care
RBA Jettisons Yield Curve Control but Continues to Resist Market Pressure

RBA Jettisons Yield Curve Control but Continues to Resist Market Pressure

Marc Chandler Marc Chandler 03.11.2021 10:54
Overview: The third record close of the S&P 500 failed to lift Asia Pacific and European shares today.  In Asia, the large bourses fell, except South Korea, which rallied a little more than 1%.  Europe's Stoxx 600 is threatening to snap a three-day advance, while US index futures are soft.  The US 10-year yield is firm, around 1.56%.  European bonds are rallying.  Peripheral yields are off 8-9 bp, while core rates are 3-5 lower.  The Reserve Bank of Australia formally abandoned its yield-curve control, and the local debt market was quiet, but the Australian dollar is selling off and dragging the other dollar-bloc currencies lower.  Only the yen, among the majors, is gaining on the greenback.  Emerging market currencies are faring better, led by Asian currencies and most central and eastern European currencies.  The JP Morgan Emerging Market Currency Index is rising for the first time in five sessions.  Gold continues to consolidate within the range set before the weekend (~$1771-$1801) but is a bit softer on the day.  Oil prices are firm, and the December WTI contract is at the upper end of the $80-$85 range that has prevailed since mid-October.  Copper initially moved higher but reversed lower, and a break of $432 could signal another two percent decline.   Asia Pacific The Reserve Bank of Australia formally jettisoned its yield-curve control of targeting the April 2024 bond yield at 10 bp.  The market expected this after the RBA had been missing in action as the yield soared.  Today, the on-the-run 3-year yield fell six basis points after falling 21 yesterday.  It has now returned below 1%.  Governor Lowe did not fully capitulate but is trying to hold on to a middle ground.  He said the central bank will be patient on rates, and it is still plausible not to raise rates until 2024. However, he acknowledged rates could be lifted in 2023.  The swaps market is pricing in almost 80 bp of tightening over the next 12 months, with a 10 bp hike seen in six months.   European and American equities have recovered from the wobble in mid-September that sparked fear that Evergrande's losses would trigger a Lehman-like event.  Yet, the problem with Chinese property developers continues, even though Evergrande took advantage of its 30-day grace period, it serviced its debt.  China's high yield bond market is dominated by the property development sector.  The yields rose for eight consecutive sessions through yesterday and briefly rose above 20% last week.  Estimate debt servicing costs amount to around $2 bln this month.  House sales and prices are falling, a separate challenge to the economy than the energy crunch and high commodity prices.  It is still unclear whether Chinese officials are prepared to take more decisive action to support the economy, like a cut in reserve requirements.  New economic initiatives may emerge from the Communist Party's Central Committee meeting (November 8-11).  Officially it will focus on the achievements in preparation for the 20th Congress next year that will likely confirm another term for President Xi but possibly shuffle other senior posts.   The dollar rose to almost JPY114.45 yesterday and has come back offered today.  It has slipped below the 20-day moving average (~JPY113.55) for the first time since September 23.  Last week's low was closer to JPY113.25.  A break of JPY113.00 could signal losses toward JPY112.60 initially.  The price action is lending credence to the JPY114.50-JPY115.00 being the top of the new range. The lower end of the range is less clear.  The Australian dollar's 4% rally led the majors last month, but it stalled near the 200-day moving average (~$0.7555) and is breaking down today.  It has taken out last week's lows (~$0.7465) marginally, but the downside momentum has continued in the European morning.  There is near-term scope toward $0.7435 and maybe $0.7410.   The PBOC set the dollar's reference rate at CNY6.4009, firmer than the median (Bloomberg) forecast of CNY6.3986. The gap was slightly wider than it has been.  The last time the gap was more than 20 pips was October 20. So if it is a protest, it is still faint. Meanwhile, stricter virus curbs took a toll on Chinese equities. The greenback has risen above CNY6.40 on an intraday basis but continues to struggle to sustain it on a closing basis.   Europe The EMU final manufacturing PMI was slightly lower than the preliminary estimate, owing to a softer than expected Spain reading and a downward revision in Germany.  The aggregate stands at 58.3, down from 58.5 initially and 58.6.  It is the fourth consecutive decline, but it can hardly be considered weak.  Germany's manufacturing PMI was lowered to 57.8 from the 58.2 preliminary projection and 58.4 in September.  The French reading was tweaked up to 53.6 from 53.5.  It is still down from 55.0 and is the fifth straight loss.  Spain disappointed with a 57.4 report.  It was projected to be unchanged at 58.1, which seemed optimistic from the get-go.  Italy offered an upside surprise.  Its manufacturing PMI rose to 61.1 from 59.7.  Economists had expected some slippage.   Some pressure on the euro appeared to be coming from the cross against the Swiss franc.  Since the Fed met in September through the end of last week, the euro fell about 3.35% against the franc. Sight deposits rose steadily in October after falling in the first half of September.  Last week's increase was the most in two months as the euro broke below CHF1.08 for the first time since  May 2020. The rise in sight deposits is consistent with stepped-up intervention by the Swiss National Bank.  Yesterday, the euro fell against the Swiss franc, even as it rose against the dollar.  Clearly, the intervention is not arresting the euro's weakness. SNB is more likely moderating the decline.   Moreover, if the SNB also seeks to maintain a certain currency allocation of its reserves, it needs to acquire dollars after acquiring euros.  And if it does not want to grow reserves like Japan or China, it will sell some of the euros for dollars, minimizing the intervention effect on reserve accumulation.  The value of the SNB's reserves declined slightly in the year through September.    The pace of the euro's decline against the franc has accelerated in the past two sessions and closed below the lower Bollinger Band (two standard deviations below the 20-day moving average) for the second consecutive session.  Last year's low was set near CHF1.05 and yesterday, the euro pushed briefly through CHF1.0550.  It is now near CHF1.0570. The next technical support may be around CHF1.0250. However, speculators in the futures market see it differently.   They have the largest net short franc position (~19.3k contracts) since December 2019 and the smallest gross longs (~1245 contacts) since 2003.   French President Macron is holding back from imposing retaliatory measures against the UK over the fishing license dispute.  Reports suggest that Jersey is considering granting temporary licenses to French trawlers.  Separately, despite some confusing gas flows yesterday (from Germany to Poland), Russia says Putin's promise to boost gas shipment to Europe starting next week, after Gazprom completely rebuilding its domestic inventories, remains intact.  Look for results shortly of the auctions for pipeline capacity.   After falling a little more than 1% before the weekend, the euro bounced back yesterday and managed to close above $1.16. Follow-through buying was limited to about $1.1615, but it has struggled to sustain the positive momentum.  There is an option for 1.8 bln euros at $1.1585 that expires today.  A break signals a test on nearby support seen in the $1.1540-$1.1560 area.  Last week's low was about $1.1535, and the year's low is closer to $1.1525.  Sterling is off for the third consecutive session.  It reached $1.3630, the lowest level since October 14, which is about the (50%) retracement objective of last month's rally.  Some sales may have been related to the GBP316 mln option at $1.3650 that expires today.  The next (61.8%) retracement is by $1.3575.  America Today is the quietest day of the week for North American economic data. However, there is one feature, monthly autos sales.  Due to the supply chain disruptions, especially semiconductor chips, auto production has been crushed, and by extension, auto sales.  This is not limited to the US by any means.   Yesterday, Japan reported that October auto sales are off slightly more than 30% year-over-year in October. European auto registrations, a proxy for sales, were down 23.1% year-over-year in September.  Last week's Q3 GDP showed that growth was halved to 4% but the problems in the auto sector.  In September, US auto sales were about 25.5% below September 2020 sales.  Bloomberg's survey found a median forecast for October sales of 12.5 mln vehicles (seasonally adjusted annual basis), which would be the first increase since April.  Cox Automotive warns of another decline to 11.8 mln vehicles. The US Treasury unexpectedly boosted its Q4 borrowing needs to about $1.02 trillion, or around $312 bln more than it anticipated in August.  It appears to be largely a function of adjusting its cash balances and the calculations around the debt ceiling.  It is projecting Q1 22 borrowing needs at less than half of the Q4 sum.  Of course, it is assuming that the debt ceiling will be raised or suspended. Still, tomorrow's quarterly refunding announcement is expected to reduce its coupon offerings for the first time since 2016.  Separately, but not totally unrelated, the Democratic Party is still struggling to agree on the infrastructure initiative.   The US dollar continues to consolidate against the Canadian dollar but is enjoying a firmer tone today.  The Bank of Canada met on October 27, and it surprised the market by ending its bond-buying program and acknowledging the risk of an earlier hike.  The US dollar covered a range of roughly CAD1.2300 to CAD1.2435.  It has remained in that range since then. We note that speculators in the futures market switched to a net long position for the first time since early September in the week through last Tuesday.  The greenback is knocking on initial resistance in the CAD1.2400-CAD1.2410 area, and a break could signal a move toward CAD1.2430-CAD1.2450.  An option for about $900 mln expires tomorrow at CAD1.2450.  The greenback has a five-day rally in tow against the Mexican peso.  Earlier today, it pushed above last month's high (~MXN20.90), but it has stalled.  It is trading little changed on the session around MXN20.8500 as the North American session is about to start.   Still, unless it can break below MXN20.80, we look for higher levels.  That said, the pace of the dollar's rally is threatening the upper Bollinger Band (~MXN20.95)
Considering Portfolios In Times Of, Among Others, Inflation...

Profit-Taking on Dollar Longs after Better than Expected Jobs Report Sets Stage Until CPI

Marc Chandler Marc Chandler 08.11.2021 09:57
The US dollar turned in a solid week's performance, rising against most currencies and recording a marginal new high for the year against the euro.  Sterling and the Australian dollar competed for the worst performer.  Both central banks pushed against market expectations for aggressive near-term tightening.  The central banks triggered a short squeeze in the bond market, where 10-year benchmark yields from 10 bp in the US to 34 bp in Italy.  UK 10-year Gilts and French Oats yields fell nearly 22 bp.  Germany lagged with an almost 18 bp decline.  The speculative market had its largest net short Treasury note futures position since March 2020.  It has swung from its largest net long position in four years (~181k contracts) in early October to a net short position of almost 270k as of November 2.  The macro focus shifts back to inflation next week with American and Chinese reports.  Rising inflation in the world's two largest economies may arrest the rally in the bond markets. We anticipated the dollar to move broadly higher this month, and the move we envision does not appear over.  However, important support has been approached in a sharp thrust that has penetrated Bollinger Bands, suggesting some patience may be needed.  The dollar did close relatively softly, especially given the stronger than expected employment report.   Dollar Index: A new high for the year was recorded after the employment report was slightly above 94.60.  The momentum indicators are trending higher, and the five-day moving average crossed back above the 20-day moving average.  Recall that the 94.50 area is (38.2%) retracement of the sell-off since the March 2020 peak (~103).  The high from last September was closer to 94.75, but above there, nothing stands out until the 95.70-96.10 band. Yet ahead of the weekend, it finished poorly and formed a potential bearish shooting star candlestick.  Initial support is seen around 93.80.   Euro:   The single currency was virtually flat last week, but it does not hide the fact that a new low for the year (~$1.1515) was recorded.  The MACD and Slow Stochastic are moving lower, and the price action has been poor.  The $1.1490 area corresponds to the (50%) retracement objective of the rally from the March 2020 low (~$1.0635).  The next retracement (61.8%) is found a little below $1.13.  The euro finished on a firm note near session highs, suggesting scope for some corrective gains at the start of the new week. The new momentum shorts are frustrated with the lack of follow-through and maybe in weak hands.  A close above $1.1620 would lift the technical tone.  Japanese Yen:  The Japanese yen was the strongest of the major currencies, gaining an inconsequential 0.25% against the dollar.  The decline in US rates helped drag the dollar lower against the yen.  In terms of market positioning, short-yen carry trades had become momentum trades, too and the unwind was also supportive of the yen.   The dollar-yen exchange rate continues to track US 10-year yields.  The 10-year yield fell below 1.50% for the first time in a month ahead of the weekend, and the dollar made a new low for the week near JPY113.30.  Recall that in the big picture, we have suggested a range-trading affair between around JPY113.00 and JPY114.50-JPY115.00.  That still seems reasonable.  However, we note the dollar's momentum is flagging, and the five-day moving average slipped below the 20-day for the first time since late September.   The Slow Stochastic and MACD are trending lower.  A break of JPY113.00 signals the next leg down into the JPY112.00-JPY112.50 band.  British Pound: After the Bank of England confounded market expectations, sterling was spanked, falling more than 1% for only the second time this year (the other was on September 28, which arguably was more of a dollar move).  Expectations, partly facilitated by official comments, for tighter monetary policy spurred a roughly 4.3-cent rally in sterling last month.  If the BOE is saying, "sorrow about the mate, you misunderstood the conditionality and our job," it seems only fitting that sterling return to the late-September low near $1.3400.  It did so ahead of the weekend to $1.3425.  Ahead of the weekend, it settled below the lower Bollinger Band for the second consecutive session.  The momentum indicators are still falling. However, it managed to close near session highs, and a potential hammer candlestick may have been formed.  However, if $1.34 does not hold, it is difficult to find much chart support ahead of the $1.3165-$1.3200 area should $1.3400 be convincingly broken.  Canadian Dollar:  The Canadian dollar fared better than the other dollar-bloc currencies but still lost about 0.5% against the US dollar.  Since meeting the head and shoulders objective near CAD1.23, the US dollar has been consolidating and forming a rounded bottom.  The five-day moving average crossed back above the 20-day for the first time in a month.  The greenback finished the week bumping against the 200-day moving average (CAD1.2480), while the momentum indicators suggest there is more to come.  A retracement (38.2%) of the greenback's slide since September 20 high (~CAD1.29) is found near CAD1.2520, and the next retracement (50%) is slightly below the neckline of the head and shoulders pattern (~CAD1.2600).     Australian Dollar:  The Australian dollar's pullback has been more profound than the other majors.  It dropped almost 2.6% from the late October higher (~$0.7555), which was its best level since early July, and retraced half of last month's rally at the pre-weekend low (~$0.7360).  The momentum indicators are still falling, and the five and 20-day moving averages have crossed for the first time in nearly a month.  The next (61.8%) retracement target is closer to $0.7315.  Still, it closed firmly and with a possible bullish hammer candlestick, suggesting a bounce early next week is likely. The $0.7430-$0.7450 area may be the first important hurdle.  The Reserve Bank of Australia, like many other central banks, is emphasizing labor market developments in their forward guidance. Given the gap between what the RBA is saying (no hike likely until 2024) and what the market is saying (the swaps market implies nearly 70 bp of tightening over the next 12 months), next week's October jobs data may have greater impact.  Australia lost almost 285k jobs in August and September amid the lockdown.  A modest recovery is expected. In fact, the worst was probably in August. Full-time positions increased by almost 27k in September.   Mexican Peso:   The peso staged a brilliant recovery last week, but only after first falling to its lowest level since March.  The fall in US rates helped take pressure off the peso and emerging markets more broadly.  The strong US employment report bolstered risk appetites and lifted the JP Morgan Emerging Market Currency Index, which had been lower on the week, ahead of the data.  The dovish FOMC tapering announcement saw the dollar record a key downside reversal against the peso by reversing lower after making new highs and closing below the previous session's low.  Modest follow-through selling pushed the dollar through the (61.8%) retracement objective (~MXN20.46) of the rally that had begun in late October (from ~MXN20.21), ahead of the FOMC meeting and jobs report.  Before the weekend, it settled at the lows for the week (~MXN20.30).  Initial support is seen near MXN20.20.  The central bank meets next week (November 11).  Most expect a 25 bp hike, but an acceleration in CPI last month ( to be reported on November 9) may boost the risk of a 50 bp move.   Chinese Yuan:  The yuan's 2% gain this year puts it in third place globally, behind the Russian ruble (4.5%) and the Canadian dollar (2.3%).  The yuan has drifted higher in recent weeks.  It has risen for the past three months for a cumulative gain of a little less than 1%.  For the past several weeks, the PBOC consistently set the dollar's reference rate above market expectations (median projection in Bloomberg's survey) but did not do so ahead of the weekend.  Last week the dollar traded quietly within the range seen in the past two weeks.  The dollar recorded four-month lows in October in front of CNY6.38.  Given the official penchant for stability, the issue now is the upper end of the range, and it seems to be CNY6.40-CNY6.41.  Since late September, the dollar has not settled above the 20-day moving average (~CNY6.4075), the middle of the Bollinger Bands.  China's 10-year bond yields peaked in mid-October near 3.05% and last week finished below 2.90% for the first time in several weeks. It is the only country whose 10-year yield has fallen this year (~25 bp).  The October inflation gauges are the market's focus, but trade and lending figures may generate more insight into the economic drivers.   Disclaimer
Intraday Market Analysis – Gold Awaits Breakout - 03.12.2021

Intraday Market Analysis – Gold Awaits Breakout - 03.12.2021

John Benjamin John Benjamin 03.12.2021 09:42
XAUUSD tests key support Gold treads water as markets await US jobs data release. The metal remains under pressure after it failed to maintain bids above 1780. Sellers are testing the daily support at 1760. A bearish breakout would shatter hopes of a swift rebound and send the price to last September’s low at 1725. That move could then threaten the integrity of the uptrend on a longer timeframe. 1806 is a fresh resistance and sellers could be waiting to double down at a better price. On the upside, a bullish breakout may propel the metal to 1845. EURUSD attempts bullish reversal The euro recoups losses as traders reposition ahead of today’s nonfarm payrolls. A bullish RSI divergence indicates a slowdown in the bearish push. The pair has found support near June 2020’s lows around 1.1190. Then successive breaks above 1.1270 and 1.1370 have prompted short interests to bail, paving the way for a potential reversal. 1.1460 next to the 30-day moving average would be the target and its breach may turn sentiment around. 1.1240 is a key support to keep the rebound relevant. US 500 heads towards daily support The S&P 500 continues on its way down as investors jump ship amid the omicron scare. The latest rebound has been capped by 4650, a sign that the bears are in control of short-term price action. A combination of pessimism and lack of buying interest means that the index is stuck in a bearish spiral. An oversold RSI may cause a limited rebound as intraday sellers cover their positions. 4450 at the origin of a previous bullish breakout would be the next target. 4360 is a second line of defense that sits in a daily demand zone.
Bridge Too Far

Bridge Too Far

Monica Kingsley Monica Kingsley 02.12.2021 16:36
S&P 500 gave up sharp intraday gains on the first Omicron patient in CA. Corona packing punch still, and sending TLT far above yesterday‘s highs while the dollar remained unchanged. That‘s as risk-off as can be on a little surprising headline – the key difference is though that the Fed doesn‘t have the back of buy the dippers this time. The accelerated taper noises coupled with demand destruction thanks to Omicron, is delivering an inflation repreive. Make no mistake though, should demand be choked off too hard, fresh stimulus would have to come – for now in the heat increasingly being turned on, practically all asset classes suffer to varying degrees. The market isn‘t yet at a stage of sniffing out fresh stimulus countering the destructive policy effects which are being felt currently. Economic activity around the world hasn‘t been hampered, but markets are willing to err on the pessimistic side. For now and still – only when the riskier debt instruments such as HYG turn up to deal with the prior downswing, would be a reason to cheer for animal spirits returning. That idea sounds though hollow at this time. The bears have the upper hand unless proven otherwise – that is, by a close in the 4670s. Which is what the title says... Let‘s move right into the charts (all courtesy of www.stockcharts.com). S&P 500 and Nasdaq Outlook S&P 500 breaking below the 50-day moving average, and taking time consolidating below, isn‘t bullish at all. The reversal was broad based, arguably hitting value more. Yes, market breadth is dismal. Credit Markets Positive HYG divergence is gone – the broad underperformance of S&P 500 must be reversed first to make stock market upswings trustworthy. It remains unclear how much would HYG be able to rebound when quality debt instruments cool off. Gold, Silver and Miners Precious metals weakness remains, but isn‘t convincing enough to short the market, no. The coming reversal to the upside would be ferocious, but we aren‘t there yet. Crude Oil Crude oil plunge is slowing down, and it‘s more than black gold that‘s looking for direction here – this concerns the commodities complex as such. I‘m looking for copper to show the way, and oil to follow. Copper Copper is sitting at a rising support line, undecided yet whether to take the Fed and Omicron threats seriously or not. It‘s wait and see for now, but the bullish side has the medium-term upper hand. Bitcoin and Ethereum Bitcoin and Ethereum are cautious as well, but the bears are looking for an ambush – let‘s see how far they can get. Summary The ugly S&P 500 close concerns both value and tech – and there was no premarket upswing to speak of. The bears have the upper hand for today as markets look to be in the phase of sell first, ask questions later. Any reversal (in stocks or commodities) has to be accompanied by a credible upswing in riskier bonds, ideally with money coming out of the dollar as well. Thank you for having read today‘s free analysis, which is available in full at my homesite. There, you can subscribe to the free Monica‘s Insider Club, which features real-time trade calls and intraday updates for all the five publications: Stock Trading Signals, Gold Trading Signals, Oil Trading Signals, Copper Trading Signals and Bitcoin Trading Signals.
The Greenback Finds Traction ahead of the Jobs Report

The Greenback Finds Traction ahead of the Jobs Report

Marc Chandler Marc Chandler 03.12.2021 12:19
December 03, 2021  $USD, Australia, Canada, China, Currency Movement, EMU, FOMC, Inflation, Japan, jobs, UK Overview:  The Omicron variant has been detected in more countries, but the capital markets are taking it in stride.  Risk appetites appear to be stabilizing.  The MSCI Asia Pacific Index rose for the third consecutive session, though Hong Kong and Taiwan markets did not participate in the advance today.  Europe's Stoxx 600 is struggling to hold on to early gains, while US futures are narrowly mixed.  The US 10-year yield is a little near 1.43%, down around six basis points this week.  European yields are slightly softer. Core yields are off 5-6 bp this week.  The dollar is firm ahead of the jobs data.  The Antipodeans and Swedish krona are the heaviest, falling around 0.6% through the European morning.  The Swiss franc and euro are up about 0.1% and are the most resilient so far today.   The JP Morgan Emerging Market Currency Index is trading lower for the third session and is set to extend its losing streak for the fourth consecutive week.  Accelerating inflation is the latest drag on the Turkish lira.  The 0.6% decline today brings the week's drop to around 10.5%.  Gold is little changed within yesterday's range.  Last week, it settled a little above $1802.  Now it is below $1775  Oil is extending yesterday's recovery. Although OPEC+  unexpectedly stuck with plans to boost output by 400,000 barrels a day next month, it warned it could change its collective mind at any point.  January WTI recovered from around $62.40 yesterday to close at $66.50.  It is trading close to $68.20 before US markets open.  US natural gas fell nearly 25.5% over the past four sessions but is bouncing by around 3.7% today. European gas (Dutch) is stabilizing after yesterday's 5.6% decline.  Still, it is posting gains for the fifth consecutive week and is up more than 35% over the run.  Iron ore and copper prices are little changed.   Asia Pacific At the same time that Chinese officials are cracking down on the "variable interest entity" form of offshore listings for domestic companies, the US SEC is moving to enforce the 2002 laws that require foreign companies to allow greater scrutiny by US regulators.  Didi, the ride-hailing service, which listed in the US over local official objections, is now in the process of reversing itself.  The press reports that China and Hong Kong companies are the only ones to refuse to acquiesce to US demands.  This seems to be another facet of the decoupling meme.  Note that the NASDAQ Golden Dragon Index that tracks 98 Chinese companies listed in the US has fallen for five consecutive sessions coming into today, for a cumulative loss of about 10%.  China's Caixin service PMI was weaker than anticipated at 52.1, down from 53.8.  This, coupled with the softer manufacturing reading, shaved the composite to 51.2 from 51.5.   In contrast, Japan and Australia's flash service and composite PMIs were revised higher.  In Japan, the service PMI was revised to 53.0 from 52.1 and 50.7 in October.  The composite was revised to 53.3 from 52.5, to rise for its third consecutive month.  Australia's service PMI stands at 55.7, up from the flash reading of 55.0 and 51.8 in October.  The composite PMI is at 55.7, its third consecutive monthly rise as well.  Japan and Australia's PMI contrasts with the disappointment in China and Europe, and the US. This is because they are recovering from the long emergency (Japan) and lockdowns (Australia).   Trading remains choppy, and market confidence is fragile.  The dollar remains in the range set against the yen on Tuesday((~JPY112.55-JPY113.90).  Today's high has been just below JPY113.50, where options for $520 mln expire today.   Options for around $1.3 bln at JPY113.00 also will be cut today.  The greenback settled last week slightly below JPY113.40.  The Australian dollar has been sold to new lows for the year a little lower than $0.7050.  We have noted that this area corresponds to the (38.2%) retracement of the Aussie's rally from the March 2020 low near $0.5500.  The next area of support is seen around $0.7000.  It is the fifth consecutive weekly decline that began in late October above $0.7500.  The US dollar's two-day rise against the Chinese yuan is ending with a minor loss today. Similarly, the greenback posted gains for the past two weeks and has given it all back this week.  The PBOC set the dollar's reference rate at CNY6.3738, just below the median (Bloomberg survey) projection of CNY6.3740.   Offshore investors appear to have bought the most Chinese stocks today via the connect-link in a couple of weeks.  Also, note that China extended the tax exemption for foreign institutional investors from the interest tax through the end of 2025.    Europe German and French PMIs were revised lower, while Spain and Italy surprised on the upside.  The revisions shaved the gains initially reported for the service and composite PMIs.  Still, the German composite rose for the first time in four months to stand at 52.2 from 52.0.  The French composite PMI stands at 56.1, up from 54.7.  It is the first increase since June.  Separately, France reported a 0.9% rise in October industrial output, which is better than expected, but the September contraction was revised to -1.5% from -1.3%.   Spain's service PMI rose to \59.8 from 56.6 and was well above expectations.  The composite reading is 58.3, up from 56.2.  It is the first gain in five months and is the highest since August.  Italy's service PMI rose to 55.9 from 52.4.  Economists had expected something closer to 54.5.  The composite rose to 57.6 from 54.2.  It has softened in September and October, and the November reading is the best since August.   The UK's service and composite PMI were revised to show a slightly larger decline than initially seen in the flash report.  The service PMI slipped to 58.5, from 58.6 preliminary estimate and 59.1 in October.  The composite PMI was shaved to 57.6 from the 57.7 initial estimate and 57.8 in October.  The November weakness was disappointing after rising in September and October to snap a three-month decline.  The December short-sterling interest rate futures consolidated in a choppy activity this week after the implied yield fell for eight consecutive sessions previously.  The market is discounting about a 1 in 3 chance of a hike at the BOE meeting on December 16.  The euro slipped to a three-day low slightly above $1.1280 in late Asian turnover before resurfacing the $1.1300 area in the European morning.  Still, we suspect the upside is limited.  The 20-day moving average is near $1.1350, and the single currency has not traded above it since November 9.  The euro remains within the range set on Tuesday (~$1.1235-$1.1385).  Given the divergence of monetary policy, resistance looks stronger than support.  For its part, steering is holding barely above its three-day low near $1.3260.  It, too, remains within Tuesday's range (~$1.3195-$1.3370).  Recall that the $1.3165 area corresponds to the (38.2%) retracement objective of the rally from the March 2020 low near $1.14.  Meanwhile, the euro is pressing below CHF1.04.  It has not closed below there in six years.   America Fully cognizant of the irony here, but barring a shockingly poor report, today's US employment data may have little last impact on the market.  If there was any doubt about it before, since Federal Reserve Chair Powell spoke, there isn't.  The Fed has shifted from helping to facilitate recovery to preventing inflation expectations from getting entrenched.  That means that even a mediocre report today will be overshadowed by next week's CPI, which will likely show that inflation is still accelerating.  Conventional wisdom holds that the White House prefers doves at the Fed, but that does not hold now.  President Biden's public approval rating is low, and the Vice President's is lower still. Polls suggest that inflation is a knock against the administration.  When Biden announced the re-nomination of Powell and Brainard's nomination to Vice-Chair, both candidates reaffirmed their commitment to combat inflation.  What is true of the employment data also holds for the final services and composite PMI, factory orders, and the service ISM.  There may be headline risk but little implication for policy.  The Senate passed the stop-gap measures to keep the federal government funded through February 18.  Meanwhile, the debt ceiling is expected to hit between December 21 and late January.   Canada's labor market has recovered quicker than the US.  Today's another constructive report will likely solidify expectations that the Bank of Canada may hike rates in the March-April period.  The Bank of Canada meets next week.  Of course, it may be cautious with the unknowns surrounding the Omicron variant, but the economic recovery is solid after the weakness in Q2.  Trade tensions with the US are rising.  The US doubled its anti-dumping and countervailing tariffs on Canadian softwood imports (almost 18%).  US January lumber prices were limit up ($45) Wednesday and yesterday and have risen by more than 19% so far this week to reach five-month highs. There is a dispute over Canadian potato exports as well.  There are also disputes over some US initiatives' "Buy American" thrust, including electric vehicles.   The US dollar is at its best level against the Canadian dollar since late September.  It is pushing near CAD1.2840. The September high was closer to CAD1.29, and the late August high, which is also the high for the year, was near CAD1.2950. Barring a reversal, this will be the sixth consecutive week of the greenback's gains.  The swaps market has the first hike discounted for March 2022.  The US dollar began the week with a seven-day advance against the Mexican peso in tow.  It ended with a 1%+ pullback on Monday and again on Tuesday.  It consolidated Wednesday and fell another 1%+ yesterday.  It is little changed today near MXN21.29.  Next week, the November CPI will be reported.  It looks set to accelerate from about 6.25% to around 7.25%.  The central bank meets on December 16, after the FOMC meeting.  A 25 bp rate hike is the consensus, but an argument can be made for a 50 bp increase from the current 5.0% target.   Disclaimer
Ready, set, silver, go

Ready, set, silver, go

Korbinian Koller Korbinian Koller 03.12.2021 12:56
The most obvious first step is: “How much?” Depending on your time horizon and if your approach is purely diversification for your overall portfolio, a percentage of total investment capital needs to be set. This percentage should be higher on a more aggressive wealth preservation strategy and higher expected returns on beating inflation. Another aspect is if silver is traded as the only hedge or alongside other precious metals. Silver already has a leverage factor in relationship to gold. For example, gold’s response to covid was a 37% up move, while silver moved up 80%. This volatility leverage works both ways, increasing the risk for silver if not purchased on low-risk entry points and traded with appropriate money management. We have pointed out various reasons why we find silver an extremely attractive play long term in this year’s chart book releases. Monthly chart (a week ago), Silver in US-Dollar, ready: Silver in US-Dollar, monthly chart as of November 26th, 2021. The above chart was posted in our last week’s publication. We wrote:” The monthly chart shows a high likelihood for November’s candle closing as an inverted hammer. Consequently, it provides for silver prices approaching the low end of the last 17-month sideways range near US$22.” Monthly chart, Silver in US-Dollar, set: Silver in US-Dollar, monthly chart as of December 3rd, 2021. We were spot on. The anticipated entry zone has been reached. We added to our physical holdings and shared the trade live in our free Telegram channel. Silver in US-Dollar, weekly chart, silver: Silver in US-Dollar, weekly chart as of December 3rd, 2021. We asked, “how much?” and in what diversification, which leaves us with the question of what denomination. The rule of thumb is that the smaller the weight amount is and the more recognizable the brand, the higher the cost. In addition, valuable numismatic collector’s coins have premiums as well. Generally, we find the added cost of brand items (Canadian maple leaf, American eagles, Austrian Philharmonic, and alike) to be of value since it adds to liquidity at a time of sale. While we would stay away from the added cost of numismatic collectible coins, we find there to be value to have a mix of coins and larger bars to arrive at a reasonably low-cost basis with a high degree of liquidity at the time of sale (larger bars are harder to sell than one-ounce coins). The weekly chart above illustrates that as much as we have entered the “shopping zone” for silver, there is a probability that we might see a quick spike down as we have seen at the end of September. As pointed out in the previous chart book, the goal of physical acquisition should not be the ultimate lowest price but availability and execution itself. We make a point of this, especially since we noticed that physical acquisition prices have in percentage retraced much less than the spot price right here, and once the turn is complete, could proportionally faster jolt up. Silver in US-Dollar, quarterly chart, go: Silver in US-Dollar, quarterly chart as of December 3rd, 2021. It is essential to have an exit strategy in place before entry. These exit projections are necessary to measure risk/reward-ratios. Moreover, with the entire plan clear, there will be no debate while in the trade. This part of exit psychology is often overlooked, but a low-risk entry point alone does not provide a good strategy. We expect a price advance on silver within the next six to eight quarters to a price target of US$74.40! Significant profits allowing for an outstanding risk/reward-ratio. Ready, set, silver, go: Last week, we anticipated the market’s direction correctly and find ourselves now at the desired low-risk entry zone. With possible additional questions about physical acquisition answered today, we might have reduced doubt. The devil is in the details, and due to the various countries, their taxation law, and the wide variety of official precious metal dealers, we did not dive into the details on where to take possession of your possibly desired purchase.  Nevertheless, our multinational membership in our free Telegram channel might provide helpful information to your specific situation. We hope we have provided enough knowledge to erase doubt. We encourage participation since we see procrastination towards a wealth preservation strategy as the poorest choice in this challenging time for your hard-earned money. Feel free to join us in our free Telegram channel for daily real time data and a great community. If you like to get regular updates on our gold model, precious metals and cryptocurrencies you can also subscribe to our free newsletter. This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision. The views, thoughts and opinions expressed here are the author’s alone. They do not necessarily reflect or represent the views and opinions of Midas Touch Consulting. By Korbinian Koller|December 3rd, 2021|Tags: Crack-Up-Boom, Gold, Gold/Silver-Ratio, inflation, low risk, Silver, silver bull, Silver Chartbook, silversqueeze, technical analysis, time frame, trading principles|0 Comments About the Author: Korbinian Koller Outstanding abstract reasoning ability and ability to think creatively and originally has led over the last 25 years to extract new principles and a unique way to view the markets resulting in a multitude of various time frame systems, generating high hit rates and outstanding risk reward ratios. Over 20 years of coaching traders with heart & passion, assessing complex situations, troubleshoot and solve problems principle based has led to experience and a professional history of success. Skilled natural teacher and exceptional developer of talent. Avid learner guided by a plan with ability to suppress ego and empower students to share ideas and best practices and to apply principle-based technical/conceptual knowledge to maximize efficiency. 25+ year execution experience (50.000+ trades executed) Trading multiple personal accounts (long and short-and combinations of the two). Amazing market feel complementing mechanical systems discipline for precise and extreme low risk entries while objectively seeing the whole picture. Ability to notice and separate emotional responses from the decision-making process and to stand outside oneself and one’s concerns about images in order to function in terms of larger objectives. Developed exit strategies that compensate both for maximizing profits and psychological ease to allow for continuous flow throughout the whole trading day. In depth knowledge of money management strategies with the experience of multiple 6 sigma events in various markets (futures, stocks, commodities, currencies, bonds) embedded in extreme low risk statistical probability models with smooth equity curves and extensive risk management as well as extensive disaster risk allow for my natural capacity for risk-taking.
Weekly Close Out

Weekly Close Out

Luke Suddards Luke Suddards 04.12.2021 17:45
Omicron: In today’s weekly I’ll be dedicating some digital ink for the latest information on the new variant omicron. Ok so what are the major points of importance. New admissions to hospitals in Gauteng increased by 144% last week (hospitalisations lag cases by around 1-3 weeks). So far the early data shows the majority of these hospitalisations are from the unvaccinated (if that trend remains that’s positive). However, a recent study released from South Africa indicates reinfection risk is 3 times higher than previous variants. In terms of the deadliness of this variant, the early data looks good with Australia’s Chief Medical Officer Paul Kelly stating that of the 300 cases recorded worldwide all were very mild or had no symptoms at all. However, the sample size is too small so we can’t draw solid conclusions at this stage. The major vaccine makers have offered timelines of two to six weeks for assessing the vaccine escape properties of omicron via in-vitro lab tests. Interestingly, Moderna is less optimistic than Pfizer about expecting current vaccines needing to be tweaked to fend off the omicron variant. Volatility will remain high as the market remains on tenterhooks as new information drips through. Dollar Index (DXY): The greenback is flat on the week, with many quite perplexed by the lack of gains (particularly against the euro) given the hawkish Fed pivot and risk sentiment remaining on edge. The dollar coming in flat is a combination of gains against high-beta cyclical companies offset by losses against traditional safe haven currencies. Just take a look at the charts of USDJPY and AUDUSD. In terms of the euro, I’ll chat more about that below in the EURUSD paragraph. The big domestic news for the dollar this week was Jerome Powell’s hawkish rhetoric. The word transitory is to be retired as he admits the threat of persistently higher inflation has grown. On the QE purchases side of things, he remains open to it being wrapped up earlier than originally expected with a discussion on a faster pace taking place in 2 weeks at their December meeting. He elucidated his thoughts on the employment side of their mandate, stating that a great labour market requires a protracted expansion and in order to achieve this price stability has to occur. I see this as inflation now taking primacy over employment goals, indicating a shift in the Fed’s thinking with regards to inflationary pressures. The hawkish commentary from FOMC members this week such as Daly, Quarles, Barkin and Bostic would certainly suggest this is the case. STIRs are showing rate lift-off for practically June 2022 (96%) and over 2.5 hikes through December 2022. All attention now falls to the Non-Farm Payrolls number out today. The preliminary indicator such as ISM manufacturing index, ADP and jobless claims all pointing towards decent numbers from the jobs report today disappointed as NFP numbers missed expectations by a significant amount. Price moves have been muted as traders may be reluctant to place any fresh positions on and chase with the risk of adverse news over the weekend regarding omicron. Bottom line - traders should expect cross-asset volatility to remain higher over December. Next week we’ll receive November US inflation data, which is expected to remain elevated. DXY has regained the upper trend line of its ascending channel, putting some distance between price and its moving averages. The 21-day EMA continues to provide some dynamic support to price dips. The RSI has held above the key 55 level of support. Targets wise keep an eye out on the 96.5 on the upside and to the downside the 21-day EMA and former support around 95.5. EURUSD: So why did EURUSD strengthen on the market sell-off due to omicron on Friday and has remained fairly defensive throughout this week? It’s certainly not because the euro is a safe-haven currency in times of risk aversion. This price action has more to do with its use as a funding currency. Traders borrow euros to search for higher yield globally which is a decent strategy when risk conditions are favourable, however, when that risk dial flips in other direction we see the typical carry trade unwind, leading to flows back into the euro. Additionally, because expectations for rate hikes with regards to the eurozone are already significantly low, it’s at much less risk of a dovish repricing working favourably in terms of spread differentials with the dollar. Political pressure is rising on the ECB to act, particularly from Germany. A Reuters article out mid-week pointed towards some members wanting to rather hold off declaring their asset purchase intentions at this December meeting due to uncertainty caused by omicron. However, the ECB's Muller stated that he doesn’t think omicron is a reason to shift the scheduled end date for PEPP. Following this line of thought just today Madame Lagarde expressed that she feels certain that PEPP will cease in March as planned, saying markets require clarity in December. On the data front we had better than expected inflation prints from Germany (5.2% YoY) and the eurozone (4.9% YoY). It’s quiet in terms of economic data next week with the ZEW survey out as we lead up to a crucial ECB meeting in two weeks. EURUSD is drifting lower from its 21-day EMA. The RSI has stalled around the 40 level. Looking at the technicals clearly EURUSD is in a downtrend. Rallies in my opinion should be short lived with sellers coming in. Key levels to monitor in both directions are 1.135 (21-day EMA) and on the downside 1.12. GBPUSD: With a vacuum of economic data for the UK, the words of central bankers took centre stage. Bailey didn’t provide much meat at his speech this Wednesday. However, Saunders (leans hawkish) who spoke today has caused a repricing lower in the probability of a 15bps rate hike come December (only an additional 4bps now from around 8bps pre-speech). He expressed the need for potentially taking a patient approach with the uncertainty from omicron. Cable is lower as a result. On the virus front, the UK regulator has given the green light for booster doses to be offered to all adults. Additionally, the government has signed a contract for 114 million vaccine doses from Pfizer and Moderna, including access to modified vaccines if they're needed to tackle omicron and other future variants of concern. On the political front, domestically the Tories held the seat of Old Bexley and Sidcup, however, with a reduced majority. On Brexit, it’s been quiet of late with some optimism around the granting of additional fish licences to French fisherman in Guernsey, Jersey is the more important zone though prone to flare ups in tension. However, temperatures remain high between France and the UK on issues related to immigration. Next week sees UK October GDP data released. EURGBP has been moving higher on the back of dovish commentary (given he’s a hawk) from Saunders as well as benefiting from any souring in risk-sentiment. The 200-day SMA isn’t far aware, which has previously capped price gains. Cable continues to -plumb fresh YTD lows and is now nearing 1.32. The RSI is near to oversold territory but with some room remaining to eke out further losses. Moving averages are all pointing downwards. Targets wise, on the upside the 1.335 and above there former support around 1.34 (21-day EMA too). USDJPY: This pair continues to trade on US 10-year yield moves and now it’s status as a safe-haven currency has kicked back in. Early Friday morning has seen a bid coming in, which could be some pre NFP positioning on expectations of a move higher in the back end of the US yield curve. Put EURJPY on your radar, price is at a key support level around 128. USDJPY is finding support around its 50-day SMA, 113 round number and the 38.2% Fibonacci level. Price is trying to overcome resistance from the 50-day SMA. The former range support is providing some resistance around 113.5. The RSI is trying to get back into its range support around 46. Targets wise on the upside, 114 will be important and on the downside 112.5 (this week's lows). Gold: Gold has slipped below the $1775 support level as the hawkish fed leads to higher short term rates, kryptonite for the shiny yellow metal. Fears over inflation have failed to help gold stay propped up as well as risk-off fears from omicron. Inflation data out from the US next week will be a risk event for gold traders as well as the Fed meeting the following week. Today’s NFP hasn’t ignited much excitement in gold markets. Gold is trying to reclaim the $1775 support level. The 50-day SMA has made a very minor cross above the 200-day SMA. The 21-day EMA has been capping further gains. The RSI is in no man's land around 38. Targets wise, if $1775 is cleared then $1800 opens up (moving averages just below there). On the downside, $1750 comes into view. Oil: Crude fell sharply into a bear market this week as risk-off, Fed tightening, fears over further lockdowns and travel bans from the new omicron variant led to a repricing on the demand side of the equation. OPEC+ the main event for crude traders this week, decided to stick to their scheduled 400k bpd for January, but caveated this with the meeting remaining in “session”, meaning changes to the supply side could be made before their 4 January meeting if omicron causes a further deterioration. This led to yo-yo style price behaviour. Until there is more clarity regarding omicron, I expect oil’s price to remain choppy without a solid price trend. Backwardation spreads have narrowed, indicating a more balanced supply and demand equation. Iranian Nuclear Negotiations began the week positively, but sentiment turned pessimistic towards the end of this week, providing further short-term bullish tailwinds to crude’s price. JPM has some very bullish forecasts with the bank expecting crude to hit $150 by 2023. Oil is having a run at its 200-day SMA. The RSI has moved out of overbought territory and is a fair distance below its 50-day SMA (some mean reversion). Right now price will remain choppy within a range as omicron news flow prevents a trend from forming. Targets wise, on the upside the 200-day SMA and $73.50 dollar mark will be key. On the downside $68 support is important.
Semblance of Stability Returns though Geopolitical Tensions Rise

Semblance of Stability Returns though Geopolitical Tensions Rise

Marc Chandler Marc Chandler 06.12.2021 12:39
December 06, 2021  $USD, China, Currency Movement, EU, Hungary, Italy, Russia Overview:  The absence of negative developments surrounding Omicron over the weekend appears to be helping markets stabilize today after the dramatic moves at the end of last week.  Asia Pacific equities traded heavily, and among the large markets, only South Korea and Australia escaped unscathed today.  Europe's Stoxx 600 is trading higher, led by energy, financials, and materials.  US futures are narrowly mixed.  Similarly, Asia Pacific bonds played a little catch-up with the large Treasury rally ahead of the weekend.  The US 10-year had approached 1.30% but is now up almost four basis points to almost 1.39%.  European yields are also a little firmer, though Italian bonds are outperforming after the pre-weekend credit upgrade by Fitch. The dollar is mixed.  The yen and Swiss franc are the heaviest, while the Scandis lead the advancers.  Among the emerging market currencies, most liquid and freely accessible currencies are higher, while India, Indonesia, and Turkey are trading lower.  The JP Morgan Emerging Market Currency Index has a four-week drop in tow and is starting the new week with a small gain.  Gold initially moved higher but is now little changed.  Iron ore and copper remain firm.  January WTI is trading firmly within the pre-weekend range, while natural gas, which collapsed by 24% in the US last week, extended its sell-off today.  European natural gas (Dutch benchmark) is trading lower after rising for the past five weeks.   Asia Pacific As tipped by Chinese Premier Li last week, the PBOC cut reserve requirement by 0.5%.  This frees up an estimated CNY1.2 trillion.  Many market participants had anticipated the timing to help banks pay back borrowing from the Medium-Term Lending Facility.  Banks owe about CNY950 bln on December 15 and another CNY500 bln on January 15.   Separately, several property developers have debt serving payments due and Evergrande is at the end of a grace period today.  Lastly, the US and a few other countries are expected to announce a diplomatic boycott of the Winter Olympics.  This is seen as largely symbolic as few diplomats were going to attend due to the severe quarantine imposed by Chinese officials.   China needs bargaining leverage if it is going to influence US policy.  It might come from an unexpected source.   While recent press reports focused on China's attempt to project its power into Africa, they have missed a potentially more impactful development.  Consider the Caribbean, which the US often acts as if it is theirs.  Barbados became a constitutional republic last week, though it is still a member of the UK Commonwealth.  The left-of-center government is friendly toward Beijing.  Under the Belt Road Initiative, Barbados and Jamaica have received several billion dollars from China.  Moreover, a recent US State Department report found that the two countries have voted against the US around 75% of the time at the UN last year.   This week, the regional highlights include the Reserve Bank of Australia (outcome first thing tomorrow in Wellington) and the Reserve Bank of India (December 8).  The RBA may revise up its economic outlook, yet, it is likely to continue to push against market expectations for an early hike.  The derivatives market appears to have the first hike priced in for late next summer.    India is expected to be on hold until early next year but could surprise with a hike.  China is expected to report trade figures tomorrow and the November CPI and PPI on Wednesday.  Lending figures may be released before the weekend.  Japan's highlights include October labor earnings and household spending tomorrow, the current account, and the final Q3 GDP on Wednesday.   The dollar's range against the yen on November 30 (~JPY112.55-JPY113.90) remains dominant.  It has not traded outside of that range since then.  The rise in US yields and equities has helped the dollar regain a toehold above JPY113.00.  The pre-weekend high was near JPY113.60, which might be too far today.  The Australian dollar traded below $0.7000 before the weekend and again today, but the selling pressure abated, and the Aussie has traded to about $0.7040. A band of resistance from $0.7040 to $0.7060 may be sufficient to cap it today.   The dollar has been in essentially the same range against the Chinese yuan for three sessions (~CNY6.3670-CNY6.3770).  If the dollar cannot get back above CNY6.38, a new and lower range will appear to be established.  The PBOC set the dollar's reference rate at CNY6.3702.  The market (Bloomberg median) had projected CNY6.3690.   Europe Germany's new government will take office in the middle of the week.  It has three pressing challenges.  First is the surge in Covid, even before the Omicron variant was detected.  Second, the economy is weak.  Last week's final PMI reading picked up some deterioration since the flash report and the 0.2 gain in the composite PMI more than 10.0 point fall in the previous three months. Third, today Germany reported dreadful factory orders.  The market had expected a slight pullback after the 1.3% gain in September.  The good news is that the September series was revised to a 1.8% gain.  However, this is more than offset by the 6.9% plummet in October orders.  If there is a silver lining here, it is that domestic orders rose 3.4% after falling in August and September.  Foreign orders plunged 13.1%, and orders from the eurozone fell by 3.2% (after falling 6.6% in September).  Orders outside the euro area collapsed by 18.1%.  The sharp drop in factory orders warns of downside risk to tomorrow's industrial production report.  Industrial output fell by 3.5% in August and 1.1% in September. Before today's report, economists were looking for a 1% gain.  Germany also reports the December ZEW survey tomorrow. Again, sentiment is expected to have deteriorated.  The third issue is Russia.  Reports suggest the US has persuaded Europe that Russia is positioned to invade Ukraine early next year.  US intelligence assessment sees Russia planning a multifront offensive.  Putin and Biden are to talk tomorrow.  Meanwhile, Putin makes his first foreign visit today in six months.  He is in India.  India is buying an estimated $5 bln of Russian weapons, including the S-400 anti-aircraft system that Turkey purchased to the dismay of Washington, which banned it from the F-35 fighter jet program.  India is a member of the Quad (with the US, Japan, and Australia), a bulwark against China.  A Russian official was quoted in the press claiming India sent a strong message to the US that it would not tolerate sanctions against it.  The regional alliances are blurry, to say the least. The US maintains ties with Pakistan.  India has had border skirmishes with China.  Russia and China have joint military exercises.   Before the weekend, Fitch upgraded Itay's credit rating one notch to BBB.  It cited the high vaccination rate, increased public and private spending, and confidence in the Draghi-led government's ability to spend the 200 bln euro funds from the EC prudently.  Recall that last week's composite PMI rose to 57.6 to snap a two-month decline.  The market (Bloomberg median) sees the Italian economy as one of the strongest in Europe this year, expanding around 6.3%.  The IMF sees it at 5.8%. The euro has been confined to about a quarter-cent range on both sides of $1.1300.  It is within the pre-weekend range (~$1.1265-$1.1335).  It was offered in Asia and turned better bid in the European morning.  Still, the consolidative tone is likely to continue through the North American session.  A move above the 20-day moving average (~$1.1335), which has not occurred for over a month, would help lift the technical tone.  Sterling tested $1.3200 before the weekend, and it held.  The steadier tone today saw it test the $1.3265 area.  It will likely remain in its trough today, though a move above the $1.3280-$1.3300 area would be constructive.   America Today's US data includes the "final" look at Q3 productivity and unit labor costs.  These are derived from the GDP and are typically not market-movers.  The US also reported that the October trade balance and improvement have been tipped by the advance merchandise trade report.  October consumer credit is due late in the session, and another hefty rise is expected ($25 bln after nearly $30 bln in September.  Consumer credit has risen by an average of $20.3 bln this year.  It fell last year and averaged $15.3 bln in the first nine months of 2019.  No Fed officials speak this week, and the economic highlight is the November CPI report at the end of the week.   Canada reports October trade figures and IVEY survey tomorrow.  The highlight of the week is the Bank of Canada decision on Wednesday.  It is not expected to do anything, but officials will likely be more confident in the economic recovery, especially after the very strong jobs report before the weekend.  The Canadian dollar's challenge is that the market has five hikes already discounted for the next 12 months.  Mexico reports November vehicle production and exports today.  The economic highlights come in the second half of the week.  November CPI on Thursday is expected to see the headline rate rise above 7%.  Last month alone, consumer prices are projected to have risen by 1%.  On Friday, Mexico is expected to report that industrial output rose by 0.9% in October after falling 1.4% in September.  Brazil reports its vehicle production and exports today and October retail sales on Thursday before the central bank meeting.  A 150 bp increase in the Selic rate, the second such move in a row, has been tipped and will put the key rate at 9.25%.  Ahead of the weekend, the IPCA measure of inflation is due.  It is expected to have ticked up closer to 11% (from 10.67%).  Lastly, we note that Peru is expected to deliver another 50 bp increase to its reference rate on Thursday, which would lift it to 2.5%.   The US dollar posted an outside up day against the Canadian dollar ahead of the weekend.  The risk-off mood overwhelmed the positive implications of the strong jobs data.  There has been no follow-through selling of the Canadian dollar today.  The pre-weekend US dollar low near CAD1.2745 is key.  Last Wednesday's range remains intact for the greenback against the Mexican peso (~MXN21.1180-MXN21.5150).  So far today, it has been confined to the pre-weekend range.   Initial support is seen near MXN21.16.  The cap around MXN21.50 looks solid.  Meanwhile, the US dollar closed above BRL5.60 for six consecutive sessions coming into today.   Disclaimer
Awaiting US CPI And Speaking Of Disney and Uber. SEK And PLN As Central Banks Moves

COT: Specs exit commodities on Omicron and Fed worries

Ole Hansen Ole Hansen 06.12.2021 12:33
Commodities 2021-12-06 10:50 Summary:  Futures positions and changes made by hedge funds across commodities, forex and financials up until last Tuesday, November 30. A week that encapsulated the markets very nervous reaction to the Omicron virus news as well as Jerome Powell's increased focus on combatting inflation. While global stocks and US long end yields dropped, a 7% correction in the Bloomberg commodity index helped trigger the biggest and most widespread hedge fund exodus since February 2020. Saxo Bank publishes weekly Commitment of Traders reports (COT) covering leveraged fund positions in commodities, bonds and stock index futures. For IMM currency futures and the VIX, we use the broader measure called non-commercial. Link to latest report This summary highlights futures positions and changes made by hedge funds across commodities, forex and financials up until last Tuesday, November 30. The reporting week encapsulated the markets very nervous reaction to the Omicron virus news as well as Jerome Powell confirming inflation is no longer being transitory. His comments to the Senate banking committee raised expectations for faster tapering with the first full 0.25% rate hike now priced in for July next year. The US yield curve flattened considerably with virus related safe-haven demand driving down the yield on 10-year US treasury notes by 22 basis point. Global stocks slumped with the VIX jumping 8%. Hardest hit, however was the commodity sector after the Bloomberg commodity index slumped by 7%, thereby triggering the biggest and most widespread hedge fund exodus since February 2020. Commodities Hedge funds responded to heightened growth and demand concerns related to the omicron virus, and the potential faster pace of US tapering, by cutting their net long across 24 major commodity futures by 17% to a 15-month low at 1.8 million lots. This the biggest one-week reduction since the first round of Covid-19 panic in February last year was triggered by net selling of all but three livestock contracts. Energy: Hardest hit was the energy sector where renewed demand concerns sent the prices of WTI and Brent down by more than 15%. In response to this, hedge funds accelerated their pace of futures selling with the combined net long slumping by 90k lots to a one-year low at 425k lots. The loss of momentum following the late October peak has driven an eight-week exodus out of oil contracts, culminating last week, and during this time the net length has seen a 35% or 224k lots reduction. Potentially setting the market up for a strong speculative driven recovery once the technical and fundamental outlook turns more friendly.Latest: Crude oil (OILUKFEB22 & OILUSJAN21) trades higher following its longest stretch of weekly declines since 2018. Today’s rise apart from a general positive risk sentiment in Asia has been supported by Saudi Arabia’s decision to hike their official selling prices (OSP) to Asia and US next month. Thereby signaling confidence demand will be strong enough to absorb last week's OPEC+ production increase at a time when mobility is challenged by the omicron virus. For now, both WTI and Brent continue to find resistance at their 200-day moving averages, currently at $69.50 and$72.88 respectively.  Metals: Gold was net sold for a second week as speculators continued to reduce exposure following the failed breakout attempt above $1830. With Fed chair Powell signaling a change in focus from job creation to fighting inflation, sentiment took another knock, thereby driving a 13.7k lots reduction to a four-week low at 105k lots. Industrial metals also suffered with the net long in HG copper slumping by one-third to a three-month low at 13.4k lots. Copper’s rangebound trading behavior since July has sapped hedge funds involvement with the current net length a far cry from the 92k record peak seen this time last year.Latest: Gold (XAUUSD) received a small bid on Friday following mixed US data, but overall, it continues to lack the momentum needed to challenge an area of resistance just above $1790 where both the 50- and 200-day moving averages meet. Focus on Friday’s US CPI data with the gold market struggling to respond to rising inflation as it could speed up rate hike expectations thereby putting upward pressure on real yields which are inverse correlated to gold's performance.  A full 25 basis point rate hike has now been priced in for July and the short-term direction will likely be determined by the ebb and flow of future rate hike expectations. Agriculture: The whole sector with the exception of livestock took a major hit, just one week after funds had increased bullish bets on grains and softs by the most in 15 months. Both sectors suffered setbacks of more than 5% with recent highflyers like wheat and cotton taking big hits. As mentioned, selling was broad and led by corn, soybeans, sugar and cocoa, with the latter together with palladium being the only two contracts where speculators hold an outright short position.This week the grain market will be focusing on weather developments in Australia and its potential impact on the wheat harvest, as well as the monthly World Agriculture Supply & Demand report (WASDE) from the USDA.  Forex In forex, speculators reacted to renewed virus concerns by increasing bullish dollar bets against ten IMM currency futures and the Dollar Index to an 18-month high at $27.9 billion. Speculators were buyers of JPY (18.4k lots or $2 billion equivalent) but sellers of everything else, including euros (6.8k) and the two commodity currencies of AUD (16.9k) and CAD (10.9k). These changes resulting in the aggregate dollar long rising by $2.3 billion. In terms of extended positioning, a euro short at 23k lots was last seen in March 2020, the GBP short at 39k lots was a two-year high while the 60k lots MXN short was the highest since March 2017. What is the Commitments of Traders report? The COT reports are issued by the U.S. Commodity Futures Trading Commission (CFTC) and the ICE Exchange Europe for Brent crude oil and gas oil. They are released every Friday after the U.S. close with data from the week ending the previous Tuesday. They break down the open interest in futures markets into different groups of users depending on the asset class. Commodities: Producer/Merchant/Processor/User, Swap dealers, Managed Money and otherFinancials: Dealer/Intermediary; Asset Manager/Institutional; Leveraged Funds and otherForex: A broad breakdown between commercial and non-commercial (speculators) The reasons why we focus primarily on the behavior of the highlighted groups are: They are likely to have tight stops and no underlying exposure that is being hedged This makes them most reactive to changes in fundamental or technical price developments It provides views about major trends but also helps to decipher when a reversal is looming
US Dollar Still Has the Green Light

US Dollar Still Has the Green Light

Przemysław Radomski Przemysław Radomski 06.12.2021 16:13
  The dollar looks poised for another rally, to gold’s dismay. So, what’s the price target for the greenback over the winter months? While the consensus across the financial markets (especially at the beginning of the year) was that the U.S. dollar was destined for devaluation, I warned that the greenback would rise from the ashes. And with gold, silver, and mining stocks often moving inversely to the U.S. dollar, the latter’s ascent helped make the precious metals one of the worst-performing asset classes in 2021. Moreover, after more dollar doubters emerged in October – and the precious metals rallied hard – the USD Index eventually cut through 94, 95, and then 96 like a knife through butter. And with the precious metals reversing sharply once again, I expect another rally to push the USD Index to ~98 over the medium term. Perhaps quite soon. And the implications for the precious metals sector, are bearish. On top of that, while overbought conditions elicited a short-term pullback, end-of-month turnarounds and / or rallies are commonplace for the greenback. For context, I warned that a consolidation was likely overdue by highlighting the USD Index’s overbought RSI (Relative Strength Index) readings with the red arrows above. Conversely, the blue vertical dashed lines above demonstrate how the USD Index often bottoms near the end of each month, and rallies often follow. And while the current consolidation may need some more time to run its course, higher highs should materialize over the medium term. To explain, after the USD Index recorded sharp rallies in June and July, consolidation phases unfolded before the uptrends continued. And while the secondary uprisings occurred at more moderate paces, the USD Index still managed to make new highs. As a result, ~98 should materialize during the winter months. Furthermore, if the forecast proves prescient, the USD Index’s strength will likely usher gold back to its previous 2021 lows. Adding to our confidence (don’t get me wrong, there are no certainties in any market; it’s just that the bullish narrative for the USDX is even more bullish in my view), the USD Index often sizzles in the summer sun and major USDX rallies often start during the middle of the year. Summertime spikes have been mainstays on the USD Index’s historical record and in 2004, 2005, 2008, 2011, 2014 and 2018 a retest of the lows (or close to them) occurred before the USD Index began its upward flights (which is exactly what’s happened this time around). Furthermore, profound rallies (marked by the red vertical dashed lines below) followed in 2008, 2011 and 2014. With the current situation mirroring the latter, a small consolidation on the long-term chart is exactly what occurred before the USD Index surged in 2014. Likewise, the USD Index recently bottomed near its 50-week moving average; an identical development occurred in 2014. More importantly, though, with bottoms in the precious metals market often occurring when gold trades in unison with the USD Index (after ceasing to respond to the USD’s rallies with declines), we’re still far away from that milestone in terms of both price and duration. Again, the recent move higher in the USD Index doesn’t necessarily apply in the case of the above rule, as it was not the strength of the USD but weakness in the euro that has driven it. Likewise, with the USD Index now approaching its long-term rising support line (which is now resistance), a rally above the upward sloping black line below would invalidate the prior breakdown and support a move back above 100. Also, please note that the recent medium-term rally has been calmer than any major upswing witnessed over the last 20 years, where the USD Index’s RSI has hit 70. I marked the recent rally in the RSI with an orange rectangle and I did the same with the second-least and third-least volatile of the medium-term upswings. The sharp rallies in 2008 and 2014 were of much larger magnitudes. And in those historical analogies, the USD Index continued its surge for some time without suffering any material corrections. As a result, the short-term outlook is more of a coin flip. However, the medium-term outlook remains profoundly bullish, and gold, silver, and mining stocks may resent the USD Index’s forthcoming uprising. Just as the USD Index took a breather before its massive rally in 2014, it seems that we saw the same recently. This means that predicting higher gold prices (or the ones of silver) here is likely not a good idea. Continuing the theme, the eye in the sky doesn’t lie. And with the USDX’s long-term breakout clearly visible, the wind remains at the dollar’s back. Furthermore, dollar bears often miss the forest through the trees: with the USD Index’s long-term breakout gaining steam, the implications of the chart below are profound. And while very few analysts cite the material impact (when was the last time you saw the USDX chart starting in 1985 anywhere else?), the USD Index has been sending bullish signals for years. Please see below: The bottom line? With my initial 2021 target of 94.5 already hit, the ~98 target is likely to be reached over the medium term (and perhaps quite soon), mind, though: we’re not bullish on the greenback because of the U.S.’ absolute outperformance. It’s because the region is fundamentally outperforming the Eurozone, the EUR/USD accounts for nearly 58% of the movement of the USD Index, and the relative performance is what really matters. In conclusion, gold, silver, and mining stocks have reversed sharply in recent weeks. And though the trio tried to ignore the USD Index’s recent uprising, I wrote on Jul. 23 that the time-tested relationship of ‘U.S. dollar up, PMs down’ will likely be a major storyline during the Autumn months. To that point, with the theme likely to continue over the medium term, lower lows should confront gold, silver, and mining stocks over the next few months. Thank you for reading our free analysis today. Please note that the above is just a small fraction of today’s all-encompassing Gold & Silver Trading Alert. The latter includes multiple premium details such as the targets for gold and mining stocks that could be reached in the next few weeks. If you’d like to read those premium details, we have good news for you. As soon as you sign up for our free gold newsletter, you’ll get a free 7-day no-obligation trial access to our premium Gold & Silver Trading Alerts. It’s really free – sign up today. Przemyslaw Radomski, CFAFounder, Editor-in-chiefSunshine Profits: Effective Investment through Diligence & Care * * * * * All essays, research and information found above represent analyses and opinions of Przemyslaw Radomski, CFA and Sunshine Profits' associates only. As such, it may prove wrong and be subject to change without notice. Opinions and analyses are based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are deemed to be accurate, Przemyslaw Radomski, CFA and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Radomski is not a Registered Securities Advisor. By reading Przemyslaw Radomski's, CFA reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Przemyslaw Radomski, CFA, Sunshine Profits' employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.
Intraday Market Analysis – USD Treads Water - 07.12.2021

Intraday Market Analysis – USD Treads Water - 07.12.2021

John Benjamin John Benjamin 07.12.2021 09:00
GBPUSD attempts to rebound The sterling consolidates as BOE officials stress due to inflationary pressure from a tight labor market. So far, rebounds have been an opportunity for trend followers to sell into strength. The pound is testing last December’s demand zone around 1.3200. An oversold RSI may help lift bids momentarily as sellers take profit. 1.3300 is the immediate resistance. Then the bulls will need to clear the origin of the latest sell-off at 1.3370 to attract more buying interest. On the downside, a breakout would send the price to 1.3100. NZDUSD sticks to downtrend The US dollar edged higher thanks to a rally in Treasury yields. Increasing divergence between the 20 and 30-day moving averages suggests a deterioration in market sentiment. On the hourly chart, a short-lived rebound has struggled to stay above 0.6780. And that is a sign that the bears are still in control of the direction. 0.6700 is the next support. Its breach would extend the sell-off to November 2020’s lows near 0.6600. The RSI’s oversold situation may cause a limited rebound with 0.6810 as the closest resistance. US 30 breaks higher The Dow Jones recoups losses as the omicron variant may have less impact than feared. The index bounced off last October’s lows around 34000. An oversold RSI in this demand zone has attracted a crowd to buy the dips. A break above 34950 and then 35300 would prompt short-term sellers to cover, paving the way for a sustainable rally. 35950 would be a key hurdle and its breach may turn the cautious mood around and resume the bullish trend. 34700 is the first support when the bulls try to catch their breath.
Animal Spirits Roar Back

Animal Spirits Roar Back

Marc Chandler Marc Chandler 07.12.2021 16:47
December 07, 2021  $USD, Canada, China, Currency Movement, Germany, Hungary, Japan, Mexico, RBA, Russia, US Overview:  A return of risk appetites can be seen through the capital markets today, arguably encouraged by ideas that Omicron is manageable and China's stimulus.  Led by Hong Kong and Japan, the MSCI Asia Pacific rose by the most in three months, while Europe's Stoxx 600 gapped higher, leaving a potentially bullish island bottom in its wake.  US futures point to a gap higher opening when the local session begins.  The bond market is taking it in stride.  The US 10-year Treasury is slightly firmer at 1.44%, while European yields are 1-3 bp higher.  The dollar-bloc currencies and Norway are leading the move higher among most major currencies.  The yen and euro are softer.  Sterling struggles to sustain upticks. Among emerging markets currencies, the Turkish lira is bouncing, while most central European currencies are being dragged lower by the weaker euros.  The JP Morgan Emerging Market Currency Index is slightly higher after four consecutive losses.  Gold is trading within yesterday's narrow range.  Oil continues to recover, and the January WTI contract is up around 2.5% (after yesterday's 4.9% advance) and is above $71.50 a barrel.  US natgas prices dropped 11.5% yesterday and have come back firmer today, while the European benchmark (Dutch) is up 7% today (~+0.5% yesterday) to near last week's highs.  Iron ore prices jumped 7.7% today after 2.5% yesterday, perhaps encouraged by strong Chinese import figures.  Copper prices are also firm.    Asia Pacific The Reserve Bank of Australia stuck to its stance. It may take two years to reach the 2-3% inflation target, and the uncertainties surrounding the Omicron variant also favor a cautious approach. This was in line with expectations.  The swaps market still has about 75 bp of higher rates discounted next year.   The Australian dollar's gains reflect the risk-on mood.   Japan's economy is on the mend.  Household spending rose 3.4% month-over-month in October.  Paradoxically, outlays on medical care actually fell (-5.7%) year-over-year in October.  Meanwhile, Labor cash earnings rose by 0.2% year-over-year, the same as in September, but less than expected.  Households headed by a worker rose 0.5% year-over-year.   China's trade surplus fell to $71.7 bln in November from $84.5 bln in October.  The US accounted for a little more than 50% of the surplus (~$37 bln).  Exports rose by 22% year-over-year, less than the 27.1% increase in October.  But, what really stood out were China's imports.  They surged, jumping 31.7% from a year ago after a 20.6% increase in October.  Commodity imports were robust.  The 35 mln tons of coal imported was the most this year. Oil imports were at three-month highs.  Iron ore imports reached a 13-month high,  Gas purchases were the highest since January.  Copper imports appear to be a record.  Separately, China reported that the value of its foreign exchange reserves rose by a minor $4.7 bln to $3.222 trillion.  Economists (Bloomberg survey median) had expected around an $11 bln decline.   The dollar has forged what appears to be a solid base now around JPY112.55.  So far, today is the first session since November 26 that the greenback has held above JPY113.00.  It has been confined to a narrow range between JPY113.40 and JPY113.75.  The dollar looks poised to move higher but may stall around JPY114.00, where an option for around $865 mln expires today.  The Australian dollar rose about half of a cent yesterday and is up around another half-cent today to test $0.7100.  An option for A$1.04 bln expires today there ($0.7100).  It is also the (61.8%) retracement objective of last week's drop.  A move above there would target the $0.7130 area and possibly $0.7200.  The reduction in Chinese banks' reserve requirements and the divergence with the direction the Fed appears headed did not deter the yuan from strengthening.  The dollar held CNY6.38 yesterday and is near CNY6.3660 now.  The low for the year was set at the end of May near CNY6.3570.  The dollar's reference rate was set at CNY6.3738, a touch higher than the models (Bloomberg survey) projected of CNY6.3734.   Europe According to the proverb, for want of a nail, a kingdom was lost.  US intelligence warns that Russia is poised to invade Ukraine.  Beijing continues to act as a bully in the South China Sea.  US President Biden is hosting a "Summit for Democracy" December 9-10.   Reportedly 110 countries will be represented, even Taiwan, which the US officially does not recognize as a country.  All of the EU members have been invited but Hungary.  Hungary, like Poland, is in a serious fight with the EC over the rule of law.  It is being fined for failing to comply with the European Court of Justice over its harsh treatment of asylum seekers.  Poland, which is invited to the summit, is also being fined a record 1 mln euros a day for deviations from the EU standards of the rule of law.   Yet Hungary's exclusion is needlessly antagonistic.  Hungary will hold parliamentary elections in April (though possibly May), and the opposition is united behind the center-right Marki-Zay.  Most polls show him ahead of Orban.   It is an insult to the EU, and Orban used his veto to block the EU from formally participating and prevented it from submitting a position paper.  It is a vulnerable position for the US to be the judge and jury about democracy and the rule of law.   Laura Thorton, director of the Alliance for Securing Democracy of the German Marshall Fund of the United States, expressed shock and dismay in a recent Washington Post op-ed over developments in Wisconsin. She wrote, "If this [where the GOP is seeking to replace the bipartisan oversight of elections with just its party's control] occurred in any of the countries where the US provides aid, it would immediately be called out as a threat to democracy.  US diplomats would be writing furious cables, and decision-makers would be threatening to cut off the flow of assistance."  Separately, the US embassy in Tokyo warned Japan about "racially profiling incidents" following the closure of its borders to new foreign entries into the country.   The US response to the Russian aggression in Georgia in 2008 and the annexation of Crimea in 2014 was soft.  Despite bringing NATO to Russia's door in the Baltics, the US recognized by its actions that it is difficult to defend what Russia calls its near-abroad. Ukraine is different.  When Ukraine gave up its nuclear weapons, the Budapest Memorandum  (1994), Russia, the US, and the UK committed to respecting its independence and territorial integrity.  Russia clearly violated the agreement, but the US says it is not legally binding.  Nevertheless, reports indicate that the Biden administration is contemplating new sanctions against Russia and Putin's inner circle.  Reportedly under consideration is removing Russia from the SWIFT payment system and new sanctions of Russia's energy companies, banks, and sovereign debt.  In late April, the European Parliament approved a non-binding resolution to exclude Russia from the SWIFT if it attacked Ukraine.  Russia is a heavy user of SWIFT, as few foreign banks, including the Chinese, are willing to use Russia's own payment system.  After a dismal factory orders report, the market had been prepared for a poor industrial output report today.  Instead, Germany surprised with its strongest gain for the year.  Industrial output surged 2.8% in October.   It is only the third monthly gain this year.  Moreover, September's decline of 1.1% was halved to 0.5%.  It appears auto production (capital goods) may be behind the improvement in activity.  Separately, the ZEW survey was mixed.  The expectations component was stronger than expected, but still, at 29.9, lower than November's 31.7 reading.  The assessment of the current situation deteriorated sharply to -7.4 from 12.5.  It has been declining since September, but this is the lowest since June.  On November 30, the euro spiked higher and has subsequently worked its way lower.  Today, it reached almost $1.1250, its lowest level since November 30, low near $1.1235. The 20-day moving average (~$1.1320) continues to block the upside.  It has not closed above it for a little more than a month.  The low for the year so far was recorded on November 24 near $1.1185.  For its part, sterling remains in its trough. The low for the year was set on November 30, slightly below $1.32.  Before the weekend, it was in a roughly $1.3210-$1.3310 range and remains well within that range yesterday and today.  It has been blocked ahead of $1.3300.  There is an option for about GBP450 mln at $1.3250 that expires today.   America The US is expected to report that productivity fell in Q3 by 4.9% rather than the 5% that was initially reported.  Productivity increased by 2.4% in Q2 and 4.3% in Q1.  It averaged 2.6% last year and 2.3% in 2019.  Unit labor costs are the most holistic measure, including wages, benefits, and output.  Looking at a four-quarter moving average, unit labor costs rose 1.6% in 2018 and 1.45% in 2019.  They jumped to 6.25% last year and fell by an average of 0.85% in H1 21.  The initial estimate for Q3 was an 8.3% surge.   The US also reports the October trade balance.  The preliminary goods balance signaled a likely improvement from the $80.9 bln deficit in September.  The median forecast (Bloomberg) sees a deficit of slightly less than $67 bln.  Through September, the monthly average was nearly $71 bln, up from $53.3 bln in the same period last year and less than a $50 bln average in the first nine months of 2019. Late in the session, the US reports October consumer credit, and another substantial increase is expected.  It jumped almost $30 bln in September.  It has averaged $20.275 bln a month through September.  Last year was too distorted, but in the first three quarters of 2019, consumer credit rose by an average of $15.3 bln a month.    Canada reports its October merchandise trade figures today, ahead of the Bank of Canada meeting tomorrow  The median forecast in Bloomberg's survey call for a C$2.08 bln surplus, which, if accurate, would the be third largest surplus since 2008.  The June surplus was larger at C$2.26, as was the December 2011 surplus of C$2.12 bln.   Canada's goods trade balance through September swung into surplus with an average of C$703 mln.  In the same period in 2020, the monthly deficit averaged C$3.1 bln and  C$1.4 bln in 2019.  The merchandise surplus may be sufficient to lift the current account too.  Canada has been running a current account deficit since 2009.   The OECD forecasts a surplus this year of 0.3% of GDP and projects it to be in balance next year.  Canada and Mexico have expressed concerns about the credits for electric vehicles in the Build Back Better US initiative.  They claim it violates the USMCA.  Europe has expressed similar problems, and the EU Trade Commissioner Dombrovskis has reportedly sent a formal letter warning that the Biden administration's efforts may also violate WTO rules.  Meanwhile, there is talk that the initiative may be blocked this year.  If this is the case, the odds of passage next year seem even slimmer.  On a different front, Mexico's controversial energy reforms, which expand the state sector, over some objections by US energy companies, look to be delayed due to lack of support.  The US dollar posted an outside up day against the Canadian dollar before the weekend, despite Canada's strong employment report.  There was no follow-through yesterday, and the greenback recorded an inside day and settled on its lows.  The US dollar has been sold to around CAD1.2700 today.  Initial support is around CAD1.2675, but the more significant test is near CAD1.2640.  A break would strengthen the conviction that a high is in place.  Meanwhile, the greenback continues to consolidate against the Mexican peso.  It remains within the range set last Wednesday (~MXN21.1180-MXN21.5150).  Thus far today, it is holding above yesterday's low (~MXN21.1720), which was- above the pre-weekend low (~MXN21.1625).            Disclaimer
Intraday Market Analysis – USD Edges Lower

Intraday Market Analysis – USD Edges Lower

John Benjamin John Benjamin 08.12.2021 09:07
EURUSD seeks support The euro bounced higher after the bloc’s Q3 GDP beat expectations. A previous rebound was capped by the 20-day moving average, suggesting that the bearish sentiment still prevails. The RSI’s double top in the overbought area has prompted short-term buyers to take profit. The pair has met support above 1.1240. The bulls will need to lift offers around 1.1330 before they could attract momentum buyers. A bearish breakout would send the price to the floor at 1.1190. Its breach would trigger a new round of sell-off. AUDUSD breaks higher The Australian dollar soared after the RBA remained optimistic about the economic recovery. The pair saw strong buying interest at the psychological level of 0.7000, which also sits near November 2020’s lows. An oversold RSI on the daily chart compounds the ‘buying-the-dips’ behavior. An initial pop above 0.7070 forced bearish trend followers to cover their latest bets. 0.7170 would be the next target though the RSI’s overbought situation may limit the surge. 0.7040 is the first support for buyers to regroup and accumulate. USDJPY attempts to rebound The yen stalled after Japan’s GDP showed an unexpected contraction in Q3. A break below the daily support at 112.70 has put the bulls on the defensive. The latest consolidation is a sign of indecision as to whether the correction would continue. The greenback found support over 112.50 and a close above 113.95 could help the bulls regain the upper hand. Then the psychological level of 115.00 would be the next step before the uptrend could resume. On the downside, a fall below 113.10 would retest the key support at 112.50.
Who Wants to Buy Bitcoin Now?

Who Wants to Buy Bitcoin Now?

Alex Kuptsikevich Alex Kuptsikevich 08.12.2021 08:40
Since yesterday, Bitcoin has gone from almost $52K to $50.7K. On Tuesday, the crypto market was green on nearly all fronts, including ETH, ADA, XRP, etc. And although the Fear Index continued to remain in the horror zone with 26 points, everyone was buying altcoins. However, BTC did not gain a foothold above the resistance at $51,800, so it is premature to talk about conquering the heights and completing the correction. Perhaps this is not even a correction now, but a search for the actual price without rose-coloured glasses and excessive optimism. Whether there are still those who want to ride up at their own expense on the market, we will only find out when Bitcoin rises above $56K. A Grayscale poll found that 26% of American investors have already bought BTC. So, apparently, we just need the remaining 74% to join in. But do they have any motivation? Moreover, the United States has introduced cryptocurrencies into its anti-corruption strategy, although exactly how this will affect the market is unclear. Aside from the local downward trend in Bitcoin, the cryptocurrency market remains bullish, rapidly changing sentiment and moving from correction to growth. Based on the posts on Twitter, the popularity of cryptocurrencies is only growing. Thus, in partnership with the Gemini crypto exchange, the largest bank in Colombia, Bancolombia, added transaction services with BTC, ETH, LTC, and BCH to its list. Video game developer Ubisoft has launched an NFT platform, and blockchain project Spiral, a division of Jack Dorsey's Block, will improve Bitcoin's Lightning Network. Among the small altcoins, the hot class of projects related to the metauniverses remains. This topic is so popular that almost any new project considers it its duty to point out the potential for the development of this topic. It seems that investors are recruiting all newcomers to their portfolio, hoping to get an impressive profit if at least one project hits. However, you should be extremely careful. At the end of November, it seemed that the Covalent coin, issued six months ago, recovered relatively quickly from the traditional drawdown in the first months of its life. However, since the beginning of December, its value has been rapidly decreasing, colouring the first eight days of the month in red and confidently remaining below the offering price. At the same time, this cryptocurrency suits well for intraday trading: for yesterday's session, for example, it grew by 3.62%, although this did not affect the overall “red” result.
Weak November Payrolls Won’t Help Gold

Weak November Payrolls Won’t Help Gold

Arkadiusz Sieron Arkadiusz Sieron 07.12.2021 17:14
  November employment report was mixed. Unfortunately for gold, however, it won’t stop the Fed’s hawkish agenda. Nonfarm payrolls disappointed in November. As the chart below shows, the US labor market added only 210,000 jobs last month. This number is much lower than both October’s figure (546,000 gains) and the market expectations (MarketWatch’s analysts forecasted 573,000 added jobs). So, it’s a huge blow to those optimistic about the US economy. However, this is a huge blow that nobody will care about because the disappointing payrolls were accompanied by a big decline in unemployment. As the chart above shows, the unemployment rate decreased by 0.4 percentage points, from 4.6% in October to 4.2% in November. What’s more, the unemployment rate declined simultaneously with the increases in both the labor-force participation rate (from 61.6% to 61.8%) and the employment-to-population ratio (from 58.8% to 59.2%). This means that the reduction in unemployment was genuine and rather not a result of dropping out from the labor market. Additionally, wage inflation has slowed down from 4.84% in October to 4.8% in November, remaining below expectations, which could slightly ease inflationary concerns. Last but not least, after revisions, employment in September and October combined was reported to be 82,000 higher than previously indicated, and the monthly job growth has averaged 555,000 so far this year. Therefore, even a weak November doesn’t change the fact that 2021 marked a great improvement in the US labor market.   Implications for Gold What does the November employment report imply for the gold market? The nonfarm payrolls disappointed, but it’s not enough to stop the Fed from accelerating the pace of tapering its quantitative easing, especially given the significant reduction in the unemployment rate. So, the hawkish revolution won’t be stopped. It may even be strengthened, as a big decline in unemployment brings us closer to “full employment” and meeting the criteria for hiking interest rates. This is, of course, not good news for the gold bulls. After hearing worries about inflation a few weeks ago, the Fed managed to calm investors. They’ve believed that Powell and his colleagues would take the inflationary threat seriously. Markets now expect a speed-up in the pace of tapering in December and as much as three interest rates hikes in 2022 (there are even investors who bet on seven hikes by the end of the next year!). However, there is a silver lining here. With the unemployment rate at 4.2%, the potential for further improvement is rather limited. And when a new upward trend begins, we will have rising unemployment rate and high inflation at the same time. Such conditions create stagflation, which would take gold higher. This is still a song of the future, though. Let’s focus on the recent past: gold prices increased slightly on Friday (December 3, 2021). Although the London P.M. Fix hardly changed (see the chart below), the New York price rebounded to about $1,783 on Friday from $1,769 the day before. However, it doesn’t change the fact that gold remains stuck in a sideways trend below $1,800, as concerns about inflation exist along with expectations of a more aggressive Fed tightening cycle. Luckily for gold, despite its hawkish rhetoric, the US central bank will remain behind the inflation curve. The cautious, dovish policy is simply too tempting, as hitting the brakes too hard could trigger a financial crisis and a recession. With the CPI annual rate above 6%, the Fed should have already hiked the federal funds rate instead of waiting until Q2 2022. And even with three 25-basis point hikes, real interest rates will remain deeply in negative territory, which should be supportive of gold prices. If you enjoyed today’s free gold report, we invite you to check out our premium services. We provide much more detailed fundamental analyses of the gold market in our monthly Gold Market Overview reports and we provide daily Gold & Silver Trading Alerts with clear buy and sell signals. In order to enjoy our gold analyses in their full scope, we invite you to subscribe today. If you’re not ready to subscribe yet though and are not on our gold mailing list yet, we urge you to sign up. It’s free and if you don’t like it, you can easily unsubscribe. Sign up today! Arkadiusz Sieron, PhDSunshine Profits: Effective Investment through Diligence & Care
Ahead Of The US CPI, Speaking Of Crude Oil And Metals - Saxo Market Call

Market Quick Take - December 3, 2021

Saxo Bank Saxo Bank 03.12.2021 09:02
Macro 2021-12-03 08:45 6 minutes to read Summary:  Risk sentiment rebounded yesterday in the US session, erasing the rather steep losses of the prior day. Sentiment in Asia is also on the mend, while oil prices recovered all of the lost ground from an intraday plunge in the wake of the OPEC+ meeting yesterday. Today, focus swings to the US November jobs report, with extra focus likely on average hourly earnings data as investors watch for signs of a wage-price spiral developing. What is our trading focus? Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) - US equities bounced back yesterday after finding a new low for the current short-term cycle lower with Nasdaq 100 futures trading around the 15,975 level this morning in European trading. Long-term US interest rates are not moving much so we expect a quiet session unless the Nonfarm Payrolls for November throws a curveball at the market. In the medium-term risk in equities will be determined by pricing of interest rates hikes next year and updated information on the new Omicron variant of Covid. Stoxx 50 (EU50.I) - Stoxx 50 futures are stuck in a stabilisation zone between 4,100 and 4,160 with the 100-day moving average at 4,157 which is obviously the key resistance level to watch today should we get risk-on. European equities remain pulled by two opposite forces with the first being that higher expected interest rates are positive for this value market, while the continent has the most to lose short-term from the Omicron variant. If the latter fades over the coming weeks, we expect investors to move back into European equities. USDJPY and JPY crosses – With every day that passes and no follow-through lower unfolds after the recent omicron-variant inspired tumble from the 115.00+ level, the odds of a reversal back higher grow, though as we have mentioned often in this space, this would likely require that US yields lift all along the curve, not just near the front of the curve where Fed expectations operate the most forcefully. A fresh wave of weak global risk sentiment, on the other hand, could bring another wave of JPY strength, particularly in the crosses like AUDJPY and CADJPY, some of which saw their largest single-day moves since the pandemic outbreak early last year. For USDJPY, the downside pivot is now near 112.50. USDCAD – USDCAD has rallied as the market has been adjusting to the more hawkish shift from the Fed, especially after this week’s testimony from Fed Chair Powell. As well, uncertainties and the real threat of a reduction in travel due to the new omicron variant of covid have taken down crude oil prices nearly twenty dollars from their late October peak, around the time USDCAD was bottoming out near 1.2300. Now it trades near 1.2800 and the top of the range (only intraday price spikes from August and September rose above this level) as oil has staged a significant rebound yesterday. If risk sentiment can stabilize and oil prices recover, this important 1.2800+ area resistance could hold. Crude oil (OILUKFEB22 & OILUSJAN21) trades up 8% from yesterday’s low point after the OPEC+ group of producers adopted a flexible approach on supply while at the same time agreeing to maintain the current rate of production increases. The market gripped with omicron angst this past week rallied on the news due to several reasons 1) the market had already priced in a significant and not yet realised reduction in demand, and 2) it the meeting was left “in session” meaning changes can be made before January 4. 3) the move eased political tensions with large consumers, 4) some of the SPR barrels on offer may not leave storage due to lack of demand from refineries, and 5) members with spare capacity wanted to increase production, as the group has not delivered the promised increases due to some struggling to reach their quotas. The next upside level to watch being the 200-day moving average at $72.85. Gold (XAUUSD) slumped to a one-month low at $1762 yesterday, as the dollar strengthened in response to robust economic data, before finding a small bid from recovering crude oil prices. Otherwise, it has been another troubled week, the third in a row, with the yellow metal struggling to put up a defense against the Fed’s changed focus from employment to combatting inflation. In addition, the spreading of the omicron variant and its potential threat to the economic recovery has so far failed to support prices despite driving bond yields sharply lower and the VIX higher. Silver (XAGUSD) has struggled even more given its industrious link with XAUXAG ratio trading near a two-month high. Focus today being the US job report with the first major upside level of interest in gold being $1792 with support at $1760. US Treasuries (IEF, TLT). Today the focus is on the nonfarm payrolls numbers, as a better-than-expected report would confirm the intention of the Federal Reserve to taper at this month's FOMC meeting. The US yield curve continued to bear-flatten yesterday as Fed’s speakers including Bostic, Daly, Quarles, and Barkin commented on the possibility of a faster tapering to open for rate hikes next year. Two-year yields rose by 8 bps, while five-year yields cheapened by 5bps. Long-term yields dropped contributing to an increased flattening of the yield curve in the 2s10s and 5s30s areas. In the meanwhile, Eurodollar futures have started to price rates cut in 2025. We expect the flattening of the yield curve to continue until Covid distortions are eased. Afterward, the long part of the yield curve will need to shift much higher adjusting to interest rate hikes expectations. US junk bonds (HYG, JNK). According to Bloomberg Barclays indexes, junk bonds’ OAS widened by 30bps to 330bps amid last Friday’s selloff reflecting the lack of liquidity in markets. Despite negative real rates continuing to support corporate bond valuations, it’s safe to expect junk bond spreads to widen throughout the end of the year amid poor liquidity. If the volatility in rates remains sustained, the widening of spreads could accelerate, posing a threat also for stocks. German Bunds (IS0L). Rate hikes expectations for the eurozone were pushed to 2023 yesterday amid a slump in tech stocks. German and Italian government bonds more than reversed Wednesday’s losses. In Europe, Covid distortions are keeping bond yields in check. However, when Covid fears ease we can expect yields in the euro area to adjust higher given the inflationary backdrop and the new German government. What is going on? Omicron covid variant cases rise, reinfection risk judged high in one study. South African officials note that the omicron variant of covid is spreading faster than the delta- or any other variant of the virus despite estimates by some that a majority of the South African population was infected with covid in prior waves. National cases were at 11.5k yesterday versus 8.6k on Wednesday and 4.4k on Tuesday. A study there of the reinfection risk suggests that it is some three times higher than prior variants. Omicron variant cases have now been discovered worldwide, including Italy, the US and South Korea. DocuSign shares plunge 30% in extended trading. The company guided Q4 revenue of $557-563mn vs est. $574mn which is a small revenue miss, but enough to spark a massive selloff in extended trading. Investors took clearly little comfort in the fact that the company is consistently improving operating margin hitting 3.1% in Q3 and expected to climb significantly in the coming quarters. China moves to delist Didi from US exchanges. US SEC set to move against Chinese listing. The Chinese ride-sharing and transportation platform company will delist in the US and move to a Hong Kong listing, perhaps in the March time frame. Meanwhile, the US SEC is set to move against a number of Chinese companies listed on US exchanges on charges that their accounting disclosures are not in compliance with US regulations. Another strong US weekly jobless claims number was out yesterday at 222k, lower than expected and near the levels during the strong labor market before the early 2020 pandemic outbreak. The prior week’s number was one of the lowest ever and was revised even lower to 194k, suggesting a very tight labor market. What are we watching next? Study of omicron variant and its virulence. Scientists will work with the provincial government of Gauteng in South Africa, which has the most measured cases of the new omicron variant, to complete a study of the new variant’s virulence as soon as next Tuesday, though results will be released to the public later. A local official there said that hospitalizations and mortality are lower than expected thus far. US November Nonfarm Payrolls Change and Average Hourly Earnings today. With the US economy operating at full capacity according to estimates from CBO, continued strong job gains will add fuel to the “inflation fire”. Wednesday's 534k increase in the November ADP private payroll number suggests that the job market growth remains healthy in the US as we await the official nonfarm payrolls numbers today (expected to show 500k+ jobs added), where strong upward revisions to prior months’ data has been a notable trend this year due to data collection issues. As well, Average Hourly earnings numbers will be closely watched for any budding signs of a wage-price spiral, as a constrained supply of labor could see companies bidding up wages and October showed a strong rise in earnings at a faster pace than at any time from the start of the survey in 2007 to the outbreak of the covid pandemic. The October Average Hourly Earnings number rose to 4.9% year-on-year, and 5.0% is expected for today’s November number. Earnings Watch – today is a quiet day on earnings with only Bank of Montreal reporting earnings. We have also put in next week’s earnings releases. Friday: Bank of Montreal Next week’s earnings: Monday: Sino Pharmaceutical, Acciona Energias, MongoDB, Coupa Software, Gitlab Tuesday: SentinelOne, AutoZone, Ashtead Group Wednesday: Huali Industrial Group, GalaxyCore, Kabel Deutschland, Dollarama, Brown-Forman, UiPath, GameStop, RH, Campbell Soup Thursday: Sekisui House, Hormel Foods, Costco Wholesale, Oracle, Broadcom, Lululemon Athletica, Chewy, Vail Resorts Friday: Carl Zeiss Meditec Economic calendar highlights for today (times GMT) 0815-0900 – Euro Zone final Nov. Services PMI 0900 – Norway Nov. Unemployment Rate 0930 – UK Nov. Final Services PMI 1100 – UK Bank of England’s Saunders to speak 1300 – ECB Chief Economist Philip Lane to speak 1330 – US Nov. Change in Nonfarm Payrolls 1330 – US Nov. Average Hourly Earnings 1330 – US Nov. Unemployment Rate 1330 – Canada Nov. Net Change in Employment 1330 – Canada Nov. Unemployment Rate 1415 – US Fed’s Bullard (voter in 2022) to speak 1500 – US Nov. ISM Services 1500 – US Nov. Factory Orders   Follow SaxoStrats on the daily Saxo Markets Call on your favorite podcast app: Apple Spotify Soundcloud Sticher
Markets Calmer, Awaiting Fresh Incentives

Markets Calmer, Awaiting Fresh Incentives

Marc Chandler Marc Chandler 08.12.2021 13:51
December 08, 2021  $USD, Bank of Canada, Currency Movement, Germany, India, Japan, Poland, Russia Overview:  The capital markets are calmer today, and the fear that was evident at the end of last week remains mostly scar tissue. Led by gains in Japan, China, Australia, New Zealand, and India, the MSCI Asia Pacific Index extended yesterday's gains.  Europe's Stoxx and US futures are firm.  The US 10-year yield is softer, around 1.43%, while European yields are mostly 1-2 bp lower.  The Norwegian krone and euro lead major currencies higher against the greenback, but the New Zealand dollar and sterling are underperforming. Most of the emerging market currencies are enjoying an upside bias. The Turkish lira is giving back a little more than half of yesterday's 2.25% bounce.  Gold is edging higher and is near the 200-day moving average (~$1792).  January WTI is off $1 around  $71 after rallying around 8% in the past two sessions.  API reported a three million barrel drawdown in inventories but a big jump in Cushing.   US natural gas is consolidating and paring Monday's 11.5% drop.  Europe (Dutch) natural gas prices are rising for the third consecutive session and around 10% this week.  Iron ore has extended this week's rally and is at the highs since October.  Copper is flat.   Asia Pacific Australia has joined the US in the diplomat boycott of the winter Olympics in Beijing.  South Korea and Japan have not formally decided yet.  China's quarantine policies made it difficult for many diplomats to attend in any event, and many apparently will not attend.  Beijing threatens unspecified retaliation.   Japan reported an increase in its October current account, rising to JPY1.18 trillion from JPY1.03 trillion in September.  The swing in the trade balance from a JPY230 bln deficit to a JPY167 bln surplus more than accounted for it.  Japan also revised Q3 GDP to a 0.9% contraction (from -0.8%).  The composition changed.  Consumption was a greater drag (-1.3% quarter-over-quarter rather than -1.1%), and inventories contributed less (0.1% vs. 0.3%) and net exports were flat (rather than contribute 0.1 percentage points).  Business investment was less a drag (-2.3% vs. -3.8%).  Still, there is reason to be more optimistic about the outlook for the world's third-largest economy.  Social restrictions have eased, the vaccination rate is among the best, and the government is providing fresh stimulus.  The Kishida government is expected to finalize its fiscal efforts toward the end of the week. A key issue is the tax incentive (subsidy) for companies that boost wages by 3%, which has not happened since 1997.   India left its key rate corridor on hold today.  The repo rate is 4%, and the reverse repo rate is 3.35%.  Some observers saw the possibility of a hike in the reverse repo rate.  The monetary policy committee voted unanimously to keep the repo rate steady.  The reverse repo rate is a broader issue decided by the central bank, not the MPC.  The emergence of Omicron may have encouraged the central bank to maintain a steady hand, while the cut in the excise duty and VAT for petrol and diesel may help ease price pressures.  It made some technical changes in its liquidity management, which some see as a prelude to a hike in February 2022, when the central bank meets again.   The dollar is consolidating in a narrow 30-point range above JPY113.35 against the Japanese yen.  Yesterday's high was just below JPY113.80.  An option for about $550 mln will roll off today at JPY114.25, while there is a nearly $1.5 bln option at JPY114.00 that expires tomorrow.  The JPY114 area also holds the 20-day moving average, which the dollar has not closed above since November 25. The Australian dollar began the week flirting with the $0.7000 area.  It is rising for its third consecutive session and has reached almost $0.7145 today.  Last week's highs were set a little above $0.7170.  Despite words of caution by Chinese officials and the cut in reserve requirements, the yuan continues to march higher.  It is at new three-year highs today.  The dollar has been sold down to almost CNY6.3455.  Local dollar bonds and bonds below investment grade have rallied as officials signal a focus on supporting the economy.  Today the rate for re-lending to rural and small businesses was cut by 25 bp.  The PBOC has also been generous with its liquidity provisions.  The reference rate for the dollar was set at CNY6.3677, a little firmer than expected (CNY6.3665, Bloomberg survey).    Europe An era is formally over today as Germany's new government takes office.  The challenges it faces are profound.  The virus was surging even before the Omicron variant was detected.  The economy has been hobbled.  Inflation is high (6% on the harmonized measure in November) and without the fiscal stimulus seen in the US, where CPI is up 6.2% from a year ago (October).  This year, the German deficit is estimated to be about 5.8% and seen falling to 2.5% next year.  The US deficit is around 12.5% this year and is expected to fall to around 6.5% in 2022. Russia is amassing troops, and fears that it will invade Ukraine early next year are running high.  Germany reportedly will nix the controversial Nord Stream II pipeline if Russia carries through with its threat as part of the economic sanctions being considered.  Italy's Draghi has had a bit of a honeymoon, but that will change.  Two of the three largest unions will strike on December 16 to protest Draghi's budget, which must be passed by the end of the month.   Moreover, the selection of a new Italian president in January may mark the beginning of the political process that will lead to a new parliamentary election by the middle of 2023.  The president of Itlay is chosen by the Italian Parliament and regional representatives.  The current president, Mattarella, has declined to run for a second term.  Draghi does lead any political party, but the latest surveys show the center-left Democratic Party is in first place, polling a couple percentage points higher than it got in the last election at 21.4% support.  The Brothers of Italy on the right are in second place with slightly less than 20% support.  The Five Star Movement has seen its fortunes slip to about 15%.  Poland's central bank is set to hike its base rate today.  It will be the third consecutive increase.  The base rate was slashed from 1.50% last year to 10 bp.  It was hiked by 40 bp in October and 75 bp last month to stand at 1.25%. The headline CPI surged from 2.4% at the end of last year to 7.7% in November. Czech and Hungary have been more aggressive in raising rates.  Last month, Czech's central bank delivered a 125 bp increase to lift its key two-week repo rate to 2.75%.   It was at 25 bp to start the year.  Its CPI is near 6%.  Hungary has raised its base rate every month since June and taken it from 60 bp to 2.10%.  It has also taken its one-week deposit rate from 75 bp to 3.10%, with 130 bp delivered in the past three weeks. Earlier today, it reported that CPI rose to 7.4% last month from 6.5%.  Most look for a 50 bp increase from Poland's central bank today.   The euro briefly dipped below $1.1230 yesterday but recovered in the North American afternoon.  It is extending the recovery today and traded $1.1300 in the European morning.  The $1.1310-$1.1320 offers nearby resistance.  The UK government is being embarrassed by reports about its holiday party a year ago in violation of the social restrictions in place at the time.  It adds to the sleaze factor that has weakened it.  The latest polls show that the Labour Party is extending its lead.  Also, ideas that the BOE could raise rates next week have diminished and been pushed into next February.  Sterling is heavy, near $1.3200.  We have warned of near-term risk toward $1.3165, the (38.2%) retracement objective of the rally from the March 2020 low near $1.14.   America A deal appears in the works to lift the US debt ceiling.  The maneuver requires 60 votes to allow the debt ceiling to pass with a simple majority.  The Republican leadership appears willing to go along with this.  It will likely set a new precedent that will be used and possibly expanded when control of Congress changes.  PredictIt.Org shows that the Republicans are favored to win control of both houses in next year's mid-term election.   The US calendar today features the JOLTS report on job openings.  The week's highlight, the November CPI, is out on Friday, and both the headline and core rates are expected to accelerate.  Fed officials are in the blackout period ahead of next week's FOMC meeting.  Today's North American feature is the Bank of Canada meeting.  No one expects a change in rates.  It is more about the rhetoric.  Despite the uncertainty surrounding the Omicron variant, Bank of Canada officials are likely to be more confident about the strength of the recovery.  Last week's jobs data adds to the positive impulses.  Moreover, the government is providing more fiscal support.  The biggest challenge is that the market has discounted five hikes over the next 12 months.  This is aggressive and difficult for the central bank to get ahead of market expectations. Even after the strong Canadian jobs data at the end of last week, the US dollar closed firmly above CAD1.28, showing the Loonie's vulnerability to the risk-off wave.  However, as cooler heads have prevailed, the Canadian dollar has bounced back.  The US dollar closed below the 20-day moving average yesterday (~CAD1.2670) for the first time in a month and was sold to about CAD1.2620 today. The (38.2%) retracement of the greenback's rally since the October 21 low (below CAD1.23) is found near CAD1.2640. The next retracement (50%) is around CAD1.2570.  Initial resistance now is likely by CAD1.2680.  The greenback also closed below its 20-day moving average against the Mexican peso yesterday for the first time since November 9.  It has slipped below MN21.00 today for the first time in about two-and-a-half weeks.  With today's loss, the US dollar has retraced (61.8%) of its rally from November 9 low (~MXN20.2750). The move seems exaggerated, and consolidation is likely.  Nearby resistance is seen in the MXN20.05-MXN20.10 area.  Disclaimer
FX Update: Risk sentiment comeback with a few twists

FX Update: Risk sentiment comeback with a few twists

John Hardy John Hardy 08.12.2021 15:14
Forex 2021-12-08 14:45 4 minutes to read Summary:  Risk sentiment is well on its way to erasing the reaction to the news of the omicron variant of covid, with most reactions across FX adjusting as one would expect on an improved outlook, with commodity currencies performing best, while safe haven JPY and CHF trade weaker and the euro is unable to figure out what it wants to do. Adding to a more hopeful stance and a weaker US dollar overnight was China allowing its currency to push to new highs for the year, beyond the highs established back in May. FX Trading focus: CNY new highs for the year, strong resurgence in risk sentiment The US dollar has pushed lower this week on a resurgence in risk sentiment, led by fading omicron fears – particularly yesterday – but also on hopes that China is set to support the global growth outlook and signaling confidence by allowing the renminbi to push to new highs for the year versus the US dollar. The weaker US dollar elsewhere this week explains the timing of the large move to new lows in USDCNH, as the CNH has actually underperformed resurgent commodity FX and some EM FX this week even while it outperformed the strong US dollar this year on balance. If the USD is to weaken further from here, it would be no surprise to see CNH continuing higher versus the US dollar – perhaps even beyond the 2018 lows in USDCNH – while keeping it somewhat weaker versus other currencies against which it has appreciated so aggressively this year. China is clearly interested in defending the stability and purchasing power of the CNH versus the USD and its basket, but the extent of the revaluation is getting stretched if we look at the official CNY basket. In G10 FX, the resurgence in risk sentiment has boosted the usual suspects and weighed against the other usual suspects, although a couple of unusual situations stick out: GBP and SEK: Sterling is in danger of breaking down versus the euro here after testing new lows for the year this morning in GBPUSD despite sterling’s former correlation with risk appetite, perhaps as a lot of air has been taken out of Bank of England expectations as the market has shifted the expected lift-off meeting to February of next year after pricing as early as November a couple of months ago. Late last week, the BoE’s normally hawkish Saunders sounded cautious on lifting off next week, while the day before yesterday Deputy Governor Broadbent advised looking “a couple of years ahead” in predicting that “these pressures on traded goods prices are more likely to subside than intensify”, although he did say wages could be an inflation driver. Chart: EURGBPEURGBP is poking at the 200-day moving average from the downside for the third time in recent months, and the less hawkish BoE may help trigger a further squeeze higher, especially if the 0.8600 prior pivot high falls. Next focus higher still comes in at the range highs from April-May near 0.8720. Source: Saxo Group SEK has traded sideways today rather than rallying, as one would expect, on the strong comeback in risk sentiment. The krona is historically one of the most highly risk sensitive currencies. Sure, the euro is largely stuck in the water here and the EU growth outlook has plenty of clouds over it with covid shut-downs etc, but EURSEK looks “wrong” relative to other reaction to the improved mood across markets, and should be lower. A statement today by Riksbank dove Jansson that it is hard to justify rate hikes and that a more active fiscal policy is the way forward likely held back SEK, as perhaps NOKSEK buying, judging from the last couple of session in that cross. In other developments, AUDNZD has cleared the important 1.0500 level, EURCHF is trying to pull higher but is still some way from challenging the important 1.0500 level. The CHF has not behaved anything like the JPY in recent months, failing to show sensitive in EURCHF, at least, to large shifts in safe haven years. Likely, to get EURCHF off the mat, we’ll need to see a broader EUR rally that includes EURUSD on a brightening outlook for EU growth. Hard to see how it gets much worse, on a relative basis, at present (covid shutdowns, energy crunch, etc…) The Bank of Canada is out just after pixel time for this article. The market is leaning for hawkish guidance for a sure rate hike at the January meeting, which is very likely what it will get. The degree to which CAD can continue to rally will also depend on whether the now suddenly very CAD-supportive backdrop extends. USDCAD needs to bash back below 1.2500 to suggest a full reversal of the rally move off the sub-1.2300 lows in October is in the cards. Looking ahead, the next critical event risks are the Friday US November CPI print, and then the exercise next week in seeing how the market reacts to the crystallization of the now hawkish Fed’s adjustments to its new monetary policy statement and to the “dot plot” of its policy forecasts. Table: FX Board of G10 and CNH trend evolution and strengthStill mean reverting from the prior trends in most currencies, but far more upside needed from commodity currencies to fully reverse the prior trends. Source: Bloomberg and Saxo Group Table: FX Board Trend Scoreboard for individual pairs.A strong move higher in EU yields taking EURJPY back well above the important 128.00 level of contention lately – watching whether the trend can flip positive in the week ahead. Elsewhere, note again that AUDNZD has pulled above the important 1.0500, that USDCHF flipped positive (even if it is mid-range after surviving another test of the 200-day moving average), and that NOKSEK is trying flipping positive after a very sharp rebound from recent lows. Source: Bloomberg and Saxo Group Upcoming Economic Calendar Highlights (all times GMT) 1500 – Canada Bank of Canada Rate Decision 1500 – US JOLTS Job Openings survey 2130 – Brazil Selic Rate Announcement 2205 – Australia RBA Governor Lowe to speak 0001 – UK Nov. RICS House Price Balance 0130 – China Nov. CPI / PPI
The Pound: will the bears win the market without news?

The Pound: will the bears win the market without news?

Alex Kuptsikevich Alex Kuptsikevich 08.12.2021 09:27
The pound was down against the dollar on Tuesday. However, the very nature of the movements, as in the case of the euro rate, was far from ideal and straightforward. The mixed dynamics is clearly visible on the 30-minute timeframe, where the rate consolidated above a strong downtrend line with four pivots. The chart first crossed this line and then decided to resume the downward movement. It was as if the obvious buy signal turned out to be false, and it was possible to exit from it by the downward reversal of the MACD indicator. In general, it turns out that the downward trend of the pound has continued, but at the same time, the annual lows set on November 30th have not been updated so far. It should also be noted that during Tuesday, neither the UK nor the US saw a single important event or publication of economic data. They will not be there today either. Despite this, the volatility increased yesterday, and today, during the session, more calm movements are expected. On the 30-minute timeframe, the pound continues to have a downward trend. Earlier today, the downtrend line was broken, so both the continuation of the fall and a rematch, in which traders will try to return the rate above it, is possible. In general, the worsening epidemiological situation and the introduction of quarantine by the authorities of European countries make investors expect a drop in activity and sentiment by the end of the week.
Market Quick Take - December 9, 2021

Market Quick Take - December 9, 2021

Saxo Strategy Team Saxo Strategy Team 09.12.2021 09:48
Macro 2021-12-09 08:40 6 minutes to read Summary:  Global markets tried to gin up additional enthusiasm yesterday on the announcement yesterday from Pfizer that three shots of vaccine may offer far more protection from the omicron variant, but the market traded largely sideways as the sharp rally from the prior day was consolidated. The US dollar is showing signs of consolidating lower ahead of arguably the last two major event risks for the year for the currency, the Friday US November CPI data and the FOMC meeting next Wednesday. What is our trading focus? Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) - US equities momentum waned a bit yesterday and trading flat in early European trading hours. In Nasdaq 100 futures the 16,420 is the key resistance level to watch in today’s session. While Nasdaq 100 futures are flat this morning, Bitcoin is trading 2% lower which if it continues could spill over into US technology stocks as these pockets of the market are connected in terms of risk-off. Bubble stocks were the biggest gainers yesterday and provide another opportunity for retail investors to reduce exposure in bubble stocks ahead of the new year. EURUSD – The EURUSD rallied sharply yesterday as the US dollar was generally on its back foot, but a solid jump higher in EU sovereign bond yields and the official handover of power to the new German government coalition yesterday may have been elements supporting the rally. The move rose as high as 1.1350, just ahead of tactical resistance near 1.1375, the last hurdle ahead of more major trend resistance near 1.1500. In many past cycles, the calendar roll has proven a major inflection point for EURUSD. The December 15 FOMC meeting and December 16 ECB meeting both look important for the provision of new guidance, with the FOMC already having made a clear hawkish shift, while the ECB will have to deliver revised inflation forecasts and guidance on balance sheet policy after its emergency “PEPP” form of QE is set to end in March. AUDUSD – The Aussie has undergone a significant sentiment shift from one of the weakest G10 currencies to one of the strongest in recent sessions, in part on the reversal in risk sentiment, but also aided by China signaling a willingness to ease policy. Speculative positioning in the US futures market suggest a very heavy short position that, if similar to positioning in the OTC market, could provide significant fuel for a squeeze higher in the currency if the backdrop of improving risk sentiment and a focus on inflation risks further boosts the price action in key commodities like iron ore, coking coal and other metals. At any rate, AUDUSD has reversed up through the first resistance near 0.7100 and is now staring down the next pivotal area into 0.720-7250, needing to blast through this and then some to suggest an attempt to put in a bottom after touching the huge 0.7000 level within the last week. Crude oil (OILUKFEB22 & OILUSJAN22) trades higher for a fourth day as omicron demand concerns continue to ease and speculators accumulate length following last week’s washout. Flare-ups around the world resulting in temporary lockdowns is however likely to prevent the market from returning to pre-omicron levels at this point. The EIA reported a small 240k barrels weekly decline in crude stocks while inventories of fuel rose by a combined 6.6 million barrels. Next level of resistance in Brent being the 21-day moving average at $77.20 followed by $77.60. Gold (XAUUSD) remains stuck below the 200-day moving average, currently at $1793 with the market struggling for direction ahead of Friday’s key US inflation data. Support from a softer dollar continues to be offset by worries that a succession of expected US rate hikes in 2022 will drive up US real yields, thereby reducing a key source of support for gold. Ahead of Friday’s CPI data, the market has priced in three rate hikes next year with the first potentially coming as soon as May. Focus on silver (XAGUSD) which following its recent 13% slump is trying to establish support at $22, thereby supporting a lower XAUXAG ratio has stopped rising after finding resistance above 80 ounces of silver to one ounce of gold. US Treasuries (IEF, TLT). Haven bid for bonds faded as news hit the market that a third vaccine dose gives coverage for the omicron strain. Ten-year US Treasury yields rose above 1.50%, and yesterday’s 10-year US Treasury auction wasn’t as good as the 3-year auction the previous day. It tailed 0.4bps pricing at 1.518%. The bid-to-cover rose to 2.43x, a little lower than the past six auctions average. The yield curve bear steepened. Yet, we expect long-term yields to remain compressed if Covid infections still are an issue and lead to more restrictions. Today, the Treasury is selling 30-year bonds. If the selloff in the long part of the yield curve continues, we might witness a weak auction. What is going on? China PPI falls less than expected in November as it rises 12.9% year-on-year. The PPI number is widely considered a global inflation barometer as China is “the world’s factory”. The rise was higher than the 12.1% year-on-year expected, but lower than October’s 13.5%. The November China CPI number came in slightly cooler than expected at 2.3% year-on-year versus 2.5% expected and 1.5% in October. Pfizer says three shots of its vaccine offer more significant protection against the omicron covid variant. This news from yesterday sounded more promising than the news from just yesterday from a preliminary South African study that patients vaccinated with two shots showed some, but heavily reduced, production of antibodies in patients with the omicron variant. Pfizer found the same, but says that a third shot can bring the antibody response to similar levels as for the prior covid variants. Pfizer also said an omicron-targeted version of its vaccine could be ready in March. Buffett-backed digital lender Nubank to start trading today. The Brazilian-based digital bank Nubank is raising $2.6bn in its IPO becoming of the biggest IPOs this year with shares priced at $9 and first day of trading today on NYSE. This will mark one of the biggest publicly listed fintech companies in the world and provide a glimpse into the feasibility of running a large digital only bank. Bank of Canada upgrades language on inflation, likely set for January rate hike. The new Bank of Canada policy statement dropped a reference from the prior statement on “temporary” inflation forces, though it still maintained the expectation that inflation would drop toward 2 percent in the second half of next year. The strength in the jobs market was noted. Overall, the hawkish language changes were clear, if relatively small relative to rather aggressive market shift in expectations, and Canadian yields eased a few basis points lower at the front part of the yield curve, though a January rate hike from the bank remains likely, according to market expectations. Brazil hikes policy rate 150 basis points, BRL sees sharp gains. The rate hike to 9.25% was in line with expectations, but the central bank delivered hawkish guidance for another hike of the same size at the February meeting as the bank has clearly gone into aggressive inflation fighting mode. The Brazilian real responded strongly, gaining some 1.4% versus the US dollar yesterday. The EU gas and power market went from bad to worse yesterday after an unplanned outage temporarily cut supplies from Norway’s giant Troll field. Coming on top of geopolitical risks related to Ukraine, low winter supplies from Russia, freezing cold weather and rapidly declining stocks, these developments have driven Dutch TTF one month benchmark gas back above €100 per MWh or $34 per MMBtu. With rising demand for coal driving the cost of EU emissions to a fresh record above €90 per tons, the cost of power has surged as well. In Germany the one-year baseload contract reached a record €189 per MWh, or 5 times the long-term average. What are we watching next? WASDE on tap - Ahead of today’s monthly update on world supply and demand, the grains sector has seen a slight drift lower during the past week as the market tried to gauge the impact of the omicron variant. Today’s World Agriculture Supply and Demand report (WASDE) will primarily focus on ending stocks with expectations pointing to a relatively quiet update. US corn stockpiles are expected to have fallen slightly from November while wheat and soybean stocks are both expected to be higher, both in the US and globally. The EU is set to decide by December 22 whether investments in gas and nuclear energy should be labelled climate friendly. The design of the EU green investment classification system is closely watched by investors worldwide and could potentially attract billions of euros in private finance to help the green transition, especially given the need to reduce the usage of coal, the biggest polluter. This week’s earnings: Today’s focus is Oracle which is still struggling to find an attractive growth trajectory in the age of cloud applications, SaaS business models, and more open-source software on databases with flat revenue over the past four fiscal years. Lululemon has been one of the big winners during the pandemic gaining tailwind from home exercising, but generally the company taps into a longer-term trend of personal health. Analysts expect Lululemon to report 29% y/y revenue growth in Q3 (ending 31 October). Thursday: Sekisui House, Hormel Foods, Costco Wholesale, Oracle, Broadcom, Lululemon Athletica, Chewy, Vail Resorts Friday: Carl Zeiss Meditec Economic calendar highlights for today (times GMT) 0830 – Hungary Rate Announcement 1200 – Mexico Nov. CPI 1330 – US Weekly Initial Jobless Claims and Continuing Claims 1530 – EIA Natural Gas Storage Change 1700 – USDA World Agriculture Supply and Demand Report (WASDE) 1800 – US Treasury 30-year T-Bond auction   Follow SaxoStrats on the daily Saxo Markets Call on your favorite podcast app: Apple Spotify Soundcloud Sticher
Erdogan's stance keeps hurting Turkish Lira

Erdogan's stance keeps hurting Turkish Lira

Alex Kuptsikevich Alex Kuptsikevich 09.12.2021 10:20
The Turkish lira has stabilised recently, although it remains near historic lows against the dollar and euro, at 13.7 and 15.5 respectively. Erdogan’s latest comments have so far been of little help to the national currency and have not allowed it to develop a rebound after the grand overselling. In particular, the Turkish president remains firmly in the position that lower interest rates will reduce inflation in the country, and the results will be visible early next year. Mentioning that low rates will solve the inflation problem and stabilise the currency seems only to inflame the greed of currency speculators, reversing the already relatively modest achievements of the Bank of Turkey, which has intervened to stop the one-sided movement of the national currency. From the economic side, the cumulative effect of the recent devaluation (+65% since September and 77% y/y) will be transferred to consumer prices in the coming months, which promises to be a much bigger problem for Turkey than for other EM countries. Erdogan’s dispute with the conclusions of the conventional economic theory could be called a remarkable experiment if the welfare of millions of people in the country were not at stake. The decline in interest rates in response to rising inflation and a falling currency can be compared to the populist policies of some Latin American countries in previous years, which caused an endless devaluation of their currencies and a decline in living standards. And at the moment, it isn’t easy to find economic reasons to say that Erdogan’s stance allows for a bet on the rise of the lira.      
Markets Turn Cautious Ahead of Tomorrow's US CPI

Markets Turn Cautious Ahead of Tomorrow's US CPI

Marc Chandler Marc Chandler 09.12.2021 12:34
December 09, 2021  $USD, Brazil, Canada, China, Currency Movement, Germany, Japan, Portfolio flows, UK Overview: The euro has come back offered after its seemingly inexplicable advance yesterday.  The dollar is firmer against most major currencies today, with the yen an exception after JPY114.00 held on yesterday's advance.  Most emerging market currencies are also softer, with a handful of smaller Asian currencies proving a bit resilient.  Most large bourses advance in the Asia Pacific region, except Japan and Australia.  Europe's Stoxx 600 is steady after retreating late yesterday while US futures are pointing to a softer opening.  After rising for the past three sessions (~18 bp), the yield of the 10-year US Treasury is consolidating by hovering a little below 1.5%.  European yields are 3-5 bp softer.   Gold is little change.  This week's quiet tone contrasts with the sharp moves in Bitcoin and Ethereum.  Oil is consolidating after the three-day advance that lifted January WTI by around 8.5%.  US and European natural gas is also softer after the rally over the last few days.  Iron ore, which rallied over 10% in the first two sessions this week, edged lower yesterday and is off 3% today.  Copper's three-day rally is in jeopardy.   Asia Pacific The number of countries participating in a diplomatic boycott of the Beijing Winter Olympics is growing.  In addition to the US, Lithuania, Australia, New Zealand, Canada, and the UK have joined.  While it may annoy Chinese officials, it is symbolic.  Given Chinese quarantine protocols, many diplomats were not going to attend in the first place.  Also, the impact on China's human rights will likely be negligible.  The moral righteousness is signaling to domestic constituencies.  Yet, treatment of the Peng Shuai and the jailing of reporters needless antagonized the already precarious situation.  China's consumer inflation rose less than expected while producer prices rose more.  Owing to a jump in vegetable prices (30.6%), November CPI rose 2.3% from a year ago. The median forecast (Bloomberg survey) was for a 2.5% increase.  It is the fastest pace since August 2020. The decline in pork prices (-32.7% year-over-year) is slowing.  Excluding pork, the CPI would have risen by 3%.  Service prices remain soft.  Excluding food and energy, the core CPI is up 1.2% over the past year (1.3% previously).  Producer price inflation slowed from 13.5% in October to 12.9% in November.  Economists had forecast a 12.1% pace.  Recall officials moved to boost supplies, including coal, helping to ease the strong upside pressures.   Officials have moved to a more pro-growth stance, which means that inflation will not stand in the way of further easing monetary policy (via reserve requirements even if not interest rates) next year. Meanwhile, Evergrande and the Kaisa Group have formally missed debt-servicing payments on dollar obligations. Still, unlike the end of the property bubble in the US and Europe, China is forcing banks to continue to lend. This keeps the proverbial treadmill going.   The lending figures for November, released today, illustrate it.  New yuan loans, which track bank lending, rose by 50%+ to CNY1.27 trillion from CNY826 bln in October.  Aggregate financing, which adds shadow banking activity to bank lending, rose to CNY2.61 trillion from CNY1.59 trillion.  Note that just before publishing this report, the PBOC announced a two percentage point hike in the reserve requirement for foreign currency deposits.  This will likely weigh on the yuan, initially.    Japanese weekly portfolio flows were unusually large last week.  Data from the Ministry of Finance showed that Japanese investors were large sellers of foreign bonds for the second consecutive week.  The JPY1.18 trillion in sales followed the divestment of JPY1.34 trillion the previous week. It was the most selling in a two-week period since February.  From a high level, most of the selling last week did not require net yen buying as Japanese investors essentially shifted into foreign equities, snapping up JPY1.2 trillion.  This is the most since the time series began in 2005.  Separately, foreign investors bought JPY2.0 trillion of Japanese bonds, which appears to be the second-highest on record (after the JPY2.57 trillion bought in early July).   For the third consecutive week, foreign investors were small sellers of Japanese shares.  The dollar approached JPY114.00 yesterday and was turned back, falling to JPY113.35 today.  The JPY114 area is "defended" by a $2.2 bln option at JPY114.10 that expires today and a $1.15 bln option at JPY114.25 that expires tomorrow.  A break of JPY113.25-JPY113.35 could signal a test on JPY113.00, but the market will likely be cautious ahead of tomorrow's US CPI report.  The Australian dollar's recovery faltered earlier today slightly above $0.7185, the 20-day moving average, which it has not traded above since November 4.  The first retracement (38.2%) of this week's bounce is near $0.7115, but initial support is seen in the $0.7140 area.  The greenback edged slightly lower against the Chinese yuan (~CNY6.3430) before steadying and turning marginally higher.  It is caught between two large options expiring today.  One set is for around $2.5 bln at CNY6.34, and another set is for about $950 mln at CNY6.35.  The PBOC's reference rate for the dollar today (CNY6.3498) was the largest gap with the median projection (Bloomberg, CNY6.3467) since the middle of October.   Europe Germany's October trade figures are maybe too dated to have much market impact, but the growth of imports and exports is a constructive development.  The 4.1% rise in exports, the most since July 2020, were well above expectations, as was the 5% jump in imports (most since August 2020).  For Germany, it translates into a smaller than expected trade surplus (12.8 bln euros).  The monthly average surplus this year through October is 15.5 bln euros, which is a little above the average for the same period last year (14.4 bln euros), but off average in 2019 (through October) of 19 bln euros.   On the heels of "party-gate," UK Prime Minister Johnson has announced Plan B in the face of the new infection surge that calls for people to work from home again.  It has created much furor. Businesses have called for more government support, and unions want the furlough program to be re-instituted.  Any lingering ideas of a rate hike next week by the Bank of England have faded.  The short-sterling interest rate futures contract expiring shortly is implying the lowest yield (11 bp) in three months.   Short-covering appeared to lift the euro to $1.1355 yesterday, and it settled above its 20-day moving average for the first time since November 3.  However, this was not a harbinger of a breakout, and the euro's gains are being pared today. Initial support is seen around $1.13 and then $1.1275 area.  Sterling recorded new lows for the year yesterday slightly below $1.3165, the (38.2%) retracement of the rally since March 2020 low.  Today, it is in less than a quarter-cent range capped near $1.3215.  It is consolidating weakly.  There are options at $1.32 that expire today (~GBP370 mln) and tomorrow (GBP600 mln) that are likely neutralized.   America The US reports weekly initial jobless claims, wholesale trade and inventories, and Q3 household net worth. These are not market movers, especially today. Instead, investors' focus will likely be on equities as it waits for tomorrow's CPI.  US inflation is still accelerating, and the headline CPI is likely to move closer to 7%, setting the stage for a hawkish FOMC meeting next week.  An acceleration in tapering and more officials will likely see the need for more hikes.  Recall that in September, the last time officials updated their forecasts, half did not see a need to hike rates next year.  The market has done much of the heavy lifting for the Federal Reserve.  The implied yield of the December 2022 Fed funds futures contract has risen around 50 bp since the September FOMC meeting.  The Bank of Canada left policy on hold yesterday, as widely expected.  However, the market was disappointed that it did not upgrade its forward guidance to reflect the strong data.  The swaps market is pricing in five hikes over the next 12 months, and the central bank said nothing to encourage such an aggressive stance.  This leaves the Canadian dollar somewhat vulnerable, we think.   Brazil did not disappoint.  The central bank hiked the Selic rate by 150 bp for the second consecutive month and signaled another hike of the same magnitude in February when it meets again.  It has lifted the Selic rate by 750 bp this year.  It is being driven by rising inflation, and the economy contracted in Q2 and Q3.  The Selic rate stands at 9.25%.  The IPCA inflation measure is due tomorrow, and it is expected to have risen to 10.9% (Bloomberg survey) from 10.67% in October.   Peru is expected to hike its reference rate by 50 bp to 2.5%. It would be the third 50 bp in a row.   Its November CPI, reported at the start of the month, is slightly above 5.6%.   Mexico reports its November CPI figures today.  It is expected to rise from about 6.25% to 7.25% and set the stage for another 25 bp rate hike next week in the overnight rate to 5.25%.   The US dollar is trading firmly against the Canadian dollar, and the heavier equities may be helping it.  While initial resistance is seen near CAD1.2700, we suspect there is scope toward CAD1.2730-CAD1.2750.  The greenback fell to almost MXN20.8860 yesterday, its lowest level since November 23, and the five-day moving average crossed below the 20-day moving average for the first time since early last month.  The move appears to have exhausted itself, but the dollar needs to resurface above the MXN21.05 area to boost confidence that a low is in place.  Disclaimer
Gold Stuck Between High Inflation and Strong Dollar

Gold Stuck Between High Inflation and Strong Dollar

Arkadiusz Sieron Arkadiusz Sieron 09.12.2021 16:46
  Inflation supports gold, the expected Fed’s reaction to price pressure – not. Since gold ended November with a small gain, what will December bring? I have good and bad news. The good is that the price of gold rose 2% in November. The bad –is that the price of gold rose 2% in November. It depends on the perspective we adopt. Given all the hawkish signals sent by the Fed and all the talk about tapering of quantitative easing and the upcoming tightening cycle, even a small increase is an admirable achievement. However, if we focus on the fact that US consumer inflation rose in October to its highest level in 30 years, and that real interest rates have stayed deeply in negative territory, gold’s inability to move and stay above $1,800 looks discouraging. We can also look at it differently. The good news would be that gold jumped to $1,865 in mid-November. The bad news, on the other hand, would be that this rally was short-lived with gold prices returning to their trading range of $1,750-$1,800 in the second half of the month, as the chart below shows. Now, according to the newest WGC’s Gold Market Commentary, gold’s performance in November resulted from the fact that higher inflation expectations were offset by a stronger dollar and rising bond yields that followed Powell’s nomination for the Fed Chair for the second term. Indeed, as you can see in the chart below, the greenback strengthened significantly in November, and real interest rates rallied for a while. Given the scale of the upward move in the dollar, and that it was combined with a surge in yields, gold’s performance last month indicates strength rather than weakness. As the WGC notes, “dollar strength was a headwind in November, acting as a drag on gold’s performance, but not enough to outweigh inflation concerns.”   Implications for Gold Great, but what’s next for the gold market in December and 2022? Well, that’s a good question. The WGC points out that “gold remains heavily influenced by investors’ continued focus on the path of inflation (…) and the Fed’s and other central banks’ potential reaction to it.” I agree. Inflation worries increase demand for gold as an inflation hedge, supporting gold, but they also create expectations for a more hawkish Fed, hitting the yellow metal. It seems that the upcoming days will be crucial for gold. Tomorrow (December 10, 2021), we will get to know CPI data for November. And on Wednesday (December 15, 2021), the FOMC will release its statement on monetary policy and updated dot plot. My bet is that inflation will stay elevated or that it could actually intensify further. In any case, the persistence of high inflation could trigger some worries and boost the safe-haven demand for gold. However, I’m afraid that gold bulls’ joy would be – to use a trendy word – transitory. The December FOMC meeting will probably be hawkish and will send gold prices down. Given the persistence of inflation, the Fed is likely to turn more hawkish and accelerate the pace of tapering. Of course, if the Fed surprises us on a dovish side, gold should shine. What’s more, the hawkish tone is widely expected, so it might be the case that all the nasty implications are already priced in. We might see a “sell the rumor, buy the fact” scenario, but I’m not so sure about it. The few last dot-plots surprised the markets on a hawkish side, pushing gold prices down. I’m afraid that this is what will happen again. Next week, the Fed could open the door to earlier rate hikes than previously projected. Hence, bond yields could surge again, making gold move in the opposite direction. You’ve been warned! If you enjoyed today’s free gold report, we invite you to check out our premium services. We provide much more detailed fundamental analyses of the gold market in our monthly Gold Market Overview reports and we provide daily Gold & Silver Trading Alerts with clear buy and sell signals. In order to enjoy our gold analyses in their full scope, we invite you to subscribe today. If you’re not ready to subscribe yet though and are not on our gold mailing list yet, we urge you to sign up. It’s free and if you don’t like it, you can easily unsubscribe. Sign up today! Arkadiusz Sieron, PhDSunshine Profits: Effective Investment through Diligence & Care
Catching More Than a Decent Bid

Catching More Than a Decent Bid

Monica Kingsley Monica Kingsley 10.12.2021 15:48
S&P 500 predictably relented, but the resilience of value provides a glimmer of hope. Quite a solid one as the HYG spurt to the downside didn‘t inspire a broader selloff, including in tech. Yesterday was your regular wait-and-see session of prepositioning to today‘s CPI data. This not exactly a leading indicator of inflation clearly hasn‘t peaked, and inflation around the world either. The difference between the U.S. with eurozone, and the rest of the world, is that many other central banks are already on a tightening path.I count on such a CPI reading that wouldn‘t cause a rush to the exit door and liquidation in fears of Fed going even more hawkish (in rhetoric, it must be said). My series of pre-CPI release tweets have worked out to the letter – and now, it‘s back to the inflation trades.I already told you in yesterday‘s report:(…) A reasonably hot inflation figure is expected tomorrow – inflation expectations have risen already yesterday. The fears are that a higher than what used to be called transitory figure, would cut into profit margins and send value lower. Even if inflation (which certainly hasn‘t peaked yet as I‘m on the record for having said already) isn‘t yet strong enough to sink stocks, the Fed‘s reaction to it is. The dynamic of tapering response messing up with the economy would take months to play out – so, the bumpy ride ahead can continue. If only the yield curve stopped from getting ever more inverted...Markets keep chugging along for the time being, and the warning signs to watch for talked in Monday‘s extensive analysis, aren‘t flashing red.The pieces of the stock market and commodities rally continuation are in place, and the same goes for precious metals reversing the prior cautious stance. Even cryptos are warming up to the data release.Looking further ahead in time to 2022, I can‘t understate the bright prospects of agrifoods (DBA) – and it‘s in no way just about the turmoil in fertilizer land.Let‘s move right into the charts (all courtesy of www.stockcharts.com).S&P 500 and Nasdaq OutlookS&P 500 downswing looks ready to be reversed soon – in spite of the drying up volume which often accompanies bull markets. The daily indicators remain positioned favorably to the bulls.Credit MarketsHYG weakness looks somewhat overdone to me – the prior upswing is still getting the benefit of my doubt. The coming sessions just shouldn‘t bring a steep HYG decline in my view.Gold, Silver and MinersPrecious metals are still basing, and I‘m looking for the hesitation to be reversed to the upside. Just see the tough headwinds in comparing silver being almost at its Sep lows while gold is trading much higher. Once the inflation narratives get a renewed boost, silver would play catch up.Crude OilCrude oil upswing is running into predictable headwinds, but I‘m looking at the next attempt at $72 to succeed, and for $74 to be broken to the upside later on.CopperCopper is still lukewarm, and waiting for the broader commodity fires to reignite. The red metal isn‘t in an anticipatory, frontrunning mood – its prolonged consolidation means though it‘s prefectly prepared to rise decisively again.Bitcoin and EthereumBitcoin and Ethereum are finding buying interest, but the Ethereum underperformance has me still cautious after taking sizable ETH profits off the table yesterday.SummaryS&P 500 rally is likely to continue today, and the same goes for risk-on and real assets. The Fed evidently won‘t be forced into a more hawkish position in Dec, and the markets are starting to celebrate. Silently celebrate as it‘s not about fireworks, but a reasonable and well bid advance across the board. I hope you‘re likewise positioned!Thank you for having read today‘s free analysis, which is available in full at my homesite. There, you can subscribe to the free Monica‘s Insider Club, which features real-time trade calls and intraday updates for all the five publications: Stock Trading Signals, Gold Trading Signals, Oil Trading Signals, Copper Trading Signals and Bitcoin Trading Signals.
Silver is moving up

Silver is moving up

Korbinian Koller Korbinian Koller 11.12.2021 10:45
So, what are the facts: Monthly chart, Silver in US-Dollar, probabilities: Silver in US-Dollar, monthly chart as of December 10th, 2021. In 2020, silver broke a multiyear sideways range and moved strongly up. It has now consolidated for over a year in a sideways range again. This is a bullish setup! As much as emotions might be weary, from a probability perspective, a general rule is that the longer a congestion is from a time perspective, the more significant will be the subsequent breakout from that range. Statistical probabilities are also clearly pointing to the upside rather than returning into the prior range. Not to forget, buying near the lows of such a range box guarantees the lowest entry risk and highest risk/reward-ratio play to be taken for the long side, even if emotions might tell you otherwise. 2021 silver trades performance: 2021 silver trades performance. Another fact is that one does not need to know when and if a breakout is happening to extract money from the markets consistently. The above chart is this year’s silver trades that we posted in real-time in our free Telegram channel. The systematic approach focuses on low-risk entry points with a risk reduction method through our quad exit strategy. Sideways markets provide an income-producing aspect of one’s trading, and a possible breakout of a range would give a significant bonus. An approach like this keeps emotions in check since one’s labor gets rewarded and allows for significantly higher rewards once ranges do break. Silver in US-Dollar, quarterly chart, silver is moving up: Silver in US-Dollar, quarterly chart as of December 10th, 2021. In short, while waiting is strenuous, and one might feel doubtful, from a probability perspective, silver is an even likelier success story now than it has been six months or a year ago. What should also not be underestimated is the fundamental situation of this wealth preservation play. The extensions of governments playing the inflation game to such length are like adding fuel to the silver play. Widespread problems that are the pillars to this insurance play have, if anything, increased. Consequently, supporting a good likelihood that silver prices go up. When? Well, that is hard to say since no one knows the future, but maybe this question gets proportionally in weight too much attention since insurance isn’t just bought for the next storm to come but in principle acquired to make one feel good and to protect one’s wealth long term. The quarterly chart above shows how silvers inherent volatility can sustain, in times of market turmoil, extended phases of extreme standard deviation levels. Price moves far away from the mean (red line). We are trading near the mean as of now, and the very right green line is a projection of a possible price move up.   S&P 500 in US-Dollar, quarterly chart, Quod erat demonstrandum: S&P 500 in US-Dollar, quarterly chart as of December 10th, 2021. Still, some doubt left? Have a look at the above S&P500 chart, representing the broad market. Does that look like a healthy chart? Baby boomers and general stock-market participants might be in for a rude awakening once they realize how little their fiat currency is still worth when they cash in those stock portfolio investments. Just compare your total living cost from 2020 with 2021. All positions from food to health insurance, from car gas to electricity bills. Calculate the percentage difference from those two numbers and add this percentage to the average acquisition cost of your physical silver, and you have the real value of your silver already now. How does homelessness double to a half million people per day sleeping roofless factor in? Does this chart represent great times when we face supply chain disruptions? Or is it all smoke and mirrors, and once the music stops, there will be countless chairs missing for everyone to sit down? Silver is moving up: The essential principle in play is that markets are counterintuitive. Meaning your feelings might have switched from enthusiasm to uncertainty, even frustration, but probability facts are in direct opposition to one’s feelings. This principle is the underlying reason why moves out of extended congestion zones can result in substantial moves. Once emotionally weak hands are washed out, these breakouts come from an emotional perspective surprising. Bears step aside and bulls chase prices. Feel free to join us in our free Telegram channel for daily real time data and a great community. If you like to get regular updates on our gold model, precious metals and cryptocurrencies you can also subscribe to our free newsletter. This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision. The views, thoughts and opinions expressed here are the author’s alone. They do not necessarily reflect or represent the views and opinions of Midas Touch Consulting.
Omicron, USDJPY, Gold, DXY highlighted in this Luke Suddards' piece

Omicron, USDJPY, Gold, DXY highlighted in this Luke Suddards' piece

Luke Suddards Luke Suddards 10.12.2021 15:15
Pfizer and BioNTech released the results of their recent laboratory study which found that their vaccine’s antibody response is capable of neutralizing omicron (levels similar to 2 doses against previous strains) after three doses. There was a more than 25-fold reduction in the efficacy of the vaccine however, showing the 32 mutations in omicron does certainly have an impact. The vaccine induced T cells are not affected by omicron and should therefore still provide protection from severe symptoms. To finish off a Japanese study showed that omicron was 4.2 times more transmissible than delta in its early stage. We know that omicron was far more transmissible already so this isn’t a major shock, however, the issue with higher transmissibility is the opportunity for further new variants to arise which (hopefully) will not increase in lethality. Dollar Index (DXY): The greenback is basically flat from where it started the week as traders remain hesitant to push price in a new direction until today’s CPI result is out the way. Omicron news as mentioned above has been on the positive side so risk-off flows derived from that side of things has been non-existent. However, where we could see more safe haven bids for the dollar is from any escalation in the Russia Ukraine tensions, with an invasion very likely seeing risk-off ensconcing markets. This would clearly benefit the dollar on the lhs of the smile (risk-off). Data wise, job numbers filled the rather quiet calendar throughout the week with vacancies reaching new records as well as jobless claims breaching the 200k mark, coming in at 184k. We also had bond auctions coming to the fore, beginning with the front end of the curve, 3-year auctions showed strong demand despite today’s inflation numbers; moving to the back end of the curve the 10-year also showed relatively robust demand. It was the 30-year bond which was very weak with yields spiking higher leading to fears over today’s inflation numbers being the main driver. Inflation numbers were smack bang in line with consensus at 6.8% YoY (highest since 1982) and 4.9% YoY for core. The initial market reaction saw the dollar softer as short term rates fell (clearly the market was positioned for 7%), but that initial dollar weakness is now being retraced as it's still a solid number (Fed won't change path) with prices increases broad based.  Next week the focus will be on the Fed meeting where the risks are definitely tilted towards the hawkish side for the dollar. (Source: TradingView - Past performance is not indicative of future performance.) The dollar is ever so slightly above its upper trend line and the 21-day EMA has provided good dynamic support. The RSI has bounced off the 55 support level too keeping the uptrend momentum in tact. There is some resistance at 96.5 to monitor and on the downside the 21-day EMA would be important to watch if price slides. EURUSD: The euro continues to tread water as it faces headwinds on multiple fronts. The week began with fairly positive ZEW sentiment reading with current conditions missing (expected with covid restrictions), but the main index reading more positive than expected. Olaf Scholz has now been inducted as Chancellor of Germany with the end of Merkel’s reign officially coming to an end. European gas has been soaring again as tensions between Russia and US led to reports than Biden could implement sanctions on Russia. Europe is highly exposed to the price of natural gas so this could be one to watch for sure. Next week sees a very important ECB meeting with a fresh set of economic projections out (I’ll be watching their inflation forecasts particularly) as well as insights into how they’ll navigate the completion of their PEPP programme and transition. I’ll be providing a preview next week.  (Source: TradingView - Past performance is not indicative of future performance.) EURUSD moves sideways with a slight tilt towards the downside capped by the overhead 21-day EMA. 1.135 resistance has formed as the one to watch. The price support at 1.125 should be on your radar too. The RSI has rolled over a touch and pointing lower. The former low around the lower trend line at 1.12 could be very important over the next week. GBPUSD: Sterling has been under pressure as multiple factors line up against it. The week began with centrist Ben Broadbent’s speech which didn’t drop any hints on what the BoE may do at their December meeting. UK GDP data was disappointing with missed expectations on a monthly time frame as well as YoY and 3-month average. Plan B restrictions have now been implemented - guidance to work from home from Monday, and an extension of face masks to most public indoor venues (public transport etc). Mandatory Covid-19 passes will now be needed for entry to places such as nightclubs and venues with large crowds. With Plan B restrictions and softer GDP data, markets are all but certain a BoE hike will not happen at next week’s meeting, opting to rather wait until February for a move. I’ll be providing a preview for this event, but we shouldn’t be getting any curve balls as expectations are widely baked in for no hike, leading to very muted reactions in GBP crosses if any. UK opinion polls have moved against Boris Johnson after the uproar caused by allegations of his rule breaking Christmas party. Labour is now ahead in a variety of polls, which hasn’t occurred for a long time. If the fallout continues the Conservative MPs may decide to trigger a vote of no confidence in him which may inject some political instability. Article 16 could be used as a deflection and distraction tactic to turn the spotlight away from himself. (Source: TradingView - Past performance is not indicative of future performance.) GBPUSD looks technically weak as it trades below the lower trend line of its descending channel. The RSI hovers just above oversold. 1.315 on the downside would be key for a move lower while 1.32.5 - 1.33 on the upside just below the 21-day EMA would be key. USDJPY: The yen continues to come under pressure as the US 10-year yield moves higher and risk sentiment leans on the positive side, reducing the need for risk-off hedges. Tensions over Russian invading Ukraine will need to be monitored though as this could see flows directed towards the yen. (Source: TradingView - Past performance is not indicative of future performance.) USDJPY continues to be bid around its 38.2% Fibonacci level and mini range support around 113.5. The 50-day SMA and 21-day EMA are bunched up right together on the price candles. The RSI edges above the 46 level of support. Targets wise, on the upside 114-114.5 will remain key while on the downside 112.5 will be important to watch. Gold: Omicron variant positive news flow is taking the allure away from gold for safe haven flows, however, rising tensions between the US and Russia is helping to offset that. Real yields have also been rising higher of late which will pressure gold as well as a stronger dollar. Gold is a tad stronger on the inflation release as traders had most likely positioned for a 7% print and this not being the case has led to some bids flowing through.  (Source: TradingView - Past performance is not indicative of future performance.) Gold remains trapped in a tight range with today's inflation data a potential catalyst for a more directional move. Price is now just above the $1775 support level. The RSI has turned back upwards, but remains in no-man's land. The important level on the upside will be $1800 just above all the key moving averages. Oil: Oil certainly saw some new hot money coming back in to drive the recent recovery up from the $68 support area. Beginning the week we saw Saudi Arabia decided to hike their selling price to Asia and the US, indicating that they believe demand will remain robust despite omicron restriction fears. So far omicron news has been positive enough not to lead to expectations of serious demand destruction. Plan B work from home guidance has probably led to some slight weakness in crude, but we’ll need to watch what airlines decided to do in the next few weeks for jet fuel demand. Official US inventory data showed a modest reduction in inventory levels, but nothing to get excited about. Iranian talks are continuing ahead with nothing of anything major to report back on (Source: TradingView - Past performance is not indicative of future performance.) Oil now between its 200-day SMA and the 21-day EMA, is looking for its next direction. Support comes in around $73.50 with the 200-dauy SMA just below there. On the upside $76 provides resistance aided by the 21-day EMA. The RSI, has turned upwards and will need to continue in that direction for bulls to be satisfied.
Can Dollar Bears Resist the Fed? Can Yuan Bulls Shrug-Off the PBOC?

Can Dollar Bears Resist the Fed? Can Yuan Bulls Shrug-Off the PBOC?

Marc Chandler Marc Chandler 13.12.2021 10:56
December 12, 2021  $USD US yields and the dollar softened after the release of the November CPI figures before the weekend.  The data were in line with expectations showing the headline rate accelerated to 6.8% and the core rate to 4.9%.  The price action likely reflected positioning rather than a reassessment of the outlook for next week's FOMC meeting.  Nearly everyone recognizes the likelihood that the pace of tapering is quickened, and the individual forecasts reflect a more aggressive tightening path than anticipated in September.  With the diverging monetary policy impulses are evident in the shifting two-year interest rate differentials in the US favor, it is increasingly expensive to resist a stronger greenback.  A critical part of the backdrop is that market participants feel more comfortable that the Omicron variant may not be as disruptive as feared in Europe and the US (where the current surge is notable in its own right). As a result, those major currencies that tend to do well when risk appetites are strong, namely the dollar bloc and Scandis, are outperforming.  At the same time, the traditional funding currencies, the yen, and Swiss franc, were out of favor.  The euro falls in the latter camp.  A return to working from home, the evaporation of speculation that the BOE would raise rates in the week ahead, and a disappointing October GDP report pinned sterling in its trough.   It is difficult to see the market getting significantly more aggressive about the next year's outlook for the Fed.  The futures market is pricing in two hikes entirely and around two-thirds of a third hike.  A similar logic has turned us more cautious about the Canadian dollar.  There the market has discounted 125 bp of hikes over the next 12-months, which seems too aggressive.   Dollar Index:  The Dollar Index has been moving broadly sideways, though it rose for the seventh consecutive week.  For the first eight sessions of December, it has traded within the range set on November 30 (~95.50-96.65).   The momentum indicators have trended lower but appear to be stabilizing near mid-range.  The next big target is slightly below 97.75, which is the high from June-July 2020, and the (61.8%) retracement target of the decline since the March 2020 high near 103.00.   Euro:  The single currency briefly traded below the November 30 low (~$1.1235) last Tuesday before short-covering lifted it to the week's high ($1.1355) the following day.  It finished the week on a firm note after wobbling initially after the US CPI report.  With a brief exception, the euro has chopped between $1.12 and $1.14 since mid-November.   The broad sideways movement has seen the momentum indicators correct from over-extended territory.  Since November 10, when the US reported the jump in CPI to 6.2%, the US 2-year premium over Germany rose by roughly 18 bp to 1.40%,  to set the year's high.  It stalled.  The consolidative phase may continue ahead of the FOMC meeting.  Given what the market is pricing in, it may be difficult for the Fed to get ahead of market expectations for next year when it meets on December 15.   Japanese Yen: After testing support near JPY112.55 to start last week, the dollar recovered to almost JPY114.00 in the middle of the week before moving sideways.  It continued to track the movement of US 10-year yields.  As yields rose in the first part of the week, the dollar traded higher against the yen, and when yields slipped min the second half of the week, so did the greenback.  The MACD has flatlined, while the Slow Stochastic is trending higher.  A break of JPY113.00 retargets the lows.  On the topside, the JPY114.00-JPY114.30 area offers nearby resistance. British Pound:  Little is going sterling way.  Support for the Prime Minister has fallen, and polls show Labour opening its largest lead in years.  It has opted for "Plan B," with people returning to working from home, though no new government support was offered.  The economic growth slowed more than expected in October, which was before the Covid wave intensified and the Omicron variant was detected.  The rate hike that looked so likely in November now seems off the table until at least February.  Meanwhile, the fishing row and the attempt to change the Northern Ireland Agreement remain unresolved but causing enough consternation to deter the US from lifting the steel and aluminum tariffs that Trump imposed, let alone discussing a free-trade agreement.  Sterling made a marginal new low for the year last week (slightly below $1.3165, which met the (38.2%) retracement objective of the rally from the March 2020 low.  The next retracement (50%) is around $1.2830.  The momentum indicators are not generating a strong signal presently.  It finished last week on a firm note but a move above $1.3300-$1.13350 is needed to signal anything important.   Canadian Dollar:  The Canadian dollar's recovery fizzled after the central bank failed to provide fresh encouragement to the market, with 125 bp of hikes priced into the swaps market over the next 12 months.  The US dollar, which had rallied and closed above CAD1.28 on December 3 despite the diverging jobs reports, fell nearly CAD1.26 before catching a good bid.  Ahead of the weekend, it had recovered to the middle of the week's range (~CAD1.2730).  A move above the CAD1.2760 area could signal another run at the highs. The MACD pulled back, but it looks like it may try turning higher, while the Slow Stochastic is still falling.  The five-day moving average is set to slip below the 20-day moving average for the first time in a month.  Canada reports November CPI figures on December 15, and the year-over-year pace is set to accelerate from the 4.7% 12-month clip seen in October.  Inflation is also likely rising even faster this month.   Australian Dollar: The Australian dollar rose almost 2.5% last week to end a five-week slide that shook a nickel from it.  The Aussie recovered from the year's low slightly below $0.7000 (December 3), the measuring objective of the potential head and shoulder pattern traced out in H1 21. However, the recovery stalled shy of $0.7190.  The initial retracement of the leg lower that began in late October was closer to $0.7210. Still, the anticipation of a strong employment report (December 15) could help underpin the Aussie.  Provided it holds above the $0.7120 area, the Australian dollar can work its way higher.  The MACD and Slow Stochastic are trending higher.   Mexican Peso: While the Australian dollar was the strongest of the major currencies, the Mexican peso led the emerging market currencies a nearly 2% gain.  Last week, Latam provided three of the four strongest emerging market currencies (Colombian peso +1.25%) and the Brazilian real (0.95%).  The Thai baht was in third place with a 1.25% gain.  Banixco meets on December 16.  It is widely expected to hike by another 25 bp.  The central bank of Chile meets on December 14 and is expected to hike 125 bp to 4.0%.  The last move in October was also for 125 bp.    The Colombian central bank meets on December 17.  Most anticipate a 50 bp hike to 3.0% after initiating the tightening cycle with a 75 bp move in October.  Mexico's central bank appears to be a laggard in this cycle, but the peso's 4.5% loss this year makes it the top performer in the region.  The US dollar fell to a new three-week low slightly below MXN20.85 before the weekend.  The momentum indicators are trending lower, and the five-day moving average crossed below the 20-day for the first time since mid-November.  Initial support is seen in the MXBN20.70-MXN20.75 band. Chinese Yuan:  Chinese officials have delivered verbal warnings and cautioned banks and businesses to adopt good foreign exchange hedging practices and avoid a one-way market.  It signaled displeasure as the yuan rose to new three-year highs against the dollar by setting the daily reference rate.  It cut reserve requirements ahead of the expected FOMC decision next week to accelerate its tapering and bring forward its first rate hike.  The PBOC also raised the reserve requirement for foreign currency deposits.  Yet, the yuan rose in all but one session last week and eked a small gain on the week.  This month, the dollar's high was set ahead of the weekend near CNY6.3835,  but the positive greenback momentum was not sustained.  The dollar finished around CNY6.3700.  In the grand scheme of things, these are small moves, yet this is where the lines are being drawn.  Some observers have argued that state-owned banks in China have operated on behalf of the central bank (stealth intervention).  If this is true,  one must ask what happened to them now or why is that channel not working?  Still, with policy divergence on the PBOC's side, the risk-reward does not seem to favor fighting it now.  If the PBOC wants to drive home its message, the dollar needs to rise above CNY6.40.  Portfolio inflows and the large trade surplus need to be offset by increased capital outflows if officials want to remove the upside pressure on the currency.  That said, if there is an escalation ladder here, officials dominate nearly every rung.  In the long game, officials cannot be seen as losing, and if the carrots do not work, the will appears to be there to use the stick.   Disclaimer
Dollar Starts the Week Bid ahead of the FOMC

Dollar Starts the Week Bid ahead of the FOMC

Marc Chandler Marc Chandler 13.12.2021 13:44
December 13, 2021  $USD, Australia, Canada, China, Currency Movement, FOMC, Japan, Mexico, South Korea, Switzerland, Turkey, UK   Overview: Equities, bonds, and the dollar begin the new week on a firm note.  Japanese, Chinese, Australian, and New Zealand equities advanced in the Asia Pacific region.  Europe's Stoxx 600 is snapping a three-day decline, and US futures are 0.25%-0.35% higher.  The US 10-year yield is a little softer at 1.48%. European benchmark yields are mostly 1-2 bp lower, and near 0.71%, the UK Gilt's yield is at a three-month low.  The dollar is rising against all the major currencies and is 0.3%-0.45% higher against most.  The Canadian dollar and sterling are the most resilient.  Among emerging market currencies, the Chinese yuan continues to defy official signals to eke out a small gain.  The Turkish lira is off more than 2%, after having dropped 4% initially. Intervention at the end of last week failed to have a lasting impact, and the central bank is expected to cut rates again later this week.  The JP Morgan Emerging Market Currency Index is giving back last week's 0.2% gain plus more today.  It was the first weekly gain in five weeks.  Gold is quiet in the upper end of the pre-weekend range, holding above $1780.  January WTI is firm but capped near the 20-day moving average (~$72.80).  US natgas is firm after falling 5% last week.  Dutch gas is up 8% to new two-month highs.  It has a six-week rally in tow, during which time it has gained a little more than 60%.  Industrial metals are higher too.  Iron ore snapped a three-day air pocket and gained it all back and more with its 6.5% rally today.  Copper has steadied after falling almost 2.5% in the last two sessions.   Asia Pacific The results of Japan's Tankan survey were in line with the talk we have picked up that while the new government, vaccination efforts, and fiscal stimulus are helping fuel the economic recovery, businesses are not yet convinced that significant change is taking place.  Sentiment among large manufacturers was steady at 18, and the outlook ticked lower.  The improvement in sentiment among the large non-manufacturers was more pronounced (9 vs. 2). However, the outlook was subdued at 8 (from 3).  Capex plans from the large businesses were softer than expected at 9.3% (from 10.1%).  Sentiment among the small companies improved, but the diffusion index and the outlook remained negative.  South Korea reported strong traded numbers for the first ten days of December (exports 20.4% and imports 42.3% year-over-year).  Seoul was busy.  Its foreign minister met with high Japanese counterpart on the sidelines of the G7 meeting and struck a cooperative tone. South Korea's President Moon met with Australia's Prime Minister Morrison and struck a A$1 bln weapon deal for self-propelled howitzers (which have already been purchased by other countries, including India and Turkey).  South Korea, however, will not be participating in the diplomatic boycott of the Winter Olympics, citing the need for Beijing's cooperation to denuclearize the peninsula.   The US dollar remains within its recent range against the Japanese yen (~JPY113.20-JPY113.95).  The 20-day moving average is at the top of the range, and it has not traded above it this month yet.  An option for almost $400 mln at JPY114.00 expires today.  It is the fifth session that the dollar has not traded below JPY113.20.  The Australian dollar's rally stalled near $0.7185 last week and is testing the lower end of its three-day range (~$0.7130) in the European morning.  Support is seen in the $0.7090-$0.7115 area.  The highlight of the week is the November jobs report, which is expected to show a strong bounce after three months of Covid-related declines.  More problems among China's property developers and activity in the manufacturing hub in Zhejiang were suspended due to an outbreak of the virus that failed to trigger a retreat in the yuan.  The dollar spent most of the local session below the pre-weekend low (~CNY6.3615).  The PBOC set the dollar's reference rate at CNY6.3669.  The market (Bloomberg survey) expected CNY6.3649.   Europe The UK appeared to make two concessions over the weekend.  First, it signaled that it was no longer seeking to exclude a role for the European Court of Justice in enforcing the Northern Ireland protocol.  Second, new fishing licenses were made available to the EU and French fishers. Jersey and the UK issued another 23 licenses, and although Paris was seeking more, it seemed sufficient to de-escalate the situation.   The UK government is under pressure from many sides.  The "partygate" scandal is a culmination of miscues by the Prime Minister, who has struggled with a Peppa Pig speech and a Kermit the Frog speech at the UN.  Several petty sleaze scandals have also marred the government.  Recent polls put Labour ahead of the Conservatives. This Thursday, the special election could see the Tories defeated in a traditional stronghold (ie Lib-Dems a protest vote for disenchanted Tories?).  The UK's stance toward the EU and the risk to the Good Friday Agreement have estranged the US government to some extent, which has not lifted Trump's steel and aluminum tariffs and put much energy into a free-trade agreement between the two special allies.   Turkey reported a large than expected October current account surplus ($3.16 bln) current account surplus.  While the currency's sharp depreciation would be expected to help the trade account, it also scares international investors.  It reported a net outflow of $2.2 bln portfolio capital in October.  Industrial output surprised on the upside in October, rising by 0.6%.  Economists (Bloomberg survey) expected a 0.1% decline after a 1.5% fall in September.  Turkey appeared to intervene in the foreign exchange market at the end of last week.  The dollar held below TRY14 but jumped to almost TRY14.76 today before pulling back.  The Swiss National Bank also looks like it intervened last week.  The euro held above CHF1.04 after having been sold to about CHF1.0375 earlier this month, its lowest level since July 2015.  Swiss domestic sight deposits rose by CHF1.12 bln, the biggest increase in three weeks.  Note that after buying euros against the franc, the SNB is believed to sell euros for dollars to maintain the allocation of its reserves.  The euro peaked last week near $1.1355.  It has been sold to a four-day low of $1.1260 today.    There is an option for 1.44 bln euros at $1.1250 that expires today.  The low for the year was set on November 24 near $1.1185, while last week's low was slightly below $1.1230.  With diverging impulses expected from the Fed and ECB this week, the euro looks vulnerable.  Sterling closed on its highs before the weekend and is on the defensive today.  The market appears to be absorbing bids that might be related to the expiration of a couple of options today (~GBP500 mln at $1.3235 and ~GBP560 mln at $1.3200).  The low for the year was set last week (December 8) near $1.3165, but initial support today is around $1.3220.  The odds of a BOE rate hike later this week have fallen to less than a 1 in 5 chance.   America The highlight of the week is the FOMC meeting.  Nearly everyone expects the Fed to accelerate its tapering and for individual forecasts to shift, matching the more hawkish rhetoric seen since the October CPI print jumped above 6% (November 10).  November's CPI, reported at the end of last week, accelerated to 6.8%.  Before we get to the FOMC meeting, though, this US reports PPI (the heading is expected to accelerate above 9% and the core above 7%) and November retail sales (a solid gain is anticipated of around 0.8% but off the heady 1.7% pace seen in October).  After the mid-week FOMC meeting conclusion, the US reports November housing starts, industrial production, and the Philly Fed's December survey.  The preliminary December PMI estimates are also due Thursday.  The week's data highlight for Canada is the mid-week estimate of November CPI.  Prices may have edged up by 0.2% on the month, but the year-over-year rate is expected to be little changed from the 4.7% pace seen in October.  The underlying measures may have edged up a little.  Price pressures are elevated but do not appear to be accelerating, as seen in the US.  Tomorrow, the new central bank mandate will be announced.  The mandate is reviewed every five years.  The press reports that the 2% inflation target will be retained, but the mandate may include a component of the labor market as it takes what is expected to be a small step toward a dual mandate like the Fed's.   Mexico's central bank meets on Thursday.  It is widely expected to lift the overnight rate target by 25 bp to 5.25%. In Bloomberg's survey of  17 economists, three forecast a 50 bp hike.  It would be the fourth hike in the cycle that began in August.  Chile and Colombia's central banks also are expected to hike rates this week.  Chile, which hiked by 125 bp in October after a 75 bp increase in August, is expected to make another 125 bp adjustment tomorrow.  It would lift the policy rate to 4%. It holds the second round of its presidential election on December 19.  Colombia's central bank meets on December 17.  A 50 bp increase would lift the repo rate to 3.0%.  The first increase in the cycle was 75 bp in October (to 2.5%).  November's CPI was a little above 5.25%.   The US dollar is rising against the Canadian dollar for the fourth consecutive session.  It is poking above CAD1.2750 in the European morning, where an option for almost $450 mln expires today (and another for $515 mln expires tomorrow).  A convincing move above CAD1.2760 could retarget the month's high (~CAD1.2855).  The market has 125 bp of hikes discounted over the next 12 months, but little new encouragement from the central bank.  The greenback fell against the peso in four of last week's five sessions.  It is little changed today, trading above the pre-weekend low (~MXN20.8430).  The next support area is seen closer to MXN20.70.  Still, the market is likely to be cautious extending short US dollar positions ahead of the Fed.   Disclaimer
Market Quick Take - December 14, 2021

Market Quick Take - December 14, 2021

Saxo Strategy Team Saxo Strategy Team 14.12.2021 11:57
Macro 2021-12-14 08:35 6 minutes to read Summary:  Risk sentiment soured yesterday, with some attributing the market nervousness to uncertainty on how hawkish a pivot the Fed is set to make at the FOMC tomorrow, although Fed rate expectations for next year as expressed in the most liquid futures have eased from recent highs. That meeting is the most significant major macro event risk for the 2021 calendar year, although important ECB and BoE meetings are set for Thursday. What is our trading focus? Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) - yesterday was a very disappointing session for US technology stocks with Nasdaq 100 futures looking to push higher early during the session but ended on the lowest close in four trading sessions. Nasdaq 100 futures are trading around the 16,110 level this morning with the 50-day average around the 15,810 level as the key support level to watch on the downside should risk-off continue. EURUSD – the EURUSD supermajor continues to coil in a tight range ahead of the FOMC meeting tomorrow and ECB meeting on Thursday, both of which are set to bring refreshed forecasts for the economy and policy. The FOMC meeting is likely to carry more weight in terms of the market reaction, especially if the Fed waxes more hawkish than expected (more below) and takes Fed rate expectations for next year to new highs for the cycle. The lines in the sand on the chart include the 1.1186 lows of November, while the recent pivot highs of 1.1355 and 1.1384 bar the upside, with 1.1500 a more structural resistance/pivot zone. AUDUSD – watching the US dollar closely over the next couple of sessions, particularly in the wake of tomorrow’s FOMC meeting and what it brings in the way of a crystallization of the Fed’s hawkish shift (more below) and in the market reaction. If the meeting brings a spike in market volatility, traditionally risk-correlated currencies like the Aussie could show high beta to swings in the US dollar in either direction (I.e., if the Fed waxes more hawkish than expected and this triggers risk-off and a stronger USD). AUDUSD recently broke down through the prior 2021 lows near 0.7100 and tested the huge 0.7000 level before staging a sharp bounce. That 0.7000 level could serve as a kind of “bull-bear” line from here. Crude oil (OILUKFEB22 & OILUSJAN22) has settled into a relatively narrow range with Brent finding resistance at $76, the 21-day moving average while support remains the 200-day moving average at $73.15. OPEC in its monthly oil market report maintained their 4.2 million barrels per day demand growth outlook for 2022 with current omicron-related weakness being offset by a strong recovery during Q1. The Saudi energy minister said the energy transition will cause an oil-price spike later this decade while also warning traders against shorting the market at a time where large speculators have reduced their Brent crude oil long to a 13-month low. On tap today we have IEA’s Monthly Oil Market Report. Gold (XAUUSD) remains stuck just below its 200-day moving average at $1794 with focus on what 20 central bank meetings this week will deliver in terms of inflation fighting measures at a time where the omicron variant continues to cloud the economic outlook. With US inflation rising at the fastest pace since the 1980’s, Wednesday’s FOMC meeting remains the top event. The market is currently pricing in three rate hikes next year with the first one due around June. The other semi-investment metals of silver (XAGUSD) and platinum (XPTUSD) both struggling with the latter’s 850-dollar discount to gold, near a one year high, potentially deserving some attention. US Treasuries (TLH, TLT). The US yield curve bulled flatten yesterday with 10-year yields falling by 7bps to test support at 1.41%. To contribute to this move was news of the first omicron death in the UK, and the winding done of short US Treasury positions before the end of the year. Price action will remain volatile ahead of the Federal Reserve meeting, where Powell is expected to announce an acceleration of the pace of tapering. The focus is going to be also on the Dot plot, where longer term projections might be moved higher, pushing up the long part of the yield curve. However, long-term yields can move higher only that much, as omicron distortions will continue to keep them compressed. It looks likely that 10-year yields will continue to trade rangebound between 1.40% and 1.70% until the end of the year. European sovereign bonds (IS0L, BTP10). The Bund yield curve bull flattened yesterday led by safe-haven buying amid concerns over omicron. Italian BTPS gained the most as the market pushes back on interest rate hikes in 2022. The focus, however, continues to be on the ECB meeting on Thursday. An announcement of the end of the PEPP program in March 2022 is widely anticipated. What’s not clear is whether it will be announced that bond purchases will be compensated by another scheme, such as the APP. It is likely that the ECB will stall as members are torn between inflation and a new wave of Covid infections. If investors feel the support of the central bank is fading, European yields might resume their rise with the periphery and Italian BTPS leading the way. Yet, the move will be contained as yields will remain compressed by covid concerns. UK Gilts (IGLT, IGLS). The BOE might not deliver on a 10bps interest rate hike this week as members are divided concerning Covid restrictions. Michael Saunders, one of the most hawkish MPC members, said that he will need to think about it twice before voting for a rate hike. As expectations for interest rate hikes in the UK are the most aggressive among developed economies. It is possible that if the central bank does not hike, the Gilt yield curve will be steeping with short-term Gilts gaining the most as the market pushes back on next year’s rate expectations. What is going on? China reports first omicron variant case of covid - bringing fears of supply chain disruptions due to the country’s zero tolerance policy on virus cases that can mean profound shutdowns in response to outbreaks. Chinese property developers under new pressure, with the focus this time on Shimao Group Holdings, whose Hong-Kong listing is down over 75% this year and down over 30% over the last week on concerns that a deal between the company’s business units is a sign of financial stress for the company. The company’s 2030 USD-denominated bonds lost almost 13% overnight as the yield rose above 10%. Other Chinese property developer shares were also under pressure overnight. Tesla shares down 5% as growth stocks are under pressure. Tesla shares pushed below $1,000 yesterday adding further pressure to related assets in the Ark Innovation ETF and Bitcoin is also seen lower this morning. Elon Musk sold $907mn worth of shares yesterday according to a filing overnight in order to pay taxes on another round stock options that were exercised. Toyota finally pushes into EV. Japan’s largest carmaker wants to compete with Tesla and Volkswagen announcing $35bn of investments into battery electric vehicles showing the first sign that Toyota is acknowledging that this is the future of the industry. Toyota has so far pursued hybrids on the ground of being more economical, but this push into BEV with 30 new models validates BEVs once and for all, even though Toyota is still saying that it does not know which technology will win. US Harley-Davidson set to spin-off EV motorcycle unit – the plan to spin off Harley’s EV business via a SPAC saw Harley-Davidson shares spike 19% before surrendering most of the gains. Harley’s LiveWire EV business unit will combine with SPAC AEA-Bridges Impact to form a new publicly traded company. The move is meant to take advantage of the premium the market is willing to pay for pure-play EV companies. EU diplomats suggest time running out on Iran nuclear deal - as Iran is progressing rapidly toward enriching uranium for potential use in nuclear weapons. The diplomats worry that without a breakthrough soon, the original 2015 agreement “will very soon become an empty shell.” What are we watching next? The Wednesday FOMC as the year’s final major macro event risk. The FOMC meeting tomorrow is set to bring a very different monetary policy statement from the prior statement after the Fed’s clear pivot to inflation fighting mode. As well, the meeting will see an update of economic forecasts and interest rate policy forecasts (the “dot plot” in which 19 Fed members forecast where the Fed funds rate will likely be in 2022-24 and in the longer term). Most interesting will be the degree to which Fed members have raised their policy rate forecasts relative to what the market is predicting, which is for just under three rate hikes through the end of next year. Prior forecasts have generally come in lower than market expectations. The baseline expectation for the pace of QE “tapering”, or slowing of purchases, is that the Fed will double the pace of tapering, which would mean the Fed’s balance sheet is set to stop growing by the end of March. Anything that suggests a faster pace of tapering than this doubling (for example, a promise to wind down before March) and that hints that a hike at the March FOMC meeting is possible would be a hawkish surprise. The European Council meets on Thursday, and apart from having to deal with Covid-19 and the Russian threat on its eastern borders, the council is also set to decide whether investments in gas and nuclear energy should be labelled climate friendly. The design of the EU green investment classification system is closely watched by investors worldwide and could potentially attract billions of euros in private finance to help the green transition, especially given the need to reduce the usage of coal, the biggest polluter. Earnings Watch – the earnings calendar is getting very thin this week and no major earnings expected today. Wednesday: Inditex, Toro, Lennar, Heico, Trip.com, Nordson Thursday: FedEx, Adobe, Accenture Economic calendar highlights for today (times GMT) 0830 – Sweden Nov. CPI 1000 – Euro Zone Oct. Industrial Production 1100 – US Nov. NFIB Small Business Optimism 1300 – Hungary Central Bank Rate Decision 1330 – US Nov. PPI 1900 – New Zealand RBNZ Governor Orr before parliament committee 2130 – API Weekly Report on US Oil and Fuel Inventories 2330 – Australia Dec. Westpac Consumer Confidence 0200 – China Nov. Retail Sales 0200 – China Nov. Industrial Production During the day: IEA’s Monthly Oil Market Report   Follow SaxoStrats on the daily Saxo Markets Call on your favorite podcast app: Apple Spotify Soundcloud Sticher
Market Quick Take - December 10, 2021

Market Quick Take - December 10, 2021

Saxo Strategy Team Saxo Strategy Team 10.12.2021 12:10
Macro 2021-12-10 08:30 6 minutes to read Summary:  Risk sentiment has consolidated after sharp gains earlier this week as the market nervously eyes the US November CPI release today from the US and whether this will trigger a more hawkish FOMC meeting next week. The US White House has already been out attempting damage control from the inflation headlines today, saying that the data will not reflect recent declines in gasoline and other prices.   What is our trading focus? Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) - US equities and particularly tech stocks consolidated a significant chunk of the sharp gains from earlier this week, with speculative sectors getting the worst of it on the day, although most stocks were down on the day. A high US November CPI release today could spook investors as it would raise the anticipation of an even more hawkish FOMC meeting next week. EURUSD – The EURUSD rally attempt from Wednesday faltered in what now looks a mere tactical squeeze ahead of today’s US November CPI report (more below). Given that the slide in EURUSD has largely tracked with the rise in Fed expectations, the degree to which those expectations are adjusted higher or lower in the wake of today’s US CPI data and then next week in the wake of the FOMC meeting Wednesday and ECB meeting Thursday will likely correlate with EURUSD direction, where the focus is on the cycle lows just below 1.1200 for a possible run at 1.1000 on a break lower and the tactical pivot high near 1.1380. USDJPY and JPY crosses – the omicron variant news of some two weeks ago triggered a huge slide in USDJPY just after it was trying to engineer a break above multi-year highs near 114-50. Similar to developments in crude oil and longer US yields, USDJPY has failed to get back to the upper reaches of the recent range since that sell-off, which bottomed out near the 112.50 area – the current trigger zone for a possible further sell-off wave (most like in a scenario of cratering risk sentiment and US treasuries serving as a safe-haven) that could poke at the important 111.00-50 downside pivot zone. Elsewhere, JPY crosses backed up very sharply this week on hopes that the omicron variant will prove mild and won’t impact the growth outlook, but the scale of the rally or squeeze has been modest relative to the prior sell-off. Watching areas like 127.50-128.00 in EURJPY and 79.00 in AUDJPY in coming sessions for whether another wave of JPY strength is in the cards. Crude oil’s (OILUKFEB22 & OILUSJAN22) week-long rally hit the buffers yesterday with Brent and WTI retracing back towards support at their 200-day moving averages at $73 and $69.80 respectively. A study finding the omicron variant is 4.2 times more transmissible than the delta combined with new restrictions among several nations helped weaken the sentiment, and with end of year approaching many traders are increasingly becoming more risk adverse, potentially leading to more fluctuations. Focus today on omicron news, US inflation data and whether the mentioned support level can be maintained. Wheat (WHEATMAR22 & ZWH2) trades near five-week low following three days of losses which accelerated yesterday after the USDA raised its outlook for global stocks. The 3% drop in Chicago also helped drag down the recent highflyers futures for Kansas and Paris milling wheat. Global stock levels at the end of the 2022-23 season received a boost from production upgrades in Russian (1mt) and Australian (2.5mt) while US export slowed with high prices curbing demand. US Treasuries (TLH, TLT).  Yesterday’s 30-year auction showed that the market is not willing to buy long-term US Treasuries at current low yields. The 30-year auction was priced with a high yield of 1.895%, tailing by 3.2bps. Although the tail was smaller than last month’s 5.2bps, it would have been enough to cause a selloff in long-term Treasuries. However, covid distortions kept yields compressed, hence volatility in rates was avoided. Today’s CPI numbers are in focus as a high number is likely to contribute to more upward pressure in the yield curve. What is going on? The US White House was already out attempting damage control on inflation before today’s CPI release. A White House official, economic adviser Brian Deese, was out late yesterday saying that today’s US November CPI release won’t reflect recent drops in the price of key commodities, especially gasoline and natural gas as it is “backward looking”. China property developers formally declared to have defaulted - as Fitch Ratings noted missed interest payments on Evergrande and Kaisa Group Holdings USD bonds as it downgraded these issues to restricted default. USDCNY and USDCNH bounce sharply a day after posting new low for the year - China fixed the USDCNY level at a far weaker level than expected and announced an FX reserve ratio increase to 9%, forcing domestic banks to maintain higher reserves of foreign currencies.  These are rather obvious signals that China would like to avoid a further rise in its currency after a powerful and broad rally that saw both the offshore and onshore yuan posting new highs for the US dollar for the year just this Wednesday. Bitcoin and other cryptocurrencies close sharply lower – with Bitcoin closing at its lowest levels on a weekday since September. Technically, the 40-45k zone looks important for avoiding a more significant capitulation lower after the recent weekend meltdown that took the price some 20% lower to below 43k before support was found. According to coinmarketcap.com, the market cap of the nearly 15.5k cryptocurrencies is currently near $2.26 trillion after peaking near $2.93 trillion in November, a drawdown of over 22%. What are we watching next? US November CPI data release today, expected at 6.8% year-on-year for the headline number and 4.9% at the core, both of which would be the highest readings in decades. Given that expectations are so high, would a slightly hotter than expected number move the needle on a Friday ahead of next week’s important FOMC meeting? A significant beat to the upside just might make a difference, given that the Fed has clearly made a shift toward fighting inflation and would probably need to bring a March 2022 rate hike possibility into its forward guidance. Fed rate expectations for next year are poised near the high for the cycle, suggesting a 0.8% Fed Funds rate (vs. currently 0-0.25%) is priced in through the December 2022 Fed meeting. The EU is set to decide by December 22 whether investments in gas and nuclear energy should be labelled climate friendly. The design of the EU green investment classification system is closely watched by investors worldwide and could potentially attract billions of euros in private finance to help the green transition, especially given the need to reduce the usage of coal, the biggest polluter. Economic calendar highlights for today (times GMT) 0905 – ECB President Lagarde, others speaking at panel discussion1300 - Poland National Bank of Poland meeting minutes1330 – US Nov. CPI1500 – US Dec. Preliminary University of Michigan Sentiment Follow SaxoStrats on the daily Saxo Markets Call on your favorite podcast app: Apple Spotify Soundcloud Sticher
UK jobs data

UK jobs data

Alex Kuptsikevich Alex Kuptsikevich 14.12.2021 13:18
British jobs data came out stronger than expected, supporting the British currency and helping the FTSE100 partially counter the market pressure from the start of the day on Tuesday. Wage growth has been slower than expected, adding 4.9% in the last three months to the same period a year earlier, vs expected 4.6%. The rate of wage growth is declining due to a move away from the low base effect, and current data leaves earnings above inflation (4.2%). This is a noticeably stronger performance than in Europe and the USA, where wages are not keeping up with price rises. Furthermore, the number of jobless claims has fallen for the ninth month in a row, although there are still 722K more claims than before the pandemic hit in March 2020. On balance, strong wage growth and a recovery in employment give the Bank of England more room to tighten monetary policy. Later this week, the BoE will likely give transparent hints of an imminent rate hike, further supporting the contrast of the pound against the euro.
US PPI hits forecasts, feeding an appetite for the USD ahead of FOMC

US PPI hits forecasts, feeding an appetite for the USD ahead of FOMC

Alex Kuptsikevich Alex Kuptsikevich 14.12.2021 16:01
The start of the Fed’s two-day meeting gave new signs of the strength of inflationary pressures in the market, adding to speculation about a tightening of the monetary policy tone. In November, the PPI index was 9.6% y/y, markedly higher than the expected 9.2% and 8.6% a month earlier. The PPI ex-energy and food accelerated to 7.7% y/y last month from 6.8% in October. The latest data shows that inflationary pressures are no longer a problem of Oil and agriculture price spikes. It has spread across the economy, forcing the Fed to step up. This bad news increased pressure on the US stock market before the opening of the regular session. However, it is positive news for the dollar, which managed to retreat from intraday lows against the euro, yen and franc. The dollar index has been consolidating in a converging triangle since late November. The latest inflation data has a high chance of pushing it beyond consolidation without waiting for the official comments from the Fed tomorrow evening.
No Turnaround Tuesday for Equities?

No Turnaround Tuesday for Equities?

Marc Chandler Marc Chandler 14.12.2021 15:01
December 14, 2021  $USD, Canada, Chile, Currency Movement, EMU, Hungary, Japan, Mexico, UK Overview:  Activity in the capital markets is subdued today, ahead of tomorrow's FOMC meeting conclusion and the ECB meeting on Thursday.  The MSCI Asia Pacific equity index fell for the third consecutive session.  European bourses are heavy after the Stoxx 600 posted an outside down day yesterday. Today would be the fifth consecutive decline. Selling pressure on the US futures indices continues after yesterday's losses.  Australia and New Zealand bonds played catch-up to the large drop in US Treasury yields yesterday, while European benchmark yields are edging higher.  The 10-year US Treasury yield is around 1.43%.  The dollar is mixed against the major currencies.  The Canadian and Australian dollars and Norway are softer, while the Swiss franc and euro lead with around a 0.25%-0.35% gain.  Most emerging market currencies are little changed, though the Turkish lira is paring yesterday's intervention-fueled gains.  Led by the Hungarian forint ahead of the outcome of the central meeting, and helped by a firm euro, central European currencies lead the emerging markets.  The JP Morgan Emerging Market Currency Index is off for a second session after breaking a four-week slide last week.  Gold continues to consolidate and is within yesterday's range ($1782-$1791).  Oil is also trading quietly, with the January WTI contract in a $70.50-$72.00 range.  European (Dutch) natural gas is rising for the sixth session of the past seven, during which time it has increased by nearly a third.  US natgas has fallen by almost 30% in the past two weeks and is off for about 4.4% this week already.  Iron ore is paring yesterday's 6.5% gain, while copper is drifting lower and is extending its loss into the fourth consecutive session.   Asia Pacific Year-end pressures are evident in Japan's money markets, and the BOJ responded by arranging an unscheduled repo operation for the second consecutive session.  Yesterday's overnight operation was for JPY2 trillion (~$17.5 bln) after the repo rate rose to two-year highs.  The repo appeared to have been lifted by dealers securing funding for bill purchases.  Today the BOJ offered to buy JPY9 trillion of bonds under the repo agreement.   The US has offered to lift the steel and aluminum tariffs on Japan on similar terms as the deal struck with the EU.   A certain amount, based on some historical market share, can be shipped to the US duty-free, but over that threshold, a levy will be imposed.  Unlike the EU, Tokyo did not impose retaliatory tariffs.  Estimates suggest that Japan shipped around 5% of its steel to the US, though some might have made its way through Mexico.   The regional highlights for the week still lie ahead.  Tomorrow, China reports November retail sales, industrial production, new home prices, investment, and the surveyed jobless rate.  Retail sales are expected to have slowed, while industrial output may have firmed.  Investment in property and fixed assets may have stalled.  Japan has its tertiary index (October) tomorrow, a November trade balance on Thursday (it nearly always deteriorates from October), and the Friday BOJ meeting.  The BOJ is expected to extend some of its emergency facilities.  Australia reports its November jobs data first thing Thursday morning in Canberra.  After three months of job losses, a strong report is expected as social restrictions were lifted.   Today, the dollar is confined to about a quarter of a yen range above JPY113.50.  It has not traded above JPY114.00 this month so far.  Nor has it traded below JPY113.20 since last Monday.  An option for $760 mln at JPY1113.85 rolls off today.  The Australian dollar tested the session high near $0.7135 in the European morning but met a wall of sellers, perhaps, related to the nearly A$600 mln option at $0.7130 that expires today. It has traded down to a five-day low around $0.7090, which is the halfway point of last week's rally.  The next retracement (61.8%) is near $0.7065. The dollar continues to struggle to sustain upticks against the Chinese yuan. It is trading heavily today, its seventh loss in the past eight sessions.   Still, the greenback held above yesterday's low (~CNY6.3580).  It was unable to poke above CNY6.37.   The PBOC's dollar fixing was set at CNY6.3675, while the market (Bloomberg survey) anticipated CNY6.3666.   Europe The UK reported solid employment data.  The November claimant count rate eased to 4.9% from a revised 5.0% (initially 5.1%), representing a nearly 50k decline after the October decline was revised to 58.5k from -14.9k.  The pace of earnings growth slowed to 4.9% from 5.9% (three-month, year-over-year).  Employment rose by nearly 150k (three months) after a 247k increase previously.  Tomorrow, the UK sees November CPI and PPI.  Both are expected to have quickened from October.  Nevertheless, the BOE is now seen on hold until February.   Hungary's central bank is set to hike the base rate today.  A 40 bp increase would follow last month's 30 bp hike.  Today's move would be the sixth in a row.  The base rate began the year at 60 bp, and today's hike would lift it to 2.50%.  On Thursday, Hungary likely hiked the one-week deposit rate.  It has been hiked for the last four weeks.  It had been at 75 bp until June, when it was hiked by 15 bp.  It was lifted by 30 bp in July and again in August.  It reverted to 15 bp increases in September and October.  The one-week deposit rate was raised several times last month to 2.90%.  It is up another 40 bp so far this month, and it is expected to be lifted by another 20 bp this week.   In October, industrial output in the euro area rose 1.1% after a 0.2% decline in September.  The preliminary PMI will be reported on Thursday, ahead of the ECB meeting.  Activity likely slowed. The focus of the ECB meeting is on the guidance about bond-buying next year.  The emergency facility is expected to wind down at the end of Q1, but given that it will still be buying bonds, tapering may not be as necessary or pronounced as, say, with the Federal Reserve.  The ECB staff will also update forecasts, including a sharp upward revision to next year's while extending the projections to 2024.  There is also interest in what the ECB will do about its long-term loans (TLTRO).    The euro has firmed in the European morning but remains mired in a narrow range.  Indeed, the range over the past five sessions is a little less than a cent (~$1.1260-$1.1355). There is an option for nearly 500 mln euros at $1.1330 that expires today.  For the past month, the euro has been in a $1.12-$1.14 trading range, with the notable exception on November 24, when the low for the year was recorded (~$1.1185).   Sterling slipped below $1.32 in late Asian turnover but found bids lurking there, and Europe has extended its recovery toward $1.3235.  Resistance is seen in the $1.3260-$1.3275 area. Sterling has not traded above $1.33 since December 3, yet a move above there is necessary to lift the technical tone.   America The US reports November producer prices today.  The headline rate is expected to push above 9%, while the core rate pokes through 7%.  The market is understandably more sensitive to consumer prices than producer prices.  Tomorrow, ahead of the FOMC statement, the November retail sales (softer than the 1.7% headline increase in October) and the December Empire manufacturing survey will be released.   Although the Senate is expected to maneuver to lift the debt ceiling today, the Treasury is planning a large bill pay down (~$175 bln) to ensure it would have the space to settle the coupon auctions.  That said, the supply of bills is likely to improve through Q1 22, according to estimates.  By most accounts, the Treasury has overfunded itself, and this will allow it to cut back further on new supply, just as the Federal Reserve is expected to accelerate its tapering.   The Bank of Canada was told its inflation target remains 2% but that it can overshoot to support "maximum sustainable employment."  The central bank's language is important.  It said it would "continue" to support the labor market objective, suggesting that yesterday's adjustment to the mandate will have a minor operational impact.  In fact, with inflation (October CPI 4.7%, an 18-year high), Governor Macklem quickly indicated that this was not the situation when it could probe for the maximum sustainable employment.  Still, the new mandate requires that the central bank explain when it is using its new flexibility and how labor market outcomes are incorporated into monetary decisions.  Separately, Canada is proposing alternatives to the US proposed tax incentives for electric vehicles in the Build Back Better initiative.  Canada and Mexico claim that it violated the USMCA and throws a wrench in the 30-year auto integration.  The EU trade commissioner has also expressed concerns about whether the legislation would break the WTO rules too.   Late today, Chile's central bank is expected to deliver a 125 bp rate hike, the same as in October.  The overnight target rate began the year at 50 bp.  It was hiked by 25 bp in July and 75 bp in August.  With today's hike, it will stand at 4%.  More work is needed as November CPI was at 6.7%.  Chile holds the run-off presidential election this weekend.  In the first round last month, the conservative Kast drew 28% support while the left candidate Boris garnered 26%.  Chile's innovation during Covid was to allow people to withdraw funds from their pensions (yes, like a farmer eating their corn seed).  Three withdrawals were granted, but a fourth effort was rebuffed earlier this month.  The World Bank and the IMF expressed concern about the pension fund industry, which had been among the best in the region.  The Chilean peso is among the worst-performing emerging market currencies this year.  It has fallen nearly 15.5% and has only been "bested" by the Argentine peso (~17.3%) and the Turkish lira (-48%).   The Canadian dollar's retreat is being extended for the fifth consecutive session.  The greenback has largely held above CAD1.2800 and is drawing near the high seen after the employment reports on December 3 (~CAD1.2855).  We usually see the exchange rate is driven by 1) general risk appetite, 2) commodity prices, and 3) rate differential.  Here we note that Canada's 2-year premium has fallen from about 60 basis points at the start of last month to around 27 bp now.  Over the same time, the 10-year premium has wholly disappeared.  It was almost 20 bp on November 1 and currently is trading at a four basis point discount.  Meanwhile, the greenback is consolidating against the Mexican peso. For the fifth consecutive session, it has been mainly chopping in a MXN20.85-MXN21.08 range.   On Thursday, Banxico is expected to hike its overnight rate by 25 bp.  We continue to think it is more likely to hike by 50 bp than standpat.  Since June, it has lifted the target rate by 100 bp to 5%.   November CPI stood at 7.37%.     Disclaimer
A quick story before we start

A quick story before we start

Brent Donnelly Brent Donnelly 16.12.2021 15:18
FAIRFIELD COUNTY, CONNECTICUT May 6, 2010 4:55AM The Connecticut air is cold and damp. The trader moves in silence. He steps quietly through the pitch-black darkness of his Victorian McMansion and toward the door. As he disarms the home security system, the BEEP BEEP BEEP of the keypad code he enters is impossibly loud in the quiet of the pre-dawn morning. He steps out of the house, closes and locks the door, and hops into his car. As he rolls down the driveway and into the foggy morning, he inserts a Deadmau5 CD and blasts it at high volume in an effort to wake up and get pumped for another day of trading. But this will not just be another day of trading. This will be one of the most insane trading days of his career. It has been a frustrating year so far. The Eurozone Crisis has been smoldering for months but the trader’s attempts to sell the euro have been met with massive countertrend rallies as the Fed embarks on another round of USD-negative quantitative easing (QE). They call EURUSD a collision of two garbage trucks. The trader struggles to steer clear of the wreckage. His strongest view recently has been lower USDJPY. There is risk aversion popping up all over the place as markets worry about a domino effect where Greece crashes out of the Eurozone, followed by Spain, Portugal, Ireland and then finally Italy. Everyone is bearish stocks as the S&P 500 rally from 666 in March 2009 to 1050 now is seen as a mirage; the side effect of a money printing magic trick performed by central bankers. Totally unsustainable. EURUSD opened the year at 1.4500 and now trades sub-1.25 so the short trade is hard to stomach. Even when you know it’s the right thing to do, it takes a lot of courage to sell something down >15%. So the trader has shifted his attention to USDJPY and he expects it to go substantially lower as global risk aversion remains elevated and safe haven currencies like the yen should find demand. USDJPY has been inexplicably well-bid given recent risk aversion and the Fed “money printing”. It just rallied from 90 to 94 on air over the last two weeks. Meanwhile, the best leading indicator for USDJPY is always US bond yields and they have been plummeting for a month. USDJPY looks completely wrong. The trader stares at the following chart, which shows US 10-year bond yields and USDJPY. The black bars are USDJPY and the dotted line shows US bond yields. Note they usually follow in lockstep. The divergence is a strong signal to the trader that he should be short USDJPY. USDJPY vs. US 10-year rates November 2009 to May 5, 2010 The chart covers the period up to May 5. This story takes place May 6. Chart courtesy of Refinitiv. If you look in the top right corner, you can see that USDJPY is a bit off the highs, but not much. Two days in a row, the high has been 94.99 and USDJPY is now bouncing aimlessly around 93.80 as he rolls into the hedge fund parking lot. It is still early so there are only three Porsche 911s in the lot right now. More will arrive later. This USDJPY trade has been tiring and painful as the trader got short at 94.00 with a stop loss at 95.05 and those two daily highs mean he has come within a hair (6 pips, or 0.064%) of getting stopped out, two days in a row. Holding on to a trade like this is exhausting as his fight-or-flight stress system remains activated for long stretches. Cortisol overload. Now, he can relax a bit and let things play out. His target is 91.00. Average daily range has been about 1 yen (100 pips) lately so he figures we might get there in the next week or so. 10:45 AM It has been a boring morning with USDJPY in a tight range. The sun comes out and it’s almost shorts weather outside so the trader decides to go for a run before lunch. Less than a mile into his run, he gets his first indication that this is not a random, ordinary day. His Blackberry rings. Bank sales on the line to tell him that USDJPY has just dumped 100 points in 15 minutes. Trading 92.80 now… Odd. He turns around and sprints back to the office, Spidey-sense tingling. By the time he grabs a quick shower and returns to the desk, USDJPY is 91.50. He is short $100 million USDJPY so that puts his profit (aka P&L or profit and loss) around +$2.8 million on the day. That’s more P&L than this trader typically makes in an excellent month. A huge haul. He scans the headlines and Bloomberg chats and finds no good explanation for what is going on. The stock market is down, but not enough to explain the move in USDJPY. This makes no sense. When a trade shows a big profit that makes no sense, he likes to cover it and move on. The trader buys 100 million USDJPY at 91.50. He is back to flat with no position and nearly 3 bucks of P&L in the bank. He sits there calmly and processes what has happened. He allows himself to feel happy, just for a second. He stuck to his plan and had the patience to sit with a decent-sized position for three days. He relaxes and basks in the satisfaction of a job well done. Then… Some dumb voice in his brain says: 2.8 million dollars is an amazing day. But... Maybe I can make 5 million today? And his hands, as if possessed by some mischievous or evil force, move slowly toward the BUY and SELL buttons. For no reason. And like a moron… He goes long USDJPY. First, he buys $50 million at 91.50 and then another $50 million at 91.25. These are impulsive trades with no rationale. His planned stop loss is 90.85 but before he has time to input a stop loss order, he notices S&Ps lurch lower on a huge volume surge. He puts on his headset and fires up the S&P squawk to see what’s going on. [If you want to hear the soundtrack to what happens next, Google “Flash crash stock market 2010 squawk” and select one of the YouTube replay videos] The announcer’s voice is strained as he narrates an unexplained fall in stocks from 1150 to 1120. USDJPY skips through 91.00 and the trader’s P&L shrinks to $2.0 million. He tries to sell at 90.80 and whiffs. USDJPY is suddenly in freefall. 90.10 trades. 90.00 breaks. USDJPY has just dropped more than four percent in a few hours. A monster move. The trader’s eyes flick over to his P&L which has now shrunk back to six digits. Two-thirds of three days’ work, gone in 60 seconds. And then… Stocks sell off hard out of nowhere. Like… REALLY HARD. The S&P squawk guy is losing it. Screaming. 1100 breaks in the S&P. 1080, 1070, 1060. USDJPY is a waterfall. The squawk loses his mind as he yells: “We have some BIG paper sellers here… 7 evens are trading. 6 evens are trading! 5 EVENS ARE TRADING!!! New lows here…” USDJPY breaks 89.00 and the trader has still sold only 23 million USD, leaving him stuck with a position of 77 million USD. It is a fast market, nearly impossible to transact. He picks up a phone to two different banks and neither one answers. He tries to hit the 88.60 and gets a reject notice from the aggregator. The price feed is stale and crossed now; it shows 89.00 / 88.10, which is not possible. The trader is now down on the day. In the red. His face is hot and feels red like his P&L. Urge to slam fist on desk is rising. The trader feels like he is falling, falling::::::::::::::::::::in cinematic slow-mo. USDJPY stabilizes a bit even as the S&P squawk continues to go nuts. “65 even offered! 60 trades… 60 even bid, this is the widest we have seen in years,” his voice cracks, he’s yelling like the announcer at Churchill Downs as the horses turn for the stretch. “60s trading! 50s trading! 50 at 70 now! We are twenty wide!” 1060 trades in S&Ps now, down just about 10% today, on zero news. Nobody knows what the hell is going on and there is panic in the air. The squawk dude continues to scream. He is pouring gasoline on the trader’s agitation. The trader’s P&L is now six figures in the red. Sadness. Anger. He is furious with himself because he had the right trade, waited patiently for almost three days for it to work, caught the move perfectly according to plan … And then flipped the other way on a whim, for no reason and gave everything and more back in half an hour. $2.8 million is a good month for this trader. He just made and lost that much in less than two hours. I am an idiot. How did I get into this mess? He needs to make a decision here and quick but he realizes that he is flooded. It is impossible to make a good trading decision when you’re flooded. He needs a second to clear his mind. He tears off the headphones, drops them on his desk, and stands up. He walks over to the window and tries to find a moment of lucid calm. He has been through these emotional storms before and knows how to get back to shore. He stares over the waters of the Long Island Sound. Gradually, his heart rate lowers. Clarity slowly, slowwwwly returns. His lizard brain retreats and his rational mind takes over. He talks to himself: It doesn’t matter how you got here. What are you going to do about it? 88.00 was the low in March. It’s a massive level. The panic is fading. USDJPY is down 700 points in two days and now bonds are reversing lower. This is the place to buy USDJPY, not sell. He returns to his keyboard, puts his headphones back on. The squawk guy has stopped screaming. He is noticeably more composed. S&P futures have bottomed within a whisker of limit down. They are stable but have not rebounded significantly. The bid/offer is super wide so it’s hard to tell whether they are moving higher or just bouncing along the bottom. The trader looks around the room and sees the panic and electricity levels have dropped. Not as many phones are ringing. Voices in the room are no longer frantic. He buys 50 million USDJPY at 88.85. And another 73 million at 88.95. Max long now, long $200 million USDJPY. But this time it’s thought out, not random, and he feels good about what he is doing. He feels confident but fully in control. He calmly thinks forward: USDJPY could easily rally to 92.50 from here. When you catch a turn like this, you can be greedy. He leaves a stop loss for half his position (sell 100 million USDJPY at 87.94) and then sits back to let things play out. He has his plan and now he knows all he can do is watch and see if it works. There is one more frenetic whipsaw and USDJPY briefly prints to a low of 87.95. One pip from his 100 million USD stop loss. Amazing luck. Seconds later, stocks stabilize, and then it’s like everyone realizes all at once that whatever the heck just happened… It’s over. USDJPY is paid at 88.70, then up through 89.50. It breaks 90.00 and as it hits 90.40, the trader flicks his eyes to the P&L. It is almost exactly back to the level where it peaked earlier: $2.8 million. He praises the trading gods and squares up. NICE! Too bad he didn’t stick with his plan on the way back up, either. A few hours later, USDJPY hit the trader’s original target of 92.50. Here’s the chart of USDJPY that day: USDJPY May 3-7, 2010 (US stock market Flash Crash was May 6) The trader made a multitude of both good and bad decisions in the three hours around the 2010 Flash Crash. The trading described in this story is a microcosm of everything that can go right and wrong in trading. Traders make good, careful decisions and get rewarded, they make bad decisions and get punished … but then sometimes a good decision leads to a bad outcome … or a bad decision is rescued by good luck. Every trader is a steaming hot bowl of bias stew and must maintain self-awareness and lucidity behind the screens as the trading day oscillates between boredom and terror. That story of the 2010 Flash Crash, just like this book, is all about the razor thin line that separates success and failure in trading. Alpha Trader is written to help you understand markets but also, more importantly, to help you better understand yourself as a trader. It is about great decisions and dumb mistakes. It is about how to be rational and why smart people do stupid things. All the time. The book is written for traders at every skill level. I wrote it to be understood by noobs, but I also aimed to write something that will resonate with experienced trading professionals. Alpha Traders are smart, rational, disciplined, flexible, patient, and aggressive… They have the endurance to handle unending ups, downs, hills, and valleys. They come in fired up each day to solve the ultimate puzzle and they get paid incredibly well if they succeed. Alpha Traders work hard (even when they don’t feel like it), seek to continuously improve, and love markets more than they love money. Thank you for taking the time to read my book. I hope you find it entertaining and useful. I hope it helps you unlock your maximum trading potential. By the way, I plan to publish future updates, fresh trading stories and new lessons, tactics and strategies, exclusively for readers of Alpha Trader. If you are interested, please sign up at brentdonnelly.com. Enjoy. /Brent
ECB Quick Analysis: Tapering still leaves Lagarde as the laggard, EUR/USD could turn down

ECB Quick Analysis: Tapering still leaves Lagarde as the laggard, EUR/USD could turn down

FXStreet News FXStreet News 16.12.2021 16:06
The ECB has announced the end of its special PEPP bond-buying scheme in March. Raising the volume of the APP scheme is limited and set to be reduced. Other central banks remain well ahead of the ECB, potentially limiting the euro's rise. A wise owl – that is what European Central Bank Christine Lagarde aspires to be. Her latest move seems to have met that desire, as the ECB all but tapers its bond-buying schemes, following others' footsteps. The Frankfurt-based institution will wind down its Pandemic Emergency Purchase Program (PEPP) in March 2022, two years after its launch. On the other hand, it will expand its regular Asset Purchase Program to €40 billion in the second quarter – but already pre-announced it would squeeze to €30 billion in the third quarter. In other words: tapering. Buying fewer bonds and creating more fewer euros is positive for the common currency, and that explains the 30-pip jump. However, the ECB has stiff competition. The move comes just the Federal Reserve's decision to double its tapering pace to $30 billion/month and projection of three hikes in 2022. The Bank of England surprised markets by announcing a 15bp rate hike – just 45 minutes ahead of the ECB. In the second quarter of 2022, the ECB would still be buying bonds while the Fed would already move toward raising rates and the BOE could be after its second or third move. Investors are unlikely to wait for that to happen before acting. The euro's relative disadvantage does not solely stem from central banks' intentions but from the underlying economic situation. The ECB continues labeling inflation as transitory, and for good reasons. Core inflation is roughly half that in the US, and skewed to the upside by German VAT changes. Europe is more economically sensitive to covid than the US. These gaps, which brought EUR/USD down in recent months, could return to push EUR/USD lower. This current advance could turn into a selling opportunity.
Intraday Market Analysis: USD Weakens Across The Board

Intraday Market Analysis: USD Weakens Across The Board

John Benjamin John Benjamin 17.12.2021 08:56
EURUSD tests key supply zone The euro jumped after the ECB announced it will cut its bond-buying program. The pair’s latest retreat seems to have been an accumulation phase for the bulls. Strong buying interest lies in the demand zone around 1.1230. A break above 1.1320 has put buyers back in the control room. 1.1380 from a previously botched reversal attempt is a major hurdle ahead. Its breach may trigger an extended rally towards 1.1460. The RSI’s overextended situation has caused a brief pullback with 1.1270 as a key support. GBPUSD attempts bullish reversal Sterling surged after the Bank of England raised its interest rates to 0.25%. The pound has been treading water above 1.3170. The sellers’ struggle to push lower and the buyers’ attempts above 1.3260 suggest that the mood could be improving. A break above 1.3300 has prompted the bears to cover, attracting momentum traders in the process with 1.3440 as the next target. That said, an overbought RSI may cause a temporary pullback as intraday traders take profit. 1.3260 has become the closest support. NZDUSD breaks resistance The New Zealand dollar rallied as risk sentiment made its return post-FOMC. A bullish RSI divergence indicates a deceleration in the sell-off momentum. The long candle wick from 0.6700 suggests solid buying interest. Then a break above 0.6800 has put the last sellers under pressure. An overbought RSI has limited the initial surge. A pullback may test 0.6755, previously a resistance that has turned into a support. 0.6860 near the 30-day moving average is the next hurdle, and its breach could trigger a bullish reversal.
Creating silver wealth without fear

Creating silver wealth without fear

Korbinian Koller Korbinian Koller 20.12.2021 09:32
Two weeks ago, we posted the following chart in our weekly silver chart book release, after representing a strong case for a bullish silver play: Silver in US-Dollar, Weekly chart from December 3rd, 2021: Silver in US-Dollar, weekly chart as of December 3rd, 2021. We wrote at the time: “The weekly chart above illustrates that as much as we have entered the “shopping zone” for silver. There is a probability that we might see a quick spike down as we have seen at the end of September.” Weekly chart, Silver in US-Dollar, creating silver wealth without fear: Silver in US-Dollar, weekly chart as of December 18th, 2021. We were spot on anticipating how the market would unfold in the future. Furthermore, we followed the principles of consistent analysis of our surroundings, the market, and ourselves. We advanced confidently in the direction of likely probabilities and tried to keep doubt to a minimum. Hourly chart, Silver in US-Dollar, well positioned: Silver in US-Dollar, hourly chart as of December 18th, 2021. This sequence allowed for a low-risk entry on December 15th, 2021 right at the lows. The entry-level of US$21.47 already allowed for a 2.75% partial profit-taking on half of our position size at US$22.06. As always, we use our low-risk quad exit strategy to reduce risk and, as such, fear of losing profits. Now we are well-positioned with the remainder of the position, and a stop raised to break even entry levels. Silver in US-Dollar, monthly chart, worth the effort: Silver in US-Dollar, monthly chart as of December 18th, 2021. The monthly chart above shows our planned following two targets for this trade. With an entry at US$21.47 and an initial tight stop at US$21.22, our risk/reward-ratio towards our first profit-taking target was about 1:2.37. Now for the next target at US$27.35, it is 1:23, and for the final target at US$47.20, it is 1:103. In other words, with extensive planning and stacking of odds, we were able to identify a trade that had about a percent of risk at entry time. In addition, we quickly mitigated risk by early partial profit-taking. And yet, we still have a profit potential of the final 25% of position size, possibly maturing to a 120% profit. Taking only highly likely and highly profitable trades like these is also confidence-building and a fear eliminator. Creating silver wealth without fear: Michael Jordan’s achievement of playing in the present moment only is nothing short of the accomplishment of monks and so-called enlightened beings. It takes a long stretch of a career to achieve such a skill set. It illustrates that trading is more than just pushing a button or extracting a mathematical edge system. Trading is psychology and requires many skill sets combined to produce the necessary consistency to overcome the dilemma that you are only as good as your last action. Luck alone will get you nowhere in this game. It is not our intention to discourage you. Instead, it is quite the opposite. Often trading can be overwhelming and at times one can be down thinking: „Why can’t I do this, why did I betray my own rules again?” Trading is hard, it takes screen time and skill. Do not let fear and doubt dictate your actions. You can do this! Feel free to join us in our free Telegram channel for daily real time data and a great community. If you like to get regular updates on our gold model, precious metals and cryptocurrencies you can also subscribe to our free newsletter. This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision. The views, thoughts and opinions expressed here are the author’s alone. They do not necessarily reflect or represent the views and opinions of Midas Touch Consulting. By Korbinian Koller|December 19th, 2021|Tags: bottoming pattern, Crack-Up-Boom, Gold, Gold/Silver-Ratio, inflation, low risk, Silver, silver bull, Silver Chartbook, silversqueeze, technical analysis, The bottom is in, time frame, trading principles|0 Comments About the Author: Korbinian Koller Outstanding abstract reasoning ability and ability to think creatively and originally has led over the last 25 years to extract new principles and a unique way to view the markets resulting in a multitude of various time frame systems, generating high hit rates and outstanding risk reward ratios. Over 20 years of coaching traders with heart & passion, assessing complex situations, troubleshoot and solve problems principle based has led to experience and a professional history of success. Skilled natural teacher and exceptional developer of talent. Avid learner guided by a plan with ability to suppress ego and empower students to share ideas and best practices and to apply principle-based technical/conceptual knowledge to maximize efficiency. 25+ year execution experience (50.000+ trades executed) Trading multiple personal accounts (long and short-and combinations of the two). Amazing market feel complementing mechanical systems discipline for precise and extreme low risk entries while objectively seeing the whole picture. Ability to notice and separate emotional responses from the decision-making process and to stand outside oneself and one’s concerns about images in order to function in terms of larger objectives. Developed exit strategies that compensate both for maximizing profits and psychological ease to allow for continuous flow throughout the whole trading day. In depth knowledge of money management strategies with the experience of multiple 6 sigma events in various markets (futures, stocks, commodities, currencies, bonds) embedded in extreme low risk statistical probability models with smooth equity curves and extensive risk management as well as extensive disaster risk allow for my natural capacity for risk-taking.
Chip Shortage: My iPhone Won’t Arrive in Time for Christmas – are Bitcoin Miners to Blame?

Chip Shortage: My iPhone Won’t Arrive in Time for Christmas – are Bitcoin Miners to Blame?

BeInCrypto (BeIn News Academy Ltd), we're writing about crypto. BeInCrypto (BeIn News Academy Ltd), we're writing about crypto. 22.12.2021 22:36
The chip shortage affects many industries. But are Bitcoin miners the scapegoat we are all looking for? Cars, smartphones, gaming: the chip shortage is affecting many industries. For example, the Playstation 5 has already been on the market for about a year, but some customers are still waiting for their devices to this day. The same holds for Apple products, such as the new iPhone. Here, too, customers have to brace themselves for higher prices. Those who want to buy a new car must also expect longer waiting times. “Depending on the make and model, the delivery time for a large proportion has leveled off at three to six months,” says Marcus Weller, a market expert at the German Association of Motor Trades and Repairs. Where does the chip shortage come from? The global chip shortage is due to two factors: an intense increase in demand and an inflexible and complicated microchip supply structure. For example, the increase in demand is characterized by car manufacturers investing in the expansion of electric vehicles. Similarly, the demand for electronic devices increased sharply as a result of the global pandemic. This was driven by more home offices being created, and homeschooling. The supply of microchips is inflexible mainly due to the complexity of manufacturing. “In fact, chips today have structures that are often only a few atomic layers thick. Highly sensitive clean rooms are required to produce them. This makes manufacturing facilities enormously expensive and complex. It can cost several billion euros to build a semiconductor plant,” says FHTW expert Peter Rössler. It seems the chip shortage will continue. Chip production is even more time-consuming. A microchip consists of a ‘wafer.’ In semiconductor manufacturing, ‘wafers’ are the disks on which the integrated circuits, the microchips, are produced. Such wafers have a lead time of six weeks to three months in a semiconductor factory. What role does crypto mining play in the chip shortage? What impact crypto mining companies have on the global chip shortage is debatable. Clearly, it can be stated that it makes a difference what type of crypto mining is involved. Bitcoin miners use 5nm or 7nm chips, which are mainly needed for the production of smartphones. Currently, there’s no scientific data or study that reliably sheds light on Bitcoin mining’s share of the microchip shortage. Projections assume that Bitcoin mining takes up about 4-6% of 5nm to 7nm chip production. Ethereum mining relies on graphics cards that are also used for gaming. Estimates suggest that 19% of graphics processing units produced in 2020 were purchased by Ethereum miners. This has led to computing power on the Ethereum network being at an all-time high, currently >900 tH/second. Conclusion The impact of crypto mining on chip shortages is thus industry and currency-specific. While gaming PCs are strongly competing with Ethereum miners, the impact of Bitcoin mining on smartphone production seems to be rather limited. So, if the new iPhone is not found under the Christmas tree in time this year, Bitcoin is probably only partly to blame. Do you think Bitcoin miners are responsible for the chip shortage? Let us know here. The post Chip Shortage: My iPhone Won’t Arrive in Time for Christmas – are Bitcoin Miners to Blame? appeared first on BeInCrypto.
GBPUSD arouses interest, EURUSD is consolidating near June 2020's lows

GBPUSD arouses interest, EURUSD is consolidating near June 2020's lows

John Benjamin John Benjamin 23.12.2021 08:53
EURUSD tests resistance The US dollar stalled over improved risk appetite. The pair is consolidating near June 2020’s lows. A bearish breakout would further extend the downtrend. The euro so far has found buyers at 1.1235. The bulls need to lift offers around 1.1360, the upper band of the recent consolidation range, before they could hope for a reversal. An extended rally may send the price to 1.1460. In the meantime, the RSI’s overbought situation could briefly limit the bullish push as intraday traders take profit near the resistance. GBPUSD makes a bullish attempt The sterling surged after Britain’s economy showed solid growth in Q3. A previous rebound to the supply zone near 1.3370 has put pressure on the short side. Then the pound found bids at 1.3170. Four attempts at this key support suggest a strong interest in keeping the price steady. 1.3370 is a major hurdle as it coincides with the 30-day moving average. A breakout could initiate a bullish reversal and propel the pound to 1.3500. An overbought RSI may cause a short pullback with 1.3240 as the closest support. USOIL awaits breakout WTI crude found support from a larger-than-expected decline in US inventories. Price action saw active buying above 66.00, keeping the early December rally valid in the process. The latest rebound is testing the supply zone around 73.30, which sits along the 30-day moving average. A close above this area of interest would force the bears to cover, paving the way for a rally towards 78.00. On the downside, 71.00 is the immediate support. And 68.50 is a second line of defense in case of a deeper correction.
Negative balance - how much you can actually lose while trading

Negative balance - how much you can actually lose while trading

Finance Press Release Finance Press Release 29.12.2021 10:16
If traders do not properly set stop losses (as some do), their forex trading accounts may wind up with negative balances. Using Stop Loss and Margin Call levels, a forex trader may often avoid a negative balance. Stop losses may be triggered fast during periods of high volatility, resulting in a negative balance. Making a new deposit may help you recover your overdraft.   Negative balance FX protection is a safeguard that brokers use to protect their customers. Negative balance protection is provided when a trader's account balance becomes negative as a result of their trading activity, preventing them from losing more money than they deposited.   On January 15, 2015, the USDCHF plummeted 2780 pips in 30 minutes, putting my account in the red. When the Swiss National Bank removed the euro limit, the franc increased by 30%. Because my broker was unable to alter currency pairings, I used stop losses on all of my transactions. My trading account was losing money.   Foreign currency trading (Forex) is a risky endeavor since the value of various currencies fluctuates drastically owing to a number of factors. Despite the fact that most forex traders only trade with what they have, a negative balance in one's Forex account is not uncommon. On January 15, 2015, the Swiss National Bank (SNB) made an unexpected decision to remove the floor from the EUR/CHF currency pair. When the floor was raised, hundreds of live forex account balances turned negative, much to their amazement.   Many forex accounts had negative balances as a result of the SNB's decision to remove the floor. Changes in the volatility of a certain currency pair may have an impact on some trading systems. As long as there is a significant difference in the values of various currencies, the balance may go below zero. As a consequence, the phrase "negative balance" has become synonymous with currency trading. Despite the use of stop-out levels and margin calls, it is a difficulty that many forex traders face. Negative Balance Protection In Forex Is it possible to lose money while trading currencies? Because traders utilizing leverage may owe more than they have access to in their accounts, the likelihood of a negative balance grows. It's easy to be concerned about a currency account's negative balance from this vantage point.   If you want to avoid your forex trading account from sliding into the red, you must use a stop-loss order. Stop-Loss (SL) and Margin Call (MC) stops may be employed. Furthermore, certain brokerages, such as XM broker, give their clients accounts with negative balance protection. One example is the XM ultra low account, which does not charge traders commission costs. Aside from that, traders are permitted to employ the previously stated stop-loss order, which is often used by investors, to prevent negative balances on their accounts. In certain situations, brokers imposed a Margin Call limit, which meant that floating positions would be terminated at a loss if their expected losses exceeded a predefined limit.   Many forex traders ignore the MC limit for fear of losing their whole account. Even if you have Margin Call activated in your account settings, your account balance might still fall negative or be totally wiped out. Traders tend to ignore Stop Loss orders, despite the fact that they are a crucial risk-reduction instrument.   Traders may be certain that they will not go bankrupt if their forex trading account has a negative balance. If a margin call is made, a trader who is fast losing money may be able to avoid bankruptcy. When you get a margin call, you immediately close all of your open investments that are fast losing value. How To Prevent Negative Balance? A negative balance may be prevented in the first place, and it is possible to avoid it. You will not be asked to pay the negative amount if you have Negative Amount Protection, but your account will be reset to $0. To put it another way, you'll lose all you invested. In other words, why wait for the NBP to kick in when you can halt the loss immediately?   Consider the number of your holdings as well as the number of orders you make when making transactions. Because not all transactions are successful, the more you trade, the more likely you are to lose money. What's the harm in doing so if it allows you to better regulate your transaction and reduce your risk? In this instance, forex brokers' micro accounts, which often contain smaller bets, might be a viable option.   To keep your money in your account, you must create a reasonable stop loss barrier. As a result, the danger of market and price volatility is reduced.   The more leverage you have, the more money you will be able to get. You are, however, put at greater danger as a consequence of it. There are various techniques to reduce your stock market risk.   When the market is volatile, stop losses, margin calls, and stop-outs all fail. This tendency is typically triggered when news or events with a big influence on the market cause fear. Keep an eye on the economic calendar and avoid trading at particular times of the year.   Most forex brokers will announce and change leverage and margin requirements for certain instruments when a major event or news release is near. You should either stay out of the market or adjust your position as a consequence of this warning.
SAVILLS: PROPERTY MARKET HAS ADJUSTED TO THE NEW REALITY AND REGAINS MOMENTUM

SAVILLS: PROPERTY MARKET HAS ADJUSTED TO THE NEW REALITY AND REGAINS MOMENTUM

Finance Press Release Finance Press Release 15.12.2021 10:30
SAVILLS: PROPERTY MARKET HAS ADJUSTED TO THE NEW REALITY AND REGAINS MOMENTUM 14 December 2021 Real estate advisory firm Savills presents a preliminary summary of 2021 and predicts trends for the coming months. The commercial real estate market in Poland is regaining momentum but has changed significantly, reveals Savills. Key trends expected to dominate in the year ahead include rental growth, increasing ESG awareness and a focus on innovation. As expected, the vaccine roll-out has had a positive impact on the commercial property market in 2021. With investors remaining active, this year’s investment is likely to hit EUR 5 billion. Savills expects recent investment trends to continue and industrial assets to account for close to half of the total transaction volume by the end of the year. “Although the real estate market has undoubtedly bounced back in 2021, it has remained mired in uncertainty. In addition to concerns about the course of the pandemic, there were also geopolitical and economic risks. This did not however prevent tenants and investors from gradually resuming activity. Key metrics for the past 12 months illustrating investment volumes and office take-up are likely to remain close to last year’s levels amid a positive outlook for the future. A bright exception is the warehouse sector, which - undeterred by the pandemic - is already setting new highs. The commercial real estate market has adjusted to the new reality and is beginning to return to form,” says Tomasz Buras, CEO, Savills Poland. 2021 was the year of searching for an optimal work model on the office market. Many tenants decided to introduce a permanent hybrid scheme combining in-office work and working from home. According to Savills data, Poland’s total office stock topped 12,315,000 sq m. Flexible offices continued to gain traction with flexible office providers shifting their focus to expansion in regional cities. The Build-to-Rent (multifamily) sector is gradually gaining ground on the Polish market. According to Savills, at the end of 2021 there were close to 40 BtR developments in Poland. Projects that are currently under construction will soon double the stock of rental apartments. As high-tech and e-commerce companies continue to enjoy brisk expansion, these sectors are seeing their headcount grow. According to Savills, even though this has not translated directly into more demand for offices yet, there will be a growing requirement for modern housing as the trend of hybrid working intensifies. The online penetration rate (share of total retail sales) has risen from around 5% pre-pandemic to close to 9% in 2021. The development of omnichannel strategies combining online and offline shopping has gathered pace. The growth of e-commerce remains one of the key drivers of demand for logistics space. Retail has also seen the rise of dark stores - small in-town distribution centres helping shorten delivery times. In 2021, this format was launched in Poland, among others, by Å»abka. Such platforms are also operated by Lisek, Jokr and Swyft, while Biedronka has teamed up with Glovo. According to Savills, 2022 is expected to see another spike in construction costs and land prices, as well as an upward pressure on wages amid a risk of rising inflation. This will, first of all, push service charges up. Tenants will also be affected by exchange rate differences as euro-denominated rents remain a market standard. In addition, 2022 is likely to be the first year in many to witness warehouse and office rental rates go up. “There is potential for the investment market to see more buying in 2022. Investor demand for industrial assets will remain strong while the PRS will increase its market share. Several spectacular office projects are likely to change hands. Next year’s investment volume is expected to come close to pre-pandemic levels. Commercial real estate is considered a safe haven in times of high volatility on currency, stock exchange and bond markets, driving investor activity,” adds Tomasz Buras, Savills Poland. Next year is also shaping up to be a time when ESG strategies will begin to gain prominence on the real estate market. The importance of ESG is rising as a result of the European Union’s taxonomy, or the change of regulations on non-financial sustainability reporting and the entry into force of the CSRD, as well as tenants’ preferences. ESG is not only about a concern for the environment, but also for the human being. According to Savills, this will be visible on the warehouse market, where developers wanting to stand out will also begin to focus on the second social pillar of ESG, i.e. the human aspect, in addition to investing in energy efficiency. On the office market there will be marked differences between ESG compliant buildings and those whose owners will fail to take action in this period of change. Today, both older office buildings and properties in non-central locations are faced with refinancing challenges. Prospective buyers are, however, beginning to look for existing buildings with an intention to upgrade or sometimes repurpose them, or even to pull them down. This is true not only for office assets. Warehouse developers have also become keener to engage in brownfield projects in order to secure good locations. A dichotomy or division of properties into buildings that may soon have to be repurposed for lack of other options and those that have been upgraded will become visible for example in Warsaw’s SÅ‚użewiec district. Office buildings in that area meeting high standards will be able to attract cost-sensitive tenants with an opportunity to bring rents down. Such buildings may, therefore, become the big winners of the pandemic, says Savills. In 2022, the Warsaw office market is likely to begin to slowly switch to a landlord’s market. The office development pipeline is currently at its lowest in 10 years. Savills forecasts that as office buildings whose construction began before the pandemic are gradually filling up with tenants, the second half of the year may see the first signs of an undersupply and landlords gaining the upper hand in negotiations. This trend is already apparent in prime office buildings in Warsaw. Another top trend for 2022 according to Savills is innovation comprising the implementation of new technologies in real estate (proptech) and the use of big data in property management. The drive towards more automation is expected in manufacturing facilities, office buildings and autonomous retail stores. Looking ahead, modern data analytics tools will be used for a growing number of tasks in property management and valuation.
Financial Sector May Rally 11% - 15% Higher Before End Of January 2022

Financial Sector May Rally 11% - 15% Higher Before End Of January 2022

Chris Vermeulen Chris Vermeulen 11.12.2021 10:25
The financial sector is poised for a very strong rally into the end of 2021, and early 2022 as revenues and earnings for Q4:2021 should continue to drive an upward price trend. The US Federal Reserve is keeping interest rates low. At the same time, the US consumer continues to drive home purchases and holiday shopping. Strong economic data should drive Q4 results for the financial sector close to levels we saw in Q3:2021. If that happens, we may see a robust rally in the US Financial sector over the next 45 to 60+ days. The strength of the recent rally in the US major indexes shows just how powerful the bullish trend bias is right now. Some traders focus on the downside risks associated with the US Federal Reserve actions and/or the concerns related to inflation and global markets. I, however, continue to focus on the strength in the US major indexes and various sector trends that show real opportunities for profits. Comparing Sector Strength The following two US market sector charts highlight the performance over the last 12 vs. 24 months. I want readers to pay attention to how flat the Financial Sector has stayed since just before the 2020 COVID event and how the Financial Sector has started to trend higher over the past 12 months. This is because the shock of COVID briefly disrupted consumer activity. Yet, consumers are coming back strong, driving retail sales, home sales, and the continued strong US economic data. Therefore, it makes sense that the Financial sector should continue to show firm revenue and earnings growth while the US consumer is active and spending. Sign up for my free trading newsletter so you don’t miss the next opportunity! Over the past two years, Discretionary, Technology, and Materials drove market growth compared to other sectors. Remember, the initial COVID virus event disrupted market sector trends over the last 24+ months. (Source: StockChart.com) Taking a look at this 1 Year US Market Sector chart shows how various sectors have rebounded and how the Discretionary and Materials sectors have flattened/weakened. Pay attention to how the Energy and Real Estate sectors have been over the past 12 months. Also, pay attention to how the Financial sector is strengthening. I believe that the continued deflation/deleveraging that is taking place throughout most of the world will continue to drive global central banks to stay relatively neutral regarding rising interest rates. This will likely prompt an easy money policy throughout most of 2022 and drive continued revenues/earnings for sectors associated with consumers' engagement with the economy. If inflation weakens into 2022 while wage and jobs data stays strong, we may see more moderate strength in the Financial, Healthcare, Discretionary, and Technology sectors over the next 6 to 12+ months. Read more about Global Deleveraging Here: Delivering Covid Bubble Possible Volatility Risks In Foreign Markets (Source: StockChart.com) Financials May Pop 11% Or More Over The Next 6+ Months This Weekly IYG, IShares US Financial Service ETF, highlights the recent sideways price trend in the Financial sector and the potential for a 9% to 13% rally that may take place as the markets shift into focus for the Q4:2021 earnings. Yes, inflation is still a concern, but as long as the US consumer continues spending and engaging in the economy, the Financial Services and US Banks should show strong returns. If the US markets rally into the end of 2021, possibly reaching new all-time highs again, this trend may carry well into 2022 and drive Q4:2021 and Q1:2022 revenues and earnings for the Financial sector even higher. This Weekly XLF chart shows a very similar setup to IYG. I firmly believe the recent fear in the markets related to the US Federal Reserve, the new COVID variants, and the global markets deleveraging process is missing one critical component – the strength of the US markets and the strength of the US Dollar. As the rest of the world struggles to find support and economic strength, the US markets continue to rebound on the strength of the US consumer, the recovering economy, and the growth of these sectors. As long as the US Federal Reserve does not disrupt this trend, I believe Q1:2022 could be much more robust than many people consider. I also think the deflation/deleveraging process will work to take the pressures away from recent inflation trends. What could this mean for 2022? Early 2022 may well work as a "rebalancing" process for the global markets – possibly taking the pressures away from the strength in energy, commodities, and staple products/materials. This means pricing pressures will decrease while consumers are still earning and spending. The Financial sector should benefit from these trends over the next 6+ months. Watch for the Financials to start to increase throughout the end of 2021 and into early 2022. There are many ways to consider trading this move, but ideally, I think the rally will take place before the end of February 2022. Q1 is usually relatively strong, so that this trend may last well into April/May 2022. It all depends on what happens that could disrupt the current market sector trends. If nothing happens to disrupt the strength of the US Dollar and the strength of the US markets, then I believe the Financial Sector has a very strong opportunity for at least 10% to 11% growth. Want to learn more about the potential for a financial sector rally? Learn how I use specific tools to help me understand price cycles, set-ups, and price target levels. Over the next 12 to 24+ months, I expect very large price swings in the US stock market and other asset classes across the globe. I believe the markets are starting to transition away from the continued central bank support rally phase and may start a revaluation phase as global traders attempt to identify the next big trends. Precious Metals will likely start to act as a proper hedge as caution and concern start to drive traders/investors into Metals. If you need technically proven trading and investing strategies using ETFs to profit during market rallies and to avoid/profit from market declines, be sure to join me at TEP - Total ETF Portfolio. Have a great day! Chris VermeulenChief Market Strategist
2022 and Gold

2022 and Gold

Arkadiusz Sieron Arkadiusz Sieron 30.12.2021 17:54
  2021 was bad for gold. Unfortunately, 2022 doesn’t look any better, especially at the beginning. The end, however, gives the yellow metal some hope… Bye, bye 2021! It definitely wasn’t a year of gold. As the chart below shows, the yellow metal lost 5% of its value over the last twelve months, declining from $1,887.60 on December 30, 2020, to $1,794.25 on December 29, 2021. Thus, the gold bulls won’t miss 2021, I guess. What about me? Well, I correctly predicted in January that “gold’s performance in 2021 could be worse than last year”. However, I expected more bullish behavior. I thought that rising inflation would be more supportive of gold prices. I’m fully aware that gold is not a perfect inflation hedge, but historical analysis suggests that high and accelerating inflation should be positive for gold prices. After all, inflation lowers the real interest rates, the key fundamental factor in the gold market. However, rising inflation has prompted the Fed to tighten its monetary policy and speed up the tapering of its quantitative easing. Expectations of hikes in the federal funds rate in 2022 also strengthened. In consequence, as the chart below shows, bond yields rose, especially those short- and medium-term, creating downward pressure on gold prices. Thus, we’ve learned two important lessons in 2021: don’t just count on inflation, and don’t fight with the (hawkish) Fed. As you can see, bond yields haven’t returned to their pre-pandemic level yet. Although they don’t have to fully recover, they do have room for further increases. The issue here is that when inflation peaks and disinflation starts, inflation expectations could decline, boosting the real interest rates. Actually, market-based inflation expectations already peaked in November, as shown in the chart below. This indicates that worries about inflation had calmed and investors had regained some confidence in the US central bank’s ability to contain upward price pressure.   Implications for Gold Will 2022 be better for gold than 2021? It’s possible, but I’m not an optimist. I mean here: macroeconomic conditions will turn more bearish for gold. Despite the spreading of Omicron variant of coronavirus, 2022 could mark the end of the global Covid-19 epidemic with a full economic recovery and a return to normal conditions. Fiscal policy will tighten, while the Fed will adopt a more hawkish monetary policy than in 2021. Supply shocks are easing, so inflation may peak, while real interest rates go up further. Moreover, the US dollar may strengthen against the euro, as the ECB is slower with its monetary policy tightening. On the other hand, there are also some factors that could support gold prices. In 2021, GDP rebounded greatly after the economic crisis of 2020, and financial markets also recovered robustly. 2022 may be more challenging for economic growth and the financial sector, though. One thing is the base effect, while another is central banks’ policy normalization and rising interest rates. With massive public and private debts, the Fed’s tightening cycle could deflate asset and credit bubbles and even trigger a recession, or at least a market correction. However, there are no signs of market stress yet, so a financial crisis is not in my baseline scenario for the next year. 2023 (or even later) is a more probable timeframe. Hence, I believe that the end of 2022 may be better for gold than the beginning of the year, as mere expectations of the Fed’s tightening cycle could be replaced by worries about the consequences of interest rate hikes. Anyway, 2021 is (almost) dead. Long live 2022! I wish you a return to normalcy, shining profits and all the golden next year! If you enjoyed today’s free gold report, we invite you to check out our premium services. We provide much more detailed fundamental analyses of the gold market in our monthly Gold Market Overview reports and we provide daily Gold & Silver Trading Alerts with clear buy and sell signals. In order to enjoy our gold analyses in their full scope, we invite you to subscribe today. If you’re not ready to subscribe yet though and are not on our gold mailing list yet, we urge you to sign up. It’s free and if you don’t like it, you can easily unsubscribe. Sign up today! Arkadiusz Sieron, PhDSunshine Profits: Effective Investment through Diligence & Care
USDCHF tests daily support, AUDUSD consolidates gains, EURGBP falls below daily support

USDCHF tests daily support, AUDUSD consolidates gains, EURGBP falls below daily support

John Benjamin John Benjamin 03.01.2022 09:59
USDCHF tests daily support The US dollar softens over increased risk appetite. A drop below the lower band of the consolidation range at 0.9160 confirms a lack of interest in the greenback. The pair is testing the major demand zone around 0.9100 from the daily chart. A bearish breakout could jeopardize the pair’s rebound over the past quarter. It could also trigger a sell-off towards the psychological level of 0.9000. The bulls may be tempted to buy the dip. 0.9180 would be the first resistance to lift before they could turn the downbeat inertia around. AUDUSD consolidates gains The Australian dollar finds support from rising commodity prices. A bullish MA cross on the daily chart indicates improvement in underlying sentiment. The former supply zone between 0.7210 and 0.7220 has turned into a demand zone. Buyers may be eager to join the rally after the RSI returned to the neutrality area. 0.7290 is a fresh resistance, and a combination of profit-taking and fresh selling could temporarily weigh on the Aussie. 0.7120 is a second line of defense in case of a deeper retracement. EURGBP falls below daily support The pound outperforms the euro over diverging monetary policies. The break below the daily support at 0.8380 is an invalidation of the rebound in late November. The RSI’s repeatedly oversold situation has attracted some buying interest, but not enough to sustain a meaningful bounce. 0.8420 is now a fresh resistance. And only its breach could prompt sellers to cover. On the downside, 0.8365 is a fragile support. A breakout would further deteriorate sentiment and send the euro to February 2020’s lows near 0.8280.
Quiet Start to New Year

Quiet Start to New Year

Marc Chandler Marc Chandler 03.01.2022 14:10
January 03, 2022  $USD, autos, Canada, China, Currency Movement, Inflation, jobs, Mexico, PMI, Trade Overview:  The New Year begins slowly.  Japan, mainland China, Australia, New Zealand, and the UK markets remain closed.  While Hong Kong shares traded heavily, Taiwan, South Korea, and India moved higher.  Led by consumer discretionary and staple sectors, Europe's Stoxx 600 is up about 0.6%.  US futures are 0.4%-0.6% higher.  European yields have drifted lower, with the periphery doing bettter than the core.   The US 10-year yield will begin the local session at 1.51%.  The dollar is mostly firmer, after weakening broadly at the end of last year.   The Norwegian krone and New Zealand dollar are the most resilient,  while the Canadian dollar is off nearly 0.3% to pare the year-end gains, followed by the euro, which is in the middle of its $1.1335-$1.1380 range.  The greenback is holding above JPY115.00.  Emerging market currencies are mixed but mostly softer.  Higher than expected inflation is weighing on the Turkish lira. The South Korean won leads the other softer EM currencies. It is off about 0.25%.  The South African rand (~0.7%) and Russian ruble (0.5%) lead the advancers.  The JP Morgan Emerging Market Currency Index rose by about 2.5% in the last two weeks of 2021 and is slightly firmer today (~0.2%).  Iron ore is higher for the third consecutive session and rallied more than 45% from the middle of November through Xmas, before falling 5.3% last week.  Copper has a four-week 4.6% rally in tow but is slightly softer today.  Gold is stalling near $1830, the (61.8%) retracement of its sell-off from $1880 mid-November high.  Oil rallied for the last two weeks, with February WTI gaining about 6.2%.  OPEC+ meets tomorrow and WTI is up a nearly 1.5% to push above $76.  US natural gas gained slightly more than 1% in the past two weeks and is hovering around little changed level.  Recall that diverted shipments from the US and Asia to Europe saw natural gas prices collapse from above 180 euros on December 21 to 65.5 euros at the end of last week.   Asia Pacific China's property developers remain in the spotlight. Bloomberg estimates that the sector's debt servicing costs, including deferred wages, and maturing obligations are at $197 bln this month.  Evergrande shares were suspended in Hong Kong.  When the problems, bubbling below the surface for some time, emerged last September, global risk appetites were shaken, and many observers made comparisons to the Great Financial Crisis.  However, so far, the problems seem localized and unlike the US and Europe, new lending has not frozen.   The macro data highlights include China's Caixin PMI after the official one surprised on the upside. The preliminary PMIs for Australia and Japan steal the thunder from the final report. Japan's weekly MOF report on portfolio flows may be noteworthy. Foreign investors have been on a buying spree, buying the most Japanese bonds over the first three weeks of December in at least 20 years.   The dollar has risen for the past four weeks against the Japanese yen.  It closed the last two sessions slightly above JPY115.00 and remains above it today.  Recall, last year's high, set in late November, was near JPY115.50.  Today's high thus far is about JPY115.35.  The market may be reluctant to push the dollar much higher before Tokyo returns.  The Australian dollar advanced almost 2% in the second half of December.  It is stalling near the (50%) retracement of its decline from around $0.7555 in late October, found close to $0.7275.  Support is ahead of $0.7200.  Thin trading on New Year's Eve saw the dollar plunge to its low for the year near CNY6.34 before settling slightly above CNY6.3560.  Chinese officials have signaled their desire to avoid further yuan appreciation. If the divergence of monetary policy and higher fx reserve requirements are not sufficient, investors must be wary that other tools can be deployed.   Europe The uptick in Germany's December manufacturing PMI was revised away, leaving it unchanged from November at 57.4.  The flash estimate put it at 57.9.  In contrast, the French reading was revised up to 55.6 from 54.9.  This pared the decline from 55.9 in November.   Italy's manufacturing PMI held in better than expected, slipping to 62.0 from 62.8, the post-Covid high.  Spain, on the other hand, disappointed, with its manufacturing PMI falling to 56.2 from 57.1, its lowest since last February.  The net result was the flash aggregate estimate of 58.0 was sustained (58.4 in November).   The final Eurozone aggregate PMI is of passing interest. The main takeaway from the preliminary estimate continues to resonate:  the economic activity was slowing. The flash estimate put the composite at 53.4 (down from 55.4), the lowest since March. It has risen once in the last five months. More notable for the market will be the preliminary estimate of December inflation. Consumer prices are expected to have stabilized after reaching 4.9% year-over-year in November (2.6% core).   The Turkish government has tried to absorb the currency-risk that it has unleashed by forcing the central bank to cut key interest rates by 500 bp since mid-September.  It managed to spur a powerful short-covering squeeze in the lira, which saw the dollar fall from around TRY18.36 on December 20 to nearly TRY10.25 on December 23.  The greenback recovered to nearly TRY14.00 today, its sixth consecutive advance.  Today's CPI report blew away expectations.  Just in the month of December, Turkish consumer prices jumped nearly 13.6%.  This sent the year-over-year rate to almost 36.1%.  The core rate rose about 31.9% year-over-year.  Short covering helped lifted the euro a little more than 1.1% over the past two weeks.  It reached about $1.1385 on New Year's Eve.  It has not traded above $1.14 since mid-February.  Ahead of this week's two key economic reports (EMU CPI and US employment), the market may not have the conviction necessary to extend its year-end gains.  Sterling gained about 2.1% in the last two weeks.  It reached $1.3550 at the end of last week, its best level since mid-November.  It is little changed today.  The $1.3575 area corresponds to the (50%) retracement of its sell-off from $1.3835 area in late October.  Initial support is seen in the $1.3455-$1.3465 area.   America The US economic diary is jammed packed to begin the New Year. The highlight is the jobs report at the end of the week. The median forecast (Bloomberg survey) calls for a 400k increase after being disappointed with the 210k increase in November. The unemployment rate is expected to ease to 4.1% from 4.2%, and average earnings growth likely moderated. At the end of last year, an article in the Financial Times made two important observations. First, the uniqueness of the covid-impact renders seasonal adjustments suspect. The response rate was less than two-thirds, the lowest for the month of November in more than a decade. In November, the raw establishment survey showed a 778k gain in nonfarm payrolls, but the BLS adjustment cut a record 568k. Second, also complicating the data is the participation by businesses. The response rate was less than two-thirds, the lowest for the month of November in more than a decade.   The monthly auto sales report seems under-appreciated as a broad economic indicator. The supply chain disruptions depressed auto production and, in turn, auto consumption (not just in the US). However, late in the year, there seemed to be some improvement. The median forecast (Bloomberg survey) December US auto sales (seasonally adjusted annual rate) at 13.1 mln, which would then be the most since July. Elsewhere, the preliminary goods trade balance, like the flash PMI, is the real new news. The final reading tends not to be very meaningful. In any event, the trade deficit will widen considerably. The goods deficit widened to a record $97.8 bln from $83.2 bln.   Lastly, the FOMC minutes will be looked at especially for clues about the timing of the first hike. March? It is unreasonable to expect Canada to match the nearly 154k job increase reported for November. The median forecast is 25k. Canada also reports November trade figures. Canada's trade balance has steadily improved since March 2020, and the 12-month moving average through October was the highest in around six years. The swaps market has a little more than half of the first hike (25 bp) priced in at the January 26 Bank of Canada meeting.   Mexico's data highlights include worker remittances, which could be the most important source of private capital inflows. Without meaningful fiscal support and in the face of tightening monetary policy, the economy lacks much momentum. The December CPI is expected to have edged higher toward 7.5%. Monetary policy is where the drama will be as the new central bank governor takes the reins (Rodriguez). The 50 bp hike in December lifted the overnight target to 5.5%. If the market is concerned about a policy mistake or possible erosion of its independence, you would not know it from looking at the peso. It was the strongest currency in the world in December, rising almost 4.5% against the dollar.   The Canadian dollar rallied about 2% over the past two weeks.  This saw the US dollar retrace half of its rally from the mid-October low below CAD1.23 that peaked on December 20 by CAD1.2965.  That retracement came it near CAD1.2625.  The momentum indicators are still headed down, but the greenback is recovering today.  Initial resistance is seen around CAD1.2700.  A move above CAD1.2750 warns that a low may be in place.  The Mexican peso has rallied for the past five weeks, and despite the poor close at the end of the year, it is bid today.  The US dollar was sold from near MXN20.55 to MXN20.45 in the European morning but has found a bid near midday.  The low from New Year's Eve was set around MXN20.3070 and the 200-day moving average is closer to MXN20.27.    Disclaimer
Can't skip S&P 500 (SPX) and Nasdaq

Can't skip S&P 500 (SPX) and Nasdaq

Monica Kingsley Monica Kingsley 04.01.2022 15:53
Very good S&P 500 entry to 2022, and the HYG intraday reversal is the sight to rejoice. In the sea of rising yields, both tech and value managed to do well – the market breadth keeps improving as not only the ratio of stocks trading above their 200-day moving averages shows. Likewise VIX refused to reach even 19, and instead is attacking 16.50. This is not complacency – the bulls were thoroughly shaken at the entry to the session yesterday – but a buying interest that convincingly turned the tide during the day. As I wrote yesterday: (…) thanks to the credit markets message, I‘m not reading into Friday‘s weakness much. There is still more in this rally – value held better than tech, and high yield corporate bonds didn‘t really slide. The year end rebalancing will likely give way to solid Monday‘s performance. While VIX appears to want to move up from the 17 level, it would probably take more than one day to play out. As the Santa Claus rally draws to its close, the nearest data point worth looking forward for, is Tuesday‘s ISM Manufacturing PMI. It‘ll likely show still expanding manufacturing (however challenged GDP growth is on a quarterly basis), and that would help commodities deal with the preceding downswing driven by energy and agrifoods. Both of these sectors are likely to return to gains, and especially oil is. The only sector taking a beating yesterday, were precious metals. While inflation expectations were little changed (don‘t look for inflation to go away any time soon as I‘ve been making the case repeatedly), the daily rise in yields propelled the dollar to reverse Friday‘s decline, and that knocked both gold and silver off the high perch they closed at last week. Still, none of the fundamental or monetary with fiscal policy originating reasoning has been invalidated – not even the charts were damaged badly by Monday‘s weakness. As economic growth gets questioned while fiscal policy remains expansive unlike the monetary one, volatily in the stock market together with persistent inflation would be putting a nice floor beneath the metals. Even cryptos are refusing to yield much ground, the Ethereum to Bitcoin ratio keeps trading positively, and I‘m not even talking the rubber band that commodities (crude oil and copper) are. Very good for our open positions there, as much as in the S&P 500 – let them keep bringing profits. Let‘s move right into the charts (all courtesy of www.stockcharts.com). S&P 500 and Nasdaq Outlook Really bullish price action in both S&P 500 and Nasdaq – that was the entry to 2022 I was looking for. Embellished with prior downswing that lends more credibility to the intraday reversal. Credit Markets HYG refusing to decline more, is the most bullish sign for today imaginable – let it hold, for junk bonds now hold the key, especially if quality debt instruments keep declining steeply. Gold, Silver and Miners Gold and silver look to have reversed, but reaching such a conclusion would be premature. The long basing pattern goes on, and breakout higher would follow once the Fed‘s attempting to take the punch bowl away inflicts damage on the real economy (and markets), which is what the yield curve compression depicts. Crude Oil Crude oil is about to launch higher – and it‘s not a matter of solid oil stocks performance only. Just look at the volume – it didn‘t disappoint, and in the risk-on revival that I expect for today, black gold would benefit. Copper Copper swooned, but regained composure – the stop run is over, and we‘re back to base building for the coming upswing. Broader commodities certainly agree. Bitcoin and Ethereum Bitcoin and Ethereum are very gently leaning bullish, but I‘m not sounding the all clear there yet thanks to how long Bitcoin is dillydallying. Cryptos aren‘t yet out of the woods, but their posture has improved thus far noticeably. Summary First trading day of 2022 extended prior S&P 500 gains, and the risk-on appetite is improving as we speak. Commodities are reaping the rewards, and we‘re looking at another good day ahead, including in precious metals taking a bite at yesterday‘s inordinately large downswing. Nothing of the big factors ahead for Q1 2022 as described in today‘s analysis (I wholeheartedly recommend reading it in full for the greatest benefits – there is only so much / little that I can fit into a one paragraph summary), and that means we‘re looking at further stock market gains as the bull runs (including in commodities and precious metals, yes precious metals), aren‘t over in the least. Thank you for having read today‘s free analysis, which is available in full at my homesite. There, you can subscribe to the free Monica‘s Insider Club, which features real-time trade calls and intraday updates for all the five publications: Stock Trading Signals, Gold Trading Signals, Oil Trading Signals, Copper Trading Signals and Bitcoin Trading Signals.
Considering Portfolios In Times Of, Among Others, Inflation...

Dollar Eases

Marc Chandler Marc Chandler 05.01.2022 13:19
January 05, 2022  $USD, auto sales, Currency Movement, Omicron, PMI, technology Overview:  The tech sell-off in the US yesterday, ostensibly driven by higher rates, carried over into trading today.  South Korea, China, and Hong Kong led the regional sell-off.  News that China's zero Covid tolerance led to a lockdown of the city of Xian with a population of around 13 mln played on fears of more supply chain disruptions.  A second city, Yuzhou, considerably smaller, has also been lockdown.  Japan, India, and several smaller markets gain.  European bourses, where tech is less prominent have edged higher and the Stoxx 600 is extending its gain for the third consecutive session.  US futures are softer.  Asia and most European bonds yields have risen today, while the US 10-year is steady around 1.64%.  Of note, with Italian politics rising as an issue ahead of the presidential contest later this month, maybe helping lift the 10-year BTP to new six-month highs near 1.22%.  The US dollar is seeing its recent gains trimmed against the major currencies.  The Japanese yen is recovering a little after falling to five-year lows yesterday.  The Canadian dollar is the laggard today, amid a sell-off in its bonds.   The emerging market currency complex is mixed, and the JP Morgan EM FX index is recouping about half of yesterday's 0.35% loss.  Gold is firm but remains within Monday's range (~$1798.50-$1832). Among the industrial metals we monitor, iron ore bounced back after yesterday's minor loss and is at its best level since Xmas eve.  Copper is being turned back after yesterday's rally stalled near the $448 cap.  Crude oil is consolidating yesterday's gain and February WTI is near $77.00.  US LNG firm but within the $3.50-$4.00 range, while European (Dutch) is extending yesterday's dramatic gain (31.6%). Asia Pacific While China has moved quickly to impose lockdowns where cases of the virus appear, the tech sector is off to a poor start.  The Heng Seng Tech Index fell 4.6% today, the most since July, and the third consecutive drop.  Tencent is reducing its investments, and this took a toll on companies it backed.  Some link Tencent decision to Beijing's push against anti-competitive practices.  The NASDAQ Golden Dragon Index, which tracks Chinese lists companies fell 4.3% yesterday.  The tech sell-off was also clear in the US where the NASDAQ shed 1.3%.   Japan's "Mothers" gauge weighted toward small and medium-sized software and technology companies fell 5% to its lowest level since May 2020.  In the last hours of trading, after HK tightened social restrictions, the equity loss intensified.   Japan reported that December auto sales were 10.2% lower than a year ago.  Yesterday, the US reported disappointing December auto sales.  Auto sales were expected to have risen to their best level since August but instead fell to a 12.44 mln unit annual pace.  It was the lowest since September and reflects a 23.6% decline from December 2020.  Last year, US auto sales averaged 14.93 mln a month compared with 14.41 mln in 2020 and 16.91 mln in 2019.  Although supply is argued to be a bigger problem than demand, some producers, like GM, have reported a substantial rebuilding of inventories.   The dollar closed above JPY116.00 yesterday but has failed to sustain the upside momentum.  It peaked near JPY116.35 and is approaching support at the previous resistance around JPY115.50.  A break of JPY115.00, which seems unlikely ahead of the US jobs data on Friday, would lend credence to the idea that it was a false breakout.  The Australian dollar is firm near $0.7250 after recovering from the dip below $0.7200.  Still, it needs to resurface above $0.7275-$0.7280 to be notable.  We suspect the Aussie will pullback in North America and see initial support around $0.7220.  Outside of the dramatic year-end session, the Chinese yuan continues to trade quietly in a well-worn range.  The dollar continues to trade mostly between CNY6.3660 and CNY6.3830.  The PBOC set the dollar's reference rate at CNY6.3779.  The (Bloomberg) survey found a median expectation for CNY6.3773.  Note that offshore yuan (CNH) swaps/forward points are at their lowest level since April 2020 amid reports that overseas branches of state-owned banks are continuing to lend out CNH.  Lastly, we note that the China Securities Journal plays up the possibility that the PBOC eases policy ahead of the Spring Festival holiday (January 31).   Europe The main economic news from the eurozone today is the final reading of the December service and composite PMI.  The takeaway is that it is a little softer than the preliminary estimate.  On the aggregate level, the service PMI eased to 53.1 from 53.3 flash estimate and 55.9 in November.  The composite eased from 55.4 in November to 53.4 preliminary estimate and 53.3 final.  It is the lowest since March and is the fourth decline in five months.  While the German services PMI was revised higher, it remains below 50 boom/bust (48.7) and this coupled with the weakness in manufacturing saw the composite revised to 49.9 from 50.0 initially and 52.2 in November.  It is the weakest composite reading since June 2020.   France's service PMI slipped to 57.0 from the 57.1 flash reading and 57.4 in November.  The composite was revised higher to 55.8 from 55.6.  It stood at 56.1 previously.  Italy and Spain disappointed with readings of both the service and composite below expectations.  The Italian composite stands at 54.7 down from 57.6.  Spain's composite is at 55.4 from 57.6 in November.   Intervention by the Swiss National Bank draws attention as the euro traded at six-year lows at the end of last year.  Sight deposits rose by CHF3.37 bln in December after CHF2.27 bln and CHF2.57 bln in November and October, respectively.  Overall, sight deposits rose by CHF18.85 bln in 2021 after surging CHF119.3 bln in 2020.  Denmark also anchors its monetary policy in the exchange rate peg to the euro.  Its central bank sold DKK47 bln (~$7.1 bln) in December to defend the peg.  It was the largest intervention in seven years.  Although inflation is running a little below 4%, there is some speculation that the Danish central bank may have to cut rates as its next defense of the peg.   The euro is trading inside yesterday's (~$1.1270-$1.1320) range.  It is difficult for bulls or bears to find much to like with it hovering around the middle of the two-cent range that has confined it for nearly two months.  The 480 mln euro option at $1.1290 that expires today has likely been neutralized, but there are options at $1.1275 for 1.3 bln euros that expires tomorrow that may be in play still.  Sterling is steady at the upper end of yesterday's range when it briefly poked above $1.3555.  It is the highest it has been since November 10.  An option for GBP375 mln at $1.3505 expires tomorrow.  Initial support is seen near $1.3520, and a break could test support in the $1.3480-$1.3500 area.   America ADP 's private sector jobs estimate is the early feature in the US today.  The median estimate (Bloomberg survey) is for an increase of 410k after 534k in November.  The final PMI will likely draw little attention.  The FOMC minutes from last month's meeting, at which officials announced the acceleration of tapering will be looked upon for insight into the Fed's balance sheet and any signal that it may allow maturing issues to roll-off soon.  Besides the rate hikes, for which the market has priced in three this year, the balance sheet is quickly emerging as the new focus.   Also, on tap today is the EIA inventory data.  The API reportedly showed a large rise in gasoline inventories but another drop (6.4 mln barrels) in crude stocks.   Canada's build permits are not typically a market mover.  Tomorrow it reports the November trade balance, and the highlight is Friday's jobs data.  It is difficult to envision a report as strong as November’s nearly 154k increase.  Proportionately, it would be as if the US nonfarm payrolls rose by around 1.7 mln.  Mexico reports December domestic auto sales.  In November, its auto sales were off about 13.5% year-over-year.  The highlight of the week is Friday's CPI figures.  The year-over-year pace is expected to have edged up from 7.37% in November.   The US dollar is trading inside yesterday's range against the Canadian dollar (~CAD1.2665-CAD1.2765), which was inside Monday's range (~CAD1.2630-CAD1.2780).  It is trading around CAD1.2720 near midday in London.  The intraday technical indicators seem to favor a retest of the greenback's highs.  The US dollar's performance against the Mexican peso is similar.  It is inside yesterday's range, which was inside Monday's range (~MXN20.41-MXN20.65).  The US dollar looks soft and could test the December 31 low near MXN20.33.   The 200-day moving average is near MXN20.27 and the greenback has not traded below it in a little more than two months.    Disclaimer
Gold and silver - The beginning of the year 2022 may not satisfy

Gold and silver - The beginning of the year 2022 may not satisfy

Przemysław Radomski Przemysław Radomski 04.01.2022 16:10
  Gold, silver, and mining stocks started 2022 with a bang. However, this wasn’t the kind of fireworks investors were hoping for. While gold, silver, and mining stocks partied hard into year-end, the trio woke up to massive hangovers on Jan. 3. Although I’ve been warning for some time that mining stocks would stumble in 2021, the New Year is still filled with old problems. For example, the GDX ETF has been making lower lows and lower highs for months, and when its RSI (Relative Strength Index) approaches 70, the senior miners often run out of gas. For context, I highlighted the events with the blue vertical dashed lines below. Moreover, with the senior miners’ current price action following the ominous paths of 2000, 2008, and 2013, and their stochastic indicator still signaling overbought conditions, Monday’s weakness may be a sign of things to come. Please see below: Please also consider the implications of year-end tax-loss harvesting. With the general stock market rallying to start the New Year, losing positions that were sold to offset capital gains near the end of 2021 were likely repurchased on Jan. 3. However, gold, silver, and mining stocks didn’t benefit from the phenomenon. As a result, while the GDX ETF may have outperformed gold, the relative strength was immaterial within the overall picture. Turning to the HUI Index’s long-term chart, the same bearish forecast is present. For example, I marked the specific tops with red and black arrows. In the current situation, we saw yet another small move up, but that’s most likely because price moves are now less volatile. The areas marked with red ellipses remain similar and show back-and-forth movement before the big decline. As a result, we’ve entered a consolidation phase, and the implications are not bullish, but bearish. Making three of a kind, the GDXJ ETF’s corrective upswing has likely run its course. Interestingly, the junior miners’ current rally mirrors the small correction that materialized in mid-2021. Back then, the GDXJ ETF rallied on low volume and didn’t recapture its 50-day moving average. With the same tepid strength present today, the drawdown that followed in mid-2021 will likely commence once again. On top of that, the behavior of the GDXJ ETF’s RSI is also similar – with the indicator moving from roughly 30 to 50. For context, I highlighted the similarities with green and purple ellipses below. Also noteworthy, similar developments occurred in February/March 2020, before the profound plunge unfolded. As a result, the GDXJ ETF looks set for another sharp drawdown over the medium term and predicting higher prices might be misleading. Finally, while my short position in the GDXJ ETF proved quite prescient in 2021, the junior miners continue to underperform the senior miners. With the GDX/GDXJ ratio likely to confront new lows in the coming months, the GDXJ ETF should remain a material laggard in 2022. In conclusion, gold, silver, and mining stocks started off 2022 with a bang. However, it wasn’t the kind of fireworks that investors were hoping for. With each new celebration shorter in magnitude, it’s likely only a matter of time before their parties are canceled. As a result, the precious metals still confront the same bearish technical outlooks that plagued them in 2021. While mean reversion remains undefeated over the long term, the wait may prove longer than many expect. Thank you for reading our free analysis today. Please note that the above is just a small fraction of today’s all-encompassing Gold & Silver Trading Alert. The latter includes multiple premium details such as the targets for gold and mining stocks that could be reached in the next few weeks. If you’d like to read those premium details, we have good news for you. As soon as you sign up for our free gold newsletter, you’ll get a free 7-day no-obligation trial access to our premium Gold & Silver Trading Alerts. It’s really free – sign up today. Przemyslaw Radomski, CFAFounder, Editor-in-chiefSunshine Profits: Effective Investment through Diligence & Care * * * * * All essays, research and information found above represent analyses and opinions of Przemyslaw Radomski, CFA and Sunshine Profits' associates only. As such, it may prove wrong and be subject to change without notice. Opinions and analyses are based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are deemed to be accurate, Przemyslaw Radomski, CFA and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Radomski is not a Registered Securities Advisor. By reading Przemyslaw Radomski's, CFA reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Przemyslaw Radomski, CFA, Sunshine Profits' employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.
Will 2022~23 Require Different Strategies For TradersInvestors Part II

Will 2022~23 Require Different Strategies For TradersInvestors Part II

Chris Vermeulen Chris Vermeulen 06.01.2022 00:19
Is The Lazy-Bull Strategy Worth Considering? Part III started this article by highlighting how difficult some 2021 strategies seemed for many Hedge Funds and Professional Traders. It appears the extreme market volatility throughout 2021 took a toll on many systems and strategies. I wouldn't be surprised to see various sector ETFs and Sector Mutual Funds up 15% to 20% or more for 2021 while various Hedge Funds struggle with annual returns between 7% and -5% for 2021.After many years in this industry and having built many of my own strategies over the past decade, I've learned one very important facet of trading strategy development – expect the unexpected. A friend always told me to "focus on failure" when we developed strategies together. His approach to strategy design was "you develop it do too well in certain types of market trends and volatility. By focusing on where it fails, you'll learn more about the potential draw-downs and risks of a strategy than ignoring these points of failure". I tend to agree with him.In the first part of this research article, the other concept I started discussing was how traders/investors might consider moving away from strategies that struggled in 2022. What if the markets continue trending with extreme volatility throughout 2022 and into 2023? Suppose your system or strategy has taken some losses in 2022, and you have not stopped to consider volatility or other system boundaries as a potential issue. In that case, you may be looking forward to a very difficult 12 to 14+ months of trading in 2022 and 2023.Volatility Explodes After 2017Current market volatility/ATR levels are 300% to 500% above those of 2014/2015. These are the highest volatility levels the US markets have ever experienced in the past 20+ years. The current ATR level is above 23.20 – more than 35% higher than the DOT COM Peak volatility of 17.15.As long as the Volatility/ATR levels stay near these elevated levels, traders and investors will likely find the markets very difficult to trade with strategies that cannot properly adapt to the increased risks and price rotations in trends. Simply put, these huge increases in price volatility may chew up profits by getting stopped out on pullbacks or by risking too much in terms of price range/volatility.Sign up for my free trading newsletter so you don’t miss the next opportunity!The increased volatility over the past 5+ years directly reflects global monetary policies and the COVID-19 global response to the crisis. Not only have we attempted to keep easy money policies for far too long in the US and foreign markets, but we've also been pushed into a hyperbolic price trend that started after 2017/18, which has increased global debt consumption/levels to the extreme.2022 and 2023 will likely reflect a very strong revaluation trend which I continue to call a longer-term "transition" within the global markets. This transition will probably take many forms over the next 24+ months – but mostly, it will be about deleveraging debt levels and the destruction of excess risk in the markets. In my opinion, that means the strongest global economies may see some strength over the next 24+ months – but may also see extreme price volatility and extreme price rotation as this transition takes place.Expect The Unexpected in 2022 & 2023The US major indexes had an incredible 2021 – rallying across all fears and COVID variants. The NASDAQ and S&P500 saw the biggest gains in 2021 – which may continue into early 2022. Yet I feel the US markets will continue to transition as the global markets continue to navigate the process of unwinding excess debt levels and potentially deleveraging at a more severe rate than many people expect.Because of this, I feel the US markets may continue to strengthen as global traders pile into the US Dollar based assets in early 2022. Until global pressures of deleveraging and transitioning away from excesses put enough pressure on the US stock market, the perceived safety of US assets and the US Dollar will continue as it is now.(Source: www.StockCharts.com)Watch For Sector Strength In Early 2022 As Price-Pressure & Supply-Side Issues Create A Unique Opportunity For Extended Revenues/ProfitsI believe the US markets will see a continued rally phase in early 2022 as Q4:2021 revenues, earnings, and economic data pour in. I can't see how any global economic concerns will disrupt the US markets if Q4:2021 data stays stronger than expected for US stocks and the US economy.That being said, I do believe certain sectors will be high-fliers in Q1:2022 and Q2:2022 – at least until the supply-side issues across the globe settle down and return to more normal delivery expectations. This means sectors like Automakers, Healthcare, Real Estate, Consumer Staples & Discretionary, Technology, Chip manufacturers, and some Retail segments (Construction, Raw Materials, certain consumer products sellers, and specialty sellers) will drive a new bullish trend in 2022.The US major indexes may continue to move higher in 2022. They may also be hampered by sectors struggling to find support or over-weighted in symbols that were over-hyped through the end of 2020 and in early 2021.I have been concerned about this type of transition throughout most of 2021 (particularly after the MEME/Reddit rally phase in early 2021). That type of extreme trending usually leads to an unwinding process. I still don't believe the US and global markets have completed the unwinding process after the post-COVID extreme rally phase.(Source: www.StockCharts.com)Will The Lazy-Bull Strategy Continue To Outperform In 2022 & 2023?This is a tricky question to answer simply because I can't predict the future any better than you can. But I do believe moving towards a higher-level analysis of global market trends when the proposed "transitioning" is starting to take place allows traders to move away from "chasing price spikes." It also allows them to position for momentum strength in various broader market sectors and indexes.I suspect we'll start to see annual reports from some of the biggest institutional trading firms on the planet that show feeble performance in 2021. This recent article caught my attention related to Quant Funds in China.I believe we will see 2022 and 2023 stay equally distressing for certain styles of trading strategies while price volatility and an extreme deleveraging/transitioning trend occur. Trying to navigate this type of choppy global market trending on a short-term basis can be very dangerous. I believe it is better to move above all this global market chop and trade the bigger momentum trends in various sectors and indexes.Part III of this research article will focus on Q1 through Q4 expectations for 2022 and 2023. I will highlight broader sector/index trends that may play out well for investors and traders who can move above the low-level choppiness in the US and global markets.WANT TO LEARN MORE ABOUT THE TECHNICAL INVESTOR AND THE TECHNICAL INDEX & BOND TRADING STRATEGIES?Learn how I use specific tools to help me understand price cycles, set-ups, and price target levels in various sectors to identify strategic entry and exit points for trades. Over the next 12 to 24+ months, I expect very large price swings in the US stock market and other asset classes across the globe. I believe the markets are starting to transition away from the continued central bank support rally phase and may begin a revaluation phase as global traders attempt to identify the next big trends. Precious Metals will likely start to act as a proper hedge as caution and concern start to drive traders/investors into Metals.I invite you to take a few minutes to visit the Technical Traders website to learn about our Technical Investor and Technical Index and Bond Trading strategies and how they can help you protect and grow your wealth.Have a great day!
Game of Chicken

Game of Chicken

Monica Kingsley Monica Kingsley 06.01.2022 16:18
FOMC minutes didn‘t reveal fresh hawkish tunes, but markets were caught off guard – unlike 3 weeks ago during the statement and press conference. It‘s as if S&P 500 and pretty much everything else woke up to the hawkish reality only now. In spite of the new liquidity powered Santa Claus rally, the sudden realization that the March Fed meeting might very well bring in a first rate hike, forced a sharp downturn across the board.The dollar wasn‘t too affected by the daily rise in yields that hit junk bonds particularly hard. The yield curve keeps being compressed, and is getting closer to the point of inversion. The likely good employment data on Friday would provide the Fed with a convenient cover to embark on and keep pursuing the tightening route. Not that it would have the power to break inflation (even at the professed very accelerated tapering pace – let alone the relatively measly hikes when CPI, PPI or PCE deflator are considered) – this game of chicken with the markets risks a tantrum that could bring up the „fond memories“ of Dec 2018.Yes, the risks of crashing the airplane would grow up over the coming weeks and months – the Fed is walking a very tight rope indeed. Markets are spooked, and the coming days would show whether this is already the start of something worse, or whether we can still shake it off and continue upwards till the Olympics. I‘m still leaning towards the latter.Anyway, good to have closed the profitable S&P 500 and crude oil positions in time.Let‘s move right into the charts (all courtesy of www.stockcharts.com).S&P 500 and Nasdaq OutlookTech understandably declined more than value – thanks to yields. S&P 500 bottom might not yet be in really. Bonds and tech need to stabilize first.Credit MarketsHYG is still holding the key, and would provide an early turnaround sign. The plunge in LQD isn‘t looking short-term encouraging in the least – the dust hasn‘t yet settled.Gold, Silver and MinersGold and silver still haven‘t left the sideways consolidation pattern – the white metal would be more affected through the inflation taming fears. That‘s though a premature calculation as inflation might turn out less amenable to be put down fast.Crude OilUnlike practically everything else, crude oil recovered strongly from the FOMC-induced setback – and certainly looks like the strongest of the pack at the moment.CopperCopper gave up advantageous position, and isn‘t really following (energy-led) commodities up yet. The long sideways consolidation is testing the bulls‘ resolve even as the pressure to go higher is building up. The same for silver, by the way.Bitcoin and EthereumBitcoin and Ethereum clearly lost the remainder of the bullish posture – it‘s turning out they aren‘t ready to defy the shrinking global liquidity.SummaryS&P 500 bulls look to get under some more pressure before the repeated hawkish message gets absorbed. The bond markets coupled with the dollar would reveal just how serious the bulls are about buying this dip and now. My bet is that they would remain shaken, and looking hesitantly for a floor. If there is one overarching message from yesterday, it‘s that the hawkish Fed appreciation has been woefully misapprehanded, and if followed through on in its entirety, would lead to a dangerous game of chicken with the markets (we aren‘t there quite yet).Thank you for having read today‘s free analysis, which is available in full at my homesite. There, you can subscribe to the free Monica‘s Insider Club, which features real-time trade calls and intraday updates for all the five publications: Stock Trading Signals, Gold Trading Signals, Oil Trading Signals, Copper Trading Signals and Bitcoin Trading Signals.
Shiba Inu price could surge 30% if SHIB can overcome this hurdle [Video]

Shiba Inu price could surge 30% if SHIB can overcome this hurdle [Video]

FXStreet News FXStreet News 07.01.2022 15:56
Shiba Inu price bounces off the daily demand zone, extending from $0.0000269 to $0.0000293.Increased buying pressure could propel SHIB by 31% to sweep the range high at $0.0000399.A four-hour candlestick close below $0.0000269 will create a lower low, invalidating the bullish thesis.Shiba Inu price is at an interesting point in its journey since it has produced two areas of liquidity in the opposite direction. Adding to this exciting development is one hurdle that blocks the path for SHIB and might hinder the bullish outlook.Shiba Inu price prepares for a rallyShiba Inu price set up two swing lows at $0.0000283 on December 20, 2021, and January 5, creating the double bottom setup. Interestingly, this setup took place inside the daily demand zone, extending from $0.0000269 to $0.0000293.While SHIB has recovered above this area, it needs to rally 12% before it faces the trading range’s midpoint at $0.0000341. Clearing this barrier will lead the meme coin to face $0.0000349, which harbors the buy-stop liquidity resting above it. Shiba Inu price needs to clear $0.0000349 before it can reach the range high at $0.0000399, completing its 31% ascent.SHIB/USDT 4-hour chartDepicting the importance of the hurdle at $0.0000349 is IntoTheBlock’s Global In/Out of the Money (GIOM) model. This on-chain metric shows that roughly 110,570 addresses that purchased 82,785 billion SHIB tokens at an average price of $0.0000350 are underwater.Therefore, Shiba Inu price needs to flip this barrier to reduce the selling pressure from holders trying to break even.Beyond this area, the resistance barriers thin out until $0.0000680, supporting the bullish outlook detailed above.SHIB GIOMFurther indicating the oversold nature of Shiba Inu price is the Market Value to Realized Value (MVRV) model. This on-chain metric is used to determine the average profit/loss of investors that purchased SHIB over the past month.Currently, 30-day MVRV is hovering at -11.53%, an opportunity zone, suggesting that SHIB holders are at a loss and are less likely to sell their tokens. Moreover, long-term holders tend to accumulate in this area, which could serve as a significant source of buying pressure and could be the reason to kick-start an uptrend.SHIB MVRVWhile things are looking up for Shiba Inu price, a four-hour candlestick close below the daily demand zone’s lower limit at $0.0000269 will create a lower low, invalidating the bullish thesis. This development could trigger a crash, knocking Shiba Inu price to retest the $0.0000237 support level.
USD to CAD chart is (probably as expected) linked with jobs stats

USD to CAD chart is (probably as expected) linked with jobs stats

John Benjamin John Benjamin 10.01.2022 10:30
EURUSD tests key resistance The US dollar retreated after December’s nonfarm payrolls came in far below expectations. The pair has been in a narrowing range between 1.1270 and 1.1365. The previous fall below 1.1280 added pressure on the buy side, though it turned out to be an opportunity for the bulls to accumulate at a bargain. A break above the resistance could end the sideways action and trigger a runaway rally towards 1.1460. The RSI surged into the overbought area and may cause a brief pullback above 1.1295. USDCAD tests daily support The loonie rallied after Canada added twice as many jobs as expected in December. The year-end sell-off met strong bids near the daily support at 1.2620. But the rebound came to halt at the supply zone around 1.2810, which used to be a support from the previous consolidation. The RSI’s double top in the overbought zone has restrained the upward momentum. 1.2730 is a fresh resistance as price action is about to retest the critical level at 1.2620. A bearish breakout could trigger a plunge to 1.2540. GER 40 seeks support The Dax 40 edged lower as rising CPI in the eurozone argues in favor of tightening. The index saw stiff selling pressure right under the all-time high at 16300. A bearish RSI divergence in this major supply area indicates a lack of commitment from the bulls as buying slows down. A combination of profit-taking and fresh selling has led to a drop below 16100, a warning sign for a steeper correction. 15800 is the next key support. A breakout could send the index to 15500 at the base of the latest rally.
Bitcoin (BTC) and crypto in general became even more appealing recently

Bitcoin (BTC) and crypto in general became even more appealing recently

Alex Kuptsikevich Alex Kuptsikevich 10.01.2022 10:37
The cryptocurrency market received moderate support from retail buyers over the weekend. Over the past 24 hours, the capitalisation of all coins rose 0.22%, according to CoinMarketCap, approaching $1.97 trillion. The top altcoins lost 11-19% over 7 days but found buyers over the weekend. The $2 trillion mark in total crypto valuation turned into local resistance last week, from where pressure has intensified. However, a strong buy-the-deep mood has kept the market from forming a downward spiral. The cryptocurrency Fear & Greed Index was stuck at 23 over the weekend, indicating extreme fear. The index has been hovering at the lower half of the scale since November 18th. Optimists, however, may note that the indicator has bounced back from the 10 level. The dip here in May and July coincided with the lows within the impulse, hinting at the potential for some technical rebound. Technical analysis also suggests a rebound in BTCUSD, with the RSI on daily charts showing attempts to move up from the oversold area below 30 and the price hovering near the reversal area in September. A longer-term view of the cryptocurrency market makes one more cautious about its prospects. Bitcoin has been in a downward corridor since November last year, having fallen to its lower boundary by the end of last week. Local overselling is a chance for a rebound, but the overall trend is still downwards. Cryptocurrency investors should not dismiss the idea of 4-year cycles in Bitcoin affecting the entire sector just yet. According to this hypothesis, 2022 could turn out to be a repeat of 2018 and 2014 - bear market years after a surge in the previous two years. Thus, it is worth paying increased attention to whether the crypto market manages to return to growth in the coming days and weeks. A strong start to the year will put these fears to rest.
Intraday Market Analysis – USD Under Pressure

Intraday Market Analysis – USD Under Pressure

John Benjamin John Benjamin 12.01.2022 09:05
GBPUSD rally gains tractionThe US dollar fell after the Fed Chair’s remark that no decision has been made on quantitative tightening. The pair showed some weakness near the daily resistance at 1.3600.The RSI’s double top in the overbought area led some buyers to take chips off the table. However, a follow-up close above the resistance indicates that the bulls are still in control of the direction.Sentiment remains upbeat and 1.3700 from the start of the November sell-off would be the next target. 1.3570 is a fresh support in case of a pullback.NZDUSD bounces off major supportThe New Zealand dollar recovers as risk appetite returns following Jerome Powell’s testimony.The previous rebound towards 0.6830 met strong selling pressure. Its failure to achieve a new high suggests that the bearish bias lingers. The drop below 0.6740 further weighs on the kiwi. A bounce could still be an opportunity to sell into strength.The bulls need to clear 0.6835 in order to turn the tide, and 0.6730 is a fresh support. A bearish breakout may test the base of December’s bounce at 0.6700.EURJPY maintains uptrendThe euro recoups losses as traders dump safe-haven currencies. The fall below 130.80 has shaken out some weak hands.Nonetheless, the upward bias remains intact after the single currency saw solid demand over the psychological level of 130.00. The RSI’s oversold situation compounded the attractiveness of the discount.A rise above 131.60 would bring in momentum traders and clear the path for an extended rally to 132.55 near last October’s peak. 129.10 is the second line of defence in case of a deeper retracement.
All Eyes on Copper

All Eyes on Copper

Monica Kingsley Monica Kingsley 13.01.2022 15:36
S&P 500 sold off only a little in the wake of CPI data – probably celebrating that the figure wasn‘t 8% but only 7%. As if that weren‘t uncomfortable already – and the Fed wants to field accelerated taper, and perhaps even four quarter-point rate hikes to tame it? Oh, and perhaps also balance sheet reduction through not reinvesting proceeds from matured bonds and notes as talked on Monday – sure, that will do the trick. Looking at Treasuries over the prior two days shows that the Fed isn‘t being questioned. Value defends the high ground while tech rallies – Monday‘s fear with its brief return Tuesday, is in the rear-view mirror, compacency returning, and VIX again below 18. Prior upswing consolidation right next, is the most likely action for S&P 500. The real gains though are being made elsewhere – in crude oil and copper. With commodities back on fire, these two have certainly greater appreciation potential next than stocks or cryptos – so, long live our open longs there! The red metal has defied base metals intraday consolidation yesterday, and that has consequences for inflation trades – silver is waiting in the wings. To give you an idea how mispriced the risk of persistently unpleasant inflation is, yesterday‘s CPI coming only in line with expectations, caused inflation expectations to decline… At least the dollar took a rightful breather – its prior sideways consolidation has been broken to the downside. Currencies are starting to figure out inflation, and just how far and inadequate Fed‘s promise to take on it, has been... Let‘s move right into the charts (all courtesy of www.stockcharts.com). S&P 500 and Nasdaq Outlook Daily consolidation of prior strong gains that‘s likely to go on today – stocks are making up their mind as to where next in the very short run now that the bears had been repelled. Credit Markets HYG is likewise looking to need some time to move higher next – volume is declining, and a brief sideways move is most likely now. Gold, Silver and Miners Gold and silver are still sideways to up – not down. The pressure to go higher is building up, waiting for the Fed miscalculation, or perception of the consequencies of its upcoming action. The faith in the central bank isn‘t yet really shaken. Crude Oil Crude oil finds it easiest to keep rising – the technical and fundamental conditions are in place, and oil stocks will continue to be the leading S&P 500 performers. Copper Copper is starting to play catch up to the other commodities finally – it‘ll be a rocky ride, but the red metal has waken up, and cast a clear verdict on inflation that has to seep into other markets next. Will take time, but we‘ll get there. Bitcoin and Ethereum Bitcoin and Ethereum didn‘t convince on the upside, and with no dovish surprise on the horizon, the path of least resistance probably remains down for now. Summary S&P 500 turnaround is getting cemented, and worries about the hawkish Fed or inflation look to be momentarily receding. Not even the PPI is waking up the markets – the focus seems to be on measly 0.1% undershoot. Ironic, pathetic. While stocks keep on moving in a tight range, and still want to keep on appreciating modestly, the real action is happening in the commodities, to be followed by precious metals. Thank you for having read today‘s free analysis, which is available in full at my homesite. There, you can subscribe to the free Monica‘s Insider Club, which features real-time trade calls and intraday updates for all the five publications: Stock Trading Signals, Gold Trading Signals, Oil Trading Signals, Copper Trading Signals and Bitcoin Trading Signals.
Having A Look At The Markets Considering Tensions, COVID-19 And National Banks Decisions

US 100 doesn't go really high, XAGUSD seems to feel quite good

John Benjamin John Benjamin 14.01.2022 08:38
US 100 revisits major support The Nasdaq 100 faltered after an unexpected rise in US initial jobless claims. The tech index bounced off the demand zone around 15200 which used to be a resistance on the daily chart. A bullish divergence revealed a slowdown in the sell-off momentum. The latest break above 15820 prompted some sellers to cover but came under pressure at 15980. After intraday traders took profit, 15200 is a critical support to keep the rebound relevant. A deeper correction would send the price to 14900. EURGBP stuck in bearish trend The euro rose after ECB Vice President Luis de Guindos said the inflation spike may last longer than projected. Nonetheless, the bearish sentiment still prevails after the pair failed to hold on to 0.8370. The former support has now turned into a resistance. The current consolidation could be a distribution phase and a drop below 0.8325 could send the price to February 2020’s lows near 0.8290. On the upside, the bulls have the challenging task of lifting offers around 0.8370 and then 0.8415 before they could attract more followers. XAGUSD tests major resistance Silver extends its recovery on the back of a weak US dollar. The metal saw support at the psychological level of 22.00. A break above the resistance at 22.80 and then an acceleration to the upside indicates strong buying interest. An overbought RSI has temporarily held the rally back. The bulls are testing the daily resistance at 23.40. A breakout could shake sellers out and trigger a reversal above 24.00. On the downside, buyers could be lurking around 22.60 in case of a pullback.
(TSLA) Tesla Stock with +1.75% There are many factors which can influence its price.

(TSLA) Tesla Stock with +1.75% There are many factors which can influence its price.

FXStreet News FXStreet News 17.01.2022 15:56
Tesla gains on Friday as Nasdaq finished in the green. TSLA stock closes at $1049.61 for a gain of 1.75%. Tesla shares are still in a downtrend but holding above the key pivot. Tesla (TSLA) returned to the green on Friday as the NASDAQ took the crown for best performing index, while the Dow suffered a bank burnout. Bank stocks reported on Friday in the form of Citigroup (C), JPMorgan (JPM) and Wells Fargo (WFC), and the results were decidedly mixed. Citigroup and JPMorgan fell heavily and dragged the Dow down with them. Yields though remained under control, allowing the Nasdaq to breathe lighter and make some headway after recent losses. This helped Tesla back into the green, but the stock remains choppy and sideways in motion. Tesla Stock News The Wall Street Journal reported over the weekend that a Tesla lawyer asked Cooley LLP, an international law firm, to fire one of its lawyers who had previously worked at the US SEC. The lawyer in question had supposedly interviewed Elon Musk in the SEC investigation in 2018 into Musk after he claimed on Twitter that he had gotten funding in place to take Tesla private. The SEC investigation led to Elon Musk and Tesla each paying $20 million fines. According to the WSJ article, a Tesla lawyer asked Cooley LLP to fire the attorney late last year, but Cooley did not follow through on the request. Tesla has used alternative law firms on several cases since December. Tesla and Cooley LLP have not yet responded to CNBC requests for comment. This may add to pressure on the stock despite Friday's rebound. Earlier in the week, investors and Cybertruck fans were left disappointed with a further delay to the truck's production timeline release, which has now been pushed to 2023. Tesla Stock Forecast Irrespective of the news, we have an indecisive chart here. TSLA stock's most recent high was a lower one than the previous and has put in a series of lower lows. This means it is currently in a short-term downtrend. $980 is the key pivot that will signify more losses. Breaking $980 makes the target $886. Holding above $980, and the target is $1,200. However, we have a declining Relative Strength Index (RSI) and Moving Average Convergence Divergence (MACD). The MACD has also crossed into negative territory. Tesla chart, daily
GWENT Masters Season 3 Concludes! New GWENT Update Coming Tomorrow!

GWENT Masters Season 3 Concludes! New GWENT Update Coming Tomorrow!

Finance Press Release Finance Press Release 06.12.2021 14:27
CD PROJEKT RED announces that Alexander "TLG_Cyberz" Schmidt has claimed the ultimate victory in the Season 3 GWENT World Masters tournament this past weekend, earning the title of GWENT World Champion in the official Witcher Card Game esports series. The season's grand finale tournament played out over the course of Saturday and Sunday, December 4th-5th. Streamed live on Twitch in its entirety, it saw 8 of the best GWENT players from around the world competing in high-stakes battles for a share of the $71,000 prize pool and the title of GWENT World Champion. Relive GWENT World Masters on the official CD PROJEKT RED Twitch channel. The final tournament prize pool distribution and standings are as follows: WINNERAlexander "TLG_Cyberz" Schmidt (Germany)FINALISTSAlexander "TLG_Cyberz" Schmidt (Germany) — $36,140Ilya "BigKuKuRUzina35" Lyapin (Russia) — $9,230SEMIFINALISTSZhang "lord-triss" Yusheng (China) — $8,305Oleg "Akela114" Nikolaev (Russia) — $7,455QUARTERFINALISTSAleksander "TLG_Pajabol" Owczarek (Poland) — $3,480PaweÅ‚ "kams134" Skoroda (Poland) — $2,840Damian "TailBot" Kaźmierczak (Poland) — $1,775Elias "theshaggynuts" Sagmeister (Austria) — $1,775 During the event, before the final match, CD PROJEKT RED also revealed that a new content update for GWENT is coming Tuesday, December 7th. The update will add 12 new cards (2 per each faction), while also introducing a number of regular balance changes. The video overview for the update is available on Twitch, via the GWENT World Masters tournament recording, as well as on GWENT's official YouTube channel. CD PROJEKT RED would like to thank all participants and everyone who watched live to help make GWENT World Masters such a fantastic event.For a complete overview of GWENT Masters — the official esports series for GWENT: The Witcher Card Game — including the ruleset, format, and tournament dates, visit masters.playgwent.com.GWENT: The Witcher Card Game is available for free on PC via GOG.COM and Steam, Apple M1 Macs running macOS, as well as on Android and iOS. For more information on GWENT, visit playgwent.com.   Source: CD Projekt
USD To RUB And EUR To RUB Charts With Some Green Candles

USD To RUB And EUR To RUB Charts With Some Green Candles

Alex Kuptsikevich Alex Kuptsikevich 24.01.2022 10:28
The ruble remains under pressure on Monday after four weeks of decline. The USDRUB is above 77.7 and approaching the area of last year's highs. Technically, the situation looks like a moment of truth for the ruble. An easing of geopolitical tensions has the potential to turn it around on the way to 78, as it did several times last year. And we can see that Russian politicians the previous week were ready for more constructive negotiations and compromises. However, it has not yet come to de-escalation, and pressure on the rouble persists. Reports that the US and the UK are set to expel diplomats from Kyiv have created a new local momentum of pressure on the ruble. Fixing the dollar above 78 rubles today could be the starting point for a jump of USD/RUB to 80 and EUR/RUB to 90 this week. At the same time, we believe that the overheating is close to the peak. Further chances for stabilising the situation at the current level or even compromising are higher than stricter rhetoric. In this case, the ruble would have the opportunity for another turn down from 78-80 for the dollar and 88-90 for the euro. In a partial geopolitical agreement, the Russian currency would remain tied to global risk demand, which is contracting in January. Therefore, even with a favourable geopolitical scenario, one should not expect the rouble to quickly return to levels of the start of the year.
COT Currency Speculator Sentiment rising for Euro & British Pound Sterling

COT Currency Speculator Sentiment rising for Euro & British Pound Sterling

Invest Macro Invest Macro 24.01.2022 11:36
By InvestMacro | COT | Data Tables | COT Leaders | Downloads | COT Newsletter Here are the latest charts and statistics for the Commitment of Traders (COT) data published by the Commodities Futures Trading Commission (CFTC). The latest COT data is updated through Tuesday January 18th and shows a quick view of how large traders (for-profit speculators and commercial entities) were positioned in the futures markets. All currency positions are in direct relation to the US dollar where, for example, a bet for the euro is a bet that the euro will rise versus the dollar while a bet against the euro will be a bet that the euro will decline versus the dollar. Highlighting the COT currency data is the trend changes in speculator sentiment we are seeing in the Euro and the British pound sterling. Speculators have been boosting their bets for the Euro and pound sterling over the past weeks and have now pushed their bets in both currencies to their best levels since September. Euro positions have gained for five consecutive weeks (a 5-week total rise of +36,463 contracts) and have now been in bullish territory for two straight weeks after spending thirteen out of the past fourteen weeks in bearish territory. This week’s net position of +24,584 contracts marks the best position since September 14th when positions were in a downtrend and on their way into negative territory. British pound speculator bets, meanwhile, have risen sharply with four straight weeks of gains (a 4-week rise by +57,439 contracts) and have now settled into a current position of just -247 net contracts. The net position had been at a multi-year bearish high of -57,686 contracts as recently as December 21st before a turnaround in sentiment. Free Reports: Top 5 Companies Added to Our Stock Watch List this Quarter - Here are the Stock Symbols that stood out so far in the fourth quarter of 2021. Get our Weekly Commitment of Traders Reports - See where the biggest traders (Hedge Funds and Commercial Hedgers) are positioned in the futures markets on a weekly basis. Joining the Euro (18,579 contracts) and British pound sterling (28,919 contracts) with positive changes this week were the yen (6,646 contracts), New Zealand dollar (273 contracts), Canadian dollar (14,868 contracts), Australian dollar (3,032 contracts) and the Mexican peso (9,371 contracts). The currencies with declining bets were the US Dollar Index (-1,458 contracts), Brazil real (-557 contracts), Swiss franc (-3,150 contracts), Russian ruble (-3,195 contracts) and Bitcoin (-172 contracts) Data Snapshot of Forex Market Traders | Columns Legend Jan-18-2022 OI OI-Index Spec-Net Spec-Index Com-Net COM-Index Smalls-Net Smalls-Index EUR 691,882 80 24,584 43 -50,464 61 25,880 17 JPY 201,820 56 -80,879 17 99,740 86 -18,861 9 GBP 183,234 28 -247 74 2,848 31 -2,601 50 AUD 181,136 68 -88,454 3 98,519 92 -10,065 28 MXN 151,778 27 4,920 29 -7,490 70 2,570 54 CAD 143,371 26 7,492 58 -13,723 47 6,231 42 USD Index 53,283 74 36,434 89 -42,397 4 5,963 82 RUB 45,413 46 6,422 29 -7,251 69 829 57 NZD 44,727 33 -8,331 57 10,622 47 -2,291 26 CHF 39,871 14 -10,810 51 13,799 46 -2,989 54 BRL 32,098 30 -11,369 53 10,759 48 610 74 Bitcoin 11,468 62 -549 91 -22 0 571 26   US Dollar Index Futures: The US Dollar Index large speculator standing this week was a net position of 36,434 contracts in the data reported through Tuesday. This was a weekly lowering of -1,458 contracts from the previous week which had a total of 37,892 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish-Extreme with a score of 88.6 percent. The commercials are Bearish-Extreme with a score of 4.1 percent and the small traders (not shown in chart) are Bullish-Extreme with a score of 81.8 percent. US DOLLAR INDEX Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 79.5 3.2 15.4 – Percent of Open Interest Shorts: 11.1 82.7 4.2 – Net Position: 36,434 -42,397 5,963 – Gross Longs: 42,369 1,684 8,180 – Gross Shorts: 5,935 44,081 2,217 – Long to Short Ratio: 7.1 to 1 0.0 to 1 3.7 to 1 NET POSITION TREND:       – Strength Index Score (3 Year Range Pct): 88.6 4.1 81.8 – Strength Index Reading (3 Year Range): Bullish-Extreme Bearish-Extreme Bullish-Extreme NET POSITION MOVEMENT INDEX:       – 6-Week Change in Strength Index: 2.7 -3.6 6.8   Euro Currency Futures: The Euro Currency large speculator standing this week was a net position of 24,584 contracts in the data reported through Tuesday. This was a weekly gain of 18,579 contracts from the previous week which had a total of 6,005 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 42.5 percent. The commercials are Bullish with a score of 61.5 percent and the small traders (not shown in chart) are Bearish-Extreme with a score of 17.3 percent. EURO Currency Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 30.6 56.3 11.5 – Percent of Open Interest Shorts: 27.1 63.6 7.8 – Net Position: 24,584 -50,464 25,880 – Gross Longs: 211,901 389,617 79,656 – Gross Shorts: 187,317 440,081 53,776 – Long to Short Ratio: 1.1 to 1 0.9 to 1 1.5 to 1 NET POSITION TREND:       – Strength Index Score (3 Year Range Pct): 42.5 61.5 17.3 – Strength Index Reading (3 Year Range): Bearish Bullish Bearish-Extreme NET POSITION MOVEMENT INDEX:       – 6-Week Change in Strength Index: 10.1 -8.6 -4.3   British Pound Sterling Futures: The British Pound Sterling large speculator standing this week was a net position of -247 contracts in the data reported through Tuesday. This was a weekly gain of 28,919 contracts from the previous week which had a total of -29,166 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish with a score of 73.8 percent. The commercials are Bearish with a score of 31.4 percent and the small traders (not shown in chart) are Bullish with a score of 50.3 percent. BRITISH POUND Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 21.7 62.5 14.3 – Percent of Open Interest Shorts: 21.8 60.9 15.8 – Net Position: -247 2,848 -2,601 – Gross Longs: 39,760 114,486 26,267 – Gross Shorts: 40,007 111,638 28,868 – Long to Short Ratio: 1.0 to 1 1.0 to 1 0.9 to 1 NET POSITION TREND:       – Strength Index Score (3 Year Range Pct): 73.8 31.4 50.3 – Strength Index Reading (3 Year Range): Bullish Bearish Bullish NET POSITION MOVEMENT INDEX:       – 6-Week Change in Strength Index: 27.4 -30.6 28.5   Japanese Yen Futures: The Japanese Yen large speculator standing this week was a net position of -80,879 contracts in the data reported through Tuesday. This was a weekly boost of 6,646 contracts from the previous week which had a total of -87,525 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish-Extreme with a score of 16.9 percent. The commercials are Bullish-Extreme with a score of 85.7 percent and the small traders (not shown in chart) are Bearish-Extreme with a score of 9.0 percent. JAPANESE YEN Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 4.0 86.1 8.7 – Percent of Open Interest Shorts: 44.0 36.6 18.0 – Net Position: -80,879 99,740 -18,861 – Gross Longs: 8,002 173,701 17,475 – Gross Shorts: 88,881 73,961 36,336 – Long to Short Ratio: 0.1 to 1 2.3 to 1 0.5 to 1 NET POSITION TREND:       – Strength Index Score (3 Year Range Pct): 16.9 85.7 9.0 – Strength Index Reading (3 Year Range): Bearish-Extreme Bullish-Extreme Bearish-Extreme NET POSITION MOVEMENT INDEX:       – 6-Week Change in Strength Index: -11.3 9.5 -3.1   Swiss Franc Futures: The Swiss Franc large speculator standing this week was a net position of -10,810 contracts in the data reported through Tuesday. This was a weekly reduction of -3,150 contracts from the previous week which had a total of -7,660 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish with a score of 51.1 percent. The commercials are Bearish with a score of 46.4 percent and the small traders (not shown in chart) are Bullish with a score of 54.5 percent. SWISS FRANC Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 2.3 67.3 30.0 – Percent of Open Interest Shorts: 29.4 32.7 37.5 – Net Position: -10,810 13,799 -2,989 – Gross Longs: 925 26,828 11,951 – Gross Shorts: 11,735 13,029 14,940 – Long to Short Ratio: 0.1 to 1 2.1 to 1 0.8 to 1 NET POSITION TREND:       – Strength Index Score (3 Year Range Pct): 51.1 46.4 54.5 – Strength Index Reading (3 Year Range): Bullish Bearish Bullish NET POSITION MOVEMENT INDEX:       – 6-Week Change in Strength Index: 2.2 -7.4 15.5   Canadian Dollar Futures: The Canadian Dollar large speculator standing this week was a net position of 7,492 contracts in the data reported through Tuesday. This was a weekly advance of 14,868 contracts from the previous week which had a total of -7,376 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish with a score of 57.9 percent. The commercials are Bearish with a score of 46.9 percent and the small traders (not shown in chart) are Bearish with a score of 42.2 percent. CANADIAN DOLLAR Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 34.7 41.1 21.8 – Percent of Open Interest Shorts: 29.5 50.7 17.5 – Net Position: 7,492 -13,723 6,231 – Gross Longs: 49,792 58,921 31,270 – Gross Shorts: 42,300 72,644 25,039 – Long to Short Ratio: 1.2 to 1 0.8 to 1 1.2 to 1 NET POSITION TREND:       – Strength Index Score (3 Year Range Pct): 57.9 46.9 42.2 – Strength Index Reading (3 Year Range): Bullish Bearish Bearish NET POSITION MOVEMENT INDEX:       – 6-Week Change in Strength Index: 15.3 -13.5 6.0   Australian Dollar Futures: The Australian Dollar large speculator standing this week was a net position of -88,454 contracts in the data reported through Tuesday. This was a weekly increase of 3,032 contracts from the previous week which had a total of -91,486 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish-Extreme with a score of 2.8 percent. The commercials are Bullish-Extreme with a score of 92.4 percent and the small traders (not shown in chart) are Bearish with a score of 27.9 percent. AUSTRALIAN DOLLAR Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 5.0 82.2 10.5 – Percent of Open Interest Shorts: 53.8 27.9 16.1 – Net Position: -88,454 98,519 -10,065 – Gross Longs: 9,051 148,978 19,008 – Gross Shorts: 97,505 50,459 29,073 – Long to Short Ratio: 0.1 to 1 3.0 to 1 0.7 to 1 NET POSITION TREND:       – Strength Index Score (3 Year Range Pct): 2.8 92.4 27.9 – Strength Index Reading (3 Year Range): Bearish-Extreme Bullish-Extreme Bearish NET POSITION MOVEMENT INDEX:       – 6-Week Change in Strength Index: -6.2 -0.3 17.1   New Zealand Dollar Futures: The New Zealand Dollar large speculator standing this week was a net position of -8,331 contracts in the data reported through Tuesday. This was a weekly advance of 273 contracts from the previous week which had a total of -8,604 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish with a score of 57.3 percent. The commercials are Bearish with a score of 46.8 percent and the small traders (not shown in chart) are Bearish with a score of 25.6 percent. NEW ZEALAND DOLLAR Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 26.0 66.8 6.4 – Percent of Open Interest Shorts: 44.6 43.0 11.5 – Net Position: -8,331 10,622 -2,291 – Gross Longs: 11,612 29,876 2,851 – Gross Shorts: 19,943 19,254 5,142 – Long to Short Ratio: 0.6 to 1 1.6 to 1 0.6 to 1 NET POSITION TREND:       – Strength Index Score (3 Year Range Pct): 57.3 46.8 25.6 – Strength Index Reading (3 Year Range): Bullish Bearish Bearish NET POSITION MOVEMENT INDEX:       – 6-Week Change in Strength Index: -31.9 30.0 -5.2   Mexican Peso Futures: The Mexican Peso large speculator standing this week was a net position of 4,920 contracts in the data reported through Tuesday. This was a weekly increase of 9,371 contracts from the previous week which had a total of -4,451 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 29.4 percent. The commercials are Bullish with a score of 69.7 percent and the small traders (not shown in chart) are Bullish with a score of 53.9 percent. MEXICAN PESO Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 49.7 46.1 3.9 – Percent of Open Interest Shorts: 46.5 51.0 2.2 – Net Position: 4,920 -7,490 2,570 – Gross Longs: 75,461 69,942 5,901 – Gross Shorts: 70,541 77,432 3,331 – Long to Short Ratio: 1.1 to 1 0.9 to 1 1.8 to 1 NET POSITION TREND:       – Strength Index Score (3 Year Range Pct): 29.4 69.7 53.9 – Strength Index Reading (3 Year Range): Bearish Bullish Bullish NET POSITION MOVEMENT INDEX:       – 6-Week Change in Strength Index: 29.4 -30.3 15.6   Brazilian Real Futures: The Brazilian Real large speculator standing this week was a net position of -11,369 contracts in the data reported through Tuesday. This was a weekly fall of -557 contracts from the previous week which had a total of -10,812 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish with a score of 53.4 percent. The commercials are Bearish with a score of 47.8 percent and the small traders (not shown in chart) are Bullish with a score of 74.2 percent. BRAZIL REAL Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 34.1 56.6 8.9 – Percent of Open Interest Shorts: 69.6 23.1 7.0 – Net Position: -11,369 10,759 610 – Gross Longs: 10,958 18,179 2,841 – Gross Shorts: 22,327 7,420 2,231 – Long to Short Ratio: 0.5 to 1 2.5 to 1 1.3 to 1 NET POSITION TREND:       – Strength Index Score (3 Year Range Pct): 53.4 47.8 74.2 – Strength Index Reading (3 Year Range): Bullish Bearish Bullish NET POSITION MOVEMENT INDEX:       – 6-Week Change in Strength Index: -7.7 6.6 9.9   Russian Ruble Futures: The Russian Ruble large speculator standing this week was a net position of 6,422 contracts in the data reported through Tuesday. This was a weekly decrease of -3,195 contracts from the previous week which had a total of 9,617 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 28.6 percent. The commercials are Bullish with a score of 68.9 percent and the small traders (not shown in chart) are Bullish with a score of 57.1 percent. RUSSIAN RUBLE Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 35.3 60.0 4.6 – Percent of Open Interest Shorts: 21.2 75.9 2.8 – Net Position: 6,422 -7,251 829 – Gross Longs: 16,034 27,233 2,101 – Gross Shorts: 9,612 34,484 1,272 – Long to Short Ratio: 1.7 to 1 0.8 to 1 1.7 to 1 NET POSITION TREND:       – Strength Index Score (3 Year Range Pct): 28.6 68.9 57.1 – Strength Index Reading (3 Year Range): Bearish Bullish Bullish NET POSITION MOVEMENT INDEX:       – 6-Week Change in Strength Index: -17.5 19.1 -25.4   Bitcoin Futures: The Bitcoin large speculator standing this week was a net position of -549 contracts in the data reported through Tuesday. This was a weekly decline of -172 contracts from the previous week which had a total of -377 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish-Extreme with a score of 90.9 percent. The commercials are Bearish with a score of 28.5 percent and the small traders (not shown in chart) are Bearish with a score of 25.9 percent. BITCOIN Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 73.4 3.1 12.3 – Percent of Open Interest Shorts: 78.2 3.3 7.3 – Net Position: -549 -22 571 – Gross Longs: 8,417 355 1,407 – Gross Shorts: 8,966 377 836 – Long to Short Ratio: 0.9 to 1 0.9 to 1 1.7 to 1 NET POSITION TREND:       – Strength Index Score (3 Year Range Pct): 90.9 28.5 25.9 – Strength Index Reading (3 Year Range): Bullish-Extreme Bearish Bearish NET POSITION MOVEMENT INDEX:       – 6-Week Change in Strength Index: 8.4 -13.2 -5.0   Article By InvestMacro – Receive our weekly COT Reports by Email *COT Report: The COT data, released weekly to the public each Friday, is updated through the most recent Tuesday (data is 3 days old) and shows a quick view of how large speculators or non-commercials (for-profit traders) were positioned in the futures markets. The CFTC categorizes trader positions according to commercial hedgers (traders who use futures contracts for hedging as part of the business), non-commercials (large traders who speculate to realize trading profits) and nonreportable traders (usually small traders/speculators) as well as their open interest (contracts open in the market at time of reporting).See CFTC criteria here. CountingPips Forex Blog Forex and Currency News Opinions   COT Bonds Speculators sharply reduce 5-Year Treasury bearish bets for 2nd week →
S&P 500 Declined, Gold Price (XAU/USD) Isn't Far From November's Levels

S&P 500 Declined, Gold Price (XAU/USD) Isn't Far From November's Levels

Monica Kingsley Monica Kingsley 25.01.2022 15:55
Tough call as select S&P 500 sectors came back to life, but credit markets are a bit inconclusive. Some more selling today before seeing a rebound on Wednesday‘s FOMC (I‘m leaning towards its message being positively received, and no rate hike now as that‘s apart from the Eastern Europe situation the other fear around). VIX looks to have topped yesterday, and coupled with the commodities and precious metals relative resilience (don‘t look at cryptos where I took sizable short profits in both Bitcoin and Ethereum yesterday), sends a signal of upcoming good couple of dozen points rebound in the S&P 500. Taking a correct view at the hightened, emotional market slide yesterday, is through the portfolio performance – as you can see via clicking the link, yesterday‘s setup needn‘t and shouldn‘t be anyone‘s make or break situation. Let‘s move right into the charts (all courtesy of www.stockcharts.com). S&P 500 and Nasdaq Outlook S&P 500 buyers stepped in, and carving out a nice lower knot today is the minimum expectation that the bulls can have. The reversal is still very young and vulnerable. Credit Markets HYG reversed, but isn‘t in an uptrend yet – there is just a marginal daily outperformance of quality debt instruments. More is needed. Gold, Silver and Miners Gold and silver are only pausing – in spite of the miners move to the downside at the moment. HUI and GDX will catch up – they‘re practically primed to do so over the medium-term. Crude Oil Crude oil bulls are still getting tested, and oil stocks stabilized on a daily basis. Some downside still remains, but nothing dramatic – the volume didn‘t even rise yesterday. Copper Copper declined, but didn‘t meaningfully lead lower – the downswing was actually bought, and low 4.40s look to be well defended at the moment. More fear striking, would change the picture, but we aren‘t there yet. Bitcoin and Ethereum Bitcoin and Ethereum reversed, but in spire of the volume, look to need more time to bottom out – and I wouldn‘t be surprised if that included another decline. Summary S&P 500 bulls would get tested today again, and at least a draw would be a positive result, as yesterday‘s tech upswing is more likely to be continued tomorrow than today – that‘s how it usually goes after sizable (think 5%) range days. The table is set for an upside surprise on FOMC tomorrow – the tantrum coupled with war fears bidding up the dollar, is impossible to miss. Best places to be in remain commodities and precious metals, and the coming S&P 500 upswing looks to be a worthwhile opportunity in the making, too – on a short-term and nimble basis. So, I‘m more in the glass half full camp going into tomorrow. Anyway, let‘s take the portfolio view discussed in the opening part of today‘s article. Thank you for having read today‘s free analysis, which is available in full at my homesite. There, you can subscribe to the free Monica‘s Insider Club, which features real-time trade calls and intraday updates for all the five publications: Stock Trading Signals, Gold Trading Signals, Oil Trading Signals, Copper Trading Signals and Bitcoin Trading Signals.
EURUSD, EURCHF and US 30 Chart Don't Show Spectacular Fluctations

EURUSD, EURCHF and US 30 Chart Don't Show Spectacular Fluctations

John Benjamin John Benjamin 26.01.2022 08:44
EURUSD grinds daily support The US dollar inches lower as traders take profit ahead of the Fed meeting. The euro’s struggle to stay above 1.1360 indicates buyers’ weak interest in holding onto previous gains. The latest rebounds have failed to clear the former support that has turned into a resistance. A break below the previous consolidation range and daily support (1.1280) could send the pair to 1.1235. The RSI’s oversold situation attracted some buying interest. But the bulls will need to lift 1.1360 first before a reversal could become a reality. EURCHF attempts reversal The safe-haven Swiss franc retreats as global panic selling takes a breather. A bullish RSI divergence shows a slowdown in the sell-off momentum. Then a rally above 1.0355 has prompted some sellers to cover, taking the heat off the single currency. A bullish MA cross is an encouraging sign for a reversal. 1.0400 is the next hurdle and its breach could be a turning point for traders’ sentiment and a launchpad towards 1.0480. On the downside, 1.0340 is fresh support and then 1.0300 a critical floor to safeguard the rebound. US 30 hits last major support The Dow Jones 30 recoups losses as traders await details on the Fed’s monetary tightening. Breaks below daily supports at 34700 and 34000 have forced buyers to liquidate in bulk. The index saw bids at last June’s low (33200) while the RSI sank into the oversold area on the daily chart. As the quote stabilizes, traders may be looking to buy the dips. A close above 34500 may lead to 35500 which is a key supply zone from a previous breakout. A break below the daily support could trigger a broader correction in the weeks to come.
Considering Portfolios In Times Of, Among Others, Inflation...

EUR To GBP and EURUSD Will Go Down If Dollar Strengthens?

Alex Kuptsikevich Alex Kuptsikevich 26.01.2022 09:39
The US dollar has been gaining steadily against the developed countries' currencies since the beginning of the year. By the way, the yen was an exception: it has been adding 1.8% over the past 11 days after the stock market entered the turbulence zone due to a reassessment of the monetary policy outlook. According to historical data, the Fed often finds itself at the forefront of the monetary policy cycle. That is used to be translating into a stronger USD in the months before and after the first tightening. So the question is in what currency pairs it is most profitable to buy the dollar now. Among the developed and liquid currencies, three scenarios can be considered. The first way is to sell EURUSD. The euro is weaker than the dollar due to the ECB being on several steps behind the Fed. That means that the EU rates will remain lower for a longer period of time, and the balance of bond yields will be shifted towards the dollar. Given the pace the Fed intends to take in tightening monetary policy, this yield gap promises to widen further. Another way is to bet that monetary tightening is stressing the declining markets drag the pound down. We should keep in mind that the Bank of England has already approved its first tightening policy step, and in this case it's not far behind the Fed. At the same time, it's closely correlated with falling market indices. Need to mention that GBPUSD is still far from being oversold with a wide room for further decline. The third way is often more obvious. Traders may consider selling the currencies of developing countries, which are much more sensitive to the Fed monetary policy changes. However, EMs have been raising rates for almost a year, so selling them now is a bet on market volatility in the near term. For the longer perspective, higher interest rates promise to level out short-term gains. In this case, the dollar's down turn may be faster than in the euro.
Intraday Market Analysis – USD Gains Bullish Momentum

Intraday Market Analysis – USD Gains Bullish Momentum

John Benjamin John Benjamin 27.01.2022 08:26
USDCAD breaks higherThe Canadian dollar slipped after the BOC kept interest rates unchanged. Its US counterpart found support at 1.2560 after a brief pullback.An oversold RSI attracted some bargain hunters. The current rebound is a sign that there is a strong interest in pushing for a bullish reversal. 1.2700 is a key supply zone as it coincides with the 30-day moving average.A breakout would definitely turn sentiment around and trigger a runaway rally. In turn, this sets the daily resistance at 1.2810 as the next target.NZDUSD continues lowerThe New Zealand dollar steadied after the Q4 CPI beat expectations.However, the pair is still in bearish territory after it broke below the lower end (0.6750) of the flag consolidation from the daily time frame. The RSI’s oversold situation brought in a buying-the-dips crowd around 0.6660 but its breach indicates a lack of buying interest.The kiwi is now testing November 2020’s low at 0.6600. The bears could be waiting to fade the next bounce with 0.6700 as a fresh resistance.XAUUSD pulls back for supportGold tumbled after the US Fed signaled it may raise interest rates in March. The rally stalled at 1853 and a break below the resistance-turned-support at 1830 flushed some buyers out.1810 at the base of the previous bullish breakout is a second line of defense. The short-term uptrend may still be intact as long as the metal stays above this key support.A deeper correction would drive the price down to the daily support at 1785. The bulls need a rebound above 1838 to regain control of price action.
Flucation of EUR To RUB and USD To RUB

Flucation of EUR To RUB and USD To RUB

Alex Kuptsikevich Alex Kuptsikevich 27.01.2022 09:59
The rate of the Russian currency reached 80.40 per dollar and 90.70 per euro yesterday after the close of the regular session. However, from these levels, the ruble seemed attractive for purchases. This brought the price back down from the psychologically significant round marks. The dollar was temporarily near peak levels, from where it has been unfolding since the end of 2014. Of course, the fact that the ruble previously went up from 80 does not allow one to blindly hope that the same will happen this time. However, it is a good reason to closely monitor the dynamics of the Russian currency, as well as the rhetoric of officials and the central bank when approaching these levels. Now it seems that geopolitics is more than embedded in premiums, which reduces the prices of Russian assets, including the ruble. However, there are other factors playing a part. In recent weeks, there has been increased attention to the Fed, which has entered the warpath against inflation, although for most of the past year, it was simply denied. If the tough tone of the American regulator causes pressure on the markets, this will be a new reason for the ruble to fall, even if not as sharp as under the influence of geopolitics. The best tactic for investors now is to watch the dynamics of the Russian currency near significant round levels. A sharp turn down in the EURRUB and USDRUB pairs will indicate strong purchases and will be another confirmation of how unbreakable these levels are. If we see a further slide of the ruble, we can say that the lowest point for it has not yet been reached. In general, it is worth being aware that the bottom may come very soon.
COT Euro Currency Speculators boosted their bullish bets to 23-week high

COT Euro Currency Speculators boosted their bullish bets to 23-week high

Invest Macro Invest Macro 29.01.2022 18:55
By InvestMacro | COT | Data Tables | COT Leaders | Downloads | COT Newsletter Here are the latest charts and statistics for the Commitment of Traders (COT) data published by the Commodities Futures Trading Commission (CFTC). The latest COT data is updated through Tuesday January 25th and shows a quick view of how large traders (for-profit speculators and commercial entities) were positioned in the futures markets. All currency positions are in direct relation to the US dollar where, for example, a bet for the euro is a bet that the euro will rise versus the dollar while a bet against the euro will be a bet that the euro will decline versus the dollar. Highlighting the COT currency data was the further gains of bullish bets in the Euro currency futures contracts. Euro speculators raised their bullish bets for a sixth consecutive week this week and for the seventh time in the past eight weeks. Over the last six-week time-frame, Euro bets have improved by a total of +43,439 contracts, going from -11,879 net positions on December 14th to +31,560 net positions this week. This week’s net speculator standing marks the highest level for Euro bets since August 17th, a span of twenty-three weeks. Joining the Euro (6,976 contracts) with positive changes this week were the yen (12,606 contracts), US Dollar Index (427 contracts), Australian dollar (5,181 contracts), Swiss franc (2,014 contracts), Canadian dollar (4,825 contracts) and Bitcoin (515 contracts). The currencies with declining bets were the British pound sterling (-7,516 contracts), New Zealand dollar (-2,442 contracts), Brazil real (-1,247 contracts), Russian ruble (-2,478 contracts) and the Mexican peso (-5,710 contracts). Data Snapshot of Forex Market Traders | Columns Legend Jan-25-2022OIOI-IndexSpec-NetSpec-IndexCom-NetCOM-IndexSmalls-NetSmalls-Index USD Index 52,328 72 36,861 89 -42,505 4 5,644 78 EUR 682,952 77 31,560 45 -56,258 60 24,698 15 GBP 182,040 27 -7,763 68 16,842 40 -9,079 37 JPY 197,830 53 -68,273 25 82,863 77 -14,590 18 CHF 39,742 14 -8,796 55 13,479 46 -4,683 50 CAD 146,448 28 12,317 60 -19,581 44 7,264 44 AUD 190,020 75 -83,273 8 97,749 92 -14,476 17 NZD 53,316 50 -10,773 53 13,281 51 -2,508 23 MXN 150,142 26 -790 27 -1,478 72 2,268 53 RUB 46,883 48 3,944 23 -4,288 76 344 44 BRL 46,657 54 -12,616 52 11,258 48 1,358 83 Bitcoin 11,756 64 -34 100 -478 0 512 25   US Dollar Index Futures: The US Dollar Index large speculator standing this week resulted in a net position of 36,861 contracts in the data reported through Tuesday. This was a weekly rise of 427 contracts from the previous week which had a total of 36,434 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish-Extreme with a score of 89.4 percent. The commercials are Bearish-Extreme with a score of 4.0 percent and the small traders (not shown in chart) are Bullish with a score of 78.3 percent. US DOLLAR INDEX Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 79.8 3.4 14.6 – Percent of Open Interest Shorts: 9.4 84.6 3.8 – Net Position: 36,861 -42,505 5,644 – Gross Longs: 41,772 1,777 7,658 – Gross Shorts: 4,911 44,282 2,014 – Long to Short Ratio: 8.5 to 1 0.0 to 1 3.8 to 1 NET POSITION TREND:       – Strength Index Score (3 Year Range Pct): 89.4 4.0 78.3 – Strength Index Reading (3 Year Range): Bullish-Extreme Bearish-Extreme Bullish NET POSITION MOVEMENT INDEX:       – 6-Week Change in Strength Index: 9.7 -9.8 3.0   Euro Currency Futures: The Euro Currency large speculator standing this week resulted in a net position of 31,560 contracts in the data reported through Tuesday. This was a weekly rise of 6,976 contracts from the previous week which had a total of 24,584 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 44.7 percent. The commercials are Bullish with a score of 59.8 percent and the small traders (not shown in chart) are Bearish-Extreme with a score of 15.3 percent. EURO Currency Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 31.2 55.5 11.6 – Percent of Open Interest Shorts: 26.6 63.8 8.0 – Net Position: 31,560 -56,258 24,698 – Gross Longs: 213,408 379,154 79,273 – Gross Shorts: 181,848 435,412 54,575 – Long to Short Ratio: 1.2 to 1 0.9 to 1 1.5 to 1 NET POSITION TREND:       – Strength Index Score (3 Year Range Pct): 44.7 59.8 15.3 – Strength Index Reading (3 Year Range): Bearish Bullish Bearish-Extreme NET POSITION MOVEMENT INDEX:       – 6-Week Change in Strength Index: 13.3 -11.2 -6.2   British Pound Sterling Futures: The British Pound Sterling large speculator standing this week resulted in a net position of -7,763 contracts in the data reported through Tuesday. This was a weekly lowering of -7,516 contracts from the previous week which had a total of -247 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish with a score of 68.4 percent. The commercials are Bearish with a score of 39.6 percent and the small traders (not shown in chart) are Bearish with a score of 36.8 percent. BRITISH POUND Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 20.1 64.7 13.7 – Percent of Open Interest Shorts: 24.4 55.5 18.7 – Net Position: -7,763 16,842 -9,079 – Gross Longs: 36,666 117,812 24,909 – Gross Shorts: 44,429 100,970 33,988 – Long to Short Ratio: 0.8 to 1 1.2 to 1 0.7 to 1 NET POSITION TREND:       – Strength Index Score (3 Year Range Pct): 68.4 39.6 36.8 – Strength Index Reading (3 Year Range): Bullish Bearish Bearish NET POSITION MOVEMENT INDEX:       – 6-Week Change in Strength Index: 31.0 -31.7 22.0   Japanese Yen Futures: The Japanese Yen large speculator standing this week resulted in a net position of -68,273 contracts in the data reported through Tuesday. This was a weekly advance of 12,606 contracts from the previous week which had a total of -80,879 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 24.9 percent. The commercials are Bullish with a score of 77.3 percent and the small traders (not shown in chart) are Bearish-Extreme with a score of 18.3 percent. JAPANESE YEN Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 8.0 81.0 9.1 – Percent of Open Interest Shorts: 42.5 39.1 16.4 – Net Position: -68,273 82,863 -14,590 – Gross Longs: 15,866 160,178 17,950 – Gross Shorts: 84,139 77,315 32,540 – Long to Short Ratio: 0.2 to 1 2.1 to 1 0.6 to 1 NET POSITION TREND:       – Strength Index Score (3 Year Range Pct): 24.9 77.3 18.3 – Strength Index Reading (3 Year Range): Bearish Bullish Bearish-Extreme NET POSITION MOVEMENT INDEX:       – 6-Week Change in Strength Index: -9.3 5.9 6.4   Swiss Franc Futures: The Swiss Franc large speculator standing this week resulted in a net position of -8,796 contracts in the data reported through Tuesday. This was a weekly gain of 2,014 contracts from the previous week which had a total of -10,810 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish with a score of 54.6 percent. The commercials are Bearish with a score of 46.0 percent and the small traders (not shown in chart) are Bearish with a score of 49.5 percent. SWISS FRANC Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 5.0 69.4 25.2 – Percent of Open Interest Shorts: 27.2 35.5 36.9 – Net Position: -8,796 13,479 -4,683 – Gross Longs: 1,999 27,591 9,996 – Gross Shorts: 10,795 14,112 14,679 – Long to Short Ratio: 0.2 to 1 2.0 to 1 0.7 to 1 NET POSITION TREND:       – Strength Index Score (3 Year Range Pct): 54.6 46.0 49.5 – Strength Index Reading (3 Year Range): Bullish Bearish Bearish NET POSITION MOVEMENT INDEX:       – 6-Week Change in Strength Index: -0.8 -1.5 5.2   Canadian Dollar Futures: The Canadian Dollar large speculator standing this week resulted in a net position of 12,317 contracts in the data reported through Tuesday. This was a weekly increase of 4,825 contracts from the previous week which had a total of 7,492 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish with a score of 59.6 percent. The commercials are Bearish with a score of 43.5 percent and the small traders (not shown in chart) are Bearish with a score of 44.2 percent. CANADIAN DOLLAR Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 36.3 39.3 21.5 – Percent of Open Interest Shorts: 27.9 52.6 16.6 – Net Position: 12,317 -19,581 7,264 – Gross Longs: 53,129 57,492 31,539 – Gross Shorts: 40,812 77,073 24,275 – Long to Short Ratio: 1.3 to 1 0.7 to 1 1.3 to 1 NET POSITION TREND:       – Strength Index Score (3 Year Range Pct): 59.6 43.5 44.2 – Strength Index Reading (3 Year Range): Bullish Bearish Bearish NET POSITION MOVEMENT INDEX:       – 6-Week Change in Strength Index: 24.7 -12.1 -15.8   Australian Dollar Futures: The Australian Dollar large speculator standing this week resulted in a net position of -83,273 contracts in the data reported through Tuesday. This was a weekly rise of 5,181 contracts from the previous week which had a total of -88,454 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish-Extreme with a score of 7.6 percent. The commercials are Bullish-Extreme with a score of 91.8 percent and the small traders (not shown in chart) are Bearish-Extreme with a score of 17.1 percent. AUSTRALIAN DOLLAR Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 8.0 80.7 8.6 – Percent of Open Interest Shorts: 51.8 29.3 16.2 – Net Position: -83,273 97,749 -14,476 – Gross Longs: 15,121 153,386 16,371 – Gross Shorts: 98,394 55,637 30,847 – Long to Short Ratio: 0.2 to 1 2.8 to 1 0.5 to 1 NET POSITION TREND:       – Strength Index Score (3 Year Range Pct): 7.6 91.8 17.1 – Strength Index Reading (3 Year Range): Bearish-Extreme Bullish-Extreme Bearish-Extreme NET POSITION MOVEMENT INDEX:       – 6-Week Change in Strength Index: -4.1 -0.5 12.3   New Zealand Dollar Futures: The New Zealand Dollar large speculator standing this week resulted in a net position of -10,773 contracts in the data reported through Tuesday. This was a weekly decline of -2,442 contracts from the previous week which had a total of -8,331 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish with a score of 53.2 percent. The commercials are Bullish with a score of 50.9 percent and the small traders (not shown in chart) are Bearish with a score of 23.1 percent. NEW ZEALAND DOLLAR Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 29.9 63.2 5.2 – Percent of Open Interest Shorts: 50.1 38.3 9.9 – Net Position: -10,773 13,281 -2,508 – Gross Longs: 15,948 33,712 2,784 – Gross Shorts: 26,721 20,431 5,292 – Long to Short Ratio: 0.6 to 1 1.7 to 1 0.5 to 1 NET POSITION TREND:       – Strength Index Score (3 Year Range Pct): 53.2 50.9 23.1 – Strength Index Reading (3 Year Range): Bullish Bullish Bearish NET POSITION MOVEMENT INDEX:       – 6-Week Change in Strength Index: -8.2 7.9 -2.2   Mexican Peso Futures: The Mexican Peso large speculator standing this week resulted in a net position of -790 contracts in the data reported through Tuesday. This was a weekly decrease of -5,710 contracts from the previous week which had a total of 4,920 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 27.0 percent. The commercials are Bullish with a score of 72.2 percent and the small traders (not shown in chart) are Bullish with a score of 52.6 percent. MEXICAN PESO Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 44.3 51.6 3.9 – Percent of Open Interest Shorts: 44.8 52.6 2.4 – Net Position: -790 -1,478 2,268 – Gross Longs: 66,449 77,473 5,892 – Gross Shorts: 67,239 78,951 3,624 – Long to Short Ratio: 1.0 to 1 1.0 to 1 1.6 to 1 NET POSITION TREND:       – Strength Index Score (3 Year Range Pct): 27.0 72.2 52.6 – Strength Index Reading (3 Year Range): Bearish Bullish Bullish NET POSITION MOVEMENT INDEX:       – 6-Week Change in Strength Index: 4.2 -5.8 17.0   Brazilian Real Futures: The Brazilian Real large speculator standing this week resulted in a net position of -12,616 contracts in the data reported through Tuesday. This was a weekly lowering of -1,247 contracts from the previous week which had a total of -11,369 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish with a score of 51.7 percent. The commercials are Bearish with a score of 48.4 percent and the small traders (not shown in chart) are Bullish-Extreme with a score of 83.2 percent. BRAZIL REAL Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 45.9 45.6 7.6 – Percent of Open Interest Shorts: 73.0 21.5 4.7 – Net Position: -12,616 11,258 1,358 – Gross Longs: 21,434 21,274 3,541 – Gross Shorts: 34,050 10,016 2,183 – Long to Short Ratio: 0.6 to 1 2.1 to 1 1.6 to 1 NET POSITION TREND:       – Strength Index Score (3 Year Range Pct): 51.7 48.4 83.2 – Strength Index Reading (3 Year Range): Bullish Bearish Bullish-Extreme NET POSITION MOVEMENT INDEX:       – 6-Week Change in Strength Index: -10.7 8.4 21.0   Russian Ruble Futures: The Russian Ruble large speculator standing this week resulted in a net position of 3,944 contracts in the data reported through Tuesday. This was a weekly decrease of -2,478 contracts from the previous week which had a total of 6,422 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 22.7 percent. The commercials are Bullish with a score of 75.7 percent and the small traders (not shown in chart) are Bearish with a score of 43.9 percent. RUSSIAN RUBLE Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 32.4 63.3 4.3 – Percent of Open Interest Shorts: 24.0 72.4 3.6 – Net Position: 3,944 -4,288 344 – Gross Longs: 15,179 29,669 2,015 – Gross Shorts: 11,235 33,957 1,671 – Long to Short Ratio: 1.4 to 1 0.9 to 1 1.2 to 1 NET POSITION TREND:       – Strength Index Score (3 Year Range Pct): 22.7 75.7 43.9 – Strength Index Reading (3 Year Range): Bearish Bullish Bearish NET POSITION MOVEMENT INDEX:       – 6-Week Change in Strength Index: -29.8 30.5 -20.0   Bitcoin Futures: The Bitcoin large speculator standing this week resulted in a net position of -34 contracts in the data reported through Tuesday. This was a weekly boost of 515 contracts from the previous week which had a total of -549 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish-Extreme with a score of 100.0 percent. The commercials are Bearish-Extreme with a score of 0.0 percent and the small traders (not shown in chart) are Bearish with a score of 24.6 percent. BITCOIN Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 73.8 2.4 12.5 – Percent of Open Interest Shorts: 74.1 6.5 8.1 – Net Position: -34 -478 512 – Gross Longs: 8,678 285 1,469 – Gross Shorts: 8,712 763 957 – Long to Short Ratio: 1.0 to 1 0.4 to 1 1.5 to 1 NET POSITION TREND:       – Strength Index Score (3 Year Range Pct): 100.0 0.0 24.6 – Strength Index Reading (3 Year Range): Bullish-Extreme Bearish-Extreme Bearish NET POSITION MOVEMENT INDEX:       – 6-Week Change in Strength Index: 16.9 -60.9 -0.1   Article By InvestMacro – Receive our weekly COT Reports by Email *COT Report: The COT data, released weekly to the public each Friday, is updated through the most recent Tuesday (data is 3 days old) and shows a quick view of how large speculators or non-commercials (for-profit traders) were positioned in the futures markets. The CFTC categorizes trader positions according to commercial hedgers (traders who use futures contracts for hedging as part of the business), non-commercials (large traders who speculate to realize trading profits) and nonreportable traders (usually small traders/speculators) as well as their open interest (contracts open in the market at time of reporting).See CFTC criteria here.
CPI in Germany increased by 0.4%. ECB Decision Seems To Be Obvious...

CPI in Germany increased by 0.4%. ECB Decision Seems To Be Obvious...

Alex Kuptsikevich Alex Kuptsikevich 31.01.2022 15:25
Today we have seen the first slowdown in annual inflation in seven months, but the data is better than expected. In January, consumer prices rose 0.4%, up 4.9% on the same month a year earlier. Analysts, on average, were expecting prices to fall by 0.2% and slow inflation to 4.3% YoY. The harmonized price index (adjusted for tax changes) shows an even more significant gap between expectations and reality. The index rose by 0.9% (a fall of 0.4% was expected). The figures clearly show that inflation has penetrated deeper into the economy and is increasingly taking on the features of permanent price increases. Sustained inflation raises the expectation that the ECB will also tighten its rhetoric and proceed with policy tightening more quickly than previously promised. The markets have priced in one rate hike of 0.25% by December. But with the Fed as an example, we can see how quickly things can change. These changes should be positive for the euro.
Bitcoin, Fed, Stocks and Bonds

Bitcoin, Fed, Stocks and Bonds

Korbinian Koller Korbinian Koller 01.02.2022 13:18
Bitcoin, the plan, and its execution The Plan: It is an election year when Democrats will project political pressure upon the Federal Reserve to not risk through aggressive policy changes a stock market collapse to keep their votes. As a result, more money printing expands inflation, which supports the interest for bitcoin as an inflation hedge. Should we see in opposition for whatever reason a rapid stock market decline, the investor would unlikely be interested in owning stock or bonds. While initially, bitcoin prices would likely fall alongside the markets, money will likely flow into bitcoin shortly afterward. The execution: With bitcoins prices suppressed from their recent decline (down 52% from its last all-time high at around US$69,000), we have another edge for minimizing exposure risk. BTC in US-Dollar, monthly chart, high likely turning points: Bitcoin in US-Dollar, monthly chart as of January 31st, 2022. The chart above depicts five supply zones we have our eye on. We will try identifying low-risk entry points on smaller time frames at or near these points and reduce risk further with our quad exit strategy. We already had entries near zone 1 and 2 and posted those live in our free Telegram channel. BTC in US-Dollar, weekly chart, bitcoin, the plan, and its execution, reload trading: Bitcoin in US-Dollar, weekly chart as of February 1st, 2022. Once the more significant time frame turning point is identified (white arrow), we will add what we call ‘reload’ trades (see chart above) on the smaller weekly time frame. We do so by identifying low-risk entries in congestion zones (yellow boxes) on the way up. We aim to arrive near the elections in November with a sizable position that is due to our exit strategy being risk-free. Playing with the market’s money will allow for positive execution psychology and ease us to observe our position through an expected volatility period, with further profit-taking into possible volatile upswings that are only temporary in nature. BTC in US-Dollar, Quarterly Chart, long-term profit potential: Bitcoin in US-Dollar, quarterly chart as of February 1st, 2022. While this year’s midterm trading on the long side of the bitcoin market could provide for substantial income from the 50% profit-taking of each individual trade and reload based on our quad exit strategy, the real goal is to have a remaining position size that could potentially go to unfathomable heights, since we see in the long term the inflation problem not going away but rather culminating in a bitcoin rise that could be substantially much larger in percentage than alternative inflation hedges like real estate, gold, silver and alike. Not to say that we find it also essential to hold these asset classes for wealth preservation. The quarterly chart above illustrates the potential of such a position. We illustrated both in time (six years) and price (US$ 134,000) our most conservative model in this chart. Bitcoin, the plan, and its execution: We see no scenario where inflation is just going away. The above narrative shows that a short-term fueling of inflation is likely. Furthermore, a high-risk scenario is fueling inflation even more. Should markets decline rapidly, it can be expected that money printing and buying up the market is the most predominant solution applied. Consequently, the average investor would wake up relieved that prices wouldn’t decline any further but liquidating their holdings in a further inflated fiat currency will have massively decreased purchasing power. Feel free to join us in our free Telegram channel for daily real time data and a great community. If you like to get regular updates on precious metals and cryptocurrencies, you can also subscribe to our free newsletter. Disclosure: This article and the content are for informational purposes only and do not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision. The views, thoughts and opinions expressed here are the author’s alone. They do not necessarily reflect or represent the views and opinions of Midas Touch Consulting. By Korbinian Koller|February 1st, 2022|Tags: Bitcoin, Bitcoin bounce, Bitcoin bullish, bitcoin consolidation, crypto analysis, Crypto Bull, crypto chartbook, DeFi, low risk, quad exit, technical analysis, trading education|0 Comments About the Author: Korbinian Koller Outstanding abstract reasoning ability and ability to think creatively and originally has led over the last 25 years to extract new principles and a unique way to view the markets resulting in a multitude of various time frame systems, generating high hit rates and outstanding risk reward ratios. Over 20 years of coaching traders with heart & passion, assessing complex situations, troubleshoot and solve problems principle based has led to experience and a professional history of success. Skilled natural teacher and exceptional developer of talent. Avid learner guided by a plan with ability to suppress ego and empower students to share ideas and best practices and to apply principle-based technical/conceptual knowledge to maximize efficiency. 25+ year execution experience (50.000+ trades executed) Trading multiple personal accounts (long and short-and combinations of the two). Amazing market feel complementing mechanical systems discipline for precise and extreme low risk entries while objectively seeing the whole picture. Ability to notice and separate emotional responses from the decision-making process and to stand outside oneself and one’s concerns about images in order to function in terms of larger objectives. Developed exit strategies that compensate both for maximizing profits and psychological ease to allow for continuous flow throughout the whole trading day. In depth knowledge of money management strategies with the experience of multiple 6 sigma events in various markets (futures, stocks, commodities, currencies, bonds) embedded in extreme low risk statistical probability models with smooth equity curves and extensive risk management as well as extensive disaster risk allow for my natural capacity for risk-taking.
Challenges in the Philippines: Rising Rice and Energy Costs Threaten Inflation Stability

Market Shrugs Off Chinese Signals and Keeps the Yuan Bid

Marc Chandler Marc Chandler 22.11.2021 13:35
November 22, 2021  $CHF, $USD, BOE, China, Currency Movement, FOMC, Japan, Philippines, Russia Overview:  The US dollar has come back bid from the weekend against most currencies following the talk by a couple of Fed governors about the possibility of accelerating the tapering at next month's FOMC meeting.  The weekend also saw protests against the social restrictions being imposed by several European countries in the face of a surge in Covid cases.  The Swedish krona, yen, and sterling are the weakest, while the dollar-bloc currencies are resisting the greenback's tug. Most of the freely accessible and liquid currencies among emerging market currencies, including Russia, Hungary, South Africa, and Mexico, are heavy. At the same time, the Turkish lira recoups a little of the ground lost last week, and the Chinese yuan shrugged off apparently warnings from the PBOC to post its first gain in three sessions.  Equity markets in the Asia Pacific area mostly fell, though China and South Korea were notable exceptions.  Europe's Stoxx 600 snapped a six-week advance last week but has begun the news week with a small gain through the European morning.  US futures are trading higher.  The bond market is heavy, with the 10-year US Treasury up about three basis points to around 1.58%.  European benchmark yields are 2-3 bp higher.  Gold finished last week on a softer note and edged lower today to trade below $1840 for the first time since November 10.  Resistance is around $1850.  News that Japan may join the US to release oil from reserves saw January WTI slip below $75 but recover back above $76.  It met the (38.2%) retracement of the rally from the late August low near $60.75.  European natural gas (Netherlands) is lower for the fourth consecutive session, during which time it has fallen around 11%.   Iron ore extended the 5.6% gains before the weekend with another 4% gain today.  On the other hand, copper rose 3.3% in the past two sessions and has come back offered today.  Lastly, the CRB Index eased less than 1% last week and is off two of the past three weeks.  Its seven-month rally is at risk.   Asia Pacific Despite China's economic success, it remains clumsy and heavy-handed.   As the US and some other countries were considering a symbolic diplomatic boycott of the winter Olympics in Beijing, the tennis star Peng Shuai is being censored or worse for allegations against a former Politburo member.  Meanwhile, at the end of last week, three Chinese coast guard vessels launched water cannons against two Filipino boats sent to resupply a garrison on the Second Thomas Shoal (Ayungin Shoal), which is within the Philippines' Kalayanan Island Group.  The aggressive harassment brought a rebuke by the US, which reminded Beijing of its mutual defense agreement with Manila.   The Philippines will attempt to bring provision again this week.  Separately, note that after being notified by the US of the military nature of the Chinese construction project in the UAE, the project has been halted.   With the yuan at six-year highs against a trade-weighted basket, Chinese officials have begun expressing more concern about the one-way market.  The FX Committee, composed of industry participants, wants members to do a better job monitoring prop trading, and it follows the PBOC works of caution about risk management at the end of last week.  In its quarterly monetary review, the PBOC made a few tweaks that suggest it could ease policy.   Japan's Prime Minister Kishida acknowledged that releasing oil from its strategic reserve was under discussion.  China indicated it would tap its reserves last week for the second time since September, while it is still under review in the US.  Currently, Japan keeps reserves that are intended to last 90 days, while the private sector must hold reserves to last 70 days, according to reports.  Japan is considering selling oil and using the funds to subsidize the rising gasoline prices.  It may also reduce the duration of the reserves.   The dollar is straddling the JPY114.00 level as its hugs the pre-weekend range (~JPY113.60-JPY114.55).  The JPY114.30 area offers initial resistance, while the focus in early North America may be on the downside.  Still, it appears to be going nowhere quickly.   The Australian dollar finished last week at its lowest level since early October.  That low, just below $0.7230, held, and momentum traders covered shorts, helping lift the Aussie back to session highs near $0.7260.  A move above here allows gains into the $0.7270-$0.7290 area.  The PBOC set the dollar's reference rate at CNY6.3952 today.  The market (Bloomberg survey median) had projected a CNY6.3931 fix.  Although the dollar is softer today, it held above last week's lows as consolidation is evident.  It remains within the range set last Tuesday (~CNY6.3670-CNY6.3965).   Europe With the Swiss franc appreciating to six-year highs against the euro, it would not be surprising to see the SNB intervene.  The first place to look for it is in the weekly domestic sight deposits.  They rose by CHF2.58 bln, the second-most in the past three months.  Recall the mechanics.  The SNB buys euros but just sitting on them distorts the allocation strategy.  So it needs to either sell some euros for dollars or Swiss francs for dollars.  If it does the latter, its overall level of reserve growth accelerates.  Many suspect it will do the former, i.e., sell some euros for dollars.   The US continues to warn that Russia's troop and equipment movement is consistent with a rapid large-scale push into Ukraine from multiple spots simultaneously.  The suggestion, according to reports, is that the operation could take place early next year.  Both Ukraine and Georgia are seeking more US assistance.  Recall Russia invaded Crimea in February 2014.   Bank of England Governor Bailey has toned down his rhetoric, though he blames the market for misconstruing his remarks last month.  He warns now that next month's decision is finely balanced and that the price pressures are emanating primarily from supply-side disruptions for which monetary policy is less directly effective.   The implied yield of the December 2021 short-sterling interest rate futures contract is slipping for the fourth consecutive session.  Today's yield of about 21 bp is the lowest since early October.  The yield peaked in mid-October near 62 bp.  Lastly, while progress on the UK-EU talks has been reported, the two sides are still far apart.  Talks between Frost and Sefcovic will resume at the end of this week.   The prospect that a new German government could be announced this week has not helped the euro very much.  The single currency, which was sold through $1.14 and $1.13 last week, is struggling to find a base.  It has held above the pre-weekend low near $1.12560 but only barely (~$1.1260), and the attempt to resurface above $1.1300 was rebuffed. A move above $1.1320 may suggest some near-term consolidation, perhaps ahead of Wednesday's US PCE deflator report.  That said, tomorrow's flash PMI composite reading for the eurozone is expected to have weakened for the fourth consecutive month.  Sterling could not rise 15 ticks from its pre-weekend close (~$1.3450).  The downside was also limited (~$1.3420).  It caught a bid in the European morning that could extend into the US morning.  Still, the $1.3460-$1.3480 band may be a sufficient cap.  The market does not appear inclined to see trigger the $1.3395 option that expires today for about GBP425 mln.   America President Biden's announcement on the Fed's leadership could come as early as tomorrow, as he is set to deliver a speech on the economy tomorrow.  But it probably would be a separate announcement.  Given the expiration of the terms of the two vice-chairs, changes among a few of the regional presidents, and the challenging situation, President Biden is likely to follow Treasury Secretary Yellen's recommendation to re-appoint Powell.  Moreover, a tradition goes back to Volcker of one party making the initial nomination and the other party approving of another term.  This helped "depoliticize" monetary policy.  Trump broke with that tradition, and as Biden has done in a number of other areas, is restoring some traditions.  Lastly, we suspect that if Bernanke or Yellen, or Brainard were at the helm of the Fed, there would not be substantive monetary policy differences.   Vice-Chair Clarida and Governor Waller joined regional Fed President Bullard to suggest that Fed may consider accelerating the pace of tapering at next month's FOMC meeting.  We suspect others will be sympathetic after this week's October PCE and deflator news.  The economy is rebounding in Q4 from the disappointing 2% annualized pace in Q3 (which is likely to be revised higher on Wednesday), and a critical part is consumption.  Personal consumption expenditures are expected to rise by 1% after a 0.6% increase in September.  The headline PCE deflator, which the Fed targets 2% on average, which Governor Brainard reportedly helped devise, is expected to jump above 5% from 4.4% in September.  The core rate is expected to exceed 4%.  No Fed officials are slated to speak this week, but the minutes from the November 3 FOMC meeting will be released on November 24.   El Salvador caught the crypto world's attention again.  It is the first country to make Bitcoin legal tender.  It announced plans to issue a $1 bln bond, and half the proceeds will be used to buy Bitcoin (~2000 coins).  The other half will be used to fund infrastructure projects to build the infrastructure of more Bitcoins.  It will offer a 6.5% coupon, which is lower than current dollar issues.  It looks like one pays a lot for BTC exposures.  El Salvador is rated BB+ of the equivalent by the top three rating agencies.  This makes El Salvador bonds risky, to begin with, and adding Bitcoin on top of that would seem to preclude most retail and institutional investors.  It seems like a desperate act that only an impoverished country can try.  The idea that other countries will quickly follow seems to be a stretch.  There is a good reason why Tesla had few corporate followers to buy Bitcoins with reserve funds.  The same principle would seem to apply to countries.   The economic calendar for North America begins off slowly this week.  Today's main feature is the US existing home sales report.  A pullback after September's heady 7% gain is expected, the strongest in a year.  After a weak start to the year, existing home sales have recovered.  They averaged 5.66 mln (seasonally adjusted annual rate) last year and have averaged more than 6.0 mln for the past three months.  The Canadian dollar has weakened for the past four weeks.  It briefly poked above CAD1.2660 ahead of the weekend to reach its best level since early October.  The greenback is in about a 15-tick range on either side of CAD1.2645 today.  Support is seen in the CAD1.2600-CAD1.2620 area, but it may take a break of CAD1.2585 to boost confidence that a high is in place.  The US dollar rose 1.5% against the Mexican peso last week.  It was the third weekly gain in the past four weeks.  The greenback is trading above last week's high (~MXN20.89) and looks set to test the high set earlier this month near MXN20.98.  Lastly, the Chilean presidential election will go to a run-off next month, as widely expected between the far-right and far-left candidates.   The dollar snapped a five-week pullback against the Chilean peso last week, rising 3.6%, the most in three months.  Year-to-date, the peso is off nearly 14.25%.   Disclaimer
Having A Look At The Markets Considering Tensions, COVID-19 And National Banks Decisions

ECB February Preview: Euro bulls hope for a hawkish ECB on hot EU inflation

FXStreet News FXStreet News 02.02.2022 15:56
EUR/USD has been rising steadily since the beginning of the week. Annual HICP in the euro area came in much higher than expected in January. Euro could lose its bullish momentum if ECB downplays inflation concerns. The shared currency suffered heavy losses against the dollar last week after FOMC Chairman Jerome Powell confirmed the Fed’s hawkish stance in the face of high inflation. Following a sharp decline to its lowest level since June 2020, however, EUR/USD managed to stage a decisive rebound during the first half of the week and advanced beyond 1.1300. In addition to renewed dollar weakness, hot inflation data from the euro area helped the pair push higher mid-week. Eurostat reported that annual inflation in the euro area, as measured by the Harmonised Index of Consumer Prices (HICP), rose to 5.1% in January from 5% in December. This print came in higher than the market expectation of 4.4%. The Core HICP, which excludes energy, food, alcohol and tobacco prices, edged lower to 2.3% from 2.6% but surpassed analysts’ estimate of 1.9%. With the first FOMC meeting out of the way, markets now await the European Central Bank’s (ECB) policy announcements and the euro could find it difficult to extend its rebound if investors are reminded of the policy divergence between the Fed and the ECB. ECB on hold The ECB is widely expected to leave its policy settings unchanged following the February policy meeting. In December, the ECB confirmed that it will end the Pandemic Purchase Emergency Programme (PEPP) in March. To soften the policy transition, the ECB announced that it will increase the monthly purchases under the Asset Purchase Programme (APP) to €40 billion in Q2 and €30 billion in Q3 from the current level of €20 billion. The bank intends to maintain the APP purchases at a pace of €20 billion for “as long as necessary” from the last quarter of the year. While speaking at the press conference in December, ECB President Christine Lagarde refrained from dismissing the possibility of a rate increase before the end of 2022 and helped the common currency stay resilient against its rivals for the remainder of the year. Commenting on the inflation outlook earlier in the month, several ECB members sounded relatively optimistic and EUR/USD struggled to preserve its bullish momentum. ECB policymaker Peter Kazimir noted that inflation in the eurozone was expected to peak in the “nearest months” before starting to decline. Moreover, ECB chief economist Philip Lane said that they are not yet seeing a big response from wages to inflation. Similarly, Lagarde explained that energy costs were rising due to temporary factors and added that there were no signs of wages being “bid up.” Hawkish scenario: In case Lagarde hints at the possibility of a rate hike before the end of the year after the latest inflation report, that could be assessed as a hawkish tilt in the ECB’s policy outlook and provide a boost to the euro. Currently, eurozone money markets are pricing in 30 basis points of rate hikes by the end of the year. Dovish scenario: Lagarde might opt to communicate that inflation is close to peaking in the eurozone and outright reject a rate hike in 2022 while pushing back against market rate-hike bets. Lagarde might also mention that they don’t need to normalize the policy as fast as the Fed by highlighting the differences in economic conditions in the US and the EU. Neutral scenario: Given the fact that the ECB will not release its revised economic projections until March, it would be surprising to see an obvious shift in the ECB’s tone. The accounts of the ECB’s December meeting revealed that policymakers are divided over the inflation outlook and February's policy statement is unlikely to touch on that. The ECB should reiterate that it stands ready to act if inflation becomes persistent in the euro area and that it remains committed to ensuring price stability. EUR/USD Technical Analysis Unless the ECB delivers a hawkish surprise, the policy divergence between the Fed and the ECB should continue to favour the dollar over the euro and limit EUR/USD’s upside. At the time of press, the pair was trading near 1.1300, where the 20-day and the 50-day SMAs are located. In case EUR/USD starts using these levels as support, it could target the next static resistance at 1.1375 ahead of 1.1430 (100-day SMA). Meanwhile, the Relative Strength Index (RSI) indicator on the daily chart stays near 50, suggesting that the pair needs to push higher to convince investors that the latest advance is the beginning of an uptrend rather than a correction. On the flip side, a dovish ECB statement could attract bears and cause the pair to slide toward 1.1200 (psychological level, static level). If this support fails, EUR/USD (https://www.fxstreet.com/currencies/eurusd) could touch a fresh 19-month low at 1.1100.
Bank of England (BoE) and European Central Bank (ECB) About To Make Decisions...

Bank of England (BoE) and European Central Bank (ECB) About To Make Decisions...

Alex Kuptsikevich Alex Kuptsikevich 03.02.2022 08:36
The Bank of England and the ECB will announce their monetary policy decisions today. They could reinforce the contrast in policy between these central banks and trigger a significant reassessment in the FX market. The ECB is expected to confirm its plans to halt its emergency balance sheet buying programme in March. But it will keep the refinancing rate at zero and continue with 'regular' balance sheet purchases. The ECB is likely to try to save face after yesterday's new inflation record and show more hawkish rhetoric than we are used to. Even so, the eurozone will fall seriously behind the US and UK in its fight against inflation, which can dent the euro. The Bank of England is expected to raise its rate for the second time in this cycle from 0.25% to 0.5%. And we would not be surprised if there are hints in the official comments of a willingness to raise the rate at every subsequent meeting in the coming quarters. The overall situation could resemble the early 2000s when the Bank of England acted more aggressively than its Fed and ECB counterparts to suppress inflation. Tight monetary policy will provide the pound with a chance to get out of extreme lows where it found itself due to Brexit and the pandemic, consolidating this year in the 1.42-1.60 area in GBPUSD and a move into the 0.70-0.80 range for EURGBP.
Having A Look At The Markets Considering Tensions, COVID-19 And National Banks Decisions

EURUSD - Heading To 1.1480? GBPUSD After BoE Decision, CADJPY - A Quite Wide Rang?

John Benjamin John Benjamin 04.02.2022 09:38
EURUSD breaks higher The euro soared as traders bet that persistent inflation could force the ECB to act sooner than later. A break below the daily support at 1.1300 had put the single currency under pressure. However, a swift rebound above this support-turned-resistance indicates strong commitment from the buy-side. The pair is rising towards the January peak at 1.1480. The RSI’s triple top in the overbought area may slow the momentum down as intraday buyers take a break. 1.1270 is a key support to keep the rebound relevant. GBPUSD tests resistance The pound popped higher after the BOE raised interest rates to 0.5%. The latest rebound above the resistance at 1.3520 has prompted sellers to cover. Then the rally is accelerating towards 1.3660 which is a major hurdle from the sell-off in late January. A bullish breakout could turn sentiment in the sterling’s favor and send the price to the previous peak at 1.3740. On the downside, 1.3500 is an important support and its breach could invalidate the recovery despite the bullish catalyst. CADJPY awaits breakout The Canadian dollar recovers over growing risk appetite. A fall below the demand zone around 90.60 weighed on sentiment as the loonie struggled to make a higher high. The pair found support at 89.70 in what used to be a former supply area on the daily chart. The current consolidation is a sign of indecision. 91.10 proves to be a tough resistance to crack. A bullish breakout could bring the price to the recent peak at 92.00. Failing that, the pair may suffer from another round of sell-off below 89.10.
Ukrainian Tensions and Oil - Is Russia Really the Bad Guy?

Ukrainian Tensions and Oil - Is Russia Really the Bad Guy?

Finance Press Release Finance Press Release 04.02.2022 18:04
While everyone is criticizing Russia, it’s easy to follow the US ‘savior’ narrative. However, what if we looked at what’s happening with oil in mind?Disclaimer to today’s article: I’m providing this analysis from a pure energy-focused perspective. I do not claim it represents THE right view, but rather one of those that won’t be as visible in the mainstream. It is interesting to add different views as pieces of the same puzzle. I am looking forward to reading yours in the comments!Picture Source: MemedroidSeveral port facilities in Germany, the Netherlands and Belgium have been the target of cyberattacks, prompting the judicial authorities to investigate the suspicions of extortion of funds at the expense of German operators in the oil sector. Indeed, it would appear that this series of computer hackings that began several days ago primarily concerns oil terminals. This is disrupting deliveries in several major European ports against a backdrop of soaring energy prices.After jumping the day before, thanks to the strengthening of the euro against the US dollar induced by ECB President Lagarde, oil prices continued to rise during the European session on Friday. Consequently, the fall in the greenback came on top of the recovery in demand, the fall in US crude inventories and the disruptions in supply to boost the price of black gold on the climb, the two crude benchmarks evolving above the psychological mark of 90 dollars a barrel, galvanized by solid demand and tensions on the offer coming from (geo-)political risks.Who is Provoking Who?The situation is rather complex on the geopolitical scene, with the US claiming that Russia is planning an invasion in Ukraine, whereas the US under NATO cover sent additional troops to Eastern Europe. The question that may arise here is: who is provoking who? So far, we haven’t seen Russia placing troops in Mexico, on the border with the United States. On the other hand, the Biden administration may encounter difficulties in accepting that the Kremlin can agree to various partnerships with its European neighbors, especially regarding more favorable energy supplies. Instead, it’s in the US interest to weaken those diplomatic relations, potentially leading to additional partnerships that may arise between the EU and Putin.And as we see the US-led narrative getting through the Western mainstream media with more aggressive, suspicious, and tense tones towards Russia, this obviously has the effect of pouring some oil on the Russian-Ukrainian fire. Furthermore, the US needs reasons to demonstrate that NATO is still alive and relevant while a number of countries are now questioning their own participation in the US-led military organisation created in 1949, even going so far as to show some doubts regarding its current motivations.Isolating the Russian BearBy maintaining a hostile tone towards Russia’s intentions, the US is consequently trying to isolate the Russian bear and push their European partners to blindly follow the “official narrative” (as the EU being part of NATO), which could possibly lead to new sanctions on Russia, the latter being able to retaliate by using its energy assets and capacities to deprive the EU of the Russian supplies, which currently on the gas side represent between 30% and 40% of total gas imports for Europe. Then, as a result, the Americans could start exporting more gas into Europe via Liquefied Natural Gas (LNG) shipping – which again could benefit their energy-led commercial balance – the Europeans thus becoming the losing players in this game.As an example, we saw this week that a tanker loaded with LNG from the US will arrive at the LNG terminal in Świnoujście (Poland) at the end of this month, since Poland has LNG import capabilities which could be used to deliver US gas to Ukraine. Apparently, this is the second time (after the first one took place two years ago) that such gas deliveries are made by PGNiG, the Polish state-controlled oil and gas company, in cooperation with ERU (their strategic trading partner on the Ukrainian market).Actually, Ukraine suspended imports of Russian gas at the end of 2015. After relying on Russian gas imports for decades, they currently increasingly depend on imports from Europe. Since Ukraine has no LNG import capabilities, such US gas deliveries have been organized via a pipeline from the Polish terminal (through re-gasified LNG).WTI Crude Oil (CLH22) Futures (March contract, daily chart)Brent Crude Oil (BRJH22) Futures (April contract, daily chart)RBOB Gasoline (RBH22) Futures (March contract, daily chart)Henry Hub Natural Gas (NGG22) Futures (February contract, daily chart)In summary, geopolitics is always complex because it relies on individual economic and strategic interests of countries. The readings also depend on different views, and since there is always a lot of noise, it often helps to take some steps back in order to analyze the global situation from a different angle.Have a nice weekend! And remember to chime in on the conversation.Like what you’ve read? Subscribe for our daily newsletter today, and you'll get 7 days of FREE access to our premium daily Oil Trading Alerts as well as our other Alerts. Sign up for the free newsletter today!Thank you.Sebastien BischeriOil & Gas Trading Strategist* * * * *The information above represents analyses and opinions of Sebastien Bischeri, & Sunshine Profits' associates only. As such, it may prove wrong and be subject to change without notice. At the time of writing, we base our opinions and analyses on facts and data sourced from respective essays and their authors. Although formed on top of careful research and reputably accurate sources, Sebastien Bischeri and his associates cannot guarantee the reported data's accuracy and thoroughness. The opinions published above neither recommend nor offer any securities transaction. Mr. Bischeri is not a Registered Securities Advisor. By reading Sebastien Bischeri’s reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Sebastien Bischeri, Sunshine Profits' employees, affiliates as well as their family members may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.
COT Forex Speculators reduce their US Dollar bullish bets to 7-week low

COT Forex Speculators reduce their US Dollar bullish bets to 7-week low

Invest Macro Invest Macro 05.02.2022 20:24
By InvestMacro | COT | Data Tables | COT Leaders | Downloads | COT Newsletter Here are the latest charts and statistics for the Commitment of Traders (COT) data published by the Commodities Futures Trading Commission (CFTC). The latest COT data is updated through Tuesday February 1st and shows a quick view of how large traders (for-profit speculators and commercial entities) were positioned in the futures markets. All currency positions are in direct relation to the US dollar where, for example, a bet for the euro is a bet that the euro will rise versus the dollar while a bet against the euro will be a bet that the euro will decline versus the dollar. Highlighting the COT currency data was the decline for the US Dollar Index in the currency futures contracts. Dollar Index speculators cut back on their bullish bets this week for the third time in the past four weeks after previously pushing their bullish bets to a 117-week high on January 4th. Since that high-point, bullish bets have fallen by a total of -4,507 contracts and have now dropped the overall standing to a seven-week low. Despite the recent slide, the US Dollar Index bullish bets are still near the top of their range over the past three years with a speculator strength index score of 85.4 percent which is considered extremely bullish (strength index is the current speculator standing compared to past three years, above 80 is bullish extreme, below 20 is bearish extreme). The Dollar Index price has had a volatile couple of weeks with a sharp rise to 97.22 on January 28th and then a sharp drop to 95.23 on February 3rd and closed the week at approximately 95.48. The currencies with positive changes this week were the Japanese yen (7,633 contracts), Swiss franc (557 contracts), Canadian dollar (5,947 contracts), Russian ruble (10,207 contracts), Bitcoin (175 contracts), Australian dollar (3,444 contracts) and the Mexican peso (1,520 contracts). The currencies with declining bets were the US Dollar Index (-2,290 contracts), Euro (-1,844 contracts), British pound sterling (-15,842 contracts), Brazil real (-737 contracts) and the New Zealand dollar (-925 contracts). Data Snapshot of Forex Market Traders | Columns Legend Feb-01-2022 OI OI-Index Spec-Net Spec-Index Com-Net COM-Index Smalls-Net Smalls-Index USD Index 56,477 81 34,571 85 -41,884 5 7,313 97 EUR 685,431 78 29,716 44 -57,467 59 27,751 20 GBP 184,007 28 -23,605 57 28,891 47 -5,286 45 JPY 194,435 51 -60,640 30 79,353 76 -18,713 9 CHF 41,054 16 -8,239 56 16,541 49 -8,302 39 CAD 145,082 27 18,264 65 -25,622 39 7,358 44 AUD 196,913 80 -79,829 11 96,098 91 -16,269 13 NZD 58,467 60 -11,698 52 14,019 52 -2,321 25 MXN 141,352 22 730 28 -3,848 71 3,118 56 RUB 46,358 47 14,151 47 -14,451 52 300 43 BRL 76,175 100 -13,353 51 10,467 47 2,886 100 Bitcoin 9,948 51 141 100 -491 0 350 21   US Dollar Index Futures: The US Dollar Index large speculator standing this week resulted in a net position of 34,571 contracts in the data reported through Tuesday. This was a weekly decrease of -2,290 contracts from the previous week which had a total of 36,861 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish-Extreme with a score of 85.4 percent. The commercials are Bearish-Extreme with a score of 5.0 percent and the small traders (not shown in chart) are Bullish-Extreme with a score of 96.5 percent. US DOLLAR INDEX Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 77.7 3.8 16.3 – Percent of Open Interest Shorts: 16.5 78.0 3.3 – Net Position: 34,571 -41,884 7,313 – Gross Longs: 43,897 2,141 9,203 – Gross Shorts: 9,326 44,025 1,890 – Long to Short Ratio: 4.7 to 1 0.0 to 1 4.9 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 85.4 5.0 96.5 – Strength Index Reading (3 Year Range): Bullish-Extreme Bearish-Extreme Bullish-Extreme NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: -0.9 -2.6 22.9   Euro Currency Futures: The Euro Currency large speculator standing this week resulted in a net position of 29,716 contracts in the data reported through Tuesday. This was a weekly fall of -1,844 contracts from the previous week which had a total of 31,560 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 44.1 percent. The commercials are Bullish with a score of 59.5 percent and the small traders (not shown in chart) are Bearish with a score of 20.4 percent. EURO Currency Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 31.2 55.0 12.2 – Percent of Open Interest Shorts: 26.8 63.4 8.2 – Net Position: 29,716 -57,467 27,751 – Gross Longs: 213,563 376,805 83,675 – Gross Shorts: 183,847 434,272 55,924 – Long to Short Ratio: 1.2 to 1 0.9 to 1 1.5 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 44.1 59.5 20.4 – Strength Index Reading (3 Year Range): Bearish Bullish Bearish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: 12.2 -11.8 3.2   British Pound Sterling Futures: The British Pound Sterling large speculator standing this week resulted in a net position of -23,605 contracts in the data reported through Tuesday. This was a weekly decline of -15,842 contracts from the previous week which had a total of -7,763 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish with a score of 57.0 percent. The commercials are Bearish with a score of 46.8 percent and the small traders (not shown in chart) are Bearish with a score of 44.7 percent. BRITISH POUND Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 16.1 68.8 13.5 – Percent of Open Interest Shorts: 28.9 53.1 16.4 – Net Position: -23,605 28,891 -5,286 – Gross Longs: 29,597 126,536 24,845 – Gross Shorts: 53,202 97,645 30,131 – Long to Short Ratio: 0.6 to 1 1.3 to 1 0.8 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 57.0 46.8 44.7 – Strength Index Reading (3 Year Range): Bullish Bearish Bearish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: 24.6 -25.0 16.9   Japanese Yen Futures: The Japanese Yen large speculator standing this week resulted in a net position of -60,640 contracts in the data reported through Tuesday. This was a weekly rise of 7,633 contracts from the previous week which had a total of -68,273 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 29.7 percent. The commercials are Bullish with a score of 75.6 percent and the small traders (not shown in chart) are Bearish-Extreme with a score of 9.3 percent. JAPANESE YEN Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 7.5 82.5 8.2 – Percent of Open Interest Shorts: 38.7 41.7 17.8 – Net Position: -60,640 79,353 -18,713 – Gross Longs: 14,510 160,358 15,958 – Gross Shorts: 75,150 81,005 34,671 – Long to Short Ratio: 0.2 to 1 2.0 to 1 0.5 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 29.7 75.6 9.3 – Strength Index Reading (3 Year Range): Bearish Bullish Bearish-Extreme NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: -5.3 4.1 0.3   Swiss Franc Futures: The Swiss Franc large speculator standing this week resulted in a net position of -8,239 contracts in the data reported through Tuesday. This was a weekly boost of 557 contracts from the previous week which had a total of -8,796 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish with a score of 55.6 percent. The commercials are Bearish with a score of 49.4 percent and the small traders (not shown in chart) are Bearish with a score of 38.9 percent. SWISS FRANC Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 1.7 73.5 24.6 – Percent of Open Interest Shorts: 21.8 33.2 44.8 – Net Position: -8,239 16,541 -8,302 – Gross Longs: 698 30,161 10,103 – Gross Shorts: 8,937 13,620 18,405 – Long to Short Ratio: 0.1 to 1 2.2 to 1 0.5 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 55.6 49.4 38.9 – Strength Index Reading (3 Year Range): Bullish Bearish Bearish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: 1.7 0.7 -4.6   Canadian Dollar Futures: The Canadian Dollar large speculator standing this week resulted in a net position of 18,264 contracts in the data reported through Tuesday. This was a weekly gain of 5,947 contracts from the previous week which had a total of 12,317 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish with a score of 65.4 percent. The commercials are Bearish with a score of 39.4 percent and the small traders (not shown in chart) are Bearish with a score of 44.4 percent. CANADIAN DOLLAR Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 36.1 39.6 21.6 – Percent of Open Interest Shorts: 23.5 57.3 16.5 – Net Position: 18,264 -25,622 7,358 – Gross Longs: 52,386 57,524 31,356 – Gross Shorts: 34,122 83,146 23,998 – Long to Short Ratio: 1.5 to 1 0.7 to 1 1.3 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 65.4 39.4 44.4 – Strength Index Reading (3 Year Range): Bullish Bearish Bearish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: 27.3 -22.9 9.8   Australian Dollar Futures: The Australian Dollar large speculator standing this week resulted in a net position of -79,829 contracts in the data reported through Tuesday. This was a weekly advance of 3,444 contracts from the previous week which had a total of -83,273 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish-Extreme with a score of 10.8 percent. The commercials are Bullish-Extreme with a score of 90.6 percent and the small traders (not shown in chart) are Bearish-Extreme with a score of 12.8 percent. AUSTRALIAN DOLLAR Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 9.6 78.8 9.2 – Percent of Open Interest Shorts: 50.1 30.0 17.5 – Net Position: -79,829 96,098 -16,269 – Gross Longs: 18,835 155,124 18,128 – Gross Shorts: 98,664 59,026 34,397 – Long to Short Ratio: 0.2 to 1 2.6 to 1 0.5 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 10.8 90.6 12.8 – Strength Index Reading (3 Year Range): Bearish-Extreme Bullish-Extreme Bearish-Extreme NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: 0.5 -1.4 3.4   New Zealand Dollar Futures: The New Zealand Dollar large speculator standing this week resulted in a net position of -11,698 contracts in the data reported through Tuesday. This was a weekly decrease of -925 contracts from the previous week which had a total of -10,773 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish with a score of 51.6 percent. The commercials are Bullish with a score of 52.0 percent and the small traders (not shown in chart) are Bearish with a score of 25.3 percent. NEW ZEALAND DOLLAR Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 32.8 61.0 4.8 – Percent of Open Interest Shorts: 52.9 37.0 8.7 – Net Position: -11,698 14,019 -2,321 – Gross Longs: 19,205 35,644 2,783 – Gross Shorts: 30,903 21,625 5,104 – Long to Short Ratio: 0.6 to 1 1.6 to 1 0.5 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 51.6 52.0 25.3 – Strength Index Reading (3 Year Range): Bullish Bullish Bearish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: -9.3 7.9 4.7   Mexican Peso Futures: The Mexican Peso large speculator standing this week resulted in a net position of 730 contracts in the data reported through Tuesday. This was a weekly increase of 1,520 contracts from the previous week which had a total of -790 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 27.7 percent. The commercials are Bullish with a score of 71.2 percent and the small traders (not shown in chart) are Bullish with a score of 56.2 percent. MEXICAN PESO Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 38.0 57.2 4.5 – Percent of Open Interest Shorts: 37.5 59.9 2.3 – Net Position: 730 -3,848 3,118 – Gross Longs: 53,767 80,885 6,378 – Gross Shorts: 53,037 84,733 3,260 – Long to Short Ratio: 1.0 to 1 1.0 to 1 2.0 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 27.7 71.2 56.2 – Strength Index Reading (3 Year Range): Bearish Bullish Bullish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: 2.4 -4.3 20.0   Brazilian Real Futures: The Brazilian Real large speculator standing this week resulted in a net position of -13,353 contracts in the data reported through Tuesday. This was a weekly decline of -737 contracts from the previous week which had a total of -12,616 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish with a score of 50.8 percent. The commercials are Bearish with a score of 47.4 percent and the small traders (not shown in chart) are Bullish-Extreme with a score of 100.0 percent. BRAZIL REAL Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 47.6 46.3 6.0 – Percent of Open Interest Shorts: 65.2 32.6 2.2 – Net Position: -13,353 10,467 2,886 – Gross Longs: 36,293 35,263 4,562 – Gross Shorts: 49,646 24,796 1,676 – Long to Short Ratio: 0.7 to 1 1.4 to 1 2.7 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 50.8 47.4 100.0 – Strength Index Reading (3 Year Range): Bullish Bearish Bullish-Extreme NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: -9.1 4.3 42.4   Russian Ruble Futures: The Russian Ruble large speculator standing this week resulted in a net position of 14,151 contracts in the data reported through Tuesday. This was a weekly lift of 10,207 contracts from the previous week which had a total of 3,944 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 46.9 percent. The commercials are Bullish with a score of 52.4 percent and the small traders (not shown in chart) are Bearish with a score of 42.7 percent. RUSSIAN RUBLE Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 54.0 41.5 4.4 – Percent of Open Interest Shorts: 23.5 72.7 3.7 – Net Position: 14,151 -14,451 300 – Gross Longs: 25,048 19,255 2,024 – Gross Shorts: 10,897 33,706 1,724 – Long to Short Ratio: 2.3 to 1 0.6 to 1 1.2 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 46.9 52.4 42.7 – Strength Index Reading (3 Year Range): Bearish Bullish Bearish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: 13.1 -10.5 -26.0   Bitcoin Futures: The Bitcoin large speculator standing this week resulted in a net position of 141 contracts in the data reported through Tuesday. This was a weekly advance of 175 contracts from the previous week which had a total of -34 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish-Extreme with a score of 100.0 percent. The commercials are Bearish-Extreme with a score of 0.0 percent and the small traders (not shown in chart) are Bearish with a score of 20.9 percent. BITCOIN Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 80.3 3.1 12.4 – Percent of Open Interest Shorts: 78.8 8.0 8.9 – Net Position: 141 -491 350 – Gross Longs: 7,984 304 1,232 – Gross Shorts: 7,843 795 882 – Long to Short Ratio: 1.0 to 1 0.4 to 1 1.4 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 100.0 0.0 20.9 – Strength Index Reading (3 Year Range): Bullish-Extreme Bearish-Extreme Bearish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: 22.4 -43.4 -11.1   Article By InvestMacro – Receive our weekly COT Reports by Email *COT Report: The COT data, released weekly to the public each Friday, is updated through the most recent Tuesday (data is 3 days old) and shows a quick view of how large speculators or non-commercials (for-profit traders) were positioned in the futures markets. The CFTC categorizes trader positions according to commercial hedgers (traders who use futures contracts for hedging as part of the business), non-commercials (large traders who speculate to realize trading profits) and nonreportable traders (usually small traders/speculators) as well as their open interest (contracts open in the market at time of reporting).See CFTC criteria here.
COT Forex Speculators reduce their US Dollar bullish bets to 7-week low - 06.02.2022

COT Forex Speculators reduce their US Dollar bullish bets to 7-week low - 06.02.2022

Invest Macro Invest Macro 05.02.2022 20:24
By InvestMacro | COT | Data Tables | COT Leaders | Downloads | COT Newsletter Here are the latest charts and statistics for the Commitment of Traders (COT) data published by the Commodities Futures Trading Commission (CFTC). The latest COT data is updated through Tuesday February 1st and shows a quick view of how large traders (for-profit speculators and commercial entities) were positioned in the futures markets. All currency positions are in direct relation to the US dollar where, for example, a bet for the euro is a bet that the euro will rise versus the dollar while a bet against the euro will be a bet that the euro will decline versus the dollar. Highlighting the COT currency data was the decline for the US Dollar Index in the currency futures contracts. Dollar Index speculators cut back on their bullish bets this week for the third time in the past four weeks after previously pushing their bullish bets to a 117-week high on January 4th. Since that high-point, bullish bets have fallen by a total of -4,507 contracts and have now dropped the overall standing to a seven-week low. Despite the recent slide, the US Dollar Index bullish bets are still near the top of their range over the past three years with a speculator strength index score of 85.4 percent which is considered extremely bullish (strength index is the current speculator standing compared to past three years, above 80 is bullish extreme, below 20 is bearish extreme). The Dollar Index price has had a volatile couple of weeks with a sharp rise to 97.22 on January 28th and then a sharp drop to 95.23 on February 3rd and closed the week at approximately 95.48. The currencies with positive changes this week were the Japanese yen (7,633 contracts), Swiss franc (557 contracts), Canadian dollar (5,947 contracts), Russian ruble (10,207 contracts), Bitcoin (175 contracts), Australian dollar (3,444 contracts) and the Mexican peso (1,520 contracts). The currencies with declining bets were the US Dollar Index (-2,290 contracts), Euro (-1,844 contracts), British pound sterling (-15,842 contracts), Brazil real (-737 contracts) and the New Zealand dollar (-925 contracts). Data Snapshot of Forex Market Traders | Columns Legend Feb-01-2022 OI OI-Index Spec-Net Spec-Index Com-Net COM-Index Smalls-Net Smalls-Index USD Index 56,477 81 34,571 85 -41,884 5 7,313 97 EUR 685,431 78 29,716 44 -57,467 59 27,751 20 GBP 184,007 28 -23,605 57 28,891 47 -5,286 45 JPY 194,435 51 -60,640 30 79,353 76 -18,713 9 CHF 41,054 16 -8,239 56 16,541 49 -8,302 39 CAD 145,082 27 18,264 65 -25,622 39 7,358 44 AUD 196,913 80 -79,829 11 96,098 91 -16,269 13 NZD 58,467 60 -11,698 52 14,019 52 -2,321 25 MXN 141,352 22 730 28 -3,848 71 3,118 56 RUB 46,358 47 14,151 47 -14,451 52 300 43 BRL 76,175 100 -13,353 51 10,467 47 2,886 100 Bitcoin 9,948 51 141 100 -491 0 350 21   US Dollar Index Futures: The US Dollar Index large speculator standing this week resulted in a net position of 34,571 contracts in the data reported through Tuesday. This was a weekly decrease of -2,290 contracts from the previous week which had a total of 36,861 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish-Extreme with a score of 85.4 percent. The commercials are Bearish-Extreme with a score of 5.0 percent and the small traders (not shown in chart) are Bullish-Extreme with a score of 96.5 percent. US DOLLAR INDEX Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 77.7 3.8 16.3 – Percent of Open Interest Shorts: 16.5 78.0 3.3 – Net Position: 34,571 -41,884 7,313 – Gross Longs: 43,897 2,141 9,203 – Gross Shorts: 9,326 44,025 1,890 – Long to Short Ratio: 4.7 to 1 0.0 to 1 4.9 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 85.4 5.0 96.5 – Strength Index Reading (3 Year Range): Bullish-Extreme Bearish-Extreme Bullish-Extreme NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: -0.9 -2.6 22.9   Euro Currency Futures: The Euro Currency large speculator standing this week resulted in a net position of 29,716 contracts in the data reported through Tuesday. This was a weekly fall of -1,844 contracts from the previous week which had a total of 31,560 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 44.1 percent. The commercials are Bullish with a score of 59.5 percent and the small traders (not shown in chart) are Bearish with a score of 20.4 percent. EURO Currency Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 31.2 55.0 12.2 – Percent of Open Interest Shorts: 26.8 63.4 8.2 – Net Position: 29,716 -57,467 27,751 – Gross Longs: 213,563 376,805 83,675 – Gross Shorts: 183,847 434,272 55,924 – Long to Short Ratio: 1.2 to 1 0.9 to 1 1.5 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 44.1 59.5 20.4 – Strength Index Reading (3 Year Range): Bearish Bullish Bearish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: 12.2 -11.8 3.2   British Pound Sterling Futures: The British Pound Sterling large speculator standing this week resulted in a net position of -23,605 contracts in the data reported through Tuesday. This was a weekly decline of -15,842 contracts from the previous week which had a total of -7,763 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish with a score of 57.0 percent. The commercials are Bearish with a score of 46.8 percent and the small traders (not shown in chart) are Bearish with a score of 44.7 percent. BRITISH POUND Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 16.1 68.8 13.5 – Percent of Open Interest Shorts: 28.9 53.1 16.4 – Net Position: -23,605 28,891 -5,286 – Gross Longs: 29,597 126,536 24,845 – Gross Shorts: 53,202 97,645 30,131 – Long to Short Ratio: 0.6 to 1 1.3 to 1 0.8 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 57.0 46.8 44.7 – Strength Index Reading (3 Year Range): Bullish Bearish Bearish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: 24.6 -25.0 16.9   Japanese Yen Futures: The Japanese Yen large speculator standing this week resulted in a net position of -60,640 contracts in the data reported through Tuesday. This was a weekly rise of 7,633 contracts from the previous week which had a total of -68,273 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 29.7 percent. The commercials are Bullish with a score of 75.6 percent and the small traders (not shown in chart) are Bearish-Extreme with a score of 9.3 percent. JAPANESE YEN Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 7.5 82.5 8.2 – Percent of Open Interest Shorts: 38.7 41.7 17.8 – Net Position: -60,640 79,353 -18,713 – Gross Longs: 14,510 160,358 15,958 – Gross Shorts: 75,150 81,005 34,671 – Long to Short Ratio: 0.2 to 1 2.0 to 1 0.5 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 29.7 75.6 9.3 – Strength Index Reading (3 Year Range): Bearish Bullish Bearish-Extreme NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: -5.3 4.1 0.3   Swiss Franc Futures: The Swiss Franc large speculator standing this week resulted in a net position of -8,239 contracts in the data reported through Tuesday. This was a weekly boost of 557 contracts from the previous week which had a total of -8,796 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish with a score of 55.6 percent. The commercials are Bearish with a score of 49.4 percent and the small traders (not shown in chart) are Bearish with a score of 38.9 percent. SWISS FRANC Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 1.7 73.5 24.6 – Percent of Open Interest Shorts: 21.8 33.2 44.8 – Net Position: -8,239 16,541 -8,302 – Gross Longs: 698 30,161 10,103 – Gross Shorts: 8,937 13,620 18,405 – Long to Short Ratio: 0.1 to 1 2.2 to 1 0.5 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 55.6 49.4 38.9 – Strength Index Reading (3 Year Range): Bullish Bearish Bearish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: 1.7 0.7 -4.6   Canadian Dollar Futures: The Canadian Dollar large speculator standing this week resulted in a net position of 18,264 contracts in the data reported through Tuesday. This was a weekly gain of 5,947 contracts from the previous week which had a total of 12,317 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish with a score of 65.4 percent. The commercials are Bearish with a score of 39.4 percent and the small traders (not shown in chart) are Bearish with a score of 44.4 percent. CANADIAN DOLLAR Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 36.1 39.6 21.6 – Percent of Open Interest Shorts: 23.5 57.3 16.5 – Net Position: 18,264 -25,622 7,358 – Gross Longs: 52,386 57,524 31,356 – Gross Shorts: 34,122 83,146 23,998 – Long to Short Ratio: 1.5 to 1 0.7 to 1 1.3 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 65.4 39.4 44.4 – Strength Index Reading (3 Year Range): Bullish Bearish Bearish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: 27.3 -22.9 9.8   Australian Dollar Futures: The Australian Dollar large speculator standing this week resulted in a net position of -79,829 contracts in the data reported through Tuesday. This was a weekly advance of 3,444 contracts from the previous week which had a total of -83,273 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish-Extreme with a score of 10.8 percent. The commercials are Bullish-Extreme with a score of 90.6 percent and the small traders (not shown in chart) are Bearish-Extreme with a score of 12.8 percent. AUSTRALIAN DOLLAR Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 9.6 78.8 9.2 – Percent of Open Interest Shorts: 50.1 30.0 17.5 – Net Position: -79,829 96,098 -16,269 – Gross Longs: 18,835 155,124 18,128 – Gross Shorts: 98,664 59,026 34,397 – Long to Short Ratio: 0.2 to 1 2.6 to 1 0.5 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 10.8 90.6 12.8 – Strength Index Reading (3 Year Range): Bearish-Extreme Bullish-Extreme Bearish-Extreme NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: 0.5 -1.4 3.4   New Zealand Dollar Futures: The New Zealand Dollar large speculator standing this week resulted in a net position of -11,698 contracts in the data reported through Tuesday. This was a weekly decrease of -925 contracts from the previous week which had a total of -10,773 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish with a score of 51.6 percent. The commercials are Bullish with a score of 52.0 percent and the small traders (not shown in chart) are Bearish with a score of 25.3 percent. NEW ZEALAND DOLLAR Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 32.8 61.0 4.8 – Percent of Open Interest Shorts: 52.9 37.0 8.7 – Net Position: -11,698 14,019 -2,321 – Gross Longs: 19,205 35,644 2,783 – Gross Shorts: 30,903 21,625 5,104 – Long to Short Ratio: 0.6 to 1 1.6 to 1 0.5 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 51.6 52.0 25.3 – Strength Index Reading (3 Year Range): Bullish Bullish Bearish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: -9.3 7.9 4.7   Mexican Peso Futures: The Mexican Peso large speculator standing this week resulted in a net position of 730 contracts in the data reported through Tuesday. This was a weekly increase of 1,520 contracts from the previous week which had a total of -790 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 27.7 percent. The commercials are Bullish with a score of 71.2 percent and the small traders (not shown in chart) are Bullish with a score of 56.2 percent. MEXICAN PESO Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 38.0 57.2 4.5 – Percent of Open Interest Shorts: 37.5 59.9 2.3 – Net Position: 730 -3,848 3,118 – Gross Longs: 53,767 80,885 6,378 – Gross Shorts: 53,037 84,733 3,260 – Long to Short Ratio: 1.0 to 1 1.0 to 1 2.0 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 27.7 71.2 56.2 – Strength Index Reading (3 Year Range): Bearish Bullish Bullish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: 2.4 -4.3 20.0   Brazilian Real Futures: The Brazilian Real large speculator standing this week resulted in a net position of -13,353 contracts in the data reported through Tuesday. This was a weekly decline of -737 contracts from the previous week which had a total of -12,616 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish with a score of 50.8 percent. The commercials are Bearish with a score of 47.4 percent and the small traders (not shown in chart) are Bullish-Extreme with a score of 100.0 percent. BRAZIL REAL Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 47.6 46.3 6.0 – Percent of Open Interest Shorts: 65.2 32.6 2.2 – Net Position: -13,353 10,467 2,886 – Gross Longs: 36,293 35,263 4,562 – Gross Shorts: 49,646 24,796 1,676 – Long to Short Ratio: 0.7 to 1 1.4 to 1 2.7 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 50.8 47.4 100.0 – Strength Index Reading (3 Year Range): Bullish Bearish Bullish-Extreme NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: -9.1 4.3 42.4   Russian Ruble Futures: The Russian Ruble large speculator standing this week resulted in a net position of 14,151 contracts in the data reported through Tuesday. This was a weekly lift of 10,207 contracts from the previous week which had a total of 3,944 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 46.9 percent. The commercials are Bullish with a score of 52.4 percent and the small traders (not shown in chart) are Bearish with a score of 42.7 percent. RUSSIAN RUBLE Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 54.0 41.5 4.4 – Percent of Open Interest Shorts: 23.5 72.7 3.7 – Net Position: 14,151 -14,451 300 – Gross Longs: 25,048 19,255 2,024 – Gross Shorts: 10,897 33,706 1,724 – Long to Short Ratio: 2.3 to 1 0.6 to 1 1.2 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 46.9 52.4 42.7 – Strength Index Reading (3 Year Range): Bearish Bullish Bearish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: 13.1 -10.5 -26.0   Bitcoin Futures: The Bitcoin large speculator standing this week resulted in a net position of 141 contracts in the data reported through Tuesday. This was a weekly advance of 175 contracts from the previous week which had a total of -34 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish-Extreme with a score of 100.0 percent. The commercials are Bearish-Extreme with a score of 0.0 percent and the small traders (not shown in chart) are Bearish with a score of 20.9 percent. BITCOIN Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 80.3 3.1 12.4 – Percent of Open Interest Shorts: 78.8 8.0 8.9 – Net Position: 141 -491 350 – Gross Longs: 7,984 304 1,232 – Gross Shorts: 7,843 795 882 – Long to Short Ratio: 1.0 to 1 0.4 to 1 1.4 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 100.0 0.0 20.9 – Strength Index Reading (3 Year Range): Bullish-Extreme Bearish-Extreme Bearish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: 22.4 -43.4 -11.1   Article By InvestMacro – Receive our weekly COT Reports by Email *COT Report: The COT data, released weekly to the public each Friday, is updated through the most recent Tuesday (data is 3 days old) and shows a quick view of how large speculators or non-commercials (for-profit traders) were positioned in the futures markets. The CFTC categorizes trader positions according to commercial hedgers (traders who use futures contracts for hedging as part of the business), non-commercials (large traders who speculate to realize trading profits) and nonreportable traders (usually small traders/speculators) as well as their open interest (contracts open in the market at time of reporting).See CFTC criteria here.
ECB's hard choice: economy or inflation? 

ECB's hard choice: economy or inflation? 

Alex Kuptsikevich Alex Kuptsikevich 07.02.2022 14:30
Industrial production in Germany fell by 0.3% for December and by 4.1% on the same month a year earlier. A deeper fall compared to the previous month, while surveyed analysts on average expected production to rise by 0.4% over the same period.The new data underscores the difficult choices the ECB will have to make in the coming months as record price growth rates go hand in hand with falling economic activity.The ECB will have to make choices as record inflation in decades requires tightening monetary policy and supporting the euro. On the other hand, industrial activity has been in a downtrend for almost four years.A rise in interest rates is likely to increase pressure on manufacturing activity and increase borrowing costs, negatively affecting consumer credit.The market reaction since last week suggests that the ECB will switch to fighting inflation, but the fading momentum in the economy calls this scenario into question
Rally Time

Rally Time

Monica Kingsley Monica Kingsley 07.02.2022 15:59
S&P 500 refused to break below 4,450s, and junk bonds took off the lows as well. The bottom isn‘t in, but I‘m looking for a little reprieve next. The degree to which bonds were sold off vs. stocks, hints that we would have lower to go still, ultimately bottoming around late Feb, perhaps even early Mar. Increasingly more Fed hikes are being priced in, and Friday‘s good non-farm payrolls figure is reinforcing these expectations.Treasuries are telling the story as well – the 10-year yield has been surging lately while the 30-year bond didn‘t move nearly as much. It means a lot of focus on Fed tightening, which is making the recent Amazon and Meta earnings ability to move stocks this much, all the better for the S&P 500 in the short run. The 10-year yield is likely to retrace a part of its prior increase, and that would give stocks some breathing room. At the same time though, I don‘t think that the tech selling is done, that tech is out of the woods now – the current rally is likely to run out of steam over the next 5-10 days, then go sideways to down.As for the immediate plan for Monday‘s session, I think the 4460s would hold on any retest, should we get there at all. The bulls have a very short-term advantage, then as mentioned above, selling would resume, and around May or June we could get the answer as to whether we‘ve been just consolidating or topping out. Before that, we‘re in a quite wide range where current stock market values aren‘t truly reflecting bond market sluggishness.Keeping in mind the key Friday‘s conclusion:(…) Precious metals are holding up relatively well, regardless of the miners‘ weakness. Commodities can go on enjoying their time in the limelight – crude oil is not even momentarily dipping, and copper stands ready to keep probing higher values within its still sideways range. Even cryptos are benefiting from what could almost be described as a daily flight to safety.As I wrote in extensive Monday‘s analysis and repeated since, stiff winds are still ahead in spite of the soothing verbal pause in tightening. As the 467K figure just in beats expectations, the Fed gets its justification to withdraw liquidity any way it pleases.Let‘s move right into the charts (all courtesy of www.stockcharts.com).S&P 500 and Nasdaq OutlookS&P 500 bulls aren‘t yet winning, but have a good chance to suck in those who believe the tech bottom is in – tech bears would get another opportunity in the not too distant future.Credit MarketsHYG paused, and the heavy selling is catching a bid – reprieve is approaching even if Friday‘s highs didn‘t last.Gold, Silver and MinersPrecious metals aren‘t getting anywhere, and are likely to warmly embrace the upcoming pause in higher yields. But that‘s not yet the true fireworks we would get later in 2022, which would come on the Fed‘s abrupt U-turn.Crude OilCrude oil bulls aren‘t even remotely pausing – I wouldn‘t count on pullback towards $88 or lower really. There is still much strength in black gold regardless of the Iran sanctions waiver – triple digit oil I called for months ago, is getting near.CopperCopper is back to the middle of its recent range, and the downside looks fairly well defended. The upside breakout would take time, and precede the precious metals one. Rising commodities are still sending a clear message as to which way the wind is blowing.Bitcoin and EthereumThe crypto break higher attests to the return of strength underway, and it‘s supported by the volume. The buyers have the short-term upper hand.SummaryS&P 500 bulls withstood the prospect of hawkish Fed getting more job market leeway on Friday, and look to be entering the week with a slight advantage. Also the bond markets look nearning the moment of calming down as the longer durations are painting a different picture than the 10-year Treasury. S&P 500 would like that, but the tech rebound would get tested as we likely move lower to welcome Mar. Till then, stocks are likely to drift somewhat higher before the rally runs out of steam over the next 5-10 days. Full game plan with reasoning is introduced in the opening part of today‘s extensive analysis. Cryptos good performance on Friday is as promising as the commodities surge – enjoy the days ahead.Thank you for having read today‘s free analysis, which is available in full at my homesite. There, you can subscribe to the free Monica‘s Insider Club, which features real-time trade calls and intraday updates for all the five publications: Stock Trading Signals, Gold Trading Signals, Oil Trading Signals, Copper Trading Signals and Bitcoin Trading Signals.
Bitcoin, Ethereum, Metaverse Tokens Sink After Holiday Crypto Rally

Top 3 Price Prediction Bitcoin, Ethereum, Ripple: BTC bears to go extinct beyond $53,000

FXStreet News FXStreet News 07.02.2022 16:06
Bitcoin price looks overextended as it grapples with the 50-day SMA and the weekly resistance barrier at $42,816. Ethereum price pierces through the bearish breaker and approaches the 50-day SMA at $3,242. Ripple price approaches the $0.757 to $0.807 supply zone that could cut the uptrend short. Bitcoin price has seen tremendous gains over the past three days as it attempts to overcome a massive hurdle. While altcoins like Ethereum and Ripple have corresponded to this bullishness, investors need to exercise caution with fresh investments as a retracement could be around the corner. Bitcoin price faces a decisive moment Bitcoin price has risen 18% over the past four days and is currently hovering below the 50-day Simple Moving Average (SMA) and the weekly resistance barrier confluence at $42,816. If this uptrend is a bull trap, BTC is likely to see rejection followed by a retracement to the immediate support level at $8,481. A breakdown of the said barrier will knock the big crypto down to $34,752. In an extremely bearish case, Bitcoin price could revisit the $30,000 psychological barrier and collect the liquidity resting below it. BTC/USD 1-day chart If BTC produces a daily candlestick close above the breaker’s upper limit at $44,387, however, it will invalidate the bearish thesis. While this development will alleviate the sell-side pressure, it does not mean that Bitcoin price has flipped bullish. A daily candlestick close above $52,000 will produce a higher high and suggest the possible start of an uptrend. Ethereum price slithers close to bearish thesis invalidation Ethereum price has followed the big crypto and pierced the bearish breaker, ranging from $2,789 to $3,167. Any further bullish momentum will push ETH to climb higher and retest the 50-day SMA at $3,242. Assuming BTC retraces, investors can expect Ethereum price to face rejection at $3,242, leading to a 25% pullback to the weekly support level at $2,324. In a highly bearish case, Ethereum price could revisit the $1,730 weekly support level and collect the sell-side liquidity resting below it. ETH/USD 1-day chart Regardless of the bearish outlook, the Ethereum price can invalidate the short-term bearish outlook if it produces a daily candlestick close above the $3,167 resistance zone. A bullish scenario could be kick-started, however, if buyers push ETH to produce a swing high at $3,413. Ethereum price gains momentum to breakout to $3,300 Ripple price faces a blockade Ripple price broke out of its consolidation and rallied 25% from $0.604 to $0.754. This impressive move is currently retesting the weekly resistance barrier at $0.740, which rests below another hurdle that extends from $0.757 to $0.807. Rejection at this multi-resistance zone seems likely considering the situation in which Bitcoin is in, and investors can expect the Ripple price to retrace 16%, returning to the consolidation zone at $0.628. XRP/USD 1-day chart A daily candlestick close above the supply zone’s upper limit at $0.807 will signal a resurgence of buyers and indicate their willingness to move higher. In this case, Ripple price could set up a higher high by rallying 12% to $0.911.    
Are You Thinking the Dollar Will Collapse? That’s False Hope

Are You Thinking the Dollar Will Collapse? That’s False Hope

Przemysław Radomski Przemysław Radomski 07.02.2022 15:49
  Gold’s latest feats increased investors’ appetite. The outlook for the dollar, however, remains healthy. That can only mean one thing. As volatility erupts across the financial markets, gold and silver prices are being pulled in conflicting directions. For example, with the USD Index suffering a short-term decline, the outcome is fundamentally bullish for the precious metals. However, with U.S. Treasury yields rallying, the outcome is fundamentally bearish for gold and silver prices. Then, with panic selling and panic buying confronting the general stock market, the PMs are dealing with those crosscurrents. However, with QE on its deathbed and the Fed poised to raise the Federal Funds Rate in the coming months, the common denominator is rising real interest rates. To explain, the euro’s recent popularity has impacted the USD Index. For context, the EUR/USD accounts for nearly 58% of the dollar basket’s movement. Thus, if real interest rates rise and the U.S. dollar falls, what will happen to the PMs? Well, the reality is that rising real interest rates are bullish for the USD Index, and the euro’s recent ECB-induced rally is far from a surprise. With investors often buying the EUR/USD in anticipation of a hawkish shift from the ECB, another ‘hopeful’ upswing occurred. However, the central bank disappointed investors time and time again in 2021, and the currency pair continued to make new lows. As a result, we expect the downtrend to resume over the medium term.  Supporting our expectations, I wrote the following about financial conditions and the USD Index on Feb. 2: To explain, the blue line above tracks Goldman Sachs' Financial Conditions Index (FCI). For context, the index is calculated as a "weighted average of riskless interest rates, the exchange rate, equity valuations, and credit spreads, with weights that correspond to the direct impact of each variable on GDP." In a nutshell: when interest rates increase alongside credit spreads, it's more expensive to borrow money and financial conditions tighten. To that point, if you analyze the right side of the chart, you can see that the FCI has surpassed its pre-COVID-19 high (January 2020). Moreover, the FCI bottomed in January 2021 and has been seeking higher ground ever since. In the process, it's no coincidence that the PMs have suffered mightily since January 2021. To that point, with the Fed poised to raise interest rates at its March monetary policy meeting, the FCI should continue its ascent. As a result, the PMs' relief rallies should fall flat like in 2021.  Likewise, while the USD Index has come down from its recent high, it's no coincidence that the dollar basket bottomed with the FCI in January 2021 and hit a new high with the FCI in January 2022. Thus, while the recent consolidation may seem troubling, the medium-term fundamentals supporting the greenback remain robust. Furthermore, tighter financial conditions are often a function of rising real interest rates. As mentioned, the USD Index bottomed with the FCI and surged to new highs with the FCI. As a result, the fundamentals support a stronger, not weaker USD Index. As evidence, the U.S. 10-Year real yield, the FCI, and the USD Index have traveled similar paths since January 2020. Please see below: To explain, the green line above tracks the USD Index since January 2020, while the red line above tracks the U.S. 10-Year real yield. While the latter didn’t bottom in January 2021 like the USD Index and the FCI (though it was close), all three surged in late 2021 and hit new highs in 2022. Moreover, the U.S. 10-Year Treasury nominal and real yields hit new 2022 highs on Feb. 4.  In addition, if you compare the two charts, you can see that all three metrics spiked higher when the coronavirus crisis struck in March 2020. As such, the trio often follows in each other’s footsteps. Furthermore, with the Fed likely to raise interest rates at its March monetary policy meeting, this realization supports a higher U.S. 10-Year real yield, and a higher FCI. As a result, the fundamentals underpinning the USD Index remain robust, and short-term sentiment is likely to be responsible for the recent weakness.  Likewise, as the Omicron variant slows U.S. economic activity, the ‘bad news is good news’ camp has renewed hopes for a dovish Fed. However, the latest strain is unlikely to affect the Fed’s reaction function. A case in point: after ADP’s private payrolls declined by 301,000 in January (data released on Feb. 2), concern spread across Wall Street. However, after U.S. nonfarm payrolls (government data) came in at 467,000 versus 150,000 expected on Feb. 4, the U.S. labor market remains extremely healthy.  Please see below: Source: U.S. Bureau of Labor Statistics (BLS) On top of that, the BLS revealed that “the over-the-month employment change for November and December 2021 combined is 709,000 higher than previously reported, while the over-the-month employment change for June and July 2021 combined is 807,000 lower. Overall, the 2021 over-the-year change is 217,000 higher than previously reported.”  Thus, the U.S. added more than 700,000 combined jobs in November and December than previously reported, and the net gain in 2021 was more than 200,000. Please see below: Source: BLS As for wage inflation, the BLS also revealed: “In January, average hourly earnings for all employees on private nonfarm payrolls increased by 23 cents to $31.63. Over the past 12 months, average hourly earnings have increased by 5.7 percent.” As a reminder, while investors speculate on the prospect of a hawkish ECB, the latest release out of Europe shows that wage inflation is much weaker than in the U.S. To explain, I wrote on Feb. 1: Eurozone hourly labor costs rose by 2.5% YoY on Dec. 16 (the latest release). Moreover, the report revealed that “the costs of wages & salaries per hour worked increased by 2.3%, while the non-wage component rose by 3.0% in the third quarter of 2021, compared with the same quarter of the previous year.”  As a result, non-wage labor costs – like insurance, healthcare, unemployment premiums, etc. – did the bulk of the heavy lifting. In contrast, wage and salary inflation are nowhere near the ECB’s danger zone. Please see below: And why is wage inflation so critical? Well, ECB Chief Economist Philip Lane said on Jan. 25: Source: ECB As a result, when the ECB’s Chief Economist tells you that wage inflation needs to hit 3% YoY to be “consistent” with the ECB’s 2% overall annual inflation target, a wage print of 2.3% YoY is far from troublesome. Thus, while euro bulls hope that the ECB will mirror the Fed and perform a hawkish 180, the data suggests otherwise.  In addition, while U.S. nonfarm payrolls materially outperformed on Feb. 4, I noted on Feb. 2 that there are now 4.606 million more job openings in the U.S. than citizens unemployed. Please see below: To explain, the green line above subtracts the number of unemployed U.S. citizens from the number of U.S. job openings. If you analyze the right side of the chart, you can see that the epic collapse has completely reversed and the green line is now at an all-time high. Thus, with more jobs available than people looking for work, the economic environment supports normalization by the Fed. Thus, if we piece the puzzle together, the U.S. labor market remains healthy and U.S. inflation is materially outperforming the Eurozone. As a result, the Fed should stay ahead of the ECB, and the hawkish outperformance supports a weaker EUR/USD and a stronger USD Index. Moreover, the dynamic also supports a higher FCI and a higher U.S. 10-Year real yield. As we’ve seen since January 2021, these fundamental outcomes are extremely unkind to the PMs. Finally, while the Omicron variant has depressed economic sentiment, I noted previously that the disruptions should be short-lived. For example, with Americans’ anxiety about COVID-19 decelerating, renewed economic strength should keep the pressure on the Fed. Please see below: To explain, the light brown line above tracks the net percentage of Americans concerned about COVID-19, while the dark brown line above tracks the change in flight search trends on Kayak. In a nutshell: the more concern over COVID-19 (a high light brown line), the more Americans hunker down and avoid travel (a low dark brown line). However, if you analyze the right side of the chart, you can see that the light brown line has rolled over and the dark brown line has materially risen. Moreover, with the trend poised to persist as the warmer weather arrives, increased mobility should uplift sentiment, support economic growth, and keep the Fed’s rate hike cycle on schedule. The bottom line? The USD Index’s fundamentals remain extremely healthy, and while short-term sentiment has been unkind, rising real yields and a hawkish Fed should remain supportive over the medium term. Moreover, with the PMs often moving inversely to the U.S. dollar, more downside should confront gold, silver, and mining stocks over the next few months. In conclusion, the PMs rallied on Feb. 4, despite the spike in U.S. Treasury yields. However, with so much volatility confronting the general stock market recently, sentiment has pulled the PMs in many directions. However, the important point is that the medium-term thesis remains intact: the USD Index and U.S. Treasury yields should seek higher ground, and the realization is profoundly bearish for the precious metals sector. Thank you for reading our free analysis today. Please note that the above is just a small fraction of today’s all-encompassing Gold & Silver Trading Alert. The latter includes multiple premium details such as the targets for gold and mining stocks that could be reached in the next few weeks. If you’d like to read those premium details, we have good news for you. As soon as you sign up for our free gold newsletter, you’ll get a free 7-day no-obligation trial access to our premium Gold & Silver Trading Alerts. It’s really free – sign up today. Przemyslaw Radomski, CFAFounder, Editor-in-chiefSunshine Profits: Effective Investment through Diligence & Care * * * * * All essays, research and information found above represent analyses and opinions of Przemyslaw Radomski, CFA and Sunshine Profits' associates only. As such, it may prove wrong and be subject to change without notice. Opinions and analyses are based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are deemed to be accurate, Przemyslaw Radomski, CFA and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Radomski is not a Registered Securities Advisor. By reading Przemyslaw Radomski's, CFA reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Przemyslaw Radomski, CFA, Sunshine Profits' employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.
Price Of Gold Update By GoldViewFX

Price Of Gold Is Near The Level Of November 2010's

Alex Kuptsikevich Alex Kuptsikevich 08.02.2022 08:49
Tightening monetary conditions in developed countries are not hurting gold so far, and investors' switch from buying risky stocks generates demand for the safe-haven. The daily charts also clearly show gold being repurchased in downturns. Since late last year, impulsive drawbacks on hawkish Fed comments are pushing the price down, but this momentum is not turning into a trend. Buyer support comes from higher and higher levels, although these purchases are measured and tempered, typical for long-term buyers. Such buyers could be central banks, which could diversify away from the dollar and the euro. But there could also be funds that want to stay away from bonds falling in price (on rising yields) at a time of steep rate rises. We can see the increasingly higher lows from August last year on the monthly candlestick charts for gold. So far, high inflation rates and market caution have not allowed a sustained upward trend in the price. However, the presence of solid buyers could revive buying very soon. An important reason for this could be developments in the Eurozone. Rising market interest rates are hitting the region's debt-laden periphery countries twice as hard. Investors may be worried about a repeat of the sovereign debt crisis of 2009-2011. Back then, investors used gold as a protective asset, losing confidence in the debt of almost half of the eurozone countries. It is too early to say that a repeat of the debt crisis is imminent, but early signs of a jump in Greek and Italian bond yields are forming a support for gold. If this trend turns into a problem, active buyers of safe havens promise to become many times more numerous
Bears Are Watching Crude Oil (WTIC) Carefully As It's Very Close To $91

Bears Are Watching Crude Oil (WTIC) Carefully As It's Very Close To $91

Monica Kingsley Monica Kingsley 08.02.2022 15:34
S&P 500 bulls missed the opportunity, but credit markets didn‘t turn down. Yesterday‘s pause is indicative of more chop ahead – the risk-on rally can‘t be declared yet as having run out of steam, no matter the crypto reversal of today. Bonds are in the driver‘s seat, and the dollar is also cautious – unless these move profoundly either way, the yesterday described S&P 500 reprieve can still play out even if: (…) The bottom isn‘t in, but I‘m looking for a little reprieve next. The degree to which bonds were sold off vs. stocks, hints that we would have lower to go still, ultimately bottoming around late Feb, perhaps even early Mar. Increasingly more Fed hikes are being priced in, and Friday‘s good non-farm payrolls figure is reinforcing these expectations. As for the immediate plan for Monday‘s session, I think the 4460s would hold on any retest, should we get there at all. The bulls have a very short-term advantage, then as mentioned above, selling would resume, and around May or June we could get the answer as to whether we‘ve been just consolidating or topping out. The 4,460s are still holding while commodities look to be consolidating today. As the dollar is up somewhat, bonds would have to face opening headwinds – the effect upon tech would be telling. I‘m still looking for downswing rejection in stocks while precious metals would hold up better than commodities today. Let‘s move right into the charts (all courtesy of www.stockcharts.com). S&P 500 and Nasdaq Outlook As stated yesterday, S&P 500 bulls aren‘t yet winning, but have a good chance to suck in those who believe the tech bottom is in – tech bears would get another opportunity in the not too distant future. Credit Markets HYG gave up the opening strength, and the bulls are likely to get under pressure soon – it‘s that yesterday‘s session lacked volume, thus interest of the buyers. The clock is ticking. Gold, Silver and Miners Precious metals keep refusing to make lower lows – that‘s the most important aspect of their tempered ascent. And price gains would accelerate later in 2022, which would come on the Fed‘s abrupt U-turn. Crude Oil Now, crude oil bulls did pause, but the dip isn‘t likely to reach too far – I still wouldn‘t count on pullback towards $88 or lower really – oil stocks would have to turn decidedly down first. Copper Copper is getting cautious, and would probably decline should the commodities pause continue – no matter what other base metals would do at the same time. Still, that‘s internal strength in the waiting, similarly to the precious metals strength. Bitcoin and Ethereum The crypto break higher ran out of steam, warning of a rickety ride ahead – not just in cryptos. Things can still get volatile. Summary S&P 500 bulls haven‘t lost the opportunity to force higher prices, but need to repel the upcoming intraday flush that can come today, and possibly even continue tomorrow. Yes, instead of seizing upon the chance, bonds have merely paused, creating a perfect environment for whipsawish trading today – I‘m still expecting Friday‘s lows to hold on a closing basis, but I‘m not ruling out a fake breakdown first. The very short-term outlook is simply choppy until the bond market upswing kicks in in earnest. And that would provide more fuel to precious metals and commodities while pressuring the dollar – seems though we would have to wait for a while to see that happen. Thank you for having read today‘s free analysis, which is available in full at my homesite. There, you can subscribe to the free Monica‘s Insider Club, which features real-time trade calls and intraday updates for all the five publications: Stock Trading Signals, Gold Trading Signals, Oil Trading Signals, Copper Trading Signals and Bitcoin Trading Signals.
Payrolls Release: Gold Reacted Quickly And Decreased... And Got Back In The Game A Moment Later!

Payrolls Release: Gold Reacted Quickly And Decreased... And Got Back In The Game A Moment Later!

Arkadiusz Sieron Arkadiusz Sieron 08.02.2022 16:42
  The latest employment report strongly supports the Fed’s hawkish narrative. Surprisingly, gold has shown remarkable resilience against it so far. What a surprise! The US labor market added 467,000 jobs last month. As the chart below shows, the number is below December’s figure (+510,000) but much above market expectations – MarketWatch’s analysts forecasted only 150,000 added jobs. Thus, the report reinforces the optimistic view of the US economy’s strength, especially given that the surprisingly good nonfarm payrolls came despite the disruption to consumer-facing businesses from the spread of the Omicron variant of the coronavirus. The unemployment rate increased slightly from 3.9% in December to 4% in January, as the chart above shows. However, it was accompanied by a rise in both the labor force participation rate (from 61.9% to 62.2%) and the employment-population ratio (from 59.5% to 59.7%). Last but not least, average hourly earnings have jumped 5.7% over the last 12 months, as you can see in the next chart. It indicates that wage inflation has intensified recently, despite the surge in COVID-19 cases that was expected by some analysts to dent demand for workers. Hence, the January employment report will cement the hawkish case for the Fed. Rising wages will add to the argument for decisive hiking of interest rates, while the surprisingly strong payrolls will strengthen the Fed’s confidence in the US economy.   Implications for Gold What does the latest employment report imply for the gold market? The unexpectedly high payrolls should be negative for the yellow metal. However, while gold prices initially plunged below $1,800, they rebounded quickly, returning above its key level, as the chart below shows. Gold’s resilience in the face of a strong jobs report is noteworthy and quite encouraging. After all, the report strengthened the US dollar and boosted market expectations of a 50-basis point hike in the federal funds rate in March (from 2.6% one month ago to more than 14% now). Such a big move is unlikely, but the point is that financial conditions are tightening without waiting for the Fed’s actual actions. In the past, gold disliked strong economic reports and rising bond yields and showed a negative correlation with nonfarm payrolls, but not this time. More generally, although long-term fundamentals have turned more bearish in recent months, gold has remained stuck at $1,800. However, last week, two factors could have supported gold prices. The first was rising volatility in the equity market. The S&P 500 Index dropped almost 500 points, or 10%, in January, as the chart below shows. Although it has recovered somewhat, it still remains substantially below the top, with the tech sector experiencing weakness. On Thursday, the shares of Meta, Facebook’s parent company, plunged more than 20%. The second potentially bullish driver was last Thursday’s meeting of the ECB’s Governing Council. The central bank of the Eurozone was more hawkish than expected. Christine Lagarde acknowledged inflationary risks and said that she had become more concerned with the recent surge in inflation. According to initial estimates, the annual inflation rate in the euro area amounted to 5.1% in January 2022, the highest since the common currency was created. Lagarde also backed off her previous guidance that the interest rate hike was “very unlikely” in 2022. The ECB’s pivot – the central bank opening the door for the first rate increase since 2011 – boosted the euro against the greenback. The bottom line is that gold has made itself comfortable around $1,800 and simply doesn’t want – or is not ready – to go away in either direction, at least not yet. The battle between bulls and bears is still on. I’m afraid that, given the relatively aggressive monetary and financial tightening, the sellers will win this clash and gold will drop before the bulls can regain control over the market. However, recent gold’s resilience indicates that there is an underlying bid in the markets and bulls are not giving up. If you enjoyed today’s free gold report, we invite you to check out our premium services. We provide much more detailed fundamental analyses of the gold market in our monthly Gold Market Overview reports and we provide daily Gold & Silver Trading Alerts with clear buy and sell signals. In order to enjoy our gold analyses in their full scope, we invite you to subscribe today. If you’re not ready to subscribe yet though and are not on our gold mailing list yet, we urge you to sign up. It’s free and if you don’t like it, you can easily unsubscribe. Sign up today! Arkadiusz Sieron, PhDSunshine Profits: Effective Investment through Diligence & Care
Having A Look At The Markets Considering Tensions, COVID-19 And National Banks Decisions

EURUSD Keeps Plain Line, US 30 With A Bounce, GBPUSD Gains A Bit

John Benjamin John Benjamin 09.02.2022 08:51
EURUSD hits resistance The euro fell back after ECB President Lagarde tried to cool rate hike expectations. The rally came under pressure at the January peak of 1.1480. The RSI’s overextension at this daily resistance prompted momentum buyers to cash in. A combination of profit-taking and fresh selling may drive the exchange rate lower. Short-term sentiment remains upbeat though unless the single currency drops below the origin of its bullish push at 1.1270. A recovery above 1.1480 could pave the way to last October’s high at 1.1690. GBPUSD consolidates gains The sterling turns higher as traders price in an increasingly hawkish Bank of England. A break above 1.3520 forced sellers to cover some of their positions. However, the pound’s rally came to a halt in the supply zone around 1.3620. The RSI’s overbought situation and bearish divergence suggest softness in the underlying momentum. The pair found bids on the 50% Fibonacci retracement level (1.3490), which sits in the aforementioned supply area. A new rally may propel the pair to the daily resistance at 1.3750. US 30 bounces higher The Dow Jones 30 inches higher supported by better-than-expected earnings. The index steadied after successive breaks above 34800 and 35450. Nonetheless, the recent recovery slowed down on the 30-day moving average, a sign of a lingering cautious mood. 34500 is a key support to keep the rebound relevant. A bearish breakout could extend the correction to 33800. On the upside, a rally above 35700 could attract momentum traders and initiate a bullish reversal to 36500.
EURGBP And GBPUSD Chart Linked With Indices And Obviously BoE

EURGBP And GBPUSD Chart Linked With Indices And Obviously BoE

Alex Kuptsikevich Alex Kuptsikevich 09.02.2022 12:02
GBPUSD is gaining 0.35% on Wednesday, surpassing 1.3585, not far from the month's highs of 1.3620. The British pound is closely correlated with equity market dynamics, and the latest upward momentum in major global indices supports GBP buyers. Also noteworthy is that the Bank of England switched to the next gear in its monetary policy tightening as last week's rate hike was 25 b. p. rather than 50 b. p. by only a slight margin. The euro is also losing ground against the pound after a sharp spike at the ECB meeting. In our view, the EURGBP surge was caused by a technical bounce on touching the 6-year low area. Meanwhile, the Bank of England's stance suggests a much more decisive rate hike, which should provide a carry trade inflow into the pound and further push up the British currency. With the continued upward trajectory of equity indices, a renewal of the 6-year highs of the pound to the euro and a test of the 1.3750 area should come in just a matter of weeks.
Considering Portfolios In Times Of, Among Others, Inflation...

More Profits Ahead

Monica Kingsley Monica Kingsley 09.02.2022 15:54
S&P 500 bulls took the opportunity yesterday amid mild credit market support. Looks like more fireworks are to come – the risk-on turn is merely starting. Not only financials, but also tech welcomed higher yields – it seems that the positive seasonality of 2nd to 3rd week of Feb, is working. We have quite a way to go still on the upside – 4,600s are waiting, and it remains to be seen how far in the 4,600 – 4,700 range stocks make it. Consumer discretionaries are outperforming staples, and energy isn‘t cratering – the brief commodities reprieve (don‘t look though at copper, which seems preparing a nice upside move, or crude oil‘s shallow dip) supports the stock market advance. Precious metals are rising strongly – both thanks to inflation expectations not budging much, and the expected copper upturn. Not even cryptos are plunging. The open S&P 500 and oil profits can keep on rising. Looks like the markets are slowly positioning for yet another hot inflation number tomorrow. How many times lately have there been expectations that high CPI data would sink stocks – but these rallied instead? Thursday is likely to turn out similarly – I‘m not looking for the stock market rally to top out tomorrow. The Mar FOMC is still quite a few weeks away, 50bp rate hike fears notwithstanding. Let‘s move right into the charts (all courtesy of www.stockcharts.com). S&P 500 and Nasdaq Outlook S&P 500 bulls have made the opening step, and look ready to extend gains. Even volume has returned a little, but importantly, sellers were nowhere to be seen – and that‘ll likely be the case today as well. Credit Markets HYG couldn‘t keep the opening gains, but junk bonds still did better than their quality counterparts. Anyway, the HYG weakness looks likely to be reversed (to some degree) today. Gold, Silver and Miners Precious metals are firmly on another upleg – and miners strength is confirming that. When inflation turns out more stubborn than generally appreciated, and bond yields don‘t catch up nearly enough, precious metals would like that. Love that. Crude Oil Now, crude oil bulls did pause, but the dip isn‘t likely to reach too far – I still wouldn‘t count on pullback towards $88 or lower really – this correction is more likely to be in time than in price. Copper Copper is clearly refusing to decline – its upswing looks to be a question of shortening time only. Likewise the commodities reprieve would be reversed shortly. The red metal‘s price action coupled with precious metals one, is very nice to see – for the fruits it would bring. Bitcoin and Ethereum Cryptos aren‘t weakening – they look to be pausing in the upswing only. How long would they need to consolidate before continuing the attempt to go higher? Summary S&P 500 bulls have a firm grip on higher prices – we‘re looking at another green day today. And if it‘s accompanied by the turning bonds, then all the better. Tech has risen, oil is a little down while sectoral breadth improves – the conditions are in place for S&P 500 to overcome 4,600. The risk-on rally hasn‘t yet run out of time, and the Mar FOMC is still far away. Upgraded rate hike prospects are being increasingly absorbed by the markets, and stocks don‘t look spooked at the moment. The bears‘ time would still come though, but let‘s first enjoy the gains our timely positioning is bringing. Thank you for having read today‘s free analysis, which is available in full at my homesite. There, you can subscribe to the free Monica‘s Insider Club, which features real-time trade calls and intraday updates for all the five publications: Stock Trading Signals, Gold Trading Signals, Oil Trading Signals, Copper Trading Signals and Bitcoin Trading Signals.
AUDUSD Gets Rid Of The Recent Resistance, EURGBP Flows Calmly And USOIL Hovers Around $90

AUDUSD Gets Rid Of The Recent Resistance, EURGBP Flows Calmly And USOIL Hovers Around $90

John Benjamin John Benjamin 10.02.2022 08:47
AUDUSD breaks higher The Australian dollar climbs as traders wager on a hawkish shift from the Reserve Bank of Australia. On the daily chart, a break above the 30-day moving average suggests improved sentiment in the short term. The pair extended its gains after it broke the supply area around 0.7170. As sellers scramble to cover their bets, driving up bids, the rally is heading to the next resistance at 0.7210. The RSI’s overbought situation may cause a temporary pullback with 0.7110 as the first support. EURGBP seeks support The euro consolidates gains amid mixed messages from the ECB. The pair found support at February 2020’s low at 0.8290, and a bullish MA cross on the daily chart suggests a potential turnaround. A break above the daily resistance at 0.8405 has put the single currency back on track. An overbought RSI led momentum traders to take profit. The current pullback is testing the 38.2% Fibonacci retracement level (0.8405) which used to be a resistance. 0.8475 is the main hurdle for the reversal to gain traction. USOIL tests support WTI crude bounces higher after the EIA reported a sharp drop in US inventories. Price action is looking to consolidate its gains above the psychological level of 90.00. Sentiment remains upbeat though the bulls need to take a breather after the latest vertical ascent. 88.00 on the 20-day moving average is the immediate support. An oversold RSI may attract buying interest. A deeper retracement would test 85.00. A recovery above 92.30 could trigger momentum buying once again and resume the rally towards 95.00.
The Question Is How Will Price Of Gold Act In Times Of ECB Meeting

The Question Is How Will Price Of Gold Act In Times Of ECB Meeting

Arkadiusz Sieron Arkadiusz Sieron 10.02.2022 16:22
  Lagarde opened the door to an interest rate hike, which gave the European Central Bank a hawkish demeanor. Does it also imply more bullish gold? The ECB has awoken from its ultra-dovish lethargy. In December 2021, the central bank of the Eurozone announced that its Pandemic Emergency Purchase Program would end in March 2022. Although this won’t also mean the end of quantitative easing as the ECB continues to buy assets under the APP program, the central bank will be scaling down the pace of purchases this year. Christine Lagarde, the ECB’s President, admitted it during her press conference held last week. She said: “We will stop the Pandemic Emergency Programme net asset purchases in March and then we will look at the net asset purchases under the APP.” She also left the door open for the interest rates to be raised. Of course, Lagarde did not directly signal the rate hikes. Instead, she pointed out the upside risk of inflation and acknowledged that the macroeconomic conditions have changed: We are going to use all instruments, all optionalities in order to respond to the situation – but the situation has indeed changed. You will have noticed that in the monetary policy statement that I just read, we do refer to the upside risk to inflation in our projection. So the situation having changed, we need to continue to monitor it very carefully. We need to assess the situation on the basis of the data, and then we will have to take a judgement. What’s more, Lagarde didn’t repeat her December phrase that raising interest rates in 2022 is “very unlikely”. When asked about that, she replied: as I said, I don’t make pledges without conditionalities and I did make those statements at our last press conference on the basis of the assessment, on the basis of the data that we had. It was, as all pledges of that nature, conditional. So what I am saying here now is that come March, when we have additional data, when we’ve been able to integrate in our analytical work the numbers that we have received in the last few days, we will be in a position to make a thorough assessment again on the basis of data. I cannot prejudge what that will be, but we are only a few weeks away from the closing time at which we provide the analytical work, prepare the projections for the Governing Council, and then come with some recommendations and make our decisions. It sounds very innocent, but it’s worth remembering that Lagarde is probably the most dovish central banker in the world (let’s exclude Turkish central bankers who cut interest rates amid high inflation, but they are under political pressure from Erdogan). After all, global monetary policy is tightening. For example, last week, the Bank of England hiked its main policy rate by 25 basis points and started quantitative tightening. Even the Fed will probably end quantitative easing and start raising the federal funds rate in March. In such a company, the ECB seems to be a reckless laggard. Hence, even very shy comments mean something in the case of this central bank. The markets were so impressed that they started to price in 50 basis points of rate hikes this year, probably in an exaggerated reaction.   Implications for Gold What does the latest ECB monetary policy meeting mean for the gold market? Well, maybe it wasn’t an outright revolution, but the ECB is slowly reducing its massive monetary stimulus. Although the euro area does not face the inflationary pressure of the same kind as the US, with inflation that soared to 5% in December and to 5.1% in January (according to the initial estimate), the ECB simply has no choice. As the chart below shows, inflation in the Eurozone is the highest in the whole history of euro. Additionally, in the last quarter of 2021, the GDP of the euro area finally reached its pre-pandemic level, two quarters later than in the case of the US. Europe is back in the game. The economic recovery strengthens the hawkish camp within the ECB. All of this is fundamentally bullish for gold prices. To be clear, don’t expect that Christine Lagarde will turn into Paul Volcker and hike interest rates in a rush. Given the structural problems of the euro area, the ECB will lag behind the Fed and remain relatively more dovish. However, German bond yields have recently risen, and there is still room for further increases. If the market interest rates go up more in Europe than across the pond, which is likely given the financial tightening that has already occurred in the US, the spread between American and German interest rates could narrow further (see the chart below). The narrowing divergence between monetary policies and interest rates in the US and in the Eurozone should strengthen the euro against the greenback – and it should be supportive of gold. As the chart above shows, when the spread was widening in 2012-2018, gold was in the bear market. The yellow metal started its rally at the end of 2018, just around the peak of the spread. On the other hand, if the divergence intensifies, gold will suffer. Given that Powell is expected to hike rates as soon as March, while Lagarde may only start thinking about the tightening cycle, we may have to wait a while for the spread to peak. One thing is certain: it can get hot in March! If you enjoyed today’s free gold report, we invite you to check out our premium services. We provide much more detailed fundamental analyses of the gold market in our monthly Gold Market Overview reports and we provide daily Gold & Silver Trading Alerts with clear buy and sell signals. In order to enjoy our gold analyses in their full scope, we invite you to subscribe today. If you’re not ready to subscribe yet though and are not on our gold mailing list yet, we urge you to sign up. It’s free and if you don’t like it, you can easily unsubscribe. Sign up today! Arkadiusz Sieron, PhDSunshine Profits: Effective Investment through Diligence & Care
Considering Portfolios In Times Of, Among Others, Inflation...

The Indicators Hit Higher Levels Than Expected In The US

FXStreet News FXStreet News 10.02.2022 15:44
US inflation have exceeded expectations on all measures. Alongside a jump in jobs, America's economy is on fire and the Fed is set to act. The dollar has further room to rise, at least until Fed officials open their mouths. A 6% handle on annual price rises – another milestone has been reached, this time on core inflation. Data for the first month of 2022 is hot out of the oven – and it is steaming hot. While prices of used cars and shelter seemed to have slowed down, there are few silver linings to find. On a monthly basis, both headline and Core CPI is up 0.6%, while overall annual price rises is at 7.5%, above expectations – and even implying an 8% handle next month. It is essential to note that this is no longer limited to energy or supply-chain issues, but rather broad price rises. It is accompanied by a job market that is on fire, as jobless claims for the week ending On February 4 show – a drop from 238,000 to 223,000. That comes on top of January's jobs report. Only six days ago, the Nonfarm Payrolls report came out with an increase of 467,000 positions, accompanied by upward revisions. Wages also jumped according to that NFP, adding to price pressures. Both figures are critical to the Federal Reserve, which has a dual mandate of full employment and price stability. The data more than cement a March rate hike and perhaps at a scale of 0.50% instead of 0.25%, which is the standard measure. Moreover, the Fed could raise interest rates four times by July – contrary to its projections of hiking only three times throughout the whole of 2022. That means more pressure on the dollar. The greenback has benefited from a knee-jerk reaction to the figures, but it has even more room to rise as analysts pore over the data. What could halt the greenback? Only Fed officials can cool things down, by playing down the option of raising rates by 50bp in March. That is what happened last week when hawks such as Atlanta Fed President Raphael Bostic and others calmed markets. On a relative basis, some currencies could do better than others, if central bankers talk about action to mitigate inflation. The European Central Bank's hawkish twist helped the euro recover against the dollar. After these figures, ECB hawks face an uphill battle. Overall, King Dollar reigns supreme.
COT Currency Speculator’s bullish bets for Brazilian Real jump by most on record - 12.02.2022

COT Currency Speculator’s bullish bets for Brazilian Real jump by most on record - 12.02.2022

Invest Macro Invest Macro 12.02.2022 18:28
By InvestMacro | COT | Data Tables | COT Leaders | Downloads | COT Newsletter Here are the latest charts and statistics for the Commitment of Traders (COT) data published by the Commodities Futures Trading Commission (CFTC). The latest COT data is updated through Tuesday February 8th and shows a quick view of how large traders (for-profit speculators and commercial entities) were positioned in the futures markets. All currency positions are in direct relation to the US dollar where, for example, a bet for the euro is a bet that the euro will rise versus the dollar while a bet against the euro will be a bet that the euro will decline versus the dollar. Highlighting the COT currency data was the strong gains in bullish bets for the Brazilian Real currency futures contracts. Real speculators boosted their bullish bets this week by the largest one-week amount (+33,599 contracts) on record, according the CFTC data going back to 1995. This surge in bullish sentiment pushed the overall net speculator standing for Brazilian Reals into bullish territory for the first time in nineteen weeks, dating back to September 28th. There has been a surge of trading going on in this market over the past couple of weeks with open interest increasing dramatically. Open interest (OI) for the Brazilian currency jumped on February 2nd to a total of 76,175 contracts which marked the highest OI level of the previous 381 weeks, dating all the way back to September of 2014. The previous ten weeks had seen an average open interest of less than half (ten week average of 33,492 contracts) of the February 2nd total. This week’s open interest fell a bit to 64,283 contracts but still was the second highest open interest of the past thirty-six weeks and with all this activity going on, this is a currency to watch. Joining the Brazil real (33,599 contracts) with positive changes this week were the Euro (9,126 contracts), Japanese yen (1,492 contracts), British pound sterling (15,060 contracts), New Zealand dollar (1,332 contracts), Mexican peso (514 contracts) and the Russian ruble (1,292 contracts). The currencies with declining bets were the US Dollar Index (-806 contracts), Australian dollar (-5,912 contracts), Canadian dollar (-3,378 contracts), Swiss franc (-1,160 contracts) and the Bitcoin futures (-460 contracts). Data Snapshot of Forex Market Traders | Columns Legend Feb-08-2022 OI OI-Index Spec-Net Spec-Index Com-Net COM-Index Smalls-Net Smalls-Index USD Index 53,603 75 33,765 84 -40,826 7 7,061 94 EUR 700,098 83 38,842 47 -73,252 55 34,410 31 GBP 197,948 37 -8,545 68 9,323 35 -778 54 JPY 196,478 53 -59,148 31 75,957 74 -16,809 13 CHF 41,481 16 -9,399 54 16,918 50 -7,519 41 CAD 145,208 27 14,886 62 -16,958 45 2,072 34 AUD 196,403 80 -85,741 5 98,357 92 -12,616 22 NZD 54,877 53 -10,366 54 12,733 50 -2,367 25 MXN 134,257 19 1,244 28 -4,073 71 2,829 55 RUB 39,233 35 15,443 50 -16,839 47 1,396 72 BRL 64,283 81 20,246 96 -22,432 4 2,186 92 Bitcoin 9,886 50 -319 90 -189 0 508 24   US Dollar Index Futures: The US Dollar Index large speculator standing this week was a net position of 33,765 contracts in the data reported through Tuesday. This was a weekly fall of -806 contracts from the previous week which had a total of 34,571 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish-Extreme with a score of 84.0 percent. The commercials are Bearish-Extreme with a score of 6.8 percent and the small traders (not shown in chart) are Bullish-Extreme with a score of 93.8 percent. US DOLLAR INDEX Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 75.3 5.9 16.5 – Percent of Open Interest Shorts: 12.3 82.0 3.3 – Net Position: 33,765 -40,826 7,061 – Gross Longs: 40,370 3,150 8,841 – Gross Shorts: 6,605 43,976 1,780 – Long to Short Ratio: 6.1 to 1 0.1 to 1 5.0 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 84.0 6.8 93.8 – Strength Index Reading (3 Year Range): Bullish-Extreme Bearish-Extreme Bullish-Extreme NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: -5.2 2.7 15.2   Euro Currency Futures: The Euro Currency large speculator standing this week was a net position of 38,842 contracts in the data reported through Tuesday. This was a weekly increase of 9,126 contracts from the previous week which had a total of 29,716 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 46.9 percent. The commercials are Bullish with a score of 55.0 percent and the small traders (not shown in chart) are Bearish with a score of 31.4 percent. EURO Currency Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 31.3 54.6 12.5 – Percent of Open Interest Shorts: 25.7 65.1 7.6 – Net Position: 38,842 -73,252 34,410 – Gross Longs: 218,973 382,426 87,725 – Gross Shorts: 180,131 455,678 53,315 – Long to Short Ratio: 1.2 to 1 0.8 to 1 1.6 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 46.9 55.0 31.4 – Strength Index Reading (3 Year Range): Bearish Bullish Bearish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: 14.0 -15.5 15.3   British Pound Sterling Futures: The British Pound Sterling large speculator standing this week was a net position of -8,545 contracts in the data reported through Tuesday. This was a weekly gain of 15,060 contracts from the previous week which had a total of -23,605 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish with a score of 67.8 percent. The commercials are Bearish with a score of 35.2 percent and the small traders (not shown in chart) are Bullish with a score of 54.0 percent. BRITISH POUND Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 22.6 60.7 13.6 – Percent of Open Interest Shorts: 26.9 56.0 14.0 – Net Position: -8,545 9,323 -778 – Gross Longs: 44,709 120,220 26,951 – Gross Shorts: 53,254 110,897 27,729 – Long to Short Ratio: 0.8 to 1 1.1 to 1 1.0 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 67.8 35.2 54.0 – Strength Index Reading (3 Year Range): Bullish Bearish Bullish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: 30.4 -30.0 17.8   Japanese Yen Futures: The Japanese Yen large speculator standing this week was a net position of -59,148 contracts in the data reported through Tuesday. This was a weekly boost of 1,492 contracts from the previous week which had a total of -60,640 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 30.7 percent. The commercials are Bullish with a score of 73.9 percent and the small traders (not shown in chart) are Bearish-Extreme with a score of 13.5 percent. JAPANESE YEN Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 8.0 81.2 9.0 – Percent of Open Interest Shorts: 38.1 42.6 17.5 – Net Position: -59,148 75,957 -16,809 – Gross Longs: 15,692 159,601 17,609 – Gross Shorts: 74,840 83,644 34,418 – Long to Short Ratio: 0.2 to 1 1.9 to 1 0.5 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 30.7 73.9 13.5 – Strength Index Reading (3 Year Range): Bearish Bullish Bearish-Extreme NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: -3.8 1.8 5.3   Swiss Franc Futures: The Swiss Franc large speculator standing this week was a net position of -9,399 contracts in the data reported through Tuesday. This was a weekly decline of -1,160 contracts from the previous week which had a total of -8,239 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish with a score of 53.5 percent. The commercials are Bearish with a score of 49.9 percent and the small traders (not shown in chart) are Bearish with a score of 41.2 percent. SWISS FRANC Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 3.0 72.8 23.7 – Percent of Open Interest Shorts: 25.6 32.1 41.8 – Net Position: -9,399 16,918 -7,519 – Gross Longs: 1,234 30,215 9,838 – Gross Shorts: 10,633 13,297 17,357 – Long to Short Ratio: 0.1 to 1 2.3 to 1 0.6 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 53.5 49.9 41.2 – Strength Index Reading (3 Year Range): Bullish Bearish Bearish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: 2.3 1.9 -8.8   Canadian Dollar Futures: The Canadian Dollar large speculator standing this week was a net position of 14,886 contracts in the data reported through Tuesday. This was a weekly decline of -3,378 contracts from the previous week which had a total of 18,264 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish with a score of 62.1 percent. The commercials are Bearish with a score of 45.4 percent and the small traders (not shown in chart) are Bearish with a score of 33.9 percent. CANADIAN DOLLAR Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 37.7 40.2 18.9 – Percent of Open Interest Shorts: 27.5 51.9 17.5 – Net Position: 14,886 -16,958 2,072 – Gross Longs: 54,762 58,404 27,480 – Gross Shorts: 39,876 75,362 25,408 – Long to Short Ratio: 1.4 to 1 0.8 to 1 1.1 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 62.1 45.4 33.9 – Strength Index Reading (3 Year Range): Bullish Bearish Bearish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: 24.4 -16.7 -2.2   Australian Dollar Futures: The Australian Dollar large speculator standing this week was a net position of -85,741 contracts in the data reported through Tuesday. This was a weekly reduction of -5,912 contracts from the previous week which had a total of -79,829 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish-Extreme with a score of 5.3 percent. The commercials are Bullish-Extreme with a score of 92.3 percent and the small traders (not shown in chart) are Bearish with a score of 21.7 percent. AUSTRALIAN DOLLAR Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 8.8 79.0 9.9 – Percent of Open Interest Shorts: 52.5 28.9 16.3 – Net Position: -85,741 98,357 -12,616 – Gross Longs: 17,323 155,203 19,485 – Gross Shorts: 103,064 56,846 32,101 – Long to Short Ratio: 0.2 to 1 2.7 to 1 0.6 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 5.3 92.3 21.7 – Strength Index Reading (3 Year Range): Bearish-Extreme Bullish-Extreme Bearish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: -3.7 -0.8 12.5   New Zealand Dollar Futures: The New Zealand Dollar large speculator standing this week was a net position of -10,366 contracts in the data reported through Tuesday. This was a weekly increase of 1,332 contracts from the previous week which had a total of -11,698 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish with a score of 53.9 percent. The commercials are Bullish with a score of 50.0 percent and the small traders (not shown in chart) are Bearish with a score of 24.7 percent. NEW ZEALAND DOLLAR Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 31.3 61.2 5.6 – Percent of Open Interest Shorts: 50.2 38.0 10.0 – Net Position: -10,366 12,733 -2,367 – Gross Longs: 17,168 33,591 3,097 – Gross Shorts: 27,534 20,858 5,464 – Long to Short Ratio: 0.6 to 1 1.6 to 1 0.6 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 53.9 50.0 24.7 – Strength Index Reading (3 Year Range): Bullish Bullish Bearish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: -3.3 4.1 -7.9   Mexican Peso Futures: The Mexican Peso large speculator standing this week was a net position of 1,244 contracts in the data reported through Tuesday. This was a weekly gain of 514 contracts from the previous week which had a total of 730 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 27.9 percent. The commercials are Bullish with a score of 71.1 percent and the small traders (not shown in chart) are Bullish with a score of 55.0 percent. MEXICAN PESO Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 33.6 61.3 4.5 – Percent of Open Interest Shorts: 32.7 64.3 2.4 – Net Position: 1,244 -4,073 2,829 – Gross Longs: 45,097 82,287 6,067 – Gross Shorts: 43,853 86,360 3,238 – Long to Short Ratio: 1.0 to 1 1.0 to 1 1.9 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 27.9 71.1 55.0 – Strength Index Reading (3 Year Range): Bearish Bullish Bullish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: 4.4 -5.2 9.1   Brazilian Real Futures: The Brazilian Real large speculator standing this week was a net position of 20,246 contracts in the data reported through Tuesday. This was a weekly rise of 33,599 contracts from the previous week which had a total of -13,353 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish-Extreme with a score of 95.7 percent. The commercials are Bearish-Extreme with a score of 3.5 percent and the small traders (not shown in chart) are Bullish-Extreme with a score of 91.7 percent. BRAZIL REAL Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 76.5 17.6 5.7 – Percent of Open Interest Shorts: 45.0 52.5 2.3 – Net Position: 20,246 -22,432 2,186 – Gross Longs: 49,170 11,336 3,666 – Gross Shorts: 28,924 33,768 1,480 – Long to Short Ratio: 1.7 to 1 0.3 to 1 2.5 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 95.7 3.5 91.7 – Strength Index Reading (3 Year Range): Bullish-Extreme Bearish-Extreme Bullish-Extreme NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: 34.2 -37.2 28.4   Russian Ruble Futures: The Russian Ruble large speculator standing this week was a net position of 15,443 contracts in the data reported through Tuesday. This was a weekly boost of 1,292 contracts from the previous week which had a total of 14,151 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 49.9 percent. The commercials are Bearish with a score of 46.9 percent and the small traders (not shown in chart) are Bullish with a score of 72.5 percent. RUSSIAN RUBLE Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 50.1 43.4 6.5 – Percent of Open Interest Shorts: 10.7 86.3 3.0 – Net Position: 15,443 -16,839 1,396 – Gross Longs: 19,657 17,021 2,555 – Gross Shorts: 4,214 33,860 1,159 – Long to Short Ratio: 4.7 to 1 0.5 to 1 2.2 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 49.9 46.9 72.5 – Strength Index Reading (3 Year Range): Bearish Bearish Bullish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: 16.5 -15.9 -0.7   Bitcoin Futures: The Bitcoin large speculator standing this week was a net position of -319 contracts in the data reported through Tuesday. This was a weekly reduction of -460 contracts from the previous week which had a total of 141 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish-Extreme with a score of 89.9 percent. The commercials are Bearish with a score of 24.8 percent and the small traders (not shown in chart) are Bearish with a score of 24.5 percent. BITCOIN Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 78.4 3.8 14.9 – Percent of Open Interest Shorts: 81.6 5.7 9.8 – Net Position: -319 -189 508 – Gross Longs: 7,751 376 1,474 – Gross Shorts: 8,070 565 966 – Long to Short Ratio: 1.0 to 1 0.7 to 1 1.5 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 89.9 24.8 24.5 – Strength Index Reading (3 Year Range): Bullish-Extreme Bearish Bearish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: 4.9 2.9 -5.9   Article By InvestMacro – Receive our weekly COT Reports by Email *COT Report: The COT data, released weekly to the public each Friday, is updated through the most recent Tuesday (data is 3 days old) and shows a quick view of how large speculators or non-commercials (for-profit traders) were positioned in the futures markets. The CFTC categorizes trader positions according to commercial hedgers (traders who use futures contracts for hedging as part of the business), non-commercials (large traders who speculate to realize trading profits) and nonreportable traders (usually small traders/speculators) as well as their open interest (contracts open in the market at time of reporting).See CFTC criteria here.
Russian Rouble (RUB) Has Been Supported By Local Moves, But Is Under Geopolitical Pressure Now

Russian Rouble (RUB) Has Been Supported By Local Moves, But Is Under Geopolitical Pressure Now

Alex Kuptsikevich Alex Kuptsikevich 14.02.2022 09:28
The strengthening of the ruble was interrupted on Friday as geopolitical factors again came to the forefront, pushing aside the fundamental and long-term factors that supported the ruble. The Bank of Russia did everything in its power to support the Russian currency: the rate was raised by 100 points to 9.5%, investors were warned of further increases, and the pause in foreign currency purchases for the Finance Ministry was extended. Nevertheless, before the weekend, investors again preferred to reduce the risks of owning Russian assets against the background of the fact that several Foreign Ministries of different countries called on their citizens to leave Ukraine. For the markets, this is a signal that a new round of geopolitical tensions and the negotiations in the outgoing week did not bring the long-awaited agreement. Against the backdrop of news about geopolitics, the RTS index lost more than 4.6%, and the Moscow Exchange fell by 3%. It seems that the Russian market will have to experience the convulsions of geopolitics more than once for at least another week. Fixing the ruble above 76.40 per dollar and 86.60 per euro will mean that the period of corrective rollback of the ruble has come to an end, and we need to prepare for a new wave of growth. But this is from the standpoint of technical analysis. In practice, geopolitics now rules the roost, where détente can be as fast as escalation. At the same time, fundamental factors (high rates of the Central Bank, expensive oil, and a pause in foreign currency purchases) continue to play on the side of the ruble. These factors promise to return the ruble to the path of growth very quickly, repeating the dynamics of the previous two weeks. If we are right, then the ruble may remain in an upward trend until the end of February, rushing to the area of 71 per dollar and 83 per euro by the end of the month.
Dogecoin price prediction: DOGE to first tank 7%, before rallying 40%

Dogecoin price prediction: DOGE to first tank 7%, before rallying 40%

FXStreet News FXStreet News 14.02.2022 15:59
Dogecoin price action is under pressure as global markets are nervous about a possible escalation between Ukraine and Russia. DOGE looks set to break the low from the previous week and dip towards $0.1357 Expect once DOGE price reaches that level to see a rally into the weekend that could hold 40% gains. Dogecoin (DOGE) is set for a solid rally but first needs to face the most vital forces with global markets pressing on all assets with a mood of risk-off, as today and tomorrow could be the tipping point in the escalation towards a war between Russia and Ukraine. As tailwinds are just too big a force to face, DOGE will dip further towards solid support at $0.1357. Once bulls enter, expect a big rally that could swing up to 40% towards $0.19. Time for the bulls to stake a step back and look at the bigger picture Dogecoin is under pressure as the overall cryptocurrency space joins global markets rattled by a crucial moment in the Russia-Ukraine development. As Russian army exercises near the Ukrainian border are set to end tomorrow, the crucial moment for a possible invasion to take place before then. This is putting markets on edge with risk-off across the board and EU equities down more than 3%. This risk sentiment is weighing on DOGE price action with the low of last week being tested, and bears using the entry-level from Sunday at $0.1594 where the 55-day Simple Moving Average and the pivotal historical level delivered a firm rejection to the upside. With that, expect this downtrend to continue today and dip towards $0.1357, which already proved its support at the end of January. Once there, expect bulls to jump on the opportunity and lead a rally that could jump as much as 40% towards $0.19 once the geopolitical rhetoric dies down and cools off. DOGE/USD daily chart Should Russia engage in war with Ukraine and invade, expect this to pull the trigger for investors to flee the markets and cause a fire sale across the board. For DOGE this would mean that it could tank another 24% on top of the 7% forecasted for today. That would bring DOGE price action down to around $0.1030, where the monthly S1 support level is situated, the red descending trendline and the $0.1000 psychological level – providing three elements that could catch the falling price action.
Technical Analysis: Moving Averages - Did You Know This Tool?

S&P 500 Chart - There's A Big Red Candle On The Right Hand Side

Monica Kingsley Monica Kingsley 14.02.2022 16:24
S&P 500 opening range gave way to heavy selling as 4,470s didn‘t hold. Risk-on was overpowered, and the flight to Treasuries didn‘t support tech. And that‘s most medium-term worrying – stocks don‘t look to have found a floor, and gave up the opportunity for a tight range trading on Friday all too easily. The prospects of war were that formidable opponent, against which the S&P 500 didn‘t really stand a chance. So, the downtrend has reasserted itself, and HYG doesn‘t look to have found a floor – junk bonds are leading to the downside, with energy, materials and financials standing out, which isn‘t exactly a bullish constellation. The other key beneficiaries of the safe haven bid were gold, miners and oil. Silver lagged as copper retreated all too easily, but I‘m looking for that to change. As for Monday‘s session in stocks, the odds of a countertrend move to the upside, at least intraday, are good. Just a quick glance at the dollar, gold, oil and Bitcoin would reveal the extent of possible stabilization. Stabilization, not a reversal, because HYG is unlikely to turn up, and I‘m not looking for stocks to start moving up again. Thursday marked a high point in the countertrend rally, which was cut short after some 5 days only. Sideways to a little up is the best the bulls can hope for on Monday. Funny though how with all eyes on Eastern Europe, the inflation and steep rate hike bets receded? What a Super Bowl! Let‘s move right into the charts (all courtesy of www.stockcharts.com). S&P 500 and Nasdaq Outlook Whatever backing and filling there could have been, the S&P 500 didn‘t hesitate, and is pointing to the downside. The bears are back, and aren‘t yielding. Credit Markets Credit markets went decidedly risk-off, and a little sideways reprieve wouldn‘t be surprising. But it would change nothing as the bets on rising rates, are on, and the 2-year Treasury is forcing the Fed‘s hand. Gold, Silver and Miners Miners and gold came alive on the tensions escalation news – the uptrend is alive and well indeed, even without these geopolitical developments. The upswing wasn‘t really sold into. Crude Oil Crude oil correction came to an abrupt close, and it‘s unlikely black gold would dip in the current environment. The upcoming corrections would be bought as much as the previous one, and given the oil stocks performance, wouldn‘t likely reach far to the downside. Copper Copper is under pressure, and not holding up as well as other commodities. Base metals though are breaking higher, which is why I‘m looking at Friday‘s red metal trading as a temporary setback only. Bitcoin and Ethereum The floor in cryptos is heralding a tight range day – it‘s good for risk-on that Friday‘s downswing isn‘t immediately continuing, it‘s buying some time. Summary S&P 500 bears are back in the driver‘s seat, and the rush to Treasuries took the spotlight off rate hikes – to a small degree. Not that the Fed would be changing course on geopolitics, we aren‘t there yet. To the contrary, credit markets are pressuring the central bank to move – as decisively as possible in the overleveraged system – and Powell would find it hard not to deliver. Come autumn latest, the strain on the real economy would be hard to ignore – real estate is feeling the pinch already. Stock bulls can‘t expect higher prices unless tech recovers, and we look to be still far from that moment. Real assets with safe haven appeal are likely to do best, and the same goes for the dollar temporarily too. Thank you for having read today‘s free analysis, which is available in full at my homesite. There, you can subscribe to the free Monica‘s Insider Club, which features real-time trade calls and intraday updates for all the five publications: Stock Trading Signals, Gold Trading Signals, Oil Trading Signals, Copper Trading Signals and Bitcoin Trading Signals.
Russian Rouble "Strengthened By Diplomacy"? RTS Index Increases

Russian Rouble "Strengthened By Diplomacy"? RTS Index Increases

Alex Kuptsikevich Alex Kuptsikevich 15.02.2022 13:00
The Russian market is trying to grow this morning. The RTS index has already added 5.5%, while the ruble has taken away 1.7% from the dollar and 1.3% from the euro. The growth impulse was formed yesterday when Foreign Minister Lavrov called for a search for diplomatic ways out of the situation. Later, comments by Zelensky, who in an address to the nation insisted on a diplomatic solution, and a speech by Shoigu, who ordered part of the troops to return to locations of permanent de-escalation, added positives. So far, these are only signals of readiness to discuss and look for ways to resolve it, but the incident is far from over: there are too many “buts” at all levels. If we consider the movement of currencies and stocks from the position that the market takes everything into account, we cannot fail to note positive signals. The EURRUB pair returned to the position from which it rushed upwards on Friday. Fixation below 85 will send a signal of market confidence in a trend reversal. In this case, a fast road to area 84 will be open for the pair. If politicians really plan to move forward on issues that have hung over the ruble like a sword of Damocles for the last 8 years, it will be possible to talk about the potential for the euro to roll back to the level of 80 rubles before the end of the first quarter. For the dollar, the significant point is the mark of 73.50. Fixing below this level will mark the renewal of the lows of the exchange rate for the entire last stage of tension and will also return the Russian currency to the long-term growth trend. In this case, a move to the 70 area over the next six weeks could be a viable prospect. However, even these relatively short-term forecasts look too shaky since the situation can turn 180 degrees at any second.
Sandbox price set for breakout as bulls target some low-hanging fruit

Sandbox price set for breakout as bulls target some low-hanging fruit

FXStreet News FXStreet News 15.02.2022 16:09
Since December, sandbox has been trying to break the downtrend. As bulls attempt to break through, expect some profits to be booked as some targets lie nearby. Once above $4.72, expect $5.00 and $6.00 to be the following targets in the relief rally. Sandbox (SAND) price action is surfing on a wave of relief this morning as tensions between Russia, and the West start to ease on positive news. With that, investors have been falling over each other to get back into cryptocurrencies, and Sandbox price is set to break the longer-term red descending trendline, and downtrend since December last year. Some low-hanging fruit will be targeted in the breakthrough and could provide enough incentive for bulls to book partial profits and go for the ultimate goal of $6.00, holding 47% of gains. Sandbox bulls are in for 47% gains in the relief rally Sandbox price action is again hammering on the red descending trend line that originates from December last year and has been dictating the downtrend ever since. The renewed push comes from tailwinds that emerged overnight on some positive news around de-escalation in the situation between Russia and Ukraine. As the scene is set for a solid relief rally, expect to see some excellent (https://www.fxstreet.com/cryptocurrencies/news/sandbox-tests-support-at-425-before-sand-test-prior-all-time-highs-202202112001) returns, beginning with some nice profits nearby as a good start. SAND bulls will have their eyes on $4.72 with the 55-day Simple Moving Average and an overall (https://www.fxstreet.com/cryptocurrencies/news/cryptocurrencies-price-prediction-dogecoin-sandbox-and-cardano-european-wrap-10-february-video-202202101133) pivotal level falling in line around the same area. Although this level is not far from the red descending trendline, it will still return around 16% of gains intraday. Bulls will have a good incentive to book profits midway but stay in the trade with more considerable profits gained when the price rises towards $5.00 and $6.00 – the next targets in this week’s relief rally. The trade has an excellent risk-return ratio and is the most viable (https://www.fxstreet.com/cryptocurrencies/news/sandbox-price-bound-for-another-30-gains-as-sand-finds-support-202202101005) as we advance. SAND/USD daily chart Should German chancellor Scholz come out with some negative comments and ramp up the rhetoric of full-scale escalation of the tensions, expect (https://www.fxstreet.com/cryptocurrencies/news/shiba-inu-to-enter-the-metaverse-and-challenge-axie-infinity-sandbox-and-decentraland-202202091718) a knee jerk reaction with a firm rejection or false break of the red descending trend line, trapping bulls and pushing them out of their positions as SAND price action collapses back towards $3.50. From there, another leg lower could follow towards $3.00, with the 200-day SMA coming in at around $2.85 and playing its part as a supportive element in the belief that a recovery is still possible. If the 200-day SMA is no match for the downward pressure, expect a break and further push towards $2.50 or $2.00.
Speaking Of nVidia Stock, S&P500 (SPX), The Conflict In Eastern Europe And GBP State

Look At This XAUUSD Slide. Did GBPUSD Find Its Straight Line?

John Benjamin John Benjamin 16.02.2022 08:43
EURUSD bounces off support The US dollar retreats as the Fed’s half-point hike in March remains uncertain. The euro’s break above the daily resistance at 1.1480 boosted buyers’ confidence after a sell-off in January. It bounced off 1.1280 at the base of the recent bullish breakout. The support also is right next to the 61.8% Fibonacci retracement level (1.1265) making it an area of congestion. A close above the intermediate resistance (1.1370) would attract more buying interest. Then an extension above 1.1490 may fuel a rally towards 1.1600. GBPUSD awaits breakout The sterling holds well as Britain’s wage growth beats expectations in December. The current rebound came under pressure in the supply zone around 1.3660 which was the origin of a sharp drop in late January. An overbought RSI led to some profit-taking but the pound has found support above 1.3480. The bears’ failed attempts to push lower indicates strong demand. A bullish close above 1.3640 would lift offers towards last month’s high at 1.3750. The daily support at 1.3370 is a key floor in keeping the rally intact. XAUUSD seeks support Gold drifts lower on signs of de-escalation in Ukraine. A break above last November’s high at 1875 may have put the precious metal back on track. However, the rally ran out of steam in the short term with the RSI shooting into the overbought territory. The price is taking a breather and buyers may see a pullback as an opportunity to stake in. A drop below 1852 may wash out weak hands and deepen the correction towards 1830. 1880 is now a fresh resistance and its breach could propel bullion to last June’s high at 1910.
Stumbling Again

Stumbling Again

Monica Kingsley Monica Kingsley 16.02.2022 15:53
S&P 500 rebound goes on reflexively, but stormy clouds are gathering – I‘m looking for the bears to reassert themselves over the next couple of days latest. The credit markets posture is far from raging risk-on even though select commodities are recovering (what else to expect in a secular commodities bull) and precious metals suffered a modest setback (not a reversal though). Crypto recovery is nodding towards the risk-on upturn that is though likely to get checked soon.It‘s great that tech was the driver of yesterday‘s S&P 500 upswing, but for how long would it keep leadership now that attention is shifting back towards inflation. Yesterday I wrote that: (...) rebound looks approaching as stocks might lead bonds in the risk appetite. When the East European tensions get dialed down, S&P 500 can be counted on to lead, probably more so when it comes to value than tech. That‘s why the tech participation is key as it would make up for the evaporating risk premium in energy. Or precious metals – these are likely to rise once again when the spotlight shifts to the inadequacy of Fed‘s tightening in the inflation fight.So far the stock market advance hasn‘t met a brick wall, but value upswing has been sold into (unlike tech‘s). Energy stocks lost, but are likely to come back – and the next microrotation might not be powerful enough to carry S&P 500 higher. Anyway without a HYG upswing, stock bulls are facing stiff headwinds.Let‘s move right into the charts (all courtesy of www.stockcharts.com).S&P 500 and Nasdaq OutlookS&P 500 rebounded on low volume but that wouldn‘t be an issue in a healthy bull market – the trouble is that this 2022 price action isn‘t very healthy.Credit MarketsHYG didn‘t trade on a strong note, and the rise in yields continues almost unabated. This is what I meant yesterday by saying that we may be though nearing the point of credit market reprieve – as much as that‘s compatible with rate raising cycle.Gold, Silver and MinersPrecious metals suffered a temporary setback – they easily gave up some of the safe haven gains, which isn‘t surprising. The bulls though haven‘t lost control, and that‘s key.Crude OilCrude oil dip was bought, and there wasn‘t much bearish conviction to start with. The general uptrend is likely to continue, and $90 appears likely to hold over the next few days definitely.CopperCopper is now in for some backing and filling, but managed to catch up with other commodities a little yesterday. The red metal remains range bound, but making good bullish progress.Bitcoin and EthereumCryptos are paring back yesterday‘s advance, and unless the mid Feb lows give, they‘re likely to muddle through with a modest bullish bias till the attention shifts to the Fed again.SummaryS&P 500 bulls‘ opportunity seems slipping away with each 1D or 4H candle, and I‘m not counting on the credit markets to ride to stocks‘ rescue. The commodities bull though is likely to carry on with little interference – and so does the precious metals bull as the yield curve keeps compressing. Slowdown in economic growth with rampant inflation and the realization that the Fed tightening hasn‘t had the effect, is awaiting, and would usher in strong gold and silver gains.Thank you for having read today‘s free analysis, which is available in full at my homesite. There, you can subscribe to the free Monica‘s Insider Club, which features real-time trade calls and intraday updates for all the five publications: Stock Trading Signals, Gold Trading Signals, Oil Trading Signals, Copper Trading Signals and Bitcoin Trading Signals.
Binance Coin set for pop above significant resistance as relief rally takes a short halt

Binance Coin set for pop above significant resistance as relief rally takes a short halt

FXStreet News FXStreet News 16.02.2022 16:18
Binance Coin takes a small step back this morning due to some profit-taking.BNB bulls hold all the cards as the relief rally is not over yet.Expect a pop above $444-$452 with a profit target set at $480 for the moment.Binance Coin (BNB) price action shot back above the red descending trend line yesterday with a massive relief rally that lifted market sentiment. With that, the downtrend looks to be broken, and an uptrend could be on the cards if bulls can take out the $444-$452 resistance barrier with a triple top formation, the 55-day Simple Moving Average (SMA) and the longer-term pivotal level all coincide in this region. Once through there, expect the next stage to be set for a move towards $480 with the 200-day SMA coming in, returning another 10%.Binance Coin set for the second phase in the recovery rallyBinance Coin is undergoing some profit-taking this morning after the solid relief rally from yesterday (https://www.fxstreet.com/cryptocurrencies/news/cryptocurrencies-price-prediction-decentraland-binance-dogecoin-asian-wrap-16-feb-video-202202160214) that has lifted market sentiment and saw some decent inflows into markets. On the way up, bulls hit some resistance from the double top from February 08 and January 21 and, in the process, made it a triple top resistance. This, together with the already known $452 and the 55-day SMA coming in at $445, makes it a substantial (https://www.fxstreet.com/cryptocurrencies/news/binance-coin-must-break-out-above-this-level-before-bnb-can-retest-660-202202152150) barrier that will need to be broken to prove that the relief rally still has plenty of juice to go.Expect thus some profit-taking today, a little bit on the back foot with $419 as support to bounce off back to $445. Some more positive signals coming from the Russia-Ukraine developments could be the needed additional catalyst to push through this difficult barrier. The next target is set at $480, with the 200-day SMA falling in line with that considerable number, resulting in probably the same profit-taking pattern (https://www.fxstreet.com/cryptocurrencies/news/dogecoin-and-shiba-inu-price-climbs-as-binance-smart-chain-whales-accumulate-meme-coins-202202151719) as BNB price action shows today.BNB/USD daily chartOverall, the US keeps claiming that the situation in Central-Europe remains precarious and could see an escalation (https://www.fxstreet.com/cryptocurrencies/news/cryptocurrencies-price-prediction-bitcoin-binance-coin-and-decentraland-european-wrap-11-february-202202111055) any time now. Once those headlines hit the wires, expect the whole cryptocurrency space to collapse and for there to be a massive pullback from investors, with BNB price falling back initially to $389. Depending on the severity of the attacks, another push lower towards $340 would be the logical outcome and result in BNB price shedding 22% of its value.
US IPO Activity Chart

US Seems To Be Unsure If Russia Ceased Actions, Gold Goes Up

Marc Chandler Marc Chandler 17.02.2022 13:03
February 17, 2022  $USD, Australia, Canada, Currency Movement, Japan, Norway, Oil, Russia Overview: US intelligence claims that Russia is still mobilizing for an attack on Ukraine is sapping risk appetites and lifting gold to its highest level since last June around $1885-$1890.  Asia Pacific equities advanced, except in Japan.  Europe's Stoxx 600 is nursing a small loss, while US futures are off around 0.4%-0.6%.  The 10-year US Treasury yield is hovering slightly above 2.0%.  European benchmark yields are 2-4 bp lower.   The Scandis and euro are bearing the brunt of the risk-off move among the major currencies, while the Antipodeans, yen, Swiss franc, and sterling have pushed higher.  Emerging market currencies are mostly lower, led by Russia and central European currencies, but the JP Morgan Emerging Market Currency is edging higher for the fourth consecutive session, recovering from earlier weakness.  Hungary left its one-week repo rate steady at 4.3% and Turkey is expected to also stand pat (14%).   April WTI is retracing most of yesterday's 1.8% gain and is straddling $90 a barrel.  US natural gas is falling for the first time this week.  Europe's benchmark is up about 10% since Tuesday's 16% slide.  Iron ore slumped 7% after it rose 3.2% yesterday.  Copper is slipping for the first session in four.  Asia Pacific Japan reported weaker than expected exports and stronger than expected imports drove the trade deficit to JPY2.19 trillion. It was a third larger than expected.  Seasonally, Japan's January trade balance always (20-years-plus) deteriorated from December.  Yet, there is something more going on.  Rising energy and commodity prices more generally are deteriorating Japan's terms of trade.  It shares that with the eurozone that reported its largest trade deficit in 13 years earlier this week. EMU's trade balance also typically deteriorates in January from December, but surge in energy prices appears to have aggravated the seasonal pattern.  Meanwhile, nearly every day that passes now means that a significant disruption of Russia's gas supplies could have a diminishing impact on Europe as spring approaches.  Australia's jobs market held up better than expected last month.  It created almost 18k jobs.  The market expected a flat report.  The positions created were all part-time posts, while full-time positions fell by 17k after increasing 41k in December.  Australia grew an average of almost 3 full-time jobs last year after losing a little more than 8k a month in 2020.  While the unemployment rate was steady at 4.2%, the participation rate ticked up to 66.2% from 66.1%.  The virus (sick-leave) and extended time-off (vacations) saw the hours worked fall 8.8% month-over-month.  Australia's employment report is unlikely to impact expectations.  The market continues to price in the first hike around mid-year.  Rather than ratify market expectations, the central bank continues to pushback.  The US dollar slipped through JPY115.00 for the first time since February 7.  The low was recorded in early European turnover.  The intraday momentum indicators are stretched, but a break of the JPY114.90 could see JPY114.60.  There is an option for nearly $1.1 bln struck there that expires today.  The JPY115.20 area may offer the immediate cap.  The Australian dollar was initially sold from around $0.7210 down to $0.7150 before finding good bids.  It recovered back to session highs before stalling.  It is straddling the $0.7200 area in late morning turnover in Europe, leaving it little changed on the day.   The greenback briefly and shallowly slipped through CNY6.33 and rebounded to almost CNY6.34.  For the third session in a row, the PBOC set the dollar's reference rate a little softer than expected (CNY6.3321 vs. CNY6.3325, median projection in Bloomberg's forecast).   Europe The US claims that rather than withdraw troops as previously reported, Russia has mobilized another 7k troops.  Moscow denies it.  Russia is involved in military exercises.  The operations in the Crimea appeared to have ended, but the ones with Belarus are expected to last through the weekend. It seems like Russian troop movement next week may be more telling.  The G7 foreign ministers are meeting on Saturday.   NATO chief Stoltenberg's term ends in October.  He will serve out his term before heading home to lead the central bank.  Norges Bank Olsen's term ends next month.  Deputy Governor Ida Bache who vied for the top job will act as interim head until Stoltenberg is ready.  The Norges Bank Governor also leads the $1.3 trillion sovereign wealth fund.  Last month, the central bank signaled its intention to hike rates in March.  The swaps market has 100 bp of tightening priced in over the next 12 months.   The euro was sold slightly through $1.1325 in Asia after holding below $1.14 yesterday.  The $1.1380-$1.1400 area looks to still cap upticks. The 1.7 bln euro in options struck in the $1.1435-$1.1450 area look set to roll-off today.  If uncertainty over Russia's intentions is a negative for the euro, the narrowing of the US two-year premium over Germany for the third consecutive session is a supportive development.  Sterling is bid.  It is trading above $1.36, which it has not settled above in nearly a month. The intrasession high this month was set near $1.3645.   The UK reports January retail sales tomorrow and a bounce is expected after January's large fall.  The euro has fallen to back to around GBP0.8350 near where it bottomed on Monday.  America How prices respond to fundamental news is often revealing.  Yesterday, the US reports stronger than expected January retail sales and industrial output figures.  But the two-year yield fell five basis points and the implied yield of December Fed funds futures contract shed 4.5 bp.  The two-year yield is another 3.5 bp lower today and is about 1.5 bp lower on the week (slightly above 1.48%).  With today's five basis point slippage, the December Fed funds futures implies an average effective yield of 1.53% at the end of the year, which is about 6.5 bp lower than where it finished last week after the US warned of a possible Russian attack on Ukraine in days.  Europe, Russia, and Iran are seemingly more optimistic than the US a deal with Iran may be near. With OPEC+ struggling to fulfill their commitments to boost output by 400k barrels a day and low inventories among many of the large consuming countries, new supply from Iran would help ease address the global shortage that has lifted price to almost $100 a barrel.  Saudi Arabia is believed to have about 2 mln barrels a day in spare capacity is reluctant to jeopardize the six-year agreement under the OPEC+ framework. The US EIA reported an unexpected build of US oil inventories yesterday, but Cushing saw an almost 2 milt barrel draw.  The US reports January housing starts and permits.  Both are expected to have softened but remain at historically elevated levels.  Although adverse weather may have impacted starts, the concern is rising rates and commodity prices (e.g., March lumber has risen by around 25% this month alone) will weaken demand.  The US also sees the Philadelphia Fed's manufacturing survey and weekly initial jobless claims.   Canada's January CPI surprised on the upside yesterday.  The 5.1% year-over-year headline pace was the highest since 1991, while the monthly increase of 0.9% was the largest since January 2017.  Gasoline prices rose 3.2%, meat jumped a little more than 10%, and homeowner equivalent expenses jumped 13.5%.  The Bank of Canada is set to hike rates on March 2.  The market has about a 1-in-3 chance of a 50 bp move discounted.  For about a week, the US offered a premium over Canada for two-year money, but it slipped back into a discount yesterday and is a little larger today.  Oil is firmer, but the general risk-off mood, given the uncertainties in Eastern Europe, weighs on the Loonie.  Meanwhile, the Canadian police have sent written warnings to hundreds who decamped in Ottawa.  It appears to be a prelude to arrests. The US dollar remains confined to a CAD1.2650-CAD1.2660 to CAD1.2800 trading range.  It approached the lower end of the range yesterday and is checking out the air above CAD1.27 near midday in Europe.  The greenback finally took out the 200-day moving average against the Mexican peso.  It is trading at its lowest level since last October (~MXN20.25-MXN20.26).  There is little chart support ahead of MXN20.12.  Still, the intrasession momentum indicators are stretched, warning against chasing it in early North American activity.    A bounce can carry the dollar back to the MXN20.30-MXN20.33 area.     Disclaimer
Bearish Turn Coming

Bearish Turn Coming

Monica Kingsley Monica Kingsley 17.02.2022 15:57
Thanks to Fed minutes, the S&P 500 closed modestly up, but could have taken the stronger credit markets cue. Instead, the upswing was sold into – the selling pressure is there, and neither value nor tech took the opportunity to rise, even against the backdrop of a weakening dollar. That‘s quite telling – the stock market correction hasn‘t run its course yet, and whatever progress the bulls make, is being countered convincingly. Precious metals adored the combo of yields and dollar turning down – and reacted with the miners‘ outperformance. The silver to copper ratio is basing, and the white metal looks to have better short-term prospects than the red one. Still in the headline sensitive environment we‘re in, gold would be stronger than silver until inflation is recognized for what it is. If there‘s one thing that the aftermath of Fed minutes showed, it‘s that the commodities superbull is alive and well, and that precious metals likewise are acting very positively in this tightening cycle. Suffice to say that gold has a track record of turning up once the rate hikes finally start… Excellent, the portfolio is positioned accordingly. Let‘s move right into the charts (all courtesy of www.stockcharts.com). S&P 500 and Nasdaq Outlook S&P 500 rebound is getting suspect, and should stocks close on a weak note today, it‘s clear that today‘s wobbling Philly Fed Manufacturing Index won‘t be balanced out by the succession of Fed speakers – the signs of real economy headwinds are here. Credit Markets HYG upswing could have had broader repercussions, and it‘s quite telling it didn‘t. The risk-on turn would likely be sold into, with consequences. Gold, Silver and Miners Precious metals suffered a temporary setback only indeed – I‘m looking for the gains to continue as the miners outperformance just can‘t be overlooked. Crude Oil Crude oil dipped some more, and the dip was again bought. Given the late session wavering, I‘m looking for some more sideways and volatile trading ahead before the upswing reasserts itself. Copper Copper continues trading sideways, but with bullish undertones. More consolidation before another upswing attempt is probable. Bitcoin and Ethereum Cryptos are turning down, but still haven‘t broken either way out of the current range. Both Bitcoin and Ethereum are sending a message of caution. Summary S&P 500 bulls‘ opportunity seems increasingly slipping away given that the buyers couldn‘t defend gains after Fed minutes release. The upturn in credit markets is likely to prove of fleeting shelf life, and would exert downward pressure upon stocks. As I wrote yesterday (and talked extensively within today‘s article chart captions), the commodities bull is likely to carry on with little interference – and so would the precious metals bull as the yield curve keeps compressing, and the beginning of rate hikes would mark further headwinds for the real economy at a time of persistent inflation that could be perhaps brought down to 4-5% official rate late this year (which would leave the mainstream wondering why it just isn‘t transitory somewhat more – what an irony). The Fed‘s tools to be employed are simply insufficient to break the inflation‘s back, that‘s it. Thank you for having read today‘s free analysis, which is available in full at my homesite. There, you can subscribe to the free Monica‘s Insider Club, which features real-time trade calls and intraday updates for all the five publications: Stock Trading Signals, Gold Trading Signals, Oil Trading Signals, Copper Trading Signals and Bitcoin Trading Signals.
COT Currency Speculators raise their Euro Futures bullish bets to 26-week high

COT Currency Speculators raise their Euro Futures bullish bets to 26-week high

Invest Macro Invest Macro 19.02.2022 18:38
By InvestMacro | COT | Data Tables | COT Leaders | Downloads | COT Newsletter Here are the latest charts and statistics for the Commitment of Traders (COT) data published by the Commodities Futures Trading Commission (CFTC). The latest COT data is updated through Tuesday February 15th and shows a quick view of how large traders (for-profit speculators and commercial entities) were positioned in the futures markets. All currency positions are in direct relation to the US dollar where, for example, a bet for the euro is a bet that the euro will rise versus the dollar while a bet against the euro will be a bet that the euro will decline versus the dollar. Highlighting the COT currency data is the gains in the Euro currency futures contracts. Euro speculators boosted their bullish bets for a second straight week this week and for the eighth time out of the past nine weeks. Over this nine-week time-frame, Euro bets have jumped by a total of +59,460 contracts, going from -10,162 net positions on December 21st to +47,581 net positions this week. These gains in the Euro sentiment have now brought the speculator positioning to the highest level in the past twenty-six weeks, dating back to August 17th. Joining the Euro (8,739 contracts) with positive changes this week were the US Dollar Index (1,621 contracts), Brazil real (3,514 contracts), Mexican peso (7,730 contracts),  British pound sterling (10,782 contracts), New Zealand dollar (1,033 contracts), Russian ruble (721 contracts) and the Bitcoin futures (104 contracts). The currencies with declining bets were the Japanese yen (-7,014 contracts), Canadian dollar (-2,716 contracts), Australian dollar (-953 contracts) and the Swiss franc (-316 contracts). Data Snapshot of Forex Market Traders | Columns Legend Feb-15-2022 OI OI-Index Spec-Net Spec-Index Com-Net COM-Index Smalls-Net Smalls-Index USD Index 54,283 77 35,386 87 -41,548 6 6,162 84 EUR 702,047 84 47,581 50 -85,057 52 37,476 36 GBP 195,302 36 2,237 76 2,874 31 -5,111 45 JPY 199,425 55 -66,162 26 86,256 79 -20,094 6 CHF 45,522 22 -9,715 53 18,888 52 -9,173 36 CAD 144,815 27 12,170 59 -15,116 47 2,946 36 AUD 192,578 77 -86,694 4 97,684 92 -10,990 26 NZD 64,105 71 -9,333 56 12,020 49 -2,687 21 MXN 151,098 26 8,974 31 -12,054 68 3,080 56 RUB 38,960 35 16,164 52 -17,239 46 1,075 64 BRL 67,288 85 23,760 100 -26,225 0 2,465 95 Bitcoin 10,646 56 -215 92 -213 0 428 23   US Dollar Index Futures: The US Dollar Index large speculator standing this week was a net position of 35,386 contracts in the data reported through Tuesday. This was a weekly rise of 1,621 contracts from the previous week which had a total of 33,765 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish-Extreme with a score of 86.8 percent. The commercials are Bearish-Extreme with a score of 5.6 percent and the small traders (not shown in chart) are Bullish-Extreme with a score of 83.9 percent. US DOLLAR INDEX Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 78.0 5.0 14.5 – Percent of Open Interest Shorts: 12.8 81.5 3.2 – Net Position: 35,386 -41,548 6,162 – Gross Longs: 42,349 2,717 7,897 – Gross Shorts: 6,963 44,265 1,735 – Long to Short Ratio: 6.1 to 1 0.1 to 1 4.6 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 86.8 5.6 83.9 – Strength Index Reading (3 Year Range): Bullish-Extreme Bearish-Extreme Bullish-Extreme NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: -6.4 5.3 5.7   Euro Currency Futures: The Euro Currency large speculator standing this week was a net position of 47,581 contracts in the data reported through Tuesday. This was a weekly boost of 8,739 contracts from the previous week which had a total of 38,842 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 49.6 percent. The commercials are Bullish with a score of 51.7 percent and the small traders (not shown in chart) are Bearish with a score of 36.5 percent. EURO Currency Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 31.0 54.7 12.7 – Percent of Open Interest Shorts: 24.3 66.8 7.4 – Net Position: 47,581 -85,057 37,476 – Gross Longs: 217,899 383,827 89,120 – Gross Shorts: 170,318 468,884 51,644 – Long to Short Ratio: 1.3 to 1 0.8 to 1 1.7 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 49.6 51.7 36.5 – Strength Index Reading (3 Year Range): Bearish Bullish Bearish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: 15.1 -16.6 15.7   British Pound Sterling Futures: The British Pound Sterling large speculator standing this week was a net position of 2,237 contracts in the data reported through Tuesday. This was a weekly boost of 10,782 contracts from the previous week which had a total of -8,545 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish with a score of 75.6 percent. The commercials are Bearish with a score of 31.4 percent and the small traders (not shown in chart) are Bearish with a score of 45.1 percent. BRITISH POUND Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 25.7 58.8 12.4 – Percent of Open Interest Shorts: 24.5 57.4 15.0 – Net Position: 2,237 2,874 -5,111 – Gross Longs: 50,151 114,901 24,257 – Gross Shorts: 47,914 112,027 29,368 – Long to Short Ratio: 1.0 to 1 1.0 to 1 0.8 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 75.6 31.4 45.1 – Strength Index Reading (3 Year Range): Bullish Bearish Bearish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: 29.8 -27.6 10.8   Japanese Yen Futures: The Japanese Yen large speculator standing this week was a net position of -66,162 contracts in the data reported through Tuesday. This was a weekly lowering of -7,014 contracts from the previous week which had a total of -59,148 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 26.2 percent. The commercials are Bullish with a score of 79.0 percent and the small traders (not shown in chart) are Bearish-Extreme with a score of 6.3 percent. JAPANESE YEN Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 5.2 83.6 9.5 – Percent of Open Interest Shorts: 38.4 40.3 19.6 – Net Position: -66,162 86,256 -20,094 – Gross Longs: 10,425 166,645 18,973 – Gross Shorts: 76,587 80,389 39,067 – Long to Short Ratio: 0.1 to 1 2.1 to 1 0.5 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 26.2 79.0 6.3 – Strength Index Reading (3 Year Range): Bearish Bullish Bearish-Extreme NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: -2.5 0.7 5.2   Swiss Franc Futures: The Swiss Franc large speculator standing this week was a net position of -9,715 contracts in the data reported through Tuesday. This was a weekly fall of -316 contracts from the previous week which had a total of -9,399 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish with a score of 53.0 percent. The commercials are Bullish with a score of 52.1 percent and the small traders (not shown in chart) are Bearish with a score of 36.4 percent. SWISS FRANC Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 8.0 72.6 19.0 – Percent of Open Interest Shorts: 29.4 31.2 39.2 – Net Position: -9,715 18,888 -9,173 – Gross Longs: 3,652 33,069 8,654 – Gross Shorts: 13,367 14,181 17,827 – Long to Short Ratio: 0.3 to 1 2.3 to 1 0.5 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 53.0 52.1 36.4 – Strength Index Reading (3 Year Range): Bullish Bullish Bearish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: -0.3 4.8 -11.9   Canadian Dollar Futures: The Canadian Dollar large speculator standing this week was a net position of 12,170 contracts in the data reported through Tuesday. This was a weekly lowering of -2,716 contracts from the previous week which had a total of 14,886 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish with a score of 59.5 percent. The commercials are Bearish with a score of 46.6 percent and the small traders (not shown in chart) are Bearish with a score of 35.7 percent. CANADIAN DOLLAR Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 37.6 40.4 19.5 – Percent of Open Interest Shorts: 29.2 50.9 17.5 – Net Position: 12,170 -15,116 2,946 – Gross Longs: 54,424 58,524 28,287 – Gross Shorts: 42,254 73,640 25,341 – Long to Short Ratio: 1.3 to 1 0.8 to 1 1.1 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 59.5 46.6 35.7 – Strength Index Reading (3 Year Range): Bullish Bearish Bearish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: 22.5 -16.4 0.9   Australian Dollar Futures: The Australian Dollar large speculator standing this week was a net position of -86,694 contracts in the data reported through Tuesday. This was a weekly reduction of -953 contracts from the previous week which had a total of -85,741 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish-Extreme with a score of 4.4 percent. The commercials are Bullish-Extreme with a score of 91.8 percent and the small traders (not shown in chart) are Bearish with a score of 25.6 percent. AUSTRALIAN DOLLAR Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 6.1 81.0 10.2 – Percent of Open Interest Shorts: 51.1 30.2 15.9 – Net Position: -86,694 97,684 -10,990 – Gross Longs: 11,692 155,928 19,706 – Gross Shorts: 98,386 58,244 30,696 – Long to Short Ratio: 0.1 to 1 2.7 to 1 0.6 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 4.4 91.8 25.6 – Strength Index Reading (3 Year Range): Bearish-Extreme Bullish-Extreme Bearish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: 2.5 -2.3 1.1   New Zealand Dollar Futures: The New Zealand Dollar large speculator standing this week was a net position of -9,333 contracts in the data reported through Tuesday. This was a weekly increase of 1,033 contracts from the previous week which had a total of -10,366 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish with a score of 55.6 percent. The commercials are Bearish with a score of 48.9 percent and the small traders (not shown in chart) are Bearish with a score of 21.1 percent. NEW ZEALAND DOLLAR Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 38.9 55.3 4.4 – Percent of Open Interest Shorts: 53.4 36.5 8.6 – Net Position: -9,333 12,020 -2,687 – Gross Longs: 24,923 35,432 2,838 – Gross Shorts: 34,256 23,412 5,525 – Long to Short Ratio: 0.7 to 1 1.5 to 1 0.5 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 55.6 48.9 21.1 – Strength Index Reading (3 Year Range): Bullish Bearish Bearish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: -0.8 2.6 -13.7   Mexican Peso Futures: The Mexican Peso large speculator standing this week was a net position of 8,974 contracts in the data reported through Tuesday. This was a weekly rise of 7,730 contracts from the previous week which had a total of 1,244 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 31.2 percent. The commercials are Bullish with a score of 67.8 percent and the small traders (not shown in chart) are Bullish with a score of 56.1 percent. MEXICAN PESO Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 39.4 56.0 4.1 – Percent of Open Interest Shorts: 33.4 64.0 2.1 – Net Position: 8,974 -12,054 3,080 – Gross Longs: 59,485 84,673 6,250 – Gross Shorts: 50,511 96,727 3,170 – Long to Short Ratio: 1.2 to 1 0.9 to 1 2.0 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 31.2 67.8 56.1 – Strength Index Reading (3 Year Range): Bearish Bullish Bullish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: 7.9 -8.0 3.0   Brazilian Real Futures: The Brazilian Real large speculator standing this week was a net position of 23,760 contracts in the data reported through Tuesday. This was a weekly rise of 3,514 contracts from the previous week which had a total of 20,246 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish-Extreme with a score of 100.0 percent. The commercials are Bearish-Extreme with a score of 0.0 percent and the small traders (not shown in chart) are Bullish-Extreme with a score of 95.0 percent. BRAZIL REAL Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 77.1 16.5 6.1 – Percent of Open Interest Shorts: 41.8 55.5 2.4 – Net Position: 23,760 -26,225 2,465 – Gross Longs: 51,868 11,101 4,095 – Gross Shorts: 28,108 37,326 1,630 – Long to Short Ratio: 1.8 to 1 0.3 to 1 2.5 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 100.0 0.0 95.0 – Strength Index Reading (3 Year Range): Bullish-Extreme Bearish-Extreme Bullish-Extreme NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: 33.1 -36.1 31.8   Russian Ruble Futures: The Russian Ruble large speculator standing this week was a net position of 16,164 contracts in the data reported through Tuesday. This was a weekly lift of 721 contracts from the previous week which had a total of 15,443 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish with a score of 51.6 percent. The commercials are Bearish with a score of 46.0 percent and the small traders (not shown in chart) are Bullish with a score of 63.8 percent. RUSSIAN RUBLE Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 50.8 42.2 6.9 – Percent of Open Interest Shorts: 9.4 86.4 4.2 – Net Position: 16,164 -17,239 1,075 – Gross Longs: 19,808 16,440 2,700 – Gross Shorts: 3,644 33,679 1,625 – Long to Short Ratio: 5.4 to 1 0.5 to 1 1.7 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 51.6 46.0 63.8 – Strength Index Reading (3 Year Range): Bullish Bearish Bullish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: 20.9 -19.2 -12.7   Bitcoin Futures: The Bitcoin large speculator standing this week was a net position of -215 contracts in the data reported through Tuesday. This was a weekly advance of 104 contracts from the previous week which had a total of -319 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish-Extreme with a score of 92.2 percent. The commercials are Bearish with a score of 22.8 percent and the small traders (not shown in chart) are Bearish with a score of 22.7 percent. BITCOIN Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 78.0 3.5 12.8 – Percent of Open Interest Shorts: 80.0 5.5 8.8 – Net Position: -215 -213 428 – Gross Longs: 8,307 369 1,364 – Gross Shorts: 8,522 582 936 – Long to Short Ratio: 1.0 to 1 0.6 to 1 1.5 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 92.2 22.8 22.7 – Strength Index Reading (3 Year Range): Bullish-Extreme Bearish Bearish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: 8.5 -9.8 -6.1   Article By InvestMacro – Receive our weekly COT Reports by Email *COT Report: The COT data, released weekly to the public each Friday, is updated through the most recent Tuesday (data is 3 days old) and shows a quick view of how large speculators or non-commercials (for-profit traders) were positioned in the futures markets. The CFTC categorizes trader positions according to commercial hedgers (traders who use futures contracts for hedging as part of the business), non-commercials (large traders who speculate to realize trading profits) and nonreportable traders (usually small traders/speculators) as well as their open interest (contracts open in the market at time of reporting).See CFTC criteria here.
GBPUSD Chart - Green Candles On The Right Hand Side, USDCAD Moved Down A Little

GBPUSD Chart - Green Candles On The Right Hand Side, USDCAD Moved Down A Little

John Benjamin John Benjamin 21.02.2022 08:53
GBPUSD tests resistance The sterling edged higher after January’s retail sales beat expectations. The recent pause has been an opportunity for the bulls to accumulate. A break above 1.3640 would signal solid buying after previous failed attempts. The daily resistance at 1.3750 would be the next hurdle. Its breach could trigger a broader reversal in the weeks to come. 1.3560 is the immediate support. And 1.3490 at the lower end of the horizontal consolidation is the second line of defense in case the pair needs to attract more support. USDCAD awaits breakout The Canadian dollar tanked after disappointing retail sales in December. The US counterpart is still struggling below the supply zone around 1.2800. A close above this daily resistance could propel the pair to last December’s high at 1.2950, a prerequisite for a bullish continuation in the medium-term. The current sideways action is a sign of indecision. 1.2640 is the lower boundary of the recent consolidation range. A bearish breakout would bring the greenback to a previous low at 1.2560. EURJPY struggles for support The Japanese yen rallies amid growing risk aversion across the board. The euro continues to shed gains from the surge earlier this month. A fall below 131.90 triggered profit-taking, and the latest rally came out to be a dead cat bounce after it was capped by this support-turned-resistance. A break below 130.40 (which sits over the 30-day moving average) shows fragility in market sentiment and would cause another round of sell-off. 129.20 at the base of the bullish impetus would be the next support.
Crypto Charts - BTC Monthly, Weekly, Daily Chart

Crypto Charts - BTC Monthly, Weekly, Daily Chart

Korbinian Koller Korbinian Koller 22.02.2022 09:33
Bitcoin, best in play   The Covid environment brought an additional variant risk factor to the table, especially when it comes to investor psychology. Our last weekly chart book publication made a case for positioning one’s risk hedge plays this year when equity markets most likely trade in a volatile sideways range. We also spoke of a proper wealth preservation strategy, holding both bitcoin and gold within a hedged risk reduction approach for your monies. With our primary focus on risk, the next question is allocation size between bitcoin and gold. As mentioned in the intro, it feels intuitively natural to have significant exposure to the gold side from a cycle history. Yet, insurance seems essential at this time, and as such, we tend to be a bit more aggressive towards bitcoin allocations. Bitcoin, daily chart, not just yet: Bitcoin, daily chart as of February 22nd, 2022. The daily chart reflects the common notion of bitcoin trading alongside PMI numbers and the market as a whole. With the recent break of the modest bounce from the US$33,500 level up leg (yellow up-channel), no immediate low-risk entries for longer-term exposure seems in play.   Bitcoin, weekly chart, great setup, bitcoin, best in play: Bitcoin, weekly chart as of February 22nd, 2022. Nevertheless, we find now zooming out to the weekly time frame a quite interesting entry zone (white box) between the levels US$30,000 to US$34,000. We identified by stacking multiple edges that an entry near US$31,800 would provide the most low-risk entry profile. However, it will depend on how prices will arrive at these levels. As such, we encourage you to check back in our free Telegram channel.  There we post-entries, and exits for educational purposes in real-time. Bitcoin, monthly chart, amazing potential: Bitcoin, monthly chart as of February 22nd, 2022. Where matters become more transparent, and our headlines supported, is at a view of the monthly chart. The first leg up was nothing short of a 1,600% advancement. Now we have been trading for a year in a bullish up sloping sideways channel. With a possible entry at the lows of this channel, a long-term investment provides for a stellar risk/reward-ratio. The second legs are typically longer than the first legs! But that is not all; bitcoin has a higher probability of four-leg moves versus three-leg moves. Consequently, this trade could turn out to be highly profitable after some time. One aspect of risk is the relationship between the size of a potential down move of price and the size of a likely up move. We find bitcoins’ upward potential much more significant than gold for its fundamental characteristics and stellar outperforming history percentagewise. Bitcoin, best in play: Summing it up, bitcoin might not be at its lowest retracement levels yet. Still, its powerful potential in risk/reward-ratio and as an overall risk hedge makes it best in play. We share a low-risk cost averaging in strategy in our free Telegram channel. We find that allocation of funds should be more dominant towards bitcoin. In addition, holding some cash as much as money is deflating can still be a good strategy. Cash is king to purchase desired goods and vehicles, especially when those are even more depressed.    Feel free to join us in our free Telegram channel for daily real time data and a great community. If you like to get regular updates on precious metals and cryptocurrencies, you can also subscribe to our free newsletter. Disclosure: This article and the content are for informational purposes only and do not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision. The views, thoughts and opinions expressed here are the author’s alone. They do not necessarily reflect or represent the views and opinions of Midas Touch Consulting. By Korbinian Koller|February 22nd, 2022|Tags: Bitcoin, Bitcoin bounce, bitcoin consolidation, Bitcoin correction, crypto analysis, crypto chartbook, DeFi, Gold, Gold bullish, low risk, NASDAQ, quad exit, S&P 500, technical analysis, trading education|0 Comments
Positions of large speculators according to the COT report as at 15/2/2022

Positions of large speculators according to the COT report as at 15/2/2022

Purple Trading Purple Trading 22.02.2022 11:48
Positions of large speculators according to the COT report as at 15/2/2022 Total net speculator positions in the USD index rose by 1,621 contracts last week. This change is the result of an increase in long positions by 1,979 contracts and an increase in short positions by 358 contracts. Growth in total net speculator positions occurred last week in the euro, the British pound and the New Zealand dollar. Decrease in total net positions occurred in the Australian dollar, the Japanese yen, the Canadian dollar, and the Swiss franc. In the event of a Russian invasion to Ukraine, markets would move into risk-off sentiment. This means that investors would sell risk assets, which include stock indices, and shift their resources into assets that are considered as safe havens in such situations, which include US government bonds and gold. In currency terms, this means that the US dollar, the Japanese yen and the Swiss franc in particular could then appreciate in such a situation. Commodity currencies (especially AUD, NZD) might weaken. The positions of speculators in individual currencies The total net positions of large speculators are shown in table 1: If the value is positive then the large speculators are net long. If the value is negative, the large speculators are net short. Table 1: Total net positions of large speculators Date USD Index EUR GBP AUD NZD JPY CAD CHF Feb 15, 2022 35386 47581 2237 -86694 -9333 -66162 12170 -9715 Feb 08, 2022 33765 38842 -8545 -85741 -10366 -59148 14886 -9399 Feb 01, 2022 34571 29716 -23605 -79829 -11698 -60640 18264 -8239 Jan 25, 2022 36861 31560 -7763 -83273 -10773 -68273 12317 -8796 Jan 18, 2022 36434 24584 -247 -88454 -8331 -80879 7492 -10810 Jan 11, 2022 37892 6005 -29166 -91486 -8604 -87525 -7376 -7660 Note: The explanation of COT methodolody is at the end of this report. Notes: Large speculators are traders who trade large volumes of futures contracts, which, if the set limits are met, must be reported to the Commodity Futures Trading Commission. Typically, this includes traders such as funds or large banks. These traders mostly focus on trading long-term trends and their goal is to make money on speculation with the instrument. ​The total net positions of large speculators are the difference between the number of long contracts and the number of short contracts of large speculators. Positive value shows that large speculators are net long. Negative value shows that large speculators are net short. The data is published every Friday and is delayed because it shows the status on Tuesday of the week. The total net positions of large speculators show the sentiment this group has in the market. A positive value of the total net positions of speculators indicates bullish sentiment, a negative value of total net positions indicates bearish sentiment. When interpreting charts and values, it is important to follow the overall trend of total net positions. The turning points are also very important, i.e. the moments when the total net positions go from a positive value to a negative one and vice versa. Important are also extreme values ​​of total net positions as they often serve as signals of a trend reversal. Sentiment according to the reported positions of large players in futures markets is not immediately reflected in the movement of currency pairs. Therefore, information on sentiment is more likely to be used by traders who take longer trades and are willing to hold their positions for several weeks or even months.   Detailed analysis of selected currencies   Explanations:   Purple line and histogram: this is information on the total net position of large speculators. This information shows the strength and sentiment of an ongoing trend. It is the indicator r_COT Large Speculators (by Kramsken) in www.tradingview.com. Information on the positions of so-called hedgers is not shown in the chart, due to the fact that their main goal is not speculation, but hedging. Therefore, this group usually takes the opposite positions than the large speculators. For this reason, the positions of hedgers are inversely correlated with the movement of the price of the underlying asset. However, this inverse correlation shows the ongoing trend less clearly than the position of large speculators.​ We show moving average SMA 100 (blue line) and EMA 50 (orange line) on daily charts. ​Charts are made with the use of www.tradingview.com. The source of numerical data is www.myfxbook.com Euro   date Open Interest Specs Long Specs Short Specs Net positions change Open Interest change Long change Short change Net Positions Sentiment Feb 15, 2022 702047 217899 170318 47581 1949 -1074 -9813 8739 Bullish Feb 08, 2022 700098 218973 180131 38842 14667 5410 -3716 9126 Bullish Feb 01, 2022 685431 213563 183847 29716 2479 155 1999 -1844 Weak bullish Jan 25, 2022 682952 213408 181848 31560 -8930 1507 -5469 6976 Bullish Jan 18, 2022 691882 211901 187317 24584 9589 7540 -11039 18579 Bullish Jan 11, 2022 682293 204361 198356 6005 4075 5288 -2271 7559 Bullish         Total change 23829 18826 -30309 49135     Figure 1: The euro and COT positions of large speculators on a weekly chart and the EURUSD on D1 The total net positions of speculators reached 47,581 contracts last week, up by 8,739 contracts compared to the previous week. This change is due to a decrease in long positions by 1,074 contracts and a decrease in short positions by 9,813 contracts. Total net speculators positions have increased by 49,135 contracts over the past 6 weeks. This change is due to speculators closing 30,309 short positions and adding 18,826 long positions. This data suggests continued bullish sentiment for the euro. However, the rising open interest, which increased by 1,949 contracts in the last week, shows the opposite, as the euro fell down last week and this decline is supported by the rising number of open interest contracts. So more bearish traders were in the market. So we have conflicting information here. The euro weakened slightly last week on fears of an escalation of the conflict between Russia and Ukraine. Long-term resistance: 1.1461 – 1.15 Support: 1.1280 - 1.1300. Next support is near 1.1220 - 1.1240. A strong support is in 1.1120-1.1140. The British Pound   date Open Interest Specs Long Specs Short Specs Net positions change Open Interest change Long change Short change Net Positions Sentiment Feb 15, 2022 195302 50151 47914 2237 -2646 5442 -5340 10782 Bullish Feb 08, 2022 197948 44709 53254 -8545 13941 15112 52 15060 Weak bearish Feb 01, 2022 184007 29597 53202 -23605 1967 -7069 8773 -15842 Bearish Jan 25, 2022 182040 36666 44429 -7763 -1194 -3094 4422 -7516 Bearish Jan 18, 2022 183234 39760 40007 -247 -17259 9254 -19665 28919 Weak bearish Jan 11, 2022 200493 30506 59672 -29166 486 4526 -5479 10005 Weak bearish         Total change -4705 24171 -17237 41408     Figure 2: The GBP and COT positions of large speculators on a weekly chart and the GBPUSD on D1 The total net positions of speculators reached 2,237 contracts last week, up by 10,782 contracts compared to the previous week. This change is due to an increase in long positions of 5,442 contracts and a decrease in short positions of 5,340 contracts. Total net positions have increased by 41,408 contracts over the past 6 weeks. This change is due to speculators exiting 17,237 short positions and adding 24,171 long positions. This data suggests bullish sentiment for the pound. Open interest, which fell by 2,646 contracts last week, is indicating that the bullish price action that occurred in the pound last week was not supported by volume and therefore it is weak. Risk off sentiment in US equities could have a negative effect on the Pound as well as the Euro, which could then send the Pound towards support which is at 1.3380. Long-term resistance: 1.3620-1.3640. Next resistance is near 1.3680 – 1.3750. Support: 1.3490 – 1.3520. A next support is near 1.3320 – 1.3380 and then mainly in the zone near 1.3200. The Australian dollar   Date Open Interest Specs Long Specs Short Specs Net positions change Open Interest change Long change Short change Net Positions Sentiment Feb 15, 2022 192578 11692 98386 -86694 -3825 -5631 -4678 -953 Bearish Feb 08, 2022 196403 17323 103064 -85741 -510 -1512 4400 -5912 Bearish Feb 01, 2022 196913 18835 98664 -79829 6893 3714 270 3444 Weak bearish Jan 25, 2022 190020 15121 98394 -83273 8884 6070 889 5181 Weak bearish Jan 18, 2022 181136 9051 97505 -88454 -4317 -3332 -6364 3032 Weak bearish Jan 11, 2022 185453 12383 103869 -91486 5346 -249 1871 -2120 Bearish         Total change 12471 -940 -3612 2672     Figure 3: The AUD and COT positions of large speculators on a weekly chart and the AUDUSD on D1 Total net speculator positions last week reached -86,694 contracts, down 953 contracts from the previous week. This change is due to a decrease in long positions of 5,631 contracts and a decrease in short positions of 4,678 contracts. This data suggests continued bearish sentiment on the Australian dollar, which is confirmed by the downtrend. Total net positions have increased by 2,672 contracts over the past 6 weeks. This change is due to speculators exit of 3,612 short contracts while exiting 940 long contracts at the same time. However, last week saw a decrease in open interest of 3,825 contracts. This means that the upward price action that occurred last week was weak in terms of volume because new money did not flow into the market. The Australian dollar is very sensitive to the international geopolitical situation. If the conflict between Russia and Ukraine escalates, we can expect it to weaken especially on the AUDUSD pair and also the AUDJPY. Long-term resistance: 0.7200-0.7250 and especially near 0.7270-0.7310. Long-term support: 0.7085-0.7120. A strong support is near 0.6960 – 0.6990. The New Zealand dollar   Date Open Interest Specs Long Specs Short Specs Net positions Change Open Interest Change Long Change Short Change Net Positions Sentiment Feb 15, 2022 64105 24923 34256 -9333 9228 7755 6722 1033 Weak bearish Feb 08, 2022 54877 17168 27534 -10366 -3590 -2037 -3369 1332 Weak bearish Feb 01, 2022 58467 19205 30903 -11698 5151 3257 4182 -925 Bearish Jan 25, 2022 53316 15948 26721 -10773 8589 4336 6778 -2442 Bearish Jan 18, 2022 44727 11612 19943 -8331 2661 652 379 273 Weak bearish Jan 11, 2022 42066 10960 19564 -8604 1764 1543 1302 241 Weak bearish         Celková změna 23803 15506 15994 -488     Figure 4: The NZD and the position of large speculators on a weekly chart and the NZDUSD on D1 The total net positions of speculators reached a negative value last week - 9,333 contracts, having increased by 1,033 contracts compared to the previous week. This change is due to an increase in long positions by 7,755 contracts and an increase in short positions by 6,722 contracts. This data suggests that the bearish sentiment for the New Zealand Dollar continues, but has started to weaken over the past week. Total net positions have declined by 488 contracts over the past 6 weeks. This change is due to speculators adding 15,994 short positions and adding 15,506 long positions. Open interest rose significantly last week, increasing by 9,228 contracts. The rise in the NZDUSD price action that occurred last week is therefore supported by volume and therefore the move was strong. The reason for the NZD strengthening last week is that the Reserve Bank of New Zealand is likely to raise interest rates to 1% on Feb 23, 2022. However, if the conflict in Ukraine escalates further, the NZDUSD could more likely weaken. The reason for the NZDUSD's decline from a technical analysis perspective could also be that the NZDUSD price has reached horizontal resistance and also the upper downtrend line from the daily chart. Long-term resistance: 0.6700 – 0.6740 and then 0.6850 – 0.6890. Long-term support: 0.6590-0.6600 and the next support is at 0.6500 – 0.6530. Explanation to the COT report The COT report shows the positions of major participants in the futures markets. Futures contracts are derivatives and are essentially agreements between two parties to exchange an underlying asset for a predetermined price on a predetermined date. They are standardised, specifying the quality and quantity of the underlying asset. They are traded on an exchange so that the total volume of these contracts traded is known.   Open interest: open interest is the sum of all open futures contracts (i.e. the sum of short and long contracts) that exist on a given asset. OI increases when a new futures contract is created by pairing a buyer with a seller. The OI decreases when an existing futures contract expires at a given expiry time or by settlement. Low or no open interest means that there is no interest in the market. High open interest indicates high activity and traders pay attention to this market. A rising open interest indicates that there is demand for the currency. That is, a rising OI indicates a strong current trend. Conversely, a weakening open interest indicates that the current trend is not strong. Open Interest Price action Interpretation Notes Rising Rising Strong bullish market New money flow in the particular asset, more bulls entered the market which pushes the price up. The trend is strong. Rising Falling Strong bearish market Price falls, more bearish traders entered the market which pushes the price down. The trend is strong. Falling Rising Weak bullish market Price is going up but new money do not flow into the market. Existing futures contracts expire or are closed. The trend is weak. Falling Falling Weak bearish market Price is going down, but new money do not flow into the market. Existing futures expire or are closed, the trend is weak.   Large speculators are traders who trade large volumes of futures contracts, which, if the set limits are met, must be reported to the Commodity Futures Trading Commission. Typically, this includes traders such as funds or large banks. These traders mostly focus on trading long-term trends and their goal is to make money on speculation with the instrument. Traders should try to trade in the direction of these large speculators. The total net positions of large speculators are the difference between the number of long contracts and the number of short contracts of large speculators. Positive value shows that large speculators are net long. Negative value shows that large speculators are net short. The data is published every Friday and is delayed because it shows the status on Tuesday of the week. The total net positions of large speculators show the sentiment this group has in the market. A positive value of the total net positions of speculators indicates bullish sentiment, a negative value of total net positions indicates bearish sentiment. When interpreting charts and values, it is important to follow the overall trend of total net positions. The turning points are also very important, i.e. the moments when the total net positions go from a positive value to a negative one and vice versa. Important are also extreme values ​​of total net positions as they often serve as signals of a trend reversal. The COT data are usually reported every Friday and they show the status on Tuesday of the week. Sentiment according to the reported positions of large players in futures markets is not immediately reflected in the movement of currency pairs. Therefore, information on sentiment is more likely to be used by traders who take longer trades and are willing to hold their positions for several weeks or even months.
Tension Beetween Ukraine And Russia Definetely Shaped News In Recent Days

EURGBP - Does The Single Currency Strengthen? Bearish GER 40 Ahead?

John Benjamin John Benjamin 23.02.2022 08:52
EURUSD bounces off support The euro surged over signs that Moscow may remain open to diplomacy. The pair found support at the base of the previous rally (1.1290), indicating the bulls’ commitment to keeping the rebound intact. The RSI’s oversold situation attracted a slew of bargain hunters betting on a lengthy rebound. A break above 1.1390 would prompt sellers to cover and pave the way for a sustained recovery. The recent peak and daily resistance at 1.1490 is a major hurdle. Its breach could extend the rally to 1.1600. EURGBP attempts reversal The sterling whipsawed after BOE officials’ comment about a “modest” rate hike over the coming months. The euro saw strong bids at the base of the February breakout rally (0.8310). A break above 0.8370 wiped out some selling interest, a prerequisite for a meaningful recovery. 0.8400 is the next resistance and its breach would further boost buyers’ confidence and propel the single currency to the recent high at 0.8475. On the downside, a bearish breakout would invalidate the rebound pattern and cause a sell-off below 0.8280. GER 40 breaks floor Trepid sentiment continues to weigh on the Dax. The plunge below the 9-month long consolidation area (14850) may foreshadow a bear market. As traders grew wary, trapped bulls would look to get out of their positions while the bears saw any rebound as an opportunity to sell into strength. An oversold RSI brought in some bids and 14850 is the immediate resistance. However, the index would remain under unless it lifts offers around 15200. Otherwise, the psychological level of 14000 would be the next stop.
USDRUB Went Up To A Really High Level. Will USD To RUB It Reach $90?

USDRUB Went Up To A Really High Level. Will USD To RUB It Reach $90?

Alex Kuptsikevich Alex Kuptsikevich 24.02.2022 08:57
The end of trading on Wednesday indicated growing concern as the ruble went into a sharp dive and the early start of trading marked increased sales. We saw 95.2425 for the euro and 84.075 for the dollar. After that, trading was halted as stock prices hit the lower limits set by the exchange, and there were no buyers in the stock order books - only sellers. The Moscow Exchange has suspended trading on all markets, including the currency and stock sections. SPB Exchange has suspended trading from 08:10 Moscow time for all types of securities and all trading modes. The ruble in indicative trading lost more than 10% against the dollar and the euro, the rate of which exceeds 90 and 101 rubles, respectively. Practically all financial instruments traded at the morning session are resting on the lower bars set by the exchange. Everything happened after the special operation announced by President Putin in the Donbass and reports of the shelling of military airports throughout Ukraine. The Bank of Russia announced the start of interventions in the foreign exchange market in order to slightly restrain the panicky unilateral fall of the ruble, which at the moment allowed the exchange rate to retreat from extremes. However, in such situations, it is pointless to wait for a reversal. The actions of central banks always only soften the blow but do not reverse the market. Despite the interventions and suspension of trading, extreme pressure on the Russian market promises to persist in the coming days. This is truly a new reality that we have not seen throughout our lives. The situation with Ukraine is developing according to the most dramatic scenario and will inevitably entail the most severe consequences that Russia has threatened in recent days. It is difficult to talk about some levels where the Russian currency or the market as a whole can stabilize. Recent events have pushed the ruble into uncharted territory. The latest quotes of the ruble on the Moscow Exchange show a price of 84 per dollar, and in indicative trading, it is already reaching 90. It looks like the ruble will slide very quickly down to 110 per dollar in the coming days and weeks. And near these levels, it will be necessary to look at the situation. In general, the fall of the ruble promises to carry on in the near future, while the shelling continues and the most severe sanctions are imposed on Russia. Hopes for stabilization now we can get only from politicians. The Ukrainian hryvnia, like the ruble, is trading below the levels from which it has repeatedly turned to growth since 2014. Here, too, the market has crossed the line of the conventional norm of the last eight years. From the current levels near 30 hryvnias per dollar, the outcome of this fall should be looked for, perhaps, at about 40.
It Begins

It Begins

Monica Kingsley Monica Kingsley 24.02.2022 16:00
S&P 500 reprieve that wasn‘t – the buyers didn‘t arrive, and the overnight military action sparking serious asset moves, shows that buying the dip would have been a bad idea. And it still is. Risk-on assets are likely to suffer, and I‘m not looking for a sharp, V-shaped rebound. The partial retracement seen in cryptos wouldn‘t translate to much upside in paper assets – it will likely be sold into as the bottom would take time to form. The safe haven premium seen in precious metals, crude oil and other real assets would ebb and flow, but a higher base has been established. The world has changed overnight, and recognition thereof is still pending.I think it‘s clear why I had been derisking as much as possible, wary of volatility both ways in paper assets, and betting instead on a mix of real assets. This has been hugely paying off to subscribers and readers likewise favoring gold and crude oil with some copper added for good measure.Let‘s move right into the charts (all courtesy of www.stockcharts.com).S&P 500 and Nasdaq OutlookThis isn‘t how an S&P 500 bottom looks like – downswing continues with more volatility ahead.Credit MarketsHYG is going down again, and credit markets are turning risk-off – look for Treasuries to do relatively better next, with little impact upon stocks.Gold, Silver and MinersPrecious metals fireworks continue, and the upswing got a poweful ally. Whatever retracement seen next, would be marginal in light of the developments.Crude OilCrude oil upswing can be counted on to continue, and oil stocks would remain among the best performing S&P 500 pockets. Black gold is though notorious for its wild volatility, and the coming days won‘t be an exception.CopperCopper upswing would take time to develop, especially now – but the breakout in base metals is on, the inflationary messaging is still there and thriving.Bitcoin and EthereumCryptos aren‘t in a rally mode, but are attempting to put in a low. I don‘t think it would hold, the dust hasn‘t settled yet.SummaryS&P 500 is plunging, and attempting to base, but more selling would inevitably hit. The overnight dust hasn‘t settled yet, but the panic lows would not happen today. Even if it weren‘t for geopolitics, stocks were in rough waters for weeks already, in a serious, yields and liquidity driven correction, with a slowing real economy on top. For all the short-term focus, the buying opportunity would materialize only once the Fed turns – by autumn 2022. The best places to be in right now, are those presented below – precious metals and commodities – as inflation fires continue to rage on.Thank you for having read today‘s free analysis, which is available in full at my homesite. There, you can subscribe to the free Monica‘s Insider Club, which features real-time trade calls and intraday updates for all the five publications: Stock Trading Signals, Gold Trading Signals, Oil Trading Signals, Copper Trading Signals and Bitcoin Trading Signals.
Food prices are breaking multi-year highs, and the CBs are helpless

Food prices are breaking multi-year highs, and the CBs are helpless

Alex Kuptsikevich Alex Kuptsikevich 25.02.2022 10:40
Wheat futures on the CBOE are up 16% since the start of the week, the biggest rally since the poor harvest in 2012. At one point yesterday, the weekly rise was close to 20%. The price level was the highest since April 2008, as traders anxiously assessed the impact of the conflict between two of the world’s biggest exporters of wheat, corn, and other agricultural products. The FAO’s Food Price Index in January was near its 2011 peak (in nominal terms) and one step below its 1974 peak - a time of stagflation and the aftermath of the oil crisis. And the latest spike in grains prices suggests that these highs will already be surpassed in February. It means that people will spend more on food and less on durable goods and services, worsening living standards. Such price hikes are an additional headache for central banks around the world. They may find themselves forced to turn a blind eye to inflation so as not to put the economy and consumer demand under additional stress. But this is terrible news for currencies. Forced inflation tolerance by the Central Bank will depreciate the value of money and suppress the exchange rate. This promises to be a problem for the euro and the British pound. High inflation may no longer be a reason to buy the euro and the pound against the dollar on the forex market, as it would not increase the chances of a tightening of the central bank policy in the coming months. There could also be a reverse reaction when currencies come under pressure as investors sell off local bonds amid falling real yields.
COT Forex Speculators pushed their Euro Currency bullish bets to 32-week high

COT Forex Speculators pushed their Euro Currency bullish bets to 32-week high

Invest Macro Invest Macro 26.02.2022 20:04
By InvestMacro | COT | Data Tables | COT Leaders | Downloads | COT Newsletter Here are the latest charts and statistics for the Commitment of Traders (COT) data published by the Commodities Futures Trading Commission (CFTC). The latest COT data is updated through Tuesday February 22nd and shows a quick view of how large traders (for-profit speculators and commercial entities) were positioned in the futures markets. All currency positions are in direct relation to the US dollar where, for example, a bet for the euro is a bet that the euro will rise versus the dollar while a bet against the euro will be a bet that the euro will decline versus the dollar. Highlighting the COT currency data was the further rise in bullish bets in the Euro currency futures contracts. Euro speculators raised their bullish bets for a third straight week this week and for the ninth time in the past ten weeks. Over this ten-week time-frame, Euro bets have gained by a total of +71,185 contracts, going from -10,162 net positions on December 12th to a total of +59,306 net positions through this Tuesday the 22nd of February (please note that this is a couple days before the Russian invasion of Ukraine). Overall, the current Euro standing is at the most bullish level of the past thirty-two weeks, dating back to July 13th when the net position was at +59,713 contracts. Joining the Euro (11,725 contracts) with positive speculator changes this week were the yen (2,975 contracts), Brazil real (685 contracts), US Dollar Index (698 contracts), Australian dollar (2,614 contracts), Russian ruble (3,353 contracts) and the Mexican peso (7,851 contracts). The currencies with declining bets were the Swiss franc (-1,272 contracts), British pound sterling (-8,046 contracts), New Zealand dollar (-2,218 contracts), Canadian dollar (-2,917 contracts) and Bitcoin (-68 contracts). Data Snapshot of Forex Market Traders | Columns Legend Feb-22-2022 OI OI-Index Spec-Net Spec-Index Com-Net COM-Index Smalls-Net Smalls-Index USD Index 54,922 78 36,084 88 -41,368 6 5,284 74 EUR 696,682 82 59,306 53 -98,050 48 38,744 39 GBP 188,443 31 -5,809 70 10,070 36 -4,261 47 JPY 194,169 51 -63,187 28 82,480 77 -19,293 8 CHF 47,339 24 -10,987 51 19,110 52 -8,123 39 CAD 140,305 24 9,253 57 -14,143 47 4,890 40 AUD 192,579 77 -84,080 7 96,072 91 -11,992 23 NZD 56,636 56 -11,551 52 13,908 52 -2,357 25 MXN 171,299 36 16,825 35 -21,038 64 4,213 61 RUB 38,673 34 19,517 60 -20,053 40 536 49 BRL 94,577 100 24,445 100 -27,081 0 2,636 97 Bitcoin 11,007 59 -283 91 -256 0 539 25   US Dollar Index Futures: The US Dollar Index large speculator standing this week came in at a net position of 36,084 contracts in the data reported through Tuesday. This was a weekly lift of 698 contracts from the previous week which had a total of 35,386 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish-Extreme with a score of 88.0 percent. The commercials are Bearish-Extreme with a score of 5.9 percent and the small traders (not shown in chart) are Bullish with a score of 74.3 percent. US DOLLAR INDEX Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 79.6 5.0 12.7 – Percent of Open Interest Shorts: 13.9 80.3 3.1 – Net Position: 36,084 -41,368 5,284 – Gross Longs: 43,726 2,742 6,969 – Gross Shorts: 7,642 44,110 1,685 – Long to Short Ratio: 5.7 to 1 0.1 to 1 4.1 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 88.0 5.9 74.3 – Strength Index Reading (3 Year Range): Bullish-Extreme Bearish-Extreme Bullish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: -3.1 4.6 -10.6   Euro Currency Futures: The Euro Currency large speculator standing this week came in at a net position of 59,306 contracts in the data reported through Tuesday. This was a weekly rise of 11,725 contracts from the previous week which had a total of 47,581 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish with a score of 53.2 percent. The commercials are Bearish with a score of 48.0 percent and the small traders (not shown in chart) are Bearish with a score of 38.6 percent. EURO Currency Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 30.7 54.5 12.8 – Percent of Open Interest Shorts: 22.2 68.6 7.3 – Net Position: 59,306 -98,050 38,744 – Gross Longs: 214,195 379,583 89,334 – Gross Shorts: 154,889 477,633 50,590 – Long to Short Ratio: 1.4 to 1 0.8 to 1 1.8 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 53.2 48.0 38.6 – Strength Index Reading (3 Year Range): Bullish Bearish Bearish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: 16.4 -18.3 18.8   British Pound Sterling Futures: The British Pound Sterling large speculator standing this week came in at a net position of -5,809 contracts in the data reported through Tuesday. This was a weekly lowering of -8,046 contracts from the previous week which had a total of 2,237 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish with a score of 69.8 percent. The commercials are Bearish with a score of 35.6 percent and the small traders (not shown in chart) are Bearish with a score of 46.8 percent. BRITISH POUND Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 22.4 61.8 12.8 – Percent of Open Interest Shorts: 25.5 56.4 15.1 – Net Position: -5,809 10,070 -4,261 – Gross Longs: 42,249 116,372 24,154 – Gross Shorts: 48,058 106,302 28,415 – Long to Short Ratio: 0.9 to 1 1.1 to 1 0.9 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 69.8 35.6 46.8 – Strength Index Reading (3 Year Range): Bullish Bearish Bearish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: 16.8 -16.5 9.5   Japanese Yen Futures: The Japanese Yen large speculator standing this week came in at a net position of -63,187 contracts in the data reported through Tuesday. This was a weekly rise of 2,975 contracts from the previous week which had a total of -66,162 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 28.1 percent. The commercials are Bullish with a score of 77.2 percent and the small traders (not shown in chart) are Bearish-Extreme with a score of 8.1 percent. JAPANESE YEN Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 5.7 83.5 9.2 – Percent of Open Interest Shorts: 38.2 41.0 19.1 – Net Position: -63,187 82,480 -19,293 – Gross Longs: 10,976 162,044 17,881 – Gross Shorts: 74,163 79,564 37,174 – Long to Short Ratio: 0.1 to 1 2.0 to 1 0.5 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 28.1 77.2 8.1 – Strength Index Reading (3 Year Range): Bearish Bullish Bearish-Extreme NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: 15.4 -12.8 3.4   Swiss Franc Futures: The Swiss Franc large speculator standing this week came in at a net position of -10,987 contracts in the data reported through Tuesday. This was a weekly decline of -1,272 contracts from the previous week which had a total of -9,715 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish with a score of 50.8 percent. The commercials are Bullish with a score of 52.3 percent and the small traders (not shown in chart) are Bearish with a score of 39.4 percent. SWISS FRANC Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 8.0 71.2 20.5 – Percent of Open Interest Shorts: 31.2 30.9 37.6 – Net Position: -10,987 19,110 -8,123 – Gross Longs: 3,785 33,718 9,691 – Gross Shorts: 14,772 14,608 17,814 – Long to Short Ratio: 0.3 to 1 2.3 to 1 0.5 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 50.8 52.3 39.4 – Strength Index Reading (3 Year Range): Bullish Bullish Bearish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: -5.8 4.0 -0.5   Canadian Dollar Futures: The Canadian Dollar large speculator standing this week came in at a net position of 9,253 contracts in the data reported through Tuesday. This was a weekly lowering of -2,917 contracts from the previous week which had a total of 12,170 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish with a score of 56.6 percent. The commercials are Bearish with a score of 47.3 percent and the small traders (not shown in chart) are Bearish with a score of 39.5 percent. CANADIAN DOLLAR Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 34.0 41.6 21.6 – Percent of Open Interest Shorts: 27.4 51.7 18.1 – Net Position: 9,253 -14,143 4,890 – Gross Longs: 47,661 58,345 30,327 – Gross Shorts: 38,408 72,488 25,437 – Long to Short Ratio: 1.2 to 1 0.8 to 1 1.2 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 56.6 47.3 39.5 – Strength Index Reading (3 Year Range): Bullish Bearish Bearish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: 16.1 -11.2 -1.0   Australian Dollar Futures: The Australian Dollar large speculator standing this week came in at a net position of -84,080 contracts in the data reported through Tuesday. This was a weekly lift of 2,614 contracts from the previous week which had a total of -86,694 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish-Extreme with a score of 6.9 percent. The commercials are Bullish-Extreme with a score of 90.6 percent and the small traders (not shown in chart) are Bearish with a score of 23.2 percent. AUSTRALIAN DOLLAR Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 6.0 81.7 9.6 – Percent of Open Interest Shorts: 49.7 31.9 15.8 – Net Position: -84,080 96,072 -11,992 – Gross Longs: 11,553 157,416 18,459 – Gross Shorts: 95,633 61,344 30,451 – Long to Short Ratio: 0.1 to 1 2.6 to 1 0.6 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 6.9 90.6 23.2 – Strength Index Reading (3 Year Range): Bearish-Extreme Bullish-Extreme Bearish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: 6.9 -5.6 0.3   New Zealand Dollar Futures: The New Zealand Dollar large speculator standing this week came in at a net position of -11,551 contracts in the data reported through Tuesday. This was a weekly reduction of -2,218 contracts from the previous week which had a total of -9,333 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish with a score of 51.9 percent. The commercials are Bullish with a score of 51.8 percent and the small traders (not shown in chart) are Bearish with a score of 24.8 percent. NEW ZEALAND DOLLAR Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 30.6 62.6 4.6 – Percent of Open Interest Shorts: 51.0 38.1 8.8 – Net Position: -11,551 13,908 -2,357 – Gross Longs: 17,343 35,481 2,608 – Gross Shorts: 28,894 21,573 4,965 – Long to Short Ratio: 0.6 to 1 1.6 to 1 0.5 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 51.9 51.8 24.8 – Strength Index Reading (3 Year Range): Bullish Bullish Bearish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: -4.9 5.6 -7.5   Mexican Peso Futures: The Mexican Peso large speculator standing this week came in at a net position of 16,825 contracts in the data reported through Tuesday. This was a weekly lift of 7,851 contracts from the previous week which had a total of 8,974 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 34.5 percent. The commercials are Bullish with a score of 64.0 percent and the small traders (not shown in chart) are Bullish with a score of 60.9 percent. MEXICAN PESO Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 42.5 53.0 4.1 – Percent of Open Interest Shorts: 32.7 65.3 1.7 – Net Position: 16,825 -21,038 4,213 – Gross Longs: 72,846 90,784 7,091 – Gross Shorts: 56,021 111,822 2,878 – Long to Short Ratio: 1.3 to 1 0.8 to 1 2.5 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 34.5 64.0 60.9 – Strength Index Reading (3 Year Range): Bearish Bullish Bullish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: 9.1 -9.3 4.2   Brazilian Real Futures: The Brazilian Real large speculator standing this week came in at a net position of 24,445 contracts in the data reported through Tuesday. This was a weekly lift of 685 contracts from the previous week which had a total of 23,760 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish-Extreme with a score of 100.0 percent. The commercials are Bearish-Extreme with a score of 0.0 percent and the small traders (not shown in chart) are Bullish-Extreme with a score of 97.0 percent. BRAZIL REAL Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 55.0 40.2 4.8 – Percent of Open Interest Shorts: 29.1 68.9 2.0 – Net Position: 24,445 -27,081 2,636 – Gross Longs: 51,990 38,039 4,541 – Gross Shorts: 27,545 65,120 1,905 – Long to Short Ratio: 1.9 to 1 0.6 to 1 2.4 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 100.0 0.0 97.0 – Strength Index Reading (3 Year Range): Bullish-Extreme Bearish-Extreme Bullish-Extreme NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: 46.6 -49.2 31.8   Russian Ruble Futures: The Russian Ruble large speculator standing this week came in at a net position of 19,517 contracts in the data reported through Tuesday. This was a weekly lift of 3,353 contracts from the previous week which had a total of 16,164 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish with a score of 59.6 percent. The commercials are Bearish with a score of 39.6 percent and the small traders (not shown in chart) are Bearish with a score of 49.1 percent. RUSSIAN RUBLE Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 58.5 35.9 5.6 – Percent of Open Interest Shorts: 8.0 87.8 4.2 – Net Position: 19,517 -20,053 536 – Gross Longs: 22,625 13,895 2,152 – Gross Shorts: 3,108 33,948 1,616 – Long to Short Ratio: 7.3 to 1 0.4 to 1 1.3 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 59.6 39.6 49.1 – Strength Index Reading (3 Year Range): Bullish Bearish Bearish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: 23.4 -20.6 -25.0   Bitcoin Futures: The Bitcoin large speculator standing this week came in at a net position of -283 contracts in the data reported through Tuesday. This was a weekly lowering of -68 contracts from the previous week which had a total of -215 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish-Extreme with a score of 90.7 percent. The commercials are Bearish-Extreme with a score of 19.3 percent and the small traders (not shown in chart) are Bearish with a score of 25.2 percent. BITCOIN Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 77.2 2.9 12.2 – Percent of Open Interest Shorts: 79.8 5.3 7.3 – Net Position: -283 -256 539 – Gross Longs: 8,501 322 1,338 – Gross Shorts: 8,784 578 799 – Long to Short Ratio: 1.0 to 1 0.6 to 1 1.7 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 90.7 19.3 25.2 – Strength Index Reading (3 Year Range): Bullish-Extreme Bearish-Extreme Bearish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: 2.1 -6.1 -0.5   Article By InvestMacro – Receive our weekly COT Reports by Email *COT Report: The COT data, released weekly to the public each Friday, is updated through the most recent Tuesday (data is 3 days old) and shows a quick view of how large speculators or non-commercials (for-profit traders) were positioned in the futures markets. The CFTC categorizes trader positions according to commercial hedgers (traders who use futures contracts for hedging as part of the business), non-commercials (large traders who speculate to realize trading profits) and nonreportable traders (usually small traders/speculators) as well as their open interest (contracts open in the market at time of reporting).See CFTC criteria here.
USDNOK Nears 9.000 Level, GBPUSD Trades Ca. 1.335, GER 40 (DAX) Opened Quite Lower

USDNOK Nears 9.000 Level, GBPUSD Trades Ca. 1.335, GER 40 (DAX) Opened Quite Lower

John Benjamin John Benjamin 28.02.2022 10:32
GBPUSD looks to steady The sterling recoups some losses as sentiment stabilizes after the initial fear-driven sell-off. A clean cut through the daily support at 1.3360 has triggered a wave of liquidation. Sentiment remains downbeat despite the recent rebound. A deeply oversold RSI attracted some bargain hunters. However, the pound is vulnerable to another sell-off as buyers could be wary of catching a falling knife. 1.3500 from the previous consolidation range is the closest resistance. Further down, 1.3200 (near last December’s lows) might be the next target. USDNOK breaks rising trendline The US dollar consolidates as the Ukraine conflict makes a too aggressive move by the Fed unlikely. A short-lived surge above the supply area (9.0300) indicates strong selling pressure around 9.0900. Then a fall below the rising trendline calls the recent rebound into question. 8.7900 is the next support and buyers will need to lift offers around 9.0900 before they could hope for a meaningful comeback. Further down, this month’s low at 8.6800 is a key floor to keep the greenback afloat. GER 40 attempts to rebound The Dax 40 rebounds as traders bet that sanctions against Russia may not reach their full extent. The index saw solid bids near its 12-month lows (13800). The RSI’s repeated oversold indication has led short-term sellers to take profit in this key demand zone. 14850 from the tip of a previous bounce is the immediate resistance where the bears could be awaiting to sell into strength. A bullish breakout could soothe a battered mood. Otherwise, another round of sell-off may push the index below 13500.
Having A Look At The Markets Considering Tensions, COVID-19 And National Banks Decisions

Having A Look At The Markets Considering Tensions, COVID-19 And National Banks Decisions

Marc Chandler Marc Chandler 28.02.2022 15:36
February 28, 2022  Macro March will be a pivotal month. Three key elements shape the investment climate: geopolitics, easing of Covid pressures in Europe and North America, and the continued monetary policy response.  Russia's threat to Ukraine had been simmering for several weeks before the February 11 warning by the US that an attack was imminent.  It became a significant risk-off factor and added to the pressure on equities, while helping support the bond markets.   While several concessions were offered, there has been no common ground on the key issue of NATO enlargement. Whatever military victory Putin may enjoy, Russia will see more NATO rather than less.  Not only will NATO boost its presence, but it is possible that Sweden (and maybe Finland) joins the military pact.  The risk is that the economic fallout from Russia's military action spurs more inflation and weaker growth.  Most immediately, it has seen the market downgrade the chances of a large rate hike (50 bp) by the Federal Reserve or the Bank of England at their mid-March meetings.     The virus appears to be receding and social restrictions are being lifted in Europe and North America. Economies are re-opening.  Delivery times are improving, suggesting supply chain disruptions are easing. After a slow start, the G7 economies appear to be strengthening, with the exception of Japan. Japan imposed new social restrictions in late January that ran through mid-February.  The February composite PMI was below the 50 boom/bust level for the second consecutive month. In the UK and France, the service PMI has risen above the manufacturing PMI, another sign of a post-Covid recovery.   The normalization of monetary policy takes a big step forward in the coming weeks with the first rate hikes by the US and Canada, and the first balance sheet reduction by the Bank of England.  The European Central Bank will update is forward guidance for its asset purchases and is expected to allow for a hike toward the end of the year.  The Bank of Japan's Yield-Curve Control cap on the 10-year bond at 0.25% may be challenged if global yields drag higher in their wake.   The Reserve Bank of Australia continues to push back against expectations of an early hike, which the swaps market says likely happens in July.   Commodity prices continue to rise.  The CRB Index rose by about 3.5% in February after a 9.8% gain in January.  It has not had a losing week since mid-December.  Adverse weather conditions in South America are helping boost corn and soy prices, which also translates into higher livestock prices.  Oil prices remain near multiyear highs and the April WTI contract has risen by around a quarter this year. The high does not seem to be in place yet, but a nuclear accord with Iran would boost supply.  US natural gas prices are up about 20% this year, but partly it is a function of the weak finish last year. Still, it is above the 200-day moving average by around 4%.  Europe's benchmark (Netherlands) has risen by almost 40%.  Higher oil and natural gas prices have knock-on effects on food production via fertilizer and pesticides, let alone transportation. We note that the last three recessions in the US were preceded by a doubling of oil prices.  The price of WTI has doubled since the start of last year.  Emerging markets have been resilient to start the year.  Brazil and Russia raised rate particularly aggressively 2021 and early this year.  Others, including Hungary, Czech, and Chile have done much of their heavy lifting.  The MSCI Emerging Market Equity Index has held in better than the MSCI World Index of developed countries in the first two months of the year (-4.9% vs. -7.8%).  Year-to-date the JP Morgan Emerging Market Currency Index has risen by almost 1%.  Carry and valuation were often cited as the main considerations.   Bannockburn's GDP-weighted currency index rose about 0.3% in February as the currencies tended to have appreciated against the dollar.  The Chinese yuan (21.8%) and euro (19.1%) have the most weighting after the US dollar (31%) in the index.  They rose by 0.7% and 0.3% respectively. The strongest performer in the index was the Brazilian real (2.1% weighting) with a 3.0% gain, followed by the Australian dollar's (2.0% weighting) 2.25% increase. The weakest by far was the Russian rouble (2.2% weighting), which tumbled 6.75%.     Dollar:   There is no doubt that the Federal Reserve will launch a new monetary cycle at the mid-March meeting.  At one point, the market had priced in a little more than an 80% chance of a 50 bp move out of the gate. The pushback was mild, but the market understood, and the odds now are near 28%, which may still be high.  The focus is on the updated economic projections and any fresh guidance on the balance sheet.  At issue is terminal target rate in the cycle.  In December, five officials projected the Fed funds target rate in 2024 would be above the long-term rate of 2.5% (all but two Fed officials saw it above 2.0%-2.5%).   The Federal Reserve is getting closer to deciding the parameters of its balance sheet strategy.  It may be a bit early for details, but Chair Powell could confirm a start around midyear.  Meanwhile, the US economy is slowing sharply after the historic inventory contribution that lifted Q4 22 growth to about 7fx%.  The Atlanta Fed's GDP tracker sees Q1 growth at 1.3% while the median forecast in Bloomberg's survey is for 1.6% GDP at an annualized pace. Still, a strong rebound is likely to play out before the more sustained slowdown, we expected, starting in H2.     Euro:  First it was the divergence of monetary policy that drove the euro to $1.1120 in January.  The euro recovered to almost $1.15 on February 10, the day before the US warned that Russia could invade Ukraine. Then it was actual invasion took the euro to almost $1.1100.  The European Central Bank's leadership opened the door to a rate hike later this year, before the US warning about Russia's deadly intentions, the market began pricing in a hike in June.  This seemed exaggerated at the time.  The ECB has been very clear on the sequence.  Bond buying, under the Asset Purchase Program will end shortly before the first rate hike. To prepare for a possible hike, the ECB needs to adjust its forward guidance on its asset purchases at the March 10 meeting. It will likely reaffirm purchases in Q2, but it may look for an exit shortly thereafter.  The market has pushed the first rate hike back to the end of Q3. Meanwhile, the US-German two-year interest rate differential continues to trend in the US favor.  Consider that at the end of last September, the US premium was a little less than 100 bp. Now it is near 200 bp.  On the eve of the pandemic, it was almost 220 bp, although there is not a one-to-one correspondence between the exchange rate and the interest rate differential, the euro was in a range between $1.10 and nearly $1.1250 in December 2020.    (February 25 indicative closing prices, previous in parentheses) Spot: $1.1270 ($1.1150) Median Bloomberg One-month Forecast $1.1300 ($1.1175)  One-month forward $1.1280 ($1.1160)    One-month implied vol 7.0% (6.0%)         Japanese Yen:  Unlike most other large economies, Japan continues to experience deflationary pressures as seen by the GDP deflator (-1.3% year-over-year Q4 2021) or the January CPI (excluding fresh food and energy, -0.5% year-over-year).  This, coupled with signs of a weak Q1 has persuaded the market that BOJ is on hold until after Governor Kuroda's term ends in April 2023.  Given the monetary policy divergence and the deterioration of the balance of payments (with rising oil and commodity prices), the yen appears vulnerable.  However, the exchange rate's correlation with the change in the US 10-year yield has slackened, while improving with equities. In other words, its "safe haven" status is outweighing carry considerations.  Still, on balance, we look for the dollar to challenge the January and February high near JPY116.35.  Above those highs, there appears to be little chart-based resistance ahead of the late 2016/early 2017 high around JPY118.60.     Spot: JPY115.55 (JPY115.25)       Median Bloomberg One-month Forecast JPY115.00 (JPY115.15)      One-month forward JPY115.50 (JPY115.20)    One-month implied vol 6.3% (6.1%)     British Pound: Sterling was stuck in a $1.35-$1.36 range for most of February.  Intraday violations common but there was only one close outside the range until Russia invaded Ukraine.  It briefly crashed through $1.32 before rebounding.  The UK gets only 5%-6% of its oil and gas from Russia, but foreign direct investment exposure can be substantial for some companies in some sectors.  Consider that BP has a 20% stake in Rosneft.  The Bank of England meets on March 17.  The market has dramatically downgraded the risk of a 50 bp move, which had been rejected in favor a 25 bp move by a 5-4 vote in February.  Before the US warning about a full-scale Russian attack, the swaps market had more than a 60% chance the BOE would deliver a 50 bp hike in March.  Two weeks later the odds have fallen to less than 20%, the lowest since mid-December.  With the base rate at 50 bp, the BOE will stop reinvesting maturing proceeds of its holdings, and GBP28 bln of bond maturing in March that will not be recycled.  The outright selling of assets from its balance sheet can begin when the base rate reaches 1.0% but it is not a trigger as much as a pre-condition.      Spot: $1.3410 ($1.3400)    Median Bloomberg One-month Forecast $1.3500 ($1.3450)  One-month forward $1.3405 ($1.3395)   One-month implied vol 7.0% (6.5%)     Canadian Dollar:  Like sterling, the Canadian dollar spent most of February in a clear range.  It broke down on the dramatic wave of risk-aversion on the Russian invasion, but, unlike sterling, it was back into the old range within 24 hours.  The US dollar's range was CAD1.2650-CAD1.2660 on the downside and CAD1.28 on the upside.  It shot up to CAD1.2860 but returned to CAD1.27 the following day.   The Bank of Canada meets on March 2.  The swaps market sees a 75% chance that the Bank of Canada delivers a 50 bp to initiate its tightening cycle.  The market is discounting almost 180 bp of hikes over the next 12 months and peaking between 2.25%-2.50% next year from 25 bp now.  It is the most among the G7 countries.  It is also where the central bank sees the neutral rate.  The Bank of Canada is also expected to signal that it plans on letting the balance sheet shrink passively, not replacing maturing securities shortly.     Spot: CAD1.2715 (CAD 1.2770)  Median Bloomberg One-month Forecast CAD1.2600 (CAD1.2690) One-month forward CAD1.2710 (CAD1.2765)    One-month implied vol 6.7% (7.1%)      Australian Dollar: After falling 2.7% in January, the Australian dollar rebounded by 2.25% in February.  Of the major currencies, only the New Zealand dollar outperformed it and its central bank hiked rates for the third consecutive meeting and announced its balance sheet reduction strategy.  Australia's economy appeared to recover quickly from the Covid-related disruption that pushed the January composite PMI below the 50 boom/bust level (46.7).  It bounced back in February to 55.9, the highest since last June.  Higher commodity prices are delivering a positive terms of trade shock.  The average monthly trade surplus was A$10.2 bln last year compared with an average of nearly A$5.7 bln in 2019. While the Reserve Bank of Australia acknowledges the possibility of rate hike later this year, the market is considerably more aggressive.  The swaps market has discounted around 145 bp in tightening over the next 12 months.  However, in recent weeks, the market has pushed the first hike in Q3 from Q2.  For the last four months, the Australian dollar has mostly traded between $0.7000 and $0.7300.  This range may continue to dominate.      Spot:  $0.7220 ($0.6990)        Median Bloomberg One-Month Forecast $0.7200 ($0.7090)      One-month forward $0.7230 ($0.6995)     One-month implied vol 10.0% (10.4%)        Mexican Peso:  The peso appreciated by 1.4% in February.  Latam currencies shined. and accounted for four of the top six EM performers, led by the 3% gain in the Brazilian real.  At her first meeting as Governor of the Bank of Mexico, Rodriguez delivered a 50 bp hike. With price pressures still accelerating, she is poised to repeat it at her second meeting on March 24.   It would bring the target rate to 6.5%.  Recall that in the last cycle, Banxico had raised its target to 8.25% before cutting by in August 2019.  It was at 7.25% in January 2020.  The swaps market expects it to peak in early near year in the 8.00%-8.25% area.  The key is inflation, which has been above 7% for three months through January.  The bi-weekly inflation report had it accelerating in mid-February.  Mexican asset markets are underperforming.  Consider, the yield on its 10-year dollar bond is up 100 bp this year.  Brazil's is up half as much. Mexico's equity benchmark is off almost 1.4% this year while the MSCI Latam equity index is up 11.5%.  The dollar set five-month lows in late February slightly below MXN20.16. It peaked in late January near MXN20.9150.  The bulk of the move is probably behind it and the MXN20.00-MXN20.10 area may offer a nearby floor.      Spot: MXN20.35 (MXN20.80)   Median Bloomberg One-Month Forecast MXN20.50 (MXN20.78)   One-month forward MXN20.46 (MXN20.90)     One-month implied vol 11.0% (10.6%)      Chinese Yuan:  Few observers seem to place any importance on Chinese officials claim that it is making the currency move flexible.  The yuan still can only move in a 2% band around the reference rate that the central bank sets daily ostensibly submissions by its banks.  Although it does not appear to intervene directly, it can still have various levers of influence.   The yuan has risen against the dollar for six of the past seven months.  The currency moves are small but have a cumulative effect. In February, the yuan rose by about 0.7% against the dollar.  It was sufficient to lift it to a new four-year high and what appears to be a new record-high against its trade-weighted basket (CFETS).  After cautioning the market against driving the yuan higher and raising the reserve requirement for foreign currency deposits (earned in part from selling the yuan to offshore buyers), the PBOC shifted in February.  It began setting the dollar's reference rate below expectations.  While a couple of large asset managers have reduced their weightings of Chinese bonds as the premium over Treasuries narrows considerably, foreign investors have been buying Chinese stocks outside of the technology and property sectors.  It is difficult to know the extent of the official tolerance of a stronger yuan when monetary and fiscal policy is more stimulative.  The dollar's low from 2017 was around CNY6.24-CNY6.25.     Spot: CNY6.3175 (CNY6.3615) Median Bloomberg One-month Forecast CNY6.3800 (CNY6.3895)  One-month forward CNY6.3300 (CNY6.3820)    One-month implied vol 3.1% (3.1%)         Disclaimer
USDCHF Trades Lower, EURGBP - EUR Weakened A Bit, US 100 Looks To Hold Its Normal Level

USDCHF Trades Lower, EURGBP - EUR Weakened A Bit, US 100 Looks To Hold Its Normal Level

Jing Ren Jing Ren 01.03.2022 10:07
USDCHF struggles for support The Swiss franc rallies as new sanctions against Russia trigger a flight to safety. The pair has met stiff resistance in the supply area (0.9290). Then a drop below 0.9220 and 0.9170 suggests that sentiment remains cautious and buyers are hesitant. 0.9150 is a key level to safeguard the greenback’s latest bounce. A bearish breakout could send the pair to the daily support at 0.9110. An oversold RSI may attract some buying interest. The bulls need to reclaim 0.9230 before they could hope for a turnaround. EURGBP attempts to rebound The euro struggles amid escalation in Western sanctions. A bullish attempt above 0.8400 indicates an upward bias as sellers cover their positions. 0.8310 has been solid support. And the market mood may become increasingly upbeat if buyers succeed in holding above this level. An extended rally may send the single currency to the daily resistance at 0.8475, where a breakout may cause a bullish reversal in the weeks to come. On the downside, a fall below the said demand zone may send the euro to 0.8260. US 100 to test key resistance The Nasdaq 100 bounces as Russia and Ukraine meet for peace talks. The index saw bids near last May’s lows (13050), an important floor to prevent further bleeding. A rebound above 14050 has prompted some sellers to take profit, easing the downward pressure for the moment. Price action is heading to the next resistance at 14500 which sits on the 30-day moving average, and high volume could be expected in this area of interest. A bullish breakout could boost sentiment in the short term and extend gains to 15280.
What to do with your free capital in Russia

What to do with your free capital in Russia

Alex Kuptsikevich Alex Kuptsikevich 01.03.2022 13:30
The main question that ruble traders ask themselves is whether the Central Bank managed to prevent a collapse in the exchange rate? At the moment, the euro is officially worth 104.4, and the dollar is 93.5.According to a leading analyst at FxPro, the ruble is recovering from the second shock wave that hit on Monday, when the Central Bank was unable to use foreign exchange reserves to stabilize the exchange rate. The dollar and the euro declined somewhat, but these levels still can hardly be called sustainable. An increase in the interest rate has a relatively long-term effect, while a liquidity crisis affects quotes "here and now".A steady reversal to growth in the Russian currency should be expected no earlier than when we receive reliable signals from the EU and the US. Until then, downward impulses may alternate with relatively short pullback periods. In our opinion, some stabilization of the exchange rate may occur in the range of 100-110 since this is a low enough level for traders to start picking up the ruble in the short term. Of course, this is only if we exclude the scenario of further tightening of sanctions.There is another issue that worries the consumers who are now in Russia. We are talking, among other things, about foreign citizens who came to Russia to do business or for personal reasons. Many of them have free balances in the region of 100 thousand rubbles in their bank accounts. As a rule, businesspeople short-term invest capital or acquire their own currency. The question arises of what to do with this capital now.In our opinion, it is better to save free money for force majeure, since in the current circumstances, it is worth increasing the capital and abandoning all unplanned purchases. If you are in Russia, then it is better to keep your savings in rubbles since it is not profitable to buy currency in banks now, as the exchange rate difference is too large.Of course, in the coming weeks and months, equipment, and all imported goods in the territory of the Russian Federation will rise in price significantly. At the same time, the value of cash soon may manifest itself more than ever. This is confirmed by queues at ATMs and multiple increases in cash in the hands of Russians.Many right now are looking towards buying a new car from a showroom with the prospect of selling it in a few months at a higher price (considering the sanctions).If your capital is even larger, it perhaps remains only to wait since the withdrawal to foreign accounts is limited. Thus, Russian residents will not be able to credit foreign currency to their accounts and deposits in foreign banks and brokers. The ban takes effect today.
Speaking Of Rallying Chinese Stocks, Quite Unchanged Bitcoin Price, BoE, Fed And Central Bank Of Turkey Interest Rates Decisions

Getting Rid Of Russian Commodities Affects And Will Affect Markets

Alex Kuptsikevich Alex Kuptsikevich 02.03.2022 10:04
Brent crude prices have jumped 13% since the start of the week, trading above $110 a barrel at the time of writing. These are the highest levels since July 2014. Meanwhile, the ruble continues to retreat against the dollar and euro.  USDRUB is now trading at 106.40 (+5.5%) on the Moscow Exchange, and EURRUB is above 118 (+5%). In both cases, rates are approaching the highs set at the start of trading on Monday. As would be expected, the announced support measures from the Central Bank are softening the fall but not reversing it. The one-way movement in oil prices is since buyers in Europe are increasingly refusing to buy Russian oil, trying to find a replacement for it.  This shift in priorities is visible in the sharp widening of the spread between Urals and Brent. Historically, and without various restrictions, the spread between these grades is $2-3 in favour of the lighter Brent. Now it is more than $17 as buyers are not chartering new shipments. Canada is refusing to buy Russian oil, and the UK (which is much more dependent on energy imports) is considering options for sanctions against the industry.  The European Parliament has passed a resolution calling for EU oil and gas imports restrictions. Thus, Russia has failed to fully benefit from higher prices, losing both in sales volumes and facing an actual fall in selling prices.  The potential for already announced measures destabilises the market, setting Russia up to start using energy or agricultural products as a retaliatory measure. While it is hard to imagine the world without Russian energy in the coming months - it will be as chaotic as the oil crisis in 1973, with the oil price soaring fourfold in six months of the embargo. We may see a smaller price jump but with much wider economic consequences. It is ironic that Europe and Western countries, in general, were helped by the Soviet Union. Now consumers are left to rely on the Middle East and its reserves.  Yesterday, Biden announced an agreed sale of 60m barrels to 30 countries. Still, the market reaction to these announcements indicates that the market was expecting more, and the announced volumes are not enough. It is hard to say the theoretical limit to oil's rise. The Brent price could surpass the 2012 highs of $128 in a matter of days or aim for a historical record of $147.
Indices attempt to recover as investors remain concerned over escalating conflict

Indices attempt to recover as investors remain concerned over escalating conflict

Walid Koudmani Walid Koudmani 02.03.2022 13:28
US indices are set to start today’s session lower as the conflict in Ukraine threatens supply chains and drives commodity prices higher. During yesterday’s trading session, the S&P 500 dropped 1.55%, Dow Jones moved 1.76% lower and Nasdaq declined 1.59% while the Russell 2000 dropped 1.93%. Intense shelling of Kharkiv was reported overnight and Russian attacks on residential areas and civilian buildings are becoming more frequent while the west continues to evaluate an escalation of sanctions, some of which have led to Sberbank, Russia's largest bank, informing that it will be shutting its European market business as it is no longer able to supply liquidity to its units in Europe. Despite some important data expected from the US, including the ADP employment report as well as the FED chair Powell testifying in congress, investors remain focused on further headlines and developments from the ongoing conflict in eastern europe which is sending shockwaves across markets. While negotiations are set to continue between the opposing forces, it remains to be seen if these will manage to and provide some relief Oil prices reach record levels despite strategic petroleum reserve releaseConcerns over possible disruptions on the oil market are sending Brent prices to the sky as WTI reached the highest level since 2013. Brent OIL is trading almost 60% year-to-date higher and it may not be over as the geopolitical tensions escalate and more companies continue to exit their shares in Russian energy companies with some of the most notable being BP and Shell. The release of strategic petroleum reserve release did little to ease upward pressure and OPEC+ is unlikely to decide on a bigger than 400,000 barrel hike today while traders also await the EIA petroleum report from the US, which is set to show an increase of 2.8 MB, after yesterday's API report indicated a 6.1 MB inventory draw. Unless the geopolitical situation begins to ease, or there are some major developments which would allow a noticeable increase in supply to reach the markets from elsewhere, we could be seeing a continuation of this trend that will ultimately have cascading effects across most asset classes and on consumer prices which are all related to energy prices.
Positions of large speculators according to the COT report as at 22/2/2022

Positions of large speculators according to the COT report as at 22/2/2022

Purple Trading Purple Trading 02.03.2022 21:33
Positions of large speculators according to the COT report as at 22/2/2022 Total net speculator positions in the USD index rose by 698 contracts last week. This change is the result of an increase in long positions by 1,377 contracts and an increase in short positions by 679 contracts. The increase in total net speculator positions occurred last week in the euro, the Australian dollar and the Japanese yen. The decline in total net positions occurred in the British pound, the New Zealand dollar, the Canadian dollar and the Swiss franc.  Following Russia's invasion of Ukraine, markets shifted into risk-off sentiment. From a currency perspective, this means that the euro, pound, Australian dollar and New Zealand dollar could weaken. However, the situation is changing very quickly depending on various political statements. The positions of speculators in individual currencies The total net positions of large speculators are shown in Table 1: If the value is positive then the large speculators are net long. If the value is negative, the large speculators are net short. Table 1: Total net positions of large speculators Date USD Index EUR GBP AUD NZD JPY CAD CHF Feb 22, 2022 36084 59306 -5809 -84080 -11551 -63187 9253 -10987 Feb 15, 2022 35386 47581 2237 -86694 -9333 -66162 12170 -9715 Feb 08, 2022 33765 38842 -8545 -85741 -10366 -59148 14886 -9399 Feb 01, 2022 34571 29716 -23605 -79829 -11698 -60640 18264 -8239 Jan 25, 2022 36861 31560 -7763 -83273 -10773 -68273 12317 -8796 Jan 18, 2022 36434 24584 -247 -88454 -8331 -80879 7492 -10810 Note: The explanation of COT methodolody is at the end of this report. Notes: Large speculators are traders who trade large volumes of futures contracts, which, if the set limits are met, must be reported to the Commodity Futures Trading Commission. Typically, this includes traders such as funds or large banks. These traders mostly focus on trading long-term trends and their goal is to make money on speculation with the instrument. ​The total net positions of large speculators are the difference between the number of long contracts and the number of short contracts of large speculators. Positive value shows that large speculators are net long. Negative value shows that large speculators are net short. The data is published every Friday and is delayed because it shows the status on Tuesday of the week. The total net positions of large speculators show the sentiment this group has in the market. A positive value of the total net positions of speculators indicates bullish sentiment, a negative value of total net positions indicates bearish sentiment. When interpreting charts and values, it is important to follow the overall trend of total net positions. The turning points are also very important, i.e. the moments when the total net positions go from a positive value to a negative one and vice versa. Important are also extreme values ​​of total net positions as they often serve as signals of a trend reversal. Sentiment according to the reported positions of large players in futures markets is not immediately reflected in the movement of currency pairs. Therefore, information on sentiment is more likely to be used by traders who take longer trades and are willing to hold their positions for several weeks or even months.   Detailed analysis of selected currencies   Explanations:   Purple line and histogram: this is information on the total net position of large speculators. This information shows the strength and sentiment of an ongoing trend. It is the indicator r_COT Large Speculators (by Kramsken) in www.tradingview.com. Information on the positions of so-called hedgers is not shown in the chart, due to the fact that their main goal is not speculation, but hedging. Therefore, this group usually takes the opposite positions than the large speculators. For this reason, the positions of hedgers are inversely correlated with the movement of the price of the underlying asset. However, this inverse correlation shows the ongoing trend less clearly than the position of large speculators.​ We show moving average SMA 100 (blue line) and EMA 50 (orange line) on daily charts. ​Charts are made with the use of www.tradingview.com. The source of numerical data is www.myfxbook.com The Euro   date Open Interest Specs Long Specs Short Specs Net positions change Open Interest change Long change Short change Net Positions Sentiment Feb 22, 2022 696682 214195 154889 59306 -5365 -3704 -15429 11725 Bullish Feb 15, 2022 702047 217899 170318 47581 1949 -1074 -9813 8739 Bullish Feb 08, 2022 700098 218973 180131 38842 14667 5410 -3716 9126 Bullish Feb 01, 2022 685431 213563 183847 29716 2479 155 1999 -1844 Weak bullish Jan 25, 2022 682952 213408 181848 31560 -8930 1507 -5469 6976 Bullish Jan 18, 2022 691882 211901 187317 24584 9589 7540 -11039 18579 Bullish         Total change 14389 9834 -43467 53301     Figure 1: The euro and COT positions of large speculators on a weekly chart and the EURUSD on D1   The total net positions of speculators reached 59 306 contracts last week, up by 11 725 contracts compared to the previous week. This change is due to a decrease in long positions by 3,704 contracts and a decrease in short positions by 15,429 contracts. Total net positions have increased by 53,301 contracts over the past 6 weeks. This change is due to the fact that large speculators ended 43,467 short positions and addded 9,834 long positions.  This data suggests continued bullish sentiment for the euro. Open interest, which fell by 5,465 contracts in the past week, shows that the downward movement that occurred in the euro last week was not supported by the volume and therefore it was a weak decline as there were fewer bearish traders in the market.  The euro weakened strongly last week under the influence of the war in Ukraine and reached strong support at 1.1120. Long-term resistance: 1.1280 – 1.1300. Next resistance is near 1.1370 – 1.1400. Support: 1.1100-1.1140   The British pound   date Open Interest Specs Long Specs Short Specs Net positions change Open Interest change Long change Short change Net Positions Sentiment Feb 22, 2022 188443 42249 48058 -5809 -6859 -7902 144 -8046 Bearish Feb 15, 2022 195302 50151 47914 2237 -2646 5442 -5340 10782 Bullish Feb 08, 2022 197948 44709 53254 -8545 13941 15112 52 15060 Weak bearish Feb 01, 2022 184007 29597 53202 -23605 1967 -7069 8773 -15842 Bearish Jan 25, 2022 182040 36666 44429 -7763 -1194 -3094 4422 -7516 Bearish Jan 18, 2022 183234 39760 40007 -247 -17259 9254 -19665 28919 Weak bearish         Total Change -12050 11743 -11614 23357     Figure 2: The GBP and COT positions of large speculators on a weekly chart and the GBPUSD on D1 The total net positions of speculators last week amounted to - 5,809 contracts, down by 8,046 contracts compared to the previous week. This change is due to a decrease in long positions by 7,902 contracts and an increase in short positions by 144 contracts. Total net positions have increased by 23,357 contracts over the past 6 weeks. This change is due to speculators exiting 11,614 short positions and adding 11,743 long positions. The decline in total net positions of large speculators into negative territory indicates bearish sentiment for the pound. Open interest, which fell by 6,859 contracts last week, indicates that the decline in the pound that occurred last week was not supported by volume and was therefore weak. The pound, just as the euro, might be negatively impacted by risk-off sentiment which could then send the pound towards support which is at 1.3300 or possibly 1.3200. Long-term resistance: 1.3620-1.3640.  Next resistance is near 1.3680 – 1.3750. The resistance is also in the zone 1.3490 – 1.3520. Support is near 1.3270 – 1.3300 and then mainly in the zone 1.3200.     The Australian dollar   date Open Interest Specs Long Specs Short Specs Net positions change Open Interest change Long change Short change Net Positions Sentiment Feb 22, 2022 192579 11553 95633 -84080 1 -139 -2753 2614 Bullish Feb 15, 2022 192578 11692 98386 -86694 -3825 -5631 -4678 -953 Bearish Feb 08, 2022 196403 17323 103064 -85741 -510 -1512 4400 -5912 Bearish Feb 01, 2022 196913 18835 98664 -79829 6893 3714 270 3444 Weak bearish Jan 25, 2022 190020 15121 98394 -83273 8884 6070 889 5181 Weak bearish Jan 18, 2022 181136 9051 97505 -88454 -4317 -3332 -6364 3032 Weak bearish         Total Change 7126 -830 -8236 7406     Figure 3: The AUD and COT positions of large speculators on a weekly chart and the AUDUSD on D1 Total net speculator positions last week reached -84,080 contracts, up 2,614 contracts from the previous week. This change is due to a decrease in long positions by 139 contracts and a decrease in short positions by 2,753 contracts. This data suggests a weakening of the bearish sentiment for the Australian dollar, which is confirmed by the downtrend. Total net positions have increased by 7,406 contracts over the past 6 weeks. This change is due to speculators exiting 8,236 short contracts while exiting 830 long contracts. However, there was an increase in open interest of 1 contract last week. This means that the upward movement that occurred last week was weak in terms of volume because new money did not flow into the market. The Australian dollar is very sensitive to the international geopolitical situation. In the event of geopolitical instability, it can usually be expected to weaken especially in the AUDUSD pair and also the AUDJPY. However, last week the Australian dollar surprisingly strengthened and approached the resistance band. Long-term resistance: 0.7270-0.7310                                                                                                            Long-term support: 0.7085-0.7120.  A strong support is near 0.6960 – 0.6990.   The New Zealand dollar   date Open Interest Specs Long Specs Short Specs Net positions change Open Interest change Long change Short change Net Positions Sentiment Feb 22, 2022 56636 17343 28894 -11551 -7469 -7580 -5362 -2218 Bearish Feb 15, 2022 64105 24923 34256 -9333 9228 7755 6722 1033 Weak bearish Feb 08, 2022 54877 17168 27534 -10366 -3590 -2037 -3369 1332 Weak bearish Feb 01, 2022 58467 19205 30903 -11698 5151 3257 4182 -925 Bearish Jan 25, 2022 53316 15948 26721 -10773 8589 4336 6778 -2442 Bearish Jan 18, 2022 44727 11612 19943 -8331 2661 652 379 273 Weak bearish         Total Change 14570 6383 9330 -2947     Figure 4: The NZD and the position of large speculators on a weekly chart and the NZDUSD on D1 The total net positions of speculators reached a negative value last week - 11,551 contracts, having fallen by 2,218 contracts compared to the previous week. This change is due to a decrease in long positions by 7,580 contracts and a decrease in short positions by 7,580 contracts. This data suggests that the bearish sentiment on the NZ dollar continues. Total net positions have declined by 2,947 contracts over the past 6 weeks. This change is due to speculators adding 9,330 short positions and adding 6,383 long positions. Last week, open interest fell significantly by 7,469 contracts. Therefore, the upward movement in NZDUSD that occurred last week is not supported by volume and therefore the move was weak. The strengthening of the NZDUSD that occurred last week is somewhat surprising given the geopolitical tensions in Ukraine. This upward movement is forming a channel pattern, which may be a correction in the current downtrend trend that we can see on the daily or weekly chart. Long-term resistance: 0.6850 – 0.6890 Long-term support: 0.6590-0.6600 and the next support is at 0.6500 – 0.6530.   Explanation to the COT report The COT report shows the positions of major participants in the futures markets. Futures contracts are derivatives and are essentially agreements between two parties to exchange an underlying asset for a predetermined price on a predetermined date. They are standardised, specifying the quality and quantity of the underlying asset. They are traded on an exchange so that the total volume of these contracts traded is known.   Open interest: open interest is the sum of all open futures contracts (i.e. the sum of short and long contracts) that exist on a given asset. OI increases when a new futures contract is created by pairing a buyer with a seller. The OI decreases when an existing futures contract expires at a given expiry time or by settlement. Low or no open interest means that there is no interest in the market. High open interest indicates high activity and traders pay attention to this market. A rising open interest indicates that there is demand for the currency. That is, a rising OI indicates a strong current trend. Conversely, a weakening open interest indicates that the current trend is not strong. Open Interest Price action Interpretation Notes Rising Rising Strong bullish market New money flow in the particular asset, more bulls entered the market which pushes the price up. The trend is strong. Rising Falling Strong bearish market Price falls, more bearish traders entered the market which pushes the price down. The trend is strong. Falling Rising Weak bullish market Price is going up but new money do not flow into the market. Existing futures contracts expire or are closed. The trend is weak. Falling Falling Weak bearish market Price is going down, but new money do not flow into the market. Existing futures expire or are closed, the trend is weak.   Large speculators are traders who trade large volumes of futures contracts, which, if the set limits are met, must be reported to the Commodity Futures Trading Commission. Typically, this includes traders such as funds or large banks. These traders mostly focus on trading long-term trends and their goal is to make money on speculation with the instrument. Traders should try to trade in the direction of these large speculators. The total net positions of large speculators are the difference between the number of long contracts and the number of short contracts of large speculators. Positive value shows that large speculators are net long. Negative value shows that large speculators are net short. The data is published every Friday and is delayed because it shows the status on Tuesday of the week. The total net positions of large speculators show the sentiment this group has in the market. A positive value of the total net positions of speculators indicates bullish sentiment, a negative value of total net positions indicates bearish sentiment. When interpreting charts and values, it is important to follow the overall trend of total net positions. The turning points are also very important, i.e. the moments when the total net positions go from a positive value to a negative one and vice versa. Important are also extreme values ​​of total net positions as they often serve as signals of a trend reversal. The COT data are usually reported every Friday and they show the status on Tuesday of the week. Sentiment according to the reported positions of large players in futures markets is not immediately reflected in the movement of currency pairs. Therefore, information on sentiment is more likely to be used by traders who take longer trades and are willing to hold their positions for several weeks or even months.
USOIL Became A Rocketship, EURUSD Trades Ca. 1.110 And USDCAD Hits 7-Day-Low

USOIL Became A Rocketship, EURUSD Trades Ca. 1.110 And USDCAD Hits 7-Day-Low

Jing Ren Jing Ren 03.03.2022 08:54
EURUSD sees limited bounce The euro retreats as the ECB may dial back normalization amid the Ukraine crisis. A fall below the daily support at 1.1130 was an invalidation of the February rebound and forced buyers to bail out. The lack of support means that short-term sentiment has turned bearish once again. An oversold RSI may lift the pair temporarily due to profit-taking, but trend followers could be looking to sell into strength. 1.1230 is the closest resistance. A new round of sell-off may push the euro beyond 1.1050. USDCAD breaks support The Canadian dollar jumped after the Bank of Canada raised its key interest rate to 0.5%. A break below the demand zone, around 1.2680, has put buyers on the defensive. The daily support at 1.2640 was a major level. And its breach could trigger a sell-off towards 1.2560, threatening the rally from late January. Further south, January’s low at 1.2450 is a key floor to keep the greenback afloat. An oversold RSI may lead short-term sellers to exit, driving up the price briefly, but a rebound may be capped by 1.2700. USOIL bounces higher WTI crude skyrocketed as the war in Ukraine could drag on pushing up energy prices. The rally accelerated after it broke above the psychological tag of 100.00. The RSI’s overbought situation in both hourly and daily charts indicates overextension. Profit-taking may drive the price back down and let the bulls take a breather. 104.00 is the immediate support in this case. Sentiment is overwhelmingly bullish and pullbacks could be limited. 120.00 would be the next stop when volatility comes around again.
PPI Of The Euro Area Is 30.6% Higher Than At The Same Time The Year Before

PPI Of The Euro Area Is 30.6% Higher Than At The Same Time The Year Before

Alex Kuptsikevich Alex Kuptsikevich 03.03.2022 14:16
Euro area producer prices accelerated their rise in January - a significant early signal of a further increase in consumer inflation. A fresh Eurostat report showed that PPI rose by 5.2% in the first month of the year, twice as much as expected and by 30.6% to the same month a year earlier. Until the middle of last year, the year-over-year growth rate had not exceeded 10% in the indicator's 40-year history. However, the combination of a low base and subsequent supply-chain disruptions for some commodities and energy are feeding this wave. The latest spike in gas prices and Brent’s jump by a third since the start of February indicates that price pressure promises to remain extremely high next month. A couple of months ago, this would have been good news for the euro, as markets would have reinforced expectations of policy tightening. Now the figures point to a looming inflationary horror in the eurozone, which the ECB is unlikely to tackle in order not to multiply the region's eco
S&P 500 At Tipping Point To Start A Bear Market And What You Need To See

S&P 500 At Tipping Point To Start A Bear Market And What You Need To See

Chris Vermeulen Chris Vermeulen 03.03.2022 21:38
Is a bear market on the way? My research suggests the downward sloping trend line (LIGHT ORANGE in the Daily/Weekly SPY chart below) may continue to act as solid resistance – possibly prompting a further breakdown in the markets for US major indexes.As we've seen recently, news and other unexpected events prompt very large price volatility events in the US major indexes. For example, the VIX recently rose above 30 again, which shows volatility levels are currently 3x higher than normal levels.Increased Volatility & The Start Of An Excess Phase Peak Should Be A Clear WarningThis increased volatility in the markets, coupled with the increased fear of the US Fed and the global unknowns (Ukraine, China, Debt Levels, and others), may be just enough pressure to crush any upside price trends over the next few months. Technically, my research suggests the $445 to $450 level is critical resistance. The SPY must climb above these levels to have any chance of moving higher.Sign up for my free trading newsletter so you don’t miss the next opportunity! Unless the US markets find some new support and attempt to rally back towards recent highs, an “Excess Phase Peak” pattern will likely continue to unfold throughout 2022. This unique price pattern appears to have already reached a Phase 2 or Phase 3 setup. Please take a look at this Weekly GE example of an Excess Phase Peak pattern and how it transitions through Phase 1 through Phase 4 before entering an extended Bearish price trend.Read this research article about Excess Phase Peaks: HOW TO SPOT THEN END OF AN EXCESS PHASE - PART 2SPY May Already Be In A Phase 4 Excess Peak PhaseThis Daily SPY chart highlights my analysis, showing the major downward sloping trend line, the Middle Resistance Zone, and the lower Support Zone. Combined, these are acting as a “Wedge” for price over the past few weeks – tightening into an Apex near $435~440.If the US major indexes attempt to break this downward price trend, then the price must attempt to move solidly above this downward sloping price channel and try to rally back into the Resistance Zone (near $445~$450). Unless that happens, the price will likely transition into a deeper downward price move, attempting to break below recent lows, near $410, and possibly quickly moving down to the $360 level.SPY Weekly Chart Shows Consolidation Near $435 – Possibly Starting A Phase 4 Excess PeakTraders should stay keenly aware of the risks associated with the broad US and global market decline as the Ukraine war, and other unknowns continue to elevate fear and concerns related to the global economy. In my opinion, with the current excess global debt levels, extended speculative market bubbles, and the continued commodity price rally, we may be starting to transition away from an extended growth phase and into a deeper depreciation cycle phase.My research suggests we entered a new Depreciation cycle phase in late 2019 and are already more than 25 months into a potential 9.5-year global Depreciation cycle. What comes next should not surprise anyone.Read this article about Depreciation Cycle Phases: HOW TO INTERPRET & PROFIT FROM THE RISKS OF A DEPRECIATION CYCLE Traders should stay keenly focused on market risks and weaknesses. I expected the conflict in Ukraine to have been priced into the US markets over the past 7+ days. However, I believe the markets were unprepared for this scale or invasion and will attempt to settle fair stock price valuation levels as the conflict continues. This is not the same US/Global market Bullish trend we've become used to trading over the past 5+ years. Looking Forward - preparing for a possible Bear marketMarket dynamics and trends are changing from what we have experienced over the past 40 years for stocks and bonds. The 60/40 portfolio is costing you money now. Traders need an edge to stay ahead of these markets trends and to protect and profit from big trends.The only way to navigate the financial markets safely, no matter the direction, is through technical analysis. By following assets and money flows, we identify trend changes and move our capital into whatever index, sector, industry, bond, commodity, country, and even currency ETF. By following the money, you become part of new emerging trends and can profit during weak stock or bond conditions.Want Trading Strategies that Will Help You To Navigate Current Market Trends?Learn how I use specific tools to help me understand price cycles, set-ups, and price target levels in various sectors to identify strategic entry and exit points for trades. Over the next 12 to 24+ months, I expect very large price swings in the US stock market and other asset classes across the globe. I believe the markets are starting to transition away from the continued central bank support rally phase and may start a revaluation phase as global traders attempt to identify the next big trends. Precious Metals will likely start to act as a proper hedge as caution and concern start to drive traders/investors into Metals.I invite you to learn more about how my three Technical Trading Strategies can help you protect and grow your wealth in any type of market condition by clicking the following link:   www.TheTechnicalTraders.com 
Top 3 Price Prediction Bitcoin, Ethereum, Ripple: Sentiment turns as the U.S. looks to regulate cryptos

Top 3 Price Prediction Bitcoin, Ethereum, Ripple: Sentiment turns as the U.S. looks to regulate cryptos

FXStreet News FXStreet News 03.03.2022 16:07
Bitcoin price sees its gains being pared back a bit after more talks on regulatory crackdown out of U.S. on cryptocurrencies. Ethereum price slips further away from $3,018 after Powell's speech before Congress talked about regulating cryptocurrencies. XRP price sideways, awaiting a catalyst to go either way. Cryptocurrencies are facing some headwinds – whilst they have enjoyed more inflows of late as both Ukrainian and Russian inhabitants reverted to cryptocurrencies as an alternative means of payment to avoid sanctions – there are signs this loophole will soon be closed. During Biden's State of the Union speech the president asked for a crackdown on cryptocurrencies to close the escape route for wealthy Russians. FED chair Powell added fuel to the fire by saying that he would welcome further regulation to monitor and control cryptocurrencies better. The result is that these comments have triggered some nervousness in all significant cryptocurrency pairs. Bitcoin bulls are rejected at $44,088 with the risk of sliding back to $42,000 Bitcoin (BTC) price saw a full paring back of the losses accumulated during the Russian invasion as cryptocurrencies saw renewed cash inflow from both Russians and Ukrainians looking for alternative means of payment after both central banks had put in cash withdrawal restrictions. As Bitcoin looked to be poised for another leg higher, both Biden and Powell created some headwinds by urging for more regulatory crackdown, as it is emerging that cryptocurrencies are undermining sanctions on Russia. With this renewed negative attention towards cryptocurrencies, investors are being quick to book profits and, in the process, are pushing BTC price action to the downside. BTC price saw an initial rejection at $45,261, a level which coincides with the low of December 17, and as such triggered some profit-taking. As profit-taking continues bulls are faced with another rejection at $44,088, a level that goes back to August 06. Below that, the search for support finds nothing until $41,756 or the psychological $42,000 level near the baseline of a bearish triangle we had marked up earlier. BTC/USD daily chart As more talks are underway, a breakthrough could still happen at any moment. If that happened, it would mean that bears would fail in their attempt to squeeze out bulls and get stopped out themselves once the price pierced through $44,088 to the upside. That move would even accelerate after shooting through $45,261, with a quick rally to $48,760 and, from there, positioning Bitcoin to pop back above $50,000 next week. Ethereum bulls are defending the 55-day SMA, but support is wearing thin Ethereum (ETH) price takes another step back today after more negative connotations from FED Chair Powell in the house hearing before Congress. Next to committing to more rate hikes, Powell also drilled down on cryptocurrencies and called them a risk that needs to be prioritised with regulations. That puts greater regulation for cryptocurrencies at the top of the congressional agenda – after Ukraine, and inland inflation had pushed that bullet point further down the list. For the moment, ETH sees bulls defending the 55-day Simple Moving Average (SMA) at $2,880. Although it looks good to hold for now, in the past, the 55-day SMA has not built a solid reputation of being well respected. So expect a possible breach once the US session kicks in and Powell makes more negative comments on cryptocurrencies in his second day of congressional hearings, which will likely push ETH price below the 55-day SMA at $2,880, through the monthly pivot at $2,835, and down to a possible endpoint at around $2,695. ETH/USD daily chart As the situation in Russia further deteriorates with more sanctions on the shelf, residents will be forced even more to flee into cryptocurrencies to avoid any repercussions from the financial sanctions imposed. That would mean broad flux inflow throughout the coming days, with ETH price action popping above $3,018, and in the process breaking the double top of rejection from Tuesday and Wednesday. To the upside, that could see $3,391 for a test as the inflow will outweigh any bearish attempts from short sellers. XRP price testing monthly pivot to the downside as dollar strength weighs Ripple's (XRP) price is under pressure to the downside as bears are putting in their effort to break the new monthly pivot at $0.76. Bears are getting help from the other side of the asset pair by the dollar’s strength weighing on price action for a second consecutive day. With Ukraine's current tension and possible retaliation from Russia against the West, safe havens are broadly bid with the Greenback on the front foot and thus outpacing XRP’s valuation, resulting in a move lower. Expect XRP price to see an accelerated move once the monthly pivot at $0.76 gives way. With not much in the way, the road is open to drop to $0.62, with $0.70 and $0.68 as possible breaking off points where bears could see some profit-taking and attempts by bulls to halt the downturn. But the trifecta of the negative comments from both Biden and Powell joined with the safe-haven bid is too big of a force to withstand, making $0.62 almost inevitable in the coming hours or trading days. XRP/USD daily chart The only event that could turn this around is if a catalyst were to remove the safe-haven bid. That could come with a resolution of the current tension in Ukraine or surrender of the Russian army of some sort. In such an outcome, the safe-haven bid would evaporate, followed by a massive risk-on flow which would see XRP pop above $0.78 and rally to $0.88, taking out $0.84 along the way to the upside.
Tension Beetween Ukraine And Russia Definetely Shaped News In Recent Days

The EURUSD (Euro To Dollar) Keeps Going Down And Trades 1.100

Alex Kuptsikevich Alex Kuptsikevich 04.03.2022 09:57
The single currency approached 1.1000 against US Dollar - its lowest since May 2020 - and is close to declining for the fourth week in a row. Investors fleeing into safe havens outside the eurozone continues to gain momentum. The single currency is also losing sharply against the Swiss franc, falling to 1.01, the lowest since January 2015. In modern history (at least since 1993), the EURCHF has only traded lower briefly in August 2011 and at the Swiss National Bank's unpegging of the exchange rate in 2015. In the meantime, the franc against the dollar is trading in a tight sideways position around 0.9200. A few observers argue that with the euro approaching parity with the franc, the risks of active interventions or a re-establishment of a strict peg increase. But we believe that it is still not the time for such a move. The NBS is not facing a downgrade now after the financial crisis. On the contrary, the risks of accelerating inflation are increasing, and the national currency appreciation helps to dampen external inflationary pressures. Furthermore, the stability of the franc against the dollar indicates that we see a flight away from the euro rather than a general pull towards the franc.
Fighting Continues: Good for Ukraine... And Gold

Fighting Continues: Good for Ukraine... And Gold

Arkadiusz Sieron Arkadiusz Sieron 03.03.2022 16:10
  Kherson fell, but Ukrainians are still fighting fiercely. In the face of war, gold also shows courage – to move steadily up. The battle of Ukraine is still going on. Russian troops took control of Kherson, a city of about 300,000 in the south of Ukraine, but other main cities haven’t been captured yet. Ukrainian soldiers even managed to conduct some counter-offensive actions near the country’s capital. There is a large Russian column advancing on Kyiv, but its progress has been very slow over the last few days due to the staunch Ukrainian resistance and Russian forces’ problems with equipment, tactics, and supplies, including fuel and food. David is still bravely fighting Goliath! Of course, Russian forces still have an advantage and are progressing. However, the pace of the invasion is much slower than Vladimir Putin and his generals expected. The Ukrainians’ defense is much fiercer, while Russia’s losses are more severe. The Russian defense ministry admitted that 498 Russian soldiers have already been killed and 1,597 wounded, but the real number is probably much higher. Even if Russia takes control of other cities, it’s unclear whether it will be able to hold them. What’s more, although the West didn’t engage directly in the war, the response of the West was much stronger than Putin could probably have expected. The US and its allies supplied Ukraine with weapons and imposed severe sanctions against Putin and the Russian governing elite, as well as on Russia’s economy and financial system. For instance, the West decided to exclude several Russian banks from SWIFT and also to freeze most of Russian central bank’s foreign currency reserve assets. Additionally, many international companies are moving out of Russia or exporting their products to this country, adding to the economic pressure. The ruble plummeted, as the chart below shows.   Implications for Gold What does the ongoing war in Ukraine mean for the precious metals market? Well, the continuous heroic stance of President Volodymyr Zelenskyy and Ukrainian defenders is not only heating up the hearts of all freedom-lovers, but also gold prices. As the chart below shows, the price of the yellow metal has soared to about $1,930, the highest level since January 2021. As a reminder, until recently, gold was unable to surpass $1,800. Thus, the recent rally is noteworthy. The war is clearly boosting the safe-haven demand for gold. Another bullish driver is rising inflation. According to early estimates, euro area annual inflation soared from 5.1% in January to 5.8%, and the war is likely to add to the inflationary pressure due to rising energy prices. Both Brent and WTI oil prices have surged above $110 per barrel. Last but not least, I have to mention Powell’s appearance before Congress. In the prepared testimony, he said that the Fed would hike the federal funds rate this month, despite the war in Ukraine: Our monetary policy has been adapting to the evolving economic environment, and it will continue to do so. We have phased out our net asset purchases. With inflation well above 2 percent and a strong labor market, we expect it will be appropriate to raise the target range for the federal funds rate at our meeting later this month. This sounds rather hawkish and, thus, bearish for gold. However, Powell acknowledged that the implications of Russia’s invasion of Ukraine for the U.S. economy are highly uncertain. The near-term effects on the U.S. economy of the invasion of Ukraine, the ongoing war, the sanctions, and of events to come, remain highly uncertain. Making appropriate monetary policy in this environment requires a recognition that the economy evolves in unexpected ways. We will need to be nimble in responding to incoming data and the evolving outlook. Hence, the war in Eastern Europe could make the Fed more dovish than expected at a time when inflation could be higher than forecasted before the war outbreak. Such an environment should be bullish for the gold market. However, there is one important caveat. The detailed analysis of gold prices shows that they declined around the first and second rounds of negotiations between Russian and Ukrainian diplomats in anticipation of the end of the conflict. However, when it became apparent that the talks ended in a stalemate, gold resumed its upward move. The implication should be clear: as long as the war continues, the yellow metal may shine, but when the ceasefire or truce is agreed, we could see a correction in the gold market. It doesn’t have to be a great plunge, but a large part of the geopolitical premium will disappear. Having said that, the war may take a while. I pray that I’m wrong, but the slow progress of the Russian invasion could prompt Vladimir Putin to adopt a “whatever it takes” stance. According to some experts, he is already more emotional than usual, and when faced with the prospects of failure, he could become even more brutal or irrational. We already see that Russian troops, unable to break the Ukrainian defense in open combat, siege the cities and bomb civilians. Hence, the continuation or escalation of Russia’s military actions could provide support for gold prices. If you enjoyed today’s free gold report, we invite you to check out our premium services. We provide much more detailed fundamental analyses of the gold market in our monthly Gold Market Overview reports and we provide daily Gold & Silver Trading Alerts with clear buy and sell signals. In order to enjoy our gold analyses in their full scope, we invite you to subscribe today. If you’re not ready to subscribe yet though and are not on our gold mailing list yet, we urge you to sign up. It’s free and if you don’t like it, you can easily unsubscribe. Sign up today! Arkadiusz Sieron, PhDSunshine Profits: Effective Investment through Diligence & Care
Strong jobs growth refreshed Dollar's boost 

Strong jobs growth refreshed Dollar's boost 

Alex Kuptsikevich Alex Kuptsikevich 04.03.2022 15:20
The US labour market added 678K jobs outside the agricultural sector in February. This is higher than the expected 400K. In addition, last month's estimates were improved, which also adds strength to the fresh data.Hourly earnings were virtually flat over the month, with year-on-year growth slowing to 5.1% vs. +0.6% and 5.5%, respectively.The slowdown in wages while hiring accelerates seems due to the economy re-opening on the easing of coronavirus restrictions, which is bringing more low-paid workers back into the market.The FxPro analyst team, mentioned, that the publication of the employment data accelerated the dollar's gains, bringing it to 1.15% today and 2.4% so far this week. The EURUSD, which started the day near 1.1060, has slipped below 1.0900 at the time of writing, hitting lows since May 2020 and almost erasing the gains from the sharp pandemic phase.Next, Europe, as after the global financial crisis, could face a severe recession, which would increase the interest rate differential in the eurozone and the USA and encourage a flow of investors to the US dollar in addition to capital flows on the back of military action. 
Back to Risk-Off

Back to Risk-Off

Monica Kingsley Monica Kingsley 04.03.2022 15:50
S&P 500 consolidation isn‘t turning out well for the bulls as 4,300 can be easily broken again if I look at credit markets‘ posture. Treasuries just aren‘t sliding no matter the Fed‘s ambiguity on inflation, let alone markets sniffing out rate hike ideas getting revisited. Still, tech gave up opening gains, and closed on a weak note while commodities and precious metals maintained high ground, and the dollar continued rising.The odds are stacked against paper market bulls, and as I had been telling you weeks ago already, this is the time of real assets outperformance. In this sense, miners‘ leadership is a great confirmation of more strength to come, of inflation to continue… Everyone‘s free to make their own opinion after the State of the Union address.On the bright side, the flood of recently closed series of trades spanning stocks, precious metals, oil and copper, has resulted in sharp equity curve gains – and more good calls are in the making, naturally:Let‘s move right into the charts (all courtesy of www.stockcharts.com).S&P 500 and Nasdaq OutlookS&P 500 is facing a setback, which could turn a lot worse if the sentiment turn continues. Odds are it would, and we would see some selling going into the weekend.Credit MarketsHYG refused to extend opening gains, and the message is clear, and also a reaction to the Fed‘s pronouncements. Treasuries though are more careful in the tightening prospects assessment – risk-off in bonds and the dollar continues.Gold, Silver and MinersPrecious metals are doing great, and are likely to continue rising no matter what the dollar does. There is no good reason for a selloff if you look around objectively. Miners are confirming, the upleg is underway.Crude OilCrude oil upswing isn‘t yet done, it would be premature to say so. It seems though that the time of volatile chop and new base building can continue – oil stocks are the barometer.CopperCopper outperformance leaves me a bit cautious – the advance is likely to slow down and get challenged next. It was a good run, and the red metal isn‘t at all done in the medium-term.Bitcoin and EthereumCrypto downswing is reaching a bit farther than I would have been comfortable with. The buyers are welcome to step in on good volume, but I‘m not expecting miracles today or through the weekend.SummaryS&P 500 bulls are losing the initiative, and neither credit markets nor the dollar favor a turnaround today. Treasuries rising in spite of the Fed‘s messaging are also casting a clear verdict, and the yield curve compression continues. The risk-off sentiment that is getting an intermezzo here and there, is likely to rule unless the Fed makes a profound turn before the Mar FOMC. And given the inflation dynamics with all the consequences beyond economics, that‘s unlikely to happen. Markets are thus likely to continue fearing the confluence of events till...Thank you for having read today‘s free analysis, which is available in full at my homesite. There, you can subscribe to the free Monica‘s Insider Club, which features real-time trade calls and intraday updates for all the five publications: Stock Trading Signals, Gold Trading Signals, Oil Trading Signals, Copper Trading Signals and Bitcoin Trading Signals.
We Will Probably Review All Of Inflation Indicators Around The World This Weekend

Intraday Market Analysis – USD Consolidates - 07.03.2022

John Benjamin John Benjamin 07.03.2022 09:21
USDCHF struggles for support USDCHF The US dollar softens as the Fed may settle for a less aggressive rate hike agenda. The recent sideways action is a sign of the market’s indecision. Sellers’ previous attempts to push below 0.9150 have met some buying interest in this demand zone. A definitive breakout may send the pair to January’s lows around 0.9100. Then the path of least resistance could be down, ending a three-month-long consolidation. 0.9230 is the immediate resistance and 0.9290 is a major hurdle before the greenback could bounce back. XAUUSD breaks higher XAUUSD Gold rallies as investors’ flight to safety continues. The bulls have tempered their aggressiveness after the initial surge. The latest pullback has been an opportunity to accumulate against a bullish backdrop. Price action continues to climb along the rising trendline which suggests that the direction is still up. A break above the psychological level of 2000 would bring in more momentum traders. In fact, that would send the price to August 2020’s high at 2075. Between the trendline and 1930 there is a key demand zone. GER 40 drops to a fresh low GER 40 The Dax 40 plunges for fears of stagflation in the eurozone. The index has ventured further into the bearish territory after it broke below March 2021’s lows around 14000. The liquidation is yet to end as sentiment remains downbeat. A break below the psychological level of 13000 would trigger a new round of sell-off to 12000. The RSI’s oversold situation from both daily and hourly charts may cause a limited bounce if short-term traders take profit. 13500 is the first resistance ahead and could attract more trend followers.  
Markets News: Crude Oil, Gold, EuroStoxx 600, Copper

Market News: Crude Oil, Gold, EuroStoxx 600, Copper, Natural Gas

Marc Chandler Marc Chandler 07.03.2022 14:46
March 07, 2022  $USD, China, Currency Movement, Oil, Russia, SNB, South Korea Overview:  The economic disruption seen since the US warning of an imminent Russian attack on February 11 continue to ripple through the capital and commodity markets.  Equities are being slammed.  Most Asia Pacific bourses were off 2-3% today. Europe's Stoxx 600 gapped lower ad has approached February 2021 levels, orr about 2.6% today.  US futures are around 1.5% lower. The reaction in the major bond markets is subdued.  The US 10-year yield is near 1.72%, off about 10 bp from a week ago.  European benchmark yields are mostly firmer after falling 15-20 bp last week.  In the foreign exchange market, the dollar-bloc currencies continue to show resilience, while the European complex remains under pressure.  The Swedish krona continues to underperform.  It is off more than 5% in the past week.  The euro slumped to almost $1.0810 in the European morning. The JP Morgan Emerging Market Currency Index is down 1.3% after last week's 4.6% drop.  Central European currencies, as one might expect, continue to be punished the most.  They appear to be being treated like high-beta euros.  Gold is flirting with $2000.  April WTI gapped higher and spiked to $130.50 before pulling back to around $123.  US natgas is up more than 1%.  It has risen by more than a quarter of the past three weeks.  Europe's natgas benchmark is surging by nearly a third today after jumping by almost 123% last week.  Iron ore rose about 5.5% today after 14.7% last week.  Copper initially rose by more than 1.5%, but is pulling back a bit. Still, it is up around 0.5% after gaining more than 10% last week.  May wheat is rising for the sixth consecutive session.  Today's 7% advance comes on top of last week's 40.6% jump.   Asia Pacific China and Russia's relationship is on two-tracks.  The strategic relationship is based on the antipathy to a US-centric world and the expansion of NATO, which Beijing says the US is trying to create a Pacific version.  The other track is tactical.  They avoid saying much about each other's neighborhoods, including Ukraine, Taiwan, or the fact that Russia sells weapons to India that ae used to fight and resist China.   China reports a larger than expected Jan Feb trade surplus of nearly $116 bln.  The median forecast in Bloomberg's survey was for a $95 bln surplus.  Exports rose 16.3%, more than anticipated, while imports rose 15.5%, a bit less than expected.  Separately, and also surprisingly, the value of China's reserves fell to $3.21 trillion from $3.22 trillion.  A small gain had been expected.  Still, it appears that valuation, weaker non-dollar reserve currencies and a sell-off in bonds, is the key consideration.    China's National People's Congress gave a 5.5% growth target this year.  It is on the upper end of expectations and is higher than a weighted average of the projections of the provinces, which typically over-deliver. Still, it is the lowest since 1990, excluding 2020.  China's economy is said to have grown 8.1% last year. Despite increased spending and slower growth, the NPC projected that the budget deficit would fall to 2.8% of GDP from 3.2% last year.  Here, Beijing seems to plant to draw from unspent funds from past year.  The targets seem ambitious and would seem to require more monetary and fiscal support.   South Korea votes on Wednesday for a new president, who serves one five-year term.  The contest will go down to the wire. Lee represents the governing Democrats, who enjoy a super-majority in parliament.  Of note, he has endorsed a universal basic income.  Yoon is the candidate of the major opposition People Power Party.  He enjoyed a slight lead in the last poll, and he may have enjoyed a slightly bump when a minor conservative candidate dropped out and endorsed him.  Both campaigns have been marred with gaffes and petty scandals.  Unlike Japan and China, South Korea is experiencing rising price pressures (3.7% February CPI and 3.2% core). The seven-day repo rate has been hiked three times beginning last August to 1.25%.  The won is off about 3.1% this year.   The yen is sidelined.  The dollar is trading in a narrow range between about JPY114.80 and JPY115.15.  Last week's range was roughly JPY114.65-JPY115.80.  Nevertheless, benchmark three-month implied volatility has risen above 8% to approach last November's spike to 8.2%, the highest since September 2020.  The put-call skew (risk-reversal) is the most extreme since October 2020.  Demand for dollar puts, perhaps has protection for dollar receivables appears to be a key factor.  The Australian dollar's rally continues, as its commodity exposures attracts participants.  It reached $0.7440 today, its best level since last November.  It rose 2% last week, its fifth consecutive weekly advance.  It is getting stretched.  The upper Bollinger Band (two standard deviations above the 20-day moving average) is around $0.7330, and the Aussie has closed above it the past two sessions.  The greenback gapped higher against the Chinese yuan.  It opened on the session high near CNY6.3265 but ground lower to CNY6.3170.  The PBOC set the dollar's reference rate at CNY6.3478.  The market (Bloomberg survey) looked for CNY6.3450.   Europe The economic noose on Russia continues to tighten.  Mastercard and Visa will no longer support Russian activity (as of March 10).  Euroclear and Clearstream will no longer settle rouble transactions.  Russia's ability to service its debt is at risk.  While some bonds allow for rouble settlement and coupon payments, some do not.  Some dollar bond coupons are due next week, which reportedly do not have the rouble payment clause, and this could be the default event that triggers credit-default swaps.  Of course, these is talk that China will help, but its assistance is likely limited.  It CIPS payment system works for yuan settlement only.  Meanwhile, Russia has begun rationing staples ostensibly to prevent hoarding.   The euro plummeted through the CHF1.0 level for the first time today since early 2015 when the Swiss National Bank lifted its cap (floor) on the franc (euro).  Under the threat of intervention by the SNB, the euro rebounded to CHF1.0050 in early European turnover but has begun coming off again.  The weekly sight deposit report suggests not intervention took place last week.  Overall sight deposits were little changed, while the domestic sight deposits fell by about CHF3 bln.  While the SNB may not have intervened, central banks in central Europe are thought to have intervened.  The proximity to Russia and the weakness of the euro are the proximate triggers.   The euro is unable to sustain even modest upticks.  It is off for the sixth consecutive session. Last week, it tumbled 3%.  It was the fourth consecutive weekly drop.  The euro has risen in only two weeks this year.  A break of $1.08 could spur a move to the March 2020 low near $1.06, but there is increasingly talk of a move to parity.   Sterling is trading near $1.3150, its lowest level since December 2020.  The $1.3165 area corresponds to the (38.2%) retracement of the big rally since March 2020 low close to $1.14.  A convincing break of this area suggests a move into $1.2830-$1.3000 band.  America While the US begins moving to ban Russian oil imports (500k-600k barrels a day), Europe does not appear ready to do the same.  April WTI futures gapped higher and pushed a little through $130 a barrel before pulling back.  It is hovering around $123.  The pre-weekend high was near $116.00.  There have been several developments over the weekend to note.  Iran will provide more data on its nuclear efforts, and this could lead renewing the accord the US pulled out of and allow for Iranian oil in Q3.  US officials reportedly met with senior members of Venezuela's Maduro government, apparently to discuss lifting sanctions.  The US cut diplomatic ties in 2019.   Before the sanctions and mismanagement, Venezuela's was producing around 3 million barrels a day.  Meanwhile, some Canadian capacity is being taken offline for maintenance, and Libya has lost 200k barrels a day over the past few days due to the political crisis.  Lastly, Saudi Arabia announced it will hike prices to Asia next month.  The economic highlight for the week in the US is the February CPI figures on Thursday.  The headline pace could approach 8% and the core near 6.5%.  Ahead of that report, on tap today is the January consumer credit.  Note that American household debt increased by $1.02 trillion last year, the most since 2007.  Total consumer debt is around $15.6 trillion, including cars and houses.  Tomorrow, the US see the January trade balance, where a large deficit is expected, and the wholesale inventories, which may be linked to stronger imports.   In some quarters, there is still talk about "artificially" low rates in the US. However, consider what would happen if next week, the Fed Chair Powell were to channel Volcker and hike the Fed funds target by 100 bp.  We suspect that medium and long-term US interest rates would fall sharply.  Many would likely assume that it would drive the world's largest economy into contraction.  Note that 2-10-year yield curve is slipping below 25 bp today. Canada reports tits January trade figures tomorrow and return to surplus is expected.  The highlight of the week will be the jobs report on Friday.  After losing 200k jobs in January, the Canadian jobs market is expected to have recovered smartly.  The unemployment rate is expected to fall to 6.3% from 6.5% even while the participation rate is projected to rise to 65.2% from 65.0%.  Mexico report February CPI figures on Wednesday.  A rise to nearly 7.25% is expected after 7.07% in January.  At the end of the week, January industrial production figures are due.  A small decline is expected.     Since late January, the US dollar has mostly been in a CAD1.2650-CAD1.2800 range.  It was briefly pushed below CAD1.26 in the middle of last week but quickly snapped back to the upper end of the range.  It is trading inside the pre-weekend range (~CAD1.2670-CAD1.2790).  The Canadian dollar appears pulled between its commodity exposure and its risk-off sensitivity.  The Mexican peso is less ambivalent.  The greenback jumped 1.5% before the weekend and is up another 1.2% today.  Near MXN21.20, the US dollar is at its best level since mid-December, when it poked above MXN21.36.  The dollar is rally has lifted it more than three standard deviations (~MXN21.21) from its 20-day moving average.    Disclaimer
The Swing Overview - Week 9

The Swing Overview - Week 9

Purple Trading Purple Trading 07.03.2022 20:22
The Swing Overview - Week 9 The war in Ukraine continues, and although we all want this tragic event to be ended immediately, but unfortunately, according to last statements of Russian officials, it looks like the war will drag on for a longer period of time. Investors have reacted to this development by selling risk assets, including the Czech koruna. Stock indices are losing ground and the DAX in particular has been under heavy pressure. On the other hand, commodities such as oil, gold, and coal are strengthening strongly. Somewhat surprising is the development in the Australian dollar, which usually weakens in the events of geopolitical uncertainties. However, there is a reason for its current rise. More on this in our article. Conflict in Ukraine   Vladimir Putin probably did not expect to encounter such a brave resistance from Ukraine and that  almost the whole world would send Russia into isolation through significant sanctions. The list of companies and actions that have cut ties with Russia is growing day by the day and Western companies are leaving Russia. Thus, for Russians, foreign goods (food, clothing, furniture, electronics, cars) will gradually become very rare. Probably the strongest sanction that Russia has felt so far, was the freeze of the Russian Central Bank's foreign exchange reserves. In response, the Russian ruble began to depreciate significantly on February 28, 2022, and has already lost more than 30% of its pre-invasion value. In response, the Russian Central Bank intervened by raising the interest rate to 20%, which temporarily halted the ruble's fall.    Figure 1: The Russian ruble paired with the USD and the euro Meanwhile, Western countries have not exhausted all options to stop Russia in this war through economic sanctions in case of further escalation of the conflict yet. The fact that European countries might stop taking Russian gas is also at stake. This would, of course, have a very significant impact on the entire European economy. However, these are still just some economic losses, which can not be   compared at all with the losses of lives experienced by the unprecedentedly attacked Ukraine. In any case, this crisis seems to have the potential to surpass in its consequences the crisis that occurred in Russia in 1998, which led to inflation exceeding 80% and central bank interest rates reaching 150%.   Data from the US economy The ISM manufacturing sentiment indicator for February came in at 58.6 which is better than expected and points to an optimistic development of the US economy. In the labour market sector, the ADP (non-farm job change) indicator was reported, which showed that 475 thousand jobs were created in America in February (compared to 509 thousand in January). The number of unemployment claims reached 215 thousand last week, which was less than expected 226 thousand. Thus, the data show that the US economy is doing well so far and the US Fed is going to raise interest rates at its next meeting on March 16, 2022. Jerome Powell said that he would support a 0.25% rate hike. Powell also said that the war in Ukraine means significant uncertainty for monetary policy.   The US dollar and bond yields The US dollar continues to strengthen, as the USD index shows. In addition to the expected US interest rate hike, the US dollar bullishness is explained by demand for US government bonds in times of uncertainty. Demand for these bonds then pushes down their yields, which continue to fall. Figure 2: 10-year government bond yield on the 4H chart and USD index on the daily chart Index SP500 The US SP 500 index moved in a consolidation range last week. This shows that investors have so far viewed the conflict in Ukraine as an event that is more or less a regional event and therefore saw cheap stocks as a buying opportunity.  However, the sanctions adopted by Western countries will of course also have an impact on the global economy, especially if the conflict deepens further. This concern was then reflected at the end of the week when the index started to weaken. Figure 3: The SP 500 on H4 and D1 chart   Resistance according to the H4 chart is in the region of around 4,410 - 4,420. The nearest support according to the H4 chart is at 4255 - 4284. Significant support is at 4,100 - 4,113. German DAX index In contrast to the SP 500 index, there was a big sell-off in the DAX, showing that investors are worried, among other things, that a further escalation of the conflict could lead to a disruption in the supply of Russian gas, on which Germany is heavily dependent.  According to the daily chart, it looks like the DAX index is now in free fall and is breaking through support barriers as if they did not exist. It looks like the market is starting to show signs of panic selling by inexperienced investors.  If you are speculating in the short term, then bear in mind that short term speculation against such a strong downtrend is very disadvantageous and risky.   Figure 4: DAX on H4 and daily chart     Current resistance is in the area of 13,655 - 13,756. The price is now at support at 13,400, which is already slightly broken, but the closing of the whole session will be crucial. The next support is then at 13 000 - 13 100.   The Czech koruna is losing significantly The Czech koruna has long benefited from the interest rate differential, which has been very favourable for the koruna against the euro and has been the reason why the koruna has appreciated strongly since November 2021. But the Czech koruna, along with other Central European currencies, is a currency that is losing ground heavily in the current conflict.   Figure 5: The EURCZK on the daily chart   Firstly, there is the concern that the Czech Republic is geographically quite close to Ukraine, even though the Czech Republic does not have very significant exports directly with Ukraine nor Russia (in total, around 3% of total Czech exports). At the same time, there is concern about the Czech Republic's dependence on Russian gas. If the taps are closed, then the koruna could shoot above  CZK 27 per euro. Currently, the EURCZK pair is trading at the resistance level of 25. 80 - 25.90.   The Australian dollar The Australian dollar is a currency that tends to weaken during major global crises. In particular, the AUDJPY pair is correlated with the SP 500 index in the short term. Currently, however, the Australian dollar is strengthening.  This is because the Australian economy is export-oriented and exports commodities such as gold, iron ore, coal and gas.  All these commodities are now in high demand. Europe, for example, is realising that dependence on Russian gas is not paying off and is looking for alternatives. A temporary solution will be to rebuild coal-fired power stations. Germany and Italy have already started to buy coal stocks, which are therefore appreciating strongly. As a result, the price of coal has sky-rocketed, with one tonne reaching a record price of the USD 400. Figure 6: The coal price   The gold, traditionally seen as a safe haven in times of uncertainty, is also strengthening. The gold has also been helped by a fall in US bond yields.   Figure 7: The gold on H4 and D1 charts   In terms of technical analysis, the gold stopped at the resistance of $1,973 per ounce. The nearest support according to the daily chart is  $1,870 - 1,878 per ounce. The rise in commodity prices then resulted in the strengthening of the Australian dollar.     Figure 8: The AUDJPY currency pair on D1 chart   The AUDJPY broke the resistance in the range of 0.8400 - 0.8420, which became the new support. The next resistance is then at the level of 85.90 - 86.20.  
Large Currency Speculators raise their Brazilian Real bullish bets to Record High

Large Currency Speculators raise their Brazilian Real bullish bets to Record High

Invest Macro Invest Macro 05.03.2022 20:47
By InvestMacro | COT | Data Tables | COT Leaders | Downloads | COT Newsletter Here are the latest charts and statistics for the Commitment of Traders (COT) data published by the Commodities Futures Trading Commission (CFTC). The latest COT data is updated through Tuesday March 1st and shows a quick view of how large traders (for-profit speculators and commercial entities) were positioned in the futures markets. All currency positions are in direct relation to the US dollar where, for example, a bet for the euro is a bet that the euro will rise versus the dollar while a bet against the euro will be a bet that the euro will decline versus the dollar. Highlighting the COT currency data is the jump in bullish bets in the Brazilian Real currency futures contracts. Real speculators increased their bullish bets for a fourth straight week this week and by a total of +63,801 contracts over this four-week time-frame. This bullishness has taken the Real speculator level from -13,353 net positions on February 1st to +50,448 net positions this week. The current overall speculator standing has now climbed to the most bullish level on record, according to the CFTC data that goes back to the mid-1990’s and eclipsing the previous high set in 2017. The BRLUSD currency pair price has been in an uptrend since the beginning of the year and has reached the highest levels since June just below the 0.2000 exchange rate. The currencies with higher speculator bets this week were the Brazil real (26,003 contracts), Mexican peso (25,553 contracts), Euro (5,633 contracts), British pound sterling (5,472 contracts), Canadian dollar (4,887 contracts), Australian dollar (5,744 contracts) and Bitcoin (363 contracts). The currencies with lower speculator bets were the US Dollar Index (-1,310 contracts), Japanese yen (-5,545 contracts), Swiss franc (-4,261 contracts), New Zealand dollar (-2,621 contracts) and the Russian ruble (-9,843 contracts). Data Snapshot of Forex Market Traders | Columns Legend Mar-01-2022 OI OI-Index Spec-Net Spec-Index Com-Net COM-Index Smalls-Net Smalls-Index USD Index 56,651 82 34,774 86 -39,391 9 4,617 67 EUR 719,975 91 64,939 55 -95,105 49 30,166 24 GBP 211,869 46 -337 74 14,129 38 -13,792 27 JPY 208,629 61 -68,732 25 79,535 76 -10,803 27 CHF 47,273 24 -15,248 43 20,862 54 -5,614 47 CAD 143,507 26 14,140 61 -21,586 42 7,446 45 AUD 189,667 75 -78,336 12 87,737 84 -9,401 30 NZD 50,389 44 -14,172 47 16,090 55 -1,918 30 MXN 154,664 28 42,378 45 -45,811 54 3,433 58 RUB 24,753 11 9,674 36 -9,068 65 -606 18 BRL 94,577 100 24,445 74 -27,081 25 2,636 97 Bitcoin 9,980 51 80 99 -517 0 437 23   US Dollar Index Futures: The US Dollar Index large speculator standing this week equaled a net position of 34,774 contracts in the data reported through Tuesday. This was a weekly fall of -1,310 contracts from the previous week which had a total of 36,084 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish-Extreme with a score of 85.8 percent. The commercials are Bearish-Extreme with a score of 9.1 percent and the small traders (not shown in chart) are Bullish with a score of 67.0 percent. US DOLLAR INDEX Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 77.2 8.5 10.5 – Percent of Open Interest Shorts: 15.9 78.1 2.3 – Net Position: 34,774 -39,391 4,617 – Gross Longs: 43,761 4,831 5,942 – Gross Shorts: 8,987 44,222 1,325 – Long to Short Ratio: 4.9 to 1 0.1 to 1 4.5 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 85.8 9.1 67.0 – Strength Index Reading (3 Year Range): Bullish-Extreme Bearish-Extreme Bullish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: -2.9 5.0 -14.7   Euro Currency Futures: The Euro Currency large speculator standing this week equaled a net position of 64,939 contracts in the data reported through Tuesday. This was a weekly boost of 5,633 contracts from the previous week which had a total of 59,306 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish with a score of 54.9 percent. The commercials are Bearish with a score of 48.8 percent and the small traders (not shown in chart) are Bearish with a score of 24.4 percent. EURO Currency Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 31.7 54.2 11.7 – Percent of Open Interest Shorts: 22.7 67.4 7.5 – Net Position: 64,939 -95,105 30,166 – Gross Longs: 228,385 390,260 84,321 – Gross Shorts: 163,446 485,365 54,155 – Long to Short Ratio: 1.4 to 1 0.8 to 1 1.6 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 54.9 48.8 24.4 – Strength Index Reading (3 Year Range): Bullish Bearish Bearish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: 12.4 -12.6 7.1   British Pound Sterling Futures: The British Pound Sterling large speculator standing this week equaled a net position of -337 contracts in the data reported through Tuesday. This was a weekly lift of 5,472 contracts from the previous week which had a total of -5,809 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish with a score of 73.8 percent. The commercials are Bearish with a score of 38.0 percent and the small traders (not shown in chart) are Bearish with a score of 27.1 percent. BRITISH POUND Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 22.5 62.1 10.6 – Percent of Open Interest Shorts: 22.7 55.4 17.2 – Net Position: -337 14,129 -13,792 – Gross Longs: 47,679 131,583 22,551 – Gross Shorts: 48,016 117,454 36,343 – Long to Short Ratio: 1.0 to 1 1.1 to 1 0.6 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 73.8 38.0 27.1 – Strength Index Reading (3 Year Range): Bullish Bearish Bearish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: -0.1 6.7 -23.2   Japanese Yen Futures: The Japanese Yen large speculator standing this week equaled a net position of -68,732 contracts in the data reported through Tuesday. This was a weekly decrease of -5,545 contracts from the previous week which had a total of -63,187 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 24.6 percent. The commercials are Bullish with a score of 75.7 percent and the small traders (not shown in chart) are Bearish with a score of 26.5 percent. JAPANESE YEN Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 7.0 80.3 10.7 – Percent of Open Interest Shorts: 40.0 42.2 15.9 – Net Position: -68,732 79,535 -10,803 – Gross Longs: 14,665 167,605 22,407 – Gross Shorts: 83,397 88,070 33,210 – Long to Short Ratio: 0.2 to 1 1.9 to 1 0.7 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 24.6 75.7 26.5 – Strength Index Reading (3 Year Range): Bearish Bullish Bearish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: 7.7 -10.0 17.5   Swiss Franc Futures: The Swiss Franc large speculator standing this week equaled a net position of -15,248 contracts in the data reported through Tuesday. This was a weekly reduction of -4,261 contracts from the previous week which had a total of -10,987 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 43.3 percent. The commercials are Bullish with a score of 54.3 percent and the small traders (not shown in chart) are Bearish with a score of 46.8 percent. SWISS FRANC Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 3.5 74.1 21.4 – Percent of Open Interest Shorts: 35.7 30.0 33.3 – Net Position: -15,248 20,862 -5,614 – Gross Longs: 1,651 35,045 10,127 – Gross Shorts: 16,899 14,183 15,741 – Long to Short Ratio: 0.1 to 1 2.5 to 1 0.6 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 43.3 54.3 46.8 – Strength Index Reading (3 Year Range): Bearish Bullish Bearish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: -7.8 8.0 -7.7   Canadian Dollar Futures: The Canadian Dollar large speculator standing this week equaled a net position of 14,140 contracts in the data reported through Tuesday. This was a weekly increase of 4,887 contracts from the previous week which had a total of 9,253 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish with a score of 61.4 percent. The commercials are Bearish with a score of 42.2 percent and the small traders (not shown in chart) are Bearish with a score of 44.6 percent. CANADIAN DOLLAR Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 35.5 40.1 21.5 – Percent of Open Interest Shorts: 25.6 55.2 16.3 – Net Position: 14,140 -21,586 7,446 – Gross Longs: 50,881 57,576 30,817 – Gross Shorts: 36,741 79,162 23,371 – Long to Short Ratio: 1.4 to 1 0.7 to 1 1.3 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 61.4 42.2 44.6 – Strength Index Reading (3 Year Range): Bullish Bearish Bearish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: 6.4 -5.4 2.4   Australian Dollar Futures: The Australian Dollar large speculator standing this week equaled a net position of -78,336 contracts in the data reported through Tuesday. This was a weekly advance of 5,744 contracts from the previous week which had a total of -84,080 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish-Extreme with a score of 12.2 percent. The commercials are Bullish-Extreme with a score of 84.4 percent and the small traders (not shown in chart) are Bearish with a score of 29.5 percent. AUSTRALIAN DOLLAR Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 6.7 80.1 10.5 – Percent of Open Interest Shorts: 48.0 33.8 15.4 – Net Position: -78,336 87,737 -9,401 – Gross Longs: 12,720 151,922 19,865 – Gross Shorts: 91,056 64,185 29,266 – Long to Short Ratio: 0.1 to 1 2.4 to 1 0.7 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 12.2 84.4 29.5 – Strength Index Reading (3 Year Range): Bearish-Extreme Bullish-Extreme Bearish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: 9.4 -8.0 1.6   New Zealand Dollar Futures: The New Zealand Dollar large speculator standing this week equaled a net position of -14,172 contracts in the data reported through Tuesday. This was a weekly reduction of -2,621 contracts from the previous week which had a total of -11,551 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 47.5 percent. The commercials are Bullish with a score of 55.2 percent and the small traders (not shown in chart) are Bearish with a score of 29.9 percent. NEW ZEALAND DOLLAR Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 20.8 72.1 5.3 – Percent of Open Interest Shorts: 48.9 40.2 9.1 – Net Position: -14,172 16,090 -1,918 – Gross Longs: 10,485 36,326 2,665 – Gross Shorts: 24,657 20,236 4,583 – Long to Short Ratio: 0.4 to 1 1.8 to 1 0.6 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 47.5 55.2 29.9 – Strength Index Reading (3 Year Range): Bearish Bullish Bearish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: -9.8 8.4 4.3   Mexican Peso Futures: The Mexican Peso large speculator standing this week equaled a net position of 42,378 contracts in the data reported through Tuesday. This was a weekly advance of 25,553 contracts from the previous week which had a total of 16,825 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 45.4 percent. The commercials are Bullish with a score of 53.7 percent and the small traders (not shown in chart) are Bullish with a score of 57.6 percent. MEXICAN PESO Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 48.5 46.9 4.1 – Percent of Open Interest Shorts: 21.1 76.5 1.9 – Net Position: 42,378 -45,811 3,433 – Gross Longs: 74,971 72,497 6,306 – Gross Shorts: 32,593 118,308 2,873 – Long to Short Ratio: 2.3 to 1 0.6 to 1 2.2 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 45.4 53.7 57.6 – Strength Index Reading (3 Year Range): Bearish Bullish Bullish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: 16.0 -16.0 3.7   Brazilian Real Futures: The Brazilian Real large speculator standing this week equaled a net position of 24,445 contracts in the data reported through Tuesday. This was a weekly boost of 685 contracts from the previous week which had a total of 23,760 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish with a score of 74.4 percent. The commercials are Bearish with a score of 24.7 percent and the small traders (not shown in chart) are Bullish-Extreme with a score of 97.0 percent. BRAZIL REAL Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 55.0 40.2 4.8 – Percent of Open Interest Shorts: 29.1 68.9 2.0 – Net Position: 24,445 -27,081 2,636 – Gross Longs: 51,990 38,039 4,541 – Gross Shorts: 27,545 65,120 1,905 – Long to Short Ratio: 1.9 to 1 0.6 to 1 2.4 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 74.4 24.7 97.0 – Strength Index Reading (3 Year Range): Bullish Bearish Bullish-Extreme NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: 34.7 -37.1 31.8   Russian Ruble Futures: The Russian Ruble large speculator standing this week equaled a net position of 9,674 contracts in the data reported through Tuesday. This was a weekly reduction of -9,843 contracts from the previous week which had a total of 19,517 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 36.3 percent. The commercials are Bullish with a score of 64.8 percent and the small traders (not shown in chart) are Bearish-Extreme with a score of 18.1 percent. RUSSIAN RUBLE Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 44.6 51.9 3.5 – Percent of Open Interest Shorts: 5.6 88.5 5.9 – Net Position: 9,674 -9,068 -606 – Gross Longs: 11,050 12,848 855 – Gross Shorts: 1,376 21,916 1,461 – Long to Short Ratio: 8.0 to 1 0.6 to 1 0.6 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 36.3 64.8 18.1 – Strength Index Reading (3 Year Range): Bearish Bullish Bearish-Extreme NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: 7.7 -4.2 -39.0   Bitcoin Futures: The Bitcoin large speculator standing this week equaled a net position of 80 contracts in the data reported through Tuesday. This was a weekly rise of 363 contracts from the previous week which had a total of -283 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish-Extreme with a score of 98.7 percent. The commercials are Bearish-Extreme with a score of 0.0 percent and the small traders (not shown in chart) are Bearish with a score of 22.9 percent. BITCOIN Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 80.0 3.2 12.0 – Percent of Open Interest Shorts: 79.2 8.4 7.6 – Net Position: 80 -517 437 – Gross Longs: 7,981 321 1,198 – Gross Shorts: 7,901 838 761 – Long to Short Ratio: 1.0 to 1 0.4 to 1 1.6 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 98.7 0.0 22.9 – Strength Index Reading (3 Year Range): Bullish-Extreme Bearish-Extreme Bearish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: 13.8 -39.7 -3.0   Article By InvestMacro – Receive our weekly COT Reports by Email *COT Report: The COT data, released weekly to the public each Friday, is updated through the most recent Tuesday (data is 3 days old) and shows a quick view of how large speculators or non-commercials (for-profit traders) were positioned in the futures markets. The CFTC categorizes trader positions according to commercial hedgers (traders who use futures contracts for hedging as part of the business), non-commercials (large traders who speculate to realize trading profits) and nonreportable traders (usually small traders/speculators) as well as their open interest (contracts open in the market at time of reporting).See CFTC criteria here.
Positions of large speculators according to the COT report as at 1/3/2022

Positions of large speculators according to the COT report as at 1/3/2022

Purple Trading Purple Trading 07.03.2022 21:35
Positions of large speculators according to the COT report as at 1/3/2022 Total net speculator positions in the USD index fell 1,310 contracts last week. This change is the result of 35 contracts increase in long positions and a 1,345 contracts increase in short positions. Growth in total net speculator positions occurred last week in the euro, the British pound, the Australian dollar, and the Canadian dollar. Decreases in total net positions occurred in the New Zealand dollar, the Japanese yen, and the Swiss franc.   Following Russia's invasion to Ukraine, markets shifted into risk-off sentiment. This means that especially the euro and the pound are weakening. The Australian dollar and New Zealand dollar are strengthening due to rising prices of commodities that these countries export. The positions of speculators in individual currencies The total net positions of large speculators are shown in Table 1: If the value is positive then the large speculators are net long. If the value is negative, the large speculators are net short. Table 1: Total net positions of large speculators DatE USD Index EUR GBP AUD NZD JPY CAD CHF Mar 01, 2022 34774 64939 -337 -78336 -14172 -68732 14140 -15248 Feb 22, 2022 36084 59306 -5809 -84080 -11551 -63187 9253 -10987 Feb 15, 2022 35386 47581 2237 -86694 -9333 -66162 12170 -9715 Feb 08, 2022 33765 38842 -8545 -85741 -10366 -59148 14886 -9399 Feb 01, 2022 34571 29716 -23605 -79829 -11698 -60640 18264 -8239 Jan 25, 2022 36861 31560 -7763 -83273 -10773 -68273 12317 -8796 Note: The explanation of COT methodolody is at the the end of the report.   Notes: Large speculators are traders who trade large volumes of futures contracts, which, if the set limits are met, must be reported to the Commodity Futures Trading Commission. Typically, this includes traders such as funds or large banks. These traders mostly focus on trading long-term trends and their goal is to make money on speculation with the instrument. ​The total net positions of large speculators are the difference between the number of long contracts and the number of short contracts of large speculators. Positive value shows that large speculators are net long. Negative value shows that large speculators are net short. The data is published every Friday and is delayed because it shows the status on Tuesday of the week. The total net positions of large speculators show the sentiment this group has in the market. A positive value of the total net positions of speculators indicates bullish sentiment, a negative value of total net positions indicates bearish sentiment. When interpreting charts and values, it is important to follow the overall trend of total net positions. The turning points are also very important, i.e. the moments when the total net positions go from a positive value to a negative one and vice versa. Important are also extreme values ​​of total net positions as they often serve as signals of a trend reversal. Sentiment according to the reported positions of large players in futures markets is not immediately reflected in the movement of currency pairs. Therefore, information on sentiment is more likely to be used by traders who take longer trades and are willing to hold their positions for several weeks or even months.   Detailed analysis of selected currencies   Explanations:   Purple line and histogram: this is information on the total net position of large speculators. This information shows the strength and sentiment of an ongoing trend. It is the indicator r_COT Large Speculators (by Kramsken) in www.tradingview.com. Information on the positions of so-called hedgers is not shown in the chart, due to the fact that their main goal is not speculation, but hedging. Therefore, this group usually takes the opposite positions than the large speculators. For this reason, the positions of hedgers are inversely correlated with the movement of the price of the underlying asset. However, this inverse correlation shows the ongoing trend less clearly than the position of large speculators.​ We show moving average SMA 100 (blue line) and EMA 50 (orange line) on daily charts. ​Charts are made with the use of www.tradingview.com. The source of numerical data is www.myfxbook.com The Euro   date Open Interest Specs Long Specs Short Specs Net positions change Open Interest change Long change Short change Net Positions Sentiment Mar 01, 2022 719975 228385 163446 64939 23293 14190 8557 5633 Bullish Feb 22, 2022 696682 214195 154889 59306 -5365 -3704 -15429 11725 Bullish Feb 15, 2022 702047 217899 170318 47581 1949 -1074 -9813 8739 Bullish Feb 08, 2022 700098 218973 180131 38842 14667 5410 -3716 9126 Bullish Feb 01, 2022 685431 213563 183847 29716 2479 155 1999 -1844 Weak bullish Jan 25, 2022 682952 213408 181848 31560 -8930 1507 -5469 6976 Bullish         Total change 28093 16484 -23871 40355     Figure 1: The euro and COT positions of large speculators on a weekly chart and the EURUSD on D1   The total net positions of speculators reached 64,939 contracts last week, which is an increase by 5,633 contracts compared to the previous week. This change is due to an increase in long positions by 14,190 contracts and an increase in short positions by 8,557 contracts. These data suggest continued bullish sentiment in the euro. Open interest, which has increased by 23,293 contracts in the last week, shows that the downward movement that occurred in the euro last week was supported by volume and is therefore strong. The euro is weakening sharply under the influence of the war in Ukraine and we can see that support levels have not been respected in such a strong trend. In a strong downtrend it is very risky to try to catch the bottom and open bullish long positions.  Long-term resistance: 1.0980 – 1.1010. Next resistance is near 1.1120 – 1.1150. Support: 1.0640-1.0700 The British pound date Open Interest Specs Long Specs Short Specs Net positions change Open Interest change Long change Short change Net Positions Sentiment Mar 01, 2022 211869 47679 48016 -337 23426 5430 -42 5472 Weak bearish Feb 22, 2022 188443 42249 48058 -5809 -6859 -7902 144 -8046 Bearish Feb 15, 2022 195302 50151 47914 2237 -2646 5442 -5340 10782 Bullish Feb 08, 2022 197948 44709 53254 -8545 13941 15112 52 15060 Weak bearish Feb 01, 2022 184007 29597 53202 -23605 1967 -7069 8773 -15842 Bearish Jan 25, 2022 182040 36666 44429 -7763 -1194 -3094 4422 -7516 Bearish         Total change 28635 7919 8009 -90     Figure 2: The GBP and COT positions of large speculators on a weekly chart and the GBPUSD on D1   The total net positions of speculators last week reached to -337 contracts, having increased by 5,472 contracts compared to the previous week. This change is due to an increase in long positions by 5,430 contracts and a decrease in short positions by 42 contracts. This suggests bearish sentiment, but it is weak as the total net positions of large speculators increased. Open interest, which rose by 23,426 contracts last week, means that the fall in the pound that occurred last week was supported by volume and is therefore strong. Risk off sentiment due to the war in Ukraine continues to weigh on the pound as well as the euro and therefore the pound is weakening strongly. Long-term resistance: 1.3270-1.3300.  Next resistance is near 1.3420 – 1.3440. The resistance is also in the zone 1.3490 – 1.3520. Support is near 1.3150 – 1.3200.     The Australian dollar   date Open Interest Specs Long Specs Short Specs Net positions change Open Interest change Long change Short change Net Positions Sentiment Mar 01, 2022 189667 12720 91056 -78336 -2912 1167 -4577 5744 Weak bearish Feb 22, 2022 192579 11553 95633 -84080 1 -139 -2753 2614 Weak bearish Feb 15, 2022 192578 11692 98386 -86694 -3825 -5631 -4678 -953 Bearish Feb 08, 2022 196403 17323 103064 -85741 -510 -1512 4400 -5912 Bearish Feb 01, 2022 196913 18835 98664 -79829 6893 3714 270 3444 Weak bearish Jan 25, 2022 190020 15121 98394 -83273 8884 6070 889 5181 Weak bearish         Total change 8531 3669 -6449 10118     Figure 3: The AUD and COT positions of large speculators on a weekly chart and the AUDUSD on D1   The total net positions of speculators last week reached to - 78,336 contracts, up by 5,744 contracts compared to the previous week. This change is due to an increase in long positions by 1,167 contracts and a decrease in short positions by 4,577 contracts. This data suggests a weakening of bearish sentiment in the Australian dollar. However, last week we saw a decline in open interest by 2,912 contracts. This means that the upward movement that occurred last week in the AUDUSD was weak because new money did not flow into the market. The Australian dollar has been strengthening strongly recently, which is explained by the rise in the prices of commodities that Australia exports. These commodities include coal, gas and gold.  Long-term resistance: 0.7520-0.7560                                                                                                              Long-term support: 0.7085-0.7120.  A strong support is near 0.6960 – 0.6990.   The New Zealand dollar   date Open Interest Specs Long Specs Short Specs Net positions change Open Interest change Long change Short change Net Positions Sentiment Mar 01, 2022 50389 10485 24657 -14172 -6247 -6858 -4237 -2621 Bearish Feb 22, 2022 56636 17343 28894 -11551 -7469 -7580 -5362 -2218 Bearish Feb 15, 2022 64105 24923 34256 -9333 9228 7755 6722 1033 Weak bearish Feb 08, 2022 54877 17168 27534 -10366 -3590 -2037 -3369 1332 Weak bearish Feb 01, 2022 58467 19205 30903 -11698 5151 3257 4182 -925 Bearish Jan 25, 2022 53316 15948 26721 -10773 8589 4336 6778 -2442 Bearish         Total change 5662 -1127 4714 -5841     Figure 4: The NZD and the position of large speculators on a weekly chart and the NZDUSD on D1     The total net positions of speculators last week reached a value of - 14,172 contracts, having fallen by 2,621 contracts compared to the previous week. This change is due to a decrease in long positions by 6,858 contracts and a decrease in short positions by 4,237 contracts. This data suggests that the bearish sentiment for the NZD continues. Last week, open interest fell significantly by 6,247 contracts. Therefore, the upward movement in the NZDUSD that occurred last week is not supported by volume and therefore the price action was weak. The strengthening of the NZDUSD that occurred last week is somewhat surprising given the geopolitical tensions in Ukraine and risk off sentiment. What helped the NZD rise are rising prices of commodities  such as milk, which New Zealand produces. Long-term resistance: 0.6850 – 0.6890 Long-term support: 0.6590-0.6600 and the next support is at 0.6500 – 0.6530.   Explanation to the COT report The COT report shows the positions of major participants in the futures markets. Futures contracts are derivatives and are essentially agreements between two parties to exchange an underlying asset for a predetermined price on a predetermined date. They are standardised, specifying the quality and quantity of the underlying asset. They are traded on an exchange so that the total volume of these contracts traded is known.   Open interest: open interest is the sum of all open futures contracts (i.e. the sum of short and long contracts) that exist on a given asset. OI increases when a new futures contract is created by pairing a buyer with a seller. The OI decreases when an existing futures contract expires at a given expiry time or by settlement. Low or no open interest means that there is no interest in the market. High open interest indicates high activity and traders pay attention to this market. A rising open interest indicates that there is demand for the currency. That is, a rising OI indicates a strong current trend. Conversely, a weakening open interest indicates that the current trend is not strong. Open Interest Price action Interpretation Notes Rising Rising Strong bullish market New money flow in the particular asset, more bulls entered the market which pushes the price up. The trend is strong. Rising Falling Strong bearish market Price falls, more bearish traders entered the market which pushes the price down. The trend is strong. Falling Rising Weak bullish market Price is going up but new money do not flow into the market. Existing futures contracts expire or are closed. The trend is weak. Falling Falling Weak bearish market Price is going down, but new money do not flow into the market. Existing futures expire or are closed, the trend is weak.   Large speculators are traders who trade large volumes of futures contracts, which, if the set limits are met, must be reported to the Commodity Futures Trading Commission. Typically, this includes traders such as funds or large banks. These traders mostly focus on trading long-term trends and their goal is to make money on speculation with the instrument. Traders should try to trade in the direction of these large speculators. The total net positions of large speculators are the difference between the number of long contracts and the number of short contracts of large speculators. Positive value shows that large speculators are net long. Negative value shows that large speculators are net short. The data is published every Friday and is delayed because it shows the status on Tuesday of the week. The total net positions of large speculators show the sentiment this group has in the market. A positive value of the total net positions of speculators indicates bullish sentiment, a negative value of total net positions indicates bearish sentiment. When interpreting charts and values, it is important to follow the overall trend of total net positions. The turning points are also very important, i.e. the moments when the total net positions go from a positive value to a negative one and vice versa. Important are also extreme values ​​of total net positions as they often serve as signals of a trend reversal. The COT data are usually reported every Friday and they show the status on Tuesday of the week. Sentiment according to the reported positions of large players in futures markets is not immediately reflected in the movement of currency pairs. Therefore, information on sentiment is more likely to be used by traders who take longer trades and are willing to hold their positions for several weeks or even months.
USDCAD Trades Higher, EURGBP Nears 0.83, S&P 500 (SPX) Fell A Little

USDCAD Trades Higher, EURGBP Nears 0.83, S&P 500 (SPX) Fell A Little

Jing Ren Jing Ren 08.03.2022 09:29
USDCAD breaks higher The US dollar bounces back as traders pile into safer currencies at the expense of commodity assets. The previous rally above the supply zone at 1.2800 has prompted sellers to cover. Then a follow-up pullback saw support over 1.2600, a sign of accumulation and traders’ strong interest in keeping the greenback afloat. A breakout above 1.2810 could pave the way for an extended rise to last December’s high at 1.2950, even though the RSI’s situation may briefly hold the bulls back. 1.2680 is a fresh support in case of a pullback. EURGBP bounces back The euro recoups losses as shorts cover ahead of the ECB meeting. The pair’s fall below the major floor (0.8280) on the daily chart further weighs on sentiment. The lack of support suggests that traders’ are wary of catching a falling knife. The RSI’s double-dip into the oversold area has led to profit-taking, driving the price up. However, the rally could turn out to be a dead cat bounce if the bears fade the rebound in the supply zone around 0.8360. 0.8200 is a fresh support when momentum comes back again. SPX 500 struggles to rebound The S&P 500 extended losses as investors are wary of a global economic downturn. On the daily chart, a brief rebound has met stiff selling pressure on the 30-day moving average (4410). In fact, this indicates that the bearish mood still dominates after the index fell through 4250. Buyers have failed to hold above 4230, leaving the market vulnerable to another round of sell-off. 4110 is the next stop and a bearish breakout could lead to the psychological level of 4000. 4320 is now the closest resistance ahead.
GBPUSD (Pound To US Dollar) Reaches Quite Old Levels

GBPUSD (Pound To US Dollar) Reaches Quite Old Levels

Alex Kuptsikevich Alex Kuptsikevich 08.03.2022 14:49
The British pound was down to a 16-month low at 1.3080 in the morning, having lost 2% last Thursday. The pressure on the British currency looks to be developing capital outflows from Europe on speculation that reduced energy and materials supplies from Russia will prove to be a shock to the region's economy in the near term. In addition, the British pound was probably influenced by technical factors yesterday and today. The single currency has been sharply oversold in recent days and the EURGBP approach of 0.8200 on Monday morning triggered a strong wave of buying, bringing the pair back above 0.8310. On Monday, the euro got visible support against a wide range of other currencies, from the Swiss franc to the New Zealand dollar. Interest in the euro was also supported on Tuesday by a rally in equities on EU plans to issue joint bonds. But these are also good fundamentals for the British currency, which often directly correlates to the stock market. Short-term, relatively strong oversold conditions in the British currency creates the potential for a technical bounce in the coming days and in the area of 1.30-1.31 to stop its decline, gaining strong buy support until the end of the week and further heading to 1.3350 by the end of the month.
S&P 500 (SPX) Plunges, Metals And Crude Oil Prices Go Up

S&P 500 (SPX) Plunges, Metals And Crude Oil Prices Go Up

Monica Kingsley Monica Kingsley 08.03.2022 15:41
S&P 500 indeed didn‘t reverse on Friday in earnest, and both tech and value sold off hard. Not much reason to be bullish thanks to credit markets performance either – the posture is very risk-off, and the rush to commodities goes on. With a little check yesterday on the high opening prices in crude oil and copper, but still. My favorite agrifoods picks of late, wheat and corn, are doing great, and the pressure within select base metals, is building up – such as (for understandable reasons) in nickel and aluminum. Look for more to come, especially there where supply is getting messed with (this doesn‘t concern copper to such a degree, explaining its tepid price gains). And I‘m not talking even the brightest spot, where I at the onset of 2022 announced that precious metals would be the great bullish surprise this year. Those who listened, are rocking and rolling – we‘re nowhere near the end of the profitable run! Crude oil is likely to consolidate prior steep gains, and could definitely continue spiking higher. Should it stay comfortably above $125 for months, that would lead to quite some demand destruction. Given that black gold acts as a „shadow Fed funds rate“, let‘s bring up yesterday‘s rate raising thoughts and other relevant snippets: (,,,) If TLT has a message to drive home after the latest Powell pronouncements, it‘s that the odds of a 50bp rate hike in Mar (virtual certainty less than two weeks ago, went down considerably) – it‘s almost a coin toss now, and as the FOMC time approaches, the Fed would probably grow more cautious (read dovish and not hawkish) in its assessments, no matter the commodities appreciation or supply chains status. Yes, neither of these, nor inflation is going away before the year‘s end – they are here to stay for a long time to come. Looking at the events of late, I have to dial back the stock market outlook when it comes to the degree of appreciation till 2022 is over – I wouldn‘t be surprised to see the S&P 500 to retreat slightly vs. the Jan 2022 open. Yes, not even the better 2H 2022 prospects would erase the preceding setback. Which stocks would do best then? Here are my key 4 tips – energy, materials, in general value, and smallcaps. But the true winners of the stagflationary period is of course going to be commodities and precious metals. And that‘s where the bulk of recent gains that I brought you, were concentrated in. More is to come, and it‘s gold and silver that are catching real fire here. Let‘s move right into the charts (all courtesy of www.stockcharts.com). S&P 500 and Nasdaq Outlook S&P 500 didn‘t do at all well yesterday, and signs of a short-term bottom are absent. It‘s entirely possible that the brief upswing that I was looking to be selling into to start the week, has been not merely postponed. Credit Markets HYG is clearly on the defensive, and TLT reassessing rate hike prospects – yet, long-dated Treasuries still declined. There is no appetite to buy bonds, and that confirms my thesis of lower lows to be made still in Mar. Gold, Silver and Miners Precious metals keep doing great, and will likely continue rising no matter what the dollar does – last three days‘ experience confirms that. This is more than mere flight to safety - I‘m looking for further price gains as the upleg has been measured and orderly so far. Crude Oil Crude oil‘s opening gap had been sold into, but we haven‘t seen a reversal yesterday. The upswing can continue, and it would happen on high volatility. I don‘t think we have seen the real spike just yet. Copper For all the above reasons, copper isn‘t rising as fast as other base metals (one of the key engines of commodities appreciation). The run is respectable, and not overheated. $5.00 would remain quite a tough nut to crack – for the time being. Bitcoin and Ethereum Cryptos haven‘t made up their mind yet, but one thing is sure – they aren‘t acting as a safe haven. Given the extent of retreat from Mar highs, it means I‘m looking for not too spectacular performance in the days ahead. Summary S&P 500 missed an opportunity to rise (even if just to open the week on a positive note), and its prospects for today aren‘t way too much brighter. It‘s that practically nothing is giving bullish signals for paper assets, and the market breadth has understandably deteriorated. The rush into precious metals, dollar and commodities remains on – these are the pockets of strength, lifting to a very modest and hidden degree Treasuries as well (these are however reassessing the hawkish Fed prospects) at a time when global growth downgrades are starting to arrive. Pretty serious figures, let me tell you. As I wrote yesterday, stocks may even undershoot prior Thursday‘s lows, but I‘m not looking for that to happen. The sentiment is very negative already, the yield curve keeps compressing, commodities are rising relentlessly, and all we got is a great inflation excuse / smoke screen. Inflation is always a monetary phenomenon, and supply chain disruptions and other geopolitical events can and do exacerbate that. Just having a look at the rising dollar when rate hike prospects are getting dialed back, tells the full risk-off story of the moment, further highlighted by the powder keg that precious metals are. And silver isn‘t yet outperforming copper, which is something I am looking for to change as we go by. Thank you for having read today‘s free analysis, which is available in full at my homesite. There, you can subscribe to the free Monica‘s Insider Club, which features real-time trade calls and intraday updates for all the five publications: Stock Trading Signals, Gold Trading Signals, Oil Trading Signals, Copper Trading Signals and Bitcoin Trading Signals.
EURUSD Rallies, GBPUSD Moves Up A Little, USOIL Goes Back To "Normal" (?) Levels

EURUSD Rallies, GBPUSD Moves Up A Little, USOIL Goes Back To "Normal" (?) Levels

Jing Ren Jing Ren 10.03.2022 08:43
EURUSD bounces back The euro rallies on news that the EU may issue a joint bond to fund energy and defense. The pair found bids near May 2020’s lows (1.0810). An oversold RSI on the daily chart prompted sellers to take profit, easing the downward pressure. A rally above the immediate resistance at 1.0940 and a bullish MA cross may improve sentiment in the short term. However, buyers will need to clear the support-turned-resistance at 1.1160 before they could hope for a meaningful rebound. 1.0910 is the support in case of a pullback. GBPUSD inches higher The sterling claws back losses as risk appetite makes a timid return across the board. Following a three-month-long rebound on the daily chart, a lack of support at 1.3200 and a bearish MA cross shows strong selling pressure. A bounce-back above 1.3200 may only offer temporary relief as sellers potentially look to fade the rebound. 1.3350 is a key hurdle that sits along the 20-day moving average. 1.3080 is fresh support and its breach could trigger a new round of sell-off below the next daily support at 1.2880. USOIL breaks support WTI crude tumbled after the UAE said consider boosting production. The parabolic climb came to a halt at 129.00 and pushed the RSI into an extremely overbought condition on the daily chart. A bearish RSI divergence suggested a loss of momentum and foreshadowed a correction as traders would be wary of chasing the rally. A fall below 115.00 led buyers to bail out, triggering a wave of liquidation. 105.00 is the next support and a breakout could bring the price back to 95.00 near the 30-day moving average.
Not Passing Smell Test

Not Passing Smell Test

Monica Kingsley Monica Kingsley 10.03.2022 16:01
S&P 500 tech driven upswing makes the advance a bit suspect, and prone to consolidation. I would have expected value to kick in to a much greater degree given the risk-on posture in the credit markets. The steep downswing in commodities and precious metals doesn‘t pass the smell test for me – just as there were little cracks in the dam warning of short-term vulnerability at the onset of yesterday, the same way there are signs of the resulting downswing being overdone now.And that has consequences for the multitude of open positions – the PMs and commodities super bull runs are on, and the geopolitics still support the notion of the next spike.Let‘s move right into the charts (all courtesy of www.stockcharts.com).S&P 500 and Nasdaq OutlookS&P 500 turned around, and the volume isn‘t raising too many eyebrows. However, the bulls should have tempered price appreciation expectations, to put it politely...Credit MarketsHYG turned around, but isn‘t entirely convincing yet. We saw an encouraging first step towards risk-on turn that requires that the moves continue, which is unlikely today – CPI is here, and unlikely to disappoint the inflationistas.Gold, Silver and MinersPrecious metals downswing looks clearly overdone, and I continue calling for a shallow, $1,980 - $2,000 range consolidation next. This gives you an idea not to expect steep silver discounts either. Miner are clear, and holding up nicely.Crude OilCrude oil downswing came, arguably way too steep one. Even oil stocks turned down in spite of the S&P 500 upswing, which is odd. I‘m looking for gradual reversal of yesterday‘s weakness in both.CopperCopper has made one of its odd moves on par with the late Jan long red candle one – I‘m looking for the weakness to be reversed, and not only in the red metal but within commodities as such.Bitcoin and EthereumCryptos are giving up yesterday‘s upswing – they are dialing back the risk-on turn and rush out of the safe havens of late.SummaryThe S&P 500 dog indeed just had its day, but the price appreciation prospects are not looking too bright for today. With attention turning to CPI, and yesterday‘s „hail mary decline aka I don‘t need you anymore“ in the safe havens of late (precious metals, crude oil, wheat, and the dollar to name just a few) getting proper scrutiny, I‘m looking for gradual return to strength in all things real (real assets) – it‘s my reasonable assumption that the markets won‘t get surprised by an overwhelmingly positive headline from Eastern Europe at this point. Focusing on the underlying fundamentals and charts, I don‘t think so we have seen the real asset tops – precious metals are likely to do great on the continued inflation turning into stagflation (GDP growth figures being downgraded), and commodities are set to further benefit from geopolitics (among much else).Thank you for having read today‘s free analysis, which is available in full at my homesite. There, you can subscribe to the free Monica‘s Insider Club, which features real-time trade calls and intraday updates for all the five publications: Stock Trading Signals, Gold Trading Signals, Oil Trading Signals, Copper Trading Signals and Bitcoin Trading Signals.
ECB Analysis: EUR/USD selling opportunity? Taper helps with inflation, full war shock still to come

ECB Analysis: EUR/USD selling opportunity? Taper helps with inflation, full war shock still to come

FXStreet News FXStreet News 10.03.2022 16:14
The ECB has announced a quick phasing out of bond buys, boosting the euro.Shoring up the currency helps the eurozone in the short term.The full impact of Russia's Ukraine invasion is still to come.ECB may refrain from rate hikes in 2022, bringing the euro down.Influenced by inflation, (almost) ignoring the war – the European Central Bank has announced a fast pace of tapering its bond-buying scheme as prices rise and despite the adverse effects of Russia's invasion of Ukraine. EUR/USD has jumped, but it may be premature. The ECB plans to buy some €40 billion worth of bonds in April, falling to €30 billion in May and €20 billion in June. That opens the door to raising interest rates already in the summer rather than in the autumn. While that would not be considered surprising after the previous decision, it seems hawkish given the war. After two weeks of fighting, the Frankfurt-based institution seems to focus on the surge in commodity prices coming from Russian President Vladimir Putin's "special operation." Russia is the world's third-largest oil producer and some 40% of European natural gas is sent on orders from Moscow. Ukraine and Russia are responsible for a substantial portion of global wheat exports, and port blockades are already felt in supermarkets.However, Russia's atrocities in a European country are pushing prices higher and destroying demand. A war on the doorstep of the eurozone is hitting confidence and also leaving consumers with less money to spend. Even if headline inflation rises, underlying prices may fall.ECB President Christine Lagarde promised decisions based on new forecasts presented in March, but these new projections may remain slient while the cannons are heard. The taper announcement serves to push the euro higher and somewhat squeeze the prices hikes coming from imports. However, that is nothing in comparison to the economic damage done by the war and the sanctions, and that may eventually haunt the common currency. It may come sooner than later, providing a selling-opportunity on EUR/USD now.
The War Is on for Two Weeks. How Does It Affect Gold?

The War Is on for Two Weeks. How Does It Affect Gold?

Arkadiusz Sieron Arkadiusz Sieron 10.03.2022 17:21
  With each day of the Russian invasion, gold confirms its status as the safe-haven asset. Its long-term outlook has become more bullish than before the war. Two weeks have passed since the Russian attack on Ukraine. Two weeks of the first full-scale war in Europe in the 21th century, something I still can’t believe is happening. Two weeks of completely senseless conflict between close Slavic nations, unleashed without any reasonable justification and only for the sake of Putin’s imperial dreams and his vision of Soviet Reunion. Two weeks of destruction, terror, and death that captured the souls of thousands of soldiers and hundreds of civilians, including dozens of children. Just yesterday, Russian forces bombed a maternity hospital in southern Ukraine. I used to be a fan of Russian literature and classic music (who doesn’t like Tolstoy or Tchaikovsky?), but the systematic bombing of civilian areas (and the use of thermobaric missiles) makes me doubt whether the Russians really belong to the family of civilized nations. Now, for the warzone report. The country’s capital and largest cities remain in the hands of the Ukrainians. Russian forces are drawing reserves, deploying conscript troops to Ukraine to replace great losses. They are still trying to encircle Kyiv. They are also strengthening their presence around the city of Mykolaiv in southern Ukraine. However, the Ukrainian army heroically holds back enemy attacks in all directions. The defense is so effective that the large Russian column north-west of Kyiv has made little progress in over a week, while Russian air activity has significantly decreased in recent days.   Implications for Gold How has the war, that has been going on for already two weeks, affected the gold market so far? Well, as the chart below shows, the military conflict was generally positive for the yellow metal, boosting its price from $1,905 to $1989, or about 4.4%. Please note that initially the price of gold jumped, only to decline after a while, and only then rallied, reaching almost $2,040 on Tuesday (March 8, 2022). However, the price has retreated since then, below the key level of $2,000. This is partially a normal correction after an impressive upward move. It’s also possible that the markets are starting to smell the end of the war. You see, Russian forces can’t break through the Ukrainian defense. They can continue besieging cities, but the continuation of the invasion entails significant costs, and Russia’s economy is already sinking. Hence, they can either escalate the conflict in a desperate attempt to conquer Kyiv – according to the White House, Russia could conduct a chemical or biological weapon attack in Ukraine – or try to negotiate the ceasefire. In recent days, the President of Ukraine, Volodymyr Zelensky, said he was open to a compromise with Russia. Today, the Russian and Ukrainian foreign ministers met in Turkey for the first time since the horror started (unfortunately, without any agreement). However, although gold prices may consolidate for a while or even fall if the prospects of the de-escalation increase, the long-term fundamentals have turned more bullish. As you can see in the chart below, the real interest rates decreased amid the prospects of higher inflation and slower economic growth. Russia and Ukraine are key exporters of many commodities, including oil, which would increase the production costs and bring us closer to stagflation. What’s next, risk aversion increased significantly, which is supportive of safe-haven assets such as gold. After all, Putin’s decision to invade Ukraine is a turning point in modern history, which ends a period of civilized relations with Russia and relative safety in the world. Although Russia’s army discredited itself in Ukraine, the country still has nuclear weapons able to destroy the globe. As you can see in the chart below, both the credit spreads (represented here by the ICE BofA US High Yield Index Option-Adjusted Spread) and the CBOE volatility index (also called “the fear index”) rose considerably in the last two weeks. Hence, the long-term outlook for gold is more bullish than before the invasion. The short-term future is more uncertain, as there might be periods of consolidation and even corrections if the conflict de-escalates or ends. However, given the lack of any decisions during today’s talks between Ukrainian and Russian foreign ministers and the continuation of the military actions, gold may rally further. If you enjoyed today’s free gold report, we invite you to check out our premium services. We provide much more detailed fundamental analyses of the gold market in our monthly Gold Market Overview reports and we provide daily Gold & Silver Trading Alerts with clear buy and sell signals. In order to enjoy our gold analyses in their full scope, we invite you to subscribe today. If you’re not ready to subscribe yet though and are not on our gold mailing list yet, we urge you to sign up. It’s free and if you don’t like it, you can easily unsubscribe. Sign up today! Arkadiusz Sieron, PhDSunshine Profits: Effective Investment through Diligence & Care
Crypto Update: Bitcoin Price Has Decreased By 1%, ETH Hasn't Fluctuate Much. XRP Has Gone Up By 1.6%

Crypto Update: Bitcoin Price Has Decreased By 1%, ETH Hasn't Fluctuate Much. XRP Has Gone Up By 1.6%

Alex Kuptsikevich Alex Kuptsikevich 11.03.2022 08:37
Bitcoin fell 5.4% on Thursday, ending the day near $39.6K, and further to $38.9K on Friday morning, down 1% in 24 hours. Ethereum has remained almost unchanged over the same time (-0.3%), while other leading altcoins from the first are changing in different directions, from a 1.6% increase (XRP) to a 1% decrease (BNB). According to CoinMarketCap, the total capitalization of the crypto market sank by 0.2% over the day to $1.74 trillion. The bitcoin dominance index continues to decline, falling from 42.7% yesterday to 42.4% due to the greater stability of altcoins. The crypto-currency index of fear and greed lost 6 points in a day to 22, again entering the territory of "extreme fear". Bitcoin fully returned the growth of Wednesday, which was caused by the adoption in the United States of the first document on the regulation of cryptocurrencies. The decline in stock indices and the growth of the dollar also did not favour the purchases of the first cryptocurrency, which often moves in unison with the general demand for risks. The first decree on cryptocurrencies signed the day before can become the basis for future US legislation on regulating relations in the crypto sphere. Against this background, the shares of companies associated with cryptocurrencies have noticeably risen in price. One of the largest investment banks, Goldman Sachs, is going to expand its offering for trading digital assets. The bank is exploring the possibility of launching bilateral crypto-currency options. World-famous investor and writer Robert Kiyosaki has warned that the world economy is now on the verge of hyperinflation and advised to "stay away" from the stock market. Against the backdrop of a severe crisis in the financial system of the Russian Federation and restrictions imposed on the circulation of the dollar and the euro, the demand of the population for cryptocurrency has increased sharply. Now it is primarily used for the transfer of capital abroad or for parking in "hard" currency. Analysts believe that regulators are unlikely to be able to effectively prevent such transactions. But the state is helped by crypto-exchanges, which block the Russians on their own initiative. There remain the possibilities of p2p platforms, that is, transfers between individuals. However, there are significant risks of fraud associated with such transactions.
Now, That‘s Better

Now, That‘s Better

Monica Kingsley Monica Kingsley 11.03.2022 15:59
S&P 500 gave up the opening gains, but managed to close on a good note, in spite of credit markets not confirming. Given though the high volume characterizing HYG downswing and retreating crude oil, we may be in for a stock market led rebound today. It‘s that finally, value did much better yesterday than tech.CPI came red hot, but didn‘t beat expectations, yield curve remains flat as a pancake, and the commodity index didn‘t sell off too hard. It remains to be seen whether the miners‘ strength was for real or not – anyway, the yesterday discussed shallow $1,980 - $2,000 range consolidation still remains the most likely scenario. I just don‘t see PMs and commodities giving up a lion‘s share of the post Feb 24 gains next.Let‘s move right into the charts (all courtesy of www.stockcharts.com).S&P 500 and Nasdaq OutlookS&P 500 can still turn around, and the odds of doing so successfully (till the closing bell today), have increased yesterday. The diminished volume points to no more sellers at this point while buyers are waiting on the sidelines.Credit MarketsHYG has only marginally closed below Tuesday‘s lows – corporate junk bonds can reverse higher without overcoming Wednesday‘s highs fast, which would still be constructive for a modest S&P 500 upswing.Gold, Silver and MinersPrecious metals are indeed refusing to swing lower too much – the sector remains excellently positioned for further gains. For now though, we‘re in a soft patch where the speculative fever is slowly coming out, including out of other commodities. Enter oil.Crude OilCrude oil still remains vulnerable, but would catch a bid quite fast here. Ideally, black gold wouldn‘t break down into the $105 - $100 zone next. I‘m looking for resilience kicking in soon.CopperCopper fake weakness is being reversed, and the red metal is well positioned not to break below Wednesday‘s lows. I‘m not looking for selloff continuation in the CRB Index either.Bitcoin and EthereumCryptos remain undecided, and erring on the side of caution – this highlights that the risk appetite‘s return is far from universal.SummaryS&P 500 missed a good opportunity yesterday, but the short-term bullish case isn‘t lost. Stocks actually outperformed credit markets, and given the commodities respite and value doing well, bonds may very well join in the upswing, with a notable hesitation though. That wouldn‘t be a short-term obstacle, take it as the bulls temporarily overpowering the bears – I still think that the selling isn‘t over, and that the downswing would return in the latter half of Mar if (and that‘s a big if) the Fed‘s response to inflation doesn‘t underwhelm the market expectations that have been dialed back considerably over the last two weeks. Token 25bp rate hike, anyone? That wouldn‘t sink stocks dramatically...Thank you for having read today‘s free analysis, which is available in full at my homesite. There, you can subscribe to the free Monica‘s Insider Club, which features real-time trade calls and intraday updates for all the five publications: Stock Trading Signals, Gold Trading Signals, Oil Trading Signals, Copper Trading Signals and Bitcoin Trading Signals.
Natural Gas: When A Trade Plan Provides Consecutive Wins

Natural Gas: When A Trade Plan Provides Consecutive Wins

Finance Press Release Finance Press Release 11.03.2022 16:24
From time to time, we may want to consider volatility as an ally. After all, why would highly volatile markets necessarily mean more losing trades?The first target was hit – BOOM! Today – just before the weekend – it is time to bank some profits from my recent trade projections (provided on March 2). Since then, the trade plan has provided our dear subscribers with multiple bounces to trade the NYMEX Natural Gas Futures (April contract) in various ways, always depending on each one’s personal risk profile.The first possibility is the swing trading with trailing stop method explained in my famous risk management article.Trade entry triggered on Tuesday, March 8 (firm rebound on yellow band), stop lifted once price extends beyond mid-point (median) price between first target and entry, thus ending at $4.607 (black dotted line), given the market closed at its daily high of $4.704 (purple dotted line) that same day and assuming you entered that long trade at $4.550 (top of the yellow band). That was a quick one that lasted only a couple hours for the day traders who closed their trades at the regular market close (two candles later, see below chart). For the swing traders, the win-stop was triggered the next day (Wednesday) on the following pull-back. Henry Hub Natural Gas (NGJ22) Futures (April contract, hourly chart)The second option is to scale the rebounds with fixed targets (active or experienced traders).This method consists of “riding the tails” (or the shadows). To get a better grasp of this concept, let’s zoom out on a 4H-chart so you can see the multiple rebounds of the price characterized by the shadows (or tails) of candlesticks, where a crowd of bulls are placing buy orders around that yellow support zone, therefore squeezing bears by pushing prices towards the upside (like some sort of rope pulling game). This trading style often requires stops to be tighter with some profit-to-risk ratio greater than 1.5 (with usually fixed targets). Henry Hub Natural Gas (NGJ22) Futures (April contract, 4H chart)Third possibility: position trading. This is probably the most passive trading style, as it would suit everyone’s busy timetable (and be the most rewarding). This is usually the one we privilege at Sunshine Profits since it allows us to provide trade projections some time in advance for our patient sniper traders to lock in their trading targets and take sufficient time to assess the associated risk with each projection as part of a full trade plan (or flying map).Let’s zoom out again to spot our first target getting hit today on a daily chart so we can have an overall view of the next target to be locked in while lifting our stop to breakeven (entry), previous swing low ($4.450) or using an Average True Range (ATR) ratio as some of you may like to use:Henry Hub Natural Gas (NGJ22) Futures (April contract, daily chart)That’s all folks for today. Have a great weekend!Like what you’ve read? Subscribe for our daily newsletter today, and you'll get 7 days of FREE access to our premium daily Oil Trading Alerts as well as our other Alerts. Sign up for the free newsletter today!Thank you.Sebastien BischeriOil & Gas Trading Strategist* * * * *The information above represents analyses and opinions of Sebastien Bischeri, & Sunshine Profits' associates only. As such, it may prove wrong and be subject to change without notice. At the time of writing, we base our opinions and analyses on facts and data sourced from respective essays and their authors. Although formed on top of careful research and reputably accurate sources, Sebastien Bischeri and his associates cannot guarantee the reported data's accuracy and thoroughness. The opinions published above neither recommend nor offer any securities transaction. Mr. Bischeri is not a Registered Securities Advisor. By reading Sebastien Bischeri’s reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Sebastien Bischeri, Sunshine Profits' employees, affiliates as well as their family members may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.
COT Currency Speculators boost Mexican Peso bullish bets to 104-week high

COT Currency Speculators boost Mexican Peso bullish bets to 104-week high

Invest Macro Invest Macro 12.03.2022 22:20
By InvestMacro | COT | Data Tables | COT Leaders | Downloads | COT Newsletter Here are the latest charts and statistics for the Commitment of Traders (COT) data published by the Commodities Futures Trading Commission (CFTC). The latest COT data is updated through Tuesday March 8th and shows a quick view of how large traders (for-profit speculators and commercial entities) were positioned in the futures markets. All currency positions are in direct relation to the US dollar where, for example, a bet for the euro is a bet that the euro will rise versus the dollar while a bet against the euro will be a bet that the euro will decline versus the dollar. Highlighting the COT currency data is the rising bullish sentiment in the Mexican Peso currency futures contracts. Peso speculators have boosted their bullish bets for six consecutive weeks and in nine out of the past ten weeks. Over the past six-week time-frame, Peso bets have gained by a total of +53.807 contracts, going from -790 net positions on January 25th to +53,017 net positions this week. This recent improvement in Peso positioning pushed the current net speculator standing (+53,017 contracts) to the most bullish level in the past one hundred and four weeks, dating back to March 10th of 2020. Joining the Mexican peso (10,639 contracts) with positive changes this week were the Japanese yen (12,876 contracts), Brazil real (48 contracts), Swiss franc (5,538 contracts), New Zealand dollar (1,793 contracts), Australian dollar (141 contracts) and Bitcoin (185 contracts). The currencies with declining bets were the US Dollar Index (-730 contracts), Euro (-6,095 contracts), British pound sterling (-12,189 contracts), Canadian dollar (-6,494 contracts) and the Russian ruble (-1,868 contracts). Data Snapshot of Forex Market Traders | Columns Legend Mar-08-2022 OI OI-Index Spec-Net Spec-Index Com-Net COM-Index Smalls-Net Smalls-Index USD Index 62,447 95 34,044 85 -37,890 12 3,846 59 EUR 738,990 98 58,844 53 -83,873 52 25,029 16 GBP 246,312 68 -12,526 65 25,457 45 -12,931 29 JPY 208,683 61 -55,856 33 76,657 74 -20,801 5 CHF 51,820 30 -9,710 53 21,942 56 -12,232 27 CAD 149,425 30 7,646 55 -15,494 46 7,848 45 AUD 197,094 80 -78,195 12 78,183 77 12 52 NZD 53,250 50 -12,379 50 13,592 51 -1,213 38 MXN 166,433 34 53,017 50 -55,194 50 2,177 52 RUB 22,420 7 7,806 32 -7,325 69 -481 22 BRL 68,623 65 50,496 100 -52,564 0 2,068 90 Bitcoin 9,591 48 265 100 -422 0 157 17   US Dollar Index Futures: The US Dollar Index large speculator standing this week totaled a net position of 34,044 contracts in the data reported through Tuesday. This was a weekly decrease of -730 contracts from the previous week which had a total of 34,774 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish-Extreme with a score of 84.5 percent. The commercials are Bearish-Extreme with a score of 11.6 percent and the small traders (not shown in chart) are Bullish with a score of 58.6 percent. US DOLLAR INDEX Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 73.7 12.8 9.0 – Percent of Open Interest Shorts: 19.2 73.4 2.9 – Net Position: 34,044 -37,890 3,846 – Gross Longs: 46,031 7,962 5,642 – Gross Shorts: 11,987 45,852 1,796 – Long to Short Ratio: 3.8 to 1 0.2 to 1 3.1 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 84.5 11.6 58.6 – Strength Index Reading (3 Year Range): Bullish-Extreme Bearish-Extreme Bullish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: -4.9 7.7 -19.7   Euro Currency Futures: The Euro Currency large speculator standing this week totaled a net position of 58,844 contracts in the data reported through Tuesday. This was a weekly decline of -6,095 contracts from the previous week which had a total of 64,939 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish with a score of 53.1 percent. The commercials are Bullish with a score of 52.0 percent and the small traders (not shown in chart) are Bearish-Extreme with a score of 15.9 percent. EURO Currency Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 32.8 52.3 11.6 – Percent of Open Interest Shorts: 24.9 63.7 8.2 – Net Position: 58,844 -83,873 25,029 – Gross Longs: 242,683 386,654 85,727 – Gross Shorts: 183,839 470,527 60,698 – Long to Short Ratio: 1.3 to 1 0.8 to 1 1.4 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 53.1 52.0 15.9 – Strength Index Reading (3 Year Range): Bullish Bullish Bearish-Extreme NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: 8.4 -7.8 0.5   British Pound Sterling Futures: The British Pound Sterling large speculator standing this week totaled a net position of -12,526 contracts in the data reported through Tuesday. This was a weekly decrease of -12,189 contracts from the previous week which had a total of -337 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish with a score of 65.0 percent. The commercials are Bearish with a score of 44.7 percent and the small traders (not shown in chart) are Bearish with a score of 28.9 percent. BRITISH POUND Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 20.7 66.8 9.4 – Percent of Open Interest Shorts: 25.8 56.4 14.6 – Net Position: -12,526 25,457 -12,931 – Gross Longs: 50,982 164,423 23,076 – Gross Shorts: 63,508 138,966 36,007 – Long to Short Ratio: 0.8 to 1 1.2 to 1 0.6 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 65.0 44.7 28.9 – Strength Index Reading (3 Year Range): Bullish Bearish Bearish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: -3.4 5.1 -8.0   Japanese Yen Futures: The Japanese Yen large speculator standing this week totaled a net position of -55,856 contracts in the data reported through Tuesday. This was a weekly boost of 12,876 contracts from the previous week which had a total of -68,732 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 32.7 percent. The commercials are Bullish with a score of 74.3 percent and the small traders (not shown in chart) are Bearish-Extreme with a score of 4.8 percent. JAPANESE YEN Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 7.5 81.6 8.1 – Percent of Open Interest Shorts: 34.2 44.9 18.1 – Net Position: -55,856 76,657 -20,801 – Gross Longs: 15,548 170,330 16,884 – Gross Shorts: 71,404 93,673 37,685 – Long to Short Ratio: 0.2 to 1 1.8 to 1 0.4 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 32.7 74.3 4.8 – Strength Index Reading (3 Year Range): Bearish Bullish Bearish-Extreme NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: 7.9 -3.1 -13.5   Swiss Franc Futures: The Swiss Franc large speculator standing this week totaled a net position of -9,710 contracts in the data reported through Tuesday. This was a weekly boost of 5,538 contracts from the previous week which had a total of -15,248 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish with a score of 53.0 percent. The commercials are Bullish with a score of 55.5 percent and the small traders (not shown in chart) are Bearish with a score of 27.4 percent. SWISS FRANC Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 9.4 70.7 17.3 – Percent of Open Interest Shorts: 28.1 28.4 40.9 – Net Position: -9,710 21,942 -12,232 – Gross Longs: 4,856 36,635 8,947 – Gross Shorts: 14,566 14,693 21,179 – Long to Short Ratio: 0.3 to 1 2.5 to 1 0.4 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 53.0 55.5 27.4 – Strength Index Reading (3 Year Range): Bullish Bullish Bearish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: -1.6 9.6 -22.1   Canadian Dollar Futures: The Canadian Dollar large speculator standing this week totaled a net position of 7,646 contracts in the data reported through Tuesday. This was a weekly fall of -6,494 contracts from the previous week which had a total of 14,140 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish with a score of 55.1 percent. The commercials are Bearish with a score of 46.4 percent and the small traders (not shown in chart) are Bearish with a score of 45.4 percent. CANADIAN DOLLAR Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 32.5 41.7 22.7 – Percent of Open Interest Shorts: 27.3 52.1 17.5 – Net Position: 7,646 -15,494 7,848 – Gross Longs: 48,492 62,360 33,951 – Gross Shorts: 40,846 77,854 26,103 – Long to Short Ratio: 1.2 to 1 0.8 to 1 1.3 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 55.1 46.4 45.4 – Strength Index Reading (3 Year Range): Bullish Bearish Bearish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: -4.5 2.8 1.2   Australian Dollar Futures: The Australian Dollar large speculator standing this week totaled a net position of -78,195 contracts in the data reported through Tuesday. This was a weekly advance of 141 contracts from the previous week which had a total of -78,336 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish-Extreme with a score of 12.3 percent. The commercials are Bullish with a score of 77.2 percent and the small traders (not shown in chart) are Bullish with a score of 52.5 percent. AUSTRALIAN DOLLAR Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 9.9 74.1 13.0 – Percent of Open Interest Shorts: 49.6 34.5 13.0 – Net Position: -78,195 78,183 12 – Gross Longs: 19,521 146,144 25,564 – Gross Shorts: 97,716 67,961 25,552 – Long to Short Ratio: 0.2 to 1 2.2 to 1 1.0 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 12.3 77.2 52.5 – Strength Index Reading (3 Year Range): Bearish-Extreme Bullish Bullish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: 4.7 -14.6 35.3   New Zealand Dollar Futures: The New Zealand Dollar large speculator standing this week totaled a net position of -12,379 contracts in the data reported through Tuesday. This was a weekly rise of 1,793 contracts from the previous week which had a total of -14,172 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish with a score of 50.5 percent. The commercials are Bullish with a score of 51.3 percent and the small traders (not shown in chart) are Bearish with a score of 37.9 percent. NEW ZEALAND DOLLAR Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 29.6 62.0 5.2 – Percent of Open Interest Shorts: 52.9 36.5 7.5 – Net Position: -12,379 13,592 -1,213 – Gross Longs: 15,775 33,005 2,792 – Gross Shorts: 28,154 19,413 4,005 – Long to Short Ratio: 0.6 to 1 1.7 to 1 0.7 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 50.5 51.3 37.9 – Strength Index Reading (3 Year Range): Bullish Bullish Bearish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: -2.7 0.5 14.8   Mexican Peso Futures: The Mexican Peso large speculator standing this week totaled a net position of 53,017 contracts in the data reported through Tuesday. This was a weekly lift of 10,639 contracts from the previous week which had a total of 42,378 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 50.0 percent. The commercials are Bearish with a score of 49.8 percent and the small traders (not shown in chart) are Bullish with a score of 52.3 percent. MEXICAN PESO Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 45.7 36.4 3.4 – Percent of Open Interest Shorts: 13.8 69.5 2.1 – Net Position: 53,017 -55,194 2,177 – Gross Longs: 76,020 60,537 5,674 – Gross Shorts: 23,003 115,731 3,497 – Long to Short Ratio: 3.3 to 1 0.5 to 1 1.6 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 50.0 49.8 52.3 – Strength Index Reading (3 Year Range): Bearish Bearish Bullish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: 22.9 -22.4 -0.4   Brazilian Real Futures: The Brazilian Real large speculator standing this week totaled a net position of 50,496 contracts in the data reported through Tuesday. This was a weekly lift of 48 contracts from the previous week which had a total of 50,448 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish-Extreme with a score of 100.0 percent. The commercials are Bearish-Extreme with a score of 0.0 percent and the small traders (not shown in chart) are Bullish-Extreme with a score of 90.3 percent. BRAZIL REAL Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 79.5 15.3 5.1 – Percent of Open Interest Shorts: 5.9 91.9 2.1 – Net Position: 50,496 -52,564 2,068 – Gross Longs: 54,543 10,468 3,488 – Gross Shorts: 4,047 63,032 1,420 – Long to Short Ratio: 13.5 to 1 0.2 to 1 2.5 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 100.0 0.0 90.3 – Strength Index Reading (3 Year Range): Bullish-Extreme Bearish-Extreme Bullish-Extreme NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: 62.0 -62.3 8.4   Russian Ruble Futures: The Russian Ruble large speculator standing this week totaled a net position of 7,806 contracts in the data reported through Tuesday. This was a weekly fall of -1,868 contracts from the previous week which had a total of 9,674 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 31.9 percent. The commercials are Bullish with a score of 68.7 percent and the small traders (not shown in chart) are Bearish with a score of 21.5 percent. RUSSIAN RUBLE Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 36.5 60.6 2.9 – Percent of Open Interest Shorts: 1.6 93.3 5.1 – Net Position: 7,806 -7,325 -481 – Gross Longs: 8,173 13,590 657 – Gross Shorts: 367 20,915 1,138 – Long to Short Ratio: 22.3 to 1 0.6 to 1 0.6 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 31.9 68.7 21.5 – Strength Index Reading (3 Year Range): Bearish Bullish Bearish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: 9.1 -7.0 -22.4   Bitcoin Futures: The Bitcoin large speculator standing this week totaled a net position of 265 contracts in the data reported through Tuesday. This was a weekly gain of 185 contracts from the previous week which had a total of 80 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish-Extreme with a score of 100.0 percent. The commercials are Bearish-Extreme with a score of 7.6 percent and the small traders (not shown in chart) are Bearish-Extreme with a score of 16.5 percent. BITCOIN Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 80.9 2.8 9.9 – Percent of Open Interest Shorts: 78.1 7.2 8.3 – Net Position: 265 -422 157 – Gross Longs: 7,760 272 950 – Gross Shorts: 7,495 694 793 – Long to Short Ratio: 1.0 to 1 0.4 to 1 1.2 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 100.0 7.6 16.5 – Strength Index Reading (3 Year Range): Bullish-Extreme Bearish-Extreme Bearish-Extreme NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: 6.4 4.5 -8.1   Article By InvestMacro – Receive our weekly COT Reports by Email *COT Report: The COT data, released weekly to the public each Friday, is updated through the most recent Tuesday (data is 3 days old) and shows a quick view of how large speculators or non-commercials (for-profit traders) were positioned in the futures markets. The CFTC categorizes trader positions according to commercial hedgers (traders who use futures contracts for hedging as part of the business), non-commercials (large traders who speculate to realize trading profits) and nonreportable traders (usually small traders/speculators) as well as their open interest (contracts open in the market at time of reporting).See CFTC criteria here.
Intraday Market Analysis – The Canadian Dollar Recovers

Intraday Market Analysis – The Canadian Dollar Recovers

Jing Ren Jing Ren 14.03.2022 07:50
USDCAD struggles for supportThe Canadian dollar surged after a sharp drop in February’s unemployment rate. A break above the recent peak at 1.2875 has consolidated the US dollar’s lead.The RSI’s repeatedly overbought condition has led to some profit-taking. As the indicator swung into the oversold area, a pullback attracted bargain hunters in the demand zone between 61.8% (1.2700) Fibonacci retracement level and 1.2680.A rally above 1.2840 may resume the rally and send the pair to December’s high at 1.2960.EURJPY attempts reversalThe euro continues upward after the ECB left the door open to an interest rate hike. A pop above 128.60 has prompted sellers to reconsider their bets.However, traders can expect strong bearish pressure in the supply zone around 129.20. This level overlays with the 20-day moving average, making it a congestion area.An overbought RSI has tempered the initial comeback and the bulls need to consolidate their positions before they could push further. 126.50 is key support and 124.40 a second line of defense to keep the pair afloat.UK 100 bounces backThe FTSE 100 recoups losses as Britain’s GDP beat expectations in January. The rebound has gained traction after it broke above 7200.After a brief pause, the index met buying interest over 7050 and a bullish MA cross indicates an acceleration to the upside. Sentiment remains cautious from the daily chart perspective though and the bears could be waiting to sell into strength.7450 at the origin of the latest sell-off is a major hurdle as its breach could turn the mood around. Otherwise, there could be a revision of 6800 soon.
Are Current Market Cycles Similar To The GFC Of 2007–2009?

Are Current Market Cycles Similar To The GFC Of 2007–2009?

Chris Vermeulen Chris Vermeulen 14.03.2022 16:14
Soaring real estate, rising volatility, surging commodities and slumping stocks - Sound Familiar?This past week marked the 13th anniversary of the bottom of the Global Financial Crisis (GFC) of 2007-2009. The March 6, 2009 stock market low for the S&P 500 marked a staggering overall value loss of 51.9%.The GFC of 2007-09 resulted from excessive risk-taking by global financial institutions, which resulted in the bursting of the housing market bubble. This, in turn, led to a vast collapse of mortgage-back securities resulting in a dramatic worldwide financial reset.Sign up for my free trading newsletter so you don’t miss the next opportunity! IS HISTORY REPEATING ITSELF?The following graph shows us that precious metals and energy outperform the stock market as the ‘Bull’ cycle reaches its maturity. The stock market is always the first to lead, the second being the economy, and the third, being the commodity markets. But history has shown that commodity markets can move up substantially as the stock market ‘Bull’ runs out of steam.The current commodities rally in Gold began August 2021, Crude Oil April 2020, and Wheat in January 2022. Interestingly we started seeing capital outflows in the SPY-SPDR S&P 500 Trust ETF in early January 2022, and the DRN-Direxion Daily Real Estate Bull 3x Shares ETF starting back in late December 2021.LET’S SEE WHAT HAPPENED TO THE STOCK AND COMMODITY MARKETS IN 2007-2008SPY - SPDR S&P 500 TRUST ETFFrom August 17, 2007 to July 3, 2008: SPDR S&P 500 ETF Trust depreciated -20.12%The State Street Corporation designed SPY for investors who want a cost-effective and convenient way to invest in the price and yield performance of the S&P 500 Stock Index. According to State Street’s website www.ssga.com, the Benchmark, the S&P 500 Index, comprises selected stocks from five hundred (500) issuers, all of which are listed on national stock exchanges and span over approximately 24 separate industry groups.DBC – INVESCO DB COMMODITY INDEX TRACING FUND ETFFrom August 17 2007 to July 3, 2008: Invesco DB Commodity Index Tracking Fund appreciated +96.81%Invesco designed DBC for investors who want a cost-effective and convenient way to invest in commodity futures. According to Invesco’s website www.invesco.com, the Index is a rules-based index composed of futures contracts on 14 of the most heavily traded and important physical commodities in the world.BE ALERT: THE US FEDERAL RESERVE POLICY MEETING IS THIS WEEK!In February, the inflation rate rose to 7.9% as food and energy costs pushed prices to their highest level in more than 40 years. If we exclude food and energy, core inflation still rose 6.4%, which was the highest since August 1982. Gasoline, groceries, and housing were the most significant contributors to the CPI gain. The consumer price index is the price of a weighted average market basket of consumer goods and services purchased by households.The FED was expected to raise interest rates by as much as 50 basis points at its policy meeting this week, March 15-16. However, given the recent world events of the Russia – Ukraine war in Europe, the FED may decide to be more cautious and raise rates by only 25 basis points.HOW WILL RISING INTEREST RATES AFFECT THE STOCK MARKET?As interest rates rise, the cost of borrowing becomes more expensive. Rising interest rates tend to affect the market immediately, while it may take about 9-12 months for the rest of the economy to see any widespread impact. Higher interest rates are generally negative for stocks, with the exception of the financial sector.WILL RISING INTEREST RATES BURST OUR HOUSING BUBBLE?It is too soon to tell exactly what the impact of rising interest rates will be regarding housing. It is worth noting that in a thriving economy, consumers continue buying. However, in our current economy, where the consumers' monthly payment is not keeping up with the price of gasoline and food, it is more likely to experience a leveling off of residential prices or even the risk of a 2007-2009 repeat of price depreciation.THE POTENTIAL FOR OUTSIZED GAINS IN A BEAR MARKET ARE 7X GREATER THAN A BULL MARKET!The average bull market lasts 2.7 years. From the March low of 2009, the current bull market has established a new record as the longest-running bull market at 12 years and nine months. The average bear market lasts just under ten months, while a few have lasted for several years. It is worth noting that bear markets tend to fall 7x faster than bull markets go up. Bear markets also reflect elevated levels of volatility and investor emotions which contribute significantly to the velocity of the market drop.WHAT STRATEGIES CAN HELP YOU NAVIGATE CURRENT MARKET TRENDS?Learn how I use specific tools to help me understand price cycles, set-ups, and price target levels in various sectors to identify strategic entry and exit points for trades. Over the next 12 to 24 months, I expect very large price swings in the US stock market and other asset classes across the globe. I believe we are seeing the markets beginning to transition away from the continued central bank support rally phase and have started a revaluation phase as global traders attempt to identify the next big trends. Precious Metals will likely start to act as a proper hedge as caution and concern start to drive traders/investors into metals, commodities, and other safe havens.IT'S TIME TO GET PREPARED FOR THE COMING STORM; UNDERSTAND HOW TO NAVIGATE THESE TYPES OF MARKETS!I invite you to learn more about how my three Technical Trading Strategies can help you protect and grow your wealth in any type of market condition by clicking on the following link: www.TheTechnicalTraders.com
The Swing Overview – Week 10 2022

The Swing Overview – Week 10 2022

Purple Trading Purple Trading 14.03.2022 15:05
The Swing Overview – Week 10 The war in Ukraine has been going on for more than two weeks and there is no end in sight. However, the markets seem to have started to adapt to the new situation and the decline in the indices has stopped. Meanwhile, inflation in the Czech Republic rose to 11.1% and the ECB left rates unchanged as expected. There is extreme volatility in oil. After reaching 2008 price levels there has been a larger correction. The conflict in Ukraine   The high-profile meeting between Russian Foreign Minister Lavrov and his Ukrainian counterpart Kuleba did not bring a solution to end the war.  Russia continues to expect Ukraine to recognise Crimea as part of Russia, to recognise the independence of republics declared by pro-Russian separatists in eastern Ukraine, and not to join NATO. Kuleba commented that Ukraine will not surrender. So, unfortunately, the war continues.   The sanctions, which have caused the Russian economy a shock and which are being extended, should help to end the war. The US announced that it stopped taking Russian oil. However, European leaders have not agreed to stop taking Russian energy because of their current dependence on it. As a lesson from this war, the EU is preparing a plan to stop taking Russian gas by 2027.   Meanwhile, the markets have calmed down a bit and although a resolution to the conflict is nowhere in sight, the markets seem to have come to accept the war as a regional issue that will have a negative but limited impact on global economic growth. This can be seen in US 10-year bond rates, which have started to rise again.   Figure 1: 10-year government bond yield on the 4H chart and USD index on the daily chart   The US inflation at highest levels in 40 years Annual inflation in the US for February was 7.9%, the highest since January 1982. The biggest contributor to inflation is energy, which saw inflation reaching 25.6%, while gasoline prices were up 38%. These figures do not include recent developments in Europe. Continued supply-side logistics problems and strong demand, together with a tight labour market mean that higher inflation will last for a longer period. Figure 2: The inflation in the US   Next week, the US Fed will meet to respond to rising inflation. Interest rates are generally expected to rise by at least 0.25%.    The SP500 index Long-term investors in the SP 500 index track an indicator of the number of companies whose stock prices are above the 50-day average. Figure 3: The SP 500 Index and an indicator of the number of companies in the SP 500 Index above the 50-day moving average   This indicator has recently fallen to a value of 20. In the past, as the figure shows, reaching a value of 20 was mostly followed by an increase in the index. It is therefore likely that investors will now start buying the shares. Amazon shares gained significantly after the company announced a 20:1 stock split. The stock can thus be afforded by more retail investors. As for the current trend in the SP 500 index, it has been moving down recently. This may be a correction to the overall uptrend shown in Figure 3. In Figure 4 we have a short-term view.     Figure 4: SP 500 on H4 and D1 chart   From a technical analysis perspective, the moving averages suggest that the index is moving down. Investor interest in buying a dip has slowed this decline, which can be seen on the H4 chart where a higher low has formed.  Support is at 4,140 - 4,152. Resistance is at 4,288 - 4,300. The next resistance is at 4,385 - 4,415. The moving averages also serve as resistance.   The inflation in the Czech Republic has surpassed 11% Annual inflation in the Czech Republic for February 2022 was 11.1% (9.9% in January), higher than market expectations (10.3% was expected). This is the highest inflation in the Czech Republic since 1998. The largest contributors to inflation are housing (16%), electricity (22.6%) and gas (28.3%). This figure is likely to force the CNB to raise rates further. The Czech koruna has stalled against the euro at resistance around 25.80 - 25.90. The reason for the weakening of the koruna was geopolitical uncertainty regarding the war in Ukraine. Now it seems that the markets have absorbed this situation and this may be the reason for the appreciation of the koruna that occurred last week. If the war in Ukraine does not escalate further into new unexpected dimensions (such as the disruption of gas supplies to Europe from Russia), then the interest rate differential could again be an important factor, which, due to higher interest rates on the koruna, could lead to the koruna appreciation towards January levels.   Figure 5: EURCZK on the daily chart   Resistance: 25.80 - 25.90.  Support: 24.50 - 24.60 and then around 24.10   ECB and the euro The ECB left interest rates unchanged at 0%. At the same time, it surprised the market by ending its bond buying program in Q3, earlier than previous forecasts. The reaction to the news was a strong appreciation of the euro and it jumped to 1.1120 against the dollar. Eventually, however, the euro ended the session at around 1.10. The reason for this reversal is that tightening at a time when the economy is slowing could lead to stagflation. Strong US inflation data also contributed to the euro sell-off. The US is also much less vulnerable to sanctions against Russia than Europe.   Figure 6: EURUSD on the H4 and daily charts   From a technical point of view, we can see that the EURUSD has stalled right at the resistance band, which is at the 1.11-1.1130 level. The nearest support is 1.08-1.0850.   Crude Oil Brent crude oil reached $136 earlier this week, the highest level since July 2008. This was due to fears of a shortage of black liquid due to the conflict in Ukraine. However, Russia , which produces 7% of global demand, has announced that it will meet its contractual obligations. At the same time, Chevron said there was no shortage of oil and some other producers were ready to increase production if necessary. The EU has also announced that it will not impose an embargo on Russian oil imports, which would otherwise shock the market at a time when oil stocks are reaching multi-year lows, and will not join the US and the UK. Following this, oil began to retreat from its highs.   Figure 7: Brent crude oil on monthly and daily charts Resistance is in the 132-135 range. The nearest support is 103 - 105 USD per barrel. The next support is then in the band around USD 85 - 87 per barrel.  
Positions of large speculators according to the COT report as at 8/3/2022

Positions of large speculators according to the COT report as at 8/3/2022

Purple Trading Purple Trading 14.03.2022 16:01
Positions of large speculators according to the COT report as at 8/3/2022 Total net speculator positions in the USD index fell by 730 contracts last week. This change is the result of an increase in long positions by 2,270 contracts and an increase in short positions by 3,000 contracts. The decrease in total net speculator positions occurred last week in the euro, the British pound, and the Canadian dollar. The increase in total net positions occurred in the New Zealand dollar, the Australian dollar, the Japanese yen and the Swiss franc.     The positions of speculators in individual currencies The total net positions of large speculators are shown in Table 1: If the value is positive then the large speculators are net long. If the value is negative, the large speculators are net short. Table 1: Total net positions of large speculators DatE USD Index EUR GBP AUD NZD JPY CAD CHF Mar 08, 2022 34044 58844 -12526 -78195 -12379 -55856 7646 -9710 Mar 01, 2022 34774 64939 -337 -78336 -14172 -68732 14140 -15248 Feb 22, 2022 36084 59306 -5809 -84080 -11551 -63187 9253 -10987 Feb 15, 2022 35386 47581 2237 -86694 -9333 -66162 12170 -9715 Feb 08, 2022 33765 38842 -8545 -85741 -10366 -59148 14886 -9399 Feb 01, 2022 34571 29716 -23605 -79829 -11698 -60640 18264 -8239 Note: The explanation of COT methodolody is at the the end of the report.   Notes: Large speculators are traders who trade large volumes of futures contracts, which, if the set limits are met, must be reported to the Commodity Futures Trading Commission. Typically, this includes traders such as funds or large banks. These traders mostly focus on trading long-term trends and their goal is to make money on speculation with the instrument. ​The total net positions of large speculators are the difference between the number of long contracts and the number of short contracts of large speculators. Positive value shows that large speculators are net long. Negative value shows that large speculators are net short. The data is published every Friday and is delayed because it shows the status on Tuesday of the week. The total net positions of large speculators show the sentiment this group has in the market. A positive value of the total net positions of speculators indicates bullish sentiment, a negative value of total net positions indicates bearish sentiment. When interpreting charts and values, it is important to follow the overall trend of total net positions. The turning points are also very important, i.e. the moments when the total net positions go from a positive value to a negative one and vice versa. Important are also extreme values ​​of total net positions as they often serve as signals of a trend reversal. Sentiment according to the reported positions of large players in futures markets is not immediately reflected in the movement of currency pairs. Therefore, information on sentiment is more likely to be used by traders who take longer trades and are willing to hold their positions for several weeks or even months.   Detailed analysis of selected currencies   Explanations:   Purple line and histogram: this is information on the total net position of large speculators. This information shows the strength and sentiment of an ongoing trend. It is the indicator r_COT Large Speculators (by Kramsken) in www.tradingview.com. Information on the positions of so-called hedgers is not shown in the chart, due to the fact that their main goal is not speculation, but hedging. Therefore, this group usually takes the opposite positions than the large speculators. For this reason, the positions of hedgers are inversely correlated with the movement of the price of the underlying asset. However, this inverse correlation shows the ongoing trend less clearly than the position of large speculators.​ We show moving average SMA 100 (blue line) and EMA 50 (orange line) on daily charts. ​Charts are made with the use of www.tradingview.com. The source of numerical data is www.myfxbook.com date Open Interest Specs Long Specs Short Specs Net positions change Open Interest change Long change Short change Net Positions Sentiment Mar 08, 2022 738990 242683 183839 58844 19015 14298 20393 -6095 Weak bullish Mar 01, 2022 719975 228385 163446 64939 23293 14190 8557 5633 Bullish Feb 22, 2022 696682 214195 154889 59306 -5365 -3704 -15429 11725 Bullish Feb 15, 2022 702047 217899 170318 47581 1949 -1074 -9813 8739 Bullish Feb 08, 2022 700098 218973 180131 38842 14667 5410 -3716 9126 Bullish Feb 01, 2022 685431 213563 183847 29716 2479 155 1999 -1844 Weak bullish         Total Change 56038 29275 1991 27284     Figure 1: The euro and COT positions of large speculators on a weekly chart and the EURUSD on D1 The total net positions of speculators reached 58,844 contracts last week, down by 6,095 contracts from the previous week. This change is due to an increase in long positions by 14,198 contracts and an increase in short positions by 20,393 contracts. These data suggest a weakening of the bullish sentiment for the euro. Open interest, which rose by 19,015 contracts in the past week, shows that the downward price action movement that occurred in the euro last week was supported by volume and it was  therefore a strong trend. The euro continues to weaken under the influence of the war in Ukraine and we can see that support levels have not been respected in such a strong trend. The ECB's announcement last week to end the bond purchases in 3Q 2022 also contributed to the euro’s weakness. This hawkish statement at a time when economic growth is slowing sparked fears of stagflation in the market and therefore the euro weakened following the ECB announcement.   Long-term resistance: 1.1120 – 1.1150. Support: 1.080-1.0850. The next support is at 1.0640-1.0700.   The British pound date Open Interest Specs Long Specs Short Specs Net positions change Open Interest change Long change Short change Net Positions Sentiment Mar 08, 2022 246312 50982 63508 -12526 34443 3303 15492 -12189 Bearish Mar 01, 2022 211869 47679 48016 -337 23426 5430 -42 5472 Weak bearish Feb 22, 2022 188443 42249 48058 -5809 -6859 -7902 144 -8046 Bearish Feb 15, 2022 195302 50151 47914 2237 -2646 5442 -5340 10782 Bullish Feb 08, 2022 197948 44709 53254 -8545 13941 15112 52 15060 Weak bearish Feb 01, 2022 184007 29597 53202 -23605 1967 -7069 8773 -15842 Bearish         Total Change 64272 14316 19079 -4763     Figure 2: The GBP and COT positions of large speculators on a weekly chart and the GBPUSD on D1 The total net positions of speculators last week reached - 12,526 contracts, having fallen by 12,189 contracts compared to the previous week. This change is due to the growth in long positions by 3,303 contracts and the growth in short positions by 15,492 contracts. This suggests bearish sentiment as the total net speculators positions  are negative while there has been a further decline as well. Open interest, which rose by 34,443 contracts last week, means that the fall in the pound that occurred last week was supported by the volume and it was therefore a strong price action. Risk off sentiment due to the war in Ukraine continues to weigh on the pound as well as the euro and therefore the pound is weakening strongly. Long-term resistance: 1.3180-1.3210.  Next resistance is near 1.3270 – 1.3330. Support is near 1.3000.     The Australian dollar   date Open Interest Specs Long Specs Short Specs Net positions change Open Interest change Long change Short change Net Positions Sentiment Mar 08, 2022 197094 19521 97716 -78195 7427 6801 6660 141 Weak bearish Mar 01, 2022 189667 12720 91056 -78336 -2912 1167 -4577 5744 Weak bearish Feb 22, 2022 192579 11553 95633 -84080 1 -139 -2753 2614 Weak bearish Feb 15, 2022 192578 11692 98386 -86694 -3825 -5631 -4678 -953 Bearish Feb 08, 2022 196403 17323 103064 -85741 -510 -1512 4400 -5912 Bearish Feb 01, 2022 196913 18835 98664 -79829 6893 3714 270 3444 Weak bearish         Total Change 7074 4400 -678 5078     Figure 3: The AUD and COT positions of large speculators on a weekly chart and the AUDUSD on D1 The total net positions of speculators last week reached 78,195 contracts, up by 141 contracts compared to the previous week. This change is due to the growth in long positions by 6,801 contracts and the growth in short positions by 6,660 contracts. This data suggests a weakening of the bearish sentiment for the Australian dollar. Last week we saw an increase in open interest of 7,427 contracts. This means that the downward movement that occurred last week was supported by volume as new money flowed into the market. The Australian dollar weakened quite significantly last week. This may be explained by the fact that there has been a fall in prices in commodities that Australia exports (e.g. gold, coal). The decline in commodity prices also reflects efforts to find a diplomatic solution to the war in Ukraine.  Long-term resistance: 0.7370-0.7440                                                                                                              Long-term support: 0.7085-0.7120.  A strong support is near 0.6960 – 0.6990.   The New Zealand dollar   date Open Interest Specs Long Specs Short Specs Net positions change Open Interest change Long change Short change Net Positions Sentiment Mar 08, 2022 53250 15775 28154 -12379 2861 5290 3497 1793 Weak bearish Mar 01, 2022 50389 10485 24657 -14172 -6247 -6858 -4237 -2621 Bearish Feb 22, 2022 56636 17343 28894 -11551 -7469 -7580 -5362 -2218 Bearish Feb 15, 2022 64105 24923 34256 -9333 9228 7755 6722 1033 Weak bearish Feb 08, 2022 54877 17168 27534 -10366 -3590 -2037 -3369 1332 Weak bearish Feb 01, 2022 58467 19205 30903 -11698 5151 3257 4182 -925 Bearish         Total Change -66 -173 1433 -1606     Figure 4: The NZD and the position of large speculators on a weekly chart and the NZDUSD on D1 The total net positions of speculators reached a negative value last week - 12,379 contracts, having increased by 1,793 contracts compared to the previous week. This change is due to an increase in long positions by 5,290 contracts and an increase in short positions by 3,497 contracts. This data suggests that the bearish sentiment on the NZ dollar has weakened over the past week. Open interest rose significantly by 2,861 contracts last week. The downward movement in the NZDUSD that occurred last week was therefore supported by volume and therefore the move was strong. The weakening in the NZDUSD that occurred last week can be explained by the decline in the prices of commodities that New Zealand produces. Long-term resistance: 0.6850 – 0.6920 Long-term support: 0.6590-0.6600 and the next support is at 0.6500 – 0.6530.   Explanation to the COT report The COT report shows the positions of major participants in the futures markets. Futures contracts are derivatives and are essentially agreements between two parties to exchange an underlying asset for a predetermined price on a predetermined date. They are standardised, specifying the quality and quantity of the underlying asset. They are traded on an exchange so that the total volume of these contracts traded is known.   Open interest: open interest is the sum of all open futures contracts (i.e. the sum of short and long contracts) that exist on a given asset. OI increases when a new futures contract is created by pairing a buyer with a seller. The OI decreases when an existing futures contract expires at a given expiry time or by settlement. Low or no open interest means that there is no interest in the market. High open interest indicates high activity and traders pay attention to this market. A rising open interest indicates that there is demand for the currency. That is, a rising OI indicates a strong current trend. Conversely, a weakening open interest indicates that the current trend is not strong. Open Interest Price action Interpretation Notes Rising Rising Strong bullish market New money flow in the particular asset, more bulls entered the market which pushes the price up. The trend is strong. Rising Falling Strong bearish market Price falls, more bearish traders entered the market which pushes the price down. The trend is strong. Falling Rising Weak bullish market Price is going up but new money do not flow into the market. Existing futures contracts expire or are closed. The trend is weak. Falling Falling Weak bearish market Price is going down, but new money do not flow into the market. Existing futures expire or are closed, the trend is weak.   Large speculators are traders who trade large volumes of futures contracts, which, if the set limits are met, must be reported to the Commodity Futures Trading Commission. Typically, this includes traders such as funds or large banks. These traders mostly focus on trading long-term trends and their goal is to make money on speculation with the instrument. Traders should try to trade in the direction of these large speculators. The total net positions of large speculators are the difference between the number of long contracts and the number of short contracts of large speculators. Positive value shows that large speculators are net long. Negative value shows that large speculators are net short. The data is published every Friday and is delayed because it shows the status on Tuesday of the week. The total net positions of large speculators show the sentiment this group has in the market. A positive value of the total net positions of speculators indicates bullish sentiment, a negative value of total net positions indicates bearish sentiment. When interpreting charts and values, it is important to follow the overall trend of total net positions. The turning points are also very important, i.e. the moments when the total net positions go from a positive value to a negative one and vice versa. Important are also extreme values ​​of total net positions as they often serve as signals of a trend reversal. The COT data are usually reported every Friday and they show the status on Tuesday of the week. Sentiment according to the reported positions of large players in futures markets is not immediately reflected in the movement of currency pairs. Therefore, information on sentiment is more likely to be used by traders who take longer trades and are willing to hold their positions for several weeks or even months.
The Bitcoin Market Is Now Developing The Corrective Cycle To The Downside

Bitcoin Price Charts: BTC/XAUUSD And BTCUSDT - 15/03/22

Korbinian Koller Korbinian Koller 15.03.2022 14:39
Bitcoin is needed as an alternative   The weakened US-Dollar and the present unexpected climate seems not being fully reflected in bitcoin´s price. Consequently, bitcoin prices could soar in the not too distant future. Bitcoin/Gold-Ratio, daily chart, bottom building: Bitcoin/Gold-Ratio, daily chart as of March 15th, 2022. A phenomenon in times of crisis is that individuals look for absolutes or extremes to resolve difficult circumstances. We instead advocate a more principle-based process of solving problems, an approach of choices. Regarding wealth preservation, this would mean gold and silver alongside bitcoin. The daily chart of the bitcoin/gold-ratio shows the bottom building after a downtrend. Currently, one can purchase a bitcoin for twenty ounces of gold. Nearly half as much as five months ago. Indeed, an opportunity to rotate one’s precious metal holding partially into a cheap bitcoin acquisition.     Bitcoin, monthly chart, in waiting position: Bitcoin in USD, monthly chart as of March 15th, 2022. War inherently divides nations, and that does not mean limiting only the ones directly in conflict with each other. It is this divide that, in addition, fuels the competition for each nation to be first in their digital currency release. Sanctioned countries have limited access to the US-Dollar. Consequently, they are highly motivated to create an alternate payment method. The monthly chart is not showing this fundamental support for bitcoin. Early signs of a triangle show that we find likely to break to the upside. Slow stochastic indicator reading (A) shows that the last time around at these levels, a strong up move followed. Similar to the yellow CCI turbo line-level reading (B). Before such a move, we witnessed a quick price spike down (C), which would be no surprise. Bitcoin, weekly chart, bitcoin as an alternative is needed: Bitcoin in USD, weekly chart as of March 15th, 2022. Zooming into the weekly time frame, we can make out the battle between bulls and bears in more detail. Over the last three weeks, prices were rejected above the POC (point of control = high volume node, where our volume profile analysis ranges over the previous fifteen months). As well, price behavior is reflecting the war climate’s uncertainty. At the same time, the bulls have held steady any attempt of the bears trying to push prices below US$37,500. Hence, we should see a substantial move once trading snaps out of this “magnet trading” to the high-volume node. Bitcoin, daily chart, gains and volatility: Bitcoin in USD, daily chart as of March 15th, 2022. The daily chart of bitcoin above describes how we see the future unfold. We anticipate the price to reach all-time highs within the upcoming month. Unfortunately, not in bitcoins typical swing trading manner. We foresee a choppy, volatile market. Consequently, short and midterm trading will be challenging. Stepping up in time frame is a helpful approach to avoid the noise. Bitcoin is needed as an alternative: Governments will try to keep their monopolies and power. However, we don’t think that the adoption of a digital dollar by the masses will not be that easy. We find this especially true to be in a highly transitory time of rapid changes and many challenges. Typically, multiple propaganda waves through media have bridged such doubt but might have lost some of its trustworthiness. Consequently, bitcoin has a fair chance for mass adoption just as well. It already has a history and carries inherent features of freedom that people might long for more than anticipated.   Feel free to join us in our free Telegram channel for daily real time data and a great community. If you like to get regular updates on precious metals and cryptocurrencies, you can also subscribe to our free newsletter. Disclosure: This article and the content are for informational purposes only and do not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision. The views, thoughts and opinions expressed here are the author’s alone. They do not necessarily reflect or represent the views and opinions of Midas Touch Consulting. By Korbinian Koller|March 15th, 2022|Tags: Bitcoin, Bitcoin bounce, Bitcoin bullish, Bitcoin consolidation, bitcoin/gold-ratio, crypto analysis, crypto chartbook, DeFi, Gold, Gold bullish, low risk, quad exit, technical analysis, trading education|0 Comments About the Author: Korbinian Koller Outstanding abstract reasoning ability and ability to think creatively and originally has led over the last 25 years to extract new principles and a unique way to view the markets resulting in a multitude of various time frame systems, generating high hit rates and outstanding risk reward ratios. Over 20 years of coaching traders with heart & passion, assessing complex situations, troubleshoot and solve problems principle based has led to experience and a professional history of success. Skilled natural teacher and exceptional developer of talent. Avid learner guided by a plan with ability to suppress ego and empower students to share ideas and best practices and to apply principle-based technical/conceptual knowledge to maximize efficiency. 25+ year execution experience (50.000+ trades executed) Trading multiple personal accounts (long and short-and combinations of the two). Amazing market feel complementing mechanical systems discipline for precise and extreme low risk entries while objectively seeing the whole picture. Ability to notice and separate emotional responses from the decision-making process and to stand outside oneself and one’s concerns about images in order to function in terms of larger objectives. Developed exit strategies that compensate both for maximizing profits and psychological ease to allow for continuous flow throughout the whole trading day. In depth knowledge of money management strategies with the experience of multiple 6 sigma events in various markets (futures, stocks, commodities, currencies, bonds) embedded in extreme low risk statistical probability models with smooth equity curves and extensive risk management as well as extensive disaster risk allow for my natural capacity for risk-taking.
USDCHF Nears 0.940 Levels, EURGBP Keeps Its "Stability", USOIL Is Like A Benchmark For Geopolitical Situation

USDCHF Nears 0.940 Levels, EURGBP Keeps Its "Stability", USOIL Is Like A Benchmark For Geopolitical Situation

Jing Ren Jing Ren 16.03.2022 08:11
USDCHF breaks major resistance The US dollar continues upward as the Fed is set to increase its interest rates by 25bp. The rally sped up after it cleared the daily resistance at 0.9360. The bullish breakout may have ended a 9-month long consolidation from the daily chart perspective. The rising trendline confirms the optimism and acts as an immediate support. Solid momentum could propel the greenback to April 2021’s high at 0.9470. Buyers may see a pullback as an opportunity to jump in. 0.9330 is the closest support should this happen. EURGBP tests key resistance The sterling found support after a drop in Britain’s unemployment rate in January. A break above the daily resistance at 0.8400 has prompted sellers to cover, easing the downward pressure. Sentiment remains downbeat unless buyers push the single currency past 0.8475. In turn, this could pave the way for a reversal in the weeks to come. Otherwise, the bears might double down and drive the euro back into its downtrend. A fall below 0.8360 would force early bulls to liquidate and trigger a sell-off to 0.8280. USOIL drops towards key support WTI crude falls back over a new round of ceasefire talks between Russia and Ukraine. Previously, a bearish RSI divergence indicated a loss of momentum as the price went parabolic. Then a steep fall below 107.00 was a sign of liquidation. Buyers continue to unwind their positions as the price slides back to its pre-war level. The psychological level of 90.00 is an important support on the daily chart. An oversold RSI may attract buying interest in this demand zone. 105.00 is the first resistance before buyers could regain control.
S&P 500 (SPX) - It Looks Like Fed Decision Was Needed To Go Up

S&P 500 (SPX) - It Looks Like Fed Decision Was Needed To Go Up

Monica Kingsley Monica Kingsley 17.03.2022 15:57
S&P 500 reversed the pre-FOMC decline, and turned up. The upswing didn‘t fizzle out after the conference, quite to the contrary, the credit markets deepened their risk-on posture. I guess stocks are buying the story of 7 rate hikes and balance sheet reduction in 2022 a bit too enthusiastically. Not gonna happen, next quarter‘s GDP data would probably be already negative. Yet Powell says that the risk of recession into next year isn‘t elevated – given the projected tightening, I beg to differ. But of course, Powell is right – it‘s only that we won‘t see all those promised hikes, let alone balance sheet reduction starting in spring. Inflation would retreat a little towards year‘s end (on account of recessionary undercurrents and modest tightening), only to surprise once again in 2023 on the upside. I already wrote so weeks ago – before the East European events. There wouldn‘t enough time to celebrate the notion of vanquishing inflation. For now, stocks can continue the bullish turn – just as commodities and precious metals aren‘t asking permission. The FOMC is over, and real assets can rise, including the badly beaten crude oil. Made a good decision to keep adding to the commodities positions at much lower prices (or turning bullish stocks around the press conference). Let‘s move right into the charts (all courtesy of www.stockcharts.com). S&P 500 and Nasdaq Outlook S&P 500 upswing looks like it can go on for a while. It was driven by tech, participating more enthusiastically than value. The conditions are in place for the rally to continue, and it‘s likely that Friday would be a better day than Thursday for the bulls. Credit Markets HYG is catching quite some bid, and credit markets have turned decidedly risk-on. It also looks like a sigh of relief over no 50bp hike – the stock market rally got its hesitant ally. Gold, Silver and Miners Precious metals upswing can return – and this correction wasn‘t anyway sold heavily into. Needless to say how overdone it was if you look at the miners. $1950s would be reconquered easily. Crude Oil Crude oil bottom looks to be in, and $110s are waiting. Obviously it would take more than a couple of days to return there, but we‘re on the way. Copper Copper is rebounding, and even if other base metals aren‘t yet following too enthusiastically, $4.70 isn‘t far away. Coupled with precious metals returning to more reasonable values, the red metal would continue trending higher. Bitcoin and Ethereum Cryptos are leaning risk-on, and the bulls will close this weekend on a good note. Today‘s price action is merely a consolidation in a short-term upswing. Summary S&P 500 bulls got enough fuel from the Fed, and the run can continue – albeit at a slower pace. Importantly, credit markets aren‘t standing in the short-term way, but I think they would carve out a bearish divergence when this rally starts topping out. I‘m not looking for fresh ATHs, the headwinds are too stiff, but as stated within today‘s key analysis, the tech participation is a very encouraging sign for the short-term. The dollar indeed didn‘t make any kind of upside progress to speak of yesterday – and as I have also written at length in yesterday‘s report, the pre-FOMC trading pattern in real assets can be reversed now. Long live precious metals, oil and copper gains! Thank you for having read today‘s free analysis, which is available in full at my homesite. There, you can subscribe to the free Monica‘s Insider Club, which features real-time trade calls and intraday updates for all the five publications: Stock Trading Signals, Gold Trading Signals, Oil Trading Signals, Copper Trading Signals and Bitcoin Trading Signals.
GBPUSD Almost Full Recovered After BoE's Decision, USDJPY Doesn't Fluctuate Significantly, S&P 500 (SPX) Is Not So Far From 4400.00

GBPUSD Almost Full Recovered After BoE's Decision, USDJPY Doesn't Fluctuate Significantly, S&P 500 (SPX) Is Not So Far From 4400.00

Jing Ren Jing Ren 18.03.2022 07:58
GBPUSD attempts to rebound The British pound stalled after the BOE failed to secure a unanimous vote for higher rates. A bullish RSI divergence suggests exhaustion in the sell-off, and combined with the indicator’s oversold condition on the daily chart, may attract buying interest. A tentative break above 1.3190 led some sellers to take profit. The bulls will need to push above the 1.3250 next to the 20-day moving average to get a foothold. On the downside, the psychological level of 1.3000 is a critical floor to keep the current rebound valid. USDJPY takes a breather The Japanese yen struggles as the BOJ pledges to stick with stimulus. Sentiment turned extremely bullish after the pair rallied above December 2016’s high at 118.60. The RSI went overbought on both hourly and daily charts, and the overextension could refrain buyers from chasing bids. Trend followers may be waiting to buy at pullbacks. 117.70 is the first level to gauge buying interest and 116.80 is the second line of support. A rebound above 119.00 would extend gains beyond the psychological level of 120.00. SPX 500 tests resistance The S&P 500 bounced higher after Russia averted a bond default. Price action has stabilized above last June’s lows around 4140 where a triple bottom indicates a strong interest in keeping the index afloat. A previous attempt above 4350 forced sellers to cover but hit resistance at 4420. A bullish close above this key level on the daily chart could trigger a runaway rally. 4590 would be the next target when sentiment turns around. Otherwise, a lack of conviction from the buy-side would send the index to test 4250.
Natural Gas Hits Its Final Target. The Luck of St. Patrick’s Day?

Natural Gas Hits Its Final Target. The Luck of St. Patrick’s Day?

Sebastian Bischeri Sebastian Bischeri 18.03.2022 17:14
  St. Patrick’s Day is historically considered among the best trading days. Apparently, judging by the results, it may have brought some luck to natural gas. If you are interested in looking at the stats, an article by Market Watch summed them up. The second target hit – BOOM! Yesterday, on St. Patrick's Day, the opportunity to bank the extra profits from my recent Nat-Gas trade projections (provided on March 2) finally arrived. That trade plan has provided traders with multiple bounces to trade the NYMEX Natural Gas Futures (April contract) in various ways, always depending on each one’s personal risk profile. To get some more explanatory details on understanding the different trading ways this fly map (trading plan) could offer, I invite you to read my previous article (from March 11). To quickly sum it up, the various trade opportunities that could be played were as follows (with the following captures taken on March 11): The first possibility is swing trading, with the trailing stop method explained in my famous risk management article. Henry Hub Natural Gas (NGJ22) Futures (April contract, hourly chart) The second option consisted of scalping the rebounds with fixed targets (active or experienced traders). I named this method “riding the tails” (or the shadows). Henry Hub Natural Gas (NGJ22) Futures (April contract, 4H chart) The third way is position trading – a more passive trading style (and usually more rewarding). Henry Hub Natural Gas (NGJ22) Futures (April contract, daily chart) The chart below shows a good overall view of NYMEX Natural Gas hitting our final target, $4.860: Henry Hub Natural Gas (NGJ22) Futures (April contract, daily chart) Henry Hub Natural Gas (NGJ22) Futures (April contract, 4H chart) As you can see, the market has provided us with multiple entries into the same support zone (highlighted by the yellow band) – even after hitting the first target, you may have noticed that I maintained the entry conditions in place – after the suggestion to drag the stop up just below the new swing low ($4.450). The market, still in a bull run, got very close to that point on March 15 by making a new swing low at $4.459 (just about 10 ticks above it). Before that, it firmly rebounded once more (allowing a new/additional entry) and then extended its gains further away while consecutively hitting target 1 ($4.745) again. After that, it finally hit target 2 ($4.860)! That’s all folks for today. It is time to succesfully close this trade. Have a great weekend! Like what you’ve read? Subscribe for our daily newsletter today, and you'll get 7 days of FREE access to our premium daily Oil Trading Alerts as well as our other Alerts. Sign up for the free newsletter today! Thank you. Sebastien BischeriOil & Gas Trading Strategist * * * * * The information above represents analyses and opinions of Sebastien Bischeri, & Sunshine Profits' associates only. As such, it may prove wrong and be subject to change without notice. At the time of writing, we base our opinions and analyses on facts and data sourced from respective essays and their authors. Although formed on top of careful research and reputably accurate sources, Sebastien Bischeri and his associates cannot guarantee the reported data's accuracy and thoroughness. The opinions published above neither recommend nor offer any securities transaction. Mr. Bischeri is not a Registered Securities Advisor. By reading Sebastien Bischeri’s reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Sebastien Bischeri, Sunshine Profits' employees, affiliates as well as their family members may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.
Large Forex Speculators boosted their bets of Commodity Currencies this week

Large Forex Speculators boosted their bets of Commodity Currencies this week

Invest Macro Invest Macro 19.03.2022 17:45
By InvestMacro | COT | Data Tables | COT Leaders | Downloads | COT Newsletter Here are the latest charts and statistics for the Commitment of Traders (COT) data published by the Commodities Futures Trading Commission (CFTC). The latest COT data is updated through Tuesday March 15th and shows a quick view of how large traders (for-profit speculators and commercial entities) were positioned in the futures markets. All currency positions are in direct relation to the US dollar where, for example, a bet for the euro is a bet that the euro will rise versus the dollar while a bet against the euro will be a bet that the euro will decline versus the dollar. Highlighting the COT currency data was the strong speculator sentiment for the commodity currencies in the currency futures contracts. The Canadian dollar, Australian dollar and the New Zealand dollar all saw boosts in their bets that either pushed their bullish standings higher or sharply reduced their bearish levels this week. The Australian dollar saw the largest improvement with a huge net gain of over +33,000 contracts this week which marked the largest one-week increase in the past three hundred and sixty-five weeks, dating all the way back to March of 2015. This week’s gain dropped the AUD’s current bearish standing down to -44,856 contracts from approximately -78,000 contracts in the previous week. The New Zealand dollar contracts saw a one-week gain of +16,032 contracts which marked its largest one-week rise in the past one hundred and seventeen weeks (back to December of 2017). This rise brought the NZD speculator positions out of bearish territory for the first time in fourteen weeks to a very small bullish level of +3,653 contracts. Finally, the Canadian dollar contracts increased by a net position of +10,094 contracts this week after falling in four out of the previous five weeks. This climb in speculative bets brings the current CAD bullish standing to the best level of the past six weeks. Overall, the currency markets with higher speculator bets this week were the New Zealand dollar (16,032 contracts), Canadian dollar (10,094 contracts), Swiss franc (4,481 contracts) and the Australian dollar (33,339 contracts). The currencies with declining bets were the US Dollar Index (-5,664 contracts), Mexican peso (-63,593 contracts), Euro (-40,050 contracts), Japanese yen (-6,484 contracts), Brazil real (-6,333 contracts), British pound sterling (-16,535 contracts), Russian ruble (-263 contracts) and Bitcoin (-75 contracts). Data Snapshot of Forex Market Traders | Columns Legend Mar-15-2022 OI OI-Index Spec-Net Spec-Index Com-Net COM-Index Smalls-Net Smalls-Index USD Index 47,574 62 28,380 75 -31,969 21 3,589 56 EUR 666,010 70 18,794 41 -42,629 64 23,835 14 GBP 188,323 31 -29,061 53 37,279 52 -8,218 39 JPY 215,484 65 -62,340 29 87,597 80 -25,257 0 CHF 43,356 19 -5,229 61 17,460 50 -12,231 27 CAD 143,863 26 17,740 65 -13,145 50 -4,595 21 AUD 124,521 25 -44,856 43 48,640 55 -3,784 43 NZD 39,200 23 3,653 77 -1,815 28 -1,838 31 MXN 102,749 4 -10,576 23 7,848 76 2,728 55 RUB 20,930 4 7,543 31 -7,150 69 -393 24 BRL 68,874 65 44,163 94 -46,800 6 2,637 97 Bitcoin 10,198 53 190 98 -453 0 263 19   US Dollar Index Futures: The US Dollar Index large speculator standing this week came in at a net position of 28,380 contracts in the data reported through Tuesday. This was a weekly lowering of -5,664 contracts from the previous week which had a total of 34,044 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish with a score of 74.7 percent. The commercials are Bearish with a score of 21.5 percent and the small traders (not shown in chart) are Bullish with a score of 55.8 percent. US DOLLAR INDEX Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 83.6 3.1 11.0 – Percent of Open Interest Shorts: 23.9 70.3 3.5 – Net Position: 28,380 -31,969 3,589 – Gross Longs: 39,767 1,452 5,242 – Gross Shorts: 11,387 33,421 1,653 – Long to Short Ratio: 3.5 to 1 0.0 to 1 3.2 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 74.7 21.5 55.8 – Strength Index Reading (3 Year Range): Bullish Bearish Bullish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: -10.7 16.5 -40.7   Euro Currency Futures: The Euro Currency large speculator standing this week came in at a net position of 18,794 contracts in the data reported through Tuesday. This was a weekly decline of -40,050 contracts from the previous week which had a total of 58,844 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 40.8 percent. The commercials are Bullish with a score of 63.7 percent and the small traders (not shown in chart) are Bearish-Extreme with a score of 13.9 percent. EURO Currency Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 30.3 55.4 11.3 – Percent of Open Interest Shorts: 27.5 61.8 7.7 – Net Position: 18,794 -42,629 23,835 – Gross Longs: 202,040 369,253 75,191 – Gross Shorts: 183,246 411,882 51,356 – Long to Short Ratio: 1.1 to 1 0.9 to 1 1.5 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 40.8 63.7 13.9 – Strength Index Reading (3 Year Range): Bearish Bullish Bearish-Extreme NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: -3.4 4.2 -6.5   British Pound Sterling Futures: The British Pound Sterling large speculator standing this week came in at a net position of -29,061 contracts in the data reported through Tuesday. This was a weekly decrease of -16,535 contracts from the previous week which had a total of -12,526 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish with a score of 53.1 percent. The commercials are Bullish with a score of 51.7 percent and the small traders (not shown in chart) are Bearish with a score of 38.6 percent. BRITISH POUND Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 17.2 66.9 12.6 – Percent of Open Interest Shorts: 32.7 47.1 16.9 – Net Position: -29,061 37,279 -8,218 – Gross Longs: 32,442 125,994 23,650 – Gross Shorts: 61,503 88,715 31,868 – Long to Short Ratio: 0.5 to 1 1.4 to 1 0.7 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 53.1 51.7 38.6 – Strength Index Reading (3 Year Range): Bullish Bullish Bearish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: -3.9 5.0 -6.1   Japanese Yen Futures: The Japanese Yen large speculator standing this week came in at a net position of -62,340 contracts in the data reported through Tuesday. This was a weekly decrease of -6,484 contracts from the previous week which had a total of -55,856 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 28.6 percent. The commercials are Bullish with a score of 79.7 percent and the small traders (not shown in chart) are Bearish-Extreme with a score of 0.0 percent. JAPANESE YEN Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 15.8 75.7 7.2 – Percent of Open Interest Shorts: 44.7 35.0 18.9 – Net Position: -62,340 87,597 -25,257 – Gross Longs: 34,016 163,089 15,533 – Gross Shorts: 96,356 75,492 40,790 – Long to Short Ratio: 0.4 to 1 2.2 to 1 0.4 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 28.6 79.7 0.0 – Strength Index Reading (3 Year Range): Bearish Bullish Bearish-Extreme NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: -1.1 4.1 -13.6   Swiss Franc Futures: The Swiss Franc large speculator standing this week came in at a net position of -5,229 contracts in the data reported through Tuesday. This was a weekly lift of 4,481 contracts from the previous week which had a total of -9,710 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish with a score of 60.8 percent. The commercials are Bullish with a score of 50.5 percent and the small traders (not shown in chart) are Bearish with a score of 27.4 percent. SWISS FRANC Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 13.4 66.3 20.2 – Percent of Open Interest Shorts: 25.5 26.1 48.4 – Net Position: -5,229 17,460 -12,231 – Gross Longs: 5,808 28,761 8,768 – Gross Shorts: 11,037 11,301 20,999 – Long to Short Ratio: 0.5 to 1 2.5 to 1 0.4 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 60.8 50.5 27.4 – Strength Index Reading (3 Year Range): Bullish Bullish Bearish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: 5.3 1.0 -11.5   Canadian Dollar Futures: The Canadian Dollar large speculator standing this week came in at a net position of 17,740 contracts in the data reported through Tuesday. This was a weekly boost of 10,094 contracts from the previous week which had a total of 7,646 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish with a score of 64.9 percent. The commercials are Bullish with a score of 50.0 percent and the small traders (not shown in chart) are Bearish with a score of 20.6 percent. CANADIAN DOLLAR Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 33.0 41.3 20.3 – Percent of Open Interest Shorts: 20.6 50.4 23.5 – Net Position: 17,740 -13,145 -4,595 – Gross Longs: 47,406 59,344 29,213 – Gross Shorts: 29,666 72,489 33,808 – Long to Short Ratio: 1.6 to 1 0.8 to 1 0.9 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 64.9 50.0 20.6 – Strength Index Reading (3 Year Range): Bullish Bullish Bearish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: -0.5 9.0 -23.8   Australian Dollar Futures: The Australian Dollar large speculator standing this week came in at a net position of -44,856 contracts in the data reported through Tuesday. This was a weekly boost of 33,339 contracts from the previous week which had a total of -78,195 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 43.2 percent. The commercials are Bullish with a score of 55.2 percent and the small traders (not shown in chart) are Bearish with a score of 43.2 percent. AUSTRALIAN DOLLAR Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 19.5 62.3 15.6 – Percent of Open Interest Shorts: 55.5 23.3 18.6 – Net Position: -44,856 48,640 -3,784 – Gross Longs: 24,281 77,621 19,378 – Gross Shorts: 69,137 28,981 23,162 – Long to Short Ratio: 0.4 to 1 2.7 to 1 0.8 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 43.2 55.2 43.2 – Strength Index Reading (3 Year Range): Bearish Bullish Bearish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: 32.4 -35.4 30.4   New Zealand Dollar Futures: The New Zealand Dollar large speculator standing this week came in at a net position of 3,653 contracts in the data reported through Tuesday. This was a weekly rise of 16,032 contracts from the previous week which had a total of -12,379 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish with a score of 77.4 percent. The commercials are Bearish with a score of 27.6 percent and the small traders (not shown in chart) are Bearish with a score of 30.8 percent. NEW ZEALAND DOLLAR Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 54.8 37.4 6.2 – Percent of Open Interest Shorts: 45.5 42.1 10.9 – Net Position: 3,653 -1,815 -1,838 – Gross Longs: 21,493 14,671 2,417 – Gross Shorts: 17,840 16,486 4,255 – Long to Short Ratio: 1.2 to 1 0.9 to 1 0.6 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 77.4 27.6 30.8 – Strength Index Reading (3 Year Range): Bullish Bearish Bearish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: 25.8 -24.4 5.5   Mexican Peso Futures: The Mexican Peso large speculator standing this week came in at a net position of -10,576 contracts in the data reported through Tuesday. This was a weekly reduction of -63,593 contracts from the previous week which had a total of 53,017 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 22.8 percent. The commercials are Bullish with a score of 76.1 percent and the small traders (not shown in chart) are Bullish with a score of 54.6 percent. MEXICAN PESO Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 38.1 55.1 6.1 – Percent of Open Interest Shorts: 48.4 47.5 3.5 – Net Position: -10,576 7,848 2,728 – Gross Longs: 39,164 56,610 6,302 – Gross Shorts: 49,740 48,762 3,574 – Long to Short Ratio: 0.8 to 1 1.2 to 1 1.8 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 22.8 76.1 54.6 – Strength Index Reading (3 Year Range): Bearish Bullish Bullish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: -4.8 4.9 -1.7   Brazilian Real Futures: The Brazilian Real large speculator standing this week came in at a net position of 44,163 contracts in the data reported through Tuesday. This was a weekly fall of -6,333 contracts from the previous week which had a total of 50,496 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish-Extreme with a score of 93.8 percent. The commercials are Bearish-Extreme with a score of 5.6 percent and the small traders (not shown in chart) are Bullish-Extreme with a score of 97.0 percent. BRAZIL REAL Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 80.1 13.7 6.2 – Percent of Open Interest Shorts: 16.0 81.7 2.3 – Net Position: 44,163 -46,800 2,637 – Gross Longs: 55,181 9,444 4,239 – Gross Shorts: 11,018 56,244 1,602 – Long to Short Ratio: 5.0 to 1 0.2 to 1 2.6 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 93.8 5.6 97.0 – Strength Index Reading (3 Year Range): Bullish-Extreme Bearish-Extreme Bullish-Extreme NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: 56.5 -55.9 -3.0   Russian Ruble Futures: The Russian Ruble large speculator standing this week came in at a net position of 7,543 contracts in the data reported through Tuesday. This was a weekly decline of -263 contracts from the previous week which had a total of 7,806 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 31.2 percent. The commercials are Bullish with a score of 69.1 percent and the small traders (not shown in chart) are Bearish with a score of 23.9 percent. RUSSIAN RUBLE Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 36.6 60.6 2.8 – Percent of Open Interest Shorts: 0.5 94.7 4.7 – Net Position: 7,543 -7,150 -393 – Gross Longs: 7,658 12,679 593 – Gross Shorts: 115 19,829 986 – Long to Short Ratio: 66.6 to 1 0.6 to 1 0.6 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 31.2 69.1 23.9 – Strength Index Reading (3 Year Range): Bearish Bullish Bearish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: -15.6 16.7 -18.8   Bitcoin Futures: The Bitcoin large speculator standing this week came in at a net position of 190 contracts in the data reported through Tuesday. This was a weekly decline of -75 contracts from the previous week which had a total of 265 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish-Extreme with a score of 98.4 percent. The commercials are Bearish-Extreme with a score of 5.1 percent and the small traders (not shown in chart) are Bearish-Extreme with a score of 18.9 percent. BITCOIN Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 78.3 2.7 10.1 – Percent of Open Interest Shorts: 76.5 7.2 7.5 – Net Position: 190 -453 263 – Gross Longs: 7,989 279 1,029 – Gross Shorts: 7,799 732 766 – Long to Short Ratio: 1.0 to 1 0.4 to 1 1.3 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 98.4 5.1 18.9 – Strength Index Reading (3 Year Range): Bullish-Extreme Bearish-Extreme Bearish-Extreme NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: 1.0 3.0 -2.0   Article By InvestMacro – Receive our weekly COT Reports by Email *COT Report: The COT data, released weekly to the public each Friday, is updated through the most recent Tuesday (data is 3 days old) and shows a quick view of how large speculators or non-commercials (for-profit traders) were positioned in the futures markets. The CFTC categorizes trader positions according to commercial hedgers (traders who use futures contracts for hedging as part of the business), non-commercials (large traders who speculate to realize trading profits) and nonreportable traders (usually small traders/speculators) as well as their open interest (contracts open in the market at time of reporting).See CFTC criteria here.
US 20-City house prices decreased by 1.3% month-on-month

SAVILLS: STRONG Q1 EXPECTED FOR EUROPEAN REAL ESTATE INVESTMENT DESPITE GEOPOLITICAL EVENTS

Finance Press Release Finance Press Release 21.03.2022 11:27
  Preliminary figures compiled by Savills suggest that the total real estate investment volume in Europe for the first quarter of the year will reach approximately €70bn, a 19.5% increase year-on-year. Despite geopolitical events, the real estate advisor expects solid European investment activity for the remainder of the year, notably fuelled by large portfolio and entity deals. Savills anticipates total European real estate investment volumes for 2022 to reach between €300bn and €330bn, which would be 5-10% above the five-year average, as long as the Russia/Ukraine crisis doesn’t last too long and doesn’t have a long-term impact on the European economy. Lydia Brissy, Director, European Research at Savills, says: “Given the current context, we expect most of the investment activity this year will focus on Western Europe and particularly, the core countries of UK, Germany and France. Our preliminary Q1 figures suggest that those three countries have received 66.6% of the total European investment volume this quarter, up from 61.4% last year.” Tomasz Buras, CEO, Savills Poland, says: “The hostilities in Ukraine are having a stronger impact on the Polish real estate market than on Western European markets. Developers are facing severe disruptions to supplies of building materials and reduced availability of construction workers. Tenants have already suffered from rising inflation and energy charges, further fuelled by the weakening Polish zÅ‚oty relative to the euro, a currency in which rents are denominated. We are, however, seeing a surge in demand on the residential rental market and more enquiries for office and warehouse space from companies wanting or forced to relocate operations to Poland. Cross-border investors are likely to remain more cautious in the coming weeks, leading to a short-term dip in real estate investment volumes, albeit with a potential for a strong rebound if the armed conflict is quickly resolved peacefully.” James Burke, Director, Regional Investment Advisory EMEA at Savills, says: “For perhaps the first time since the Covid-19 pandemic, prime offices are looking like an increasingly attractive defensive investment as they are relatively protected from higher inflation due to the indexation of rents across core European cities. Based on our preliminary figures, prime office yields compressed further by an average of 17 bps year on year to 3.40% in Q1 2022. Office yield spreads to risk-free rates continue to illustrate the sector’s attractiveness despite some more recent increases in bond yields. Given this, we believe the potential for further yield compression is less likely, and we forecast a stable outlook on pricing throughout 2022.”
Chart of the Week - Gold Miners vs Energy Producers - 20.04.2022

Why Is The Current Crude Oil Price Higher Than Only Few Days Ago? Russia And Ukraine Still Waging War, Kremlin Says Sanctions (If Applied) Will Seriously Impact Europe

Mikołaj Marcinowski Mikołaj Marcinowski 21.03.2022 15:08
Sanctions keep affecting the supply diversification. It’s not sure how will the following days shape so civilians, investors and big companies are following, we may say, indefinite fluctuations of Brent and WTI. The price has increased by ca. 20% since the beginning of the war on February 24th. As the chart below shows the price was interacting with the news about crude oil inventories, testimonies of countries’ leaders and all the communication. Crude Oil Price Chart – 24/02-21/03 Today crude oil has gained ca. X% opening higher as the war goes on and there’s no significant signal that it’s coming to an end. Ukrainians don’t surrender in Mariupol and, according to Bloomberg, Kremlin says that consequences of sanctions will seriously impact Europe. Crude Oil Price Chart 21/03/22 – [UPDATE: 14:05 GMT] It’s not sure what can we expect from the following days. A thing we can be sure of is that we should follow the Crude Oil Inventories release on Wednesday. Follow us on Twitter to check the markets’ reaction and don’t miss a thing! Source: Investing.com, Bloomberg.com Charts: Courtesy of TradingView.com
S&P 500 (SPX) Up, Crude Oil Up, Credit Markets Up, Bitcoin Price Oops...

S&P 500 (SPX) Up, Crude Oil Up, Credit Markets Up, Bitcoin Price Oops...

Monica Kingsley Monica Kingsley 21.03.2022 15:37
S&P 500 did really well through quad witching, and the same goes for credit markets. 4-day streak of non-stop gains – very fast ones. Short squeeze characteristics in the short run, makes me think this rally fizzles out before the month ends – 4,600 would hold. We‘re likely to make a higher low next, and that would be followed by 4-6 weeks of rally continuation before the bears come back with real force again. July would present a great buying opportunity in this wild year of a giant trading range. As I wrote yesterday: (…) The paper asset made it through quad witching in style - both stocks and bonds. The risk-on sentiment however didn't sink commodities or precious metals. Wednesday's FOMC brought worries over the Fed sinking real economy growth but Powell's conference calmed down fears through allegedly no recession risks this year, ascribing everything to geopolitics. Very convenient, but the grain of truth is that the Fed wouldn't indeed jeopardize GDP growth this year - that's the context of how to read the allegedly 7 rate hikes and balance sheet shrinking this year still. Not gonna happen as I stated on Thursday already. Such are my short- and medium-term thoughts on stocks. Copper remains best positioned to continue rising with relatively little volatility while crude oil isn‘t yet settled (its good times would continue regardless of the weak volume rally of last two days, which is making me a little worried). Precious metals are still basing, and would continue moving higher best on the Fed underperforming in its hawkish pronouncements. No way they‘re hiking 7 times this year and shrinking balance sheet at the same time as I wrote on Thursday – Treasury yields say they‘ll take on inflation more in 2023. 2022 is a mere warm-up. Let‘s move right into the charts (all courtesy of www.stockcharts.com). S&P 500 and Nasdaq Outlook S&P 500 is now past the 4,400 – 4,450 zone, and hasn‘t yet consolidated. This week would definitely though not be as bullish as the one just gone by – the bulls will be challenged a little. Credit Markets HYG eked out more gains, but the air is slowly becoming thinner. As the sentiment turns more bullish through no deep decline over the coming few days, that‘s when junk bonds would start wavering. Gold, Silver and Miners Precious metals aren‘t turning down for good here – I think they‘re deciphering the Fed story of hiking slower than intended, which in effect gives inflation a new lease on life. Not that it was wavering, though. More upside in gold and silver to come. Crude Oil Crude oil is rising again, but look for a measured upswing that‘s not free from headwinds. While I think we would climb above $110 still, I‘m sounding a more cautious note given the decreasing volume – I would like to see more conviction next. Copper Copper is behaving, and would continue rising reliably alongside other commodities. It‘s also the best play considering downside protection at the moment. Bitcoin and Ethereum Bitcoin isn‘t recovering Sunday‘s setback – but the Ethereum upswing bodes well for risk taking today, even that doesn‘t concern cryptos all too much. Summary S&P 500 has a bit more to run before running into headwinds, which would happen still this week. Credit markets are a tad too optimistic, and rising yields would leave a mark especially on tech. Value, energy and materials are likely to do much better. Crude oil is bound to be volatile over the coming weeks, but still rising and spiking – not yet settled. Copper and precious metals present better appreciation opportunities when looking at their upcoming volatility. Within today‘s key analysis, I‘ve covered the path of stocks, so do have a good look at the opening part. Finally, cryptos likewise paint the picture of risk-on trades not being over just yet. Thank you for having read today‘s free analysis, which is available in full at my homesite. There, you can subscribe to the free Monica‘s Insider Club, which features real-time trade calls and intraday updates for all the five publications: Stock Trading Signals, Gold Trading Signals, Oil Trading Signals, Copper Trading Signals and Bitcoin Trading Signals.
Warren Buffett's Berkshire Hathaway Stock Tops $500,000

Warren Buffett's Berkshire Hathaway Stock Tops $500,000

Chris Vermeulen Chris Vermeulen 21.03.2022 21:44
A subscriber asked us recently where he should be putting his money and how to limit losses in his retirement portfolio. He expressed frustration as he watched Buffett’s Berkshire Hathaway stock going up, but at the same time, the stock indices going lower and many of his previously favored stocks experiencing substantial losses! This conversation naturally piqued our curiosity. We decided to look into this for him and, at the same time, share our findings with our subscribers.Berkshire Hathaway stock traded at an all-time record high price of $520,654.46. At a stock price of $512,991, Berkshire’s market capitalization is $756.23 billion. Last year, Berkshire generated a record $27.46 billion of operating profit, including gains at Geico car insurance, the BNSF railroad, and Berkshire Hathaway Energy.BERKSHIRE vs. S&P 500 BENCHMARKWarren Buffett, age 91 (known as the ‘Sage of Omaha’), is the chairman and CEO of Berkshire Hathaway. He is considered by many to be the most successful stock investor in the world and, according to Forbes Real-Time Billionaire List, has a personal net worth that exceeds $120 billion USD.Very few can compete with his long-term track record. Since 1965, Berkshire has provided +20% average annual returns, almost double the +10.2% average annual returns for the S&P 500 Stock Index benchmark. The 2022 year-to-date comparison is:BRK.A Berkshire Hathaway +14.53%; SPY SPDR ETF -6.36%; FB Facebook -35.64%However, according to Buffett’s own humility, he has endured years of underperformance and has had his share of bad stock picks. When Buffet was asked about drawdowns at one of Berkshire’s annual meetings, he stated, “Unless you can watch your stock holdings decline by 50% without becoming panic-stricken, you should not be in the stock market.” According to www.finance.yahoo.com, the five biggest percentage losses for Berkshire have been:1974 -48.7%, 1990 -23.1%, 1999 -19.9%, 2008 -31.8%, and 2015 -12.5%.WHAT CAN WE LEARN FROM THE ‘BUFFETT INDICATOR’?The Buffett Indicator, as dubbed by Berkshire shareholders, is the ratio of the total United States stock market valuations (the Wilshire 5000 stock index) divided by the annual U.S. GDP. The indicator peaked at the beginning of 2022 and remains near all-time highs even though many stocks are well off their record levels.This historical chart of the Buffett Indicator was created by www.currentmarketvaluation.com. Doing quantitative analysis, we learn that the indicator is more than 1.6 standard deviations above the historical average, which suggests the market is over-valued and, in time, will fall back to its historical average.Berkshire Hathaway At Fibonacci Resistance!On March 18, 2022, Berkshire hit an all-time high price of $520,654. The Fibonacci resistance level of 2.618 or 261.8% of the March 23 low of $239,440 is $520,196. As shown on the daily chart, Berkshire also met resistance at the 2.618 standard deviations of the quarterly Bollinger Band.THE BENCHMARK: S&P 500 SPY ETFThe S&P 500 Index is the industry standard benchmark when comparing investment returns. It’s worth noting that as Berkshire reached the Fibonacci 2.618 resistance, the SPY found support at the Fibonacci 1.618 of the SPY March 23, 2020 low.Central banks have begun to tighten credit by raising interest rates for the first time since 2018, attempting to bring fast-rising energy, food, and housing prices under control. More time is needed to determine the full impact that rising global interest rates will have on current markets.However, on the chart below, we can see that the SPY put in a major top around 480 and, for the time being, has found support around 420 (the Fibonacci 1.618 level). Considering the increased market volatility and that we are now entering a cycle of higher interest rates, it would not surprise us to see the SPY eventually break below 420.It is worth noting that when a market makes a top after a prolonged bull-market, we usually experience distribution. Distribution with volatility results from large institutions beginning to liquidate their holdings while smaller retail investors are trying to buy stocks on sale. In other words, the retail investors are buying the dip hoping to get a bargain, while the institutional investors are selling the rally hoping to be liquidated and/or go short. It is a battle that retail investors will eventually lose!It is important to understand we are not saying the market has topped and is headed lower. This article sheds some light on some interesting analyses that you should be aware of. As technical traders, we follow price only, and when a new trend has been confirmed, we will change our positions accordingly. We provide our ETF trades with subscribers to our newsletter, and surprisingly, we have just entered five new trades.Sign up for my free trading newsletter so you don’t miss the next opportunity!WHAT STRATEGIES CAN HELP YOU NAVIGATE The CURRENT MARKET TRENDS? Learn how we use specific tools to help us understand price cycles, set-ups, and price target levels in various sectors to identify strategic entry and exit points for trades. Over the next 12 to 24+ months, we expect very large price swings in the US stock market and other asset classes across the globe. We believe the markets have begun to transition away from the continued central bank support rally phase and have started a revaluation phase as global traders attempt to identify the next big trends. Precious Metals will likely start to act as a proper hedge as caution and concern begin to drive traders/investors into Metals and other safe-havens.GET READY, GET SET, GO - We invite you to learn more about how my three ETF Technical Trading Strategies can help you protect and grow your wealth in any type of market condition by clicking on the following link: www.TheTechnicalTraders.com
The Bitcoin Market Is Now Developing The Corrective Cycle To The Downside

March 22nd, 2022, Crypto Chartbook

Korbinian Koller Korbinian Koller 22.03.2022 19:44
Bitcoin´s time to go   Trying to pick tops and bottoms is honorable and a desirable goal. Nevertheless, there needs to be other insurances and principles in place. If an ideal spot passes or the market doesn’t provide for a low-risk entry or enough liquidity for an exit, one still needs alternate tools to participate in the market. Our quad exit strategy allows for position building and market participation that consistently extracts monies from the markets. Bitcoin, daily chart, keep calm and keep trading: Bitcoin in USD, daily chart as of March 22nd, 2022. Precision trading gets even more difficult in wartimes, when frequent and conflicting news events jolt prices alternating up and down. The daily chart above shows these jolts over the last three weeks of wartime. We can identify three low-risk long trade entry opportunities (green up arrows on double bottom price scenarios) and one short trading one (red downward arrow at a double top price formation). Our quad exit strategy takes on each of these trades a partial initial profit to mitigate risk, which allows the remainder position size to be the market’s money at risk only.     Bitcoin, weekly chart, pushing up: Bitcoin in USD, weekly chart as of March 22nd, 2022. Zooming out to larger time frames is another way to avoid noise and see a trading scenario more clearly, and, as such, find “go times” with more accuracy. This weekly chart illustrates that entries and exits are rather entry zones (red and green boxes) versus a precise price level. The trader’s goal is to exploit within such a zone a low-risk entry spot on a lower time frame to get positioned. Regarding bitcoin, we find overall price behavior to be up sloping over the last twelve months, a bullish notion. And we find a high likelihood for the momentary entry zone (green box to the right of the chart). In other words, we are right now in a price zone where its Bitcoin´s time to go. Bitcoin, monthly chart, March closing price: Bitcoin in USD, monthly chart as of March 22nd, 2022. Suppose we further remove ourselves from the noise by electing a higher timeframe. In that case, we find a pat situation on the monthly chart, pat not for a more significant edge for prices to go higher up but for timing on when to enter the markets. Our statistics show that it will be essential on what price level the month of March will be closing. With a close above current levels (white line), we will enter a bullish buy zone. Yet, if prices decline from here in the last nine days of this month, the probabilities of an immediate price advance rapidly decline. Bitcoin/Gold-Ratio, daily chart, Bitcoin´s time to go: Bitcoin/Gold-Ratio, daily chart as of March 22nd, 2022. An additional benefit quiet charting provides in turbulent times is to think outside the box. While all noise points toward the most heated issues, finding a trading opportunity elsewhere might be best. In our previous chart book release, we exploited a great go time for bitcoin. Last week, we provided entry points (green up arrows) for rotating one’s gold into bitcoin. Using our quad exit strategy, the trader who wanted to not expose his money to a volatile fiat currency trading world could profit near ten percent on his first fifty percent of position size. We are now placing the stop for the remainder position size to breakeven entry levels. Bitcoin´s time to go: In war, the first casualty is the truth. Under stress, our minds insist on reason, clarity, precise calls for action. Unfortunately, even the best-informed brightest minds can’t find reliable data in times of war since the distortion field of media around the world is at a level where lies and propaganda outweigh facts and truth.  Luckily, a trader can, in these times, rely more heavily on charts. Charts always encompass the sum of opinion. Charts are consistently working as a reliable source to trade from.  The psychological aspect is hugely beneficial since a consistent bombardment of news and everybody’s opinion can get quickly exhausting.  Reduce news data consumption at a time when calm and levelheadedness is the most powerful tool for wealth creation and preservation, and the “go time” will reveal itself nearly effortlessly.     Feel free to join us in our free Telegram channel for daily real time data and a great community. If you like to get regular updates on precious metals and cryptocurrencies, you can also subscribe to our free newsletter. Disclosure: This article and the content are for informational purposes only and do not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision. The views, thoughts and opinions expressed here are the author’s alone. They do not necessarily reflect or represent the views and opinions of Midas Touch Consulting. By Korbinian Koller|March 22nd, 2022|Tags: Bitcoin, Bitcoin bounce, Bitcoin bullish, Bitcoin consolidation, bitcoin/gold-ratio, crypto analysis, crypto chartbook, DeFi, Gold, Gold bullish, low risk, quad exit, technical analysis, trading education|0 Comments About the Author: Korbinian Koller Outstanding abstract reasoning ability and ability to think creatively and originally has led over the last 25 years to extract new principles and a unique way to view the markets resulting in a multitude of various time frame systems, generating high hit rates and outstanding risk reward ratios. Over 20 years of coaching traders with heart & passion, assessing complex situations, troubleshoot and solve problems principle based has led to experience and a professional history of success. Skilled natural teacher and exceptional developer of talent. Avid learner guided by a plan with ability to suppress ego and empower students to share ideas and best practices and to apply principle-based technical/conceptual knowledge to maximize efficiency. 25+ year execution experience (50.000+ trades executed) Trading multiple personal accounts (long and short-and combinations of the two). Amazing market feel complementing mechanical systems discipline for precise and extreme low risk entries while objectively seeing the whole picture. Ability to notice and separate emotional responses from the decision-making process and to stand outside oneself and one’s concerns about images in order to function in terms of larger objectives. Developed exit strategies that compensate both for maximizing profits and psychological ease to allow for continuous flow throughout the whole trading day. In depth knowledge of money management strategies with the experience of multiple 6 sigma events in various markets (futures, stocks, commodities, currencies, bonds) embedded in extreme low risk statistical probability models with smooth equity curves and extensive risk management as well as extensive disaster risk allow for my natural capacity for risk-taking.
Gold To Go Head To Head With Fed And Inflation

Gold To Go Head To Head With Fed And Inflation

Przemysław Radomski Przemysław Radomski 23.03.2022 15:17
  The Fed's hawkish alerts seem like a voice in the wilderness to gold investors. However, a carefree attitude can backfire on them – in just a few months. An epic battle is unfolding across the financial markets as the Fed warns investors about its looming rate hike cycle and the latter ignores the ramifications. However, with perpetually higher asset prices only exacerbating the Fed's inflationary conundrum, a profound shift in sentiment will likely occur over the next few months. To explain, I highlighted in recent days how the Fed has turned the hawkish dial up to 100. Moreover, I wrote on Mar. 22 that it's remarkable how much the PMs' domestic fundamental outlooks have deteriorated in recent weeks. Yet, prices remain elevated, investors remain sanguine, and the bullish bands continue to play.  However, with inflation still rising and the Fed done playing games, the next few months should elicit plenty of fireworks. For example, with another deputy sounding the hawkish alarm, San Francisco Fed President Mary Daly said on Mar. 22: "Inflation has persisted for long enough that people are starting to wonder how long it will persist. I'm already focused on letting make sure this doesn't get embedded and we see those longer-term inflation expectations drift up." As a result, Daly wants to ensure that the "main risk" to the U.S. economy doesn't end up causing a recession. Please see below: Source: Reuters Likewise, St. Louis Fed President James Bullard reiterated his position on Mar. 22, telling Bloomberg that “faster is better,” and that “the 1994 tightening cycle or removal of accommodation cycle is probably the best analogy here.” Please see below: Source: Bloomberg   Falling on Deaf Ears To that point, while investors seem to think that the Fed can vastly restrict monetary policy without disrupting a healthy U.S. economy, a major surprise could be on the horizon. For example, the futures market has now priced in nearly 10 rate hikes by the Fed in 2022. As a result, should we expect the hawkish developments to unfold without a hitch? Please see below: To explain, the light blue, dark blue, and pink lines above track the number of rate hikes expected by the Fed, BoE, and ECB. If you analyze the right side of the chart, you can see that the light blue line has risen sharply over the last several days and months. For your reference, if you focus your attention on the material underperformance of the pink line, you can see why I’ve been so bearish on the EUR/USD for so long. Also noteworthy, please have a look at the U.S. 2-Year Treasury yield minus the German 2-Year Bond yield spread. If you analyze the rapid rise on the right side of the chart below, you can see how much short-term U.S. yields have outperformed their European counterparts in 2021/2022. Source: Bloomberg/ Lisa Abramowicz More importantly, though, with Fed officials’ recent rhetoric encouraging more hawkish re-pricing instead of talking down expectations (like the ECB), they want investors to slow their roll. However, investors are now fighting the Fed, and the epic battle will likely lead to profound disappointment over the medium term. Case in point: when Fed officials dial up the hawkish rhetoric, their “messaging” is supposed to shift investors’ expectations. As such, the threat of raising interest rates is often as impactful as actually doing it. However, when investors don’t listen, the Fed has to turn the hawkish dial up even more. If history is any indication, a calamity will eventually unfold.  Please see below: To explain, the blue line above tracks the U.S. federal funds rate, while the various circles and notations above track the global crises that erupted during the Fed’s rate hike cycles. As a result, standard tightening periods often result in immense volatility.  However, with investors refusing to let asset prices fall, they’re forcing the Fed to accelerate its rate hikes to achieve its desired outcome (calm inflation). As such, the next several months could be a rate hike cycle on steroids.  To that point, with Fed Chairman Jerome Powell dropping the hawkish hammer on Mar. 21, I noted his response to a question about inflation calming in the second half of 2022. I wrote on Mar. 22: "That story has already fallen apart. To the extent it continues to fall apart, my colleagues and I may well reach the conclusion we'll need to move more quickly and, if so, we'll do so." To that point, Powell said that “there’s excess demand" and that "the economy is very strong and is well-positioned to handle tighter monetary policy." As a result, while investors seem to think that Powell’s bluffing, enlightenment will likely materialize over the next few months. Please see below: Source: Reuters Furthermore, with Goldman Sachs economists noting the shift in tone from “steadily” in January to “expeditiously” on Mar. 21, they also upped their hawkish expectations. They wrote: “We are now forecasting 50bp hikes at both the May and June meetings (vs. 25bp at each meeting previously). The level of the funds rate would still be low at 0.75-1% after a 50bp hike in May, and if the FOMC is open to moving in larger steps, then we think it would see a second 50bp hike in June as appropriate under our forecasted inflation path.” “After the two 50bp moves, we expect the FOMC to move back to 25bp rate hikes at the four remaining meetings in the back half of 2022, and to then further slow the pace next year by delivering three quarterly hikes in 2023Q1-Q3. We have left our forecast of the terminal rate unchanged at 3-3.25%, as shown in Exhibit 1.” Please see below: In addition, this doesn’t account for the Fed’s willingness to sell assets on its balance sheet. For context, Powell said on Mar. 16 that quantitative tightening (QT) should occur sometime in the summer and that shrinking the balance sheet “might be the equivalent of another rate increase.” As a result, investors’ lack of preparedness for what should unfold over the next few months has been something to behold. However, the reality check will likely elicit a major shift in sentiment.  In contrast, the bond market heard Powell’s message loud and clear, and with the U.S. 10-Year Treasury yield hitting another 2022 high of ~2.38% on Mar. 22, the entire U.S. yield curve is paying attention. Please see below: Source: Investing.com Finally, the Richmond Fed released its Fifth District Survey of Manufacturing Activity on Mar. 22. With the headline index increasing from 1 in February to 13 in March, the report cited “increases in all three of the component indexes – shipments, volume of new orders, and number of employees.” Moreover, the prices received index increased month-over-month (MoM) in March (the red box below), while future six-month expectations for prices paid and received also increased (the blue box below). As a result, inflation trends are not moving in the Fed’s desired direction. Please see below: Source: Richmond Fed Likewise, the Richmond Fed also released its Fifth District Survey of Service Sector Activity on Mar. 22, nd while the headline index decreased from 13 in February to -3 in March, current and future six-month inflationary pressures/expectations rose MoM. Source: Richmond Fed The bottom line? While the Fed is screaming at the financial markets to tone it down to help calm inflation, investors aren't listening. With higher prices resulting in more hawkish rhetoric and policy, the Fed should keep amplifying its message until investors finally take note. If not, inflation will continue its ascent until demand destruction unfolds and the U.S. slips into a recession. As such, if investors assume that several rate hikes will commence over the next several months with little or no volatility in between, they're likely in for a major surprise. In conclusion, the PMs declined on Mar. 22, as the sentiment seesaw continued. However, as I noted, it's remarkable how much the PMs' domestic fundamental outlooks have deteriorated in recent weeks. Thus, while the Russia-Ukraine conflict keeps them uplifted, for now, the Fed's inflation problem is nowhere near an acceptable level. As a result, when investors finally realize that a much tougher macroeconomic environment confronts them over the next few months, the shift in sentiment will likely culminate in sharp drawdowns. Thank you for reading our free analysis today. Please note that the above is just a small fraction of today’s all-encompassing Gold & Silver Trading Alert. The latter includes multiple premium details such as the targets for gold and mining stocks that could be reached in the next few weeks. If you’d like to read those premium details, we have good news for you. As soon as you sign up for our free gold newsletter, you’ll get a free 7-day no-obligation trial access to our premium Gold & Silver Trading Alerts. It’s really free – sign up today. Przemyslaw Radomski, CFAFounder, Editor-in-chiefSunshine Profits: Effective Investment through Diligence & Care * * * * * All essays, research and information found above represent analyses and opinions of Przemyslaw Radomski, CFA and Sunshine Profits' associates only. As such, it may prove wrong and be subject to change without notice. Opinions and analyses are based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are deemed to be accurate, Przemyslaw Radomski, CFA and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Radomski is not a Registered Securities Advisor. By reading Przemyslaw Radomski's, CFA reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Przemyslaw Radomski, CFA, Sunshine Profits' employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.
The Swing Overview - Week 11 2022

The Swing Overview - Week 11 2022

Purple Trading Purple Trading 23.03.2022 16:13
The Swing Overview - Week 11 The fall in the indices that we have seen in recent days has stopped. The indices strengthened on expectations of a diplomatic solution to the war in Ukraine, which has been going on for more than three weeks. However, these negotiations have not led to any significant breakthrough yet, so the upside potential for the indices could be limited. In addition, the Fed has started its own war against inflation and raised interest rates for the first time in three years, which is rather negative news for equity indices in the short term. However, the statistics say that in the long run it does not mean a trend reversal for the SP 500 index. The Bank of England also raised rates, but the pound surprisingly weakened. The reason for this is in our article. The war in Ukraine   The war in Ukraine has been going on for more than three weeks now and there is still no end in sight. Sentiment has started to improve after reports on negotiations for a diplomatic solution to the war. However, Russia continues to make unrealistic demands that Ukraine cannot agree to. Negotiations have therefore have not led to a solution yet.   Meanwhile, the economic situation in Russia continues to deteriorate rapidly as a result of the sanctions. The credit rating agency Standard & Poor's has downgraded Russia's credit rating from the current grade CCC- to CC. Russia has already announced that it is having difficulty repaying its bonds. However, Russia managed to pay the coupon payments that were due this week, averting the country's imminent bankruptcy for now.   The war in Ukraine will have a negative impact on the global economy. World economic growth for 2022 is expected to fall from 4% to 3.2%. Apart from Russia and Ukraine, Europe and the UK will be hardest hit, where there is a significant risk of recession.   The Fed has raised interest rates The US Fed has launched a war on inflation and raised interest rates for the first time since December 2018. The current rate is 0.50% and further increases will continue. The Fed disclosed that rates are expected to rise to 2.80% within a year.  Figure 1: The evolution of interest rates in the US   The evolution of interest rates, over the last 25 years, is shown in Figure 1.   Jerome Powell commented that the Fed's main goal is to achieve price stability and maximum employment. He expects inflation, which has now reached 7.9%, to reach the target of 2%, but this will take longer than originally expected.    The problem is a persistent labour shortage, which is putting upward pressure on wages. However, the situation is already starting to normalise in some sectors, suggesting that this should not be an uncontrollable spiral wage growth that would strongly support inflation.   According to Powell, the US economy is in good shape and ready for monetary policy normalisation. Therefore, the Fed will start in May to reduce the bonds in its balance sheet, which has grown considerably to almost $9 trillion thanks to the support of the economy during the covid pandemic.   The Index SP500 As far as the impact of interest rate hikes is concerned, this should not change the long-term bullish market. Statistics confirm that over the following 12 months from the date of the hike, the index has reached higher levels in every case since 1983. Figure 2: The impact of the first interest rate hike on the performance of the SP 500 index. Source: Bloomberg     However, the statistics also show that in the short term, there were declines in the index within 3 months and this cannot be ruled out now as well. As for the current developments on the SP 500 index, it has recently bounced off its supports. The reason for this was the hope for a diplomatic solution to the war in Ukraine. However, this has stalled. The Fed also gave optimism to the indices with its statement about the economy doing well. Figure 3: SP 500 on H4 and D1 chart   Overall, the index is currently in a downtrend. In terms of technical analysis, the price has reached the resistance level which is at 4,383 - 4,420. According to the daily chart, the price has reached the EMA 50 moving average, which also serves as resistance. Support according to the H4 chart is at 4,328 - 4,334.  Significant support according to the daily chart is at 4 105 - 4 152.  German DAX index Figure 4: The German DAX index on H4 and daily chart   There was a significant deterioration in economic sentiment in Germany in March, as shown by the ZEW index, which reached a negative reading of -39.3. However, the DAX index, which is much more affected by the war in Ukraine than the US indices, strengthened last week.  The reason for the index's rise was mainly due to signs of a diplomatic solution to the conflict. The price climbed up to the resistance level on the H4 chart last week, which is in the area near the 14,500 price. The strong resistance according to the daily chart is in the range between 14,800 - 15,000.  The closest support according to the H4 chart is at 14,030 - 14,100.   The euro strengthened after the Fed announcement The euro price retested the resistance area which is in the area near 1.1130 - 1.1150 according to the daily chart. However, the Euro remains under pressure and although the ECB was surprisingly hawkish at the last meeting, it is still lagging behind compared to the US Fed. Moreover, the war in Ukraine, and according to some, the looming recession in the Eurozone, does not give much room for the Euro to strengthen. Therefore, it would not be surprising if the EURUSD falls to levels around 1. 0890 - 1. 0900, where the nearest support level is.     Figure 5: The EURUSD on the H4 and daily charts.   From a technical point of view, we can see that EURUSD is still in a downtrend according to the daily chart, so the current pullback may be an opportunity for trades in the short direction.   The Bank of England also raised interest rates The Bank of England raised its key interest rate by 0.25%.  Therefore, the rate is currently at 0.75%. By raising interest rates, the central bank is responding to rising inflation, which is expected to hit 8% in June 2022. But the pound surprisingly weakened sharply after the rate announcement. This was because the central bank was much more cautious in its expectations for the future of the economy. There are already signs that the war in Ukraine is having a negative impact on consumer confidence and is also having a negative impact on household incomes. This would slow economic activity. That is why the central bank has moved away from its previous aggressive hawkish tone.   Figure 6: The British Pound on H4 and daily chart.   A resistance is in the area of 1.3170 - 1.3200, where the price has halted. A support is at 1.3000.  
Positions of large speculators according to the COT report as at 15/3/2022

Positions of large speculators according to the COT report as at 15/3/2022

Purple Trading Purple Trading 23.03.2022 19:52
Positions of large speculators according to the COT report as at 15/3/2022 Total net speculator positions in the USD index fell by 5,664 contracts last week. This change is the result of a decrease in long positions by 6,264 contracts and a decrease in short positions by 600 contracts. The decline in total net speculator positions occurred last week in the euro, the British pound and the Japanese yen. The increase in total net positions occurred in the New Zealand dollar, the Australian dollar, the Canadian dollar and the Swiss franc. The significant growth in positions of large speculators in the commodity currencies AUD, NZD and CAD can be explained by the rising prices of commodities exported by these countries. A large number of options and futures contracts expired last week, which explains the large decline in open interest for each currency. The positions of speculators in individual currencies The total net positions of large speculators are shown in Table 1: If the value is positive then the large speculators are net long. If the value is negative, the large speculators are net short. Table 1: Total net positions of large speculators Date USD Index EUR GBP AUD NZD JPY CAD CHF Mar 15, 2022 28380 18794 -29061 -44856 3653 -62340 17740 -5229 Mar 08, 2022 34044 58844 -12526 -78195 -12379 -55856 7646 -9710 Mar 01, 2022 34774 64939 -337 -78336 -14172 -68732 14140 -15248 Feb 22, 2022 36084 59306 -5809 -84080 -11551 -63187 9253 -10987 Feb 15, 2022 35386 47581 2237 -86694 -9333 -66162 12170 -9715 Feb 08, 2022 33765 38842 -8545 -85741 -10366 -59148 14886 -9399   Note: The explanation of COT methodolody is at the the end of the report.   Notes: Large speculators are traders who trade large volumes of futures contracts, which, if the set limits are met, must be reported to the Commodity Futures Trading Commission. Typically, this includes traders such as funds or large banks. These traders mostly focus on trading long-term trends and their goal is to make money on speculation with the instrument. ​The total net positions of large speculators are the difference between the number of long contracts and the number of short contracts of large speculators. Positive value shows that large speculators are net long. Negative value shows that large speculators are net short. The data is published every Friday and is delayed because it shows the status on Tuesday of the week. The total net positions of large speculators show the sentiment this group has in the market. A positive value of the total net positions of speculators indicates bullish sentiment, a negative value of total net positions indicates bearish sentiment. When interpreting charts and values, it is important to follow the overall trend of total net positions. The turning points are also very important, i.e. the moments when the total net positions go from a positive value to a negative one and vice versa. Important are also extreme values ​​of total net positions as they often serve as signals of a trend reversal. Sentiment according to the reported positions of large players in futures markets is not immediately reflected in the movement of currency pairs. Therefore, information on sentiment is more likely to be used by traders who take longer trades and are willing to hold their positions for several weeks or even months.   Detailed analysis of selected currencies   Explanations:   Purple line and histogram: this is information on the total net position of large speculators. This information shows the strength and sentiment of an ongoing trend. It is the indicator r_COT Large Speculators (by Kramsken) in www.tradingview.com. Information on the positions of so-called hedgers is not shown in the chart, due to the fact that their main goal is not speculation, but hedging. Therefore, this group usually takes the opposite positions than the large speculators. For this reason, the positions of hedgers are inversely correlated with the movement of the price of the underlying asset. However, this inverse correlation shows the ongoing trend less clearly than the position of large speculators.​ We show moving average SMA 100 (blue line) and EMA 50 (orange line) on daily charts. ​Charts are made with the use of www.tradingview.com. The source of numerical data is www.myfxbook.com The Euro date Open Interest Specs Long Specs Short Specs Net positions change Open Interest change Long change Short change Net Positions Sentiment Mar 15, 2022 666010 202040 183246 18794 -72980 -40643 -593 -40050 Weak bullish Mar 08, 2022 738990 242683 183839 58844 19015 14298 20393 -6095 Weak bullish Mar 01, 2022 719975 228385 163446 64939 23293 14190 8557 5633 Bullish Feb 22, 2022 696682 214195 154889 59306 -5365 -3704 -15429 11725 Bullish Feb 15, 2022 702047 217899 170318 47581 1949 -1074 -9813 8739 Bullish Feb 08, 2022 700098 218973 180131 38842 14667 5410 -3716 9126 Býčí         Total Change -19421 -11523 -601 -10922     Figure 1: The euro and COT positions of large speculators on a weekly chart and the EURUSD on D1   The total net positions of speculators reached 18 794 contracts last week and they are down by 40 050 contracts compared to the previous week. This change is due to a decrease in long positions by 40,643 contracts and an increase in short positions by 593 contracts. These data suggest a weakening of the bullish sentiment in the euro. The open interest, which fell by 72,980 contracts in the last week, shows that the upward movement that occurred in the euro last week was not supported by a volume and it is therefore a weak price action. The euro continues to weaken under the influence of the war in Ukraine. Last week it returned to a resistance level which could be an opportunity to trade short in the event of a downtrend.  Long-term resistance: 1.1120 – 1.1150. Support: 1.080-1.0850. The next support is at 1.0640-1.0700.   The British pound date Open Interest Specs Long Specs Short Specs Net positions change Open Interest change Long change Short change Net Positions Sentiment Mar 15, 2022 188323 32442 61503 -29061 -57989 -18540 -2005 -16535 Bearish Mar 08, 2022 246312 50982 63508 -12526 34443 3303 15492 -12189 Bearish Mar 01, 2022 211869 47679 48016 -337 23426 5430 -42 5472 Weak bearish Feb 22, 2022 188443 42249 48058 -5809 -6859 -7902 144 -8046 Bearish Feb 15, 2022 195302 50151 47914 2237 -2646 5442 -5340 10782 Bullish Feb 08, 2022 197948 44709 53254 -8545 13941 15112 52 15060 Weak bearish         Total Change 4316 2845 8301 -5456     Figure 2: The GBP and COT positions of large speculators on a weekly chart and the GBPUSD on D1   The total net positions of speculators last week amounted to -29,061 contracts and they are down by 16,535 contracts compared to the previous week. This change is due to a decrease in long positions by 18,540 contracts and a decrease in short positions by 2,005 contracts. This suggests bearish sentiment as the total net positions of large speculators are negative while there is also their further decline. Open interest, which fell by 57,989 contracts last week, means that the rise in the pound price that occurred last week was not supported by volume and it is therefore a weak price action. Risk off sentiment due to the war in Ukraine continues to weigh on the pound and therefore the pound is weakening strongly. Although the Bank of England raised interest rates by 0.25% to 0.75% last week, it also warned of a decline in economic growth as a result of the war in Ukraine. The change in central bank rhetoric is a bearish signal for the pound. Long-term resistance: 1.3180-1.3210.  Next resistance is near 1.3270 – 1.3330. Support is near 1.3000.     The Australian dollar   date Open Interest Specs Long Specs Short Specs Net positions change Open Interest change Long change Short change Net Positions Sentiment Mar 15, 2022 124521 24281 69137 -44856 -72573 4760 -28579 33339 Weak bearish Mar 08, 2022 197094 19521 97716 -78195 7427 6801 6660 141 Weak bearish Mar 01, 2022 189667 12720 91056 -78336 -2912 1167 -4577 5744 Weak bearish Feb 22, 2022 192579 11553 95633 -84080 1 -139 -2753 2614 Weak bearish Feb 15, 2022 192578 11692 98386 -86694 -3825 -5631 -4678 -953 Bearish Feb 08, 2022 196403 17323 103064 -85741 -510 -1512 4400 -5912 Bearish         Total Change -72392 5446 -29527 34973     Figure 3: The AUD and COT positions of large speculators on a weekly chart and the AUDUSD on D1     The total net positions of speculators last week reached - 44 856 contracts, having increased by 33 339 contracts compared to the previous week. This change is due to an increase in long positions by 4,706 contracts and a decrease in short positions by 28,579 contracts. This data suggests a weakening of bearish sentiment in the Australian dollar. Last week we saw a decline in open interest of 72,573 contracts. This means that the upward move that occurred last week was not supported by a volume and it was therefore a weak move as new money did not flow into the market. The Australian dollar strengthened strongly again last week and reached a resistance level. Long-term resistance: 0.7370-0.7440 Long-term support: 0.7160-0.7180.  A strong support is near 0.7080 – 0.7120.   The New Zealand dollar   date Open Interest Specs Long Specs Short Specs Net positions change Open Interest change Long change Short change Net Positions Sentiment Mar 15, 2022 39200 21493 17840 3653 -14050 5718 -10314 16032 Bullish Mar 08, 2022 53250 15775 28154 -12379 2861 5290 3497 1793 Weak bearish Mar 01, 2022 50389 10485 24657 -14172 -6247 -6858 -4237 -2621 Bearish Feb 22, 2022 56636 17343 28894 -11551 -7469 -7580 -5362 -2218 Bearish Feb 15, 2022 64105 24923 34256 -9333 9228 7755 6722 1033 Weak bearish Feb 08, 2022 54877 17168 27534 -10366 -3590 -2037 -3369 1332 Weak bearish         Total Change -19267 2288 -13063 15351     Figure 4: The NZD and the position of large speculators on a weekly chart and the NZDUSD on D1   The total net positions of speculators reached 3,653 contracts last week and they are up by 16,032 contracts compared to the previous week. This change is due to an increase in long positions by 5,718 contracts and a decrease in short positions by 10,314 contracts. This data suggests that there was bullish sentiment on the New Zealand dollar last week. Open interest fell significantly by 14,050 contracts last week. Therefore, the upward movement in the NZDUSD that occurred last week was not supported by volume and therefore the move was weak. The NZDUSD strengthened strongly last week and reached the resistance level. Long-term resistance: 0.690 – 0.6930 Long-term support: 0.6730-0.6740 and the next support is at 0.6590 – 0.6600.   Explanation to the COT report The COT report shows the positions of major participants in the futures markets. Futures contracts are derivatives and are essentially agreements between two parties to exchange an underlying asset for a predetermined price on a predetermined date. They are standardised, specifying the quality and quantity of the underlying asset. They are traded on an exchange so that the total volume of these contracts traded is known.   Open interest: open interest is the sum of all open futures contracts (i.e. the sum of short and long contracts) that exist on a given asset. OI increases when a new futures contract is created by pairing a buyer with a seller. The OI decreases when an existing futures contract expires at a given expiry time or by settlement. Low or no open interest means that there is no interest in the market. High open interest indicates high activity and traders pay attention to this market. A rising open interest indicates that there is demand for the currency. That is, a rising OI indicates a strong current trend. Conversely, a weakening open interest indicates that the current trend is not strong. Open Interest Price action Interpretation Notes Rising Rising Strong bullish market New money flow in the particular asset, more bulls entered the market which pushes the price up. The trend is strong. Rising Falling Strong bearish market Price falls, more bearish traders entered the market which pushes the price down. The trend is strong. Falling Rising Weak bullish market Price is going up but new money do not flow into the market. Existing futures contracts expire or are closed. The trend is weak. Falling Falling Weak bearish market Price is going down, but new money do not flow into the market. Existing futures expire or are closed, the trend is weak.   Large speculators are traders who trade large volumes of futures contracts, which, if the set limits are met, must be reported to the Commodity Futures Trading Commission. Typically, this includes traders such as funds or large banks. These traders mostly focus on trading long-term trends and their goal is to make money on speculation with the instrument. Traders should try to trade in the direction of these large speculators. The total net positions of large speculators are the difference between the number of long contracts and the number of short contracts of large speculators. Positive value shows that large speculators are net long. Negative value shows that large speculators are net short. The data is published every Friday and is delayed because it shows the status on Tuesday of the week. The total net positions of large speculators show the sentiment this group has in the market. A positive value of the total net positions of speculators indicates bullish sentiment, a negative value of total net positions indicates bearish sentiment. When interpreting charts and values, it is important to follow the overall trend of total net positions. The turning points are also very important, i.e. the moments when the total net positions go from a positive value to a negative one and vice versa. Important are also extreme values ​​of total net positions as they often serve as signals of a trend reversal. The COT data are usually reported every Friday and they show the status on Tuesday of the week. Sentiment according to the reported positions of large players in futures markets is not immediately reflected in the movement of currency pairs. Therefore, information on sentiment is more likely to be used by traders who take longer trades and are willing to hold their positions for several weeks or even months.
Falling Japanese yen suggests a changing world order

Falling Japanese yen suggests a changing world order

Alex Kuptsikevich Alex Kuptsikevich 24.03.2022 15:23
The collapse of the Japanese yen continues, and so far, there are no signs of a trend reversal. The rise in the Yen is often linked to capital flight from risky assets, and the weakening is a sign of increased demand for risky assets. But that explanation hardly fits with what is happening now. We likely see the start of a significant reassessment by the markets of Japan's position in the financial system. In a worst-case scenario, this may turn into a debt crisis in the Land of the Rising Sun and be an even bigger disaster for financial markets than the eurozone debt crisis of a decade ago.The starting point for the weakening of the Yen was at the start of February. At that time, equities were in demand as a haven for capital to maintain the purchasing power of investments. The flow into equities was interrupted by the war in Ukraine but accelerated in the last couple of weeks on signs that these events have hyped up the processes that were taking place before. And these processes are now most visible in the dynamics of the Japanese yen against those currencies where the central bank can respond adequately to inflation.Since the start of February, the USDJPY has risen by 6.5%, and almost all of this increase has taken place since March 7th, taking the pair back to levels last seen at the end of 2015. A much more impressive rally is taking place in the Aussie and Kiwi against the Yen. Since the start of February, they have soared by more than 12%. So far this month, the strengthening is the largest in 11 years for AUDJPY and in more than 12 years for NZDJPY.The interest rate differential game, which was so beloved by traders in Japan before the global financial crisis, has found a second life. Australia and New Zealand have the economic potential to raise interest rates, as they are experiencing a surge in exports due to the boom in their export prices. However, the situation in Japan looks considerably more alarming, as Japan's debt-to-GDP ratio has risen by 77 percentage points to 170% since the financial crisis. Permanent QE from the Bank of Japan has kept government debt costs down but doesn't solve the problem.In the last decade, Japan has turned into a net commodity importer due to its growing dependence on energy and metals and increasing competition from China and Korea. The exchange rate should act as a natural mechanism to stabilise trade in this situation.But this adjustment is difficult for debt-laden Japan because selling currency would de facto mean selling bonds denominated in that currency. Under these circumstances, the Bank of Japan will either have to openly accept that it will finance the government (i.e. increase purchases despite inflation) or soften QE. The first option risks triggering a historic revaluation of the Yen. The second option would deal a blow to the economy and finances by raising questions about whether Japan can service its debt.
Operation in Ukraine leads to German Business climate collapse

Operation in Ukraine leads to German Business climate collapse

Alex Kuptsikevich Alex Kuptsikevich 25.03.2022 12:20
According to fresh Ifo estimates, business sentiment in Germany fell in March to its lowest level since January 2021. The business climate index fell from 98.5 to 90.8 following a collapse in business expectations amid war in Ukraine and the associated surge in energy and several other commodity prices.The drop in economic expectations was comparable to what we saw exactly two years ago at the start of the pandemic. New sentiment data may prove to be the first indication of the depth of the economic losses in the next quarter or two from ongoing events. They could wipe out as much as 1% of GDP in the outgoing quarter and another 2% in the next.However, the current scenario is already priced in the financial markets. The Eurozone stock indices, which often outperform the economic cycle, are now more than 15% above their lows of March 7th. The same can be said for the euro, which is firmly based around USD 1.10, which has been stable for the last three months against the pound and strengthened by more than 8% against the Japanese yen.
Large Currency Speculators sharply cut back on Canadian dollar bets

Large Currency Speculators sharply cut back on Canadian dollar bets

Invest Macro Invest Macro 27.03.2022 13:29
By InvestMacro | COT | Data Tables | COT Leaders | Downloads | COT Newsletter Here are the latest charts and statistics for the Commitment of Traders (COT) data published by the Commodities Futures Trading Commission (CFTC). The latest COT data is updated through Tuesday March 22nd and shows a quick view of how large traders (for-profit speculators and commercial entities) were positioned in the futures markets. All currency positions are in direct relation to the US dollar where, for example, a bet for the euro is a bet that the euro will rise versus the dollar while a bet against the euro will be a bet that the euro will decline versus the dollar. Highlighting the COT currency data was the sharp pullback in the Canadian dollar currency futures contracts. Canadian dollar speculators cut back on their bullish bets by a total of -22,680 contracts, the largest change among currencies this week and one week after CAD saw bullish bets rise by over +10,000 contracts (bringing the speculator standing to a six-week high). This week’s decline dropped the total net speculator standing back into bearish territory (-4,940 contracts) for the first time in the past ten weeks, dating back to January 11th. The major commodity currencies (Canadian dollar, Australian dollar and New Zealand dollar) all saw pullbacks in their speculator bets this week after strong rises last week. The only currency markets with higher speculator bets this week were the US Dollar Index (1,255 contracts) and the Euro (5,049 contracts). The currencies with declining bets were the Japanese yen (-16,142 contracts), Brazil real (-2,599 contracts), Swiss franc (-3,195 contracts), British pound sterling (-8,183 contracts), New Zealand dollar (-1,133 contracts), Canadian dollar (-22,680 contracts), Russian ruble (-263 contracts) and Bitcoin (-190 contracts). Data Snapshot of Forex Market Traders | Columns Legend Mar-22-2022 OI OI-Index Spec-Net Spec-Index Com-Net COM-Index Smalls-Net Smalls-Index USD Index 51,952 72 29,635 77 -33,521 19 3,886 59 EUR 658,817 66 23,843 42 -46,378 63 22,535 12 GBP 195,712 36 -37,244 47 50,390 59 -13,146 28 JPY 248,221 87 -78,482 18 104,790 88 -26,308 0 CHF 44,911 21 -8,424 55 20,499 54 -12,075 28 CAD 124,090 13 -4,940 43 -7,565 54 12,505 55 AUD 127,767 28 -51,189 37 48,388 55 2,801 59 NZD 35,256 15 2,520 75 -2,069 27 -451 47 MXN 134,766 19 -18,051 20 13,919 79 4,132 61 RUB 20,930 4 7,543 31 -7,150 69 -393 24 BRL 70,832 68 41,564 91 -44,463 8 2,899 100 Bitcoin 11,274 61 0 94 -481 0 481 24   US Dollar Index Futures: The US Dollar Index large speculator standing this week resulted in a net position of 29,635 contracts in the data reported through Tuesday. This was a weekly lift of 1,255 contracts from the previous week which had a total of 28,380 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish with a score of 76.9 percent. The commercials are Bearish-Extreme with a score of 18.9 percent and the small traders (not shown in chart) are Bullish with a score of 59.0 percent. US DOLLAR INDEX Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 83.8 3.2 10.5 – Percent of Open Interest Shorts: 26.8 67.7 3.0 – Net Position: 29,635 -33,521 3,886 – Gross Longs: 43,561 1,665 5,434 – Gross Shorts: 13,926 35,186 1,548 – Long to Short Ratio: 3.1 to 1 0.0 to 1 3.5 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 76.9 18.9 59.0 – Strength Index Reading (3 Year Range): Bullish Bearish-Extreme Bullish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: -7.1 12.1 -34.7   Euro Currency Futures: The Euro Currency large speculator standing this week resulted in a net position of 23,843 contracts in the data reported through Tuesday. This was a weekly boost of 5,049 contracts from the previous week which had a total of 18,794 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 42.3 percent. The commercials are Bullish with a score of 62.6 percent and the small traders (not shown in chart) are Bearish-Extreme with a score of 11.7 percent. EURO Currency Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 31.4 54.3 11.5 – Percent of Open Interest Shorts: 27.8 61.3 8.1 – Net Position: 23,843 -46,378 22,535 – Gross Longs: 207,051 357,492 75,970 – Gross Shorts: 183,208 403,870 53,435 – Long to Short Ratio: 1.1 to 1 0.9 to 1 1.4 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 42.3 62.6 11.7 – Strength Index Reading (3 Year Range): Bearish Bullish Bearish-Extreme NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: -4.6 7.6 -19.7   British Pound Sterling Futures: The British Pound Sterling large speculator standing this week resulted in a net position of -37,244 contracts in the data reported through Tuesday. This was a weekly fall of -8,183 contracts from the previous week which had a total of -29,061 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 47.2 percent. The commercials are Bullish with a score of 59.5 percent and the small traders (not shown in chart) are Bearish with a score of 28.4 percent. BRITISH POUND Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 16.7 70.4 9.9 – Percent of Open Interest Shorts: 35.8 44.7 16.6 – Net Position: -37,244 50,390 -13,146 – Gross Longs: 32,753 137,829 19,316 – Gross Shorts: 69,997 87,439 32,462 – Long to Short Ratio: 0.5 to 1 1.6 to 1 0.6 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 47.2 59.5 28.4 – Strength Index Reading (3 Year Range): Bearish Bullish Bearish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: -20.7 24.3 -25.6   Japanese Yen Futures: The Japanese Yen large speculator standing this week resulted in a net position of -78,482 contracts in the data reported through Tuesday. This was a weekly fall of -16,142 contracts from the previous week which had a total of -62,340 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish-Extreme with a score of 18.4 percent. The commercials are Bullish-Extreme with a score of 88.2 percent and the small traders (not shown in chart) are Bearish-Extreme with a score of 0.0 percent. JAPANESE YEN Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 14.8 76.2 7.2 – Percent of Open Interest Shorts: 46.4 34.0 17.7 – Net Position: -78,482 104,790 -26,308 – Gross Longs: 36,676 189,100 17,749 – Gross Shorts: 115,158 84,310 44,057 – Long to Short Ratio: 0.3 to 1 2.2 to 1 0.4 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 18.4 88.2 0.0 – Strength Index Reading (3 Year Range): Bearish-Extreme Bullish-Extreme Bearish-Extreme NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: -12.2 14.3 -19.3   Swiss Franc Futures: The Swiss Franc large speculator standing this week resulted in a net position of -8,424 contracts in the data reported through Tuesday. This was a weekly lowering of -3,195 contracts from the previous week which had a total of -5,229 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish with a score of 55.2 percent. The commercials are Bullish with a score of 53.9 percent and the small traders (not shown in chart) are Bearish with a score of 27.9 percent. SWISS FRANC Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 13.4 68.3 18.1 – Percent of Open Interest Shorts: 32.1 22.6 45.0 – Net Position: -8,424 20,499 -12,075 – Gross Longs: 6,012 30,663 8,143 – Gross Shorts: 14,436 10,164 20,218 – Long to Short Ratio: 0.4 to 1 3.0 to 1 0.4 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 55.2 53.9 27.9 – Strength Index Reading (3 Year Range): Bullish Bullish Bearish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: 1.7 4.0 -13.4   Canadian Dollar Futures: The Canadian Dollar large speculator standing this week resulted in a net position of -4,940 contracts in the data reported through Tuesday. This was a weekly lowering of -22,680 contracts from the previous week which had a total of 17,740 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 42.9 percent. The commercials are Bullish with a score of 54.1 percent and the small traders (not shown in chart) are Bullish with a score of 54.7 percent. CANADIAN DOLLAR Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 23.6 47.8 26.9 – Percent of Open Interest Shorts: 27.6 53.9 16.8 – Net Position: -4,940 -7,565 12,505 – Gross Longs: 29,314 59,269 33,406 – Gross Shorts: 34,254 66,834 20,901 – Long to Short Ratio: 0.9 to 1 0.9 to 1 1.6 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 42.9 54.1 54.7 – Strength Index Reading (3 Year Range): Bearish Bullish Bullish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: -19.2 6.8 20.8   Australian Dollar Futures: The Australian Dollar large speculator standing this week resulted in a net position of -51,189 contracts in the data reported through Tuesday. This was a weekly decline of -6,333 contracts from the previous week which had a total of -44,856 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 37.4 percent. The commercials are Bullish with a score of 55.0 percent and the small traders (not shown in chart) are Bullish with a score of 59.3 percent. AUSTRALIAN DOLLAR Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 18.6 59.4 20.0 – Percent of Open Interest Shorts: 58.7 21.5 17.8 – Net Position: -51,189 48,388 2,801 – Gross Longs: 23,747 75,916 25,508 – Gross Shorts: 74,936 27,528 22,707 – Long to Short Ratio: 0.3 to 1 2.8 to 1 1.1 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 37.4 55.0 59.3 – Strength Index Reading (3 Year Range): Bearish Bullish Bullish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: 32.0 -37.3 37.6   New Zealand Dollar Futures: The New Zealand Dollar large speculator standing this week resulted in a net position of 2,520 contracts in the data reported through Tuesday. This was a weekly fall of -1,133 contracts from the previous week which had a total of 3,653 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish with a score of 75.5 percent. The commercials are Bearish with a score of 27.2 percent and the small traders (not shown in chart) are Bearish with a score of 46.7 percent. NEW ZEALAND DOLLAR Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 48.7 40.4 9.5 – Percent of Open Interest Shorts: 41.5 46.2 10.7 – Net Position: 2,520 -2,069 -451 – Gross Longs: 17,156 14,227 3,339 – Gross Shorts: 14,636 16,296 3,790 – Long to Short Ratio: 1.2 to 1 0.9 to 1 0.9 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 75.5 27.2 46.7 – Strength Index Reading (3 Year Range): Bullish Bearish Bearish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: 21.6 -22.8 21.9   Mexican Peso Futures: The Mexican Peso large speculator standing this week resulted in a net position of -18,051 contracts in the data reported through Tuesday. This was a weekly reduction of -7,475 contracts from the previous week which had a total of -10,576 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish-Extreme with a score of 19.6 percent. The commercials are Bullish with a score of 78.6 percent and the small traders (not shown in chart) are Bullish with a score of 60.5 percent. MEXICAN PESO Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 43.1 51.1 5.1 – Percent of Open Interest Shorts: 56.5 40.8 2.0 – Net Position: -18,051 13,919 4,132 – Gross Longs: 58,150 68,880 6,851 – Gross Shorts: 76,201 54,961 2,719 – Long to Short Ratio: 0.8 to 1 1.3 to 1 2.5 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 19.6 78.6 60.5 – Strength Index Reading (3 Year Range): Bearish-Extreme Bullish Bullish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: -8.2 7.5 5.5   Brazilian Real Futures: The Brazilian Real large speculator standing this week resulted in a net position of 41,564 contracts in the data reported through Tuesday. This was a weekly fall of -2,599 contracts from the previous week which had a total of 44,163 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish-Extreme with a score of 91.2 percent. The commercials are Bearish-Extreme with a score of 7.9 percent and the small traders (not shown in chart) are Bullish-Extreme with a score of 100.0 percent. BRAZIL REAL Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 77.6 15.3 6.8 – Percent of Open Interest Shorts: 19.0 78.1 2.8 – Net Position: 41,564 -44,463 2,899 – Gross Longs: 55,001 10,863 4,851 – Gross Shorts: 13,437 55,326 1,952 – Long to Short Ratio: 4.1 to 1 0.2 to 1 2.5 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 91.2 7.9 100.0 – Strength Index Reading (3 Year Range): Bullish-Extreme Bearish-Extreme Bullish-Extreme NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: 20.9 -21.5 8.5   Russian Ruble Futures: The Russian Ruble large speculator standing this week resulted in a net position of 7,543 contracts in the data reported through Tuesday. This was a weekly decline of -263 contracts from the previous week which had a total of 7,806 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 31.2 percent. The commercials are Bullish with a score of 69.1 percent and the small traders (not shown in chart) are Bearish with a score of 23.9 percent. RUSSIAN RUBLE Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 36.6 60.6 2.8 – Percent of Open Interest Shorts: 0.5 94.7 4.7 – Net Position: 7,543 -7,150 -393 – Gross Longs: 7,658 12,679 593 – Gross Shorts: 115 19,829 986 – Long to Short Ratio: 66.6 to 1 0.6 to 1 0.6 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 31.2 69.1 23.9 – Strength Index Reading (3 Year Range): Bearish Bullish Bearish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: -15.6 16.7 -18.8   Bitcoin Futures: The Bitcoin large speculator standing this week resulted in a net position of 0 contracts in the data reported through Tuesday. This was a weekly lowering of -190 contracts from the previous week which had a total of 190 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish-Extreme with a score of 94.3 percent. The commercials are Bearish-Extreme with a score of 2.9 percent and the small traders (not shown in chart) are Bearish with a score of 23.9 percent. BITCOIN Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 74.7 2.9 11.2 – Percent of Open Interest Shorts: 74.7 7.2 6.9 – Net Position: 0 -481 481 – Gross Longs: 8,425 326 1,263 – Gross Shorts: 8,425 807 782 – Long to Short Ratio: 1.0 to 1 0.4 to 1 1.6 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 94.3 2.9 23.9 – Strength Index Reading (3 Year Range): Bullish-Extreme Bearish-Extreme Bearish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: 6.8 -23.4 -0.6   Article By InvestMacro – Receive our weekly COT Reports by Email *COT Report: The COT data, released weekly to the public each Friday, is updated through the most recent Tuesday (data is 3 days old) and shows a quick view of how large speculators or non-commercials (for-profit traders) were positioned in the futures markets. The CFTC categorizes trader positions according to commercial hedgers (traders who use futures contracts for hedging as part of the business), non-commercials (large traders who speculate to realize trading profits) and nonreportable traders (usually small traders/speculators) as well as their open interest (contracts open in the market at time of reporting).See CFTC criteria here.
Euro (EUR), Japanese Yen And Dollar (USD) Interactions. Dollar Index (DXY) Looks Quite Fine. A Year Full Of Fed Decisions...

Euro (EUR), Japanese Yen And Dollar (USD) Interactions. Dollar Index (DXY) Looks Quite Fine. A Year Full Of Fed Decisions...

Alex Kuptsikevich Alex Kuptsikevich 28.03.2022 12:44
There has been a lot of talk lately about the decline of the US dollar's reserve status. However, investors and traders should separate long-term trends from short-term market impulses. Reserve fund managers often prefer to refrain from active selling so as not to cause unnecessary market turbulence, so all reserve trends are stretched out over decades. As long as there is no real threat to the existence of the dollar and the solvency of the US government, managers will avoid making active moves to sell dollar assets. And all the revolutionary changes, such as switching to national currencies, will only result in CBs buying fewer new dollars. But it has little effect on the exchange rate. Right now, we are seeing the opposite picture, as the main competitors are under pressure. Investors are getting rid of the Japanese yen as the Bank of Japan accelerates its currency printing to buy bonds out of the market to stem rising yields. The local government is overburdened with debt, and the economy is still stalling. The only market solution is a devaluation of the yen, which would make exports from Japan more competitive and boost domestic spending. The single currency is suffering from a spike in energy prices and economic problems related to the war in Ukraine. Trading below 1.1000, the EURUSD pair is now where it was heading for the last six months before the pandemic. The medium-term outlook for the dollar is largely influenced by the extent to which the Fed will be able to implement policy tightening. More accurately, how Fed policy compares with the policy of the Bank of Japan, the ECB, or another major central bank. The Fed is clearly acting with greater amplitude, setting itself up for 7 rate hikes this year, which is far more than one would expect from Japan or the eurozone. Moreover, the US remains much further away from the war in Ukraine in business and trade terms than its biggest competitors, which means it can continue to benefit from capital inflows as a haven.
The Bitcoin Market Is Now Developing The Corrective Cycle To The Downside

Bitcoin (BTC) Price Charts - Daily, Monthly, BTC/GOLD - 29/03/22

Korbinian Koller Korbinian Koller 29.03.2022 11:35
Bitcoin wins the race   While Russia accepts hard currencies like gold, a move like this shows that the efficient attributes of bitcoin come to the forefront in times of crisis and are accepted for large business transactions between nations. Bitcoin, daily chart, price breakout: Bitcoin in USD, daily chart as of March 29th, 2022. Shortly after, president Putin confirmed this new way of doing business. In addition, China and Russia agreed to a thirty-year contract in the gas sector, transacted in Euros. We can see that we find ourselves in times of currency warfare and that it is essential to pay close attention to where and in what form we store our values. The daily chart above reflects this recent news in a price advance of bitcoin from US$37,567 to US$47,701. A 28% advance in just two weeks. Bitcoin broke through the sideways range, and this week shall show whether this breakout will be a successful one or not. In this case, the bulls have their odds much in favor over the bears.     Bitcoin, weekly chart, price left the station: Bitcoin in USD, weekly chart as of March 29th, 2022. We have now left the entry zone (green box) compared to last week’s chart book and the published weekly chart. While the crowd now chases a trade, struggling with the typical inefficiencies of volatility breakouts (bad fills, slippage, being late), we are established in our positioning with the sum of 9 accumulated runners. The runners being the last 25% of each initial position. A fully de-risked or more precisely no-risk venture (see quad exit)! Looking at the weekly chart, we find the resistance distribution zones at around US$49,650 and US$52,430. We place additional entries if the price returns to the entry box top. Bitcoin, monthly chart, if March closes strong: Bitcoin in USD, monthly chart as of March 28th, 2022. The price has entered the confirmed buy zone from a monthly perspective. The dual chart shows the progression from last week’s anticipation to this week’s chart book release. Should prices within this week stay within the green box, all-time frames are in alignment. A picture of a confirmed bullish bitcoin trend. It is a rare occurrence and confirmation for larger time frame traders and a call to look for low-risk entries, if no sufficient exposure is at play yet. Bitcoin/Gold-Ratio, daily chart, Bitcoin wins the race: Bitcoin/Gold-Ratio, daily chart as of March 28th, 2022. Another split-screen view of a chart (a daily chart of the bitcoin/gold ratio) shows the progression of last week’s chart book publication and the situation right now. We had a triangle breakout last week and a substantial advance since then. The suggested rotation out of gold and into bitcoin was/is a successful one. The overall move was 30% in just two weeks. One can use this relationship as well to indicate bitcoins’ recent gain in strength and direction. Bitcoin wins the race: Change is never accepted lightly. We typically resist change and prefer an existing state of affairs as human beings. Nevertheless, we find ourselves in less than average circumstances with a worldwide pandemic, a never-ending war, and a general divide in opinions. Russia’s recent move towards approval of bitcoin shows that when the rubber meets the road, what works and is practical in times of crisis and need, wins the race. While governments around the globe feverishly try to get their electronic payment systems developed, bitcoin already finds its use spreading, and successfully so.    Feel free to join us in our free Telegram channel for daily real time data and a great community. If you like to get regular updates on precious metals and cryptocurrencies, you can also subscribe to our free newsletter. Disclosure: This article and the content are for informational purposes only and do not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision. The views, thoughts and opinions expressed here are the author’s alone. They do not necessarily reflect or represent the views and opinions of Midas Touch Consulting. By Korbinian Koller|March 29th, 2022|Tags: Bitcoin, Bitcoin bounce, Bitcoin bullish, Bitcoin consolidation, bitcoin/gold-ratio, crypto analysis, crypto chartbook, DeFi, low risk, quad exit, technical analysis, trading education|0 Comments About the Author: Korbinian Koller Outstanding abstract reasoning ability and ability to think creatively and originally has led over the last 25 years to extract new principles and a unique way to view the markets resulting in a multitude of various time frame systems, generating high hit rates and outstanding risk reward ratios. Over 20 years of coaching traders with heart & passion, assessing complex situations, troubleshoot and solve problems principle based has led to experience and a professional history of success. Skilled natural teacher and exceptional developer of talent. Avid learner guided by a plan with ability to suppress ego and empower students to share ideas and best practices and to apply principle-based technical/conceptual knowledge to maximize efficiency. 25+ year execution experience (50.000+ trades executed) Trading multiple personal accounts (long and short-and combinations of the two). Amazing market feel complementing mechanical systems discipline for precise and extreme low risk entries while objectively seeing the whole picture. Ability to notice and separate emotional responses from the decision-making process and to stand outside oneself and one’s concerns about images in order to function in terms of larger objectives. Developed exit strategies that compensate both for maximizing profits and psychological ease to allow for continuous flow throughout the whole trading day. In depth knowledge of money management strategies with the experience of multiple 6 sigma events in various markets (futures, stocks, commodities, currencies, bonds) embedded in extreme low risk statistical probability models with smooth equity curves and extensive risk management as well as extensive disaster risk allow for my natural capacity for risk-taking.
Currency Speculators continue Japanese Yen bearishness, push bearish bets to 20-week high

Currency Speculators continue Japanese Yen bearishness, push bearish bets to 20-week high

Invest Macro Invest Macro 02.04.2022 19:33
By InvestMacro | COT | Data Tables | COT Leaders | Downloads | COT Newsletter Here are the latest charts and statistics for the Commitment of Traders (COT) data published by the Commodities Futures Trading Commission (CFTC). The latest COT data is updated through Tuesday March 29th and shows a quick view of how large traders (for-profit speculators and commercial entities) were positioned in the futures markets. All currency positions are in direct relation to the US dollar where, for example, a bet for the euro is a bet that the euro will rise versus the dollar while a bet against the euro will be a bet that the euro will decline versus the dollar. Highlighting the COT currency data is the increase of bearish bets in the Japanese yen currency futures contracts. Japanese yen speculators raised their bearish bets for a third straight week this week and for the fourth time in the past five weeks. Over this five-week time-frame, yen bets have now dropped by a total of -38,944 contracts, going from -63,187 net positions on February 22nd to -102,131 net positions this week. This weakness in speculator sentiment has pushed the current Yen positioning to the most bearish level in the past twenty weeks, dating back to November 9th when net positions over over -105,000 contracts. Since the new year, yen speculator positions have averaged -70,432 weekly contracts, underscoring the sentiment weakness and compared to the 2021 weekly positions average of -44,182 contracts (positions averaged +17,100 weekly contracts in 2020). Japanese yen prices have also been extremely weak versus the other major currencies. Currently, the yen has recorded losses against all of the majors year-to-date and many majors currencies are trading at the highest levels since 2015 versus the yen. Overall, the currencies with higher speculator bets this week were the US Dollar Index (1,306 contracts), Australian dollar (1,583 contracts), Brazil real (1,052 contracts), Canadian dollar (3,405 contracts) and the Mexican peso (9,804 contracts). The currencies with declining bets this week were the Japanese yen (-23,649 contracts), Euro (-2,469 contracts), Swiss franc (-3,155 contracts), British pound sterling (-2,826 contracts), New Zealand dollar (-3,387 contracts), Russian ruble (-263 contracts) and Bitcoin (-271 contracts). Data Snapshot of Forex Market Traders | Columns Legend Mar-29-2022 OI OI-Index Spec-Net Spec-Index Com-Net COM-Index Smalls-Net Smalls-Index USD Index 53,967 76 30,941 79 -35,106 16 4,165 62 EUR 662,415 67 21,374 42 -47,348 62 25,974 17 GBP 224,365 54 -40,070 45 52,009 60 -11,939 31 JPY 239,698 82 -102,131 3 124,850 98 -22,719 7 CHF 44,327 20 -11,579 50 23,228 57 -11,649 29 CAD 147,421 28 -1,535 46 -15,518 48 17,053 64 AUD 143,007 39 -49,606 39 40,894 49 8,712 74 NZD 34,881 15 -867 70 -3 30 870 62 MXN 157,779 30 -8,247 24 3,286 74 4,961 64 RUB 20,930 4 7,543 31 -7,150 69 -393 24 BRL 78,894 79 42,616 92 -45,623 7 3,007 100 Bitcoin 12,024 66 -271 89 -411 0 682 28   US Dollar Index Futures: The US Dollar Index large speculator standing this week recorded a net position of 30,941 contracts in the data reported through Tuesday. This was a weekly rise of 1,306 contracts from the previous week which had a total of 29,635 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish with a score of 79.2 percent. The commercials are Bearish-Extreme with a score of 16.3 percent and the small traders (not shown in chart) are Bullish with a score of 62.1 percent. US DOLLAR INDEX Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 83.3 2.8 10.5 – Percent of Open Interest Shorts: 26.0 67.8 2.8 – Net Position: 30,941 -35,106 4,165 – Gross Longs: 44,970 1,493 5,684 – Gross Shorts: 14,029 36,599 1,519 – Long to Short Ratio: 3.2 to 1 0.0 to 1 3.7 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 79.2 16.3 62.1 – Strength Index Reading (3 Year Range): Bullish Bearish-Extreme Bullish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: -7.7 10.7 -21.9   Euro Currency Futures: The Euro Currency large speculator standing this week recorded a net position of 21,374 contracts in the data reported through Tuesday. This was a weekly fall of -2,469 contracts from the previous week which had a total of 23,843 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 41.6 percent. The commercials are Bullish with a score of 62.3 percent and the small traders (not shown in chart) are Bearish-Extreme with a score of 17.4 percent. EURO Currency Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 30.2 55.0 12.1 – Percent of Open Interest Shorts: 27.0 62.1 8.2 – Net Position: 21,374 -47,348 25,974 – Gross Longs: 200,043 364,163 80,321 – Gross Shorts: 178,669 411,511 54,347 – Long to Short Ratio: 1.1 to 1 0.9 to 1 1.5 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 41.6 62.3 17.4 – Strength Index Reading (3 Year Range): Bearish Bullish Bearish-Extreme NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: -8.0 10.7 -19.0   British Pound Sterling Futures: The British Pound Sterling large speculator standing this week recorded a net position of -40,070 contracts in the data reported through Tuesday. This was a weekly decrease of -2,826 contracts from the previous week which had a total of -37,244 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 45.1 percent. The commercials are Bullish with a score of 60.4 percent and the small traders (not shown in chart) are Bearish with a score of 30.9 percent. BRITISH POUND Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 13.6 73.3 9.9 – Percent of Open Interest Shorts: 31.5 50.1 15.2 – Net Position: -40,070 52,009 -11,939 – Gross Longs: 30,624 164,519 22,187 – Gross Shorts: 70,694 112,510 34,126 – Long to Short Ratio: 0.4 to 1 1.5 to 1 0.7 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 45.1 60.4 30.9 – Strength Index Reading (3 Year Range): Bearish Bullish Bearish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: -30.5 29.1 -14.2   Japanese Yen Futures: The Japanese Yen large speculator standing this week recorded a net position of -102,131 contracts in the data reported through Tuesday. This was a weekly decrease of -23,649 contracts from the previous week which had a total of -78,482 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish-Extreme with a score of 3.5 percent. The commercials are Bullish-Extreme with a score of 98.2 percent and the small traders (not shown in chart) are Bearish-Extreme with a score of 7.3 percent. JAPANESE YEN Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 6.4 83.9 8.5 – Percent of Open Interest Shorts: 49.0 31.8 18.0 – Net Position: -102,131 124,850 -22,719 – Gross Longs: 15,274 201,190 20,392 – Gross Shorts: 117,405 76,340 43,111 – Long to Short Ratio: 0.1 to 1 2.6 to 1 0.5 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 3.5 98.2 7.3 – Strength Index Reading (3 Year Range): Bearish-Extreme Bullish-Extreme Bearish-Extreme NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: -22.7 19.1 -5.3   Swiss Franc Futures: The Swiss Franc large speculator standing this week recorded a net position of -11,579 contracts in the data reported through Tuesday. This was a weekly lowering of -3,155 contracts from the previous week which had a total of -8,424 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 49.7 percent. The commercials are Bullish with a score of 57.0 percent and the small traders (not shown in chart) are Bearish with a score of 29.1 percent. SWISS FRANC Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 7.4 73.2 19.2 – Percent of Open Interest Shorts: 33.5 20.8 45.5 – Net Position: -11,579 23,228 -11,649 – Gross Longs: 3,292 32,430 8,522 – Gross Shorts: 14,871 9,202 20,171 – Long to Short Ratio: 0.2 to 1 3.5 to 1 0.4 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 49.7 57.0 29.1 – Strength Index Reading (3 Year Range): Bearish Bullish Bearish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: -3.3 4.9 -7.3   Canadian Dollar Futures: The Canadian Dollar large speculator standing this week recorded a net position of -1,535 contracts in the data reported through Tuesday. This was a weekly advance of 3,405 contracts from the previous week which had a total of -4,940 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 46.2 percent. The commercials are Bearish with a score of 48.3 percent and the small traders (not shown in chart) are Bullish with a score of 63.7 percent. CANADIAN DOLLAR Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 22.0 52.1 24.9 – Percent of Open Interest Shorts: 23.0 62.6 13.4 – Net Position: -1,535 -15,518 17,053 – Gross Longs: 32,429 76,738 36,771 – Gross Shorts: 33,964 92,256 19,718 – Long to Short Ratio: 1.0 to 1 0.8 to 1 1.9 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 46.2 48.3 63.7 – Strength Index Reading (3 Year Range): Bearish Bearish Bullish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: -13.3 -0.3 28.1   Australian Dollar Futures: The Australian Dollar large speculator standing this week recorded a net position of -49,606 contracts in the data reported through Tuesday. This was a weekly gain of 1,583 contracts from the previous week which had a total of -51,189 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 38.8 percent. The commercials are Bearish with a score of 49.4 percent and the small traders (not shown in chart) are Bullish with a score of 73.7 percent. AUSTRALIAN DOLLAR Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 23.7 56.6 18.7 – Percent of Open Interest Shorts: 58.4 28.0 12.7 – Net Position: -49,606 40,894 8,712 – Gross Longs: 33,960 80,885 26,806 – Gross Shorts: 83,566 39,991 18,094 – Long to Short Ratio: 0.4 to 1 2.0 to 1 1.5 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 38.8 49.4 73.7 – Strength Index Reading (3 Year Range): Bearish Bearish Bullish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: 34.4 -42.4 48.0   New Zealand Dollar Futures: The New Zealand Dollar large speculator standing this week recorded a net position of -867 contracts in the data reported through Tuesday. This was a weekly reduction of -3,387 contracts from the previous week which had a total of 2,520 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish with a score of 69.8 percent. The commercials are Bearish with a score of 30.4 percent and the small traders (not shown in chart) are Bullish with a score of 61.8 percent. NEW ZEALAND DOLLAR Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 44.4 44.5 10.5 – Percent of Open Interest Shorts: 46.9 44.5 8.0 – Net Position: -867 -3 870 – Gross Longs: 15,504 15,507 3,666 – Gross Shorts: 16,371 15,510 2,796 – Long to Short Ratio: 0.9 to 1 1.0 to 1 1.3 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 69.8 30.4 61.8 – Strength Index Reading (3 Year Range): Bullish Bearish Bullish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: 14.2 -18.5 40.7   Mexican Peso Futures: The Mexican Peso large speculator standing this week recorded a net position of -8,247 contracts in the data reported through Tuesday. This was a weekly gain of 9,804 contracts from the previous week which had a total of -18,051 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 23.8 percent. The commercials are Bullish with a score of 74.2 percent and the small traders (not shown in chart) are Bullish with a score of 64.1 percent. MEXICAN PESO Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 47.6 46.9 4.8 – Percent of Open Interest Shorts: 52.8 44.8 1.7 – Net Position: -8,247 3,286 4,961 – Gross Longs: 75,081 73,952 7,577 – Gross Shorts: 83,328 70,666 2,616 – Long to Short Ratio: 0.9 to 1 1.0 to 1 2.9 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 23.8 74.2 64.1 – Strength Index Reading (3 Year Range): Bearish Bullish Bullish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: -7.3 6.4 8.0   Brazilian Real Futures: The Brazilian Real large speculator standing this week recorded a net position of 42,616 contracts in the data reported through Tuesday. This was a weekly advance of 1,052 contracts from the previous week which had a total of 41,564 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish-Extreme with a score of 92.3 percent. The commercials are Bearish-Extreme with a score of 6.8 percent and the small traders (not shown in chart) are Bullish-Extreme with a score of 100.0 percent. BRAZIL REAL Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 67.3 26.2 6.1 – Percent of Open Interest Shorts: 13.2 84.0 2.3 – Net Position: 42,616 -45,623 3,007 – Gross Longs: 53,065 20,649 4,805 – Gross Shorts: 10,449 66,272 1,798 – Long to Short Ratio: 5.1 to 1 0.3 to 1 2.7 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 92.3 6.8 100.0 – Strength Index Reading (3 Year Range): Bullish-Extreme Bearish-Extreme Bullish-Extreme NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: 18.5 -18.9 6.4   Russian Ruble Futures: The Russian Ruble large speculator standing this week recorded a net position of 7,543 contracts in the data reported through Tuesday. This was a weekly fall of -263 contracts from the previous week which had a total of 7,806 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 31.2 percent. The commercials are Bullish with a score of 69.1 percent and the small traders (not shown in chart) are Bearish with a score of 23.9 percent. RUSSIAN RUBLE Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 36.6 60.6 2.8 – Percent of Open Interest Shorts: 0.5 94.7 4.7 – Net Position: 7,543 -7,150 -393 – Gross Longs: 7,658 12,679 593 – Gross Shorts: 115 19,829 986 – Long to Short Ratio: 66.6 to 1 0.6 to 1 0.6 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 31.2 69.1 23.9 – Strength Index Reading (3 Year Range): Bearish Bullish Bearish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: -15.6 16.7 -18.8   Bitcoin Futures: The Bitcoin large speculator standing this week recorded a net position of -271 contracts in the data reported through Tuesday. This was a weekly lowering of -271 contracts from the previous week which had a total of 0 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish-Extreme with a score of 88.5 percent. The commercials are Bearish-Extreme with a score of 8.5 percent and the small traders (not shown in chart) are Bearish with a score of 28.4 percent. BITCOIN Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 80.9 3.2 10.8 – Percent of Open Interest Shorts: 83.1 6.6 5.2 – Net Position: -271 -411 682 – Gross Longs: 9,722 383 1,302 – Gross Shorts: 9,993 794 620 – Long to Short Ratio: 1.0 to 1 0.5 to 1 2.1 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 88.5 8.5 28.4 – Strength Index Reading (3 Year Range): Bullish-Extreme Bearish-Extreme Bearish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: -1.2 -15.9 5.8   Article By InvestMacro – Receive our weekly COT Reports by Email *COT Report: The COT data, released weekly to the public each Friday, is updated through the most recent Tuesday (data is 3 days old) and shows a quick view of how large speculators or non-commercials (for-profit traders) were positioned in the futures markets. The CFTC categorizes trader positions according to commercial hedgers (traders who use futures contracts for hedging as part of the business), non-commercials (large traders who speculate to realize trading profits) and nonreportable traders (usually small traders/speculators) as well as their open interest (contracts open in the market at time of reporting).See CFTC criteria here.
Positions of large speculators according to the COT report as at 22/3/2022

Positions of large speculators according to the COT report as at 22/3/2022

Purple Trading Purple Trading 03.04.2022 21:41
Positions of large speculators according to the COT report as at 22/3/2022 Total net speculator positions in the USD index rose by 1,355 contracts last week. This change is the result of an increase in long positions of 3,794 contracts and an increase in short positions of 2,539 contracts. There was a significant decrease in the total net positions of large speculators in the Canadian dollar last week, which fell by 22,690 contracts. At the same time, total net positions of large speculators moved from bullish to overall bearish sentiment for the first time in 10 weeks. The rise in total net positions of large speculators occurred only in the euro last week. There was a decline in total net positions in the other currencies monitored. The positions of speculators in individual currencies The total net positions of large speculators are shown in Table 1: If the value is positive then the large speculators are net long. If the value is negative, the large speculators are net short.   Table 1: Total net positions of large speculators DatE USD Index EUR GBP AUD NZD JPY CAD CHF Mar 22, 2022 29635 23843 -37244 -51189 2520 -78482 -4940 -8424 Mar 15, 2022 28380 18794 -29061 -44856 3653 -62340 17740 -5229 Mar 08, 2022 34044 58844 -12526 -78195 -12379 -55856 7646 -9710 Mar 01, 2022 34774 64939 -337 -78336 -14172 -68732 14140 -15248 Feb 22, 2022 36084 59306 -5809 -84080 -11551 -63187 9253 -10987 Feb 15, 2022 35386 47581 2237 -86694 -9333 -66162 12170 -9715   Note: The explanation of COT methodolody is at the the end of the report.   Notes: Large speculators are traders who trade large volumes of futures contracts, which, if the set limits are met, must be reported to the Commodity Futures Trading Commission. Typically, this includes traders such as funds or large banks. These traders mostly focus on trading long-term trends and their goal is to make money on speculation with the instrument. ​The total net positions of large speculators are the difference between the number of long contracts and the number of short contracts of large speculators. Positive value shows that large speculators are net long. Negative value shows that large speculators are net short. The data is published every Friday and is delayed because it shows the status on Tuesday of the week. The total net positions of large speculators show the sentiment this group has in the market. A positive value of the total net positions of speculators indicates bullish sentiment, a negative value of total net positions indicates bearish sentiment. When interpreting charts and values, it is important to follow the overall trend of total net positions. The turning points are also very important, i.e. the moments when the total net positions go from a positive value to a negative one and vice versa. Important are also extreme values ​​of total net positions as they often serve as signals of a trend reversal. Sentiment according to the reported positions of large players in futures markets is not immediately reflected in the movement of currency pairs. Therefore, information on sentiment is more likely to be used by traders who take longer trades and are willing to hold their positions for several weeks or even months.   Detailed analysis of selected currencies   Explanations:   Purple line and histogram: this is information on the total net position of large speculators. This information shows the strength and sentiment of an ongoing trend. It is the indicator r_COT Large Speculators (by Kramsken) in www.tradingview.com. Information on the positions of so-called hedgers is not shown in the chart, due to the fact that their main goal is not speculation, but hedging. Therefore, this group usually takes the opposite positions than the large speculators. For this reason, the positions of hedgers are inversely correlated with the movement of the price of the underlying asset. However, this inverse correlation shows the ongoing trend less clearly than the position of large speculators.​ We show moving average SMA 100 (blue line) and EMA 50 (orange line) on daily charts. ​Charts are made with the use of www.tradingview.com. The source of numerical data is www.myfxbook.com The Euro   date Open Interest Specs Long Specs Short Specs Net positions change Open Interest change Long change Short change Net Positions Sentiment Mar 22, 2022 658817 207051 183208 23843 -7193 5011 -38 5049 Bullish Mar 15, 2022 666010 202040 183246 18794 -72980 -40643 -593 -40050 Weak bullish Mar 08, 2022 738990 242683 183839 58844 19015 14298 20393 -6095 Weak bullish Mar 01, 2022 719975 228385 163446 64939 23293 14190 8557 5633 Bullish Feb 22, 2022 696682 214195 154889 59306 -5365 -3704 -15429 11725 Bullish Feb 15, 2022 702047 217899 170318 47581 1949 -1074 -9813 8739 Bullish         Total Change -41281 -11922 3077 -14999     Figure 1: The euro and COT positions of large speculators on a weekly chart and the EURUSD on D1   The total net positions of speculators reached 23,843 contracts last week, up by 5,049 contracts compared to the previous week. This change is due to an increase in long positions by 5,011 contracts and a decrease in short positions by 38 contracts. These data suggest bullish sentiment for the euro. Open interest fell by 7,193 contracts last week. This shows that the downward movement that occurred in the euro last week was not supported by the volume and is therefore a weak trend. The euro continues to move in a downtrend. It returned to a resistance level last week, which could be an opportunity to trade short.  Long-term resistance: 1.1120 – 1.1150. Support: 1.080-1.0850. The next support is at 1.0650-1.0700. The support can b also a value around 1.0900.   The British pound   date Open Interest Specs Long Specs Short Specs Net positions change Open Interest change Long change Short change Net Positions Sentiment Mar 22, 2022 195712 32753 69997 -37244 7389 311 8494 -8183 Bearish Mar 15, 2022 188323 32442 61503 -29061 -57989 -18540 -2005 -16535 Bearish Mar 08, 2022 246312 50982 63508 -12526 34443 3303 15492 -12189 Bearish Mar 01, 2022 211869 47679 48016 -337 23426 5430 -42 5472 Weak bearish Feb 22, 2022 188443 42249 48058 -5809 -6859 -7902 144 -8046 Bearish Feb 15, 2022 195302 50151 47914 2237 -2646 5442 -5340 10782 Bullish         Total Change -2236 -11956 16743 -28699     Figure 2: The GBP and COT positions of large speculators on a weekly chart and the GBPUSD on D1   The total net positions of speculators last week reached - 37,244 contracts, down by 8,183 contracts compared to the previous week. This change is due to the growth of long positions by 311 contracts and the growth of short positions by 8,494 contracts. This suggests bearish sentiment as the total net positions of large speculators are negative while there has been a further decline. Open interest rose by 7,389 contracts last week. This means that the modest rise in the pound that occurred last week was supported by the volume and is therefore strong. However, the pound's growth was not significant. In addition, a pin bar formed on the weekly chart which would suggest more of a further weakening in line with sentiment. Long-term resistance: 1.3270 – 1.3300. Support is near 1.3000.     The Australian dollar   date Open Interest Specs Long Specs Short Specs Net positions change Open Interest change Long change Short change Net Positions Sentiment Mar 22, 2022 127767 23747 74936 -51189 3246 -534 5799 -6333 Bearish Mar 15, 2022 124521 24281 69137 -44856 -72573 4760 -28579 33339 Weak bearish Mar 08, 2022 197094 19521 97716 -78195 7427 6801 6660 141 Weak bearish Mar 01, 2022 189667 12720 91056 -78336 -2912 1167 -4577 5744 Weak bearish Feb 22, 2022 192579 11553 95633 -84080 1 -139 -2753 2614 Weak bearish Feb 15, 2022 192578 11692 98386 -86694 -3825 -5631 -4678 -953 Bearish         Total Change -68636 6424 -28128 34552     Figure 3: The AUD and COT positions of large speculators on a weekly chart and the AUDUSD on D1   The total net positions of speculators last week reached - 51,189 contracts, down by 6,333 contracts compared to the previous week. This change is due to a decrease in long positions by 534 contracts and an increase in short positions by 5,799 contracts. This data suggests a continuation of bearish sentiment in the Australian dollar. Last week there was an increase in open interest of 3,246 contracts. This means that the upward move that occurred last week was supported by the volume and was therefore strong as new money flowed into the market. The Australian dollar strengthened strongly again last week and reached a significant resistance level. Long-term resistance: 0.7510-0.7560                                                                                                               Long-term support: 0.7370-0.7440.  A strong support is near 0.7160 – 0.7180.   The New Zealand dollar   date Open Interest Specs Long Specs Short Specs Net positions change Open Interest change Long change Short change Net Positions Sentiment Mar 22, 2022 35256 17156 14636 2520 -3944 -4337 -3204 -1133 Weak bullish Mar 15, 2022 39200 21493 17840 3653 -14050 5718 -10314 16032 Bullish Mar 08, 2022 53250 15775 28154 -12379 2861 5290 3497 1793 Weak bearish Mar 01, 2022 50389 10485 24657 -14172 -6247 -6858 -4237 -2621 Bearish Feb 22, 2022 56636 17343 28894 -11551 -7469 -7580 -5362 -2218 Bearish Feb 15, 2022 64105 24923 34256 -9333 9228 7755 6722 1033 Weak bearish         Total Change -19621 -12 -12898 12886     Figure 4: The NZD and the position of large speculators on a weekly chart and the NZDUSD on D1   The total net positions of speculators reached 2,520 contracts last week, down by 1,133 contracts from the previous week. This change is due to a decrease in long positions by 4,337 contracts and a decrease in short positions by 3,204 contracts. This data suggests that there was a weakening of bullish sentiment in the New Zealand dollar last week. Open interest fell by 3,944 contracts last week. Therefore, the upward movement in the NZDUSD that occurred last week was not supported by the volume and therefore the move was weak. The NZDUSD strengthened strongly last week and reached the resistance level. Long-term resistance: 0.6980 – 0.7000 Long-term support: 0.6860-0.6920 and the next support is at 0.6730 – 0.6740.   Explanation to the COT report The COT report shows the positions of major participants in the futures markets. Futures contracts are derivatives and are essentially agreements between two parties to exchange an underlying asset for a predetermined price on a predetermined date. They are standardised, specifying the quality and quantity of the underlying asset. They are traded on an exchange so that the total volume of these contracts traded is known.   Open interest: open interest is the sum of all open futures contracts (i.e. the sum of short and long contracts) that exist on a given asset. OI increases when a new futures contract is created by pairing a buyer with a seller. The OI decreases when an existing futures contract expires at a given expiry time or by settlement. Low or no open interest means that there is no interest in the market. High open interest indicates high activity and traders pay attention to this market. A rising open interest indicates that there is demand for the currency. That is, a rising OI indicates a strong current trend. Conversely, a weakening open interest indicates that the current trend is not strong. Open Interest Price action Interpretation Notes Rising Rising Strong bullish market New money flow in the particular asset, more bulls entered the market which pushes the price up. The trend is strong. Rising Falling Strong bearish market Price falls, more bearish traders entered the market which pushes the price down. The trend is strong. Falling Rising Weak bullish market Price is going up but new money do not flow into the market. Existing futures contracts expire or are closed. The trend is weak. Falling Falling Weak bearish market Price is going down, but new money do not flow into the market. Existing futures expire or are closed, the trend is weak.   Large speculators are traders who trade large volumes of futures contracts, which, if the set limits are met, must be reported to the Commodity Futures Trading Commission. Typically, this includes traders such as funds or large banks. These traders mostly focus on trading long-term trends and their goal is to make money on speculation with the instrument. Traders should try to trade in the direction of these large speculators. The total net positions of large speculators are the difference between the number of long contracts and the number of short contracts of large speculators. Positive value shows that large speculators are net long. Negative value shows that large speculators are net short. The data is published every Friday and is delayed because it shows the status on Tuesday of the week. The total net positions of large speculators show the sentiment this group has in the market. A positive value of the total net positions of speculators indicates bullish sentiment, a negative value of total net positions indicates bearish sentiment. When interpreting charts and values, it is important to follow the overall trend of total net positions. The turning points are also very important, i.e. the moments when the total net positions go from a positive value to a negative one and vice versa. Important are also extreme values ​​of total net positions as they often serve as signals of a trend reversal. The COT data are usually reported every Friday and they show the status on Tuesday of the week. Sentiment according to the reported positions of large players in futures markets is not immediately reflected in the movement of currency pairs. Therefore, information on sentiment is more likely to be used by traders who take longer trades and are willing to hold their positions for several weeks or even months.
EURUSD And XAUUSD Trade Lower Than Before. UK100 Gains Gradually

EURUSD And XAUUSD Trade Lower Than Before. UK100 Gains Gradually

Jing Ren Jing Ren 04.04.2022 07:34
EURUSD seeks support The US dollar rallied after March’s average hourly wages jumped by 5.6%. The euro came to a halt in the supply zone at the origin of the March sell-off (1.1180). A bearish RSI divergence pointed to softness in the rebound. A fall below 1.1120 then 1.1070 prompted buyers to bail out, further weighing on overall sentiment. 1.0980 at the base of the recent bullish impetus is major support. Its breach could invalidate the recovery and trigger a new round of sell-offs. The bulls need to clear 1.1120 to regain the upper hand. XAUUSD builds support Gold retreats as the US dollar finds support from a fall in the jobless rate. On the daily chart, price action still holds above the demand zone between 1890 and 1900 which is a sign of strong buying interest. A break above 1940 forced sellers out. This may also foreshadow a reversal. Sentiment would improve if the precious metal stays above 1915. A bullish close above 1960 could extend the rally to the psychological level of 2000. On the downside, 1890 is a critical level to maintain the bulls’ optimism. UK 100 consolidates gains The FTSE 100 treads water dragged by weaker energy stocks. A bullish MA cross on the daily chart suggests that the index could be back on track in the medium term. The intraday direction is still up despite its choppiness. A close above 7590 would extend the rally to this year’s high at 7690. Trend followers may see pullbacks as a bargain opportunity. The RSI’s oversold condition attracted some buying interest over 7460. A deeper correction would send the index to 7380 which coincides with the moving averages.
COT Currency Speculators boost Australian Dollar bets to best level in 37-weeks

COT Currency Speculators boost Australian Dollar bets to best level in 37-weeks

Invest Macro Invest Macro 09.04.2022 20:09
By InvestMacro | COT | Data Tables | COT Leaders | Downloads | COT Newsletter Here are the latest charts and statistics for the Commitment of Traders (COT) data published by the Commodities Futures Trading Commission (CFTC). The latest COT data is updated through Tuesday April 5th and shows a quick view of how large traders (for-profit speculators and commercial entities) were positioned in the futures markets. All currency positions are in direct relation to the US dollar where, for example, a bet for the euro is a bet that the euro will rise versus the dollar while a bet against the euro will be a bet that the euro will decline versus the dollar. Highlighting the COT currency data was the further retreat of bearish bets in the Australian currency futures contracts. Australian dollar speculators reduced their bearish bets for a second straight week this week and for the sixth time in the past seven weeks. Over this seven-week time-frame, Aussie bets have improved by a total of +49,181 contracts, going from -86,694 net positions on February 15th to -37,513 net positions this week. This improvement in speculator sentiment has brought the current net position (-37,513 contracts) to the least bearish level of the past thirty-seven weeks, dating back to July 20th when the net position totaled -35,690 contracts. The speculator level for the Aussie has not registered a bullish or positive net weekly position since May 18th of 2021, a span of forty-seven weeks. Despite the bearish level of speculators, the AUD has been one of the stronger currencies over the past month and has been helped along by the outlook that the Reserve Bank of Australia will start to raise interest rates for the first time since 2010. The currencies with higher speculator bets this week were the US Dollar Index (911 contracts), Australian dollar (12,093 contracts), Mexican peso (9,157 contracts), Euro (5,996 contracts), Brazil real (2,910 contracts), Canadian dollar (8,458 contracts) and Bitcoin (27 contracts). The currencies with declining bets were the Japanese yen (-1,698 contracts), Swiss franc (-814 contracts), British pound sterling (-1,688 contracts), New Zealand dollar (-702 contracts) and the Russian ruble (-263 contracts). Speculator strength standings for each currency where strength index is current net position compared to past three years, above 80 is bullish extreme, below 20 is bearish extreme OI Strength = Current Open Interest level compared to last 3 years range Spec Strength = Current Net Speculator level compared to last 3 years range Strength Move = Six week change of Spec Strength Data Snapshot of Forex Market Traders | Columns Legend Apr-05-2022 OI OI-Index Spec-Net Spec-Index Com-Net COM-Index Smalls-Net Smalls-Index USD Index 49,049 65 31,852 81 -35,194 16 3,342 53 EUR 663,589 67 27,370 43 -49,617 62 22,247 11 GBP 238,266 63 -41,758 44 57,779 64 -16,021 22 JPY 242,217 83 -103,829 2 125,224 98 -21,395 10 CHF 40,005 14 -12,393 48 20,743 54 -8,350 39 CAD 157,562 35 6,923 54 -30,414 38 23,491 77 AUD 148,898 44 -37,513 50 22,332 36 15,181 89 NZD 35,788 16 -1,569 69 171 31 1,398 68 MXN 172,712 36 910 28 -5,778 70 4,868 64 RUB 20,930 4 7,543 31 -7,150 69 -393 24 BRL 65,870 61 45,526 95 -47,961 4 2,435 93 Bitcoin 11,374 61 -244 89 -397 0 641 28   US Dollar Index Futures: The US Dollar Index large speculator standing this week recorded a net position of 31,852 contracts in the data reported through Tuesday. This was a weekly boost of 911 contracts from the previous week which had a total of 30,941 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish-Extreme with a score of 80.7 percent. The commercials are Bearish-Extreme with a score of 16.1 percent and the small traders (not shown in chart) are Bullish with a score of 53.1 percent. US DOLLAR INDEX Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 83.7 2.9 10.7 – Percent of Open Interest Shorts: 18.7 74.6 3.9 – Net Position: 31,852 -35,194 3,342 – Gross Longs: 41,038 1,417 5,243 – Gross Shorts: 9,186 36,611 1,901 – Long to Short Ratio: 4.5 to 1 0.0 to 1 2.8 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 80.7 16.1 53.1 – Strength Index Reading (3 Year Range): Bullish-Extreme Bearish-Extreme Bullish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: -7.3 10.3 -21.2   Euro Currency Futures: The Euro Currency large speculator standing this week recorded a net position of 27,370 contracts in the data reported through Tuesday. This was a weekly boost of 5,996 contracts from the previous week which had a total of 21,374 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 43.4 percent. The commercials are Bullish with a score of 61.7 percent and the small traders (not shown in chart) are Bearish-Extreme with a score of 11.3 percent. EURO Currency Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 31.8 53.8 11.7 – Percent of Open Interest Shorts: 27.7 61.3 8.4 – Net Position: 27,370 -49,617 22,247 – Gross Longs: 210,914 357,140 77,946 – Gross Shorts: 183,544 406,757 55,699 – Long to Short Ratio: 1.1 to 1 0.9 to 1 1.4 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 43.4 61.7 11.3 – Strength Index Reading (3 Year Range): Bearish Bullish Bearish-Extreme NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: -9.8 13.7 -27.3   British Pound Sterling Futures: The British Pound Sterling large speculator standing this week recorded a net position of -41,758 contracts in the data reported through Tuesday. This was a weekly lowering of -1,688 contracts from the previous week which had a total of -40,070 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 43.9 percent. The commercials are Bullish with a score of 63.9 percent and the small traders (not shown in chart) are Bearish with a score of 22.4 percent. BRITISH POUND Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 15.1 73.6 8.4 – Percent of Open Interest Shorts: 32.6 49.4 15.1 – Net Position: -41,758 57,779 -16,021 – Gross Longs: 35,873 175,429 19,923 – Gross Shorts: 77,631 117,650 35,944 – Long to Short Ratio: 0.5 to 1 1.5 to 1 0.6 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 43.9 63.9 22.4 – Strength Index Reading (3 Year Range): Bearish Bullish Bearish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: -25.9 28.2 -24.4   Japanese Yen Futures: The Japanese Yen large speculator standing this week recorded a net position of -103,829 contracts in the data reported through Tuesday. This was a weekly reduction of -1,698 contracts from the previous week which had a total of -102,131 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish-Extreme with a score of 2.4 percent. The commercials are Bullish-Extreme with a score of 98.4 percent and the small traders (not shown in chart) are Bearish-Extreme with a score of 10.0 percent. JAPANESE YEN Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 6.0 84.7 7.9 – Percent of Open Interest Shorts: 48.9 33.0 16.8 – Net Position: -103,829 125,224 -21,395 – Gross Longs: 14,583 205,209 19,190 – Gross Shorts: 118,412 79,985 40,585 – Long to Short Ratio: 0.1 to 1 2.6 to 1 0.5 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 2.4 98.4 10.0 – Strength Index Reading (3 Year Range): Bearish-Extreme Bullish-Extreme Bearish-Extreme NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: -25.7 21.2 -4.3   Swiss Franc Futures: The Swiss Franc large speculator standing this week recorded a net position of -12,393 contracts in the data reported through Tuesday. This was a weekly reduction of -814 contracts from the previous week which had a total of -11,579 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 48.3 percent. The commercials are Bullish with a score of 54.2 percent and the small traders (not shown in chart) are Bearish with a score of 38.8 percent. SWISS FRANC Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 4.6 73.5 21.7 – Percent of Open Interest Shorts: 35.6 21.6 42.6 – Net Position: -12,393 20,743 -8,350 – Gross Longs: 1,860 29,392 8,694 – Gross Shorts: 14,253 8,649 17,044 – Long to Short Ratio: 0.1 to 1 3.4 to 1 0.5 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 48.3 54.2 38.8 – Strength Index Reading (3 Year Range): Bearish Bullish Bearish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: -2.5 1.8 -0.7   Canadian Dollar Futures: The Canadian Dollar large speculator standing this week recorded a net position of 6,923 contracts in the data reported through Tuesday. This was a weekly increase of 8,458 contracts from the previous week which had a total of -1,535 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish with a score of 54.4 percent. The commercials are Bearish with a score of 37.6 percent and the small traders (not shown in chart) are Bullish with a score of 76.6 percent. CANADIAN DOLLAR Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 23.7 49.4 26.0 – Percent of Open Interest Shorts: 19.3 68.7 11.1 – Net Position: 6,923 -30,414 23,491 – Gross Longs: 37,325 77,906 40,906 – Gross Shorts: 30,402 108,320 17,415 – Long to Short Ratio: 1.2 to 1 0.7 to 1 2.3 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 54.4 37.6 76.6 – Strength Index Reading (3 Year Range): Bullish Bearish Bullish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: -2.3 -11.7 37.0   Australian Dollar Futures: The Australian Dollar large speculator standing this week recorded a net position of -37,513 contracts in the data reported through Tuesday. This was a weekly advance of 12,093 contracts from the previous week which had a total of -49,606 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish with a score of 50.1 percent. The commercials are Bearish with a score of 35.5 percent and the small traders (not shown in chart) are Bullish-Extreme with a score of 89.5 percent. AUSTRALIAN DOLLAR Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 23.4 53.9 21.7 – Percent of Open Interest Shorts: 48.6 38.9 11.5 – Net Position: -37,513 22,332 15,181 – Gross Longs: 34,871 80,207 32,313 – Gross Shorts: 72,384 57,875 17,132 – Long to Short Ratio: 0.5 to 1 1.4 to 1 1.9 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 50.1 35.5 89.5 – Strength Index Reading (3 Year Range): Bullish Bearish Bullish-Extreme NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: 43.2 -55.1 66.3   New Zealand Dollar Futures: The New Zealand Dollar large speculator standing this week recorded a net position of -1,569 contracts in the data reported through Tuesday. This was a weekly decline of -702 contracts from the previous week which had a total of -867 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish with a score of 68.6 percent. The commercials are Bearish with a score of 30.7 percent and the small traders (not shown in chart) are Bullish with a score of 67.8 percent. NEW ZEALAND DOLLAR Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 43.1 44.3 12.0 – Percent of Open Interest Shorts: 47.5 43.8 8.1 – Net Position: -1,569 171 1,398 – Gross Longs: 15,428 15,863 4,311 – Gross Shorts: 16,997 15,692 2,913 – Long to Short Ratio: 0.9 to 1 1.0 to 1 1.5 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 68.6 30.7 67.8 – Strength Index Reading (3 Year Range): Bullish Bearish Bullish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: 16.7 -21.2 43.0   Mexican Peso Futures: The Mexican Peso large speculator standing this week recorded a net position of 910 contracts in the data reported through Tuesday. This was a weekly advance of 9,157 contracts from the previous week which had a total of -8,247 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 27.7 percent. The commercials are Bullish with a score of 70.4 percent and the small traders (not shown in chart) are Bullish with a score of 63.7 percent. MEXICAN PESO Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 45.6 49.6 4.5 – Percent of Open Interest Shorts: 45.1 53.0 1.6 – Net Position: 910 -5,778 4,868 – Gross Longs: 78,728 85,690 7,698 – Gross Shorts: 77,818 91,468 2,830 – Long to Short Ratio: 1.0 to 1 0.9 to 1 2.7 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 27.7 70.4 63.7 – Strength Index Reading (3 Year Range): Bearish Bullish Bullish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: -6.8 6.4 2.8   Brazilian Real Futures: The Brazilian Real large speculator standing this week recorded a net position of 45,526 contracts in the data reported through Tuesday. This was a weekly lift of 2,910 contracts from the previous week which had a total of 42,616 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish-Extreme with a score of 95.1 percent. The commercials are Bearish-Extreme with a score of 4.5 percent and the small traders (not shown in chart) are Bullish-Extreme with a score of 93.3 percent. BRAZIL REAL Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 76.7 16.4 6.6 – Percent of Open Interest Shorts: 7.6 89.2 2.9 – Net Position: 45,526 -47,961 2,435 – Gross Longs: 50,518 10,795 4,319 – Gross Shorts: 4,992 58,756 1,884 – Long to Short Ratio: 10.1 to 1 0.2 to 1 2.3 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 95.1 4.5 93.3 – Strength Index Reading (3 Year Range): Bullish-Extreme Bearish-Extreme Bullish-Extreme NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: 20.7 -20.4 -2.4   Russian Ruble Futures: The Russian Ruble large speculator standing this week recorded a net position of 7,543 contracts in the data reported through Tuesday. This was a weekly fall of -263 contracts from the previous week which had a total of 7,806 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 31.2 percent. The commercials are Bullish with a score of 69.1 percent and the small traders (not shown in chart) are Bearish with a score of 23.9 percent. RUSSIAN RUBLE Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 36.6 60.6 2.8 – Percent of Open Interest Shorts: 0.5 94.7 4.7 – Net Position: 7,543 -7,150 -393 – Gross Longs: 7,658 12,679 593 – Gross Shorts: 115 19,829 986 – Long to Short Ratio: 66.6 to 1 0.6 to 1 0.6 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 31.2 69.1 23.9 – Strength Index Reading (3 Year Range): Bearish Bullish Bearish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: -15.6 16.7 -18.8   Bitcoin Futures: The Bitcoin large speculator standing this week recorded a net position of -244 contracts in the data reported through Tuesday. This was a weekly lift of 27 contracts from the previous week which had a total of -271 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish-Extreme with a score of 89.1 percent. The commercials are Bearish-Extreme with a score of 9.6 percent and the small traders (not shown in chart) are Bearish with a score of 27.5 percent. BITCOIN Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 77.5 3.8 11.6 – Percent of Open Interest Shorts: 79.6 7.3 6.0 – Net Position: -244 -397 641 – Gross Longs: 8,811 437 1,322 – Gross Shorts: 9,055 834 681 – Long to Short Ratio: 1.0 to 1 0.5 to 1 1.9 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 89.1 9.6 27.5 – Strength Index Reading (3 Year Range): Bullish-Extreme Bearish-Extreme Bearish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: 0.8 -11.3 2.3   Article By InvestMacro – Receive our weekly COT Reports by Email *COT Report: The COT data, released weekly to the public each Friday, is updated through the most recent Tuesday (data is 3 days old) and shows a quick view of how large speculators or non-commercials (for-profit traders) were positioned in the futures markets. The CFTC categorizes trader positions according to commercial hedgers (traders who use futures contracts for hedging as part of the business), non-commercials (large traders who speculate to realize trading profits) and nonreportable traders (usually small traders/speculators) as well as their open interest (contracts open in the market at time of reporting).See CFTC criteria here.
Positions of large speculators according to the COT report as at 29/3/2022

Positions of large speculators according to the COT report as at 29/3/2022

Purple Trading Purple Trading 11.04.2022 06:40
Positions of large speculators according to the COT report as at 29/3/2022 Total net speculator positions in the USD index rose by 1,306 contracts last week. This change is the result of an increase in long positions by 1,409 contracts and an increase in short positions by 103 contracts. Growth in total net positions occurred last week in the euro, the Australian dollar and the Canadian dollar. There were declines in the total net positions of large speculators in the British pound, the New Zealand dollar, the Japanese yen and the Swiss franc. In the Japanese yen, in particular, the decline in total net positions of large speculators has been very strong. Over the past five weeks, total net positions have decreased by 38 944 contracts. The total net positions of large speculators are the most bearish for the yen in the last 20 weeks. This may be due to the Bank of Japan's continuing dovish monetary policy to support Japanese economic growth. The positions of speculators in individual currencies The total net positions of large speculators are shown in Table 1: If the value is positive then the large speculators are net long. If the value is negative, the large speculators are net short.   Table 1: Total net positions of large speculators DatE USD Index EUR GBP AUD NZD JPY CAD CHF Mar 29, 2022 30941 21374 -40070 -49606 -867 -102131 1535 -11579 Mar 22, 2022 29635 23843 -37244 -51189 2520 -78482 -4940 -8424 Mar 15, 2022 28380 18794 -29061 -44856 3653 -62340 17740 -5229 Mar 08, 2022 34044 58844 -12526 -78195 -12379 -55856 7646 -9710 Mar 01, 2022 34774 64939 -337 -78336 -14172 -68732 14140 -15248 Feb 22, 2022 36084 59306 -5809 -84080 -11551 -63187 9253 -10987   Note: The explanation of COT methodolody is at the the end of the report.   Notes: Large speculators are traders who trade large volumes of futures contracts, which, if the set limits are met, must be reported to the Commodity Futures Trading Commission. Typically, this includes traders such as funds or large banks. These traders mostly focus on trading long-term trends and their goal is to make money on speculation with the instrument. ​The total net positions of large speculators are the difference between the number of long contracts and the number of short contracts of large speculators. Positive value shows that large speculators are net long. Negative value shows that large speculators are net short. The data is published every Friday and is delayed because it shows the status on Tuesday of the week. The total net positions of large speculators show the sentiment this group has in the market. A positive value of the total net positions of speculators indicates bullish sentiment, a negative value of total net positions indicates bearish sentiment. When interpreting charts and values, it is important to follow the overall trend of total net positions. The turning points are also very important, i.e. the moments when the total net positions go from a positive value to a negative one and vice versa. Important are also extreme values ​​of total net positions as they often serve as signals of a trend reversal. Sentiment according to the reported positions of large players in futures markets is not immediately reflected in the movement of currency pairs. Therefore, information on sentiment is more likely to be used by traders who take longer trades and are willing to hold their positions for several weeks or even months.   Detailed analysis of selected currencies   Explanations:   Purple line and histogram: this is information on the total net position of large speculators. This information shows the strength and sentiment of an ongoing trend. It is the indicator r_COT Large Speculators (by Kramsken) in www.tradingview.com. Information on the positions of so-called hedgers is not shown in the chart, due to the fact that their main goal is not speculation, but hedging. Therefore, this group usually takes the opposite positions than the large speculators. For this reason, the positions of hedgers are inversely correlated with the movement of the price of the underlying asset. However, this inverse correlation shows the ongoing trend less clearly than the position of large speculators.​ We show moving average SMA 100 (blue line) and EMA 50 (orange line) on daily charts. ​Charts are made with the use of www.tradingview.com. The source of numerical data is www.myfxbook.com   The Euro   date Open Interest Specs Long Specs Short Specs Net positions change Open Interest change Long change Short change Net Positions Sentiment Mar 29, 2022 662415 200043 178669 21374 3598 -7008 -4539 2469 Weak bullish Mar 22, 2022 658817 207051 183208 23843 -7193 5011 -38 5049 Bullish Mar 15, 2022 666010 202040 183246 18794 -72980 -40643 -593 -40050 Weak bullish Mar 08, 2022 738990 242683 183839 58844 19015 14298 20393 -6095 Weak bullish Mar 01, 2022 719975 228385 163446 64939 23293 14190 8557 5633 Bullish Feb 22, 2022 696682 214195 154889 59306 -5365 -3704 -15429 11725 Bullish         Total Change -39632 -17856 8351 -26207     Figure 1: The euro and COT positions of large speculators on a weekly chart and the EURUSD on D1   The total net positions of speculators reached 21,374 contracts last week, down by 2,469 contracts compared to the previous week. This change is due to a decrease in long positions by 7,008 contracts and a decrease in short positions by 4,539 contracts. This data indicates weak bullish sentiment for the euro. Open interest has risen by 3 598 contracts in the last week. This shows that the upward movement that occurred in the euro last week was supported by a volume and is therefore strong price action. The euro continues to move in a downtrend. Last week it returned to the resistance level from which it bounced downwards. Long-term resistance: 1.1160 – 1.1180 Support: 1.0950-1.0980 and the next support is at 1.080-1.0850.   The British pound   date Open Interest Specs Long Specs Short Specs Net positions change Open Interest change Long change Short change Net Positions Sentiment Mar 29, 2022 224365 30624 70694 -40070 28653 -2129 697 -2826 Bearish Mar 22, 2022 195712 32753 69997 -37244 7389 311 8494 -8183 Bearish Mar 15, 2022 188323 32442 61503 -29061 -57989 -18540 -2005 -16535 Bearish Mar 08, 2022 246312 50982 63508 -12526 34443 3303 15492 -12189 Bearish Mar 01, 2022 211869 47679 48016 -337 23426 5430 -42 5472 Weak bearish Feb 22, 2022 188443 42249 48058 -5809 -6859 -7902 144 -8046 Bearish         Total Change 29063 -19527 22780 -42307     Figure 2: The GBP and COT positions of large speculators on a weekly chart and the GBPUSD on D1   The total net positions of speculators last week reached - 37,244 contracts, down by 8,183 contracts compared to the previous week. This change is due to the growth of long positions by 311 contracts and the growth of short positions by 8,494 contracts. This suggests bearish sentiment as the total net positions of large speculators are negative while there has been a further decline. Open interest rose by 7,389 contracts last week. This means that the modest rise in the pound that occurred last week was supported by the volume and is therefore strong. However, the pound's growth was not significant. In addition, a pin bar formed on the weekly chart which would suggest more of a further weakening in line with sentiment. Long-term resistance: 1.3270 – 1.3300. Support is near 1.3000.     The Australian dollar   date Open Interest Specs Long Specs Short Specs Net positions change Open Interest change Long change Short change Net Positions Sentiment Mar 29, 2022 143007 33960 83566 -49606 15240 10213 8630 1583 Weak bearish Mar 22, 2022 127767 23747 74936 -51189 3246 -534 5799 -6333 Bearish Mar 15, 2022 124521 24281 69137 -44856 -72573 4760 -28579 33339 Weak bearish Mar 08, 2022 197094 19521 97716 -78195 7427 6801 6660 141 Weak bearish Mar 01, 2022 189667 12720 91056 -78336 -2912 1167 -4577 5744 Weak bearish Feb 22, 2022 192579 11553 95633 -84080 1 -139 -2753 2614 Weak bearish         Total change -49571 22268 -14820 37088     Figure 3: The AUD and COT positions of large speculators on a weekly chart and the AUDUSD on D1   The total net positions of speculators reached 49,606 contracts last week, having grown by 1,583 contracts compared to the previous week. This change is due to the growth of long positions by 10,213 contracts and the growth of short positions by 8,630 contracts. This data suggests weak bearish sentiment for the Australian dollar as the total net positions of large speculators are negative, but they increased last week. There was an increase in open interest of 15,240 contracts last week. This means that the sideways movement that occurred last week was supported by the volume and was therefore strong as new money flowed into the market. The Australian dollar moved near a strong resistance level last week. If it is validly broken then a further bullish movement may be seen.  Long-term resistance: 0.7510-0.7560                                                                                                              Long-term support: 0.7370-0.7440.  A next support is near 0.7160 – 0.7180.   The New Zealand dollar   date Open Interest Specs Long Specs Short Specs Net positions change Open Interest change Long change Short change Net Positions Sentiment Mar 29, 2022 34881 15504 16371 -867 -375 -1652 1735 -3387 Bearish Mar 22, 2022 35256 17156 14636 2520 -3944 -4337 -3204 -1133 Weak bullish Mar 15, 2022 39200 21493 17840 3653 -14050 5718 -10314 16032 Bullish Mar 08, 2022 53250 15775 28154 -12379 2861 5290 3497 1793 Weak bearish Mar 01, 2022 50389 10485 24657 -14172 -6247 -6858 -4237 -2621 Bearish Feb 22, 2022 56636 17343 28894 -11551 -7469 -7580 -5362 -2218 Bearish Mar 29, 2022 34881 15504 16371 -867 -375 -1652 1735 -3387 Bearish         Total Change -29224 -9419 -17885 8466     Figure 4: The NZD and the position of large speculators on a weekly chart and the NZDUSD on D1   The total net positions of speculators last week amounted to - 867 contracts, having fallen by 3,387 contracts compared to the previous week. This change is due to a decrease in long positions by 1,652 contracts and an increase in short positions by 1,735 contracts. This data suggests that there was a bearish sentiment for the New Zealand dollar over the past week as the total net positions of large speculators got negative. Open interest fell by 375 contracts last week.  Therefore, the sideways move in the NZDUSD that occurred last week was not supported by a volume and therefore the move was weak. The NZDUSD strengthened strongly last week and got to the resistance level. Long-term resistance: 0.6980 – 0.7000 Long-term support: 0.6860-0.6880 and the next support is at 0.6730 – 0.6740.   Explanation to the COT report The COT report shows the positions of major participants in the futures markets. Futures contracts are derivatives and are essentially agreements between two parties to exchange an underlying asset for a predetermined price on a predetermined date. They are standardised, specifying the quality and quantity of the underlying asset. They are traded on an exchange so that the total volume of these contracts traded is known.   Open interest: open interest is the sum of all open futures contracts (i.e. the sum of short and long contracts) that exist on a given asset. OI increases when a new futures contract is created by pairing a buyer with a seller. The OI decreases when an existing futures contract expires at a given expiry time or by settlement. Low or no open interest means that there is no interest in the market. High open interest indicates high activity and traders pay attention to this market. A rising open interest indicates that there is demand for the currency. That is, a rising OI indicates a strong current trend. Conversely, a weakening open interest indicates that the current trend is not strong. Open Interest Price action Interpretation Notes Rising Rising Strong bullish market New money flow in the particular asset, more bulls entered the market which pushes the price up. The trend is strong. Rising Falling Strong bearish market Price falls, more bearish traders entered the market which pushes the price down. The trend is strong. Falling Rising Weak bullish market Price is going up but new money do not flow into the market. Existing futures contracts expire or are closed. The trend is weak. Falling Falling Weak bearish market Price is going down, but new money do not flow into the market. Existing futures expire or are closed, the trend is weak.   Large speculators are traders who trade large volumes of futures contracts, which, if the set limits are met, must be reported to the Commodity Futures Trading Commission. Typically, this includes traders such as funds or large banks. These traders mostly focus on trading long-term trends and their goal is to make money on speculation with the instrument. Traders should try to trade in the direction of these large speculators. The total net positions of large speculators are the difference between the number of long contracts and the number of short contracts of large speculators. Positive value shows that large speculators are net long. Negative value shows that large speculators are net short. The data is published every Friday and is delayed because it shows the status on Tuesday of the week. The total net positions of large speculators show the sentiment this group has in the market. A positive value of the total net positions of speculators indicates bullish sentiment, a negative value of total net positions indicates bearish sentiment. When interpreting charts and values, it is important to follow the overall trend of total net positions. The turning points are also very important, i.e. the moments when the total net positions go from a positive value to a negative one and vice versa. Important are also extreme values ​​of total net positions as they often serve as signals of a trend reversal. The COT data are usually reported every Friday and they show the status on Tuesday of the week. Sentiment according to the reported positions of large players in futures markets is not immediately reflected in the movement of currency pairs. Therefore, information on sentiment is more likely to be used by traders who take longer trades and are willing to hold their positions for several weeks or even months.
The Swing Overview - Week 14 2022

The Swing Overview - Week 14 2022

Purple Trading Purple Trading 11.04.2022 06:41
The Swing Overview - Week 14 Equity indices weakened last week on news of rising interest rates and a tightening of the US economy. The euro is also weakening not only because it is under pressure from the ongoing war in Ukraine and sanctions against Russia, but also from the uncertainty of the upcoming French presidential election. The outbreak of the coronavirus in China has fuelled negative sentiment in oil, where the market fears an excess of supply over demand. The US dollar was the clear winner in this environment.  The USD index strengthens along with US bond yields According to the US Fed meeting minutes released on Wednesday, the Fed is prepared to reduce its balance sheet by the USD 95 billion per month from May this year.  In addition, the Fed is ready to raise interest rates at a pace of 0.50%. Thus, at the next meeting, which will take place in May, we can expect a rate increase from the current 0.50% to 1.00%. This option is already included in asset prices.     As a result of this the yields on US 10-year bonds continued to rise and has already reached 2.64%. The US dollar in particular is benefiting from this development and is approaching the level 100. Figure 1: US 10-year bond yields and USD index on the daily chart   Equity indices under pressure from high interest rates The prospect of aggressive interest rate hikes is having a negative impact on investor sentiment, particularly for growth stocks. However, it is positive for financial sector stocks. High yields on the US bonds are attractive to investors, who will thus prefer this yield to, for example, investments in gold, which does not yield any interest. Figure 2: SP 500 on H4 and D1 chart   The US SP 500 index is currently moving in a downward correction, which is shown on the H4 chart. Prices could move in a downward channel that is formed by a lower high and a lower low. The SP 500 according to the H4 chart is below the SMA 100 moving average, which also indicates bearish tendencies.   The nearest resistance according to the H4 chart is in the range of 4,513 - 4,520. The next resistance is around 4,583 - 4,600. A support is at 4 450 - 4 455.   German DAX index A declining channel has also formed for the DAX index. The price is below the SMA 100 moving average on the H4 chart, where at the same time the SMA 100 got below the EMA 50, which is a strong bearish signal. Figure 3: German DAX index on H4 and daily chart According to the H4 chart, the nearest resistance is in the range between 14,340 - 14,370. There is also a confluence with the moving average EMA 50 here. The next resistance is at 14,590 - 14,630. A support is at 14,030 - 14,100.   The DAX is influenced by the upcoming French presidential election, the outcome of which could have a major impact on the European economy.    The euro remains in a downtrend The Euro is negatively affected by the sanctions against Russia, which will also have a negative impact on the European economy. In addition, uncertainty has arisen regarding the French presidential election. Although the victory of the far-right candidate Marine Le Pen over the defending President Emmanuel Macron is still unlikely, the polls suggest that it is within the statistical margin of error. And this makes markets nervous.   A Le Pen victory would be bad for the economy and France's overall international image. It would weaken the European Union. That's why this news sent the euro below 1.09. The first round of elections will be held on Sunday April 10 and the second round on April 24, 2022.    Figure 4: EURUSD on H4 and daily chart. The nearest resistance according to the H4 chart is at 1.0930 - 1.0950. The significant resistance according to the daily chart is 1.1160 - 1.1190.  A support is at 1.080 - 1.0850.   According to the technical analysis, the euro is in a downtrend, but as it is currently at significant support levels, any short speculation could be considered only after the current support is broken and retested to validate the break.   The crude oil continues to descend The oil prices fell for a third straight day after the Paris-based International Energy Agency (IEA) announced it would release 60 million barrels of its members' reserves to the open market, adding to an earlier reserve release of 180 million barrels announced by the United States. In total, 240 million barrels would be delivered to the market over six months, resulting in a net inflow of 1.33 million barrels a day.   That would be more than triple the monthly production additions of 400,000 barrels per day by the world's oil producers under the OPEC+ alliance led by Saudi Arabia and controlled by Russia.   Adding to the negative sentiment on oil was a coronavirus outbreak in Shanghai, the largest in two years, which forced a more than week-long closure of China's second-largest city. This raises concerns about demand among oil consumers in the Chinese economy, which has a significant impact on prices. Figure 5: Brent crude oil on the H4 and daily charts. Brent crude oil is thus approaching support, which according to the H4 chart is at around USD 97-99 per barrel. The nearest resistance according to the H4 chart is at the price of USD 106 per barrel. The more significant resistance is at USD 111-112 per barrel of the Brent crude.   
The Swing Overview - Week 13 2022

The Swing Overview - Week 13 2022

Purple Trading Purple Trading 11.04.2022 06:41
The Swing Overview - Week 13 Equity indices closed the first quarter of 2022 in a loss under the influence of geopolitical tensions. The Czech koruna strengthened as a result of the CNB raising interest rates to 5%, the highest since 2001. The US supports the oil market by releasing 180 million barrels from its strategic reserves. War in Ukraine   The war in Ukraine has been going on for more than a month and there is still no end in sight. Ongoing diplomatic negotiations have not led to a result yet. Meanwhile, Russian President Putin has decided that European countries will pay for Russian gas in rubles. This has been described as blackmailing from Europe's point of view and is not in line with the gas supply contracts that have been concluded. A way around this is to open an account with Gazprombank where the gas can be paid for in euros. Geopolitical tensions are therefore still ongoing and are having a negative effect on stock markets.   Equity indices have had their worst quarter since 2020 US and European equities posted their biggest quarterly loss since the beginning of 2020, when the COVID-19 pandemic broke out and the global economy was in crisis. Portfolio rebalancing at the end of the quarter boosted demand for bonds and kept yields lower.   On Tuesday, the yield curve briefly inverted, meaning that short-term bonds yields were higher than  long-term bonds. An inverted yield curve is a signal of a recession according to many economists. It means that future corporate profits should be rather behind expectations and stock prices might reflect it.    On Thursday, the S&P 500 index fell 1.6%. The Dow Jones industrial index also fell by 1.6% and the Nasdaq Composite index fell by 1.5%. The European STOXX 600 index closed down by 0.94%. Even after last week's rally, as investors celebrated signs of progress in peace talks between Russia and Ukraine, the S&P 500 index is still down 5% for the first three months, its worst quarterly performance in two years.  Figure 1: SP 500 on H4 and D1 chart   The SP 500 index reached the resistance level at 4,600, which it broke, but then closed below it. This indicates a false break. The new nearest resistance is in the range of 4,625 - 4,635. Support is at 4,453 and then significant support is at 4,386 - 4,422.   German DAX index The DAX index has rallied since March 8 and has reached the resistance level which is in the 14,800 - 15,000 range.  However, the index started to weaken in the second half of the week. The news that Russia will demand payments for gas in rubles, which Western countries refuse, contributed to the index's weakening. The fear of gas supply disruption then caused a sell-off.    Figure 2: German DAX index on H4 and daily chart Resistance is between 14,800 - 15,000 according to the daily chart. The nearest support according to the H4 chart is at 14,100 - 14,200.   The euro remains in a downtrend The euro was supported at the beginning of the week by hopes for peace in Ukraine. However, by the end of the week, the Ukrainian President warned that Russia was preparing for more attacks and the Euro started to weaken. News of Russia's demand to pay for gas in rubles had a negative effect on the euro as well. Figure 3: The EURUSD on the H4 and daily charts. From a technical point of view, we can see that the EURUSD according to the daily chart has reached the resistance formed by EMA 50 (yellow line). The new horizontal resistance is in the area of 1.1160 - 1.1180. Support is at 1.0950 - 1.0980. The euro still remains in a downtrend.   CNB raised the interest rate In the fight against the inflation, the CNB decided to further raise the interest rate by 0.50%. Currently, the base rate is at 5%, where it was last in 2001. The interest rate hike is aimed at slowing inflation by slowing demand through higher borrowing costs.   Figure 4: Interest rate developments in the Czech Republic In addition, a strong koruna should support the slowdown in inflation. The koruna could appreciate especially against the euro due to higher interest rates. However, the strengthening of the koruna is conditional on the war in Ukraine not escalating further.  We can see that the koruna against the euro is approaching a support around 24.30. The low of this year was 24.10 korunas for one euro. Figure 5: USD/CZK and EUR/CZK on the daily chart. The koruna is also strengthening against the US dollar. Here, however, the situation is slightly different in that the US Fed is also raising rates and is expected to continue raising rates until the end of the year. Therefore, the interest rate differential between the koruna and the dollar is less favourable than between the koruna and the euro. The appreciation of the koruna against the dollar is therefore slower.   Currently, the koruna is at the support of 22 koruna per dollar. The next support is at 21.70 and then 21.10 koruna per dollar, where this year's low is.   Oil has weakened Oil prices saw the deep losses after the news that the United States will release up to 180 million barrels from its strategic petroleum reserves as part of measures to reduce fuel prices. US crude oil fell 5.4% and Brent crude oil fell 6.6% on Thursday after the news. Figure 6: Brent crude oil on a monthly and daily chart We can see that a strong bearish pinbar was formed on a  monthly chart. The nearest support is in the zone 103 – 106 USD per barel. A strong support is around 100 USD per barel which will be closely watched.  
The French elections: effects on euro

The French elections: effects on euro

Alex Kuptsikevich Alex Kuptsikevich 11.04.2022 14:06
Politics is once again temporarily becoming the main driver for the single currency. EURUSD returned to 1.0925 on Monday, gaining 0.8% from Friday's lows on reports that incumbent Macron is ahead of far-right Le Pen and will potentially get even more votes in the second round on April 24th as the majority of those voting for alternative candidates lean towards Macron. The lowering of political risks is attracting buyers of the single currency as EURUSD fell late last week to 1.0850 - near the lows of March and a support area in the pair between February and May 2020. In 1997, the EURUSD (then still non-cash) was gaining support near this level, but a return to 1.08 two years later triggered a capitulation. The EURUSD sell-off then had only halted two years later after the single currency had lost a quarter of its value and only after ECB interventions. The French elections and the events in Ukraine have enough potential to trigger a historic euro move away from that line. A strong pullback under 1.0800 opens the direct road to 1.05 (pandemic lows), but it may only be the first step in a long term slide of the single currency towards 0.8500. The opposite is also true: the political détente in the coming weeks may fundamentally change the attitude towards the single currency, making purchases attractive in the long term from the current levels. Investors and traders should pay close attention to the EURUSD in the coming weeks because the following dynamics will be decisive for the number one currency and the entire forex market for many months.
Positions of large speculators according to the COT report as at 5/4/2022

Positions of large speculators according to the COT report as at 5/4/2022

Purple Trading Purple Trading 11.04.2022 22:12
Positions of large speculators according to the COT report as at 5/4/2022 Total net speculator positions in the USD index rose by 911 contracts last week. This change is the result of a decrease in long positions by 3,932 contracts and a decrease in short positions by 4,843 contracts. The growth in total net positions occurred last week in the euro, the Australian dollar and the Canadian dollar. There were declines in the total net positions of large speculators in the British pound, the New Zealand dollar, the Japanese yen and the Swiss franc. Interest rate decisions will be made by the central banks of New Zealand and Canada (Wednesday) and the ECB on Thursday this week. The published monetary policy of these banks will be the decisive driver for the NZD, the CAD and the EUR this week. The positions of speculators in individual currencies The total net positions of large speculators are shown in Table 1: If the value is positive then the large speculators are net long. If the value is negative, the large speculators are net short. Table 1: Total net positions of large speculators DatE USD Index EUR GBP AUD NZD JPY CAD CHF Apr 05, 2022 31852 27370 -41758 -37513 -1569 -103829 6923 -12393 Mar 29, 2022 30941 21374 -40070 -49606 -867 -102131 1535 -11579 Mar 22, 2022 29635 23843 -37244 -51189 2520 -78482 -4940 -8424 Mar 15, 2022 28380 18794 -29061 -44856 3653 -62340 17740 -5229 Mar 08, 2022 34044 58844 -12526 -78195 -12379 -55856 7646 -9710 Mar 01, 2022 34774 64939 -337 -78336 -14172 -68732 14140 -15248   Note: The explanation of COT methodolody is at the the end of the report.   Notes: Large speculators are traders who trade large volumes of futures contracts, which, if the set limits are met, must be reported to the Commodity Futures Trading Commission. Typically, this includes traders such as funds or large banks. These traders mostly focus on trading long-term trends and their goal is to make money on speculation with the instrument. ​The total net positions of large speculators are the difference between the number of long contracts and the number of short contracts of large speculators. Positive value shows that large speculators are net long. Negative value shows that large speculators are net short. The data is published every Friday and is delayed because it shows the status on Tuesday of the week. The total net positions of large speculators show the sentiment this group has in the market. A positive value of the total net positions of speculators indicates bullish sentiment, a negative value of total net positions indicates bearish sentiment. When interpreting charts and values, it is important to follow the overall trend of total net positions. The turning points are also very important, i.e. the moments when the total net positions go from a positive value to a negative one and vice versa. Important are also extreme values ​​of total net positions as they often serve as signals of a trend reversal. Sentiment according to the reported positions of large players in futures markets is not immediately reflected in the movement of currency pairs. Therefore, information on sentiment is more likely to be used by traders who take longer trades and are willing to hold their positions for several weeks or even months.   Detailed analysis of selected currencies   Explanations:   Purple line and histogram: this is information on the total net position of large speculators. This information shows the strength and sentiment of an ongoing trend. It is the indicator r_COT Large Speculators (by Kramsken) in www.tradingview.com. Information on the positions of so-called hedgers is not shown in the chart, due to the fact that their main goal is not speculation, but hedging. Therefore, this group usually takes the opposite positions than the large speculators. For this reason, the positions of hedgers are inversely correlated with the movement of the price of the underlying asset. However, this inverse correlation shows the ongoing trend less clearly than the position of large speculators.​ We show moving average SMA 100 (blue line) and EMA 50 (orange line) on daily charts. ​Charts are made with the use of www.tradingview.com. The source of numerical data is www.myfxbook.com   The Euro   date Open Interest Specs Long Specs Short Specs Net positions change Open Interest change Long change Short change Net Positions Sentiment Apr 05, 2022 663589 210914 183544 27370 1174 10871 4875 5996 Bullish Mar 29, 2022 662415 200043 178669 21374 3598 -7008 -4539 2469 Weak bullish Mar 22, 2022 658817 207051 183208 23843 -7193 5011 -38 5049 Bullish Mar 15, 2022 666010 202040 183246 18794 -72980 -40643 -593 -40050 Weak bullish Mar 08, 2022 738990 242683 183839 58844 19015 14298 20393 -6095 Weak bullish Mar 01, 2022 719975 228385 163446 64939 23293 14190 8557 5633 Bullish         Total change -33093 -3281 28655 -31936     Figure 1: The euro and COT positions of large speculators on a weekly chart and the EURUSD on D1 The total net positions of large speculators reached 27 370 contracts last week and they were up by 5 996 contracts compared to the previous week. This change is due to an increase in long positions by 10,871 contracts and an increase in short positions by 4,875 contracts. These data indicates a bullish sentiment for the euro. Open interest has risen by 1,174 contracts in the last week. This shows that the downward movement that occurred in the euro last week was supported by a volume and it was therefore a strong price action. The euro keeps moving in a downtrend. Last week it again reached a strong support in the area around 1.0850. Long-term resistance: 1.0950 – 1.0980.  The next resistance is in the zone 1.1160 – 1.1180. Support: 1.080-1.0850   The British pound   date Open Interest Specs Long Specs Short Specs Net positions change Open Interest change Long change Short change Net Positions Sentiment Apr 05, 2022 238266 35873 77631 -41758 13901 5249 6937 -1688 Bearish Mar 29, 2022 224365 30624 70694 -40070 28653 -2129 697 -2826 Bearish Mar 22, 2022 195712 32753 69997 -37244 7389 311 8494 -8183 Bearish Mar 15, 2022 188323 32442 61503 -29061 -57989 -18540 -2005 -16535 Bearish Mar 08, 2022 246312 50982 63508 -12526 34443 3303 15492 -12189 Bearish Mar 01, 2022 211869 47679 48016 -337 23426 5430 -42 5472 Weak bearish         Total change 49823 -6376 29573 -35949     Figure 2: The GBP and COT positions of large speculators on a weekly chart and the GBPUSD on D1   The total net positions of speculators last week reached 41,758 contracts and thez were down by 1,688 contracts compared to the previous week. This change is due to the growth in long positions by 5,249 contracts and the growth in short positions by 6,937 contracts. This suggests bearish sentiment as the total net positions of large speculators are negative while there has been their further decline. Open interest rose by 13,901 contracts last week. This means that the downward movement in the pound that occurred last week was supported by a volume and it is therefore strong. Long-term resistance: 1.3050 – 1.3070. The next resistance is in the zone 1.3270 – 1.3300. Support is near 1.3000. The next support is near 1.2900   The Australian dollar   date Open Interest Specs Long Specs Short Specs Net positions change Open Interest change Long change Short change Net Positions Sentiment Apr 05, 2022 148898 34871 72384 -37513 5891 911 -11182 12093 Weak bearish Mar 29, 2022 143007 33960 83566 -49606 15240 10213 8630 1583 Weak bearish Mar 22, 2022 127767 23747 74936 -51189 3246 -534 5799 -6333 Bearish Mar 15, 2022 124521 24281 69137 -44856 -72573 4760 -28579 33339 Weak bearish Mar 08, 2022 197094 19521 97716 -78195 7427 6801 6660 141 Weak bearish Mar 01, 2022 189667 12720 91056 -78336 -2912 1167 -4577 5744 Weak bearish         Total change -43681 23318 -23249 46567     Figure 3: The AUD and COT positions of large speculators on a weekly chart and the AUDUSD on D1   The total net positions of speculators last week reached - 37,513 contracts, growing by 12,093 contracts compared to the previous week. This change is due to the growth in long positions by 911 contracts and a decrease in short positions by 11,182 contracts. This data suggests weak bearish sentiment for the Australian dollar as the total net positions of large speculators are negative, but there was an increase in the previous week. There was an increase in open interest of 5,891 contracts last week. This means that the downward movement that occurred last week was supported by a volume and it was therefore a strong price action as new money flowed into the market. The Australian dollar formed a strong bearish pin bar last week. This could indicate further weakening of the AUD/USD pair. However, the pair is in a support area, so to speculate in the short direction it is necessary to wait for the pair to break this support and for a valid retest of the break. Long-term resistance: 0.7580-0.7660                                                                                                              Long-term support: 0.7370-0.7440.  A next support is near 0.7160 – 0.7180.   The New Zealand dollar   date Open Interest Specs Long Specs Short Specs Net positions change Open Interest change Long change Short change Net Positions Sentiment Apr 05, 2022 35788 15428 16997 -1569 907 -76 626 -702 Bearish Mar 29, 2022 34881 15504 16371 -867 -375 -1652 1735 -3387 Bearish Mar 22, 2022 35256 17156 14636 2520 -3944 -4337 -3204 -1133 Weak bullish Mar 15, 2022 39200 21493 17840 3653 -14050 5718 -10314 16032 Bullish Mar 08, 2022 53250 15775 28154 -12379 2861 5290 3497 1793 Weak bearish Mar 01, 2022 50389 10485 24657 -14172 -6247 -6858 -4237 -2621 Bearish         Total change -20848 -1915 -11897 9982     Figure 4: The NZD and the position of large speculators on a weekly chart and the NZDUSD on D1   The total net positions of speculators last week reached to - 1 569 contracts, falling by 702 contracts compared to the previous week. This change is due to a decrease in long positions by 76 contracts and an increase in short positions by 626 contracts. This data suggests that bearish sentiment has set in in the New Zealand dollar over the past week, as the total net positions of large speculators are negative and they continue to fall Open interest rose by 907 contracts last week.  It means that the downward movement in NZDUSD that occurred last week was supported by a volume and therefore this price action was strong. Long-term resistance: 0.6860 – 0.6880. The next resistance is near 0.6980 – 0.7030 Long-term support: 0.6730 – 0.6740.   Explanation to the COT report The COT report shows the positions of major participants in the futures markets. Futures contracts are derivatives and are essentially agreements between two parties to exchange an underlying asset for a predetermined price on a predetermined date. They are standardised, specifying the quality and quantity of the underlying asset. They are traded on an exchange so that the total volume of these contracts traded is known.   Open interest: open interest is the sum of all open futures contracts (i.e. the sum of short and long contracts) that exist on a given asset. OI increases when a new futures contract is created by pairing a buyer with a seller. The OI decreases when an existing futures contract expires at a given expiry time or by settlement. Low or no open interest means that there is no interest in the market. High open interest indicates high activity and traders pay attention to this market. A rising open interest indicates that there is demand for the currency. That is, a rising OI indicates a strong current trend. Conversely, a weakening open interest indicates that the current trend is not strong. Open Interest Price action Interpretation Notes Rising Rising Strong bullish market New money flow in the particular asset, more bulls entered the market which pushes the price up. The trend is strong. Rising Falling Strong bearish market Price falls, more bearish traders entered the market which pushes the price down. The trend is strong. Falling Rising Weak bullish market Price is going up but new money do not flow into the market. Existing futures contracts expire or are closed. The trend is weak. Falling Falling Weak bearish market Price is going down, but new money do not flow into the market. Existing futures expire or are closed, the trend is weak.   Large speculators are traders who trade large volumes of futures contracts, which, if the set limits are met, must be reported to the Commodity Futures Trading Commission. Typically, this includes traders such as funds or large banks. These traders mostly focus on trading long-term trends and their goal is to make money on speculation with the instrument. Traders should try to trade in the direction of these large speculators. The total net positions of large speculators are the difference between the number of long contracts and the number of short contracts of large speculators. Positive value shows that large speculators are net long. Negative value shows that large speculators are net short. The data is published every Friday and is delayed because it shows the status on Tuesday of the week. The total net positions of large speculators show the sentiment this group has in the market. A positive value of the total net positions of speculators indicates bullish sentiment, a negative value of total net positions indicates bearish sentiment. When interpreting charts and values, it is important to follow the overall trend of total net positions. The turning points are also very important, i.e. the moments when the total net positions go from a positive value to a negative one and vice versa. Important are also extreme values ​​of total net positions as they often serve as signals of a trend reversal. The COT data are usually reported every Friday and they show the status on Tuesday of the week. Sentiment according to the reported positions of large players in futures markets is not immediately reflected in the movement of currency pairs. Therefore, information on sentiment is more likely to be used by traders who take longer trades and are willing to hold their positions for several weeks or even months.
COT Currency Speculators drop their Japanese Yen bets to 183-week low

COT Currency Speculators drop their Japanese Yen bets to 183-week low

Invest Macro Invest Macro 16.04.2022 22:07
By InvestMacro | COT | Data Tables | COT Leaders | Downloads | COT Newsletter Here are the latest charts and statistics for the Commitment of Traders (COT) data published by the Commodities Futures Trading Commission (CFTC). The latest COT data is updated through Tuesday April 12th and shows a quick view of how large traders (for-profit speculators and commercial entities) were positioned in the futures markets. All currency positions are in direct relation to the US dollar where, for example, a bet for the euro is a bet that the euro will rise versus the dollar while a bet against the euro will be a bet that the euro will decline versus the dollar. Highlighting the COT currency data was the further rise of bearish bets in the Japanese yen currency futures contracts. Yen speculators pushed their bearish bets higher for a fifth straight week this week and for the sixth time in the past seven weeks. Over the past five weeks, yen bets have fallen by a total of -55,971 contracts, going from a total of -55,856 net positions on March 8th to a total of -111,827 net positions this week. Speculator positions have now slid all the way to the lowest standing of the past one hundred and eight-three weeks, dating back to October 9th of 2019. This recent weakness in yen positions and the yen price has taken place while open interest has been increasing which shows an accelerating downtrend as prices have been falling as more traders have been entering the market on the bearish side. The speculator strength index is also showing that the Japanese yen positions are at a bearish extreme position with the strength index at a zero percent level (strength index is the current speculator standing compared to past three years, above 80 is bullish extreme, below 20 is bearish extreme). The fundamental backdrop has been the major driver of yen weakness. The Bank of Japan has continued on with its stimulus program and has not indicated any plans to move interest rates off their near-zero level while other central banks around the world have put the breaks on their stimulus actions and have started hiking their interest rates to try to tame inflationary pressures. The yen this week hit the lowest level in twenty years against the US dollar as the USDJPY currency pair trades above the 126.00 level. The other major currencies have all hit multi-year highs versus the yen as well. Overall, the currencies with higher speculator bets this week were the Euro (11,690 contracts), Brazil real (603 contracts), New Zealand dollar (1,280 contracts), Canadian dollar (5,235 contracts), Bitcoin (411 contracts), Australian dollar (8,798 contracts) and the Mexican peso (14,050 contracts). The currencies with declining bets were the US Dollar Index (-2,215 contracts), Japanese yen (-7,998 contracts), Swiss franc (-1,549 contracts) and the British pound sterling (-11,296 contracts). Speculator strength standings for each Currency where strength index is current net position compared to past three years, above 80 is bullish extreme, below 20 is bearish extreme OI Strength = Current Open Interest level compared to last 3 years range Spec Strength = Current Net Speculator level compared to last 3 years range Strength Move = Six week change of Spec Strength Data Snapshot of Forex Market Traders | Columns Legend Apr-12-2022 OI OI-Index Spec-Net Spec-Index Com-Net COM-Index Smalls-Net Smalls-Index USD Index 54,836 78 29,637 77 -36,045 15 6,408 87 EUR 678,607 73 39,060 47 -60,750 59 21,690 10 GBP 246,152 68 -53,054 36 70,949 72 -17,895 19 JPY 245,403 86 -111,827 0 131,902 100 -20,075 13 CHF 41,231 16 -13,942 46 22,299 56 -8,357 39 CAD 155,390 34 12,158 59 -33,450 35 21,292 72 AUD 150,939 45 -28,715 58 17,876 32 10,839 79 NZD 37,585 20 -289 71 -429 30 718 60 MXN 175,905 38 14,960 34 -19,553 65 4,593 62 RUB 20,930 4 7,543 31 -7,150 69 -393 24 BRL 67,772 64 46,129 96 -48,954 4 2,825 98 Bitcoin 10,632 56 167 98 -439 0 272 19   US Dollar Index Futures: The US Dollar Index large speculator standing this week resulted in a net position of 29,637 contracts in the data reported through Tuesday. This was a weekly lowering of -2,215 contracts from the previous week which had a total of 31,852 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish with a score of 76.9 percent. The commercials are Bearish-Extreme with a score of 14.7 percent and the small traders (not shown in chart) are Bullish-Extreme with a score of 86.6 percent. US DOLLAR INDEX Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 80.8 2.2 15.3 – Percent of Open Interest Shorts: 26.7 68.0 3.6 – Net Position: 29,637 -36,045 6,408 – Gross Longs: 44,303 1,226 8,402 – Gross Shorts: 14,666 37,271 1,994 – Long to Short Ratio: 3.0 to 1 0.0 to 1 4.2 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 76.9 14.7 86.6 – Strength Index Reading (3 Year Range): Bullish Bearish-Extreme Bullish-Extreme NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: -8.9 5.6 19.6   Euro Currency Futures: The Euro Currency large speculator standing this week resulted in a net position of 39,060 contracts in the data reported through Tuesday. This was a weekly advance of 11,690 contracts from the previous week which had a total of 27,370 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 47.0 percent. The commercials are Bullish with a score of 58.6 percent and the small traders (not shown in chart) are Bearish-Extreme with a score of 10.3 percent. EURO Currency Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 32.7 53.0 11.7 – Percent of Open Interest Shorts: 26.9 62.0 8.5 – Net Position: 39,060 -60,750 21,690 – Gross Longs: 221,645 359,853 79,165 – Gross Shorts: 182,585 420,603 57,475 – Long to Short Ratio: 1.2 to 1 0.9 to 1 1.4 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 47.0 58.6 10.3 – Strength Index Reading (3 Year Range): Bearish Bullish Bearish-Extreme NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: -7.9 9.7 -14.0   British Pound Sterling Futures: The British Pound Sterling large speculator standing this week resulted in a net position of -53,054 contracts in the data reported through Tuesday. This was a weekly lowering of -11,296 contracts from the previous week which had a total of -41,758 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 35.8 percent. The commercials are Bullish with a score of 71.6 percent and the small traders (not shown in chart) are Bearish-Extreme with a score of 18.6 percent. BRITISH POUND Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 14.4 75.7 8.0 – Percent of Open Interest Shorts: 36.0 46.9 15.3 – Net Position: -53,054 70,949 -17,895 – Gross Longs: 35,514 186,343 19,803 – Gross Shorts: 88,568 115,394 37,698 – Long to Short Ratio: 0.4 to 1 1.6 to 1 0.5 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 35.8 71.6 18.6 – Strength Index Reading (3 Year Range): Bearish Bullish Bearish-Extreme NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: -38.0 33.6 -8.5   Japanese Yen Futures: The Japanese Yen large speculator standing this week resulted in a net position of -111,827 contracts in the data reported through Tuesday. This was a weekly decrease of -7,998 contracts from the previous week which had a total of -103,829 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish-Extreme with a score of 0.0 percent. The commercials are Bullish-Extreme with a score of 100.0 percent and the small traders (not shown in chart) are Bearish-Extreme with a score of 12.7 percent. JAPANESE YEN Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 4.0 86.7 8.2 – Percent of Open Interest Shorts: 49.6 33.0 16.3 – Net Position: -111,827 131,902 -20,075 – Gross Longs: 9,925 212,850 20,022 – Gross Shorts: 121,752 80,948 40,097 – Long to Short Ratio: 0.1 to 1 2.6 to 1 0.5 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 0.0 100.0 12.7 – Strength Index Reading (3 Year Range): Bearish-Extreme Bullish-Extreme Bearish-Extreme NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: -26.5 25.5 -18.8   Swiss Franc Futures: The Swiss Franc large speculator standing this week resulted in a net position of -13,942 contracts in the data reported through Tuesday. This was a weekly lowering of -1,549 contracts from the previous week which had a total of -12,393 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 45.6 percent. The commercials are Bullish with a score of 55.9 percent and the small traders (not shown in chart) are Bearish with a score of 38.8 percent. SWISS FRANC Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 4.0 74.7 21.2 – Percent of Open Interest Shorts: 37.8 20.6 41.5 – Net Position: -13,942 22,299 -8,357 – Gross Longs: 1,642 30,798 8,742 – Gross Shorts: 15,584 8,499 17,099 – Long to Short Ratio: 0.1 to 1 3.6 to 1 0.5 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 45.6 55.9 38.8 – Strength Index Reading (3 Year Range): Bearish Bullish Bearish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: 2.3 1.6 -8.0   Canadian Dollar Futures: The Canadian Dollar large speculator standing this week resulted in a net position of 12,158 contracts in the data reported through Tuesday. This was a weekly gain of 5,235 contracts from the previous week which had a total of 6,923 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish with a score of 58.8 percent. The commercials are Bearish with a score of 35.4 percent and the small traders (not shown in chart) are Bullish with a score of 72.2 percent. CANADIAN DOLLAR Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 24.3 49.5 25.0 – Percent of Open Interest Shorts: 16.5 71.0 11.3 – Net Position: 12,158 -33,450 21,292 – Gross Longs: 37,724 76,922 38,796 – Gross Shorts: 25,566 110,372 17,504 – Long to Short Ratio: 1.5 to 1 0.7 to 1 2.2 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 58.8 35.4 72.2 – Strength Index Reading (3 Year Range): Bullish Bearish Bullish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: -2.0 -8.6 27.6   Australian Dollar Futures: The Australian Dollar large speculator standing this week resulted in a net position of -28,715 contracts in the data reported through Tuesday. This was a weekly increase of 8,798 contracts from the previous week which had a total of -37,513 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish with a score of 58.2 percent. The commercials are Bearish with a score of 32.2 percent and the small traders (not shown in chart) are Bullish with a score of 78.9 percent. AUSTRALIAN DOLLAR Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 26.3 53.9 19.3 – Percent of Open Interest Shorts: 45.4 42.1 12.1 – Net Position: -28,715 17,876 10,839 – Gross Longs: 39,770 81,396 29,106 – Gross Shorts: 68,485 63,520 18,267 – Long to Short Ratio: 0.6 to 1 1.3 to 1 1.6 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 58.2 32.2 78.9 – Strength Index Reading (3 Year Range): Bullish Bearish Bullish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: 46.0 -52.2 49.4   New Zealand Dollar Futures: The New Zealand Dollar large speculator standing this week resulted in a net position of -289 contracts in the data reported through Tuesday. This was a weekly boost of 1,280 contracts from the previous week which had a total of -1,569 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish with a score of 70.8 percent. The commercials are Bearish with a score of 29.7 percent and the small traders (not shown in chart) are Bullish with a score of 60.1 percent. NEW ZEALAND DOLLAR Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 43.4 45.9 10.0 – Percent of Open Interest Shorts: 44.1 47.0 8.1 – Net Position: -289 -429 718 – Gross Longs: 16,295 17,233 3,773 – Gross Shorts: 16,584 17,662 3,055 – Long to Short Ratio: 1.0 to 1 1.0 to 1 1.2 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 70.8 29.7 60.1 – Strength Index Reading (3 Year Range): Bullish Bearish Bullish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: 23.3 -25.5 30.2   Mexican Peso Futures: The Mexican Peso large speculator standing this week resulted in a net position of 14,960 contracts in the data reported through Tuesday. This was a weekly advance of 14,050 contracts from the previous week which had a total of 910 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 33.7 percent. The commercials are Bullish with a score of 64.6 percent and the small traders (not shown in chart) are Bullish with a score of 62.5 percent. MEXICAN PESO Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 46.4 48.8 4.3 – Percent of Open Interest Shorts: 37.9 59.9 1.7 – Net Position: 14,960 -19,553 4,593 – Gross Longs: 81,582 85,784 7,517 – Gross Shorts: 66,622 105,337 2,924 – Long to Short Ratio: 1.2 to 1 0.8 to 1 2.6 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 33.7 64.6 62.5 – Strength Index Reading (3 Year Range): Bearish Bullish Bullish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: -11.7 10.9 4.9   Brazilian Real Futures: The Brazilian Real large speculator standing this week resulted in a net position of 46,129 contracts in the data reported through Tuesday. This was a weekly lift of 603 contracts from the previous week which had a total of 45,526 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish-Extreme with a score of 95.7 percent. The commercials are Bearish-Extreme with a score of 3.5 percent and the small traders (not shown in chart) are Bullish-Extreme with a score of 97.9 percent. BRAZIL REAL Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 77.6 15.6 6.6 – Percent of Open Interest Shorts: 9.6 87.9 2.5 – Net Position: 46,129 -48,954 2,825 – Gross Longs: 52,624 10,591 4,496 – Gross Shorts: 6,495 59,545 1,671 – Long to Short Ratio: 8.1 to 1 0.2 to 1 2.7 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 95.7 3.5 97.9 – Strength Index Reading (3 Year Range): Bullish-Extreme Bearish-Extreme Bullish-Extreme NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: -4.2 3.3 10.9   Bitcoin Futures: The Bitcoin large speculator standing this week resulted in a net position of 167 contracts in the data reported through Tuesday. This was a weekly gain of 411 contracts from the previous week which had a total of -244 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish-Extreme with a score of 97.9 percent. The commercials are Bearish-Extreme with a score of 6.3 percent and the small traders (not shown in chart) are Bearish-Extreme with a score of 19.1 percent. BITCOIN Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 77.2 3.6 10.0 – Percent of Open Interest Shorts: 75.6 7.7 7.4 – Net Position: 167 -439 272 – Gross Longs: 8,207 382 1,058 – Gross Shorts: 8,040 821 786 – Long to Short Ratio: 1.0 to 1 0.5 to 1 1.3 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 97.9 6.3 19.1 – Strength Index Reading (3 Year Range): Bullish-Extreme Bearish-Extreme Bearish-Extreme NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: 1.9 6.3 -3.8   Article By InvestMacro – Receive our weekly COT Reports by Email *COT Report: The COT data, released weekly to the public each Friday, is updated through the most recent Tuesday (data is 3 days old) and shows a quick view of how large speculators or non-commercials (for-profit traders) were positioned in the futures markets. The CFTC categorizes trader positions according to commercial hedgers (traders who use futures contracts for hedging as part of the business), non-commercials (large traders who speculate to realize trading profits) and nonreportable traders (usually small traders/speculators) as well as their open interest (contracts open in the market at time of reporting).See CFTC criteria here.
The Swing Overview - Week 16 2022

The Swing Overview - Week 16 2022

Purple Trading Purple Trading 22.04.2022 15:00
The Swing Overview - Week 16 Jerome Powell confirmed that the Fed will be aggressive in fighting the inflation and confirmed tighter interest rate hikes starting in May. Equity indices fell strongly after this news. Inflation in the euro area reached a record high of 7.4% in March. Despite this news, the euro continued to weaken. The sell-off also continued in the Japanese yen, which is the weakest against the US dollar in last 20 years.  The USD index strengthens along with US bond yields Fed chief Jerome Powell said on Thursday that the Fed could raise interest rates by 0.50% in May. The Fed could continue its aggressive pace of rate hikes in the coming months of this year. US 10-year bond yields have responded to this news by strengthening further and have already reached 2.94%. The US dollar has also benefited from this development and has already surpassed the value 100 and continues to move in an uptrend. Figure 1: US 10-year bond yields and USD index on the daily chart Earnings season is underway in equities Rising interest rates continue to weigh on equity indices, which gave back gains from the first half of the last week and weakened significantly on Thursday following the Fed’s information on the aggressive pace of interest rate hikes.   In addition, the earnings season, which is in full swing, is weighing on index movements. For example, Netflix and Tesla reported results last week.   While Netflix unpleasantly surprised by reducing the number of subscribers by 200,000 in 1Q 2022 and the company's shares fell by 35% in the wake of the news, Tesla, on the other hand, exceeded analysts' expectations and the stock gained more than 10% after the results were announced. Tesla has thus shown that it has been able to cope with the supply chain problems and higher subcontracting prices that are plaguing the entire automotive sector much better than its competitors.   The decline in Netflix subscribers can be explained by people starting to save more in an environment of rising prices. Figure 2: The SP 500 on H4 and D1 chart The SP 500 index continues to undergo a downward correction, which is shown on the H4 chart. The price has reached the resistance level at 4,514-4,520. The price continues to move below the SMA 100 moving average (blue line) on the daily chart which indicates bearish sentiment.  The nearest resistance according to the H4 chart is at 4,514 - 4,520. The next resistance is around 4,583 - 4,600. The support is at 4,360 - 4,365.   The German DAX index The DAX is also undergoing a correction and the last candlestick on the daily chart is a bearish pin bar which suggests that the index could fall further. Figure 3: The German DAX index on H4 and daily chart This index is also below the SMA 100 on the daily chart, confirming the bearish sentiment. The price has reached a support according to the H4 chart, which is at 14,340 - 14,370. However, this is very likely to be overcome quickly. The next support is 13 910 - 14 000. The nearest resistance is 14 592 - 14 632.   The DAX is affected by the French presidential election that is going to happen on Sunday April 24, 2022. According to the latest polls, Macron is leading over Le Pen and if the election turns out like this, it should not have a significant impact on the markets. However, if Marine Le Pen wins in a surprise victory, it can be very negative news for the French economy and would weigh on the DAX index as well.   The euro remains in a downtrend The Fed's hawkish policy and the ECB's dovish rhetoric at its meeting on Thursday April 14, 2022, which showed that the ECB is not planning to raise rates in the short term, put further pressure on the European currency. The French presidential election and, of course, the ongoing war in Ukraine are also causing uncertainty.  Figure 4: The EURUSD on the H4 and daily charts. The inflation data was reported last week, which came in at 7.4% on year-on-year basis. The previous month inflation was 5.9%. This rise in inflation caused the euro to strengthen briefly to the resistance level at 1.0930 - 1.0950. However, there was then a rapid decline from this level following the Fed's reports of a quick tightening in the economy. A support is at 1.0760 - 1.0780.   The sell-off in the Japanese yen is not over The Japanese yen is also under pressure. The US dollar has already reached 20-year highs against the Japanese yen (USD/JPY) and it looks like the yen's weakening against the US dollar could continue. This is because the Bank of Japan has the most accommodative monetary policy of any major central bank and continues to support the economy while the Fed will aggressively tighten the economy. Thus, this fundamental suggests that a reversal in the USD/JPY pair should not happen anytime soon. Figure 5: The USDJPY on the monthly chart In terms of technical analysis, the USD/JPY price broke through the strong resistance band around the price of 126.00 seen on the monthly chart. The currency pair thus has room to grow further up to the resistance, which is in the area near 135 yens per dollar.  
Currency Speculators raise their bullish bets for Canadian Dollar to 40-week high

Currency Speculators raise their bullish bets for Canadian Dollar to 40-week high

Invest Macro Invest Macro 23.04.2022 20:49
By InvestMacro | COT | Data Tables | COT Leaders | Downloads | COT Newsletter Here are the latest charts and statistics for the Commitment of Traders (COT) data published by the Commodities Futures Trading Commission (CFTC). The latest COT data is updated through Tuesday April 19th and shows a quick view of how large traders (for-profit speculators and commercial entities) were positioned in the futures markets. All currency positions are in direct relation to the US dollar where, for example, a bet for the euro is a bet that the euro will rise versus the dollar while a bet against the euro will be a bet that the euro will decline versus the dollar. Highlighting the COT currency data is the rising of bullish bets in the Canadian ‘Loonie’ dollar currency futures contracts. CAD speculators raised their bullish bets for a fourth straight week this week and for the fifth time in the past six weeks. Over the past four-week time-frame, CAD bets have improved by a total of +26,166 contracts, going from -4,940 net positions on March 22nd to +21,226 net positions this week. These gains have brought this week’s speculator level to the most bullish position since July 13th of 2021, a span of forty weeks. This recent improvement in Loonie sentiment has been helped out by the hike in interest rates by the Bank of Canada (BOC). The BOC recently pushed its key interest rate higher by 50 basis points on April 13th and has in the past few days hinted that more interest rate rises were to come. The recent inflation numbers out of Canada were above expectations (6.7 percent) and according to Bloomberg, market participants have pushed their odds to 100 percent for another 50 basis point hike in June. Overall, the currencies with higher speculator bets this week were the US Dollar Index (2,943 contracts), Japanese yen (4,640 contracts), Swiss franc (2,492 contracts), New Zealand dollar (654 contracts), Canadian dollar (9,068 contracts)and the Mexican peso (6,704 contracts). The currencies with declining bets were the Euro (-7,759 contracts), Brazil real (-1,557 contracts), Australian dollar (-122 contracts), Bitcoin (-361 contracts) and the British pound sterling (-5,860 contracts). Speculator strength standings for each Commodity where strength index is current net position compared to past three years, above 80 is bullish extreme, below 20 is bearish extreme Data Snapshot of Forex Market Traders | Columns Legend Apr-19-2022 OI OI-Index Spec-Net Spec-Index Com-Net COM-Index Smalls-Net Smalls-Index USD Index 54,524 77 32,580 82 -35,893 15 3,313 53 EUR 675,939 72 31,301 45 -49,726 62 18,425 5 GBP 249,529 70 -58,914 32 72,889 73 -13,975 27 JPY 251,291 90 -107,187 3 129,842 99 -22,655 7 CHF 44,269 20 -11,450 50 23,051 57 -11,601 29 CAD 153,302 32 21,226 68 -39,338 31 18,112 66 AUD 147,309 43 -28,837 58 20,800 34 8,037 72 NZD 41,098 26 365 72 503 31 -868 42 MXN 165,403 33 21,664 37 -26,214 62 4,550 62 RUB 20,930 4 7,543 31 -7,150 69 -393 24 BRL 70,553 68 44,572 94 -47,063 5 2,491 94 Bitcoin 11,276 61 -194 90 -175 0 369 21   US Dollar Index Futures: The US Dollar Index large speculator standing this week reached a net position of 32,580 contracts in the data reported through Tuesday. This was a weekly lift of 2,943 contracts from the previous week which had a total of 29,637 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish-Extreme with a score of 82.0 percent. The commercials are Bearish-Extreme with a score of 15.0 percent and the small traders (not shown in chart) are Bullish with a score of 52.8 percent. US DOLLAR INDEX Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 85.6 3.3 9.5 – Percent of Open Interest Shorts: 25.9 69.1 3.5 – Net Position: 32,580 -35,893 3,313 – Gross Longs: 46,685 1,778 5,198 – Gross Shorts: 14,105 37,671 1,885 – Long to Short Ratio: 3.3 to 1 0.0 to 1 2.8 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 82.0 15.0 52.8 – Strength Index Reading (3 Year Range): Bullish-Extreme Bearish-Extreme Bullish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: -2.5 3.3 -5.8   Euro Currency Futures: The Euro Currency large speculator standing this week reached a net position of 31,301 contracts in the data reported through Tuesday. This was a weekly lowering of -7,759 contracts from the previous week which had a total of 39,060 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 44.6 percent. The commercials are Bullish with a score of 61.9 percent and the small traders (not shown in chart) are Bearish-Extreme with a score of 4.9 percent. EURO Currency Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 32.7 53.7 11.4 – Percent of Open Interest Shorts: 28.1 61.0 8.7 – Net Position: 31,301 -49,726 18,425 – Gross Longs: 221,003 362,930 76,939 – Gross Shorts: 189,702 412,656 58,514 – Long to Short Ratio: 1.2 to 1 0.9 to 1 1.3 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 44.6 61.9 4.9 – Strength Index Reading (3 Year Range): Bearish Bullish Bearish-Extreme NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: -8.5 9.7 -10.9   British Pound Sterling Futures: The British Pound Sterling large speculator standing this week reached a net position of -58,914 contracts in the data reported through Tuesday. This was a weekly decrease of -5,860 contracts from the previous week which had a total of -53,054 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 31.6 percent. The commercials are Bullish with a score of 72.8 percent and the small traders (not shown in chart) are Bearish with a score of 26.7 percent. BRITISH POUND Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 14.8 74.6 8.8 – Percent of Open Interest Shorts: 38.4 45.4 14.4 – Net Position: -58,914 72,889 -13,975 – Gross Longs: 36,811 186,134 21,987 – Gross Shorts: 95,725 113,245 35,962 – Long to Short Ratio: 0.4 to 1 1.6 to 1 0.6 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 31.6 72.8 26.7 – Strength Index Reading (3 Year Range): Bearish Bullish Bearish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: -33.4 28.1 -2.2   Japanese Yen Futures: The Japanese Yen large speculator standing this week reached a net position of -107,187 contracts in the data reported through Tuesday. This was a weekly lift of 4,640 contracts from the previous week which had a total of -111,827 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish-Extreme with a score of 2.9 percent. The commercials are Bullish-Extreme with a score of 99.0 percent and the small traders (not shown in chart) are Bearish-Extreme with a score of 7.4 percent. JAPANESE YEN Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 5.1 86.0 8.3 – Percent of Open Interest Shorts: 47.7 34.3 17.3 – Net Position: -107,187 129,842 -22,655 – Gross Longs: 12,723 216,101 20,761 – Gross Shorts: 119,910 86,259 43,416 – Long to Short Ratio: 0.1 to 1 2.5 to 1 0.5 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 2.9 99.0 7.4 – Strength Index Reading (3 Year Range): Bearish-Extreme Bullish-Extreme Bearish-Extreme NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: -31.6 25.9 -3.8   Swiss Franc Futures: The Swiss Franc large speculator standing this week reached a net position of -11,450 contracts in the data reported through Tuesday. This was a weekly increase of 2,492 contracts from the previous week which had a total of -13,942 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 50.0 percent. The commercials are Bullish with a score of 56.8 percent and the small traders (not shown in chart) are Bearish with a score of 29.2 percent. SWISS FRANC Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 6.6 71.7 21.7 – Percent of Open Interest Shorts: 32.4 19.6 47.9 – Net Position: -11,450 23,051 -11,601 – Gross Longs: 2,900 31,735 9,599 – Gross Shorts: 14,350 8,684 21,200 – Long to Short Ratio: 0.2 to 1 3.7 to 1 0.5 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 50.0 56.8 29.2 – Strength Index Reading (3 Year Range): Bearish Bullish Bearish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: -3.0 1.3 1.8   Canadian Dollar Futures: The Canadian Dollar large speculator standing this week reached a net position of 21,226 contracts in the data reported through Tuesday. This was a weekly advance of 9,068 contracts from the previous week which had a total of 12,158 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish with a score of 67.7 percent. The commercials are Bearish with a score of 31.1 percent and the small traders (not shown in chart) are Bullish with a score of 65.8 percent. CANADIAN DOLLAR Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 28.7 45.0 24.6 – Percent of Open Interest Shorts: 14.9 70.7 12.8 – Net Position: 21,226 -39,338 18,112 – Gross Longs: 44,063 68,989 37,784 – Gross Shorts: 22,837 108,327 19,672 – Long to Short Ratio: 1.9 to 1 0.6 to 1 1.9 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 67.7 31.1 65.8 – Strength Index Reading (3 Year Range): Bullish Bearish Bullish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: 13.4 -17.2 20.4   Australian Dollar Futures: The Australian Dollar large speculator standing this week reached a net position of -28,837 contracts in the data reported through Tuesday. This was a weekly decline of -122 contracts from the previous week which had a total of -28,715 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish with a score of 58.1 percent. The commercials are Bearish with a score of 34.4 percent and the small traders (not shown in chart) are Bullish with a score of 72.0 percent. AUSTRALIAN DOLLAR Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 26.6 53.8 19.2 – Percent of Open Interest Shorts: 46.2 39.6 13.7 – Net Position: -28,837 20,800 8,037 – Gross Longs: 39,201 79,208 28,257 – Gross Shorts: 68,038 58,408 20,220 – Long to Short Ratio: 0.6 to 1 1.4 to 1 1.4 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 58.1 34.4 72.0 – Strength Index Reading (3 Year Range): Bullish Bearish Bullish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: 45.8 -42.8 19.6   New Zealand Dollar Futures: The New Zealand Dollar large speculator standing this week reached a net position of 365 contracts in the data reported through Tuesday. This was a weekly boost of 654 contracts from the previous week which had a total of -289 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish with a score of 71.9 percent. The commercials are Bearish with a score of 31.2 percent and the small traders (not shown in chart) are Bearish with a score of 41.9 percent. NEW ZEALAND DOLLAR Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 46.4 45.9 6.8 – Percent of Open Interest Shorts: 45.5 44.6 8.9 – Net Position: 365 503 -868 – Gross Longs: 19,081 18,853 2,797 – Gross Shorts: 18,716 18,350 3,665 – Long to Short Ratio: 1.0 to 1 1.0 to 1 0.8 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 71.9 31.2 41.9 – Strength Index Reading (3 Year Range): Bullish Bearish Bearish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: 21.4 -20.2 4.0   Mexican Peso Futures: The Mexican Peso large speculator standing this week reached a net position of 21,664 contracts in the data reported through Tuesday. This was a weekly advance of 6,704 contracts from the previous week which had a total of 14,960 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 36.6 percent. The commercials are Bullish with a score of 61.9 percent and the small traders (not shown in chart) are Bullish with a score of 62.3 percent. MEXICAN PESO Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 44.6 50.0 4.7 – Percent of Open Interest Shorts: 31.5 65.8 1.9 – Net Position: 21,664 -26,214 4,550 – Gross Longs: 73,710 82,643 7,701 – Gross Shorts: 52,046 108,857 3,151 – Long to Short Ratio: 1.4 to 1 0.8 to 1 2.4 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 36.6 61.9 62.3 – Strength Index Reading (3 Year Range): Bearish Bullish Bullish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: -13.4 12.1 10.1   Brazilian Real Futures: The Brazilian Real large speculator standing this week reached a net position of 44,572 contracts in the data reported through Tuesday. This was a weekly fall of -1,557 contracts from the previous week which had a total of 46,129 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish-Extreme with a score of 94.2 percent. The commercials are Bearish-Extreme with a score of 5.4 percent and the small traders (not shown in chart) are Bullish-Extreme with a score of 94.0 percent. BRAZIL REAL Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 76.2 17.6 6.1 – Percent of Open Interest Shorts: 13.1 84.3 2.5 – Net Position: 44,572 -47,063 2,491 – Gross Longs: 53,790 12,399 4,272 – Gross Shorts: 9,218 59,462 1,781 – Long to Short Ratio: 5.8 to 1 0.2 to 1 2.4 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 94.2 5.4 94.0 – Strength Index Reading (3 Year Range): Bullish-Extreme Bearish-Extreme Bullish-Extreme NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: -5.8 5.4 5.0   Bitcoin Futures: The Bitcoin large speculator standing this week reached a net position of -194 contracts in the data reported through Tuesday. This was a weekly decline of -361 contracts from the previous week which had a total of 167 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish-Extreme with a score of 90.2 percent. The commercials are Bearish with a score of 27.4 percent and the small traders (not shown in chart) are Bearish with a score of 21.3 percent. BITCOIN Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 73.3 3.6 10.2 – Percent of Open Interest Shorts: 75.0 5.2 7.0 – Net Position: -194 -175 369 – Gross Longs: 8,263 408 1,155 – Gross Shorts: 8,457 583 786 – Long to Short Ratio: 1.0 to 1 0.7 to 1 1.5 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 90.2 27.4 21.3 – Strength Index Reading (3 Year Range): Bullish-Extreme Bearish Bearish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: -9.8 19.8 4.8   Article By InvestMacro – Receive our weekly COT Reports by Email *COT Report: The COT data, released weekly to the public each Friday, is updated through the most recent Tuesday (data is 3 days old) and shows a quick view of how large speculators or non-commercials (for-profit traders) were positioned in the futures markets. The CFTC categorizes trader positions according to commercial hedgers (traders who use futures contracts for hedging as part of the business), non-commercials (large traders who speculate to realize trading profits) and nonreportable traders (usually small traders/speculators) as well as their open interest (contracts open in the market at time of reporting).See CFTC criteria here.
A Bright Spot Amidst Economic Challenges

Eurozone Amid War And Strong US Dollar (USD), Very Weak Euro (EUR), Poor Australian Dollar (AUD), Recovering (?) UK100?

Jing Ren Jing Ren 27.04.2022 08:31
EURUSD breaks critical support The euro struggles as the eurozone’s growth prospect dampens. The pair remains under pressure after it broke below a short-lived congestion area around 1.0770. A bearish breakout below March 2020’s lows near 1.0650 (a major demand zone) could send the single currency to 1.0580. In the meantime, the RSI’s double-dip in the oversold territory may trigger a buy-the-dips behavior. 1.0750 is a fresh resistance and its breach could alleviate the selling pressure. The bulls must clear 1.0840 before they could regain control. Read next: Powerful (USD), Really Strong (CAD) - US Dollar To Canadian Dollar, Solid NZD Performance, UKOIL To Stabilize? | FXMAG.COM AUDUSD sees limited bounce The Australian dollar recovers over a better-than-expected Q1 CPI reading. A break below March’s low at 0.7170 may have invalidated the recent rebound and put the Aussie on a reversal course in the weeks to come. A bearish MA cross on the daily chart indicates an acceleration to the downside. An extremely oversold RSI on the hourly time frame prompted sellers to take profit, driving the price up momentarily. Stiff selling pressure could be expected around 0.7370. 0.7100 would be the next stop in case of another sell-off. Read next: EUR/USD: US Dollar (USD) Supported By A 75bp Rate Hike!? EUR Influenced By Last Week's Activities, Price Of Gold (XAUUSD) May Not Stop Below $1980 | FXMAG.COM UK 100 struggles for bids The FTSE 100 tumbles as China’s lockdowns hit sentiment. A plunge below the demand zone at 7500 further weighs on the market mood after buyers failed to lift offers around this year’s peak at 7670. The RSI’s overextension led to a rebound. Nonetheless, downbeat sentiment capped the price at 7490 where a new round of sell-off started. Trapped buyers could be scrambling for the exit, compounding existing selling interests in the process. A deeper correction below 7370 would send the index to 7250. Read next: What Is Chia Coin? - (XCH) - First New Nakamoto Coin Since Bitcoin Launch (2009) | FXMAG.COM
The French Housing Market Is More Resilient | The Chance Of Republicans Winning The Senate Is Up

ING Economics: "French inflation still on the rise and spreading to the whole economy"

ING Economics ING Economics 29.04.2022 13:06
Consumer price inflation increased again in April, reaching 4.8%. Price increases are now spreading to all sectors and will continue to strengthen in the coming months Inflationary pressures continue to spread Together with the 1Q GDP figures released this morning, the April inflation figures seem to confirm that the risk of stagflation is becoming more concrete every day. Inflation rose again in France in April, with the national measure showing a rise of 4.8% from 4.5% in March, due to the acceleration in services prices (+2.9% year-on-year, driven by the seasonal rebound in transport services prices), food (+3.8%) and manufactured goods (+2.7%). The increase over the month is nevertheless less significant than the one observed in March. This is due to the reduction in fuel prices implemented by the government since 1 April, which led to a “smaller” rise in the energy component of consumer price inflation in April (26.6% year-on-year), compared with 29.2% in March. The harmonised index, which is important for the European Central Bank, stands at 5.4% compared to 5.1% in March. Currently, in France, the rise in inflation is still mainly due to energy and commodity prices. However, it is clear from the data that the pass-through to the wider economy is in full swing. Inflation rates in services, food and manufactured goods, which are all rising and above the ECB's target, illustrate the widening inflationary pressures. As this is also the case in the other countries of the eurozone, one can understand the ECB's current concern about the risk of inflation forecasts becoming unanchored in the medium term. Hence the ECB's willingness to start normalising monetary policy by starting to increase interest rates in the third quarter, despite the much weaker outlook for growth, as illustrated by the stagnation of French GDP in 1Q. Inflation has not peaked yet Looking ahead, inflation is likely to continue to rise in the coming months due to the war in Ukraine, tensions in supply chains and continued upward pressure on energy, commodity and food prices. These price increases will continue to put increasing pressure on business costs, which will add to upward pressure on consumer prices across all sectors in the short term. However, the sharp deceleration in growth and weak consumer demand is likely to begin to limit the scope for companies to pass on cost increases in selling prices. This should contribute to a slowdown in inflation from the end of the summer. Inflation should therefore continue to rise in the coming months, exceeding 5% for the national measure, before decreasing in the second half of the year. For the year as a whole, inflation should be above 4.5%. Although these are high forecast figures, and well above the ECB's target, inflation in France is expected to remain significantly lower than in the rest of the euro area, where we expect inflation to average above 6% for the year. This difference is mainly explained by the measures taken by the government to limit the increase in gas and electricity prices ("bouclier tarifaire"), which allows the energy contribution to French inflation to remain much lower than in other European countries, and ultimately leads to overall inflationary pressures that are more moderate, although still high (see graph). Energy contribution to inflation much lower in France than in the eurozone Source: Refinitiv Datastream, ING Economic Research TagsInflation France Eurozone ECB DisclaimerThis publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
The EUR/USD Pair Showed Local Speculative Interest In Short Positions Yesterday

(EUR/USD) US Dollar Continues To Strengthen, BoEs Inflation Forecast and Economic Outlook Due On Thursday - Good Morning Forex!

Rebecca Duthie Rebecca Duthie 03.05.2022 12:22
Summary: EUR/USD breaks below 1.05. BoE’s and Fed monetary policy decisions due on during the trading week. GBP relying on the Fed’s quantitative tightening decisions. EURO is under pressure. The EURO lost more ground to the USD during the trading day on Tuesday, the price is sitting below 1.05. The first quarter of 2022 has not been positive for the EURO, with the Russia-Ukraine conflict still raging, the post-covid world, the hawkish Fed and lockdowns in China, are all putting pressure on the already weakening EURO. The market sentiment for this currency pair is mixed. EUR/USD Price Chart Read next: GBP: BoE Expected to Raise Yields, US Dollar (USD) Strengthens across the board - Good Morning Forex!  GBP sees strength against the EUR The GBP has strengthened against the EUR since the market opened this morning, however market sentiment is showing bullish signals. The strengthening of the GBP comes in anticipation of the Bank of Englands (BoEs) announcements due on Thursday, the market expectation is to see a hawkish BoE. If the BoE remains dovish, we could see the EURO bounce back. EUR/GBP Price Chart USD/CAD beats March high on Tuesday. The USD strengthened against the CAD on Tuesday, it's a busy week for the USD, the Federal Reserve is due to announce its monetary policy decision. The market sentiment for this currency pair is showing bullish signals, however, investor sentiment and confidence could easily be swayed in the coming days. USD/CAD Price Chart GBP shows strength against the USD. The Bank of Englands (BoE) monetary policy is the key driver for its small recovery against the USD, however the future of this currency pair lies in the decision of the Fed. The Fed is expected to begin the balance sheet reduction process through quantitative tightening could have adverse effects on the GBP. The market sentiment for this currency pair is bullish. GBP/USD Price Chart Read next: US Dollar (USD) Continues To Trump The EUR, BoE Expected To Increase Interest Rates, SNB Remains Dovish, South African Rand (ZAR) Performance  Sources: finance.yahoo.com, dailyfx.com, poundsterlinglive.com
The Swing Overview – Week 17 2022

The Swing Overview – Week 17 2022

Purple Trading Purple Trading 03.05.2022 11:04
The Swing Overview – Week 17 Major stock indices continued in their correction and tested strong support levels. In contrast, the US dollar strengthened strongly and is at its highest level since January 2017. The strengthening of the dollar had a negative impact on the value of the euro and commodities such as gold, which fell below the $1,900 per ounce. The Bank of Japan kept interest rates low and the yen broke the magic level 130 per dollar. The USD index strengthened again but the US GDP declined The US consumer confidence in the month of April came in at 107.3, a slight decline from the previous month when consumer confidence was 107.6.   The US GDP data was surprising. The US economy decreased by 1.4% in 1Q 2022 (in the previous quarter the economy grew by 6.4%). This sharp decline surprised even analysts who expected the economy to grow by 1.1%. This result is influenced by the Omicron, which caused the economy to shut down for a longer period than expected earlier this year.    The Fed meeting scheduled for the next week on May 4 will be hot. In fact, even the most dovish Fed officials are already leaning towards a 0.5% rate hike. At the end of the year, we can expect a rate around 2.5%.   The US 10-year bond yields continue to strengthen on the back of these expectations. The US dollar is also strengthening and is already at its highest level since January 2017, surpassing 103 level.  Figure 1: US 10-year bond yields and the USD index on the daily chart   Earnings season is underway in equities Earnings season is in full swing. Amazon's results were disappointing. While revenue was up 7% reaching $116.4 billion in the first quarter (revenue was $108.5 billion in the same period last year), the company posted an total loss of $8.1 billion, which translated to a loss of $7.56 per share. This loss, however, is not due to operating activities, but it is the result of the revaluation of the equity investment in Rivian Automotive.   Facebook, on the other hand, surprised in a positive way posting unexpectedly strong user growth, a sign that its Instagram app is capable of competing with Tik Tok. However, the revenue growth of 6.6% was the lowest in the company's history.    Apple was also a positive surprise, reporting earnings per share of $1.52 (analysts' forecast was $1.43) and revenue growth of $97.3 billion, up 8.6% from the same period last year. However, the company warned that the closed operations in Russia, the lockdown in China due to the coronavirus and supply disruptions will negatively impact earnings in the next quarter.   Figure 2: The SP 500 on H4 and D1 chart In terms of technical analysis, the US SP 500 index is in a downtrend and has reached a major support level on the daily chart last week, which is at 4,150. It has bounced upwards from this support to the resistance according to the 4 H chart which is 4,308 - 4,313. The next resistance according to the H4 chart is 4,360 - 4,365.  The strong resistance is at 4,500.   German DAX index German businessmen are optimistic about the development of the German economy in the next 6 months, as indicated by the Ifo Business Climate Index, which reached 91.8 for April (the expectation was 89.1). However, this did not have a significant effect on the movement of the index and it continued in its downward correction. Figure 3: German DAX index on H4 and daily chart The index is below the SMA 100 on both the daily chart and the H4 chart, confirming the bearish sentiment. The nearest support according to the H4 is 13,600 - 13,650. The resistance is 14,180 - 14,200. The next resistance is 14,592 - 14,632.   The euro has fallen below 1.05 The euro lost significantly last week. While the French election brought relief to the markets as Emmanuel Macron defended the presidency, geopolitical tensions in Ukraine continue to weigh heavily on the European currency. The strong dollar is also having an impact on the EUR/USD pair, pushing the pair down. The price has fallen below 1.05, the lowest level since January 2017.    Figure 4: EURUSD on H4 and daily chart The euro broke through the important support at 1.0650 - 1.071, which has now become the new resistance. The new support was formed in January 2017 and is around the level 1.0350 - 1.040.   Japan's central bank continues to support the fragile economy The Bank of Japan on Thursday reinforced its commitment to keep interest rates at very low levels by pledging to buy unlimited amounts of 10-year government bonds daily, sparking a fresh sell-off in the yen and reviving government bonds. With this commitment, the BOJ is trying to support a fragile economy, even as a surge in commodity prices is pushing the inflation up.   The decision puts Japan in the opposite position to other major economies, which are moving towards tighter monetary policy to combat soaring prices. Figure 5: The USD/JPY on the monthly and daily chart In fresh quarterly forecasts, the central bank has projected core consumer inflation to reach 1.9% in the current fiscal year and then ease to 1.1% in fiscal years 2023 and 2024, an indication that it views the current cost-push price increases as transitory.   In the wake of this decision, the Japanese yen has continued to weaken and has already surpassed the magical level 130 per dollar.   Strong dollar beats also gold Anticipation of aggressive Fed action against inflation, which is supporting the US dollar, is having a negative impact on gold. The rising US government bond yields are also a problem for the yellow metal. This has put gold under pressure, which peaked on Thursday when the price reached USD 1,872 per ounce of gold. But then the gold started to strengthen. Indeed, the decline in the US GDP may have been something of a warning to the Fed and prevent them from tightening the economy too quickly, which helped gold, in the short term, bounce off a strong support. Figure 6: The gold on H4 and daily chart Strong support for the gold is at $1,869 - $1,878 per ounce. There is a confluence of horizontal resistance and the SMA 100 moving average on the daily chart. The nearest resistance according to the H4 chart is 1 907 - 1 910 USD per ounce. The strong resistance according to the daily chart is then 1 977 - 2 000 USD per ounce of gold. Moving averages on the H4 chart can also be used as a resistance. The orange line is the EMA 50 and the blue line is the SMA 100.  
Currency Speculators drop Euro bets into bearish territory on interest rates & low growth

Currency Speculators drop Euro bets into bearish territory on interest rates & low growth

Invest Macro Invest Macro 07.05.2022 14:13
By InvestMacro | COT | Data Tables | COT Leaders | Downloads | COT Newsletter Here are the latest charts and statistics for the Commitment of Traders (COT) data published by the Commodities Futures Trading Commission (CFTC). The latest COT data is updated through Tuesday May 3rd 2022 and shows a quick view of how large traders (for-profit speculators and commercial entities) were positioned in the futures markets. All currency positions are in direct relation to the US dollar where, for example, a bet for the euro is a bet that the euro will rise versus the dollar while a bet against the euro will be a bet that the euro will decline versus the dollar. Highlighting the COT currency data was the continued drop in speculator bets for European common currency futures contracts. Euro speculators reduced their bets for the third straight week this week and have now trimmed the net position by a total of -45,438 contracts over this three-week period. This decreasing sentiment among speculators accelerated this week with a large drop of -28,579 contracts and knocked the net contract level back into a bearish position for the first time since the beginning of October 2021. The fundamental backdrop for the euro is one of weak growth and low interest rates compared to many of the other major currency countries. The Eurozone GDP for the first quarter of 2022 amounted to just 0.2 percent growth following a fourth quarter of 2021 growth reading of 0.3 percent. The war in Ukraine combined with surging inflation and weakening consumer demand has some banks believing a GDP contraction could be on the horizon while others see parity in the euro versus the US dollar as inevitable. Eurozone interest rates are forecasted to rise this year but they have been behind their major currency counterparts. The US, Canada, UK, Australia and New Zealand have all raised their benchmark interest rates over the past quarter and look likely to see more over the year, possibly widening the interest rate differential even more if the European Central Bank does not act. This week was a very rare week when all the currencies we cover had lower speculator bets including the Euro (-28,579 contracts), Canadian dollar (-11,852 contracts), New Zealand dollar (-6,676 contracts), Mexican peso (-5,503 contracts), Japanese yen (-5,259 contracts), Brazil real (-5,096 contracts), British pound sterling (-4,192 contracts), Swiss franc (-1,038 contracts), US Dollar Index (-808 contracts), Australian dollar (-865 contracts) and Bitcoin (-24 contracts). Speculator strength standings for each Commodity where strength index is current net position compared to past three years, above 80 is bullish extreme, below 20 is bearish extreme OI Strength = Current Open Interest level compared to last 3 years range Spec Strength = Current Net Speculator level compared to last 3 years range Strength Move = Six week change of Spec Strength Data Snapshot of Forex Market Traders | Columns Legend May-03-2022 OI OI-Index Spec-Net Spec-Index Com-Net COM-Index Smalls-Net Smalls-Index USD Index 54,092 76 33,071 83 -35,684 15 2,613 45 EUR 694,926 80 -6,378 33 -24,586 69 30,964 26 GBP 268,496 82 -73,813 21 89,026 82 -15,213 24 JPY 254,813 92 -100,794 7 120,264 94 -19,470 14 CHF 49,385 31 -13,907 46 30,542 68 -16,635 7 CAD 152,779 32 9,029 56 -12,959 51 3,930 38 AUD 152,257 46 -28,516 58 34,225 44 -5,709 39 NZD 50,844 45 -6,610 60 9,879 46 -3,269 14 MXN 151,933 27 14,623 34 -18,552 65 3,929 60 RUB 20,930 4 7,543 31 -7,150 69 -393 24 BRL 61,549 56 41,788 91 -43,371 9 1,583 83 Bitcoin 10,051 52 388 100 -429 0 41 14   US Dollar Index Futures: The US Dollar Index large speculator standing this week came in at a net position of 33,071 contracts in the data reported through Tuesday. This was a weekly lowering of -808 contracts from the previous week which had a total of 33,879 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish-Extreme with a score of 82.8 percent. The commercials are Bearish-Extreme with a score of 15.3 percent and the small traders (not shown in chart) are Bearish with a score of 45.1 percent. US DOLLAR INDEX Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 85.5 2.7 9.8 – Percent of Open Interest Shorts: 24.4 68.6 5.0 – Net Position: 33,071 -35,684 2,613 – Gross Longs: 46,264 1,439 5,296 – Gross Shorts: 13,193 37,123 2,683 – Long to Short Ratio: 3.5 to 1 0.0 to 1 2.0 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 82.8 15.3 45.1 – Strength Index Reading (3 Year Range): Bullish-Extreme Bearish-Extreme Bearish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: 5.9 -3.6 -13.9   Euro Currency Futures: The Euro Currency large speculator standing this week came in at a net position of -6,378 contracts in the data reported through Tuesday. This was a weekly lowering of -28,579 contracts from the previous week which had a total of 22,201 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 33.0 percent. The commercials are Bullish with a score of 69.0 percent and the small traders (not shown in chart) are Bearish with a score of 25.7 percent. EURO Currency Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 30.0 55.1 12.7 – Percent of Open Interest Shorts: 30.9 58.7 8.2 – Net Position: -6,378 -24,586 30,964 – Gross Longs: 208,449 383,222 88,267 – Gross Shorts: 214,827 407,808 57,303 – Long to Short Ratio: 1.0 to 1 0.9 to 1 1.5 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 33.0 69.0 25.7 – Strength Index Reading (3 Year Range): Bearish Bullish Bearish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: -9.3 6.2 13.9   British Pound Sterling Futures: The British Pound Sterling large speculator standing this week came in at a net position of -73,813 contracts in the data reported through Tuesday. This was a weekly decline of -4,192 contracts from the previous week which had a total of -69,621 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 20.8 percent. The commercials are Bullish-Extreme with a score of 82.3 percent and the small traders (not shown in chart) are Bearish with a score of 24.1 percent. BRITISH POUND Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 12.5 77.7 7.7 – Percent of Open Interest Shorts: 40.0 44.6 13.3 – Net Position: -73,813 89,026 -15,213 – Gross Longs: 33,536 208,754 20,590 – Gross Shorts: 107,349 119,728 35,803 – Long to Short Ratio: 0.3 to 1 1.7 to 1 0.6 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 20.8 82.3 24.1 – Strength Index Reading (3 Year Range): Bearish Bullish-Extreme Bearish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: -26.3 22.8 -4.3   Japanese Yen Futures: The Japanese Yen large speculator standing this week came in at a net position of -100,794 contracts in the data reported through Tuesday. This was a weekly lowering of -5,259 contracts from the previous week which had a total of -95,535 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish-Extreme with a score of 6.8 percent. The commercials are Bullish-Extreme with a score of 94.3 percent and the small traders (not shown in chart) are Bearish-Extreme with a score of 13.9 percent. JAPANESE YEN Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 7.3 84.6 7.1 – Percent of Open Interest Shorts: 46.8 37.4 14.7 – Net Position: -100,794 120,264 -19,470 – Gross Longs: 18,585 215,563 18,007 – Gross Shorts: 119,379 95,299 37,477 – Long to Short Ratio: 0.2 to 1 2.3 to 1 0.5 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 6.8 94.3 13.9 – Strength Index Reading (3 Year Range): Bearish-Extreme Bullish-Extreme Bearish-Extreme NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: -13.7 7.5 13.9   Swiss Franc Futures: The Swiss Franc large speculator standing this week came in at a net position of -13,907 contracts in the data reported through Tuesday. This was a weekly decline of -1,038 contracts from the previous week which had a total of -12,869 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 45.7 percent. The commercials are Bullish with a score of 68.3 percent and the small traders (not shown in chart) are Bearish-Extreme with a score of 7.3 percent. SWISS FRANC Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 8.8 75.8 15.0 – Percent of Open Interest Shorts: 37.0 13.9 48.7 – Net Position: -13,907 30,542 -16,635 – Gross Longs: 4,357 37,429 7,397 – Gross Shorts: 18,264 6,887 24,032 – Long to Short Ratio: 0.2 to 1 5.4 to 1 0.3 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 45.7 68.3 7.3 – Strength Index Reading (3 Year Range): Bearish Bullish Bearish-Extreme NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: -9.6 11.9 -14.5   Canadian Dollar Futures: The Canadian Dollar large speculator standing this week came in at a net position of 9,029 contracts in the data reported through Tuesday. This was a weekly decrease of -11,852 contracts from the previous week which had a total of 20,881 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish with a score of 55.7 percent. The commercials are Bullish with a score of 51.2 percent and the small traders (not shown in chart) are Bearish with a score of 37.6 percent. CANADIAN DOLLAR Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 29.2 47.5 21.0 – Percent of Open Interest Shorts: 23.3 56.0 18.4 – Net Position: 9,029 -12,959 3,930 – Gross Longs: 44,670 72,629 32,093 – Gross Shorts: 35,641 85,588 28,163 – Long to Short Ratio: 1.3 to 1 0.8 to 1 1.1 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 55.7 51.2 37.6 – Strength Index Reading (3 Year Range): Bullish Bullish Bearish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: 13.8 -4.0 -17.1   Australian Dollar Futures: The Australian Dollar large speculator standing this week came in at a net position of -28,516 contracts in the data reported through Tuesday. This was a weekly decrease of -865 contracts from the previous week which had a total of -27,651 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish with a score of 58.4 percent. The commercials are Bearish with a score of 44.4 percent and the small traders (not shown in chart) are Bearish with a score of 38.5 percent. AUSTRALIAN DOLLAR Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 30.9 52.6 14.0 – Percent of Open Interest Shorts: 49.6 30.2 17.8 – Net Position: -28,516 34,225 -5,709 – Gross Longs: 46,995 80,147 21,330 – Gross Shorts: 75,511 45,922 27,039 – Long to Short Ratio: 0.6 to 1 1.7 to 1 0.8 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 58.4 44.4 38.5 – Strength Index Reading (3 Year Range): Bullish Bearish Bearish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: 21.0 -10.6 -20.8   New Zealand Dollar Futures: The New Zealand Dollar large speculator standing this week came in at a net position of -6,610 contracts in the data reported through Tuesday. This was a weekly decrease of -6,676 contracts from the previous week which had a total of 66 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish with a score of 60.2 percent. The commercials are Bearish with a score of 45.6 percent and the small traders (not shown in chart) are Bearish-Extreme with a score of 14.4 percent. NEW ZEALAND DOLLAR Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 34.3 60.6 4.8 – Percent of Open Interest Shorts: 47.3 41.1 11.2 – Net Position: -6,610 9,879 -3,269 – Gross Longs: 17,427 30,789 2,423 – Gross Shorts: 24,037 20,910 5,692 – Long to Short Ratio: 0.7 to 1 1.5 to 1 0.4 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 60.2 45.6 14.4 – Strength Index Reading (3 Year Range): Bullish Bearish Bearish-Extreme NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: -15.3 18.4 -32.3   Mexican Peso Futures: The Mexican Peso large speculator standing this week came in at a net position of 14,623 contracts in the data reported through Tuesday. This was a weekly reduction of -5,503 contracts from the previous week which had a total of 20,126 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 33.6 percent. The commercials are Bullish with a score of 65.1 percent and the small traders (not shown in chart) are Bullish with a score of 59.7 percent. MEXICAN PESO Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 42.0 52.3 4.5 – Percent of Open Interest Shorts: 32.4 64.5 1.9 – Net Position: 14,623 -18,552 3,929 – Gross Longs: 63,860 79,394 6,771 – Gross Shorts: 49,237 97,946 2,842 – Long to Short Ratio: 1.3 to 1 0.8 to 1 2.4 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 33.6 65.1 59.7 – Strength Index Reading (3 Year Range): Bearish Bullish Bullish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: 13.9 -13.5 -0.9   Brazilian Real Futures: The Brazilian Real large speculator standing this week came in at a net position of 41,788 contracts in the data reported through Tuesday. This was a weekly lowering of -5,096 contracts from the previous week which had a total of 46,884 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish-Extreme with a score of 91.4 percent. The commercials are Bearish-Extreme with a score of 9.0 percent and the small traders (not shown in chart) are Bullish-Extreme with a score of 83.3 percent. BRAZIL REAL Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 81.2 13.5 5.3 – Percent of Open Interest Shorts: 13.3 83.9 2.8 – Net Position: 41,788 -43,371 1,583 – Gross Longs: 49,991 8,280 3,278 – Gross Shorts: 8,203 51,651 1,695 – Long to Short Ratio: 6.1 to 1 0.2 to 1 1.9 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 91.4 9.0 83.3 – Strength Index Reading (3 Year Range): Bullish-Extreme Bearish-Extreme Bullish-Extreme NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: 0.2 1.1 -15.4     Bitcoin Futures: The Bitcoin large speculator standing this week came in at a net position of 388 contracts in the data reported through Tuesday. This was a weekly decrease of -24 contracts from the previous week which had a total of 412 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish-Extreme with a score of 99.5 percent. The commercials are Bearish-Extreme with a score of 7.1 percent and the small traders (not shown in chart) are Bearish-Extreme with a score of 13.9 percent. BITCOIN Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 80.8 3.0 8.6 – Percent of Open Interest Shorts: 76.9 7.2 8.2 – Net Position: 388 -429 41 – Gross Longs: 8,121 298 867 – Gross Shorts: 7,733 727 826 – Long to Short Ratio: 1.1 to 1 0.4 to 1 1.0 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 99.5 7.1 13.9 – Strength Index Reading (3 Year Range): Bullish-Extreme Bearish-Extreme Bearish-Extreme NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: 8.0 4.2 -10.0   Article By InvestMacro – Receive our weekly COT Reports by Email *COT Report: The COT data, released weekly to the public each Friday, is updated through the most recent Tuesday (data is 3 days old) and shows a quick view of how large speculators or non-commercials (for-profit traders) were positioned in the futures markets. The CFTC categorizes trader positions according to commercial hedgers (traders who use futures contracts for hedging as part of the business), non-commercials (large traders who speculate to realize trading profits) and nonreportable traders (usually small traders/speculators) as well as their open interest (contracts open in the market at time of reporting).See CFTC criteria here.
Industrial Metals Outlook: Assessing the Impact of China's Stimulus Measures

Italian GDP (Gross Domestic Product) Isn't Likely To Rise Shortly... | ING Economics: "Italian industrial production stabilises in March"

ING Economics ING Economics 10.05.2022 19:16
Italian industry has shown it is temporarily less vulnerable to supply disruptions, but we suspect that this will not be enough to prevent another GDP contraction in 2Q22, marking the start of a short-lived technical recession In this article Flat production after an extremely volatile start to the year Sector breakdown confirms previous patterns Unlikely improvement over 2Q22, in the current circumstances Italian industrial production stabilised in March Flat production after an extremely volatile start to the year After an extremely volatile start to the year, Italian industrial production stabilised in March, the first month fully encompassing the start of the war in Ukraine. According to the national statistics agency Istat, in seasonally-adjusted terms, production was flat on the month and up 3% year-on-year when adjusted for working days. This is better than expected and somehow confirms that Italian industry remains less vulnerable to supply chain disruptions than other major European countries. In March, the production index was still 2.7% higher than in pre-pandemic February 2020. Sector breakdown confirms previous patterns All big aggregates posted monthly gains, with the exception of intermediate goods. When looking at the yearly changes for the first quarter, within the manufacturing domain, the production of refined products, textiles and apparel, electronic equipment and pharma led the growth ranking. At the other end of the spectrum, the worst performers were plastics and non-metal mineral products, the latter likely most affected by the sharp increase in the price of gas, an essential energy input in many processes. Unlikely improvement over 2Q22, in the current circumstances Looking forward, it is hard to believe that Italian industry will not be affected by the ongoing combination of supply chain constraints, high energy prices and softening consumption. Since March, business surveys have been pointing towards a softening of orders, less markedly for capital goods, and in parallel to a downward revision of production expectations. We are not talking about free falls, but more likely adjustments to a new temporary reality against a backdrop of decent domestic fundamentals. With uncertainty about developments of the war and with energy markets still elevated, we believe that the second quarter will unlikely mark a rebound after the 0.2% quarter-on-quarter contraction of 1Q22. We stick to our base case of a technical recession, but take stock of positive indications coming from the tourism sector, which might contribute to a decent rebound in 3Q22. We are currently forecasting average Italian GDP growth for 2022 at 2.3%. TagsItaly industrial production Italy GDP Italy   Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
ECB's Dovish Shift: Markets Anticipate Softer Policy Guidance

(EUR/USD) German Inflation Meets Forecasts, Pound Sterling Continues To Weaken (EUR/GBP, GBP/USD), (EUR/JPY) Japanese Yen Strengthens As Investors Seek Safe-Haven Assets - Good Morning Forex!

Rebecca Duthie Rebecca Duthie 11.05.2022 13:27
Summary: US Dollar sentiment awaits CPI report. EUR continues to strengthen against the Pound Sterling. JPY safe-haven is attractive to investors. Read next: (EUR/USD) Wall Street Tanks, Allowing the Euro To Slightly Recover, (EUR/GBP) Goldman Sachs Betting Against GBP, JPY Gets The Better Of The US Dollar And EUR - Good Morning Forex!  EUR gains slightly on the US Dollar For the trading day on wednesday, the EUR/USD currency pair is reflecting mixed market signals. The Euro remained stable today after Germany announced their April inflation amount was 7.4%, which was inline with forecasts. The German announcements have investors hoping the European Central Bank (ECB) comments today will come with a more hawkish tone. The market sentiment remains mixed as investors await the U.S CPI report due later today. EUR/USD Price Chart GBP not seeing price relief against the Euro Market sentiment for this currency pair is reflecting bullish signals. Investors are tending to go net long on this currency pair as they expect the Euro to continue to strengthen. The Pound sterling value does not seem to be receiving any relief from its current price fall. Despite the Bank of Englands (BoE) 1% increase in interest rates in May, the other economic forecasts made spooked investors away from the currency. EUR/GBP Price Chart JPY safe-haven currency becomes more attractive The market is reflecting bearish signals for this currency pair. As the adverse wider economic conditions continue, investors are turning away from riskier assets, the Japanese Yen is considered a safe-haven currency, making it an attractive investment for risk averse investors. Hence, the investor sentiment is driving the price of the JPY upwards and therefore the price of this currency pair downwards. EUR/JPY Price Chart Bearish sentiment for the Pound Sterling continues The market is reflecting bearish signals for this currency pair. The USD continues to get stronger and the GBP continues to weaken in the overall market. The GBP has seen some relief against the USD on Wednesday, but the longevity of this trend is unlikely. GBP/USD Price Chart Read next: (EUR/USD) US Dollar Continues To Trump the EUR, (EUR/GBP)(GBP/JPY) Pound Sterling Unlikely To Recover Anytime Soon.  Sources: dailyfx.com, finance.yahoo.com, poundsterling.com
UK Budget: Short-term positives to be met with medium-term caution

COT Currency Speculators raised British Pound Sterling bearish bets for 10th week

Invest Macro Invest Macro 15.05.2022 14:26
By InvestMacro | COT | Data Tables | COT Leaders | Downloads | COT Newsletter Here are the latest charts and statistics for this week’s Commitment of Traders (COT) data published by the Commodities Futures Trading Commission (CFTC). The latest COT data is updated through Tuesday May 10th and shows a quick view of how large traders (for-profit speculators and commercial entities) were positioned in the futures markets. All currency positions are in direct relation to the US dollar where, for example, a bet for the euro is a bet that the euro will rise versus the dollar while a bet against the euro will be a bet that the euro will decline versus the dollar. Highlighting the COT currency data this week was the rise in bearish bets for the British pound sterling currency futures contracts. Pound speculators have raised their bearish bets for a tenth consecutive week this week and for the eleventh time out of the past twelve weeks. Over the past ten-week time-frame, pound bets have dropped by a total of -79,261 contracts, going from -337 net positions on March 1st to a total of -79,598 net positions this week. The deterioration in speculator sentiment has now pushed the pound net position to the most bearish standing of the past one hundred and thirty-seven weeks, dating back to September 24th of 2019. Pound sterling sentiment has been hit by a recent slowing economy as the UK GDP declined by 0.1 percent in March after flat growth in February. Also, weighing on the UK economy is the war in Ukraine that has sharply raised inflation in the country (and elsewhere) and which could see the UK economy with the lowest growth rate among G7 countries in 2023, according to the IMF. Overall, the currencies with higher speculator bets this week were the Euro (22,907 contracts), US Dollar Index (1,705 contracts), Bitcoin (315 contracts) and the Mexican peso (2,102 contracts). The currencies with declining bets were the Japanese yen (-9,660 contracts), Australian dollar (-13,198 contracts), Brazil real (-1,010 contracts), Swiss franc (-1,856 contracts), British pound sterling (-5,785 contracts), New Zealand dollar (-6,386 contracts), Canadian dollar (-14,436 contracts), Russian ruble (-263 contracts) and the Mexican peso (2,102 contracts). Speculator strength standings for each Commodity where strength index is current net position compared to past three years, above 80 is bullish extreme, below 20 is bearish extreme OI Strength = Current Open Interest level compared to last 3 years range Spec Strength = Current Net Speculator level compared to last 3 years range Strength Move = Six week change of Spec Strength Data Snapshot of Forex Market Traders | Columns Legend May-10-2022OIOI-IndexSpec-NetSpec-IndexCom-NetCOM-IndexSmalls-NetSmalls-Index USD Index 57,556 84 34,776 86 -37,174 13 2,398 43 EUR 705,046 84 16,529 40 -43,026 64 26,497 18 GBP 264,594 80 -79,598 17 95,245 86 -15,647 23 JPY 247,278 87 -110,454 1 124,927 97 -14,473 24 CHF 51,282 37 -15,763 40 29,819 69 -14,056 16 CAD 151,009 31 -5,407 38 2,939 67 2,468 35 AUD 153,209 47 -41,714 46 47,126 54 -5,412 39 NZD 56,235 56 -12,996 49 16,874 56 -3,878 7 MXN 153,858 28 16,725 34 -20,866 64 4,141 61 RUB 20,930 4 7,543 31 -7,150 69 -393 24 BRL 61,450 55 40,778 90 -42,031 10 1,253 79 Bitcoin 10,841 57 703 100 -789 0 86 15 Open Interest is the amount of contracts that were live in the marketplace at time of data. US Dollar Index Futures: The US Dollar Index large speculator standing this week came in at a net position of 34,776 contracts in the data reported through Tuesday. This was a weekly lift of 1,705 contracts from the previous week which had a total of 33,071 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish-Extreme with a score of 85.8 percent. The commercials are Bearish-Extreme with a score of 12.8 percent and the small traders (not shown in chart) are Bearish with a score of 42.8 percent. US DOLLAR INDEX Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 86.6 3.2 8.6 – Percent of Open Interest Shorts: 26.2 67.8 4.5 – Net Position: 34,776 -37,174 2,398 – Gross Longs: 49,864 1,837 4,970 – Gross Shorts: 15,088 39,011 2,572 – Long to Short Ratio: 3.3 to 1 0.0 to 1 1.9 to 1 NET POSITION TREND:       – Strength Index Score (3 Year Range Pct): 85.8 12.8 42.8 – Strength Index Reading (3 Year Range): Bullish-Extreme Bearish-Extreme Bearish NET POSITION MOVEMENT INDEX:       – 6-Week Change in Strength Index: 6.6 -3.4 -19.3   Euro Currency Futures: The Euro Currency large speculator standing this week came in at a net position of 16,529 contracts in the data reported through Tuesday. This was a weekly increase of 22,907 contracts from the previous week which had a total of -6,378 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 40.1 percent. The commercials are Bullish with a score of 63.8 percent and the small traders (not shown in chart) are Bearish-Extreme with a score of 18.3 percent. EURO Currency Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 32.4 53.3 12.0 – Percent of Open Interest Shorts: 30.0 59.4 8.3 – Net Position: 16,529 -43,026 26,497 – Gross Longs: 228,230 376,043 84,921 – Gross Shorts: 211,701 419,069 58,424 – Long to Short Ratio: 1.1 to 1 0.9 to 1 1.5 to 1 NET POSITION TREND:       – Strength Index Score (3 Year Range Pct): 40.1 63.8 18.3 – Strength Index Reading (3 Year Range): Bearish Bullish Bearish-Extreme NET POSITION MOVEMENT INDEX:       – 6-Week Change in Strength Index: -1.5 1.2 0.9   British Pound Sterling Futures: The British Pound Sterling large speculator standing this week came in at a net position of -79,598 contracts in the data reported through Tuesday. This was a weekly fall of -5,785 contracts from the previous week which had a total of -73,813 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish-Extreme with a score of 16.6 percent. The commercials are Bullish-Extreme with a score of 86.0 percent and the small traders (not shown in chart) are Bearish with a score of 23.2 percent. BRITISH POUND Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 11.1 79.6 7.6 – Percent of Open Interest Shorts: 41.2 43.6 13.5 – Net Position: -79,598 95,245 -15,647 – Gross Longs: 29,469 210,627 20,157 – Gross Shorts: 109,067 115,382 35,804 – Long to Short Ratio: 0.3 to 1 1.8 to 1 0.6 to 1 NET POSITION TREND:       – Strength Index Score (3 Year Range Pct): 16.6 86.0 23.2 – Strength Index Reading (3 Year Range): Bearish-Extreme Bullish-Extreme Bearish NET POSITION MOVEMENT INDEX:       – 6-Week Change in Strength Index: -28.5 25.6 -7.7   Japanese Yen Futures: The Japanese Yen large speculator standing this week came in at a net position of -110,454 contracts in the data reported through Tuesday. This was a weekly decline of -9,660 contracts from the previous week which had a total of -100,794 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish-Extreme with a score of 0.8 percent. The commercials are Bullish-Extreme with a score of 96.6 percent and the small traders (not shown in chart) are Bearish with a score of 24.0 percent. JAPANESE YEN Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 4.5 86.2 8.0 – Percent of Open Interest Shorts: 49.2 35.7 13.9 – Net Position: -110,454 124,927 -14,473 – Gross Longs: 11,196 213,084 19,811 – Gross Shorts: 121,650 88,157 34,284 – Long to Short Ratio: 0.1 to 1 2.4 to 1 0.6 to 1 NET POSITION TREND:       – Strength Index Score (3 Year Range Pct): 0.8 96.6 24.0 – Strength Index Reading (3 Year Range): Bearish-Extreme Bullish-Extreme Bearish NET POSITION MOVEMENT INDEX:       – 6-Week Change in Strength Index: -5.1 0.0 16.7   Swiss Franc Futures: The Swiss Franc large speculator standing this week came in at a net position of -15,763 contracts in the data reported through Tuesday. This was a weekly fall of -1,856 contracts from the previous week which had a total of -13,907 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 39.8 percent. The commercials are Bullish with a score of 69.2 percent and the small traders (not shown in chart) are Bearish-Extreme with a score of 15.5 percent. SWISS FRANC Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 9.2 74.6 16.1 – Percent of Open Interest Shorts: 40.0 16.5 43.5 – Net Position: -15,763 29,819 -14,056 – Gross Longs: 4,727 38,258 8,271 – Gross Shorts: 20,490 8,439 22,327 – Long to Short Ratio: 0.2 to 1 4.5 to 1 0.4 to 1 NET POSITION TREND:       – Strength Index Score (3 Year Range Pct): 39.8 69.2 15.5 – Strength Index Reading (3 Year Range): Bearish Bullish Bearish-Extreme NET POSITION MOVEMENT INDEX:       – 6-Week Change in Strength Index: -7.7 8.0 -7.6   Canadian Dollar Futures: The Canadian Dollar large speculator standing this week came in at a net position of -5,407 contracts in the data reported through Tuesday. This was a weekly fall of -14,436 contracts from the previous week which had a total of 9,029 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 38.3 percent. The commercials are Bullish with a score of 66.9 percent and the small traders (not shown in chart) are Bearish with a score of 34.7 percent. CANADIAN DOLLAR Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 25.6 49.8 21.8 – Percent of Open Interest Shorts: 29.2 47.9 20.1 – Net Position: -5,407 2,939 2,468 – Gross Longs: 38,679 75,215 32,880 – Gross Shorts: 44,086 72,276 30,412 – Long to Short Ratio: 0.9 to 1 1.0 to 1 1.1 to 1 NET POSITION TREND:       – Strength Index Score (3 Year Range Pct): 38.3 66.9 34.7 – Strength Index Reading (3 Year Range): Bearish Bullish Bearish NET POSITION MOVEMENT INDEX:       – 6-Week Change in Strength Index: -4.0 14.5 -29.0   Australian Dollar Futures: The Australian Dollar large speculator standing this week came in at a net position of -41,714 contracts in the data reported through Tuesday. This was a weekly decrease of -13,198 contracts from the previous week which had a total of -28,516 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 46.2 percent. The commercials are Bullish with a score of 54.0 percent and the small traders (not shown in chart) are Bearish with a score of 39.2 percent. AUSTRALIAN DOLLAR Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 24.1 59.9 13.1 – Percent of Open Interest Shorts: 51.3 29.1 16.7 – Net Position: -41,714 47,126 -5,412 – Gross Longs: 36,869 91,731 20,131 – Gross Shorts: 78,583 44,605 25,543 – Long to Short Ratio: 0.5 to 1 2.1 to 1 0.8 to 1 NET POSITION TREND:       – Strength Index Score (3 Year Range Pct): 46.2 54.0 39.2 – Strength Index Reading (3 Year Range): Bearish Bullish Bearish NET POSITION MOVEMENT INDEX:       – 6-Week Change in Strength Index: 7.3 4.7 -34.4   New Zealand Dollar Futures: The New Zealand Dollar large speculator standing this week came in at a net position of -12,996 contracts in the data reported through Tuesday. This was a weekly fall of -6,386 contracts from the previous week which had a total of -6,610 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 49.5 percent. The commercials are Bullish with a score of 56.4 percent and the small traders (not shown in chart) are Bearish-Extreme with a score of 7.4 percent. NEW ZEALAND DOLLAR Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 27.0 68.5 3.9 – Percent of Open Interest Shorts: 50.1 38.5 10.8 – Net Position: -12,996 16,874 -3,878 – Gross Longs: 15,203 38,541 2,216 – Gross Shorts: 28,199 21,667 6,094 – Long to Short Ratio: 0.5 to 1 1.8 to 1 0.4 to 1 NET POSITION TREND:       – Strength Index Score (3 Year Range Pct): 49.5 56.4 7.4 – Strength Index Reading (3 Year Range): Bearish Bullish Bearish-Extreme NET POSITION MOVEMENT INDEX:       – 6-Week Change in Strength Index: -20.4 26.0 -54.4   Mexican Peso Futures: The Mexican Peso large speculator standing this week came in at a net position of 16,725 contracts in the data reported through Tuesday. This was a weekly advance of 2,102 contracts from the previous week which had a total of 14,623 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 34.5 percent. The commercials are Bullish with a score of 64.1 percent and the small traders (not shown in chart) are Bullish with a score of 60.6 percent. MEXICAN PESO Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 41.5 53.1 4.2 – Percent of Open Interest Shorts: 30.7 66.7 1.5 – Net Position: 16,725 -20,866 4,141 – Gross Longs: 63,921 81,735 6,467 – Gross Shorts: 47,196 102,601 2,326 – Long to Short Ratio: 1.4 to 1 0.8 to 1 2.8 to 1 NET POSITION TREND:       – Strength Index Score (3 Year Range Pct): 34.5 64.1 60.6 – Strength Index Reading (3 Year Range): Bearish Bullish Bullish NET POSITION MOVEMENT INDEX:       – 6-Week Change in Strength Index: 10.6 -10.1 -3.5   Brazilian Real Futures: The Brazilian Real large speculator standing this week came in at a net position of 40,778 contracts in the data reported through Tuesday. This was a weekly lowering of -1,010 contracts from the previous week which had a total of 41,788 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish-Extreme with a score of 90.5 percent. The commercials are Bearish-Extreme with a score of 10.3 percent and the small traders (not shown in chart) are Bullish with a score of 79.4 percent. BRAZIL REAL Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 79.5 15.4 5.0 – Percent of Open Interest Shorts: 13.1 83.8 3.0 – Net Position: 40,778 -42,031 1,253 – Gross Longs: 48,835 9,454 3,070 – Gross Shorts: 8,057 51,485 1,817 – Long to Short Ratio: 6.1 to 1 0.2 to 1 1.7 to 1 NET POSITION TREND:       – Strength Index Score (3 Year Range Pct): 90.5 10.3 79.4 – Strength Index Reading (3 Year Range): Bullish-Extreme Bearish-Extreme Bullish NET POSITION MOVEMENT INDEX:       – 6-Week Change in Strength Index: -1.8 3.5 -20.6   Russian Ruble Futures: The Russian Ruble large speculator standing this week came in at a net position of 7,543 contracts in the data reported through Tuesday. This was a weekly fall of -263 contracts from the previous week which had a total of 7,806 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 31.2 percent. The commercials are Bullish with a score of 69.1 percent and the small traders (not shown in chart) are Bearish with a score of 23.9 percent. RUSSIAN RUBLE Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 36.6 60.6 2.8 – Percent of Open Interest Shorts: 0.5 94.7 4.7 – Net Position: 7,543 -7,150 -393 – Gross Longs: 7,658 12,679 593 – Gross Shorts: 115 19,829 986 – Long to Short Ratio: 66.6 to 1 0.6 to 1 0.6 to 1 NET POSITION TREND:       – Strength Index Score (3 Year Range Pct): 31.2 69.1 23.9 – Strength Index Reading (3 Year Range): Bearish Bullish Bearish NET POSITION MOVEMENT INDEX:       – 6-Week Change in Strength Index: -15.6 16.7 -18.8   Bitcoin Futures: The Bitcoin large speculator standing this week came in at a net position of 703 contracts in the data reported through Tuesday. This was a weekly gain of 315 contracts from the previous week which had a total of 388 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish-Extreme with a score of 100.0 percent. The commercials are Bearish-Extreme with a score of 0.0 percent and the small traders (not shown in chart) are Bearish-Extreme with a score of 14.9 percent. BITCOIN Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 81.1 2.1 9.1 – Percent of Open Interest Shorts: 74.6 9.4 8.3 – Net Position: 703 -789 86 – Gross Longs: 8,789 227 989 – Gross Shorts: 8,086 1,016 903 – Long to Short Ratio: 1.1 to 1 0.2 to 1 1.1 to 1 NET POSITION TREND:       – Strength Index Score (3 Year Range Pct): 100.0 0.0 14.9 – Strength Index Reading (3 Year Range): Bullish-Extreme Bearish-Extreme Bearish-Extreme NET POSITION MOVEMENT INDEX:       – 6-Week Change in Strength Index: 19.0 -24.9 -13.6   Article By InvestMacro – Receive our weekly COT Reports by Email *COT Report: The COT data, released weekly to the public each Friday, is updated through the most recent Tuesday (data is 3 days old) and shows a quick view of how large speculators or non-commercials (for-profit traders) were positioned in the futures markets. The CFTC categorizes trader positions according to commercial hedgers (traders who use futures contracts for hedging as part of the business), non-commercials (large traders who speculate to realize trading profits) and nonreportable traders (usually small traders/speculators) as well as their open interest (contracts open in the market at time of reporting).See CFTC criteria here.
The Swing Overview - Week 18 2022

The Swing Overview - Week 18 2022

Purple Trading Purple Trading 16.05.2022 10:51
The Swing Overview - Week 18 In the war against rising inflation, central banks in the US, the UK and Australia raised interest rates this week. Britain, meanwhile, warned of the risk of a recession. The CNB also raised rates. They have thus reached their highest levels since 1999. The key interest rate in the Czech Republic is now 5.75%.   The main stock indices have weakened strongly in response to the monetary tightening policies of the major economies and are at significant support levels. The negative sentiment on the indices is confirmed by the VIX fear indicator, which is above 30. The US dollar, on the other hand, continues to ride on the winning wave. The Fed raised interest rates by 0.5% The Fed raised rates by 0.5% points on Wednesday as expected, the highest jump in 22 years. This took the interest rate to 1%. The Fed chief announced that further half a percentage point rate hikes will continue at the next meetings in June and July. Powell also stated that the US economy is doing well and that it can withstand interest rate hikes without the risk of a recession and a significant increase in unemployment.   In addition to the rate hike, the Fed announced that in June it would begin reducing the assets on the bank's balance sheet that the central bank had accumulated during the pandemic. In June, July and August, the Fed will sell $45 billion of assets a month, and starting in September it will sell $95 billion a month.   Although Powell ruled out a 0.75% rate hike at the next meetings, interest rate futures markets continue to expect that possibility with about an 80% probability. Figure 1: The CME Fed Watch tool projections of the target interest rate for the next Fed meeting on June 15, 2022 Based on these expectations, US 10-year Treasury yields continue to strengthen and have surpassed the 3% mark. The US dollar is also strengthening and it is at the highest level since January 2017 and approaching 104.  Figure 2: The US 10-year bond yields and the USD index on the daily chart   Equity indices remain under pressure The SP 500 index initially rallied strongly following the announcement of the rate hike, after Powell ruled out a 0.75% rate hike in subsequent meetings. However, markets gave back all the gains the following day as interest rate futures continue to estimate an 80% probability that the next rate hike, which will take place in June 2022, will be 0.75%.   Figure 3: SP 500 on H4 and D1 chart Thus, in terms of technical analysis, the US SP 500 index continues to move in a downtrend below both the SMA 100 and EMA 50 moving averages with resistance, according to the 4 H chart, at 4,308 - 4,313. The next resistance, according to the H4 chart, is 4,360 - 4,365.  Strong resistance is at 4,500. The current support is 4 070 - 4 100.   German DAX index German industrial orders fell by 4.7% in March, which is more than expected. A major contributor to this negative result was a reduction in orders from abroad as the war in Ukraine hit demand in the manufacturing sector. The outlook is negative and some analysts suggest that the German economy is heading into recession. The reasons are the war in Ukraine, problems in supply chains and high inflation. The Dax index confirms these negative outlooks with a downward trend. Figure 4: German DAX index on H4 and daily chart The index continues to move below the SMA 100 on the daily chart and on the H4 chart, confirming the bearish sentiment. The nearest support according to the H4 is 13,600 - 13,650. Resistance is 14,300 - 14,330. The next resistance is 14,592 - 14,632.   The outlook for the euro remains negative HSBC bank on Thursday significantly cut its forecast for the euro, saying it expects the euro to weaken to parity against the US dollar this year, the first major investment bank to make such a prediction.   The post-pandemic economic environment, which has been damaged by the ongoing war in Ukraine, looks challenging for the European economy, potentially forcing the European Central Bank to tighten policy slowly compared to the U.S. Federal Reserve, which has begun an aggressive rate-hiking cycle.  This has raised the prospect of the single currency falling to levels not seen in two decades. HSBC said it expects the move to happen by the fourth quarter of 2022.   ECB board member Isabel Schnabel said this week that rates may need to be raised as early as July. The precursor to any rate hike must be an end to bond purchases and that could come in late June. Markets are pricing in a 90 basis point tightening in rates this year.   Figure 5: The EURUSD on H4 and daily chart The EUR/USD pair is in a clear downtrend with resistance at 1.0650 - 1.071. The important support is 1.05, but it has already been tested several times and could be broken soon. The next support is from January 2017 at around 1.0350 - 1.040.   The Czech koruna got another injection in the form of an interest rate hike The CNB raised the interest rate by 0.75%, which exceeded analysts' expectations who projected a 0.50% rise. The current rate now stands at 5.75%, the highest since 1999. Consumer price growth continues to rise and by raising the interest rate the central bank is trying to dampen this growth by raising the interest rate. Inflation is expected to reach 15% by mid-year. The CNB has an inflation target of 2% and inflation is expected to reach these levels in 2024.   The problem is economic growth, which is slowing significantly.  But maintaining price stability is clearly more important than the negative effects of higher rates on the real economy.  Figure 6: The USD/CZK and the EUR/CZK on the daily chart The Czech koruna has so far done best on the pair with the euro, as interest rates are zero on the euro. The koruna has been weakening significantly on the USD pair in recent days. The current significant resistance on the USD/CZK is CZK 23.50 per dollar and on the EUR/CZK it is 24.70.    Bank of England warned of recession and more than 10% inflation The Bank of England sent out a strong warning that Britain faces the twin dangers of recession and inflation above 10% when it raised interest rates by a quarter percentage point to 1% on Thursday. The pound fell more than a cent against the US dollar and hit its lowest level since mid-2020, below $1.24, as the gloominess of the BoE's new forecasts for the world's fifth-largest economy caught investors off guard.    The BoE also said it was also concerned about the impact of renewed COVID-19 lockdowns in China, which threaten to hit supply chains again and increase inflationary pressures.    The BoE's rate hike was the fourth since December, the fastest pace of policy tightening in 25 years. The central bank also revised up its price growth forecasts, which suggest it will peak above 10% in the final three months of this year. Previously, it had expected it to peak at around 8% in April. Markets expect interest rates to reach 2-2.25% by the end of 2022.  Figure 7: The GBP/USD on weekly and daily charts In terms of technical analysis, the GBP/USD is in a downtrend. The pound is trading at levels below 1.24 pounds per dollar and has reached to the support of 1.225-1.2330. The nearest resistance according to the weekly chart is at 1.2700-1.2750.   
The Swing Overview - Week 19 2022

The Swing Overview - Week 19 2022

Purple Trading Purple Trading 16.05.2022 10:59
The Swing Overview - Week 19 Stock indices continued to weaken strongly last week, while the US dollar has already surpassed the mark 104 and is at 20-year highs. However, a set of important data is behind us, which could bring some temporary relief to the equity markets. The Czech koruna weakened sharply after the appointment of the new CNB Governor Ales Michl, who is a proponent of a dovish approach. Thus, the rise in interest rates in the Czech Republic appears to be close to its peak.   Macroeconomic data The US consumer inflation for April was reported on Wednesday, which came in at 8.3% on year-on-year basis. Analysts were expecting inflation to be 8.1%. Although the figure achieved was higher than expectations, it was still lower than the 8.5% inflation figure achieved in March. On a month-on-month basis, the price increase in April was 0.3%, significantly lower than in March when prices rose by 1.5%.   On Thursday, industrial inflation was reported at 8.8% year-on-year and 0.4% month-on-month for April.   The positive thing about this data is that inflation declined from previous readings. However, it is important to note that the year-on-year comparison is based on data where inflation was also higher in the previous year due to the recovery from the Covid-19 pandemic.   The Fed chief reiterated that he expects another 0.50% point rise in interest rates at the next two Fed meetings. He also mentioned that a higher rate hike cannot be ruled out if necessary.   The US 10-year bond yields came down from their peak and made a slight correction. However, the US dollar continued to strengthen and broke the resistance at 104. The dollar is thus at 20-year highs. Figure 1: US 10-year bond yields and USD index on the daily chart   Equity indices heavily oversold The strong dollar, rising US bond yields, the war in Ukraine and the effects of the lockdown in China were the main reasons for the decline in equity indices. The SP 500 index hit 3,860, the lowest level since March 2021. This is also where long-term support is. However, the important macro data is behind us and the market has processed all the available fundamental information. This could bring temporary relief to the markets and the index could make an upward correction. The fall in 10-year bond yields, gives this move some boost as well.   Figure 2: The SP 500 on H4 and D1 chart However, from a technical analysis perspective, the US SP 500 index remains in a current downtrend as the markets have formed lower low and is also below both the SMA 100 and EMA 50 moving averages on the H4 and daily charts. The nearest resistance is 4040 - 4070. The next resistance is at 4,140 and especially 4,293 - 4,300. The support is at 3,860 - 3,900.   German DAX index In macroeconomic data, the German ZEW Economic Sentiment for May was reported last week and showed a reading of -34.3, an improvement from the previous month's reading of -41.0. Inflation in Germany for April is at 7.4% on year-on-year basis and up 0.8% from March (the previous month's increase was 2.5%). Figure 3: German DAX index on H4 and daily chart The index continues to move in a downtrend along with the major world indices. The price has reached the SMA 100 moving average on the H4 chart, which tends to signal resistance in a downtrend. The price is moving below the SMA 100 on both the daily chart and the H4 chart, confirming the bearish sentiment. The nearest support according to the H4 is 13,600 - 13,650. The resistance is 14,300 - 14,330. The next resistance is 14,592 - 14,632.   The big sell-off in the euro continues The euro fell to 1.0356 against the dollar, the lowest value since January 2017. This value is also an area of significant support where price could stall. Fundamentally, the euro's depreciation is due to the strong dollar and the Fed's hawkish policy, which contrasts with the ECB's policy of not raising rates yet.    Figure 4: The EURUSD on H4 and daily chart Eurozone inflation data will be reported next week, which could be an important catalyst for further movement. The significant support is priced around 1.0350 - 1.040. The current resistance is at 1.05.   Czech koruna weakened strongly on the new governor appointment The President Miloš Zeman surprised with the appointment of Ales Michl for the governor of the CNB. Michl is known for his dovish views, having spoken out against raising interest rates at recent meetings. His appointment was welcomed in the markets by a strong depreciation of the Czech koruna. However, the bank later intervened in the markets by selling part of its foreign exchange reserves to prevent further depreciation of the Czech koruna.   It is important to know that the Bank's monetary policy is decided by the seven-member Bank Board. So far, the proportion for voting on rate hikes has been 5:2. But by the end of June, the president must appoint 3 new board members. This could significantly change the voting ratio on the board and set a new course for the bank's policy, which would mean a halt to the rise in interest rates. However, it is likely that at the June board meeting the board, still with the old composition, will decide on further interest rate increases. Figure 5: The USD/CZK and the EUR/CZK on the daily chart The Czech koruna has reached 24.36 against the dollar and 25.47 against the euro, from which it started to descend after the CNB interventions.  
Energy and Metals Decline, Wheat Rallies Amid Disappointing Chinese Growth

EURCHF - My Trading Plan in a picture. Euro To Swiss Franc (EUR/CHF) is overall bullish trading inside the orange channel | Richard Nasr

Richard Nasr Richard Nasr 16.05.2022 11:57
As per my trading style/plan; Here are the two strong zones where I will be looking for high probability buy setups: I call them War Zones, (highlighted in Purple circles) Zone 1: (around 1.060) This highlighted purple circle is a strong area to look for sell setups as it is the intersection of the blue resistance and upper orange trendline. (acting as non-horizontal resistance) Read next: Altcoins: What Is Polkadot (DOT)? Cross-Chain Transfers Of Any Type Of Asset Or Data. A Deeper Look Into Polkadot Protocol | FXMAG.COM Zone 2: (around 1.030) This highlighted purple circle is a strong area to look for buy setups as it is the intersection of the green support and lower orange trendline. (acting as non-horizontal support) As per my trading style: As EURCHF approaches one of the purple circles, I will be looking for reversal setups (like a double bottom /top pattern, trendline break , and so on...) Read next: (TRX) TRON USD Decentralised Blockchain Platform That Focuses On Entertainment And Content Sharing. Altcoins: A Deep Look Into The TRON Network | FXMAG.COM Always follow your trading plan regarding entry, risk management, and trade management. Good luck! All Strategies Are Good; If Managed Properly! ~Rich
Risks in the US Banking System: Potential Impacts and Contagion Concerns

How Are USD (US Dollar), (Canadian Dollar) CAD, (Euro) EUR, (British Pound) GBP Doing? | FX Daily: Hold your horses | ING Economics

ING Economics ING Economics 18.05.2022 08:58
The rebound in global equities is fuelling a widespread recovery in G10 pro-cyclical FX against the USD. Still, yesterday's remarks by Jay Powell were a reminder of the very hawkish Fed policy. Ultimately, rate and growth differentials should curb the dollar's weakness against most peers - except for the CAD where today's CPI should endorse more hikes Learn on ING Economics USD: Don't forget the rate and growth factor The rebound in global equities has continued to fuel a recovery in pro-cyclical currencies, and a correction in the safe-haven US dollar and Japanese yen. Overnight, Asian equities were mixed, and the CSI300 failed to follow yesterday’s jump in US-traded Chinese tech stocks following some unusually supportive comments for China’s tech companies from one of Beijing’s top officials, which fuelled speculation of some easing in the current crackdown. Stock index futures suggest a flat open in major Western equity markets today. Clearly, the monetary policy story is playing a secondary role in the market narrative at the moment, but yesterday’s comments by Fed Chair Powell were quite relevant from a signalling perspective, as he firmly reiterated the Fed’s determination to bring inflation sustainably lower, even by hiking beyond the neutral rate if necessary. While the dollar momentum is set to remain weak as long as global assets stay in recovery mode, the notion of aggressive Fed tightening continues to argue against a sustained bearish dollar trend. Incidentally, this week’s moves have likely placed the dollar in a less overbought condition. With this in mind, DXY should find increasing support below the 103.00 area. The US economic calendar includes some housing data today, and Patrick Harker is the only Fed speaker scheduled for remarks. EUR: Upside room starting to shrink EUR/USD has risen in line with other pro-cyclical pairs this week, breaking back above the 1.0500 level and now being at a safe distance from the key 2017-low support of 1.0340, which if breached would probably pave the way for a move towards parity. Today, the eurozone calendar is not busy and only includes the final print of April’s CPI numbers. We’ll also hear from European Central Bank hawk Madis Muller today, although the recent re-pricing higher in ECB rate expectations (markets now fully price in a deposit rate at 1.0% in December) means that the bar for any hawkish surprise is set very high. Our view on the limited downside risk for the dollar beyond the very short term obviously implies that the room for appreciation in EUR/USD should also start to shrink soon. We also believe that markets are pricing in too much tightening by the ECB – though not by the Fed – and expect the theme of growth divergence (exacerbated by the EU-Russia standoff on commodities) to become more relevant into the summer. With this in mind, we suspect that any further rally in EUR/USD may start to lose steam around the 1.0650-1.0700 area, with risks of a return below 1.0500 in the near term being quite material. GBP: Inflation rises, but double digits aren't assured This morning’s inflation report in the UK was broadly in line with consensus expectations, as headline CPI rose to 9.0% (largely due to the increase in the electricity price cap) with the core rate rising to 6.2% year-on-year in April. This means inflation is largely where the Bank of England expects it to be. Still, the BoE projections embed a move to double-digit inflation by the end of the year, a prospect that we are still not convinced will materialise. There are no BoE speakers today. The oversold pound has faced a strong rebound this week, recouping some of its recent sharp losses as global risk appetite improved. While the good GBP momentum may continue as equities find some stability in the coming days, the pound still faces two major downside risks in the coming months: a) a further dovish repricing of BoE rate expectations (the implied rate for end-2022 is still 2.0%); b) Brexit-related risk, as the unilateral suspension by the UK of parts of the Northern Ireland agreement would likely trigger a trade war with the EU. We think cable will mostly trade below the 1.2500 mark during the summer. CAD: Inflation data unlikely to affect BoC policy expectations Inflation data will be released in Canada today, and the market is expecting some signs that the headline rate has peaked (at 6.7% YoY), which would imply a monthly increase of 0.5% in April. Core measures may however continue to inch marginally higher. Barring major surprises in the data today, we suspect that the impact on the Bank of Canada's rate expectations and on the Canadian dollar will be limited. The BoC remains on track to deliver 50bp of rate increases in tandem with the Fed, being able to count on a tight labour market, growing workforce and positive commodity story. In our view, the BoC will ultimately have to deliver more monetary tightening than the Fed in the next year. USD/CAD has broken below 1.2800 and should continue to weaken if we see further signs of stability in global sentiment today. Crucially, the rate and growth differential that may curb EUR/USD don't apply to CAD vs USD given a hawkish BoC and strong growth in Canada, which means that a rally in the loonie should prove more sustainable than the EUR/USD one. We continue to target sub-1.25 levels in USD/CAD by the second half of the year. Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Oil Defies Broader Risk-off Sentiment: Commodities Update

ECB minutes show that the hawks are calling the shots | ING Economics

ING Economics ING Economics 19.05.2022 15:29
The European Central Bank hawks are calling the shots. The minutes of the ECB’s April meeting just confirmed that the hawks increasingly have the upper hand in discussions. A rate hike in July is no longer uncertain, the only uncertainty is whether it will be 25bp or 50bp   The minutes of the ECB’s April meeting provided more evidence that a majority of policymakers at the ECB have become increasingly concerned about the inflation outlook. The most important elements of the minutes are: Pipeline inflationary pressure. “The war in Ukraine and the pandemic measures in China suggested that pipeline pressures and bottlenecks were likely to intensify further, affecting consumer prices over a relatively long period of time.” Fear of stronger wage growth. While the ECB currently only sees moderate wage pressure, “there could be little doubt that workers would eventually ask for compensation for the loss in real income.” There was also evidence from different countries pointing to some heterogeneity across the eurozone. Greenflation. The accelerated decarbonisation and the attempt to increase Europe’s energy independence was another factor structurally pushing up prices. Also, reshoring efforts could reduce the disinflationary impact of globalisation on wages and inflation. Not whether the ECB will hike in July but by how much As regards the next policy steps, several members claimed that the accommodative monetary stance “was no longer consistent with the inflation outlook”, arguing for a faster normalisation process. Otherwise, inflation expectations could continue to rise further from a level that is already above the Governing Council’s target. Acting too late could also lead to second-round effects and “might have high economic, financial stability and credibility costs if the Governing Council were forced to tighten more aggressively at a later stage in order to re-anchor inflation expectations.” All in all, the minutes confirmed the increasingly hawkish tone of many ECB members since the April meeting. There seems to be an eerie feeling that the ECB is acting too late and quickly needs to join the bandwagon of monetary policy normalisation. This means that the question is no longer whether the ECB should hike interest rates in July but by how much. Former ECB President Mario Draghi once said that “when in a dark room you move with tiny steps. You don’t run but you do move”. It currently looks as if there is a growing majority at the ECB that wants not just to run but to sprint. Read this article on THINK TagsMonetary policy GDP Eurozone ECB Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Market Trends and Currency Positioning: USD Net Short Position, Euro and Pound Analysis - 22.08.2023

FX Daily: Activity currencies remain under pressure | ING Economics

ING Economics ING Economics 19.05.2022 09:56
Wednesday was another bad day for equities where the MSCI World equity index fell another 3%. The fact that expectations for Fed policy tightening remain intact is a sign that investors appreciate that tackling inflation is now the priority for central banks. This continues to favour the anti-cyclical dollar, but also now the Japanese yen Source: Shutterstock USD: The cavalry ain't coming Yesterday saw the S&P 500 sell off 4%, led by consumer stocks. The fact that some of the biggest main street names are under pressure on the back of profit warnings is a reminder that the squeeze on real incomes is starting to hit home. Over prior decades, decades associated with very dovish Fed policy, one might have expected this magnitude of an equity market sell-off to put a dent in Fed tightening expectations - or expectations that the Fed would come to the equity market's rescue. In fact, the Fed funds futures strip barely budged yesterday. We read this as a sign that investors now appreciate that tackling inflation is the number one priority of the Fed - and the Fed will not easily be blown off course. At the same time, we are still only hearing concerns from Chinese policymakers about the slowdown, rather than any promise of major fiscal support. And one could argue what would be the use of major fiscal support if workers and residents remain trapped in Covid lockdowns? For that reason, it seems very difficult to argue that renminbi depreciation has run its course and we cannot rule out USD/CNY pushing through the 6.80 area over coming weeks and months. This all leaves the anti-cyclical dollar quite well supported. We had made the case on Tuesday for a bounce in the oversold dollar. That bounce did not last long and again it is hard to rule out the dollar edging back to recent highs. Not until the Fed blinks on policy tightening or the rest of the world's growth prospects start to look attractive - neither of which seem likely over coming months - will the dollar put in an important top.  For today, the US calendar is light with just initial claims and existing home sales for April. Housing looks to be one of the most vulnerable sectors of the US economy, but its slowdown (and its effect on dragging core inflation lower) looks a story for much later in the year. DXY has seen a modest bull market correction this week, but can probably edge higher to 104.10 today. Read next: Altcoins: What Is Monero? Explaining XMR. Untraceable Cryptocurrency!? | FXMAG.COM EUR: ECB will have to talk a good game Providing the euro a little support this week has been even more hawkish commentary from the European Central Bank. We had felt that the market would struggle to price in more than 75bp of ECB tightening this year, but central bank hawks such as Klaas Knot have introduced the idea of the ECB moving in 50bp increments. This has helped narrow the two-year German Schatz-US Treasury spread to 225bp from recent wides at 250bp and provided some modest support for the dollar. This can be seen as verbal intervention from the ECB to support the euro. An important policy paper from the ECB a few years ago concluded that two-year rate differentials were the most significant driver of EUR/USD and the ECB's best hope of stablising EUR/USD may indeed be to talk up prospects of the forthcoming tightening cycle. For today, look out for the minutes of the April ECB meeting, where again it might choose to emphasise the more hawkish elements. EUR/USD has had its oversold bounce to 1.0550 and with the global environment remaining challenged, EUR/USD could today drift back through 1.0450/60 to 1.0400. Elsewhere, we note some short-term similarities between both the Swiss franc and the Czech koruna. The central banks behind both currencies would prefer stronger currencies to play their role in delivering stable/tighter monetary conditions. We conclude that EUR/CHF upside may be more limited - and the downside more open - than most believe. While for EUR/CZK, the Czech National Bank (CNB) will want EUR/CZK to continue trading under 25.00 and perhaps lower still - until at least 1 July when a new CNB governor takes over.  GBP: One month realised volatility at 8%! EUR/GBP one month realised volatility is back at 8% - which is very high for a European FX pair. Expect this volatility to continue given much uncertainty about the policy path for both the Bank of England (BoE) and the ECB. Here, we happen to think that tightening cycles in both are over-priced and one would probably think that the BoE cycle gets repriced lower first. Expect EUR/GBP to continue to trade in a very wide 0.8400-0.8600 range, while cable looks more one-way traffic. We have seen the bear market bounce to 1.2500 this week and the difficult external environment would favour a break of 1.2330 support in a move back to the 1.22 lows.  Read next: Altcoins: What Is Polkadot (DOT)? Cross-Chain Transfers Of Any Type Of Asset Or Data. A Deeper Look Into Polkadot Protocol | FXMAG.COM ZAR: SARB expected to hike 50bp today The South African Reserve Bank (SARB) is widely expected to hike 50bp to 4.75% today. The policy rate is quite low by emerging market standards, but that is because core inflation is only running at 3.9% year-on-year. A 50bp hike looks unlikely to generate much support to the rand, which is currently being re-priced off of the Chinese growth cycle. With $70bn of portfolio capital having left emerging markets since Russia invaded Ukraine - and with South Africa having large weights in emerging market debt and equity benchmarks - we expect the rand to stay under pressure for the time being.  16.35 is big resistance for USD/ZAR, above which 17.00 beckons for later in the year. Rising US real yields and the China slowdown continue to make the bear case for emerging markets.   Read this article on THINK Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
The Complex Factors Influencing Gold Prices in 2023: From Interest Rates to China's Impact

Stronger Euro (EUR)? Rates Spark: Four ECB hikes and a bit more | ING Economics

ING Economics ING Economics 19.05.2022 09:08
Curves pivoting flatter fits a narrative further shifting towards growth concerns. As European Central Bank pricing gets more hawkish there is more than just the possibility of 50bp moves that could explain how 100bp in four meetings after June could come to pass, even if that is not our view    USD and EUR curves pivoting flatter around the belly of the curve amid weaker risk assets is a pattern that fits the narrative of market concerns having shifted toward rising risks to the growth outlook as central banks tighten policies amid high inflation. Continuing to lean more hawkish on the hawk-dove seesaw In EUR, markets have further ratcheted up their ECB rate hike expectations. By the end of the year they expect an overnight rate more than 100bp higher from now. If one assumes that the ECB will use the June meeting to prepare the grounds for rate hikes by announcing also the end of all net asset purchases, then this would imply an expectation of 25bp hikes at each of the other four remaining policy setting meetings in 2022 – and a bit more. 25bp hikes at the four ECB meetings starting with July – and a bit more Does that mean the possibility of a 50bp hike by the ECB is catching on?  After all it had been floated by the ECB’s Klaas Knot earlier this week, but his remarks may have been more about signaling a commitment to act forcefully. A sources article published yesterday outlined that a majority of the Council supported at least two 25bp hikes this year, but downplayed the notion of a 50bp move. Read next: Altcoins: What Is Litecoin (LTC)? A Deeper Look Into The Litecoin Platform| FXMAG.COM Curve flattening fits a pattern of growth concerns and tightening central banks Source: Refinitiv, ING Other factors driving aggressive market pricing The aggressive market pricing will to a degree also reflect a higher risk premium amid volatile times, but we would also not exclude some uncertainty being reflected about the evolution of excess reserves in the banking system and how the ECB proceeds with the tiered deposit rate. The expectation is still that larger early repayments of banks’ targeted longer-term refinancing operations borrowings loom in the months ahead, although higher comparable market rates may have now made it more compelling for banks to hold on to the funds beyond June until the September repayment date. On the forwards strip for the ECB meeting periods markets see c.4bp higher overnight rates for the upcoming June meeting, though it may also include outside chances for an immediate ECB rate hike. It is conspicuous that the market prices the largest increase for September, a rise of noticeably more than 30bp while it is below 25bp for the other meetings this year save July. More than 100bp from the ECB in the four 2022 meetings after June Source: Refinitiv, ING   For September the market prices an increase of more than 30bp Perhaps the ECB minutes to be released today will shed more light on the ECB’s internal deliberations on what needs to be done in the face of rising inflation and the balance of risks tilting less favourably. But given how far official communication has already evolved since the April meeting to converge with the market view, the minutes should look dovish, not to say outdated. It was a meeting that still signaled a very gradual move. To be sure, our own expectation is also that aggressive market pricing will likely not be realised with our economists looking for three ECB hikes by the turn of the year. Today's events and market view In the Eurozone the ECB minutes of the 14 April meeting will take the spotlight amid an otherwise quiet data calendar. The minutes have seldomly been market moving, and they should appear especially outdated this time around as ECB communication has evolved quickly since then. We will also hear from the ECB's de Guindos and de Cos today. The other market focus will be today’s busy supply slate. France sells up to €13bn across shorter dated bond lines, including a new 6Y, and linkers. Spain reopens four bond lines including its 20Y green bond for up to €6bn in total.   The US sees publication of initial jobless claims and existing home sales. Read next: Altcoins: What Is Monero? Explaining XMR. Untraceable Cryptocurrency!? | FXMAG.COM Read this article on THINK TagsRates Daily Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Australian CPI Expected to Rise to 5.2%: Impact on AUD/USD and RBA's Rate Hike Dilemma

Rates Spark: The rates upside remains real | ING Economics

ING Economics ING Economics 20.05.2022 08:41
Completing the shift of the market narrative towards growth concerns, bonds are reasserting their role as safe havens. The European Central Bank minutes confirmed the Council's desire to act faster, also with an eye on still ultra low real yields  Risks remain to the upside for rates Bonds' negative correlations with risk assets consolidates amid growth concerns As markets continue to trade in a risk-off fashion, bonds have managed to reassert their role as safe havens. The pattern of bond curves consistently rallying flatter as risk assets sell off has only reestablished itself over the past few sessions. In a way this dynamic completes the transition of the market narrative toward growth concerns, away from being dominated by central banks' prospective tightening lifting market rates out the entire curves. bonds have managed to reassert their role as safe havens This does not mean that data releases couldn't shift the focus again. Next week will offer some opportunities with the release of the flash PMI surveys for instance. And if the Fed deems inflation (expectations) are not coming down fast enough, it may well use the FOMC minutes next week to signal more hawkish moves. The 75bp-hike discussion is not entirely off the table. Unlike the ECB, the Fed has used its meeting minutes as a more active communications tool, such as outlining its plans for the balance sheet run-off. We will also watch the PCE deflator, the Fed's preferred inflation gauge at the end of next week. Risk-off drives curves flatter Source: Refinitiv, ING ECB minutes, outdated but also highlighting the upside in rates The ECB minutes have been overtaken by the quick evolution of ECB communication since the last meeting. The indication now is that a majority of the Council is backing ending net asset purchases in June and hiking for a first time in July is already common place. And markets are attaching some probability to hikes larger than 25bp. The ECB has to increasingly grapple with potential de-anchoring of inflation expectations That does not mean that the known objections of the Council’s doves are invalid: too fast tightening being counterproductive, weighing on growth without being able to do anything about inflation driven by supply shocks. The line of reasoning still holds and explains market concerns reflected in current curve flattening. But the ECB has to increasingly grapple with potential de-anchoring of inflation expectations with some of the related measures already displaying notable shifts. This shift in some inflation expectation measures had been outlined by Isabel Schnabel in one of her more recent speeches. She had also highlighted the still very low level of real yields. This hawkish argument was also found in yesterday’s minutes, with real yields remaining low while the rise in nominal yields was not enough to dampen aggregate demand and bring down inflation in the medium term. Read next: Altcoins: What Is Litecoin (LTC)? A Deeper Look Into The Litecoin Platform| FXMAG.COM EUR real rates have a long way to go Source: Refinitiv, ING   It is worth noting that back around the April ECB meeting the 10Y swap rate was just below 1.6% versus a current level of 1.65%, although following a decent rally after a brief excursion above 2% earlier this month. Real rates remain deeply negative regardless of the maturity, and if this is a measure considered instrumental at reining in inflation over the medium term, then we may have to reckon with more upside to rates. The important question is whether the ECB will have enough time to realize its goals.   The ECB's "separation principle" is still lacking detail The "separation principle" referenced in the ECB accounts states the idea that monetary policy could be set independently from any measures designed to avoid disruptions triggered by any such policy tightening. More specifically to the current situation, Eurozone sovereign bond spreads could be managed while the ECB starts hiking. However, as of now the ECB has still not provided any details on how such a tool could look in practice. Beyond stating the need to keep flexibility and pointing to the potential use of pandemic emergency purchase programme reinvestments, it appears there is no desire to have a broader discussion on the topic just yet. With ECB plans still vague, Italian bonds especially remain vulnerable With ECB plans still vague, Italian government bonds especially remain vulnerable. In the current risk-off environment Italian bonds are still positively correlated with Bunds, ie, they do not trade as risk assets, but the spreads have started to rewiden towards 195bp in 10-year maturities. We still think the market could test out widening this spread towards 250bp before the ECB steps in. ECB plans remain vague, leaving Italian bond spreads vulnerable to further widening Source: Refinitiv, ING Today's events and market views In terms of data and events it will be a quieter session today. The main focus will be on central bank speakers with the ECB's Muller, Kazaks Lane, and Centeno all scheduled for the day. In the UK we will hear from the Bank of England's Chief Economist Huw Pill. Main data of note is the Eurozone consumer confidence. In this shaky risk environment, we expect bonds to retain their poise. It would take a lot of good news for yield upside to resume at the long-end, but central bankers should keep the heat on shorter rates. Read next: Altcoins: What Is Monero? Explaining XMR. Untraceable Cryptocurrency!? | FXMAG.COM Read this article on THINK TagsRates Daily Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more Follow FXMAG.COM on Google News
Euro Area Final CPI Ahead of ECB's Interest Rate Decision on Thursday

Major Index NASDAQ (IXIC) Sell Off After Equities Fall, Will the ECB Turn Hawkish?

Rebecca Duthie Rebecca Duthie 20.05.2022 09:50
Summary: Despite growing confidence in the stock market, major indices are struggling to keep up with the volatile market. The ECBs turn to a hawkish attitude could lead toward a stronger Euro. Nasdaq loses value during the trading day on Thursday Equity stocks attempted to rebound during trading on Thursday after a sell-off. The sell off came as market participants grew concerned about whether the Fed’s continuous hawkish attitude could cause a slow down in the U.S economy. In general the investor sell-off attitude seems to be easing somewhat, however markets still remain volatile. NASDAQ Price Chart Read next: Altcoins: What Is PancakeSwap (CAKE)? A Deeper Look Into The PancakeSwap Platform| FXMAG.COM European Central Banks possible tightening of monetary policy During trading on Thursday the Euro saw some strengthening based on the hopes of a more hawkish European Central Bank (ECB) in the summer. As the European Central Bank looks at a 50bps hike in interest rates this July, investor confidence is starting to restore in the Euro. The Euro showed particular strength against the pound sterling, which simultaneously pushed back their next interest rate hike. Sources: pounsterlinglive.com, finance.yahoo.com Follow FXMAG.COM on Google News
Agriculture: Russia's Exit from Black Sea Grain Deal Impacts Grain Prices

FX Daily: Dollar rally pauses for breath | ING Economics

ING Economics ING Economics 20.05.2022 10:57
Some support measures for the Chinese economy and some stability in the Chinese renminbi have helped usher in a period of consolidation in FX markets. This may well last into next week, although we would consider this a pause not a reversal in the dollar's bull trend. The stronger dollar is also exporting Fed hikes around the world Not until the Fed pours cold water on tightening expectations should the dollar build a top USD: Some consolidation is in order The dollar is now about 2% off its highs seen late last week. Driving that move has probably been some position liquidation and a preference for currencies like the Japanese yen (JPY) and the Swiss franc (CHF) during turbulent times in global equity markets. In fact, yesterday's FX activity looked like the big sell-off in EUR/CHF on Swiss National Bank (SNB) comments which triggered downside stops in USD/CHF and prompted a slightly broader dollar adjustment. Also helping this period of consolidation has been this week's stability in the Chinese renminbi (CNY). The overnight 15bp cut in the 5-year Loan Prime Rate – aimed at supporting the property sector – has instilled a little more confidence in Chinese assets markets. However, we cannot see USD/CNY heading straight back to 6.50. Instead, a 6.65-6.80 trading range may be developing after the recent CNY devaluation.  However, the emerging market environment still looks challenged given that the stronger dollar is effectively exporting tighter Fed policy around the world. Yesterday we saw rate hikes in Egypt, South Africa, and the Philippines. After devaluing the Egyptian pound by 15% in March, authorities there are very much struggling with the external environment. This has seen Egypt's 5-year Sovereign Credit Default swap rise to news highs of 940bp and is a reminder of the challenge North Africa faces from surging food prices. For today, the data calendar is relatively quiet and there may be some interest in what G7 finance ministers and central bank governors have to say after their meeting in Bonn. Reports suggest Japan would like some tweaks to the final G7 communique, but we very much doubt there will be any change in the core FX language that FX rates be market-determined and that excessive volatility and disorderly moves be avoided. DXY could correct a little lower to 102.30, but we see this as bull market consolidation, rather than top-building activity. Not until the Fed pours cold water on tightening expectations should the dollar build a top. And yesterday Fed hawk, Esther George, said that even this 'rough week' in equity markets would not blow the Fed off course.  EUR: ECB hawks in control Minutes of the April ECB meeting released yesterday show that the hawks are calling the shots. The market now prices a 31/32bp ECB rate hike at the 21 July ECB meeting – pricing which has plenty of scope to bounce between +25bp and +50bp over the next two months. This could drag EUR/USD back to the 1.0650/70 area over the coming days – helped by brief periods of calm in the external environment – but as above we would see this as a bear market bounce. Our core EUR/USD view for 2H22 is one of heightened volatility and probably EUR/USD getting close to parity in 3Q22 when expectations of the Fed tightening cycle could be at their zenith. Read next: Altcoins: What Is PancakeSwap (CAKE)? A Deeper Look Into The PancakeSwap Platform| FXMAG.COM GBP: April retail sales provide a reprieve UK retail sales have come in a little better than expected and break/suspend the narrative that the cost of living squeeze is large enough to derail the Bank of England tightening cycle. We would not get carried away with the sterling recovery, however. Sterling is showing a high correlation with risk assets – trading as a growth currency – and the outlook for risk assets will remain challenging for the next three to six months probably. Here's what our credit strategy team thinks of the European outlook.  Cable may struggle to breach the 1.2500/2550 area and 1.20 levels are very possible over the coming months. New-found hawkishness at the ECB means that EUR/GBP may struggle to sustain a move below 0.8450 before returning to 0.8600. Read next: Altcoins: What Is Litecoin (LTC)? A Deeper Look Into The Litecoin Platform| FXMAG.COM CHF: SNB policy makes the case for EUR/CHF sub 1.00 next year As we discuss in an article released yesterday, it looks like the SNB is targeting a stable real exchange rate to fight inflation. Given that Switzerland's inflation is roughly 4% lower than key trading partners, a stable real exchange rate means that the nominal exchange rate needs to be 4% stronger. This will be an added factor supporting the CHF over the coming months and may start to generate interest in trades positioning for a lower GBP/CHF. 1.2080 is a big support level but 1.1860 looks like the near-term target. Read this article on THINK TagsGBP FX Daily ECB CHF Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Serious liquidity crisis? According to Franklin Templeton, a massive, but unlikely deposit flight from Credit Suisse would have to happen

US Dollar Is Likely To Experience Volatility In The Coming Weeks (EUR/USD), UK Retail Data Exceeds Market Expectations (EUR/GBP), SNB Turns Hawkish Causing the CHF To Rally (EUR/CHF) - Good Morning Forex!

Rebecca Duthie Rebecca Duthie 20.05.2022 15:22
Summary: Euro showing upside potential. UK economic data exceeds market expectations. SNB turns hawkish, which acts in favour of the CHF. Investors turning to JPY in times of market uncertainty. Read next: (EUR/USD, EUR/GBP) Market Participants Betting On A More Hawkish ECB, A Dovish BoJ Weighs On The Safe-Haven Currency (USD/JPY) - Good Morning Forex!  The US Dollar is likely to experience volatility during the next trading week. Market sentiment for this major currency pair is reflecting a bullish market sentiment. The next trading week is full of economic data releases which are likely to impact the US Dollar, on Thursday the Fed’s preferred inflation reading PCE will give the market an indication of the growing pressures in the U.S. The Euro is also showing upside potential as investors expect the European Central Bank (ECB) will tighten their monetary policy during the summer. EUR/USD Price Chart UK retail data exceeds market expectations. Market sentiment for this currency pair is showing mixed signals. The GBP saw a positive market turn around on Friday after a positive market turnaround. UK sales volume data raised by 1.4% in April following a fall of 1.2% during March. The data release exceeded the market expectation of -0.2%. The data shows that UK households are showing resilience in the current economic environment. EUR/GBP Price Chart CHF rallies on Friday Market sentiment is showing bearish signals for this currency pair. On Thursday the Swiss Franc began to rally after the president of the Swiss National Bank (SNB) announced that they are ready to act on the rising inflation which is currently at 2.5%. EUR/CHF Price Chart GBP/JPY currency pair Market sentiment is showing bearish signals for this currency pair. This currency pair is sensitive to risk appetite, as investors begin to turn away from risky investments, the JPY tends to strengthen due to its safe-haven asset. GBP/JPY Price Chart Read next:Major Index NASDAQ (IXIC) Sell Off After Equities Fall, Will the ECB Turn Hawkish?  Sources: finance.yahoo.com, dailyfx.com, poundsterlinglive.com
Forex Speculators weaken Commodity Currency sentiment over last month - 22.05.2022

Forex Speculators weaken Commodity Currency sentiment over last month - 22.05.2022

Invest Macro Invest Macro 22.05.2022 12:34
By InvestMacro | COT | Data Tables | COT Leaders | Downloads | COT Newsletter Click for larger image Here are the latest charts and statistics for the Commitment of Traders (COT) data published by the Commodities Futures Trading Commission (CFTC). The latest COT data is updated through Tuesday May 17th and shows a quick view of how large traders (for-profit speculators and commercial entities) were positioned in the futures markets. All currency positions are in direct relation to the US dollar where, for example, a bet for the euro is a bet that the euro will rise versus the dollar while a bet against the euro will be a bet that the euro will decline versus the dollar. Highlighting the COT currency data was the commodity currency speculator positions that have been on the defensive in recent weeks. Canadian dollar positions declined for a fourth straight week this week and have fallen by a total of -35,722 contracts over the past four weeks. This has pushed the overall speculator standing into a bearish position for a second straight week and to the most bearish level since October 2021. Previously, from the middle of January, CAD positions had started to trend higher and mostly maintained a bullish position into April, reaching a 40-week high on April 19th before seeing speculator sentiment weaken (-14,496 contracts this week). Australian dollar spec positions slipped for a third straight week this week and the overall speculator position has now hit a 7-week low. Aussie positions have maintained a bearish speculator bias since last May (52 consecutive weeks in bearish territory) but had recently seen a reprieve of the weak sentiment. Aussie positions improved strongly from late-February to late-April with a 10-week contract rise of +59,043 positions from February 22nd to April 26th. The speculator positions hit the least bearish level (on April 26th) of the previous 42 weeks before these past 3 weeks has seen speculators re-up their bearish levels. New Zealand dollar speculators also added to their bearish bets for a fourth straight week and have now pushed the position to the most bearish level since March 17th of 2020, a span of 113 weeks. Kiwi speculator positions had spent almost all of 2021 in bullish levels but spec bets started to falter at the end of the year and into the new year (through early March). Recently, positions had turned positive to bullish positioning in the middle of March and again later in April before turning lower in recent weeks. The NZD speculator sentiment has now been in bearish territory for the past three weeks after dropping by a total of -18,132 contracts from April 26th to this week. Overall, the currencies with higher speculator bets this week were the US Dollar Index (1,437 contracts), Japanese yen (8,145 contracts), Euro (3,810 contracts), British pound sterling (357 contracts), Bitcoin (103 contracts) and the Mexican peso (11,490 contracts). The currencies with declining bets were the New Zealand dollar (-4,771 contracts), Canadian dollar (-9,089 contracts), Australian dollar (-2,928 contracts), Brazil real (-2,683 contracts) and the Swiss franc (-829 contracts). Speculator strength standings for each Commodity where strength index is current net position compared to past three years, above 80 is bullish extreme, below 20 is bearish extreme OI Strength = Current Open Interest level compared to last 3 years range Spec Strength = Current Net Speculator level compared to last 3 years range Strength Move = Six week change of Spec Strength Data Snapshot of Forex Market Traders | Columns Legend May-17-2022 OI OI-Index Spec-Net Spec-Index Com-Net COM-Index Smalls-Net Smalls-Index USD Index 61,899 93 36,213 88 -39,506 9 3,293 53 EUR 706,712 85 20,339 41 -51,517 61 31,178 26 GBP 253,811 73 -79,241 17 94,344 85 -15,103 24 JPY 241,308 83 -102,309 6 115,062 92 -12,753 28 CHF 53,291 42 -16,592 37 31,181 72 -14,589 14 CAD 151,585 31 -14,496 28 12,591 75 1,905 34 AUD 163,809 55 -44,642 43 54,437 59 -9,795 29 NZD 60,804 64 -17,767 41 21,390 63 -3,623 10 MXN 170,924 36 28,215 39 -32,249 59 4,034 60 RUB 20,930 4 7,543 31 -7,150 69 -393 24 BRL 55,990 48 38,095 88 -39,436 13 1,341 80 Bitcoin 11,644 63 806 100 -875 0 69 15   US Dollar Index Futures: The US Dollar Index large speculator standing this week resulted in a net position of 36,213 contracts in the data reported through Tuesday. This was a weekly rise of 1,437 contracts from the previous week which had a total of 34,776 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish-Extreme with a score of 88.2 percent. The commercials are Bearish-Extreme with a score of 9.0 percent and the small traders (not shown in chart) are Bullish with a score of 52.5 percent. US DOLLAR INDEX Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 86.5 3.4 8.8 – Percent of Open Interest Shorts: 28.0 67.2 3.5 – Net Position: 36,213 -39,506 3,293 – Gross Longs: 53,519 2,105 5,449 – Gross Shorts: 17,306 41,611 2,156 – Long to Short Ratio: 3.1 to 1 0.1 to 1 2.5 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 88.2 9.0 52.5 – Strength Index Reading (3 Year Range): Bullish-Extreme Bearish-Extreme Bullish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: 7.5 -7.2 -0.5   Euro Currency Futures: The Euro Currency large speculator standing this week resulted in a net position of 20,339 contracts in the data reported through Tuesday. This was a weekly boost of 3,810 contracts from the previous week which had a total of 16,529 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 41.2 percent. The commercials are Bullish with a score of 61.4 percent and the small traders (not shown in chart) are Bearish with a score of 26.0 percent. EURO Currency Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 32.7 52.7 12.1 – Percent of Open Interest Shorts: 29.8 59.9 7.7 – Net Position: 20,339 -51,517 31,178 – Gross Longs: 230,770 372,113 85,455 – Gross Shorts: 210,431 423,630 54,277 – Long to Short Ratio: 1.1 to 1 0.9 to 1 1.6 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 41.2 61.4 26.0 – Strength Index Reading (3 Year Range): Bearish Bullish Bearish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: -2.2 -0.5 14.8   British Pound Sterling Futures: The British Pound Sterling large speculator standing this week resulted in a net position of -79,241 contracts in the data reported through Tuesday. This was a weekly advance of 357 contracts from the previous week which had a total of -79,598 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish-Extreme with a score of 16.9 percent. The commercials are Bullish-Extreme with a score of 85.5 percent and the small traders (not shown in chart) are Bearish with a score of 24.3 percent. BRITISH POUND Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 10.5 79.4 8.2 – Percent of Open Interest Shorts: 41.7 42.3 14.1 – Net Position: -79,241 94,344 -15,103 – Gross Longs: 26,613 201,647 20,811 – Gross Shorts: 105,854 107,303 35,914 – Long to Short Ratio: 0.3 to 1 1.9 to 1 0.6 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 16.9 85.5 24.3 – Strength Index Reading (3 Year Range): Bearish-Extreme Bullish-Extreme Bearish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: -27.0 21.6 1.9   Japanese Yen Futures: The Japanese Yen large speculator standing this week resulted in a net position of -102,309 contracts in the data reported through Tuesday. This was a weekly advance of 8,145 contracts from the previous week which had a total of -110,454 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish-Extreme with a score of 5.9 percent. The commercials are Bullish-Extreme with a score of 91.8 percent and the small traders (not shown in chart) are Bearish with a score of 27.5 percent. JAPANESE YEN Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 5.0 84.7 8.7 – Percent of Open Interest Shorts: 47.4 37.0 14.0 – Net Position: -102,309 115,062 -12,753 – Gross Longs: 12,113 204,417 20,933 – Gross Shorts: 114,422 89,355 33,686 – Long to Short Ratio: 0.1 to 1 2.3 to 1 0.6 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 5.9 91.8 27.5 – Strength Index Reading (3 Year Range): Bearish-Extreme Bullish-Extreme Bearish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: 0.9 -5.0 17.6   Swiss Franc Futures: The Swiss Franc large speculator standing this week resulted in a net position of -16,592 contracts in the data reported through Tuesday. This was a weekly reduction of -829 contracts from the previous week which had a total of -15,763 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 36.6 percent. The commercials are Bullish with a score of 72.3 percent and the small traders (not shown in chart) are Bearish-Extreme with a score of 13.8 percent. SWISS FRANC Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 9.8 74.5 15.2 – Percent of Open Interest Shorts: 41.0 16.0 42.6 – Net Position: -16,592 31,181 -14,589 – Gross Longs: 5,240 39,722 8,094 – Gross Shorts: 21,832 8,541 22,683 – Long to Short Ratio: 0.2 to 1 4.7 to 1 0.4 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 36.6 72.3 13.8 – Strength Index Reading (3 Year Range): Bearish Bullish Bearish-Extreme NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: -7.9 12.9 -19.8   Canadian Dollar Futures: The Canadian Dollar large speculator standing this week resulted in a net position of -14,496 contracts in the data reported through Tuesday. This was a weekly reduction of -9,089 contracts from the previous week which had a total of -5,407 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 28.5 percent. The commercials are Bullish with a score of 75.0 percent and the small traders (not shown in chart) are Bearish with a score of 33.6 percent. CANADIAN DOLLAR Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 23.8 52.7 20.6 – Percent of Open Interest Shorts: 33.4 44.4 19.3 – Net Position: -14,496 12,591 1,905 – Gross Longs: 36,069 79,825 31,228 – Gross Shorts: 50,565 67,234 29,323 – Long to Short Ratio: 0.7 to 1 1.2 to 1 1.1 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 28.5 75.0 33.6 – Strength Index Reading (3 Year Range): Bearish Bullish Bearish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: -22.4 33.9 -43.0   Australian Dollar Futures: The Australian Dollar large speculator standing this week resulted in a net position of -44,642 contracts in the data reported through Tuesday. This was a weekly decrease of -2,928 contracts from the previous week which had a total of -41,714 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 43.4 percent. The commercials are Bullish with a score of 59.5 percent and the small traders (not shown in chart) are Bearish with a score of 28.5 percent. AUSTRALIAN DOLLAR Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 25.3 60.4 11.7 – Percent of Open Interest Shorts: 52.6 27.1 17.7 – Net Position: -44,642 54,437 -9,795 – Gross Longs: 41,473 98,903 19,187 – Gross Shorts: 86,115 44,466 28,982 – Long to Short Ratio: 0.5 to 1 2.2 to 1 0.7 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 43.4 59.5 28.5 – Strength Index Reading (3 Year Range): Bearish Bullish Bearish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: -6.6 24.0 -60.9   New Zealand Dollar Futures: The New Zealand Dollar large speculator standing this week resulted in a net position of -17,767 contracts in the data reported through Tuesday. This was a weekly decrease of -4,771 contracts from the previous week which had a total of -12,996 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 41.5 percent. The commercials are Bullish with a score of 63.4 percent and the small traders (not shown in chart) are Bearish-Extreme with a score of 10.4 percent. NEW ZEALAND DOLLAR Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 24.7 71.1 3.9 – Percent of Open Interest Shorts: 53.9 35.9 9.8 – Net Position: -17,767 21,390 -3,623 – Gross Longs: 14,998 43,219 2,358 – Gross Shorts: 32,765 21,829 5,981 – Long to Short Ratio: 0.5 to 1 2.0 to 1 0.4 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 41.5 63.4 10.4 – Strength Index Reading (3 Year Range): Bearish Bullish Bearish-Extreme NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: -27.2 32.7 -57.5   Mexican Peso Futures: The Mexican Peso large speculator standing this week resulted in a net position of 28,215 contracts in the data reported through Tuesday. This was a weekly gain of 11,490 contracts from the previous week which had a total of 16,725 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 39.4 percent. The commercials are Bullish with a score of 59.4 percent and the small traders (not shown in chart) are Bullish with a score of 60.1 percent. MEXICAN PESO Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 45.5 49.1 4.1 – Percent of Open Interest Shorts: 29.0 67.9 1.7 – Net Position: 28,215 -32,249 4,034 – Gross Longs: 77,819 83,844 7,000 – Gross Shorts: 49,604 116,093 2,966 – Long to Short Ratio: 1.6 to 1 0.7 to 1 2.4 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 39.4 59.4 60.1 – Strength Index Reading (3 Year Range): Bearish Bullish Bullish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: 11.6 -11.0 -3.5   Brazilian Real Futures: The Brazilian Real large speculator standing this week resulted in a net position of 38,095 contracts in the data reported through Tuesday. This was a weekly decline of -2,683 contracts from the previous week which had a total of 40,778 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish-Extreme with a score of 87.8 percent. The commercials are Bearish-Extreme with a score of 12.8 percent and the small traders (not shown in chart) are Bullish-Extreme with a score of 80.5 percent. BRAZIL REAL Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 76.8 16.9 6.1 – Percent of Open Interest Shorts: 8.7 87.3 3.7 – Net Position: 38,095 -39,436 1,341 – Gross Longs: 42,989 9,470 3,438 – Gross Shorts: 4,894 48,906 2,097 – Long to Short Ratio: 8.8 to 1 0.2 to 1 1.6 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 87.8 12.8 80.5 – Strength Index Reading (3 Year Range): Bullish-Extreme Bearish-Extreme Bullish-Extreme NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: -7.3 8.3 -12.8   Bitcoin Futures: The Bitcoin large speculator standing this week resulted in a net position of 806 contracts in the data reported through Tuesday. This was a weekly gain of 103 contracts from the previous week which had a total of 703 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish-Extreme with a score of 100.0 percent. The commercials are Bearish-Extreme with a score of 0.0 percent and the small traders (not shown in chart) are Bearish-Extreme with a score of 14.5 percent. BITCOIN Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 82.1 1.7 9.3 – Percent of Open Interest Shorts: 75.2 9.2 8.7 – Net Position: 806 -875 69 – Gross Longs: 9,564 194 1,081 – Gross Shorts: 8,758 1,069 1,012 – Long to Short Ratio: 1.1 to 1 0.2 to 1 1.1 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 100.0 0.0 14.5 – Strength Index Reading (3 Year Range): Bullish-Extreme Bearish-Extreme Bearish-Extreme NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: 20.1 -29.8 -13.0   Article By InvestMacro – Receive our weekly COT Reports by Email *COT Report: The COT data, released weekly to the public each Friday, is updated through the most recent Tuesday (data is 3 days old) and shows a quick view of how large speculators or non-commercials (for-profit traders) were positioned in the futures markets. The CFTC categorizes trader positions according to commercial hedgers (traders who use futures contracts for hedging as part of the business), non-commercials (large traders who speculate to realize trading profits) and nonreportable traders (usually small traders/speculators) as well as their open interest (contracts open in the market at time of reporting).See CFTC criteria here.  
Energy and Metals Decline, Wheat Rallies Amid Disappointing Chinese Growth

Fighting With The EU Inflation. Naturally, Strong Euro (EUR) Would Help | Why some ECB officials are suddenly concerned about the weak euro | ING Economics

ING Economics ING Economics 23.05.2022 08:30
Several European Central Bank officials have become more vocal, showing their concern about the weakening euro. As much as we think that these concerns are overdone, strengthening the euro could for the ECB currently be the single most efficient way to temper inflation quickly   In recent days, ECB officials have become more vocal with their concerns about the weak euro. French central bank governor, Villeroy de Galhau, pointed out that a weaker euro would undermine the ECB’s goal of price stability. ECB Executive Board member, Isabel Schnabel, was quoted saying that the ECB was closely monitoring the impact of the weaker euro on inflation. This is in stark contrast with the minutes of the ECB meeting in April, when the exchange rate was only mentioned four times. There was also market speculation that major central banks could go for a kind of Plaza Agreement, using coordinated action and even fx interventions to stop the US dollar from strengthening further and the euro from weakening further. How much of a concern should the recent weakening of the euro really be for the ECB? Since the last ECB staff projections in March, the euro has lost some 5% against the US dollar. The trade weighted euro exchange rate lost almost 2%. However, compared with one year ago, the euro has depreciated by more than 13% vis-à-vis the US dollar and around 6% in trade-weighted terms. In normal times, this weakening of the currency would have been a welcome relief for eurozone exports but at the current juncture it is an additional inflation concern. According to standard estimates, the euro depreciation since March could add another 10 percentage points on inflation this year and 20pp next year. However, at a time in which the main inflationary drivers are energy and commodity prices, which are invoiced in US dollar, the impact of the weaker euro on inflation might be even stronger. With headline inflation rates above 7%, it is hard to see why some ECB officials are concerned about a few additional percentage points. The weak euro might not be the reason for high inflation but it is at least reinforcing it. The main reason why ECB officials have become more vocal on the exchange rate could be the fact that even if higher policy rates will not bring down energy prices or fill containers in Asia, higher policy rates could strengthen the euro. The so-called exchange rate channel could at the current juncture be the most, and probably only, efficient way to ease inflationary pressures relatively quickly. This is why the hawks at the ECB might be inclined to use the currency as an argument to support a 50bp rate hike in July and strong forward guidance that more rate hikes are to come. Expect more than the four references to the exchange rate at the April meeting in the coming weeks ahead of the ECB’s 9 June meeting. Read this article on THINK TagsMonetary policy Eurozone ECB Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Sustainability-Linked Products: Navigating Growth and Challenges for the Future

ECB Offering The Euro Support (EUR/USD), Strengthening Of The Renminbi Supporting The EUR and GBP, SNB Turns Hawkish (EUR/CHF) - Good Morning Forex!

Rebecca Duthie Rebecca Duthie 23.05.2022 10:29
Summary: ECB offering support to the EUR, whilst easing lockdowns in China aids in the weakening US Dollar. Euro and GBP are likely to strengthen with the Renminbi. SNB and ECB hawkishness offers support to their respective currencies. GBP/CAD Read next: US Dollar Is Likely To Experience Volatility In The Coming Weeks (EUR/USD), UK Retail Data Exceeds Market Expectations (EUR/GBP), SNB Turns Hawkish Causing the CHF To Rally (EUR/CHF) - Good Morning Forex!  Easing lockdowns in China dragging down the US Dollar Market sentiment for this currency pair is reflecting bullish signals. On Monday the European Central Bank (ECB) announced that it is likely that July would be the starting period for raising interest rates. At the same time, the easing of lockdowns in China has aided in weakening the US Dollar. The trading week is full of US events along with some European Central Bank events, all of which will be watched closely. EUR/USD Price Chart Euro and GBP both showing signs of strengthening Market sentiment for this currency pair is reflecting mixed signals. The prospect of the Chinese Renminbi rebounding is likely to have a positive impact on the value of both the Pound Sterling and the Euro. In addition the market believes that the Bank of England (BoE) is likely to continue raising interest rates in the coming months along with the increased likelihood of the European Central Bank (ECB) raising the interest rates. EUR/GBP Price Chart SNB and ECB hawkishness caused mixed sentiment for this currency pair. On Thursday last week the president of the Swiss National Bank (SNB) said that they were ready to act on the rising inflation, the hawkishness of the SNB caused the Swiss Franc to rally. The potential hawkishness of the European Central Bank (ECB) is also causing the Euro to strengthen, leaving the market sentiment for this currency pair showing mixed signals. EUR/CHF Price Chart GBP rallies against the CAD The strengthening of the GBP against the CAD throughout last week has come in the wake of increasing UK government bond yields. The strengthening came in the wake of the release of UK employment data, inflation and retail data all which support further increases in the UK government bond yields. GBP/CAD Price Chart Read next: (FTSE) FTSE 100 Rallies In Response To Positive Economic Data, US Dollar Expected To See More Volatility  Sources: finance.yahoo.com, poundsterlinglive.com, dailyfx.com
GBP: Softer Ahead of CPI Risk Event

(DJIA) Dow Jones Index Rising, Investors Confidence In The Euro Is Looking Bullish As ECB Confirm Interest Rate Increases

Rebecca Duthie Rebecca Duthie 23.05.2022 21:56
Summary: President Joe Biden's announcement of possible easing of tariffs on goods from China fairing well for U.S stocks. Euro expected to continue strengthening. Read next: Xpeng (XPEV) Earnings Results Cause Share Price To Fall  U.S stocks showing signs of recovery The Dow Jones Index rose almost 2% during the trading day on Monday. U.S stocks recovered on Monday in the wake of investors coming-off a 7 week losing streak. The recovery comes after investors received some fresh-trade related information from the Biden Administration. On Monday President Joe Biden announced that he was considering easing tariffs on Chinese goods due to the belief that the tariffs caused financial harm on consumers and businesses. DJIA Price Chart ECB Interest rate hike is confirmed The Euro exchange rate performed well on Monday thanks to the European Central Bank's president confirming that there will be interest rate hikes in July. The Euro responded well to this information and strengthened against both the US Dollar and the Pound. Leading up to the confirmation of the rising interest rates, the Euro had been strengthening, in the wake of the interest rates being risen, investors believe that the Euro will continue to strengthen. Read next: Altcoins: Ripple Crypto - What Is Ripple (XRP)? Price Of XRP | FXMAG.COM Sources: finance.yahoo.com, poundsterlinglive.com Follow FXMAG.COM on Google News
End Of US Dollar (USD) Rally!? How Is The Dollar Index? Is S&P 500 (SPX) Going To Recover? (EUR/USD) Euro Seems To Be Stronger Recently! EUR/GBP Keeps Fluctuating | Luke Suddards (Pepperstone)

End Of US Dollar (USD) Rally!? How Is The Dollar Index? Is S&P 500 (SPX) Going To Recover? (EUR/USD) Euro Seems To Be Stronger Recently! EUR/GBP Keeps Fluctuating | Luke Suddards (Pepperstone)

Luke Suddards Luke Suddards 24.05.2022 12:07
Every Tuesday our Global Macro Strategist Luke Suddards will be analysing the charts of key global asset classes such as FX, commodities and more. Catch him on Twitter - @lukesuddards Also, he produces The Weekly Close Out every Friday, which provides key insights into the main catalysts for all the major global macro assets throughout the week. The analysis takes a hybrid approach - combining fundamental and technical analysis with charts to enhance your trading experience. Sign up here to receive it directly in your inbox: https://cloud.go.pepperstone.com/week ➡️ Follow us on Telegram for daily market news and insights: https://t.me/s/PepperstoneFX Read next: Altcoins: Ripple Crypto - What Is Ripple (XRP)? Price Of XRP | FXMAG.COM Follow FXMAG.COM on Google News
Energy and Metals Decline, Wheat Rallies Amid Disappointing Chinese Growth

Hawkish ECB Bodes Well For The Euro, UK PMI Data Disappoints (EUR/GBP), Hawkish SNB Offers Swiss Franc Still Support (USD/CHF), AUD/JPY - Good Morning Forex!

Rebecca Duthie Rebecca Duthie 24.05.2022 13:23
Summary: The ECB turning hawkish is causing the Euro to strengthen. Disappointing PMI data caused the GBP to weaken. Hawkish SNB offers CHF support. Read next: ECB Offering The Euro Support (EUR/USD), Strengthening Of The Renminbi Supporting The EUR and GBP, SNB Turns Hawkish (EUR/CHF) - Good Morning Forex!  Euro trumps US Dollar Market sentiment for this currency pair is reflecting bullish signals, which means investors are confident in the Euro. The strengthening of the Euro comes after the European Central Bank’s (ECB) President Christine Lagarde confirmed market expectations that the ECB would raise interest rates in July. The hawkish sentiment of the ECB has instilled investor confidence in the Euro, despite the continuing hawkish Fed, investors are still turning to the Euro due to concerns around the US economy falling into a recession. EUR/USD Price Chart Pound Sterling Weakens after PMI data release The Release of PMI data showed that the UK economy was close to contracting in May, the results came in well below expectations, a figure that is out of the ordinary. The Pound Sterling weakened based on this news and JP Morgan has flagged the UK economy as the “poster child” for stagflation. The market sentiment for the EUR/GBP currency pair is reflecting bullish signals. EUR/GBP Price Chart Swiss Franc continues to trump US Dollar Market sentiment for this currency pair is reflecting a bearish sentiment. Late last week and this week the Swiss Franc began strengthening against the US Dollar, this comes in the wake of both the concerns around the slowing US economy and in conjunction the hawkish attitude from the Swiss National Bank (SNB). USD/CHF Price Chart AUD/JPY currency pair Market sentiment for this currency pair is reflecting bullish signals. This currency pair has experienced a lot of volatility over the past week. In addition there is a temporary pause in the growth of the JPY as investors are starting to be less weary about taking on some risk. AUD/JPY Price Chart Read next: (DJIA) Dow Jones Index Rising, Investors Confidence In The Euro Is Looking Bullish As ECB Confirm Interest Rate Increases  Sources: finance.yahoo.com, dailyfx.com, poundsterlinglive.com
FX: (GBP/USD) British Pound To US Dollar May Shock You!

Eurozone: PMI drops slightly as inflation pressures remain | ING Economics

ING Economics ING Economics 24.05.2022 14:22
Eurozone: PMI drops slightly as inflation pressures remain The composite PMI fell from 55.8 to 54.9 in May, still signalling decent expansion. With inflation pressures remaining close to all-time highs, this keeps hawkish pressure on the ECB to act quickly despite growth concerns Christine Lagarde, president of the European Central Bank   Squeezed purchasing power, weak consumer confidence, and tightening financial conditions are just a few of the headwinds the eurozone is facing at the moment. Nevertheless, the PMI doesn’t indicate that this is translating into a contracting economy so far, but we do see the first signs of weakness coming through. This is mainly because of the service sector still profiting from fading pandemic restrictions. The May data showed some weakening as the service sector PMI fell from 57.7 to 56.3. While still signalling strong expansion, it is a sign that the reopening boom has started to fade. The manufacturing PMI signalled stalling growth in April, but the indicator improved modestly in May from 50.7 to 51.2. Bugged by input shortages related to the war in Ukraine and lockdowns in China, the sector is having problems with production. At the same time, new orders also decreased for the first time since mid-2020, showing early demand concerns. Inflationary pressures are barely abating though. Input costs have slightly dropped from record highs, and selling price expectations remain close to April’s record high. Some early signs of improvement are unlikely to translate quickly into a fading inflation rate. Moreover, hiring intentions remain strong for now, which will add to labour shortages and subsequently to wage pressures. For the ECB, this is a hawkish signal. The growth outlook is clearly worsening, but the current impact of high inflation and the war is not yet contractionary according to the survey. We have seen ECB doves pushing back at a 50 basis point hike in July, but this PMI release will likely continue the conversation about whether President Christine Lagarde’s promise of no more negative rates by the end of 3Q will already be accomplished at the July meeting, or whether it will be 25bp in July and again in September. The next stop in terms of the ECB's data-driven lift-off is May inflation data, due out next week. Read this article on THINK TagsInflation GDP Eurozone Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Romanian GDP Slows Beyond Expectations: Revised Forecast and Economic Outlook

Hawkish European Central Bank (ECB)? (Euro To British Pound) EUR/GBP – Further gains to come? | Oanda

Craig Erlam Craig Erlam 24.05.2022 19:57
Hawkish ECB boost the single currency The ECB will become the latest central bank to concede on the inflation argument and raise rates in July and September The euro has caught a strong bid against the pound in recent days on the back of some very hawkish commentary from the ECB and poor economic data in the UK. The ECB will become the latest central bank to concede on the inflation argument and raise rates in July and September, as per President Christine Lagarde’s blog, although some support an even more aggressive approach. That’s boosted the euro at a time when the UK economy is facing the prospect of a recession, with PMI data today highlighting the struggles already appearing in the all-important services sector. EURGBP has rallied strongly on the back of this, holding above the 200/233-day SMA band in the process and pushing a breakout of the recent highs. It also broke above the 55/89-period SMA band on the 4-hour chart in the process which has capped its rallies over the last week. Read next: Altcoins: Ripple Crypto - What Is Ripple (XRP)? Price Of XRP | FXMAG.COM The next test for the pair is 0.86 and 0.8650 which has been a key area of resistance on numerous occasions over the last year, with 0.87 potentially offering further resistance above. Eventually, the euro area and others will likely be dragged into the recession conversation which may see the bullish case wane but for now, it’s interest rates that are dominating the conversation and giving the euro a major lift. Follow FXMAG.COM on Google News This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.
JPY: Assessing the FX Intervention Zone and Market Conditions

What's It Going To Be Czech Krone (CZK), NZD, Euro (EUR), USD? | FX Daily: How hawkish is too hawkish? | ING Economics

ING Economics ING Economics 25.05.2022 08:55
The RBNZ signalled a terminal rate around 4.0% in 2023, following a 50bp hike today. We suspect the rate projections may be too hawkish, but this is a story for the long run: for now, 50bp hikes should keep the NZD on track for a return to 0.70 by year-end. Elsewhere, USD may struggle to recover, but a move to 1.08-1.09 in EUR/USD is not our base case The Reserve Bank of New Zealand hiked rates by another 50bp to 2.0% today. Pictured: RBNZ Governor Adrian Orr USD: Risk sentiment remains the primary driver, but downside risks are smaller now The shockwaves that originated from the slump in US tech stocks yesterday seem to have been absorbed without too much trouble by global equity markets, although more signs of sentiment instability did take some steam off the rally in pro-cyclical currencies. The dollar has found some stabilisation after a negative start to the week and should, for now, continue to trade primarily in line with swings in global risk sentiment. Yesterday, new home sales in the US dropped much more than consensus, a first sign of how higher interest rates are starting to impact the US economy. The data also increases the significance of today’s mortgage application numbers, where another big drop (surely possible given the rising mortgage rates) would likely fuel concerns about an economic slowdown. After all, construction makes up 4% of GDP and retail sales are correlated with housing activity. It may be too soon for the dollar to start discounting a higher risk of US slowdown via the Fed rate expectations channel, but some grim mortgage application figures could contribute to the dollar's softish momentum if equities enjoy a session in the green as futures seem to suggest this morning. At the same time, we think that the downside potential for the dollar is shrinking, especially given a more balanced positioning after a widespread position squaring and a still supportive Fed story. When it comes to the Fed, markets will surely take a close look at the minutes from the May FOMC meeting this evening to gauge how much consensus there was about multiple 50bp increases over the summer and whether there were some dissents about ruling out 75bp hikes. We’ll also hear from Lael Brainard today. EUR: A move to 1.08-1.09 would be too stretched EUR/USD broke the 1.0700 mark yesterday, as markets probably feared a wider drop in the eurozone PMIs, which instead came in only slightly below consensus. The combination of some easing in stagflation-related concerns, hawkish re-pricing of ECB rate expectations, and a weak dollar momentum have all contributed to the recent EUR/USD rally. Now, it appears most of the positives are in the price, especially considering that markets are already pricing in 100bp of ECB tightening by year-end, and we think a consolidation looks more likely than an extension of the rally to the 1.08-1.09 region. The eurozone calendar doesn’t include market-moving data releases today, but there is a long line of scheduled ECB speakers to keep an eye on: Christine Lagarde and Klaas Knot in Davos, Robert Holtzmann, Pablo Hernández de Cos and Philip Lane elsewhere. NZD: Has the RBNZ gone too far with rate projection? The Reserve Bank of New Zealand hiked rates by another 50bp to 2.0% today – in line with market expectations – but delivered a substantial hawkish surprise with its updated rate projections, which signalled an even more aggressive front-loading of monetary tightening. The Bank now forecasts the policy rate at 3.25-3.50% by year-end (up from 2.25-2.50% in the February projections) and around 200bp of total tightening by the end of 2023 – therefore signalling a terminal rate around 4.0%. We start to suspect that the RBNZ might have gone too far on the hawkish side with its rate projections and could struggle to deliver on them, especially if we see a considerable cooling-off in the New Zealand housing market and a generalised global slowdown. That, however, is a story for the long run. In the short term, we have a near-guarantee that the RBNZ will deliver two more half-point hikes this summer, which should keep rate expectations anchored to the new RBNZ projections and allow NZD to maintain a wide rate differential against all other G10 currencies. Ultimately, this should fuel a return to 0.7000 in NZD/USD by 4Q22 or 1Q23 at the latest, in our view. However, the short-term outlook for NZD (and its ability to consolidate above 0.6500) remains strictly tied to swings in global risk sentiment and the Chinese economic outlook, which remains a major source of uncertainty. CZK: CNB intervenes rather verbally, but that may change soon Daily banking sector liquidity data over the past two weeks, during which the CNB has officially been intervening in the FX market, do not suggest significant central bank activity. This is in line with our expectation that the CNB's initial intervention was mainly verbal as in March. This was confirmed in an interview last week by Vice Governor Tomáš Nidetzký, who indicated that the market does not want to fight the CNB. Nevertheless, the koruna continues to lose support from the interest rate differential, which has returned to the level of early May. Thus, in our view, the next CNB dovish move (for example the appointment of new board members, new governor forward guidance) will require a more aggressive approach by the central bank in the FX market if it is serious about intervening. We continue to expect the central bank to keep the koruna below 25 EUR/CZK and, given the again surprisingly high CPI prints, may try to get the koruna closer to 24. However, we still don't have much indication of what will happen with interventions after 1 June, when the new board's term begins. Aside from the name of the new governor, we have no indication yet as to who else will be appointed to the board. In our view, this will be a topic for next month and we expect to know the composition of the new board before the CNB meeting in June. Read this article on THINK TagsRBNZ NZD GBP CZK Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
USD/JPY: Japanese Authorities Signal Intervention Amid Rapid Currency Appreciation

US stocks snap 7-day downtrend. Commodity stocks in wheat, energy and lithium brighten | Saxo Bank

Saxo Bank Saxo Bank 24.05.2022 14:34
Summary:  A technical rally occurred overnight, seeing the S&P500 gain after 7 days of declines, while Agriculture and Energy stocks shone the most, gaining even more momentum proving they are an inflation hedge. In quality tech, Apple shares rose 4% with long-term investors dripping in buy orders. Meanwhile, in big banks JPMorgan gained 6% upon forecasting net interest income to rise, which supported gains in Bank of America, Citigroup. We don’t think the market is at breaking point yet. However see Commodity gains intensifying and offering further upside, as the world worries global wheat supplies could run out in 10 weeks, while demand for lithium batteries rises seeing lithium companies upgrade their earnings and rally. What’s happening in markets that you need to know Big picture themes? Of the Equity Baskets we track across different sectors, we can see select risk appetite is starting to come back in to the market; China’s little giants are up the most month-to-date, supported by China’s fresh interest rate cut. Meanwhile, Cybersecurity stocks were up overnight (but are still down 24% YTD). Year-to-date though, our high conviction asset class, Commodities continues to see the most growth, followed by Defence. In the S&P500 oversold Ag and Bank stocks shine; Agri and Farm Tech stocks were up the most overnight, followed by Diversified Banks. In terms of standout stocks; Ross Stores and Deere (DE) rose the most (9%, 7%), after being two of the most oversold stocks last week. In S&P500 Deer was THE most oversold member. Deer makes 65% of its revenue from Agricultural equipment and selling turf. Earnings are expected to grind higher in 2022 and Deer pays a small dividend yield (1.25%). Asia Pacific’s stocks are trading mixed following more Tech disappointment in the US. While risk sentiment was upbeat overnight on Wall Street, Asia Pac’s markets turned most lower following Snap’s warning that it is unlikely to meet revenue and profit forecasts. Tech sentiment eroded again and further consumer staples earnings results this week are keeping investors cautious. Australia’s ASX200 trades flat, weight by tech falling,  with Block (SQ) down 6% after Bitcoin trades under $30k (Block makes most of its money from BTC transactions). Meanwhile, ASX lithium stocks continue to surge, supported by the new Australian government’s EV stimulus, seeing Liontown (LTR), Allkem (AKE), MinRes (MIN), Pilbara (PLS) dominate the leaderboard and rise 3-4%. Japan’s Nikkei (NI225.I) is down 0.3% led by Recruit (6098) which operates the popular HR engine “Indeed” and company information website “Glassdoor”. Singapore’s STI index (ES3) was however up 0.2% despite a record high inflation and a potential chicken-price shock. Read next: Stablecoins In Times Of Crypto Crash. What is Terra (UST)? A Deep Look Into Terra Altcoin. Terra - Leading Decentralised And Open-Source Public Blockchain Protocol | FXMAG.COM Chinese and Hong Kong equites see lackluster trading despite incremental stimulus measures from the State Council and Biden’s remarks on reviewing tariffs on goods from China.   The attempt to rally in the opening hour in response to positive news of 33 stimulus measures from China’s State Council failed.  Overnight news that Biden will discuss with Treasury Secretary Yellen about reviewing tariffs on goods from China as part of the Biden administration’s effort to ease U.S. inflationary pressures did not incur much excitement. Hang Seng Index (HSI.I) fell 0.8% and CSI300(000300.I) was 0.3% lower. Among the 33 measures was a reduction of RMB60 billion in the purchase tax on passenger cars Great Wall.  Great Wall Motor (02333), Geely (00175) and Guangzhou Automobile (02238) rose 3% to 10% while shares of EV makers fell 3%-9%.  Although reporting a larger than expected 159% YoY increase in revenues and a 30bp improvement of gross margins to 10.4% in Q1, XPeng’s (09868) share fell almost 9% on cautious Q2 guidance.  What to consider? Fed speakers remaining flexible. Fed’s Bostic backed a series of 50bps rate hike moves overnight but hinted at a pause in September if inflation comes down but also opened doors to more aggressive moves if inflation doesn’t cool. Fed’s George said she expects the central bank to raise interest rates to 2% by August (which also means about 100-125bps of rate hikes from the current 0.75-1% rates or 2-3 50bps rate hikes). While the base effects may make headline inflation appear to be softening into the summer, real price pressures aren’t going anywhere and Fed’s hiking pace is likely to continue to prove to be slow. AUD and NZD unable to sustain gains. A fresh slide was seen in NZD this morning following the unexpected decline in retail spending reported today. RBNZ decision is due tomorrow  (in early Asian hours) and it is still a close call between 25 and 50bps rate hike. But it’s more important to note that RBNZ is way ahead of other central banks and getting close to neutral faster than others, which means room for further upside in NZD is limited. AUDUSD is also back below 0.7100 and remains prone to a reversal in risk sentiment more than any domestic developments. While the AUDUSD rose to a 3-week high yesterday, supported by the Australian Labor Government being sworn in after winning the election and bringing in an EV policy ($2k tax incentives), vowing to keep Defense Spending at over 2% of GPD and pledging to offer more childcare support to keep employment high. The USD will likely remain favored for now as risk aversion returns and cut the rally of the AUD.  ECB getting ready to move to exit negative rates. ECB President Lagarde’s comment that the central bank is likely to exit negative rates by the end of the third quarter put a massive bid into the EUR overnight but the pair turned lower from 1.0700 with focus on Fed Chair Powell and PMIs due today. With Fed comments getting repetitive, there is room for ECB’s hawkishness to support the EUR even as Lagarde continues to downplay the possibility of a 50bps rate hike. Germany’s economy shows signs of unexpectedly strengthening in May. Germany’s IFO reading was out at 93.0 versus prior 91.9 in April. The increase is mostly explained by an improved current assessment. The expectations component is almost unchanged and close to levels last seen at the start of the pandemic. Several factors are pushing respondents to be careful regarding the future: supply chain frictions, the Shanghai lockdown, persistent inflationary pressures and lower real disposable incomes of households etc. The German economy will not plunge as it did at the start of the pandemic, of course. But we think that risks of a stagflation are clearly titled on the upside. We will watch closely the first estimate of the May PMIs this morning to have a better assessment of the economic situation in Germany and in the rest of the eurozone.  Potential trading ideas to consider? Singapore’s inflation pain is rising. Core CPI was at a decade high in April at 3.3%, and this is still not a peak. Singapore’s national lunch meal chicken rice is set to get expensive as Malaysia is halting exports of chicken. About 34% of Singapore's chicken imports come from Malaysia. While alternate sources of fresh chicken and options such as frozen chicken may be possible, this is not the last inflation shock to hit the island economy. Vegetable prices are also on the rise due to shortages of supply and the high fertilizer prices. In times like this, we would reiterate the possible inflation hedges remain gold, REITs and commodities. In summary, it is important to look for value investments or stocks that have a solid cash flow generation ability and pricing power but still priced below their fair value. The plot for investing in Lithium thickens.Lithium remains one of our preferred metal exposures for 2022 for upside. Albemarle Corp, the world’s largest lithium producer upgraded its outlook for the second time this month expecting higher lithium prices and demand to further boost their sales. We’ve seen many EV companies sell out of some of their electric vehicles, and this highlights the lack of supply in battery metals, which is also pushing up the lithium price. Albemarle Corp, expects sales to now be as high as $6.2 billion this year, up from its previous estimate of up to $5.6 billion. Read next: Altcoins: What Is Litecoin (LTC)? A Deeper Look Into The Litecoin Platform| FXMAG.COM If have a long time horizon for investing, you could consider dripping money into the market (this is called dollar cost averaging). Remember Shelby Davis said you can make most of your money in a bear market, you just don’t realize it at the time. But the key is to look at quality names that are in a position to return cash to shareholders. So if you want to be in tech for example, you could look at names like Apple, Microsoft and Google, who lead the S&P500 and Nasdaq indices and are growing their earnings and this is likely to continue over the next several years and longer term. The idea is that names like these, will likely lead a secular bull market, once the Market eventually begins to recover. And you ideally want to be in names with growing earnings, rather than throwing darts at some of those names with patchy results that are akin to Ark innovation ETF for example. China’s State Council announced 33 stimulus measures.  An additional VAT credit refund of RMB140 billion brings the overall target of tax refunds, tax cuts and fee reductions to RMB2.64 trillion in 2022.  China is also introducing a reduction of RMB60 billion (equivalent to about 17% of auto purchase tax last year) in tax on passenger car purchases.  The Government is increasing its supports to the aviation industry and railway construction via special bond issuance and loans and is rolling out a series of energy projects.  It is doubling the lending quota for banks to lend to SMEs and allow certain borrowers to postpone repayments.  The State Council also reiterates its support to promote legal and compliant listings of platform companies in domestic as well as overseas markets. Key company earnings to watch this week: Tuesday: Kuaishou Technology, Intuit, NetEase, AutoZone, Agilent Technologies Wednesday: Bank of Nova Scotia, Bank of Montreal, SSE, Acciona Energias Renovables, Nvidia, Snowflake, Splunk Thursday: Royal Bank of Canada, Canadian Imperial Bank of Commerce, Lenovo, Alibaba, Costco, Medtronic, Marvell Technology, Baidu, Autodesk, Workday, VMware, Dell Technologies, Dollar Tree, Zscaler, Farfetch Friday: Singapore Telecommunications   For a global look at markets – tune into our Podcast.  Follow FXMAG.COM on Google News Source: Saxo Bank
GBP Inflation Surprise: Pound Faces Downward Pressure as Rate Hike Expectations Shift

(EUR) Euro Rally Hits A Wall! | Is EUR/USD Going To Decline Again!? | Oanda

Kenny Fisher Kenny Fisher 25.05.2022 16:09
Euro falls sharply The euro has reversed directions on Wednesday and is sharply lower. In the European session, EUR/USD is trading at 1.0663, down 0.67% on the day. The euro was up 1.29% on Monday and extended its gains on Tuesday, hitting a 4-week high, after ECB President Lagarde announced that the ECB would raise interest rates in July. On the data front, there weren’t any surprises out of Germany. GDP in Q1 rose by 0.2% QoQ, as expected. Compared to Q4 of 2019, the quarter prior to the Covid-19 pandemic, growth was 0.9% smaller, which means that the economy is yet to fully recover from the Covid crisis. The war in Ukraine and Covid-19 have resulted in supply chain disruptions and accelerating inflation, which has hampered economic growth. German confidence remains in deep-freeze German GfK Consumer Sentiment came in at -26.0 in May, a slight improvement from the April reading of -26.6, which marked a record low. Not surprisingly, consumers put the blame for their deep pessimism on two key factors – the conflict in Ukraine and spiralling inflation. The GfK survey also found that consumer spending has weakened, as high costs for food and energy have reduced spending on non-essential items. Read next: Altcoins: What Is Polkadot (DOT)? Cross-Chain Transfers Of Any Type Of Asset Or Data. A Deeper Look Into Polkadot Protocol | FXMAG.COM The ECB Financial Stability Review, published twice a year, echoed what German consumers are saying. The report bluntly stated that financial stability conditions have deteriorated in the eurozone, as the post-Covid recovery has been tested by higher inflation and Russia’s invasion of Ukraine. The report noted that the economic outlook for the eurozone had weakened, with inflation and supply disruptions representing significant headwinds for the eurozone economy. Given this challenging economic landscape, the euro will be hard-pressed to keep pace with the US dollar. EUR/USD Technical There is resistance at 1.0736 and 1.0865 EUR/USD is testing support at 1.0648. The next support line is at 1.0519 This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.
Steel majors invest in green steel, but change might be driven by contenders

EUR Falls To US Dollar (EUR/USD), Pound Sterling Due To Weaken As UK Recession Looms (EUR/GBP), Market Awaits Fed Meeting Minutes (USD/CHF, GBP/USD)

Rebecca Duthie Rebecca Duthie 25.05.2022 18:27
Summary: EU PPI inflation data caused the Euro to weaken on Wednesday. Investor sentiment looks poor towards the GBP going into summer. Pound Sterling recovers against the US Dollar. Read next: Hawkish ECB Bodes Well For The Euro, UK PMI Data Disappoints (EUR/GBP), Hawkish SNB Offers Swiss Franc Still Support (USD/CHF), AUD/JPY - Good Morning Forex!  A rise in PPI inflation data causes Euro weaken Market sentiment is reflecting mixed signals for this currency pair. Looking at the value of the Euro in terms of PPI and CPI data: the rise in PPI inflation in the euro area reduced the Euros fair value estimate, whereas the European CPI inflation data remains close to that of the US CPI inflation. Therefore, it is the release of PPI inflation data that has caused the Euro to lose more than 0.6% to the US Dollar on Wednesday. EUR/USD Price Chart GBP weakens as concerns of a recession looms The market is reflecting mixed market sentiment for this currency pair. Investors expect the Pound Sterling to have a tough summer period. The slowing UK economy and disappointing PMI data are both aspects that will likely cause the GBP to weaken not only against the Euro but against other currencies too. The market is defaulting to buying Euros and selling Great British Pounds in the wake of changing European Central Bank (ECB) policy. EUR/GBP Price Chart Swiss Franc The market sentiment for this currency pair is reflecting mixed market signals. During the trading week last week, the US Dollar weakened against the Swiss Franc due to the hawkish attitude shown by the Swiss National Bank (SNB) and investors desire for safe-haven assets. This sentiment has continued into the current trading week. USD/CHF Price Chart GBP recovers against the USD The GBP strengthened against the US Dollar on Wednesday as the market awaited the Federal Reserve’s latest meeting minutes. Investors are eager to see how aggressively the Fed will raise interest rates going forward in an attempt to tackle rising inflation. Investor sentiment is negative toward the US Dollar at the moment, which has given some currencies, such as the GBP, an opportunity to recover. The market sentiment for this currency pair is reflecting bullish signals. GBP/USD Price Chart Read next: ECB Offering The Euro Support (EUR/USD), Strengthening Of The Renminbi Supporting The EUR and GBP, SNB Turns Hawkish (EUR/CHF) - Good Morning Forex!  Sources: finance.yahoo.com, poundsterlinglive.com, dailyfx.com
Currency Speculators reboot their Euro bullish bets to a 6-Week High

Currency Speculators reboot their Euro bullish bets to a 6-Week High

Invest Macro Invest Macro 28.05.2022 21:32
By InvestMacro | COT | Data Tables | COT Leaders | Downloads | COT Newsletter Here are the latest charts and statistics for the Commitment of Traders (COT) data published by the Commodities Futures Trading Commission (CFTC). The latest COT data is updated through Tuesday May 24th and shows a quick view of how large traders (for-profit speculators and commercial entities) were positioned in the futures markets. All currency positions are in direct relation to the US dollar where, for example, a bet for the euro is a bet that the euro will rise versus the dollar while a bet against the euro will be a bet that the euro will decline versus the dollar. Click to Enlarge Highlighting the COT currency data is the bounce-back for the Euro currency futures contracts. Euro speculative positions jumped by over +18,000 contracts this week and rose for a third consecutive week. This week marked the second time in the past three weeks that speculator positions increased by more than +18,000 contracts (+22,907 contracts on May 10th) and now Euro bets have gained by a total of +45,308 contracts over the past three weeks. The speculator’s bullish position marks the highest standing of the past six weeks at +38,930 contracts. Euro speculator positions had recently fallen into a bearish speculative level on May 3rd (-6,378 contracts) after dropping by a total of -45,438 contracts from April 19th to May 3rd. This was the first bearish position for the Euro since early January. The speculator sentiment has been weaker so far in 2022 compared to preceding years as Euro bets are averaging just +29,199 weekly contracts in 2022. This compares to the Euro bets average of +60,837 weekly contracts over 2021 and an average of +92,464 weekly contracts over 2020. The recent improvement in Euro positions comes amid increasing expectations for the European Central Bank to start raising interest rates higher and end their negative interest rate regime in the third quarter. The Euro exchange rate recently hit its lowest level versus the US Dollar since January of 2017 with a drop to approximately 1.350 (EUR/USD) on May 13th. Since then, the Euro has rallied over the past couple of weeks and closed Friday at the 1.0733 exchange rate. Overall, the currencies with higher speculator bets this week were the Euro (18,591 contracts), US Dollar Index (1,826 contracts), Japanese yen (2,865 contracts), Brazil real (619 contracts), Canadian dollar (1,809 contracts), Mexican peso (1,577 contracts) and Bitcoin (43 contracts). The currencies with declining bets were the Australian dollar (-804 contracts), Swiss franc (-3,081 contracts), British pound sterling (-1,131 contracts) and the New Zealand dollar (-1,554 contracts). Speculator strength standings for each market where strength index is current net position compared to past three years, above 80 is bullish extreme, below 20 is bearish extreme OI Strength = Current Open Interest level compared to last 3 years range Spec Strength = Current Net Speculator level compared to last 3 years range Strength Move = Six week change of Spec Strength Data Snapshot of Forex Market Traders | Columns Legend May-24-2022 OI OI-Index Spec-Net Spec-Index Com-Net COM-Index Smalls-Net Smalls-Index USD Index 61,857 93 38,039 91 -40,877 7 2,838 48 EUR 708,938 86 38,930 47 -72,600 55 33,670 30 GBP 253,864 73 -80,372 16 97,042 87 -16,670 21 JPY 237,256 80 -99,444 8 106,699 88 -7,255 39 CHF 49,918 38 -19,673 31 31,694 76 -12,021 17 CAD 138,508 22 -12,687 30 6,933 71 5,754 41 AUD 158,615 51 -45,446 43 53,269 59 -7,823 33 NZD 59,279 61 -19,321 39 22,703 65 -3,382 13 MXN 177,125 39 29,792 40 -34,352 58 4,560 62 RUB 20,930 4 7,543 31 -7,150 69 -393 24 BRL 63,976 59 38,714 88 -40,501 12 1,787 86 Bitcoin 11,729 64 849 100 -817 0 -32 12   US Dollar Index Futures: The US Dollar Index large speculator standing this week was a net position of 38,039 contracts in the data reported through Tuesday. This was a weekly gain of 1,826 contracts from the previous week which had a total of 36,213 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish-Extreme with a score of 91.4 percent. The commercials are Bearish-Extreme with a score of 6.7 percent and the small traders (not shown in chart) are Bearish with a score of 47.6 percent. US DOLLAR INDEX Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 86.8 3.5 8.2 – Percent of Open Interest Shorts: 25.3 69.6 3.6 – Net Position: 38,039 -40,877 2,838 – Gross Longs: 53,675 2,157 5,076 – Gross Shorts: 15,636 43,034 2,238 – Long to Short Ratio: 3.4 to 1 0.1 to 1 2.3 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 91.4 6.7 47.6 – Strength Index Reading (3 Year Range): Bullish-Extreme Bearish-Extreme Bearish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: 14.5 -8.0 -39.1   Euro Currency Futures: The Euro Currency large speculator standing this week was a net position of 38,930 contracts in the data reported through Tuesday. This was a weekly lift of 18,591 contracts from the previous week which had a total of 20,339 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 47.0 percent. The commercials are Bullish with a score of 55.4 percent and the small traders (not shown in chart) are Bearish with a score of 30.2 percent. EURO Currency Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 33.4 51.7 12.4 – Percent of Open Interest Shorts: 27.9 61.9 7.6 – Net Position: 38,930 -72,600 33,670 – Gross Longs: 237,072 366,345 87,892 – Gross Shorts: 198,142 438,945 54,222 – Long to Short Ratio: 1.2 to 1 0.8 to 1 1.6 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 47.0 55.4 30.2 – Strength Index Reading (3 Year Range): Bearish Bullish Bearish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: -0.0 -3.4 19.8   British Pound Sterling Futures: The British Pound Sterling large speculator standing this week was a net position of -80,372 contracts in the data reported through Tuesday. This was a weekly decline of -1,131 contracts from the previous week which had a total of -79,241 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish-Extreme with a score of 16.1 percent. The commercials are Bullish-Extreme with a score of 87.1 percent and the small traders (not shown in chart) are Bearish with a score of 21.1 percent. BRITISH POUND Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 10.2 80.3 7.5 – Percent of Open Interest Shorts: 41.9 42.1 14.1 – Net Position: -80,372 97,042 -16,670 – Gross Longs: 25,936 203,802 19,107 – Gross Shorts: 106,308 106,760 35,777 – Long to Short Ratio: 0.2 to 1 1.9 to 1 0.5 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 16.1 87.1 21.1 – Strength Index Reading (3 Year Range): Bearish-Extreme Bullish-Extreme Bearish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: -19.7 15.4 2.5   Japanese Yen Futures: The Japanese Yen large speculator standing this week was a net position of -99,444 contracts in the data reported through Tuesday. This was a weekly lift of 2,865 contracts from the previous week which had a total of -102,309 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish-Extreme with a score of 7.6 percent. The commercials are Bullish-Extreme with a score of 87.7 percent and the small traders (not shown in chart) are Bearish with a score of 38.7 percent. JAPANESE YEN Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 7.0 81.0 10.5 – Percent of Open Interest Shorts: 48.9 36.0 13.5 – Net Position: -99,444 106,699 -7,255 – Gross Longs: 16,567 192,215 24,858 – Gross Shorts: 116,011 85,516 32,113 – Long to Short Ratio: 0.1 to 1 2.2 to 1 0.8 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 7.6 87.7 38.7 – Strength Index Reading (3 Year Range): Bearish-Extreme Bullish-Extreme Bearish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: 7.6 -12.3 26.0   Swiss Franc Futures: The Swiss Franc large speculator standing this week was a net position of -19,673 contracts in the data reported through Tuesday. This was a weekly fall of -3,081 contracts from the previous week which had a total of -16,592 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 30.8 percent. The commercials are Bullish with a score of 76.2 percent and the small traders (not shown in chart) are Bearish-Extreme with a score of 16.8 percent. SWISS FRANC Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 2.7 80.0 16.6 – Percent of Open Interest Shorts: 42.1 16.5 40.7 – Net Position: -19,673 31,694 -12,021 – Gross Longs: 1,355 39,913 8,308 – Gross Shorts: 21,028 8,219 20,329 – Long to Short Ratio: 0.1 to 1 4.9 to 1 0.4 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 30.8 76.2 16.8 – Strength Index Reading (3 Year Range): Bearish Bullish Bearish-Extreme NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: -10.8 12.1 -12.4   Canadian Dollar Futures: The Canadian Dollar large speculator standing this week was a net position of -12,687 contracts in the data reported through Tuesday. This was a weekly increase of 1,809 contracts from the previous week which had a total of -14,496 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 30.4 percent. The commercials are Bullish with a score of 71.1 percent and the small traders (not shown in chart) are Bearish with a score of 41.2 percent. CANADIAN DOLLAR Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 20.9 54.1 23.1 – Percent of Open Interest Shorts: 30.1 49.1 19.0 – Net Position: -12,687 6,933 5,754 – Gross Longs: 28,999 74,953 32,048 – Gross Shorts: 41,686 68,020 26,294 – Long to Short Ratio: 0.7 to 1 1.1 to 1 1.2 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 30.4 71.1 41.2 – Strength Index Reading (3 Year Range): Bearish Bullish Bearish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: -25.9 32.1 -30.9   Australian Dollar Futures: The Australian Dollar large speculator standing this week was a net position of -45,446 contracts in the data reported through Tuesday. This was a weekly fall of -804 contracts from the previous week which had a total of -44,642 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 42.7 percent. The commercials are Bullish with a score of 58.6 percent and the small traders (not shown in chart) are Bearish with a score of 33.4 percent. AUSTRALIAN DOLLAR Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 23.1 62.7 11.7 – Percent of Open Interest Shorts: 51.7 29.1 16.7 – Net Position: -45,446 53,269 -7,823 – Gross Longs: 36,579 99,401 18,615 – Gross Shorts: 82,025 46,132 26,438 – Long to Short Ratio: 0.4 to 1 2.2 to 1 0.7 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 42.7 58.6 33.4 – Strength Index Reading (3 Year Range): Bearish Bullish Bearish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: -15.5 26.4 -45.5   New Zealand Dollar Futures: The New Zealand Dollar large speculator standing this week was a net position of -19,321 contracts in the data reported through Tuesday. This was a weekly fall of -1,554 contracts from the previous week which had a total of -17,767 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 38.8 percent. The commercials are Bullish with a score of 65.4 percent and the small traders (not shown in chart) are Bearish-Extreme with a score of 13.1 percent. NEW ZEALAND DOLLAR Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 18.1 76.7 3.7 – Percent of Open Interest Shorts: 50.7 38.4 9.4 – Net Position: -19,321 22,703 -3,382 – Gross Longs: 10,749 45,458 2,202 – Gross Shorts: 30,070 22,755 5,584 – Long to Short Ratio: 0.4 to 1 2.0 to 1 0.4 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 38.8 65.4 13.1 – Strength Index Reading (3 Year Range): Bearish Bullish Bearish-Extreme NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: -31.9 35.7 -46.9   Mexican Peso Futures: The Mexican Peso large speculator standing this week was a net position of 29,792 contracts in the data reported through Tuesday. This was a weekly advance of 1,577 contracts from the previous week which had a total of 28,215 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 40.1 percent. The commercials are Bullish with a score of 58.5 percent and the small traders (not shown in chart) are Bullish with a score of 62.4 percent. MEXICAN PESO Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 46.9 47.7 4.3 – Percent of Open Interest Shorts: 30.1 67.1 1.7 – Net Position: 29,792 -34,352 4,560 – Gross Longs: 83,031 84,474 7,605 – Gross Shorts: 53,239 118,826 3,045 – Long to Short Ratio: 1.6 to 1 0.7 to 1 2.5 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 40.1 58.5 62.4 – Strength Index Reading (3 Year Range): Bearish Bullish Bullish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: 6.3 -6.2 -0.1   Brazilian Real Futures: The Brazilian Real large speculator standing this week was a net position of 38,714 contracts in the data reported through Tuesday. This was a weekly advance of 619 contracts from the previous week which had a total of 38,095 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish-Extreme with a score of 88.4 percent. The commercials are Bearish-Extreme with a score of 11.8 percent and the small traders (not shown in chart) are Bullish-Extreme with a score of 85.7 percent. BRAZIL REAL Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 70.5 22.1 6.0 – Percent of Open Interest Shorts: 9.9 85.4 3.2 – Net Position: 38,714 -40,501 1,787 – Gross Longs: 45,076 14,132 3,826 – Gross Shorts: 6,362 54,633 2,039 – Long to Short Ratio: 7.1 to 1 0.3 to 1 1.9 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 88.4 11.8 85.7 – Strength Index Reading (3 Year Range): Bullish-Extreme Bearish-Extreme Bullish-Extreme NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: -7.3 8.2 -12.2   Bitcoin Futures: The Bitcoin large speculator standing this week was a net position of 849 contracts in the data reported through Tuesday. This was a weekly advance of 43 contracts from the previous week which had a total of 806 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish-Extreme with a score of 100.0 percent. The commercials are Bearish-Extreme with a score of 3.6 percent and the small traders (not shown in chart) are Bearish-Extreme with a score of 12.2 percent. BITCOIN Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 82.9 1.2 9.1 – Percent of Open Interest Shorts: 75.7 8.2 9.4 – Net Position: 849 -817 -32 – Gross Longs: 9,723 141 1,072 – Gross Shorts: 8,874 958 1,104 – Long to Short Ratio: 1.1 to 1 0.1 to 1 1.0 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 100.0 3.6 12.2 – Strength Index Reading (3 Year Range): Bullish-Extreme Bearish-Extreme Bearish-Extreme NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: 13.0 -23.6 -6.9   Article By InvestMacro – Receive our weekly COT Reports by Email *COT Report: The COT data, released weekly to the public each Friday, is updated through the most recent Tuesday (data is 3 days old) and shows a quick view of how large speculators or non-commercials (for-profit traders) were positioned in the futures markets. The CFTC categorizes trader positions according to commercial hedgers (traders who use futures contracts for hedging as part of the business), non-commercials (large traders who speculate to realize trading profits) and nonreportable traders (usually small traders/speculators) as well as their open interest (contracts open in the market at time of reporting).See CFTC criteria here.
GBP: Softer Ahead of CPI Risk Event

EUR/USD Performs Quite Well, Euro Is Supported By ECB. US Jobless Data Incoming, So Does NFP- How Will They Affect (USD) US Dollar Index (DXY)? Bank Of Canada (BoC) May Boost Canadian Dollar (CAD)! Is It Time To Buy (AMZN) Amazon Stock? | Swissquote

Swissquote Bank Swissquote Bank 30.05.2022 10:03
The week starts on a positive note after the rally we saw in the US stocks before last week’s closing bell. European futures hint at a positive open. The US 10-year yield stabilized around the 2.75% mark, and the US dollar index is now back to its 50-DMA level, giving some sigh of relief to the FX markets overall. Bonds and Equities One interesting thing is that we observe that the equities and bonds stopped moving together since the 10-year yield hit 3% threshold, suggesting that investors started moving capital to less risky bonds if they quit equities, instead of selling everything and sitting on cash. Read next: Altcoins: Ripple Crypto - What Is Ripple (XRP)? Price Of XRP | FXMAG.COM US Jobs Data, Expensive Crude Oil   That’s one positive sign in terms of broader risk appetite and should help assessing a bottom near the actual levels. But the end of the equity selloff depends on economic data. Released on Friday, the US PCE index fell from 6.6 to 6.3% in April. Due this week, the US jobs data, and the wages growth will take the center stage in the Fed talk. Weak dollar pushes the major peers higher, but the rising oil prices preoccupy investors this Monday. The barrel of US crude is above $117, and the news flow suggests further positive pressure. But till where?   Watch the full episode to find out more! 0:00 Intro 0:24 Market update 1:04 Equity, bond correlation is down since US 10-yield hit 3%! 2:58 Economic data is key: what to watch this week? 4:22 BoC to raise rates 5:09 EURUSD pushes higher 6:10 Oil under positive pressure: OPEC, UK windfall tax 9:19 Corporate calendar: GME, HP earnings, Amazon stock split Ipek Ozkardeskaya has begun her financial career in 2010 in the structured products desk of the Swiss Banque Cantonale Vaudoise. She worked at HSBC Private Bank in Geneva in relation to high and ultra-high net worth clients. In 2012, she started as FX Strategist at Swissquote Bank. She worked as a Senior Market Analyst in London Capital Group in London and in Shanghai. She returned to Swissquote Bank as Senior Analyst in 2020. Follow FXMAG.COM on Google News
UK Inflation Shows Promising Decline, Signaling a Path to More Sustainable Levels

In Times Of Hawkish ECB, This Week's Eurozone Inflation Plays A Vital Role, As Euro (EUR) May Need Some Boosting, So Does Hungarian Forint (HUF)... On Tuesday We Meet HP Earnings, So Better Let's Watch HP Stock Price Closely! | Saxo Bank

Saxo Bank Saxo Bank 30.05.2022 11:01
What is going on US core PCE prices.  US core PCE data was out on Friday, and it came in as expected at 4.9% y/y and 0.3% m/m. This was slower than last month's 5.2% y/y and may prompt more talk of inflation peaking out. While PCE is the preferred Fed metric, what cannot be ignored right now is that food and energy prices still have more room to run on the upside suggesting that inflation will remain higher for longer. The May CPI print is due on June 10, so that will be the next one on the radar for further cues in terms of Fed's rate hike trajectory but for this week, the focus will be on the jobs report due on Friday Goldman predicts end of battery metal bull market – saying that the prices for key battery metals cobalt, lithium and nickel will fall over the next two years after an over-eager speculation phase. Goldman predicts that lithium prices could drop slightly this year to $54k from recent spot prices near $60k and fall to near $16k in 2023 before rising again further down the road. There’s been “a surge in investor capital into supply investment tied to the long-term EV demand story, essentially trading a spot driven commodity as a forward-looking equity,” the analysts said. “That fundamental mispricing has in turn generated an outsized supply response well ahead of the demand trend.” Oil prices are becoming an important cross-asset driver.  Brent crude oil closed last week just shy of the $120/barrel level (see above) and also just shy of the highest weekly close for the front month contract since the outbreak of war in Ukraine. As the $120 area was often a resistance area during the high oil price period during 2011-14 (although at that time, the US dollar was far weaker), any further significant advance from here will likely dominate market attention and work against further strong improvements in risk sentiment as high energy prices cloud the growth outlook and would erode corporate profit margins. Read next: Altcoins: Ripple Crypto - What Is Ripple (XRP)? Price Of XRP | FXMAG.COM Benchmark Capital and Sequoia Capital put out a dim outlook for technology.  Both venture capital firms were around during the dot-com bubble run-up and burst, and they have both put out perspective and action plans for the companies they have invested in. Those presentations talk about a much dimmer outlook and investors are shifting focus from revenue growth and revenue multiples to that of free cash flow here and now. Cost-cutting and focus on profitable unit metrics are now paramount to survive the coming years. What are we watching next? US Memorial Day Holiday today. This is a major national holiday, so all US markets are closed today. Read next: Altcoins: Tether (USDT), What Is It? - A Deeper Look Into The Tether Blockchain| FXMAG.COM Eurozone inflation prints out this week.  The energy price shock has been bigger for Europe, and May prints are due for Spain, Germany, France, Italy and the Euro-area in the week ahead. Food price pressures continue to build up amid the supply shortages and protectionist measures, and further gains in May will add more weight to the ECB’s resolve to exit negative rates from Q3 with more aggressive tightening. Special meeting of the European Council today and tomorrow.  Talks will focus on the implementation of a proposed embargo on oil imports from Russia (from 2024 onwards according to the latest draft). Hungary is the only EU country against it. The problem is that any new sanctions against Russia require the unanimous agreement of the 27 member states in order to pass. Expect tough negotiations. Hungary’s Prime minister Viktor Orban has recently passed on a “wish list” of demands he wants met to support oil sanctions. This includes a swap line with the European Central Bank and end to the rule of law Article 7 and “conditionality mechanism” procedures, amongst other things. Australian GPD and balance of trade on watch and could disappoint.  Australian GPD data due Wednesday is expected to show economic growth fell from 4.2% YoY to 3% YoY in Q1. Quarterly GPD is expected to grow just 0.7%, following the 3.4% rise in Q4. If data is stronger than what consensus expects, the RBA has more ammunition to rise rates more than forecast, so the AUDUSD might rally. If GPD is weaker, then, the AUD will likely fall. For equities, Australian financials could rally if data is stronger than expected. Secondly, Australian Export and Import data is released Thursday. The market expects Australia’s surplus income (Export income minus imports payments) to rise from $9.4b to $9.5b in April. But given the iron ore price fell 13% in April, the trade data could miss expectations. Follow FXMAG.COM on Google News Several central banks in focus this week.  Tomorrow, the National Bank of Hungary (NBH) will likely deliver a hike of 50 basis points to 5.9 %. The NBH has recently flagged a slowdown in the pace of rate hikes which had a detrimental impact on the Hungarian currency. What the central bank needs to do now is to define more explicitly the risks to growth, the effect that it would have on inflation this year but especially in 2023, the pace of rate hike and how financing conditions could evolve in the next 12-18 months. On Wednesday, the Bank of Canada is expected to increase interest rates by 50 basis points, from 1% to 1.5% (it has downplayed the possibility of a 75-basis-point hike in the short term). The move has already been priced in the market. Further interest hikes will come in the coming months in order to fight inflation which is running at a 31-year high of 6.8% YoY in April. Last week, former Bank of Canada governor Stephen Poloz mentioned the risk that the country will fall into stagflation this year. Earnings Watch.  This week’s earnings releases are weak in terms of impact expect from earnings from Salesforce, Lululemon and Meituan. Analysts are expecting Salesforce to report FY23 Q1 revenue (ending 30 April) growth of 24% y/y on top of a significant operating margin expansion expected to boost free cash flow generation substantially. Monday: Sino Biopharmaceutical, Huazhu Group Tuesday: DiDi Global, Salesforce, HP, KE Holdings Wednesday: Acciona Energias Renovables, China Resources Power, Veeva Systems, HP Enterprise, MongoDB, NetApp, Chewy, GameStop, UiPath, SentinelOne, Elastic, Weibo Thursday: Trip.com, Pagseguro Digital, Remy Cointreau, Toro, Cooper Cos, Meituan, Crowdstrike, Lululemon, Okta, RH, Asana, Hormel Foods Economic calendar highlights for today (times GMT) 0900 – Euro zone Economic, Industrial, Services Confidence surveys 1200 – Germany May Flash CPI 1500 – US Fed’s Waller (Voter) to speak 1700 – ECB's Nagel to speak 2030 – New Zealand RBNZ’s Hawkesby to speak 2300 – South Korea Apr. Industrial Production 2330 – Japan Apr. Jobless Rate 2350 – Japan Apr. Jobless Rate 2350 – Japan Apr. Industrial Production 0030 – New Zealand May ANZ Business Confidence survey 0130 – China May Manufacturing/Non-manufacturing PMI 0130 – Australia Apr. Building Approvals 0130 – Australia Apr. Private Sector Credit Follow SaxoStrats on the daily Saxo Markets Call on your favorite podcast app: Apple  Spotify PodBean Sticher Source: Saxo Bank
German Export Weakness In The Fourth Quarter Suggests That Recession Fears Are Real

Powerful Euro Incoming? Is ECB's Rate Hike Sure!? German Inflation Is Almost 1% Higher What Can Stimulate European Central Bank (ECB) Monetary Policy Tightening! | ING Economics

ING Economics ING Economics 30.05.2022 16:18
German inflation continues to accelerate, keeping alive the European Central Bank's discussion on a possible 50bp rate hike in July Record-high inflation in Germany has had an impact on consumers' budgeting and financial planning   German headline inflation surged once again as the war in Ukraine pushed up energy and commodity prices, and inflationary pressure broadens. According to a first estimate based on the regional inflation data, German headline inflation came in at 7.9% year-on-year in May, up from 7.4% YoY in April. The HICP measure came in at 8.7% YoY, from 7.8% in April. Unless there is a sharp downward correction of energy prices in the months ahead, German headline inflation will continue to increase and only start to level off in late summer. Still more inflation in the pipeline We've stopped digging out illustrations of the times when inflation in Germany was at comparable levels. Let’s put it like this: most citizens and policymakers have hardly ever seen these kinds of inflation rates in their professional lives. Sure, the surge in headline inflation is still dominantly driven by energy and commodity prices. However, looking at available regional data, the pass-through of these higher prices to the broader economy is in full swing. In some regional states, food inflation was already at double-digit levels and prices for leisure activities, hospitality, and more general services have been accelerating in recent months. The inflation rate for these items is far above the European Central Bank's 2% target. In fact, in April only 17 out of the 94 main components of the German inflation basket had inflation rates of 2% or less. The only significant U-turn in the upward inflation trend was in packaged holidays. However, this was rather driven by the so-called Easter Bunny effect (the timing of the Easter break) and not so much by disinflationary trends. Consequently, any drop in core inflation on the back of lower packaged holidays inflation will be temporary. Looking ahead, the fact that monthly price increases are still far above their historic average (0.9% month-on-month in May compared with 0.2% in a ‘normal’ May) illustrates the high inflationary pipeline pressure. As much as we would like to see a levelling off in inflation rates, with the war in Ukraine and continued tension and upward pressure on energy, commodity and food prices, headline inflation in Germany will accelerate further in the coming months. We think that the pass-through to all kinds of sectors is still in full swing. Add to this the additional price mark-ups in the hospitality, culture and leisure sectors after the end of lockdowns and it is hard to see inflation coming down significantly any time soon. Against the backdrop of recent geopolitical events, we now expect German inflation to average at more than 8% this year with a chance that monthly inflation rates will enter double-digit territory in the summer. ECB 50bp rate hike not off the table The ECB has clearly passed the stage of discussing whether and even when policy rates should be increased. The only discussion seems to be on whether the ECB should start with a 25bp rate hike in July or 50bp. In this regard, it is quite remarkable that both ECB president Christine Lagarde and ECB chief economist Philip Lane have tried to take back control of this particular discussion. In an interview released this morning, Philip Lane definitely broke with the previous ECB communication strategy to never pre-commit. Instead, he spelled out the roadmap for normalising monetary policy, de facto announcing an the end of net asset purchases in early July, a 25bp rate hike at the ECB meeting of 21 July and another 25bp rate hike at the September meeting. There is nothing wrong with the content of his remarks as it is exactly what we have already been expecting the ECB to do. However, a de facto pre-announcement almost two months ahead of the 21 July meeting is remarkable, to say the least. In any case, as today’s German inflation numbers mark an upside surprise for many, the debate on the magnitude of the first hike, be it 25bp vs 50bp, is not entirely off the table. If core inflation in the eurozone continues accelerating in May and June, Lane and Lagarde could still regret their new pre-commitment. Read this article on THINK TagsMonetary policy Inflation Germany ECB Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Energy and Metals Decline, Wheat Rallies Amid Disappointing Chinese Growth

Supporting EUR, USD And Others - What Is Interest Rate? What Is A Negative Interest Rate | Binance Academy

Binance Academy Binance Academy 01.06.2022 16:55
TL;DR It doesn’t make much sense to lend money for free. If Alice wants to borrow $10,000 from Bob, Bob will need a financial incentive to loan it to her. That incentive comes in the form of interest – a kind of fee that gets added on top of the amount Alice borrows. Interest rates profoundly impact the broader economy, as raising or lowering them greatly affects people’s behavior. Broadly speaking: Higher interest rates make it attractive to save money because banks pay you more for storing your money with them. It’s less attractive to borrow money because you need to pay higher amounts on the credit you take out. Lower interest rates make it attractive to borrow and spend money – your money doesn’t make much by sitting idle. What’s more, you don’t need to pay huge amounts on top of what you borrow. Learn more on Binance.com Introduction As we’ve seen in How Does the Economy Work?, credit plays a vital role in the global economy. In essence, it’s a lubricant for financial transactions – individuals can leverage capital that they don’t have available and repay it at a later date. Businesses can use credit to purchase resources, use those resources to turn a profit, then pay the lender. A consumer can take out a loan to purchase goods, then return the loan in smaller increments over time. Of course, there needs to be a financial incentive for a lender to offer credit in the first place. Often, they’ll charge interest. In this article, we’ll take a dive into interest rates and how they work.   What is an interest rate? Interest is a payment owed to a lender by a borrower. If Alice borrows money from Bob, Bob might say you can have this $10,000, but it comes with 5% interest. What that means is that Alice will need to pay back the original $10,000 (the principal) plus 5% of that sum by the end of the period. Her total repayment to Bob is, therefore, $10,500. So, an interest rate is a percentage of interest owed per period. If it’s 5% per year, then Alice would owe $10,500 in the first year. From there, you might have: a simple interest rate – subsequent years incur 5% of the principal or  a compounded interest rate – 5% of the $10,500 in the first year, then 5% of $10,500 + $525 = $11,025 in the second year, and so on.   Why are interest rates important? Unless you transact exclusively in cryptocurrencies, cash, and gold coins, interest rates affect you, like most others. Even if you somehow found a way to pay for everything in Dogecoin, you’d still feel their effects because of their significance within the economy. Take a commercial bank – their whole business model (fractional reserve banking) revolves around borrowing and lending money. When you deposit money, you’re acting as a lender. You receive interest from the bank because they lend your funds to other people. In contrast, when you borrow money, you pay interest to the bank. Commercial banks don’t have much flexibility when it comes to setting the interest rates – that’s up to entities called central banks. Think of the US Federal Reserve, the People’s Bank of China, or the Bank of England. Their job is to tinker with the economy to keep it healthy. One function they perform to these ends is raising or lowering interest rates. Think about it: if interest rates are high, then you’ll receive more interest for loaning your money. On the flip side, it’ll be more expensive for you to borrow, since you’ll owe more. Conversely, it isn’t very profitable to lend when interest rates are low, but it becomes attractive to borrow. Ultimately, these measures control the behavior of consumers. Lowering interest rates is generally done to stimulate spending in times when it has slowed, as it encourages individuals and businesses to borrow. Then, with more credit available, they’ll hopefully go and spend it. Lowering interest rates might be a good short-term move to rejuvenate the economy, but it also causes inflation. There’s more credit available, but the amount of resources remains the same. In other words, the demand for goods increases, but the supply doesn’t. Naturally, prices begin to rise until an equilibrium is reached. At that point, high interest rates can serve as a countermeasure. Setting them high cuts the amount of circulating credit, since everyone begins to repay their debts. Because banks offer generous rates at this stage, individuals will instead save their money to earn interest. With less demand for goods, inflation decreases – but economic growth slows.   ➟ Looking to get started with cryptocurrency? Buy Bitcoin on Binance!   What is a negative interest rate? Often, economists and pundits speak of negative interest rates. As you can imagine, these are sub-zero rates that require you to pay to lend money – or even to store it at a bank. By extension, it makes it costly for banks to lend. Indeed, it even makes it costly to save. This may seem like an insane concept. After all, the lender is the one assuming the risk that the borrower may not repay the loan. Why should they pay?  This is perhaps why negative interest rates are something of a last resort to fix struggling economies. The idea comes from a fear that individuals may prefer to hold onto their money during an economic downturn, preferring to wait until it recovers to engage in any economic activity.  When rates are negative, this behavior doesn’t make sense – borrowing and spending appear to be the most sensible choices. This is why negative interest rates are considered to be a valid measure by some, under extraordinary economic conditions.   Closing thoughts On the surface, interest rates appear to be a relatively straightforward concept to grasp.  Nevertheless, they’re an integral part of modern economies – as we’ve seen, adjusting them can fundamentally alter the behavior of individuals and businesses. This is why central banks take such a proactive role in using them to keep nations’ economies on track. Do you have more questions about interest rates and the economy? Check out our Q&A platform, Ask Academy, where the Binance community will answer your questions.
The Bank Of Canada Is Preparing To Announce Its Final 25bp Hike

Forex: US Dollar (USD) Is Being Supported, EUR/USD Affected By Ban On Russian Oil. Jubilee - British Pound (GBP) Is Going To Take A Rest Because Of Market Holidays In The UK, Canadians Await BoC's Decision | ING Economics

ING Economics ING Economics 01.06.2022 14:14
While our base case is that the Bank of Canada will hike by another 50bp today, the strong macro picture means that a 75bp move cannot be excluded. Elsewhere, data resilience and higher yields should lay the basis for a re-strengtheining of the dollar, and the contrast with a worsening growth picture in Europe may send EUR/USD back to 1.05 in June Source: Shutterstock   Thursday 2 June and Friday 3 June are national holidays in the UK. We will resume the publication of the FX Daily on Monday 6 June. USD: Finding fresh support The dollar has continued to find some support this morning, benefiting from a general sell-off in the bond market, the impact of the EU oil embargo on Russia, and better-than-expected US data (consumer confidence yesterday was a case in point). The past few days seem to have conveyed the message that the Fed’s tightening cycle is based on a sturdier growth story than Europe's (especially after the Russian oil embargo) and the speculation around a September Fed pause is being kept at bay for now. Ultimately, we think all this is laying the basis for a period of gradual re-strengthening in the dollar. Today, data will remain in focus in the US, as the ISM manufacturing and JOLTS job openings for May are released. On the Fed side, John Williams and the arch-hawk James Bullard are both scheduled to speak today, and markets will also keep an eye on regional trends emerging from the Fed’s Beige Book released this evening. All in all, we expect the dollar to find some consolidation and possibly inch higher against most G10 peers for the rest of the week, with the weak bond environment offering a short-term supporting driver (the yen is set to remain the main victim here) and US data - our economist expects another solid US payrolls reading on Friday - still supporting the Fed tightening story and offering a longer-term bullish USD argument. Some stabilisation in global sentiment may allow high-beta currencies – and especially oil-sensitive ones like Canada's dollar and Norway's krone - to find a floor, while other European currencies may remain on the back foot due to a worsening growth outlook in the region. DXY may advance to the 103.00 area in the run-up to the 15 June FOMC meeting. EUR: On track for a return to 1.05 EUR/USD is re-testing the 1.0700 support this morning after a marginal recovery late yesterday proved very temporary. Indeed, the common currency is discounting the re-assessment of the European economic outlook after the EU announced a ban on Russian oil. That news came in conjunction with evidence that inflationary pressures in the eurozone are still not easing, as eurozone-wide CPI figures for May jumped to 8.1% while the core rate advanced to 3.8% year-on-year. While high inflation is keeping the ECB tightening expectations supported, the euro – which is already embedding a good deal of monetary tightening – is struggling to find any solid bullish driver at the moment. In our view, this was a matter of time and we continue to target a return to the 1.0500 area in EUR/USD by the end of this month. Elsewhere in Europe, the Hungarian central bank raised its base rate by 50bp yesterday in line with market expectations, but didn't meet all expectations, including ours. Even the almost historically weak forint did not persuade the central bank to make a bolder move. We did get assurances that monetary policy tightening will continue, but at a slower pace regardless of market or economic conditions. Although the central bank tried to be as hawkish as possible in its communication, it was not enough for the market to reverse the forint's direction. The forint continues to be our least preferred currency at the moment, but on the other hand, still has the most potential to strengthen in the region. We see EUR/HUF around 390 in the short run with a possible quick move to 380 should one of the external factors (war, rule-of-law debate, etc.) show early signs of improvement, reducing the risk premium. GBP: Some weakness (but not a collapse) ahead The pound seems to have been caught in the crossfire of the EU-Russia oil embargo story, largely following other European currencies (except for NOK) lower. This has meant that EUR/GBP has remained tied to the 0.8500 level, which appears to be an anchor for the short term. Given a deteriorating growth outlook in the UK, we expect some GBP weakness ahead and see a move to 0.8600 in the coming weeks as likely. However, we do not see a sterling downtrend morphing into a collapse.   With UK markets closed for two days, expect reduced GBP volatility into the weekend. CAD: We expect 50bp by the BoC today, but 75bp is possible The Bank of Canada is set to raise interest rates for a third consecutive meeting today, and the Bank’s recent communication has strongly suggested we’ll see another 50bp hike. As discussed in our BoC preview, 50bp is also our base case scenario for today, given the strong economy (and an outlook helped by high commodity prices) and jobs market, as well as elevated inflation. Against such a macroeconomic backdrop, we don’t exclude a 75bp move: markets seem to attach a relatively high probability to this scenario given that 70bp are priced in ahead of today’s meeting. As we see a 50bp hike as more likely, there are some downside risks for CAD today, as markets may have to price some 10-20bp out of the CAD swap curve. That said, we think that the BoC will reiterate a very strong commitment to fighting inflation and allow markets to consolidate their bets on at least another 50bp hike in July and a terminal rate around 3.0%. Ultimately, this should put a floor under the loonie, which has been displaying some resilience against the USD rebound, and may not depreciate beyond the 1.2700-1.2750 area even if the 75bp bets have to be scaled back today. Read this article on THINK Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
The Euro Opened Strong On Wednesday Against The US Dollar (EUR/USD), Euro Could Continue Gaining On The GBP (EUR/GBP), Australia’s Trade Balance Beats Market Expectations (AUD/USD), EUR/JPY

The Euro Opened Strong On Wednesday Against The US Dollar (EUR/USD), Euro Could Continue Gaining On The GBP (EUR/GBP), Australia’s Trade Balance Beats Market Expectations (AUD/USD), EUR/JPY

Rebecca Duthie Rebecca Duthie 02.06.2022 18:31
Summary: The euro opened strong on Wednesday in the wake of U.S treasury yields surging. Inflation for the eurozone hit record levels in April. The Australian Dollar has been unmoved by an outstanding trade balance that beat market expectations. EUR/JPY Read next: EuroZone Inflation Exceeds Market Expectations (EUR/USD) (EUR/GBP), New Zealand Economy Will Benefit From China’s Lockdown Easing (GBP/NZD), GBP Bullish (GBP/USD)  Euro and US Dollar The market is reflecting mixed market signals for this currency pair. The euro opened strong on Wednesday in the wake of U.S treasury yields surging. The U.S economic data that has been released this week has been strong, which has given the market confidence around the hiking cycle. This sentiment comes in contrast to last week's sentiment of an overconfident Federal Reserve. The eurozone is under pressure in the wake of the Russian oil embargo with the possibility of Russia retaliating by potentially cutting off gas from the region, which may aggravate an already bad inflation situation and risk downside potential for the euro. EUR/USD Price Chart Eurozone inflation hit record highs The market is reflecting mixed market signals for this currency pair. Inflation for the eurozone hit record levels in April, this means that it may be more likely that the European Central Bank (ECB) may implement a 50 basis point rate hike before the year-end. If this were to go through, it could underscore the Euro’s already steady rebound against the US Dollar and the Pound Sterling. EUR/GBP Price Chart Australian Dollar benefitting from a trade balance that beat expectations The market is reflecting bullish market signals for this currency pair. The Australian Dollar has been unmoved by an outstanding trade balance that beat market expectations. In addition, the Reserve Bank of Australia (RBA) published their commodity price index (CPI) that accounts for the composition of Australian commodity exports yesterday. AUD/USD Price Chart The Japanese Yen weakened The market is reflecting mixed market signals for this currency pair. The Japanese data revealed a jobless rate that exceeded market expectations, but retail sales stayed at 0.8% for April. The mood was then turned bad with a miss in industrial production. It was anticipated at -0.2% but came in at -1.3% for the month of April. The Japanese Yen weakened on this news as well as the higher oil price taking its toll on the energy importing economy. EUR/JPY Price Chart   Sources: finance.yahoo.com, poundsterlinglive.com, dailyfx.com
The Swing Overview – Week 20 2022

The Swing Overview – Week 20 2022

Purple Trading Purple Trading 02.06.2022 16:36
The Swing Overview – Week 20 The markets remain volatile and fragile, as shown by the VIX fear index, which has again surpassed the level 30 points. However, equity indices are at interesting supports and there could be some short-term recovery. The euro has bounced off its support in anticipation of tighter monetary policy and the gold is holding its price tag above $1,800 per troy ounce. Is the gold back in investors' favor again? Macroeconomic data The week started with a set of worse data from the Chinese economy, which showed that industrial production contracted by 2.9% year-on-year basis and the retail sales fell by 11.1%. The data shows the latest measures for the country's current COVID-19 outbreak are taking a toll on the economy. To support the slowing economy, China cut its benchmark interest rate by 0.15% on Friday morning, more than analysts expected. While this will not be enough to stave off current downside risks, markets may respond to expectation of more easing in the future. On a positive note, data from the US showed retail sales rose by 0.9% in April and industrial production rose by 1.1% in April. Inflation data in Europe was important. It showed that inflation in the euro area slowed down a little, reaching 7.4% in April compared to 7.5% in March. In Canada, on the other hand, the inflation continued to rise, reaching 6.8% (6.7% in March) and in the UK inflation was 9% in April (7% in the previous month). Several factors are contributing to the higher inflation figures: the ongoing war in Ukraine, problems in logistics chains and the effects of the lockdown in China. Concerns about the impact of higher inflation are showing up in the bond market. The benchmark 10-year US Treasury yield has come down from the 3.2% it reached on 9 May and is currently at 2.8%. This means that demand for bonds is rising and they are once again becoming an asset for times of uncertainty.  Figure 1: US 10-year bond yields and USD index on a daily chart   Equity indices on supports Global equities fell significantly in the past week, reaching significant price supports. Thus, there could be some form of short-term bounce. Although a cautious rally began on Thursday, which was then boosted by China's decision to cut interest rates in the early hours of Friday, there is still plenty of fear among investors and according to Louis Dudley of Federated Hermes, cash holdings have reached its highest level since September 2001, suggesting strong bearish sentiment. Supply chain problems have been highlighted by companies such as Cisco Systems, which has warned of persistent parts shortages. That knocked its shares down by 13.7%. The drop made it the latest big-stock company to post its biggest decline in more than a decade last week. The main risks that continue to cause volatility and great uncertainty are thus leading investors to buy "safe" assets such as the US bonds and the Swiss franc. Figure 2: The SP 500 on H4 and D1 chart From a technical analysis perspective, the US SP 500 index continues to move in a downtrend as the market has formed a lower low while being below both the SMA 100 and EMA 50 moving averages on the H4 and daily charts. The nearest resistance is 4,080 - 4,100. The next resistance is at 4,140 and especially 4,293 - 4,300. Support is at 3,860 - 3,900 level. German DAX index The index continues to move in a downtrend along with the major world indices. The price has reached the support which is at 13,680 – 13,700 and the moving average EMA 50 on the H4 chart is above the SMA 100. This could indicate a short-term signal for some upward correction. However, the main trend according to the daily chart is still downwards. The nearest resistance is at 14,260 - 14,330 level. Figure 3: German DAX index on H4 and daily chart The euro has bounced off its support The EUR/USD currency pair benefited last week from the US dollar moving away from its 20-year highs while on the euro, investors are expecting a tightening economy and a rise in interest rates, which the ECB has not risen yet as one of the few banks. Figure 4: The EURUSD on H4 and daily chart   Significant support is at the price around 1.0350 - 1.040. Current resistance is at 1.650 - 1.700.   The Gold in investors' attention again The gold has underperformed over the past month, falling by 10% since April when the price reached USD 2,000 per ounce. But there is now strong risk aversion in the markets, as indicated by the stock markets, which have fallen. The gold, on the other hand, has started to rise. Inflation fears are a possible reason, and investors have begun to accumulate the gold for protection against rising prices. The second reason is that the gold is inversely correlated with the US dollar. The dollar has come down from its 20-year highs, which has allowed the gold to bounce off its support.  Figure 5: The gold on H4 and daily chart The first resistance is at $1,860 per ounce. The support is at $1,830 - $1,840 per ounce. The next support is then at $1,805 - $1,807 and especially at $1,800 per ounce.
The EUR/USD Pair Maintains The Bullish Sentiment

Euro Currency Speculators continue to boost their bullish bets for 4th Week

Invest Macro Invest Macro 04.06.2022 22:45
By InvestMacro | COT | Data Tables | COT Leaders | Downloads | COT Newsletter Here are the latest charts and statistics for the Commitment of Traders (COT) data published by the Commodities Futures Trading Commission (CFTC). The latest COT data is updated through Tuesday May 31st and shows a quick view of how large traders (for-profit speculators and commercial entities) were positioned in the futures markets. All currency positions are in direct relation to the US dollar where, for example, a bet for the euro is a bet that the euro will rise versus the dollar while a bet against the euro will be a bet that the euro will decline versus the dollar. Highlighting the COT currency data was the further gains in bullish bets for the Euro currency futures contracts. Euro speculators boosted their bullish bets for a fourth straight week this week and for the sixth time in the past ten weeks. Over the past four-week time-frame, Euro bets have risen by a total of +58,650 contracts, going from -6,378 net positions on May 3rd to a total of +52,272 net positions this week. This week marks the highest Euro speculator standing in the past twelve weeks. The recent improvement in Euro positions has taken place with a very strong change in sentiment as just four weeks ago the overall position had fallen into bearish territory. The Euro sentiment has been so bad that analysts have been making predictions for an inevitable decline of the Euro into parity versus the dollar. However, recently there has been rising expectations that the European Central Bank will be more hawkish towards interest rates in the near future (despite the weak outlook for EU GDP growth) and will end their negative interest rate policy. Over the past few weeks, the EUR/USD exchange rate has rebounded after falling to a multi-year low of 1.0350 in early May. This week the EUR/USD hit a weekly high of 1.0787 before closing at the 1.0719 exchange rate. Overall, the currencies with higher speculator bets this week were the Euro (13,342 contracts), Brazil real (6,602 contracts), British pound sterling (6,267 contracts), Canadian dollar (5,680 contracts), Mexican peso (5,657 contracts), Japanese yen (5,005 contracts) and the New Zealand dollar (597 contracts). The currencies with declining bets were the US Dollar Index (-501 contracts), Australian dollar (-3,236 contracts), Swiss franc (-785 contracts) and Bitcoin (-446 contracts). Strength scores (3-Year range of Speculator positions, from 0 to 100 where above 80 is extreme bullish and below 20 is extreme bearish) show that most of the currency markets are below their midpoint (50 percent) of the last 3 years. The Brazil Real, US Dollar Index and Bitcoin are currently in extreme bullish levels. Strength score trends (or move index, that show 6-week changes in strength scores) shows the recent strong weakness in the commodity currencies (AUD, NZD and CAD) as well as the Swiss franc. Data Snapshot of Forex Market Traders | Columns Legend May-31-2022OIOI-IndexSpec-NetSpec-IndexCom-NetCOM-IndexSmalls-NetSmalls-Index USD Index 63,863 98 37,538 91 -41,327 6 3,789 58 EUR 706,317 85 52,272 51 -85,186 52 32,914 29 GBP 252,881 72 -74,105 21 87,172 81 -13,067 29 JPY 239,080 81 -94,439 11 105,049 87 -10,610 32 CHF 49,579 40 -20,458 10 29,851 87 -9,393 26 CAD 135,929 21 -7,007 34 -327 68 7,334 44 AUD 153,661 48 -48,682 40 51,128 57 -2,446 46 NZD 55,134 53 -18,724 40 21,374 63 -2,650 21 MXN 212,843 55 35,449 42 -40,143 56 4,694 63 RUB 20,930 4 7,543 31 -7,150 69 -393 24 BRL 74,146 73 45,316 95 -47,670 5 2,354 92 Bitcoin 10,900 58 403 92 -503 0 100 15   US Dollar Index Futures: The US Dollar Index large speculator standing this week came in at a net position of 37,538 contracts in the data reported through Tuesday. This was a weekly decrease of -501 contracts from the previous week which had a total of 38,039 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish-Extreme with a score of 90.5 percent. The commercials are Bearish-Extreme with a score of 5.9 percent and the small traders (not shown in chart) are Bullish with a score of 58.0 percent. US DOLLAR INDEX Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 85.9 3.7 8.8 – Percent of Open Interest Shorts: 27.1 68.4 2.8 – Net Position: 37,538 -41,327 3,789 – Gross Longs: 54,859 2,355 5,605 – Gross Shorts: 17,321 43,682 1,816 – Long to Short Ratio: 3.2 to 1 0.1 to 1 3.1 to 1 NET POSITION TREND:       – Strength Index Score (3 Year Range Pct): 90.5 5.9 58.0 – Strength Index Reading (3 Year Range): Bullish-Extreme Bearish-Extreme Bullish NET POSITION MOVEMENT INDEX:       – 6-Week Change in Strength Index: 8.6 -9.0 5.2   Euro Currency Futures: The Euro Currency large speculator standing this week came in at a net position of 52,272 contracts in the data reported through Tuesday. This was a weekly rise of 13,342 contracts from the previous week which had a total of 38,930 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish with a score of 51.0 percent. The commercials are Bullish with a score of 51.9 percent and the small traders (not shown in chart) are Bearish with a score of 28.9 percent. EURO Currency Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 33.5 51.7 12.3 – Percent of Open Interest Shorts: 26.1 63.8 7.7 – Net Position: 52,272 -85,186 32,914 – Gross Longs: 236,553 365,434 87,138 – Gross Shorts: 184,281 450,620 54,224 – Long to Short Ratio: 1.3 to 1 0.8 to 1 1.6 to 1 NET POSITION TREND:       – Strength Index Score (3 Year Range Pct): 51.0 51.9 28.9 – Strength Index Reading (3 Year Range): Bullish Bullish Bearish NET POSITION MOVEMENT INDEX:       – 6-Week Change in Strength Index: 6.4 -10.1 24.0   British Pound Sterling Futures: The British Pound Sterling large speculator standing this week came in at a net position of -74,105 contracts in the data reported through Tuesday. This was a weekly gain of 6,267 contracts from the previous week which had a total of -80,372 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 20.6 percent. The commercials are Bullish-Extreme with a score of 81.2 percent and the small traders (not shown in chart) are Bearish with a score of 28.6 percent. BRITISH POUND Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 12.2 76.6 7.7 – Percent of Open Interest Shorts: 41.5 42.2 12.9 – Net Position: -74,105 87,172 -13,067 – Gross Longs: 30,788 193,786 19,446 – Gross Shorts: 104,893 106,614 32,513 – Long to Short Ratio: 0.3 to 1 1.8 to 1 0.6 to 1 NET POSITION TREND:       – Strength Index Score (3 Year Range Pct): 20.6 81.2 28.6 – Strength Index Reading (3 Year Range): Bearish Bullish-Extreme Bearish NET POSITION MOVEMENT INDEX:       – 6-Week Change in Strength Index: -10.9 8.4 1.9   Japanese Yen Futures: The Japanese Yen large speculator standing this week came in at a net position of -94,439 contracts in the data reported through Tuesday. This was a weekly increase of 5,005 contracts from the previous week which had a total of -99,444 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish-Extreme with a score of 10.7 percent. The commercials are Bullish-Extreme with a score of 86.9 percent and the small traders (not shown in chart) are Bearish with a score of 31.9 percent. JAPANESE YEN Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 6.4 82.2 9.5 – Percent of Open Interest Shorts: 45.9 38.3 13.9 – Net Position: -94,439 105,049 -10,610 – Gross Longs: 15,201 196,584 22,605 – Gross Shorts: 109,640 91,535 33,215 – Long to Short Ratio: 0.1 to 1 2.1 to 1 0.7 to 1 NET POSITION TREND:       – Strength Index Score (3 Year Range Pct): 10.7 86.9 31.9 – Strength Index Reading (3 Year Range): Bearish-Extreme Bullish-Extreme Bearish NET POSITION MOVEMENT INDEX:       – 6-Week Change in Strength Index: 7.9 -12.1 24.5   Swiss Franc Futures: The Swiss Franc large speculator standing this week came in at a net position of -20,458 contracts in the data reported through Tuesday. This was a weekly lowering of -785 contracts from the previous week which had a total of -19,673 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish-Extreme with a score of 10.3 percent. The commercials are Bullish-Extreme with a score of 87.0 percent and the small traders (not shown in chart) are Bearish with a score of 25.7 percent. SWISS FRANC Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 5.3 75.6 17.3 – Percent of Open Interest Shorts: 46.6 15.4 36.3 – Net Position: -20,458 29,851 -9,393 – Gross Longs: 2,641 37,473 8,596 – Gross Shorts: 23,099 7,622 17,989 – Long to Short Ratio: 0.1 to 1 4.9 to 1 0.5 to 1 NET POSITION TREND:       – Strength Index Score (3 Year Range Pct): 10.3 87.0 25.7 – Strength Index Reading (3 Year Range): Bearish-Extreme Bullish-Extreme Bearish NET POSITION MOVEMENT INDEX:       – 6-Week Change in Strength Index: -21.5 10.4 7.5   Canadian Dollar Futures: The Canadian Dollar large speculator standing this week came in at a net position of -7,007 contracts in the data reported through Tuesday. This was a weekly boost of 5,680 contracts from the previous week which had a total of -12,687 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 33.7 percent. The commercials are Bullish with a score of 68.5 percent and the small traders (not shown in chart) are Bearish with a score of 44.4 percent. CANADIAN DOLLAR Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 22.5 51.5 24.0 – Percent of Open Interest Shorts: 27.6 51.7 18.6 – Net Position: -7,007 -327 7,334 – Gross Longs: 30,520 70,006 32,660 – Gross Shorts: 37,527 70,333 25,326 – Long to Short Ratio: 0.8 to 1 1.0 to 1 1.3 to 1 NET POSITION TREND:       – Strength Index Score (3 Year Range Pct): 33.7 68.5 44.4 – Strength Index Reading (3 Year Range): Bearish Bullish Bearish NET POSITION MOVEMENT INDEX:       – 6-Week Change in Strength Index: -30.7 32.5 -21.5   Australian Dollar Futures: The Australian Dollar large speculator standing this week came in at a net position of -48,682 contracts in the data reported through Tuesday. This was a weekly decline of -3,236 contracts from the previous week which had a total of -45,446 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 39.7 percent. The commercials are Bullish with a score of 57.0 percent and the small traders (not shown in chart) are Bearish with a score of 46.5 percent. AUSTRALIAN DOLLAR Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 21.4 63.1 12.8 – Percent of Open Interest Shorts: 53.1 29.9 14.4 – Net Position: -48,682 51,128 -2,446 – Gross Longs: 32,897 97,031 19,659 – Gross Shorts: 81,579 45,903 22,105 – Long to Short Ratio: 0.4 to 1 2.1 to 1 0.9 to 1 NET POSITION TREND:       – Strength Index Score (3 Year Range Pct): 39.7 57.0 46.5 – Strength Index Reading (3 Year Range): Bearish Bullish Bearish NET POSITION MOVEMENT INDEX:       – 6-Week Change in Strength Index: -18.4 22.6 -25.6   New Zealand Dollar Futures: The New Zealand Dollar large speculator standing this week came in at a net position of -18,724 contracts in the data reported through Tuesday. This was a weekly boost of 597 contracts from the previous week which had a total of -19,321 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 39.8 percent. The commercials are Bullish with a score of 63.3 percent and the small traders (not shown in chart) are Bearish with a score of 21.5 percent. NEW ZEALAND DOLLAR Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 16.6 76.2 5.0 – Percent of Open Interest Shorts: 50.6 37.4 9.8 – Net Position: -18,724 21,374 -2,650 – Gross Longs: 9,179 42,010 2,762 – Gross Shorts: 27,903 20,636 5,412 – Long to Short Ratio: 0.3 to 1 2.0 to 1 0.5 to 1 NET POSITION TREND:       – Strength Index Score (3 Year Range Pct): 39.8 63.3 21.5 – Strength Index Reading (3 Year Range): Bearish Bullish Bearish NET POSITION MOVEMENT INDEX:       – 6-Week Change in Strength Index: -32.0 32.2 -20.4   Mexican Peso Futures: The Mexican Peso large speculator standing this week came in at a net position of 35,449 contracts in the data reported through Tuesday. This was a weekly rise of 5,657 contracts from the previous week which had a total of 29,792 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 42.5 percent. The commercials are Bullish with a score of 56.1 percent and the small traders (not shown in chart) are Bullish with a score of 62.9 percent. MEXICAN PESO Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 53.8 41.8 3.5 – Percent of Open Interest Shorts: 37.1 60.6 1.3 – Net Position: 35,449 -40,143 4,694 – Gross Longs: 114,480 88,894 7,396 – Gross Shorts: 79,031 129,037 2,702 – Long to Short Ratio: 1.4 to 1 0.7 to 1 2.7 to 1 NET POSITION TREND:       – Strength Index Score (3 Year Range Pct): 42.5 56.1 62.9 – Strength Index Reading (3 Year Range): Bearish Bullish Bullish NET POSITION MOVEMENT INDEX:       – 6-Week Change in Strength Index: 5.9 -5.8 0.6   Brazilian Real Futures: The Brazilian Real large speculator standing this week came in at a net position of 45,316 contracts in the data reported through Tuesday. This was a weekly gain of 6,602 contracts from the previous week which had a total of 38,714 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish-Extreme with a score of 94.9 percent. The commercials are Bearish-Extreme with a score of 4.8 percent and the small traders (not shown in chart) are Bullish-Extreme with a score of 92.3 percent. BRAZIL REAL Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 71.3 22.4 5.9 – Percent of Open Interest Shorts: 10.2 86.7 2.7 – Net Position: 45,316 -47,670 2,354 – Gross Longs: 52,896 16,595 4,372 – Gross Shorts: 7,580 64,265 2,018 – Long to Short Ratio: 7.0 to 1 0.3 to 1 2.2 to 1 NET POSITION TREND:       – Strength Index Score (3 Year Range Pct): 94.9 4.8 92.3 – Strength Index Reading (3 Year Range): Bullish-Extreme Bearish-Extreme Bullish-Extreme NET POSITION MOVEMENT INDEX:       – 6-Week Change in Strength Index: 0.7 -0.6 -1.6     Bitcoin Futures: The Bitcoin large speculator standing this week came in at a net position of 403 contracts in the data reported through Tuesday. This was a weekly decline of -446 contracts from the previous week which had a total of 849 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish-Extreme with a score of 91.5 percent. The commercials are Bearish with a score of 23.2 percent and the small traders (not shown in chart) are Bearish-Extreme with a score of 15.2 percent. BITCOIN Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 79.6 1.5 9.5 – Percent of Open Interest Shorts: 75.9 6.1 8.6 – Net Position: 403 -503 100 – Gross Longs: 8,680 159 1,033 – Gross Shorts: 8,277 662 933 – Long to Short Ratio: 1.0 to 1 0.2 to 1 1.1 to 1 NET POSITION TREND:       – Strength Index Score (3 Year Range Pct): 91.5 23.2 15.2 – Strength Index Reading (3 Year Range): Bullish-Extreme Bearish Bearish-Extreme NET POSITION MOVEMENT INDEX:       – 6-Week Change in Strength Index: 11.3 -20.4 -6.1   Article By InvestMacro – Receive our weekly COT Reports by Email *COT Report: The COT data, released weekly to the public each Friday, is updated through the most recent Tuesday (data is 3 days old) and shows a quick view of how large speculators or non-commercials (for-profit traders) were positioned in the futures markets. The CFTC categorizes trader positions according to commercial hedgers (traders who use futures contracts for hedging as part of the business), non-commercials (large traders who speculate to realize trading profits) and nonreportable traders (usually small traders/speculators) as well as their open interest (contracts open in the market at time of reporting).See CFTC criteria here.
The Swing Overview - Week 22 2022

The Swing Overview - Week 22 2022

Purple Trading Purple Trading 07.06.2022 13:59
The Swing Overview - Week 22 Equity indices continued to rise for a second week despite rising inflation and sanctions against Russia. Economic data indicate optimistic consumer expectations and the easing of the Covid-19 measures in China also brought some relief to the markets. The Bank of Canada raised its policy rate to 1.5%. The Eurozone inflation hit a new record of 8.1%, giving further fuel to the ECB to raise interest rates, which is supporting the euro to strengthen.   Macroeconomic data The US consumer confidence in economic growth for May came in at 106.4. The market was expecting 103.9. This optimism points to an expected increase in consumer spendings, which is a positive development. The optimism was also confirmed by data from the manufacturing sector. The ISM PMI index in manufacturing rose by 56.1 in May, an improvement on the April reading of 55.4. The manufacturing sector is therefore expecting further expansion.   On the other hand, data from the labour market were disappointing. The ADP Non Farm Employment indicator (private sector job growth) was well below expectations as the economy created only 128k new jobs in May (the market was expecting 300k new jobs). The unemployment claims data held at the standard 200k level. However, the crucial indicator from the labour market will be Friday's NFP data.   Quarterly wage growth for 1Q 2022 was 12.6% (previous quarter was 3.9%). This figure is a leading indicator on inflation. Faster inflation growth could lead to a higher-than-expected 0.50% rate hike at the Fed's June meeting.   The US 10-year Treasury yields have rebounded from 2.6% and have started to rise again. They are currently around 2.9%. However, the US Dollar Index has not yet reacted to the rise in yields. The reason is that the euro, which has appreciated significantly in recent days, has the largest weight in the USD index. Figure 1: US 10-year bond yields and USD index on the daily chart   The SP 500 Index The SP 500 index has continued to strengthen in recent days. The market seems to be accepting the expected 0.50% rate hike and while economic data points to some slowdown, forward looking consumers‘ and managers’ expectations are optimistic.  Figure 2: The SP 500 on H4 and D1 chart   The US SP 500 index is approaching a significant resistance level, which is in the 4,197-4,204 range. The next one is at 4,293 - 4,306. The nearest support is at 4 075 - 4 086.    German DAX index Figure 3: German DAX index on H4 and daily chart Germany's manufacturing PMI for May came in at 54.8. The previous month it was 54, 6. Thus, managers expect expansion in the manufacturing sector. Surprisingly, German exports rose in April despite the disruption of trade relations with Russia. Exports in Germany grew by 4.4% even though exports to Russia fell by 10%.  The positive data has an impact on the DAX index. However, the bulls in DAX may be discouraged by the expected ECB interest rate hike.   The DAX has reached resistance in the 14,600 - 14,640 area. The nearest significant support is at 14,300 - 14,330, where the horizontal resistance is coincident with the moving average EMA 50 on the H4 chart.   The euro continues to rise Bulls on the euro were supported by inflation data, which reached a record high of 8.1% in the eurozone for the month of May. Inflation increased by 0.8% on a monthly basis compared to April. Information from the manufacturing sector exceeded expectations, with the manufacturing PMI for May coming in at 54.6, indicating optimism in the economy. The ECB will meet on Thursday 9/6/2022 and it might be surprising. While analysts do not expect a rate hike at this meeting, rising inflation may prompt the ECB to act faster.  Figure 4: The EUR/USD on H4 and daily chart The EUR/USD currency pair is reacting to the rate hike expectations by gradual strengthening. A resistance is at 1.0780 The nearest support is now at 1.0629 - 1.0640 and then at 1.0540 - 1.0550.   The Bank of Canada raised the interest rate The GDP in Canada for Q1 2022 grew by 2.89% year-on-year (3.23% in the previous period). On a month-on-month basis, the GDP grew by 0.7% (0.9% in February). This points to slowing economic growth.  Canada's manufacturing PMI for May came in at 56.8 (56.2 in April ), an upbeat development. The Bank of Canada raised its policy rate by 0.50% to 1.5% as expected by analysts. In addition to the rate hike, the Canadian dollar is positively affected by the rise in oil prices as Canada is a major exporter. Figure 5: The USD/CAD on H4 and daily chart The USD/CAD currency pair is currently in a downward movement. The nearest resistance according to the daily chart is 1.2710-1.2730. Support according to the daily chart is in the range of 1.2400-1.2470.  
Positions of large speculators according to the COT report as at 31/5/2022

Positions of large speculators according to the COT report as at 31/5/2022

Purple Trading Purple Trading 07.06.2022 15:38
Positions of large speculators according to the COT report as at 31/5/2022 Total net speculator positions on the USD index fell by 501 contracts last week to 37,538 contracts. This change is the result of an increase in long positions by 1,184 contracts and an increase in short positions by 1,685 contracts. Significant fact is the further bullish movement in speculators' positions for the euro currency futures contracts. This week, the euro speculators increased their bullish positions for the fourth consecutive week and the sixth time in the last ten weeks. Over the past four weeks, speculators' total net positions in the euro have increased by a total of +58,650 contracts, from -6,378 net positions on May 3 to a total of +52,272 net positions last week. Total net positions for the euro are the highest in twelve weeks. The recent improvement in euro positions has come with a very significant change in sentiment, as just four weeks ago the total position had fallen into bearish territory. Sentiment in the euro was so bad that analysts were talking about the inevitable decline of the euro to parity against the dollar. Recently, however, expectations have been growing that the European Central Bank will become more hawkish on interest rates in the near future and end its negative interest rate policy, causing the euro to strengthen. In addition to the euro, speculators' total net positions rose on the British pound, the New Zealand dollar, the Canadian dollar and the Japanese yen. On the Australian dollar and the Swiss franc, total net positions fell last week. The positions of speculators in individual currencies The total net positions of large speculators are shown in Table 1: If the value is positive then the large speculators are net long. If the value is negative, the large speculators are net short. Table 1: Total net positions of large speculators DatE USD Index EUR GBP AUD NZD JPY CAD CHF May 31, 2022 37538 52272 -74105 -48682 -18724 -94439 -7007 -20458 May 24, 2022 38039 38930 -80372 -45446 -19321 -99444 -12687 -19673 May 17, 2022 36213 20339 -79241 -44642 -17767 -102309 -14496 -16592 May 10, 2022 34776 16529 -79598 -41714 -12996 -110454 -5407 -15763 May 03, 2022 33071 -6378 -73813 -28516 -6610 -100794 9029 -13907 Apr 26, 2022 33879 22201 -69621 -27651 66 -95535 20881 -12869   Note: The explanation of COT methodolody is at the the end of the report.   Notes: Large speculators are traders who trade large volumes of futures contracts, which, if the set limits are met, must be reported to the Commodity Futures Trading Commission. Typically, this includes traders such as funds or large banks. These traders mostly focus on trading long-term trends and their goal is to make money on speculation with the instrument. ​The total net positions of large speculators are the difference between the number of long contracts and the number of short contracts of large speculators. Positive value shows that large speculators are net long. Negative value shows that large speculators are net short. The data is published every Friday and is delayed because it shows the status on Tuesday of the week. The total net positions of large speculators show the sentiment this group has in the market. A positive value of the total net positions of speculators indicates bullish sentiment, a negative value of total net positions indicates bearish sentiment. When interpreting charts and values, it is important to follow the overall trend of total net positions. The turning points are also very important, i.e. the moments when the total net positions go from a positive value to a negative one and vice versa. Important are also extreme values ​​of total net positions as they often serve as signals of a trend reversal. Sentiment according to the reported positions of large players in futures markets is not immediately reflected in the movement of currency pairs. Therefore, information on sentiment is more likely to be used by traders who take longer trades and are willing to hold their positions for several weeks or even months.   Detailed analysis of selected currencies   Explanations:   Purple line and histogram: this is information on the total net position of large speculators. This information shows the strength and sentiment of an ongoing trend. It is the indicator r_COT Large Speculators (by Kramsken) in www.tradingview.com. Information on the positions of so-called hedgers is not shown in the chart, due to the fact that their main goal is not speculation, but hedging. Therefore, this group usually takes the opposite positions than the large speculators. For this reason, the positions of hedgers are inversely correlated with the movement of the price of the underlying asset. However, this inverse correlation shows the ongoing trend less clearly than the position of large speculators.​ We show moving average SMA 100 (blue line) and EMA 50 (orange line) on daily charts. ​Charts are made with the use of www.tradingview.com. The source of numerical data is www.myfxbook.com     The Euro   date Open Interest Specs Long Specs Short Specs Net positions change Open Interest change Long change Short change Net Positions Sentiment May 31, 2022 706317 236553 184281 52272 -2621 -519 -13861 13342 Bullish May 24, 2022 708938 237072 198142 38930 2226 6302 -12289 18591 Bullish May 17, 2022 706712 230770 210431 20339 1666 2540 -1270 3810 Bullish May 10 2022 705046 228230 211701 16529 10120 19781 3126 22907 Bullish May 03, 2022 694926 208449 214827 -6378 6477 -14544 14035 -28579 Bearish Apr 26, 2022 688449 222993 200792 22201 12510 1990 11090 -9100 Weak bullish         Total change 30378 15550 -5421 20971     Figure 1: The euro and COT positions of large speculators on a weekly chart and the EUR/USD on D1   The total net positions of speculators reached 52,272 contracts last week, up by 13,342 contracts compared to the previous week. This change is due to a decrease in long positions by 519 contracts and a decrease in short positions by 13,861 contracts. This data suggests bullish sentiment as the total net positions are positive while there has been an increase. Open interest fell by 2,621 contracts in the last week. This shows that the move that occurred in the euro last week was not supported by the volume and it was therefore a weak price action. The price has reached the EMA 50 moving average on the daily chart, at which it is oscillating, showing that there is a resistance here. Long-term resistance: 1.0800 – 1.0840 Support: 1.0620 – 1-0630. The next support is in the zone 1.0340 – 1.0420.   The British pound   date Open Interest Specs Long Specs Short Specs Net positions change Open Interest change Long change Short change Net Positions Sentiment May 31, 2022 252881 30788 104893 -74105 -983 4852 -1415 6267 Weak bearish May 24, 2022 253864 25936 106308 -80372 53 -677 454 -1131 Bearish May 17, 2022 253811 26613 105854 -79241 -10783 -2856 -3213 357 Weak bearish May 10, 2022 264594 29469 109067 -79598 -3902 -4067 1718 -5785 Bearish May 03, 2022 268496 33536 107349 -73813 -4296 -6900 -2708 -4192 Bearish Apr 26, 2022 272792 40436 110057 -69621 23263 3625 14332 -10707 Bearish         Total change 3352 -6023 9168 -15191     Figure 2: The GBP and COT positions of large speculators on a weekly chart and the GBP/USD on D1 The total net positions of speculators last week amounted to 74,105 contracts, up by 6,267 contracts compared to the previous week. This change is due to an increase in long positions by 4,852 contracts and a decrease in short positions by 1,415 contracts. This indicates weak bearish sentiment as the total net positions of large speculators are negative, but at the same time there has been an increase in total net positions. The open interest fell by 983 contracts last week, indicating that the downward movement in the pound that occurred last week was not supported by the volume and it was therefore a weak price action. Long-term resistance: 1.2700 – 1.2760.    Support: 1.2160 – 1.2200.     The Australian dollar   date Open Interest Specs Long Specs Short Specs Net positions change Open Interest change Long change Short change Net Positions Sentiment May 31, 2022 153661 32897 81579 -48682 -4954 -3682 -446 -3236 Bearish May 24, 2022 158615 36579 82025 -45446 -5194 -4894 -4090 -804 Bearish May 17, 2022 163809 41473 86115 -44642 10600 4604 7532 -2928 Bearish May 10, 2022 153209 36869 78583 -41714 952 -10126 3072 13198 Bearish May 03, 2022 152257 46995 75511 -28516 5167 -110 755 -865 Bearish Apr 26, 2022 147090 47105 74756 -27651 -219 7904 6718 1186 Weak bearish         Total change 6352 -6304 13541 -19845     Figure 3: The AUD and COT positions of large speculators on a weekly chart and the AUD/USD on D1 The total net positions of speculators last week amounted to 48,682 contracts, down by 3,236 contracts compared to the previous week. This change is due to a decrease in long positions by 3,682 contracts and a decrease in short positions by 446 contracts. This data suggests bearish sentiment on the Australian dollar, as the total net positions of large speculators are negative, while at the same time there has been a further decline in the past week. There was a decline in open interest of 4,954 contracts last week. This means that the upward movement that occurred last week was not supported by the volume and it was therefore weak price action. The price has currently reached the horizontal resistance at 0.7260 where a reaction occurred. If this resistance is  broken, a further bullish movement could continue. Long-term resistance: 0.7250-0.7260                                                                                                              Long-term support: 0.6830-0.6850     The New Zealand dollar   date Open Interest Specs Long Specs Short Specs Net positions change Open Interest change Long change Short change Net Positions Sentiment May 31, 2022 55134 9179 27903 -18724 -4145 -1570 -2167 597 Weak bullish May 24, 2022 59279 10749 30070 -19321 -1525 -4249 -2695 -1554 Bearish May 17, 2022 60804 14998 32765 -17767 4569 -205 4566 -4771 Bearish May 10, 2022 56235 15203 28199 -12996 5391 -2224 4162 -6386 Bearish May 03, 2022 50844 17427 24037 -6610 4334 -4658 2018 -6676 Bearish Apr 26, 2022 46510 22085 22019 66 5412 3004 3303 -299 Weak bullish         Total change 14036 -9902 9187 -19089     Figure 4: The NZD and the position of large speculators on a weekly chart and the NZD/USD on D1 The total net positions of speculators reached -18,724 contracts last week, having grown by 597 contracts compared to the previous week. This change is due to a decrease in long positions by 1,570 contracts and a decrease in short positions by 2,167 contracts. This data suggests that there has been a weakening of bearish sentiment on the New Zealand Dollar over the past week as the total net positions of large speculators are negative, but there has also been an increase in total net positions. The open interest fell by 4,145 contracts last week.  The move in NZD/USD that occurred last week was not supported by the volume and therefore the move was weak. The NZD/USD has reached the resistance band at 0.6570 and also the EMA 50 moving average on the daily chart, which is a strong confluence and there has already been some bearish reaction there. If this resistance is broken, further strengthening could occur.  Long-term resistance: 0.6540 – 0.6560 Long-term support: 0.6220 – 0.6280     Explanation to the COT report The COT report shows the positions of major participants in the futures markets. Futures contracts are derivatives and are essentially agreements between two parties to exchange an underlying asset for a predetermined price on a predetermined date. They are standardised, specifying the quality and quantity of the underlying asset. They are traded on an exchange so that the total volume of these contracts traded is known.   Open interest: open interest is the sum of all open futures contracts (i.e. the sum of short and long contracts) that exist on a given asset. OI increases when a new futures contract is created by pairing a buyer with a seller. The OI decreases when an existing futures contract expires at a given expiry time or by settlement. Low or no open interest means that there is no interest in the market. High open interest indicates high activity and traders pay attention to this market. A rising open interest indicates that there is demand for the currency. That is, a rising OI indicates a strong current trend. Conversely, a weakening open interest indicates that the current trend is not strong. Open Interest Price action Interpretation Notes Rising Rising Strong bullish market New money flow in the particular asset, more bulls entered the market which pushes the price up. The trend is strong. Rising Falling Strong bearish market Price falls, more bearish traders entered the market which pushes the price down. The trend is strong. Falling Rising Weak bullish market Price is going up but new money do not flow into the market. Existing futures contracts expire or are closed. The trend is weak. Falling Falling Weak bearish market Price is going down, but new money do not flow into the market. Existing futures expire or are closed, the trend is weak.   Large speculators are traders who trade large volumes of futures contracts, which, if the set limits are met, must be reported to the Commodity Futures Trading Commission. Typically, this includes traders such as funds or large banks. These traders mostly focus on trading long-term trends and their goal is to make money on speculation with the instrument. Traders should try to trade in the direction of these large speculators. The total net positions of large speculators are the difference between the number of long contracts and the number of short contracts of large speculators. Positive value shows that large speculators are net long. Negative value shows that large speculators are net short. The data is published every Friday and is delayed because it shows the status on Tuesday of the week. The total net positions of large speculators show the sentiment this group has in the market. A positive value of the total net positions of speculators indicates bullish sentiment, a negative value of total net positions indicates bearish sentiment. When interpreting charts and values, it is important to follow the overall trend of total net positions. The turning points are also very important, i.e. the moments when the total net positions go from a positive value to a negative one and vice versa. Important are also extreme values ​​of total net positions as they often serve as signals of a trend reversal. The COT data are usually reported every Friday and they show the status on Tuesday of the week. Sentiment according to the reported positions of large players in futures markets is not immediately reflected in the movement of currency pairs. Therefore, information on sentiment is more likely to be used by traders who take longer trades and are willing to hold their positions for several weeks or even months.
Serious liquidity crisis? According to Franklin Templeton, a massive, but unlikely deposit flight from Credit Suisse would have to happen

ECB Interest Rate Announcement Due Tomorrow Offers Euro Support (EUR/USD, EUR/GBP), JPY Facing Negative Outlook (USD/JPY), Potential For A Hawkish SNB Offers CHF Support (USD/CHF)

Rebecca Duthie Rebecca Duthie 08.06.2022 16:22
Summary: Markets are becoming more optimistic around hopes of a more hawkish European Central Bank (ECB). Firmer oil prices adding to downward pressure on JPY. Strong market expectations of a more hawkish Swiss National Bank (SNB). Read next: DOW 30 Turbulent In The Wake Of Targets (TGT) Profit Warning, Japanese Yen Suffering From BoJ Monetary Easing  Euro holds steady The market is reflecting mixed signals for this currency pair. The markets are becoming more optimistic around hopes of a more hawkish European Central Bank (ECB) tomorrow after adding a couple more basis points to the yearly forecasts. There has been talk of a 50bps hike in July and rumors of a possible hike on Thursday, it is likely that the market could see a change in ECB tone which has allowed the Euro to remain resilient against the US Dollar. On Wednesday, the market opened with strong economic Q1 data for the eurozone. The euro did not react instantly to the release of this data, likely due to its delay. EUR/USD Price Chart Anticipation of ECBs announcement offers Euro support The market is reflecting mixed signals for this currency pair. The Euro has gained against the pound sterling ahead of the market awaiting the European Central Banks (ECB) interest rate announcement, which is due tomorrow. Earlier in the trading week the pound sterling rallied in response to the news of Boris Johnssons vote of no confidence. If the ECB announces an interest rate hike in July, the pound sterling currency could be under pressure against the Euro. EUR/GBP Price Chart Negative outlook for Japanese Yen is likely to continue The market is reflecting bullish signals for this currency pair. In addition to the Bank of Japan (BoJ) continuing its monetary easing, firmer oil prices have added to the downward pressure on the Japanese Yen and both of these factors will continue to add to the negative outlook for the safe-haven currency. USD/JPY Price Chart CHF holding its position in the market The market is reflecting bullish signals for this currency pair. The Swiss Franc has recovered against the US Dollar in comparison to the lows experienced in mid-May when the US Dollar was at its strongest, the recovery comes in the wake of market expectations of a more hawkish Swiss National Bank (SNB). the expectations come from indications from policy makers that the SNB will increase its interest rates for the first time since the 2008 financial crisis. USD/CHF Price Chart Sources: finance.yahoo.com, poundsterlinglive.com, dailyfx.com
The EUR/AUD Pair May Have The Potential To Continue Its Decline

Eurozone May Experience Slowdown In Growth, But FX Pairs With EUR (EUR/USD, EUR/GBP) And Inflation Definitely Needs A Solution

ING Economics ING Economics 08.06.2022 16:12
Persistent headwinds are pushing the eurozone into a 'muddling through' scenario, and there is a high probability that the region will see one quarter of negative growth this year. But sticky inflation and higher inflation expectations will force the European Central Bank to abandon negative interest rates in the third quarter Muddling through? President of EU Commission Ursula von der Leyen and European Council President Charles Michel at a summit this week in Brussels Content Farewell to negative interest rates Mixed feelings Not exactly the roaring twenties Higher inflation expectations Farewell to negative interest rates In a blog on the ECB’s website, President Christine Lagarde brought forward the growing consensus that has been building within the governing council, namely that stickier-thanexpected inflation requires the quick removal of non-conventional policy measures. A first rate hike in July looks like a near certainty and a 50bp increase cannot be excluded, especially if core inflation comes in higher than expected in the run-up to the July meeting. In any case, negative rates will have disappeared come September. It now seems that the ECB wants to seize the window of opportunity to normalise monetary policy. This requires policymakers to walk a fine line between the rising inflation expectations and economic headwinds. Sentiment divergence between consumers and businesses Source: Refinitiv Datastream Mixed feelings The first quarter showed an upwardly revised 0.3% quarter-on-quarter growth rate, but the second quarter looks more of a conundrum. There is no hard data yet and the sentiment data has been rather inconsistent. Since the start of the war in Ukraine, consumer confidence has dropped to recessionary levels, with the May reading showing hardly any improvement. However, business confidence figures have held up better while still declining. The flash eurozone PMI composite index came in at 54.9, firmly above the boom-or-bust 50 level. This is largely on the back of a strong services sector, which seems to be benefiting from some post-pandemic catch-up demand. Indeed, holiday reservations are back or even above pre-pandemic levels. In the manufacturing sector, the deceleration is more obvious on the back of renewed supply chain problems, higher input prices, and falling orders. Not exactly the roaring twenties There is no clear weakening yet in the labour market, but wages, although rising a bit more rapidly now, are definitely not keeping pace with inflation. At the same time, oil prices are climbing on the back of a (partial) European boycott of Russian oil, further sapping households’ purchasing power. As such, we don’t think that consumption will be a strong growth driver in the coming quarters. And businesses might also become more cautious in their investment plans. That said, there still seems to be a willingness among governments to support the weakest households with fiscal measures. And as the European Commission has proposed extending the escape clause for the Stability and Growth Pact into 2023, not a lot of fiscal tightening should be expected for the time being. We still believe the second or the third quarter of this year might see negative growth. Thereafter, we think the growth pattern will be pretty much in 'muddlingthrough' mode. That should still result in 2.3% GDP growth in 2022 and 1.6% in 2023. Not a recession, but not exactly the roaring twenties either. And downside risk prevails. Both headline and core inflation continue to surpass expectations Source: Refinitiv Datastream Higher inflation expectations Barring a strong increase in natural gas prices amid fewer imports (or a stoppage of supply) from Russia, inflation is probably close to its peak. In May, headline inflation rose to 8.1%, with core inflation at 3.8%. We expect the decrease to be very gradual and it might take until the second half of 2023 before headline inflation falls back below 2%. At the same time, longerterm consumer inflation expectations have now seen an upward shift to 3% in the most recent survey, which explains why the ECB wants to get rates out of negative territory pretty soon. In an interview in Cinco Días, Philip Lane, the ECB’s chief economist, made it very clear that this should be a done deal by September. What happens afterwards will be data-dependent. We don’t think a wage-price spiral will develop, as in the most recent wage agreements the increase foreseen for 2023 is only 2.4%, below the 3% the ECB considers consistent with its 2% inflation objective. That said, we can imagine that the ECB will want to get a bit closer to the elusive “neutral interest rate”. Therefore we think the deposit rate will be raised to 0.25% by year-end, moving to 0.50% in 1Q 2023. Thereafter, a long period of 'wait-and-see' might follow. Source: The eurozone’s muddling through at best | Article | ING Think TagsInflation GDP Eurozone ECB Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
The Euro May Attempt To Resume An Upward Movement

ECB officially ends its long era of unconventional monetary policy

ING Economics ING Economics 09.06.2022 14:21
The European Central Bank has just announced its stopping net asset purchases by the end of the month and pre-announced two rate hikes of 25bp each in July and September. The door for 50bp in September is set wide open ECB President, Christine Lagarde and President of De Nederlandsche Bank, Klaas Knot in Amsterdam   The ECB definitely pre-commits. In its just-announced policy decisions, the European Central Bank has not only made the upcoming 2.30 pm CET press conference less interesting but also laid out a clear path for the normalisation of monetary policy in the eurozone. The only open question is actually why the ECB hasn't already hiked interest rates today but intends to wait for lift-off until the next meeting on 21 July. The ECB's press release also includes the latest staff projections, showing that inflation is now expected to come in at 6.8% in 2022, 3.5% in 2023 and 2.1% in 2024. GDP growth is expected to come in at 2.8% in 2022, 2.1% in 2023 and 2.1% in 2024. Stagflation is the word in the eurozone. What did the ECB decide? Net asset purchases will end as of 1 July Reinvestments of the Pandemic Emergency Purchase Programme will continue at least until the end of 2024 and will remain the main instrument against a widening of yield spreads The policy rate remains unchanged, but the ECB announced it ‘intends’ to hike rates by 25bp in July and 25bp in September. The door for a rate hike of 50bp in September is wide open as the statement says, “If the medium-term inflation outlook persists or deteriorates, a larger increment will be appropriate at the September meeting.” Door open for 50bp in September With inflation running red hot but at the same time the eurozone economy slowing down and facing stagnation or even recession, the ECB’s window to normalise monetary policy has been narrowing almost by the day. Today’s decision shows it's managed to find a compromise between the doves and the hawks. A 50bp rate hike in July seemed to be fended off by opening the door for 50bp in September. The era of net asset purchases will come to an end in three weeks, and the era of negative interest rates will come to an end before the autumn. Simply put, the ECB just announced the end of a long era. Whether this will also be the start of a new era of continuously rising interest rates, however, is still far from certain. Read this article on THINK TagsMonetary policy Inflation Eurozone ECB Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
COT Week 23 Charts: Forex Speculators Positions mostly higher led by Canadian dollar & Swiss franc

COT Week 23 Charts: Forex Speculators Positions mostly higher led by Canadian dollar & Swiss franc

Invest Macro Invest Macro 12.06.2022 17:16
By InvestMacro | COT | Data Tables | COT Leaders | Downloads | COT Newsletter Here are the latest charts and statistics for the Commitment of Traders (COT) data published by the Commodities Futures Trading Commission (CFTC). The latest COT data is updated through Tuesday June 7th and shows a quick view of how large traders (for-profit speculators and commercial entities) were positioned in the futures markets. All currency positions are in direct relation to the US dollar where, for example, a bet for the euro is a bet that the euro will rise versus the dollar while a bet against the euro will be a bet that the euro will decline versus the dollar. COT Currencies market speculator bets were mostly higher this week as eight out of the eleven currency markets we cover had higher positioning this week while three markets had lower contracts. Leading the gains for currency markets was the Canadian dollar (5,945 contracts) and the Swiss franc (4,326 contracts) with the British pound sterling (3,295 contracts), Japanese yen (2,793 contracts), Brazil real (1,389 contracts), Australian dollar (786 contracts), US Dollar Index (400 contracts) and Bitcoin (87 contracts) also showing a positive week. Meanwhile, leading the declines in speculator bets this week were Mexican peso (-2,723 contracts) and Euro (-1,729 contracts) with New Zealand dollar (-1,047 contracts) also registering lower bets on the week. Currency Speculators Notes: US Dollar Index speculator bets have continued their upward climb in four out of the past five weeks as well as nine out of the past twelve weeks. USD Index remains in an extreme-bullish strength level and is very close (currently +37,938 contracts) to the highest net speculator position (+39,078 contracts on January 4th) of this recent bullish cycle, emphasizing the strong speculator bias. The Euro speculator position saw a pullback this week (-1,729 contracts) after huge gains in the previous three weeks (+58,650 contracts). Speculator sentiment is still pretty strong currently (+50,543 contracts) despite a very weak exchange rate (EURUSD at 1.0524 to close the week) and weak outlook for the Eurozone economy with rising inflation. British pound sterling speculator sentiment has crumbled in the past few months. The net speculator position managed to poke its head above its negative bias on February 15th with a total of +2,237 net contracts but sentiment has deteriorated since. From February 22nd to this week, speculator bets have dropped by a total of -73,047 contracts and recently hit a 139-week low on May 24th, the lowest level of speculator sentiment dating back to September of 2019. Japanese yen speculator positions are the most bearish of the major currencies just under -100,000 contracts. The USDJPY exchange rate is at a 20-year high and there has been no sign that the BOJ is interest in raising interest rates while other central banks commit to higher rates. These factors seem to say that the rout of the yen will continue ahead for some time (but how far can it go?). Commodity currency speculator bets are on the defensive lately. Australian dollar spec bets have fallen in five out of the past six weeks. Canadian dollar bets are now in bearish territory for a 5th straight week. New Zealand dollar speculator positions have declined in six out of the past seven weeks and the net position has now fallen to the lowest level since March of 2020 Strength scores (3-Year range of Speculator positions, from 0 to 100 where above 80 is extreme bullish and below 20 is extreme bearish) show that the Brazilian Real, US Dollar Index and Bitcoin are all in extreme-bullish levels at the current moment. On the opposite end of the extreme spectrum, the Japanese yen and the Swiss franc are very weak in relative speculator sentiment and sit in the extreme-bearish levels. Strength score trends (or move index, that calculate 6-week changes in strength scores) shows that the commodity currencies have been losing sentiment over the last six weeks. The Australian dollar, Canadian dollar and the New Zealand dollar have all had changes of at least -18.8 percent in their strength scores with the New Zealand dollar leading the decline with a -33.3 percent drop in six weeks. The US Dollar Index, Euro and Mexican Peso have had small but rising scores over the past six weeks. Data Snapshot of Forex Market Traders | Columns Legend Jun-07-2022 OI OI-Index Spec-Net Spec-Index Com-Net COM-Index Smalls-Net Smalls-Index USD Index 65,163 100 37,938 91 -41,863 5 3,925 59 EUR 730,667 95 50,543 51 -88,189 51 37,646 37 GBP 258,623 76 -70,810 23 80,465 77 -9,655 36 JPY 266,054 100 -91,646 12 109,109 89 -17,463 18 CHF 49,794 41 -16,132 16 27,216 87 -11,084 20 CAD 167,373 42 -1,062 40 -13,401 58 14,463 59 AUD 166,422 57 -47,896 40 47,413 54 483 54 NZD 63,540 70 -19,771 38 22,681 65 -2,910 19 MXN 248,184 72 32,726 41 -38,117 57 5,391 66 RUB 20,930 4 7,543 31 -7,150 69 -393 24 BRL 72,371 70 46,705 96 -48,954 4 2,249 91 Bitcoin 10,990 58 490 93 -529 0 39 14   US Dollar Index Futures: The US Dollar Index large speculator standing this week recorded a net position of 37,938 contracts in the data reported through Tuesday. This was a weekly lift of 400 contracts from the previous week which had a total of 37,538 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish-Extreme with a score of 91.2 percent. The commercials are Bearish-Extreme with a score of 5.0 percent and the small traders (not shown in chart) are Bullish with a score of 59.5 percent. US DOLLAR INDEX Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 85.1 3.2 8.9 – Percent of Open Interest Shorts: 26.9 67.5 2.8 – Net Position: 37,938 -41,863 3,925 – Gross Longs: 55,460 2,090 5,780 – Gross Shorts: 17,522 43,953 1,855 – Long to Short Ratio: 3.2 to 1 0.0 to 1 3.1 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 91.2 5.0 59.5 – Strength Index Reading (3 Year Range): Bullish-Extreme Bearish-Extreme Bullish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: 7.0 -8.8 13.4   Euro Currency Futures: The Euro Currency large speculator standing this week recorded a net position of 50,543 contracts in the data reported through Tuesday. This was a weekly reduction of -1,729 contracts from the previous week which had a total of 52,272 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish with a score of 50.5 percent. The commercials are Bullish with a score of 51.0 percent and the small traders (not shown in chart) are Bearish with a score of 36.7 percent. EURO Currency Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 31.5 50.0 12.5 – Percent of Open Interest Shorts: 24.6 62.1 7.3 – Net Position: 50,543 -88,189 37,646 – Gross Longs: 230,248 365,628 90,978 – Gross Shorts: 179,705 453,817 53,332 – Long to Short Ratio: 1.3 to 1 0.8 to 1 1.7 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 50.5 51.0 36.7 – Strength Index Reading (3 Year Range): Bullish Bullish Bearish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: 8.7 -11.9 22.7   British Pound Sterling Futures: The British Pound Sterling large speculator standing this week recorded a net position of -70,810 contracts in the data reported through Tuesday. This was a weekly increase of 3,295 contracts from the previous week which had a total of -74,105 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 23.0 percent. The commercials are Bullish with a score of 77.3 percent and the small traders (not shown in chart) are Bearish with a score of 35.6 percent. BRITISH POUND Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 13.4 74.1 8.4 – Percent of Open Interest Shorts: 40.8 43.0 12.1 – Net Position: -70,810 80,465 -9,655 – Gross Longs: 34,618 191,742 21,602 – Gross Shorts: 105,428 111,277 31,257 – Long to Short Ratio: 0.3 to 1 1.7 to 1 0.7 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 23.0 77.3 35.6 – Strength Index Reading (3 Year Range): Bearish Bullish Bearish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: -0.9 -4.4 17.9   Japanese Yen Futures: The Japanese Yen large speculator standing this week recorded a net position of -91,646 contracts in the data reported through Tuesday. This was a weekly boost of 2,793 contracts from the previous week which had a total of -94,439 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish-Extreme with a score of 12.4 percent. The commercials are Bullish-Extreme with a score of 88.9 percent and the small traders (not shown in chart) are Bearish-Extreme with a score of 18.0 percent. JAPANESE YEN Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 6.9 79.3 8.7 – Percent of Open Interest Shorts: 41.4 38.3 15.3 – Net Position: -91,646 109,109 -17,463 – Gross Longs: 18,466 210,889 23,226 – Gross Shorts: 110,112 101,780 40,689 – Long to Short Ratio: 0.2 to 1 2.1 to 1 0.6 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 12.4 88.9 18.0 – Strength Index Reading (3 Year Range): Bearish-Extreme Bullish-Extreme Bearish-Extreme NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: 2.4 -2.8 3.9   Swiss Franc Futures: The Swiss Franc large speculator standing this week recorded a net position of -16,132 contracts in the data reported through Tuesday. This was a weekly advance of 4,326 contracts from the previous week which had a total of -20,458 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish-Extreme with a score of 15.6 percent. The commercials are Bullish-Extreme with a score of 86.9 percent and the small traders (not shown in chart) are Bearish with a score of 20.0 percent. SWISS FRANC Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 5.2 69.3 18.8 – Percent of Open Interest Shorts: 37.6 14.6 41.1 – Net Position: -16,132 27,216 -11,084 – Gross Longs: 2,609 34,494 9,378 – Gross Shorts: 18,741 7,278 20,462 – Long to Short Ratio: 0.1 to 1 4.7 to 1 0.5 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 15.6 86.9 20.0 – Strength Index Reading (3 Year Range): Bearish-Extreme Bullish-Extreme Bearish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: -8.3 2.4 6.0   Canadian Dollar Futures: The Canadian Dollar large speculator standing this week recorded a net position of -1,062 contracts in the data reported through Tuesday. This was a weekly boost of 5,945 contracts from the previous week which had a total of -7,007 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 40.2 percent. The commercials are Bullish with a score of 57.6 percent and the small traders (not shown in chart) are Bullish with a score of 58.6 percent. CANADIAN DOLLAR Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 23.5 44.2 22.4 – Percent of Open Interest Shorts: 24.1 52.2 13.7 – Net Position: -1,062 -13,401 14,463 – Gross Longs: 39,288 74,044 37,463 – Gross Shorts: 40,350 87,445 23,000 – Long to Short Ratio: 1.0 to 1 0.8 to 1 1.6 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 40.2 57.6 58.6 – Strength Index Reading (3 Year Range): Bearish Bullish Bullish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: -23.8 14.2 9.7   Australian Dollar Futures: The Australian Dollar large speculator standing this week recorded a net position of -47,896 contracts in the data reported through Tuesday. This was a weekly increase of 786 contracts from the previous week which had a total of -48,682 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 40.4 percent. The commercials are Bullish with a score of 54.3 percent and the small traders (not shown in chart) are Bullish with a score of 53.6 percent. AUSTRALIAN DOLLAR Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 19.1 59.9 14.5 – Percent of Open Interest Shorts: 47.8 31.4 14.2 – Net Position: -47,896 47,413 483 – Gross Longs: 31,720 99,747 24,197 – Gross Shorts: 79,616 52,334 23,714 – Long to Short Ratio: 0.4 to 1 1.9 to 1 1.0 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 40.4 54.3 53.6 – Strength Index Reading (3 Year Range): Bearish Bullish Bullish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: -18.8 13.8 4.3   New Zealand Dollar Futures: The New Zealand Dollar large speculator standing this week recorded a net position of -19,771 contracts in the data reported through Tuesday. This was a weekly decline of -1,047 contracts from the previous week which had a total of -18,724 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 38.1 percent. The commercials are Bullish with a score of 65.4 percent and the small traders (not shown in chart) are Bearish-Extreme with a score of 18.5 percent. NEW ZEALAND DOLLAR Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 19.4 69.1 4.0 – Percent of Open Interest Shorts: 50.5 33.4 8.6 – Net Position: -19,771 22,681 -2,910 – Gross Longs: 12,310 43,890 2,538 – Gross Shorts: 32,081 21,209 5,448 – Long to Short Ratio: 0.4 to 1 2.1 to 1 0.5 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 38.1 65.4 18.5 – Strength Index Reading (3 Year Range): Bearish Bullish Bearish-Extreme NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: -33.3 31.2 -4.3   Mexican Peso Futures: The Mexican Peso large speculator standing this week recorded a net position of 32,726 contracts in the data reported through Tuesday. This was a weekly decline of -2,723 contracts from the previous week which had a total of 35,449 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 41.3 percent. The commercials are Bullish with a score of 56.9 percent and the small traders (not shown in chart) are Bullish with a score of 65.9 percent. MEXICAN PESO Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 48.0 35.4 3.4 – Percent of Open Interest Shorts: 34.8 50.8 1.2 – Net Position: 32,726 -38,117 5,391 – Gross Longs: 119,162 87,884 8,441 – Gross Shorts: 86,436 126,001 3,050 – Long to Short Ratio: 1.4 to 1 0.7 to 1 2.8 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 41.3 56.9 65.9 – Strength Index Reading (3 Year Range): Bearish Bullish Bullish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: 5.4 -6.1 8.3   Brazilian Real Futures: The Brazilian Real large speculator standing this week recorded a net position of 46,705 contracts in the data reported through Tuesday. This was a weekly boost of 1,389 contracts from the previous week which had a total of 45,316 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish-Extreme with a score of 96.3 percent. The commercials are Bearish-Extreme with a score of 3.5 percent and the small traders (not shown in chart) are Bullish-Extreme with a score of 91.1 percent. BRAZIL REAL Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 81.1 13.5 5.4 – Percent of Open Interest Shorts: 16.5 81.2 2.3 – Net Position: 46,705 -48,954 2,249 – Gross Longs: 58,657 9,780 3,931 – Gross Shorts: 11,952 58,734 1,682 – Long to Short Ratio: 4.9 to 1 0.2 to 1 2.3 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 96.3 3.5 91.1 – Strength Index Reading (3 Year Range): Bullish-Extreme Bearish-Extreme Bullish-Extreme NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: -0.2 -0.2 4.4   Bitcoin Futures: The Bitcoin large speculator standing this week recorded a net position of 490 contracts in the data reported through Tuesday. This was a weekly lift of 87 contracts from the previous week which had a total of 403 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish-Extreme with a score of 93.2 percent. The commercials are Bearish with a score of 21.6 percent and the small traders (not shown in chart) are Bearish-Extreme with a score of 13.8 percent. BITCOIN Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 81.5 1.5 9.7 – Percent of Open Interest Shorts: 77.1 6.4 9.3 – Net Position: 490 -529 39 – Gross Longs: 8,959 169 1,063 – Gross Shorts: 8,469 698 1,024 – Long to Short Ratio: 1.1 to 1 0.2 to 1 1.0 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 93.2 21.6 13.8 – Strength Index Reading (3 Year Range): Bullish-Extreme Bearish Bearish-Extreme NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: 1.5 -6.4 0.6   Article By InvestMacro – Receive our weekly COT Reports by Email *COT Report: The COT data, released weekly to the public each Friday, is updated through the most recent Tuesday (data is 3 days old) and shows a quick view of how large speculators or non-commercials (for-profit traders) were positioned in the futures markets. The CFTC categorizes trader positions according to commercial hedgers (traders who use futures contracts for hedging as part of the business), non-commercials (large traders who speculate to realize trading profits) and nonreportable traders (usually small traders/speculators) as well as their open interest (contracts open in the market at time of reporting).See CFTC criteria here.
The Swing Overview – Week 23 2022

The Swing Overview – Week 23 2022

Purple Trading Purple Trading 17.06.2022 08:53
The Swing Overview - Week 23 Major global stock indices broke through their support levels after several days of range movement in response to the tightening economy, the ongoing war in Ukraine, slowing economic growth and high inflation. The Reserve Bank of Australia raised its interest rate by 0.50%. The ECB decided to start raising interest rates by 0.25% from July 2022. The winner of last week is the US dollar, which continues to strengthen. Macroeconomic data Data from the US labour market was highly anticipated. The job creation indicator, the so-called NFP, surprised the markets positively. Analysts expected that 325,000 new jobs had been created in May. In fact, 390 thousand jobs were created in the US. Unemployment is at 3.6%. The information on the growth of hourly wages, which is a leading indicator of inflation, was important. Average hourly earnings rose 0.3% in May, less than analysts who expected 0.4%.   Unemployment claims reached 229,000 this week. This is the highest levels since 3/3/2022. However, this is not an extreme increase. The number of claims is still in the pre-pandemic average area. Nevertheless, it can be seen that since 7/4/2022, when the number of applications reached 166 thousand, the number of applications is slowly increasing and this indicator will be closely monitored.  The ISM index of purchasing managers in the US service sector reached 55.9 in May. This is lower than the previous month's reading of 57.1. A value above 50 still points to expansion in the sector although the decline in the reading indicates  economy.   The yield on the US 10-year bond is close to its peak and is currently around 3%. The rise in yields has been followed by a rise in the US dollar. The dollar index has surpassed 103. The reason for the strengthening of the dollar is the aggressive tightening of the economy by the US Fed, which began reducing the central bank's balance sheet on June 1, 2022. In practice, this means that the Fed will let expire the government bonds it previously bought as part of QE and will not reinvest them further. The first tranche of bonds will expire on June 15, so the effect of this operation remains to be seen. Figure 1: The US 10-year bond yields and USD index on the daily chart   The SP 500 Index The SP 500 index has been moving in a narrow range for the past few days between 4,200, where resistance is and 4,080, where support has been tested several times. This support was broken and has become the new resistance as we can see on the H4 chart.   Figure 2: The SP 500 on H4 and D1 chart   The catalyst for this strong initiation move is the strong US dollar and rising bond yields. Therefore, the current resistance is in the 4,075 - 4,085 range.  The nearest support is 3,965 - 3,970 according to the H4 chart. The next support is 3,879 - 3,907.   German DAX index Macroeconomic data that affected the DAX was manufacturing orders for April, which fell 2.7% month-on-month, while analysts were expecting a 0.3% rise. Industrial production in Germany rose by 0.7% in April (expectations were for 1.0%). The war in Ukraine has a strong impact on the weaker figures. The catalyst for breaking support was the ECB's decision to raise interest rates, which the bank will start implementing from July 2022. Figure 3: German DAX index on H4 and daily chart The DAX is below the SMA 100 moving average according to the daily and H4 chart. This shows a bearish sentiment. The nearest resistance is 14,300 - 14,335. Support is at 13,870 - 13,900 according to the H4 chart.   The ECB left the interest rate unchanged  The ECB left interest rates unchanged on June 9, 2022, so the key rate is still at 0.0%. However, the bank said that it will proceed with a rate hike from July, when the rate is expected to rise by 0.25%. The next hike will then be in September, probably again by 0.25%. The bank pointed to the high inflation rate, which is expected to reach 6.8% for 2022. Inflation is expected to fall to 3.4% in 2023 and 2.1% in 2024.  Figure 4: The EUR/USD on H4 and daily chart According to the bank, a significant risk is Russia's unjustified aggression against Ukraine, which is causing problems in supply chains and pushing energy and some commodity prices up. The result is a slowdown in the growth of the European economy. The bank also announced that it will end its asset purchase program as of July 1, 2022. This is the soft end of this program, as the money that will flow from matured assets will continue to be reinvested by the bank. In practice, this means that the ECB's balance sheet will not be further inflated, but for now, unlike the Fed’s balance sheet, the bank has no plans to reduce its balance sheet. This, coupled with the more moderate rate hike plans and the existence of the above risks, has supported the dollar and the euro has begun to weaken sharply in response to the ECB announcement. The resistance is 1.0760-1.0770. Current support at 1.063-1.064 is broken and it will become new resistance if the break is confirmed. The next support according to the H4 chart is 1.0530 - 1.0550.   Australian central bank surprises with aggressive approach In Australia, the central bank raised its policy rate by 0.50%. Analysts had expected the bank to raise the rate by 0.25%. Thus, the current rate on the Australian dollar is 0.80%. However, this aggressive increase did not strengthen the Australian dollar, which surprisingly weakened. The reason for this is the strong US dollar and also the risk off sentiment that is taking place in the equity indices.  Also impacting the Aussie is the situation in China, where there is zero tolerance of COVID-19. This will impact the country's economic growth, which is very likely to fall short of the 5.5% that was originally projected.  Figure 5: The AUD/USD on H4 and daily chart According to the H4 chart, the AUD/USD currency pair has broken below the SMA 100 moving average, which is a bearish signal. The nearest resistance is 0.7140 - 0.7150. The support is in the zone 0.7030 - 0.7040. 
Positions of large speculators according to the COT report as at 7/6/2022

Positions of large speculators according to the COT report as at 7/6/2022

Purple Trading Purple Trading 17.06.2022 10:30
Positions of large speculators according to the COT report as at 7/6/2022 Total net speculator positions on the USD index rose by 400 contracts last week to 37,938 contracts. This change is the result of a 600-contract increase in long positions and a 200-contract increase in short positions. On the euro, there was a decrease in total net positions after a significant previous increase. A reduction in total net positions also occurred on the New Zealand dollar last week. Increases in total net positions occurred last week on the British pound, the Australian dollar, the Japanese yen, the Canadian dollar, and the Swiss franc. The markets experienced high volatility last week, triggered by concerns that the economy was tightening more rapidly on the back of rising inflation. As a result, equity indices have continued to fall and this risk-off sentiment has led to a strengthening of the US dollar and a weakening of more or less all currencies tracked. The positions of speculators in individual currencies The total net positions of large speculators are shown in Table 1: If the value is positive then the large speculators are net long. If the value is negative, the large speculators are net short. Table 1: Total net positions of large speculators DatE USD Index EUR GBP AUD NZD JPY CAD CHF Jun 7, 2022    37938 50543 -70810 -47896 -19771 -91646 -1062 -16132 May 31, 2022 37538 52272 -74105 -48682 -18724 -94439 -7007 -20458 May 24, 2022 38039 38930 -80372 -45446 -19321 -99444 -12687 -19673 May 17, 2022 36213 20339 -79241 -44642 -17767 -102309 -14496 -16592 May 10, 2022 34776 16529 -79598 -41714 -12996 -110454 -5407 -15763 May 03, 2022 33071 -6378 -73813 -28516 -6610 -100794 9029 -13907   Note: The explanation of COT methodolody is at the the end of the report.   Notes: Large speculators are traders who trade large volumes of futures contracts, which, if the set limits are met, must be reported to the Commodity Futures Trading Commission. Typically, this includes traders such as funds or large banks. These traders mostly focus on trading long-term trends and their goal is to make money on speculation with the instrument. ​The total net positions of large speculators are the difference between the number of long contracts and the number of short contracts of large speculators. Positive value shows that large speculators are net long. Negative value shows that large speculators are net short. The data is published every Friday and is delayed because it shows the status on Tuesday of the week. The total net positions of large speculators show the sentiment this group has in the market. A positive value of the total net positions of speculators indicates bullish sentiment, a negative value of total net positions indicates bearish sentiment. When interpreting charts and values, it is important to follow the overall trend of total net positions. The turning points are also very important, i.e. the moments when the total net positions go from a positive value to a negative one and vice versa. Important are also extreme values ​​of total net positions as they often serve as signals of a trend reversal. Sentiment according to the reported positions of large players in futures markets is not immediately reflected in the movement of currency pairs. Therefore, information on sentiment is more likely to be used by traders who take longer trades and are willing to hold their positions for several weeks or even months.   Detailed analysis of selected currencies   Explanations:   Purple line and histogram: this is information on the total net position of large speculators. This information shows the strength and sentiment of an ongoing trend. It is the indicator r_COT Large Speculators (by Kramsken) in www.tradingview.com. Information on the positions of so-called hedgers is not shown in the chart, due to the fact that their main goal is not speculation, but hedging. Therefore, this group usually takes the opposite positions than the large speculators. For this reason, the positions of hedgers are inversely correlated with the movement of the price of the underlying asset. However, this inverse correlation shows the ongoing trend less clearly than the position of large speculators.​ We show moving average SMA 100 (blue line) and EMA 50 (orange line) on daily charts. ​Charts are made with the use of www.tradingview.com. The source of numerical data is www.myfxbook.com   The Euro   DatE Open Interest Specs Long Specs Short Specs Net positions Change Open Interest Change Long Change Short Change Net Positions Sentiment Jun 07, 2022 730667 230248 179705 50543 24350 -6305 -4576 -1729 Weak bullish May 31, 2022 706317 236553 184281 52272 -2621 -519 -13861 13342 Bullish May 24, 2022 708938 237072 198142 38930 2226 6302 -12289 18591 Bullish May 17, 2022 706712 230770 210431 20339 1666 2540 -1270 3810 Bullish May 10, 2022 705046 228230 211701 16529 10120 19781 -3126 22907 Bullish May 03, 2022 694926 208449 214827 -6378 6477 -14544 14035 -28579 Bearish         Total Change 42218 7255 -21087 28342     Figure 1: The euro and COT positions of large speculators on a weekly chart and the EUR/USD on D1 The total net positions of speculators reached 50 543 contracts last week, down by 1 729 contracts compared to the previous week. This change is due to a decrease in long positions by 6,305 contracts and a decrease in short positions by 4,576 contracts. This data suggests weak bullish sentiment as total net positions are positive but at the same time there has been a decline. Open interest rose by 24,350 contracts in the last week. This shows that the downward movement that occurred in the euro last week was supported by volume and it was therefore a strong price action. The price bounced off resistance at the EMA 50 moving average and is approaching horizontal support which is in the band at 1.0400. The weakening euro is a result of the ECB's approach to inflation. The ECB announced to raise the rate by 0.25% from July, which is significantly less than the interest rate increase implemented by the US Fed.  Long-term resistance: 1.0620 – 1.0650. The next resistance is at 1.0770-1.0780. Support: 1.0340 – 1.0420 The British pound DatE Open Interest Specs Long Specs Short Specs Net positions Change Open Interest Change Long change Short change Net Positions Sentiment Jun 7, 2022 258623 34618 105428 -70810 5742 3830 535 3295 Weak bullish May 31, 2022 252881 30788 104893 -74105 -983 4852 -1415 6267 Weak bearish May 24, 2022 253864 25936 106308 -80372 53 -677 454 -1131 Bearish May 17, 2022 253811 26613 105854 -79241 -10783 -2856 -3213 357 Weak bearish May 10 2022 264594 29469 109067 -79598 -3902 -4067 1718 -5785 Bearish May 03, 2022 268496 33536 107349 -73813 -4296 -6900 -2708 -4192 Bearish         Total Change -14169 -5818 -4629 -1189     Figure 2: The GBP and COT positions of large speculators on a weekly chart and the GBP/USD on D1 The total net positions of speculators last week reached - 70,810 contracts, having increased by 3,295 contracts compared to the previous week. This change is due to the growth in long positions by 3,830 contracts and the growth in short positions by 535 contracts. This suggests weak bearish sentiment as the total net positions of large speculators are negative, but at the same time there has been an increase in them. Open interest rose by 5742 contracts last week, indicating that the downward movement in the pound that occurred last week was supported by volume and it was therefore a strong price action. The pound is weakening strongly in the current risk off sentiment and has reached its long term support. Long-term resistance: 1.2440 – 1.2476.    Support: 1.2160 – 1.2200   The Australian dollar   DatE Open Interest Specs Long Specs Short Specs Net positions Change Open Interest Change Long Change Short Change Net Positions Sentiment Jun 7, 2022 166422 31720 79616 -47896 12761 -1177 -1963 786 Weak bearish May 31, 2022 153661 32897 81579 -48682 -4954 -3682 -446 -3236 Bearish May 24, 2022 158615 36579 82025 -45446 -5194 -4894 -4090 -804 Bearish May 17, 2022 163809 41473 86115 -44642 10600 4604 7532 -2928 Bearish May 10, 2022 153209 36869 78583 -41714 952 -10126 3072 13198 Bearish May 03, 2022 152257 46995 75511 -28516 5167 -110 755 -865 Bearish         Total Change 19332 -15385 4860 -20245     Figure 3: The AUD and COT positions of large speculators on a weekly chart and the AUD/USD on D1 The total net positions of speculators reached 47,896 contracts last week, up by 786 contracts compared to the previous week. This change is due to a decrease in long positions by 1,177 contracts and a decrease in short positions by 1,963 contracts. This data suggests weak bearish sentiment on the Australian dollar, as the total net positions of large speculators are negative, but at the same time there was an increase in them in the previous week. There was an increase in open interest of 12,761 contracts last week. This means that the downward movement that occurred last week on the AUD was supported by volume and it was therefore a strong price action. The Australian dollar is weakening sharply even though the Reserve Bank of Australia raised interest rates by 0.50% last week. The reason for this bearish decline is the current risk-off sentiment which is particularly threatening commodity currencies, which includes the Australian dollar. Long-term resistance: 0.7250-0.7260                                                                                                              Long-term support: 0.6830-0.6850  (the support zone begins at 0.6930 according to a weekly chart).   The New Zealand dollar   DatE Open Interest Specs Long Specs Short Specs Net positions Change Open Interest Change Long Change Short Change Net Positions Sentiment Jun 7, 2022 63540 12310 32081 -19771 8406 3131 4178 -1047 Bearish May 31, 2022 55134 9179 27903 -18724 -4145 -1570 -2167 597 Weak bearish May 24, 2022 59279 10749 30070 -19321 -1525 -4249 -2695 -1554 Bearish May 17, 2022 60804 14998 32765 -17767 4569 -205 4566 -4771 Bearish May 10, 2022 56235 15203 28199 -12996 5391 -2224 4162 -6386 Bearish May 03, 2022 50844 17427 24037 -6610 4334 -4658 2018 -6676 Bearish         Total Change 17030 -9775 10062 -19837     Figure 4: The NZD and the position of large speculators on a weekly chart and the NZD/USD on D1 The total net positions of speculators last week amounted to -19,771 contracts, down by 1,047 contracts compared to the previous week. This change is due to an increase in long positions by 3,131 contracts and an increase in short positions by 4,178 contracts. This data suggests that there has been bearish sentiment on the New Zealand Dollar over the past week as the total net positions of large speculators have been negative and there was further decline in them as well. Open interest rose by 8,406 contracts last week. The downward move in NZD/USD that occurred last week was supported by volume and therefore the move was strong. The NZD/USD bounced off the resistance band at 0.6570 and approached significant support. The decline in the New Zealand Dollar is mainly due to risk off sentiment in equity markets. Long-term resistance: 0.6540 – 0.6570 Long-term support: 0.6220 – 0.6280   Explanation to the COT report The COT report shows the positions of major participants in the futures markets. Futures contracts are derivatives and are essentially agreements between two parties to exchange an underlying asset for a predetermined price on a predetermined date. They are standardised, specifying the quality and quantity of the underlying asset. They are traded on an exchange so that the total volume of these contracts traded is known.   Open interest: open interest is the sum of all open futures contracts (i.e. the sum of short and long contracts) that exist on a given asset. OI increases when a new futures contract is created by pairing a buyer with a seller. The OI decreases when an existing futures contract expires at a given expiry time or by settlement. Low or no open interest means that there is no interest in the market. High open interest indicates high activity and traders pay attention to this market. A rising open interest indicates that there is demand for the currency. That is, a rising OI indicates a strong current trend. Conversely, a weakening open interest indicates that the current trend is not strong. Open Interest Price action Interpretation Notes Rising Rising Strong bullish market New money flow in the particular asset, more bulls entered the market which pushes the price up. The trend is strong. Rising Falling Strong bearish market Price falls, more bearish traders entered the market which pushes the price down. The trend is strong. Falling Rising Weak bullish market Price is going up but new money do not flow into the market. Existing futures contracts expire or are closed. The trend is weak. Falling Falling Weak bearish market Price is going down, but new money do not flow into the market. Existing futures expire or are closed, the trend is weak.   Large speculators are traders who trade large volumes of futures contracts, which, if the set limits are met, must be reported to the Commodity Futures Trading Commission. Typically, this includes traders such as funds or large banks. These traders mostly focus on trading long-term trends and their goal is to make money on speculation with the instrument. Traders should try to trade in the direction of these large speculators. The total net positions of large speculators are the difference between the number of long contracts and the number of short contracts of large speculators. Positive value shows that large speculators are net long. Negative value shows that large speculators are net short. The data is published every Friday and is delayed because it shows the status on Tuesday of the week. The total net positions of large speculators show the sentiment this group has in the market. A positive value of the total net positions of speculators indicates bullish sentiment, a negative value of total net positions indicates bearish sentiment. When interpreting charts and values, it is important to follow the overall trend of total net positions. The turning points are also very important, i.e. the moments when the total net positions go from a positive value to a negative one and vice versa. Important are also extreme values ​​of total net positions as they often serve as signals of a trend reversal. The COT data are usually reported every Friday and they show the status on Tuesday of the week. Sentiment according to the reported positions of large players in futures markets is not immediately reflected in the movement of currency pairs. Therefore, information on sentiment is more likely to be used by traders who take longer trades and are willing to hold their positions for several weeks or even months.
Currency Speculators boost US Dollar Index bets to 5-year high while Euro bets dip into bearish level

Currency Speculators boost US Dollar Index bets to 5-year high while Euro bets dip into bearish level

Invest Macro Invest Macro 18.06.2022 20:13
By InvestMacro | COT | Data Tables | COT Leaders | Downloads | COT Newsletter Here are the latest charts and statistics for the Commitment of Traders (COT) data published by the Commodities Futures Trading Commission (CFTC). The latest COT data is updated through Tuesday June 14th and shows a quick view of how large traders (for-profit speculators and commercial entities) were positioned in the futures markets. All currency positions are in direct relation to the US dollar where, for example, a bet for the euro is a bet that the euro will rise versus the dollar while a bet against the euro will be a bet that the euro will decline versus the dollar. There were many really large moves this week in the COT positioning as the data was recorded on Tuesday – just one day ahead of the Federal Reserve’s announcement of a 75 basis point increase in the US benchmark Fed Funds rate. Currency market speculator bets were mostly higher this week as eight out of the eleven currency markets (Russian ruble futures positions have not been updated by the CFTC since March) we cover had higher positioning this week while two markets had lower contracts. Leading the gains for currency market positions was the Canadian dollar (24,264 contracts) and the Japanese yen (21,891 contracts) with the New Zealand dollar (12,933 contracts), Swiss franc (9,324 contracts), US Dollar Index (6,538 contracts), British pound sterling (5,214 contracts), Australian dollar (4,642 contracts), Bitcoin (571 contracts) and Brazil real (508 contracts) also showing positive weeks. Meanwhile, leading the declines in speculator bets were the Mexican peso (-59,107 contracts) and the Euro (-56,561 contracts) this week. Currency Speculators Notes: US Dollar Index speculators raised their bullish bets for a second straight week this week and for the seventh time in the past ten weeks. These increases pushed the large speculator standing (+44,476 contracts) to the highest level in the past two hundred and seventy-three weeks, dating back more than five years to March 21st of 2017. The most bullish level ever was +81,270 contracts on March 10th of 2015. The US dollar strength keeps rolling along and the overall standing has now remained bullish for the past fifty consecutive weeks, dating back to July of 2021. The US Dollar Index price has continued its strength as well and reached a high this week of over 105.75 which is the best level for the DXY since back in December of 2002. Euro speculators sharply dropped their positions this week by the most on record with a huge decline of -56,561 contracts. This record decline beat out the previous high of -52,107 contracts that took place on June 19th of 2018. Euro bets had been gaining over the past month and were at a total of +50,543 contracts before this week’s sharp turnaround which has now tipped the overall spec positioning into bearish territory for the first time since January. Japanese yen speculator bets surged this week (+21,891 contracts) and gained for the fifth straight week. Yen speculator positions have been in bearish territory for over a year and have been extremely week since many central banks around the world started raising their interest rates. The Bank of Japan has not raised rates and has signaled that it will not do so, creating large interest rate differentials compared to the other major currencies. Despite the spec bets increase this week, the yen exchange rate came under further pressure this week with the USDJPY price closing over the 135.00 exchange rate (and remaining near 20-year highs). Mexican Peso speculator bets fell sharply by -59,381 contracts this week and flipped the MXN speculator positioning from bullish to bearish. The weekly speculator decline is the largest fall in the past thirteen weeks and the decrease into a bearish standing is the first time since March 29th. Canadian dollar bets jumped this week by the most in the past seventy-seven weeks and brought the speculator position back into bullish territory for the first time in six weeks. CAD speculator bets have now gained for four straight weeks and the overall spec standing is residing at the highest level since July 2021. New Zealand dollar speculators also boosted their bets this week after the NZD positions had dropped in six out of the previous seven weeks. This week’s rise in weekly bets was the most in the past thirteen weeks but the overall speculator standing remains in bearish territory for the seventh straight week. Strength scores (3-Year range of Speculator positions, from 0 to 100 where above 80 is extreme bullish and below 20 is extreme bearish) show that the US Dollar Index (100 percent), Bitcoin (100 percent) and the Brazilian Real (96.8 percent) are leading the strength scores and are all in extreme bullish positions. On the downside, the Mexican peso (16.1 percent) has fallen into extreme bearish positioning followed by the Japanese yen (25.9 percent) and British pound (26.7 percent) which are just above the 20 percent extreme bearish threshold. Strength score trends (or move index, that calculate 6-week changes in strength scores) shows that the US Dollar Index (19.5 percent), Japanese yen (19.1 percent) and Swiss franc (18 percent) have the highest six-week trend scores currently. The Mexican peso also leads the trends on the downside with a -17.5 percent trend change. Data Snapshot of Forex Market Traders | Columns Legend Jun-14-2022 OI OI-Index Spec-Net Spec-Index Com-Net COM-Index Smalls-Net Smalls-Index USD Index 61,144 91 44,476 100 -47,736 0 3,260 52 EUR 668,164 69 -6,018 33 -28,495 68 34,513 32 GBP 238,322 63 -65,596 27 81,063 78 -15,467 24 JPY 232,513 77 -69,755 26 86,443 78 -16,688 20 CHF 39,362 20 -6,808 39 18,147 72 -11,339 19 CAD 175,219 47 23,202 65 -30,284 43 7,082 44 AUD 142,857 39 -43,254 45 44,710 52 -1,456 49 NZD 45,410 35 -6,838 60 9,773 45 -2,935 18 MXN 197,375 48 -26,381 16 23,148 82 3,233 57 RUB 20,930 4 7,543 31 -7,150 69 -393 24 BRL 69,931 67 47,213 97 -48,458 4 1,245 79 Bitcoin 12,242 68 1,061 100 -947 0 -114 10   US Dollar Index Futures: The US Dollar Index large speculator standing this week resulted in a net position of 44,476 contracts in the data reported through Tuesday. This was a weekly boost of 6,538 contracts from the previous week which had a total of 37,938 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish-Extreme with a score of 100.0 percent. The commercials are Bearish-Extreme with a score of 0.0 percent and the small traders (not shown in chart) are Bullish with a score of 52.2 percent. US DOLLAR INDEX Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 86.9 2.9 9.1 – Percent of Open Interest Shorts: 14.2 80.9 3.8 – Net Position: 44,476 -47,736 3,260 – Gross Longs: 53,133 1,752 5,553 – Gross Shorts: 8,657 49,488 2,293 – Long to Short Ratio: 6.1 to 1 0.0 to 1 2.4 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 100.0 0.0 52.2 – Strength Index Reading (3 Year Range): Bullish-Extreme Bearish-Extreme Bullish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: 19.2 -19.1 7.1   Euro Currency Futures: The Euro Currency large speculator standing this week resulted in a net position of -6,018 contracts in the data reported through Tuesday. This was a weekly fall of -56,561 contracts from the previous week which had a total of 50,543 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 33.2 percent. The commercials are Bullish with a score of 67.9 percent and the small traders (not shown in chart) are Bearish with a score of 31.6 percent. EURO Currency Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 31.0 54.1 12.7 – Percent of Open Interest Shorts: 31.9 58.3 7.5 – Net Position: -6,018 -28,495 34,513 – Gross Longs: 206,986 361,159 84,823 – Gross Shorts: 213,004 389,654 50,310 – Long to Short Ratio: 1.0 to 1 0.9 to 1 1.7 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 33.2 67.9 31.6 – Strength Index Reading (3 Year Range): Bearish Bullish Bearish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: 0.1 -1.1 5.9   British Pound Sterling Futures: The British Pound Sterling large speculator standing this week resulted in a net position of -65,596 contracts in the data reported through Tuesday. This was a weekly lift of 5,214 contracts from the previous week which had a total of -70,810 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 26.7 percent. The commercials are Bullish with a score of 77.6 percent and the small traders (not shown in chart) are Bearish with a score of 23.6 percent. BRITISH POUND Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 12.3 77.2 8.7 – Percent of Open Interest Shorts: 39.8 43.2 15.1 – Net Position: -65,596 81,063 -15,467 – Gross Longs: 29,343 184,011 20,625 – Gross Shorts: 94,939 102,948 36,092 – Long to Short Ratio: 0.3 to 1 1.8 to 1 0.6 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 26.7 77.6 23.6 – Strength Index Reading (3 Year Range): Bearish Bullish Bearish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: 5.9 -4.7 -0.5   Japanese Yen Futures: The Japanese Yen large speculator standing this week resulted in a net position of -69,755 contracts in the data reported through Tuesday. This was a weekly boost of 21,891 contracts from the previous week which had a total of -91,646 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 25.9 percent. The commercials are Bullish with a score of 77.8 percent and the small traders (not shown in chart) are Bearish-Extreme with a score of 19.5 percent. JAPANESE YEN Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 14.0 75.6 9.6 – Percent of Open Interest Shorts: 44.0 38.4 16.8 – Net Position: -69,755 86,443 -16,688 – Gross Longs: 32,441 175,789 22,340 – Gross Shorts: 102,196 89,346 39,028 – Long to Short Ratio: 0.3 to 1 2.0 to 1 0.6 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 25.9 77.8 19.5 – Strength Index Reading (3 Year Range): Bearish Bullish Bearish-Extreme NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: 19.1 -16.5 5.7   Swiss Franc Futures: The Swiss Franc large speculator standing this week resulted in a net position of -6,808 contracts in the data reported through Tuesday. This was a weekly lift of 9,324 contracts from the previous week which had a total of -16,132 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 39.2 percent. The commercials are Bullish with a score of 72.4 percent and the small traders (not shown in chart) are Bearish-Extreme with a score of 19.1 percent. SWISS FRANC Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 10.9 66.2 22.9 – Percent of Open Interest Shorts: 28.2 20.1 51.7 – Net Position: -6,808 18,147 -11,339 – Gross Longs: 4,291 26,045 9,026 – Gross Shorts: 11,099 7,898 20,365 – Long to Short Ratio: 0.4 to 1 3.3 to 1 0.4 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 39.2 72.4 19.1 – Strength Index Reading (3 Year Range): Bearish Bullish Bearish-Extreme NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: 18.0 -19.8 17.9   Canadian Dollar Futures: The Canadian Dollar large speculator standing this week resulted in a net position of 23,202 contracts in the data reported through Tuesday. This was a weekly boost of 24,264 contracts from the previous week which had a total of -1,062 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish with a score of 65.4 percent. The commercials are Bearish with a score of 43.5 percent and the small traders (not shown in chart) are Bearish with a score of 44.3 percent. CANADIAN DOLLAR Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 32.3 45.1 16.8 – Percent of Open Interest Shorts: 19.0 62.4 12.7 – Net Position: 23,202 -30,284 7,082 – Gross Longs: 56,550 79,064 29,357 – Gross Shorts: 33,348 109,348 22,275 – Long to Short Ratio: 1.7 to 1 0.7 to 1 1.3 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 65.4 43.5 44.3 – Strength Index Reading (3 Year Range): Bullish Bearish Bearish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: 15.9 -14.4 6.3   Australian Dollar Futures: The Australian Dollar large speculator standing this week resulted in a net position of -43,254 contracts in the data reported through Tuesday. This was a weekly lift of 4,642 contracts from the previous week which had a total of -47,896 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 44.7 percent. The commercials are Bullish with a score of 52.2 percent and the small traders (not shown in chart) are Bearish with a score of 48.9 percent. AUSTRALIAN DOLLAR Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 22.2 59.9 14.9 – Percent of Open Interest Shorts: 52.4 28.6 16.0 – Net Position: -43,254 44,710 -1,456 – Gross Longs: 31,660 85,591 21,342 – Gross Shorts: 74,914 40,881 22,798 – Long to Short Ratio: 0.4 to 1 2.1 to 1 0.9 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 44.7 52.2 48.9 – Strength Index Reading (3 Year Range): Bearish Bullish Bearish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: -13.7 7.8 10.4   New Zealand Dollar Futures: The New Zealand Dollar large speculator standing this week resulted in a net position of -6,838 contracts in the data reported through Tuesday. This was a weekly increase of 12,933 contracts from the previous week which had a total of -19,771 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish with a score of 59.8 percent. The commercials are Bearish with a score of 45.5 percent and the small traders (not shown in chart) are Bearish-Extreme with a score of 18.2 percent. NEW ZEALAND DOLLAR Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 32.8 61.8 4.9 – Percent of Open Interest Shorts: 47.9 40.3 11.4 – Net Position: -6,838 9,773 -2,935 – Gross Longs: 14,894 28,062 2,236 – Gross Shorts: 21,732 18,289 5,171 – Long to Short Ratio: 0.7 to 1 1.5 to 1 0.4 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 59.8 45.5 18.2 – Strength Index Reading (3 Year Range): Bullish Bearish Bearish-Extreme NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: -0.4 -0.2 3.8   Mexican Peso Futures: The Mexican Peso large speculator standing this week resulted in a net position of -26,381 contracts in the data reported through Tuesday. This was a weekly reduction of -59,107 contracts from the previous week which had a total of 32,726 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish-Extreme with a score of 16.1 percent. The commercials are Bullish-Extreme with a score of 82.5 percent and the small traders (not shown in chart) are Bullish with a score of 56.7 percent. MEXICAN PESO Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 57.8 38.3 3.1 – Percent of Open Interest Shorts: 71.2 26.5 1.5 – Net Position: -26,381 23,148 3,233 – Gross Longs: 114,093 75,532 6,170 – Gross Shorts: 140,474 52,384 2,937 – Long to Short Ratio: 0.8 to 1 1.4 to 1 2.1 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 16.1 82.5 56.7 – Strength Index Reading (3 Year Range): Bearish-Extreme Bullish-Extreme Bullish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: -17.5 17.4 -2.9   Brazilian Real Futures: The Brazilian Real large speculator standing this week resulted in a net position of 47,213 contracts in the data reported through Tuesday. This was a weekly rise of 508 contracts from the previous week which had a total of 46,705 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish-Extreme with a score of 96.8 percent. The commercials are Bearish-Extreme with a score of 4.0 percent and the small traders (not shown in chart) are Bullish with a score of 79.4 percent. BRAZIL REAL Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 83.0 12.5 4.6 – Percent of Open Interest Shorts: 15.5 81.8 2.8 – Net Position: 47,213 -48,458 1,245 – Gross Longs: 58,023 8,711 3,197 – Gross Shorts: 10,810 57,169 1,952 – Long to Short Ratio: 5.4 to 1 0.2 to 1 1.6 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 96.8 4.0 79.4 – Strength Index Reading (3 Year Range): Bullish-Extreme Bearish-Extreme Bullish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: 5.3 -5.0 -4.0   Bitcoin Futures: The Bitcoin large speculator standing this week resulted in a net position of 1,061 contracts in the data reported through Tuesday. This was a weekly increase of 571 contracts from the previous week which had a total of 490 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish-Extreme with a score of 100.0 percent. The commercials are Bearish-Extreme with a score of 0.0 percent and the small traders (not shown in chart) are Bearish-Extreme with a score of 10.3 percent. BITCOIN Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 81.7 0.5 8.2 – Percent of Open Interest Shorts: 73.0 8.2 9.2 – Net Position: 1,061 -947 -114 – Gross Longs: 9,996 62 1,008 – Gross Shorts: 8,935 1,009 1,122 – Long to Short Ratio: 1.1 to 1 0.1 to 1 0.9 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 100.0 0.0 10.3 – Strength Index Reading (3 Year Range): Bullish-Extreme Bearish-Extreme Bearish-Extreme NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: 12.3 -30.9 -3.5   Article By InvestMacro – Receive our weekly COT Reports by Email *COT Report: The COT data, released weekly to the public each Friday, is updated through the most recent Tuesday (data is 3 days old) and shows a quick view of how large speculators or non-commercials (for-profit traders) were positioned in the futures markets. The CFTC categorizes trader positions according to commercial hedgers (traders who use futures contracts for hedging as part of the business), non-commercials (large traders who speculate to realize trading profits) and nonreportable traders (usually small traders/speculators) as well as their open interest (contracts open in the market at time of reporting).See CFTC criteria here.
The Swing Overview – Week 24 2022

The Swing Overview – Week 24 2022

Purple Trading Purple Trading 17.06.2022 16:54
The Swing Overview - Week 24 We've had a week in which the world's major stock indices took a bloodbath in response to rising inflation, which is advancing faster than expected. Central banks have played a major part in this drama. As expected, the US, the UK and, surprisingly, Switzerland raised interest rates. Japan, on the other hand, is still one of the few countries that decided to keep interest rates at their original level of - 0.10%. Macroeconomic data The 0.75% interest rate hike to 1.75%, which was 0.25% higher than the Fed announced at the last meeting, might not have come as a surprise to the markets given that inflation for May was 8.6% on year-on-year basis (8.3% for April). The market reacted strongly in response to the inflation data, and a sell-off in equity indices and a strengthening US dollar followed.   The 0.75% rate hike is the highest since 1994 and the next Fed meeting is expected to see another rate hike again in the range of 0.50% to 0.75%. The Fed is trying to stop rising inflation with this aggressive approach. The problem is that economic projections point to slowing economic growth. Retail data for May fell by 0.3%, which was a surprise to the markets. This is the first drop in consumer spending in 2022. The Fed also lowered GDP growth projections and unemployment is expected to rise as well. All of this points to the risk of stagflation.     But the labour market data is still good. The number of initial claims in unemployment reached 229k last week, down from 232k the previous week. The US dollar hit a new high for the year at 105.86 in response to high inflation and a faster tightening economy. The US 10-year bond yields also rose, reaching 3.479%. Figure 1: The US 10-year bond yields and the USD index on the daily chart   The SP 500 Index The SP 500 index, like other global indices, was in a bloodbath last week as data on rising US inflation in particular surprised. Major supports according to the H4 chart were very quickly broken and the market is showing that it is still in a bearish mood. According to the daily chart, another lower low has formed which together with the lower highs confirms this bearish trend.   Figure 2: The SP 500 on H4 and D1 chart   A support according to the H4 chart is in the 3,645 - 3,675 range. The nearest resistance is at 3,820 - 3,835. A broken support in the 3,710 - 3,732 area can also be considered as resistance. The most important news is behind us and the market could take a breath for a while. The low levels could also be noticed by long-term investors who will be buying dip. But for speculators, it is very risky to speculate on a market reversal in a downtrend.   German DAX index The German DAX index offers a very similar picture to the SP 500. The ZEW economic sentiment indicator in Germany for the month of June showed a deterioration in sentiment among institutional investors and analysts, with the index reading coming in at -28.0. The ongoing war in Ukraine is undoubtedly influencing this pessimism. The end of this tragic event is still not in sight. What is clear, however, is that the longer the conflict continues, the stronger the impact on the European economy will be.    Figure 3: German DAX index on H4 and daily chart The DAX is in a clear downtrend and broke through significant support at 13,300 last week. The nearest resistance according to the H4 chart is 13,250 - 13,300. Significant resistance is at 13,650 - 13,700. A new support according to the H4 chart is at 12,950 - 12,980.   The euro has rejected lower readings  Information about higher inflation in the US and a rate hike sent the EUR/USD pair to support levels at 1.0370. However, the level was not broken and the euro then took a strong move from this area. Investors seem to assume that the ECB will have to respond with a higher than 0.25% rate hike announced at the last meeting. Figure 4: The EUR/USD on H4 and daily chart According to the H4 chart, the nearest resistance is at 1.0560 - 1.0600. The next resistance is then at 1.0760-1.0770. Current support is at 1.0340 - 1.0370 according to the daily chart.   The Bank of England raised rates as expected Rising inflation did not leave the Bank of England in dovish mood as it raised its key rate by 0.25% as expected. The current rate is 1.25%. Inflation may be approaching double digits, but the bank could not afford to be more aggressive. In Britain, economic activity has already fallen and the GDP is falling at its fastest pace in a year. On a month-on-month basis, the GDP in Britain fell by 0.3%.  Manufacturing production fell by 1% in April. Figure 5: The GBP/USD on H4 and daily chart The GBP/USD currency pair had a very dramatic week, first breaking below 1.20, only to stage an unprecedented rally later. Anyway, according to the H4 chart and also the daily chart, the pound is below the SMA 100 moving average, which indicates a bearish sentiment. There are also clear lower lows and lower highs on the daily chart, confirming the downtrend.   The UK interest rate hike did send the GBP/USD currency pair to 1.24, but the price did not stay there for long time as the pound descended from higher values, underlining the overall downtrend. The nearest resistance is at 1.24. A support is then at 1.1930 - 1.2000.   Central Bank of Japan still dovish   In the early hours of Friday morning, the Bank of Japan was also deciding on rates. There, as expected, everything remains as it was, i.e. the rate remains negative at - 0.10%. This situation means a favourable interest rate differential between the US dollar and the Japanese yen in favour of the dollar. It is therefore no surprise that the USD/JPY pair has reached its highest level since 2002. However, the weak yen is a big problem for the Japanese economy, as it makes imports of basic manufacturing raw materials more expensive and thus contributes to inflation. Figure 6: The USD/JPY on H4 and monthly charts The USD/JPY pair has reached the resistance level at 134.5 - 135.0, the highest level since 2002. A support according to the H4 chart is at 131.50 - 131.80.  
Currency Speculators boost Japanese Yen bets to 15-week high while Canadian dollar bets drop sharply

Currency Speculators boost Japanese Yen bets to 15-week high while Canadian dollar bets drop sharply

Invest Macro Invest Macro 26.06.2022 13:28
By InvestMacro | COT | Data Tables | COT Leaders | Downloads | COT Newsletter Here are the latest charts and statistics for the Commitment of Traders (COT) data published by the Commodities Futures Trading Commission (CFTC). The latest COT data is updated through Tuesday June 21st and shows a quick view of how large traders (for-profit speculators and commercial entities) were positioned in the futures markets. All currency positions are in direct relation to the US dollar where, for example, a bet for the euro is a bet that the euro will rise versus the dollar while a bet against the euro will be a bet that the euro will decline versus the dollar. Currency market speculator bets overall were mixed this week as five out of the eleven currency markets we cover (Note: Russian Ruble positions have not been updated by CFTC since March) had higher positioning this week while six markets had lower contracts for the week. Leading the gains for currency markets was the Japanese yen (11,301 contracts) and the British pound sterling (2,349 contracts) with the Australian dollar (2,648 contracts), New Zealand dollar (1,415 contracts) and the US Dollar Index (534 contracts) also showing positive changes on the week. Meanwhile, leading the declines in speculator bets this week were the Canadian dollar (-19,097 contracts) and the Euro (-9,587 contracts) with the Brazil real (-2,868 contracts), Mexican peso (-489 contracts), Swiss franc (-349 contracts) and Bitcoin (-15 contracts) also showing lower speculator positions through June 21st. Currency Position Notables: Japanese Yen large speculator bets rose for the 6th straight week this week and this improvement has brought the overall speculator standing to the least bearish level of the past 15 weeks at -58,454 contracts. Speculators have trimmed a total of 52,000 contracts off of the total bearish position in these past six weeks after the standing hit -110,454 contracts on May 10th. Yen bets have been in bearish territory since March 13th of 2021 (67 weeks running) with the highest bearish level of the cycle occurring on April 12th at a total of -111,827 contracts. Canadian dollar bets dropped sharply by -19,097 contracts this week and fell for the first time in the last five weeks. CAD speculator bets had risen over the previous four weeks by a total of +37,698 contracts. The decline this week brings the CAD speculator position into a virtual neutral level at an overall bullish position of just +4,105 contracts as the speculator position has yet to find a sustainable trend and has been alternating between bearish and bullish net positions over the past few months. The US Dollar Index rose for a 3rd straight week this week and hit a new 5-year high level at +45,010 contracts. This is the first time the overall position has topped +45,000 contracts since March 21st of 2017 and the continued bullish sentiment for the DXY has pushed the US Dollar Index strength score (3-year range) to the very top of its range (100 percent – extreme bullish). Euro positions fell for the third straight week and dropped to its most bearish level of the past 29 weeks. The strength score for the Euro has dropped to just a 30.2 percent and it seems the speculator positioning is catching up to the bearishness of the EURUSD exchange rate. The speculator net position had been at a twelve-week high on May 31st at a total of +52,272 contracts before dropping over the past three weeks to settle at -15,605 contracts this week. Strength scores (3-Year range of Speculator positions, ranging from 0 to 100 where above 80 percent is extreme bullish, below 20 percent is extreme bearish and 100 percent is the top of the range) show that the US Dollar Index (100 percent), Bitcoin (99.7 percent) and the Brazilian Real (94 percent) are all in extreme bullish positions. On the bearish side, the Mexican Peso is the only currency currently in an extreme bearish position with a score of 15.9 percent. Strength score trends (or move index, that calculate 6-week changes in strength scores) shows that the Japanese Yen (32.0 percent) and the Swiss Franc (21.8 percent) are leading the strength trends over the past six weeks. Both of these markets have overall bearish net positions but have seen the bearish sentiment cooling off strongly. The Mexican Peso leads the downside trends for another week with a -18.6 percent score. Data Snapshot of Forex Market Traders | Columns Legend Jun-21-2022 OI OI-Index Spec-Net Spec-Index Com-Net COM-Index Smalls-Net Smalls-Index USD Index 58,543 86 45,010 100 -46,746 2 1,736 36 EUR 671,718 70 -15,605 30 -18,182 71 33,787 30 GBP 228,266 57 -63,247 28 77,902 76 -14,655 25 JPY 218,076 67 -58,454 33 74,349 72 -15,895 21 CHF 37,669 16 -7,157 38 14,958 67 -7,801 31 CAD 140,047 23 4,105 44 -6,578 63 2,473 35 AUD 137,017 35 -40,606 47 44,608 52 -4,002 43 NZD 42,889 30 -5,423 62 8,756 44 -3,333 13 MXN 191,265 45 -26,870 16 22,977 82 3,893 60 RUB 20,930 4 7,543 31 -7,150 69 -393 24 BRL 68,858 65 44,345 94 -45,996 6 1,651 84 Bitcoin 13,537 77 1,046 100 -995 0 -51 12   US Dollar Index Futures: The US Dollar Index large speculator standing this week recorded a net position of 45,010 contracts in the data reported through Tuesday. This was a weekly boost of 534 contracts from the previous week which had a total of 44,476 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish-Extreme with a score of 100.0 percent. The commercials are Bearish-Extreme with a score of 1.6 percent and the small traders (not shown in chart) are Bearish with a score of 35.5 percent. US DOLLAR INDEX Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 88.2 2.9 7.7 – Percent of Open Interest Shorts: 11.3 82.7 4.8 – Net Position: 45,010 -46,746 1,736 – Gross Longs: 51,606 1,676 4,522 – Gross Shorts: 6,596 48,422 2,786 – Long to Short Ratio: 7.8 to 1 0.0 to 1 1.6 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 100.0 1.6 35.5 – Strength Index Reading (3 Year Range): Bullish-Extreme Bearish-Extreme Bearish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: 17.1 -15.2 -7.2   Euro Currency Futures: The Euro Currency large speculator standing this week recorded a net position of -15,605 contracts in the data reported through Tuesday. This was a weekly decrease of -9,587 contracts from the previous week which had a total of -6,018 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 30.2 percent. The commercials are Bullish with a score of 70.9 percent and the small traders (not shown in chart) are Bearish with a score of 30.4 percent. EURO Currency Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 29.1 55.6 12.7 – Percent of Open Interest Shorts: 31.4 58.3 7.7 – Net Position: -15,605 -18,182 33,787 – Gross Longs: 195,554 373,695 85,208 – Gross Shorts: 211,159 391,877 51,421 – Long to Short Ratio: 0.9 to 1 1.0 to 1 1.7 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 30.2 70.9 30.4 – Strength Index Reading (3 Year Range): Bearish Bullish Bearish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: -9.9 7.0 12.1   British Pound Sterling Futures: The British Pound Sterling large speculator standing this week recorded a net position of -63,247 contracts in the data reported through Tuesday. This was a weekly boost of 2,349 contracts from the previous week which had a total of -65,596 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 28.4 percent. The commercials are Bullish with a score of 75.8 percent and the small traders (not shown in chart) are Bearish with a score of 25.3 percent. BRITISH POUND Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 12.5 77.6 7.8 – Percent of Open Interest Shorts: 40.2 43.5 14.2 – Net Position: -63,247 77,902 -14,655 – Gross Longs: 28,470 177,170 17,735 – Gross Shorts: 91,717 99,268 32,390 – Long to Short Ratio: 0.3 to 1 1.8 to 1 0.5 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 28.4 75.8 25.3 – Strength Index Reading (3 Year Range): Bearish Bullish Bearish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: 11.8 -10.3 2.1   Japanese Yen Futures: The Japanese Yen large speculator standing this week recorded a net position of -58,454 contracts in the data reported through Tuesday. This was a weekly advance of 11,301 contracts from the previous week which had a total of -69,755 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 32.9 percent. The commercials are Bullish with a score of 71.9 percent and the small traders (not shown in chart) are Bearish with a score of 21.1 percent. JAPANESE YEN Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 16.4 71.6 10.6 – Percent of Open Interest Shorts: 43.3 37.6 17.9 – Net Position: -58,454 74,349 -15,895 – Gross Longs: 35,864 156,248 23,099 – Gross Shorts: 94,318 81,899 38,994 – Long to Short Ratio: 0.4 to 1 1.9 to 1 0.6 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 32.9 71.9 21.1 – Strength Index Reading (3 Year Range): Bearish Bullish Bearish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: 32.0 -24.7 -2.9   Swiss Franc Futures: The Swiss Franc large speculator standing this week recorded a net position of -7,157 contracts in the data reported through Tuesday. This was a weekly decline of -349 contracts from the previous week which had a total of -6,808 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 38.4 percent. The commercials are Bullish with a score of 67.3 percent and the small traders (not shown in chart) are Bearish with a score of 31.1 percent. SWISS FRANC Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 8.1 66.2 25.7 – Percent of Open Interest Shorts: 27.1 26.5 46.4 – Net Position: -7,157 14,958 -7,801 – Gross Longs: 3,068 24,927 9,673 – Gross Shorts: 10,225 9,969 17,474 – Long to Short Ratio: 0.3 to 1 2.5 to 1 0.6 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 38.4 67.3 31.1 – Strength Index Reading (3 Year Range): Bearish Bullish Bearish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: 21.8 -23.7 21.2   Canadian Dollar Futures: The Canadian Dollar large speculator standing this week recorded a net position of 4,105 contracts in the data reported through Tuesday. This was a weekly reduction of -19,097 contracts from the previous week which had a total of 23,202 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 44.0 percent. The commercials are Bullish with a score of 63.2 percent and the small traders (not shown in chart) are Bearish with a score of 35.1 percent. CANADIAN DOLLAR Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 30.2 47.9 20.7 – Percent of Open Interest Shorts: 27.2 52.6 18.9 – Net Position: 4,105 -6,578 2,473 – Gross Longs: 42,260 67,084 29,011 – Gross Shorts: 38,155 73,662 26,538 – Long to Short Ratio: 1.1 to 1 0.9 to 1 1.1 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 44.0 63.2 35.1 – Strength Index Reading (3 Year Range): Bearish Bullish Bearish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: 10.7 -7.9 0.0   Australian Dollar Futures: The Australian Dollar large speculator standing this week recorded a net position of -40,606 contracts in the data reported through Tuesday. This was a weekly gain of 2,648 contracts from the previous week which had a total of -43,254 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 47.2 percent. The commercials are Bullish with a score of 52.2 percent and the small traders (not shown in chart) are Bearish with a score of 42.7 percent. AUSTRALIAN DOLLAR Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 23.2 60.2 13.7 – Percent of Open Interest Shorts: 52.8 27.7 16.6 – Net Position: -40,606 44,608 -4,002 – Gross Longs: 31,745 82,514 18,756 – Gross Shorts: 72,351 37,906 22,758 – Long to Short Ratio: 0.4 to 1 2.2 to 1 0.8 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 47.2 52.2 42.7 – Strength Index Reading (3 Year Range): Bearish Bullish Bearish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: 1.0 -1.9 3.4   New Zealand Dollar Futures: The New Zealand Dollar large speculator standing this week recorded a net position of -5,423 contracts in the data reported through Tuesday. This was a weekly lift of 1,415 contracts from the previous week which had a total of -6,838 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish with a score of 62.2 percent. The commercials are Bearish with a score of 43.9 percent and the small traders (not shown in chart) are Bearish-Extreme with a score of 13.3 percent. NEW ZEALAND DOLLAR Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 34.2 60.8 5.0 – Percent of Open Interest Shorts: 46.8 40.3 12.8 – Net Position: -5,423 8,756 -3,333 – Gross Longs: 14,652 26,056 2,145 – Gross Shorts: 20,075 17,300 5,478 – Long to Short Ratio: 0.7 to 1 1.5 to 1 0.4 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 62.2 43.9 13.3 – Strength Index Reading (3 Year Range): Bullish Bearish Bearish-Extreme NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: 12.7 -12.5 6.3   Mexican Peso Futures: The Mexican Peso large speculator standing this week recorded a net position of -26,870 contracts in the data reported through Tuesday. This was a weekly fall of -489 contracts from the previous week which had a total of -26,381 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish-Extreme with a score of 15.9 percent. The commercials are Bullish-Extreme with a score of 82.4 percent and the small traders (not shown in chart) are Bullish with a score of 59.5 percent. MEXICAN PESO Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 50.3 45.8 3.3 – Percent of Open Interest Shorts: 64.3 33.8 1.3 – Net Position: -26,870 22,977 3,893 – Gross Longs: 96,147 87,609 6,317 – Gross Shorts: 123,017 64,632 2,424 – Long to Short Ratio: 0.8 to 1 1.4 to 1 2.6 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 15.9 82.4 59.5 – Strength Index Reading (3 Year Range): Bearish-Extreme Bullish-Extreme Bullish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: -18.6 18.3 -1.1   Brazilian Real Futures: The Brazilian Real large speculator standing this week recorded a net position of 44,345 contracts in the data reported through Tuesday. This was a weekly fall of -2,868 contracts from the previous week which had a total of 47,213 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish-Extreme with a score of 94.0 percent. The commercials are Bearish-Extreme with a score of 6.4 percent and the small traders (not shown in chart) are Bullish-Extreme with a score of 84.1 percent. BRAZIL REAL Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 80.7 14.6 4.7 – Percent of Open Interest Shorts: 16.3 81.3 2.3 – Net Position: 44,345 -45,996 1,651 – Gross Longs: 55,599 10,020 3,238 – Gross Shorts: 11,254 56,016 1,587 – Long to Short Ratio: 4.9 to 1 0.2 to 1 2.0 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 94.0 6.4 84.1 – Strength Index Reading (3 Year Range): Bullish-Extreme Bearish-Extreme Bullish-Extreme NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: 3.5 -3.9 4.7     Bitcoin Futures: The Bitcoin large speculator standing this week recorded a net position of 1,046 contracts in the data reported through Tuesday. This was a weekly decline of -15 contracts from the previous week which had a total of 1,061 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish-Extreme with a score of 99.7 percent. The commercials are Bearish-Extreme with a score of 0.0 percent and the small traders (not shown in chart) are Bearish-Extreme with a score of 11.8 percent. BITCOIN Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 77.5 0.6 7.7 – Percent of Open Interest Shorts: 69.8 7.9 8.1 – Net Position: 1,046 -995 -51 – Gross Longs: 10,495 78 1,048 – Gross Shorts: 9,449 1,073 1,099 – Long to Short Ratio: 1.1 to 1 0.1 to 1 1.0 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 99.7 0.0 11.8 – Strength Index Reading (3 Year Range): Bullish-Extreme Bearish-Extreme Bearish-Extreme NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: 6.3 -11.9 -3.1   Article By InvestMacro – Receive our weekly COT Reports by Email *COT Report: The COT data, released weekly to the public each Friday, is updated through the most recent Tuesday (data is 3 days old) and shows a quick view of how large speculators or non-commercials (for-profit traders) were positioned in the futures markets. The CFTC categorizes trader positions according to commercial hedgers (traders who use futures contracts for hedging as part of the business), non-commercials (large traders who speculate to realize trading profits) and nonreportable traders (usually small traders/speculators) as well as their open interest (contracts open in the market at time of reporting).See CFTC criteria here.
The Swing Overview – Week 25 2022

The Swing Overview – Week 25 2022

Purple Trading Purple Trading 27.06.2022 13:52
The Swing Overview – Week 25 There was a rather quiet week in which the major world stock indices shook off previous losses and have been slowly rising since Monday. However, this is probably only a temporary correction of the current bearish trend.  The CNB Bank Board met for the last time in its old composition and raised the interest rate to 7%, the highest level since 1999. However, the koruna barely reacted to this increase. The reason is that the main risks are still in place and fear of a recession keeps the markets in a risk-off sentiment that benefits the US dollar. Macroeconomic data We had a bit of a quiet week when it comes to macroeconomic data in the US. Industrial production data was reported, which grew by 0.2% month-on-month in May, which is less than the growth seen in April, when production grew by 1.4%. While the growth is slower than expected, it is still growth, which is a positive thing.   In terms of labor market data, the number of jobless claims held steady last week, reaching 229k. Thus, compared to the previous week, the number of claims fell by 2 thousand.   The US Dollar took a break in this quiet week and came down from its peak which is at 106, 86. Overall, however, the dollar is still in an uptrend. The US 10-year bond yields also fell last week and are currently hovering around 3%. The fall in bond yields was then a positive boost for equity indices. Figure 1: US 10-year bond yields and USD index on the daily chart   The SP 500 Index The SP 500 index has been gaining since Monday, June 20, 2022. However, this is probably not a signal of a major bullish reversal. Fundamental reasons still rather speak for a weakening and so it could be a short-term correction of the current bearish trend. The rise is probably caused by long-term investors who were buying the dip. Next week the US will report the GDP data which could be the catalyst for further movement.  Figure 2: The SP 500 on H4 and D1 chart   The index has currently reached the resistance level according to the H4 chart, which is in the region of 3,820 - 3,836. The next strong resistance is then in the area of 3,870 - 3,900 where the previous support was broken and turned into the resistance. The current nearest support is 3 640 - 3 670.    German DAX index The manufacturing PMI for June came in at 52.0. The previous month's PMI was 54.8. While a value above 50 indicates an expected expansion, it must be said that the PMI has essentially been declining since February 2022. This, together with other data coming out of Germany, suggests a certain pessimism, which is also reflected in the DAX index. Figure 3: German DAX index on H4 and daily chart The DAX broke support according to the H4 chart at 12,950 - 12,980 but then broke back above that level, so we don't have a valid breakout. Overall, however, the DAX is in a downtrend and the technical analysis does not show a stronger sign of a reversal of this trend yet. The nearest resistance according to the H4 chart is 13,130 - 13,190. The next resistance is then at 13 420 - 13 440. Strong support according to the daily chart is 12,443 - 12,600.   Eurozone inflation at a new record Consumer inflation in the Eurozone for May rose by 8.1% year-on-year as expected by analysts. On a month-on-month basis, inflation added 0.8% compared to April. The rise in inflation could support the ECB's decision to raise rates possibly by more than the 0.25% expected so far, which is expected to happen at the July meeting.  Figure 4: EUR/USD on H4 and daily chart From a technical perspective, the euro has bounced off support on the pair with the US dollar according to the daily chart, which is in the 1.0340 - 1.0370 range and continues to strengthen. Overall, however, the pair is still in a downtrend. The US Fed has been much more aggressive in fighting inflation than the ECB and this continues to put pressure on the bearish trend in the euro. The nearest resistance according to the H4 chart is at 1.058 - 1.0600. Strong resistance according to the daily chart is at 1.0780 - 1.0800.   The Czech National Bank raised the interest rate again Rising inflation, which has already reached 16% in the Czech Republic, forced the CNB's board to raise interest rates again. The key interest rate is now at 7%. The last time the interest rate was this high was in 1999. This is the last decision of the old Bank Board. In August, the new board, which is not clearly hawkish, will decide on monetary policy. Therefore, it will be very interesting to see how they approach the rising inflation.   The current risks, according to the CNB, are higher price growth at home and abroad, the risk of a halt in energy supplies from Russia and generally rising inflation expectations. The lingering risk is, of course, the war in Ukraine. The CNB has also decided to continue intervening in the market to keep the Czech koruna exchange rate within acceptable limits and prevent it from depreciating, which would increase import inflation pressures. Figure 5: The USD/CZK and The EUR/CZK on the daily chart Looking at the charts, the koruna hardly reacted at all to the CNB's decision to raise rates sharply. Against the dollar, the koruna is weakening somewhat, while against the euro the koruna is holding its value around 24.60 - 24.80. The appreciation of the koruna after the interest rate hike was probably prevented by uncertainty about how the new board will treat inflation, and also by the fact that there is a risk-off sentiment in global markets and investors prefer so-called safe havens in such cases, which include the US dollar.  
Currency Speculators reduced their British Pound and Japanese Yen bearish bets to multi-week lows

Currency Speculators reduced their British Pound and Japanese Yen bearish bets to multi-week lows

Invest Macro Invest Macro 02.07.2022 20:24
By InvestMacro | COT | Data Tables | COT Leaders | Downloads | COT Newsletter Here are the latest charts and statistics for the Commitment of Traders (COT) data published by the Commodities Futures Trading Commission (CFTC). The latest COT data is updated through Tuesday June 28th and shows a quick view of how large traders (for-profit speculators and commercial entities) were positioned in the futures markets. All currency positions are in direct relation to the US dollar where, for example, a bet for the euro is a bet that the euro will rise versus the dollar while a bet against the euro will be a bet that the euro will decline versus the dollar. Currency market speculator bets were mostly higher this week as seven out of the eleven currency markets we cover had higher positioning while four markets had lower contracts. Leading the gains for currency markets was the Mexican peso (12,890 contracts) and the British pound sterling (10,129 contracts) with the Japanese yen (5,884 contracts), Euro (5,009 contracts), Canadian dollar (4,992 contracts), New Zealand dollar (112 contracts) and Bitcoin (39 contracts) also showing a positive week. Meanwhile, leading the declines in speculator bets this week were the Brazilian real (-7,317 contracts) and the Australian dollar (-2,374 contracts) with the US Dollar Index (-1,781 contracts) and the Swiss franc (-1,434 contracts) also registering lower bets on the week. Highlighting the currency contracts this week was the cool off in bearish bets for both the British pound and the Japanese yen. British pound sterling speculator positions rose for the fifth straight week and this week’s improvement pushed the overall position to the least bearish standing of the past eleven weeks. The GBP speculative standing has been in a continual bearish position since the middle of February but has come down from a total of -80,372 contracts on May 24th to a total of -53,118 contracts this week after the past five week’s improvement (by 27,254 contracts). The GBPUSD exchange rate has remained in a downtrend despite the recent cool off in speculator sentiment and touched below the 1.20 exchange this week for the second time this month. Japanese yen speculator bets rose for the seventh straight week this week and reached the least bearish position of the past 27 weeks. Japanese yen bets have been sharply bearish for over a year were at -110,454 contracts as recently as May 10th. The past seven weeks have shaved 57,884 contracts off the bearish level and brought the current speculative position to a total of -52,570 contracts this week. The exchange rate for the USDJPY currency pair remains at the top of its range (yen weakness) and near 20-year highs around 135.00. In other currency contracts, the US Dollar Index speculator positions slid a bit this week after rising for six out of the previous seven weeks. The Dollar Index spec position had hit a new 5-year high last week at over +45,000 contracts and was at a 100 percent strength score (measured against past 3-years spec positioning). This week’s decline doesn’t dent the overall position much as the net position remains over +43,000 contracts for the third straight week. The Dollar Index futures price has remained strongly in an uptrend and reached a high over 105 this week before closing just below that figure at 104.91.   Strength scores (a measure of the 3-Year range of Speculator positions, from 0 to 100 where above 80 is extreme bullish and below 20 is extreme bearish) show that the Bitcoin (100 percent), the US Dollar Index (97 percent) and the Brazilian real (87 percent) are currently near the top of their ranges and in bullish extreme levels. The Mexican peso at 21 percent is at the lowest strength level currently and followed by the Euro at 32 percent. Strength score trends (or move index, that calculate 6-week changes in strength scores) shows that the Japanese yen (31 percent) is on the greatest move of the past six weeks. The Canadian dollar (27 percent), New Zealand dollar (21 percent) and the Swiss franc (20 percent) round out the top movers in the latest data. The Mexican peso at -18 percent leads the downtrending currencies followed by the Euro at -10 percent and the Brazilian real at -1 percent. Data Snapshot of Forex Market Traders | Columns Legend Jun-28-2022 OI OI-Index Spec-Net Spec-Index Com-Net COM-Index Smalls-Net Smalls-Index USD Index 63,143 96 43,229 97 -46,558 2 3,329 53 EUR 671,472 70 -10,596 32 -19,812 70 30,408 25 GBP 228,736 57 -53,118 36 70,230 71 -17,112 20 JPY 213,767 64 -52,570 37 67,895 69 -15,325 22 CHF 40,123 21 -8,591 35 17,862 72 -9,271 26 CAD 142,584 25 9,097 50 -12,247 59 3,150 36 AUD 139,891 37 -42,980 45 47,163 54 -4,183 42 NZD 40,337 25 -5,311 62 8,551 44 -3,240 14 MXN 193,536 46 -13,980 21 9,107 77 4,873 64 RUB 20,930 4 7,543 31 -7,150 69 -393 24 BRL 60,107 54 37,028 87 -38,531 14 1,503 82 Bitcoin 13,707 78 1,085 100 -947 0 -138 10   US Dollar Index Futures: The US Dollar Index large speculator standing this week resulted in a net position of 43,229 contracts in the data reported through Tuesday. This was a weekly decline of -1,781 contracts from the previous week which had a total of 45,010 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish-Extreme with a score of 97.0 percent. The commercials are Bearish-Extreme with a score of 1.9 percent and the small traders (not shown in chart) are Bullish with a score of 52.9 percent. US DOLLAR INDEX Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 86.5 3.7 8.5 – Percent of Open Interest Shorts: 18.1 77.4 3.2 – Net Position: 43,229 -46,558 3,329 – Gross Longs: 54,646 2,340 5,371 – Gross Shorts: 11,417 48,898 2,042 – Long to Short Ratio: 4.8 to 1 0.0 to 1 2.6 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 97.0 1.9 52.9 – Strength Index Reading (3 Year Range): Bullish-Extreme Bearish-Extreme Bullish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: 11.7 -11.2 0.4   Euro Currency Futures: The Euro Currency large speculator standing this week resulted in a net position of -10,596 contracts in the data reported through Tuesday. This was a weekly advance of 5,009 contracts from the previous week which had a total of -15,605 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 31.7 percent. The commercials are Bullish with a score of 70.4 percent and the small traders (not shown in chart) are Bearish with a score of 24.8 percent. EURO Currency Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 28.2 56.6 12.5 – Percent of Open Interest Shorts: 29.8 59.6 8.0 – Net Position: -10,596 -19,812 30,408 – Gross Longs: 189,414 380,084 83,853 – Gross Shorts: 200,010 399,896 53,445 – Long to Short Ratio: 0.9 to 1 1.0 to 1 1.6 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 31.7 70.4 24.8 – Strength Index Reading (3 Year Range): Bearish Bullish Bearish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: -9.5 9.0 -1.3   British Pound Sterling Futures: The British Pound Sterling large speculator standing this week resulted in a net position of -53,118 contracts in the data reported through Tuesday. This was a weekly advance of 10,129 contracts from the previous week which had a total of -63,247 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 35.7 percent. The commercials are Bullish with a score of 71.2 percent and the small traders (not shown in chart) are Bearish with a score of 20.2 percent. BRITISH POUND Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 15.4 74.7 7.9 – Percent of Open Interest Shorts: 38.6 44.0 15.4 – Net Position: -53,118 70,230 -17,112 – Gross Longs: 35,184 170,967 18,055 – Gross Shorts: 88,302 100,737 35,167 – Long to Short Ratio: 0.4 to 1 1.7 to 1 0.5 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 35.7 71.2 20.2 – Strength Index Reading (3 Year Range): Bearish Bullish Bearish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: 18.8 -14.3 -4.2   Japanese Yen Futures: The Japanese Yen large speculator standing this week resulted in a net position of -52,570 contracts in the data reported through Tuesday. This was a weekly boost of 5,884 contracts from the previous week which had a total of -58,454 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 36.5 percent. The commercials are Bullish with a score of 68.8 percent and the small traders (not shown in chart) are Bearish with a score of 22.3 percent. JAPANESE YEN Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 17.1 71.1 10.5 – Percent of Open Interest Shorts: 41.6 39.4 17.6 – Net Position: -52,570 67,895 -15,325 – Gross Longs: 36,462 152,071 22,379 – Gross Shorts: 89,032 84,176 37,704 – Long to Short Ratio: 0.4 to 1 1.8 to 1 0.6 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 36.5 68.8 22.3 – Strength Index Reading (3 Year Range): Bearish Bullish Bearish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: 30.6 -23.0 -5.2   Swiss Franc Futures: The Swiss Franc large speculator standing this week resulted in a net position of -8,591 contracts in the data reported through Tuesday. This was a weekly reduction of -1,434 contracts from the previous week which had a total of -7,157 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 34.7 percent. The commercials are Bullish with a score of 72.0 percent and the small traders (not shown in chart) are Bearish with a score of 26.1 percent. SWISS FRANC Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 11.3 64.8 23.9 – Percent of Open Interest Shorts: 32.7 20.3 47.0 – Net Position: -8,591 17,862 -9,271 – Gross Longs: 4,523 25,994 9,588 – Gross Shorts: 13,114 8,132 18,859 – Long to Short Ratio: 0.3 to 1 3.2 to 1 0.5 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 34.7 72.0 26.1 – Strength Index Reading (3 Year Range): Bearish Bullish Bearish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: 20.3 -21.2 18.0   Canadian Dollar Futures: The Canadian Dollar large speculator standing this week resulted in a net position of 9,097 contracts in the data reported through Tuesday. This was a weekly gain of 4,992 contracts from the previous week which had a total of 4,105 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 49.6 percent. The commercials are Bullish with a score of 58.5 percent and the small traders (not shown in chart) are Bearish with a score of 36.4 percent. CANADIAN DOLLAR Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 32.2 45.9 20.7 – Percent of Open Interest Shorts: 25.8 54.5 18.5 – Net Position: 9,097 -12,247 3,150 – Gross Longs: 45,893 65,407 29,537 – Gross Shorts: 36,796 77,654 26,387 – Long to Short Ratio: 1.2 to 1 0.8 to 1 1.1 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 49.6 58.5 36.4 – Strength Index Reading (3 Year Range): Bearish Bullish Bearish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: 26.5 -20.7 2.5   Australian Dollar Futures: The Australian Dollar large speculator standing this week resulted in a net position of -42,980 contracts in the data reported through Tuesday. This was a weekly decrease of -2,374 contracts from the previous week which had a total of -40,606 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 45.0 percent. The commercials are Bullish with a score of 54.1 percent and the small traders (not shown in chart) are Bearish with a score of 42.2 percent. AUSTRALIAN DOLLAR Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 20.6 61.7 14.1 – Percent of Open Interest Shorts: 51.4 28.0 17.1 – Net Position: -42,980 47,163 -4,183 – Gross Longs: 28,887 86,347 19,791 – Gross Shorts: 71,867 39,184 23,974 – Long to Short Ratio: 0.4 to 1 2.2 to 1 0.8 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 45.0 54.1 42.2 – Strength Index Reading (3 Year Range): Bearish Bullish Bearish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: 1.5 -5.4 13.7   New Zealand Dollar Futures: The New Zealand Dollar large speculator standing this week resulted in a net position of -5,311 contracts in the data reported through Tuesday. This was a weekly gain of 112 contracts from the previous week which had a total of -5,423 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish with a score of 62.4 percent. The commercials are Bearish with a score of 43.6 percent and the small traders (not shown in chart) are Bearish-Extreme with a score of 14.4 percent. NEW ZEALAND DOLLAR Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 29.1 64.9 5.6 – Percent of Open Interest Shorts: 42.2 43.7 13.6 – Net Position: -5,311 8,551 -3,240 – Gross Longs: 11,720 26,167 2,256 – Gross Shorts: 17,031 17,616 5,496 – Long to Short Ratio: 0.7 to 1 1.5 to 1 0.4 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 62.4 43.6 14.4 – Strength Index Reading (3 Year Range): Bullish Bearish Bearish-Extreme NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: 20.9 -19.8 4.4   Mexican Peso Futures: The Mexican Peso large speculator standing this week resulted in a net position of -13,980 contracts in the data reported through Tuesday. This was a weekly boost of 12,890 contracts from the previous week which had a total of -26,870 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 21.4 percent. The commercials are Bullish with a score of 76.6 percent and the small traders (not shown in chart) are Bullish with a score of 63.7 percent. MEXICAN PESO Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 55.3 40.9 3.6 – Percent of Open Interest Shorts: 62.5 36.1 1.1 – Net Position: -13,980 9,107 4,873 – Gross Longs: 107,031 79,060 7,059 – Gross Shorts: 121,011 69,953 2,186 – Long to Short Ratio: 0.9 to 1 1.1 to 1 3.2 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 21.4 76.6 63.7 – Strength Index Reading (3 Year Range): Bearish Bullish Bullish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: -18.0 17.2 3.6   Brazilian Real Futures: The Brazilian Real large speculator standing this week resulted in a net position of 37,028 contracts in the data reported through Tuesday. This was a weekly lowering of -7,317 contracts from the previous week which had a total of 44,345 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish-Extreme with a score of 86.8 percent. The commercials are Bearish-Extreme with a score of 13.7 percent and the small traders (not shown in chart) are Bullish-Extreme with a score of 82.4 percent. BRAZIL REAL Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 71.7 22.8 5.5 – Percent of Open Interest Shorts: 10.1 86.9 3.0 – Net Position: 37,028 -38,531 1,503 – Gross Longs: 43,088 13,691 3,307 – Gross Shorts: 6,060 52,222 1,804 – Long to Short Ratio: 7.1 to 1 0.3 to 1 1.8 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 86.8 13.7 82.4 – Strength Index Reading (3 Year Range): Bullish-Extreme Bearish-Extreme Bullish-Extreme NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: -1.0 0.9 1.9   Bitcoin Futures: The Bitcoin large speculator standing this week resulted in a net position of 1,085 contracts in the data reported through Tuesday. This was a weekly gain of 39 contracts from the previous week which had a total of 1,046 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish-Extreme with a score of 100.0 percent. The commercials are Bearish-Extreme with a score of 2.8 percent and the small traders (not shown in chart) are Bearish-Extreme with a score of 9.8 percent. BITCOIN Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 81.3 0.8 6.5 – Percent of Open Interest Shorts: 73.3 7.7 7.5 – Net Position: 1,085 -947 -138 – Gross Longs: 11,137 115 890 – Gross Shorts: 10,052 1,062 1,028 – Long to Short Ratio: 1.1 to 1 0.1 to 1 0.9 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 100.0 2.8 9.8 – Strength Index Reading (3 Year Range): Bullish-Extreme Bearish-Extreme Bearish-Extreme NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: 5.1 -4.2 -4.7   Article By InvestMacro – Receive our weekly COT Reports by Email *COT Report: The COT data, released weekly to the public each Friday, is updated through the most recent Tuesday (data is 3 days old) and shows a quick view of how large speculators or non-commercials (for-profit traders) were positioned in the futures markets. The CFTC categorizes trader positions according to commercial hedgers (traders who use futures contracts for hedging as part of the business), non-commercials (large traders who speculate to realize trading profits) and nonreportable traders (usually small traders/speculators) as well as their open interest (contracts open in the market at time of reporting).See CFTC criteria here.
The Swing Overview - Week 26 2022

The Swing Overview - Week 26 2022

Purple Trading Purple Trading 04.07.2022 10:50
The Swing Overview - Week 26 2022 After ashort-term upward correction, the indices resumed their bearish trend and closed the week in the red. Along with this risk-off sentiment, commodity currencies weakened, as did the British pound and the euro. Gold is losing ground as a means of inflation protection and has fallen back below the USD 1,800 per ounce. The US dollar, on the other hand, is still the strongest currency amid the looming recession. Macroeconomic data The number of new home sales in the US for May reached 696,000, beating expectations of 588,000. This is positive news.   On the other hand, the negative news is the drop in consumer confidence, which reached 98.7 for May (103.2 the previous month). The drop in consumer confidence is expected to affect consumer spendings. It is evident that American consumers are reluctant to spend in times of rising prices and are accumulating savings for the future. This is of course contributing to the economic slowdown and the risk of a recession in the US is thus becoming stronger. This was confirmed by the GDP data, which fell for the third month in a row.   The fall in GDP last month was 1.6%. GDP was therefore negative in 1Q 2022. If it is also negative in 2Q2022, it will be an official confirmation of the recession defined by two negative quarters in a row. Jerome Powell suggested this week that the risk of the economy being damaged by higher rates is less important than restoring price stability. This heightens fears that a slowdown in the US economy will take the whole world down with it. So in times when central banks are tackling inflation, this risk will set the tone for some time.    This situation is positive for the US dollar, which is seen by investors as a safe haven asset in times of uncertainty. The dollar therefore remains close to this year's highs.  Although the yield on 10-year US Treasuries has fallen below 3%, the overall trend in bond yields is still upwards. Figure 1: US 10-year bond yields and USD index on the daily chart   The SP 500 Index The strengthening on the SP 500 Index that we have seen in the week of June 20 was really just a short-term correction to the overall downtrend, as we have previously suggested. Last week saw another sell-off and so the overall downtrend on the index continues.   Figure 2: The SP 500 on H4 and D1 chart   The nearest resistance according to the H4 chart is in the range of 3,810 - 3,820. The next resistance is 3,930 - 3,950. A support is 3 640 - 3 670.    German DAX index  The German Ifo Business Climate Index which measures the expectations of manufacturers, builders and sellers for the next 6 months continued to show a value of 92.3, which is worse than the previous month when the index value was 93.0. The fall in the reading suggests some pessimism, accentuated by current market uncertainties, which include the impact of the war in Ukraine and high inflation, which in Germany for the month of June was 7.6% year-on-year. However, inflation fell by 0.1% month-on-month.   The labour market has also indicated problems. The number of unemployed in Germany rose by 133 000, while the market had expected a fall of 6 000. This was very negative news, which triggered a strong sell-off on the Dax on Thursday. On the other hand, retail sales were positive, rising by 0.6% in May, while a 5.4% decline was recorded in April. Figure 3: German DAX index on H4 and daily chart The DAX has broken support according to the H4 chart at 12,850, which has now become the new resistance, which is in the 12,820 - 12,850 range. The next resistance according to the H4 chart is then at 13,280 - 13,375. The strong support according to the daily chart is 12,443 - 12,620, which price is currently approaching.    Eurozone inflation at a new record Eurozone consumer inflation reached another record high in June, rising by 8.6% year-on-year. This is higher than analysts' expectations, who predicted a rise of 8.4%. Inflation is therefore continuing to rise, so the expectation that the ECB could raise rates by more than 0.25% in July is on target and this could support the euro's growth. On the other hand, there is a strong dollar which could continue to slow down bulls on the euro.   Figure 4: EUR/USD on H4 and daily chart The nearest resistance according to the H4 chart is at 1.048 - 1.0500. The next resistance is at 1.0600 - 1.0610. Support is at 1.0360 - 1.0380.   Gold broke the $1,800 price tag The development in gold has once again confirmed that investors prefer US bonds instead of gold, which, in addition to being considered a "safe haven" along with the US dollar, also brings a small but still certain return. The strong dollar is not good news for gold, which has fallen below the key support of USD 1,800 per ounce.  Figure 5: Gold on H4 and daily chart The nearest resistance according to the H4 chart is therefore in the zone of USD 1,800 - 1,807 per ounce. Below this resistance we have several supports. The closest one is 1 780 - 1 787 USD per ounce.  
The Swing Overview - Week 26 2022 - 08.07.2022

The Swing Overview - Week 26 2022 - 08.07.2022

Purple Trading Purple Trading 08.07.2022 09:47
The Swing Overview - Week 26 2022 After ashort-term upward correction, the indices resumed their bearish trend and closed the week in the red. Along with this risk-off sentiment, commodity currencies weakened, as did the British pound and the euro. Gold is losing ground as a means of inflation protection and has fallen back below the USD 1,800 per ounce. The US dollar, on the other hand, is still the strongest currency amid the looming recession. Macroeconomic data The number of new home sales in the US for May reached 696,000, beating expectations of 588,000. This is positive news.   On the other hand, the negative news is the drop in consumer confidence, which reached 98.7 for May (103.2 the previous month). The drop in consumer confidence is expected to affect consumer spendings. It is evident that American consumers are reluctant to spend in times of rising prices and are accumulating savings for the future. This is of course contributing to the economic slowdown and the risk of a recession in the US is thus becoming stronger. This was confirmed by the GDP data, which fell for the third month in a row.   The fall in GDP last month was 1.6%. GDP was therefore negative in 1Q 2022. If it is also negative in 2Q2022, it will be an official confirmation of the recession defined by two negative quarters in a row. Jerome Powell suggested this week that the risk of the economy being damaged by higher rates is less important than restoring price stability. This heightens fears that a slowdown in the US economy will take the whole world down with it. So in times when central banks are tackling inflation, this risk will set the tone for some time.    This situation is positive for the US dollar, which is seen by investors as a safe haven asset in times of uncertainty. The dollar therefore remains close to this year's highs.  Although the yield on 10-year US Treasuries has fallen below 3%, the overall trend in bond yields is still upwards. Figure 1: US 10-year bond yields and USD index on the daily chart   The SP 500 Index The strengthening on the SP 500 Index that we have seen in the week of June 20 was really just a short-term correction to the overall downtrend, as we have previously suggested. Last week saw another sell-off and so the overall downtrend on the index continues.   Figure 2: The SP 500 on H4 and D1 chart   The nearest resistance according to the H4 chart is in the range of 3,810 - 3,820. The next resistance is 3,930 - 3,950. A support is 3 640 - 3 670.    German DAX index  The German Ifo Business Climate Index which measures the expectations of manufacturers, builders and sellers for the next 6 months continued to show a value of 92.3, which is worse than the previous month when the index value was 93.0. The fall in the reading suggests some pessimism, accentuated by current market uncertainties, which include the impact of the war in Ukraine and high inflation, which in Germany for the month of June was 7.6% year-on-year. However, inflation fell by 0.1% month-on-month.   The labour market has also indicated problems. The number of unemployed in Germany rose by 133 000, while the market had expected a fall of 6 000. This was very negative news, which triggered a strong sell-off on the Dax on Thursday. On the other hand, retail sales were positive, rising by 0.6% in May, while a 5.4% decline was recorded in April. Figure 3: German DAX index on H4 and daily chart The DAX has broken support according to the H4 chart at 12,850, which has now become the new resistance, which is in the 12,820 - 12,850 range. The next resistance according to the H4 chart is then at 13,280 - 13,375. The strong support according to the daily chart is 12,443 - 12,620, which price is currently approaching.    Eurozone inflation at a new record Eurozone consumer inflation reached another record high in June, rising by 8.6% year-on-year. This is higher than analysts' expectations, who predicted a rise of 8.4%. Inflation is therefore continuing to rise, so the expectation that the ECB could raise rates by more than 0.25% in July is on target and this could support the euro's growth. On the other hand, there is a strong dollar which could continue to slow down bulls on the euro.   Figure 4: EUR/USD on H4 and daily chart The nearest resistance according to the H4 chart is at 1.048 - 1.0500. The next resistance is at 1.0600 - 1.0610. Support is at 1.0360 - 1.0380.   Gold broke the $1,800 price tag The development in gold has once again confirmed that investors prefer US bonds instead of gold, which, in addition to being considered a "safe haven" along with the US dollar, also brings a small but still certain return. The strong dollar is not good news for gold, which has fallen below the key support of USD 1,800 per ounce.  Figure 5: Gold on H4 and daily chart The nearest resistance according to the H4 chart is therefore in the zone of USD 1,800 - 1,807 per ounce. Below this resistance we have several supports. The closest one is 1 780 - 1 787 USD per ounce.  
The Swing Overview - Week 27 2022

The Swing Overview - Week 27 2022

Purple Trading Purple Trading 08.07.2022 10:27
The Swing Overview - Week 27 2022 The fall in US bond yields, the rise in the US dollar and the sharp weakening in the euro, which is heading towards parity with the dollar. This is how the last week, in which stock indices cautiously strengthened and made a correction in the downward trend, could be characterised. It is worth noting that Germany has a negative trade balance for the first time since May 1991. Is the country losing its reputation as an economic powerhouse of Europe? Macroeconomic data The ISM in manufacturing, which shows purchasing managers' expectations of economic developments in the short term, came in at 53.0 for June.  While a value above 50 still indicates an expected expansion in the sector, the trend since the beginning of the year has been declining, indicating worsening of optimism.   Unemployment claims reached 231,000 last week. This is still a level that is fairly normal. However, we note that this is the 6th week in a row that the number of claims has been rising. The crucial news on the labour market will then be shown in Friday's NFP data.   On Wednesday, the minutes of the last FOMC meeting were presented, which confirmed that another 50-75 point rate hike is likely in July. The minutes also stated that the Fed could tighten further its hawkish policy if inflationary pressures persist. The Fed's target is to push inflation down to around 2%.   The Fed's hawkish tone has led to a strengthening of the dollar, which has reached a level over 107, its highest level since October 2002. Following the presentation of the FOMC minutes, the US Treasury yields started to rise again. Figure 1: The US 10-year bond yields and the USD index on the daily chart   The SP 500 Index The temporary decline in US Treasury yields was the reason for the correction in the bearish trend in equity indices. However, the bear market still continues to be supported fundamentally by fears of an impending recession.  Figure 2: The SP 500 on H4 and D1 chart   The nearest resistance according to the H4 chart is in the 3,930 - 3,950 range. A support is at 3,740 - 3,750 and then 3,640 - 3,670.    German DAX index The German manufacturing PMI for June came in at 52.0 (previous month 54.8). The downward trend shows a deterioration in optimism.    It is worth noting that Germany's trade balance is negative for the first time since May 1991, i.e. imports are higher than exports. The current trade balance is - EUR 1 billion. The market was expecting a surplus of 2.7 billion. Rising prices of imported energy and a reduction in exports to Russia have contributed to the negative balance. Figure 3: German DAX index on H4 and daily chart The DAX is in a downtrend. On the H4 chart, it has reached the moving average EMA 50. The resistance is in the range of 12,900 - 12,960. Strong support on the daily chart is 12,443 - 12,500, which was tested again last week.    Euro is near parity with the USD Even high inflation, which is already at 8.6%, has not stopped the euro from falling. It seems that parity with the dollar could be reached very soon. The negative trade balance in Germany has contributed very significantly to the euro's decline.  Figure 4: EUR/USD on H4 and daily chart The nearest resistance according to the H4 chart is at 1.020 - 1.021. Support according to the daily chart would be only at parity with the dollar at 1.00. Reaching this value would represent a unique situation that has not occurred on the EUR/USD pair since 2002.   Australia raised interest rates The Reserve Bank of Australia raised the interest rate by 0.50% as expected. The current interest rate now stands at 1.35%. According to the central bank, the Australian economy has been solid so far thanks to commodity exports, the prices of which have been rising. Unemployment is 3.9%, the lowest level in 50 years.   One uncertainty is the behaviour of consumers, who are cutting back on spending in times of high inflation. A significant risk is global development, which is influenced by the war in Ukraine and its impact on energy and agricultural commodity prices.   Figure 5: The AUD/USD on H4 and daily chart The AUD/USD is in a downtrend and even the rate hike did not help the Australian dollar to strengthen. However, there has been some correction in the downtrend. The resistance according to the H4 chart is 0.6880 - 0.6900. The support is at 0.6760 - 0.6770.  
EUR/USD Pair Has Potential For The Downside Movement Today

Podcast: Speaking Of EUR/USD And The Future Of Euro, COVID-19, British Pound And Bank Of England | Oanda

Jeffrey Halley Jeffrey Halley 12.07.2022 14:39
Senior Market Analyst Jeffrey Halley talks about news impacting the market and the week ahead. In this week’s podcast, the Euro is approaching parity with the US Dollar for the first time in decades. We discuss the move, the reasons behind it, and what lies ahead for the single currency. But first, it is a quick look at Asian markets where covid-19 concerns in China are weighing on sentiment. Then it is the British Pound and UK data and of course, British politics. From there it is the Bank of England before getting our teeth stuck into US inflation data due tomorrow. We ponder its implications for the market and why it matters to the Fed.   This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds. Market Insights Podcast (Episode 351) - MarketPulseMarketPulse
GBP Inflation Surprise: Pound Faces Downward Pressure as Rate Hike Expectations Shift

ZEW Economic Index Economic Readings (EUR/USD, EUR/GBP), Many Currencies Have Come Under Pressure As The US Dollar Continues To Strengthen

Rebecca Duthie Rebecca Duthie 12.07.2022 17:02
Summary: The Euro expectedly reacted poorly to the ZEW indexes economic readings. EUR/GBP GBP/AUD came in softer on Tuesday. GBP/NZD Read next: EUR/USD Attempts Parity (EUR/USD), Noord Stream Maintenance Is Underway (EUR/GBP), BoC Policy Decision Due Wednesday (GBP/CAD), USD/JPY  US Inflation Data will be released on Wednesday The market is reflecting bearish signals for this currency pair. The Euro expectedly reacted poorly to the ZEW indexes economic readings and is now seeing the EUR/USD currency pair testing parity. The EU region print came in at -53.8, the lowest since November 2011, reiterating the already lowering optimism in the Eurozone. Further events that could negatively affect the Euro further include an increasingly hawkish Federal Reserve, the potential energy crisis lingering over the Eurozone and recessionary fears. Focus during Wednesday's trading day will be on the US Inflation data release which will give the market further guidance around the U.S economy. EUR/USD Price Chart Euro faces more risks The market is reflecting mixed signals for this currency pair. The Pound sterling continues to be weighed down by the market's woes around the Euro. The Euro/US Dollar currency pair is testing parity. The pound was supported by the news of Prime Minister Boris Johnson stepping down in the wake of many government officials resigning. The Euro still faces risks going forward. EUR/GBP Price Chart GBP/AUD Currency pair The pound sterling to Australian Dollar entered the trading week on its front foot with the AUD coming under pressure from numerous other currencies whilst the US Dollar strengthened even against China's Renminbi and risk aversion controlled both the stock and commodity markets. Although the GBP/AUD was softer on Tuesday, it closely resembles the USD pairing against both the GBP and AUD. GBP/AUD Price Chart GBP/NZD The GBP/NZD currency pair has had a volatile start to the trading week and could see the pound sterling strengthen even more in the coming days if the Reserve Bank of New Zealand (RBNZ) surprises the markets and encourages the NZD to outperform other currencies. GBP/NZD Price Chart Sources: finance.yahoo.com, poundsterlinglive.com, dailyfx.com
Currency Speculators drop Euro bets further into bearish territory as EURUSD nears parity

Currency Speculators drop Euro bets further into bearish territory as EURUSD nears parity

Invest Macro Invest Macro 09.07.2022 19:55
By InvestMacro | COT | Data Tables | COT Leaders | Downloads | COT Newsletter Here are the latest charts and statistics for the Commitment of Traders (COT) data published by the Commodities Futures Trading Commission (CFTC). The latest COT data is updated through Tuesday July 5th and shows a quick view of how large traders (for-profit speculators and commercial entities) were positioned in the futures markets. All currency positions are in direct relation to the US dollar where, for example, a bet for the euro is a bet that the euro will rise versus the dollar while a bet against the euro will be a bet that the euro will decline versus the dollar. Currency market speculator bets were lower this week as all of the eleven currency markets we cover had lower positioning on the week. Leading the declines in speculator bets this week were the Brazil real (-20,695 contracts) and the Euro (-6,256 contracts) while the Canadian dollar (-4,804 contracts), Australian dollar (-4,641 contracts), US Dollar Index (-3,978 contracts), British pound sterling (-3,090 contracts), Japanese yen (-1,875 contracts), New Zealand dollar (-1,745 contracts), Swiss franc (-1,544 contracts), Bitcoin (-665 contracts) and the Mexican peso (-438 contracts) all saw lower speculator bets for the week. Highlighting the currency futures data this week was the Euro speculator position that fell deeper into bearish territory and dropped for the fourth time in the past five weeks. The speculator position has now decreased by a whopping -69,124 contracts in just the past five weeks and has brought the overall standing to the lowest level since November 30th of 2021, a span of 31 weeks. The Euro price has been strongly on the defensive against the dollar as the EURUSD currency pair this week hit the lowest level since December 0f 2002. The EURUSD fell to a low under the 1.0200 exchange rate on Friday and sets up what seems to be an inevitable test of parity which would also be the first time that has happened since December of 2002. More COT currency notes: US Dollar Index bets fell for a second straight week and dipped below +40,000 contracts for the first time in four weeks. Despite the 2-week decline, the Dollar Index speculator position remains extremely bullish which has seen increases in speculator bets in ten out of the past fifteen weeks. Overall, the Dollar Index positioning has been in bullish territory for fifty-three straight weeks after turning from bearish to bullish on July 6th of 2021. The Dollar Index price this week continued to climb (up 5 out of 6 weeks) and hit the highest level since October of 2002 at above the 107.75 level. Japanese yen speculator bets fell for the first time in the past eight weeks this week. Yen bets remain bearish but have improved strongly over the past few months going from a total of -110,454 contracts on May 10th to a total of -54,445 contracts this week. Despite, the speculator sentiment improvement, the USDJPY currency pair has remained near the top of its range (and close to 20-year highs) at around the 136.00 exchange rate. Brazilian real speculator bets dropped sharply this week by over -20,000 contracts and fell for the third straight week. These declines have brought the BRL position down to the lowest level in the past twenty-two weeks at just +16,333 contracts. The Brazil real price has been on the defensive in the past month as the BRLUSD currency pair fell to a five month low this week near the 0.1850 exchange rate and dropped under its 200-day moving average for the first time since January. Strength scores (a measure of the 3-Year range of Speculator positions, from 0 to 100 where above 80 is extreme bullish and below 20 is extreme bearish) show that the US Dollar Index (90.4 percent) and Bitcoin (87.9 percent) lead the currencies at the top of their respective ranges and are both in bullish extreme positions. The Brazilian real (66.4 percent) comes in as the next highest currency in strength scores but took a large tumble this week to fall out of a bullish extreme level. On the downside, the Mexican peso at 21.2 percent continues to be at the lowest strength level currently and is followed by the Euro at 29.8 percent and the Swiss franc at 30.8 percent. Strength score trends (or move index, that calculate 6-week changes in strength scores) shows that the Japanese yen (27.7 percent) leads the past six weeks trends once again this week. The Swiss franc (24.2 percent), New Zealand dollar (20.6 percent) and the Canadian dollar (19.1 percent) round out the top movers in the latest data. The Brazilian real (-22.0 percent) saw a huge decrease in speculator positions this week and leads the downside trend scores currently. The next currencies will lower trend scores were the Mexican peso at -18.9 percent followed by the Euro at -17.1 percent. Data Snapshot of Forex Market Traders | Columns Legend Jul-05-2022OIOI-IndexSpec-NetSpec-IndexCom-NetCOM-IndexSmalls-NetSmalls-Index USD Index 60,857 91 39,251 90 -41,510 10 2,259 41 EUR 673,772 71 -16,852 30 -8,636 74 25,488 17 GBP 240,926 65 -56,208 34 77,009 75 -20,801 13 JPY 217,672 67 -54,445 35 64,063 67 -9,618 34 CHF 38,504 18 -10,135 31 20,075 75 -9,940 24 CAD 145,372 27 4,293 44 -4,533 65 240 31 AUD 146,950 42 -47,621 41 55,708 60 -8,087 33 NZD 45,403 35 -7,056 59 10,521 47 -3,465 12 MXN 197,463 48 -14,418 21 10,096 77 4,322 61 RUB 20,930 4 7,543 31 -7,150 69 -393 24 BRL 39,470 26 16,333 66 -17,398 34 1,065 77 Bitcoin 13,258 75 420 88 -462 0 42 14   US Dollar Index Futures: The US Dollar Index large speculator standing this week resulted in a net position of 39,251 contracts in the data reported through Tuesday. This was a weekly decline of -3,978 contracts from the previous week which had a total of 43,229 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish-Extreme with a score of 90.4 percent. The commercials are Bearish-Extreme with a score of 9.9 percent and the small traders (not shown in chart) are Bearish with a score of 41.2 percent. US DOLLAR INDEX Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 87.0 3.3 8.2 – Percent of Open Interest Shorts: 22.5 71.5 4.5 – Net Position: 39,251 -41,510 2,259 – Gross Longs: 52,927 2,023 4,993 – Gross Shorts: 13,676 43,533 2,734 – Long to Short Ratio: 3.9 to 1 0.0 to 1 1.8 to 1 NET POSITION TREND:       – Strength Index Score (3 Year Range Pct): 90.4 9.9 41.2 – Strength Index Reading (3 Year Range): Bullish-Extreme Bearish-Extreme Bearish NET POSITION MOVEMENT INDEX:       – 6-Week Change in Strength Index: 2.0 -1.0 -6.3   Euro Currency Futures: The Euro Currency large speculator standing this week resulted in a net position of -16,852 contracts in the data reported through Tuesday. This was a weekly decline of -6,256 contracts from the previous week which had a total of -10,596 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 29.8 percent. The commercials are Bullish with a score of 73.6 percent and the small traders (not shown in chart) are Bearish-Extreme with a score of 16.6 percent. EURO Currency Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 29.3 56.1 12.2 – Percent of Open Interest Shorts: 31.8 57.3 8.5 – Net Position: -16,852 -8,636 25,488 – Gross Longs: 197,138 377,654 82,525 – Gross Shorts: 213,990 386,290 57,037 – Long to Short Ratio: 0.9 to 1 1.0 to 1 1.4 to 1 NET POSITION TREND:       – Strength Index Score (3 Year Range Pct): 29.8 73.6 16.6 – Strength Index Reading (3 Year Range): Bearish Bullish Bearish-Extreme NET POSITION MOVEMENT INDEX:       – 6-Week Change in Strength Index: -17.1 18.1 -13.5   British Pound Sterling Futures: The British Pound Sterling large speculator standing this week resulted in a net position of -56,208 contracts in the data reported through Tuesday. This was a weekly fall of -3,090 contracts from the previous week which had a total of -53,118 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 33.5 percent. The commercials are Bullish with a score of 75.2 percent and the small traders (not shown in chart) are Bearish-Extreme with a score of 12.5 percent. BRITISH POUND Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 16.4 74.2 7.3 – Percent of Open Interest Shorts: 39.8 42.2 16.0 – Net Position: -56,208 77,009 -20,801 – Gross Longs: 39,618 178,745 17,693 – Gross Shorts: 95,826 101,736 38,494 – Long to Short Ratio: 0.4 to 1 1.8 to 1 0.5 to 1 NET POSITION TREND:       – Strength Index Score (3 Year Range Pct): 33.5 75.2 12.5 – Strength Index Reading (3 Year Range): Bearish Bullish Bearish-Extreme NET POSITION MOVEMENT INDEX:       – 6-Week Change in Strength Index: 17.4 -11.8 -8.6   Japanese Yen Futures: The Japanese Yen large speculator standing this week resulted in a net position of -54,445 contracts in the data reported through Tuesday. This was a weekly reduction of -1,875 contracts from the previous week which had a total of -52,570 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 35.3 percent. The commercials are Bullish with a score of 66.9 percent and the small traders (not shown in chart) are Bearish with a score of 33.9 percent. JAPANESE YEN Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 17.8 68.8 11.7 – Percent of Open Interest Shorts: 42.8 39.3 16.1 – Net Position: -54,445 64,063 -9,618 – Gross Longs: 38,660 149,702 25,452 – Gross Shorts: 93,105 85,639 35,070 – Long to Short Ratio: 0.4 to 1 1.7 to 1 0.7 to 1 NET POSITION TREND:       – Strength Index Score (3 Year Range Pct): 35.3 66.9 33.9 – Strength Index Reading (3 Year Range): Bearish Bullish Bearish NET POSITION MOVEMENT INDEX:       – 6-Week Change in Strength Index: 27.7 -20.8 -4.8   Swiss Franc Futures: The Swiss Franc large speculator standing this week resulted in a net position of -10,135 contracts in the data reported through Tuesday. This was a weekly reduction of -1,544 contracts from the previous week which had a total of -8,591 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 30.8 percent. The commercials are Bullish with a score of 75.5 percent and the small traders (not shown in chart) are Bearish with a score of 23.9 percent. SWISS FRANC Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 8.4 69.2 22.3 – Percent of Open Interest Shorts: 34.7 17.1 48.2 – Net Position: -10,135 20,075 -9,940 – Gross Longs: 3,218 26,664 8,602 – Gross Shorts: 13,353 6,589 18,542 – Long to Short Ratio: 0.2 to 1 4.0 to 1 0.5 to 1 NET POSITION TREND:       – Strength Index Score (3 Year Range Pct): 30.8 75.5 23.9 – Strength Index Reading (3 Year Range): Bearish Bullish Bearish NET POSITION MOVEMENT INDEX:       – 6-Week Change in Strength Index: 24.2 -18.5 7.0   Canadian Dollar Futures: The Canadian Dollar large speculator standing this week resulted in a net position of 4,293 contracts in the data reported through Tuesday. This was a weekly lowering of -4,804 contracts from the previous week which had a total of 9,097 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 44.2 percent. The commercials are Bullish with a score of 65.0 percent and the small traders (not shown in chart) are Bearish with a score of 30.6 percent. CANADIAN DOLLAR Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 31.2 46.7 21.0 – Percent of Open Interest Shorts: 28.3 49.8 20.8 – Net Position: 4,293 -4,533 240 – Gross Longs: 45,365 67,829 30,460 – Gross Shorts: 41,072 72,362 30,220 – Long to Short Ratio: 1.1 to 1 0.9 to 1 1.0 to 1 NET POSITION TREND:       – Strength Index Score (3 Year Range Pct): 44.2 65.0 30.6 – Strength Index Reading (3 Year Range): Bearish Bullish Bearish NET POSITION MOVEMENT INDEX:       – 6-Week Change in Strength Index: 19.1 -9.6 -11.1   Australian Dollar Futures: The Australian Dollar large speculator standing this week resulted in a net position of -47,621 contracts in the data reported through Tuesday. This was a weekly decrease of -4,641 contracts from the previous week which had a total of -42,980 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 40.7 percent. The commercials are Bullish with a score of 60.4 percent and the small traders (not shown in chart) are Bearish with a score of 32.7 percent. AUSTRALIAN DOLLAR Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 18.8 64.8 12.6 – Percent of Open Interest Shorts: 51.2 26.9 18.1 – Net Position: -47,621 55,708 -8,087 – Gross Longs: 27,622 95,252 18,508 – Gross Shorts: 75,243 39,544 26,595 – Long to Short Ratio: 0.4 to 1 2.4 to 1 0.7 to 1 NET POSITION TREND:       – Strength Index Score (3 Year Range Pct): 40.7 60.4 32.7 – Strength Index Reading (3 Year Range): Bearish Bullish Bearish NET POSITION MOVEMENT INDEX:       – 6-Week Change in Strength Index: -2.0 1.8 -0.6   New Zealand Dollar Futures: The New Zealand Dollar large speculator standing this week resulted in a net position of -7,056 contracts in the data reported through Tuesday. This was a weekly decline of -1,745 contracts from the previous week which had a total of -5,311 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish with a score of 59.4 percent. The commercials are Bearish with a score of 46.6 percent and the small traders (not shown in chart) are Bearish-Extreme with a score of 11.8 percent. NEW ZEALAND DOLLAR Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 30.0 63.9 5.9 – Percent of Open Interest Shorts: 45.6 40.8 13.6 – Net Position: -7,056 10,521 -3,465 – Gross Longs: 13,634 29,029 2,689 – Gross Shorts: 20,690 18,508 6,154 – Long to Short Ratio: 0.7 to 1 1.6 to 1 0.4 to 1 NET POSITION TREND:       – Strength Index Score (3 Year Range Pct): 59.4 46.6 11.8 – Strength Index Reading (3 Year Range): Bullish Bearish Bearish-Extreme NET POSITION MOVEMENT INDEX:       – 6-Week Change in Strength Index: 20.6 -18.8 -1.0   Mexican Peso Futures: The Mexican Peso large speculator standing this week resulted in a net position of -14,418 contracts in the data reported through Tuesday. This was a weekly reduction of -438 contracts from the previous week which had a total of -13,980 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 21.2 percent. The commercials are Bullish with a score of 77.0 percent and the small traders (not shown in chart) are Bullish with a score of 61.3 percent. MEXICAN PESO Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 54.3 41.6 3.5 – Percent of Open Interest Shorts: 61.6 36.5 1.3 – Net Position: -14,418 10,096 4,322 – Gross Longs: 107,141 82,106 6,947 – Gross Shorts: 121,559 72,010 2,625 – Long to Short Ratio: 0.9 to 1 1.1 to 1 2.6 to 1 NET POSITION TREND:       – Strength Index Score (3 Year Range Pct): 21.2 77.0 61.3 – Strength Index Reading (3 Year Range): Bearish Bullish Bullish NET POSITION MOVEMENT INDEX:       – 6-Week Change in Strength Index: -18.9 18.5 -1.0   Brazilian Real Futures: The Brazilian Real large speculator standing this week resulted in a net position of 16,333 contracts in the data reported through Tuesday. This was a weekly reduction of -20,695 contracts from the previous week which had a total of 37,028 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish with a score of 66.4 percent. The commercials are Bearish with a score of 34.3 percent and the small traders (not shown in chart) are Bullish with a score of 77.2 percent. BRAZIL REAL Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 61.5 29.8 7.8 – Percent of Open Interest Shorts: 20.1 73.9 5.1 – Net Position: 16,333 -17,398 1,065 – Gross Longs: 24,261 11,776 3,089 – Gross Shorts: 7,928 29,174 2,024 – Long to Short Ratio: 3.1 to 1 0.4 to 1 1.5 to 1 NET POSITION TREND:       – Strength Index Score (3 Year Range Pct): 66.4 34.3 77.2 – Strength Index Reading (3 Year Range): Bullish Bearish Bullish NET POSITION MOVEMENT INDEX:       – 6-Week Change in Strength Index: -22.0 22.5 -8.5     Bitcoin Futures: The Bitcoin large speculator standing this week resulted in a net position of 420 contracts in the data reported through Tuesday. This was a weekly lowering of -665 contracts from the previous week which had a total of 1,085 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish-Extreme with a score of 87.9 percent. The commercials are Bearish with a score of 30.9 percent and the small traders (not shown in chart) are Bearish-Extreme with a score of 13.9 percent. BITCOIN Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 80.3 1.2 8.0 – Percent of Open Interest Shorts: 77.1 4.7 7.7 – Net Position: 420 -462 42 – Gross Longs: 10,642 158 1,058 – Gross Shorts: 10,222 620 1,016 – Long to Short Ratio: 1.0 to 1 0.3 to 1 1.0 to 1 NET POSITION TREND:       – Strength Index Score (3 Year Range Pct): 87.9 30.9 13.9 – Strength Index Reading (3 Year Range): Bullish-Extreme Bearish Bearish-Extreme NET POSITION MOVEMENT INDEX:       – 6-Week Change in Strength Index: -7.8 20.6 1.7   Article By InvestMacro – Receive our weekly COT Reports by Email *COT Report: The COT data, released weekly to the public each Friday, is updated through the most recent Tuesday (data is 3 days old) and shows a quick view of how large speculators or non-commercials (for-profit traders) were positioned in the futures markets. The CFTC categorizes trader positions according to commercial hedgers (traders who use futures contracts for hedging as part of the business), non-commercials (large traders who speculate to realize trading profits) and nonreportable traders (usually small traders/speculators) as well as their open interest (contracts open in the market at time of reporting).See CFTC criteria here.
Euro, Mexican Peso & Brazilian Real lead Currency Speculators bets lower

Euro, Mexican Peso & Brazilian Real lead Currency Speculators bets lower

Invest Macro Invest Macro 16.07.2022 19:19
By InvestMacro | COT | Data Tables | COT Leaders | Downloads | COT Newsletter Here are the latest charts and statistics for the Commitment of Traders (COT) data published by the Commodities Futures Trading Commission (CFTC). The latest COT data is updated through Tuesday July 12th and shows a quick view of how large traders (for-profit speculators and commercial entities) were positioned in the futures markets. All currency positions are in direct relation to the US dollar where, for example, a bet for the euro is a bet that the euro will rise versus the dollar while a bet against the euro will be a bet that the euro will decline versus the dollar. Weekly Speculator Changes COT currency market speculator bets were mostly lower this week as just three out of the eleven currency markets we cover had higher positioning while the other eight markets had lower speculator contracts. Leading the gains for the currency markets was the Australian dollar with a weekly gain of 6,021 contracts while the New Zealand dollar (1,773 contracts) and the Swiss franc (1,411 contracts) also had positive weeks. The currencies leading the declines in speculator bets this week were the Mexican peso (-8,820 contracts) and the Euro (-8,392 contracts) with the Brazilian real (-6,128 contracts), Japanese yen (-5,553 contracts), British pound sterling (-2,881 contracts), US Dollar Index (-897 contracts), Canadian dollar (-788 contracts) and Bitcoin(-591 contracts) also registering lower bets on the week.     Highlighting this week’s COT currency data is the continued decline in the Euro speculator positions which fell for a second straight week and for the fifth time in the past six weeks. Euro bets have now dropped by -77,516 contracts in just the past six weeks, going from +52,272 contracts on May 31st to -25,244 contracts this week. This weakness put the current speculator position at the lowest level since March of 2020 but it is nowhere near the extremely bearish levels of years past (for example: -114,021 contracts in 2020 or -182,845 contracts in 2015). There seems to be a lot of room for the speculator position to fall further. Will this bring the Euro price even lower? That is a fascinating question as the largest currency news story of the past few weeks has been the EURUSD reaching parity for the first time in over twenty years. The EURUSD actually hit 0.9952 on Thursday before closing the week near the 1.0080 exchange rate and with the US Federal Reserve poised to raise interest rates further soon – the EURUSD will likely remain under pressure but how low can it go? The other side of the COT data this week is the continued strength of the US Dollar Index speculator positions. The USD Index speculator bets fell this week for a third straight week but remain very much near their recent highs. Speculative positions recently had three straight weeks of over at least +40,000 net contracts for the first time since 2019 while the speculator position also topped +45,000 contracts (on June 21st) for the first time since March 21st of 2017, a span of 274 weeks. The strong sentiment for the dollar has helped boost the US Dollar Index price to a high over 109.00 this week, reaching the highest level since 2002. With the two largest components of the US Dollar Index, the Euro at 57.6 percent of the index and the Japanese yen at 13.6 percent, so weak at the moment, the DXY might challenge the 110 exchange rate in the weeks to come. Data Snapshot of Forex Market Traders | Columns Legend Jul-12-2022 OI OI-Index Spec-Net Spec-Index Com-Net COM-Index Smalls-Net Smalls-Index USD Index 59,565 88 38,354 89 -40,895 11 2,541 44 EUR 682,031 75 -25,244 27 5,760 78 19,484 7 GBP 231,945 59 -59,089 31 75,405 74 -16,316 22 JPY 223,539 71 -59,998 32 75,067 72 -15,069 23 CHF 41,255 23 -8,724 34 19,882 75 -11,158 20 CAD 139,297 23 3,505 43 -4,653 65 1,148 32 AUD 158,263 51 -41,600 46 52,490 58 -10,890 26 NZD 45,837 36 -5,283 62 8,979 44 -3,696 9 MXN 195,611 47 -23,238 17 20,317 81 2,921 55 RUB 20,930 4 7,543 31 -7,150 69 -393 24 BRL 41,034 28 10,205 60 -10,868 41 663 73 Bitcoin 13,505 77 -171 77 -201 0 372 21   Strength Scores Strength Scores (a normalized measure of Speculator positions over a 3-Year range, from 0 to 100 where above 80 is extreme bullish and below 20 is extreme bearish) show that the US Dollar Index (88.9 percent) leads the currency markets near the top of its 3-year range and in a bullish extreme position (above 80 percent). Bitcoin (77.2 percent) comes in as the next highest in the currency markets strength scores with the New Zealand Dollar (62.4 percent) and the Brazilian Real (60.4 percent) rounding out the only other markets above 50 percent or above their midpoint for the past 3 years . On the downside, the Mexican Peso (17.4 percent) comes in at the lowest strength level currently and the only one in a bearish extreme level.  The EuroFX (27.3 percent) continues to fall and is the second lowest strength score this week. Strength Statistics: US Dollar Index (88.9 percent) vs US Dollar Index previous week (90.4 percent) EuroFX (27.3 percent) vs EuroFX previous week (29.8 percent) British Pound Sterling (31.4 percent) vs British Pound Sterling previous week (33.5 percent) Japanese Yen (31.9 percent) vs Japanese Yen previous week (35.3 percent) Swiss Franc (34.4 percent) vs Swiss Franc previous week (30.8 percent) Canadian Dollar (43.3 percent) vs Canadian Dollar previous week (44.2 percent) Australian Dollar (46.3 percent) vs Australian Dollar previous week (40.7 percent) New Zealand Dollar (62.4 percent) vs New Zealand Dollar previous week (59.4 percent) Mexican Peso (17.4 percent) vs Mexican Peso previous week (21.2 percent) Brazil Real (60.4 percent) vs Brazil Real previous week (66.4 percent) Russian Ruble (31.2 percent) vs Russian Ruble previous week (31.9 percent) Bitcoin (77.2 percent) vs Bitcoin previous week (87.9 percent) Strength Trends Strength Score Trends (or move index, calculates the 6-week changes in strength scores) show that the Swiss Franc (29.7 percent) leads the past six weeks trends for the currency markets this week. The New Zealand Dollar (22.6 percent) and the Japanese Yen (21.2 percent) round out the next highest movers in the latest trends data as the CHF, NZD and the JPY have seen improving sentiment from speculators. The Brazilian Real (-34.5 percent) leads the downside trend scores this week while the next markets with lower trend scores were the Mexican Peso (-25.0 percent) followed by the Euro (-23.8 percent). Strength Trend Statistics: US Dollar Index (1.4 percent) vs US Dollar Index previous week (2.0 percent) EuroFX (-23.8 percent) vs EuroFX previous week (-17.1 percent) British Pound Sterling (10.8 percent) vs British Pound Sterling previous week (17.4 percent) Japanese Yen (21.2 percent) vs Japanese Yen previous week (27.7 percent) Swiss Franc (29.7 percent) vs Swiss Franc previous week (24.2 percent) Canadian Dollar (11.8 percent) vs Canadian Dollar previous week (19.1 percent) Australian Dollar (6.6 percent) vs Australian Dollar previous week (-2.0 percent) New Zealand Dollar (22.6 percent) vs New Zealand Dollar previous week (20.6 percent) Mexican Peso (-25.0 percent) vs Mexican Peso previous week (-18.9 percent) Brazil Real (-34.5 percent) vs Brazil Real previous week (-22.0 percent) Russian Ruble (-15.6 percent) vs Russian Ruble previous week (9.1 percent) Bitcoin (-10.4 percent) vs Bitcoin previous week (-7.8 percent) Individual Markets: US Dollar Index Futures: The US Dollar Index large speculator standing this week totaled a net position of 38,354 contracts in the data reported through Tuesday. This was a weekly fall of -897 contracts from the previous week which had a total of 39,251 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish-Extreme with a score of 88.9 percent. The commercials are Bearish-Extreme with a score of 10.9 percent and the small traders (not shown in chart) are Bearish with a score of 44.3 percent. US DOLLAR INDEX Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 85.8 3.9 9.0 – Percent of Open Interest Shorts: 21.4 72.5 4.7 – Net Position: 38,354 -40,895 2,541 – Gross Longs: 51,109 2,305 5,365 – Gross Shorts: 12,755 43,200 2,824 – Long to Short Ratio: 4.0 to 1 0.1 to 1 1.9 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 88.9 10.9 44.3 – Strength Index Reading (3 Year Range): Bullish-Extreme Bearish-Extreme Bearish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: 1.4 0.7 -13.7   Euro Currency Futures: The Euro Currency large speculator standing this week totaled a net position of -25,244 contracts in the data reported through Tuesday. This was a weekly reduction of -8,392 contracts from the previous week which had a total of -16,852 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 27.3 percent. The commercials are Bullish with a score of 77.7 percent and the small traders (not shown in chart) are Bearish-Extreme with a score of 6.7 percent. EURO Currency Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 28.9 56.5 12.2 – Percent of Open Interest Shorts: 32.6 55.6 9.4 – Net Position: -25,244 5,760 19,484 – Gross Longs: 197,240 385,039 83,394 – Gross Shorts: 222,484 379,279 63,910 – Long to Short Ratio: 0.9 to 1 1.0 to 1 1.3 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 27.3 77.7 6.7 – Strength Index Reading (3 Year Range): Bearish Bullish Bearish-Extreme NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: -23.8 25.8 -22.2   British Pound Sterling Futures: The British Pound Sterling large speculator standing this week totaled a net position of -59,089 contracts in the data reported through Tuesday. This was a weekly reduction of -2,881 contracts from the previous week which had a total of -56,208 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 31.4 percent. The commercials are Bullish with a score of 74.3 percent and the small traders (not shown in chart) are Bearish with a score of 21.8 percent. BRITISH POUND Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 14.6 75.3 8.2 – Percent of Open Interest Shorts: 40.1 42.8 15.2 – Net Position: -59,089 75,405 -16,316 – Gross Longs: 33,850 174,748 18,999 – Gross Shorts: 92,939 99,343 35,315 – Long to Short Ratio: 0.4 to 1 1.8 to 1 0.5 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 31.4 74.3 21.8 – Strength Index Reading (3 Year Range): Bearish Bullish Bearish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: 10.8 -7.0 -6.7   Japanese Yen Futures: The Japanese Yen large speculator standing this week totaled a net position of -59,998 contracts in the data reported through Tuesday. This was a weekly decline of -5,553 contracts from the previous week which had a total of -54,445 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 31.9 percent. The commercials are Bullish with a score of 72.3 percent and the small traders (not shown in chart) are Bearish with a score of 22.8 percent. JAPANESE YEN Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 15.9 71.8 10.4 – Percent of Open Interest Shorts: 42.7 38.3 17.1 – Net Position: -59,998 75,067 -15,069 – Gross Longs: 35,533 160,589 23,147 – Gross Shorts: 95,531 85,522 38,216 – Long to Short Ratio: 0.4 to 1 1.9 to 1 0.6 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 31.9 72.3 22.8 – Strength Index Reading (3 Year Range): Bearish Bullish Bearish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: 21.2 -14.6 -9.1   Swiss Franc Futures: The Swiss Franc large speculator standing this week totaled a net position of -8,724 contracts in the data reported through Tuesday. This was a weekly rise of 1,411 contracts from the previous week which had a total of -10,135 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 34.4 percent. The commercials are Bullish with a score of 75.2 percent and the small traders (not shown in chart) are Bearish-Extreme with a score of 19.8 percent. SWISS FRANC Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 17.0 63.5 19.4 – Percent of Open Interest Shorts: 38.2 15.4 46.4 – Net Position: -8,724 19,882 -11,158 – Gross Longs: 7,017 26,217 7,984 – Gross Shorts: 15,741 6,335 19,142 – Long to Short Ratio: 0.4 to 1 4.1 to 1 0.4 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 34.4 75.2 19.8 – Strength Index Reading (3 Year Range): Bearish Bullish Bearish-Extreme NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: 29.7 -15.9 -6.0   Canadian Dollar Futures: The Canadian Dollar large speculator standing this week totaled a net position of 3,505 contracts in the data reported through Tuesday. This was a weekly decrease of -788 contracts from the previous week which had a total of 4,293 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 43.3 percent. The commercials are Bullish with a score of 64.9 percent and the small traders (not shown in chart) are Bearish with a score of 32.4 percent. CANADIAN DOLLAR Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 29.9 46.4 22.9 – Percent of Open Interest Shorts: 27.4 49.8 22.0 – Net Position: 3,505 -4,653 1,148 – Gross Longs: 41,613 64,673 31,834 – Gross Shorts: 38,108 69,326 30,686 – Long to Short Ratio: 1.1 to 1 0.9 to 1 1.0 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 43.3 64.9 32.4 – Strength Index Reading (3 Year Range): Bearish Bullish Bearish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: 11.8 -3.6 -12.4   Australian Dollar Futures: The Australian Dollar large speculator standing this week totaled a net position of -41,600 contracts in the data reported through Tuesday. This was a weekly gain of 6,021 contracts from the previous week which had a total of -47,621 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 46.3 percent. The commercials are Bullish with a score of 58.0 percent and the small traders (not shown in chart) are Bearish with a score of 25.9 percent. AUSTRALIAN DOLLAR Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 19.3 67.0 10.5 – Percent of Open Interest Shorts: 45.6 33.9 17.4 – Net Position: -41,600 52,490 -10,890 – Gross Longs: 30,527 106,112 16,570 – Gross Shorts: 72,127 53,622 27,460 – Long to Short Ratio: 0.4 to 1 2.0 to 1 0.6 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 46.3 58.0 25.9 – Strength Index Reading (3 Year Range): Bearish Bullish Bearish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: 6.6 1.0 -20.6   New Zealand Dollar Futures: The New Zealand Dollar large speculator standing this week totaled a net position of -5,283 contracts in the data reported through Tuesday. This was a weekly gain of 1,773 contracts from the previous week which had a total of -7,056 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish with a score of 62.4 percent. The commercials are Bearish with a score of 44.2 percent and the small traders (not shown in chart) are Bearish-Extreme with a score of 9.2 percent. NEW ZEALAND DOLLAR Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 32.6 61.7 5.3 – Percent of Open Interest Shorts: 44.1 42.1 13.4 – Net Position: -5,283 8,979 -3,696 – Gross Longs: 14,926 28,261 2,436 – Gross Shorts: 20,209 19,282 6,132 – Long to Short Ratio: 0.7 to 1 1.5 to 1 0.4 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 62.4 44.2 9.2 – Strength Index Reading (3 Year Range): Bullish Bearish Bearish-Extreme NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: 22.6 -19.1 -12.0   Mexican Peso Futures: The Mexican Peso large speculator standing this week totaled a net position of -23,238 contracts in the data reported through Tuesday. This was a weekly lowering of -8,820 contracts from the previous week which had a total of -14,418 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish-Extreme with a score of 17.4 percent. The commercials are Bullish-Extreme with a score of 81.3 percent and the small traders (not shown in chart) are Bullish with a score of 55.4 percent. MEXICAN PESO Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 53.5 43.1 3.1 – Percent of Open Interest Shorts: 65.4 32.7 1.6 – Net Position: -23,238 20,317 2,921 – Gross Longs: 104,715 84,247 6,023 – Gross Shorts: 127,953 63,930 3,102 – Long to Short Ratio: 0.8 to 1 1.3 to 1 1.9 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 17.4 81.3 55.4 – Strength Index Reading (3 Year Range): Bearish-Extreme Bullish-Extreme Bullish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: -25.0 25.2 -7.5   Brazilian Real Futures: The Brazilian Real large speculator standing this week totaled a net position of 10,205 contracts in the data reported through Tuesday. This was a weekly decline of -6,128 contracts from the previous week which had a total of 16,333 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish with a score of 60.4 percent. The commercials are Bearish with a score of 40.7 percent and the small traders (not shown in chart) are Bullish with a score of 72.5 percent. BRAZIL REAL Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 46.8 46.0 7.2 – Percent of Open Interest Shorts: 21.9 72.5 5.6 – Net Position: 10,205 -10,868 663 – Gross Longs: 19,197 18,878 2,957 – Gross Shorts: 8,992 29,746 2,294 – Long to Short Ratio: 2.1 to 1 0.6 to 1 1.3 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 60.4 40.7 72.5 – Strength Index Reading (3 Year Range): Bullish Bearish Bullish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: -34.5 35.9 -19.8   Bitcoin Futures: The Bitcoin large speculator standing this week totaled a net position of -171 contracts in the data reported through Tuesday. This was a weekly decline of -591 contracts from the previous week which had a total of 420 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish with a score of 77.2 percent. The commercials are Bearish with a score of 46.1 percent and the small traders (not shown in chart) are Bearish with a score of 21.4 percent. BITCOIN Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 76.5 1.6 9.2 – Percent of Open Interest Shorts: 77.7 3.1 6.5 – Net Position: -171 -201 372 – Gross Longs: 10,325 216 1,247 – Gross Shorts: 10,496 417 875 – Long to Short Ratio: 1.0 to 1 0.5 to 1 1.4 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 77.2 46.1 21.4 – Strength Index Reading (3 Year Range): Bullish Bearish Bearish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: -10.4 17.5 6.2   Article By InvestMacro – Receive our weekly COT Reports by Email *COT Report: The COT data, released weekly to the public each Friday, is updated through the most recent Tuesday (data is 3 days old) and shows a quick view of how large speculators or non-commercials (for-profit traders) were positioned in the futures markets. The CFTC categorizes trader positions according to commercial hedgers (traders who use futures contracts for hedging as part of the business), non-commercials (large traders who speculate to realize trading profits) and nonreportable traders (usually small traders/speculators) as well as their open interest (contracts open in the market at time of reporting).See CFTC criteria here.
What Does Inflation Rates We Got To Know Mean To Central Banks?

What Does Inflation Rates We Got To Know Mean To Central Banks?

Purple Trading Purple Trading 15.07.2022 13:36
The Swing Overview – Week 28 2022 This week's new record inflation readings sent a clear message to central bankers. Further interest rate hikes must be faster than before. The first of the big banks to take this challenge seriously was the Bank of Canada, which literally shocked the markets with an unprecedented rate hike of a full 1%. This is obviously not good for stocks, which weakened again in the past week. The euro also stumbled and has already fallen below parity with the usd. Uncertainty, on the other hand, favours the US dollar, which has reached new record highs.   Macroeconomic data The data from the US labour market, the so-called NFP, beat expectations, as the US economy created 372 thousand new jobs in June (the expectation was 268 thousand) and the unemployment rate remained at 3.6%. But on the other hand, unemployment claims continued to rise, reaching 244k last week, the 7th week in a row of increase.   But the crucial news was the inflation data for June. It exceeded expectations and reached a new record of 9.1% on year-on-year basis, the highest value since 1981. Inflation rose by 1.3% on month-on-month basis. Energy prices, which rose by 41.6%, had a major impact on inflation. Declines in commodity prices, such as oil, have not yet influenced June inflation, which may be some positive news. Core inflation excluding food and energy prices rose by 5.9%, down from 6% in May.   The value of inflation was a shock to the markets and the dollar strengthened sharply. We can see this in the dollar index, which has already surpassed 109. We will see how the Fed, which will be deciding on interest rates in less than two weeks, will react to this development. A rate hike of 0.75% is very likely and the question is whether even such an increase will be enough for the markets. Meanwhile, there has been an inversion on the yield curve on US bonds. This means that yields on 2-year bonds are higher than those on 10-year bonds. This is one of the signals of a recession. Figure 1: The US Treasury yield curve on the monthly chart and the USD index on the daily chart   The SP 500 Index Apart from macroeconomic indicators, the ongoing earnings season will also influence the performance of the indices this month. Among the major banks, JP Morgan and Morgan Stanley reported results this week. Both banks reported earnings, but they were below investor expectations. The impact of more expensive funding sources that banks need to finance their activities is probably starting to show.   We must also be interested in the data in China, which, due to the size of the Chinese economy, has an impact on the movement of global indices. 2Q GDP in China was 0.4% on year-on-year basis, a significant drop from the previous quarter (4.8%). Strict lockdowns against new COVID-19 outbreaks had an impact on economic situation in the country. Figure 2: SP 500 on H4 and D1 chart The threat of a recession is seeping into the SP 500 index with another decline, which stalled last week at the support level, which according to the H4 is in the 3,740-3,750 range. The next support is 3,640 - 3,670.  The nearest resistance is 3,930 - 3,950. German DAX index The German ZEW sentiment, which shows expectations for the next 6 months, reached - 53.8. This is the lowest reading since 2011. Inflation in Germany reached 7.6% in June. This is lower than the previous month when inflation was 7.9%. Concerns about the global recession continue to affect the DAX index, which has tested significant supports. Figure 3: German DAX index on H4 and daily chart Strong support according to the daily chart is 12,443 - 12,500, which was tested again last week. We can take the moving averages EMA 50 and SMA 100 as a resistance. The nearest horizontal resistance is 12,950 - 13,000.   The euro broke parity with the dollar The euro fell below 1.00 on the pair with the dollar for the first time in 20 years, reaching a low of 0.9950 last week. Although the euro eventually closed above parity, so from a technical perspective it is not a valid break yet, the euro's weakening points to the headwinds the eurozone is facing: high inflation, weak growth, the threat in energy commodity supplies, the war in Ukraine. Figure 4: EUR/USD on H4 and daily chart Next week the ECB will be deciding on interest rates and it is obvious that there will be some rate hike. A modest increase of 0.25% has been announced. Taking into account the issues mentioned above, the motivation for the ECB to raise rates by a more significant step will not be very strong. The euro therefore remains under pressure and it is not impossible that a fall below parity will occur again in the near future.   The nearest resistance according to the H4 chart is at 1.008 - 1.012. A support is the last low, which is at 0.9950 - 0.9960.   Bank of Canada has pulled out the anti-inflation bazooka Analysts had expected the Bank of Canada to raise rates by 0.75%. Instead, the central bank shocked markets with an unprecedented increase by a full 1%, the highest rate hike in 24 years. The central bank did so in response to inflation, which is the highest in Canada in 40 years. With this jump in rates, the bank is trying to prevent uncontrolled price increases.   The reaction of the Canadian dollar has been interesting. It strengthened significantly immediately after the announcement. However, then it began to weaken sharply. This may be because investors now expect the US Fed to resort to a similarly sharp rate hike. Figure 5: USD/CAD on H4 and daily chart Another reason may be the decline in oil prices, which the Canadian dollar is correlated with, as Canada is a major oil producer. The oil is weakening due to fears of a drop in demand that would accompany an economic recession. Figure 6: Oil on the H4 and daily charts Oil is currently in a downtrend. However, it has reached a support value, which is in the area near $94 per barrel. The support has already been broken, but on the daily chart oil closed above this value. Therefore, it is not a valid break yet.  
Euro: Although ECB Is Expected To Rise Interest Rate By 25bps, 50bps Move Wouldn't Be That Shocking

Euro: Although ECB Is Expected To Rise Interest Rate By 25bps, 50bps Move Wouldn't Be That Shocking

FXStreet News FXStreet News 20.07.2022 16:47
The ECB has pre-committed to raising rates by 25 bps in its July meeting. A 50 bps rate increase by the ECB would not come as a surprise. The bank’s rate hike guidance and new anti-fragmentation tool are being eyed. Almost a decade ago, Mario Draghi pledged to do ‘whatever it takes’ to save the euro. Ten years later, the situation is no different and the shared currency is in a dire state yet again. Will European Central Bank (ECB) President Christine Lagarde repeat history by responding to a larger rate hike this Thursday? The central bank meets on July 21 to announce the first interest rate hike in eleven years at 1215 GMT. Lagarde’s press conference will follow at 1245 GMT. ECB could opt for a 50 bps rate hike The ECB is on track to raise rates by 25 bps on Thursday, lifting the key deposit rate to -0.25%. A recent story by Reuters suggested that the ECB policymakers are set to discuss a 50 bps rate hike at the meeting. Therefore, a double-dose rate increase to control record-high inflation will not come as a surprise. Money markets are pricing in 40% odds on a half-point rate hike this week while wagering 97 bps of tightening by September after earlier baking in a one-percentage-point increase. I believe that the ECB will deliver a 50 bps lift-off this month, in the wake of rampant inflation, resumption of the Russian gas supply and the fact that the ECB is way behind the curve. It’s also worth noting that front-loading rates now may allow the central bank some room to pause or go slower on rate hikes when a recession hits. The euro area is battling a record-high inflation rate of 8.6% on an annualized basis, reported in June. Lagarde clearly mentioned in the press conference following the June policy meeting that the rate hike path will remain ‘data-dependent’. Meanwhile, the latest European Commission forecasts showed that inflation is seen at 4% in 2023, lower than the current rate but still double than the central bank’s target. Source: FXStreet But Lagarde did walk back on her words and later said there were "clearly conditions in which gradualism would not be appropriate". Despite the well-telegraphed talks of a 25 bps rate hike, the ECB could follow the US Federal Reserve’s (Fed) footsteps in turning against its pre-committed guidance. With inflation control on top of its agenda, the ECB needs to move forward with bigger rate hikes, as it remains the main laggard in the global tightening bandwagon. Even the Swiss National Bank (SNB) surprised markets with a 50 bps rate rise in its last policy meeting. Meanwhile, the Fed is likely to hike rates by 75 bps next week, totaling 250 bps of increases so far. The premise for a quarter-point rate rise could be also ebbing fears over an imminent recession in the bloc, especially after Russia announced on Tuesday that Russia's Nord Stream 1 pipeline will resume gas flows on schedule this week but at reduced levels. The Nord Stream 1 carries more than one-third of Russia's natural gas exports to Europe and it was critical for the pipeline to restart after it went offline for 10 days on July 11 for annual maintenance. However, a big move this week could trigger a renewed explosion in the peripheral bond yields, already when the Italian bond yields are through the roof amid simmering political turmoil in the region. But the risk could be mitigated by the policymakers if they announce a new bond-buying scheme on Thursday. The new transmission protection mechanism will cap member countries' borrowing costs when they are deemed to be out of sync with economic reality. Sources with knowledge of the matter said, “ECB policymakers home in on a deal to make new bond purchases conditional on next generation EU targets and fiscal rules.” "These include the targets set by the Commission for securing money from the European Union Recovery and Resilience Facility as well as the Stability and Growth Pact, when it is reinstated next year after the pandemic break,” the sources added. Trading EURUSD price with the ECB EURUSD price is witnessing a classic short-squeeze in the lead-up to the ECB showdown after the euro succumbed below parity against the US dollar last week. The pair has recovered roughly 300 pips from a two-decade low of 0.9952 but the further upside remains at the mercy of Lagarde & Co. EURUSD could resume its downtrend towards parity on ‘sell the fact’ trading should the central bank deliver the expected 25 bps rate hike. A double-dose lift-off could restore the ECB’s credibility in fighting inflation, offering a temporary boost to the euro. The main currency pair could extend the short-squeeze towards the critical 1.0360-1.0370 supply zone, eyeing 1.0400 the figure. The upside risks to EURUSD price could be limited if Lagarde fails to commit on big moves in the September meeting. Also, the lack of details on the new anti-fragmentation tool could leave EUR bulls in limbo once again.
Norway: Norges bank announced lower-than-expected Forex purchases. According to ING authorities may want to support NOK

Exotic Forex Pair: Euro To Norwegian Krone (EUR/NOK) - Technical Analysis - 05/08/22

InstaForex Analysis InstaForex Analysis 05.08.2022 13:50
Relevance up to 11:00 UTC+2 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. EUR/NOK: The chart shows the movement of EUR/NOK (euro to Norwegian krone) in the daily (D1) chart. This pair may be of interest to those who are ready to open orders for a long period in their trading strategy. Unlike classic currency pairs, EUR/NOK has increased volatility and large spread. It is currently forming a new trend, with support at 9.85 and estimated target at 10.53. In the event of a breakdown, quotes will cease to grow. Good luck! Read more: https://www.instaforex.eu/forex_analysis/318176   Read more: https://www.instaforex.eu/forex_analysis/318176
The Euro May Gradually Climb To The Target Level

Forex: Euro To US Dollar - Technical Update - 11/08/22

Kim Cramer Larsson Kim Cramer Larsson 11.08.2022 15:51
EURUSD has broken bullish out of its sideways range on back of the CPI numbers released yesterday. EURUSD hasn’t moved far after the breakout however, being rejected at the 0.618 Fibonacci retracement at 1.0360, coinciding with the medium-term falling trend line and 55 SMA. A strong resistance area.RSI is still showing negative sentiment and needs to close above 60 to reverse that. Today EURUSD seems to have another go at the resistance. If EURUSD can push through those resistances, there is room up till around 1.06. Possibly 1.0790. If it fails once again and is pushed back below 1.0280 it could be range bound in past few weeks range for a couple of more weeks. Source: Saxo Group Source: Saxo Group The longer-term picture on EURUSD outlined in previous analysis remains intact. EURUSD trend is down and parity is likely to be tested later in 2022. To reverse that a close above 1.15 is needed.   Source: Saxo Group Source: Technical Update - EURUSD having another go at strong resistance at 1.0360. It might succeed this time | Saxo Group (home.saxo)
Saxo Bank Podcast: The Upcoming Bank Of Japan Meeting, A Look At Crude Oil, Copper And More

Japanese Yen (JPY) Rise. Energy Prices Are Finally Falling!?

John Hardy John Hardy 16.08.2022 10:05
Summary:  Weak data out of China overnight, together with a surprise rate cut from the PBOC and collapsing energy prices later on Monday saw the Japanese yen surging higher across the board. Indeed, the two key factors behind its descent to multi-decade lows earlier this year, rising yields and surging energy prices, have eased considerably since mid-June with only modest reaction from the yen thus far. Is that about to change? FX Trading focus: JPY finding sudden support on new disinflation narrative Weaker than expected Chinese data overnight brought a surprise rate cut from the Chinese central bank and seems to have sparked a broadening sell-off in commodities, which was boosted later by a crude oil drop of some five dollars per barrel on the news that Iran will decide by midnight tonight on whether to accept a new draft on the nuclear deal forward by the Euro zone. In response, the Chinese yuan has weakened toward the highs for the cycle in USDCNH, trading 6.78+ as of this writing and  (there was a spike high to 6.381 back in May but the exchange rate has been capped by 6.80 since then), but the Japanese yen is stealing the volatility and strength crown, surging sharply across the board and following up on the move lower inspired by the soft US CPI data point. US long yields easing considerably lower after an odd spike last Thursday are a further wind at the JPY’s back here. In the bigger picture, it has been rather remarkable that the firm retreat in global long-date yields since the mid-June peak and the oil price backing down a full 25% and more from the cycle highs didn’t do more to support the yen from the yield-spread angle (Bank of Japan’s YCC policy less toxic as yields fall) and from the current account angle for Japan. Interestingly, while the JPY has surged and taken USDJPY down several notches, the US dollar is rather firm elsewhere, with the focus more on selling pro-cyclical and commodity currencies on the possible implication that China may be content to export deflation by weakening its currency now that commodity prices have come down rather than on selling the US dollar due to any marking down of Fed expectations. Still, while the USD may remain a safe haven should JPY volatility be set to run amok across markets, the focus is far more on the latter as long as USDJPY is falling Chart: EURJPY As the JPY surges here, EURJPY is falling sharply again, largely tracking the trajectory of longer European sovereign yields, which never really rose much from their recent lows from a couple of weeks back, making it tough to understand the solid rally back above 138.00 of late. After peaking above 1.90% briefly in June, the German 10-year Bund, for example, is trading about 100 basis points lower and is not far from the cycle low daily close at 77 basis points. The EURJPY chart features a rather significant pivot area at 133.50, a prior major high back in late 2021 and the recent low and 200-day moving average back at the beginning of the month. After a brief JPY volatility scare in late July and into early August that faded, are we set for a second and bigger round here that takes USDJPY down through 130.00 and EURJPY likewise? A more significant rally in long US treasuries might be required to bring about a real JPY rampage. Source: Saxo Group The focus on weak Chinese data and key commodity prices like copper suddenly losing altitude after their recent rally has the Aussie shifting to the defensive just after it was showing strength late last week in sympathy with strong risk sentiment and those higher commodity prices. Is the AUDUSD break above 0.7000-25 set for a high octane reversal here? AUDJPY is worth a look as well after it managed to surge all the way back toward the top of the range before. The idea that a weak Chine might export deflation from here might be unsettling for Aussie bulls. The US macro data focus for the week is on today’s NAHB homebuilder’s survey, which plunged to a low since 2015 in June (not including the chaotic early 2020 pandemic breakout months), the July Housing Starts and Building Permits and then the July Retail Sales and FOMC minutes on Wednesday. With a massive relief in gasoline prices from the July spike high, it will be interesting to see whether the August US data picks up again on the services side. The preliminary August University of Michigan sentiment survey release on Friday showed expectations rising sharply by over 7 points from the lowest since-1980 lows of June, while the Present Situation measure dropped a few points back toward the cycle (and record) lows from May. Table: FX Board of G10 and CNH trend evolution and strength. The JPY is the real story today, but as our trending measures employ some averaging/smoothing, the move will need to stick what it has achieved today to show more. Watch out for a big shift in the commodity currencies in coming days as well if today’s move is the start of something. Elsewhere, the JPY comeback is merely taking CHF from strength to strength, although even the might franc has dropped against the JPY today. Source: Bloomberg and Saxo Group Table: FX Board Trend Scoreboard for individual pairs. Big momentum shift afoot today and watching whether this holds and the JPY pairs and pairs like AUDUSD and USDCAD to see if we are witnessing a major momentum shift in themes here. Also note NOK pairs like USDNOK and EURNOK here. Source: Bloomberg and Saxo Group Upcoming Economic Calendar Highlights (all times GMT) 1400 – US Aug. NAHB Housing Market Index 0130 – Australia RBA Meeting Minutes Source: FX Update: JPY jumps on deflating energy prices, fresh retreat in yields.
Lowest China's Yield Level In 2 Years!? Dollar (USD) Is Disturbing Gold In It's Challenge

Lowest China's Yield Level In 2 Years!? Dollar (USD) Is Disturbing Gold In It's Challenge

Marc Chandler Marc Chandler 16.08.2022 11:44
Overview: Equities were mostly higher in the Asia Pacific region, though Chinese and Hong Kong markets eased, and South Korea and India were closed for national holidays. Despite new Chinese exercises off the coast of Taiwan following another US congressional visit, Taiwan’s Taiex gained almost 0.85%. Europe’s Stoxx 600 is advancing for the fourth consecutive session, while US futures are paring the pre-weekend rally. Following disappointing data and a surprise cut in the one-year medium-term lending facility, China’s 10-year yield fell to 2.66%, its lowest in two years. The US 10-year is soft near 2.83%, while European yields are mostly 2-4 bp lower. Italian bonds are bucking the trend and the 10-year yield is a little higher. The Antipodeans and Norwegian krone are off more than 1%, but all the major currencies are weaker against the greenback, but the Japanese yen, which is practically flat. Most emerging market currencies are lower too. The Hong Kong Dollar, which has been supported by the HKMA, strengthened before the weekend, and is consolidating those gains today. Gold tested the $1800 level again but has been sold in the wake of the stronger dollar and is at a five-day low near $1778. The poor data from China raises questions about demand, and September WTI is off 3.6% after falling 2.4% before the weekend. It is near $88.60, while last week’s five-month lows were set near $87.00. US natgas is almost 2% lower, while Europe’s benchmark is up 2.7% to easily recoup the slippage of the past two sessions. China’s disappointment is weighing on industrial metal prices. Iron ore tumbled 4% and September copper is off nearly 3%. September wheat snapped a four-day advance before the weekend and is off 2.3% today.  Asia Pacific With a set of disappointing of data, China surprised with a 10-bp reduction in the benchmark one-year lending facility rate to 2.75%  It is the first cut since January. It also cut the yield on the seven-day repo rate to 2.0% from 2.1%. The string of poor news began before the weekend with a larger-than-expect in July lending figures. However, those lending figures probably need to be put in the context of the surge seen in June as lenders scramble to meet quota. Today's July data was simply weak. Industrial output and retail sales slowed sequentially year-over-year, whereas economists had projected modest increases. New home prices eased by 0.11%, and residential property sales fell 31.4% year-over-year after 31.8% decline in June. Property investment fell 6.4% year-over-year, year-to-date measures following a 5.4% drop in June. Fix asset investment also slowed. The one exception to the string of disappointment was small slippage in the surveyed unemployment rate to 5.4% from 5.5%. Incongruous, though on the other hand, the jobless rate for 16–24-year-olds rose to a record 19.9%. Japan reported a Q2 GDP that missed estimates, but the revisions lifted Q1 GDP out of contraction  The world's second-largest economy grew by 2.2% at an annualized pace in Q2. While this was a bit disappointing, Q1 was revised from a 0.5% fall in output to a 0.1% expansion. Consumption (1.1%) rebounded (Q1 revised to 0.3% from 0.1%) as did business spending (1.4% vs. -0.3% in Q1, which was originally reported as -0.7%). Net exports were flat after taking 0.5% off Q1 GDP. Inventories, as expected, were unwound. After contributing 0.5% to Q1 GDP, they took 0.4% off Q2 growth. Deflationary forces were ironically still evident. The GDP deflator fell 0.4% year-over-year, almost the same as in Q1 (-0.5%). Separately, Japan reported industrial surged by 9.2% in June, up from the preliminary estimate of 8.9%. It follows a two-month slide (-7.5% in May and -1.5% in April) that seemed to reflect the delayed impact of the lockdowns in China. The US dollar is little changed against the Japanese yen and is trading within the pre-weekend range (~JPY132.90-JPY133.90). It finished last week slightly above JPY133.40 and a higher closer today would be the third gain in a row, the longest advance in over a month. The weakness of Chinese data seemed to take a toll on the Australian dollar, which has been sold to three-day lows in the European morning near $0.7045. It stalled last week near $0.7140 and in front of the 200-day moving average (~$0.7150). A break of $0.7035 could signal a return to $0.7000, and possibly $0.6970. The greenback gapped higher against the Chinese yuan and reached almost CNY6.7690, nearly a two-week high. The pre-weekend high was about CNY6.7465 and today's low is around CNY6.7495. The PBOC set the dollar's reference rate at CNY6.7410, a little above the Bloomberg survey median of CNY6.7399. Note that a new US congressional delegation is visiting Taiwan and China has renewed drills around the island. The Taiwan dollar softened a little and traded at a three-day low. Europe Turkey's sovereign debt rating was cut a notch by Moody's to B3 from B2  That is equivalent to B-, a step below Fitch (B) and two below S&P (B+). Moody's did change its outlook to stable from negative. The rating agency cited the deterioration of the current account, which it now sees around 6% of GDP, three times larger than projected before Russia invaded Ukraine. The Turkish lira is the worst performing currency this year, with a 27.5% decline after last year's 45% depreciation. Turkey's two-year yield fell below 20% today for the first time in nine months, helped ostensibly by Russia's recent cash transfer. The dollar is firm against the lira, bumping against TRY17.97. The water level at an important junction on the Rhine River has fallen below the key 30-centimeter threshold (~12 inches) and could remain low through most of the week, according to reports of the latest German government estimate  Separately, Germany announced that its gas storage facility is 75% full, two weeks ahead of plan. The next target is 85% by October 1 and 95% on November 1. Reports from France show its nuclear reactors were operating at 48% of capacity, down from 50% before the weekend. A couple of reactors were shut down for scheduled maintenance on Saturday.  Ahead of Norway' rate decision on Thursday, the government reported a record trade surplus last month  The NOK229 bln (~$23.8 bln). The volume of natural gas exports surged more than four-times from a year earlier. Mainland exports, led by fish and electricity, rose by more than 20%. The value of Norway's electricity exports increased three-fold from a year ago. With rising price pressures (headline CPI rose to 6.8% in July and the underlying rate stands at 4.5%) and strong demand, the central bank is expected to hike the deposit rate by 50 bp to 1.75%. The euro stalled near $1.0370 last week after the softer than expected US CPI  It was pushed through the lows set that day in the European morning to trade below $1.02 for the first time since last Tuesday. There appears to be little support ahead of $1.0160. However, the retreat has extended the intraday momentum indicators. The $1.0220 area may now offer initial resistance. Sterling peaked last week near $1.2275 and eased for the past two sessions before breaking down to $1.2050 today. The intraday momentum indicators are stretched here too. The $1.2100 area may offer a sufficient cap on a bounce. A break of $1.20 could confirm a double top that would project back to the lows. America The Congressional Budget Office estimates that the Inflation Reduction Act reduces the budget deficit but will have a negligible effect on inflation  Yet, starting with the ISM gauge of prices paid for services, followed by the CPI, PPI, and import/export prices, the last string of data points came in consistently softer than expected. In addition, anecdotal reports suggest the Big Box stores are cutting prices to reduce inventories. Energy is important for the medium-term trajectory of measured inflation, but the core rate will prove sticky unless shelter cost increases begin to slow. While the Democrats scored two legislative victories with the approval of the Chips and Science Act and the Inflation Reduction Act, the impact on the poll ahead of the November midterm election seems minor at best. Even before the search-and-seizure of documents still in former President Trump's residence, PredictIt.Org "wagers" had turned to favor the Democratic Party holding the Senate but losing the House of Representatives. In terms of the Republican nomination for 2024, it has been back-and-forth over the last few months, and recently Florida Governor DeSantis narrowly pulled ahead of Trump. The two new laws may face international pushback aside from the domestic impact  The EU warned last week that the domestic content requirement to earn subsidies for electric vehicles appears to discriminate against European producers. The Inflation Reduction Act offers $7500 for the purchases of electric cars if the battery is built in North America or if the minerals are mined or recycled there. The EU electric vehicle subsidies are available for domestic and foreign producers alike. On the other hand, the Chips and Science Act offers billions of dollars to attract chip production and design to the US. However, it requires that companies drawing the subsidies could help upgrade China's capacity for a decade. Japan and Taiwan will likely go along. It fits into their domestic political agenda. However, South Korea may be a different kettle of fish. Hong Kong and China together accounted for around 60% of South Korea's chip exports last year. Samsung has one overseas memory chip facility. It is in China and produces about 40% of the Galaxy phones' NAND flash output. Pelosi's apparent farewell trip to Asia, including Taiwan, was not well received in South Korea. President Yoon Suk Yeol did not interrupt his staycation in Seoul to meet the US Speaker. Nor was the foreign minister sent. This is not to cast aspersions on South Korea's commitment to regional security, simply that it is not without limits. Today's economic calendar features the August Empire State manufacturing survey  A small decline is expected. The June TIC data is out as the markets close today. Today is also the anniversary of the US ending Bretton Woods by severing the last links between gold and the dollar in 1971. Canada reports manufacturing sales and wholesale trade, but the most market-sensitive data point may be the existing home sales, which are expected to have declined for the fifth consecutive month. Canada reports July CPI tomorrow (Bloomberg survey median forecast sees headline CPI slowing to 7.6% from 8.1% in June).  The Canadian dollar is under pressure  The US dollar has jumped above CAD1.2900 in Europe after finishing last week near CAD1.2780. Last week's high was set near CAD1.2950, where a $655 mln option is set to expire today. A move above CAD1.2920 could target CAD1.2975-CAD1.3000 over the next day or day. A combination of weaker equities, thin markets, and a short-term market leaning the wrong way after the likely drivers today. The greenback posted its lowest close in two months against the Mexican peso before the weekend near MXN19.85. However, it is rebounding today and testing the MXN20.00 area Initial resistance may be encountered around MXN20.05, but we are looking for a move toward MXN20.20 in the coming days. Mexico's economic calendar is light this week, and the highlight is the June retail sales report at the end of the week.    Disclaimer Source: China Disappoints and Surprises with Rate Cut
Netherlands: Wow! Dutch GDP Exceeded Expectations Growing By 2.6%!

Netherlands: Wow! Dutch GDP Exceeded Expectations Growing By 2.6%!

ING Economics ING Economics 18.08.2022 10:07
Dutch GDP rose significantly in the second quarter of this year, up by 2.6% from the previous quarter; it's much stronger than expected. The service sector rebounded particularly well but there was growth in all the main expenditure items. However, the outlook for the second half of the year is negative 'Staff wanted' says this sign at a restaurant in Maastricht, but the economic outlook for the Netherlands is negative 2.6% Dutch GDP growth rate 2Q22 (QoQ) Better than expected Growth supported by expansion of all main expenditure items These are good growth figures for the Netherlands; all expenditures, except inventories, rose. Investment provided the largest contribution to growth; gross capital formation expanded by 5.2% compared with the first quarter. Expenditure volumes rose thanks to a massive increase in transport equipment (37.2%), which had a lot of rebound potential due to earlier supply chain issues. Investment in non-residential buildings (3.7%), ICT equipment (3.2%), machinery & other equipment (2.6%), intangible assets (2.1%) and housing (1.5%) increased. Investment in infrastructure fell (-1.3%) and stock-building also contributed negatively (-0.2% GDP contribution). Household consumption rose 0.9%, particularly because of high spending at the beginning of the quarter. While consumption of services and durable were still expanding, food consumption volumes fell due to higher prices and increased visits to restaurants and bars. It was the first quarter without significant lockdown measures, which mostly ended in  January 2022. Government consumption expanded by 0.1%. Despite still elevated worldwide supply chain disruptions, Dutch exports grew by a decent 2.7%. Goods exports expanded by 2.7%, with both domestically produced goods exports and re-exports showing a positive development. Service exports, such as those driven by incoming foreign tourism, expanded by 2.8%, but remember that this is a rebound from the previous low levels we saw due to the pandemic.  The overall net contribution of international trade to GDP growth was positive (1.2%-point) in the second quarter, because of a long-standing trade surplus and the fact that imports (1.6%) showed weaker growth than exports. The import of services fell by -2.5%. Strong sectorial performance From a sectoral perspective, the value-added growth figure was strongest in the small energy supply sector (8.8% quarter-on-quarter growth). ICT (6.2%), specialised business services (4.5%), semi-public services (3.6%), trade, transport & hospitality (3.6%), water utilities (2.0%), manufacturing (1,2%) also expanded, while output was rather stable in financial services (-0.1%) and agriculture (-0.2%) and value-added contracted in mining & quarrying (i.e. oil & gas, -3.5%). While detailed seasonally adjusted data for subsectors is not available, it seems reasonable to assume that bars & restaurants, travel and recreation, and culture had even more substantial growth than the energy supply sector, given the rebound potential these sectors still had. Outlook less positive The fact that the second-quarter GDP figures were very strong does not mean that the outlook is bright. We maintain that growth will be negative in the coming quarters. Consumers will increasingly be affected by higher prices for energy and food, resulting in cuts to the consumption of other items. Last month we observed the first signs of weakening demand in the value of transactions by ING consumers and the latest figures only seem to confirm that. On top of that, gas prices have risen even further in the past few weeks. Consumer confidence figures have been at record lows for some time, while business sentiment indicators only started to drop recently. While composite indicators are still holding up reasonably well, the balance of business expectations of the economic climate in the next three months has reached its lowest level since the third quarter of 2013, bar the Covid period, according to a survey for the third quarter (mostly executed in July). On a positive note, investment expectations for the current year only fell a little and remained net positive in the third quarter. So we are currently forecasting a mild technical recession for the Dutch economy as our base case. A still very tight labour market, high amounts of Covid-related savings and expansionary fiscal policy in the medium term may somewhat limit the dip in the real economy caused by higher prices. That said, further cuts in energy supplies from Russia are a downward risk scenario that could push energy prices higher still further and put even more pressure on spending and GDP. We’re seeing the first signs of weaker demand Read this article on THINK TagsInflation GDP Consumption Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Hold On Tight! Look How Much Has (EUR) Euro Weakened Against USD (US Dollar) Since The Beginning Of 2021!

Hold On Tight! Look How Much Has (EUR) Euro Weakened Against USD (US Dollar) Since The Beginning Of 2021!

ING Economics ING Economics 18.08.2022 10:27
The euro's depreciation has helped to improve the competitiveness of eurozone businesses but in contrast to previous episodes of euro weakness, exports are hardly benefiting. Remarkably, structurally weaker eurozone economies have gained relative competitiveness since the start of the pandemic Does parity bring relief for eurozone exporters? Euro-dollar reached parity for the first time since 2002 - a milestone that is largely symbolic. However, the weakening of the euro, in general, deserves attention. The euro has been falling against the dollar since mid-2021, which seems to be largely related to diverging central bank expectations and a sudden decline in the eurozone's trade balance. The latter is mainly related to the energy crisis, which has turned a solid trade surplus into a large trade deficit. The high energy prices paid in international markets have played an important role in the weakening of the currency. Because the energy element is so important in the slide of the euro, the euro has weakened most significantly against the dollar. Against other important trade partners, the eurozone has seen its currency weaken less. While the euro has lost 16.2% vis-à-vis the US dollar since 1 January 2021, the trade-weighted exchange rate has only depreciated by 6.9%. The euro's slide has resulted in a lot of imported inflation because we pay for global commodities in dollars. At the same time, gains in competitiveness have been modest. This is far from the best of both worlds. The euro weakening is closely linked to higher energy prices Source: Macrobond, ING Research Competitiveness is improving, but businesses aren't noticing it The competitiveness improvement does require a deeper look, though, as relative inflation between trade partners plays a role. Taking this into account, the real effective exchange rate (REER) for a country is considered to be a key indicator measuring competitiveness. This is an exchange rate which is weighted by local cost developments. In this case, we use unit labour costs. As chart 3 shows, the REER for the eurozone has been sliding, which boosts the competitive position of eurozone companies. This means that despite a limited drop in the nominal effective exchange rate, businesses do seem to be profiting from relatively better price competitiveness. So while the main impact of the weakening euro is definitely negative through higher imported inflation, there is at least some improvement in export competitiveness to be seen, which could cushion the recessionary effects in the domestic market. Competitiveness is improving, but businesses aren't noticing it Source: European Commission, Eurostat, ING Research   The problem is that businesses are far from feeling this though. The Economic Sentiment Indicator has a subindex which reveals how businesses perceive their competitiveness to have changed in their home markets and abroad. This indicates that competitiveness has dropped significantly within the EU and outside. While exports have recovered to the pre-pandemic trend in recent quarters, it looks like the weaker euro has not given an extra push. The question is whether this relates to price competitiveness or whether weakening global demand is causing this. Regardless, it does not look like businesses are profiting from the improved REER at this point, highlighting the fact that the eurozone is currently mainly feeling the burden from the weak euro and is reaping little benefit from it. How has relative competitiveness within the eurozone evolved since the pandemic started? Reflecting on the euro crisis, we noticed a severe deterioration in competitiveness among the ‘periphery’ countries ahead of the crisis. The big question was if the weaker economies could make structural adjustments to become more attractive exporters again and with that, run surpluses. Painful wage adjustments were modestly successful in regaining competitiveness at that point. While competitiveness is not the primary economic problem right now, it is interesting to see if any divergence in competitiveness is emerging again. When looking at the developments in the real effective exchange rate based on unit labour costs against other eurozone economies in recent years, we see interesting differences in performance. Germany, the Netherlands and Belgium have seen their competitiveness deteriorate, while Italy, France and Greece have seen strong improvements. Spanish competitiveness has been stable over recent years, while Portugal has experienced a sizable deterioration. The export powerhouses of the past decade have seen their competitive position slip a little compared to other eurozone countries. This is mainly due to stronger wage growth while productivity growth did not improve in tandem. Overall, this development is a small step towards making the monetary union more coherent and reducing the risk of a new euro crisis triggered by differences in competitiveness. Internal eurozone competitiveness gains are made by France and Italy Source: European Commission, ING Research   A shift in relative competitiveness had already started prior to the pandemic. However, some of the large moves at the start of the pandemic were likely related to how furlough schemes are included in the statistics and so are not necessarily an accurate reflection of underlying competitiveness developments. This seems to be the case for the Netherlands and Greece for example, but in the Dutch case, we still notice a break from the pre-pandemic trend as cost competitiveness ended up at a weaker level in the second quarter. Since energy prices have become a dominant factor and labour cost competitiveness is muddied by government support, a look at a different measure of cost competitiveness is useful. Taking the GDP deflator, a broad price index across the economy, we see that a roughly similar picture emerges. Also here, the Netherlands and Germany have seen cost competitiveness deteriorate compared to other eurozone economies, while Italy and France have seen improvements. Compared to a broader basket of trade partners, the weaker euro dominates but still, we see that Germany and the Netherlands have experienced smaller gains compared to France and Italy. Competitiveness gains have been modest and smallest in the north The euro's depreciation has helped to improve the traditional cost competitiveness of eurozone businesses but in contrast to previous episodes of euro weakness, exports are hardly benefiting. As energy prices are probably a much larger cost concern for eurozone businesses, traditional cost competitiveness indicators have to be taken with a pinch of salt. Still, looking at competitiveness shifts within the eurozone, remarkably, structurally weaker eurozone economies have become relatively more competitive since the start of the pandemic, reducing the risk of a new euro crisis being triggered by stark differences in competitiveness. Read this article on THINK TagsGDP Eurozone Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Ukraine Saves The Day For The World As The Corridor Shipping Crops Is Opened. Other Countries Harvest Is Quite Low Therefore To Weather Issues

Ukraine Saves The Day For The World As The Corridor Shipping Crops Is Opened. Other Countries Harvest Is Quite Low Therefore To Weather Issues

Saxo Strategy Team Saxo Strategy Team 19.08.2022 11:33
Summary:  Equity markets managed a quiet session yesterday, a day when the focus is elsewhere, especially on the surging US dollar as EURUSD is on its way to threatening parity once again, GBPUSD plunged well below 1.2000 and the Chinese renminbi is perched at its weakest levels against the US dollar for the cycle. Also in play are the range highs in longer US treasury yields, with any significant pull to the upside in yields likely to spell the end to the recent extended bout of market complacency.   What is our trading focus?   Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) S&P 500 futures bounced back a bit yesterday potentially impacted by the July US retail sales showing that the consumer is holding up in nominal terms. The key market to watch for equity investors is the US Treasury market as the US 10-year yield seems to be on a trajectory to hit 3%. In this case we would expect a drop in S&P 500 futures to test the 4,200 level and if we get pushed higher in VIX above the 20 level then US equities could accelerate to the downside. Fed’s Bullard comments that he is leaning towards a 75 basis point rate hike at the September meeting should also negatively equities here relative to the expectations. Hong Kong’s Hang Seng (HSI.I) and China’s CSI300 (000300.I) Hang Seng Index edged up by 0.4% and CSI300 was little changed. As WTI Crude bounced back above $90/brl, energy stocks outperformed, rising 2-4%. Technology names in Hong Kong gained with Hang Seng Tech Index (HSTECH.I) up 0.6%. Investors are expecting Chinese banks to cut loan prime rates on Monday, following the central bank’s rate cut earlier this week. The China Banking and Insurance Regulatory Commission (CBIRC) is looking at the quality of real estate loan portfolios and reviewing lending practices at some Chinese banks. The shares of NetEase (09999:xhkg/NTES:xnas) dropped more than 3% despite reporting above-consensus Q2 revenue up 13% y/y, and net profit from continuing operations up 28%.  PC online game revenue was above expectations, driven by Naraka Bladepoint content updates and the launch of Xbox version. Mobile game segment performance was in line. USD pairs as the USD rally intensifies The US dollar rally is finding its legs after follow up action yesterday that took EURUSD below the key range low of 1.0100, setting up a run at the psychologically pivotal parity, while GBPUSD slipped well south of the key 1.2000 and USDJPY ripped up through 135.50 resistance. An accelerator of that move may be applied if US long treasury yields pull come further unmoored from the recent range and pull toward 3.00%+. A complete sweep of USD strength would arrive with a significant USDCNH move as discussed below, and the US dollar “wrecking ball” will likely become a key focus and driver of risk sentiment as it is the premiere measure of global liquidity. The next key event risk for the US dollar arrives with next Friday’s Jackson Hole symposium speech from Fed Chair Powell. USDCNH The exchange rate is trading at the highs of the cycle this morning, and all traders should keep an eye out here for whether China allows a significant move in the exchange rate toward 7.00, and particularly whether CNH weakness more than mirrors USD strength (in other words, if CNH is trading lower versus a basket of currencies), which would point to a more determined devaluation move that could spook risk sentiment globally, something we have seen in the past when China shows signs of shifting its exchange rate regime from passive management versus the USD. Crude oil Crude oil (CLU2 & LCOV2) remains on track for a weekly loss with talks of an Iran nuclear deal and global demand concerns being partly offset by signs of robust demand for fuel products. Not least diesel which is seeing increasing demand from energy consumers switching from punitively expensive gas. Earlier in the week Dutch TTF benchmark gas at one point traded above $400 per barrel crude oil equivalent. So far this month the EU diesel crack spread, the margin refineries achieve when turning crude into diesel, has jumped by more than 40% while stateside, the equivalent spread is up around 25%, both pointing to a crude-supportive strength in demand. US natural gas US natural gas (NGU2) ended a touch lower on Thursday after trading within a 7% range. It almost reached a fresh multi-year high at $9.66/MMBtu after spiking on a lower-than-expected stock build before attention turned to production which is currently up 4.8% y/y and cooler temperatures across the country lowering what until recently had driven very strong demand from utilities. LNG shipments out of Freeport, the stricken export plant may suffer further delays, thereby keeping more gas at home. Stockpiles trail the 5-yr avg. by 13%. US Treasuries (TLT, IEF) The focus on US Treasury yields may be set to intensify if the 10-year treasury benchmark yield, trading near 2.90% this morning, comes unmoored from its recent range and trades toward 3.00%, possibly on the Fed’s increase in the pace of its quantitative tightening and/or on US economic data in the coming week(s). Yesterday’s US jobless claims data was better than expected and the August Philadelphia Fed’s business survey was far more positive than expected, suggesting expansion after the volatile Empire Fed survey a few days earlier posted a negative reading.   What is going on?   Global wheat prices continue to tumble ... with a record Russian crop, continued flows of Ukrainian grain and the stronger dollar pushing down prices. The recently opened corridor from Ukraine has so far this month seen more than 500,000 tons of crops being shipped, and while it's still far below the normal pace it has nevertheless provided some relief at a time where troubled weather has created a mixed picture elsewhere. The Chicago wheat (ZWZ2) futures contract touch a January on Thursday after breaking $7.75/bu support while the Paris Milling (EBMZ2) wheat traded near the lowest since March. Existing home sales flags another red for the US housing market while other US economic data continues to be upbeat US existing home sales fell in July for a sixth straight month to 4.81 mn from 5.11 mn, now at the slowest pace since May 2020, and beneath the expected 4.89 mn. Inventory levels again continued to be a big concern, with supply rising to 3.3 months equivalent from 2.9 in June. This continues to suggest that the weakening demand momentum and high inventory levels may weigh on construction activity. The Philly Fed survey meanwhile outperformed expectations, with the headline index rising to +6.2 (exp. -5.0, prev. -12.3), while prices paid fell to 43.6 (prev. 52.2) and prices received dropped to 23.3 (prev. 30.3). New orders were still negative at -5.1, but considerably better than last month’s -24.8 and employment came in at 24.1 from 19.4 previously Fed speakers push for more rate hikes St. Louis Federal Reserve President James Bullard 2.6% with more front-loading in 2022. Fed’s George, much like Fed’s Daly, said that last month’s inflation is not a victory and hardly comforting. Bullard and George vote in 2022. Fed’s Kashkari said that he is not sure if the Fed can avoid a recession and that there is more work to be done to bring inflation down, but noted economic fundamentals are strong. Overall, all messages remain old and eyes remain on Fed Chair Powell speaking at the Jackson Hole conference on August 26, next Friday.  Japan’s inflation came in as expected Japan’s nationwide CPI for July accelerated to 2.6% y/y, as expected, from 2.4% y/y in June. The core measure was up 2.4% y/y from 2.2% previously, staying above the Bank of Japan’s 2% target and coming in at the strongest levels since 2008. Upside pressures remain as Japan continues to face a deeper energy crisis threat into the winter with LNG supplies possibly getting diverted to Europe for better prices. Still, Bank of Japan may continue to hold its dovish yield curve control policy unless wage inflation surprises consistently to the upside.   What are we watching next?   Strong US dollar to unsettle markets – and Jackson Hole Fed conference next week? The US dollar continues to pull higher here, threatening the cycle highs versus sterling, the euro and on the comeback trail against the Japanese yen as well. The US dollar is a barometer of global liquidity, and a continued rise would eventually snuff out the improvement in financial conditions we have seen since the June lows in equity markets, particularly if longer US treasury yields are also unmoored from their recent range and rise back to 3.00% or higher.  The focus on the strong US dollar will intensify should the USDCNH exchange rate, which has pulled to the highs of the cycle above 6.80, lurch toward 7.00 in coming sessions as it would indicate that China is unwilling to allow its currency to track USD direction. As well, the Fed seems bent on pushing back against market expectations for Fed rate cuts next year and may have to spell this out a bit more forcefully at next week’s Jackson Hole conference starting on Thursday (Fed Chair Powell to speak Friday). Earnings to watch The two earnings releases to watch today are from Xiaomi and Deere. The Chinese consumer is challenged over falling real estate prices and input cost pressures on food and energy, and as a result consumer stocks have been doing bad this year. Xiaomi is one the biggest sellers of smartphones in China and is expected to report a 20% drop in revenue compared to last year. Deere sits in the booming agricultural sector, being one of the biggest manufacturers of farming equipment, and analysts expect a 12% gain in revenue in FY22 Q3 (ending 31 July).   Today: China Merchants Bank, CNOOC, Shenzhen Mindray, Xiaomi, Deere Economic calendar highlights for today (times GMT) 1230 – Canada Jun. Retail Sales 1300 – US Fed’s Barkin (Non-voter) to speak Follow SaxoStrats on the daily Saxo Markets Call on your favorite podcast app: Apple  Spotify PodBean Sticher   Source: Financial Markets Today: Quick Take – August 19, 2022
The Euro To US Dollar Instrument Did Not Change In Value

The Peak Of Inflation May Be Yet To Come? ECB Takes Steps

Conotoxia Comments Conotoxia Comments 19.08.2022 12:38
Inflation in the Eurozone appears to be rising steadily, which may be influenced by the rising cost of electricity and energy carriers. Today's release of producer prices in Germany suggests that the peak of inflation in the Eurozone may be yet to come. Germany is the eurozone's largest economy, so published readings for that economy could heavily influence data for the community as a whole. Energy for businesses rose by 105 percent. Today we learned that in July producer prices (PPI inflation) rose in Germany at the fastest pace on record. PPI inflation on an annualized basis was as high as 37.2 percent. A month earlier, price growth stood at 32.7 percent, while the market consensus was for inflation of 32 percent. Energy prices still seem to remain the main driver of producer costs. The cost of the aforementioned energy for businesses rose 105 percent compared to July 2021. Had it not been for this factor, producer prices could have risen much more slowly, by only 14.6 percent. - according to the published data. Entrepreneurs could translate such a significant increase in costs into their products, which could also raise consumer CPI inflation as a result. Hence, it is not impossible that a possible peak in inflation in the eurozone is yet to come. It could fall in the last quarter of this year, or early next year, assuming that energy prices begin to stabilize or fall. Otherwise, the eurozone economy could plunge into a deep crisis. EUR/USD near parity again The rate of the EUR/USD pair fell today to 1.0084 (yesterday it was around 1.0200) and again approached parity at 1.0000. Concerns about the eurozone economy may be reflected in the exchange rate. However, it seems that the reaction to negative data is becoming less and less, as if the market has to some extent already discounted some of the bad news that may come in the near future. The European Central Bank's forthcoming actions may put the brakes on the euro's sell-off. According to the interest rate market, the ECB may opt for two rate hikes of 50 basis points each this fall. The market assumes that the ECB will raise the main interest rate to 1.5 percent throughout the cycle. Unlike the Fed, which may reduce the pace of hikes at the end of the year, the ECB may only move with a rapid increase in interest rates. Daniel Kostecki, Director of the Polish branch of Conotoxia Ltd. (Conotoxia investment service) Materials, analysis and opinions contained, referenced or provided herein are intended solely for informational and educational purposes. Personal opinion of the author does not represent and should not be constructed as a statement or an investment advice made by Conotoxia Ltd. All indiscriminate reliance on illustrative or informational materials may lead to losses. Past performance is not a reliable indicator of future results. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 82.59% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. Source: PPI inflation in Germany highest on record. Euro under pressure
USD/JPY Eyes Psychological Level of 150.00 Amidst BoJ's Monetary Policy and Fed's Rate Hike Expectations

The Bank Of England (BoE) Chasing The Inflation. Forex: GBPUSD, CNHJPY, EURUSD And Others

John Hardy John Hardy 19.08.2022 13:41
Summary:  The USD is breaking higher still, with important levels falling versus the Euro and yen yesterday. But the pain in sterling is most intense as presaged by the lack of a response to surging UK rates. Can the Bank of England do anything but continue to chase inflation from behind, caught between the Scylla of inflation and the Charybdis of a vicious recession? Also, USDCNH lurks at the top of the range ahead of another PBOC rate announcement on Monday. FX Trading focus: USD wrecking ball swinging again. UK faced with classic ugly choice between taking the pain via inflation or a severe recession The US dollar strength has picked up further after yesterday saw the breakdown in EURUSD below 1.0100 and a shot through 135.50 in USDJPY as longer US yields pushed to local highs. GBPUSD has been a bigger move on sterling weakness as discussed below.  A bit of resilient US data (especially the lower jobless claims than expected and a sharp revision lower of the prior week’s data taking the momentum out of the rising trend) has helped support the USD higher as longer US yields rose a bit further, taking the 10-year US treasury yield benchmark to new local highs, although we really need to see 3.00% achieved there after a few recent teases higher with no follow through higher. Looking forward to next week, the market will have to mull whether it has been too aggressive in pricing the Fed to pivot policy next year on disinflation and an easy-landing for the economy. The steady drumbeat of Fed pushback against the market’s complacency, together with a few of the recent data points (ISM Services, nonfarm payrolls, yesterday’s claims, etc.) has seen some of the conviction easing. But the key test will come next Friday, when Fed Chair Powell is set to speak on the same day we get the July PCE inflation data. Keep USDCNH on the radar through the end of today on the risk of an upside break above the range and Monday as the PBOC is set for a rate announcement (consensus expectations or another 10 bps of easing).   Chart: GBPUSD Lots at stake for sterling as discussed below, as it is a bit scary to see a currency weaken sharply despite a massive ratcheting higher in rate expectations from the central bank. The fall of 1.2000 has set in motion a focus on the 1.1760 cycle low, with an aggravated USD rise here and tightening of global financial conditions possibly quickly bringing the spike low toward 1.1500 from the early 2020 pandemic outbreak panic into focus. It is worth noting that the lowest monthly closing level for GBPUSD since the mid-1980’s is 1.2156. Without something dramatic to push back against USD strength next week from Jackson Hole, it is hard to see how this month may set the new low water mark for monthly closes. Source: Saxo Group GBPUSD slipped below 1.1900 this morning after breaking below the psychologically important 1.2000 level yesterday. As noted in the prior update, it’s remarkable to see the marked weakness in sterling despite the marking taking UK short rates sharply higher – with 2-year UK swaps over 100 basis points higher from the lows early this month. The Bank of England has expressed a determination to get ahead of the inflation spike and the market has priced in a bit more than a 50-basis-points-per-meeting pace for the three remaining BoE meetings of 2022. But is that sufficient given the UK’s structural short-comings and external deficits? Currency weakness risks adding further to spike in inflation this year. The BoE can take a couple of approaches in response: continue with the 50 bps hikes while bemoaning the backdrop and trotting out the expectation that eventually, economic weakness and easing commodity prices will feed through to drop inflation back into the range. Or, the BoE can actually get serious and super-size hikes even beyond the acceleration the market has priced, at the risk of bringing forward and increasing the severity of the coming recession. Until this week, the BoE’s anticipated tightening trajectory had prevented an aggravated weakness in sterling in broader terms, but the currency’s weakness despite a massive mark-up of BoE expectations has ratcheted the pressure on sterling and the BoE’s response to an entirely new level. Turkey shocked with a fresh rate cut yesterday of 100 basis points to take the policy rate to 13.00%. This with year-on-year inflation in Turkey at 79.6% and PPI at 144.6%, and housing measured at 160.6%. The move took USDTRY above 18.00, though it was a modest move relative to the size of the surprise. Turkish central bank chief Kavcioglu said that the bank would also look to “further strengthen macroprudential policy” by addressing the yawning difference between the policy rate and the rate commercial banks are charging for loans (more than double the official policy rate), as the push is to continue a credit-stimulated approach, inflation-be-darned.   Table: FX Board of G10 and CNH trend evolution and strength Note: a new color scheme for the FX Board! Besides changing the green for positive readings to a more pleasant blue, I have altered the settings such that trend readings don’t receive a more intense red or blue coloring until they have reached more significant levels – starting at an absolute value of 4 or higher. So far, most of the drama in sterling is the lack of a response to shifts in the UK yield curve, the broad negative momentum has only shifted a bit here, but watching for the risk of more. Source: Bloomberg and Saxo Group Table: FX Board Trend Scoreboard for individual pairs AUDNZD is crossing back higher, AUDCAD back lower, so NZDCAD….yep. Note the CNHJPY – if CNH is to make more waves, need to see more CNH weakness in an isolated sense, not just v. a strong USD. And speaking of a strong USD, the last holdouts in reversing, USDNOK and USDCHF, are on the cusp of a reversal. Source: Bloomberg and Saxo Group Upcoming Economic Calendar Highlights (all times GMT) 1230 – Canada Jun. Retail Sales 1300 – US Fed’s Barkin (Non-voter) to speak   Source: FX Update: USD surging again, GBP spinning into abyss
Credit squeezing into central banks – what next?

Everyone Is Dissapointed In Euro (EUR). Japanese Officials Have To Face Discontests From Yields Rise

Marc Chandler Marc Chandler 21.08.2022 23:14
For many, this will be the last week of the summer. However, in an unusual twist of the calendar, the US August employment report will be released on September 2, the end of the following week, rather than after the US Labor Day holiday (September 5).   The main economic report of the week ahead will be the preliminary estimate of the August PMI  The policy implications are not as obvious as they may seem. For example, in July, the eurozone composite PMI slipped below the 50 boom/bust level for the first time since February 2021. It was the third consecutive decline. Bloomberg's monthly survey of economists picked up a cut in Q3 GDP forecasts to 0.1% from 0.2% and a contraction of 0.2% in Q4 (previously 0.2% growth). Over the past week, the swaps market has moved from around 80% sure of a 50 bp hike next month to a nearly 20% chance it will lift the deposit rate by 75 bp.  The UK's composite PMI fell in three of the four months through July  However, at 52.1, it remains above the boom/bust level, though it is the weakest since February 2021. The Bank of England's latest forecasts are more pessimistic than the market. It projects the economy will contract by 1.5% next year and another 0.3% in 2024. It has CPI peaking later this year at around 13% before falling to 5.5% in 2023 and 1.5% in 2024. Market expectations have turned more hawkish for the BOE too. A week ago, the swap market was pricing in a nearly 90% chance of another 50 bp hike. After the CPI jump reported in the middle of last week, the market fully priced in the 50 bp move and a nearly 30% chance of a 75 bp hike.   Japanese officials have successfully turned back market pressure that had driven the benchmark three-month implied volatility to 14% in mid-June, more than twice as high as it was at the start of the year  It slipped below 10% in recent days. The BOJ was forced to vigorously defend its 0.25% cap on the 10-year bond. It has spent the better part of the past three weeks below 0.20%. The BOJ has not had to spend a single yen on its defense since the end of June. However, with the jump in global yields (US 10-year yield rose 20 bp last week, the German Bund 33 bp, and the 10-year UK Gilt nearly 40 bp) and the weakness of the yen, the BOJ is likely to be challenged again.   The economy remains challenging  The composite PMI fell to 50.2 in July from 53.2 in June. It is the weakest reading since February. It has averaged 50.4 through July this year. The average for the first seven months last year was 49.0. The government is working on some support measures aimed at extending the efforts to cushion the blow of higher energy and food prices. Japan's Q2 GDP deflator was minus 0.4%, which was half of the median forecast in Bloomberg's survey, but it shows the tough bind of policy. Consider that the July CPI rose to 2.6%, and the core measure, which the BOJ targets, excludes fresh food, rose to 2.4% from 2.2%. The target is 2%, and it was the third month above it. Tokyo will report its August CPI figures at the end of the week.   Australia's flash PMI may be more influential as the futures market is nearly evenly split between a 25 bp hike and a 50 bp move at the September 6 central bank meeting  The minutes from the RBA's meeting earlier this month underscored its data dependency. However, this is about the pace of the move. The target rate is currently at 1.85%, and the futures market is near 3.15% for the end of the year, well beyond the 2.5% that the central bank sees as neutral. The weakness of China's economy may dent the positive terms-of-trade shock. The Melbourne Institute measure of consumer inflation expectations fell in August for the second month but at 5.9%, is still too high.  Through the statistical quirkiness of GDP-math, the US economy contracted in the first two quarters of the year  A larger trade deficit did not help, but the real problem was inventories. In fairness, more of the nominal growth resulted from higher prices than economists expected rather than underlying activity. Still, it does appear that the US economy is expanding this quarter, and the high-frequency data will help investors and economists assess the magnitude. While surveys are helpful, the upcoming real sector data include durable goods orders (and shipments, which feed into GDP models), July personal income and consumption figures, the July goods trade balance, and wholesale and retail inventories.   Consumption still drives more than 2/3 of the economy, and like retail sales, personal consumption expenditures are reported in nominal terms, which means that they are inflated by rising prices  However, the PCE deflator is expected to slow dramatically. After jumping 1% in June, the headline deflator is expected to increase by 0.1%. This will allow the year-over-year rate to slow slightly (~6.5% from 6.8%). The core deflator is forecast (median, Bloomberg's survey) to rise by 0.4%, which given the base effect, could see the smallest of declines in the year-over-year rate that stood at 4.8% in June. Given the Fed's revealed preferences when it cited the CPI rise in the decision in June to hike by 75 bp instead of 50 bp, the CPI has stolen the PCE deflator's thunder, even though the Fed targets the PCE deflator. Real consumption was flat in Q2, and Q3 is likely to have begun on firmer footing.   The softer than expected CPI, PPI, and import/export prices spurred the market into downgrading the chances of a 75 bp hike by the Fed next month  After the stronger than expected jobs growth, the Fed funds futures priced in a little better than a 75% chance of a 75 bp hike. It has been mostly hovering in the 40%-45% range most of last week but finished near 55%. It is becoming a habit for the market to read the Fed dovishly even though it is engaged in a more aggressive course than the markets anticipated. This market bias warns of the risk of a market reversal after Powell speaks on August 26.   At the end of last year, the Fed funds futures anticipated a target rate of about 0.80% at the end of this year. Now it says 3.50%. The pace of quantitative tightening is more than expected and will double starting next month. There is also the tightening provided by the dollar's appreciation. For example, at the end of 2021, the median forecast in Bloomberg's survey saw the euro finishing this year at $1.15. Now the median sees the euro at $1.04 at the end of December. And even this may prove too high.    The FOMC minutes from last month's meeting recognized two risks. The first was that the Fed would tighten too much. Monetary policy impacts with a lag, which also acknowledges that soft-landing is difficult to achieve. The market initially focused on this risk as is its wont. However, the Fed also recognized the risk of inflation becoming entrenched and characterized this risk as "significant." The Jackson Hole confab (August 25-27) will allow the Fed to help steer investors and businesses between Scylla and Charybdis.  Critics jumped all over Fed Chair Powell's claim that the Fed funds target is now in the area the officials regard as neutral. This was not a forecast by the Chair, but merely a description of the long-term target rate understood as neither stimulating nor restricting the economy. In June, all but three Fed officials saw the long-term rate between 2.25% and 2.50%. To put that in perspective, recall that in December 2019, the median view of the long-term target was 2.50%. Eleven of the 18 Fed officials put their "dot" between 2.25% and 2.50%. The FOMC minutes were clear that a restrictive stance is necessary, and the Fed clearly signaled additional rate hikes are required. The discussions at Jackson Hole may clarify what the neutral rate means.  Barring a significant downside surprise, we expect the Fed will deliver its third consecutive 75 bp increase next month. The strength and breadth of the jobs growth while price pressures remain too high and financial conditions have eased encourages the Fed to move as fast as the market allows. However, before it meets, several important high-frequency data points will be revealed, including a few employment measures, the August nonfarm payroll report, and CPI.   The market is also having second thoughts about a rate cut next year  At the end of July, the implied yield of the December 2023 Fed funds futures was 50 bp below the implied yield of the December 2022 contract. It settled last week at near an 8 bp discount. This reflects a growing belief that the Fed will hike rates in Q1 23. The March 2023 contract's implied yield has risen from less than five basis points more than the December 2022 contract to more than  20 bp above it at the end of last week.   Let's turn to the individual currency pairs, put last week's price action into the larger context, and assess the dollar's technical condition  We correctly anticipated the end of the dollar's pullback that began in mid-July, but the power for the bounce surprises. Key technical levels have been surpassed, warning that the greenback will likely retest the July highs.   Dollar Index: DXY surged by more than 2.3% last week, its biggest weekly advance since March 2020. The momentum indicators are constructive and not over-extended. However, it closed well above the upper Bollinger Band (two standard deviations above the 20-day moving average), found near 107.70. Little stands in the way of a test on the mid-July high set around 109.30. Above there, the 110-111.30 area beckons. While the 107.50 area may offer some support now, a stronger floor may be found closer to 107.00.   Euro:  The euro was turned back from the $1.0365-70 area on August 10-11 and put in a low near $1.0030 ahead of the weekend. The five-day moving average slipped below the 20-day moving average for the first time in around 3.5 weeks. The MACD is trending lower, while the Slow Stochastic did not confirm the recent high, leaving a bearish divergence in its wake. The only caution comes from the euro's push through the lower Bollinger Band (~$1.0070). Initially, parity may hold, but the risk is a retest on the mid-July $0.9950 low. A convincing break could target the $0.96-$0.97 area. As the euro has retreated, the US two-year premium over Germany has trended lower. It has fallen more than 30 bp since peaking on August 5. We find that the rate differential often peaks before the dollar.   Japanese Yen: The dollar will begin the new week with a four-day advance against the yen in tow. It has surpassed the (61.8%) retracement objective of the pullback since the mid-July high (~JPY139.40) found near JPY136.00. The momentum indicators are constructive, and the five-day moving average has crossed above the 20-day for the first time since late July. It tested the lower band of the next resistance bans seen in the JPY137.25-50 area at the end of last week. But it appears poised to re-challenge the highs. As volatility increases and yields rise, Japanese officials return to their first line of defense: verbal intervention.  British Pound: Sterling took out the neckline of a possible double top we have been monitoring that came in at $1.20. It projects toward the two-year lows set in mid-July near $1.1760, dipping below $1.18 ahead of the weekend. As one would expect, the momentum indicators are headed lower, and the five-day moving average has fallen below the 20-day moving average for the first time in four weeks. It has closed below its lower Bollinger Band (~$1.1910) in the last two sessions. A convincing break of the $1.1760 low clears the way to the March 2020 low, about 3.5-cents lower. Initial resistance is now seen around $1.1860 and, if paid, could signal scope for another 3/4 to a full-cent squeeze.  Canadian Dollar:  The Canadian dollar was no match for the greenback, which moved above CAD1.30 ahead of the weekend for the first time in a month. The momentum indicators suggest the US dollar has more scope to advance, and the next target is the CAD1.3035 area. Above there, the CAD1.3100-35 band is next. The high since November 2020 was recorded in the middle of July around CAD1.3225. After whipsawing in Q1, the five- and 20-day moving averages have caught the big moves. The shorter average crossed above the longer moving average last week for the first time since July 21. Initial support will likely be encountered near CAD1.2935.   Australian Dollar:  The Aussie was sold every day last week. It is the first time in a year, and its 3.4% drop is the largest since September 2020.   The rally from the mid-July low (~$0.6680) to the recent high (~$0.7135) looks corrective in nature. Before the weekend, it tested the rally's (61.8%) retracement objective. The momentum indicators are falling, and the Slow Stochastic did not confirm this month's high, creating a bearish divergence. A break of the $0.6850-60 area may signal follow-through selling into the $0.6790-$0.6800 band, but a retest on the July low is looking increasingly likely. Initial resistance is now seen near $0.6920.   Mexican Peso:  The peso's four-day slide ended a six-day run. The peso lost about 1.6% last week, slightly better than the 2.25% slide of the JP Morgan Emerging Market Currency Index. This month, the US dollar peaked around MXN20.8335 and proceeded to fall and forged a base near MXN19.81. It has met the (38.2%) retracement objective around MXN20.20 before the weekend. The next (50%) retracement is near MXN20.3230. The 200-day moving average is closer to MXN20.41. The dollar is probing the 20-day moving average seen a little below MXN20.24. The momentum indicators have only just turned up for the greenback. We suspect there may be potential to around MXN20.50 in the coming days.   Chinese Yuan:  The yuan was tagged with more than a 1% loss against the dollar last week, its biggest decline in three months. A combination of poor Chinese data, its small rate cut, and a resurgent US dollar spurred the exchange rate adjustment. At the end of July, China's 10-year yield was about 11 bp on top of the US. However, it switched to a discount after the US jobs data (August 5), and the discount grew every day last week, reaching 35 bp, the most since late June. After gapping higher before the weekend, the greenback reached nearly CNY6.8190, its highest level since September 2020. The next target is around CNY6.85, but given the divergence of policy, a move back toward CNY7.00, last seen in July 2020, maybe a reasonable medium-term target. The PBOC's dollar fix ahead of the weekend showed no protest of the weaker exchange rate.     Disclaimer   Source: Flash PMI, Jackson Hole, and the Price Action
Japan's Prime Minister Tested Covid Positive. Gazprom Confirmed Gas Shipment Would Be Stopped!

Japan's Prime Minister Tested Covid Positive. Gazprom Confirmed Gas Shipment Would Be Stopped!

Marc Chandler Marc Chandler 22.08.2022 16:28
Overview: The euro traded below parity for the second time this year and sterling extended last week’s 2.5% slide. While the dollar is higher against nearly all the emerging market currencies, it is more mixed against the majors. The European currencies have suffered the most, except the Norwegian krone. The dollar-bloc and yen are also slightly firmer. The week has begun off with a risk-off bias. Nearly all the large Asia Pacific equity markets were sold. Chinese indices were a notable exception following a cut in the loan prime rates. Europe’s Stoxx 600 is off by around 1.20%, the most in a month. US futures are more than 1% lower. The Asia Pacific yield rose partly in catch-up to the pre-weekend advance in US yields, while today, US and European benchmark 10-year yields are slightly lower. The UK Gilt stands out with a small gain. Gold is being sold for the sixth consecutive session and has approached the (61.8%) retracement of the rally from last month’s low (~$1680) that is found near $1730. October WTI is soft below $90, but still inside the previous session’s range. US natgas is up 2.4% to build on the 1.6% gain seen before the weekend. It could set a new closing high for the year. Gazprom’s announcement of another shutdown of its Nord Stream 1 for maintenance sent the European benchmark up over 15% today. It rose almost 20.3% last week. Iron ore rose for the first time in six sessions, while September copper is giving back most of the gains scored over the past two sessions. September wheat rallied almost 3% before the weekend and is off almost 1% now.  Asia Pacific Following the 10 bp reduction in benchmark one-year Medium-Term Lending Facility Rate at the start of last week, most observers expected Chinese banks to follow-up with a cut in the loan prime rates today  They delivered but in a way that was still surprising. The one-year loan prime rate was shaved by five basis points to 3.65%, not even matching the MLF reduction. On the other hand, the five-year loan prime rate was cut 15 bp to 4.30%. This seems to signal the emphasis on the property market, as mortgages are tied to the five-year rate, while short-term corporate loans are linked to the shorter tenor. The five-year rate was last cut in May and also by 15 bp. Still, these are small moves, and given continued pressures on the property sector, further action is likely, even if not immediately. In addition to the challenges from the property market and the ongoing zero-Covid policy, the extreme weather is a new headwind to the economy. The focus is on Sichuan, one of the most populous provinces and a key hub for manufacturing, especially EV batteries and solar panels. It appears that the aluminum smelters (one million tons of capacity) have been completed halted. The drought is exacerbating a local power shortage. Rainfall along the Yangtze River is nearly half of what is normally expected. Hydropower accounts for a little more than 80% of Sichuan power generation and the output has been halved. Officials have extended the power cuts that were to have ended on August 20 to August 25. Factories in Jiangsu and Chongqing are also facing outages. According to reports, Shanghai's Bund District turned off its light along the waterfront. Japan's Prime Minister Kishida tested positive for Covid over the weekend  He will stay in quarantine until the end of the month. In addition to his physical health, Kishida's political health may become an issue. Support for his government has plunged around 16 percentage points from a month ago to slightly more than 35% according to a Mainchi newspaper poll conducted over the weekend. The drag appears not to be coming from the economy but from the LDP's ties with the Unification Church. Meanwhile, Covid cases remain near record-highs in Japan, with almost 24.8k case found in Tokyo alone yesterday. Others are also wrestling with a surge in Covid cases. Hong Kong's infections reached a new five-month high, for example. The dollar reached nearly JPY137.45 in Tokyo before pulling back to JPY136.70 in early European turnover  It is the fifth session of higher highs and lows for the greenback. The upper Bollinger Band (two standard deviations above the 20-day moving average) is near JPY137.55 today. We suspect the dollar can re-challenge the session high in North America today. The Australian dollar is proving resilient today after plunging 3.45% last week. It is inside the pre-weekend range (~$0.6860-$0.6920). Still, we like it lower. Initial support is now seen around $0.6880, and a break could spur another test on the lows. That pre-weekend low coincides with the (61.8%) retracement of the rally from last month's low (~$0.6680) to the high on August 11 (~$0.7135). The Chinese yuan slumped to new lows for the year today. For the second consecutive session, the dollar gapped higher and pushed through CNY6.84. The PBOC set the dollar's reference rate at CNY6.8198. While this was lower than the CNY6.8213, it is not seen as much as a protest as an at attempt to keep the adjustment orderly. Europe Gazprom gave notice at the end of last week that gas shipments through the Nord Stream 1 pipeline would be stopped for three days (August 31-September 2) for maintenance  The European benchmark rose nearly 20.3% last week and 27% this month. It rose 35.2% last month and 65.5% in June. The year-to-date surge has been almost 380%. The energy shock seems sure to drive Europe into a recession. The flash August PMI out tomorrow is expected to see the composite falling further below the 50 boom/bust level. Bundesbank President Nagel, who will be attending the Jackson Hole symposium at the end of this week recognized the risk of recession but still argued for the ECB rate increases to anchor inflation expectations. The record from last month's ECB meeting will be published on Thursday. There are two keys here. First, is the color than can be gleaned from the threshold for using the new Transmission Protection Instrument. Second, the ECB lifted its forward guidance, which we argue is itself a type of forward guidance. Is there any insight into how it is leaning? The swaps market prices in another 50 bp hike, but a slight chance of a 75 bp move. The German 10-year breakeven (difference between the yield of the inflation linked bond and the conventional security) has been rising since last July and approached 2.50% last week  It has peaked in early May near 3% before dropping to almost 2% by the end of June. It is notable that Italy's 10-year breakeven, which has begun rising again since the third week of July, is almost 25 bp less than Germany. Several European countries, including Germany and Italy, have offered subsidies or VAT tax cut on gasoline that have offset some of the inflation pressures. Nagel, like Fed Chair Powell, BOE Governor Bailey, and BOJ Governor Kuroda place much emphasis on lowering wages to bring inflation down. Yet wages are rising less than inflation, and the cost-of-living squeeze is serious. They take for granted that business are simply passing on rising input costs, including labor costs, but if that were true, corporate earnings would not be rising, which they have. Costs are being passed through. Later this week, the UK regulator will announce the new gas cap for three months starting in October  Some reports warn of as much as an 80% increase. It is behind the Bank of England's warning that CPI could hit 13% then. The UK's wholesale benchmark has soared 47.5% this month after an 83.7% surge last month. Gas prices in the UK have nearly tripled this year. The UK's 10-year breakeven rose by 38 bp last week to 4.29%, a new three-month high. Although the UK economy shrank slightly in Q2 (0.1%), the BOE warned earlier this month that a five-quarter recession will likely begin in the fourth quarter. Unlike the eurozone, the UK's composite PMI has held above the 50 boom/bust level. Still, it is expected to have slowed for the fourth month in the past five when the August preliminary figures are presented tomorrow. The euro and sterling extended their pre-weekend declines  The euro slipped below parity to $0.9990. The multiyear low set last month was near $0.9950. The break of parity came in the early European turnover. Only a recovery of the $1.0050-60 area helps stabilizes the tone. Speculators in the futures market extended their next short euro position in the week through August 16 to a new two-year extreme and this was before the euro's breakdown in the second half of last week. The eurozone's preliminary August composite PMI due tomorrow is expected to show the contraction in output deepened while the market is expecting the Fed's Powell to reinforce a hawkish message on US rates. After falling to almost $1.1790 before the weekend, sterling made a marginal new low today, closer to $1.1780. The two-year low set last month was near $1.1760. The $1.1850-60 area offers an initial cap. Strike activity that hobbled the trains and underground spread to the UK's largest container port, Felixstowe, which handles about half of the country's containers. An eight-day strike began yesterday. Industrial activity is poised to spread, and this is prompting Truss and Sunak who are locked in a leadership challenge, to toughen their rhetoric against labor. America This is a busy week for the US  First, there is supply. Today features $96 bln in bills. Tomorrow sees a $60 bln three-week cash management bill and $44 bln 2-year notes. On Wednesday, the government sell another $22 bln of an existing two-year floating rate note, and $45 bln five-year note. Thursdays sale includes four- and eight-week bills and $37 bln seven-year notes. There are no long maturities being sold until mid-September. The economic data highlights include the preliminary PMI, where the estimate for services is forecast (median in Bloomberg's survey) to recover from the drop below the 50 boom/bust level. In the middle of the week, the preliminary estimate of July durable goods is expected. Shipments, which feed into GDP models is expected to rise by 0.3%. The revision of Q2 GDP the following day tends not to be a `big market movers. Friday is the big day. July merchandise trade and personal income and consumption measures are featured. Like we saw with the CPI, the headline PCE deflator is likely to ease while the core measure proves a bit stickier. Shortly after they are released, Powell addresses the Jackson Hole gathering.  Canada has a light economic diary this week, but Mexico's a bit busier  The highlight for Mexico will be the biweekly CPI on Wednesday. Price pressures are likely to have increased and this will encourage views that Banxico will likely hike by another 75 bp when it meets late next month (September 29). The July trade balance is due at the end of the week. It has been deteriorating sharply since February and likely continued.    The US dollar rose more than 1% against the Canadian dollar over the past three sessions. It edged a little higher today but stopped shy of the CAD1.3035 retracement objective. Initial support is seen near CAD1.2975-80. With sharp opening losses expected for US equities, it may discourage buying of the Canadian dollar in the early North American activity. The greenback is rising against the Mexican peso for the fifth consecutive session. However, it has not taken out the pre-weekend high near MXN20.2670. Still, the next important upside technical target is closer to MXN20.3230, which corresponds to the middle of this month's range. Support is now seen near MXN20.12.    Disclaimer   Source: No Relief for the Euro or Sterling
Euro (EUR) And British Pound (GBP) Losing The Race Against U.S. Dollar (USD)! 1 Year Statistics

Euro (EUR) And British Pound (GBP) Losing The Race Against U.S. Dollar (USD)! 1 Year Statistics

Conotoxia Comments Conotoxia Comments 22.08.2022 16:44
The recent behavior of the euro and the British pound and their potential weakness against the rest of the world's major currencies is beginning to bring concerns about a sustained deterioration in the prospects for these currencies. As Bloomberg commentators note, the behavior of the pound and the euro are worrisome. We have recently seen large shifts in the euro and pound's short-term market interest rates against the U.S. dollar, with a simultaneous weakening of the GBP/USD and EUR/USD exchange rates. Last week was the worst week for the pound in nearly two years, and at the same time, the yield on the UK's 2-year bond rose by 50 basis points. Typically, the opposite happens in developed markets. Expectations of a central bank rate hike and thus an increase in short-term market yields generally strengthen the currency. The collapse in the correlation between the exchange rate and interest rates is usually associated with emerging markets, which may have lost the battle for the credibility of keeping inflation within the inflation target. The energy dependence of the UK and Europe as a whole means that their balance sheets could deteriorate in the near future, while energy commodity inflation shows no signs of abating. Rate hikes in such a situation may not stem the tide of depreciation of the aforementioned currencies, Bloomberg reports. Thus, it seems that the winter months for the EUR and GBP may be a kind of test of the credibility of the economies in the eyes of investors. Their abandonment of investments in the EUR and GBP despite rising interest rates could be potentially worrying. Moreover, it could change the entire scene of the foreign exchange market. In the dollar index, the euro has a weighting of more than 57 percent, while the pound has a weighting of more than 11 percent. Together, these two currencies alone have a weighting of almost 70 percent. Since the beginning of the year, the euro against the U.S. dollar has lost almost 12 percent, and the British pound almost 13 percent. In contrast, since August 2021, the euro has lost almost 15 percent to the dollar, and the British pound less than 14 percent. Of the major currencies, only the Japanese yen has fared worse and has weakened by almost 20 percent against the U.S. dollar over the year. Daniel Kostecki, Director of the Polish branch of Conotoxia Ltd. (Conotoxia investment service) Materials, analysis and opinions contained, referenced or provided herein are intended solely for informational and educational purposes. Personal opinion of the author does not represent and should not be constructed as a statement or an investment advice made by Conotoxia Ltd. All indiscriminate reliance on illustrative or informational materials may lead to losses. Past performance is not a reliable indicator of future results. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 82.59% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.   Source: Pound and euro similar to currencies of emerging markets?
The Euro To US Dollar (EUR/USD) Pair Moved Without Panic But Now No One Is Thinking About Buying The Euro

People Are Buying US Dollar So Much That EUR/USD Is Falling Off A Cliff!

InstaForex Analysis InstaForex Analysis 23.08.2022 11:40
Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Technical Market Outlook: The EUR/USD pair had broken below the parity level and made a new swing low at the level of 0.9916 (at the time of writing the analysis). The nearest technical resistance is located at the level of 0.9955 and needs to be clearly violated for a solid bounce. Please notice the weak and negative momentum on the H4 time frame chart supports the short-term bearish outlook for EUR with a potential target seen at the level of 0.9900 or even lower. The US Dollar is still being bought all across the board, so the bearish pressure on EUR is still strong.   Weekly Pivot Points: WR3 - 1.0089 WR2 - 1.0057 WR1 - 1.0035 Weekly Pivot - 1.0025 WS1 - 1.0003 WS2 - 0.9992 WS3 - 0.09960 Trading Outlook: There is no sign of relief for the EUR as the down trend should continue lower towards the level or 0.9900 and below. The EUR is under the strong bearish pressure and as long as the USD is kept being bought all across the board, the down trend will continue. Source: Forex Analysis & Reviews: Technical Analysis of EUR/USD for August 23, 2022
Biden Declared Unwavering Support For Ukraine, The Reserve Bank Of New Zealand May Go Back To Raising Rates

Why Is Euro Falling? Heroic Ukrainian War, Strong Dollar And More

InstaForex Analysis InstaForex Analysis 23.08.2022 19:33
Relevance up to 13:00 2022-08-24 UTC+2 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. The euro and the pound reacted with a decline to the news that economic activity continues to weaken worldwide, and Europe was no exception. It has increased fears that rising prices and the war in Ukraine will lead the world into recession. Accordingly, nothing is surprising in that the euro has fallen below parity against the US dollar as the demand for safe-haven assets has increased again. As today's data showed, the volume of production in the eurozone, which includes 19 countries, decreased for the second month. In August, record inflation for energy and food severely undermined demand, pushing more and more sectors down. The problem also lies in the high activity in the service sector, such as tourism, which has almost stopped. Only in the UK did the purchasing managers' index manage to stay above 50 points, which indicates an increase in activity. But this is what concerns the service sector. Manufacturing activity showed an unexpectedly large drop. In Asia, Japan's output also declined due to a surge in COVID-19 cases, further reducing demand, which is already struggling with the weight of rising inflation. Australia's services sector contracted for the first time in seven months, somewhat offsetting tourism growth. All these data paint a bleak picture for the global economy, as most central banks remain focused on curbing inflation by raising borrowing costs. A little later today, several US PMI data will be released, showing improvements in manufacturing and services. But the published figures of the eurozone indicate a contraction of the economy in the third quarter of this year because the decline in production is currently observed in several sectors, from manufacturers of basic materials and cars to companies engaged in tourism and real estate. Even more painful for investors was the news that Germany began to sink, which showed the sharpest decline since June 2020. All the efforts of the authorities to reduce dependence on Russian natural gas against the background of a reduction in supplies after Ukraine start winning the war. In France, things are also no better – activity there has decreased for the first time in a year and a half. Europe's largest economies cannot withstand record inflation and growing uncertainty. The indicator of the French private sector activity in August reached the lowest level since the failures and amounted to 51 points, while production activity decreased to 49 points. New orders declined both in the service sector and manufacturing, while companies quickly lost confidence in their future. In Germany, the index of business activity in the manufacturing sector turned out to be slightly better than economists' forecasts, but this did not help much, as it amounted to 49.8 points – this indicates a decline in the sphere. The index of business activity in the services sector completely collapsed to 48.2 points. The European economy is experiencing a deepening decline in private sector business activity, riddled with further uncertainty. Against this background, the euro continues to fall. Bulls need to correct the situation very quickly and return to 0.9940 since the problems will only increase without this level. Going beyond 0.9940 will give confidence to buyers of risky assets, opening a direct road to 1.0000 and 1.0130. If there is a further decline in the euro, buyers will certainly show something around 0.9860, but this will not help them much since updating the next annual minimum will only strengthen the bear market. Having missed 0.9860, you can say goodbye to hopes for a correction, which will open a direct road to 0.9820. Nothing good happens for the pound. Buyers need to do everything to stay above 1.1730 – the nearest support level. Without doing this, you can say goodbye to the hopes of recovery. Moreover, in this case, we can expect a new major movement of the trading instrument to the levels: 1.1690 and 1.1640. A breakdown of these ranges will open a direct road to 1.1580. It will be possible to talk about stopping the bearish scenario only after the breakdown and consolidation above 1.1780, allowing the bulls to count on a recovery to 1.1820 and 1.1870. Source: Forex Analysis & Reviews: The answer to the question of why the euro is falling so much
The French Housing Market Is More Resilient | The Chance Of Republicans Winning The Senate Is Up

France: In August Business Climate Indicator Hit 103

ING Economics ING Economics 25.08.2022 14:44
France's business climate stabilised in August at 103, painting a more favourable picture than the PMI indices. However, the sub-indices do not give cause for optimism and there is little doubt that the autumn and winter will be more difficult. Shoppers at the Galeries Lafayette department store on the Champs-Elysees in Paris   The business climate indicator, published by INSEE, stabilised in August at 103, above the long-term average (100). The decline in industry (from 106 to 104) was offset by an improvement in retail trade (from 96 to 99). In the services sector, the indicator remained almost stable at 106. The economic situation depicted by the business climate indicators seems more favourable than the PMI indices for August published on Tuesday suggested. Both the composite PMI and the PMI for the manufacturing sector were below the 50 level, which signifies contraction. Although business sentiment is generally above its long-term average in most sectors, some components of the index are more worrying. In particular, in industry, the stock of finished goods is rising sharply and is back above its long-term average for the first time since July 2020. At the same time, both global and foreign order books are deteriorating. After months of supply difficulties, stocks are now high and will need to be cleared in the coming months, which, combined with a slowdown in global demand, is likely to have a negative impact on production. The fall in production could therefore be faster than the fall in demand, thus accentuating the contraction in activity. We see a similar pattern in the retail sector, where the assessment of expected sales is deteriorating sharply while inventories are rising. Moreover, while industrial managers remain relatively positive about expected production in the coming months, they have revised their production assessment downwards sharply in recent months. This indicates that industrial activity is weaker than expected already this quarter.  There's more optimism in the service sector There's more optimism in the service sector. This is particularly the case in the accommodation and catering sub-sector, thanks to an excellent tourist summer in France. The general and personal outlook of business leaders in the services sector has improved and the economic uncertainty felt has decreased. There is little doubt that the service sector will make a more positive contribution to economic growth in the third quarter than industry, although optimism in the tourism sector could diminish rapidly as the summer fades.  All in all, after a rather good spring, with second quarter GDP up 0.5% Quarter-on-Quarter after the first quarter's drop (-0.2%), and a summer boosted by tourism and good weather, all indicators are now pointing to a much more difficult autumn and winter. The global slowdown in demand, the deterioration in consumer and business confidence, the risks to energy supplies and inflation, which is reaching new heights and undermining purchasing power, are likely to push the European and French economies straight into recession. While French GDP this year could grow by around 2.2% thanks to the second quarter and the carry-over effect, growth will stall in 2023 and will probably be close to 0% for the whole of the year. Read this article on THINK TagsGDP France Eurozone Business climate Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
The EUR/USD Price May Fall Under 1.0660

Breaking: ECB Has Another Reason To Be Hawkish! Non-financial Corporate Lending Rose!

ING Economics ING Economics 26.08.2022 12:53
Bank lending to non-financial corporates continued to be surprisingly strong at the start of summer despite higher rates and high economic uncertainty. A hawkish sign for the ECB Rising corporate bank lending in the eurozone is a hawkish sign for the ECB ahead of its September meeting   Credit to the private sector continued to grow strongly in July. This is somewhat surprising given higher interest rates, low confidence and banks indicating tighter credit standards and weaker demand for borrowing. Nevertheless, growth for non-financial corporate bank lending accelerated from 6.8% year-on-year to 7.7% YoY in July. This sounds dramatic but is mainly due to a large base effect. Nevertheless, month-on-month bank lending to non-financial corporates was still 0.9% in July, well above recent trend growth. Household credit growth slowed from 4.6 to 4.5%. The trend in household bank lending growth is slowing at the moment, which hints at a more immediate effect of higher interest rates. Money growth continues to slow rapidly as the ECB has stopped quantitative easing (QE) and increased interest rates. Broad money growth (M3) fell from 5.7 to 5.5% YoY in July. The narrower estimate M1, considered to be a better leading indicator of economic activity, dropped from 7.2% YoY to 6.7% YoY growth. The tightening of the monetary stance is adding to concerns about economic growth, as signs are becoming clearer that the economy could have already started a mild recession at this point. September ECB Meeting For the ECB, continued strong growth in corporate bank lending could be taken as a sign that the neutral rate is still a bit away. Sliding consumer borrowing points in the other direction, but overall this is a hawkish sign ahead of the September meeting. We expect the ECB to move by another 50 basis points now before signs of a recessionary economic environment become more widespread. Read this article on THINK TagsGDP Eurozone ECB Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Italian headline inflation decelerates in January, courtesy of energy

Italy - Q3 GDP May Not Decline Thanks To Tourism

ING Economics ING Economics 26.08.2022 14:07
The deterioration is more marked in manufacturing and less so in services, which are benefiting, alongside retailers, from a prolonged tourism-related re-opening effect. We expect Italy to avoid a quarter-on-quarter GDP contraction in the third quarter of the year, but not in the fourth quarter We think the Italian economy will avoid a GDP contraction in the third quarter, mainly on the back of a protracted tourism-related re-opening effect   Qualitative evidence continues to point to a deterioration of the economic environment over the third quarter. This is what confidence data for August are telling us, with some exceptions. Manufacturers more downbeat This is more apparent in the manufacturing sector, where confidence fell two points between July and August, the lowest reading since last February. The fall in confidence was more marked for intermediate and investment goods, where orders are softening and inventories of finished goods are increasing, but with only a limited bearing on production expectations. Consumer goods were less affected, though. Here, the softer deterioration in orders did not prevent a soft improvement in production expectations. Retailers substantially more upbeat, likely reflecting an ongoing re-opening effect In a way, the detail in the manufacturing survey shows that in the midst of the summer, the re-opening effect which had likely strongly affected 2Q22 growth data (we will know the details next week) was still at work in 3Q22. This seems confirmed by other parts of the business survey, more specifically by the sharp increase in retailer confidence, which reached pre-Covid levels in August. Tourism businesses happy about current activity levels Confidence held up better in the service sectors, where the headline index lost only half a point. The re-opening effect is still at play there too, but some warning signals are starting to emerge, in particular in the tourism sector (where we still lack official data on arrivals for 3Q22). Here, judgements about current turnover are even improving, but the evaluation of orders is softening and expectations about future orders are dropping. Comforting rebound in consumer confidence The idea that the re-opening effect might have continued over the summer is finally supported by another bit of good news coming from the consumer front: the rebound of consumer confidence is back to June’s level. The absolute level of the index remains very low (close to 2020 lows), but August’s rebound signals that the deterioration did not accelerate over the summer. The resilience of the labour market (helped by tourism-related hirings) and the strong measures put in place by the government to limit the impact of gas and electricity price shocks on households’ balance sheets have very likely supported consumers’ spirits. Italy might avoid a GDP contraction in 3Q22 All in all, today’s confidence report supports our view that over 3Q22, the Italian economy will temporarily manage to avoid a GDP contraction, mainly on the back of a protracted tourism-related re-opening effect. However, as the summer season is over, we suspect that both services and manufacturing will act as a drag on growth, bringing GDP growth into negative territory both in 4Q22 and 1Q23. As far as 2022 is concerned, we confirm our forecast of a 3.3% average GDP growth. Read this article on THINK TagsItaly GDP Italy Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Forex: Euro On Holidays. Do Not Count Your Chickens Before They Are Hatched!

Forex: Euro On Vacations. Do Not Count Your Chickens Before They Are Hatched!

Kim Cramer Larsson Kim Cramer Larsson 30.08.2022 08:53
US 2-years Treasury yields is testing June peak at 3.45 forming what looks like an Ascending triangle like pattern. If yields close above 3.45 first target is 3.73 but a move to around 3.90-4.00% is likely.If rejected at the 3.45 we could see US 2-year yields test the lower rising trendline.However, RSI is above 60 with no divergence indicating higher levels are the most likely scenario Source: Bloomberg. US 10-years Treasury yields is struggling to break the 3.11 resistance just peaking above to be rejected at the 0.618 retracement at 3.13. Now being rejected twice the past week it is having another go today. If closing above 3.13 there is some resistance at 3.27 but June peak at 3.50 is likely to be tested.However, the US 10-years is moving in what looks like a rising wedge meaning if it is once again rejected and closes below 3%, a correction down to around the 0.618 retracement at 2.76 is likely. However, RSI is above 60 and no divergence indication yields will break higher Source: Saxo Group The US 10-years Treasury future has broken below 0.618 retracement and support at 117 5/32. If it closes below, it has further confirmed the downtrend and is on course to test June lows at around 114 7/32. Some support at around 116   Source: Saxo Group Euro Bunds gapped lower this morning below key support at 149.75 testing 0.618 retracement at 147.94. RSI is below 40 and no divergence indicating lower levels. We could see buyers trying to close the gap but the former support at 149.75 is now a strong resistance.Some support at around 145.16 Source: Saxo Group   Source: Technical Update - US 2 and 10-years Treasury yields testing key resistance levels. Euro Bund future hit by heavy selling  
Navigating the New Normal: Central Banks Grapple with Policy Dilemmas

Euro (EUR) May Be Skyrocketing Soon! Jackson Hole Meeting Wasn't Only About Fed's Hawks

ING Economics ING Economics 30.08.2022 12:57
We will remember Jackson Hole not just for Powell's hawkish speech, but also for the ECB gearing up its own hawkishness – 75bp hikes are not just for the Fed. Even if just an attempt to invoke the market's help to do the heavy lifting of tightening financial conditions, near term it means more curve flattening. Accelerating inflation still justifies the means  Hawkish ECB communications shift bear flattens the curve... EUR money markets have clearly set their sights on a 75bp hike at the September meeting after the string of hawkish comments over the weekend. The ESTR OIS (euro short-term rate overnight indexed swap) forward for the September reserve period is now at 65bp, implying a 60% probability for a larger move. It was the European Central Bank’s Robert Holzman, Martins Kazaks and Klaas Knot who all hinted more-or-less explicitly at a 75bp hike being on the table while others have called for more forceful action. France’s François Villeroy appears to suggest more frontloading with a call for showing determination now to avoid “unnecessarily brutal” hikes at a later stage. The significance of that hawkish communications shift was underscored by the ECB’s Isabel Schnabel who warned that greater sacrifices may be needed to bring inflation under control. And indeed the ECB’s current official economic outlook certainly still looks overly optimistic against the backdrop of a deepening energy crunch. This all spells further yield curve flattening as the ECB looks more prepared to hike even into a downturn.    The barrage of hawkish ECB comments means more EUR curve flattening is on the cards Source: Refinitiv, ING ...but may signal more reliance on the market to do the heavy lifting While acknowledging further normalisation is appropriate, the ECB’s chief economist Philip Lane struck a more balanced tone. In light of high uncertainty, he argued for a steady pace of hikes to the terminal rate. Smaller hikes would be less likely to cause adverse side effects and make it easier to correct course. Under the current circumstances, we suspect that 50bp would fit his idea of “steady” and “small”. He also notes that policy works through its influence on the entire yield curve. After the July rate hike, higher market rates have meant that the monetary tightening that has already occurred is far greater than just the first policy rate increase. In particular, he notes that mid and longer-end segments of the yield curve are most important for determining financing conditions in the economy and that these are more sensitive to expectations of the terminal rate than the precise path of policy rates towards it. That insight leads us back to one possible aim of the more hawkish communications twist: let the market do the heavy lifting of tightening financing conditions. As long as inflation risks are skewed to the upside, hawkish talk is likely to persist. And as long as the market plays ball, it may not necessarily translate into an even larger 75bp hike. However, one can also argue that when relying on hawkish talk it is even easier to eventually correct course than it is with a strategy of “smaller hikes". At this point, we still think that the ECB will significantly underdeliver compared to what markets are pricing. The crucial question is just when this notion will dawn on markets. The EUR swap curve prices front-loaded hikes in 2022 Source: Refinitiv, ING ECB quantitative tightening on the back burner? It appears that a discussion on quantitative tightening might not be as imminent, which should also come as a relief for periphery bonds. Accelerated ECB rate hikes and political uncertainty in Italy have already brought the benchmark 10Y spread of Italian bonds over German Bunds back towards 230bp. Bringing quantitative tightening to the table could tip the fragile balance towards more widening, even after the introduction of the Transmission Protection Mechanism. But it is quite notable that amid the latest hawkish push on rates, Italy's spreads have actually managed to eke out a small tightening versus Bunds. The Council's views on quantitative tightening seem not quite as aligned as their view on rates. After being brought up last week by the Bundesbank's Nagel and also by subtle hints in the ECB meeting minutes, the ECB’s Olli Rehn now said it was too early to publicly discuss quantitative tightening. While Kazaks said it could be discussed, he added it was too early to implement. Today's events and market view The reason for the ECB's hawkish turn will become more obvious today. As markets are looking for a further acceleration in inflation, all eyes are on the German and Spanish readings today ahead of tomorrow's eurozone flash CPI release which the consensus sees heading to 9%. The core rate is seen accelerating to 4.1%. Also to watch are the business climate indicators today, economic sentiment and consumer confidence, all of which are expected to come in softer. The 1y1y ESTR forward is back to 2.13%, though that is still short of the peak seen in June when it topped 2.5%. It might still push higher from here, but the long end should increasingly lag. In primary markets, Italy will reopen the 5Y, 8Y and 10Y sectors as well as a floating rate bond for a total of up to €8bn. Read this article on THINK TagsRates Daily Federal Reserve ECB Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
The Markets Still Hope That The Fed May Consider Softer Decision

Eurozone: Economic Sentiment Indicator Decreased

ING Economics ING Economics 30.08.2022 14:18
The Economic Sentiment Indicator fell modestly from 98.9 to 97.6 in August. Both industry and services indicate weakening economic activity. Meanwhile, recession prospects are causing more moderation in selling price expectations for the months ahead We expect the eurozone economy to enter a shallow recession in the current quarter Recent production for industry and demand for the services industry fell considerably in August and the manufacturing sector indicates rapidly weakening order books A recession is drawing closer as businesses are becoming more pessimistic about economic activity at this point. Recent production for industry and demand for the services industry fell considerably in August and the manufacturing sector indicates rapidly weakening order books. Fewer businesses have been hiring as weaker activity demands fewer workers, although the positive note is that the Employment Expectations index remains above its long-term trend. Nevertheless, we do expect that the economy will enter a shallow recession in the current quarter. Most notable from the survey is that selling price expectations from both manufacturers and service providers have been falling for four months in a row now. Generally correlated with core inflation, this begs the question of whether peak inflation is indeed drawing closer. The question here is how the next jump in gas and electricity prices will put pressure on margins, which could lead to more pressure on core inflation in the months ahead. But the rapidly slowing economy is clearly cooling inflation prospects as well. Read this article on THINK TagsInflation GDP Eurozone Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
The Market Expects Norges Bank To Keep Interest Rates Unchanged

Swiss Franc (CHF) And Norwegian Krone (NOK) Weakness

John Hardy John Hardy 31.08.2022 16:54
Summary:  The G3 currencies are chopping around aimlessly versus one another while the bigger story afoot across FX is weakness in the rest of the G10 currencies, particularly in the Swiss franc and Norwegian krone, the currencies that had formerly traded the strongest against the euro as a bit of ECB catchup on tightening guidance and easing energy prices. NOK is particularly weak today, perhaps on fears that the EU is set to cap energy and power prices and may twist Norway’s arm in the process? FX Trading focus: EUR relief and squeeze for now, but remember longer term picture. Is NOK suddenly worried about price caps for its energy exports? Yesterday I highlighted the squeeze risk in EURUSD If the 1.0100 area traded, but the US dollar has remained quite firm, while the real story is in the euro upside squeeze elsewhere, particularly against the Swiss franc as the ECB has gotten religion on the need to bring forward and raise its tightening plans, while the collapse in oil prices and natural gas prices to a lesser degree over the last couple of days has EURNOK shorts running for cover. Yesterday, another flurry of ECB speakers at a conference saw ECB rate expectations pulled back a bit higher as some, including Nagel, argued for a front-loading of rate hikes, which has the market leaning a big harder in favour of a 75-basis point move at next Thursday’s ECB meeting. Still, as the weeks wear on, it is important to realize that Germany being ahead of its schedule on refilling gas storage reserves doesn’t mean the country can meet anything approaching normal gas demand through the winter unless Russia turns up the gas flow rates or the gas can be sourced from elsewhere, as storage is only a fraction of the amount need for winter consumption rates as heating demand jumps. The EU has called an emergency meeting next Friday that will likely result in a cap on electricity and perhaps also natural gas prices for some end users, a  move that will prevent many consumers and especially small businesses from going cold over the winter or going broke or having too much of their budgets swallowed by energy costs. But such a move to cap prices will also have the typical result that demand will remain higher than it would otherwise, and that will have to mean rationing of power/gas, a dicey process to manage. Either way, real GDP will decline if less gas is available, even if Russia does turn back on the gas after turning it off today for a few days of purported maintenance and continues to deliver the trickle of flows that it has been delivering recently. The August US ADP payrolls data release today is the first using a “revamped” methodology that is meant to provide more time and higher frequency data on the labor market, as well as information on pay rises, given the ADP access to salary information. The headline release of +125k was disappointing, but it will take time for the market to trust this data point even if the new methodology eventually proved better for calling the eventual turn in the labor market. Yesterday’s Jul. JOLTS jobs openings survey was nearly a million jobs higher than expected after the prior month was revised solidly higher, suggesting a still very strong demand for labor. The USD picture is still choppy and uncertain, with today’s ADP number chopping long treasury yields back lower after they trade to new local highs. The Friday’s official jobs report will weigh more heavily, with earning surprises potentially the largest factor, while the September 13 CPI data point will weigh heaviest of all ahead of the Sep 21 FOMC meeting. As discussed in this morning’s Saxo Market Call podcast, an Atlanta Fed measure of “sticky inflation” is showing unprecedented relative strength to the BLS’s standard core CPI measure. Chart: EURNOKEURNOK has backed up aggressively higher on the huge haircut to crude oil prices over the last couple of sessions and as the ECB has delivered a far sterner message on its intent to bring forward and steepen rate tightening intentions. As well, if the EU emergency meeting sees the spotlight turned on Norway’s gargantuan profits it is earning on oil and gas profits from the reduction of Russian deliveries, the EURNOK rise could be aggravated well through the pivotal 10.00 area. Source: Saxo Group Table: FX Board of G10 and CNH trend evolution and strength.The US dollar remains strong, with Euro flashing hot in the momentum higher – although questions remain how long this can last. Sterling continues its ugly slide, while CHF has lost moment likely on EURCHF flows, and NOK is losing altitude very quickly as noted above. Source: Bloomberg and Saxo Group Table: FX Board Trend Scoreboard for individual pairs.USDCAD and AUDUSD are looking at interesting levels, with the former having now more decisively broken the range, while AUDUSD is teetering. Note the EURCHF and EURNOK readings trying to flip to positive here, together with other EUR pairs. USDNOK has flipped positive in rapid fashion after yesterday’s flip higher. Source: Bloomberg and Saxo Group Source: FX Update: NOK, NOK, who’s there? Energy price caps?
Bond Markets Feeling Weighted: US 10-Year Yield Still Pressured

What To Expect From Pair EUR / USD? Currently Trying To Push Through The Support Level

InstaForex Analysis InstaForex Analysis 01.09.2022 09:09
In the first half of Wednesday, the euro was growing against the decline of other world currencies for the second consecutive day - the bulls on the euro were still able to work out the growth of the August CPI to 9.1% from the previous value of 8.9% y/y. Data from ADP on employment in the US private sector came out in the evening - 132,000 jobs were created in August against the forecast of 300,000. The US stock index S&P 500 fell by 0.78%, the yield on 5-year government bonds increased from 3.26% to 3.35%, investors continued their weekly withdrawal from risk and the euro lost ground. The pair is currently trying to push through the support level of 1.0020, leaving under which will open the nearest target of 0.9950. Overcoming 0.9950 opens the 0.9850 target. We are also waiting for the signal line of the Marlin Oscillator to go under the turquoise line forming convergence and its decrease to the area of the pink dashed line, from which a stronger correction is likely to form. The price is still above the balance and MACD indicator lines on the four-hour chart, the Marlin Oscillator is still in the positive area, but it has a clear intention to go below the zero line and change direction. The MACD line is approaching the level of 0.9950, thus it will strengthen it, and the price, in case of overcoming this level, will receive a strong impulse to further decline. The critical level of this scenario is 1.0088, the high on August 26th.   Relevance up to 04:00 2022-09-02 UTC+2 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/320504
The Markets Still Hope That The Fed May Consider Softer Decision

Analysis Of The EUR/USD Pair. The Price Will Drop?

InstaForex Analysis InstaForex Analysis 01.09.2022 10:12
Trend analysis (Fig. 1). The euro-dollar pair may move downward from the level of 1.0052 (close of yesterday's daily candle) to test 1.0013, the 85.4% retracement level (blue dotted line). Upon reaching this level, an upward movement is possible to 1.0079, the 38.2% retracement level (white dotted line). From this level, the price may continue to move up. Fig. 1 (daily chart). Comprehensive analysis: General conclusion: Today, the price may move downward from the level of 1.0052 (close of yesterday's daily candle) to test 1.0013, the 85.4% retracement level (blue dotted line). Upon reaching this level, an upward movement is possible to 1.0079, the 38.2% retracement level (white dotted line). From this level, the price may continue to move up. Alternative scenario: from the level of 1.0052 (close of yesterday's daily candle), the price may move downward to test the support level of 0.9952 (thick blue line). Upon reaching this level, an upward movement is possible to 1.0010, the 23.6% retracement level (white dotted line).     Relevance up to 08:00 2022-09-02 UTC+2 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/320514
The Upside Of The EUR/USD Pair Remains Limited

The EUR/USD Pair Is Swinging. Details Of What Happens.

InstaForex Analysis InstaForex Analysis 01.09.2022 10:25
EUR/USD 5M The EUR/USD pair continued to move in a style already familiar over the past two weeks. The price reversed sharply again, and the movement took place inside the 0.9900-1.0072 channel. We have already said that this channel cannot be considered a horizontal channel, although formally it is just that. That movement, which we call flat, is also not really such, but has all the signs of it. Best of all, the current movement fits the description of a "swing", which is actually no better than a flat. The pair failed to settle above the level of 1.0072 for the second time, so now we can count on a certain drop in quotes. From Wednesday's macroeconomic reports, we note inflation in the European Union, which continued to accelerate and now stands at 9.1% y/y. It was after the release of this report that the euro began to appreciate, but we do not believe that these two events are connected. At this time, when it is already known about the possible tightening of the European Central Bank's monetary policy in September, the likelihood of a tougher rate hike does not increase. In regards to Wednesday's trading signals, the situation was slightly better than the day before. Mainly due to the formed area of 1.0001-1.0019. First, a sell signal was formed when the price settled below it, and then a buy signal. The sell signal turned out to be false, but the pair went down 15 points. Therefore, Stop Loss should have been set to breakeven. The long position managed to earn 30 points as the price reached the nearest target level of 1.0072. A rebound from the level of 1.0072 could no longer be worked out, since this signal was formed rather late. COT report: The Commitment of Traders (COT) reports on the euro in the last few months clearly reflect what is happening in the euro/dollar pair. For most of 2022, they showed an openly bullish mood of commercial players, but at the same time, the euro fell steadily at the same time. At this time, the situation is different, but it is NOT in favor of the euro. If earlier the mood was bullish, and the euro was falling, now the mood is bearish and... the euro is also falling. Therefore, for the time being, we do not see any grounds for the euro's growth, because the vast majority of factors remain against it. The number of long positions for the non-commercial group increased by 11,600, and the number of shorts increased by 12,900 during the reporting week. Accordingly, the net position increased by about 1,300 contracts. After several weeks of weak growth, the decline in this indicator resumed, and the mood of major players remains bearish. From our point of view, this fact very eloquently indicates that at this time even commercial traders still do not believe in the euro. The number of longs is lower than the number of shorts for non-commercial traders by 44,000. Therefore, we can state that not only does the demand for the US dollar remain high, but that the demand for the euro is also quite low. The fact that major players are in no hurry to buy the euro may lead to a new, even greater fall. Over the past six months or a year, the euro has not been able to show even a tangible correction, not to mention something more. We recommend to familiarize yourself with: Overview of the EUR/USD pair. September 1. The ECB was late, does not admit its mistakes and continues to do everything "for show". Overview of the GBP/USD pair. September 1. The pound is already falling by inertia and tends to overtake the euro in the fall against the dollar. Forecast and trading signals for GBP/USD on September 1. Detailed analysis of the movement of the pair and trading transactions. EUR/USD 1H The pair has consolidated above the trend line on the hourly timeframe, but still does not leave the feeling that the downward trend continues. At the moment, the pair is generally trading inside the horizontal channel, and this channel has already expanded to 0.9900-1.0072. If the bulls manage to settle above it, then it will be possible to count on a slight increase in the euro, but given the current "swing", there may be constant rollbacks to the downside. We highlight the following levels for trading on Thursday - 0.9900, 1.0019, 1.0072, 1.0124, 1.0195, 1.0269, as well as Senkou Span B (1.0051) and Kijun-sen (1 ,0001). There is not a single level below the level of 0.9900, so there is simply nothing to trade there. Ichimoku indicator lines can move during the day, which should be taken into account when determining trading signals. There are also secondary support and resistance levels, but no signals are formed near them. Signals can be "rebounds" and "breakthrough" extreme levels and lines. Do not forget about placing a Stop Loss order at breakeven if the price has gone in the right direction for 15 points. This will protect you against possible losses if the signal turns out to be false. The European Union will publish the unemployment rate and the index of business activity in the manufacturing sector in the second assessment for August. Both reports are insignificant. Meanwhile, we have the ISM index of business activity in the service sector in the United States, and this report may provoke a market reaction. Explanations for the chart: Support and Resistance Levels are the levels that serve as targets when buying or selling the pair. You can place Take Profit near these levels. Kijun-sen and Senkou Span B lines are lines of the Ichimoku indicator transferred to the hourly timeframe from the 4-hour one. Support and resistance areas are areas from which the price has repeatedly rebounded off. Yellow lines are trend lines, trend channels and any other technical patterns. Indicator 1 on the COT charts is the size of the net position of each category of traders. Indicator 2 on the COT charts is the size of the net position for the non-commercial group.     Relevance up to 02:00 2022-09-02 UTC+2 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/320492
The EUR/AUD Pair May Have The Potential To Continue Its Decline

How The EUR/USD Looks In The Short And In The Long Positions?

InstaForex Analysis InstaForex Analysis 01.09.2022 11:54
Analysis of transactions in the EUR / USD pair Euro tested 0.9998 at the time when the MACD was far below zero, which limited the downside potential of the pair. Sometime later, it tested the level again, but this time the MACD line was above zero, so the upside potential was limited. This happened after the test of 1.0043. Although the sharp rise in the eurozone consumer price index came as no surprise, it hurt euro's upward outlook in the morning. Then, in the afternoon, dollar was affected by weak employment data from ADP, which suggested that the rate hikes implemented by the Fed hurt the labor market. Today, a number of reports are scheduled to be released, namely the volume of retail trade in Germany, index of business activity in the manufacturing sector and change in the unemployment rate of the eurozone. Good figures will allow buyers to try updating the weekly highs. But in the afternoon, the focus will shift to the data on US jobless claims, ISM manufacturing index and speech by FOMC member Raphael Bostic. For long positions: Buy euro when the quote reaches 1.0026 (green line on the chart) and take profit at the price of 1.0081. A rally will occur if statistics in the Euro area exceed expectations. Take note that when buying, the MACD line should be above zero or is starting to rise from it. Euro can also be bought at 1.0005, but the MACD line should be in the oversold area as only by that will the market reverse to 1.0026 and 1.0081. For short positions: Sell euro when the quote reaches 1.0005 (red line on the chart) and take profit at the price of 0.9959. Pressure will return if the Euro area releases weak economic statistics. The failure of buyers to update yesterday's highs will also end the upward correction. Take note that when selling, the MACD line should be below zero or is starting to move down from it. Euro can also be sold at 1.0026, but the MACD line should be in the overbought area, as only by that will the market reverse to 1.0005 and 0.9959. What's on the chart: The thin green line is the key level at which you can place long positions in the EUR/USD pair. The thick green line is the target price, since the quote is unlikely to move above this level. The thin red line is the level at which you can place short positions in the EUR/USD pair. The thick red line is the target price, since the quote is unlikely to move below this level. MACD line - when entering the market, it is important to be guided by the overbought and oversold zones. Important: Novice traders need to be very careful when making decisions about entering the market. Before the release of important reports, it is best to stay out of the market to avoid being caught in sharp fluctuations in the rate. If you decide to trade during the release of news, then always place stop orders to minimize losses. Without placing stop orders, you can very quickly lose your entire deposit, especially if you do not use money management and trade large volumes. And remember that for successful trading, you need to have a clear trading plan. Spontaneous trading decision based on the current market situation is an inherently losing strategy for an intraday trader.       Relevance up to 09:00 2022-09-02 UTC+2 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/320532
What's ahead of Euro against greenback today? Let's look at Stefan Doll's review

Despite Declining Energy Prices, European Central Bank (ECB) Is Expected To Hike The Rate By 75bp

ING Economics ING Economics 01.09.2022 12:46
Markets now favour a 75bp hike by the European Central Bank in an upcoming meeting, ignoring the drop in energy prices this week. Gilts are suffering from fears of fiscal spending and foreign outflows Bonds have their hawkish blinkers on and miss a drop in energy prices A beat in core eurozone CPI, with our economist flagging worrying signs of second-round effects from energy to goods prices, has tipped the scales in favour of a 75bp ECB hike in September. The market is now pricing 125bp of tightening over the next two meetings. Another flurry of hawkish comments, from the usual suspects Joachim Nagel and Robert Holzmann, helped convince investors that hawks are winning the front-loading hike debate. What’s more surprising is that the further rise in front-end rates and, expectedly, curve flattening, occurs while European-traded energy prices continue their decline this week. September and October are shaping up to be busy months in terms of supply With so much hawkishness priced and some relief in traded energy, it is tempting to call the peak in 10Y Bund yields, but there is another factor at play. September and October are shaping up to be busy months in terms of supply. Even if volumes do not match the previous years, we ascribe lower issuance to more difficult liquidity conditions, we would expect a greater market impact. The first eight months of the year are a case in point, despite lower volumes, supply has put greater pressure on bond yields across the credit spectrum. Bond sales should push bond yields higher in September and October Source: Bond Radar, ING Gilts have no (foreign) friends UK rates continue to rise relative to their European and US peers. As we wrote recently, divergence in energy prices and inflation explains their jump relative to USD yields. As for the faster rise than European peers, one needs to dig deeper into UK-specific problems. In an economy that is generating a greater proportion of its inflation domestically, the coming fiscal support package stands a greater chance of resulting in a more aggressive Bank of England (BoE) tightening cycle. These fears are probably exacerbated by the current leadership vacuum and the uncertainty about the extent of extra spending and tax cuts that will be unveiled. Fears of fiscal profligacy tend to hit gilts harder. Due to a (historically at least) wider current account deficit, UK markets are more sensitive to a worsening of its twin deficits. The recent decline in net overseas buying of gilts, still positive but the lowest on a rolling three-month basis since 2020 when fears of a mini run on the sterling were rife, did not help. We’re still far from the simultaneous sell-off in UK bonds, stocks, and currency that occurred in March 2020 and prompted the BoE to restart quantitative easing, but the parallel sheds an awkward light on its plan to actively sell bonds, on top of ‘passive’ balance sheet reduction. Foreign buying of gilts is at its lowest since 2020 Source: Refinitiv, ING Today's events and market views Most manufacturing PMIs released today will be second readings with the exception of the Dutch, Spanish, and Italian indices. Italian and eurozone unemployment complete the list of European releases. Supply will remain an important driver of short-term price action with Spain (3Y/10Y/30Y and linker), France (9Y/10Y/16Y), and Ireland (10Y/30Y) lined up for today. In the afternoon, US PMI manufacturing is a second reading but its ISM equivalent is a first. In addition to a decline in the headline figure, markets will look closely for a further drop in the prices paid component. Jobless claims and construction spending are the other US releases we look out for. The pre-ECB meeting quiet period starts today so we would be surprised to hear Fabio Centeno make any comment on monetary policy. The Fed’s own quiet period only starts this weekend so Raphael Bostic might try to out-hawk his colleagues. Read this article on THINK TagsRates Daily ECB Bonds Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Russia's Weekend Mutiny and Gold's Bounce off Support Raise Concerns; Verbal Intervention in USD/JPY and US Banking Stocks Tumble Ahead of Fed's Stress Test Results

The FED's Monetary Policy Is Favorable To The USD

InstaForex Analysis InstaForex Analysis 01.09.2022 13:12
The US currency is in tension before the release of the US labor market report, despite the advantage over the European one. At the same time, EUR does not leave attempts to rise and catch up. Currently, the downward trend prevails on the markets, plunging the American and European currencies into pessimism. According to economists at Commerzbank, a long-term strengthening of the US labor market provides significant support to the greenback. Experts put an equal sign between a strong labor market and a growing dollar. According to preliminary estimates, the positive trend in the USD will continue as long as the Federal Reserve adheres to a tight monetary policy. This situation is favorable for the US currency, but undermines the position of the European one. The EUR/USD pair was trading at 1.0012 on the morning of Thursday, September 1, trying to get out of the current range. At the same time, analysts pay attention to the high probability of the pair moving towards parity. The greenback plunged a bit on Wednesday evening, August 31, after the release of macro statistics on the US labor market, but later won back short-term losses. U.S. private-sector jobs increased by 132,000 last month, according to Automatic Data Processing (ADP), an analyst firm. Initial jobless claims in the U.S. surged to 248,000 on Friday, according to preliminary forecasts. Data on unemployment in the country will be released on September 2. Experts expect this indicator to remain at the level of July (3.5%) and to increase the number of jobs in the non-agricultural sector of the country. Many currency strategists rely on strong US employment data and falling unemployment. They consider these indicators the most important for the Fed and its future monetary policy. However, some experts argue that the key indicator for the central bank is the level of salaries. Recall that Fed Chairman Jerome Powell and other members of the FOMC are counting on the "cooling" of the national labor market. Representatives of the Fed are trying to avoid a situation in which wage growth provokes another round of inflation. In such a situation, the increase in the number of vacancies recorded in August is a negative signal for the central bank. Against this background, the European currency seeks to maintain balance and get out of the price hole. However, its efforts are rewarded with rare bursts of recovery, and then a decline. Adding fuel to the fire is uncertainty about the European Central Bank's next steps on the rate. According to Nordea economists, next week the central bank will raise the rate by 75 basis points. The bank believes that even negative forecasts for economic growth in the region will not interfere with this. At present, the inflation rate in the eurozone remains stably high. According to current reports, inflation in EU countries reached an impressive 9.1% in August. Previously, this figure was 8.9%. The current situation undermines the euro's position, which is hardly kept afloat. According to analysts, the weakening of the euro against the dollar is due to the active tightening of monetary policy by the Fed. At the same time, the current parity between currencies may disappear when a compromise is reached in the EU on tightening the monetary policy or when inflation in the United States returns to the target of 2%. However, both situations are unlikely, experts say. According to experts, the 1:1 ratio between the dollar and the euro will remain until the EU countries begin to tighten monetary policy following the example of the United States. However, there are many pitfalls here, as the ECB needs to find a compromise between all the countries of the euro bloc. Many experts believe that by the end of 2022 the balance of power in the EUR/USD pair will change, due to which the topic of parity will be removed. Experts allow changes in the ECB's actions regarding monetary policy. The same is possible with regard to the Fed, which is worried about labor market problems and galloping inflation. According to analysts, the pair will tend to the usual ratio of 1.0500-1.1000. "In the event of a sharp turnaround, the EU economy will receive a solid bonus for the growth of exports and the economy at the expense of the US and China," the experts emphasize. Market participants are concerned about the questions: will the Fed take a decisive approach to monetary policy? Will the ECB follow suit? Many traders and investors are skeptical about the immediate prospects for the dollar and the euro. At the same time, analysts expect a reduction in key rates in the second half of 2023. The implementation of such a scenario will weaken the greenback and limit the potential for its strengthening. In the current situation, some experts believe that the markets are wishful thinking, expecting less rigidity from the Fed in the process of forming monetary policy. In this matter, much depends on the level of unemployment in the country. Excessive strengthening of the labor market in the US is pushing the central bank to tighten monetary policy as soon as possible. Fed officials are stepping up the pace of this tightening, emphasizing that they are ready to temporarily sacrifice the economy for the sake of curbing inflation. However, a few months ago they said they would try to avoid a recession. However, despite the economic upheavals, the US currency remains strong and remains competitive in the global market.       Relevance up to 08:00 2022-09-04 UTC+2 Company does not offer investment advice and the analysis performed does not guarantee results. Read more: https://www.instaforex.eu/forex_analysis/320524
FX Daily: Testing the easing pushback

How The EUR/USD Pair May Look Like Today? Will Go Up?

InstaForex Analysis InstaForex Analysis 02.09.2022 09:46
The almost weekly growth of the euro against other major currencies was not in vain for it - yesterday's fall was 108 points (the market leader), the price attacked the target support of 0.9950, behind which is the target of 0.9850. On the daily chart, the signal line of the Marlin Oscillator has stopped at the line forming the convergence. The synchronous transition of this line by the oscillator and the price breaking through the support of 0.9950 will create another downward momentum for the euro. Probably, the 0.9752 target will be reached. On the H4 chart, the Marlin Oscillator moved into negative territory and managed to gain a foothold in it. The price attempted a short-term consolidation under the MACD indicator line, but the first attempt failed. Now we are waiting for the second such attempt and the advance towards the first target support at 0.9850.     Relevance up to 05:00 2022-09-03 UTC+2 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/320623
UK Public Sector Borrowing Sees Decline in July: Market Insights - August 22, 2023

Problems Of The Euro. Will The ECB Rates Rise And How Much?

InstaForex Analysis InstaForex Analysis 02.09.2022 10:01
The dollar starts September with a combative mood, trading near 20-year highs and benefiting from flows to safe havens. Fears for the fate of the global economy and the drumbeat of leading central banks are rattling traders' nerves. The greenback is also popular with investors, as they need to buy USD to maintain their margin positions in the face of declining stock indices. Players' nervousness is compounded by the fact that stocks are entering a historically weak period for the market. Since 1950, the S&P 500 has fallen by an average of 0.5% in September. This year, everything speaks in favor of repeating historical trends. Over the past two months, the volume of a net short position against S&P 500 futures has grown significantly and reached its highest value in two years. The index just ended the month with its fourth consecutive daily decline on Wednesday. Investors are still under the impression after Federal Reserve Chairman Jerome Powell's statement last Friday that the central bank's key rate should be raised to a level that will allow inflation to be controlled, despite the risks of recession. The S&P 500 index since last Thursday, the last day before Powell's speech in Jackson Hole, lost more than 5%. "The market has received a message that the Federal Reserve is going to fight inflation at any cost. We don't think we've seen a bottom this year," strategists at Optimal Capital Advisors said. On Wednesday, the head of the Federal Reserve Bank of Cleveland, Loretta Mester, continued this topic. She said that the US central bank needs to raise the base rate from the current target range of 2.25%-2.5% above 4% by the beginning of next year and leave it at this level for some time to reduce inflation. Against this background, the yield of two-year US Treasury bonds, which changes in accordance with expectations regarding interest rates, reached the highest level since the end of 2007 yesterday, rising above 3.5%. The higher yield of treasuries pushes up the dollar as investors sell debt denominated in other currencies to get a higher premium on US treasuries. "It doesn't look like they can actually offer decent resistance to the dollar, given such a gloomy global outlook," Rabobank strategists said, referring to other major currencies. "If you sell the dollar, what will you buy?" – they said. The greenback has been growing for three consecutive months, while the euro fell by 6.5% over the same period. The greenback's growth against the single currency reflects concerns that a sharp jump in energy prices in the eurozone, caused by the conflict between Russia and Ukraine, will lead to higher inflation and push the European economy into recession. "High inflation and gas supplies are still serious problems in the euro area. We think this will continue to put downward pressure on the single currency," Commonwealth Bank of Australia analysts said. As data released on Wednesday showed, inflation in the eurozone rose to a record high of 9.1% in August. This strengthened the case for further significant rate hikes by the ECB to tame it. "Before the start of the Jackson Hole symposium, the market expected the ECB to raise the rate by 1 bps by the October meeting, and since then these expectations have only increased. However, a rate hike is unlikely to strongly support the euro against the greenback, given that investors are likely to remain focused on the risks of stagflation in the eurozone and given the safe haven function for the dollar," Rabobank analysts said. "We maintain our EUR/USD target at 0.9500 for one month and still expect the widespread strengthening of the US dollar to persist over the next six months or so," they added. Another unexpected rise in inflation increases speculation about a 75 bps ECB rate hike at next week's meeting. However, MUFG Bank economists do not believe that the euro will benefit from this sharp tightening. "Market participants currently estimate a 71 bps rate hike by the ECB policy meeting on September 8, as well as the fact that it will continue to raise rates to 1.50% by the end of the year. Market expectations of a sharper tightening of policy were supported by the hawkish comments of ECB policy makers after Jackson Hole and the recent announcement of another unexpected increase in inflation in the eurozone. However, we are not convinced that a sharp tightening of the ECB's policy will support the steady growth of the euro, as the risks of recession in the eurozone remain elevated," they said. The eurozone, in case of termination of pipeline gas supplies from Russia, may face a recession in the second half of 2022, analysts at Fitch Ratings believe. "The onset of recession in the eurozone is likely in the second half of 2022, and in 2023, Germany and Italy will experience an annual decline in GDP. Economic vulnerability in the event of termination of pipeline gas supplies remains high, despite recent active efforts to diversify import sources, in particular LNG," Fitch said. With the passing of the summer heat, as well as news that European countries are filling their storage facilities at a faster pace than expected, energy prices in the eurozone have decreased from peak values. However, the European economy, and especially Germany, remain vulnerable to the onset of winter if Russia stops supplying gas, given that storage facilities cover only 25-30% of winter consumption. "It is very difficult to predict how the situation with gas will develop in the European Union in winter, since much will depend, among other things, on the weather and the volume of gas coming from alternative sources to Russia," said the deputy head of the Directorate of the European Commission for Energy in the relevant committee of the European Parliament. The European Commission expects gas prices in Europe to remain at an elevated level in the coming winter and fall in 2024-2025. "We expect that prices will remain at an elevated level in the coming winter, they will fall again in 2024-2025. But they are subject to some fluctuations," EC spokesman Tim McPhie said. Gas prices and sentiment in Europe are now undergoing a serious stress test, as the Nord Stream-1 gas pipeline closed on August 31 for maintenance. All this warns against excessive enthusiasm for the recovery of the European currency at this stage, ING strategists note. The EUR/USD pair ended Wednesday's session with an increase of 0.3%, near 1.0057, having reached a weekly high at 1.0080 during yesterday's trading. At the same time, the USD index fell by 0.1% to 108.65 points. The euro was supported by expectations that the ECB will raise the interest rate by 75 basis points next week.Meanwhile, dollar shorts were mainly caused by the rebalancing of portfolios at the end of the month, turning into consolidation. The EUR/USD pair lost its bullish momentum on Thursday and plunged by almost 150 points from Wednesday's closing levels. At the same time, the USD index rose to the highest levels since June 2002, coming close to 110. The Fed's tough stance is still working in favor of the greenback, and the energy crisis in Europe is against the euro, which has not gone away with the correction of gas prices over the past three days. "Even after reaching new records, the dollar has room for further growth, which is facilitated by the prospects of a global recession and, in particular, the energy crisis in Europe," Generali analysts said. Fears related to the global recession were exacerbated by China, which announced that Chengdu, a city with a population of about 21 million people, was put on lockdown due to coronavirus. Reflecting investors' unwillingness to take risks, key Wall Street indexes mostly declined on Thursday. Friday's US employment report for August carries risks for stocks, because if it is strong, it will increase the prospects for further Fed rate hikes. The Fed's determination is beyond doubt, since it once led the movement among major central banks to aggressively tighten monetary policy. As for the ECB, it has yet to prove that it is really ready to act, and not just talk. "The ECB has yet to convince the markets with its comments to prove that it is willing to endure economic pain in order to effectively combat price risks. Only at this point will the euro be able to really benefit from the ECB's monetary policy on a more sustainable basis," noted the strategists of Commerzbank. "In a crisis, the market is likely to sell the euro as an initial reaction due to fears of a recession. The ECB's determination to fight inflation is likely to have a positive impact on the single currency only at a later stage – if at that time the ECB really sticks to its approach. This means that euro bulls will probably have to be patient for some time," they added. "The markets are now putting in quotes an increase in the ECB rate by 167 bps in total by the end of the year. However, the recent narrowing of spreads on two-year swaps between the euro and the dollar may have already ended, and a reversal – if the ECB does not meet the new hawkish expectations embedded in prices – could send EUR/USD to new lows next week," ING analysts said. They predict that the EUR/USD pair will remain under pressure in the range of 0.9900-1.0100.         Relevance up to 22:00 UTC+2 Company does not offer investment advice and the analysis performed does not guarantee results. Read more: https://www.instaforex.eu/forex_analysis/320609
Escalating Russia-Ukraine Tensions Amplify Oil Supply Risks: The Commodities Feed

The EUR/USD Pair: The Trend Will Be Bullish Or Bearish?

InstaForex Analysis InstaForex Analysis 02.09.2022 10:11
EUR/USD 5M The EUR/USD pair continued to move in the style already familiar over the past two weeks and the 0.9900-1.0072 channel. Despite the fact that there was a fall of more than 100 points during the day, the pair still remained inside the horizontal channel. Therefore, no new conclusions on the technical picture can be made now. Perhaps the euro will continue to fall (especially if the US statistics are strong), and then the pair will overcome the level of 0.9900. But until this happens, we are stating a fact - a wide flat or "swing" remains. There were only minor reports in the European Union on Thursday. The unemployment rate and the second assessment of the index of business activity in the services sector are not the data that could provoke the euro's collapse. Also not involved in the pair's decline and the ISM business activity index in the US. Thus, the macroeconomic statistics was, in contrast to the previous days of the week, but it had no effect on the course of trading. In regards to Thursday's trading signals, everything was pretty good. First, a buy signal was formed when the price settled above the extreme level of 1.0019. The upward movement did not last long and ended near the Senkou Span B line. The signal cannot be considered false, since the nearest target level was worked out. Managed to earn 7 points. The sell signal also had to be worked out, and it brought good profit to traders, since the pair, after its formation, went down about 110 points, forming another sell signal near the critical line along the way. The pair did not reach the level of 0.9900 by only a dozen points, the deal had to be closed manually in the late afternoon with a profit of at least 90 points. COT report: The Commitment of Traders (COT) reports on the euro in the last few months clearly reflect what is happening in the euro/dollar pair. For most of 2022, they showed an openly bullish mood of commercial players, but at the same time, the euro fell steadily at the same time. At this time, the situation is different, but it is NOT in favor of the euro. If earlier the mood was bullish, and the euro was falling, now the mood is bearish and... the euro is also falling. Therefore, for the time being, we do not see any grounds for the euro's growth, because the vast majority of factors remain against it. The number of long positions for the non-commercial group increased by 11,600, and the number of shorts increased by 12,900 during the reporting week. Accordingly, the net position increased by about 1,300 contracts. After several weeks of weak growth, the decline in this indicator resumed, and the mood of major players remains bearish. From our point of view, this fact very eloquently indicates that at this time even commercial traders still do not believe in the euro. The number of longs is lower than the number of shorts for non-commercial traders by 44,000. Therefore, we can state that not only does the demand for the US dollar remain high, but that the demand for the euro is also quite low. The fact that major players are in no hurry to buy the euro may lead to a new, even greater fall. Over the past six months or a year, the euro has not been able to show even a tangible correction, not to mention something more. We recommend to familiarize yourself with: Overview of the EUR/USD pair. September 2. The euro has nothing to hope for and nowhere to expect help. Overview of the GBP/USD pair. September 2. The pound continues to slide downhill. Forecast and trading signals for GBP/USD on September 2. Detailed analysis of the movement of the pair and trading transactions. EUR/USD 1H The pair continues to be inside the 0.9900-1.0072 channel on the hourly timeframe. If the bears manage to gain a foothold below it, then it will be possible to count on the resumption of the global downward trend. Otherwise, the "swing" will remain. We highlight the following levels for trading on Friday - 0.9900, 1.0019, 1.0072, 1.0124, 1.0195, 1.0269, as well as Senkou Span B (1.0051) and Kijun-sen (1.0001). There is not a single level below 0.9900, so there is simply nothing to trade there. Ichimoku indicator lines can move during the day, which should be taken into account when determining trading signals. There are also secondary support and resistance levels, but no signals are formed near them. Signals can be "rebounds" and "breakthrough" extreme levels and lines. Do not forget about placing a Stop Loss order at breakeven if the price has gone in the right direction for 15 points. This will protect you against possible losses if the signal turns out to be false. There will again not be a single important event in the European Union on September 2, but we have as many as three important reports in the United States. Of course, the NonFarm Payrolls report will be of most interest. We are waiting for the market reaction to it, two other reports (wages and unemployment) are important, but more secondary. Explanations for the chart: Support and Resistance Levels are the levels that serve as targets when buying or selling the pair. You can place Take Profit near these levels. Kijun-sen and Senkou Span B lines are lines of the Ichimoku indicator transferred to the hourly timeframe from the 4-hour one. Support and resistance areas are areas from which the price has repeatedly rebounded off. Yellow lines are trend lines, trend channels and any other technical patterns. Indicator 1 on the COT charts is the size of the net position of each category of traders. Indicator 2 on the COT charts is the size of the net position for the non-commercial group. Paolo Greco   Relevance up to 02:00 2022-09-03 UTC+2 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/320611
The EUR/JPY Pair Is Expected To Start A New Zig-Zag Correction

Will The EUR/JPY Pair Gain Or Lose Today?

InstaForex Analysis InstaForex Analysis 02.09.2022 10:24
EUR/JPY has gained some ground in the last couple of weeks, but that doesn't change the larger picture, that a corrective decline is unfolding. We have seen wave A/ as a three-wave decline from 144.25 to 133.40. The question now is whether an X-wave is building before a second three-wave decline takes over. If this is the case, then we should see EUR/JPY peak near 142.33 for a new decline towards at least 131.69. The second option is that we see a break above resistance at 142.33 for a full return to test the peak at 144.25 in a flat correction in wave B/, before the final decline in wave C/ takes over for a decline to 132.66 and possibly 131.69. So, no matter which structure wave B/ ends up in, having the end gold will not change and that is more downside is needed to complete wave 2/.     Relevance up to 07:00 2022-09-05 UTC+2 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/291117
The EUR/AUD Pair May Have The Potential To Continue Its Decline

The EUR Is Downward Trend But What The EUR/USD Pair Looks Like Today ?

InstaForex Analysis InstaForex Analysis 02.09.2022 10:45
Technical Market Outlook: The EUR/USD pair bounce was capped at the 38% Fibonacci retracement level located at the 1.0078 and pushed down by bears. In order to extend the bounce higher, bulls must break through this level and test the 50% Fibonacci retracement located at 1.0133. The momentum is negative again as the market breaks below the parity level again as the main data from the USA are scheduled for release later on in form of the NFP Payrolls for the month of August. The nearest technical support is seen at 0.9955 and 0.9901. Weekly Pivot Points: WR3 - 1.00077 WR2 - 0.99699 WR1 - 0.99503 Weekly Pivot - 0.99321 WS1 - 0.99125 WS2 - 0.98943 WS3 - 0.98565 Trading Outlook: There is no sign of relief for the EUR as the down trend should continue lower towards the level or 0.9900 and below. The EUR is under the strong bearish pressure and as long as the USD is kept being bought all across the board, the down trend will continue.     Relevance up to 08:00 2022-09-03 UTC+2 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/291129
Agriculture: Russia's Exit from Black Sea Grain Deal Impacts Grain Prices

The Dollar Is At Highs And The Euro Is Retreating

InstaForex Analysis InstaForex Analysis 02.09.2022 11:51
The US currency is closing the week strongly higher, having confirmed its leading position once again. Its European rival is rapidly losing ground. According to analysts, EUR/USD will be retesting the parity level from time to time, which is not good for the euro. The greenback, which has reached its peak in the past 20 years, started its rally late on Thursday, September 1. On the first day of autumn, the US dollar posted the third week of continuous gains. So, on Friday, it recorded the highest value in the past two decades trading against the euro and the yen. The US dollar hit 20-year highs following the release of the manufacturing index in the US. The data showed that the ISM Manufacturing PMI stayed at the same level of 52.8 in August. Some analysts expected a drop to 52 points. Yet, as the data shows, activity in the US manufacturing sector has notably increased. The indicator has been showing strength for a long time already. In this light, the European currency is noticeably retreating against its American counterpart. The euro opened this week below the parity level but managed to win back some losses later on. In the middle of the trading week, EUR/USD recovered to 1.0078 amid lower gas and oil prices and hawkish comments from the ECB. For your reference, the euro first tested the party level in early July and then slumped to the critical level of 0.9903. The situation only worsened as EUR was struggling to leave the parity level and withstand the downward pressure. On Friday morning, September 2, the EUR/USD pair was trading near 0.9970. There is a possibility that the pair may slightly advance to 0.9980. Its breakout will open the way for sellers towards the area of 0.9800–0.9820. Monetary policy tightening of the US Federal Reserve provides significant support to the greenback. The dollar is getting stronger as the Fed's September meeting is approaching. At the same time, the European currency is in a much less favorable position as it is pressured by a protracted energy crisis in Europe. Market participants expect the Fed to maintain its tight monetary policy as this measure is necessary to tackle accelerated inflation. The rate is projected to increase by 75 basis points to 3-3.25%. On Friday, the employment data in the US will be released. Estimates suggest that the unemployment rate in August stayed close to 3.5% recorded in July. The nonfarm payroll employment has increased by 300K. The Federal Reserve will consider this data to evaluate the state of the labor market and make a decision on the key rate. Experts assume that strong macroeconomic data will greenlight the rate hike through 2023. Markets are sure that the Fed will raise the rate for the third time in September by 75 basis points. For a different scenario, the Fed will need to see a deep decline in the labor market. Yet, there are currently no signs that it is cooling down. This summer, the US economy performed relatively well despite the threat of a recession. However, analysts at Danske Bank are skeptical about the current policy of the Fed. They point out that headline inflation in the country has reached its peak while the labor market and inflationary pressure remain strong. This makes it harder for the regulator to avoid recession as this is where the US economy is headed in 2023, Danske Bank concludes.     Relevance up to 08:00 2022-09-05 UTC+2 Company does not offer investment advice and the analysis performed does not guarantee results. Read more: https://www.instaforex.eu/forex_analysis/320649
The EUR/USD Pair Showed Local Speculative Interest In Short Positions Yesterday

The EUR/USD Pair Showed Local Speculative Interest In Short Positions Yesterday

InstaForex Analysis InstaForex Analysis 02.09.2022 11:58
Yesterday, the single currency showed a rather impressive decline, falling below parity again. And it started during the European trading session, under the influence of the actual European macroeconomic statistics. In particular, the final data on the index of business activity in the manufacturing sector turned out to be worse than the preliminary estimate, and fell from 49.8 points to 49.6 points. While the preliminary estimate showed a decrease to 49.7 points. In addition, the data on unemployment also turned out to be not the best, although formally, it fell from 6.7% to 6.6%. But in fact, it remained unchanged, as the previous data were revised upwards. Unemployment rate (Europe): But in the United States, the final data on the index of business activity in the manufacturing sector turned out to be better than the preliminary estimate, which showed a decrease from 52.2 points to 51.3 points. In fact, it dropped to 51.5 points. However, the strengthening of the dollar is still somewhat surprising, as the data on applications for unemployment benefits do not inspire optimism. Of course, the number of initial requests decreased by 5,000. But the number of repeated requests increased by 26,000. And this is quite a lot. Number of retries for unemployment benefits (United States): It is possible that the dollar's growth is purely speculative in anticipation of today's release of the report of the United States Department of Labor. And while the unemployment rate is projected to remain unchanged, data on employment change clearly indicate a high potential for its growth. In addition, 310,000 new jobs should be created outside of agriculture, against 528,000 in the previous month. Such a strong decline in the rate of job creation clearly hints that the US labor market is losing momentum, and the situation is starting to worsen, which will be the reason for a sharp weakening of the dollar. Number of new non-agricultural jobs (United States): The EURUSD currency pair showed local speculative interest in short positions yesterday. As a result, the quote fell below the parity level, having almost reached the lower boundary of the sideways range of 0.9900/1.0050. The technical instrument RSI H4 crossed the middle line 50 from top to bottom during the downward momentum. As a result, the indicator settled in the lower area of 30/50, which indicates the downward mood of market participants. It should be noted that the signals from RSI H4 are of a variable nature due to the fact that the quote, as before, is moving within the sideways formation. MA moving lines on Alligator H4 have many intersections, which corresponds to the flat stage. Alligator D1 is directed to the downside, there is no intersection between the MA lines. This signal from the indicator corresponds to the direction of the main trend. In this case, the strengthening of the downward signal will occur at the moment when the MA (D1) lines are kept below the parity level. Expectations and prospects The convergence of the price with the lower limit of the flat 0.9900 led to an increase in the volume of long positions, as a result, a rebound appeared on the market. Despite the variable speculative interest, the quote is still in the sideways on the basis of a downward trend. Thus, the work can be built on the basis of two tactics: Rebound or breakdown relative to one or another control border. Concretize the above The bounce tactic is seen by traders as a temporary strategy. The breakout tactic is considered the main strategy because it can indicate the subsequent price move. Complex indicator analysis in the short-term and intraday periods have a variable signal due to the current flat. At this time, the indicators indicate a long position due to the price rebound from the lower border of the flat. Indicators in the medium term are focused on a downward trend.     Relevance up to 20:00 UTC+2 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/320635
The EUR/AUD Pair May Have The Potential To Continue Its Decline

How Can Beginner Investors Interpret The EUR/USD Pair Today?

InstaForex Analysis InstaForex Analysis 02.09.2022 12:38
Analysis of transactions in the EUR / USD pair Euro tested 1.0026 at the time when the MACD was just starting to move above zero, which was a good signal to buy. It led to a price increase of around 15 pips, after which pressure returned mainly because of weak statistics on the Euro area. Sometime later, the pair tested 1.0005, but this time the MACD line was far below zero, which should have limited the downward potential. Surprisingly, the quote continued to move down, and long positions from 0.9959 brought losses. Euro fell yesterday because of the disappointing data on the volume of retail trade in Germany and index of business activity in the manufacturing sector of Germany and the whole Euro area. Similar index from the US also led to its decline as the better-than-expected figure strengthened the positions of euro sellers and dollar buyers. This led to the fall of EUR/USD to yearly lows Data on the foreign trade balance of Germany and producer price index of the eurozone are scheduled to be released today, but they are of little interest to the market. That is why the focus will shift in the afternoon, after the release of reports on the unemployment rate, change in the number of people employed in the non-farm sector, change in the average hourly wage and share of the economically active population in the US. All of these are likely to lead to a surge in volatility as their numbers are expected to be much better than the forecasts. This will prompt another decrease in EUR/USD. The opposite scenario will start an upward correction. For long positions: Buy euro when the quote reaches 0.9978 (green line on the chart) and take profit at the price of 1.0119. A rally will occur only if statistics in the US come out lower than the forecasts. Take note that when buying, the MACD line should be above zero or is starting to rise from it. Euro can also be bought at 0.9959, but the MACD line should be in the oversold area as only by that will the market reverse to 0.9978 and 1.0019. For short positions: Sell euro when the quote reaches 0.9959 (red line on the chart) and take profit at the price of 0.9919. Pressure will return if statistics in the US exceed expectations. Take note that when selling, the MACD line should be below zero or is starting to move down from it. Euro can also be sold at 0.9978, but the MACD line should be in the overbought area, as only by that will the market reverse to 0.9959 and 0.9919. What's on the chart: The thin green line is the key level at which you can place long positions in the EUR/USD pair. The thick green line is the target price, since the quote is unlikely to move above this level. The thin red line is the level at which you can place short positions in the EUR/USD pair. The thick red line is the target price, since the quote is unlikely to move below this level. MACD line - when entering the market, it is important to be guided by the overbought and oversold zones. Important: Novice traders need to be very careful when making decisions about entering the market. Before the release of important reports, it is best to stay out of the market to avoid being caught in sharp fluctuations in the rate. If you decide to trade during the release of news, then always place stop orders to minimize losses. Without placing stop orders, you can very quickly lose your entire deposit, especially if you do not use money management and trade large volumes. And remember that for successful trading, you need to have a clear trading plan. Spontaneous trading decision based on the current market situation is an inherently losing strategy for an intraday trader.     Relevance up to 08:00 2022-09-03 UTC+2 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/320645
"A notable risk facing credit markets next year is the potential for the European Central Bank (ECB) to reduce the size of its balance sheet via the tapering of the asset purchase programme"

The Euro Is Under Pressure. Will It Able To Rebounds?

Kenny Fisher Kenny Fisher 02.09.2022 14:02
The euro is in positive territory today after taking a nasty spill on Thursday. In the European session, EUR/USD is trading at 0.9984, up 0.40%. Euro slides as risk appetite slides Thursday was a day to file away and move on for the euro, as EUR/USD tumbled 1.07%. The euro is under pressure from a high-flying US dollar and is having trouble staying above the symbolic parity line. A combination of solid US numbers, weak eurozone data and lower risk sentiment sent the euro sharply lower. German Manufacturing PMI dipped to 49.1, down from 49.3 in July. This marked a second straight contraction, and was the lowest level since May 2020, at the start of the Covid pandemic. It was a similar story for the eurozone Manufacturing PMI, which dropped from 49.8 to 49.6, a 26-month low. The manufacturing sector continues to struggle with supply chain disruptions and a shortage of workers, and high inflation and an uncertain economic outlook are only exacerbating matters. In the US, the ISM Manufacturing PMI held steady at 52.8, showing modest expansion. The labour market remains strong, with initial jobless claims dropping to 232 thousand, down from 237 thousand a week earlier and much better than the consensus of 248 thousand. Adding to the euro’s woes is the uncertainty over European energy supplies from Russia. Russia has shut down Nord Stream 1 pipeline for three days for maintenance, but Germany has charged that the shutdown is politically motivated and that the pipeline is “fully operational”. Nord Stream is supposed to come back online on Saturday. Even if Moscow does restore service, this episode is a reminder of Europe’s energy dependence on an unreliable Russia. Germany has greatly reduced its dependence on Russian gas, from 55% in February to just 26%, but a cutoff from Moscow would result in a shortage this winter. The week wraps up with the August nonfarm payrolls report. The consensus is for a strong gain of 300 thousand, after the unexpected massive gain of 528 thousand in July. The report could well be a market-mover for the US dollar. The markets are finally listening to the Fed’s hawkish message, and a strong reading will raise expectations of a 0.75% hike in September and likely push the dollar higher. Conversely, a weak report would complicate the Fed’s plans and raise the likelihood of a 0.50% hike, which could result in the dollar losing ground after the NFP release. . EUR/USD Technical EUR/USD is testing resistance at 0.9985. Above, there is resistance at 1.0068 There is support at 0.9880 and 0.9797 This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.
📈 Tech Giants Soar, 💵 Dollar Plummets! Disney-Charter Truce, Wall Street's AI Warning!

ING Economics Team Expects Fed And ECB To Change Their Strategy A Bit As Recession Could Be More Acute Than Forecasted

ING Economics ING Economics 04.09.2022 10:43
Different shades of recession are spreading across the globe at record speed as soaring inflation, geopolitical tensions, and astronomical gas prices show no signs of abating. As central banks grapple with working out how to balance inflation and growth, there's one thing we're sure of: tough times lie ahead In this article A return to reality for Europe The colours of recession Out with the old, in with the new Looking ahead Recession’s coat of many colours ING's Carsten Brzeski on the different shades of recession spreading across the globe.   A return to reality for Europe Returning from the summer break always helps when looking at the bright side of the world's economic prospects. An often heard truism is that relaxed economists make fewer pessimistic forecasts. But when you're tracking the European and, specifically, German economies, no summer break is long enough to make short-term economic forecasts more optimistic. On the contrary, returning to Europe’s economic reality after the summer means returning to a recessionary environment, as gas prices are moving from one astronomic high to the other and will lead to unprecedentedly high energy bills over the winter. Even without a complete stop to Russian gas, high energy and food prices will weigh heavily on consumers and industry, making a technical recession – at least – inevitable. The colours of recession No two recessions, however, are the same. In fact, we are currently seeing different colours of recession across the world. The US economy has actually been in a technical recession – defined as two consecutive quarters of negative growth – but it feels nowhere close to a recession. Our chief international economist in New York, James Knightley, says weaker global growth, the strong dollar and the slowdown in the housing market on the back of higher interest rates, will make it feel like a ‘real’ recession at the turn of the year, however. In other regions of the world, we are not currently seeing fully-fledged recessions, but given that China and emerging markets need higher growth rates than the Western hemisphere, the expected sub-potential growth rates can easily feel recessionary. As a consequence, even if Europe currently remains the epicentre of geopolitical tensions, it almost looks as if recession and recessionary trends are a new export item. Out with the old, in with the new With different shades of recession spreading across the global economy, but inflation still stubbornly high as a result of post-pandemic mismatches of demand and supply as well as energy price shocks, the dilemma for major central banks is worsening: how to balance inflation and growth. In the past, the answer would have been clear: most central banks would have shifted towards an easing bias. Not this time around. We are currently witnessing a paradigm shift, recently illustrated at the Jackson Hole conference. A paradigm shift that is characterised by central banks trying to break inflation, accepting the potential costs of pushing economies further into recession. This is similar to what we had in the early 1980s. Back then, higher inflation was also mainly a supply-side phenomenon but eventually led to price-wage spirals and central banks had to hike policy rates to double-digit levels in order to bring inflation down. With the current paradigm shift, central banks are trying to get ahead of the curve. At least ahead of the curve of the 1970s and 1980s. Whether the paradigm shift of central bankers is the right one or simply too much of a good thing is a different question. What strikes me is that central bankers have implicitly moved away from measuring the impact of their policies by medium-term variables and expectations towards measuring it by current and actual inflation outcomes. This could definitely lead to some overshooting of policy rates and post-policy mistakes. Looking ahead We still think that the paradigm shift will not last that long and looming recessions will bring new pivots, forcing the Fed to stop hiking rates at the end of the year and eventually cutting rates again in 2023, and stopping the ECB from engaging in a longer series of rate hikes. Reasons for this out-of-consensus view are that we expect a more severe recession than the Fed and ECB do, and a faster drop in US inflation, in particular, than the Fed expects. Also, in a recession, any neutral interest rate is lower than in a strong growth environment. Finally (and a bit meanly), central banks have not had a good track record with their inflation predictions over the past few years. In any case, we are back from the summer break and looking ahead to a very exciting autumn. Enjoy reading and stay tuned. TagsMonthly Update   Source: ING Monthly: Recession’s coat of many colours | Article | ING Think   Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
German labour market starts the year off strongly

Better Supply Chain Status Contrasted With Ecological Problems And Energy Prices. Situation In Germany Leaves Investors With Mixed Feelings

ING Economics ING Economics 05.09.2022 12:51
With disappointing July trade data, the German economy starts the third quarter on a weak footing Trade is no longer a growth driver but has become a drag on German growth Germany: Exports and imports declined German exports (seasonally and calendar-adjusted) disappointed at the start of the third quarter and dropped by 2.1% month-on-month in July. Imports also decreased, by 1.5% month-on-month, lowering the trade surplus to €5.4bn, from €6.2bn in June. Exports to Russia as a result of the sanctions almost came to a standstill and fell by another 15% month-on-month. Lower energy imports from Russia were the reason for German imports from Russia to drop by more than 17% MoM. Trade is no longer a growth driver but has become a drag on German growth. Since the second quarter of 2021, the growth contribution of net exports has actually been negative. Global supply chain frictions, geopolitical risks and rising production costs are the obvious drivers behind this new trend. Looking ahead, the outlook for German trade is mixed. There is some relief in supply chains and transportation costs. However, at the same time, low water levels, high energy prices and the possible fundamental change in supply chains and production processes on the back of geopolitical uncertainty will be clear obstacles to growth. After yesterday’s encouraging increase in July retail sales, today’s trade data add to the long list of growth concerns for the German economy in the second half of the year. Read this article on THINK TagsGermany Exports Eurozone Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Saxo Bank Podcast: Natural Gas On Colder Weather, Wheat And Coffee Under Pressure, JPY Weaker And More

The Interruption Of Gas Supply Has Sent The Euro Downwards

InstaForex Analysis InstaForex Analysis 05.09.2022 13:29
The energy crisis in the EU continues to deepen amid Russia's full shutdown of the Nord Stream pipeline over the past weekend. The interruption of gas supply has sent the euro downwards once again. Early on Monday, the European currency lost 0.5% against the US dollar and hit a 20-year low at 0.9903. EUR/USD came under pressure following Russia's decision to extend maintenance of the Nord Stream pipeline. Gazprom shut down the pipeline indefinitely, citing an oil leak in one of its turbines. EU officials believe the technical issues are merely a pretext by the Kremlin to shut down gas exports to the European Union According to the West, Moscow is trying to impose an energy blockade on the EU at the beginning of the heating season in a last-ditch attempt to force EU to relax its sanctions against Russia. At the same time, the Kremlin has blamed Western sanctions imposed on Russia for the pipeline's shutdown. Russia is claiming that sanctions prevent Gazprom from keeping the Nord Stream's turbines running. On Saturday, Gazprom tried to alleviate EU concerns by stating that the company would increase natural gas exports to Europe via Ukraine. However, the West has deemed Gazprom's promises to be unreliable. Such an increase would not fully compensate for the shutdown of Nord Stream. Furthermore, this cannot be a permanent solution. Natural gas deliveries via Ukraine could be difficult due to the ongoing conflict between the two countries. This escalation of the gas war between Russia and the EU is forcing EU policymakers to seek solutions for the supply problem. The EU is worried that the shutdown of Nord Stream could send natural gas prices in Europe even higher. On Friday, EU energy ministers are set to present emergency measures to tackle rising energy prices. These measures would likely include natural gas price caps. Furthermore, EU politicians would push for a reduction in gas demand and consumption in the European Union. The ongoing energy crisis will be in the headlines this week, dimming the short-term prospects of the euro. As the gas conflict escalates, risks of an economic slowdown would rise. With the ECB preparing for another interest rate increase, the timing for these risks could not be worse. The ECB's policy meeting is scheduled to take place on Thursday. The EU regulator is now increasingly expected to carry out more aggressive policy measures after inflation in the eurozone reached 9.1%. However, with the EU facing a renewed threat of an energy collapse, recession, and a serious financial crisis, many analysts do not believe that ECB president Christine Lagarde will take a more hawkish step than in July. Earlier, the European Central Bank increased the key rate by 50 basis points to 0.5%. At the same time, the Federal Reserve hiked the rate by 75 basis points to 2.25-2.5%. The gap between EU and US interest rates could likely increase even further in September, as traders expect another 75 bps move by the Fed in September. It would be a third such increase in a row. "Everything is pointing to a lower euro," Carol Kong, senior associate for international economics and currency strategy at Commonwealth Bank of Australia said. "We've heard a great deal of negative news about the European economy, and I think the decline in the euro can continue this week." On the technical side, EUR/USD bears hold dominance in the market. The 7-week support line at 0.9880 is acting as an additional downside filter for the pair. EUR/USD must regain 1.0100 for bullish traders to return to the market.     Relevance up to 10:00 2022-09-10 UTC+2 Company does not offer investment advice and the analysis performed does not guarantee results. Read more: https://www.instaforex.eu/forex_analysis/320805
Short-term analysis - Euro to US dollar by InstaForex - 31/10/22

Eurozone: Retail Sales Rose Because Of Increased Food And Fuel Consumption

ING Economics ING Economics 05.09.2022 14:30
The small increase in retail sales at the start of the third quarter brings little optimism about the outlook. Increased food and fuel spending masked a decline in sales for all other items. Expect consumption to decline from here on due to the purchasing power squeeze that the eurozone is going through Eurozone retail sales in July Retail sales increased by 0.3% in July, which is small enough for this uptick to be in line with the downward trend seen in recent months. The peak in retail sales was in November and sales in July were about 2.5% below that level. Food and fuel caused the small increase in July as all other items saw a decline of -0.4% in terms of sales volumes. A strong increase in Germany and the Netherlands masked declines in the other large eurozone markets. Don’t expect this to be the start of a sustained upturn in sales. The outlook remains rather bleak for the months ahead as real incomes go through an unprecedented squeeze due to high inflation and lagging wages. We expect consumption to contract for the coming quarters on the back of this. For the European Central Bank though, it is definitely no smoking gun for the start of a contraction. With the September meeting coming up and October of course not long after, the doves are looking for clear evidence that the economy is moving into contraction territory. Today’s data will, in that sense, not be of much help. Still, evidence of a recessionary environment is likely to become more apparent as new data comes in. Read this article on THINK TagsInflation GDP Eurozone ECB Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Disappointing German March macro data increase risk of technical recession

Germany: What Is Third Relief Package About? Germans' Battle With Inflation

ING Economics ING Economics 05.09.2022 15:36
The German government is increasing fiscal stimulus to offset the impact of higher energy prices, but we doubt that these measures will be sufficient to prevent a recession German Chancellor Olaf Scholz What does third relief package help Germans with? The German government on Sunday announced a third relief package to cushion citizens and companies from soaring energy costs while also vowing to reform the energy market to collect windfall profits and cap prices. The measures are aimed at, at least, partly offsetting the impact of higher energy prices on low-income households but the more groundbreaking elements of the package are so far only plans and not actual measures. The announced measures in more detail: One-off financial support of 300 euro for pensioners and 200 euro for students. Extension of housing allowance from currently 700,000 recipients to around 2 million recipients and a slight increase Cuts in social security contributions for people with a monthly income below €2,000 Increase in the child allowances by 18 euro per month The reduction of the VAT to 7% for restaurants and bars, which was part of the pandemic stimulus package, will be extended Extension of furlough schemes Credit support for companies And here is what the government did not announce or plans that still need additional work: The government announced a price cap on electricity prices but this price cap is linked to a mechanism to tax windfall profits, which the government wants to be agreed at the European level. The government did not announce a price cap on gas consumption but only the start of a task force to look into this issue. There is no new incentive to use public transportation but the government offered to spend 1.5bn euro per year if the regional states find an agreement on the details of such an incentive and are willing to spend at least the same amount as the federal government. Interestingly, the government also talks about a concerted action between social partners for the next wage rounds, offering to exempt one-off payments by companies to their employees from taxes and social contributions. Hardly enough The new relief package, which comes on top of two previous packages that together amounted to 30bn euro, is obviously aimed at bringing financial relief for low-income households and the ones who will be hit the hardest by higher energy prices. How much relief this package will actually provide remains unclear. At the press conference, German Chancellor Olaf Scholz talked about a 65bn euro package. However, as so often with these kind of packages, it is unclear how the number is really calculated. In any case, while the announced package will indeed bring some relief for the financially weaker ones, it is doubtful that the package will be enough to offset the impact from higher energy bills entirely. Don't forget that 65bn euro are less than 2% of German GDP. German fiscal stimulus during the pandemic, excluding guarantees, amounted to roughly 15% of GDP.  Also, the fact that two crucial elements, price caps and a windfall profit tax, are still works in progress suggests that the full package is hardly operational this year. The fact that there is basically no support for households, which currently do not receive social transfers and that there is also little support for companies, implies that the package will probably fall short in preventing the broader economy from falling into recession. Read this article on THINK TagsGermany Fiscal stimulus Eurozone Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
German labour market starts the year off strongly

Eurozone: German Ifo Index Decreased Once Again Hitting 88.5!

ING Economics ING Economics 25.08.2022 14:08
The list of arguments why the German economy is sliding into recession is getting ever longer. The question isn't about whether there'll be a recession but rather how severe and how long it will be Germany Economy Minister, Robert Habeck, speaking about energy at a news conference in Berlin yesterday   Germany’s most prominent leading indicator, the Ifo index, just dropped for the third month in a row, coming in at 88.5 in August, from 88.7 in July. This is the lowest level since June 2020. The positive interpretation is that the weakening of the Ifo index is slowing down. The negative interpretation is obviously that no improvement is currently in sight. Expectations remain close to their all-time lows and were only worse in December 2018 and April 2020. Earlier this morning, the details of German GDP growth in the second quarter brought some positive surprises. Growth was slightly revised upwards to 0.1% Quarter-on-Quarter, from zero in the first estimate, which finally brought the German economy back to its pre-crisis level. Private consumption surprised to the upside (+0.8% QoQ) and even more importantly was revised upwards significantly in the first quarter to +0.8% QoQ, from initially -0.1% QoQ. It was net exports and the construction sector which weighed on economic activity in the second quarter. Ifo index provides more recession evidence Looking ahead, however, it is hard to see private consumption holding up when inflation is high, energy invoices will be doubling or tripling in the coming months and consumer confidence is at all-time lows. Tuesday’s PMI readings already suggested that the economy is in contraction territory and we are afraid that this time around the indicators are right. The Germany economy is quicky approaching a perfect storm In fact, the German economy is quickly approaching a perfect storm. The war in Ukraine has probably marked the end of Germany’s very successful economic business model: importing cheap (Russian) energy and input goods, while exporting high-quality products to the world, benefitting from globalisation. The country is now in the middle of a complete overhaul, accelerating the green transition, restructuring supply chains, and preparing for a less globalised world. And these things come on top of well-known long-standing issues, such as a lack of digitalisation, ageing infrastructure, and an ageing society, to mention a few. In the coming weeks and months, these longer-term changes will be overshadowed by shorter-term problems: high inflation, possible energy supply disruptions, and ongoing supply chain frictions. In recent weeks, these shorter-term problems have become larger as low water levels and the new gas levy have added to inflation and recession concerns. There are some upsides. Surprisingly strong consumer spending in the first half of the year is one. The fact that the filling of the national gas reserves is actually ahead of schedule is another. Gas reserves are currently back to their average levels of 2016-2021. However, it remains far from certain whether gas reserves at 95% in November, as targeted by the government, can get energy consumption through an entire winter without Russian gas. There are simply too many unknowns like the severity of the winter season and the potential reductions in gas consumption by households and corporates. In any case, even without an energy supply disruption, the economy would be facing high energy costs. This alone, combined with the disruption from the low water levels for industry, ongoing geopolitical uncertainty and supply chain frictions, should be enough to push the German economy into a winter recession. Today’s Ifo index adds to the long list of evidence that the German economy is sliding into a winter recession. The question no longer seems to be if it will be a recession. The only question is how severe and how long that  recession will be. Read this article on THINK TagsIfo index Germany Eurozone Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
The EUR/USD Price May Fall Under 1.0660

A Bullish Outlook For The Dollar Index. The Importance Of The Rate Hike For The Euro

InstaForex Analysis InstaForex Analysis 06.09.2022 11:26
The euro seeks to wrap itself in favor of the gas problems faced by the countries of the eurozone. Most often, the EUR loses, but now there is a small chance for its short-term recovery amid a slowing USD rally. The greenback took a breather on the morning of Tuesday, September 6, to recover from a heady rally. This strategy has led to some decline from all-time highs against the euro, but it is still too early to draw conclusions. The threat of a recession looms over both currencies. Adding fuel to the fire is the high likelihood of a sharp rise in US interest rates. A short-term slowdown in the growth of the USD against key currencies and a slight subsidence against the European one was caused by expectations of statistical data on the index of business activity in the US services sector (ISM). According to preliminary estimates, this figure fell to 55.1% in August from 56.7% in July. Significant support for the US currency is provided by expectations about the rate hike by the Federal Reserve. According to analysts, the central bank is "at a low start" in this matter. At the same time, 62% of specialists include in prices its increase by an additional 0.75 percentage points, up to 3-3.25% per annum. In such a situation, the dynamics of the euro, which has to withstand the gas crisis in the eurozone, is in distress. At the beginning of this week, the euro fell by 0.7% to 0.9880. According to experts, this is the lowest figure in the last 20 years. The current energy crisis has seriously shaken the euro's position. The driver of this fall was the actions of the Russian authorities, who announced a complete suspension of the supply of natural gas through the Nord Stream pipeline. According to analysts, this will increase the economic problems of European businesses and households. Against this background, mass short positions on the European and British currencies were recorded. Experts fear that this trend will strengthen. According to currency strategists at ING Bank, "gas pressures sent the EUR/USD pair to new lows this year." Recall that earlier this week, the pair fell below 0.9900 for the first time since October 2002. According to ING economists, in the near future the EUR/USD pair will continue to fall to a new support level in the range of 0.9600-0.9650. However, this is an extremely low level for a pair, which threatens the existence of the single currency. The EUR/USD pair cruised near 0.9963 on the morning of Tuesday, September 6, winning back previous losses. However, experts warn against euphoria, as the dollar is ready to brace itself and continue its rally, displacing the euro. In such a situation, many analysts see a way out in a further increase in the key rate by the European Central Bank. However, ING economists do not agree with this, who consider it excessive to raise the rate by the central bank by 75 bps at once. According to experts, this will not solve the current problems of the eurozone. ING bank believes that the rate hike by 75 bps at the next meeting, scheduled for Thursday, September 8, is "too big a step for the ECB, which will not help the euro." You should expect it to increase by 50 bps, analysts conclude. Expectations about a sharp rate hike by the ECB (by 75 bps) are fueled by growing inflation in the euro area, the threat of a recession and disappointing macroeconomic data for the region. The icing on the cake was the deepening of the energy crisis in Europe. This undermines the demand for a single currency, experts emphasize. According to current reports, in July, retail sales in the euro area fell by 0.9% in annual terms. At the same time, markets expected a decline of 0.7%. In addition, the Sentix investor confidence index fell to -31.8 points in September from -25.2 points in August. Against this backdrop, Sentix analysts noted a "clear deterioration" in the economic situation in the eurozone, stressing that this is the lowest rate since May 2020. The US currency continues to benefit from the current situation, despite a short-term subsidence. Many experts agree on the long-term upward trend of the dollar, which has been observed since mid-2021. Experts believe that a significant divergence in the monetary strategies of central banks is a significant driver of the growth of the USD against the euro. It is noted that the ECB is still "two steps behind the Fed" in terms of raising rates. The situation was not saved even by its increase by 50 points in July. However, the ECB may revise its strategy and raise the rate at the next meeting by 50-75 bps. Another important factor in the greenback's growth is the stability of the US economy. According to analysts, the US is relatively easy to survive the gas crisis, while selling energy to Europe. In the long term, this state of affairs plays against the ECB and the countries of the European bloc, but it plays into the hands of the Federal Reserve. In such a situation, it is difficult for the ECB not only to raise, but also to keep rates at a high level, unlike the Fed. Under such a scenario, a deep economic downturn in the eurozone is possible, experts warn. The current market environment creates a bullish outlook for the dollar index (USDX). Currently, the bulls on the dollar are in a strong position, pushing the bears. However, the situation may change at any time. In the short and medium term, analysts allow it to rise to an impressive 120 points, that is, an increase of 9%. In a favorable scenario, USDX will head towards the peaks of 2001-2002. However, experts consider this option extreme, although they allow its implementation until the end of 2022.     Relevance up to 08:00 2022-09-11 UTC+2 Company does not offer investment advice and the analysis performed does not guarantee results. Read more: https://www.instaforex.eu/forex_analysis/320889
The Price Of EUR/USD Pair Will Develop Sideways Movement

Despite The Rising Rates, What Does Change Of Interest Rate Policy Means To Eurozone

ING Economics ING Economics 06.09.2022 12:24
Eurozone government deposits at the central bank are subject to a 0% rate cap. This means hundreds of billions of euros could be shifted around. In some cases, this will reduce repo lending or boost demand for safe bonds, all exacerbating the existing collateral shortage Source: Shutterstock The return to positive policy rates will change the incentives for public sector actors in markets Germany’s and Austria’s debt agencies no longer want to lend securities against cash Exiting negative and eventually zero interest rate policies does not simply mean higher rates, but it also means some of the incentives that have dictated the basic market structure and functioning we have become accustomed to over the years of extraordinary policies will change as well. One such change has been highlighted by reports that Germany’s and Austria’s debt agencies are planning to change their repo rules. They no longer want to lend out their securities against cash, but only against other collateral. Why now? And what are the amounts involved? Government cash deposits held at central banks are remunerated at the ECB's deposit facility rate, but importantly that remuneration is capped at zero. Given the vast amounts of excess liquidity in the banking system, short term market rates have traded noticeably below the deposit facility rate. With the deposit facility rate below or at zero the incentive for governments to park cash outside of the central bank were low. But the ECB is now expected to hike the deposit facility rate at a fast pace to well above zero, possibly by 75bp already this week – and the gap to the remuneration capped at 0% will widen quickly. For the abovementioned repos that means that the economics of  government debt agency lending out a security against cash and redepositing at the ECB will change dramatically. Ballooning government central bank deposits are a problem as their remuneration is capped at 0% Source: Refinitiv, ING Germany’s government deposits at the Bundesbank amount to currently €176bn, €120bn of which from the central government Eurozone government deposits at their respective central banks amount to around €600bn currently, fluctuating between €600 to 700bn over the past year. Pre-pandemic they were in the region of €200 to 300bn, already up from around €50 to 150bn before negative interest rates (and then QE) were introduced. But it was the pandemic that has led governments to build up vast cash buffers. Remuneration at the negative depo rate did not matter, it was actually better than market rates. Germany’s government deposits at the Bundesbank amount to currently €176bn, €120bn of which from the central government. Those of Austria at the Oesterreichische Nationalbank amount to €17bn. Certainly not all of that cash originates from the debt agencies' repo operations for which the rules are now tweaked. The operations affected are those that the agencies conduct to support market functioning and market liquidity. Collateral scarcity is set to worsen It all boils down to the one burning issue, the scarcity of high quality collateral. The incentives for the German debt agency to reduce its cash holdings at the central bank are clear. The options are to either seek alternative short term investments, or –  in this special case the simpler solution – to tweak the rules to avoid generating the cash in the first place. Crucially, allowing market participants to effectively only swap securities does not add to the overall availability of government bonds as lending against cash does. While it may still ease price distortions for individual securities, the overall high price for already scarce collateral is unaddressed. As an aside, the ECB's own securities lending against cash (capped at 150bn) has gained importance since late last year, tripling in volume to now account for half of the ECB's overall securities lending. Worsening collateral scarcity is already visible in widening 2Y German swap spreads Source: Refinitiv, ING   There should be an incentive to reduce the cash holdings at the central bank Looking beyond the case where just repo rules are tweaked, there should be an incentive to reduce the cash holdings at the central bank, thus limiting those holdings to the need for safety liquidity buffers. Some countries already have institutional arrangements in place to transfer the cash back to the banking system, via daily repos or the collection of non-collateralised deposits. Those arrangements were more likely meant to smoothen the volatility of the accounts to facilitate the ECB’s liquidity management rather than to structurally reduce the vast amounts that have now accumulated. Cash could of course also be invested in high quality liquid assets - think government bills or similar assets. Alternatively, debt agencies could run down cash buffers, simply by issuing less government paper. All of this to the same effect that the market's collateral availability for is further reduced. This is already visible in the stretched bond valuations (2Y German Schatz in the chart above) relative to swaps. Read this article on THINK
Eurozone's GDP Is Forecasted To Hit 2.1% For 2022, Inflation Expectations May Be Corrected

Eurozone's GDP Is Forecasted To Hit 2.1% For 2022, Inflation Expectations May Be Corrected

Jing Ren Jing Ren 06.09.2022 15:01
We can expect quite a bit of volatility on Thursday, when the ECB will make its rate decision. Surveyed economists are almost evenly split on whether there will be a 50bps or a 75bps hike. The market has priced in around 68bps, implying a favoritism towards the tighter policy. However, it's still possible to get a bounce in the currency, since the move isn't fully priced in. Though part of the expectations could be influenced by an unusually large amount of debt issuance by Eurozone countries this week. Italy, Austria and Germany are all issuing bonds before the ECB meeting, which could put upward pressure on yields, and obscure how the market is really feeling about what will happen with the rate decision. Putting the pieces together There are good fundamental arguments for both positions, as might be expected. On the one hand, EU inflation is likely to keep rising after Russia cut off supply of gas through Nord Stream 1. Tighter policy might be justified in an attempt to prevent higher energy costs from spreading through the economy. On the other hand, that very possibility of higher energy costs could justify keeping rates on hold. Higher energy costs would contribute to a recession, thus lower prices, and less need for the ECB to take as aggressive attitude. However, the reality is inflation isn't on the "supply side" (that is, because of increased funds) as much as it is due to factors outside the ECB's control. The ECB doesn't control the price of energy, nor the flow of gas from Russia, nor the shutdown of factories because of higher energy and transportation costs. The ECB has one tool, and just because it might not be the most appropriate for the situation, it doesn't mean they won't use it, anyway. The market reaction There is wide expectation that the Fed will also hike rates by 75bps. Meaning that if the ECB goes for only 50bps, the gap between the Euro and the dollar will once again widen. That would put downward pressure on the EURUSD. On the other hand, a 75bps hike would simply maintain the gap, which could help the EURUSD, but would have less buoyancy. The other factor to keep in mind is that ECB staff projections are announced at the same time. This could have a bigger impact on the currency, since forward expectations of rate hikes weigh more on institutional investors. Lately, there have been several ECB members emphasizing that they will push for tighter policy. Some have gone so far as to suggest that rates could go above the "neutral rate" in order to tamp down inflation. That would imply at least another 175bps of hikes over the next four meetings. The future is what matters Those aggressive stances might be tempered if the staff forecasts cut the outlook for the shared economy's growth for this year and next. The last projections showed that the bank expected 2.1% growth for this year, and is likely to be revised downward. Inflation was also projected to be at 2% for next year, something that is likely to be revised upwards.
Inflation Rising Again In The Eurozone, Positive GDP In The Great Britain

Euro Is Awaiting Thursday! Is There Any Chance For ECB (European Central Bank) To Change Its Stance?

ING Economics ING Economics 07.09.2022 11:14
Thursday’s ECB rate decision is apparently on a knife edge. This should also tell you that there is a very broad range of possible hike outcomes by year end, do not dismiss anything. The upshot is higher front-end rates volatility, especially with the explosion in swap spreads and collateral shortage ECB doves out in force, but enough to force a 50bp hike? Despite the ECB’s pre-meeting quiet period being in full force, it seems doves have mounted a last minute, and coordinated, push to a more gradual approach to policy normalisation. Fabio Centeno, Yannis Stournaras, and to a lesser extent Martins Kazaks and Edward Scicluna, seem to push back against the barrage of hawkish comments that have coloured ECB communication in the past few weeks. The disagreement on the face of it does not seem insurmountable, but they highlight that whatever policy decision is taken tomorrow, a 75bp hike is not yet set in stone. A 75bp hike is not yet set in stone The main takeaway from our four doves (for the purpose of these comments at least) was that they did highlight the policy trade-off between fighting inflation and safeguarding growth, something the hawks, and other central banks such as the Fed, have been at pains to dismiss. Ultimately ECB forward guidance, for it hasn’t abandoned the idea of steering market expectations despite what it says, should be taken with a pinch of salt by markets. In addition to a wide range of opinions today, the range of possible economic outcomes into this winter should in turn convince markets that it is very difficult to predict ECB policy even a few meetings into the future. 2Y implied EUR rates volatility has overtaken 10Y Source: Refinitiv, ING Don't get wedded to any specific ECB outcome, and expect more volatility The implications are twofold. First, even out-of-consensus calls like our own for only another 75bp of hikes this year, are far from impossible if the economy takes a turn for the worse between this meeting and the next. On the other hand, more hikes than the roughly 150bp priced for this year, let alone next, are definitely possible, especially if governments expand support measures for energy consumers. The second implication is that rates volatility at the short-end is definitely warranted, more so than for longer maturities which should rely mostly on much slower-moving estimates for long-term equilibrium interest rates. Rates volatility at the short-end is definitely warranted, more so than for longer maturities On the topic of front-end volatility, the explosion in swap spreads is gaining more attention in rates markets. The 0% rate cap on government deposits at the ECB (or at national central banks) means some national treasuries have suspended their repo operations as they will soon get a much worse rate on their deposits than the interest rates they are paying on repos. Similarly, we expect national and sub-national treasuries to prefer parking their excess cash into short-term securities rather than earning nothing by placing it at their domestic central banks. Both effects are worsening the collateral shortage, and widening swap spreads. The collateral shortage is widening the gap between bond yields and swap rates Source: Refinitiv, ING US 10yr continues to journey towards 3.5% The rise in US market rates and the pressure it places on wider core rates continues. The US economy is clearly refusing to lie down, with yesterday's ISM number a reminder of this. The structure of the curve has moved from being a bullish one for bonds to quite a neutral one (positioning of the 5yr to the curve). But it has not quite switched to outright bearish positioning. This continues to imply that a rise in the 10yr back towards the high hit at 3.5% in June remains on the cards, but not necessarily a big rise beyond that (so far). The US economy is clearly refusing to lie down The 2yr is already there (at 3.5%), and the market has 3.75% to 4% as an end game for the Federal Reserve. The risk going forward is that the market decides to edge this even higher. The fact that risk assets are lower will not worry the Fed here. The key thing is whether the system can take it. Based off where banks can print commercial paper as a spread over the risk free rate, the system remains in good shape (as that spread remains exceptionally low). The rising rates environment has more to go, and that also forms the background music as the ECB faces its own key decision on Thursday. Today's events and market view Bank of England governor Bailey and other members will appear in front of the treasury select committee. It is hard to imagine the questions and answers not being heavily interpreted by markets with an eye on next week’s policy meeting. Germany will add to long-end supply this week with a 15Y auction worth €1.5bn. This is the last scheduled euro sovereign bond sale of the week so we expect the long-end to trade better afterwards. Eurozone Q2 unemployment and GDP will feel dated and the economic focus will likely be on US July trade in the afternoon instead. There is a long list of Fed speakers today including Thomas Barkin, Loretta Mester, and Lael Brainard. Read this article on THINK
The EUR/USD Pair Could Resume Its Larger Degree Downtrend

What Can We Expect From Euro (EUR) And ECB (European Central Bank)? Check Out This Detailed Comment By ING Economics

ING Economics ING Economics 07.09.2022 15:02
We expect the European Central Bank (ECB) to hike by 50bp at its September meeting. Markets are pricing in 66bp at the moment, and the consensus is leaning in favour of 75bp, so we see some downside risks for the euro. At the same time, short-term rates have not had much of an impact on EUR/USD lately, and the energy crisis should remain the key driver Four scenarios ahead of the September ECB meeting As discussed in our September ECB preview, policymakers in Frankfurt will likely have to choose between a 50bp or 75bp rate hike this week. We think that a 75bp move would be too hard to digest for the dovish front within the Governing Council, and our call is for a 50bp move. That said, we cannot fully exclude a 75bp hike aimed at frontloading tightening before a recession hits this winter. In our “Crib Sheet”, we analyse four potential scenarios on a scale from dovish to ultra-hawkish and what this can mean for EUR/USD and EUR rates, taking into account the size of the rate hike as well as the ECB’s stance on inflation, growth and quantitative easing/tightening (QE/QT). EUR and ECB crib sheet Source: ING Downside risks for EUR... The market’s pricing for the meeting is currently around 66bp, which by itself suggests some negative reaction by the EUR if our 50bp call proves correct. Much of the market reaction will also be driven by any hints about future policy. Since a reiteration of the meeting-by-meeting, data-dependent approach seems quite likely, markets will have to derive their rate path expectations from the updated staff projections on growth and inflation. In particular, the size and length of a winter recession will be key, and should it become the ECB’s baseline scenario, then some dovish re-pricing across the curve might occur and weigh on the euro. Comments about the euro weakness are likely to be a theme too and could have some impact on the EUR. However, verbal protest about a weak currency is now the norm among many central banks and has notably yielded very few results. Unless any reference to FX interventions is made, markets may not read too much into currency-related comments. ... but the ECB is a secondary driver now Regardless of the direction of the EUR reaction on Thursday, there’s a non-negligible chance that the FX impact will prove rather short-lived. This is because EUR/USD has been blatantly unreactive to ECB rate expectations lately, as the energy crisis has continued to drive the majority of the pair’s moves. In the chart below, we show how the two-year EUR-USD swap rate differential – a gauge of ECB-Fed monetary policy divergence expectations – has moved significantly in favour of the EUR recently, but EUR/USD has failed to follow it higher. EUR/USD hasn't followed the short-term rate differential higher Source: Refinitiv, ING   In our EUR/USD short-term fair value model, the short-term rate differential now has a smaller beta than relative equity performance, which is a gauge of diverging growth expectations and is more directly impacted by the energy crisis. This also means that the short-term undervaluation in EUR/USD has shrunk to around 3-4% from the 5-6% peak seen two weeks ago.   We expect the energy story to return firmly to the driving seat for EUR/USD after the post-ECB reaction. Barring a very hawkish surprise, this should keep EUR/USD below parity and prevent it to reconnect with the more supportive rate differential. The 0.98-0.99 area could prove to be a near-term anchor for EUR/USD, but a further worsening of the energy crisis and/or further dollar strengthening can trigger a drop to the 0.96-0.97 area. Read this article on THINK TagsEURUSD Energy crisis ECB Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
The French Housing Market Is More Resilient | The Chance Of Republicans Winning The Senate Is Up

France: Industrial Production Decreased | French GDP (Gross Domestic Product) Is Expected To Decline

ING Economics ING Economics 09.09.2022 16:41
Industrial production fell sharply in July and remains 6% below its pre-pandemic level. Industry will probably contribute negatively to French economic growth in the third quarter   French industrial production fell by 1.6% over one month in July, and the decline was widespread across all branches of the industrial sector. Only construction increased its output by 0.5% over the month. Over a year, industrial production is down by 1%. It is therefore a difficult start to the third quarter for the French industrial sector, which is clearly suffering from the disruption of supply chains due to the war in Ukraine, lockdowns in China, and rising energy prices. Looking ahead, the contraction in order books since February, the high level of stocks of finished goods, high uncertainty, high energy and raw material prices, and potential disruptions to energy supplies do not point to an improved outlook for the French industrial sector. Indeed, the business climate indicator for the sector fell further in August. It is therefore likely that industry will make a negative contribution to French economic growth in the third quarter. The industrial sector only represents 15% of total French value added (20% if we include construction), so the weakness of industry is not enough in itself to conclude that the macroeconomic outlook for the next few quarters has worsened. However, the outlook is not much more favourable in the services sector. The deterioration in purchasing power caused by inflation, the decline in consumer confidence, and the fading of the positive effects of the post-pandemic reopenings will weigh on the dynamism of services in the coming months. As a result, the question is no longer really whether France and other European countries are heading for recession, but rather how fast the recession is coming. Given the developments of the last few weeks, there is a risk that French GDP growth will turn negative in the third quarter. We expect growth of 2.2% for the whole of 2022 and -0.2% for the whole of 2023.  Read this article on THINK TagsIndustrial Production GDP France Eurozone Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Russia's Weekend Mutiny Raises Concerns About Putin's Power Grip; Market Highlights: Gold Support, FX Intervention, and Fed's Stress Test Results

The US Dollar Keeps Growing And Is It Thanks To Fed's Policy?

InstaForex Analysis InstaForex Analysis 12.09.2022 11:17
Former US Treasury Secretary Lawrence Summers said dollar has more room to grow given a number of fundamentals behind it. He expressed skepticism over the effectiveness of any intervention to turn the tide for yen. In a statement, Summers stressed that the US has a huge advantage in not being dependent on "outrageously expensive foreign energy." He noted that Washington has taken a stronger macroeconomic response to the pandemic, and that the Federal Reserve is now tightening monetary policy faster than its counterparts. So far, the Bloomberg Dollar Spot Index is up about 11% year-to-date, hitting a record high this week. Dollar reached its highest level against euro since 2002 on Tuesday - 0.9864, while it reached the highest level since 1998 against yen on Wednesday - 144.99. Yen has depreciated faster than euro, causing a more-than-19% fall against dollar this year. This prompted increased warnings from Japanese officials, with Bank of Japan Governor Haruhiko Kuroda meeting with Prime Minister Fumio Kishida to discuss latest concerns on Friday. Japanese officials are not ruling out options as market participants discuss the chances of intervention to buy yen and sell dollars. Japan hasn't done this since 1998, when it teamed up with the US - while Summers was deputy treasury secretary - to help stem the yen's fall. For its part, the US Treasury Department insisted on its unwillingness to support any potential intervention in the forex market to stop the depreciation of yen. Summers stressed that the more fundamental issue for yen is the interest rate adjustments in Japan, both short-term and long-term. The Bank of Japan maintained a negative short-term interest rate, as well as a 0.25% yield cap on 10-year bonds.  Go to dashboard       Relevance up to 14:00 UTC+2 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/321348
Industrial Metals Outlook: Assessing the Impact of China's Stimulus Measures

Podcast: The Situation In Ukraine Helps The European Market, The Yen's Situation

Saxo Bank Saxo Bank 12.09.2022 11:24
Summary:  Today we discuss market risk sentiment brightening in Europe in the wake of Ukrainian momentum on the battlefield since late last week, with EURUSD breaking well above important local resistance. The JPY is nearly as weak as the US dollar as yields have poked higher again. We also discuss developments in crude oil, wheat and rice after an Indian export ban, stocks to watch this week, including Oracle on the earnings report today and key semiconductor stocks as the US is likely to widen its curb on exports to China. Today's pod features Peter Garnry on equities and John J. Hardy hosting and on FX. Listen to today’s podcast - slides are found via the link. Follow Saxo Market Call on your favorite podcast app: Apple  Spotify PodBean Sticher If you are not able to find the podcast on your favourite podcast app when searching for Saxo Market Call, please drop us an email at marketcall@saxobank.com and we'll look into it.   Questions and comments, please! We invite you to send any questions and comments you might have for the podcast team. Whether feedback on the show's content, questions about specific topics, or requests for more focus on a given market area in an upcoming podcast, please get in touch at marketcall@saxobank.com.     Source:https://www.home.saxo/content/articles/podcast/podcast-sep-12-2022-12092022
Hawkish Fed Minutes Spark US Market Decline to One-Month Lows on August 17, 2023

The EUR/USD Pair Has A Chances For A Further Recovery

InstaForex Analysis InstaForex Analysis 13.09.2022 12:23
Euro is likely to rise as risk appetite will surge if inflationary pressure in the US eases. The lower figure will also affect the Federal Reserve, weakening its grip on rate increases. Recently, US Treasury Secretary Janet Yellen expressed optimism for a slowdown in inflation, but warned that uncertainty remains. The core CPI for August is expected to show growth, while the overall index is likely to slow to 8.1%. Inflation has been a major concern for the Biden administration as high gas and food prices earlier in the year have seriously undermined the president's popularity and the Democrats' prospects for maintaining control of Congress. Also, in response to high price increases, the Federal Reserve has been raising interest rates rapidly. They hope that such a move will curb further price hike as quickly as possible, so there were several increases of 75 basis points at once at the past meetings, and the same is expected in September. But even if inflation slows in August, the Fed is unlikely to step back from its mandate as the central bank intends to do whatever it takes to bring inflation under control. Talking about EUR/USD, there are chances for a further recovery, but only in the event that inflation eases in the US. If the opposite happens, euro will decline, and buyers will have to cling to 1.0100 in order to bring back the possibility of a rally. The nearest target will be resistance level of 1.0150, the breakdown of which will open a direct path to 1.0190 and 1.0240. The farthest target will be the level of 1.0270. In case of a further decrease and breakdown of 1.0100, sellers will become more active in the market, which could push the quote to 1.0030 and 1.0000 In terms of GBP/USD, a lot depends on the 17th figure as its breakdown creates a pretty good chance for a larger upward correction. That will open a direct route to the highs at 1.1750 and 1.1790. The farthest target will be 1.1840. But if pressure on the pair returns, buyers will have to do everything to stay above 1.1660, otherwise, there will be another major sell-off towards the level of 1.16130. Its breakdown will open a direct path to 1.1580 and 1.1550.   Relevance up to 08:00 2022-09-14 UTC+2 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/321521
It's not clear we find out the results of mid-term elections immediately. Binance to buy FTX

Japanese PPI Stays The Same. Decline Of The US CPI Let US Stocks And EUR/USD (Euro To US Dollar) Gain

ING Economics ING Economics 13.09.2022 12:46
Asian currencies likely to extend gains against the USD as risk sentiment remains solid ahead of the US inflation report  Source: shutterstock Macro outlook Global Markets: US equities made further gains yesterday ahead of the US CPI release later today, which is expected to show a decline in headline inflation thanks to lower crude oil, and hence retail gasoline prices. The risk-on sentiment has also hurt the USD, with EURUSD pushing back above 1.01 to 1.0126, and other G-10 currencies all following suit. In Asia, currencies yesterday made modest gains on the whole against the USD, but have lagged the G-10 moves. So with equity futures suggesting no turn in sentiment just yet, Asian FX will likely continue to strengthen today ahead of the US session. USDCNY is now down to 6.9265, taking the USDCNY 7.0 target off the agenda for the time being. US Treasury yields were slightly higher yesterday, especially at the back end, where a lackluster USD32bn 10Y auction saw yields on 10Y bonds rising almost 5bp to 3.358%. G-7 Macro: It’s all about the US August CPI result tonight. And though the headline inflation rate will most likely decline from July’s 8.5%YoY rate, thanks to lower gasoline prices, the core rate is expected to rise 0.3%MoM, and take core inflation up to 6.1% from 5.9%. Markets are likely to balance any headline falls against core rises, so its too early to be celebrating the end of inflation, as some market participants seem already to be doing. UK labour market data and Germany’s ZEW business confidence survey are also on the calendar. India: August inflation came in just above the consensus expectation at 7.0% (consensus 6.9%, ING f 7.0%), mainly due to somewhat stronger food price inflation. In any event, with inflation still well above the RBI’s target range (2-6%), more rate increases are still likely over the coming 2 meetings before the year end. The repo rate is currently 5.4%. We see rates ending the year at 5.9%.   China: With the yuan under recent weakening pressure, we don’t anticipate the PBoC making any further amendments to its 1Y medium term lending facility (1Y MLF) rate today, which will remain at 2.75%. Japan: Pipeline prices appear to have stabilized in August. Producer price inflation remained unchanged at 9.0% YoY in August (vs 9.4% in June) and import price growth slowed to 21.7%YoY (vs 26.1% in July). Despite the recent weakness in the JPY, the drop in global oil prices has led to price stabilization. But next week’s August CPI report is expected to show inflation still accelerating to nearly 3.0%. Despite the recent depreciation of the JPY and looming 3% inflation, we still expect no policy change from the BoJ at its September meeting. What to look out for: US inflation and China activity data Japan PPI (13 September) Australia consumer confidence (13 September) US CPI inflation (13 September) Japan industrial production and core machine orders (14 September) Hong Kong PPI and industrial production (14 September) US PPI inflation (14 September) Japan trade balance (15 September) Australia labour market data (15 September) US initial jobless claims and retail sales (15 September) South Korea unemployment (16 September) Singapore NODX (16 September) China industrial production, retail sales and fixed asset (16 September) US University of Michigan expectations (16 September) Read this article on THINK TagsEmerging Markets Asia Pacific Asia Markets Asia Economics Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
The ECB President Christine Lagarde's Speech Could Bring Back Risk Appetite

Could The Situation On Energy Market Make Rates Go Down?

ING Economics ING Economics 13.09.2022 15:22
Falling energy prices are a key downside risk to European rates. Hawkish central banks and fiscal policy mean a further jump in yields is possible, but this may bring forward the bond rally we expected for late 2022/early 2023 Eye-popping volatility in energy markets is making short-dated rates and bonds even more difficult to trade The plunge in traded energy prices continues The European Union’s proposed energy market reforms and consumption curbs managed to draw a line under the continued climb in both traded gas and electricity prices. The impact has been nothing short of spectacular, especially as it occurred in the midst of a gas supply worst-case scenario, a total cut-off of the Nord Stream flow. We’ve highlighted recently that a continued fall in energy prices constitutes a key downside risk to European rates, in EUR and GBP. That downside is growing. From the point of view of rates markets, the (tentative) reaction has been as close as one would expect from energy policy goldilocks: not too effective economically that it provides cover for central banks to hike further, but effective enough that it does allow energy prices to drop. Of course, between the two effects, the drop in energy prices may well be the one that impacts rates the most, but this is far from a foregone conclusion. Central banks are now overtly worried about second-round effects, a de-anchoring of inflation expectations, and a broadening of inflation – all of which could justify a continued hawkish tone. Short EUR rates haven't yet reacted to lower gas prices Source: Refinitiv, ING Bonds remain shaky but the next rally may occur earlier than 2023 The main takeaway from last week’s European Central Bank meeting for EUR rates markets is an updated, more hawkish, ECB reaction function. The ECB seemed to have taken, indeed ripped, more than a few pages out of the Fed’s book. The upshot is that markets should, and have to a large extent already, concluded that euro for euro, the central bank will deliver more monetary tightening if energy prices rise further. We’ll leave it to our economics colleagues to discuss whether this is the right approach going into a recession but we share their scepticism.  The upshot is that a jump in energy prices has so far impacted rates to the upside, but not to the downside. Nothing is set in stone and the further they drop, the more likely they are to take rates with them. For now, we stick to our view, also motivated by the strength of the US economy, that upside risk dominates for bonds. This is particularly true in an environment of fragile investor sentiment and rising supply, as is customary in September and October. If confirmed, however, the milder inflation picture would precipitate the rally in government bonds we expect for late 2022/early 2023, through 1% in the case of 10Y Bunds. Falling inflation expectations are another challenge to the Fed's hawkish stance Source: New York Fed, ING Today's events and market view Today’s eurozone CPI are final readings of the August prints, and so are less liable to surprise, but the forward-looking Zew components should be a good indicator of market sentiment. It’ll be interesting if the drop in traded energy prices and various measures taken to shield customers register in the market mood. Judging from the improvement in risk assets this month, we would say they have. The main fireworks will come from the US, however, with the August CPI report. Consensus, and our own view, is for a drop in headline inflation, but a rebound in core. How markets react to these mixed messages is an important question for rates over the coming weeks and months. The Fed has pushed aggressively against any dovish interpretation of one CPI report in July so a drop in rates and re-steepening of the curve would be notable. The drop in consumer inflation expectations published by the New York Fed yesterday was another challenge to its hawkish stance. The National Federation of Independent Business small business optimism completes the list of releases. Primary market activity will take the form of 3Y/7Y/24Y auctions in Italy, a 2Y debt sale in Germany, and of dual-tranche 5Y/30Y European Union syndication which could raise upwards of €10bn. In the US session, a 30Y T-bond auction is a highlight. Note that 3Y and 10Y auctions already took place yesterday, meaning a lot of supply pressure has already been felt in USD markets, however demand was soft.  Read this article on THINK TagsRates Daily Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
United Kingdom: Inflation Is Expected To Hit 11%

Eurozone: Industrial Production Declined By Over 2% And May Decrease Further

ING Economics ING Economics 14.09.2022 13:15
July industrial production fell by 2.3%, reversing gains made in May and June. While Irish volatility plays a large part in recent swings, we expect manufacturing weakness to continue over the second half of 2022 – mainly due to an environment of slowing new orders and continued supply-side problems For the months ahead, the outlook remains relatively bleak While we saw a decent end to the second quarter for manufacturing, data confirms that industrial production in July was flat at best, and is likely to decline. Looking at production categories, capital goods production saw a large drop which was mainly related to big Irish swings that relate to large multinational activity. Other goods saw more of a mixed bag in terms of production. Durable consumer goods production was down, which is also true for intermediate goods. Non-durable consumer goods production partially reversed a large decline seen in June. In terms of the larger countries, Germany, Spain and France all saw production decrease significantly in July. Italy and The Netherlands saw a modest improvement at the start of the third quarter. For the months ahead, the outlook remains relatively bleak. The energy crisis has started to result in production cuts across the eurozone for the most gas-intensive producers and other supply problems have faded but not disappeared. On top of that, demand for goods is also weakening. Businesses reported that new orders slowed again in August, which means that inventories are rising and backlogs of work are falling. Overall, this suggests modest production expectations for the second half of the year in manufacturing for now. Read this article on THINK TagsGDP Eurozone Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
The EUR/USD Pair Is Showing A Potential For Bearish Drop

"(...) ECB is now expected to introduce a tiered remuneration for EL."

ING Economics ING Economics 15.09.2022 16:17
The European Central Bank (ECB) could once again engage in banks' profit micro-management by remunerating some bank liquidity at 0% instead of the deposit rate. We review potential deposit and reserve tiering designs and how they may impact money markets Abundant excess liquidity will become very expensive for the ECB As things stand, the ECB is set to pay an increasing amount of interest to banks on the nearly €4.6tr of excess liquidity (EL) outstanding in the banking system. At current deposit rates, this means €34.5bn per year, and if rates reach the 2.5% peak implied by the swap curve in 2023, this would amount to €115bn. Whilst this is sure to be portrayed, unfairly, in some corners as a subsidy to banks, this is not necessarily a problem insofar as banks' financing costs are also increasing. The problem is that a large part of this excess liquidity was provided by the ECB in past targeted longer-term refinancing operations (TLTRO) loans to banks, with a lower average interest rate. As a result, the ECB is now expected to introduce a tiered remuneration for EL. There is a precedent. In 2019, it shielded part of banks' excess reserves held at the ECB (which are part of EL alongside deposits placed at the ECB) from negative interest rates. Back then, the goal was to prevent a collapse in banks' profitability; this time around, the aim is the opposite, but the practice of micro-managing banks' profitability is the same. The distribution of excess liquidity and TLTRO balances is different across countries Source: ECB, ING Potential designs The form tiering of EL takes depends on the ECB's goals. If the aim is simply to offset the benefit offered through TLTROs and to incentivise banks to repay the existing balance, then remunerating a proportion of EL proportional to TLTRO balances at 0% is the way to go. If, on the other hand, the ECB is digging in for a long period of high-interest rates, and high excess liquidity (the remaining portion is explained by the size of its bond portfolio, which will take a lot longer to unwind than TLTRO balances) then it may opt to remunerate at 0% either: a) A multiple of banks' required reserves. This is what it did in 2019, with the multiple set at 6x or b) A proportion of banks’ EL. For instance, calculated as an average balance over a certain period. In the example below, we calibrate the threshold calculated for each method so to the total amount of EL earning 0% at the eurozone level is the same as for a 6x multiple of required reserves, currently around €960bn. In effect, option one is more targeted and limited in time to the maturity of existing TLTRO facilities with the latest due to be repaid in 2024. We surmise this would be an effective way to force TLTRO repayments, but there is a simpler way to achieve this: change TLTRO terms. This is also the option that would cause the most disruptions. For instance, Italian banks would see a greater proportion of their EL earning 0%. Within the two sub-options a) would make the size of EL earning 0% proportional to a bank’s balance sheet, which is not ideal in cases where reserve requirements are not proportional to the EL deposited at the ECB. Similarly to option one above, Italian banks would see a greater portion of their EL earning 0%. Sub-option b) on the other hand would make sure that all banks see the same proportion of their EL remunerated at 0% and at the deposit rate. The ECB will want to make sure the deposit rate remains the marginal policy interest rate The impact on EUR rates and money markets will depend on how the tiering system is structured. We’re assuming that in all cases the amount remunerated at 0% will be fixed (according to one of the methods described above) and that any EL above that threshold will earn the deposit rate. In practice, however, tiering will lower the average rate earned by banks on their EL. It is also possible that for some banks, 0% becomes the marginal interest rate if their EL is below the threshold. An alternative design would be to remunerate at the deposit rates EL until a certain threshold. If that threshold is high enough, it would act as an incentive to repay TLTRO without causing a fall in money market rates. Some tiering options could have disrupting effects on Italian money markets Source: Refinitiv, ING The higher the threshold, the greater the disruptions The most important factor is thus how many banks will find themselves with EL at the ECB below or close to the threshold. In a ‘prudent’ scenario, tiering is designed so that the vast majority of banks find themselves with EL balances well above the threshold. This, however, would only partially reduce the ECB’s interest rate bill. In a more aggressive case, a high threshold means many banks would find that they are earning 0% on all of their EL balance, thus creating an incentive to reduce them by any economical means possible. Irrespective of how it is calculated, the ECB can set the tiering threshold at three levels. 1 High threshold (above €2.5tr of EL earning 0%) At the eurozone level, if the threshold is set so high that more banks have EL below the threshold than above, we would expect a collapse in money market rates as banks rush to lend their cash and disincentivise depositors from parking cash at their branches. This makes this option unlikely as it would amount to a net easing of financial conditions, which is contrary to the ECB’s goal. Even if EL currently stands at €4.6tr, TLTRO repayments could make that figure shrink over the next two years to closer to €2.5bn. 2 Balanced threshold (€1.5-2tr) In a more likely scenario where, at the eurozone level, a majority of banks have EL above the tiering threshold, then the main focus should be on country differences. It may well be that some countries find themselves net lenders of reserves (if they are below the threshold and so earn 0% on all their balances) and others net borrowers (if they are above and so earn the deposit rate on any additional reserves). This would mean a fall in effective interest rates in some countries, for example, Italy and Spain, and a rise in others, for instance, Belgium and Luxembourg. This should be reflected primarily in the fall in repo rates in net lender countries if their domestic banks own a large amount of government debt, but also in a relative fall in deposit rates. If, as we expect, the net lender banks are in Italy and Spain, this could go some way towards helping sovereign spreads tighten but could also disrupt the functioning of the repo market. On the whole, we are unsure if this benefit would offset the operational problems caused to banks. The impact on net borrower countries should be less marked as we assume the marginal deposit rate for domestic banks wouldn’t be altogether different from the prevailing deposit and repo rates. Interestingly, the effect could be to ease financial conditions, on a relative basis, in peripheral countries. 3 Low threshold (below €1.5tr) In the case where the vast majority of banks have EL well above the threshold, including within each country, then we expect the risk of a rush to lend out liquidity less likely. This scenario is the most probable in our view as it would result in less money market disruption but would also mean a lower reduction in the ECB’s interest rate payments to banks.   Depending on how it is calculated, especially if as a multiple of required reserves, then a fall in EL would also bring more banks closer to the threshold. This would imply reducing the multiple over time. Greater impact on ESTR only after larger declines of excess liquidity Source: ECB, ING Money market rates and excess liquidity The overnight rate (ESTR) which is the ECB’s starting point to assess whether its key rates are properly transmitted was pushed below the deposit facility rate when large excess reserves became a feature of the ECB’s policy implementation. Historical relationships between the level of overnight rates and the level of excess reserves suggest that the average rate will only very slowly rise from its depo floor as excess liquidity melts away (by about 1.5bp per €1tr reduction) and take off at an accelerated speed when levels drop below €500bn. At €4.6tr, that seems far away, but also keep in mind the Fed’s experience that the market's plumbing has changed in such a way that these levels have likely shifted higher. The most recent push lower in overnight rates and more significantly also longer unsecured rates such as the 3m Euribor fixing came with the large liquidity injections of the TLTROs amid the pandemic. To the degree that they have changed the short-term funding mix of banks affecting the fixing, repayment of these operations could see this effect unwind again. It is one reason why the impact on overnight rates could already occur at still overall higher levels of excess liquidity than past experience would suggest.         Read this article on THINK TagsRepo rate Interest rates ECB Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
The EUR/JPY Pair Is Expected To Start A New Zig-Zag Correction

In The Short Term, The EUR/JPY Pair Need A Break Below The Minor Support

InstaForex Analysis InstaForex Analysis 20.09.2022 08:40
We continue to look for wave C/ lower towards 131.69 to complete the correction that began in early June. In the short term, we need a break below the minor support at 142.27 to confirm the next push lower towards the support at 138.21 on the way towards our long-term corrective target seen at 131.69. Only an unexpected break above resistance at 145.43 could extend wave B/ higher towards 148.34, but it will not alter our view that this only is a corrective rally in wave B/.   Relevance up to 07:00 2022-09-21 UTC+2 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/293357
The Commodities Feed: China's 2023 growth target underwhelms markets

Will Bank Of Japan Remain Committed To Its Easy Policy?

Saxo Bank Saxo Bank 20.09.2022 12:11
Summary:  More trouble may be brewing for the Japanese yen if the Fed stays hawkish this week. But a Bank of Japan pivot is still unlikely as wage inflation remains muted. The only other way for the Japanese authorities to defend the yen would be a direct intervention. However, a coordinated intervention remains unlikely and a unilateral intervention rarely has a long-lasting impact. We discuss how one could ride this in the direction of possible intervention, or on the reverse. While the key focus is on the FOMC meeting this week, let’s not forget that we also have other global central banks racing to tighten policy to get the inflation runaway train under control. Still, the Bank of Japan continues to buck the global trend, remaining committed to its yield curve control policy and keeping the 10-year yields capped at 0.25%. This has meant a widening divergence to US yields, where the 10-year has reached 11-year highs at 3.50%. This has weighed on the Japanese yen, which is now close to its 24-year lows. A hawkish FOMC this week could further push up US yields, and in turn cause more pain for the yen. The weakness in the yen is starting to hurt consumer and businesses, even as inflation in Japan remains very low compared to elsewhere. Japan’s August CPI touched the 3% mark, much higher than the BOJ’s 2% target. However, the Bank of Japan remains committed to achieving wage inflation, and is unlikely to remove accommodation just yet. The most hawkish signal we could get from the BOJ this week could be removing the dovish guidance. One of the key statements from their last meeting that we will be watching is: “[The Bank] will not hesitate to take additional easing measures if necessary; it also expects short- and long-term policy interest rates to remain at their present or lower levels.” But if we assume that the BOJ will not be ready to make any changes to their monetary policy stance or communication, there is further room for weakness in the yen. This is still possible, especially with the Fed nearing “peak hawkishness” and markets pricing in terminal rate close to 4.5%. Once the US yields peak and the US dollar tops out, pressure on the yen will ease. A sustained reversal in the Japanese yen will have to wait for a significant deterioration in the US economy, if Bank of Japan remains committed to its easy policy. But that’s unlikely to happen just yet, suggesting some more room for a weaker yen. And that will increase the possibility of intervention by the Japanese authorities. With verbal intervention to defend the yen having minimal impact, the BOJ reportedly conducted a foreign exchange check last week. This move usually involves the central bank “inquiring about trends in the foreign exchange market” and is usually seen as a precursor for a formal intervention. While direct intervention is becoming more likely, it is unlikely to be effective if done unilaterally. Direct interventions are only effective if they are done as a coordinated effort with other countries. At this juncture, when all global central banks are fighting to bring inflation under control and protect their currencies from the wrath of the US dollar, it is unlikely they would agree to an intervention to support the yen, which would in turn weaken their own currencies. That brings us two options to ride a unilateral intervention, if one was to happen: Ride the direction of the intervention, which would mean taking a position expecting the yen to strengthen. (See charts 1 and 2 below)   Ride the reversal of the intervention, which would mean entering a position just after the intervention announcement (See chart 3 below). Usually, a large chunk of the move will happen in the first 30-60 minutes of the announcement, but the previous rounds of intervention from Japanese authorities were repeated in Tokyo, London and New York hours. If you expect the move to be somewhat reversed in the days/weeks that follow, you could position for yen weakness at that point. In any case, it is worth highlighting that volatility is high and will likely pick up further if intervention happens. It might be a good idea to use stops on your positions, although liquidity conditions in fast markets do bring the risk of discontinuous pricing and slippage relative to stop levels. Source: https://www.home.saxo/content/articles/forex/bank-of-japan-the-yen-and-the-increasing-possibility-of-an-intervention-20092022
EUR/CHF To Go Down? Swiss National Bank Decides On Interest Rate On Thursday!

EUR/CHF To Go Down? Swiss National Bank Decides On Interest Rate On Thursday!

ING Economics ING Economics 21.09.2022 15:23
The Swiss National Bank holds its quarterly monetary policy meeting on Thursday and is expected to hike its policy rate by around 75bp to 0.50%. The SNB has also been using FX policy to fight inflation. We think the SNB will continue to guide EUR/CHF lower at a rate of around 5-7% a year, in order to keep its real exchange rate stable A stable real exchange rate requires a lower EUR/CHF Since June, the SNB has been very clear: after years of fighting deflation, inflation is currently considered too high and the SNB wants to react by raising its interest rate. Inflation reached 3.5% in August, well below the inflation rate of neighbouring countries but above the SNB's target of between 0% and 2%. Since the SNB is no longer fighting an overvalued exchange rate, but rather believes that a strong Swiss franc is favourable, it can now raise interest rates quickly, without necessarily following the ECB's moves. This is why it moved ahead of the ECB by raising rates by 50 basis points in June. There is little doubt that the SNB will raise rates by at least 75 basis points at Thursday's meeting. A 100 basis point hike like the Riksbank did is not out of the question, especially since the SNB only meets once every quarter, unlike other central banks. However, with inflation "only" at 3.5% in Switzerland and the strength of the Swiss franc allowing imported inflation to fall, 100 points might be a bit too much of a move, so a 75 basis point hike remains more likely. Turning to FX matters, EUR/CHF has come steadily lower since June. Driving this trend have been some key statements from the SNB that (i) it wants to keep the real exchange rate stable and (ii) it will intervene on both sides of the FX market. In practice, we think that means the SNB wants to manage EUR/CHF lower. At the heart of the story is a more hawkish SNB and its view that as a small, open economy a weaker real exchange rate is inappropriate right now in that it would be providing additional stimulus at a time when CPI is overshooting its close to, but not over 2% target. What does a stable real exchange rate mean in practice? In the case of Switzerland, where inflation amongst its trading partners is running nearly 5% higher than in Switzerland, it means that a nominal 5% appreciation of the trade-weighted exchange rate is required to keep the real exchange rate stable. Rather conveniently, as we show in our chart below, the recent bout of Swiss franc strength leaves the trade-weighted Swiss franc around 5% stronger on a year-on-year basis. Not being a member of the G20 grouping allows Switzerland a little more latitude with its FX practices. And the above analysis suggests the SNB may be running a managed float here. With huge FX reserves of close to CHF900bn, the SNB remains a major force to be reckoned with and has the firepower to back up this managed float. Hence the remarks from the SNB in June that it planned to intervene on both sides of the market. Like the Czech National Bank (CNB), the SNB has previously experimented with FX floors, but the managed float underway today is more akin to activity undertaken by the Monetary Authority of Singapore (MAS) which more formally uses a managed float in its monetary toolkit. CHF: Real exchange rate stable YoY, nominal exchange rate +5% YoY Source: SNB, ING forecasts What does this mean for EUR/CHF? Away from the arcane concept of a real or nominal trade-weighted Swiss franc, what does this all mean to the more familiar EUR/CHF? First, it is important that the two biggest weights in the trade-weighted Swiss franc are: (i) the euro at 51% and (ii) the dollar at 23%. If the SNB wants a stronger trade-weighted Swiss franc then clearly EUR/CHF and USD/CHF are going to have to play their parts. Secondly, we have said that the SNB wants to keep the real CHF stable. In the chart above, we present our inflation forecasts, which show the inflation differential staying at around 5% into 2Q23 and only dropping back to zero by end 23. The argument then is that the SNB continues to manage the Swiss trade-weighted index firmer at this 5% year-on-year rate into next Spring before slowing the pace of appreciation. Thirdly, there are many moving parts in the trade-weighted exchange rate, but crucially our stronger dollar view means that USD/CHF may not come lower as the SNB wishes. This places a greater burden on the adjustment in EUR/CHF. Assuming USD/CHF stays flat, EUR/CHF would need to fall at around a 7% per annum rate to get the trade-weighted CHF stronger by 5%. Bringing it all together – and assuming that the SNB has the wherewithal to control EUR/CHF – we can argue that to achieve its objective of keep the real exchange rate stable according to our inflation forecasts, the SNB could be managing EUR/CHF on something like the following path… 4Q22 0.93, 1Q23 0.92, 2Q23 0.91 and flat-lining near 0.90 in 2H23. Read this article on THINK Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
The EUR/JPY Pair Is Expected To Start A New Zig-Zag Correction

The EUR/JPY Pair Confirm Renewed Downside Pressure

InstaForex Analysis InstaForex Analysis 22.09.2022 08:18
EUR/JPY has broken below minor support at 142.30 to confirm renewed downside pressure towards the 131.69 target. In the short term, we could see EUR/JPY retest and even slightly break back above the former support at 142.30 but it should be a short-lived break as the pressure is to the downside for a continuation lower in wave C/ of 2/ towards 131.69 to complete the correction in wave 2/ and set the stage for a new impulsive rally. Remember that's only when the ongoing correction is complete near 131.69.   Relevance up to 06:00 2022-09-23 UTC+2 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/293736
Financial World in a Turbulent Dance: Lego, Gold, and Market Mysteries

Podcast: Comments On The Fed And Bank Of Japan Decisions, Putin's Actions And Its Impact On Commodities

Saxo Bank Saxo Bank 22.09.2022 11:49
Summary:  The FOMC delivered a hawkish message to the market sending equities and bonds lower. Russia also announced a partial mobilization of its reservists increasing the stake in its war in Ukraine impacting commodities. We go through the details of yesterday's FOMC decision and details, and what knock-on effects they have caused throughout the various markets. We also discuss BOJ's decision to stay firm on its rate policy putting more pressure on JPY. Today's pod features Peter Garnry on equities and Ole Hansen on commodities. Listen to today’s podcast - slides are found via the link. Follow Saxo Market Call on your favorite podcast app: Apple  Spotify PodBean Sticher If you are not able to find the podcast on your favourite podcast app when searching for Saxo Market Call, please drop us an email at marketcall@saxobank.com and we'll look into it.   Questions and comments, please! We invite you to send any questions and comments you might have for the podcast team. Whether feedback on the show's content, questions about specific topics, or requests for more focus on a given market area in an upcoming podcast, please get in touch at marketcall@saxobank.com. Share   Source: https://www.home.saxo/content/articles/podcast/podcast-sep-22-2022-22092022
FX: The SNB Is Getting Its Stronger Swiss Franc Via Gains Against The Dollar

Swiss National Bank Decided On Interest Rate. Let's Check EUR/CHF Reaction To The Hike And Comments

ING Economics ING Economics 22.09.2022 14:39
The Swiss National Bank raised interest rates by 75 basis points to 0.5% as planned, bringing the rate into positive territory for the first time since 2015. A reverse tiering system and a reduction in liquidity were also announced. EUR/CHF suffered a short squeeze on the news, but should come lower again 75bp increase As expected, the SNB has just announced an increase of 75bp in its key interest rate, bringing it to 0.5%. The rate in Switzerland is therefore back in positive territory for the first time since January 2015 and is no longer the lowest in the world. It is the end of an era. This rate hike is intended to combat inflation in Switzerland, which reached 3.5% in August, and is therefore higher than the SNB's objective of having inflation between 0 and 2%. Thanks to a more favourable energy mix, a lower share of energy in consumption, and the strength of the Swiss franc, which limits imported inflation, inflation in Switzerland is nevertheless still much lower than in neighbouring countries. The SNB believes that the risk of second-round effects is significant. The SNB now expects inflation to reach 3.0% in 2022, 2.4% in 2023 and 1.7% in 2024. Against this background, it says it "does not rule out further rate hikes in the coming months". Reverse tiering and liquidity reductions Interestingly, the SNB also took two other important decisions. First, it will introduce a two-tier system for the remuneration of sight deposits held by banks and other financial market participants. From now on, they will be remunerated at the SNB's key interest rate (0.5%) up to a threshold, and the part above this threshold will be remunerated at a rate of 0%. The threshold is currently set at 28 times the reserve requirement. It is therefore a reverse tiering system. The aim of this system is, according to the SNB, to encourage money market operations, even in a situation of excess liquidity. At first sight, this may seem surprising, as it could push money market rates to remain below the SNB rate. However, this system goes hand in hand with the desire to reduce liquidity in the market, which in practice should severely limit the proportion of holdings bearing 0% interest. To reduce liquidity, the SNB will conduct open market operations (repo and T-bills). According to the SNB, the aim of this is to ensure that money rates reach the SNB's key interest rate as quickly as possible. Further rate hikes to come in December Given the inflation forecasts, there is little doubt that the SNB will continue to raise rates in the future. Unlike other central banks, the SNB only meets quarterly, so the next meeting will be in December. By then, the European Central Bank and the Federal Reserve will probably have raised rates by another 75 basis points in October and November and will raise rates again in December. The SNB could follow suit, probably raising its rate by 75bp in December as well. This is likely to be the last rate hike and we do not expect anything more in 2023. Indeed, the deteriorating economic outlook and the expected decline in inflation in 2023 should be enough to leave the SNB comfortable with a rate of 1.25% for the year as a whole. EUR/CHF: Short squeeze should not last EUR/CHF rallied around 1.5% following the 75bp hike and comments from SNB Chairman Thomas Jordan that it would intervene against excessive moves. The squeeze probably owed to some positioning for a 100bp rate hike today, following the Swedish Riksbank's 100bp hike earlier in the week. Like the Riksbank, the SNB now only has one further rate meeting this year. However, we do not think this EUR/CHF rally will last. We think the SNB is happy to guide EUR/CHF lower as a means to keep its real exchange rate stable - given trading partner inflation is some 5% higher than in Switzerland. At the start of the year, few would have believed the SNB would be comfortable with EUR/CHF at today's level of 0.95/0.96. Equally, we think the case is growing for EUR/CHF to be trading 0.93 by the end of the year and conceivably 0.90 by next summer. Developments to the East only add to the case to hold the Swiss franc now.  Read this article on THINK TagsSwitzerland Swiss National Bank SNB CHF Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Italian Election 2022: Why Is It Crucial In Terms Of Finance?

Italian Election 2022: Why Is It Crucial In Terms Of Finance?

Jing Ren Jing Ren 23.09.2022 11:43
Italy goes to the polls on Sunday, with results expected through the course of the morning of Monday. Polls are showing a pretty strong lead for Brothers of Italy leader Meloni, so it's unlikely there will be a surprise with the electoral outcome. But, as far as the markets are concerned, a shift in the way Italy's finances are managed and how it relates to the Euro could have an impact on the shared currency. Who is likely to be PM is known, but who will be finance minister is another open question. While the three right-wing parties held a joint rally to close their election campaigns, the leaders put on a show of unity ahead of the polls. But there are still rifts between them, and some rather large egos that have already brought a previous government to a premature end. Negotiations for who will hold which ministers could end up showing the first cracks in the coalition. Possible implications Italy is the third largest economy in the Eurozone, but it's the largest in the so-called "periphery". Italy has had a contentious relationship with Brussels for years now, particularly over the issue of government finance and debt levels. The financial situation has only gotten worse since covid, and accelerated with the gas crisis. For now, the issue of how much money the Italian government is spending has been mostly ignored, but not forgotten. Particularly, apparently, among Italians who seem to be warming to the Euro-skeptic rhetoric of the lead candidate, Meloni. Italy has a debt-to-GDP ratio of 150%, nearly triple the Maastricht criteria. Italy's government deficit last year was 7.2%, well over double the 3% limit of the criteria. Italy's ability to service that debt is increasingly questionable as interest rates rise, particularly in the periphery. Meloni's confrontational attitude towards the EU is likely to further inflame tensions around the issue as well. Will the past repeat? The Euro entered a period of crisis in 2011 driven by a collapse in Greek debt payments. There was substantial worry that it would spread through other periphery countries, such as Spain and Italy. However, a rescue plan was cobbled together, some banks suffered, and the situation was barely averted. The Euro crisis included recessions and talk of a potential breakup of the shared currency. Read next: Cryptocurrency: Bitcoin Up, Ethereum Price Found Support, Ripple Price (XRP) Jumped! | FXMAG.COM Italy's economic situation is worse now than it was then. But not as bad as Greece was at the time. Greek debt lost investor confidence when it was revealed that authorities had misstated economic figures. And the debt-to-GDP ratio was 175%. Greece was not kicked out of the shared currency despite failing almost all the Maastricht criteria, which ultimately allowed more confidence in periphery countries' loose financials. On the other hand, it apparently also meant that the financial leaders of those countries felt they could get away with less fiscal discipline. To the point that even some Italian banks have not been provisioning as much as their American, UK and even German peers under the expectation that if the economic situation gets really bad, they will get a bailout. Just like in 2011. While Meloni might be able to convince voters to support her, getting investors to have confidence in Italy might be a whole different question. And by extension, investors might be worried that at least some of the problems from 2011 might appear again.
The EUR/USD Pair Is Showing A Potential For Bearish Drop

Europe: Eurozone PMI Declined. Is Recession Here? | Euro: Next ECB Move Could Be A 75bp Hike

ING Economics ING Economics 23.09.2022 14:35
The third decline in a row for the eurozone PMI indicates that business activity has been contracting throughout the quarter. This confirms our view that a recession could have already started. At the same time, the August increase in energy prices is translating into stronger price pressures Shoppers in Lubeck, Germany German Composite PMI Reached 45.9 The third quarter clearly marks a turning point in the eurozone economy. After a strong rebound from contractions caused by the pandemic, the economy is now becoming more severely affected by high inflation both at the consumer and producer level. Led by Germany, which saw its composite PMI drop to 45.9 in September, the eurozone saw its composite PMI fall to 48.2. Both services and manufacturing output are well below 50 at 48.9 and 46.2, respectively, signalling broad-based contracting business activity. Read next:  The manufacturing sector is bearing the brunt of the problems. Supply chain problems still disturb production, but weaker global demand has caused backlogs of work to fall as new orders are decreasing quickly. Incidental production stoppages due to high energy costs are also adding to declining production in the sector. But with the tourism season behind us, there are few opportunities left for any marked catch-up effects in the eurozone economy. That has pushed the services PMI deeper into negative territory as consumers are starting to become more cautious in spending as energy bills rise across the monetary union. Overall, the view of a eurozone economy moving into recession seems confirmed by the gloomy September PMI survey. European Central Bank May Hike The Rate By 75bp The surge in gas and electricity prices in August is now leading to further price pressures emerging for businesses in September, even though other costs have been moderating due to weakening global demand. This confirms the stagflationary environment that the eurozone is currently in. The ECB has made clear that it will continue to hike in a determined manner for the short-run, as it tries to battle stubbornly high inflation. A 75 basis point hike in October is therefore definitely on the table, despite a weakening economy. Read this article on THINK TagsInflation GDP Eurozone ECB Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Britain's Rishi Sunak And EU's Ursula Von Der Leyen Will Meet Today To Finalize The Northern Ireland Drama

The EUR/GBP Pair Has Broken Above The Neckline Resistance

InstaForex Analysis InstaForex Analysis 26.09.2022 08:19
It has been a while since we last looked at EUR/GBP. Since July, EUR/GBP has broken clearly above the neckline resistance of the S/H/S bottom and is now testing resistance at 0.9270 which we expect will be broken too for a continuation towards our long-term target at 1.0592. In the short term, we could see a temporary consolidation either just below or just above resistance at 0.9270 before the next rally higher to 1.0592. Relevance up to 06:00 2022-09-27 UTC+2 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/294116
Oil Prices Soar on Prospect of Soft Landing, Eyes Set on $80 Breakout

Very Dramatic Moves In Forex Markets With The Euro (EUR) And The Pound (GBP)

Swissquote Bank Swissquote Bank 26.09.2022 11:13
The FX markets kick off the week on an extremely chaotic note. Both the pound and the euro are being severely punished for the political decisions that are taken in the UK and in Italy respectively. Elections in Italy As expected, the far-right candidate Giorgia Meloni won a clear majority in Italy at yesterday’s election, with Brothers of Italy gaining more than 25% of the votes. And Meloni’s right-wing alliance with Salvini’s League and Berlusconi’s Forza Italia got around 43% of the votes: the terrible consequence of the pandemic, the war and the energy crisis. Situation the major currency  The EURUSD has been shattered this morning. The pair dived to 0.9550. But it’s almost worst across the Channel, if that’s any consolation. Investors really hated the ‘mini budget’ announced in UK last Friday. Investors were expecting to hear about a huge spending package from Liz Truss government, but the package has been even HUGER than the market expectations. UK’s 10-year yield jumped more than 20% since last week, the FTSE dived near 2% and Cable tanked below 1.0350 in Asia this morning. Elsewhere, the US dollar index took a lift, and the dollar index is just crossing above the 114 mark at the time of talking. Stock market Outlook Gold dived to $1626 on the back of soaring US dollar. US crude oil plunged below $80 per barrel. The S&P500 fell to the lowest levels since this summer, whereas the Dow Jones fell below the summer dip. Happily, the European equities are better bid this morning, but investors remain tense and worried. Watch the full episode to find out more! 0:00 Intro 0:24 Italy turns right, euro gets smashed 4:15 UK assets treated like EM after the ‘MINI’ budget 7:45 USD rallies, XAU, oil under pressure 8:49 US stocks dive to, or below summer lows on Fed fear Ipek Ozkardeskaya Ipek Ozkardeskaya has begun her financial career in 2010 in the structured products desk of the Swiss Banque Cantonale Vaudoise. She worked at HSBC Private Bank in Geneva in relation to high and ultra-high net worth clients. In 2012, she started as FX Strategist at Swissquote Bank. She worked as a Senior Market Analyst in London Capital Group in London and in Shanghai. She returned to Swissquote Bank as Senior Analyst in 2020. #Italy #election #Meloni #UK #mini #budget #EUR #GBP #selloff #USD #rally #crude #oil #XAU #BP #APA #XOM #recession #energy #crisis #SPX #Dow #Nasdaq #investing #trading #equities #stocks #cryptocurrencies #FX #bonds #markets #news #Swissquote #MarketTalk #marketanalysis #marketcommentary ___ Learn the fundamentals of trading at your own pace with Swissquote's Education Center. Discover our online courses, webinars and eBooks: https://swq.ch/wr ___ Discover our brand and philosophy: https://swq.ch/wq Learn more about our employees: https://swq.ch/d5 ___ Let's stay connected: LinkedIn: https://swq.ch/cH
Italian headline inflation decelerates in January, courtesy of energy

Italy: Giorgia Meloni Wins Italian Election. Could Alleged Political Differences Between EU And Italy Affect Market?

ING Economics ING Economics 26.09.2022 12:23
As largely expected, a centre-right coalition led by Giorgia Meloni has secured a clear victory in Italy's election. Meloni will now form a government which will count on a stable majority. For now, concerns about budget decisions and relationships with the EU are quite muted, and both Italian bonds and the euro have bigger short-term issues to deal with Giorgia Meloni secured a clear victory in Italy's election Centre-right got an ample majority in both branches of parliament For once, actual Italian election data broadly confirms what opinion polls had anticipated. According to preliminary data available as we write, the centre-right coalition has got an ample majority (44%), with the centre-left following some way behind (26%). The Five-Star Movement, which runs in isolation, has come third (15%), followed by the centrists of Azione/IV (7.7%). As expected, with the current electoral system attributing a third of seats under a first-past-the-post rule, the ability (or a lack thereof) to form a wide coalition was a decisive factor. The centre-right exploited it very well, mopping up an overwhelming majority of first-past-the-post seats. Based on preliminary data, the centre-right coalition should get a decent majority in both branches of the Parliament.  Meloni to get a mandate to form a government The undisputed big winner in this election was Giorgia Meloni, the leader of Fratelli d’Italia. With 26% of the votes, she prevailed in her coalition by a huge margin over Lega (9%) and Forza Italia (8%). There will be no leadership issue, and she will very likely get the mandate from President Sergio Mattarella to form a new government. This will not happen before mid-October, though, after the first gathering of the houses and the election of their speakers. A new Meloni government could thus be installed by the end of October. Italian election results Source: Italian Ministry of the Interior, ING A tight agenda awaits Meloni, with the budget at the top of the list The scope of Meloni’s lead within her coalition will likely give her the upper hand in many decisions, but we suspect she will be very careful not to humiliate her allies for the sake of stability. Still, on some crucial matters, such as the fiscal stance, she will likely be in a position to effectively oppose calls for more deficit from Matteo Salvini, the leader of Lega, who was a big loser in the polls. As the new budget will have to be approved before year-end, we expect the outgoing Mario Draghi government to set up the macro framework and, possibly, the Planning Document setting the budgetary framework. This should prevent any meaningful deviation from the set track in the short run. More critically, Meloni will over time have to clarify her stance on the international positioning of Italy. If adhesion to the Atlantic Pact seems not at stake, the relationship with Brussels and big eurozone countries will have to be clarified. If participation in the euro project is neatly reaffirmed in the programme, the notion of doing so while defending national interests has yet to be qualified. Not a very short-term issue, but a potential area of conflict for 2023, when the new European fiscal rules will be discussed.   Rates: too early to make long-term calls on policy Italian bonds largely shrugged off the goldilocks result of this weekend’s election: enough votes for the right-wing coalition to ensure stability but not too much so it can change the constitution with a two-thirds majority. Italian spreads tightened into the election in a sign that they have made peace with the prospect of an FdL-led government, for now at least. Focus is now on the early decisions that Meloni’s government will take, including the FinMin appointment, and on the 2023 budget. Longer term, this government’s policies, especially towards Brussels and fiscal discipline, are an unknown quantity. But markets aren’t well equipped to make long-term calls on policy, especially with contradictory near-term signals. Instead, the main driver of Italian bonds over the coming weeks and months is likely to be the broader tone in financial markets. In a context where central banks tighten monetary policy in unison, or even competing with each other in some instances, carry-oriented investors are understandably shy in picking up the additional yields offered by Italy’s bonds. The ECB’s newfound hawkishness is a particular worry, and so is the prospect of it reducing the size of its bonds portfolio through quantitative tightening. FX: Italy is not a short-term concern for the euro The Italian election results seem to have gone mostly unnoticed in the currency market. This is partly due to the predictability of the outcome, but may also denote how markets are giving Meloni the benefit of the doubt after a campaign where she firmly reiterated her intention to respect fiscal rules and maintain Italy’s foreign stance unchanged. Quite crucially, like for government bonds (BTPs), the euro has bigger concerns to deal with – Russia-Ukraine developments and the energy crisis above all – and is now also feeling some spill-over effect from the meltdown in the GBP market over the past two sessions. With the ECB’s hawkishness having blatantly failed to offer the euro any solid support and the dollar staying strong, EUR/USD downside risks remain quite elevated in the near term, even without Italian politics adding any pressure. We think that some Italy-EU confrontation on Meloni’s party's core themes (like immigration) may trigger some adverse market reaction further down the road, and that fiscal decisions may be scrutinised more if she presses forward with tax cut proposals, but it is simply too early for any risk premium to emerge on EUR/USD or even EUR/CHF.   Read this article on THINK TagsItaly elections Italy Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
The Grains Sector Saw Continued Demand| Acceleration In The Sale Of Gold

The Grains Sector Saw Continued Demand| Acceleration In The Sale Of Gold

Saxo Bank Saxo Bank 26.09.2022 14:41
Summary:  Our weekly Commitment of Traders update highlights future positions and changes made by hedge funds and other speculators across commodities and forex during the week to Tuesday, September 20, a week leading up to the FOMC meeting, Bank of Japan intervention, a Sterling crisis and the dollar surging to levels not seen in decades. Ahead of these events speculators chose to cut their dollar long by one-third, increasing their gold short to a four year high while adding exposure in grains and crude oil Saxo Bank publishes weekly Commitment of Traders reports (COT) covering leveraged fund positions in commodities, bonds and stock index futures. For IMM currency futures and the VIX, we use the broader measure called non-commercial. Link to latest report This summary highlights futures positions and changes made by hedge funds across commodities and forex during the week to Tuesday, September 20. A week that saw financial market adjust positions ahead of the FOMC meeting on September 21. In anticipation of another 75 basis point rate hike, the market sold stocks, bonds and commodities while the dollar was bought. As it turned out, the FOMC was the starting shot to a very volatile end of week that saw heightened recession worries, Bank of Japan intervention to support the yen for the first time in 24 years, and an unfolding crisis in the UK sending the Sterling towards an all-time low.   Commodities The Bloomberg Commodity Index dropped 2.3% during the week to last Tuesday with losses seen across most sectors, the exception being grains and livestock. Selling was particularly felt across the energy sector and in precious metals. Money managers responded to these heightened growth and strong dollar concerns by cutting length in energy and softs while adding to already short positions in precious metals. The only sector continuing to see demand were grains where the speculators have now been net buyers in all but one of the last eight reporting weeks. Energy Money managers raised their combined crude oil net long to a seven-week high despite the recessionary clouds growing ever darker and the dollar continued to strengthen. During the reporting week when oil dropped around 3% the total net long in WTI and Brent was raised by 13.5k contracts to 355k lots. The ICE gas long meanwhile slumped by 30% to a 22-month low while in New York the ULSD (diesel) length was cut by 17% to 15.7k contracts. Despite falling by around 7% only small changes were seen in natural gas. Metals Gold selling accelerated last week with the net short jumping by 225% to 33k contracts to near a four-year low. This the culmination of six consecutive weeks of selling driven by a stronger dollar and rising Treasury yields as well a firm belief the FOMC will successfully manage to bring inflation under control next year. Silver saw no major net change with reductions in both long and short positions offsetting each other. The copper net short was unchanged at 4k contacts, the weakest belief in lower prices since June while platinum’s 3.5% rally supported an 82% reduction in the net short to just 2k contracts, again weakest short bet since June. Agriculture The grains sector saw continued demand with speculators having been net buyers in all but one of the past eight weeks. The increase last week was led by a 16% increase in the soymeal long to 102k contracts, a seasonal high while corn buying extended to an eight week. The wheat market which found support from renewed threats to the Ukraine grain corridor saw net buying of both Chicago and Kansas wheat. Overall however the net exposure remains close to zero with a 16k contracts CBT net short partly offsetting a 19k contracts long in KCB wheat. Renewed selling of sugar cut the net long by 72% to 8.6k contracts, the cocoa net short extended to a fresh 3-1/2 year high while long liquidation continued in both coffee and cotton.   Forex Ahead of the post-FOMC dollar surge to a fresh multi-year high against several major currencies, and the first intervention from the Bank of Japan to support the yen in 24 years, speculators had reduced bullish dollar bets by 35% to $13.9 billion, a six month low. The bulk of the change was driven by the biggest amount of short covering in the euro since March 2020, a change that flipped the position back to a long of 33k lots or €4.2 billion equivalent, up from a €6 billion short three weeks ago.The net short in sterling was reduced by 13k lots to 55k lots just days before tumbling to a 37-year low following the announcement of a historic debt financed tax cuts. The yen meanwhile saw no major changes ahead of Thursday’s USDJPY surge and subsequent    What is the Commitments of Traders report? The COT reports are issued by the U.S. Commodity Futures Trading Commission (CFTC) and the ICE Exchange Europe for Brent crude oil and gas oil. They are released every Friday after the U.S. close with data from the week ending the previous Tuesday. They break down the open interest in futures markets into different groups of users depending on the asset class. Commodities: Producer/Merchant/Processor/User, Swap dealers, Managed Money and otherFinancials: Dealer/Intermediary; Asset Manager/Institutional; Leveraged Funds and otherForex: A broad breakdown between commercial and non-commercial (speculators) The reasons why we focus primarily on the behavior of the highlighted groups are: They are likely to have tight stops and no underlying exposure that is being hedged This makes them most reactive to changes in fundamental or technical price developments It provides views about major trends but also helps to decipher when a reversal is looming   Source: https://www.home.saxo/content/articles/commodities/cot-specs-sold-dollar-and-gold-ahead-of-fomc-26092022
Disappointing German March macro data increase risk of technical recession

Germany's Business climate worsens further

Alex Kuptsikevich Alex Kuptsikevich 26.09.2022 16:21
Business sentiment in Germany continued its substantial deterioration in September. The Ifo says the business climate index fell from 88.6 to 84.3 this month. The index has only been lower for two months in its history - in April and May 2020. The actual figures were weaker than expected, at 86.9 and marked a deterioration in the current assessment and economic expectations. As usual, forward-looking markets pay more attention to the development of the expectations component, which recorded its second-lowest fall in history in September from 80.5 to 75.2. However, optimists may note that the current conditions did not deteriorate too sharply. The Index of Current Conditions in September fell from 97.5 to 94.5 against a historical average since 2005 of 96.7. From the latter, it can be concluded that the brunt of the crisis in Germany is still only in the "heads" of the businessmen but could quickly become a self-fulfilling prophecy if expectations do not turn sharply upwards in the coming months.
UK Monetary Policy Outlook: A September Hike Likely, but November Uncertain

Intervention In The Yen (JPY) Still Remains A Far Cry| The Pound (GBP) Is The Weakest Against The Dollar (USD)

InstaForex Analysis InstaForex Analysis 27.09.2022 11:04
Summary:  Havoc has spread to the markets, not just with the Fed staying the hawkish course, but with the collapse in confidence in the UK economy after a fiscal policy and lack of monetary policy response adding into the mix with a massive bond selloff. Meanwhile, the surge in the US dollar continued taking its toll on several currencies, and the effect of Japan’s intervention from last week has also faded. Earnings pressure may be the next shoe to drop, and recession concerns also still need to be priced in more broadly. Fed’s high-for-longer message is now being taken seriously The September FOMC meeting was not precisely a pivot point for the Fed, but more so for the markets which finally understood the Fed’s message on inflation. The dot plot, particularly, conveyed two key messages as listed below. Even though the accuracy of the dot plot remains in doubt, given a very weak correlation with what actually transpired previously, it is a great signalling tool to understand the intentions of the FOMC members. Terminal rate is seen at ~4.6%, which was above what Fed funds futures were pricing in before the meeting. Even slower growth and higher unemployment levels, as conveyed by the Fed’s projections, would not deter the central bank from hiking rates There was some pushback on premature easing, with the dot plot showing a 4.5-5.0% rate even at the end of December 2023. Alongside that commitment to tighten, the Fed is now at the full pace of its quantitative tightening program, which is sucking liquidity out of financial markets at a rapid pace. The aim is to shrink the Fed’s balance sheet by $95bn a month — double the August pace. While quantitative tightening strongly influences liquidity conditions and asset markets, it is less useful in directly impacting inflation. While systemic risks from QT may remain contained, it ramps up the rise in Treasury yields as the Fed’s balance sheet shrinks and the amount of Treasuries in private hands increases. Trussonomics pushing UK to an emerging market status Sterling has fallen close to 10% on a trade-weighted basis in a little under two months, and has surpassed the Japanese yen to be the weakest against the US dollar year-to-date. An immediate response from the Bank of England may have saved some face, but remember that last week’s BOE decision was a pretty split vote as well with two members voting for 75bps rate hike and one calling for a smaller 25bps rate hike as well. So, it remains hard to expect a prudent policy response from the BOE, and a parity for GBPUSD in that case may not prove to be the floor. UK’s net forex reserves of $100bn are also enough to only cover two months of imports, or roughly equal to 3% of GDP as compared to Japan’s 20% and Switzerland’s 115%. But it’s not just about the sterling crisis in the UK, but more generally a crisis of confidence. Not to forget, inflation forecasts for end of the year are already at 10%+ levels and the market is now pricing in over 200bps of rate hikes by the end of the year, with two meetings left. The central bank will need to deliver this massive tightening simply to keep the sterling where it currently is and that won’t reverse the impact of the government’s decisions on UK markets. The scale and speed of the hikes could also do significant damage to the economy. The iShares MSCI United Kingdom ETF (EWU:arcx) traded lower by another 1.8% on Monday and is now down 7.3% over the last one week. Bank of Japan’s patience will keep getting tested We wrote earlier about what will need to change to call it a top in the US dollar, and nothing seems to be in order yet except some of the non-US officials starting to get concerned about currency weakness. Still, the intervention from Bank of Japan didn’t have long lasting effects on USDJPY, even as it helped to strengthen the yen against some of the other currencies such as the EUR, GBP or AUD. It may have also helped to stop some speculative shorts. But a coordinated intervention in the yen still remains a far cry, with the weakness in the Japanese yen being BoJ's own-doing due to the yield curve control policy. Japanese government bonds will likely continue to test the patience of Bank of Japan with its yield curve control policy. Downside for Japanese government bonds (JGB1c1) will potentially spike exponentially if the BOJ pivots at some point. Earnings pressure may be next While the Q2 earnings season proved to be more resilient than expectations, intensifying inflation concerns have turned corporates more cautious on the outlook and less optimistic for the near-term earnings performances. We have seen some downward revision of EPS estimates for the third quarter in July and August, and we still cannot rule out further grim outlook and margin pressures. Estimates for S&P 500 earnings in 2022 stood at $226.15 per share as of August 31, according to FactSet. This is down 1.5% from the $229.60 per share estimate as of June 30. For 2023, analysts now expect EPS of $243.68, down 2.8% from the June estimate of $250.61. So far, companies dealt with rising inflation by passing on increased costs to consumers, given the pandemic-era fiscal support measures underpinned strength in the consumer side. These increased pass-through was also visible in higher CPI prints. But with the economic outlook getting duller by the day, there is bound to be some pushback from the consumers and that will likely show up in the earnings report card. From a sectoral perspective, tech stocks will likely be battered as tight corporate budgets weigh and the US 10-year yields are in close sights of 4%. Semiconductors, a barometer of global economic health, could also face further pressure. Meanwhile, the oil and gas sector was the saviour of the Q2 earnings season, but would also likely see some pressure in Q3, unless the outlook starts to look slightly more upbeat with improving capex plans. Dollar pivot is the next key catalyst to watch The majority of the market downfall we have seen so far has come from a rapid shift in cost of capital and correcting peak valuation. The next leg, as discussed above could be the earnings recession. Still, economic recession risks remain and history suggests that the market lows do not come until after the recession begins (see chart below). Still, with the US 10-year yields approaching 4% - which maybe a likely ceiling – the focus turns to a reversal in the US dollar as the next pivot, not the Fed. Testing those key levels could mean a short-term bounce in equities which may be favourable for building new short positions as the trend still remains down. Alternatively, for investors, it would rather be optimal to look for signs of selling exhaustion to accumulate long positions, such as VIX above 40. Historically, a decline in stocks of the order of 20% makes it buying stocks after they have been down 20% from record highs has been a good risk/reward proposition for longer-term investors.     Source: https://www.home.saxo/content/articles/macro/macro-insights-approaching-a-breaking-point-but-not-without-more-pain-first-27092022
Eurozone: On Thursday, September 29th, Germany Releases Its Inflation Print And It's Quite Important To Keep An Eye On It

Eurozone: On Thursday, September 29th, Germany Releases Its Inflation Print And It's Quite Important To Keep An Eye On It

Jing Ren Jing Ren 27.09.2022 13:09
The ECB has only two more meetings for the rest of the year. Which means that the space to get inflation under control by the end of December is getting tight. The common bank is behind other major central banks in raising policy, which has kept the shared currency relatively weak. Therefore, there is a lot of expectation on what will happen with inflation. Though, it should be noted that the next ECB meeting isn't until late October, meaning that there is still another round of CPI data coming out before they meet. So, that is likely to have a much bigger impact on what the bank actually decides to do. On the other hand, the series of CPI figures expected later in the week are expected to shape interest rate expectations. And that, in the end, is the main driver of the currency. Restoring credibility A series of ECB officials have come out to talk in a way that suggests potentially stronger action. Rumors of a 75bps hike in October are starting to grow. This is because of the going theory among central bankers that inflation is shaped by the "credibility" of the central bank. That is, it's how confident the market is that it will raise rates as needed to get inflation down. Both Nagel and de Cos made comments to that effect yesterday. But they need to be contextualized within the ECB's Chief Economist Lane's views expressed also yesterday. That is, expecting a significant decrease in inflation through the course of next year. In other words, the ECB might be coalescing around the idea of a sharp rate hiking through the next couple of months to force CPI figures to turn around. It's out of their hands The thing is, while the ECB did expand the monetary base by around 10% during the pandemic, a larger chunk of the inflationary effects come from external factors. Higher energy costs, and increased cost of imported goods from China due to lockdowns, are the two main ones. That isn't something monetary policy can fix. On the other hand, China is seen relaxing some of the covid restrictions, and energy prices have been falling (although over fears of a pending global recession). That could contribute to lower inflation next year regardless of what the ECB does. So, it might come down to a matter of whether the ECB thinks it can control prices. What to look out for On Thursday, Germany reports Inflation figures, which are expected to set the tone for the rest of the shared economy. German September monthly inflation is expected to accelerate to 1.1% from 0.3% prior. That would contribute to annual inflation jumping to 9.5% compared to 7.9% prior. Then on Friday we get EuroZone headline inflation rate expected to move up to 9.6% from 9.1% in August. Of course what the ECB pays the most attention to is the core rate, which is also expected to accelerate, though not as sharply. Core September inflation is forecast at 4.7% compared to 4.3% prior.
Italian headline inflation decelerates in January, courtesy of energy

Italy: Could GDP (Gross Domestic Product) In Q4 Decline?

ING Economics ING Economics 28.09.2022 22:26
There has been a marked deterioration in confidence across most sectors of the Italian economy. In our view, a GDP contraction might just be avoided in the third quarter, but it is almost inevitable in the fourth  September confidence data points to a broad-based deterioration in the Italian economic picture Consumers are getting gloomy again Data from Italy's National Institute of Statistics (ISTAT) shows that in September, consumer confidence fell back to July’s level, which was the lowest level since May 2020 during the peak of the pandemic. Consumers are increasingly concerned about economic developments and expect a deterioration in household economic conditions. Combined with growing concerns about future unemployment, this translates into a reduced willingness to purchase durable goods. Further fall in manufacturing confidence Confidence in the manufacturing sector fell for the third consecutive month, recording the lowest level since February 2021, driven by weakening demand for consumer and intermediate goods, where orders fell for the third month in a row. The fall was much more contained in the investment goods sector, possibly reflecting the ongoing support of the European Recovery Fund. Production expectations fell markedly across the board, pointing to a further deterioration in industry’s supply-side push over the fourth quarter of 2022. Construction was the only sector to post a monthly gain, partially recouping August’s lost ground. The impact of generous tax incentives on building construction is clearly still at play, and firms’ rising employment expectations seem to reflect confidence that favourable conditions will remain in place. Services no longer a safe haven, as the re-opening effect fades away Today’s release seems to mark a break in developments in the service sector. After stabilising over the summer, confidence in the service sector fell abruptly in September, reaching the lowest level since February 2022. This involved all subsectors, suggesting that the re-opening effect, helped by revamped tourism flows, is fading away. This seems to be confirmed by the decline in retailer confidence. Read next: Tim Moe (Goldman Sachs) Comments On USD And Turbulent Times For Markets In General, Ole Hansen (Saxo)Talks Nord Stream | FXMAG.COM A GDP contraction in the fourth quarter looks inevitable All in all, September's confidence data points to a broad-based deterioration in the Italian economic picture. The jury is still out about whether the third quarter of this year will mark the start of a recession: we still believe that, notwithstanding a very likely manufacturing drag, services and construction might have managed to generate a minor GDP expansion. However, the combined effect of budget-constrained consumption and softer industrial production will make a GDP contraction in the fourth quarter almost unavoidable, marking the start of a technical recession. The new Italian government is set for a tricky start: in a no-growth environment, it will immediately have to craft a budget in which electoral promises will have to come to terms with evaporating fiscal space. Read this article on THINK TagsItaly GDP Italy Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Spain: Price Pressures Higher Up The Production Chain Are Starting To Ease

Macroeconomics: Eurozone - September Spanish Inflation Print May Catch You By Surprise!

ING Economics ING Economics 29.09.2022 12:29
Spanish inflation fell in September to 9% from 10.5% in August, marking the second consecutive month of decline. These figures fuel hopes that the peak in inflation is now behind us While inflation in Spain is falling, it will nevertheless remain high until the end of the year Spanish inflation falls for the second consecutive month Spanish inflation fell to 9.0% in September from 10.5% a month earlier. This is now the second month in a row in which inflation has fallen. Core inflation, excluding more volatile energy and food prices, also fell slightly to 6.2% from 6.4% last month. The decline in headline inflation is mainly due to base effects that are starting to kick in. We are now comparing energy prices to a period when energy prices started to rise in 2021. Increasing base effects will further weaken year-on-year comparisons. Encouragingly, core inflation has also cooled slightly, suggesting that the strength of second-round effects is waning, mitigating the risks of entering a wage-price spiral. In the coming months, the cooling demand will ease inflationary pressures as it will become more difficult for companies to pass on new price increases to the end customer. Nevertheless, inflation will remain high until the end of the year. For the whole of 2022, we forecast inflation to come out around 9%. In 2023, inflation will gradually start to come down, reaching 4.5%. From 1 October, the Spanish government will reduce VAT on gas from 21% to 5% to soften the inflation shock. However, this will have only a marginal effect on the CPI. According to our calculations, the VAT cut on gas will reduce inflation by only 0.1 percentage point in October. Despite cooling off, ECB will continue its policy of interest rate hikes Despite the cooling trend, inflation remains historically high across the eurozone. Therefore, the current high inflation figures are unlikely to prompt the ECB to ease its monetary tightening policy. Judging from ECB officials' latest speeches, their first priority is to reduce inflation as soon as possible, rather than looking at inflation expectations or medium-term inflation. A 9% inflation rate is still well above the ECB's 2% target. Even with an upcoming recession, we think it likely that the ECB will opt for another 75 basis point rate hike in November as well. Read this article on THINK TagsSpain Inflation Eurozone ECB Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Euro to US dollar - Ichimoku cloud analysis - 21/11/22

Macroeconomics: Eurozone Economic Sentiment Went Down! Let's Check How Much

ING Economics ING Economics 29.09.2022 14:26
The drop from 97.3 to 93.7 in the eurozone economic sentiment indicator indicates a likely contraction in the economy in the third quarter. Selling price expectations have been on the rise again, increasing the risk of a longer period of stagflation in the eurozone economy Selling price expectations are increasing again as businesses face higher energy costs Is Recession Already Here, In The Eurozone? The eurozone economy is slowing rapidly as high prices reduce business activity and dampen consumer demand. We expect that a recession could, therefore, have already started. For industry, production expectations dropped sharply in September. Backlogs of work have fallen as new incoming orders disappointed in recent months and in some industries production is reduced as high energy costs impact the profitability of production. With energy costs still at unsustainably high levels for some industrial sectors, this is adding to the bleaker outlook for industrial production. For the services sector, confidence fell even more as the post-pandemic catch-up demand is fading and the purchasing power squeeze is starting to bite. The services indicator dropped from 8.1 to 4.9 as businesses indicate that demand has recently weakened and they are becoming gloomier about demand in the months ahead. Read next: Tim Moe (Goldman Sachs) Comments On USD And Turbulent Times For Markets In General, Ole Hansen (Saxo)Talks Nord Stream | FXMAG.COM  Despite the clear slowing of the economy, selling price expectations are increasing again as businesses face higher energy costs again due to the spike in prices in August. This is particularly worrisome as it could prolong a period of stagflation in the eurozone economy. For the ECB, the path is already quite clear: the central bank is set to hike in the coming meetings regardless of a slowing economy. The increase in selling price expectations will only strengthen that view for the October meeting. Read this article on THINK
"A notable risk facing credit markets next year is the potential for the European Central Bank (ECB) to reduce the size of its balance sheet via the tapering of the asset purchase programme"

Eurozone: German Inflation Shocks! What Could It Mean For The Euro And European Central Bank?

ING Economics ING Economics 29.09.2022 15:00
German inflation reached another peak in September, providing more ammunition for the ECB to hike by 75bp at the October meeting The inflation peak in Germany could be around 13%   German inflation just reached unprecedented double-digit levels coming in at 10.0% year-on-year in September, from 7.9% YoY in August. The HICP measure increased to 10.9% YoY, from 8.8% YoY in August and 8.5% in July. The fact that monthly inflation (1.9% month-on-month) is far above the historical average for September also illustrates that inflation is running red hot in Germany. Inflation will continue to increase We knew that the September numbers would be the first inflation reading without the dampening effect of the government’s energy relief package over the summer months. The end of the so-called €9 ticket for public transportation and the end of a gasoline rebate alone would have pushed up inflation. But inflationary pressure is all over the economy. Looking ahead, the only way for German inflation is up. With high wholesale gas prices now reaching people’s homes and pockets as well as more inflationary pressure in the industrial pipeline – with producer price inflation at 45% YoY – inflation will test even higher levels. It will take until next Spring before headline inflation could start to move down as negative base effects kick in. Based on today's numbers, peak inflation could come in at around 13%. ECB to hike by 75bp in October and more to come For the ECB, today’s German inflation data will add to the long list of arguments in favour of a 75bp rate hike at the October meeting. Since the late summer and probably marked by Isabel Schnabel’s Jackson Hole speech, the ECB’s reaction function has clearly changed. Following in the Fed’s footsteps, the ECB has increasingly focused on actual inflation and to a lesser extent on inflation expectations. It is hard to see how the ECB cannot move again by 75bp with headline inflation still on the rise. In this context, the discussion on whether or not the ECB can actually bring down headline inflation is no longer relevant for the central bank. Even if the unfolding recession is not enough to slow down the ECB’s process of rate normalisation. It clearly is an experiment with a risk of becoming a policy mistake, but for the time being the ECB looks fully determined to continue on the path of aggressive rate hikes. The first real test of how sustainable the consensus within the ECB is will only come at the December meeting. Then, a new round of staff projections is likely to show further downward revisions to growth and could show 2025 inflation at 2%, tempting some of the newly self-declared tough inflation fighters to blink. Unless we see more central banks performing a major U-turn as the Bank of England had to do this week, we expect the ECB to hike rates by some 150bp until early 2023 and the risk is currently rather tilted to more rather than fewer rate hikes. Still, it is not the ECB that can provide short-term relief against inflation, but governments. However, the idea that governments can completely offset all inflationary pressures should also be discarded after this week's developments in the UK. Read this article on THINK TagsInflation Germany Eurozone ECB Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
The ECB President Christine Lagarde's Speech Could Bring Back Risk Appetite

Forex: Euro To US Dollar (EUR/USD) - Let's Have A Technical Look - 29/09/22

InstaForex Analysis InstaForex Analysis 29.09.2022 16:02
  Euro To US Dollar - Technical outlook: EURUSD rose through the 0.9750 highs during the New York session on Wednesday after testing the levels close to the 0.9535 lows earlier. The daily chart has confirmed a Morning Star bullish reversal pattern, which could push prices through 1.0200 at least. The potential remains for a push towards 1.0600 which is the Fibonacci 0.382 of the earlier bearish drop between 1.2350 and 0.9535. EURUSD has hit major Fibonacci support close to the 0.9550-0.9600 area as projected on the daily chart here. A significant target has been met just above the 0.9500 handle and the price could also produce a sharp bullish reversal. The bulls are now looking poised to hold prices above the 0.9535 mark and push through the 1.0200 initial resistance at least. Read next: Tim Moe (Goldman Sachs) Comments On USD And Turbulent Times For Markets In General, Ole Hansen (Saxo)Talks Nord Stream | FXMAG.COM EURUSD has interim support just above 0.9500 while resistance is seen at 1.0200, followed by 1.0365. Looking at the daily chart, a break above 1.0200 would signify that the bulls are under control and are looking to push through 1.0600. Only a consistent break below 0.9535 from here will bring back bears into the picture. Trading idea: Potential rally towards 1.0200 and up to 1.0600 against 0.9500 Good luck! Relevance up to 13:00 UTC+2 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/294851
Energy and Metals Decline, Wheat Rallies Amid Disappointing Chinese Growth

The Euro Will Strengthen, But Questions Remain About What To Do Next

InstaForex Analysis InstaForex Analysis 30.09.2022 09:00
The euro has strengthened its position against the dollar and continues to grow amid repeated statements by European politicians this week that the European Central Bank should raise interest rates by another 75 basis points at the next meeting, which is scheduled for October this year. Data on inflation in the eurozone will be released today, which will surely confirm the correct attitude of European politicians to the current situation, it was just necessary to act a little earlier – the Federal Reserve went too far, which led to such a gap in interest rates and a strong weakening of the euro against the US dollar. In his recent speech, member of the Board of Governors Martins Kazaks stated: "In the current situation, we can still do much more. The next step still needs to be quite large, because we are far from the rates corresponding to 2% inflation. I would support a 75 basis point increase — let's take a bigger step and raise rates." European Central Bank and rate The Latvian official said that this does not mean that 75 basis points are now the "golden mean", and that, probably, as soon as rates will be more in line with the inflation target, future steps need to be done more carefully. His calls for decisive action are supported by other officials from the Baltic region. European Central Bank President Christine Lagarde and other officials from the board of governors told us about something similar this week. The surge in prices caused by Russia's military special operation in Ukraine and the resulting energy crisis prompted ECB officials to start raising rates for the first time in more than a decade — this month rates were raised immediately by a historic three-quarters of a point. Now they are weighing how to proceed, as the price increase is accompanied by ever-increasing forecasts of a recession. Lagarde told European Union lawmakers this week that officials will start considering cutting trillions of euros worth of bonds it accumulated during recent crises only after rates reach that point. Traders estimate the probability of another 75 basis point move next month at 40%. An increase in this amount will double the deposit rate to 1.5% — the highest level since 2009. The opinion of a Latvian politician As for Kazaks' speech, in his opinion, the cost of borrowing will reach a "neutral" level, which does not stimulate or limit the economy by the end of the year. "Of course, we should discuss all the tools so that when it is necessary to make a tough decision, we are ready," Kazaks said. "The ECB should delay its balance sheet reduction program, or quantitative tightening, until next year." According to the Latvian politician, this will prevent the European crisis from flowing into recession. Given that the main source of inflation is the crisis in the energy market, which is of a geopolitical and structural nature, an extremely rapid tightening of monetary policy will simply push the economy into recession. The Technical Outlook  As for the technical picture of EURUSD, the bulls have regained their advantage and the market under their control, which they lost at the beginning of the week, and are now aiming to break through the nearest resistance of 0.9840. It is necessary to do this if they expect the upward correction to continue at the end of this month. A breakdown of 0.9840 will take the trading instrument even higher to the area of 0.9890 and 0.9950. But despite the good upward prospects, protecting the nearest support of 0.9780 is still an important task for the bulls. Its breakthrough will push the euro to a low of 0.9730, but there will be nothing critical in this situation either, since there is the lower boundary of the new ascending channel. Only after missing 0.9730 will it be possible to start getting nervous, as the pair will easily fall into the area of 0.9680 and 0.9640. The Pound (GBP) The pound continues to win back positions one by one thanks to the support of the Bank of England. Now bulls are focused on the 1.1200 resistance, the breakthrough of which will open up prospects for further recovery in the area of 1.1260 and 1.1320. It will be possible to talk about the return of pressure on the trading instrument only after the bears take control of 1.1070, but this will not cause serious damage to the bull market observed since the middle of the week. Only a breakthrough of 1.1070 will push GBPUSD back to 1.1010 and 1.0950.   Relevance up to 08:00 UTC+2 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/323100
Monitoring Hungary: Glimmering light at the end of the tunnel

The Euro To Hungarian Forint (EUR/HUF) Will Be Exposed To An Increase

TeleTrade Comments TeleTrade Comments 03.10.2022 11:40
Forint’s carry appeal has become hard to ignore. Analysts at Credit Suisse now target 395 in EUR/HUF over the medium-term. EUR/HUF still exposed to the upside in the short-term “We turned medium-term bullish on the forint in the middle of September on the back of sizeable carry and cheap valuations by historical REER standards. We also see scope for Hungary to unlock the EU funds from the 2021-2027 budget (which are currently frozen) later in Q4.”   “We set an end-quarter target of 395 for EUR/HUF. But in the short-run, the risk that Hungary will see a cut to its EU funds allocation as well as a possible escalation in the Russia/Ukraine conflict, will keep implied volatility abnormally high and EUR/HUF exposed to the upside.”
The EUR/JPY Pair Is Expected To Start A New Zig-Zag Correction

The Continuation Of The Rebound Of USD/JPY Remains On The Right Track

TeleTrade Comments TeleTrade Comments 03.10.2022 13:37
EUR/JPY adds to the recent rebound and surpasses 142.00. Further upside could see the 144.00 region revisited. EUR/JPY maintains the bullish bias and reclaims the area beyond the 142.00 barrier at the beginning of the week. The continuation of the rebound from last week’s lows remains well in place for the time being. That said, the cross could therefore extend the bullish attempt to the weekly top at 144.04 (September 20), which is deemed as the last defense for a move to the 2022 peak at 145.63 (September 12). In the meantime, while above the key 200-day SMA at 135.90, the constructive outlook for the cross should remain unchanged. EUR/JPY daily chart  
The EUR/JPY Pair Is Expected To Start A New Zig-Zag Correction

EUR/JPY Pair: The Continuation Of The Rebound From Last Week’s Lows Remains Well

TeleTrade Comments TeleTrade Comments 04.10.2022 13:36
EUR/JPY extends the sharp bounce beyond the 143.00 mark. The breakout of 144.04 should open the door to the YTD high. EUR/JPY remains well bid and trades in multi-session peaks above the 143.00 yardstick on Tuesday. The continuation of the rebound from last week’s lows remains well in place for the time being. That said, if the cross breaks above the weekly top at 144.04 (September 20), it could then challenge the 2022 peak at 145.63 (September 12). In the meantime, while above the key 200-day SMA at 135.97, the constructive outlook for the cross should remain unchanged. EUR/JPY daily chart  
Eurozone: Spanish Gross Domestic Product jumped much less than in August

Eurozone: Spain - International Tourism Before The Pandamic Vs Now | Spanish GDP Expectations

ING Economics ING Economics 05.10.2022 12:04
The recovery in Spanish tourism seems to be slowing down. While the number of international visitors in July was still at 92% of its pre-pandemic levels, this dropped to 87% in August Tourists in Benidorm, Spain International tourism at 87% of pre-pandemic levels in August The gloomy economic outlook and the uncertain geopolitical situation now seem to be slowing down the recovery of the Spanish tourism sector. In August, Spain welcomed 8.8 million international tourists, equivalent to 87% of its pre-pandemic level. In July, 9.1 million international tourists visited Spain, which then corresponded to 92% of its pre-pandemic level. Also, total expenditures by international tourists, corrected for inflation, dropped to 85% of pre-pandemic levels in August, from 88% in July. These figures show that it will probably take another year for international tourism to return to pre-pandemic levels. The slowdown in domestic tourism was even greater than that of foreign tourism. The number of hotel stays booked by residents fell to 101% of pre-pandemic levels in August, from 107% in July. International tourists entering Spain, in % of pre-Covid levels Tourism will still support economic activity in 3Q but outlook is weaker As tourism is an important economic sector in Spain, contributing 14% to total GDP in 2019, according to the World Travel and Tourism Council, a sustained recovery is an important factor for economic growth. The tourism sector has held up much better than the rest of the economy so far. Although the recovery appears to be slowing, tourism will still continue to support Spanish economic activity in the third quarter of 2022. However, the new figures also show that the contribution of tourism to Spain's economic growth is likely to fall in the coming months as the eurozone heads towards recession. In the second quarter, Spain's economy still grew by 1.5% on a quarterly basis, thanks to strong growth in domestic demand and the revival of tourism. However, the third quarter looks set to be weaker than the second. The latest manufacturing PMI released last Friday showed that factory activity contracted in September due to high inflation and a falling number of new orders. The PMI index fell to 49.0 last month from 49.9 in August, staying below the 50.0 mark that separates growth from contraction. Also, consumer confidence fell again in September which does not bode well for consumption in the third quarter. For the third quarter, we expect a slowdown in the economy followed by a slight contraction in the fourth quarter. Year-on-year growth would then reach 4.3% over the full year. For 2023, we expect growth between 0 and 1% as the energy crisis will continue to weigh on the outlook. Read this article on THINK TagsTourism Spain GDP Eurozone Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
France escapes recession, for now

Eurozone: France - Oh My! Check Out August Print Of French Industrial Production!

ING Economics ING Economics 05.10.2022 14:19
Industrial production rebounded more than expected in August, by 2.4% over the month, thanks to the easing of supply constraints. As a result, economic activity could narrowly avoid a contraction in the third quarter, but a recession remains more than likely for this winter A broad rebound After falling by 1.6% over a month in July, French industrial production rebounded in August, increasing by 2.4% over the month. Over a year, the increase was 0.4%. Manufacturing output rose by 2.7% (after -1.6% in July). All branches of industry saw their production increase over the month, except for construction. The rebound was particularly dynamic in automotive production, which increased by 15.6% over the month, thanks to the easing of supply constraints. The August rebound allows industrial production to erase the losses accumulated during 2022 and return to its pre-war level. Nevertheless, output remains 3.5% below its pre-pandemic level. August's strong performance gives hope that industrial production will make a positive contribution to economic growth in the third quarter, which could narrowly avoid a contraction in activity. Headwinds are too strong for the rebound to last Nevertheless, looking ahead, it is to be feared that the effect of reduced supply constraints will not be sufficient to allow the French industry to continue to rebound. In fact, further contractions in industrial activity can be expected. Indeed, the sharp decline in global growth, the contraction in order books since February, the high level of finished goods inventories, high uncertainty, high energy and raw material prices and potential disruptions in energy supply clearly point to a deterioration in the outlook for the French industrial sector in the coming months. The business climate indicator for the sector fell further in September. Since the beginning of the year, it has lost more than 10 points, falling back to the level of spring 2021, thus erasing all its post-lockdowns gains. Moreover, the outlook is not much better in the services sector, which is weighed down by worsening purchasing power, declining consumer confidence and the fading positive effects of the post-pandemic reopening. There is therefore little doubt that France, like its European neighbours, is heading straight for recession. Given the developments of the last few weeks, it is to be feared that French GDP growth will move into negative territory in the fourth quarter, after a probable stagnation in the third quarter. The recession is likely to last throughout the winter, and the prospects for a rebound in the spring of 2023 are fading by the day. We therefore expect growth of 2.4% for the whole of 2022 and -0.4% for the whole of 2023. Read this article on THINK  
The Outlook Of EUR/USD Pair For Long And Short Position

Today ECB Meeting Minutes Are Released. UK: Jonathan Haskel (Bank Of England) Speaks

ING Economics ING Economics 06.10.2022 12:13
Central banks are still far from bailing markets out. There is no evidence that financial stability concerns are distracting them from their inflation fight. Their inflexibility is why we see more upside for rates and spreads Risks remain to the upside for rates BoE and ECB let markets fly on their own If financial stability no doubt registers on central banks’ consciousness, it is doubtful that they see policy implications. The Bank of England (BoE) balking at buying long-end gilts for the second day in a row clearly confirmed that it sees its operation as a temporary backstop, and not something that should dilute its monetary policy stance. Along the same lines, the European Central Bank’s (ECB) reluctance to support peripheral bond markets in August and September 2022 by using PEPP reinvestment flexibility sends a similar message. In the BoE’s case, the gilt long-end received the message loud and clear. 10s30s is racing back towards the levels prevailing before the mini budget and subsequent BoE intervention. If the shape of the curve is the best sign that markets are pricing out BoE intervention, it is the speed of the sell-off that should keep investors up at night. 30Y yields are up almost 40bp this week. Let us hope that pension funds and other structural swap receivers managed to reduce their exposure, or found funding sources for inevitable collateral calls. Markets are forward-looking, and there are no ECB purchases for them to look forward to The glass half full take on European Central Bank (ECB) intervention, or lack thereof, is that spreads remained contained without its help. This is particularly notable in a context of rising core rates and rates volatility. The problem with this take is that markets are forward-looking, and that there are no ECB purchases for them to look forward to. It seems, the bar for purchases is higher than previously thought and could get even higher as hawks seem intent on pushing discussions on quantitative tightening (QT). Read next: RBNZ “Hawkish” Move Offers NZD Support, Australian Retail Sales Rose 0.6% During August| FXMAG.COM Gilt 10s30s is steepening back to its pre-BoE intervention level Source: Refinitiv, ING Central banks can't afford to be complacent on financial stability A look at wider market stress indicators in rates and credit yields a similar conclusion. For the most part, peripheral and core rates are already at crisis levels, but not yet at a breaking point. This is hardly encouraging. A bright spot so far has been short-term funding and money markets but, each time, it is clear that the ECB’s heavy hand is responsible. This is all well and good but the expiration of TLTRO loans, tiering, and the looming QT discussion means markets cannot count on ECB support going forward. Expect to see new highs in yields and spreads as a result of central bank intransigence We think it would be wrong to take comfort in still (barely) functioning markets and that central banks should pay greater attention to financial stability. Balance sheet reduction programmes are adding to financial instability and could ultimately make their fight against inflation harder, not easier, if they are forced to choose between rescuing financial institutions and cooling the economy. Despite the BoE’s intervention last week, we keep a cautious outlook on bond markets. We expect to see new highs in yields and spreads as a result of central bank intransigence. The ECB barely intervened to support spreads in August/September 2022 Source: ECB, ING Today's events and market view European data releases today comprise German and UK construction PMIs and eurozone retail sales, but the minutes of September ECB meeting are likely to steal the limelight. We’re unlikely to get much discussion on QT but we might see some on reserve tiering. Even if this isn’t the case, it is possible that officials discuss in the press the content of yesterday’s ‘non-policy’ meeting discussions on either topics. In the minutes proper, the extent of the ECB’s inflation worries and reasons for a change in reaction function should be the main focus. Jonathan Haskel, of the BoE, is on today’s list of speakers. Bond markets have to absorb supply from Spain (7Y/8Y/10Y/30Y) and France (10Y/30Y/44Y). Today’s US job data menu includes jobless claims and Challenger Job Cuts but this will merely be an appetiser to tomorrow’s employment report. Charles Evans, Lisa Cook, Neel Kashkari, Christopher Waller, and Loretta Mester are all lined up to give their spin on the latest economic, and perhaps financial, developments. Read this article on THINK TagsRates Daily Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
The delayed release of Germany's inflation data should confirm the slowdown seen across the rest of the continent amidst falling energy prices due to a relatively mild winter

Eurozone: German Exports Went Up, But The Trade Surplus...

ING Economics ING Economics 06.10.2022 12:30
German exports rebounded somewhat in August but high energy prices continue to shrink what was, until recently, still a notoriously high trade surplus Source: Shutterstock   German exports (seasonally and calendar-adjusted) rebounded in August, increasing by 1.6% month-on-month. On the year, exports were up by more than 18%. Imports also decreased, by 3.4% month-on-month, further lowering the trade surplus to €1.4bn. The war in Ukraine has succeeded in delivering what nothing else had managed before: letting the notorious German trade surplus disappear. However, unfortunately, it is not a ‘good’ disappearing of the trade surplus, driven by stronger domestic demand but rather a ‘bad’ disappearing, driven by high energy prices and structurally weaker exports. Also, when interpreting these trade data, don’t forget that they are seasonally and calendar-adjusted but not price adjusted. Even a weaker euro hardly helps Trade is no longer a growth driver but has become a drag on German growth. Since the second quarter of 2021, the growth contribution of net exports has actually been negative. In the past, the current weakness of the euro would at least have brought some smiles to German exporters’ faces. Like almost no other, German exports have often seen an asymmetric reaction to exchange rate developments. The negative impact of a stronger currency is cushioned by inelastic demand and high product quality, while the full price impact of a weaker currency normally adds to export strength. Not this time around. Export order books have weakened significantly in recent months as the global economic slowdown, high inflation and high uncertainty leave clear marks on (not only) German exports. Even if transportation costs have started to come down and global supply chains have improved somewhat, the outlook for the German export sector remains mixed, at best. Read this article on THINK TagsGermany Export Eurozone Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Technical Outlook Of The EUR/JPY Pair Movement In Short Term

The EUR/JPY Pair: Maintain The Rebound From Last Week's Lows

TeleTrade Comments TeleTrade Comments 06.10.2022 13:59
EUR/JPY regains some buying interest after Wednesday’s retracement. Further upside is expected to retarget the 144.00 mark in the near term. EUR/JPY partially reverses the recent pullback and looks slightly bid above the 143.00 mark on Thursday. The continuation of the rebound from last week’s lows remains well in place despite Wednesday’s knee-jerk. Against that, if the cross extends the breakout of the weekly top at 144.04 (September 20), it could then dispute the 2022 high at 145.63 (September 12). In the meantime, while above the key 200-day SMA at 136.10, the constructive outlook for the cross should remain unchanged. EUR/JPY daily chart  
Mexican Rate Spread: Tight vs. Central Bank's Rate Spread and Implications for Dis-inversion

The Euro To British Pound (EUR/GBP) Pair Weakness Is Slowing

TeleTrade Comments TeleTrade Comments 06.10.2022 14:02
EUR/GBP weakness is slowing. Analysts at Credit Suisse look for a floor above support at 0.8585/57, with a break above 0.8832/52 needed to suggest the sell-off is over. Close below 0.8657 would suggest a more concrete decline is underway “The decline is showing signs of slowing ahead of what we see as more important support at the rising 55-day average, September low and uptrend from August at 0.8585/57. Resistance is seen at 0.8778 initially, with a break above 0.8832/52 still needed to suggest the worst of the sell-off may have been seen for strength back to 0.8973/81 initially.” “A close below 0.8657 though would suggest a more concrete decline is underway, opening the door to a test of the key rising long-term 200-day average, now at 0.8473.”
The USD/CHF Pair Can Overcome The Immediate Obstacle Of A Trend Line

The Actions Of The Swiss National Bank (SNB) May Support The Strong Franc (CHF)

TeleTrade Comments TeleTrade Comments 07.10.2022 12:39
Against the backdrop of elevated price pressures, economists at CIBC Capital Markets expect the Swiss National Bank (SNB) to be increasingly prepared to tolerate a stronger franc. Additional policy tightening “In the context of elevated CPI, we can expect the SNB to remain wary of elevated price pressures feeding through into wage demands; this comes as the unemployment rate is at a 20-year low of 2.1%.” “A central bank keen to bear down on wage growth and an overheated real estate market could prove to be more activist than the ECB, supporting a stronger CHF into 2023.” “EUR/CHF: Q4 2022: 0.94 | Q1 2023: 0.97”
Navigating Interconnectedness: Analyzing Banks' Exposures and Funding from Non-Bank Financial Institutions

Economists Expect The National Bank of Hungary To Narrow The EUR/HUF Rate

TeleTrade Comments TeleTrade Comments 07.10.2022 13:34
EUR/HUF has pushed above 420. Therefore, economists at TD Securities expect the Hungarian National Bank to tighten and drive the pair to 412 by the end of the fourth quarter. NBH to continue running an FX-driven monetary policy “We expect the NBH to continue running an FX-driven monetary policy, rather than an inflation-driven one. In essence, hike rates in response to forint weakness rather than upside inflation risks.” “We think that EUR/HUF will trade in the 400-430 range in Q4 2022, but fall back below 420 and settle at 412 by the end of the quarter.”
CEEMEA FX Outlook 2023: The Situation Remains Fragile

In Poland and Hungary, Iflation Is Getting Higher And Higher

ING Economics ING Economics 08.10.2022 13:34
Inflation data is in focus next week, with a substantial increase expected in Poland. In Hungary, the Ministry of Finance will release the preliminary budget balance for September In this article Poland: Current account widen to 5% of GDP and Sep CPI expected at 17.2% Czech Republic: Unchanged year-on-year pace of inflation Hungary: Inflation still moving higher whilst budget improves Source: Shutterstock Poland: Current account widen to 5% of GDP and Sep CPI expected at 17.2% Current account (Aug): EUR-1573mn Weakening domestic demand and somewhat lower pressure from commodity prices eased pressure on Poland’s trade balance, but the scale of the external imbalance remains substantial. We forecast that in August exports in EUR went up by 14.7% YoY, while imports rose by 16.3% YoY. According to our forecasts, the cumulative 12-month current account will widen towards 5% of GDP by the end of the year. CPI (Sep, final): 17.2%YoY We expect the StatOffice to confirm its flash estimate of September consumer inflation at 17.2% YoY. The substantial upswing (from 16.1%YoY in August) was linked to rising prices of food and energy (mainly coal), but the scale of increase in core inflation is also shocking. According to our estimates, core inflation excluding food and energy prices jumped from 9.9% YoY in August to 10.7% YoY in September. Core prices increased by some 1.4% MoM, confirming that another wave of higher costs (mainly energy and transport) is being passed onto the prices of final products. Upward pressure on prices remains substantial and inflation is becoming stubbornly persistent. Deeply negative real interest rates and expansionary fiscal policy do not give much hope for significant disinflation anytime soon. Czech Republic: Unchanged year-on-year pace of inflation According to our estimates, inflation slowed again to 0.2% in September from 0.4% in August, which would be the slowest pace since November last year. In annual terms, this implies a stable rate at 17.2%. Compared to the previous month, we see higher prices for food (1.6%), clothing (1.8%) due to the start of the winter season and education (1.4%) due to the start of the school year. On the other hand, prices fell in transport (-1.5%) due to a drop in fuel prices (-4.1%) and tourism (-4.4%) due to the end of the summer season. For energy prices, we expect a similar pace of price increases as in the previous two months, although a few energy price hikes have again been announced for September by the main suppliers. However, the statistical office approach is still unclear and the last two months suggest that we can expect a gradual pass-through of these changes into the CPI rather than a spike in energy prices. Of course, as in the last two months, an upward spike in CPI energy prices cannot be ruled out, but otherwise, we see YoY inflation peaking in these months and we should see a decline by the end of the year, though still above the 16% YoY level. Hungary: Inflation still moving higher whilst budget improves Next week is all about the budget and inflation in Hungary. The Ministry of Finance is going to release the preliminary budget balance for September, where we expect a further deterioration with the pressure coming from the expenditure side, while the revenue side will see a boost from the windfall taxes only in the fourth quarter. In this regard, we expect a significant improvement in the months ahead. When it comes to the September inflation print, we see both the core inflation and the headline reading moving higher. The significant uptick in headline inflation is coming from the change in the utility bill support scheme. This could add roughly 3ppt to the year-on-year headline inflation as households were facing higher utility bills in September. The move in core inflation will come mainly from services and processed food as rising energy costs for corporates and the drought feed into consumer prices. Key events in EMEA next week Source: Refinitiv, ING Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more  
Euro: Current Financial Supply Is Still Running Slightly Ahead Of Previous Years

Euro: Current Financial Supply Is Still Running Slightly Ahead Of Previous Years

ING Economics ING Economics 09.10.2022 13:47
Corporate supply was €25bn in September, lower than in previous years • Corporate supply amounted to €25bn in September. This is much lower than the average €45bn of recent years. We don’t expect much more supply to come in the ensuing months as much higher funding costs, combined with a volatile market is leaving a rather unattractive environment for issuers. For the coming months, there should be brief windows of opportunity when the markets offer a period of stability. • Corporate supply is now sitting at €202bn thus far this year. We expect no more than €250bn for the year. This will leave supply €100bn short of what was issued last year. Redemptions this year are pencilled in at €223bn. As such net supply will be very low this year. When the purchases of CSPP (and PEPP) and coupon payments are included, net supply is negative, and this leaves the technical picture very strong. • On a YTD basis, the Utilities sector still has the largest credit supply with €43bn followed by Industrial & Chemicals at €35bn, while the Healthcare sector has seen the lowest credit supply with €18bn. In terms of maturity, the 2-6yr maturity bucket has seen the most credit supply with €8bn in September but the 6-9yr maturity bucket remains the one with the highest YTD figure of €57bn. • Corporate Reverse Yankee supply is now at €25bn YTD, after €4bn was issued in September. This is significantly lower than previous years. Limited primary market activity due to the volatile markets and higher funding costs has resulted in supply being concentrated in local currency, and thus relatively lower Reverse Yankee supply. Financials supply still running ahead of previous years • Financials supply amounted to €25bn in September, matching that of August. This is lower than last year’s €37bn figure. Banks senior supply accounted for €19bn of last month’s supply. Financial supply is now sitting at €221bn YTD, still running slightly ahead of previous years. • Another €22bn in covered bond supply in September, following €16bn in August. Covered bonds remain a fan favourite for banks to issue. YTD supply is now at €174bn, up considerably compared to the €101bn full year figures seen in 2020 and 2021. Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
German industry rebounds in January

Supply Chain Issues And Rivers Status Affect German Industry Sector. Retail Sales Down (07/10/22)

ING Economics ING Economics 09.10.2022 17:23
Weak industrial production and retail sales provide further evidence that the German economy continues to slide into recession Industrial production declined... Germany continues to descend into recession. In August, production in industry in real terms was down by 0.8% on the previous month on a price, seasonally and calendar-adjusted basis, from an upwardly revised stagnation in July. Over the year, industrial production was up by 2.1%. Ongoing supply chain frictions as well as the low water levels in German rivers were the main reasons behind this drop in industrial activity. To make things worse, production in the energy sector was down by 6.1% month-on-month and the construction sector by 2.1%. According to the statistical office, production in the energy-intensive sectors was down by 2.1% MoM and by 8.6% compared with February this year. Retail sales in August were down by 1.3%, from an increase of 0.7% in July. Read next: Great Britain Expects Positive Results For Its Economy | FXMAG.COM More to come German industry and the entire economy have not come to an abrupt stop but are rather in the middle of a long and gradual slide into recession. Some examples? At the start of the year, production expectations were close to all-time highs but since the start of the war in Ukraine they have gradually come down, with no end currently in sight. Order books were richly filled at the start of the year and companies were filling inventories. Since then, new orders have dropped in almost every single month, and actual production has weakened since the summer. We don't need a crystal ball to see a further weakening of German industry in the coming months. The full impact of higher energy prices will only be felt in the last months of the year. It is not only the price effect putting a burden on German industry but also the lack of industrial input goods (including industrial gas). Today’s data are like a sneak preview of more to come. High energy prices will increasingly weigh on private consumption and industrial production, making a contraction of the economy inevitable. The only question is how severe such a contraction or recession will be. Read this article on THINK TagsIndustrial Production Germany Eurozone Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Hungary's Central Bank to Maintain Base Rate at 13%, Eyes on Effective Rate Amid Forint's Performance

The EUR/GBP Cross-Currency Pair Justifies The Escalating Fears Of The Eurozone’s Recession

TeleTrade Comments TeleTrade Comments 10.10.2022 10:34
EUR/GBP prints the first daily negative in five, grinds lower of late. Escalating fears of Eurozone recession, mixed political headlines from BOE keep sellers hopeful. BOE’s Bailey will face a tough task during his trip to Washington. Russia responds to Crimean bridge explosion by blowing Ukrainian President’s office. EUR/GBP fails to extend the four-day uptrend as it stays depressed near 0.8785 heading into Monday’s European session. In doing so, the cross-currency pair justifies the escalating fears of the Eurozone’s recession while trying to take positives from the mixed headlines from Britain. As per the latest update, the Bank of England (BOE) launches multiple intermediate measures to unleash liquidity into the UK market. Among the key measures discussed, the alterations in the repo facility will be important and can help the “Old Lady”, as the BOE is often called. Elsewhere, the fears of EU recession amplified after Russia’s reaction to the Crimean bridge explosion. Recently, the BBC came out with the news suggesting multiple large explosions hit Kyiv, marking it the first tragic event in months. It’s worth noting that the missiles also destroyed Ukrainian President Volodymyr Zelensky's office. While the UK is likely benefiting from the bloc’s fears of a pause in the European Central Bank’s (ECB) hawkish move, doubts over the BOE’s ability to tame the financial crisis triggered by chancellor Kwasi Kwarteng’s September 23 fiscal announcements can keep the EUR/GBP buyers hopeful. Furthermore, political pessimism in Britain also propels the cross-currency pair. Moving on, the aforementioned risk catalysts and the UK’s employment data can entertain the EUR/GBP traders ahead of Friday’s speech of BOE Governor Andrew Bailey. If Bailey fails to defend his latest surprises, the EUR/GBP may have further upside to track. Technical analysis EUR/GBP retreats from the one-month-old support-turned-resistance line, around 0.8815 by the press time, as it directs bears towards June’s peak surrounding 0.8720.
The Euro To Swedish Krona (EUR/SEK) Pair Is In A Bullish Mood And Has A Chance To Move Up In The Near Future

The Euro To Swedish Krona (EUR/SEK) Pair Is In A Bullish Mood And Has A Chance To Move Up In The Near Future

TeleTrade Comments TeleTrade Comments 10.10.2022 11:52
EUR/SEK has formed a large bullish triangle. With this bullish pattern in place, analysts at Credit Suisse expect the pair to move higher toward 11.3650.  Move above 10.9799 to expose 11.0436 “EUR/SEK has recently confirmed a large bullish triangle continuation pattern, which we think likely sets the market up for a significant move higher over the next few months.” “We look for an eventual move above 10.9799 to expose the 78.6% retracement of the 2020/21 decline at 11.0436. Thereafter, should we see a convincing break here as well, we would see no reason not to look for a further ascent to the 2020 high at 11.3650.”
EUR/USD Rangebound Ahead of Data Releases and Rate Expectations

The Media Report Is Likely To Be Hungarian Forint (HUF) Supportive News

TeleTrade Comments TeleTrade Comments 10.10.2022 12:30
Local media in Hungary have reported that the Europen Council may be considering extending the deadline for a decision on freezing funds for Hungary by two more months. Thus, the forint should strengthen, economists at Commerzbank report. EC may extend deadline by two months “The usual decision timeframe was one month, but the EC could extend this by a maximum of further two months in exceptional circumstances – it appears that this extension is now being granted.” “The media report is likely to be HUF-supportive news: 1) it raises the probability that some compromise may be worked out in time for the funds to be released; and 2) crucially, that recent legislative changes announced by the Hungarian government (in an attempt to address corruption in the use of EU funds) is perhaps being viewed favourably by the EC.”
The EUR/USD Pair Maintains The Bullish Sentiment

Be Like Federal Reserve: Would European Central Bank Introduce Quantitive Tightening?

ING Economics ING Economics 10.10.2022 14:10
The European Central Bank looks determined to follow in the Federal Reserve's footsteps. After the start of aggressive rate hikes, and with no end in sight yet, the next milestone is a reduction of its bond portfolio. However, we think the ECB's hawkishness might be premature. Quantitative tightening will come but not now QT is on the ECB's radar but still a distant prospect The minutes of the ECB's September meeting delivered a couple of interesting insights: the decision to hike rates by 75bp was not taken unanimously, so 75bp increments should not be the new normal. However, the ECB was clearly determined to continue hiking rates significantly. Also, looking beyond the configuration of the key ECB interest rates, the minutes underlined that the Eurosystem's large balance sheet was continuing to provide significant monetary policy accommodation by compressing term premia. The Governing Council felt it appropriate to reiterate that it stood ready to adjust all of the instruments within its mandate to ensure that inflation returned to its medium-term target of 2%. This is a clear signal that reducing the ECB's balance sheet has become an issue. Quantitative tightening (QT) - how to reduce the size of the balance sheet - was also apparently on the agenda at this week's non-monetary policy meeting in Cyprus. However, so far, no information has been leaked from this meeting. Bond yields have already increased significantly in recent months without any quantitative tightening A discussion is one thing, an actual decision another. Just a little more than a week ago, ECB President Christine Lagarde said that the ECB would only start to consider QT when the ECB had completed its monetary policy normalisation. At the same time, bond yields have already increased significantly in recent months without any QT. Also, given the very uncertain economic outlook and more pressure on governments to deliver additional fiscal stimulus, QT at the current juncture could trigger an unwarranted widening of bond spreads, a.k.a, a new euro crisis. This is something the ECB clearly does not want. A premature QT decision also has other risks. It could raise the bar for triggering the Transmission Protection Instrument (TPI) even higher, a development that could actually spark a new euro crisis. As such, an actual decision on QT is very unlikely as it would add to financial stress and uncertainty. However, it's good to at least have a plan for when this is really needed.             How the ECB's QT could work Though quantitative tightening currently looks unlikely, it will come eventually. Given the complicated structure of the ECB's bond purchases across countries, sectors and durations, an outright selling of the bond portfolio will not be an easy one without disturbing markets. Also, don't forget that the ECB's balance sheet not only comprises the bond portfolio but also the series of liquidity operations to support bank lending. These bank lending operations (TLTROs) will be repaid by banks, automatically reducing the balance sheet. Still, when financial markets think of QT, they think of reversing the ECB's asset purchases. In this regard, the option of gradually and more passively reducing its asset portfolio looks the most attractive.   The option of gradually and more passively reducing its asset portfolio looks the most attractive A possible first step would be to (gradually) stop the reinvestments of the Asset Purchase Programme (APP). One way to phase in QT would be to first cap APP reinvestments at 50% of their normal amount during, say, the second and third quarters before ending them in the fourth. In this scenario, the resulting balance sheet reduction would be a manageable €155bn in 2023, doubling to €300bn in 2024. The next step would be to end the reinvestments under the Pandemic Emergency Purchase Programme (PEPP). These would add to the balance sheet reduction in 2025, leading to a total reduction of €388bn (along with the APP reductions). In addition, the ECB could speed up the process with outright sales but we doubt peripheral bond markets would be able to stomach the impact (see next sections). In terms of timing, we take Christine Lagarde's recent comments for granted and expect a gradual end to the APP reinvestments between 2Q and 4Q next year. PEPP reinvestments will stop by the end of 2024. QT could reduce the ECB's balance sheet by €155bn in 2023 and €300bn in 2024 Source: Refinitiv, ING   Whenever it happens, we expect QT to be felt across three dimensions of rates markets: duration, credit (and sovereign) premia, and money markets (through the price of liquidity).  Impact on core yields: moderate at the start One of the channels through which QE influenced markets was by suppressing the compensation for a certain number of risks, including duration risk. At face value, this means that, when the ECB reduces its balance sheet, long-dated yields will rise. So far so good. There is empirical evidence for that. For reference, we find that a €155bn reduction in the ECB's bond portfolio size in 2023 would push 10Y Bund yields up by only 7bp, and a €300bn reduction in 2024 would reduce them by 14bp. If this sounds unimpressive, note that without the €5tn of ECB purchases, 10Y Bund yields would be 230bp higher by this, admittedly rough, estimate. Note also that QT would add to the amount of debt that private markets would have to absorb if European governments were to significantly increase their borrowing to finance energy support packages. This is another argument for a delayed start to QT. A €155bn reduction in the ECB’s bond portfolio size in 2023 would push 10Y Bund yields up by only 7bp What is much more difficult to track is the impact this will have on the shape of the yield curve. On paper, the longer the maturity point, the more QE suppresses yields. We're not expecting a re-steepening as a result of QT, however. The experience of the US and UK has shown that yield curves can invert even in the context of QT. The reason is that other factors have a greater influence, namely that base rates are going above their long-term neutral levels. In short, we're still expecting a German curve inversion next year irrespective of QT. Without QE 10Y German Bund yields would be over 200bp higher Source: Refinitiv, ING Sovereign spreads: adding fuel to the fire When one moves away from so-called ‘risk-free’ markets, the main impact of QE is suppressing credit compensation. In the case of sovereign bonds, QE was instrumental in suppressing eurozone break-up risk in the sovereign crisis of 2010-12, and in subsequent periods of market stress. Our analysis of German yields above implies that the stock, rather than the flow of purchases is the relevant variable to assess market impact. This isn’t so simple for sovereign spreads, where both variables matter. In plain English, we think the impact of QT on sovereign spreads will occur a lot faster than on core yields, once flows turn negative. This explains why spreads already started widening before QT was even discussed, as QE purchases drew to a close in mid-2022. We fear the ECB following through with QT would compound the worries of already stressed financial markets. We struggle to see how peripheral markets would cope with rising interest rates and QT at the same time We struggle to see how peripheral markets would cope with rising interest rates and QT at the same time. This is a key reason why we expect QT to start only once the phase of rising base interest rates is over. Additionally, the ECB keeping spread-support programmes, such as the TPI, at hand would go some way to reassuring markets. It would also mean a slower reduction in the ECB's bond portfolio if it is forced to temporarily buy peripheral bonds. QT will reduce excess liquidity and help widen money market spreads, such as Euribor Source: Refinitiv, ING Money markets: taking away the comfort blanket A large chunk of money market rates also has a credit and duration component, which we covered in the sections above. But the compensation in money markets is even more heavily suppressed by the tide of ECB Excess Liquidity (EL) introduced during successive rounds of QE and loans to banks (TLTROs). As QT begins, EL will shrink by the same amount. In 2023, the estimated €155bn reduction in excess liquidity from QT will pale in comparison to the nearly €2tn reduction coming from targeted longer-term refinancing operations (TLTRO) loan repayments. Each incremental reduction in liquidity will make money market rates more sensitive to other risk factors After that date, however, each incremental reduction in liquidity will make money market rates more sensitive to other risk factors. The widening of money market spreads, for instance Euribor fixings compared to overnight index swaps (OIS), is not linear. The first €2tn reduction will probably have little effect. After that, at the latest after mid-2023, the impact of EL reduction will accelerate. This effect could even be magnified if the ECB decides to effectively lock away a portion of EL using tiered bank reserve remunerations (see our article on that topic). Read this article on THINK TagsQuantitative tightening Interest Rates ECB Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Ralph Shedler's Technical Analysis Of The USD/JPY Pair

The Euro To Japanese Pair (EUR/JPY) Accelerates Its Losses

TeleTrade Comments TeleTrade Comments 10.10.2022 15:00
EUR/JPY extends the bearish move to the sub-141.00 region. Further downside could revisit the 139.80/50 band in the near term. EUR/JPY accelerates its losses and breaks below the 141.00 region to print new 2-week lows on Monday. The continuation of the decline would likely leave the recent peaks in the 144.00 neighbourhood as short-term tops. In case the downside accelerates, there is an interim support at the 139.80/50 band, where the 100- and 55-day SMAs converge. In the meantime, while above the key 200-day SMA at 136.20, the constructive outlook for the cross should remain unchanged. EUR/JPY daily chart  
Manning the Renminbi Barricade: Navigating FX Markets Amid Chinese Defenses

Eurozone: What Can We Expect From Belgian Construction Sector?

ING Economics ING Economics 10.10.2022 15:02
Activity in the Belgian construction sector is starting to slow. Although order books are still well filled, new orders are coming in more slowly. For this year, we forecast 2.5% growth for the Belgian construction sector, but next year growth will come to a halt Belgian construction activity still 6.1% below its pre-pandemic level Construction activity in Belgium in the first seven months of this year was 0.4% lower than during the same period last year. The war in Ukraine has put activity under pressure even more. In July, construction activity was 1.1% lower than in February before the outbreak of war in Ukraine. In the European Union, construction activity was still up 3.7% for the first seven months of this year, thanks to a strong start to the year. Yet the European average has also been under strong pressure since the war in Ukraine. Construction activity in the EU has declined by 2.2% since February. Rising costs due to sharply increased energy and construction material prices, combined with growing uncertainty due to the war in Ukraine, are weighing on construction activity. As a result, it will take longer to fully recover from the Covid-19 hit. Construction activity in Belgium fell more sharply than the European average during the first lockdown. The recovery afterwards was also weaker. In July 2022, construction volume in Belgium was still 6.1% lower than in July 2019, the same month before the pandemic, while activity in the European Union was already 1.9% above its pre-pandemic level. Fig. 1. Construction production index (July 2019 = 100) Source: Eurostat Construction business confidence down sharply since start of Ukraine war According to the European Commission's confidence indicator, sentiment in the construction sector has fallen sharply since the start of the war. Rising costs and problems in global supply chains have weighed on profitability and caused a lot of construction sites to experience delays. Although pressure on supply chains is still high, it is beginning to normalise. While the pressure on building material prices seemed to ease somewhat during the summer, the prices of energy-intensive building materials rose sharply again in September. Unlike the situation in the spring, this further increase in building material prices is no longer due to higher commodity prices on international markets, but due to higher energy costs, which make the production process of building materials more expensive. From a survey by Embuild, eight in 10 respondents expect further price increases for these materials over the next three months. A number of Belgian producers have already reduced or halted production, which in turn could affect the availability and delivery time of these materials. Falling demand will also make it more difficult to pass on price increases, putting pressure on the industry's profitability. Fig. 2. Evolution of confidence in the construction industry Source: European Commission More companies planning to raise prices again These cost hikes are again increasing sales prices. The European Commission's business survey shows that the net balance of construction companies planning to increase their selling prices rose again in September. Price pressure seemed to have eased somewhat recently, but once again more contractors feel compelled to raise their prices further. However, as demand begins to decline, it is becoming increasingly difficult to pass on these higher costs to the end customer which is putting pressure on profitability. In a survey by Embuild, half of the construction companies already said they were having trouble paying their invoices in the short term. For now, the volume of work is still decent, but the industry is concerned about shrinking order books. Fig. 3. Sales price expectations in the Belgian construction sector Source: European Commission Alongside increased material costs, the sector faces other headwinds In addition to the sharply increased cost of building materials, the construction industry is also struggling with a number of other problems, including shortages of labour and building materials. Although pressure on global supply chains has improved somewhat since early summer, there are still many delays and difficulties in obtaining certain materials. The number of contractors reporting that a lack of materials is hindering production is still quite a bit higher than before the Covid-19 pandemic. In addition, the industry is also struggling to find suitable labour which is holding back activity. Although this figure has come down somewhat recently due to declining demand, this continues to hamper the sector. Fig. 4. Factors hindering activity Source: European Commission Higher mortgage rates weigh on residential market Higher interest rates on a mortgage loan will dampen demand for new residential projects. Mortgage rates on a 20-year term have already doubled this year from 1.4% at the beginning of the year to nearly 3% by the end of September. This translates into a declining number of applications for new mortgage credit for new construction projects. The number of mortgage loans registered in August was 24% lower than in the same month last year. Although it's important to say that the number was exceptionally high last year, partly because many homeowners took advantage of low interest rates to refinance their mortgage loans. We expect these mortgage rates to continue to hover at these higher levels. On top of that, the ongoing war in Ukraine is creating additional uncertainty that may cause people to postpone new construction and renovation projects. All of these factors are translating into declining demand for new projects. Thus, there are fewer new construction projects in the pipeline. The number of licensed new residential buildings decreased by 3.4% in the first five months of 2022 compared to the same period in 2021. Moreover, economic uncertainty is making more households postpone their renovation projects. The European Commission's latest consumer survey shows that the intentions of Belgians to carry out improvement works on their own homes in the next 12 months fell to the lowest level in 12 years in the third quarter. Fig. 5. Belgian's intention to carry out improvement works on own home in the next 12 months Source: European Commission Belgium's residential construction sector likely to hold up better than other countries' On the other hand, purchasing power in Belgium is holding up much better than the European average. According to the Federal Planning Bureau, purchasing power will decline only 0.1% this year thanks to automatic wage indexation and strong job creation. For next year, it predicts a 0.7% increase in purchasing power. As a result, the Belgian residential real estate market, and thus the residential construction sector, is likely to hold up better than in neighbouring countries. In addition, uncertainty due to the ongoing war in Ukraine combined with sharply increased prices for energy and building materials will cause many households to postpone non-urgent beautification and renovation projects. As we expect the Belgian economy to head towards a recession in the winter months, residential construction activity will also weaken further in the second half of the year. The start of 2023 will be difficult. It is likely that the residential construction market will only recover from the second quarter of next year. Negative business sentiment will further dampen the non-residential sector The outlook for the non-residential sector is strongly dependent on the economic context of the companies that need these types of properties. There is little optimism on their part. In September, business confidence fell for the sixth consecutive month. The decline was strongest in manufacturing, but confidence also crumbled further in the service sector. Energy-intensive companies are particularly hard hit by high energy prices. Given the likelihood of the economy slipping further into recession, we expect business confidence to weaken further. The negative sentiment will encourage companies to invest less in non-residential real estate. In September, the component measuring confidence in the construction sector for non-residential buildings (such as commercial spaces, job stores, bank offices, sports complexes, office buildings, etc.) improved slightly but is still strongly negative. Sentiment also fell sharply for government projects in September Public construction projects held up a little better, but confidence also fell sharply in September. Many public clients have had to postpone plans in recent months due to the sharp increase in the cost of building materials and increased operating costs due to high inflation. Notwithstanding, public investments are usually less cyclical and the need for more investment in public infrastructure is still very high. We expect this branch to suffer less from the upcoming recession. Rising headwinds will put brakes on growth in 2023 Although the construction industry started the year well, the sector is facing increasing headwinds. Supply problems have improved but are not yet completely gone. Higher mortgage rates and declining consumer confidence are making builders hesitant about new projects. On top of that, the industry is facing new price increases for energy-intensive building materials. For now, contractors still have plenty of work as they are still catching up due to the supply problems caused by the Covid crisis. Therefore, we still expect the sector to grow by 2.5% this year. For 2023, we expect stagnation, or possibly even a slight contraction in activity. Read this article on THINK TagsReal estate Construction Belgium Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Forex: Most NOK Gains May Be Channelled Against The Dollar

The Euro To Norwegian Krone (EUR/NOK) Pair Keeps Staying Above The 10 level

TeleTrade Comments TeleTrade Comments 11.10.2022 10:13
Inflation in Norway surprised to the upside in September. The krone benefited from the data but the EUR/NOK is set to stay above the 10 level for now, economists at Commerzbank report. Inflation points towards Norges Bank tightening course “The overall rate rose by 6.9% YoY, the core rate by 5.3%. Both rates are already above Norges Bank’s expectations according to its monetary policy report of September. First of all, that illustrates that Norges Bank will stick to its signalled rate hike cycle.”  “The September data also increased the likelihood that Norges Bank will tighten its rate path again and might adjust the peak of its key rate.” “The NOK was able to benefit from the publication of the data yesterday, but negative market sentiment is preventing more substantial gains – regardless of the higher oil price. For that reason, it might still take a while before EUR/NOK eases below 10 again.”
Upcoming Corporate Earnings Reports: Ashtead, GameStop, and DocuSign - September 5-7, 2023

Dombrovskis: “Decoupling From China Is Not An Option For Our Companies”

TeleTrade Comments TeleTrade Comments 11.10.2022 13:25
The European Union (EU) Trade Commissioner Valdis Dombrovskis said on Tuesday, “the commission is currently working on a new temporary state aid framework, which will allow EU countries to support companies suffocating under high energy bills.” Further comments “Decoupling from China is not an option for our companies.” “We have deep concerns, particularly concerning the UIS inflation reduction act.” Related reads EUR/USD Forecast: Next bearish target aligns at 0.9650 Chancellor Scholz: Will make it through the winter if Germany continues to adapt
Italy: ING Economics expect quarter-on-quarter GDP in the fourth quarter may contract by 0.2%

ING Economics: Italy - Even If In Q3 Gross Domestic Product (GDP) Will Avoid A Decline, Q4 May Be Worse

ING Economics ING Economics 11.10.2022 18:27
Volatile August production data should be taken with a pinch of salt as underlying developments continue to point to more accentuated weakness over 4Q22, when industry will very likely be confirmed as a drag on growth Car production line in Turin, Italy   According to Istat data, Italy's seasonally-adjusted industrial production increased a surprisingly strong 2.3% month-on-month in August (from an upwardly revised 0.5% in July). The working day adjusted measure posted a 2.9% year-on-year change (from -1.3% YoY in July). "August effect" possibly at play, in 3Q22 industry should remain a drag on GDP growth The broad aggregate breakdown shows that consumer and investment goods were the main drivers of the acceleration while the production of energy contracted. To be sure, this is a positive reading, but it should be taken with a pinch of salt, as the August release is often affected by marked volatility due to firm closures and their impact on seasonal adjustments. In order to get a sense of the underlying developments, we look at the moving quarter and note that over the June-August period, production contracted by 1.2% from the previous three months. Confidence and PMI data point to a deterioration in September While the August reading can still be partially interpreted as evidence that Italian industry continues to be relatively more resilient to international supply chain disruptions and to ballooning energy prices, we expect the picture to get gloomier over the coming months. The manufacturing PMI has been in contraction territory since July and business confidence plunged in September, with the expected production subcomponent down to levels not seen since November 2020. The set of measures recently put in place by the outgoing government to weather the energy inflation shock will help limit the damage for businesses but is unlikely to stop industry from becoming a drag on growth in both 3Q22 and 4Q22. The European Central Bank's tightening mode will not make things any easier over the next few months, possibly weighing on the investment component. A GDP contraction could still be avoided in 3Q22, not in 4Q22 After today’s reading we are mildly comforted in our view that the Italian economy might manage to avoid a contraction in 3Q22 (we expect a minor 0.1% GDP expansion) but remain convinced that this will not be possible in 4Q22, when we project a 0.5% quarter-on-quarter contraction, which should mark the start of a recession. Read this article on THINK Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Beyonce Bounce and Soaring UK Inflation: A Challenge for Bank of England

Bank Of England (BoE) And Its Gilts, European Central Bank's Balance Sheet

ING Economics ING Economics 11.10.2022 21:27
The approaching end to the Bank of England’s purchases has sent gilts into a tailspin, a repo facility would help deal with margin financing but won’t solve the underlying problem. Joint EU debt issuance could compound fears of a more hawkish European Central Bank The Bank of England The end of BoE gilt buying looms large The Bank of England (BoE) tried – and failed – to reassure markets about the end of its gilt-buying program on 14 October. Despite a greater buying capacity of £10bn at each of the remaining operations, offers were limited and the BoE only managed to buy less than £1bn on Monday. The underlying concern is that even as its intervention draws to a close, not enough deleveraging has been achieved by pension funds, and that another wave of forced selling will emerge into next week. Volatility could well force the BoE back to the gilt market, maybe as early as today As the BoE itself has said, the aim of the buying facility was to buy pension funds time to shore up their liquidity position. Concerns remain about whether the last week-and-a-half was enough to achieve this in distressed market conditions. Eventually, the gilt sell-off could force the BoE back into the market. As we wrote at the time, we think a longer period of support for gilts will be necessary to restore market confidence. 30Y gilts traded at 4.7% yesterday, just 30bp below their pre-intervention peak, and their weakness dragged the pound lower. Volatility could well force the BoE back to the gilt market, maybe as early as today. And indeed, the Bank just announced that it will extend its purchases to inflation-linked gilts, adding one buying operation of up to £5bn each day this week to the already scheduled conventional gilt purchases. Helpfully, the announcement came alongside the launch of a repo facility accepting a broader range of assets as collateral. The idea is that instead of being forced sellers of, say, corporate bonds due to growing margin requirements, pension funds could instead pledge them as collateral to obtain financing. The facility will be in place for one month. In our view, this should be viewed as a complement to support the gilt market, not as a replacement, as a gilt sell-off (30Y yields have risen 110bp since their post-intervention through, for 30Y inflation-linked gilts, that figure is over 150bp) could still generate margin calls that exceed the fund’s funding capacity. In a further sign of its concern for market stability, the BoE also temporarily suspended its corporate bonds' quantitative tightening (QT) sales for two days. Long-end gilts are back in the danger zone Source: Refinitiv, ING The multi-headed fiscal hydra is back Of course, the difficulties facing the UK are not unique. The Fed’s tightening cycle and the rising dollar are thorns in the side of many central banks already grappling with inflation, including the ECB. In that context, Bloomberg reporting that Germany is dropping its opposition to joint EU borrowing to finance the energy support package is unlikely to be greeted kindly by bond investors. If confirmed, it would mean more issuance in already nervous markets (have a look at today’s supply slate in the last section), but investors would also worry about the inflationary impact and the ECB’s reaction. Markets can find solace from the contradictory sources cited by Reuters late yesterday. The concern however is that the reports come after Germany unveiled an up to €200bn package, drawing criticism from other countries with insufficient bond market liquidity to finance a commensurate package. Joint issuance would be bad news for core bonds which would nervously await the ECB’s reaction. For sovereign spreads, however, this is good news, as EU loans would lower pressure on peripheral bond markets. The prospect of ECB balance sheet reduction also casts a long shadow on bond markets. Klass Knot suggested that QT could begin at the earliest in early 2023. We still doubt QT could start in such a short timeframe but, if it does, we could see phased-out asset purchase programme (APP) redemptions in 2023, followed by pandemic emergency purchase programme (PEPP) redemptions in 2025. The strongest impact should be felt in peripheral debt markets, while it could also compound the tightening of money market spreads (eg rising Euribor vs Estr or Estr vs ECB deposit rate) due to targeted longer-term refinancing operations (TLTROs) repayments. The reduction in ECB purchases has already sent bond yields up Source: ECB, ING Today's events and market view Italian industrial production is the main item on today’s economic calendar but it is fair to say that the attention will be on the heavy bond supply slate after yesterday's gilt-led, long-end sell-off. The EU and Germany have both mandated banks for the sales of 7Y/20Y and 30Y bonds, respectively, via syndication. This will come on top of 2Y and 7Y auctions already scheduled by Germany and the Netherlands. The aftermath of the sales could see relief in the sector provided the gilt sell-off doesn’t accelerate. In that respect, the results of the sale of £0.9bn of 30Y inflation-linked gilts, the epicentre of yesterday's market rout, and the focus of newly announced purchases operations, will be key. In the afternoon, the main flashpoint will be US small business optimism. Our economics team flagged the pricing intention component as an important indicator to watch for declining inflation. The US Treasury kicks off this week's supply slate with a 3Y T-note auction for $40bn. Central bank speakers will also be plentiful. From the ECB, Philip Lane and François Villeroy are on the schedule. We’ll look closely for comments on QT or on the risk of more fiscal spending (see above). Andrew Bailey, of the BoE, will also be closely watched as the Bank’s response to the jitter in the gilt market is coming under greater scrutiny. Read this article on THINK TagsRates Daily Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Britain's Rishi Sunak And EU's Ursula Von Der Leyen Will Meet Today To Finalize The Northern Ireland Drama

The EUR/GBP Pair: A Slump Towards The Monthly Low Can’t Be Ruled Out

TeleTrade Comments TeleTrade Comments 12.10.2022 09:37
EUR/GBP consolidates biggest daily gains in two weeks inside bullish chart formation. Reports that BOE could extend bond-buying triggered GBP’s immediate strength. 200-SMA adds strength to 0.8735 support confluence, oscillators also favor buyers. EUR/GBP portrays the British Pound’s (GBP) immediate run-up on the Financial Times (FT) report that the Bank of England (BOE) is likely to extend the bond-buying program. In doing so, the cross-currency pair reverses from the upper line of a weekly bullish channel while flashing 0.8796 as the daily low, around 0.8825 by the press time of early Wednesday morning in Europe. “The Bank of England has signaled privately to bankers that it could extend its emergency bond-buying program past this Friday’s deadline, according to people briefed on the discussions, even as Governor Andrew Bailey warned pension funds that they “have three days left” before the support ends,” mentioned FT. Although the recent news suggests further downside of the EUR/GBP pair, a convergence of the 200-SMA and the stated bullish channel’s bottom, around 0.8735, appears a tough nut to crack for the bears. Following that, a slump towards refreshing the monthly low, currently around 0.8650, can’t be ruled out. It should be noted that the MACD and the RSI (14) are both in favor of the quote’s further upside. That said, the aforementioned channel’s top, close to 0.8870, guards the EUR/GBP pair’s immediate rebound. Also acting as an upside filter is the 50% Fibonacci retracement level of September month upside, near 0.8910, a break of which will direct the EUR/GBP bears towards the 0.9000 psychological magnet. EUR/GBP: Four-hour chart Trend: Limited downside expected
The Outlook Of EUR/USD Pair For Long And Short Position

"Central banks that can print money can never fall short of money."

ING Economics ING Economics 12.10.2022 14:13
A look at monetary policy’s paradigm shift and the impact on central bank balance sheets Source: Shutterstock   Around the world, central banks have aggressively hiked interest rates in an attempt to tackle record-high inflation and to bring inflation expectations back to where they were at the start of the Covid-19 pandemic. In Europe, this shift in monetary policy implied a shift from negative interest rates to positive interest rates but still with abundant liquidity. As central banks are moving into a more ‘normal’ world for monetary policy, this also means that bank reserves will again be remunerated at positive interest rates. Some market participants might have forgotten about this, but this new normal has always been the reality. It is not that banks are suddenly getting remunerated for their deposits at central banks – they always have and there has hardly ever been any speculation about central banks going bankrupt because they only pay interest rates on bank reserves. Admittedly, the current situation is different from anything we have seen in the past as excess liquidity as a result of quantitative easing (QE) and negative interest rates is extremely high. In the period of asset purchases and negative interest rates, national central banks (NCBs) did not hedge their interest rate risk but built reserves to address these risks. Still, with the unexpectedly sharp rise in policy rates, potential losses are arriving faster and exceeding existing buffers. Eurozone central banks running down their buffers, and their equity turning negative, has now become a possible scenario for the years ahead.  Central banks that can print money can never fall short of money. Central banks can make losses but they don’t go bust. Instead, central banks can roll over losses into the next year, have reserves or need to be “bailed out” by the governments via capital injections or an increase in their own capital.  In the eurozone, losses by the European Central Bank (ECB) can first be absorbed by a strategic reserve. If this is not enough, losses will have to be paid by the national central banks according to their share in the ECB’s capital. The ECB’s capital can also be increased, as was the case during the euro crisis when it was increased from €5bn to €10bn. National central bank losses do eventually end up with taxpayers as they transfer their net profits to national Treasuries. In its June 2022 Convergence Report, which covers EU member states that are not yet members of the monetary union, the ECB states that “any situation should be avoided whereby for a prolonged period of time an NCB's net equity is below the level of its statutory capital or is even negative... Any such situation may negatively impact the NCB’s ability to perform its European System of Central Bank (ESCB)-related tasks but also its national tasks. Moreover, such a situation may affect the credibility of the Eurosystem’s monetary policy. Therefore, the event of an NCB’s net equity becoming less than its statutory capital or even negative would require that the respective Member State provides the NCB with an appropriate amount of capital at least up to the level of the statutory capital within a reasonable period of time so as to comply with the principle of financial independence.” A clear hint at how the ECB probably looks at the current situation with national central banks running the risk of negative equity. Credibility is obviously key when talking about potential negative capital cases of central banks. Particularly in a situation in which central banks are trying hard to restore their credibility as inflation fighters, negative equity would be counterproductive. Even more as in a phase of policy rate hikes, printing their own money will not work. The option to print money in order to offset central bank losses would mean purchasing assets while hiking rates. A combination that hardly works. What can be done to reduce excess liquidity Reversed reserve tiering. The ECB introduced a reserve tiering system to deal with the impact of negative deposit rates on banks. Banks were only required to put a fraction of their reserves in the ECB’s deposit facility, the rest could be parked at a zero interest rate in the ECB’s current account facility. Now, a reversal of such reserve tiering makes sense as it allows central banks to not remunerate all reserves. My colleagues Antoine Bouvet and Benjamin Schröder have written an excellent piece on the recent developments of excess liquidity and central banks' options for how to deal with it in the UK, Switzerland and the eurozone. Read it here: Tiers of joy: European central banks adjust their liquidity settings As mentioned in the piece, the Swiss National Bank (SNB) was the first European central bank to actually implement a reserve tiering system at its September meeting. In a nutshell, banks’ sight deposits at the SNB up to a certain threshold will earn the SNB policy rate, currently 0.5%, and 0% on balances above that threshold. This, however, is only part of the story. In parallel, the SNB announced it will conduct liquidity-absorbing operations (Open Market Operations or OMOs).  The question is how to determine the threshold. This could be done by either determining a fixed amount or a multiplier of the reserves (as the ECB did for its first tiering). ECB could change the terms of targeted longer-term refinancing operations (TLTROs). As policy rates rise, the interest banks earn by placing liquidity at the ECB will gradually rise above the rate they are paying on their TLTRO loans, presenting them with an interest rate gain. If this is the sole problem it is intending to solve, one option would be to retroactively change the TLTRO terms by raising the applied interest rate. The ECB would then ‘earn’ a higher interest rate than it has to pay on banks’ deposits. However, such a change in terms would be detrimental to the predictability and attractiveness of future TLTRO operations. With the brunt of TLTRO loans due to expire by the middle of next year, one could also question the need to come up with risky solutions to a problem that will disappear in nine months' time. A design similar to the one described above for the Bank of England, where a fixed amount earns 0% and balances above that threshold earn the policy rate, would guarantee some interest rate saving but wouldn’t provide an incentive for banks to repay TLTRO funds if the threshold is set low enough. If the threshold is set high, then the risk is that 0% becomes the marginal interest rate for many banks and that some countries end up being net lenders, and others net borrowers. The result would be a drop in money market rates in some countries and a rise in others. Reducing excess liquidity is the first step in avoiding negative central bank equity All in all, the rapid transition from negative to positive interest rates comes with unwarranted side effects, particularly as it (intently) coincided with ample liquidity. These side effects are losses for central banks which have triggered the first central banks to quickly withdraw excess liquidity and others are likely to follow. For the ECB, the easiest and least controversial way forward is a reversed tiering of the deposit facility. This option would not be as counterproductive to further rate hikes as offsetting potential losses by printing new money or asking governments for capital injections would be. Read this article on THINK TagsMonetary policy Eurozone ECB Central banks Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Positive Shift in Inflation Structure: Core Inflation Falls in Hungary

The German CPI Reached The Forecast Level, The Inflation Report From America Ahead

Kamila Szypuła Kamila Szypuła 13.10.2022 09:26
Today, mainly important reports from the United States will appear. The report on inflation and the number of requests for unemployment insurance may significantly affect traders and give a picture of the condition of the US economy. On the old continent, we will mainly focus on the result of the German CPI. German CPI The monthly change and the annual consumer price index met expectations. The monthly change in the German CPI reached 1.9% and rose from 0.3%. Similarly, there was an increase in the annual change of the CPI from the level of 7.9% to the level of 10.0%. Switzerland Producer Price Index There were no forecasts for the Switzerland Producer Price Index. The monthly price of the change in the price of goods sold by manufacturers rose from -0.1% to 0.2%. After weak readings in July and August, this is a positive signal for this sector. On the other hand, the PPI YoY fell by 0.1%, thus reaching the level of 5.4%. BOE Credit Conditions Survey The Bank of England (BoE) will published the results of their Credit Conditions Survey for Q3, 2022. The bank conducts such research every quarter. As part of the Bank of England mission to maintain monetary and financial stability, the bank conducts research to understand credit trends and changes. Today's quarterly survey of construction banks and lenders contributes to this work. The survey covers: Secured and unsecured loans to households. Loans for non-financial corporations, small businesses and non-bank financial companies. Speeches of the day At 8:00 CET the first speech of the day was the speech from Germany. The speaker was President Nagel. He is also voting member of the ECB Governing Council. He's believed to be one of the most influential members of the council. For this reason, his speech may significantly affect the monetary situation of the euro zone. The next speech will be from the Bank of England which is set at 13:00 CET. Dr Catherine L Mann serves as a member of the Monetary Policy Committee (MPC) of the Bank of England. Her public engagements are often used to drop subtle clues regarding future monetary policy. US Core CPI The Core Consumer Price Index (CPI) measures the changes in the price of goods and services, excluding food and energy. The current reading of the indicator is expected to decline by 0.1% to 0.5%. The previous reading was at 0.6% and it was an increase from the July drop (0.3%). On the other hand, the annual change in the index is forecasted at 6.5%. And it may mean an increase from the level of 6.3%. US CPI Today the US inflation report will be published. This report can significantly impact the foreign exchange market. Read more about forecasts for the current level: https://www.fxmag.com/forex/inflation-report-ahead-what-might-it-look-like-in-the-united-states-u-s-cpi US Initial Jobless Claims There will also be a weekly report on the number of unemployment insurance applications today. The previous reading was negative as it rose to a higher level than expected. Current forecasts show a further increase in this number from 219K to 225K. The expected further negative results in a row may translate into deterioration of the economy in this sector. Crude Oil Inventories The weekly report about change in the number of barrels of commercial crude oil held by US firms will be published at 17:00 CET. Forecasts for this period show an increase from -1.356M to 1.750M. The increase in crude inventories is more than expected, it implies weaker demand and is bearish for crude prices. Summary 8:00 CET German Buba President Nagel Speaks 8:00 CET German CPI (YoY) (Sep) 8:00 CET German CPI (MoM) (Sep) 8:30 CET Switzerland PPI (MoM) (Sep) 10:30 CET BOE Credit Conditions Survey 13:00 CET BoE MPC Member Mann 14:30 CET US Core CPI (MoM) (Sep) 14:30 CET US Core CPI (YoY) (Sep) 14:30 CET US CPI (MoM) (Sep) 14:30 CET US CPI (YoY) (Sep) 14:30 CET US Initial Jobless Claims 17:00 CET Crude Oil Inventories Source: https://www.investing.com/economic-calendar/
Analysis Of Movement Of The Canadian Dollar To Swiss Franc Pair (CAD/CHF)

With The SNB Broadly Following The ECB, We See Relative Rates As An Inferior Driver For The EUR/CHF

TeleTrade Comments TeleTrade Comments 13.10.2022 10:35
EUR/CHF has traded fairly volatile, most recently moving back up to 0.97. Nonetheless, economists at Danske Bank expect the pair to edge lower toward 0.93 over the coming months. Swiss National Bank to hike by 75 basis points in December “We expect the SNB to hike by 75 bps in December to curtail underlying inflation pressures bringing the policy rate to 1.25%. With the SNB broadly following the ECB, we see relative rates as an inferior driver for the cross.” “We continue to forecast the cross to move lower on the back of fundamentals and a tighter global investment environment.” “We continue to forecast EUR/CHF at 0.93 in 12M.”
Tight Monetary Policy Is Already Weighing On The Swedish Housing Market

The Current Situation Have Not A Positive Effect On The Swedish Krona (SEK)

TeleTrade Comments TeleTrade Comments 13.10.2022 12:07
Weaker growth prospects have sent the Swedish krona to its weakest level since March 2020. Economists at Danske Bank expect EUR/SEK to move higher over the coming months to 11.20. Krona hit by triple whammy  “We stick to our long-held, non-consensus, negative view on the SEK, which is underpinned by the gloomy global growth outlook, associated negative outlook for global and Swedish equities alike and relative monetary policy – a triple whammy if you like.” “The Riksbank’s 100 bps rate hike had no lasting positive impact on the krona. The rate path underwhelmed expectations. In addition, more frontloading will exacerbate the downturn in the Swedish housing market, a headwind for the krona.” “Forecast: 10.80 (1M), 11.00 (3M), 11.20 (6M), 11.20 (12M).”
Analyzing the Latest Norwegian Economic Data and Central Bank Actions: Implications for the Norwegian Krone

The Euro To Norwegian Krone (EUR/NOK) Pair Is Forecast To Increase

TeleTrade Comments TeleTrade Comments 13.10.2022 13:50
The Norwegian krone has sold off mirroring the general move lower in commodity currencies. Economists at Danske Bank pencil in a rise in EUR/NOK over the coming three months. Timing NOK rebound is tricky “We still pencil in EUR/NOK heading higher over the coming 3-6M driven by a slowdown in growth, a European recession, volatile asset markets and spread tightening in the short-end of rates curves.” “For 2023, we still pencil in a NOK rebound – but timing is tricky. Until we see global central banks and not least the Fed signal a shift of policy towards a more dovish direction we prefer to play the weak leg in NOK.”  We maintain a ‘reverse V-profile’ and forecast EUR/NOK at 10.60 in 1M (from 10.40), 10.70 in 3M (from 10.60), 10.30 in 6M (from 10.20) and 9.80 in 12M (unchanged).” 
The EUR/JPY Pair Is Expected To Start A New Zig-Zag Correction

The Japanese Currency (JPY) Is Under Pressure, How The EUR/JPY Pair May Develop

InstaForex Analysis InstaForex Analysis 14.10.2022 08:28
The yen remains under pressure and the correction that began back in early June at 144.88 came to an end after testing137.37 in a running expanded flat correction. The next strong rally higher is now ready to develop. We will be looking for a clear break above 144.88 and 145.64 soon for a rally towards 149.79 as the next upside target. In the long term, even more upside towards 164.50 should be expected. In the short term, only a break below support at 140.90 will revive the corrective consolidation from 144.88 and add renewed downside pressure to 133.44.   Relevance up to 06:00 2022-10-15 UTC+2 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/296797
Analysis Of USD/CHF Pair: The Swiss Currency Pair Rebounds

The Trade-Weighted The Swiss Franc (CHF) Is Even Softer

TeleTrade Comments TeleTrade Comments 14.10.2022 09:52
Yesterday was the third time this year that the USD/CHF reversed sharply from levels just above 1.00. The Swiss National Bank (SNB) could be behind the move as it wants to avoid a soft franc, economists at ING report. What to make of USD/CHF at parity? “Could the Swiss National Bank (SNB) be at work here? Recall that the dollar is the second-largest weight in the Swiss franc trade-weighted basket and a higher USD/CHF will naturally weaken the nominal trade-weighted Swiss franc – something the SNB wants to avoid as it battles inflation. In fact, SNB president Thomas Jordan is turning into one of the most ardent hawks in the central bank community.” “We have quite a forthright view on EUR/CHF at the moment that the SNB wants to guide it lower by 5% plus per year. The higher USD/CHF is making the trade-weighted Swiss franc even softer and if we are right, the SNB should be even more inclined to drive EUR/CHF down to 0.95 and away from the near 0.98 levels at which spot EUR/CHF trades today.”
Technical Outlook Of The EUR/JPY Pair Movement In Short Term

The Situation Of The EUR/JPY Pair Is Quite Good | The Danmarks Nationalbank (DN) Will Follow The European Central Bank (ECB)

ING Economics ING Economics 15.10.2022 08:01
EUR/JPY Current spot: 141.16 • EUR/JPY has been holding up quite well despite the global bear market in risk assets. Our bias would be that EUR/JPY struggles to sustain a break above 145 in an environment where central banks are actively looking to slow aggregate demand. • For the European Central Bank, we are looking for a 75bp hike in October, perhaps 50bp in December and another 25bp in 1Q23. The ECB will also have to think about quantitative tightening in its Asset Purchase Programme portfolio, which may create problems for the eurozone’s peripheral bond markets. • Typically, the Japanese have been more interventionist than the eurozone and on that basis – and given the forthcoming eurozone recession - EUR/JPY risks look skewed lower the next six months. EUR/GBP Current spot: 0.8763 • Sterling has been driven by the fiscal credibility story. And it is interesting to note that the 10-year Gilt-Bund spread is struggling to narrow inside 200bp again – suggesting credibility is hard won and easily lost. • The Chancellor’s U-turn on the upper income tax bracket does little to assuage fiscal concerns. It only saves around £2bn compared to what could be £200bn of Gilt supply in FY23/24. Instead, the Chancellor will somehow need to find spending cuts or more likely tax increases – U-turn on energy windfall tax? • Clearly this is a challenging picture and combined with a difficult global environment, sterling risks remain skewed lower. EUR/NOK Current spot: 10.35 • Norway’s krone has dropped by more than 6% this past month, with its low-liquidity character leaving it highly exposed to the rocky risk environment. • A decisive turn in the krone will need to wait for a recovery in risk assets, which may only occur in the new year. The OPEC+ output cuts may suggest a slightly better outlook for oil currencies (in the crosses) into year-end, but not enough to trigger a NOK recovery at this stage. • Norges Bank should stick to the rate hikes it signalled at its latest meeting: 50bp in November, 25bp in December. There is some room for a hawkish surprise, but FX implications are small. EUR/SEK Current spot: 10.95 • Riksbank Governor Stefan Ingves recently said the Bank must keep a comfortable distance to the ECB with rate hikes, not least because the Bank is explicitly seeking a stronger krona. • In practice, rate hikes may still prove largely ineffective to strengthen the krona given the challenging risk environment. Slowing the pace of FX reserve-related SEK selling could actually do more to help SEK, but the central bank has signalled reluctance here. • There is an elevated risk that EUR/SEK breaks above 11.00 before the end of the year as the energy crisis deepens and risk assets remain pressured. We look for a gradual 2023 recovery in SEK, but the timing remains highly uncertain. EUR/DKK Current spot: 7.4383 • For the first time in 2022, Danmarks Nationalbank jumped back into the currency market, selling DKK 23bn to weaken Denmark’s krone in September. This is half the size of the last FX intervention (47bn in December 2021). • For now, it looks like DN will stick to replicating the size of ECB rate increases and intervening to support EUR/DKK. However, we expect more EUR weakness into the winter and this may start to cast doubt over the sustainability of FX intervention. • We still see a non-negligible risk that DN hikes rates by less than the ECB (10bp would be a start) in one of the coming meetings. This risk is likely higher if the ECB sticks to large hikes. This article is a part of a report by ING Economics available here. Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
EUR/USD Pair: The Bulls Might Remain Inclined To Be Back In Control

The Eurozone Economy Looks Worse Than The American One

InstaForex Analysis InstaForex Analysis 16.10.2022 09:43
Trading in the financial markets in the second half of the year is pure pleasure. The stock indices of the US and EURUSD step on the same rake with enviable frequency, counting on a dovish reversal where it does not even exist. Even the acceleration of US core inflation to 6.6% in September, the highest mark in 40 years, was seen as a command to euro fans. Where, where are you heading, fools? When the probability of a 75 bps hike in the federal funds rate in December jumps from 35% to 65%, and its ceiling rises from 4.5% to 5%, selling the US dollar is absolutely the wrong strategy. The US currency is enjoying well-deserved popularity in 2022 due to the aggressive tightening of the Federal Reserve's monetary policy and high demand for safe-haven assets due to recurrent stresses. Why get rid of it if the rate of monetary restriction is increasing, and there is no end in sight to the problems? The same crisis in the British debt market that has swept through global bonds in waves is far from over. Bond yield dynamics The government of British Prime Minister Liz Truss decided to turn it into a farce. They say that it is not the mini-budget that is to blame for the shocks, but the Bank of England, which raised rates more slowly than the Fed. In fact, as European Central Bank President Christine Lagarde says, during a period of monetary policy normalization, care must be taken to shift the focus of fiscal policy towards measures that keep debt sustainable. And what about Germany, which has announced a €200 billion stimulus package to support households hit by the energy crisis? A new fire could break out in the eurozone debt markets. So it turns out that problems arise in the eurozone, and investors flee from them to America. This leads to the strengthening of the US dollar no less than the monetary policy of the Fed. Which, by the way, does not think to slow down. What did the financial markets come up with amid the acceleration of US inflation, but their next campaign against the Fed will most likely end in another fiasco. Of course, EURUSD's paradoxical rise in response to strong core inflation figures can be blamed on the "buy the dollar on the rumor, sell on the facts" principle, but smart people don't do that. They prefer to wait until the bears throw away the ballast, unsure of the continuation of the downward trend of traders, and then move down again. In the end, nothing has changed. The eurozone economy looks worse than the American one, the Fed is already wrapping up the balance sheet, while the ECB is going to start doing this only in 2023, the armed conflict in Ukraine is not over, and there is no end in sight to the energy crisis. Technically, on the EURUSD daily chart, the bulls are trying to start a correction. Their failure to do so will result in the pair closing below the moving average near 0.978. If this happens, the euro will need to be sold on a break of the fair value of 0.97.   Relevance up to 15:00 UTC+2 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/324375
The Markets Still Hope That The Fed May Consider Softer Decision

The Double-Digit Inflation In The Eurozone Is Here! (European CPI)

Kamila Szypuła Kamila Szypuła 16.10.2022 11:21
After a hot US inflation report, the focus shifts in the coming week on the inflation result in the euro zone. The figures are published by Eurostat, the statistical office of the European Union. This reading is specific because we see the results for the euro area and not for the whole union. Previous data Inflation has been in an upward trend since the beginning of the year. At first, it went down a tenth of a percent. March grew rapidly by 1.7%, largely due to the start of the war in Ukraine. Later it increased successively, until in August it exceeded the threshold of 9.0%. The euro area annual inflation rate was 9.1% in August 2022, up from 8.9% in July. A year earlier, the rate was 3.0%. European Union annual inflation was 10.1% in August 2022, up from 9.8% in July. The result for the European Union was higher than for the euro area, because in the union there are more countries that have an impact on the final result. The lowest annual rates were registered in France (6.6%), Malta (7.0%) and Finland (7.9%). The highest annual rates were recorded in Estonia (25.2%), Latvia (21.4%) and Lithuania (21.1%). We can observe that the highest inflation results appeared in the countries of Eastern Europe, especially Baltic countries. These countries are closest to Russia and Ukraine, where war is currently being fought, and economically they will suffer the most from it, including high inflation. Source: eruostat.eu Forecast In the euro area, inflation is expected to reach 10.0% Due to the tense situation on the European gas markets, the experts also maintain their forecast of a recession in the euro area. However, the economic slowdown is supposed to be mild. In August, the highest contribution to the annual euro area inflation rate came from energy. It is forecasted that the last quarter of this year will be energy-hard for Europe. For this reason, we can assume that it is the energy sector that will play an important role in the rise in inflation. The price increase in this sector will be significant. According to Eurostat on its Twitter account, energy prices increased by + 40.8%. Another sector that will see significant growth is food, alcohol & tobacco + 11.8%. The prices of many commodities - crucially including food - have also been rising ever since COVID-19 pandemic lockdowns were first introduced two years ago, straining global supply chains, leaving crops to rot, and causing panic-buying in supermarkets. The war in Ukraine again dramatically worsened the outlook, as Russia and Ukraine account for nearly a third of global wheat and barley, and two-thirds of the world's exports of sunflower oil used for cooking. The smallest increase will be in other goods + 5.6% and services + 4.3%.   Euro area #inflation up to 10.0% in September 2022: energy +40.8%, food, alcohol & tobacco +11.8%, other goods +5.6%, services +4.3% - flash estimate https://t.co/6PNYzrCwCS pic.twitter.com/NlnZGeoewp — EU_Eurostat (@EU_Eurostat) September 30, 2022 In the euro area, Estonia will still have the highest inflation (24.2%) and the lowest in France (6.2%). As we can see, the prospects for European economies are bleak. Moreover, with Europe driving up prices, gas is becoming too expensive in other parts of the world.
Short-term analysis - Euro to US dollar by InstaForex - 31/10/22

ING Economics Think Inflation Is Already There In The Eurozone. Q3 GDP May Decline By 0.2%

ING Economics ING Economics 17.10.2022 12:34
Looking at all the evidence available so far, it looks like the eurozone fell into a shallow recession in the third quarter. For the European Central Bank, this is unlikely to be enough to prompt an immediate dovish pivot given its determination to hike interest rates in the face of double-digit inflation. We still expect another 75bp hike in October   A recession in the eurozone has now become the near-consensus view, with the IMF being the latest international institution to predict a contraction in the eurozone economy in 2023. The only question seems to be how severe this winter recession will be and when it will start. We take a look at whether the economy actually started to shrink in the third quarter. Soft data suggests that a recession is likely to have started During the pandemic, we developed a nowcast indicator that gave us insight into how the eurozone economy was performing during lockdowns. While it was designed to perform well in the specific circumstances of the pandemic, there is merit in looking at it once again. The big caveat is that electricity use is an important driver of the index, which has of course been subject to large productivity gains as the energy crisis has unfolded. Nevertheless, we see that the direction for most underlying variables is slightly negative at the moment, corresponding to a view that the economy fell into a mild contraction at the end of the third quarter. Nowcast tracker suggests that activity has been moderately declining recently For more on how this index is constructed, read here: https://think.ing.com/articles/introducing-the-ing-weekly-economic-activity-index-for-the-eurozone/ Source: ING Research   Mobility indicators are an important part of the nowcast index. When the economy reopened earlier in the year, we saw a strong increase. But except for workplace activity, most mobility indicators normalised during the spring and have remained at these levels over the course of the third quarter. Our average of the Google mobility indicators shows that the second quarter still saw large mobility gains, while the third quarter was flat. While seasonal factors may understate the performance in this regard, it does seem fair to assume that most, if not all, of the post-lockdown rebound is now behind us. Adding to meagre nowcast data, surveys suggest that a recession is likely to have started already. The composite PMI was below 50 – signalling contraction – for all three months of the third quarter. In fact, it gradually worsened as the quarter progressed, with September showing more serious signs of contraction as the summer months ended. Both services and manufacturing activity are now well below 50. This is a broader indicator of activity, which adds to signs that a shallow recession began in 3Q. Still, some evidence from data not collected from surveys would be useful so as not to miss out on positive surprises. Retail sales are weak and tourism is not expected to make up for it When looking at consumer spending, we see a clear downward trend in retail sales. November last year was the recent peak in sales activity after which a steady decline set in. This is because of the sharp decline in purchasing power that households have experienced since then, but will also be related to the reopening of certain services. With people returning to restaurants and bars and starting to take holidays again, spending patterns have shifted away from goods. The latter seems to be a smaller part of this though. As chart 2 shows, people are spending more than ever in retail, but volumes are down. So the impact of inflation is that people are forced to spend more and more at the store but take home less for it. Interestingly, car sales have been increasing in August, coming from a very low base. Consumers pay more in retail, but take home lower volumes than late last year Source: Eurostat, ING Research   The ECB put a lot of emphasis on the positive impact of tourism on third-quarter growth. This is a bit of a blind spot in terms of more frequent data and could indeed add to positive activity this quarter. Looking at overnight stays in the eurozone, we see that July and August were very close to pre-pandemic levels which suggests continued 3Q strength, but businesses are less optimistic. Surveys suggest that the peak in tourism activity was in June and that the summer may have slightly disappointed. Still, tourism is likely to have added positively to the third quarter GDP growth number. All in all though, it looks like the summer was not strong enough to have kept consumption growth positive overall. Industry limits losses so far due to improving supply chains, but trend is down When looking at industry, we see a divergence between the survey and hard data so far. While surveys suggest a sizable weakening in activity, August data was better than expected. It seems that the improvement in supply chain problems and the availability of inputs to production are allowing businesses to catch up on backlogs of orders. Still, new orders are falling and survey data suggests a weaker September. Particularly in energy-intensive sectors, production seems to have dropped again in September. The German statistical office has started to release a new times series for energy-intensive industry, showing that production in these sectors dropped by more than 8% between February and August. If September was indeed weaker than August, industrial production will have been negative on the quarter, adding to expectations that the economy was already in a shallow contraction in 3Q. Production recovered a bit in August, but energy-intensive sectors look problematic in September Right chart shows total manufacturing and the most energy-intensive sectors Source: Eurostat, Macrobond, European Commission DGECFIN, ING Research   Interestingly enough, trade is very difficult to judge at the moment. Data on volumes is hard to come by and strongly rising prices for energy have caused nominal imports to soar. It looks like real export growth weakened over the summer, but imports could have fallen even more as energy is such an important component and energy use is down due to high prices. This means that net exports could have actually contributed positively to GDP growth last quarter. If this makes growth positive, it would mean that a recessionary environment saw positive growth. Just as the US went through a technical recession in the first half of this year when the economy contracted but no real signs of recession were visible, so the eurozone could be in a technical expansion, where the economy expands in a recessionary setting. Contraction in 3Q, but no smoking gun for a dovish pivot from the ECB Taking this all together, we find enough weakness in recent data to believe that a recession has already started and stick to our forecast of a -0.2% quarter-on-quarter contraction in 3Q. But shallow negative growth – still held up by temporary recovery factors – is also unlikely to give the ECB the smoking gun for a dovish pivot. In fact, at the next ECB meeting on 27 October, there won’t be any new staff projections, nor will there be hard data for September, allowing the ECB to announce another hike by 75 basis points. It will take until the December meeting before the ECB has a better view on the severity of the recession, which should then be enough to embark on a dovish pivot. Read this article on THINK TagsGDP Eurozone ECB Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Britain's Rishi Sunak And EU's Ursula Von Der Leyen Will Meet Today To Finalize The Northern Ireland Drama

The Euro To British Pound (EUR/GBP) Cross Gets Support From Another Factor

TeleTrade Comments TeleTrade Comments 18.10.2022 08:34
EUR/GBP seesaws between tepid gains/minor losses through the Asian session on Tuesday. The UK political uncertainty undermines the British pound and offers support to the cross. A weaker USD benefits the shared currency and also contributes to limiting the downside. The EUR/GBP cross struggles to capitalize on the overnight bounce from its lowest level since early September and oscillates in a narrow trading band on Tuesday. The cross is currently placed in neutral territory, around mid-0.8600s, as traders await a fresh catalyst before positioning for the next leg of a directional move. The downside, however, remains cushioned, at least for now, amid the UK political uncertainty, which continues to act as a headwind for the British pound. In fact, rebels within the ruling Tory Party are coming together to replace the newly-elected UK Prime Minister Liz Truss in the wake of the recent tax cut fiasco. It is worth recalling that the new UK Finance Minister Jeremy Hunt reversed almost all tax measures set out in the mini-budget led to chaos in the financial markets. The shared currency, on the other hand, draws some support from the prevalent selling bias around the US dollar. This is seen as another factor offering some support to the EUR/GBP cross. That said, soaring bets for a bigger 100 bps rate hike by the Bank of England (BoE) in November offer some support to sterling and keep a lid on any meaningful upside for the cross. This, in turn, warrants some caution for aggressive traders and positioning for a firm intraday direction. The market focus now shifts to the latest UK consumer inflation figures, due for release on Wednesday. The data will influence BoE rate hike expectations and drive the British pound. Traders will further take cues from the final Eurozone CPI prints, which might further contribute to providing some meaningful impetus to the EUR/GBP cross.
The German Purchasing Managers' Index, ZEW Economic Sentiment And More Ahead

The Economic Outlook In Euroland And Germany Is Getting Worse

Kamila Szypuła Kamila Szypuła 18.10.2022 10:21
Today the market will be calmer as I do not have very important data that could be confusing. Mainly, the eyes of traders will be focused on the results of the ZEW Economic Sentiment in Germany and in Euroland as well as the statements of bank criminals in these regions. From the American economy, we are only waiting for the report on Industrial Production. The Reserve Bank of Australia (RBA) events As the day started, events from Australia arrived. The first event took place at 2:05 CET, and it was a speech. The speaker was Michele Bullock, who is an Assistant Governor of the Reserve Bank of Australia. Her public engagements are often used to drop subtle clues regarding future monetary policy. The RBA minutes provide a detailed record of the discussions held between the RBA’s board members on monetary policy and economic conditions that influenced their decision on adjusting interest rates and/or bond buys, significantly impacting the Australian Dollar (AUD). ZEW Economic Sentiment German ZEW Economic Sentiment According to the report on the six-month economic outlook, the mood is currently pessimistic. Another decline is projected from -61.9 to -65.7. Since March, the indicator has been below 0, which means negative results. In June it looked like the situation could improve, but the next results quickly showed that it was a temporary change and that the downward trend has been consistently maintained since then. Source: investing.com Eurozone ZEW Economic Sentiment In the euro zone, the outlook is also negative. It is expected to drop from -60.7 to -61.2. Contrary to Germany, the situation in the euro zone deteriorated only in May. The downward trend has continued since then. The higher results than the German index are due to the fact that 19 Member States have an influence on the European one. Source: investing.com Speeches Also today, representatives of the central banks of Europe and Germany will take the floor. The speeches will be held in the evening. The first one at 18:00 CET and the speaker will be a member of the Executive Board of the European Central Bank, Isabel Schnabel. One hour later at 19:00 CET, Joachim Nagel, who is Deutsche Bundesbank President and voting member of the ECB Governing Council, will speak. Canada Housing Starts The annualized number of new residential buildings that began construction during the reported month will published today. It is expected to drop to 263K from 267.4K. At the beginning of the year, the trend was exemplary, with the highest level recorded in May (287.3K). After this reading, the trend changed to a downward trend. The positive fact is that since the April reading the result was higher than expected. Source: investing.com Canada Foreign Securities Purchases The overall value of domestic stocks, bonds, and money-market assets purchased by foreign investors in Canada is expected to increase compared to the previous month. Canada Foreign Securities Purchases is expected to reach 17.32B. Purchase by foreign investors will provide new money to the Canadian economy and will also demonstrate its attractiveness. During the year, the appearance of the indicator varied considerably. At the beginning of the year it was in a downward trend, then the readings for January and February were downward. After these negative results, the highest reading was recorded at 46.94B. This very positive result was followed by a shift to a downward trend. A rebound after a negative reading in June could mean an improvement. US Industrial Production There are no forecasts for the change in the total inflation-adjusted value of output produced by manufacturers, mines, and utilities. Observing the last result, the trend is downward, and the last reading was 0.13% lower than the previous reading (3.81%). We can only expect it to decline slightly. Summary 2:05 CET RBA Assist Gov Bullock Speaks 2:30 CET RBA Meeting Minutes 11:00 CET German ZEW Economic Sentiment (Oct) 11:00 CET ZEW Economic Sentiment (Oct) 14:15 CET Housing Starts (Sep) 14:30 CET Foreign Securities Purchases (Aug) 15:15 CET US Industrial Production 18:00 CET ECB's Schnabel Speaks 19:00 CET German Buba President Nagel Speaks Source: https://www.investing.com/economic-calendar/
Mexico’s Central Bank Surprised Markets With A 50bps Rate Hike Once Again

Mexican Peso (MXN) Positions May Fall Further | The GBP/USD Pair Is Struggling To Gain Confidence In The Market

ING Economics ING Economics 18.10.2022 11:11
A reversal in UK fiscal policies, some stability in equity markets, and a dip in European energy prices point to a further corrective period in FX markets. The dollar could weaken a little further, but the core bull trend should remain intact In this article USD: Corrective forces may dominate short term EUR: Terms of trade go into reverse GBP: Don’t chase sterling higher MXN: Interesting carry USD: Corrective forces may dominate short term Measures of the trade-weighted dollar index are around 2.5% off their highs of the year. The correction has nothing to do with any softening of Federal Reserve tightening expectations. Here the market firmly expects the Fed to hike 75bp on 2 November and prices a terminal rate as high as 4.90% next spring. Instead, we would say three factors are behind this current dollar correction. The first is the reversal in UK fiscal policy. The much-maligned policy that garnered criticism at the IMF meetings has been largely reversed. This has brought some calm to global bond markets (Gilt instability had been dragging US Treasuries lower). Our rates strategy team does not see UK 10-year Gilt yields racing a lot further under 4.00%, though reports of the Bank of England delaying the start of its quantitative tightening Gilt sales programme should be helpful. Equally, it may be too early to expect US 10-year Treasury yields to drop back to the 3.75% or 3.50% area if the market is still searching for the top in Fed funds near 5%. The second factor is global equity markets. It is very early days, but the MSCI world equity index is now 5% above last week's lows, with the S&P 500 rallying another 2.6% yesterday. Global asset managers, positioned very underweight equities and overweight cash, could be putting money to work and are wary of the seasonal factors, where the S&P 500 index has rallied in nine of the last ten Novembers. How far the equity rally continues remains to be seen - but so far 3Q US earnings have been encouraging (only 29% of those reporting so far have missed on expected sales numbers, with only 24% missing on earnings). And the third factor is energy. European gas prices continue to sink on warmer weather and European gas storage facilities being largely full. Lower gas prices are allowing a drop in electricity prices, where German one-month forward power prices are just 50% above early June levels, compared to being three times higher in late August. The drop in energy prices is reversing the negative income shock that hit energy importers over the summer and reduces the dollar's advantage. A quiet week for US data could see the dollar correction extend a little. High beta currencies which trade on higher implied volatilities, eg AUD, NZD, NOK, SEK and possibly GBP may outperform during this period. And the case could be made for DXY heading back to 110 (another 2% drop). But a core view of not just the Fed, but other central banks hiking into a looming recession should mean that the core dollar bull trend remains intact. Chris Turner  EUR: Terms of trade go into reverse EUR/USD went under parity in late August largely driven by the negative terms of trade shock of higher energy prices. That energy shock is temporarily going into reverse as European gas prices drop sharply on the warmer weather and European governments having largely achieved their gas storage targets. It would thus be churlish of us to suggest that EUR/USD does not need to rally. A quiet week for US data (just soft US housing) and the conditions we outlined above, therefore, create a corrective window for EUR/USD, where an obvious target is the top of this year's bear channel at around the 0.9980/1.0000 area. We would assume that this continues to hold the correction.  Elsewhere today we have the German ZEW investor survey, which should continue to decline.  And we also have some ECB speakers in Gabriel Makhlouf (1540CET) and Isabel Schnabel (1900CET). The core ECB message at the moment seems to be the need to get the policy rate (deposit rate now 0.75%) as quickly as possible to 2% and then take stock from there. Chris Turner GBP: Don’t chase sterling higher As new UK Chancellor Jeremy Hunt carefully claws back all the fiscal giveaways offered in late September, the question is how far should sterling now rally? Taking the UK sovereign credit default swap as a benchmark for levels of UK fiscal anxiety, one could mark out dates around mid-September (GBP/USD at 1.15) and the third week in August (1.18) as possible targets – representing brief periods of stability before Trussonomics hits home. While there may be some more fiscal positives to come were the Conservatives to look at a windfall tax on the energy companies, we suspect cable will struggle to sustain gains over 1.15 this month. News that the UK government is shortening the period of the Energy Price Guarantee to six months from two years may not be greeted well by the consumer and also raises the prospect of UK inflation staying higher for longer. Equally, the Fed terminal rate has been priced close to 100bp higher over the last month. We think higher US real rates have contributed to the size of the sell-off in UK asset markets. There are no signs that the Fed wants to reverse this rise in real interest rates anytime soon. And one month GBP/USD implied volatility (now at 16% versus a peak near 22% in late September) may struggle to return to pre-crisis levels of 12% - confirming that trust is hard won and easily lost. Chris Turner MXN: Interesting carry Given the prospects of a brief corrective period in the dollar, interest may return to the carry trade. The highest available carry in the FX space can be found in Eastern Europe (Hungarian forint one month implied yields pay a staggering 16.5% per annum) and also the Latam currencies. However, we think Central and Eastern European FX still carries a lot of risks currently. The Mexican peso also has an attractive carry, with one-month implied yields are 10.2%. Banxico continues to move in lock-step with the Fed. Whilst investors could miss out on some larger nominal appreciation elsewhere, Mexican peso positions may have lower draw-downs if things went wrong. Spot USD/MXN could even make a run to 19.80 as well. Chris Turner Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Mexican Rate Spread: Tight vs. Central Bank's Rate Spread and Implications for Dis-inversion

The EUR/GBP Pair Has A Chance To Break Above The Steep Downward Trend Line

Saxo Bank Saxo Bank 18.10.2022 11:28
GBPUSD is once again testing long term pivot around 1.14. Seems like it has trouble breaking above.EURGBP is set to rebound from supports and has 0.90 in sight  GBPUSD is touching the Pivot at around 1.14 as mentioned in earlier analysis: https://www.home.saxo/content/articles/forex/ta-gbpusd-multi-decade-cycles-30092022  If GBPUSD breaks above 1.15 there is room up to around 1.1738. However, 55 SMA is coming down indicating underlying sentiment is declining and RSI is still below 60 threshold and must close above to reverse that. . GBPUSD slides back and RSI drops back below 40 last week’s lows at around 1.0922 is likely to be tested but lower levels are quite likely to be seen . EURGBP is bouncing off 100 SMA around 0.8571 support, now back above 55 SMA. RSI has bounced off its 40 Threshold and sentiment is still positive indicating EURGBP could rebound further from here. If EURGBP breaks above the steep falling trendline minor resistance at 0.8867 is likely to be tested.First sign of this scenario to play out is likely to be RSI breaking above its falling trendline. Keep an eye on that to occur.If EURGBP on the other hand, breaks below 0.8570 and RSI closes below 40 it is likely to reverse the scenario and EURGBP to drop further to 0.8450-0.8350. Source: https://www.home.saxo/content/articles/forex/ta-gbpusd-eurgbp-18102022
Britain's Rishi Sunak And EU's Ursula Von Der Leyen Will Meet Today To Finalize The Northern Ireland Drama

The Euro To British Pound Pair (EUR/GBP) Are Not Targeting The Bulls

TeleTrade Comments TeleTrade Comments 19.10.2022 08:56
EUR/GBP steps back from weekly top, grinds lower of late. Bearish MACD signals, steady RSI favors the sellers. Ascending trend line from August, 100-DMA restricts immediate downside. EUR/GBP holds lower ground near 0.8690 as traders keenly await inflation data from the UK and Eurozone heading into Wednesday’s European session. In doing so, the cross-currency pair takes a U-turn from the downward-sloping resistance line from September 26, around 0.8710 by the press time. In addition to the immediate trend line resistance, the bearish MACD signals and the steady RSI keeps EUR/GBP bears hopeful. However, the 2.5-month-long upwards-sloping support line, near 0.8690, appears a tough nut to crack for the pair sellers. Additionally, the 100-DMA support of 0.8585 also acts as the last defense of the EUR/GBP buyers, a break of which could drag the quote towards September’s low near 0.8565. On the contrary, an upside break of the 0.8710 trend line resistance isn’t an open invitation to the EUR/GBP bulls as the 21-DMA level of 0.8775 also acts as a short-term resistance. Should the pair remains firmer past 0.8775, the monthly high near 0.8865 and the 0.8900 threshold could challenge the pair buyers. Overall, EUR/GBP remains on the bear’s radar but the downside remains elusive until the quote stays beyond .8585. EUR/GBP: Daily chart Trend: Further weakness expected
Wage agreement may be game-changing in a way. First meeting of the new BoJ Governor Ueda takes place on April 28th

A Member Of The Board Of The Bank Of Japan Believes That Inflation May Accelerate

TeleTrade Comments TeleTrade Comments 19.10.2022 09:13
The Bank of Japan (BOJ) board member Seiji Adachi is back on the wires this Wednesday, noting that “recent yen fall are very rapid,” which “could heighten uncertainty for firms planning capex.” Additional comments “Japan's consumer inflation may accelerate quite rapidly in Oct.” “Japan's inflation to remain high for some time early next year.” “Don't see immediate need to take additional steps to address worsening functioning of JGB market.” Market reaction These comments have little to no impact on the Japanese currency, as it resumes its drop versus the US dollar in early Europe. The pair is trading modestly flat at around daily highs of 149.30, as of writing.
The EUR/JPY Pair Is Expected To Start A New Zig-Zag Correction

Warnings From Japanese Officials About The Intervention Kept Investors Aside

TeleTrade Comments TeleTrade Comments 19.10.2022 09:18
EUR/JPY has pursued consolidation ahead of possible BOJ intervention. Japan officials have warned risks of deflation due to global demand shock. According to a Reuters poll, the ECB is set to announce a 75 bps rate next week. The EUR/JPY pair is hanging around 147.00 after a mild correction from a fresh seven-year high at 147.25. The asset is expected to pursue a rangebound structure as investors are awaiting fresh developments on the Bank of Japan (BOJ)’s intervention plans in the currency market to support yen against speculative forex moves. Continuous warnings from Japan’s officials of potential intervention have kept investors on the sidelines as the supportive move for Japan will trigger volatility in the yen-linked FX pair. Chatters over possible BOJ’s intervention heated after the Japanese yen fell to its record lows near 150.00 against the dollar in the past 32 years. On Wednesday, Japan’s Finance Minister Shunichi Suzuki, and BOJ’s Governor Haruhiko Kuroda crossed wires, citing that Japan's economy is vulnerable to external demand shock, which could tip it back to deflation. This clears the fact that the concept of policy tightening is far from thought. This week, Japan’s Consumer Price Index (CPI) data will remain in the spotlight. As per the projections, the headline CPI could move to 3.1% vs. the prior release of 3.0%. While the core CPI could accelerate to 2% against the former print of 1.6%. On the Eurozone front, the odds for a bigger rate hike by the European Central Bank (ECB) are skyrocketing. A Reuters poll on ECB’s rate hike extent states that ECB President Christine Lagarde will step up the interest rates by 75 basis points (bps) on October 27. As the European Harmonized Index of Consumer Prices (HICP) is trading at 5x than the targeted rate of 2%, efficiency in policy tightening is highly required.
The Markets Still Hope That The Fed May Consider Softer Decision

Eurozone CPI Inflation Came in Lower Than Expected

Rebecca Duthie Rebecca Duthie 19.10.2022 13:11
Summary:  Eurozone CPI inflation came in lower than expected. CPI inflation drops for the first time since May 2022. Initial market reactions. The Eurozone CPI inflation  The market had originally forecasted a CPI (YoY) inflation of 10% for the Eurozone, the actual figure came in at 9.9%, missing market expectations slightly. This could indicate to the market that the European Central Bank should continue its interest rate hiking cycle.  The falling inflation during September marks the first drop in Eurozone CPI inflation since May 2022. The falling inflation could provide the European Central Bank with an incentive to continue on their hawkish interest rate hiking path.  Effect of the CPI inflation data When the European Central Bank meets again at the end of the month, it is anticipated that it will boost its benchmark interest rates by an additional 75 basis points, adding to the total number of rises announced since July of 125 basis points. However, the Euro Area is predicted to "stagnate later in the year and in the first quarter of 2023," and the fear of a weakening economy may induce the central bank to implement lower rate increases over the following months. With the U.K. inflation figures, concerns that central bank tightening may cause a worldwide downturn have reemerged, reversing the previous upbeat feeling brought on by solid earnings reports and dissipating concerns about systemic risk from Britain's debt markets. The U.K’s hotter than expected inflation figure has also put pressure on the markets. In addition, the European economy has been weighed down by the conflict between Russia and the Ukraine, and the looming energy crisis. The Initial market reaction in the wake of the softer than expected CPI inflation data saw the Euro weaken against both the US Dollar and the Pound sterling. The initial market reaction saw both the HSBC shares and the iBEX index rise. Sources: finance.yahoo.com, marketsummary.com, ft.com, investing.com
The EUR/USD Pair Is Showing A Potential For Bearish Drop

Eurozone Inflation Hits 9.9%, It's The Highest Level In More Than 25 Years!

Conotoxia Comments Conotoxia Comments 19.10.2022 15:26
While consumer inflation seems to be slowing down in the United States, looking at the CPI measure, the opposite is true in the Eurozone or the United Kingdom. Price growth continues to accelerate, according to data released today. What is the inflation rate in Europe? The annual inflation rate in the eurozone rose to 9.9 percent in September 2022, up from 9.1 percent a month earlier. This is the highest inflation rate since measurements began in 1991. Inflation has thus moved further away from the European Central Bank's 2 percent target, which may cause policymakers to continue tightening monetary policy despite the risk of recession. The main upward pressure for eurozone prices came from the energy sector (40.7 percent versus 38.6 percent in August), followed by food (11.8 percent versus 10.6 percent), services (4.3 percent versus 3.8 percent) and non-energy industrial goods (5.5 percent versus 5.1 percent). Annual core inflation, which excludes volatile energy, food, alcohol and tobacco prices, rose to 4.8 percent in September. On a monthly basis, consumer prices rose 1.2 percent, Eurostat reported. Source: Conotoxia MT5, EUR/USD, H4 Prices in the UK are also rising The UK's annual inflation rate rose to 10.1 percent in September 2022 from 9.9 percent in August, returning to the 40-year high reached in July and beating market expectations of 10 percent, trading economics reported. The biggest contributor to the increase was food, which became more expensive by 14.8 percent. Costs also rose sharply for housing and utilities, as they rose by as much as 20.2 percent, mainly, due to soaring electricity or gas prices. In contrast, core inflation on an annualized basis, which excludes energy, food, alcohol and tobacco, rose to a record 6.5 percent, compared to expectations of 6.4 percent, according to data from the Office for National Statistics. Source: Conotoxia MT5, GBP/USD, H4 High inflation in Europe - central banks with no way out? High inflation may not give much room for further action by central banks in the context of executing the so-called pivot, i.e. a turnaround in the current monetary policy, which consists mainly of interest rate hikes. Further price increases could seal further interest rate hikes in the Eurozone or the UK, which in turn could affect household budgets, but also company valuations. Daniel Kostecki, Director of the Polish branch of Conotoxia Ltd. (Conotoxia investment service) Materials, analysis and opinions contained, referenced or provided herein are intended solely for informational and educational purposes. Personal opinion of the author does not represent and should not be constructed as a statement or an investment advice made by Conotoxia Ltd. All indiscriminate reliance on illustrative or informational materials may lead to losses. Past performance is not a reliable indicator of future results.
The EUR/USD Pair: There Are Still No Sell Signals

It's Unbelievable That Eurozone Inflation Is That Close To The Level Of 10%

ING Economics ING Economics 19.10.2022 15:48
The final estimate of eurozone inflation has been adjusted down from 10% to 9.9%. When looking at the details there's little to be optimistic about. But the chances of peak inflation happening soon are increasing Monthly developments in inflation are concerning Inflation of 9.9% in the eurozone in September marks a huge jump from the 9.1% seen in August. We discussed our first thoughts on the reading here. Now that more detail has been released, let’s see whether there are any positive signs of inflation turning around. Let’s look at monthly developments, which we judge on a seasonally-adjusted basis to allow for month-on-month comparisons (seasonal adjustments are our own). The one bright spot was goods inflation, which fell on a seasonally-adjusted monthly basis from 0.8% to 0.3%. Other than that, jumps in services and food inflation stand out. Energy inflation continues to be too high as well, so the broad conclusion is that inflation remains far too high across all broad categories. Monthly inflation came in hot again as most categories saw prices grow faster than in August Seasonal adjustment from ING Research Source: Eurostat, Macrobond, ING Research   Looking somewhat deeper under the hood, we see that the jump in September was mainly driven by the end of the German €9 ticket for public transport as most other services saw stable price growth compared to last month. Package holidays’ inflation was elevated over the summer but dropped back in August and September, while other categories have been fairly stable (albeit at rates that are far too high). So, next month is likely to see slower services inflation on a monthly basis. Services inflation was driven by the reversal of the €9 public transport ticket in Germany Seasonally adjusted by ING Research Source: Eurostat, Macrobond, ING Research It's far too early to call peak inflation, but chances of a peak soon are increasing Energy inflation saw another uptick in both fuel and electricity and gas categories on a monthly basis due to the bounce back in oil prices and pass-through to the consumer of the August peak in gas prices. For the months ahead, the energy price declines of recent weeks are very welcome for the overall economy, but the question is how quickly that feeds through to consumer prices. Do expect some relief of course as year-on-year growth in spot prices for natural gas has turned negative this month, while it was still 192% in September and 425% in August. We also see declining futures prices, albeit at a slower pace. Annual growth in fuel prices is also steadily dropping, from 15% in September to 11% in October. Energy inflation remains high, but drop in market gas prices should provide some relief Base effects will be more favourable in October and November. The monthly increase in the index last year was strong at 0.7% and 0.8%, which will drop out of the calculations this month. That should add to some relief. But on the other hand, steady increases in food and core inflation are unlikely to be reversed quickly so not too much is expected from the upcoming inflation reading. While we see encouraging news from the energy side, there is too much uncertainty about key drivers of price, such as geopolitical developments and weather, to call peak inflation at this point. Also, core inflation drivers show only modest improvements at this point, so we’re cautious about an immediate peak there too. Still, the current improvements on the energy side should provide some relief for the moment and as strong base effects are fading and price caps are discussed, chances of an inflation peak soon are increasing. Read next: Apple’s New Products | Goldman Sachs’ Results | In Amazon Rejected A Unionization| FXMAG.COM Read this article on THINK
Euro to US dollar - Ichimoku cloud analysis - 21/11/22

ECB Is Said To Hike The Rate By 75bp Next Week, But The Decision Isn't Everything

ING Economics ING Economics 20.10.2022 09:24
A 75bp hike looks like a done deal but the European Central Bank has a lot on its plate at its October meeting. Quantitative Tightening talks are premature but it will seek to mop up bank liquidity. Rates, sovereign and money market spread upside dominates with the 10Y Bund set to test 2.5%. None of this should be enough to support the EUR President of the European Central Bank (ECB) Christine Lagarde Source: Shutterstock Too optimistic growth forecast no obstacle to a 75bp hike When the ECB meets again next week, it looks as if the entire Governing Council could start humming the old Depeche Mode song “I just can’t get enough” as a choir. The hawks have clearly convinced the few doves left of the necessity to go big on rate hikes again. Contrary to the run-ups to the July and September meetings, there hasn’t been any publicly debated controversy on the size of the rate hike. In fact, ECB President Christine Lagarde seems to have succeeded in disciplining a sometimes very heterogeneously vocal club. The hawks have clearly convinced the few doves left of the necessity to go big on rate hikes again The economic backdrop of next week’s meeting has hardly changed from September. Confidence indicators have continued to drop, while hard data points at a very mild contraction of the eurozone economy in the third quarter. If anything, the ECB’s September growth projections that looked already very optimistic six weeks ago have become even less likely. Needless to say that the outlook for the eurozone economy is surrounded by an extremely high degree of uncertainty. The precise pass-through of higher energy and commodity prices on growth and inflation and the precise fiscal policy reaction are crucial but also very unclear determinants of eurozone growth and inflation in the coming months. A lot on the ECB's plate besides hikes At the current juncture, the ECB has turned a blind eye on recession risks but is highly determined to bring down inflation and inflation expectations. To this end, it is hard to see how the ECB cannot move again by 75bp at next week’s meeting. As the 75bp rate hike looks like a done deal, all eyes will also be on other, more open, issues: excess liquidity, quantitative tightening and the terminal interest rate. As regards excess liquidity, this seems to be the most pressing topic for the ECB and a solution could already be announced next week. Basically there are two possible options: reinstating a tiering multiplier or an ex post change of the terms of the targeted longer-term refinancing operations (TLTROs) in order to trigger early repayments. We think that reinstating a tiering multiplier would be the easiest option. Changing the TLTRO terms could hit the ECB’s credibility and would lead to reluctance of banks to ever make use of the TLTROs in the future again. As regards quantitative tightening, we think that markets have got ahead of themselves. Even if the discussion might have started at the ECB, with current financial stability risks, the recent UK experience and a very uncertain macro outlook, QT is still some way out. Christine Lagarde mentioned several times that interest rates would first have to be brought to their normal or neutral levels before any QT could start. Any QT would rather be an end to reinvestments than actively selling bonds. As we still see that end of the ECB’s rate hike cycle in the first quarter of next year, a gradual phasing out of the reinvestments under the Asset Purchase Programme (APP) could start in Spring 2023, at the earliest. As regards the level of the terminal rate, French central bank governor Francois Villeroy de Galhau said in an interview with the Financial Times that the ECB could “go quickly” to a deposit rate of 2% by year-end. ECB chief economist Philip Lane made similar comments, indicating that the ECB currently sees the neutral interest rate slightly above the common range of between 1% and 2%. We don’t expect a clear communication on where the terminal interest rate could be but see a growing consensus at the ECB that at least the neutral rate is currently a deposit rate of around 2%. This fits into our ECB call of another 50bp rate hike in December and 25bp in February before pausing as there is a high likelihood that already at the December meeting the ECB’s inflation forecasts for 2024 and 2025 will point to a return to price stability. Interestingly, since the start of the year, the ECB surprised to the hawkish side at every single meeting. Next week’s meeting could be the first one without such a surprise as the ECB has finally managed to guide market expectations. A 75bp rate hike looks like a done deal and the reinstatement of a tiering multiplier could be the first answer to tackle excess liquidity. The ECB can simply not get enough of hiking rates aggressively. 10Y Bund and swap rates won't turn before inflation starts declining Source: Refinitiv, ING Rates: upside risk dominates for now High rates volatility, and the underlying uncertainty about the growth and inflation outlooks, don’t allow investors to focus on the long-term picture. We think there is sympathy with the view that the ECB’s hiking cycle will be stopped in its tracks by the looming recession, we doubt many market participants are able to position for it. All this is to say, near-term upside risk dominates and will dominate as long as investors haven’t seen tangible evidence of a downtrend in inflation. This puts 10Y Bund and EUR swaps within touching distance of 2.5% and 3.4% respectively before year-end. 10Y Bund and EUR swaps are within touching distance of 2.5% and 3.4% respectively before year-end With talk of QT, withdrawing bank liquidity, and front-loaded hikes, the ECB is piling risks on financial markets. The debacle in the gilt market in recent weeks should serve as a cautionary tale and is another reason for investor caution. Sovereign spreads have remained relatively stable in a context of elevated rates volatility and QT chatter, all this as Pandemic Emergency Purchase Programme (PEPP) bi-monthly data showed minimal market intervention in August and September. An accelerated timetable for QT would provide the impetus needed for the 10Y Italy-Germany spread to break above the fateful 250bp line. Even with all that’s going on in long-dated interest rates, the action will probably be in money markets after the meeting. Whatever option the ECB retains to cause a repayment of TLTRO loans, the result will at least be a reduction in liquidity and greater sensitivity of money market rates to credit and sovereign spreads. Tiering, the most likely of these options, could have longer-lasting effects, ranging from easing collateral pressure in the best of cases, to differentiated pass-through of interest rates if not designed properly. Money market and sovereign spreads aren't pricing ECB balance sheet reduction yet Source: Refinitiv, ING A strong euro is a welcome – but unlikely – development While it’s true that the ECB has consistently surprised on the hawkish side in the past few meetings, the positive impact on the euro have been null. As shown in the table below, EUR/USD mostly weakened in the six hours following the last five ECB announcements.   Source: ING, Refinitiv We doubt there will be much support to the euro after the October announcement, even if the ECB attaches a hawkish message to a 75bp rate hike, as: 1) EUR/USD beta to short-term rate differentials has remained low; 2) markets have remained structurally pessimistic on the eurozone’s domestic outlook despite the recent drop in gas prices; and 3) the Fed’s hawkishness continues to fuel a strong dollar. Attempts by the ECB to lift the euro through more tightening should still be unsuccessful in the near term and we continue to target 0.92 as a year-end value in EUR/USD, with any upside correction proving only temporary. Read this article on THINK TagsInterest Rates Foreign exchange ECB meeting Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
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Europe's Fear Of A Social Crisis Is The Main Difference Between Ahe US And The Eurozone Strategy

TeleTrade Comments TeleTrade Comments 20.10.2022 09:30
The fight against inflation is much softer in the eurozone than in the United States because of the risk of a social crisis, analysts at Natixis report. The US government and central bank are not afraid of a social crisis “The US strategy is to rapidly reduce inflation, whatever the cost of this strategy (loss of household purchasing power, increase in unemployment), and this strategy can be implemented due to the lack of risk of a social crisis even if households suffer from this policy of rapid inflation reduction.” “The eurozone’s strategy is to reduce inflation very slowly, with the ECB hiking interest rates slowly and household purchasing power being boosted by fiscal deficits.” “The reason for this difference between the strategy of the US and the eurozone is fear in Europe of a social crisis if household purchasing power declines or if the unemployment rate rises.”
China: PMI positively surprises the market

People's Bank of China Loan Prime Rate Stays Unchanged | A Softer Labour Market In Australia |Eyes On The US - Philly Fed Manufacturing Index

Kamila Szypuła Kamila Szypuła 20.10.2022 10:56
This morning, reports from Asia and the Pacific appeared. Traders also are now looking at macro data from the US - Philly Fed Manufacturing Index, the usual weekly data on initial unemployment claims, and data on existing home sales. Japanese Trade Balance (Sep) Japan provided data on exports and imports, and thus on its balance sheet, at the start of the day. The current reading is positive and shows an improvement in the trading result. The current reading is higher than the pronosed -2.167.4B and is at the level of -2.094.0B. For more than a year, Japan has been importing more than exporting, and since May the situation has worsened significantly. The balance then decreased from the level of -842.8B to the level of -2,384.7B. In the following months, the result was above the level of 1,000.0B. This situation is unfavorable for the country, so the current positive reading has a significant impact on the Japanese currency (JPY). Source: investing.com This positive trade result was largely influenced by the positive export performance. The published report shows that exports increased from 22% to 28.9%. He was taller than expected. This is the lowest result during the year. Source: investing.com Australia labor maket reports Australia today presented the result on the appearance of the labor market. The number of employees and the unemployment rate are instances of the country's conditions in this sector. Despite a rebound from the negative area in the previous reading, the number of people employed in September fell to 0.9K. The index scores for the year are generally in a downward trend. The decline will begin in the first half of the year, and the lowest level was in April at 4.0K. It then doubled and the annual peak was at 88.4K. The unexpected drop below zero occurred in the month following the highest score. Therefore, the positive reading from the previous period was significant for the economy. The current reading may weaken not only the economy but also the Australian dolar (AUD). Source: investing.com People's Bank of China Loan Prime Rate The positive news for the Australian labor market is that the unemployment rate remains at 3.5%. Another reading showed that this indicator holds up once again. People's Bank of China Loan Prime Rate will remain at 3.65% for the third time. EU Leaders Summit The most important event of the day for europe is Leaders Summit . The Euro Summit brings together the heads of state or government of the euro area countries, the Euro Summit President and the President of the European Commission. This meetings provide strategic guidelines on euro area economic policy. The comments made at this meeting may give a signal about future decisions, which at the moment are very important not only for the economy but also for the market. US Initial Jobless Claims Every weekly report on the number of individuals who filed for unemployment insurance for the first time during the past week will appear at 14:30 CET. Another increase is expected. The projected number of applications is at the level of 230K. This means that the indicator will be in an uptrend for the second week in a row. Philadelphia Fed Manufacturing Index The Philadelphia Federal Reserve Manufacturing Index rates the relative level of general business conditions in Philadelphia. The last picture of conditions is negative. It has been at a very low level since May, falling below zero levels. The latest reading was at -9.9, expected to rise to -5.0. This is a small but important improvement in conditions. The general appearance is negative. US Existing Home Sales Another important report for the US market is the change in the annualized number of existing residential buildings that were sold during the previous month. The outlook for this indicator is pessimistic. The number is expected to drop from 4.80M to 4.70M. Despite the economic situation, the index remained above 5.0M for a significant part of this year. The first drop below this level took place in July (4.81M). In August, it fell slightly to the level of 4.80M. Another decline may signal a deepening of the downward trend. This means that home sales deteriorate significantly. Source: investing.com Summery 1:50 CET Japan Exports (YoY) (Sep) 1:50 CET Japan Trade Balance (Sep) 2:30 CET Australia Employment Change (Sep) 2:30 CET Australia Unemployment Rate (Sep) 3:15 CET PBoC Loan Prime Rate 12:00 CET EU Leaders Summit 14:30 CET US Initial Jobless Claims 14:30 CET Philadelphia Fed Manufacturing Index (Oct) 16:00 CET US Existing Home Sales (Sep) Source: https://www.investing.com/economic-calendar/
CEEMEA FX Outlook 2023: The Situation Remains Fragile

It Is Expected That Rate Of The EUR/HUF Pair And The EUR/PLN Pair Will Drop

TeleTrade Comments TeleTrade Comments 20.10.2022 12:18
CEE continues to rally driven by lower gas prices. Economists at ING expect EUR/HUF to return to sub-410 levels while EUR/PLN is set to slip back below 4.78. Favourable conditions for CEE to continue to rally “In addition to lower gas prices, we see rising interest rate differentials across the region. In Hungary, we are at a new all-time high after Friday's NBH emergency rate hike and in Poland we are at the highest levels since early September.” “With EUR/USD above recent lows, we thus see favourable conditions for CEE to continue to rally, driven by further gas price declines if the European Commission approves the proposed measures.” “We see a good chance for the Hungarian forint to erase last week's losses and return below 410 EUR/HUF and the Polish zloty to move below 4.780 EUR/PLN.”  
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Further Tightening Is Highly Uncertain And May Be Rather Triggered By Polish Zloty (PLN) Weakness

ING Economics ING Economics 20.10.2022 14:23
Industrial output growth remained close to double-digit levels in September on the back of robust manufacturing in export-oriented industries and was rather solid in the third quarter, raising hopes of more than 3% year-on-year growth in GDP. We see no risk of a technical recession in the final quarter   Manufacturing benefited from external demand Industrial production rose by 9.8% year-on-year in September (consensus: 8.8% YoY; ING: 8.3% YoY), following an increase of 10.9% YoY in August. Poland's industrial sector performance is clearly better than the dismal picture painted by very low manufacturing PMI readings in recent months. Seasonally-adjusted data suggest that the industrial sector is improving again after contracting in the second quarter. In September, output was particularly buoyant in export industries, which benefited from the recovery of European manufacturing. The apparent easing of supply chain problems supported Poland's main trading partners and local production. The improved availability of inputs supported growth in industries such as automotive (+46.5% YoY from a low reference base), other transport equipment (+19.2% YoY), machinery and equipment (+26.1% YoY) and electrical equipment (+17.9% YoY). The manufacture of capital goods expanded rapidly (+29.1% YoY). Industrial output improved again in the third quarter after a softer second quarter Industrial production, % MoM (SA).   Source: GUS. PPI inflation moderated Producer price growth moderated slightly in September, although remains very high. PPI inflation was 24.6% YoY last month (consensus: 25.6% YoY; ING: 25.4% YoY) and is starting to stabilise at high levels around 25% YoY. The fall in wholesale petrol prices and slightly lower upward pressure on manufacturing prices in September was accompanied by a fall in energy prices (-3.7% MoM). Although the local peak in PPI inflation is probably behind us, we expect another wave of second-round effects. We see evidence of companies passing rising energy prices to output prices and retail prices, so clearly second-round effects are in place here. PPI inflation has probably peaked PPI, % YoY   Source: GUS Chances of solid third-quarter GDP growth – but outlook remains rather grim The performance of industry in the third quarter should be assessed as solid and raises the prospect of a final quarter GDP growth rate of well above 3% YoY. Following the latest revision of the annual national accounts, the StatOffice has yet to publish updated quarterly data. While there was no significant change in the quarterly growth profile, the third quarter saw a rebound in seasonally-adjusted GDP vs. the previous quarter, after a deep quarterly decline between April and June. European and German industry performed better than expected during the last quarter, helped by improvements in supply chains. This translated favourably into the output of Polish export industries. However, this does not change the fact that we are facing a gradual downturn and the coming quarters will be difficult for the domestic economy. Much will depend on weather conditions and the availability of energy commodities for the European industry. In addition, high inflation is undermining the real purchasing power of European and Polish consumers. Our forecast for 2022 is for GDP growth of around 4%, while there are a number of downside risks to the 1.5% growth forecast for 2023. We do not rule out a decline in GDP at the beginning of next year, on an annualised basis. We see enough arguments for further tightening, possibly in November. But further tightening is highly uncertain and may be rather triggered by Polish zloty (PLN) weakness, or another CPI top in February 2023 when we see CPI at about 21% YoY. TagsZloty   Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more    
Wage agreement may be game-changing in a way. First meeting of the new BoJ Governor Ueda takes place on April 28th

Chinese Yuan And Japanese Yen (JPY) In Trouble, Gold Price Broke A Record

Marc Chandler Marc Chandler 20.10.2022 15:50
October 20, 2022  $USD, Australia, Canada, Currency Movement, Current Account, Japan, Turkey, UK, US Overview: China and Japan continue to struggle to stabilize their currencies, while global interest rates rise. The offshore yuan has fallen to new lows but in late dealings the onshore and offshore yuan have recovered. The dollar also traded above JPY150 for the first time since 1990 and the market knows it is on thin ice as with the threat of official intervention. A risk-off mood permeates. Equity markets have retreated in the Asia Pacific region and Europe. US futures are also trading lower. Benchmark 10-yields are 1-3 bp higher in Europe, and 10-year US Treasury yields reached a new high around 4.17% before steadying. The greenback is mixed. Among the G10 currencies, the Australian and Canadian dollars are firmer, while sterling, the Swiss franc, and Swedish krona are nursing small losses. Emerging market currencies are also mixed. Central Europe is outperforming East Asia. Gold recorded a new low for the month near $1622.50 before catching a bid. Initial resistance is seen near $1640. December WTI extended yesterday’s recovery and reached a new four-day high near $86.30. The nearby cap is seen in front of $88.00. Natural gas is snapping a four-day drop in both the US and Europe’s benchmark. Iron ore tumbled 2.4% to new lows below $90. However, copper is jumping back 1.4% in what could be its first gain in five sessions. December wheat, which has lost 2.3% over the past two sessions is recouping a little more than 1% today.  Asia Pacific The dollar rose above JPY150 for the first time since 1990 and there has been no sign of intervention. Ironically, the weaker yen is one of the factors pushing up Japanese yields, which in turn spurs BOJ purchases, which in turn underscore the monetary divergence that weighs on the yen. In regularly scheduled and unannounced purchases, the BOJ bought about JPY1.3 trillion today (~$8.5 bln). The yen's weakness aggravates the terms-of-trade shock in the first instance. Japan reported a slight narrowing of the September trade deficit to JPY2.09 trillion from JPY2.8 trillion. Export growth accelerated to 29% year-over-year from 22%, while import growth slowed to 45.9% from 49.9%. Tomorrow, Japan reports September CPI. The core rate, which excludes fresh food, is seen rising to 3%, while the measure that excludes both fresh food and energy may tick up to 1.8% from 1.6%. The BOJ meets next week. Its forecasts may change, but policy is a different story. Employment in Australia ground to a near halt in September, gaining less than 1000 jobs. This may overstate the case, a little. The loss of part-time positions more than offset the 13.3k increase in full-time posts. Still, the loss of momentum is clear. The three-month moving average of full-time posts is slightly negative the lowest this year. The other metric held in better. The participation rate was unchanged at 66.6%, and the unemployment was steady at 3.5%. The Reserve Bank of Australia meets on November 1 and is expected to hike the target rate 25 bp to 2.85%. The dollar poked above JPY150 in early European turnover and quickly fell back to about JPY149.70. It just as abruptly snapped back to the JPY149.90 area. The market knows it is tempting official action and is skittish. Indeed, the entire session range was set in a little more than 30 minutes. Without international cooperation, we see BOJ intervention most likely confined to Tokyo hours and that the second operation will not yield the same results as the first. Late September's record intervention immediately knocked the dollar back about 5.5 yen. Follow-through selling initially saw the Australian dollar fall to a three-day low near $0.6230 before bouncing back to new session highs in the European morning near $0.6280. The intraday momentum indicators are getting stretched, suggesting a run to yesterday's highs around $0.6325 may be too much. The dollar traded to CNY7.2480 today, its highest level since late September. It pulled back a little away from the CNY7.25 level and is trading near CNY7.2360 in late turnover. The prime lending rates were left unchanged today. Even without the latest weakness of the yuan, a cut was not expected. The PBOC lifted the dollar's reference rate to CNY7.1188. That puts the upper end of the 2% band a little above CNY7.26. The greenback reached CNH7.2790 against the offshore yuan, a new high. It has pulled back to below the CNH7.2550 area. Europe Out of the frying pan, into the fire. So goes the UK Prime Minister whose honeymoon may be measured in hours. Her tenure is still be debated. It is not about economic policy so much anymore, as Truss has accepted the reversal of her fiscal experiment. She did not win the leadership challenge among the Tory parliamentary members, but their job was to narrow the field to two candidate and let the rank-and-file decide. And chose they did. Now, a new effort by the MPs to force her out short of an election, which polls say the Conservatives are sure to lose. Meanwhile, Home Secretary Braverman was forced to resign after violating cabinet confidentiality. Braverman was a candidate herself party leader but was knocked out early. Her resignation letter was also a biting criticism of Truss. Ironically less than 24 hours earlier, in a rhetorical flourish, Braverman called the Labour Party and the Lib Dems, a "coalition of chaos, it's the Guardian-reading, tofu-eating wokerati."  Truss tried tightening the screws on a vote on fracking, Tory MPS were threatened with expulsion from the party if they voted against the beleaguered government and controversial issue even in some strong Tory districts. The Chief whip, the parliamentary enforcer resigned as did her deputy. And then in a dramatic reversal, it appears Truss persuaded them to retract their resignations to end a dramatic day. The eurozone reported a 26.3 bln euro August current account deficit. Like, Japan, the eurozone has experienced a significant terms-of-trade shock and a marked deterioration of its external balance. Consider that last August, the EMU recorded a 17.1 bln surplus, or that this year it has recorded an average monthly deficit of 9.2 bln euros compared with an average surplus of 28.3 bln euros in the first eight months of last year. The euro initially extended yesterday's losses to about $0.9755 before recovering to almost $0.9800, where options for nearly 2 bln euros expire today. We suspect that they have largely been neutralized, but today's high is about $0.9795. The intraday momentum indicators suggest there may be a little more upside potential, but the $0.9820 area looks like the best that can be hoped for today, barring new developments. Sterling has sulked to almost $1.1170 in the European morning. On the downside, there are options for GBP480 mln at $1.1145 that roll off today. If Truss does step down, we suspect sterling can bounce initially. While we suspect a major low is in place, a move above $1.15 would add credence to this view. More immediately, the $1.1250 area looks to offer the initial cap. Lastly, Turkey's experiment is set to continue. Despite CPI above 84%, the central bank is expected to cut its one-week repo rate by 100 bp (to 11%) for the third consecutive move. The lira is off about 28.5% this year, of which about 5% has been recorded in the past three months. America The Beige Book was unexpectedly dour. However, it did not deter the surge in US interest rates. The anecdotal report prepared for the November 1-2 FOMC meeting gave an overall sense of slowing activity and easing of some price pressures. Businesses were worried about demand. Several districts reported easing of labor market conditions. In broad strokes, here is a scenario, which seems to be gaining credence:  Q3 growth is a bit of catch-up the first half and most of the payback will be from trade. The US economy may nearly stagnate or worse over the next few quarters. Monetary and fiscal brakes are being slammed. Inflation is high but the year-over-year comparison has too long of a memory, as it were. US headline CPI rose at an annualized rate of around 10% in Q1 and Q2. It slowed to 2.0% in Q3. The Fed, as Bullard suggests, may front load more hikes this year and ratify market expectations (that he helped shape), meaning 75 bp moves in November and December. Frontloading takes on new meaning if one is in a hurry to get inflation down, so it is in a better position to act if when the economy warrants. The implied yield of the December 2023 Fed funds futures is about 17 bp below the implied yield of the September 2023 contract.  September housing starts reported yesterday were weaker than expected, slowing after jumping almost 14% in August. Existing home sales are on tap for today and they are expected to have continued to fall. January was the last month-over-month increase. Mortgage demand has cratered as one would expect. Also, the drying up of the refinance market also cuts into a source of income (consumption?) as previously, owners were often tempted to take out equity. Also, weekly initial jobless claims are rising again but the levels are modest. Still, looking ahead, it seems reasonable to assume the labor market conditions are likely to weaken. The October Philadelphia Fed survey may confirm the weak sentiment seen in the Empire State survey last week. The price sub-indices draw attention given the market's sensitivity to inflation. Four Fed officials have scheduled appearances, but only Hacker (around midday ET) may address the economic issues. Canada's CPI was stronger than expected and this sparked a new appreciation for the risks that the Bank of Canada delivers another three-quarter point hike next week. The headline rose slightly, and the market had expected a small decline. The year-over-year rate eased to 6.9% from 7.0%., not quite as much as expected. That said, the pace of inflation stopped cold in Q3. Consider, and CPI rose at an annualized pace of more than 13% in Q1 and almost 12% in Q2. Q3? Minus 0.4%. The average of the core rates was little changed because of the upward revision to the August series. In the swaps market the odds of a 75 bp move surged from almost 25% to 85%. That failed to give the Canadian dollar traction as the risk-off (proxy S&P 500) was the flavor of the day. For the third session, the US dollar has found offers above CAD1.38 that caps the greenback. A close below CAD1.3720, where the 20-day moving average is found, would be a cautionary note for the greenback. This moving average has not been violated on a closing basis for over a month. Without new US dollar strength, the 5-day moving average can fall below the 20-day moving average early next week. It would be the first time in two months. The greenback firmed to a marginal new high for the month yesterday against the Mexican peso near MXN20.1760. With a few exceptions, the MXN20.20 area has capped the dollar since mid-August. For those needing to buy peso, this area may be attractive. Initial support today is seen near MXN20.05-MXN20.10.    Disclaimer
Britain's Rishi Sunak And EU's Ursula Von Der Leyen Will Meet Today To Finalize The Northern Ireland Drama

The Euro To British Pound (EUR/GBP) Pair Consistently Hit Lower Lows

TeleTrade Comments TeleTrade Comments 21.10.2022 09:13
EUR/GBP has advanced to 0.8740 amid downbeat UK Retail Sales data. A negative divergence formation has bolstered signs of a bullish reversal. The cross is overlapping with the 200-EMA at around 0.8715. The EUR/GBP pair has picked significant bids and has accelerated to near 0.8740 as the UK Office for National Statistics has reported downbeat Retail Sales data. The annual Retail Sales have declined by 6.9%, against the expectations of a 5.0% decline and the prior release of -5.4%. While the monthly retail sales figure remained negative by 1.4% vs. the projections of a 0.5% decline. Meanwhile, public Sector Net Borrowings have remained marginally lower at GBP 19.248B vs. the estimate of GBP 19.325B. On an hourly scale, the asset has displayed a rebound after a bullish negative divergence formation. It is worth noting that the asset was continuously making lower lows while the momentum oscillator, Relative Strength Index (RSI) (14) made a higher low. This indicates a loss in the downside momentum. Also, the momentum oscillator has shifted into the 40.00-60.00 range. The cross is overlapping with the 200-Exponential Moving Average (EMA) at around 0.8715, which signals a consolidation ahead. Going forward, a break above the upward-sloping trendline from October 4 low at 0.8649 will drive the asset towards the round-level hurdle of 0.8900, followed by September 29 high at 0.8980. On the contrary, a drop below Monday’s low at 0.8578 will drag the asset toward August 19 high at 0.8511. A slippage below the latter will expose the cross to August 19 low at 0.8449. EUR/GBP hourly chart  
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Economists Skeptical About The Strength Of The Hungarian Forint (HUF)

TeleTrade Comments TeleTrade Comments 21.10.2022 09:23
The Hungarian forint reached record lows on 13 October. The HUF has since rebounded c.5%, though it remains down 22% year-to-date. Economists at Commerzbank remain sceptical about the HUF strength. EUR/HUF levels seem to suggest that the MNB’s strategy was working “We remain sceptical as far as the strength of the forint is concerned and see it more as a reflection of improved market sentiment. The central bank (MNB) has committed to a mixture of different tools, above all aimed at financial stability and the support of the currency, which in the end make monetary policy measures less transparent. They are less suited for the fight against inflation.” “It might be dangerous for the MNB to hope that inflation rates might ease soon, thus reducing the pressure to take action regarding the key rate (and thus the downside pressure on the forint).” “For the time being, EUR/HUF levels seem to suggest that the MNB’s strategy was working. It remains to be seen how long the market will swallow that. The first test will be the key rate decision on Tuesday, and more importantly the publication of the October inflation data in early November.”
ECB press conference brings more fog than clarity

Will The European Central Bank’s (ECB) Interest Rate Decision Meet Market Expectations?

Kamila Szypuła Kamila Szypuła 22.10.2022 10:18
In the current situation, the ECB turns a blind eye to the risk of recession, but is very determined to bring down inflation and inflation expectations. To that end, it is hard to imagine how the ECB could not raise rates again. The economic outlook The economic situation is not looking very good in Europe and the euro area. Recent data showed a worsening picture of the situation. Many experts believe that the region may face a serious recession in the near future. Also the attempts by the ECB to raise the euro exchange rate through further tightening should continue to be ineffective in the near future. The economy is expected to stagnate in the first quarter of 2023. Very high energy prices reduce the purchasing power of the population's income. Moreover, Russia's unjustified aggression against Ukraine continues to undermine the confidence of entrepreneurs and consumers. The steady rise in prices in Europe is making households and businesses prepare for even greater pressure in the coming months. Previous date Economic difficulties have arisen since the start of the covid-19 pandemic. The persistent threats caused by the pandemic continue to pose a threat to the smooth transmission of monetary policy. Nevertheless, the European Central Bank did not manage to raise interest rates at that time and for a long time the rate was at 0.0%. The situation regarding interest rates changed after the second quarter of 2022. Inflation rose sharply, and other macroeconomic data were also not optimistic. For this reason, the ECB decided to raise rates by 50 bp. The first rate hike was expected to be milder, the forecast was at 0.25%. Another hike was also hawkish. And now the rate is 1.25%. It’s true that the ECB has consistently surprised on the hawkish side in the past few meetings, but the positive impact on the euro have been null. Source: investing.com What to expect? The economic background has hardly changed since September. Confidence indicators continue to decline, while data for the third quarter point to a very mild contraction in the eurozone economy. Needless to say, the outlook for the euro area economy is surrounded by an extremely high degree of uncertainty. Price pressures across the economy continued to strengthen and widen, and inflation may increase further in the near term. It is believed that the peak of inflation is close, but the economic situation will depend on the situation related to Russia's invasion of Ukraine. The Governing Council stands ready to adjust all instruments to ensure that inflation stabilizes at the 2% target. Finally, the ECB managed to lead the market expectations and next week's meeting may be the first without such a surprise. According to the minutes from the previous meeting, policy makers at the European Central Bank (ECB) were concerned that inflation might be stuck at a high level, so aggressive tightening was necessary. We can expect that this mood will also replicate at the next week's meeting. The September hike of the ECB by 75bp was expected by the markets, and now it expects that its next move in politics, planned for October 27, will be similar. Contrary to the preparations for the July and September meetings, there was no public controversy about the size of the rate hike. Source: investing.com, ecb.europa.eu
Britain's Rishi Sunak And EU's Ursula Von Der Leyen Will Meet Today To Finalize The Northern Ireland Drama

The EUR/GBP Pair: The Shared Currency Bulls Have Picked Demand

TeleTrade Comments TeleTrade Comments 24.10.2022 09:04
EUR/GBP is playing around the immediate hurdle of 0.8700 after a firmer rebound. The chances of a 75 bps rate hike announcement by the ECB look solid. Former UK PM Boris Johnson has asked Rishi Sunak to step back from the UK PM race. The EUR/GBP pair is hovering near the round-level resistance of 0.8700 in the late Tokyo session. The asset has accelerated after a gap-down opening near 0.8660 and is aiming to overstep the immediate hurdle of 0.8700. The shared currency bulls have picked demand as investors are betting over a bigger rate hike announcement by the European Central Bank (ECB). Price pressures in the trading bloc are mounting and have not displayed any sign of exhaustion yet. Therefore, ECB President Christine Lagarde is required to tighten its policy further. According to analysts from Rabobank, a 75 basis point (bps) interest rate hike is a done deal. They see the deposit rate reaching 3% by March next year. Currently, the ECB rates stand at 1.25% as the central bank announced a 75 bps rate hike in September. Apart from that, soaring energy bills are hurting the sentiment of households in Germany. On Friday, Reuters reported that German Parliament is preparing to vote for the approval of a €200 billion emergency rescue package to tackle the energy crisis. On the UK front, escalating political tensions have turned the pound bulls extremely volatile. The Shortest UK Prime Ministerial term by Liz Truss has dampened the confidence of stakeholders. Meanwhile, the debt crisis in the UK economy has reached the sky and the novel UK prime Minister will face the highest-ever debt burden. It would be worth watching the efforts from would-be UK Prime Minister and newly appointed Finance Minister Jeremy Hunt in fixing the pile debt mess. British Conservative Party needs a suitable candidate to maintain decorum and avoid their defeat in General Elections, scheduled for 2024. However, Boris Johnson has asked Rishi Sunak to step down from the UK PM race, which will be decided latest by Friday.
The Outlook Of EUR/USD Pair For Long And Short Position

Eurozone PMI hits 47.1, one point less than the consensus | ING Economics expects two hikes of 50 and 75bp this year

ING Economics ING Economics 24.10.2022 11:08
A weaker-than-expected PMI confirms that the eurozone is now in recession. While pipeline price pressures are gradually abating, it seems too soon to give the all-clear on consumer price inflation. The European Central Bank (ECB) will therefore remain in tightening mode until the first quarter of 2023 Downturn confirmed The eurozone composite PMI flash estimate fell to a lower-than-expected 47.1 in October, from 48.1 in September. This is not only a 23-month low but is also the fourth consecutive month that the PMI has been below the 50 boom-or-bust level, clearly suggesting negative GDP growth. The manufacturing PMI came out at 46.6, while the services sector PMI is now at 48.2. The steepest downturns were seen in the most energy-dependent industries, such as chemical and plastics and basic resource sectors. Industrial powerhouse Germany saw the fastest decline in activity, while in France growth merely stalled. Forward-looking components of the survey don’t herald any improvement in the coming months – on the contrary. New orders for goods and services fell for the fourth month in a row. Excluding the Covid-19 pandemic, manufacturing orders saw the biggest drop since April 2009, while the decline in new business inflows into service sector companies was the strongest since June 2013. No wonder that backlogs of orders fell for a fourth consecutive month, especially in manufacturing. While there was still modest employment growth in October, there seems to be job cutting at some firms and hesitancy to hire in the wake of the uncertain economic outlook. This means that the job market is likely to be less of a support for consumption in the coming quarters. Too soon to give the all-clear on inflation In this rapidly weakening economic environment, supply chain delays have eased to the lowest in just over two years. Manufacturers also bought fewer inputs, reflecting lower production plans and inventory reduction policies in the wake of weakening sales. Easing raw material supply constraints were partially offset by rising energy costs and upward wage pressures, keeping the overall rate of input cost inflation elevated. This still translated into a high rate of increase in prices charged for goods and services, with rates of selling price inflation cooling only marginally in both manufacturing and services. While it seems obvious that upstream price increases are now softening, it still seems a bit too soon to give the all-clear on consumer price inflation. This is one of the last important economic data the ECB disposes of in the run-up to the meeting of the Government Council on Thursday. While in our view today’s figure clearly confirms that the eurozone economy is already in recession, the ECB has made it clear that a downturn would not deter it from tightening monetary policy, as long as inflation is not brought under control. With inflation hovering around 10%, the bank surely wants to restore its credibility. We therefore pencil in another 75bp hike this week and 50bp in December. As inflation is likely to start to come down in the first quarter of 2023 and signs of recession will become more prominent, we think the ECB will stop tightening after the February meeting when we expect the deposit rate to have reached 2.25%. Read this article on THINK TagsInflation GDP Eurozone ECB Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Technical Outlook Of The EUR/JPY Pair Movement In Short Term

The Outlook For The Euro To Japanese Yen Pair Should Remain Unchanged

TeleTrade Comments TeleTrade Comments 24.10.2022 14:38
EUR/JPY resumes the upside and retests the area beyond 147.00. The recent YTD high at 148.40 (October 21) comes next. EUR/JPY fades Friday’s strong retracement and regains the 147.00 barrier and above at the beginning of the week. Considering the current price action in the cross, the door still looks open to extra upside. That said, the immediate target now emerges at the 2022 high at 148.40 (October 21) prior to the December 2014 top at 149.78 (December 8). In the short term the upside momentum is expected to persist while above the October lows near 141.00. In the longer run, while above the key 200-day SMA at 136.92, the constructive outlook for the cross should remain unchanged. EUR/JPY daily chart  
ISM Business Surveys Signal Economic Softening and Recession Risks Ahead

German manufacturing PMI hits 45.7, ECB will most probably go for 75bp, but 100bp is not excluded. Naturally, Lagarde's rhetoric will be crucial for euro

Kenny Fisher Kenny Fisher 24.10.2022 14:59
EUR/USD has edged lower at the start of the week. In the European session, EUR/USD is trading at 0.9824, down 0.37%.   Manufacturing, services PMI point to contraction Germany is the locomotive of the Eurozone, and a faltering economy means trouble for the entire bloc. German Service and Manufacturing PMIs remained in contraction territory in September, below the neutral level of 50.0. The Manufacturing PMI fell to 45.7, down from 47.8 (47.0 est). The PMI has declined for a fourth straight month, as high energy costs and weak demand for goods have dampened factory production. German business activity is also struggling, as the Services PMI ticked lower to 44.9, down from 45.0, (44.7 est). The eurozone PMIs are also mired in contraction territory, and with winter coming and no end in sight to the Ukraine war, the PMIs will likely continue to decline in the short term.   ECB expected to hike by 0.75% The ECB meets on Thursday, with policy makers having to contend not only with a gloomy economic outlook, but also with spiralling inflation, with no sign of a peak. Eurozone CPI jumped to 9.9% in September, up sharply from the 9.1% rise in August. The markets have priced in a supersize 0.75% hike, which would bring the cash rate to 2.0% and will be looking for the Bank to declare its commitment to bring inflation back to the 2% target. A jumbo full-point increase is unlikely, but a possibility, given that inflation is close to double-digits. Investors will be monitoring the follow-up press conference, and the euro’s movement could well depend on ECB President Lagarde message to the markets – a signal that further rate hikes are coming would be bullish for the euro.   EUR/USD Technical EUR/USD is testing support at 0.9814. Next, there is support at 0.9753 There is resistance at 0.9924 and 0.9985     This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds. Euro slips lower on soft German PMIs - MarketPulseMarketPulse
Tight Monetary Policy Is Already Weighing On The Swedish Housing Market

Difficulty In Assessing Risk | The Swedish Krona (SEK) Will Not Be Able To Increase

TeleTrade Comments TeleTrade Comments 25.10.2022 09:33
The Swedish krona is struggling to record gains. In the opinion of economists at Commerzbank, SEK will continue to struggle The great unknown – the weather this winter “Many negative factors have already been priced into SEK, but as long as it is unclear how the eurozone and its economy will get through the winter it will be difficult to price the risk of ‘a deep recession in the eurozone with the resulting effects on the Swedish economy’ out of SEK. In particular, as rate hikes will also affect the economy, in particular the housing market.” “I fear that SEK will be unable to record significant gains over the winter half.”
EUR/USD Rangebound Ahead of Data Releases and Rate Expectations

The Hungarian Forint (HUF) Remains Sensitive To Global Risk Aversion

TeleTrade Comments TeleTrade Comments 25.10.2022 12:30
The Hungarian central bank meeting is on the agenda today while EUR/HUF has stabilised at 412.00. Economists at ING expect the EUR/HUG to move back to a 405-410 range. The forint should remain supported “Although the National Bank of Hungary does not need to hike rates again at the moment, we expect the central bank to confirm its readiness to act if the forint decides to weaken again.” “Considering that HUF remains sensitive to global risk aversion, we cannot rule out some periodic correction. For the time being, however, the forint should remain supported and enjoy this moment of peace created by recent central bank actions and global conditions.” “We expect the forint to return to the 405-410 EUR/HUF range.”
Hang Seng Index Plummets -2% Amid Weak China Data, Short-Term Trend Intact

The Euro To British Pound (EUR/GBP) Pair Is Likely To Meander Slowly Up

TeleTrade Comments TeleTrade Comments 25.10.2022 12:49
EUR/GBP has settled above 0.87. Kit Juckes, Chief Global FX Strategist at Société Générale, believes that the pair could advance nicely towards the 0.90 level.  Sterling unlikely to enjoy much more of a relief bounce “EUR/GBP has reversed the spike which we saw in late September but remains well above the post-Brexit average, and GBP/USD is even further above average than EUR/GBP. Both measures of volatility should fall further, as the pound settles down.”  “But with the economy surely already in recession and set to suffer from possibly even tighter fiscal policy, sterling is unlikely to enjoy much more of a relief bounce and over time, EUR/GBP is likely to meander slowly up to 0.90 or so.”
The USD/CHF Pair Returned To Its Previous Three-Day Recovery

The Swiss Franc (CHF) Has Not Completely Retraced Its Gains

TeleTrade Comments TeleTrade Comments 26.10.2022 09:35
EUR/CHF is trading close to parity again. Economists at Commerzbank believe that the pair could extend its advance. Swiss National Bank can still sit back for now “During the last monetary policy evaluation, the head of the SNB Thomas Jordan had pointed out that the franc would contribute to dampening inflation pressure: at the time CHF had appreciated by 7% since June.” “The franc has not completely retraced its gains which might explain why the SNB can still sit back for now. However, it also means that EUR/CHF still has some upside scope until the SNB might begin to feel unhappy about the developments.”
Spain: Price Pressures Higher Up The Production Chain Are Starting To Ease

According to ING, unemployment rate in Spain, which amounted to 12.7% in Q3, may crawl over 14% in 3Q2024

ING Economics ING Economics 27.10.2022 11:40
The Spanish unemployment rate rose slightly to 12.7% in the third quarter, but is still very low. However, a sharp decline in hiring intentions shows that a cooling-off in the labour market is on the way. We expect unemployment to rise further in the coming quarters due to the deteriorating economic outlook, peaking at 14.3% in the third quarter of next year We expect unemployment to continue to rise in the coming quarters due to deteriorating economic conditions Unemployment rate slightly up in the third quarter According to INE figures released this morning, unemployment rose to 12.7% in the third quarter from 12.5% in the second quarter. With the exception of the previous quarter, this still puts unemployment at its lowest level since the third quarter of 2008, the start of the financial crisis. Although the unemployment rate is historically low, it is still well above the euro average. Eurostat's harmonised figures, which differ slightly from those published by INE, show that Spain's unemployment rate was 12.4% in August, compared with the eurozone average of 6.6%, a difference of 5.8 percentage points. For under-25s, the deviation from the eurozone average even runs to 12.7 percentage points. This average harbours large differences between regions. In the south of the country (Andalusia, Extremadura, Murcia etc) unemployment is typically above the national average, while the northern regions (Cantabria, Navarre, Catalonia, and so on) pull the average down a bit. We expect unemployment to continue to rise in the coming quarters due to deteriorating economic conditions. We predict that the Spanish economy will enter a mild recession starting in the fourth quarter of 2022 that will continue until the first quarter of next year. This will put some upward pressure on unemployment rates. Since unemployment rates usually lag somewhat behind the economic cycle, the biggest impact will be next year. We think that Spanish unemployment will peak at 14.3% in the third quarter of 2023. Unemployment rate, 1976-2022 Hiring intentions dropped sharply Although the labour market is still very tight, more signals point to a cooling in the coming months. The 12-month moving average of the number of vacancies has been stabilising for several months and seems to be at a peak. Business confidence has also deteriorated sharply in recent months, which will encourage companies to be more careful with new hires. This is already reflected in the latest Manpower survey, which polls every three months on the hiring intentions of companies. The latest results polling hiring intentions in the fourth quarter of 2022 show the largest quarterly decline in the index since the start of the survey in 2003. Although the index was historically high, this points to a turnaround in the labour market. The deteriorating economic outlook is already causing companies to be more cautious about hiring new people. Manpower survey – hiring intentions in the next three months, 2003-2022 A cooling economy will take longer to restore productivity to pre-Covid levels GDP per person of working age, a good measure of an economy's productivity, is still below its pre-Covid levels. Since 2014, following the financial crisis and debt crisis, the productivity parameter was on a strong remount. Between 2014 and 2019, GDP per working age population rose by an average of 2.6% per year. This came to an abrupt end with the onset of the Covid-19 pandemic. In the first two quarters of 2020, GDP per person of working age fell 24.2% from the last quarter of 2019 due to a sharp drop in activity. Afterwards, the measure recovered strongly. In each of the past three quarters, it grew more than 6% year-on-year but is still 3.5% below its 4Q19 pre-Covid levels. However, this increase is likely to be strongly driven by the activation of lower-productivity workers. This pushes GDP per person of working age higher, but puts pressure on real labour productivity per hour worked. We see that the latter has been under strong pressure since the beginning of this year (-3.1%). The end of Covid restrictions has allowed a lot of employees in the tourism and hospitality sector to get back to work, but these are typically employees who contribute relatively less to GDP. The tight labour market also makes it easier for less skilled and recent graduates to find a job – in general, these are also people with lower productivity. With activity again under strong pressure from the energy crisis and high inflation, productivity is likely to fall. Over the winter months, we forecast a contraction of 0.8% in the Spanish economy. As a result, it will probably take until 2024 before GDP per working age person returns to its pre-pandemic level. Productivity – GDP per working age population, Q4 2019 = 100 Spanish labour market supported by strong growth in open-ended contracts The high number of temporary contracts in Spain has long been one of the weaknesses of the Spanish labour market. According to Eurostat data, about 22% of Spaniards were on temporary contracts before the pandemic, compared to an average of 14.4% in the EU. However, the number of open-ended contracts has increased over the past year. The number of permanent employees reached a record high in the second quarter to 13.5 million employees (seasonally adjusted figures), an increase of 8.7% compared to the second quarter of last year. The number of employees on temporary contracts has fallen by 6.7% in the past year to just over four million. The increase started in the middle of last year but was accelerated by the labour market reform approved by the government in December. The share of permanent contracts has increased by three percentage points in one year, from 74% in the second quarter of last year to more than 77% in the second quarter of this year. It is too early to estimate the long-term effects of the labour market reform, but we can already say that the reform, which imposes additional restrictions on the use of temporary contracts, has resulted in many temporary contracts being converted into open-ended contracts. These also offer better protection during economic headwinds. A higher share of permanent contracts is also likely to mean that the rise in the unemployment rate, which usually follows a fall in economic activity, will be less pronounced than during previous recessionary periods. Share of permanent contracts Bleak economic outlook will lead to higher unemployment rate All in all, despite a slight rise in the unemployment rate in the third quarter, the labour market remains very tight. The bleak economic outlook, which is already prompting companies to be more cautious about new hires, will ease the pressure on the labour market in the coming months. We expect the unemployment rate to rise further to 14.3% in 3Q23, partly held back by a higher number of permanent contracts, before slowing down again. Read this article on THINK TagsUnemployment rate Spain Labour market GDP Eurozone Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Bond Markets Feeling Weighted: US 10-Year Yield Still Pressured

Euro to US dollar - technical analysis by Sebastian Seliga (InstaForex) - 27/10/22

InstaForex Analysis InstaForex Analysis 27.10.2022 12:29
Technical Market Outlook: The EUR/USD pair has broken above the wave A high located at the level of 1.0000 and made a new local high at the level of 1.0091. The bulls wait for the ECB interest rate decision that is scheduled for release at 14:15 today in order to continue the rally higher despite the extremely overbought market conditions. In the longer term, the key technical resistance level is located at 1.0389 (swing high from August 11th), so the bulls still have a long road to take before the down trend reversal is confirmed. The mid and long-term outlook for the EUR remains bearish until the swing high seen at 1.0389 is clearly broken.     Weekly Pivot Points: WR3 - 0.99810 WR2 - 0.99177 WR1 - 0.98838 Weekly Pivot - 0.98544 WS1 - 0.98205 WS2 - 0.97911 WS3 - 0.97278 Trading Outlook: The EUR had made a new multi-decade low at the level of 0.9538, so as long as the USD is being bought all across the board, the down trend will continue towards the new lows. In the mid-term, the key technical resistance level is located at 1.0389 and only if this level is clearly violated, the down trend might be considered terminated. Please notice, there is plenty of room to the downside for the EUR to go, all of the potential technical support level are very old and might not be much reliable anymore. Relevance up to 09:00 2022-10-28 UTC+2 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/298587
The EUR/JPY Pair Is Expected To Start A New Zig-Zag Correction

The Constructive Outlook Of The EUR/JPY Pair Is Expected

TeleTrade Comments TeleTrade Comments 27.10.2022 14:03
EUR/JPY sheds part of the recent uptrend and drops below 147.00. The 2022 high at 148.40 still remains as the immediate target for bulls. EUR/JPY comes under pressure and slips back below the 147.00 mark following three consecutive daily advances. Considering the current price action in the cross, the door still looks open to extra upside. That said, the immediate target now emerges at the 2022 high at 148.40 (October 21) prior to the December 2014 top at 149.78 (December 8). In the short term the upside momentum is expected to persist while above the October lows near 141.00. In the longer run, while above the key 200-day SMA at 137.18, the constructive outlook is expected to remain unchanged. EUR/JPY daily chart  
Euro to US dollar - Ichimoku cloud analysis - 21/11/22

ING Economics expect that European Central Bank may end hiking in February 2023

ING Economics ING Economics 27.10.2022 20:35
The press conference after the rate hike announcement showed that the European Central Bank (ECB) is determined to continue hiking interest rates. However, while today's jumbo hike was a no-brainer, we expect much more controversial discussions in December and an end to the hiking cycle in February next year ECB President Christine Lagarde at today's press conference   The ECB has hiked interest rates by 75bp, bringing the deposit facility interest rate to 1.5% and the main refinancing rate to 2%. Contrary to the rate hike decisions in July and September, the size of today’s rate hike seems to have been uncontested and broadly supported by all ECB members. Alongside the expected rate hike, the ECB also announced changes to the current Targeted-Long-Term-Refinancing Operations (TLTRO), in terms of the applied interest rate and earlier repayment dates. The central bank also decided to set the remuneration of minimum reserves at the ECB’s deposit facility rate. Regarding the changed TLTRO terms, from 23 November 2022 onwards, the interest rate on all remaining TLTRO III operations will be indexed to the average applicable key ECB interest rates. There will also be three additional moments for earlier repayments. According to the ECB, “it is necessary to adapt certain parameters of TLTRO III to reinforce the transmission of our policy rates to bank lending conditions so that TLTRO III contributes to the transmission of the monetary policy stance”, which is a bit strange as the latest Bank Lending Survey had already signalled a tightening of lending conditions. As regards the decision to set the remuneration of minimum reserves at the ECB’s deposit rate and no longer at the refi rate, this should hardly have an impact as minimum reserves are currently only a fraction of overall excess liquidity. The ECB did not announce any reverse tiering. The sharpest and biggest rate hike cycle ever The ECB has now hiked interest rates by a total of 200bp over a period of slightly more than three months. It's the sharpest and most aggressive hiking cycle ever. In the previous two hiking cycles since the start of the monetary union, it took the ECB at least 18 months to hike rates by a total of 200bp. Today’s rate hike provides further evidence of the extreme paradigm change at the ECB. A year ago, ECB president Christine Lagarde said at a press conference that “the lady is not tapering”. Now, the ECB has conducted the most aggressive rate hikes in its history, despite a war in Europe, little signs of an overheating economy but rather indications of a looming recession, and record high inflation, which is mainly driven by high energy and commodity prices. A couple of years ago, the same ECB but different main characters might have decided differently. The current ECB, however, has woken up very late to the fact that even if inflation is driven by supply-side factors, too high inflation for too long can damage a central bank’s credibility and plant the seeds for unwarranted second-round effects. At the current juncture of a looming recession and high uncertainty, normalising monetary policy is one thing but moving into restrictive territory is another. With today’s rate hike, the ECB has come very close to the point at which normal could become restrictive. However, during the press conference, Lagarde said that the ECB might still have to hike rates at several more meetings as the job to bring inflation back to target is not done yet. First opening for a dovish pivot in December Looking ahead, the ECB seems determined to continue hiking interest rates, though no longer at the current jumbo size of 75bp. Lagarde tried to give the impression that there will be more than one more rate hike. However, her comments about the fact that the ECB no longer believes in any estimates of a neutral interest rate, after previous comments that the central bank no longer believed in its inflation projections, make it hard to identify the ECB’s precise reaction function. This reaction function can probably be summarised as 'whatever, whenever'. Lagarde also mentioned the word “recession” and stressed that incoming data and the next staff projections at the December meeting would be important. A first opening for a dovish pivot at the December meeting We think that the debate at the December meeting will already be much more controversial than today, delivering another 50bp rate hike. However, as the ECB’s inflation outlook for 2024 was already at 2.3% in September and will very likely be at 2% for 2025 at the December meeting, it is hard to see how the ECB can deliver more than an additional 75bp rate hikes. For us, the terminal rate remains at 2.25% for the deposit rate. The ECB has been too late and too slow with normalising monetary policy. It shouldn’t try to make up for it by being too high for too long. Read this article on THINK TagsMonetary policy Inflation Eurozone ECB Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Oil Prices Soar on Prospect of Soft Landing, Eyes Set on $80 Breakout

Headline Tokyo CPI increased by 0.7%, Nasdaq lost 1.63%

ING Economics ING Economics 28.10.2022 09:02
CNY rises again as USD finds renewed support ahead of next week's FOMC meeting Source: shutterstock Macro outlook Global markets: Expectations for Fed tightening continue to be pared back ahead of next week’s FOMC meeting. The May 23 Fed funds contract implied rate is now 4.74%. It was more than 5% earlier this month. This has also pulled back yields on Treasuries. 2Y Yields fell 13bp yesterday. 10y yields are now 3.919% after dropping 8.4bp overnight. There don’t seem to be any obvious catalysts for this. It is the blackout period so there are no Fed speakers. Falling reverse repo usage may be an indicator that the Fed could at least slow the pace of QT, but other than that, it looks mostly like speculation ahead of the FOMC meeting for some “pivot” hints. Despite the softer yield environment, the USD has caught a small bid and has pushed back below parity with the EUR, maybe benefiting from a softer equity backdrop too as the NASDAQ had another bad day ( -1.63%), following some softer sales guidance from Amazon. Equity futures are also still looking soft, so the current sentiment looks likely to persist through today. The USD was slightly stronger against most of the G-10 currencies,  though the JPY has held onto the ground it made yesterday. Asian FX is split, with the CNY bouncing higher after its plunge yesterday, weakening back to 7.229. The KRW and TWD, both of which topped the Asian FX pack yesterday will likely soften into today’s trading. G-7 Macro: As widely predicted, the ECB hiked the refi-rate by 75bp yesterday, taking it to 2%. This note From our Head Of Macro Research, Carsten Brzeski, summarises the decision and press conference. But in short, the ECB is not done with hiking yet as it moves closer to a restrictive rate setting. We also had 3Q22 US GDP data yesterday, which delivered a bigger-than-expected bounce back of 2.6% (saar). Though as our Chief US Economist, James Knightley states, “the outlook is deteriorating rapidly”. Today, we get preliminary October inflation data from Germany, which may continue to creep higher according to the consensus view.  3Q22 GDP for Germany is also released and should register a decline from the previous quarter, taking Germany one step closer to an official recession.  US September personal income and spending data don’t add much to the stock of macro knowledge and can probably be glossed over, though the University of Michigan consumer confidence data and inflation outlook will be worth a look. And finally, the BoJ meets today. As usual, nothing is likely to happen here, especially now the JPY is off its recent highs (see below).   Japan: Headline Tokyo CPI inflation rose quite sharply to 3.5% YoY in October (vs 2.8% in September, market consensus 3.3%). The core inflation rate excluding fresh food also hit 3.4%, the highest level since 1989. We don't think this morning’s much faster rate of inflation will change the BoJ's policy decision today. The BoJ takes a different view than the ECB. If inflation is not driven by demand-side factors, they will not change the easy policy stance and it seems like they believe this will maintain their credibility. Meanwhile, PM Kishida announced a 29.1 trillion yen extra budget. Including local government spending, the number adds up to 71.6 trillion yen.  South Korea: The authorities continue to calm down money markets by providing easier measures on policies. The BoK also eased some of its micro-policy measures. The BoK will temporarily (for three months starting Nov 1st) accept bonds issued by banks and nine state-owned companies such as KEPCO and KOGAS, as eligible collateral for banks borrowing money from the central bank. The plan to raise the Liquidity Coverage Ratio (LCR) from 70% to 80% will be postponed by three months to May 2023. The BoK will also carry out a temporary RP (until the end of January 2023) with an estimated amount of 6 trillion KRW.  The government also announced plans to ease mortgage terms from early next year. We think this will help ease market nervousness, but the housing market will continue to cool for the time being given that mortgage rates are now reaching 7%. What to look out for: US sentiment and core PCE Tokyo CPI inflation (28 October) Bank of Japan policy meeting (28 October) Australia PPI inflation (28 October) Taiwan GDP (28 October) US personal spending, core PCE and Univ of Michigan sentiment (28 October) Read this article on THINK TagsEmerging Markets Asia Pacific Asia Markets Asia Economics Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
NBR Meeting: Hawkish Tone Maintained as Rate Cuts Await

Danmarks Nationalbank Will Follow The ECB And The EUR/DKK Pair Is Expected To Rise

TeleTrade Comments TeleTrade Comments 28.10.2022 10:13
Danmarks Nationalbank (DN) hiked its key policy rate 60 bps to 1.25%. The spread to ECB’s key policy rate is now -0.25%, which economists at Danske Bank think will be enough to weaken DKK and end the need for FX intervention. DN ‘only’ hikes 60bp to end DKK strength “As we expected, Danmarks Nationalbank (DN) opted for a smaller rate hike than ECB – ECB hiked its key policy rate 75bp today, but DN only 60bp. It widens the spread to ECB’s key policy rate to -0.25%. The decision comes after large-scale FX intervention.” “We expect the adjustment is enough to send EUR/DKK higher and end the need for further FX intervention selling and more adjustments of the interest rate spread.” “We look for EUR/DKK to rise towards the top end of this year’s trading range, i.e. to around 7.4450, and for DN to follow ECB 1:1 from here, i.e. to hike to 2.25% in February.”
Technical Outlook Of The EUR/JPY Pair Movement In Short Term

Trading Signal Of The Euro To Japanese Yen Pair (EUR/JPY) On Daily Chart

TeleTrade Comments TeleTrade Comments 28.10.2022 13:10
EUR/JPY regains poise and reclaims part of the ground lost on Thursday. Immediately to the upside comes the YTD high at 148.40. EUR/JPY resumes the upside and surpasses the 147.00 barrier at the end of the week. Considering the current price action, there is still chances for the cross to advance further in the short-term horizon. That said, the immediate up barrier now emerges at the 2022 high at 148.40 (October 21) ahead of the December 2014 top at 149.78 (December 8). In the short term the upside momentum is expected to persist while above the October lows near 141.00. In the longer run, while above the key 200-day SMA at 137.27, the constructive outlook is expected to remain unchanged. EUR/JPY daily chart  
The EUR/USD Pair Chance For The Further Downside Movement

Euro's reaction to the latest ECB decision, Fed outlook and more

Conotoxia Comments Conotoxia Comments 28.10.2022 14:34
The end of October and the beginning of November seems to be hectic time in the foreign exchange market, as the European Central Bank has already communicated its interest rate decisions, and the US Fed will do so on November 2. As a result, the forex market may see above-average volatility. Yesterday the European Central Bank raised its three key interest rates by an expected 75 basis points, the third consecutive hike. It could confirm the ECB's determination that further policy tightening would continue until inflation approaches its 2% target. The main refinancing operations rate and the central bank lending and deposit rates were raised to 2%, 2.25% and 1.50%, respectively, with the decision taking effect on November 2. BBN reported that the ECB said that the current inflation rate, which stood at 9.9% last month, remains "far too high" and would remain at elevated levels in the coming months.  How did the euro exchange rate react to the ECB's decision? Source: Conotoxia MT5, EURUSD, H1 The euro exchange rate fell immediately after the ECB decision, perhaps because the market expected a more hawkish stance. The Bank has changed its statement that interest rates will rise at future meetings to a statement that decisions will be made from meeting to meeting. As a result, the market has pushed back its expectations by a full 25 bps, and is perhaps hoping for a softer tone from the ECB due to a potential recession in 2023. Statements after the ECB decision - will they affect the euro? According to the BBN website, Bank of Lithuania head Gediminas Simkus argued on Friday that the next interest rate hike must be significant. A Simkus hinted at the possibility of the ECB raising key rates by another 75 basis points after yesterday's hike, noting that this should not be the new norm. He also shared expectations that the ECB will raise inflation projections in December. In contrast, Bank of France Governor Francois Villeroy de Galhau said Friday that the European Central Bank needs to be cautious in the way it will approach quantitative tightening. However, he expects rapid moves toward normalizing interest rates, BBN reports.ECB President Christine Lagarde said yesterday that the bank's governing council will formally discuss a reduction in the asset purchase program (APP) in December. What can the Fed do? Recent data from the US show a decline in inflation and a drop in activity in the industrial sector and the real estate market. As a result, the market seems to expect that the Fed may begin to slow down the pace of interest rate hikes, and after the November hike, the chance of an end to the cycle in Q1 2023 seems to be increasing. Moreover, the market may expect that the Fed will still cut interest rates by 50 bps next year. Such expectations could have a negative impact on the US dollar and could strengthen the euro, but confirmation of this could be possible on November 2. Daniel Kostecki, Director of the Polish branch of Conotoxia Ltd. (Conotoxia investment service) Read more reviews and open a demo account at invest.conotoxia.com Materials, analysis and opinions contained, referenced or provided herein are intended solely for informational and educational purposes. Personal opinion of the author does not represent and should not be constructed as a statement or an investment advice made by Conotoxia Ltd. All indiscriminate reliance on illustrative or informational materials may lead to losses. Past performance is not a reliable indicator of future results. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75,21% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. Read the aricle on Conotoxia.com
The ECB President Christine Lagarde's Speech Could Bring Back Risk Appetite

"The ECB was also not unanimous on the size of yesterday’s hike"

ING Economics ING Economics 28.10.2022 14:47
The ECB hiked and signalled more to come, but markets rallied seeing it as more appreciative of the downside growth risks. Staying vague on QT has helped sovereign spreads, and the ECB chose less disruptive balance sheet tweaks as first steps. It fit well into markets looking for any signs of central banks shifting into lower gear    The ECB is seen more appreciative of downside risk to growth The ECB hiked rates by 75bp as expected and signalled it had more ground to cover. Still, markets rallied as the European Central Bank was perceived as being more appreciative of the downside risks to growth. It may be a bit of a selective perception, markets being predisposed with potential policy pivots of central banks globally. President Lagarde did spend more time on risks to growth in the press conference, yet the downbeat views and warnings on rising unemployment were offset by inflation risks now seen “clearly” to the upside. The perceived dovishness has its price – markets have pushed their inflation expectations higher in reaction to the ECB meeting, the often cited 5y5y forward inflation swap nudging around 5bp higher. The ECB was also not unanimous on the size of yesterday’s hike Money market pricing of future hikes eased notably with the terminal rate slipping almost 30bp towards 2.5% – that is still another 100bp of further rate hikes from here. While the ECB itself also expects to raise rates further, it removed the reference to “the next several meetings” from its press statement, though Lagarde still made that reference in the press conference. It later emerged that the ECB was also not unanimous on the size of yesterday’s hike with three council members calling for a smaller hike, according to Bloomberg. But reportedly the Council did not intend to send any specific signal for the size of future rate hikes.    The clearest dovish signal was that quantitative tightening had not been discussed further at this meeting. A decision for the key parameters has been left for December with an actual start date for quantitative tightening to follow later. That still leaves all options for a start next year on the table, but clearly the ECB has not set itself on a pre-set course as some hawks would have liked to see it happen given their remarks over the past month. The market’s reaction was clear with the yield spread of the 10Y Italian government bonds tightening by more than 10bp yesterday closer towards 200bp again.     Peripheral bonds are the main beneficiaries of an ECB perceived to be less hawkish Source: Refinitiv, ING Money markets are the next battleground after TLTRO tweaks The ECB also changed the targeted longer-term refinancing operation lending terms and lowered the remuneration of banks minimum reserve holdings. Of all the options available to the ECB, they were probably the least disruptive. The latter only marginally reduces the ECB’s interest rate expenses, though the ECB may at some later stage still opt to increase the minimum reserve requirement – recall that it was halved in 2012. And think of it more like a tax on banks which does not change any of the incentives driving market rates.    The former decision on TLTROs increased the effective lending rate for the remainder of the operations’ terms and could thus lead to larger early repayments. To that end the ECB has also offered additional repayment dates outside of the established quarterly rhythm. As our banking analyst notes, repayments should edge up, but maybe not overwhelmingly in the beginning, as even the higher rate may still compare favourably to market funding for some banks.     TLTROs were instrumental in bringing down Euribor/OIS and suppressing the pass-through of sovereign risks The TLTRO decision marks the ECB’s first steps towards reducing its balance sheet. The ECB’s stated aim is to “normalise bank funding costs”, which effectively should be read as higher rates. Even after TLTROs are paid down, the excess liquidity levels should still be high enough to prevent a larger updrift of the overnight ESTR rate, but term rates should increase first, meaning wider money market (credit) spreads. Recall that TLTROs were instrumental in bringing down Euribor rates relative to OIS, the high excess liquidity levels also largely suppressing the pass-through of sovereign risks down to the money market level. This effect is now about to unwind. Do the TLTRO tweaks ease the collateral squeeze? Lagarde said it was not their primary intent, but it could be a side effect. The collateral pledged in the operations itself is hardly the high quality and liquid type that is so dearly in demand, but repaying the TLTROs can still mean on aggregate less excess liquidity chasing the same quality collateral. It may thus still ease the strains at the margin.     As excess liquidity retreats, Euribor will become more sensitive to credit and sovereign spreads Source: Refinitiv, ING Today's events and market view Near term the ECB has more ground to cover in its fight against inflation, and the first background reports after the meeting seem to suggest that it was not the ECB's intention to signal any loss of determination or slowing in the tightening process. More pushback from the hawks could be forthcoming, though that may prove difficult with the markets’ current predisposition for central banks to shift into a lower gear and the focus now turning to the BoE and Fed next week. Our economists anticipate that the ECB will manage to deliver another 75bp of rate increases in total, but eventually also the ECB will not be able to withdraw itself from a souring economic reality. Data today should highlight the ECB’s struggle with first preliminary inflation data from individual eurozone countries staying elevated, if not edging higher. Also for release are the first 3Q GDP readings confirming the slowdown. In the US the PCE core deflator, the Fed's preferred inflation measure, will also show that this central bank's job is not done yet as it is seen edging up again. Q3 employment cost index will also provide an important clue as to the strengh of underlying inflation. Also on the menu are personal income and spending data as well as the final University of Michigan consumer confidence readings.  Today's bond supply comes from Italy, which will reopen a 5Y bond and a 5Y floating rate note, as well as auction a new 10Y benchmark – all in all for a total of up to €7.5bn.  Read this article on THINK TagsRates Daily Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Spain: Price Pressures Higher Up The Production Chain Are Starting To Ease

Among others, lower energy prices made Spanish inflation go down by over 1.5%!

ING Economics ING Economics 28.10.2022 17:19
Spanish inflation fell in September to 7.3% from 8.9% in September, marking the third consecutive month of decline. The main driver is the fall in the energy component Spanish inflation falls to 7.3% in October Spanish inflation fell to 7.3% in October from 8.9% a month earlier. This is now the second month in a row in which inflation has fallen. Core inflation, excluding more volatile energy and food prices, remained flat at 6.2%. The decline in headline inflation is mainly due to a drop in energy prices. This translates into a significant drop in the energy component. Clothing and footwear prices also rose more moderately than last year, reducing headline inflation, albeit to a lesser extent. From 1 October, the Spanish government reduced VAT on gas from 21% to 5% to soften the inflation shock. However, according to our calculations, this had only a marginal effect on the CPI of 0.1 percentage point. Many factors ease inflationary pressures, but the decline will be very gradual There are many structural factors easing some of the pressure on inflation. Many commodity prices have already fallen sharply from their peak levels a few months ago. Container transport prices have also fallen significantly, and supply chain problems continue to ease. These factors point to less inflationary pressure in the pipeline. Much will also depend on the development of energy prices. These have recently fallen sharply from the peak in August thanks to favourable weather conditions, but the question is how long this will last when winter really starts. Due to all these factors, producer price inflation has also already fallen from 47% in March to 36% in September but is still very high. This ensures that transmission to consumer prices also starts to weaken, and that will continue as the economy slips into recession. Cooling demand will continue to ease inflationary pressures as it will become more difficult for companies to pass on higher prices to the end customer. Although still historically high, the number of companies planning to raise prices further also shows a downward trend in a wide range of sectors. Price selling expectations only continue to edge higher in food and consumer goods.  This shows that inflationary pressures will remain high in the coming months and only very gradually start to ease. For the full year of  2022, we forecast inflation to reach around 8.7%. In 2023, inflation will gradually start to come down, reaching 4.4% in 2023. Read this article on THINK TagsSpain Inflation Eurozone Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
The German Purchasing Managers' Index, ZEW Economic Sentiment And More Ahead

The New Czech National Bank (CNB) Leadership Meeting Ahead | Inflation In Poland And In Turkey Continued Trending Upward

ING Economics ING Economics 29.10.2022 08:21
The third monetary policy meeting under the new Czech National bank will take place next Thursday. We believe interest rates will remain unchanged, as inflation is expected to be revised downward. On the other hand, Turkish and Polish inflation has continued to trend upward, and we see no signs of it levelling off soon In this article Turkey: Annual inflation expected to increase further Poland: No signs of polish inflation levelling off soon Czech Republic: CNB rates set to remain unchanged, again Source: Shutterstock Turkey: Annual inflation expected to increase further In October, we expect annual inflation to further increase to 86.2% (4.1% on a monthly basis) from 83.5% a month ago, given continuing broad-based pricing pressures on the back of a largely supportive policy framework along with less gradual currency weakness weighing on TRY-denominated import prices. Poland: No signs of polish inflation levelling off soon October CPI: 18.1% year-on-year Our forecasts indicate that CPI inflation increased further in October and probably slightly exceeded 18% year-on-year on the back of a sharp monthly increase in petroleum prices and further growth of energy and food prices. At the same time, we expect that core inflation continued trending upward. There are no signs of inflation levelling off soon and the momentum of core inflation remains high. October Manufacturing PMI: 42.2 percentage points Following a surprising upswing in manufacturing PMI in September, we expect the assessment of conditions in the domestic industry by purchasing managers to deteriorate again in October. Although supply-side bottlenecks eased recently and the energy outlook for the European industry is less challenging, elevated prices and softer global demand (decline in new orders) are projected to continue weighing on manufacturing activity in the coming quarters.  Czech Republic: CNB rates set to remain unchanged, again The third monetary policy meeting under the new Czech National Bank (CNB) leadership will take place on Thursday. We expect interest rates to remain unchanged. Thus, the central bank's new forecast will be the main focus. Compared to the August forecast, we see the biggest deviation in inflation, which surprised to the downside. In September, this deviation came in at 2.4 percentage points. Therefore, here we can expect the biggest downward revision in the new forecast. Nevertheless, the interest rate forecast can be expected to remain roughly similar to the CNB's summer version, indicating a rate cut in the next quarter due to the nature of the central bank's model. On the FX side, we don't expect much change in the forecast weakening trajectory of the koruna under the pressure of the declining interest rate differential. However, we don't see much implication for FX interventions, which are fully decoupled from the CNB forecast and depend only on the discretionary decision of the board. But, at the moment, we see the CNB in a comfortable position with no reason to change anything about the current regime. In the long run, we do not expect any further CNB rate hikes. Despite the board's highlighting of the wage-inflation risk, we believe that the stability or decline in annual inflation combined with a weaker economy will be enough in the coming months for the CNB to confirm the end of the rate hike cycle at future meetings. Read our full CNB preview here. Key events in EMEA next week Source: Refinitiv, ING TagsTurkey Poland PMI Czech Repulbic   Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more  
The EUR/JPY Pair Is Expected To Start A New Zig-Zag Correction

Forecast For Movement Of The Euro To Japanese Yen (EUR/JPY) Pair

InstaForex Analysis InstaForex Analysis 31.10.2022 08:30
The EUR/JPY pair failed to make a new higher high and now is trading at 147.17 below 147.67 today's high. It is moving sideways in the short term, that's why we have to wait for a fresh trading signal before taking action. Fundamentally, the Japanese economic data came in mixed. Retail Sales rose by 4.5% versus the 4.0% expected, Prelim Industrial Production registered a 1.6% drop compared to the 0.8% drop estimated, the Consumer Confidence dropped from 30.8 points to 29.9 points far below 31.0 forecasts, while Housing Starts registered a 1.0% growth less versus 2.6% expected. Later, German Retail Sales may report a 0.5% drop, Euro-zone CPi Flash Estimate may register a 9.9% growth, Core CPI Flash Estimate could increase by 4.8%, while the Prelim Flash GDP is expected to register a 0.1% growth. EUR/JPY Trading In The Red! As you can see on the H1 chart, the rate failed to test and retest the uptrend line signaling upside pressure. It's trapped between 145.63 and 147.72 levels. The bias remains bullish as long as it stays above the uptrend line. Now, it is almost reaching the 147.72 former high. This level stands as resistance. 148.40 is seen as resistance as well. After its strong rally post the BOJ, we cannot exclude a temporary retreat. EUR/JPY Forecast! The EUR/JPY could continue to move sideways as long as the 147.72 resistance remains intact. Coming back to test and retest the uptrend line could announce a new bullish momentum. A new buying opportunity could appear if the rate makes a new higher high, a valid breakout through 148.40 activates further growth.   Relevance up to 06:00 UTC+1 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/298955
The Markets Still Hope That The Fed May Consider Softer Decision

The Markets Still Hope That The Fed May Consider Softer Decision

InstaForex Analysis InstaForex Analysis 31.10.2022 09:52
The coming week will be unusually rich in economic statistics and various events that will have a significant impact on the markets. A number of important economic data will be released this week, where the values of production indicators both in Europe, China and the USA will play a significant role. The numbers of indexes of business activity in the manufacturing sectors will have to indicate what impact the processes of raising interest rates have on national economies, of course, here we mean the countries of the so-called West. The decline in indicators will demonstrate a steady trend towards recession in the Western countries with the expected result - continued increase in interest rates by central banks and, as a result, continued pressure on demand in the stock markets and the dollar. Also, new data on consumer inflation in the euro area will be published today, which, as predicted, will again show its increase in annual terms from 9.9% to 10.2%. If the reports do not disappoint, then the growth of inflation in the euro area will again bring to life the topic of further continuation of the aggressive increase in European Central Bank interest rates, however, which we strongly doubt, since there are noticeable discrepancies between the words of the central bank's representatives and real actions. This allows us to believe that the euro is unlikely to receive significant support in the near future. Monetary policy meetings of the Reserve Bank of Australia and the Bank of England will be held this week. Interest rates are expected to rise by 0.25% in Australia and by 0.75% in Britain, which, in our opinion, is unlikely to noticeably change the positioning of the Australian dollar and sterling against the US currency if the Federal Reserve, following the meeting on Tuesday, makes it clear that the growth rate rates at 0.75% can be maintained until the start of the new year. Only a softening of the US central bank's position regarding the prospective aggressive continuation of raising rates can significantly change the situation on the markets and lead to a global reversal in the stock markets and a weakening of the dollar. And the icing on the cake will be the release on Wednesday and Friday of new data from the US labor market. If they show the preservation of a high rate of creation of new jobs, this may allow the Fed to continue actively raising rates, which will become a new basis for the dollar's growth. What can we expect in the markets today? We believe that trading in Europe, according to the dynamics of futures for stock indices, will start in the red, but a lot will depend on the positioning of American investors. If trading in the United States starts positive, this may put pressure on the dollar and support its local weakening, as the markets still hope that the Fed at the November meeting may consider reducing the rate growth rate in the near future. Forecast of the day: EURUSD The pair is trading in a very tight range of 0.9925-0.9970. If the eurozone inflation report turns out to be lower than expected or in line with the forecast, the pair may break out of this range and fall to 0.9820, at the same time, if inflation shows more growth, this will cause an expectation of a continuation of the ECB's aggressive rate hike and may cause the pair to rise to 1.0080. EURJPY The pair is moving in the range of 14550-147.65. A strong increase in inflation in the euro area may trigger the likelihood of continued aggressive rate hikes by the ECB, which will support the euro against the yen. In this case, a rise above 147.65 could lead to a rise of the pair to 148.65.       Relevance up to 08:00 UTC+1 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/325759
The EUR/USD Pair Is Showing A Potential For Bearish Drop

Eurozone's GDP growth hits 0.2%, inflation exceeds 10.5%!

ING Economics ING Economics 31.10.2022 12:02
The eurozone contraction hasn’t started yet as GDP growth for the third quarter came in at 0.2%. Inflation continues to increase though, which sets the eurozone economy up for a tough winter as a recession is looming Inflation continues to be a problem across the eurozone. Pictured: shoppers in Madrid GDP growth of 0.2% is better than expected A positive surprise for eurozone GDP. In fairness, this has happened often during the pandemic recovery as the rebound effect has been stronger and lasted longer than expected. While cracks in the eurozone economy are clearly showing, the economy continued to expand in the third quarter. In Germany, it looks like this was mainly due to the last legs of the consumer rebound, while in France consumption growth had already stalled. Investment was the positive surprise in France. Spain experienced fast slowing growth but the tourism recovery prevented the economy from going into the red in the third quarter.  Overall, the picture remains bleak though. Consumer confidence is near historical lows as real wage growth is at a multiple-decade low at the moment. This weighs substantially on the consumption outlook, as retail sales have already been trending down over recent quarters. The reopening of economies boosted services, but that effect is now fading. With interest rates up and the economic outlook uncertain, investment expectations are weakening too. We therefore still expect the economy to contract over the coming quarters. Inflation into double digits The inflation rate jumped once again in October, to a whopping 10.7%. This was partly on higher consumer energy prices. The low prices on the wholesale market in recent weeks are clearly not yet translating into declining prices for households. In fact, it’s likely that this will only happen in a few months’ time and even that is a big 'if' because it depends on uncertain factors such as energy supply and the weather of course. Other components saw little bright spots in this October release. Food inflation continues to trend up fast despite commodity prices moderating, and goods inflation is also still showing large monthly gains which that's pushed core inflation up to 5%. Services inflation trended just mildly higher to 4.4% in October. Overall there is still clear evidence that the second round effects of the supply-side shocks to the economy keep pushing up inflation despite moderating demand. Tough time for a pivot? The slightly more dovish tone at the ECB press conference on Thursday indicates we shouldn't come to expect such extensive rate hikes, such as the 75bp rise they gave us last week, to be a feature of forthcoming meetings, especially since a recession is drawing closer. Today’s data will provide more ammunition for the hawks to show that there is no need to make a sudden pivot yet. Overall though, we keep reiterating that current inflation cannot be fought effectively by monetary policy that has the most effect with a big lag. And hawks cannot expect GDP to keep surprising on the upside forever. With economic conditions weakening and a recession in the making for the winter, we think the ECB is going make its next hike somewhat smaller at 50 basis points. Given the historic total size of the hikes the ECB is delivering, that will have quite the slowing impact on the economy next year. Read this article on THINK TagsInflation GDP Eurozone Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Forex: Most NOK Gains May Be Channelled Against The Dollar

Together With The Risk In The Financial Markets The Norwegian Krone (NOK) Has Strengthened

TeleTrade Comments TeleTrade Comments 31.10.2022 12:19
The Norwegian krone strengthened last week in tandem with the pullback of the USD and risk-on in financial markets. Still, economists at Nordea see EUR/NOK trading as high as 10.75 until year-end. More pain to come “Historically speaking, the period towards year-end, remains a difficult period for the NOK seasonality-wise. We don’t think this year will be an expectation given the macroeconomic backdrop and see EUR/NOK trading as high as 10.75.”  “USD/NOK could rise to 11.50 if/when EUR/USD takes a turn to 0.95 again.”
Apple Q3 2023 Results – Surpassing Expectations and Aiming for New Heights

The Euro To British Pound (EUR/GBP) Cross Pair Prices Back Above

TeleTrade Comments TeleTrade Comments 31.10.2022 13:11
EUR/GBP gains some positive traction on Monday and snaps a four-day losing streak. Stronger Eurozone inflation data provide a modest lift to the euro and offer support. A combination of factors seems to underpin sterling and might cap gains for the cross. The EUR/GBP cross attracts some buying near the 0.8575-0.8570 region on Monday and snaps a four-day losing streak to its lowest level since early September. The intraday uptick picks up pace following the release of stronger Eurozone consumer inflation figures and lifts spot prices back above the 0.8600 mark during the first half of the European session. The latest data published by Eurostat showed that the annualized Eurozone Harmonised Index of Consumer Prices (HICP) accelerate to 10.7% in October from 9.9% in the previous month. Adding to this, the core figures climbed to 5.0% YoY during the reported month as compared to the 4.9% expected and 4.8% recorded in September. Separately, the first reading of the Eurozone GDP print showed that the economy expanded by 0.2% during the third quarter, matching consensus estimates. This, in turn, is seen as a key factor behind the shared currency's relative outperformance against its British counterpart and offering some support to the EUR/GBP cross. That said, a more dovish tone adopted by the European Central Bank last week - in the wake of the worsening economic outlook - continues to act as a headwind for the euro. The British pound, on the other hand, draws support from the latest optimism over the appointment of Rishi Sunak as the new UK Prime Minister. Market players see Sunak as someone who can bring stability back after the recent volatility in the markets. Adding to this, International Monetary Fund (IMF) Managing Director Kristalina Georgieva told Reuters that she expects the new UK PM Sunak to steer Britain towards a path of medium-term fiscal sustainability. Apart from this, expectations for a 75 bps hike by the Bank of England warrant some caution for aggressive bullish traders and positioning for a further appreciating move for the EUR/GBP cross. Hence, any subsequent strength is more likely to confront stiff resistance and remain capped near the mid-0.8600s, which should act as a pivotal point for intraday traders. Some follow-through buying should push spot prices back above the 0.8700 mark and allow bulls to aim back to retest the 0.8750-0.8760 supply zone.
Technical Outlook Of The EUR/JPY Pair Movement In Short Term

Strength To The Downside Bias Of The EUR/USD Pair Is The Strongest Bearish

TeleTrade Comments TeleTrade Comments 02.11.2022 09:18
EUR/JPY breaks five-week-old support line during three-day downtrend. MACD prints the biggest bearish signal in a month. A daily closing below September’s peak becomes necessary for the buyers to leave the table. EUR/JPY drops half a percent as the bears keep reins around 145.80, down for the third consecutive day to early Wednesday morning in Europe. The cross-currency pair’s latest weakness could be linked to the seller’s ability to conquer an upward-sloping support line from September 26, now resistance around 146.15. Also adding strength to the downside bias is the strongest bearish MACD signal since October 03. That said, the EUR/JPY pair’s further downside needs to provide a daily closing below September’s peak of 145.63 to keep the sellers hopeful. Also acting as a downside filter is the 21-DMA level surrounding 145.15. In a case where the quote remains bearish below 145.15, the odds of its south-run towards 144.10-00 area comprising tops marked since October 20 can’t be ruled out. Alternatively, recovery moves need a daily close beyond the support-turned-resistance line around 146.15. Even so, a descending trend line from October 21, close to 147.50 by the press time, will act as the last defense of the bears. Should the EUR/JPY prices remain firmer past 147.50, the previous monthly high of 148.40 and the upper line of a 3.5-month-old bullish channel, around 149.10, will be in focus. EUR/JPY: Daily chart Trend: Further downside expected
Forex: Most NOK Gains May Be Channelled Against The Dollar

Norway’s Norges Bank (NB) And Another Hike | The Krone’s (NOK) Upside Potential Is Limited

TeleTrade Comments TeleTrade Comments 03.11.2022 10:26
Norway’s Norges Bank (NB) is due to deliver another hike. Economists at ING note that the EUR/NOK could break under 10.20, however, the krone’s upside potential is limited. 50 bps hike can offer some extra help to the krone “We note that consensus is split between a 25 bps and a 50 bps move today: we expect a half point hike, as the September CPI upside surprise (6.9% year-on-year) may have overshadowed concerns about slowing economic activity. We think this can offer some extra help to the krone, which is already benefiting from oil’s good performance and the support from Norges Bank’s reduced daily FX purchases for November.”  “EUR/NOK may break below 10.20 in the near-term, but we suspect that a worsening of risk sentiment conditions into year-end may limit further NOK appreciation.” See – Norges Bank Preview: Forecasts from five major banks, back to 25 bps hikes
The EUR/JPY Pair Is Expected To Start A New Zig-Zag Correction

A Corrective Decline Of The EUR/JPY Pair Is Expected

InstaForex Analysis InstaForex Analysis 04.11.2022 08:27
We have been looking for EUR/JPY to take off in a strong rally, but the most recent price action doesn't really support that scenario and rather looks like an ending diagonal just completed its wave v/ of 5 at 148.40. A corrective decline is ready to take over the weeks to come. A break below minor support at 143.75 will confirm that the ending diagonal has been completed and a corrective decline to the starting point of the ending diagonal at 133.25 is unfolding.     Relevance up to 07:00 2022-11-07 UTC+1 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/299675
Britain's Rishi Sunak And EU's Ursula Von Der Leyen Will Meet Today To Finalize The Northern Ireland Drama

Further Weakness Of The EUR/GBP Pair Is Expected

TeleTrade Comments TeleTrade Comments 04.11.2022 09:02
EURGBP pares the biggest daily gain in six weeks. Sustained break of descending triangle, firmer oscillators favor buyers. Bears need validation from 0.8660, October’s high adds to the upside filters. EURGBP takes offers to refresh the intraday low near 0.8708 heading into Friday’s European session. In doing so, the cross-currency pair consolidates the biggest daily gains since late September, marked the previous day. Technically, the quote’s recent weakness could be portrayed by a pullback from the 200-SMA. However, a successful break of the three-week-old bearish triangle, crossed on Thursday, keeps the pair buyers hopeful unless the quote drops back below 0.8660. Also favoring the EURGBP sellers could be the bullish MACD signals and the strong RSI (14), not overbought. Even if the quote breaks 0.8660 resistance-turned-support, the downside could have a limited shelf life lower line of the stated triangle, around 0.8570, which could challenge the pair bears. It should be noted that September’s low near 0.8566 acts as the last defense of the EURGBP buyers. Alternatively, recovery moves need to cross the 200-SMA hurdle of 0.8740 to recall the EURGBP bulls. Even so, the previous monthly top near 0.8865 appears a tough nut to crack for buyers. Following that, a run-up towards the 0.9000 psychological magnet can’t be ruled out. EURGBP: Four-hour chart Trend: Further weakness expected
Disappointing German March macro data increase risk of technical recession

German industrial orders decreased by 4% month-on month! Such print reminds us of looming recession

ING Economics ING Economics 04.11.2022 13:27
Another plunge in industrial orders shows that last week's positive GDP growth reading was a last hurrah for the economy. The slide into recession continues German industrial orders just took another sharp hit, plunging by 4% month-on-month in September, from -2% MoM in August. On the year, industrial orders were down by almost 11%. Since the start of the year, German order books have shrunk by almost 15%. At the start of the year, German industrial order books were richly filled and provided decent anti-recession insurance. Since the start of the Ukraine war, however, this insurance has lessened by the month. Last week, surprisingly strong GDP growth for the third quarter might have given the impression that the German economy could defy recession. This year’s order book deflation, however, sends a clear signal that these signs of hope are illusionary. The long slide into recession continues. Read this article on THINK TagsIndustry Germany GDP Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Unraveling UK Inflation: The Bank of England's Next Move

The Dovish Decision Of The Bank Of England (BoE) Puts A Heavy Burden On The GBP

Saxo Bank Saxo Bank 04.11.2022 13:39
Summary:  The FOMC meeting this week forced the market to adjust to the idea that the Fed could continue to take rates higher than had previously been priced. But clearly, to drive tightening expectations higher still, we’ll need to continue to see hotter than expected US data, with today’s US jobs report the next test on that. Elsewhere, sterling is in a world of hurt after BoE’s very dovish guidance. FX Trading focus: US incoming data focus after hawkish FOMC. BoE in dovish pushback against market hike expectations. The US dollar followed through stronger yesterday on the momentum off the back of the hawkish Powell presser Wednesday, but has come in for a chunky reversal overnight and today since a somewhat softer than expected ISM services survey yesterday (nudged lower to 54.4 vs. 55.3 expected and 56.7 in September, with the employment sub-index dipping back below 50 at 49.1 vs. 53.0 in September). Wouldn’t it be ironic if we also were to get a soft US jobs report today that takes US yields back to their starting point of the week, making Powell’s hawkish message so much noise, at least until the next incoming data point jerks the market the other way? Interestingly, the USD is selling off ahead of today’s US data releases even as short US yields are posting new highs for the cycle Specifically in today’s jobs report, in addition to any strong directional surprise in payrolls (multi-month grain of salt needed with this data series, as single releases require further corroborating evidence), we should keep both eyes on the average hourly earnings survey. Arguably, if we get the expected 0.3% month-to-month average hourly earnings print today after a couple of prior prints of a similar size, observers may begin to judge that the annualized rise in earnings is beginning to look far less threatening at sub-4.0%. The year-on-year is expected to drop to a 15-month low of 4.7% today. A significant upside surprise in earnings is perhaps could generate significant volatility. Chart: EURGBPWorth considering how the dovish Bank of England meeting yesterday (see more below) is weighing heavily on sterling, as it should, with the Bank of England reluctant to signal much tightening energy when it sees an incoming recession. Sterling is down sharply across the board, with EURGBP suddenly well backed up within the old range and now far away from the sub-0.8600 range support. The next area between the 0.8800 and pivot high of 0.8870 area looks key for whether sterling weakness is set to become a bit more unhinged, and the next key event-risk test is likely how the market greets an austere Autumn budget statement on November 17. Bank of England wrap. The BoE hiked by 75 bps to 3%, as most expected and as was mostly priced in, but Bailey and company strongly pushed back against expectations for the scale of future moves, saying that the terminal rate priced in currently by the markets would induce a two-year recession. There were also two dovish dissenters at the meeting, one calling for 50 bps rate hike and another for a mere 25 bps. New forecasts were also released, which gave a particularly grim outlook for the economy, looking for a GDP print of -0.5% QoQ in Q3 2022 vs -0.1% expected in September. The inflation forecast now shows a peak around 11% in Q4, which is marginally hotter than the prior meeting’s projection. Sterling was crushed lower, having already fallen heading into the meeting, and it speaks volumes that even though the BoE pushed back against the forward implied expectations for further tightening, which it said would trigger a 2-year UK recession, the market did not budge those expectations. In short: the market refuses to acknowledge what the BoE thinks it might do, probably figuring that the BoE will have no choice due to sterling weakness but to pursue the path to 4.50% or higher rates before mid-next year. I was surprised by the lack of discussion or journalist questioning in the press conference around the risk that currency weakness drives worse inflationary outcomes if the BoE fails to do as much as the market is pricing. Sterling remains in a heap of trouble. Table: FX Board of G10 and CNH trend evolution and strength.The USD needs to stick the move off the back of the FOMC meeting after the US jobs data today, otherwise we’ll suddenly be back to square one. The hottest movement in FX was clearly the sterling sell-off yesterday on a very clearly dovish Bank of England meeting. CNH is making waves on a lot of movement overnight and noise (unconfirmed) of an eventual opening up. Table: FX Board Trend Scoreboard for individual pairs.While the US dollar flipped to a positive trend in many places, we must still consider the risk that incoming data complicates the plot. GBP is already registering a negative trend in many new GBP pairs after yesterday’s BoE meeting. Interesting that the NOK failed to roll over to the downside in a couple of key pairs after the small hike from the Norges Bank yesterday. Upcoming Economic Calendar Highlights 1215 – UK Bank of England Chief Economist Huw Pill to speak 1230 – US Oct. Nonfarm Payrolls Change 1230 – US Oct. Unemployment Rate 1230 – US Oct. Average Hourly Earnings 1230 - Canada Oct. Unemployment Change/Rate 1400 – Canada Oct. Ivey PMI 1400 – US Fed’s Collins (Voter 2022) to speak Source: https://www.home.saxo/content/articles/forex/fx-update-us-incoming-data-sterling-pays-price-after-dovish-boe-04112022
Hungarian inflation peak is behind us

Hungary Is Expecting A Significant Surplus |The Romanian National Bank (NBR) Will Announce Its Rate Decision

ING Economics ING Economics 05.11.2022 08:22
Two central bank meetings will take place next week. For the National Bank of Poland, we see a 25bp hike to 7%, however it is a close call between that and there being no change in the policy rate. For the Romanian National Bank, we expect a reduction in the tightening pace, taking the key rate to 6.75% with a 50bp hike In this article Czech Republic: Inflation accelerates due to fuel prices, while energy remains uncertain Poland: Baseline scenario is a 25bp hike to 7.00% Romania: End of the tightening cycle is close Hungary: Slowdown, adjustment and rationalisation Source: Shutterstock Czech Republic: Inflation accelerates due to fuel prices, while energy remains uncertain We expect inflation to accelerate again in October from 0.8% to 1.3% month-on-month, which translates into an acceleration in the annual rate from 18.0% to 18.2% year-on-year. The main reason for this is the significant increase in fuel prices in October (5.0% MoM) and food prices. On the other hand, we see a seasonal downward movement in clothing prices. The main issue as always in recent months is energy prices. These were largely behind September's surprise, but the main question in October may be the impact of the saving tariff as a government measure that should affect household prices throughout the fourth quarter. As in previous months, the statistical office’s approach is unclear and therefore inflation could surprise either way. Poland: Baseline scenario is a 25bp hike to 7.00% The November Monetary Policy Council (MPC) decision will be a close call between 25bp and no change in the National Bank of Poland (NBP) policy rate. On the one hand, headline inflation continues to trend upward and is increasingly broad-based, as indicated by rising core inflation. The peak is still ahead and bringing inflation back to the NBP target in the foreseeable future will require additional policy tightening. On the other hand, the Polish zloty firmed recently and the majority of the Council is increasingly eager to refrain from further rate hikes as it claims that monetary policy has almost reached its limits in containing demand factors. Our baseline scenario is a 25bp rate hike, but we do not rule out a scenario where rates remain unchanged. The Council will receive new macroeconomic projections and some policymakers indicated that the mid-term outlook for CPI inflation may trigger additional fine-tuning with respect to interest rates. Romania: End of the tightening cycle is close The Romanian National Bank (NBR) will announce its latest policy rate decision on Tuesday. We expect a reduction of the tightening pace to 50bp, taking the key rate to 6.75%. An open-end press release leaving the door open for another hike in January is to be expected. The NBR will also approve its latest inflation report and we should see another upwardly revised inflation forecast. The year-end estimate could flirt with the 17.0% area, though our own estimate currently sits closer to the 16.0% handle. Nevertheless, upside surprises in inflation prints versus estimates are still persistent, and forecasts should be taken – as usual lately – with a lot more than a pinch of salt. Perhaps more important than the rate hike itself will be any hint of an alteration in the tight liquidity management stance. We see little to no chance of this being changed for now. Read our full preview here. Hungary: Slowdown, adjustment and rationalisation Next week will be extremely busy in Hungary. We start the week with September economic activity data with an expectation of a general weakening in businesses. Retail sector growth will be limited by rising inflation thus decreasing real wage growth. Industrial production is a bit of a black box now with the wildly volatile manufacturing PMI, but we think we will see a slowdown here as well as adjustment and rationalisation continue as manufacturers face rising energy bills. The October inflation readings might draw a lot of interest, too. Our calls are higher readings in headline and core inflation. The common drivers here will be rising processed food and services prices with some extra pressure coming from durables as well as the forint hitting its weakest level versus all the majors during October. We might see a bit better trade balance data as energy prices have been moving lower in general, supporting the reduction of the monthly deficit via the energy-related goods balance. Speaking of balances, we are about to see the October budget balance as well. Here we are expecting a significant surplus, thanks to the revenue side as a huge chunk of windfall tax payments were first due in October. Key events in EMEA next week   Source:  Refinitiv, ING TagsNational Bank of Poland Hungary   Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Apple Q3 2023 Results – Surpassing Expectations and Aiming for New Heights

Enrique Díaz-Álvarez talks Forex market highlighting euro, pound, Japanese yen and more

Enrique Díaz-Álvarez Enrique Díaz-Álvarez 07.11.2022 14:48
Currency market volatility continues to rise, and signs are emerging that the dollar rally is running out of steam. The Federal Reserve delivered a massive hike and a more hawkish than expected message, while other central banks begin to fret about the impact of higher rates on their respective economies. However, the dollar failed to rally and in fact fell against most G10 currencies, with the notable exception of sterling, which was hobbled by an uber-dovish Bank of England. The star of the week, and also the year so far, was undoubtedly the Brazilian real, a favourite of ours, which put in another scorching rally on the back of the peaceful transfer of power to what looks to be a moderate Lula administration.   All eyes turn now to the critical October CPI inflation report out of the US (Thursday). Headline prices will probably drop further as energy prices continue to moderate, but the key will be once again the more persistent core rate. UK third-quarter GDP growth (Friday) may be important for sterling. Beyond economic news, it will be important to see whether signs of China easing its COVID policies are confirmed. As this is written, signs are emerging that last week’s rally in Chineses assets may have been premature. Figure 1: G10 FX Performance Tracker [base: USD] (1 week) Source: Refinitiv Datastream Date: 07/11/2022 British pound The Bank of England hiked rates by 75 basis points last Thursday as expected, but then surprised markets with one of its periodic pivots, this time a dovish one. The Bank of England appears to be taking a blasé view of inflation and focusing on recessionary risks instead. The reference to markets overestimating the terminal rate was unusually blunt, and sterling did not like it one bit, losing significant ground against every major currency worldwide. Third-quarter GDP growth data will be in focus this week. The MPC warned last week that the UK economy may already be in a recession, and this week data is indeed expected to show that contraction on a quarterly basis. This is, however, a backward looking number, and we expect sterling to react as much or more to the US inflation data out this week. Euro Another month, another blow out inflation report out of the Eurozone. This one came just a few days after the muddled attempt at a dovish pivot from the ECB at its meeting the previous week, thereby contributing to the developing credibility gap at the institution. In addition to double digit headline inflation, sticky core inflation continues to march higher. Figure 2: Euro Area Inflation Rate (2013 – 2022) Source: Refinitiv Datastream Date: 07/11/2022 On the plus side, the worst fears about a winter energy crisis continue to fade. On the negative side, early Monday morning reports from Asia suggest that hopes for an easing of Chinese lockdowns may have been premature, and hence the recovery of European exports to China may be further delayed. This week’s main event in the Eurozone will be a number of ECB official speeches, including President Lagarde. US dollar The hopes for a Federal Reserve pivot to a more dovish stance failed to materialise last week, and in fact Chair Powell indicated that rates may have to go even higher than markets were pricing in before the meeting. Bonds fell, as did stocks, but the dollar failed to follow the script and actually ended the week slightly down in trade-weighted terms following Friday’s nonfarm payrolls data. The labour market report was mixed, but still consistent with a very tight market that is yet to feel the impact of monetary tightening in any significant way. Figure 3: US Nonfarm Payrolls (2021 – 2022) Source: Refinitiv Datastream Date: 07/11/2022 The inflation report this week is expected to show another easing of headline annual price pressures on the back of lower energy costs. However, the key will be the core index that strips out the volatile food and energy components. The Fed needs to see a downward trend in these numbers before it can think of pausing hikes in interest rates, and is unlikely to see that in this report. Japanese yen The yen was one of the better performers in the G10 last week, ending modestly higher on the US dollar. The currency remains by far the worst performing major this year, though recent intervention efforts by the Bank of Japan appear to have put a temporary floor under the yen. According to Japan’s Ministry of Finance, intervention totalled more than ¥6 trillion last month, by far the largest ever. The 150 mark on the dollar seems to be a line in the sand for the BoJ, so we would expect fresh intervention to prop up the currency should the yen make another move towards this level. Tentative signs that the Bank of Japan is open to tweaking its monetary policy stance also provided a bit of assistance to JPY. During a speech mid-week, Governor Kuroda noted that changing the bank’s yield curve control policy could be an option should inflation pick-up. Japanese inflation remains far more contained than in most other countries, though it is expected to test three decade highs in the coming months, which could force the BoJ’s hand. Swiss franc EUR/CHF ended last week little changed, and the pair continues to hover below parity. The abundance of domestic economic data had little impact on the franc. Soft prints, for the most part, continue to point to a slowdown ahead. An indicator of consumer confidence, for instance, plunged to its lowest level since its inception in 1972. Retail sales, however, continue to show healthy consumer activity, expanding by another 0.9% in September. This resembles the situation in many other economies, where sentiment indicators and hard data are at odds. There’s not much on tap from Switzerland this week. Speeches by SNB chairman Thomas Jordan and fellow member Andrea Maechler could prove the most noteworthy. Last week, chairman Jordan suggested that further rate hikes may be needed in Switzerland, confirming our view that another rate increase is on the way in December. Australian dollar The Reserve Bank of Australia mostly met expectations during its meeting last week. Interest rates were raised by another 25 basis points to 2.85%, the second in consecutive meetings, having become the first major central bank to revert back to ‘standard’ sized hike in October. Governor Lowe struck a balanced tone in his presser, keeping the door open to additional hikes of a larger magnitude, as it waits to gauge the impact of its tightening cycle on domestic activity. The growth forecast for next year was downgraded, though there was an upward revision to its inflation forecast. All in all, there were no real surprises of note, and AUD largely tracked global risk sentiment and news out of the US. Meanwhile, news out of the Australian economy last week was mixed, with surprises to the upside in business activity and housing data offset by Friday’s soft retail sales print. This week is set to be a relatively quiet one in Australia, so we expect the dollar to be driven largely by goings on elsewhere. New Zealand dollar A stronger-than-expected labour report helped propel the New Zealand dollar to the top of the FX performance tracker last week. Employment rose strongly in the third quarter (+1.3%), following three quarters of essentially flat net employment gains, with the participation rate also up more than anticipated. News that China plans to stick by its zero-covid policy led a bit of a retracement in the dollar during Asian trading this morning, although a general improvement in market risk sentiment has kept the currency well bid. Developments out of China may be the main driver of NZD this week, as the domestic economic calendar is relatively light. We also think that expectations for the RBNZ’s next meeting in a couple of weeks time will remain key. Markets are torn between a 50bp and 75bp hike, though surprises to the upside in this week’s PMI and/or inflation expectations data could tip the balance in favour of the latter. Canadian dollar Friday’s stellar employment report out of Canada helped trigger one of the most violent rallies in CAD witnessed since the extreme volatility of the global financial crisis in ‘08-’09. The employment change number blew all expectations out of the water, as 108k net jobs were created last month, above the 21k consensus and the fastest pace of job creation since February 2020. Investors reacted by immediately raising expectations for Bank of Canada policy tightening, with markets now seeing a two-in-three chance of another 50bp rate hike in December. Figure 4: Canada Employment Change (2021 – 2022) Source: Refinitiv Datastream Date: 07/11/2022 A speech by BoC governor Macklem (Thursday) could be key in shaping the aforementioned rate expectations, and confirm whether this is indeed enough to delay a dovish pivot. Should the Bank of Canada follow in the footsteps of the Fed in prolonging its hiking cycle, then CAD would likely be dragged higher along with the US currency against most majors. Swedish krona The Swedish krona appreciated against the euro last week, extending the rally in SEK to almost 2% against the common currency since the recent peak in mid-October. The latest data out of Sweden continues to be mixed. The manufacturing PMI released last week decreased to 46.8 in October, pointing to the most significant contraction in factory activity since May 2020. However, the services PMI increased to 56.9 from a more than two-year low of 55.1 in the previous month. eptember industrial production data, which will be released this Wednesday, will complete the picture of the economy’s performance, although it has to be said that this data point runs on somewhat of a lag, and is not expected to have too much impact on the currency. Norwegian krone Norges Bank has become the latest G10 central bank to begin slowing its tightening cycle. At its meeting last week, interest rates were raised by only 25 basis points, below the 50bps expected by markets. This weighed on the Norwegian krone, which fell to its lowest level in two years against the euro, although it has since recovered some of these losses. According to its communications, Norges Bank anticipates further hikes ahead, but at a slower pace due to cooling in some areas of the economy and expectations of lower inflationary pressures. This decision is at odds with core inflation, at an all-time high 5.3%, and a labour market that is almost at full employment. In the words of Norges Bank, a larger rate hike would have been needed had only these two variables been taken into account, but the board has put more weight on risks to growth and a tightening in financial conditions. The October inflation rate, to be released on Thursday, is expected to continue its upward trend. This could cause the terminal base rate to be revised upwards, which would likely support the krone. CNY Traders certainly couldn’t complain about a lack of volatility last week. The yuan ended the week higher against the broadly weaker dollar, and the drop in the USD/CNY pair on Friday was among the biggest on record. Looking beyond the FX market, last week was extraordinarily positive for equities, with the key indices rallying sharply on rumour-fuelled hopes that China may soon embark on a path to exit its controversial zero-Covid policy. On Saturday, however, officials quashed speculation, stressing that China would ‘unswervingly’ stick to zero-Covid. Chinese equities have extended their gains today, but this could tell more about their relative cheapness than the validity of reopening hopes. Just before the weekend, China’s new Covid cases surged to six-month highs. Rising infection numbers don’t bode well for the economic outlook, and domestic consumption has already taken a hit, as shown by last week’s soft PMI numbers. Looking ahead, news on the covid front and October’s inflation data (Wednesday) could prove market moving this week. Economic Calendar (07/11/2022 – 11/11/2022) To stay up to date with our publications, please choose one of the below: 📩 Click here to receive the latest market updates👉 Our LinkedIn page for the latest news✍️ Our Blog page for other FX market reports 🔊 Stay up to date with our podcast FXTalk Source: US dollar rally stalls in spite of hawkish Federal Reserve | Ebury UK
Long-Term Yields Soar Amidst Hawkish Fed: Will They Reach 5%?

Eurozone: confidence and spending power in the current status don't paint a rosy picture

ING Economics ING Economics 08.11.2022 15:56
Eurozone retail sales grew by 0.4% month-on-month in September, rounding out a disappointing quarter for sales. We see a continued cloudy outlook for retail as spending power remains under pressure and confidence is still near record lows A modest increase in retail sales in September rounded out a disappointing third quarter in terms of consumer spending. While there were some upside surprises to be noted, the consumer in general has started to reign in spending as the cost-of-living crisis continues and reopening effects from the pandemic fade. The effect of inflation is very apparent in retail sales as consumers bought -2.6% lower volumes in September than in June of last year but have spent 8.1% more. Netherlands and Germany led the way with 1.3 and 0.9% month-on-month increases respectively, while France, Italy and Spain all saw more or less stable retail trade compared to last month. The outlook for retail remains bleak, with ongoing inflation eating into consumer spending power and uncertainty about the economy increasing. This has resulted in record-low consumer confidence over recent months. While that is not necessarily a strong predictor of household consumption, movements as pronounced as this have always been associated with a contraction in consumption. We expect consumption to contract in the current and coming quarter, followed by a very modest recovery. Read this article on THINK TagsRetail sales GDP Eurozone Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Apple Q3 2023 Results – Surpassing Expectations and Aiming for New Heights

The Bank Of England's Gloomy Outlook Should Undermine The Pound (GBP)

TeleTrade Comments TeleTrade Comments 09.11.2022 09:13
EURGBP lacks any firm intraday direction and remains confined in a narrow trading band. Talks for aggressive policy tightening by the ECB underpin the Euro and offers support. The BoE’s gloomy outlook could weigh on the British Pound and favour bullish traders. The EURGBP cross struggles to capitalize on the previous day's modest gains and oscillates in a narrow trading band, just above the 0.8700 mark through the early European session on Wednesday. Talks of a more aggressive policy tightening by the European Central Bank (ECB) continue to benefit the shared currency and offer support to the EURGBP cross. In fact, several ECB policymakers said that higher rates are needed for longer to bring down double-digit inflation in the Eurozone back to its 2% target. This, in turn, pushes the rate-sensitive two-year German bond yield to its highest since December 2008 and is seen acting as a tailwind for the Euro. The British Pound, on the other hand, draws support from the recent slump in the US Dollar and keeps a lid on the EURGBP cross. That said, the Bank of England's gloomy outlook for the UK economy should undermine the Sterling and supports prospects for some upside for the cross. It is worth recalling that the UK central bank forecasts a recession to last for all of 2023 and the first half of 2024 while indicating a lower terminal peak than is priced into markets. The fundamental backdrop suggests that the path of least resistance for the EURGBP cross is to the upside and any slide below the 0.8700 round figure could be seen as a buying opportunity. Bulls, however, might wait for a sustained strength beyond the 0.8775-0.8780 resistance zone before placing fresh bets amid absent relevant market-moving economic releases. The market focus now shifts to the release of the Preliminary UK Q3 GDP report on Friday.
The EUR/JPY Pair Is Expected To Start A New Zig-Zag Correction

The EUR/JPY Pair Has Potential For Further Upside Movement

InstaForex Analysis InstaForex Analysis 09.11.2022 09:26
Technical analysis: EUR/JPY has been trading sideways at the price of 146.70. Anyway, I see potential for the upside breakout in the next period. Trading recommendation: Due to the trading range in the strong upside trend in the background, I see potential for further upside movement. Watch for buying opportunities if the price breaks level of 147.00 with the first upside objective at 148.30. MACD oscillator is showing upside reading, which is good sign that buyers are in control. Support is set at the price of 145.95   Relevance up to 08:00 2022-11-10 UTC+1 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/300242
Indonesia's Inflation Slips, Central Bank Maintains Rates Amidst Stability

The USD Could Yet Reject This Breakdown Attempt | Weak Risk Sentiment Could Provide The Strongest Support For The JPY

Saxo Bank Saxo Bank 09.11.2022 13:25
Summary:  Market sentiment improved further yesterday before dipping slightly overnight, as China Covid cases are on the rise, pushing back against hopes for a lifting of Covid restrictions. In the US mid-term elections, Democrats are slightly outperforming expectations, possibly set to retain control of the Senate even if Republicans look set to take narrow control of the House of Representatives. FX Trading focus: Next test for struggling USD over tomorrow’s US CPI data. The US mid-term election results are still rolling in this morning in Europe, with the Republicans set to take a small majority in the House and the Senate outcome looking at risk of riding on the outcome of a Georgia run-off election on December 6th as neither candidate looks set to achieve the 50% required for elections there. Remember that we had a similar setup after the 2020 election when two Senate races in Georgia were only decided in a January 5 run-off. There are no real market conclusions from the outcome, even if the Georgia race gives the Republicans a majority in the Senate, as the only scenario that would have guaranteed dramatic potential for fiscal policy would have been the Democrats surprisingly retaining both houses. Other conclusions: Trump is a liability for the Republican party, which likely would have done far better without his involvement, and forensic studies of split-ticket voting will likely confirm this, and it will be interesting to see if this deters his possible renewed ambitions for the presidency. Finally: razor thin Georgia results keep alive the narratives around election fraud, etc. Can the US move beyond its dysfunctional elections by 2024 or will the republic face an existential test in that election cycle? Back to incoming data, with tomorrow’s US October CPI in focus. Let’s recall that the September CPI data point was a real shocker as many qualified slicers and dicers of the data were looking for a deceleration in the core data rather than the acceleration we got. That has me leaning for a slightly softer release tomorrow. But I am far more interested in the nature of the market reaction. As I have discussed the last couple of days on the Saxo Market Call podcast, I find the most interesting test for the US dollar one in which we see inflation decelerating and US treasury yields perhaps easing a bit lower, but in which we also see risk sentiment weak as equity and bond markets are starting to decouple, as equities begin to fret recession rather than being merely led around by the nose by the treasury market. If that is the scenario we get and the USD weakens, then I think USD weakness can extend a bit more forcefully for a time, if not, then the USD could yet reject this breakdown attempt. I withhold judgement for now, as the USD has not yet broken down. But the easiest thing to do is to simply judge what happens on the charts in the wake of the data release (not knee-jerk, but how the day closes), as we have a number of clear-cut levels in play for the major USD pairs. Chart: USDJPY USDJPY has traditionally been a strong focus over US data surprises over the years and will be in focus with the macro event risk of the week, if not the month, coming up tomorrow in the form of the US October CPI release. Reaction in yields and risk sentiment are both worth watching as I have cooked up some thoughts of late (see above) on whether US treasury markets and equity markets could move out of correlation, i.e., that risk sentiment may have a hard time celebrating a drop in treasury yields. So, a weaker than expected US CPI report together with falling treasury yields, but also together with weak risk sentiment could provide the strongest support for the JPY here in a broad sense, though it might be felt more forcefully in JPY crosses. Regardless, if the JPY finds bids tomorrow, the 145.00 level will be a huge focus in USDJPY. Table: FX Board of G10 and CNH trend evolution and strength.The USD is clearly down, but will only be out on sticking further weakness in the wake of the US CPI release tomorrow. Elsewhere, note the sterling momentum turning badly south and SEK trying to look higher, not a surprise given European equities having rallied vertically for weeks – looking a bit much. Table: FX Board Trend Scoreboard for individual pairs.EURGBP is one to focus on around the 0.8800 level. JPY crosses are interesting in places as well as yields have consolidated a bit lower – look at the 165 area in GBPJPY, for example. But it is all about key USD levels after the US data tomorrow, including 1.0100 in EURUSD, 0.6522 in AUDUSD, etc… Upcoming Economic Calendar Highlights 1200 – Mexico Oct. CPI 1300 – UK Bank of England’s Haskel to speak 1530 – EIA's Weekly Crude and Fuel Stock Report 1630 – UK Bank of England’s Cunliffe to speak 1700 – World Agriculture Supply and Demand Estimates (WASDE) 0001 – UK Oct. RICS House Price Balance 0100 – US Fed’s Kashkari (Voter 2023) to speak   Source: https://www.home.saxo/content/articles/forex/fx-update-usd-on-edge-ahead-of-the-us-cpi-data-tomorrow-09112022
Bank of England survey highlights easing price pressures

The UK Central Bank (BoE) Expects A Recession To Last For All Of 2023

TeleTrade Comments TeleTrade Comments 10.11.2022 09:51
EURGBP lacks any firm intraday direction and oscillates in a range on Thursday. A combination of factors, however, continues to act as a tailwind for the cross. Talks for aggressive tightening by the ECB underpin the Euro and offers support. The BoE’s bleak outlook for the UK economy supports prospects for further gains. The EURGBP cross is seen oscillating in a range, around the 0.8800 round-figure mark through the early European session and consolidating the overnight strong gains to a nearly one-month high. The Bank of England's gloomy outlook for the UK economy turns out to be a key factor behind the British Pound's relative underperformance and acts as a tailwind for the EURGBP cross. In fact, the UK central bank expects a recession to last for all of 2023 and the first half of 2024. Moreover, the BoE last week indicated a lower terminal peak than was priced into the markets. The shared currency, on the other hand, continues to draw some support from bets for a more aggressive policy tightening by the European Central Bank (ECB). Several ECB policymakers, including President Christine Lagarde, indicated that the central bank will keep raising rates aggressively to tackle red-hot consumer inflation, which accelerated to a record high of 10.7% in October. This, in turn, pushed Germany’s short-dated yields to fresh multi-year highs earlier this week and adds credence to the near-term positive bias for the EURGBP cross. Even from a technical perspective, the previous day's sustained move and acceptance above the 0.8775-0.8780 supply zone support prospects for an extension of a nearly three-week-old uptrend. There isn't any major market-moving economic data due for release on Thursday, either from the Eurozone or the UK. Hence, the focus remains on the Preliminary UK Q3 GDP print on Friday. Investors will also look forward to British Finance Minister Jeremy Hunt's fiscal statement on November 17. Nevertheless, the fundamental backdrop seems tilted in favour of bullish traders.
Forex: Most NOK Gains May Be Channelled Against The Dollar

Norges Bank Is Likely To Step Up The Speed Of Its Measures

TeleTrade Comments TeleTrade Comments 10.11.2022 09:55
October inflation data is due in Norway. Norges Bank remains credible, cautious and flexible. Therefore, economists at Commerzbank expect EURNOK to ease towards 10 again. New information for Norges Bank “It seems that inflation is likely to have risen again. In all probability, Norges Bank will have to adjust its inflation projections to the upside again. On the other hand, Norges Bank pointed out last week that electricity and gas prices have fallen recently, which means that the rates for November and December might already be falling, thus confirming the smaller rate step in November. If prices were not falling, Norges Bank is likely to step up the speed of its measures again in December.” “25 bps more or less are not the decisive factor, what matters is the fact that the central bank continues to take decisive action against the price risks even though it is keeping an eye on the economy – the second part of its mandate.” “I stick to my view that the krone is actually trading too cheaply and that EURNOK should ease towards 10 again over the coming weeks.”
Apple Q3 2023 Results – Surpassing Expectations and Aiming for New Heights

The EUR/GBP Pair's Bulls Are All Set To Challenge

TeleTrade Comments TeleTrade Comments 11.11.2022 09:15
EURGBP remains mildly bid while showing no major reaction to the UK, German data. UK’s Q3 GDP eased to -0.2% QoQ versus -0.5% expected and 0.2% prior. Germany’s HICP inflation gauge confirmed 11.6% YoY figures for October. The market’s cautious optimism underpins bullish bias, off in the US, and Canada restricts immediate advances. EURGBP holds onto smaller gains around 0.8730, picking up bids of late, even as the UK’s third quarter (Q3) Gross Domestic Product (GDP) printed mixed data heading into Friday’s London open. That said, the preliminary prints of the UK’s Q3 GDP signaled that the British economy contracted by 0.20% QoQ versus -0.50% market consensus and the previous expansion of the 0.20% QoQ figure. On the other hand, the final prints of Germany’s inflation data for October, as per theHarmonized Index of Consumer Prices (HICP) measure confirmed the 11.6% initial readings. With this, the market’s cautious optimism and the Euro’s (EUR) benefit from the US Dollar’s (USD) south-run, mainly after the previous day’s US inflation data, keeps the EURGBP buyers hopeful. It’s worth noting that the US Consumer Price Index (CPI) dropped to the lowest levels in the eight months the previous day and bolstered the hopes of an easy Fed rate hike. The same contrast with the hawkish comments from the European Central Bank (ECB) representatives and enable the EUR to remain firmer. However, a bank holiday in the US and Canada restricts the market’s latest moves. On the same line are mixed concerns surrounding the US-China tussle over Taiwan and the Covid conditions in China. Amid these plays, the US S&P 500 futures stay on their way to refreshing the two-month high while the US Treasury yields remain pressured, mostly inactive. Moving on, EURGBP traders should pay attention to the updates from the UK government and the Bank of England (BOE) concerning the reaction to the UK Q3 GDP, for fresh impulse. Technical analysis A daily closing below the 21-DMA immediate support, around 0.8690 by the press time, appears necessary for the EURGBP bears to retake control. Until then, the bulls are all set to challenge the monthly resistance line, around 0.8825 by the press time.
Apple Q3 2023 Results – Surpassing Expectations and Aiming for New Heights

US Dollar (USD) Recovery Keeps A Lid On Any Meaningful Upside For The EUR/GBP Cross

TeleTrade Comments TeleTrade Comments 14.11.2022 10:58
EURGBP gains some positive traction for the second straight day, though lacks any follow-through. A modest USD rebound is weighing on the common currency and acting as a headwind for the cross. Traders also seem reluctant ahead of this week’s UK macro data and Chancellor Hunt’s statement. The EURGBP cross edges higher for the second successive day on Monday and sticks to its modest intraday gains through the early European session. The cross is currently placed above the mid-0.8700s, though lacks any follow-through buying or bullish conviction. The shared currency continues to draw some support from bets for a more aggressive policy tightening by the European Central Bank (ECB). The British Pound, on the other hand, is undermined by the gloomy outlook for the UK economy. In fact, the National Institute of Economic and Social Research (NIESR) expects the UK GDP growth to be flat in Q4 and noted that the risk of a contraction remains elevated. This, in turn, is seen lending some support to the EURGBP cross. That said, the prospects for further interest rate hikes by the Bank of England act as a tailwind for the Sterling. Apart from this, a modest US Dollar recovery from a nearly three-month low exerts some pressure on the Euro and keeps a lid on any meaningful upside for the EURGBP cross, at least for now. Traders also seem reluctant to place aggressive bets ahead of this week's important UK macro data - the monthly jobs report on Tuesday and the CPI report on Wednesday. Investors will further take cues from the BoE's Monetary Policy Report Hearings on Wednesday and Chancellor Jeremy Hunt’s Autumn Statement on Thursday. This will play a key role in influencing the near-term sentiment surrounding the GBP and determine the next leg of a directional move for the EURGBP cross. In the meantime, spot prices seem more likely to consolidate in a range amid absent relevant market-moving economic releases, either from the Eurozone or the UK.
The EUR/JPY Pair Is Expected To Start A New Zig-Zag Correction

Downside Pressure Of The Euro To Japanese Yen Pair (EUR/JPY) Will Be Seen

InstaForex Analysis InstaForex Analysis 15.11.2022 08:32
We feel confident that our count is correct. So, more downside pressure will be seen over the coming weeks as a corrective decline towards 132 which really starts to take over. Short-term we would like to see a break below minor support at 142.56 as confirmation that more downside pressure is added and the 132 target is set to be reached. Only an unexpected break above minor resistance at 147.11 will prolong the current temporary rally towards 148.30, but the real pressure is to the downside at this point. Relevance up to 07:00 2022-11-16 UTC+1 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/300997
Saxo Bank Podcast: Riksbank's Expected 75 Basis Point Hike Today

Inflation Data Would Have To Surprise To Provide Support For Swedish Krona (SEK)

TeleTrade Comments TeleTrade Comments 15.11.2022 10:00
In Sweden, inflation is due for publication today. An upside surprise is required to provide support to the Swedish Krona, economists at Commerzbank report. Inflation data from Sweden likely to support further hikes “The data for October, due for publication today, is unlikely to point towards an improvement on the inflation front, thus confirming that the Riksbank will have to take a further 50 bps rate step next week.” “The market also expects 50 bps next week. That means today’s inflation data would have to surprise on the upside to provide support for SEK, as this would fuel speculation that the Riksbank will have to raise its rate path again, meaning that it would expect rates to peak at more than 2.50%.”  “Market sentiment of course also remains an important factor for further SEK gains.”  
Mexican Rate Spread: Tight vs. Central Bank's Rate Spread and Implications for Dis-inversion

Aggressive Bearish Bets Has Arrived Around The EUR/GBP Pair

TeleTrade Comments TeleTrade Comments 15.11.2022 10:04
EURGBP comes under some selling pressure on Tuesday, though the downside remains cushioned. The mixed UK employment figures reaffirm further BoE rate hikes and underpin the British Pound. Talks for a more aggressive tightening ECB  benefit the shared currency and lend support to the cross. The EURGBP cross extends the previous day's modest pullback from the 0.8820-0.8830 resistance zone and edges lower through the early European session on Tuesday. The cross remains on the defensive around the 0.8770-0.8765 region and moves little following the release of the latest UK employment details. The UK Office for National Statistics reported that the jobless rate unexpectedly ticks higher to 3.6% during the three months to September from 3.5% previous. Adding to this, the number of people claiming unemployment-related benefits came in at 3.3K against consensus estimates pointing to a fall of 12.6K. The disappointment, however, was offset by stronger wage growth figures. In fact, the Average Earnings Excluding Bonuses rose to 5.7% from 5.5%, beating estimates for an uptick to 5.6%. The data reaffirms market bets for a further policy tightening by the Bank of England, which is seen offering some support to the British Pound. That said, a modest pickup in demand for the shared currency acts as a tailwind for the EURGBP cross and limits the downside. Against the backdrop of talks for a more aggressive policy tightening by the European Central Bank (ECB), the emergence of fresh selling around the US Dollar offers support to the Euro. This, in turn, warrants some caution before placing aggressive bearish bets around the EURGBP cross and positioning for any further intraday losses ahead of the German ZEW Economic Sentiment.
Indonesia's Inflation Slips, Central Bank Maintains Rates Amidst Stability

FX Daily: General Optimism After Meeting Between US President And Chinese President At The G20 Meeting

ING Economics ING Economics 15.11.2022 12:46
The dollar is inching lower again this morning and we think the ongoing correction could extend a bit more as optimism on US-China relations appears to be lifting sentiment. That said, a broader and sustained USD downtrend on the back of the China and/or Fed pivot story appears premature. Today, keep an eye on the ZEW and UK pre-Budget headlines In this article USD: A bit more pain EUR: Eyes on ZEW GBP: More Budget-related headlines SEK: Riksbank may go for 75bp after all USD: A bit more pain The dollar showed tentative signs of recovery yesterday, but appears to be lacking any strong support at the moment. While we don’t buy the one-way traffic, and the USD-bearish narrative in the longer run, there may be extra downside room for the greenback this week. With the US calendar being rather light, the two main drivers of global sentiment are China and Fed speakers. With respect to the first, there are two aspects to consider: data and diplomatic talks. As discussed here, Chinese industrial production and fixed asset growth numbers for October were in line with consensus, but the retail sales drop (-0.5% year-on-year) came as a surprise. Still, retail sales are highly sensitive to Covid restrictions, and the recent progress towards more flexible rules suggests room for recovery. Asian equities are rallying this morning, and this appears to be due to general optimism after a long meeting between US President Joe Biden and Chinese President Xi Jinping at the G20 meeting yesterday, which was followed by mildly encouraging remarks about diplomatic cooperation. We still suspect it is too early to point at China as the key driver for a broader recovery in risk sentiment (and dollar descent), considering the still sizeable economic challenges affecting China going beyond its Covid policy (e.g. real estate fragility, slowing global demand). On the Fed front, we heard from both sides of the hawk-dove spectrum yesterday. The hawk Christopher Waller dismissed the deceleration in core inflation as just “one data point” and that more data was needed to conclude tightening should slow. The dove Lael Brainard also signalled there is more work to do, but explicitly said the Fed will likely shift to slower rate increases soon. It appears that the FX market was primarily affected by Waller’s remark, with the ultra-Fed-sensitive yen dropping around 1% yesterday. For now, we read recent Fedspeak as further indication that a bearish dollar call on the back of Fed dovish pivot bets still appears premature. Today, we’ll hear from the Fed’s Patrick Harker, while the data calendar includes October Empire Manufacturing and PPI figures. Some extra near-term USD weakness is possible, but we suspect we are reaching the bottom of the recent downtrend. Francesco Pesole EUR: Eyes on ZEW November’s ZEW survey is the main release to watch in the eurozone’s calendar today, and expectations are for a generalised improvement on the back of lower energy prices. Later this morning, it will be worth watching for any revision in the eurozone’s third-quarter GDP numbers. We’ll also hear from the ECB’s Francois Villeroy. EUR/USD strength is largely a USD story, and any support to the euro appears largely driven by energy prices, if anything. We could see another leg higher in the pair over the coming days, and 1.0500 could be at reach, even if we expect a relatively fast descent over the winter. Francesco Pesole GBP: More Budget-related headlines Ahead of the Autumn Budget announcement in the UK this Thursday, markets are being flooded with reports about which measures will be announced. Chancellor Jeremy Hunt is now widely expected to deliver a 40% windfall tax on energy companies’ excess profits, while it’s been reported that the minimum wage will be raised from £9.50 to £10.40 an hour. Expect more headlines – and some sterling reaction – today. On the data front, jobs numbers were released in the UK this morning. As expected, the unemployment rate edged higher but was mostly driven by hiring freezes rather than rising redundancies. Reduced labour supply remains a bigger concern, especially as long-term sickness numbers continue to rise. Our economics team continues to expect a 50bp hike by the Bank of England in December. Francesco Pesole SEK: Riksbank may go for 75bp after all The Swedish inflation report this morning was a mixed bag. Headline inflation rose less than expected (from 10.8% to 10.9% YoY), CPIF inflation surprisingly declined (from 9.7% to 9.3%) but core CPIF rose (7.4% to 7.9%). Ultimately, the latter may matter more than the others for the Riksbank, which announces policy on 24 November, and that may tilt the balance towards a 75bp rate hike. Implications for the krona should however remain quite limited – today’s muted FX reaction to CPI was a case in point. We think SEK remains in a disadvantageous position compared to other procyclical currencies to benefit from an improvement in risk sentiment given the still clouded European outlook. We see room for a return toward 10.90/11.00 in EUR/SEK in the near term. Francesco Pesole TagsUS dollar SEK GBP FX EURUSD   Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Technical Outlook Of The EUR/JPY Pair Movement In Short Term

The EUR/JPY Pair Will Experience A Downward Correction

InstaForex Analysis InstaForex Analysis 16.11.2022 08:28
On the daily chart, the EUR/JPY cross currency pair on the whole still looks moving above its Moving Average 200 which means that the Buyers still dominate. However, With the appearance of deviations between price movements and the CCI indicator as well as the bearish 123 pattern, it is confirmed that in the near future EUR/JPY will experience a downward correction where the level to be tested is 142.55 if this level is successfully broken below the 139.51 level will be the next level to be tested. EUR/JPY will not return to its initial bias, especially if it breaks above the 146.71 level because if this level is successfully penetrated upwards, the possibility of a downward correction scenario described previously will canceled automatically.   Relevance up to 01:00 2022-11-19 UTC+1 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/113947
Hungarian inflation peak is behind us

The Objective Of The National Bank Of Hungary Is Stability

ING Economics ING Economics 17.11.2022 10:28
We have seen no material improvement either in the risk environment or in the macro outlook which would make the National Bank of Hungary think about any change. We expect a reinforcement of the hawkish ‘whatever it takes’ stance, even if we get some positive news about the Rule-of-Law procedure 13% ING's call No change in the base rate The rationale behind our call Since mid-October, the National Bank of Hungary has been in Phase 3 of its tightening cycle. This means it has used both temporary and targeted measures to ensure both long-term price stability and short-term market stability. In this regard, the effective (marginal) rate is defined as the one-day deposit quick tender. After the previous rate-setting meeting, Deputy Governor Barnabás Virág highlighted that the central bank needs to see a significant improvement in general risk sentiment to gradually reduce the spread between the base rate (13%) and the effective rate (18%). General risk sentiment is defined as a combination of external (war, global monetary policy, energy, general investor sentiment) and internal risks (Rule-of-Law procedure, current account imbalance). As we see no material improvement in these criteria, we expect no change in the monetary policy setup. Regarding the war, the Polish missile incident proved that the geopolitical situation remains very fragile. We can say the same about general investor sentiment as well. When it comes to global monetary policy, we might see the beginning of a slowdown in general tightening as we approach year-end, but as a developing, BBB-rated economy with a free-floating currency, it is too early to make a move on these early changes. Hungary’s gas storages are now filled, so the worst-case scenario is off the table, though the energy crisis is still with us and winter is still ahead. On internal risks, the current account balance has been dragged down by the import of energy goods. After the record trade deficit in August (EUR 1.58bn), the balance in goods showed an improvement in September, posting just a EUR 0.65bn shortfall. The same happened with the monthly current account balance, showing a roughly EUR 0.5bn improvement to EUR -1.1bn from August to September. A small step in the right direction but not enough to label it as a permanent and material change. Finally, there is the Rule-of-Law debate. The next milestone here is the European Commission's report and recommendation which will be published on 19 November and the following European Commission meeting on 22 November. By the time the NBH’s rate-setting meeting takes place (also 22 November), we might see some positive headlines coming from the European Commission regarding the Rule-of-Law procedure. With a green(ish) enough light, Hungary may be able to secure a signature on the Recovery and Resilience Facility just in time so as not to lose EUR 4.6bn of the EUR 5.8bn grant which is at stake should Hungary miss the year-end deadline to have its plan accepted. However, no matter how green this light is, we don’t expect the central bank to make a policy change on that very quickly and we expect the NBH to underscore its hawkish “whatever it takes” approach again. When it comes to macro developments, neither the inflation nor the GDP outlook show a material decoupling from the latest central bank forecast. Core and headline inflation readings moved higher in October and the peak might come only in late 2022 or early 2023. This gives no room for manoeuvre in monetary policy this time. Real GDP has started to decline on a quarterly basis, but as it is just the first leg of the technical recession, Hungary is not out of the woods yet from an inflation and external balance point of view. Moreover, this drop in economic activity was widely expected, including by the central bank.  And yes, despite the 18% marginal rate and the hawkish monetary policy stance in Hungary, the forint has remained volatile. The recent market movements have provided excellent proof that it is not fundamentals, monetary policy intentions or financial processes that decide what happens to a given country's financial assets. In our view, all this confirms that the central bank will continue to maintain a high state of alert and policy flexibility. In our FX Outlook 2023, particularly in our CEEMEA FX Outlook 2023, we said that a material improvement in risk sentiment could translate into a gradual convergence of the effective rate to the base rate, starting as soon as late December. Perhaps even that seems to be too optimistic based on the developments of the past few days. At the moment, it is more than likely that the central bank will change interest rates on its temporary and targeted measures only at the beginning of next year. TagsRates National Bank of Hungary Monetary policy Hungary   Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Forex: Most NOK Gains May Be Channelled Against The Dollar

A Recovery In Global Sentiment Should Offer Support To Norwegian Krone (NOK)

TeleTrade Comments TeleTrade Comments 18.11.2022 09:25
The Norwegian Krone is not a currency for the faint of heart. Economists at ING believe that NOK could benefit from its attractive commodity exposure but may face a big downside in a risk-off scenario.  NOK may continue to struggle with the high volatility environment “A recovery in global sentiment should offer support to NOK in the second half of next year, but restoring market confidence in a very high-beta currency is no easy feat.” “If indeed markets enjoy a calmer environment in 2023 and Norges Bank favours a stronger currency, then NOK is left with considerable room to benefit from a still strong energy market picture for Norway.” “We see EURNOK at 10.50 in the fourth quarter of 2023, but NOK hiccups along the way are highly likely.”  
WTI Oil Shows Signs of Short-Term Uptrend Amid Medium-Term Uptrend Phase

FX: G10 Currencies Should Face Less Trend And More Volatility

ING Economics ING Economics 18.11.2022 09:47
In our 2023 FX Outlook, we argued that G10 currencies should face less trend and more volatility in 2023. We saw an example this week, as the fading bear-dollar trend did not prevent some wide swings in risk-sensitive currencies (like NOK and SEK). In the UK, the pound survived the Autumn Statement, but downside risks persist in GBP/USD In this article USD: Bearish sentiment cooling off EUR: Lagarde's speech in focus GBP: Most painful fiscal measures delayed NOK: Strong domestic story may not matter USD: Bearish sentiment cooling off As recently discussed in our 2023 FX Outlook, we are quite sceptical of a clean bear dollar trend from the current levels. This week’s moves in the FX market may have offered a glimpse of what we expect to be the main theme in G10 FX next year: less trend, more volatility. The dollar has stabilised after the big correction, but regional stories triggered significant swings in some crosses. Scandinavian currencies fell by around 2% this week, hit by equity volatility and geopolitical tensions, while NZD and GBP have appreciated on some domestic optimism. In New Zealand, next week’s central bank meeting will be a key risk event: here is our preview. We think this consolidation phase in the dollar may extend for a little longer, before a re-appreciation of the greenback into the end of the year. Indeed, markets will remain highly sensitive to Fed speakers: today, only Susan Collins is scheduled to speak, but we have a number of other members lined up for next week. FOMC minutes will also be released on Wednesday. So far, post-CPI comments have indicated some lingering caution on the inflation battle as most Fed members tried to curb the market’s enthusiasm about an imminent dovish pivot. The future market has now fully priced back in a 5.00% peak rate in the first half of 2023. The US calendar is rather light today and only includes existing home sales and the Leading Index. With the dovish pivot narrative softening, we expect some re-appreciation of the dollar in the near term, but that is a trend that could only start from next week or the one after. DXY may stay around 106/107 today.    Francesco Pesole EUR: Lagarde's speech in focus ECB President Christine Lagarde will deliver a keynote speech at a banking conference this morning. Two more ECB speakers are on the list today: Joachim Nagel and Klaas Knot, both hawkish voices in the Governing Council. If the Fed remains the key driver for the dollar, the ECB continues to have a rather marginal role for the euro, which instead remains primarily tied to global risk sentiment and geopolitical/energy dynamics. EUR/USD may stay in the 1.0350-1.0400 trading range into the weekend and while we don’t exclude another short-term mini-rally, we think that the macro picture continues to point to sub-parity levels in the coming months. Francesco Pesole GBP: Most painful fiscal measures delayed The pound survived the much-feared Autumn Statement by Chancellor Jeremy Hunt yesterday. The build-up to the statement seemed to signal more restrictive measures on the economy, but Hunt counted on a calmer market backdrop and – as discussed in detail by our economist – delayed some of the most painful measures. Ultimately, the impact on next year's growth should not prove huge, especially compared to expectations. The tax hike will only affect high incomes and energy companies, and the National Insurance cut by the previous government has not been reversed. The most relevant change was the increase in the energy bill guarantee from £2,500 to £3,000 from April 2023, which should generate some drag on consumers. That is only marginally more generous than the average household energy bill under current wholesale prices (which we estimate at around £3,200). The risk is obviously that wholesale prices spike again, meaning a higher cost for the energy support package. We think it is too early to call for a prolonged stabilisation in the gilt market, and our debt team notes that there is still a lot of extra supply for private investors to absorb. We continue to see downside risks for GBP/USD as the dollar may start to recover into year-end, and target sub-1.15 levels in the near term. However, we forecast some outperformance in EUR/GBP (primarily due to EUR weakness), which could rise to 0.89 by year-end. Francesco Pesole NOK: Strong domestic story may not matter Norwegian GDP data for the third quarter surprised on the upside this morning, showing a rather strong 1.5% quarter-on-quarter growth. This is a testament to how the domestic story should remain largely supportive of NOK, also into the new year. Whether this will ultimately feed into a stronger krone is another question, and mostly depends on whether markets will prove calm enough to allow fundamentals to play a role. The last week clearly showed that the road to a recovery in NOK is going to prove quite uneven, as the low-liquidity krone should continue to face large swings. We really think volatility will be the name of the game for EUR/NOK next year, even though our base-case scenario is downward-sloping in 2023. In the short run, a return to 10.60+ is a tangible possibility. Francesco Pesole TagsNOK FX Dollar Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Indonesia's Inflation Slips, Central Bank Maintains Rates Amidst Stability

G10 Forex Market in 2023 To Be Characterised By More Volatility

ING Economics ING Economics 20.11.2022 11:30
After an 18-month bull trend in the dollar, the FX outlook has become less clear. Further position adjustment could prompt a little more short-term dollar weakness, but we do not believe the conditions are in place for a major dollar bear trend just yet. Instead, we expect FX markets in 2023 to be characterised by less trend and more volatility. Source: Shutterstock G10: Less trend, more volatility The final quarter of 2022 has seen a breakdown in the otherwise orderly dollar bull trend – a trend which had been worth 5% per quarter over the first nine months of the year. That dollar rally had largely been driven by a Federal Reserve wanting to take policy into restrictive territory – a trend only exacerbated by the war in Ukraine. For all the current discussions about peak dollar and peak macro pessimism, we think it is still worth examining whether the conditions will be in place to deliver an orderly dollar bear trend in 2023. We think not and here are three reasons why: Driving the dollar bull trend since summer 2021 has been a Fed at first abandoning Average Inflation Targeting and then trying to get ahead of the inflation surge. A call on a benign dollar decline in 2023 requires the Fed to be taking a back seat. That seems unlikely. The stark message from both the Fed’s Jackson Hole symposium and the IMF autumn meetings was that central banks should avoid relaxing too early in their inflation battle – a move which would deliver the pain of recession without any of the sustained gains on inflation. We suspect it will be too early for the Fed to sound relaxed at its 14 December meeting and March 2023 may be the first opportunity for a decisive turn in Fed rhetoric. While a softer Fed profile may be a necessary condition for a turn in the dollar, a sufficient condition requires a global economic environment attractive enough to draw funds out of the dollar. 2023 global growth forecasts are still being cut – dragged lower especially by recession in Europe. ING forecasts merchandise world trade growth below 2% in 2023 – not a particularly attractive story for the trade-sensitive currencies in Europe and emerging markets. A liquidity premium will be required of non-dollar currencies. 2023 will be a year when central banks are initially still hiking into a recession and shrinking balance sheets. The Fed will reduce its balance sheet by a further $1.1tn in 2023 and the European Central Bank will be looking at quantitative tightening, too. Lower excess reserves will tighten liquidity conditions still further and raise FX volatility levels. Again, the bar not to invest in dollar deposits remains high – especially when those dollar deposits start to pay 5% and the dollar retains its crown as the most liquid currency on the planet. What do these trends mean for G10 FX markets? This probably means that the dollar can bounce around near the highs rather than embark on a clean bear trend in 2023. If the dollar is to turn substantially lower, we would favour the defensive currencies such as the Japanese yen and Swiss franc outperforming. Here, the positive correlation between bonds and equity markets may well break down via the bond market rallying on the back of a US recession and easier Fed policy. ING forecasts US 10-year Treasury yields ending 2023 at 2.75% - USD/JPY could be trading at 130 under that scenario.  Recession in Europe means that EUR/USD could be trading in a 0.95-1.05 range for most of the year, where fears of another energy crisis in the winter of 2023 and uncertainty in Ukraine will hold the euro back. Sterling should also stay fragile as the new government attempts to restore fiscal credibility with Austerity 2.0. We cannot see sterling being rewarded much more on austerity and suspect that GBP/USD struggles to hold gains over 1.20.  Elsewhere in Europe, some differentiation could emerge between the Scandinavian currencies. The Swedish krona may struggle to enter a sustained uptrend next year given its elevated exposure to the eurozone’s growth story, while the Norwegian krone could benefit from its attractive commodity exposure. However, NOK is an illiquid and more volatile currency, and would therefore face a bigger downside in a risk-off scenario. As shown in the chart below, commodity currencies look undervalued versus the dollar on a fundamental basis. However, a stabilisation in risk sentiment is a necessary condition to close the misvaluation gap. For the Australian and New Zealand dollars, an improvement in China’s medium-term outlook is also essential, so the Canadian dollar may emerge as a more attractive pro-cyclical bet given low exposure to the economic woes of Europe and China. Another factor to consider is the depth of the forthcoming house price contraction. We think central banks will increasingly take this into consideration and will try to avert an uncontrolled fall in the housing sector. However, this is potentially a very sizeable downside risk, especially for the currencies of commodity-exporting countries, which generally display the most overvalued property markets in the G10. To conclude, we think FX trends will become less clear in 2023 and volatility will continue to rise. FX option volatility may seem expensive relative to historical levels, but not at all when compared to the volatility FX pairs are actually delivering. We suspect risk management through FX options may become even more popular in 2023.   Valuation, volatility and liquidity in G10 Source: ING, Refinitiv EUR/USD: Dollar bromance will take some breaking   Spot Year ahead bias4Q221Q232Q233Q234Q23 EUR/USD 1.035 Bearish 0.98 0.95 0.98 1.00 1.00 Bullish leap of faith is too dangerous: We are bearish on EUR/USD into the end of the first quarter of 2023. Key factors which have driven EUR/USD lower this year will remain largely in place. The softish US October CPI print may give the Fed some pause for thought, but should not be enough to derail it from some further tightening – taking the policy rate close to 5.00% in the first quarter of 2023. Another key factor for EUR/USD this year has been energy. Here, our team sees prices for both natural gas and oil rising from current levels through 2023. A difficult 2023 European winter for energy may well restrain the EUR/USD recovery later in the year, continuing to depress the eurozone’s traditionally large current account surplus.   Necessary but not sufficient: Tighter Fed policy has been at the forefront of this year’s dollar rally and a shift in the Fed tone (more likely in March 2023 than December 2022) will be necessary to see the short end of the US yield curve soften appreciably and the dollar weaken. But the sufficient condition for a EUR/USD turnaround is the state of affairs amongst trading partners. Are they attractive enough to draw funds away from USD cash deposits potentially paying 5%? That is a high bar and why we would favour the EUR/USD 2023 recovery being very modest, rather than the ‘V’ shape some are talking about. ECB will blink first: The case for a central bank pivot is stronger for the ECB than the Fed. The German economy looks set to contract 1.5% next year and at its 15 December meeting, the ECB may well use its 2025 forecast round to show inflation back on target. We see the ECB tightening cycle stalling at 2.25% in February versus the near 3% currently priced by the market for 2023. This all assumes a seamless ECB introduction of quantitative tightening and one that does not upset peripheral bond markets. Add in global merchandise trade barely growing above 1% next year (recall how the 2017-19 trade wars weighed on the euro) plus the risk of tighter liquidity spilling into financial stability – all suggest the market’s bromance with the dollar will continue for a while yet.  USD/JPY: 1Q23 will be a crucial quarter   Spot Year ahead bias4Q221Q232Q233Q234Q23 USD/JPY 140.00 Bearish 145.00 145.00 140.00 135.00 130.00 Clash of the titans: The stark divergence in monetary policy between the Fed and the Bank of Japan has been the primary driver of this year’s 15%+ rally in USD/JPY. In 2023, investors may question whether the BoJ is ready to tighten. The default view is that the perma-dovish BoJ Governor, Haruhiko Kuroda, will not be moved. However, the end of Governor Kuroda’s term on 8 April 2023 will no doubt lead to frenzied speculation on his replacement and whether a less dovish candidate emerges. Interest rate markets are starting to price a change – e.g. the BoJ’s 10-year target sovereign yield of 0.25% is priced at 0.50% in six months’ time. March 2023 will be especially volatile: The first quarter of 2023 will also see huge focus on the Japanese wage round, where a rise in wages is a prerequisite for the BoJ to tighten policy. Japanese politicians have been encouraging business leaders to raise wages, while at the same time, the government has been quite aggressive with fiscal stimulus to offset the cost-of-living shock. This period will also see the Fed release its dot plots (22 March), which may be the first real chance for the Fed to acknowledge a turn in the inflation profile. As such, this period (March/April) could see a big reversal lower in USD/JPY. FX Intervention slows the move: Most agree that USD/JPY is higher for good reasons (including the energy crisis) and that Japanese FX intervention can only slow, not reverse the move. The Japanese have already spent around $70bn in FX intervention between the 146 and 151 region in USD/JPY and will likely be called into further action based on our view of a stronger dollar over coming months. FX reserves are not limitless, of course, but Japan’s large stockpile of $1.1tn means that this campaign can continue for several more months. The purpose here is to buy time before the Fed cycle turns. Unless we end up with 6%+ policy rates in the US next year, we would expect USD/JPY to be ending 2023 nearer 130. GBP/USD: Running repairs   Spot Year ahead bias4Q221Q232Q233Q234Q23 GBP/USD 1.19 Mildly Bearish 1.10 1.07 1.11 1.14 1.14 Fiscal rescue plan: After September’s government-inflicted flash crash, GBP/USD is now recovering on the expectation of more credible UK fiscal plans and the softer dollar. As above, we doubt 2023 will prove the year of a benign dollar decline. And the risk is that the Fed keeps rates at elevated levels for longer. Given sterling’s large current account deficit and its transition to high beta on the external environment, we think it is too early to be expecting a sustained recovery here. Instead, we favour a return to the 1.10 area into year-end as the government introduces Austerity 2.0 and the Bank of England cycle is repriced lower. Tighter fiscal/looser monetary mix: At its meeting in early November, the BoE pushed back against the market pricing of the rate cycle – arguing that hikes close to 5% would see the UK economy contract 5%. Our call is that the BoE terminal rate will be closer to the 3.75% area than the 4.50% that the market prices today. As the BoE assesses the degree of tightening needed to curtail inflation, the government is discussing ways to fill around a £60bn hole in the budget. The plan will be revealed on 17 November, probably in a roughly 50:50 split between tax hikes and real terms spending cuts. We look for the UK economy to contract every quarter in 2023 – making it a very difficult environment for sterling. Sterling suffers from liquidity outages: This year’s BIS triennial FX survey saw sterling retain its position as the fourth most traded currency pair. Despite this, sterling does occasionally suffer from flash crashes. We think liquidity will be at a premium in 2023 and that a Fed taking real rates even higher as economies head into recession is a dangerous combination for sterling – where financial services make up a large section of the economy. GBP/USD realised volatility is now back to levels seen during Brexit and our market call for 2023 is that these types of levels will become more, not less, common. EUR/JPY: A turn in the cycle   Spot Year ahead bias4Q221Q232Q233Q234Q23 EUR/JPY 144.50 Bearish 142.00 138.00 137.00 135.00 130.00 Downside risks into 1Q23: EUR/JPY has defied typical relationships with risk assets by gently rallying all year even as both bond and equity benchmarks sold off 20%. Driving that JPY underperformance has probably been BoJ policy and USD/JPY’s strong relationship with US 10-year yields. Both the eurozone and Japan have been hit by the energy shock, where external surpluses have quickly dwindled. As above, we tend to think there are downside risks to EUR/JPY in the first quarter of 2023 as speculation mounts over BoJ Kuroda's successor as well as the ECB potentially calling time on their tightening cycle at the February meeting. US10yr can drag EUR/JPY to 130 in 2H23: A large part of the JPY underperformance during 2022 has been driven by developments in the US bond market. USD/JPY consistently shows the most positive correlation to US 10-year Treasury yields of any of the G10 FX pairs – and far higher than EUR/USD. Consistent with ING’s view on the Fed cutting rates in the third quarter of 2023, our debt strategy team sees US 10-year yields starting to edge lower in the second quarter of 2023, and then falling 100bp in the second half of 2023. In theory, this should heavily pressure EUR/JPY into the end of the year. Financial stability risks increase: Lower growth and tighter liquidity conditions – at least through the early part of 2023 – increase the prospect of financial stability risks. Recall the Fed will be shrinking its balance sheet by $1.1tn in 2023 even as liquidity and bid-offer spreads continue to create difficult market conditions. The yen lost its shine as a safe-haven currency in 2022, but we suspect relative to the euro, some of that shine can be regained in a softer US rate environment. The EUR/JPY cycle should also turn if the ECB calls time on its tightening cycle at the 2 February meeting. EUR/GBP: Listless in London   Spot Year ahead bias4Q221Q232Q233Q234Q23 EUR/GBP 0.87 Neutral 0.89 0.89 0.88 0.88 0.88 In the same macro boat: Both the eurozone and UK economies have been hit hard by the war in Ukraine and the surge in energy prices. Both saw sharp terms of trade declines into August and then a sharp reversal as natural gas prices dipped into the warm winter. There is not a substantial amount of difference between our German and UK quarterly growth profiles for 2023 – both contracting every quarter of the year. Perhaps one could argue that the UK is more exposed to higher mortgage rates given the shorter duration of fixed-rate mortgages in the UK. This could all make for a trendless EUR/GBP environment. Energy price guarantees could differentiate: One important determinant for UK growth in 2023 will be how the new government handles the Energy Price Guarantee. Former UK Prime Minister, Liz Truss, offered a two-year programme – subsequently cut back to six months after the UK fiscal crisis. How the UK consumer copes with having to pay market prices for energy will be key to the UK story in 2023 as well as how the EU as a whole copes with similar challenges. Currently, it seems that the ECB is concerned that the fiscal programmes in Europe are too generous and not particularly targeted – adding to the inflation challenge.    Political wild cards: To pick out a few political wild cards, the first is a re-run of the Scottish independence referendum. The Scottish National Party (SNP) has picked 19 October 2023 as the date – although such an exercise would likely have to be approved by the UK parliament. Currently, the SNP is pursuing an action through the Supreme Court to see whether London can indeed still veto the referendum. In Europe, the focus will probably be on the fiscal path taken by the new right-wing Meloni government and also the reform of the Stability and Growth Pact. Budgets submitted in late 2023 could become an issue were the rules to be tightened again.   EUR/CHF: Swiss National Bank to guide it lower   Spot Year ahead bias4Q221Q232Q233Q234Q23 EUR/CHF 0.98 Bearish 0.95 0.93 0.90 0.90 0.92 Does the SNB want a stronger Swiss franc?: The Swiss National Bank this year said it made a conscious decision to allow nominal Swiss franc appreciation in light of the inflation environment. The three-month policy rate has been raised 125bp to 0.50% and the SNB says it wants to keep the real exchange rate stable. With inflation running at 3% in Switzerland versus 10% in its largest trading partner, the eurozone, the SNB in theory should be happy with something like 5-7% per annum nominal appreciation in the Swiss franc. That certainly was the story into the end of September but does not quite explain the Swiss franc's weakness over the last six weeks. Two-sided intervention: When hiking rates earlier this year the SNB also said it would be engaging in two-sided FX intervention. Ever since the start of the financial crisis in 2008, the SNB has been more familiar as a seller of the Swiss franc – including its 1.20 floor in 2011-2015. Now its strategy is changing and we read that as an objective to potentially manage the Swiss franc stronger in line with its ambitions to tighten monetary conditions. Earlier this year, we estimated that the SNB could possibly drive EUR/CHF to the 0.90 area in summer 2023 based on expected inflation differentials and the need for a stable real exchange rate. The risk environment should favour the franc: Central banks are communicating that they need to tighten rates into recession and remove the excess liquidity poured out during a series of monetary bailouts. Tighter monetary and financial conditions typically spell stormy waters for risk assets. With its still sizable current account surplus (worth 8% of GDP in the second quarter of 2022) the Swiss franc should perform well during this stage of the global economic cycle. Closer to home, the European economic cycle and the ECB discussing quantitative tightening into early 2023 will prove a challenge to peripheral eurozone debt markets and likely reinforce the franc as a eurozone hedge. EUR/NOK: Not for the faint of heart   Spot Year ahead bias4Q221Q232Q233Q234Q23 EUR/NOK 10.33 Bearish 10.30 10.15 9.95 9.70 9.60 Risk sentiment remains key: The krone is not a currency for the faint of heart. It is the least liquid currency in the G10 space, making it considerably exposed to negative shifts in global risk sentiment and equity market turmoil. It is, at this stage, way too early to call for a turn in equities, and a hawkish Fed into the new year may actually mean more pain for risk assets, at least in the near term. A recovery in global sentiment should offer support to NOK in the second half of next year, but restoring market confidence in a very high-beta currency is no easy feat. Norges Bank policy: The krone’s underperformance in 2022 was exacerbated by Norges Bank effectively sterilising oil and gas profits via a large increase in daily NOK sales. In November, FX daily sales have been scaled back from NOK4.3bn to NOK3.7bn, and we think there could be some interest by NB to further ease the pressure on the currency via smaller FX sales. With recent dovish hints suggesting that the NB hiking cycle may peak at 3.0% (with most of the country on variable mortgage rates, many more rate hikes could be difficult to tolerate), allowing a stronger currency to do some inflation-fighting sounds reasonable.  Energy prices: If indeed markets enjoy a calmer environment in 2023 and NB favours a stronger currency, then NOK is left with considerable room to benefit from a still strong energy market picture for Norway. There is probably an optimal range for oil and – above all – gas prices to trade at elevated levels but not such high levels that would significantly hit risk sentiment. For TTF, this could be somewhere around 150-200 €/MWh. This a plausible forecast for next year, but the margin for error can be very large. We see EUR/NOK at 10.50 in the fourth quarter of 2023, but NOK hiccups along the way are highly likely. EUR/SEK: Eurozone exposure a drag on SEK   Spot Year ahead bias4Q221Q232Q233Q234Q23 EUR/SEK 10.80 Neutral 10.85 10.70 10.60 10.40 10.50 Riksbank’s policy: The Riksbank delivered more than one hawkish surprise in 2022, including a 100bp rate hike. This appeared to be part of a front-loading operation where lifting the krona was seen as a welcome side effect. In practice, and like in many other instances in the G10, the high volatility environment meant that short-term rate differentials played a negligible role in FX. So, despite a wide EUR-SEK negative rate differential throughout 2022, SEK was unable to draw any real benefit. That differential has now evaporated, but we expect 125bp of tightening (rates at 3.0%) in Sweden versus 75bp in the eurozone, which could suggest some EUR/SEK downside room in a more stable market environment. Also, a slowdown in FX purchases by the RB, now that reserves are back to the 1H19 levels, should remove some of the pressure on SEK. European picture: Sweden is a very open economy with more than half of its exports heading to other EU countries. Our expectations are that 2023 will see a rather pronounced eurozone recession and that the energy crisis will extend into the end of next year. Barring a prolonged period of low energy prices (and essentially an improvement in the geopolitical picture) in Europe, we doubt SEK will be able to enter a sustainable appreciation trend in 2023 as sentiment in the eurozone should remain depressed. Valuation: We are not fans of the euro in 2023, which means that our EUR-crosses forecasts reflect the weaker EUR profile. We see some room for EUR/SEK to move lower throughout the year – also considering that we estimate the pair to be around 9.0% overvalued. However, the high risk of a prolonged energy crisis in the eurozone means that SEK is significantly less attractive than other pro-cyclical currencies next year. Incidentally, SEK is highly correlated to the US tech stock market, which looks particularly vulnerable at the moment. A return to 10.00 or below would likely require a significant improvement in European sentiment. USD/CAD: Loonie is an attractive pro-cyclical bet   Spot Year ahead bias4Q221Q232Q233Q234Q23 USD/CAD 1.33 Bearish 1.34 1.32 1.30 1.26 1.24 Commodities and external factors: Our commodities team expects Brent to average slightly above $100/bbl next year, and Western Canadian Select around $85/bbl. Along with our expectations for higher gas prices, the overall commodity picture should prove rather supportive for the Canadian dollar in 2023. In our base-case scenario, where global risk sentiment gradually recovers but two major risk-off forces – Ukraine/Europe and China – remain, CAD would be in an advantageous position, since Canada has much more limited direct exposure to China and Europe compared to other commodity-exporting economies.  Domestic economy: If the US proves to be a relative 'safe-haven' in the global recession, therefore withstanding the downturn better than other major economies like the eurozone, this should offer a shield to Canada’s economy, which is heavily reliant on exports to the US. There is probably one major concern for the domestic economy: house prices. Canada is among the most vulnerable housing markets in the world, with price-to-income ratios around 9x in many cities (compared to 5-6x in the US). Whether we’ll see a sizeable but controlled descent or a fully-fledged housing crash will depend on the Bank of Canada and the depth of the recession. Monetary policy and valuation: It does appear that the BoC has started to consider domestic warning signals (probably, also house prices), and recently shifted to a more moderate pace of tightening. Markets are currently expecting rates to peak around 4.25/4.50% in Canada, and we tend to agree. Barring a rapid acceleration in the unemployment rate, a housing crash should be averted. It is also likely that the BoC will start cutting before the Fed in 2023. All in all, accepting the downside risks stemming from the housing market and/or a further deterioration in risk sentiment, we see room for a descent in USD/CAD to the 1.25 level towards the end of 2023. In our BEER model, CAD is around 20% undervalued in real terms. AUD/USD: Riding Beijing’s roller coaster   Spot Year ahead bias4Q221Q232Q233Q234Q23 AUD/USD 0.68 Mildly Bullish 0.66 0.66 0.68 0.69 0.70 Exposure to China: The Australian dollar is a high-beta currency, and the direction of global risk sentiment will be the key driver next year. We think that a gradual recovery in sentiment will be accompanied by a still challenging energy picture, which may force investors to choose which pro-cyclical currencies to bet on. When it comes to AUD, the China factor will remain very central, as Australia has the most China-dependent export machine in the G10. Our economics team’s baseline scenario is that the real estate crisis will be the main drag on growth in China and while retail should recover on looser Covid rules, slowing global demand should hit exports. One positive development: the new Australian government is seeking a more friendly relationship with Beijing, paving the way for the removal of export curbs next year. Commodities and growth: Iron ore remains Australia’s main export (estimated at $130bn in 2022), and it is a very sensitive commodity to China's real estate sector. Our commodities team thinks a return to $100+ levels is unlikely given the worsening Chinese demand picture, but still forecasts prices to average $90/t in 2023. The second and third largest exports are oil and natural gas ($100bn combined). Here, we see clearly more upside room for prices, especially on the natural gas side. On balance, we expect the commodity picture for Australia to be rather constructive next year, which could offer a buffer to the Australian economy during the downturn. Growth in 2022 should have topped the 4% mark, but that will be much harder to achieve in 2023. The combination of higher rates, reset mortgages, a slowing housing market and possibly softening labour market should bring growth back closer to 3%. This would still be an extremely strong outcome against the backdrop of global weakness.   Monetary policy and valuation: The Reserve Bank of Australia has been one of the 'pioneers' of the dovish pivot, and a return to 50bp increases seems unlikely, as the Bank is probably monitoring the rather overvalued housing market, and the inflation picture is less concerning than in the US or in Europe. Most Australian households have short-term fixed mortgage rates, and we could see a deterioration in disposable income (especially at the start of the year). We think the RBA will be careful to avert an excessively sharp housing contraction, and we expect rates to peak at 3.60% (well below the Fed and the Reserve Bank of New Zealand) and cuts from 3Q23. This would mean a less attractive carry – and less upside risk in an optimistic scenario for global sentiment; but also less damage to the economy, which may play in AUD’s favour in our baseline scenario. Valuation highly favours AUD, as the positive terms of trade shock means that AUD/USD is 20% undervalued in real terms, according to our behavioural equilibrium exchange rate (BEER) model. We have a moderately upward-sloping profile for the pair in 2023, but high sensitivity to risk sentiment and China suggests downside risks remain high. NZD/USD: Dodging the housing bullet   Spot Year ahead bias4Q221Q232Q233Q234Q23 NZD/USD 0.62 Mildly Bullish 0.60 0.60 0.62 0.63 0.64 Monetary policy: The Reserve Bank of New Zealand has given very few reasons to believe it is approaching a dovish pivot. Markets are currently expecting the Bank to hike well into 2023, and take rates to around 5.0%. While inflation (7.2% year-on-year) and job market tightness (unemployment at 3.3%) both remained elevated in the third quarter, there are growing concerns about the rapid downturn in the New Zealand property market, which in our view will trigger either an earlier-than-expected end to the tightening cycle or a faster pace of rate cuts in 2023. Housing troubles: The RBNZ recently published its financial stability report, where it showed relatively limited concern about households’ ability to withstand the forthcoming downturn in house prices. In its August 2022 forecasts, the RBNZ estimated that the YoY contraction in house prices will reach 11.6% in the first quarter of 2023. However, that implied an Official Cash Rate at 4.0%, so only 50bp of extra tightening from now, which seems too conservative now. House prices have fallen 7.5% from their first quarter 2022 peak so far, but the trend may well accelerate, especially given a hawkish RBNZ and the risk of slowing global demand hitting the very open New Zealand economy. External drivers and valuation: Even assuming a constructive domestic picture in the housing market and an attractive yield for the currency in 2023, external factors will determine how much NZD can draw any benefit. As for AUD, risk sentiment and China are the two central themes. The New Zealand dollar is more exposed to risk sentiment (as it is less liquid and higher-yielding) than AUD, but probably less exposed to China’s story. In particular, the real estate troubles in China may well hit Australia via the iron ore channel, while NZ exports (primarily dairy products) are much more linked to China’s Covid restrictions, which look likely to be gradually scaled back. In our base case, the two currencies should largely move in tandem next year. The real NZD/USD rate is 15% undervalued, according to our BEER model. EUR/DKK: Tricky mix of intervention and rates   Spot Year ahead bias4Q221Q232Q233Q234Q23 EUR/DKK 7.44 Neutral 7.44 7.44 7.44 7.44 7.45 Central bank policy: Danmarks Nationalbank delivered FX intervention worth DKK45bn in September and October to defend the EUR/DKK peg. On 27 October, it opted for a smaller rate hike (60bp) compared to the ECB (75bp), which briefly sent EUR/DKK close to the 7.4460 February highs before rapidly falling back to 7.4380/90. We think it will be a busy year ahead for the central bank, as we expect very limited idiosyncratic EUR strength and potentially more pressure on EUR/DKK. Having now exited negative rate territory, DN has much more room to adjust the policy rate for a wider rate differential with the ECB if needed. However, with inflation running above 10% in Denmark, DN may prefer FX intervention over dovish monetary policy to support the peg. We have recently revised our EUR/DKK forecast, and expect a return to 7.4600 only in 2024. Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more  
CEEMEA FX Outlook 2023: The Situation Remains Fragile

CEEMEA FX Outlook 2023: The Situation Remains Fragile

ING Economics ING Economics 20.11.2022 11:51
The geographic and geopolitical situation has made this a difficult period for the region. However, things should normalise in the coming year. We expect global pressures to ease and central banks to drop their FX intervention approach. Nevertheless, the situation remains fragile and we remain vigilant Source: Shutterstock Make the FX market normal again Although it can be said globally that the last few months have been very complicated, the CEEMEA region and in particular the CEE4 have been clearly leading the way in this mess. The Covid years forced central banks in Central and Eastern Europe to start a global hiking cycle, and this year's events have compounded the burden on the region. In our view, the main shock is already over, but we are far from out of the woods and are only moving into the second stage – the aftermath. In addition to the standard drivers of FX, such as rate differentials and EUR/USD, the price of natural gas has now become a central theme for the CEE4 region. The coming winter will test the unity of the European Union with a shallow recession and central bank efforts to end record hiking cycles bringing further pain to FX. Moreover, twin deficits, which will remain with us for a longer period, do not play in the region's favour. Central banks have been forced to do more than just hike rates to ensure price stability and the CEE4 region has split into two camps: full FX intervention regimes (Romania and the Czech Republic) and hybrid defence (Poland and Hungary). To make matters worse, politics has also come into play, and in particular, the dispute between Hungary and Poland with the EU has weighed heavily on the forint and the zloty. As you can see, the cards are heavily stacked against the CEE region, and we carry all these themes into the next year. However, we believe that these issues will be addressed in 2023 and market conditions will begin to normalise. By far the biggest potential, in our view, is the Hungarian forint, which has suffered badly from the government's uncertain access to EU funds, full dependence on Russian energy, and the greatest sensitivity to a global sell-off. Therefore, with the calming of these issues, which we believe is only a matter of time, the hidden potential of the forint could be unlocked, outperforming its CEE peers. We see a similar story on a smaller scale in Poland. On the other hand, the Czech National Bank and National Bank of Romania have taken the path of keeping FX under control, leading to artificial overvaluation. In both cases, we expect a loosening of the central banks' approach in the first half of next year, which should lead to significant depreciation. Among the high-yielders, Turkish policymakers have used an array of unorthodox policy measures to limit weakness in the Turkish lira. The Turkish election in June will be a pivotal period for financial markets, and investors will remain wary that unchecked inflation could put pressure on the lira. In South Africa, the rand looks to have found some good buyers near the 18.50 area in USD/ZAR. Those levels could be tested again early next year should the Federal Reserve push real interest rates higher again, but as pessimism in the Chinese economy starts to fade in the second half of 2023, (the rand is very much driven by commodity prices and China’s performance) USD/ZAR could be trading well below 17.00. Finally, USD/ILS normally proves a good bellwether for the broad dollar trend. And the Bank of Israel might be slightly more tolerant of shekel strength in 2023. We target 3.00 for USD/ILS. Twin deficits - the new standard in the region Source: ING forecast EUR/PLN: Conditions to improve, zloty remains at risk   Spot Year ahead bias4Q221Q232Q233Q234Q23 EUR/PLN 4.70 Neutral 4.90 4.85 4.74 4.66 4.70 Valuation: Our relative value EUR/PLN model (gauging the exchange rate against other market variables, such as swap spreads, option volatility, etc) continues to point to the zloty still being some 3% undervalued against the euro. We attribute this to a mix of risks, both external, particularly the war in Ukraine and its economic fallout, and internal, specifically, tensions with the EU, elevated CPI risk and expansionary fiscal policy undermining the local currency bond market – Polish government bonds (POLGBs). Many analysts suggest another major Russian offensive may be due in the spring. If Russia simultaneously attempts to put economic pressure on the EU, this could again sour sentiment towards the CEE region. The prospect of the conflict coming to an end is a major unknown, but investors should at least become increasingly resilient to news about the war. External position: Fundamental backing behind the zloty should improve next year, but risks behind the local policy mix will rise. We expect the current account deficit to tighten from €35bn to €26bn, owing to e.g. a more favourable terms of trade. Poland is also likely to draw some €20bn from the 'old' EU budget. Moreover, the government finally decided to lean towards hard currency funding. All of this is likely to be converted via the market under the current Ministry of Finance's FX strategy – balancing the current account deficit. Also, FDI inflows should remain solid, already standing at a net €16bn in the first half of 2022. Year-end 2022 may prove more difficult, as refilling natural gas reserves may again prove costly. Politics: Domestic politics is a major unknown in 2023. The proximity of the October elections is a key risk for the fiscal consolidation the government recently unveiled to curtail weak POLGBs. The government is also attempting to reset relations with the EU – possibly encouraged by Hungary’s pro-EU turn. While reaching an actual compromise will take time (and may prove impossible ahead of the general elections), it is at least a move in the right direction and likely to improve the market perception of Poland. Moreover, opinion polls show increasing support for the EU-orientated opposition. A victory for them could prove supportive to the zloty, as investors would bet on swift access to the 'new' EU budget. EUR/HUF: Waiting for a forint breakout   Spot Year ahead bias4Q221Q232Q233Q234Q23 EUR/HUF 405.00 Bearish 400.00 390.00 380.00 385.00 390.00 Inflation: The forint's (HUF) underperformance is largely related to price pressures. Despite the anti-inflationary measures provided by the Hungarian government via price caps in basic food, fuel, and utilities, core inflation is the highest in the EU. However, we believe that the peak is close. Real wage growth dropped into negative territory from September, consumer confidence is close to a record low and a higher share of companies are complaining about a lack of demand rather than a lack of labour. These factors should tame the pricing power of companies. Thus, we see headline and core inflation peaking around the end of 2022 or early 2023. As soon as inflation starts to ease, inflation expectations will come down, so a forward-looking positive real interest rate will spur interest in the HUF. Monetary policy: The central bank stepped into Phase 3 of its tightening cycle in mid-October with an emergency move. New temporary targeted measures were introduced to maintain financial stability alongside the main goal of price stability. The effective rate is now defined by the one-day deposit quick tender, sitting at 18%. With further fine-tuning in the system, we see monetary transmission improving, with short-end rates rising further. In parallel, tightening via the squeezing of liquidity will continue. The exit strategy from the 'whatever it takes' stance will be triggered by materially improved risk sentiment (see next bullet). We think this could translate into a gradual convergence of the effective rate to the base rate, starting as soon as late December. Internal risks: As this policy turnaround will be triggered by a materially improved risk environment, we see a potential relief rally in the forint, despite some normalisation in interest rates. The two key elements of internal risks are the Rule-of-Law procedure and the current account imbalance. Regarding the former, we expect Hungary to settle the dispute with the EU, opening the door for EU transfers as soon as mid-December. This will eliminate a key barrier to HUF strengthening. We expect the country’s external balance to improve in the coming months as the recession and coming winter will dampen the country’s import needs, easing the systemic pressure on the forint. In our view, this could result in a 5% strengthening of the forint over the next six months. EUR/CZK: Koruna under CNB control   Spot Year ahead bias4Q221Q232Q233Q234Q23 EUR/CZK 24.30 Neutral 24.50 24.50 25.00 25.00 24.50 Monetary policy: The Czech National Bank left interest rates unchanged at 7.0% for the third consecutive meeting and we think the Bank has now ended its hiking cycle – the first central bank in the region to do so. The economy already posted a decline in the third quarter of 2022 and we believe it is heading into a shallow recession. Wage growth remains high but inflation below the CNB's forecast suggests a hawkish surprise is unlikely, in our view. The current account has plunged into a record deficit and, in relative terms, we forecast it will reach the largest deficit since 2003. Moreover, fiscal policy shows only marginal signs of consolidation, and so the Czech Republic joins the twin deficit club within the CEEMEA region. FX Interventions: The main topic for the Czech koruna in the coming months is the fate of the CNB's FX intervention regime. According to the central bank's figures, it has so far spent 16% of FX reserves from mid-May to the end of September. In our view, the CNB's activity in the markets has been zero in recent weeks, as confirmed by the Bank's board member Oldrich Dedek in a recent interview. Therefore, we see the CNB in a comfortable position and expect FX intervention to continue at least until the end of the first quarter next year with a line in the sand at 24.60-24.70 EUR/CZK. What next? For now, the koruna is clearly capped on the upside due to the presence of the CNB in the market, while we also see the pressure on the CZK from the global environment as gradually easing. Moreover, within CEE, markets see more interesting themes in Poland and Hungary and several CZK short squeezes have discouraged bets against the end of CNB FX intervention. Therefore, we expect EUR/CZK to trade slightly below the CNB's unofficial line and the koruna will return to the market's attention in the second quarter of 2023 when we think the topic of the CNB's exit strategy will return. EUR/RON: Focus on the 'managed' in managed float   Spot Year ahead bias4Q221Q232Q233Q234Q23 EUR/RON 4.91 Mildly Bullish 4.94 4.95 5.10 5.10 5.10 Hiking cycle: Having reached a key rate of 6.75% in November, the National Bank of Romania is either at or very close to the end of the hiking cycle. We narrowly favour no more hikes in 2023, though we admit that chances are high for another 25bp increase in January. The NBR’s commitment to firm liquidity management will likely – on average – keep carry rates above the policy rate. However, we see a good chance for the liquidity situation to improve substantially into year-end on the back of accelerated spending by the Treasury. Mopping up this liquidity is likely to take a good couple of months. Twin deficits: While on the budget deficit side, policymakers seem committed to reaching the 3.00% of GDP target in 2024 (with a 4.4% target for 2023), developments on the current account side are not encouraging. Due to unfavourable price developments in external markets (including the energy sector) but also on the back of robust GDP growth in the first half of 2022, the trade balance deficit will close well within double digits in 2022, possibly flirting with levels last touched in 2008 when it surpassed 16.0% of GDP. This represents a significant structural weakness that will keep pressure on the leu and require constant FX intervention from the central bank. Strong EU funds absorption will be key to balancing this imbalanced picture. Politics: The relatively eventless political scene in 2022 has been rather remarkable after years of political turmoil. As per the current coalition agreement, the PNL prime minister will resign in May 2023 and a PSD prime minister should be voted in by the same coalition. While there are no real signs of trouble currently, the impending 2024 electoral year still makes it somewhat hard to picture a completely serene change of power in May-June 2023. EUR/RSD: IMF acts as an anchor of stability   Spot Year ahead bias4Q221Q232Q233Q234Q23 EUR/RSD 117.30 Neutral 117.30 117.30 117.35 117.40 117.40 IMF: On 2 November, the IMF announced that a EUR2.4 billion 24-month Stand-By Arrangement (SBA) will replace the current Policy Coordination Instrument (PCI), subject to IMF Board approval in December 2022. The agreement will help to address “emerging external and fiscal financing needs”. On the external front, the IMF estimates the current account deficit to reach 9.0% of GDP in both 2022 and 2023 due to “sharply higher energy import costs along with shortfalls in domestic electricity production, as well as weakening external demand”. On the fiscal side, the initial 3.0% of GDP budget deficit target will be exceeded, most likely ending up around 4.0% of GDP. Summing up, the country needs financing, and the current choppy markets have made the IMF SBA look more appealing despite the strings attached. Monetary policy: Beyond the proposed reforms on the fiscal side, the SBA will undoubtedly shape monetary policy as well. The 2 November press release specifically mentions that “the macroeconomic policy mix should be tight to contain high inflation and support exchange rate stability” and “the ongoing monetary tightening is crucial to ensure that inflation does not become entrenched”. Essentially, we read this as a signal that the IMF is relatively comfortable with the current FX stability policy but that interest rates should continue to be increased. We revise our terminal key rate forecast from 4.50% to 5.75%, which should be reached in the first quarter of 2023. (Geo)Politics: While on the internal front, the April 2022 elections have settled things for some time, the regional developments – be it the war in Ukraine or the Kosovo car plates dispute – are making it more and more difficult for the country to sustain the ambivalent stance it has so far maintained. Absent more clarity, Serbia’s progress as a candidate country for EU accession might see little improvement in the short to medium term, which could dent its efforts to achieve the long-awaited investment grade status. USD/KZT: A defensive play on local fundamentals   Spot Year ahead bias4Q221Q232Q233Q234Q23 USD/KZT 460.00 Mildly Bullish 480.00 480.00 470.00 470.00 470.00 Scope for higher exports: The Kazakh tenge (KZT) depreciated 6% in the first 10 months of 2022, which is defensive given the geopolitics in the region and the 10-15% US dollar appreciation against major currencies. This is attributable to Kazakhstan’s stronger trade. Exports grew 48% year-on-year in the first nine months of 2022, and the current account is back to a $7.9bn surplus vs. a $5.6bn deficit in the first nine months of 2021. Oil production of 1.5m barrels per day is below the OPEC+ quota of 1.6m bpd, and the official target of 1.9-2.0m bpd, meaning there is scope for an increase in exports in 2023, assuming stable oil prices. Meanwhile, oilfield maintenance and an 85% dependence on Russian pipeline infrastructure are downside risk factors. The government is looking to reduce involvement in the FX market: The government is planning fiscal consolidation to reduce the breakeven oil price from a high $110-140 in 2021-2022 to a more comfortable $55-76/bbl to 2023-25. As a result, more FX oil revenues could be saved, reducing the gross spending of the sovereign fund to $7bn in 2023 from $9-11bn in 2021-22. However, the planned 3% GDP increase in non-oil revenues appears ambitious, and the actual conversion of FX oil revenues into KZT for state spending could be higher than officially planned in the event of non-oil revenue under-collection and higher than expected spending. Private capital flows remain uncertain: While the state capital flows, including the sovereign fund and foreign debt, are normally a mirror image of the current account, the private sector’s capital flows are subject to uncertainty. In the first nine months of 2022, private outflows (including unidentified operations) narrowed to $0.3bn vs. $3.8bn in 2021, in line with our expectations, due to the post-Covid recovery in corporate borrowing and the government’s capital repatriation measures. Continued capital inflows will require further progress in structural reforms, improvement in the global/regional risk appetite, and signs of a reversal in the nominal key rate trend, which is so far heading higher. USD/UAH: Central bank allows further depreciation   Spot Year ahead bias4Q221Q232Q233Q234Q23 USD/UAH 36.80 Neutral 40.00 40.00 38.50 37.70 37.00 Central bank: 2023 prospects for the hryvnia remain concerning. Analysts warn that the recent Russian mobilisation may prolong the conflict by at least several months. Moreover, the Ukrainian military progress may slow this winter after recent successes. This leaves the economy struggling with a massive trade deficit (US$5.4bn during the first eight months of 2023), largely reliant on international aid to shore up its FX reserves, currently at $25.2bn owing to a massive injection. However, while the scale of FX intervention has decreased markedly since its peak in July ($4bn), it remains considerable ($2bn in October). The very likely intensification of fighting in early 2023 may again push up the scale of FX intervention required to stabilise the currency. That is why we expect the central bank to allow for further depreciation of the hryvnia, possibly in the first half of 2023. Long-term view: The prospects for the Ukrainian currency largely hinge on the timing of an end to the conflict and the ensuing inflow of reconstruction aid. Various estimates indicate that the restoration may cost up to $750bn (or nearly four times the 2021 Ukrainian GDP). A fraction of this should suffice to drive USD/UAH lower, considering the costs of Ukraine’s FX intervention so far. New normal: Returning to pre-war USD/UAH levels is impossible, though. Given the massive damage to Ukraine’s infrastructure and means of production, the economy will for years remain dependent on investment-related imports. Even if those could theoretically be covered by inflows of foreign aid, the country will likely aim at maintaining a weaker hryvnia in order to support exports. USD/TRY: No relief in sight for TRY   Spot Year ahead bias4Q221Q232Q233Q234Q23 USD/TRY 18.60 Bullish 19.50 21.20 22.40 23.30 24.00 Central bank focus to keep financial conditions supportive: The Central Bank of Turkey (CBT) has delivered 350bp in cuts since August, pushing rates to 10.50%, while also signalling that the rate-cutting cycle will end in November at 9%. The reasoning behind the extension of the rate-cutting cycle at an accelerated pace remains the same. The CBT has cited the need for supportive financial conditions so as to preserve the growth momentum in industrial production and the positive trend in employment. Further signs of a slowdown in economic activity and the recovery in FX reserves since late July are likely factors for the cutting cycle. However, given tighter regulations on the asset side which selectively limit loan growth, cuts are not easing financial conditions quickly. Supportive fiscal stance and continuation of selective credit policy: The timing of the recently announced Credit Guarantee Fund package (reportedly at least TRY50bn) and any possible easing in macro-prudential regulations could reverse the recent momentum loss in lending ahead of elections, with the objective of further supporting domestic demand. Policymakers are also leaning towards a more expansionary stance on the fiscal side as the budget deficit, estimated in the Medium Term Program at 3.4% of GDP in 2022, has been rapidly increasing from c.1.4% in September. The budget deficit forecast for 2023 is 43% higher than this year's forecast. And we should not rule out a breach of this target as the elections approach – scheduled for June 2023. Inflation and external imbalances remain as major concerns: While the policy mix has tilted to a more supportive stance lately, sustained disinflation is not likely unless real rates are normalised. The recent steps are not sufficient to facilitate an external rebalancing which will be determined by the evolution of energy and gold imports. In this environment, TRY is likely to remain under pressure not only because of macro fundamentals but also because of the current unsupportive global backdrop. A recovery in FX reserves will be more challenging in this environment. USD/ZAR: Surprise fiscal outperformance   Spot Year ahead bias4Q221Q232Q233Q234Q23 USD/ZAR 17.20 Mildly Bearish 18.00 17.50 17.25 17.00 16.50 Some good fiscal news: For many years, the fiscal position has been the rand’s Achilles' heel, including the high-profile downgrade to junk status of its sovereign bonds in 2017 and their removal from key bond indices in the 2017-20 period. However, the October budgetary statement in parliament projected South Africa running a fiscal surplus next year and the country’s gross debt-to-GDP stabilising at lower and earlier-than-predicted levels. This has helped the sovereign five-year CDS retrace from the 360bp levels seen in late September. This suggests that if external conditions improve, the rand would be rewarded. Terms of trade will be key: As a high beta, EM commodity exporter, the rand is also very much driven by both commodity prices and China’s performance. Commodity prices and weak imports had helped South Africa’s current account position switch to a strong surplus in 2021 and early 2022. Into 2023, however, the South African Reserve Bank (SARB) forecasts the terms of trade declining 17% and the current account moving back into deficit. South Africa will also be playing its part in the energy transition as it switches from coal and the hope is that the nation’s electricity provider, Eskom, can find some stability if the sovereign assumes a big chunk of its debt. The profile: It seems as though international investors have started to find value in the rand when USD/ZAR trades at 18.50. We think it could trade there again into early next year if the Fed tightens US real rates still further. Yet the global stagflation story is well flagged and into 2023 we think investors could switch to a more reflationary mindset if it looks like the Fed is preparing to cut rates later in the year. Equally, it is hard to see investors remaining as pessimistic on China for the entirety of 2023. We therefore see USD/ZAR trading back to 17.00 and possibly even 16.00 as 2023 progresses. USD/ILS: Shekel well positioned when equities turn   Spot Year ahead bias4Q221Q232Q233Q234Q23 USD/ILS 3.40 Bearish 3.50 3.40 3.25 3.10 3.00 Equities a key driver: 2022 has proved a strange year for the shekel in that when the Bank of Israel (BoI) finally turned hawkish, and with good reason, the shekel sold off along with the rest of the EMFX complex. Recall that for many years the BoI had been battling shekel strength with a large FX intervention campaign. Apart from widespread dollar strength, it also does seem that the shekel is very much driven by equities. Here, declines in overseas (mainly US) equities markets drive margin calls to Israeli buy-side investors and generate shekel weakness. We tentatively expect this dynamic to reverse in the second quarter of 2023. Strong economy: The Israeli economy is expected to grow around 6% this year and 3% next year – even when the US and Europe are likely to be in a recession. Perhaps Israel should be warier of second-round inflation effects than most since the economy is operating above capacity and at full employment. However, the BoI hints that its tightening cycle might end around the 3% area and that inflation should come back into the BoI’s 1-3% target range by the end of 2023. The risks would seem to be skewed towards the BoI needing to tighten further. Why we like the shekel: Israel runs a 3%+ of GDP current account surplus, has strong domestic growth and a central bank not afraid to get involved in FX markets – meaning that shekel weakness will not be particularly welcome. In our experience, USD/ILS is always at the forefront of the dollar trend and if the dollar does turn in the first half of 2023 as we expect, USD/ILS should come a lot lower. Less concern over deflation by the BoI should mean that it will be more tolerant of USD/ILS breaking below 3.00 towards the end of 2023 – which could be the surprise. Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more  
Mexican Rate Spread: Tight vs. Central Bank's Rate Spread and Implications for Dis-inversion

The Euro To Pound Pair (EUR/GBP) Will Try To Get Down

InstaForex Analysis InstaForex Analysis 21.11.2022 08:33
On the 4 hour chart EUR/GBP cross Currency pair seems to appear. 1. Deviations between price movements with the CCI indicator. 2. Ascending Broadening Wedge. 3. Bearish Wolve Waves Based on the three information above it can be confirmed that in the near future EUR/GBP will try to get down below the level 0,8689 where if this level successfully penetrated will potentially bring EUR/GBP down to ETA Line from Wolve Waves and/or to the level 0,8589 as a target that will aim for with a note that if on his way to these levels there is no upward correction movement that penetrates above the 0.8775 level because if this level is successfully broken above, it is very likely that the scenario described previously will potentially become invalid. Relevance up to 02:00 2022-11-22 UTC+1 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/114225
Technical Outlook Of The EUR/JPY Pair Movement In Short Term

The Outlook Of The Euro To Japanese Yen Pair On Chart

InstaForex Analysis InstaForex Analysis 21.11.2022 08:42
Relevance up to 06:00 2022-11-22 UTC+1 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/301759
WTI Oil Shows Signs of Short-Term Uptrend Amid Medium-Term Uptrend Phase

CEE FX Will Remain On The Stronger Side This Week

ING Economics ING Economics 21.11.2022 09:16
FX markets start a holiday-shortened week quietly, as the forces that drove the recent dollar correction continue to fade. In China, sentiment is softening as the Covid situation deteriorates again. For the Fed, the market is again pricing 5% rates next year. This week the highlight will be FOMC minutes, European PMIs and a few monetary policy meetings In this article USD: FOMC minutes in focus this week EUR: PMIs in focus this week GBP: Sterling could take a welcome back seat CEE: All eyes on Hungary, again USD: FOMC minutes in focus this week The dollar is continuing to crawl higher after its sharp sell-off earlier this month. Driving that sharp sell-off had been a combination of softer US CPI data and some optimism emerging from China regarding Beijing's stance on Covid Zero and the property market. On the latter, it seems that the recent outbreak of Covid in some Chinese cities is still prompting similarly restrictive measures and that the Covid Zero policy has yet to undergo wholesale changes. Additionally, regulatory forbearance on the Chinese property development sector will not turn the economy around. Here our colleague, Iris Pang, remains concerned over China's export sector into 2023. For reference, Korean trade data for the first 20 days of November released overnight was pretty poor - exports falling 17% year-on-year. USD/CNH has comfortably turned higher from the recent low near 7.00. For the Federal Reserve story, Wednesday will see the release of the minutes of the 2 November FOMC meeting. At the time, we felt that it was still a reasonably hawkish meeting - although the Fed clearly wanted to shift the narrative from the size of rate hikes to the terminal rate. The minutes could pose a risk that the current dollar correction extends - especially since we will be faced with thin markets later this week as the US celebrates the Thanksgiving public holiday on Thursday. But assuming there are no big surprises - e.g. 'many participants wanting to take stock of the tightening undertaken so far', we would expect the dollar to find support on dips. Today's session should be reasonably quiet, too. DXY probably trades a 107.00-107.50 range. Upside risks could emerge from rising US Treasury yields were this week's $120bn of US Treasury issuance to demand concessionary pricing. And for those who missed it last week, please see our 2023 FX Outlook: The dollar's high wire act. Chris Turner EUR: PMIs in focus this week EUR/USD continues to edge lower in quiet markets. The recent outperformance in eurozone equity indices is no longer providing a boost. In addition to the continued wall of European Central Bank speakers, this week will see the advanced November PMIs for the eurozone, Germany and France.  The composite PMIs are expected to be in contraction territory for all three and be a reminder that at some point the ECB will probably call time on its tightening cycle. Our team's view is that the ECB hikes 50bp on 15 December (59bp priced in the markets) and then finishes the cycle with a 25bp hike in February. In other words, we look for the cycle to conclude at 2.25% rather than the 2.90% area priced for the markets in late summer. In the short term, EUR/USD has just sunk below support at 1.0270 and we would not rule out it drifting towards the 1.0200 area near term.  Elsewhere, we note that Swedish house prices dropped 3% month-on-month in October. The Riksbank's recent release of its financial stability report warned about the heavy lending to the property sector (42% of GDP) and potential problems with a housing market downturn. Our team still expects the Riksbank to hike rates 75bp to 2.50% this Thursday - but the housing sector is certainly one of the factors which can see the Swedish krona underperform in early 2023 and EUR/SEK retesting the October 11.10 high seems likely. Chris Turner GBP: Sterling could take a welcome back seat After a wild ride since the late summer, sterling could now begin to take less of the limelight. The chancellor has delivered the autumn statement and we are now left to examine how quickly growth softens and how aggressively the Bank of England will tighten when it next meets on 15 December. On the subject of growth, the next input here will be Wednesday's release of the November PMI, where the composite indicator is expected to remain below 50 - for the fourth month in a row. EUR/GBP is softening as the euro seems to be taking the larger strain of the softer China view.  However, 0.8665 should be good intra-day support. We are more bearish on GBP/USD. And unless Wednesday's FOMC minutes throw up some dovish surprises, GBP/USD could drift back to the 1.1700/1710 area this week. Our year-end GBP/USD target remains a reasonably aggressive 1.10 - largely on the back of renewed dollar strength. Chris Turner CEE: All eyes on Hungary, again Last week, we saw the third quarter GDP results across the region, and with the exception of Hungary, we saw rather positive surprises. This week we will see a number of monthly indicators from Poland, including industrial production and labour market data, and the National Bank of Hungary meeting on Tuesday. We do not expect any fireworks from the central bankers at the November rate-setting meeting. The latest data regarding inflation and GDP were broadly in line with the central bank's expectations and the next staff projection update is only due in December. But Hungary will also be in the spotlight at the government level this week. A decision on Hungary's access to the recovery plan is expected to be taken by the European Commission on Tuesday. However, reports last week suggested that the decision could be delayed, which would be a problem for the EU finance ministers' meeting scheduled for 6 December, when a final decision on the matter is due. We expect Hungary to find a deal with the EU, but given the timing constraints, it could be a bumpy road.  In the FX market, conditions were almost unchanged for the CEE region over the past week. While global conditions remain strongly positive for the region, domestic conditions still remain on the negative side in our view though slightly better than they were. The dollar index remains near its lowest levels since mid-August, sentiment in Europe has improved slightly again, and the CEE region continues to unwind its relationship with gas prices as issues are resolved for this winter. On the other hand, local rates remain volatile and interest rate differentials are unchanged or only slightly higher.   Thus, we expect CEE FX to remain on the stronger side this week, but the situation remains fragile. Of course, the main focus will be on the Hungarian forint, which will be driven purely by incoming headlines, and given last week's indications, we can expect moves in both directions before a deal with the EU is agreed upon and the forint heads below 400 EUR/HUF. The Polish zloty maintains the largest gap against the interest rate differential and has also leveraged the most improvement in global conditions in recent weeks. Therefore, we see a move up to 4.72 EUR/PLN.   Frantisek Taborsky  Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Tight Monetary Policy Is Already Weighing On The Swedish Housing Market

2023 FX Outlook: Swedish Krona (SEK) Remain Vulnerable On The Back Of European And Global Risk Factors

ING Economics ING Economics 21.11.2022 14:22
For now, higher-than-expected inflation data trumps the mounting concerns about the housing market for the Riksbank. A 75bp rate hike looks likely on Thursday, and we expect one final 50bp increase in February In this article The Riksbank is likely to hike faster than signalled in September Riksbank is keen to stay ahead of the ECB, but housing is a risk A stronger SEK still unlikely in the near term The Riksbank is likely to hike faster than signalled in September When the Riksbank hiked its policy rate by a full percentage point back in September, it was coupled with a message that this was unlikely to happen a second time. The bank’s forecasts pointed to a peak policy rate of 2.5% in April, effectively setting the stage for a 50bp hike this week. But in what has become a familiar tale for central banks, core inflation has since come in higher than the Riksbank had anticipated, and a more aggressive move now looks likely. The Riksbank's September rate hike projection Source: Riksbank, ING   At 7.9%, core CPIF is half a percentage point above the central bank’s September forecast. The jobs market still looks strong, too, even if we saw an unexpected rise in the unemployment rate in the latest set of data (these numbers are fairly volatile). Together with the weak krona, it looks like policymakers will opt for a 75bp rate rise on Thursday. We’re forecasting that rates peak at 3% in February. Core inflation rose from 7.4% to 7.9% in October Source: Riksbank, ING Riksbank is keen to stay ahead of the ECB, but housing is a risk All of this is reinforced by the recent messaging we’ve had from Swedish policymakers. Among the Riksbank’s hawks, Governor Stefan Ingves has stressed the importance of staying a “comfortable distance” ahead of the European Central Bank. Don’t forget that Thursday’s meeting is the last before February, and the ECB will meet – and presumably hike rates – twice before then. Ingves said in the last set of meeting minutes that the Riksbank would need to “follow along upwards at the same pace” at the very least. However, there are good reasons to think the Riksbank is not very far away from the end of its tightening cycle, and the most obvious of these is the housing market. It’s no secret that Sweden’s economy is among the more interest-rate sensitive, and there are already signs that tighter policy is weighing on the housing market. Transaction volumes have fallen sharply, and by some measures, property prices have already started to fall. The headline Valueguard HOX housing index fell a further 3% in October alone, and the Riksbank has projected more declines to come. Much of Sweden’s mortgage market is either fixed for short periods or not at all. Housing market is declining at a faster pace than expected Source: Macrobond, ING   In short, there’s a growing trade-off for the Riksbank between taming inflation and exposing debt fragilities – a challenge that’s far from unique to Sweden. We expect the Riksbank’s new rate projections to factor in a further 25-50bp of tightening next year, and much will depend on the outcome of wage negotiations in the spring. A stronger SEK still unlikely in the near term The SEK OIS curve is embedding around 60bp of tightening this week, so a 75bp move would likely come as a hawkish surprise. However, we believe a greater focus will be on the new rate projections, which are (unlike in Norway) hardly ever followed to the letter by investors, but will provide an indication of how much appetite there is for further tightening. Implicitly, the projections will also show how much the focus is shifting from the mere inflation-fighting exercise to domestic concerns – in particular on housing. This is important because it will shape how SEK rates react to future data releases. On the FX side, despite the Riksbank’s constant protests against a weak krona, the implications of monetary policy remain rather limited for the near term, where we see EUR/SEK trading around 11.00 and facing upside risks. The RB’s hawkishness has been ineffective at lifting SEK in an unstable risk environment, especially in Europe, and we doubt this will change any time soon. The actual implications may emerge in the longer run. If the RB ends up hiking substantially more than the ECB by the time both central banks’ tightening cycles come to an end, then EUR/SEK may face some downward pressure next year, but only under the condition that risk sentiment stabilises. As discussed in our 2023 FX Outlook, we expect SEK to remain vulnerable on the back of European and global risk factors, and only expect limited downside risks for EUR/SEK into end-2023 despite a widening in the Riksbank-ECB rate differential. We currently forecast 10.40/50 for the pair in 2H23. TagsSwedish krona Sweden Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more  
Eurozone inflation slowdown is not a euro problem yet

Eurozone inflation slowdown is not a euro problem yet

Alex Kuptsikevich Alex Kuptsikevich 21.11.2022 16:44
German producer prices lost 4.2% in October; its year-over-year growth rate slowed dramatically by 11.3 percentage points. This is a necessary reversal of the inflation trend that Europe's largest economy has been waiting for. At the same time, it is worth bearing in mind that inflation has climbed too high, accounting for 45.8% y/y in producer prices in the previous two months, and regulators are looking with great concern at how broadly it will be beyond energy and food. Not surprisingly, we saw the first signs of a trend reversal in import prices (-0.9% m/m and slowing from 32.7% to 29.8% YoY in September). In October, we see an impressive drop in producer prices, supported by a cut in wholesale selling prices. The October price decline is an argument against the euro as it brings somewhat closer to the point at which the ECB will stop its rate hikes. But at the same time, we should remember that the ECB overslept now when it should have started its fight against inflation, which took it to higher levels compared to the US and Switzerland. Also, what is most worrying for central banks worldwide is that the longer prices rise at an elevated rate, the more it begins to be regarded as the norm. The inertia of the ECB could well manifest itself in the fact that it will raise rates after Q1 2023, when the Fed has already reached a plateau. Simply put, weak eurozone inflation figures are not a problem for the euro and may even support its strength if the ECB sticks to its hawkish policy while it saves more purchasing power of money.
Hungarian inflation peak is behind us

FX Daily: In Hungary, The Central Bank Left Rates Unchanged

ING Economics ING Economics 23.11.2022 10:11
Risk sentiment is still being driven by news from China, with markets now turning a blind eye to Covid restrictions and instead speculating about an easing in tech regulation. Today, it's all about the Fed minutes, as bulls hope to find signs that Powell's hawkishness was conditional on a strong CPI reading. The USD correction may be nearing its bottom In this article USD: Ready to scan the Fed minutes EUR: Only a dollar function GBP: Hunt to testify CEE: The region remains quiet Source: Shutterstock   USD: Ready to scan the Fed minutes Global risk sentiment has rebounded after absorbing the news about China’s new Covid wave. One factor driving the rally has been increasing speculation that China is loosening its regulatory grip on the tech sector, essentially offering a lifeline to tech shares which have gone through some rough months. This sharp recovery in sentiment appears a bit premature in our view. While there is no clear evidence that the regulatory crackdown has taken a decisive turn (only yesterday, it was reported that China will fine Ant Group $1bn), there is plenty of evidence that Covid restrictions are rapidly being reintroduced into many parts of the country, including Shanghai. But today, all eyes are on the FOMC minutes, the big risk event before a quieter rest of the week as the US enters the Thanksgiving holiday break. Investors will scan the minutes for indications that the “higher for longer” plan is linked to short-term dynamics in CPI releases. Expect another rally in risk assets should the minutes provide hints of conditionality of Powell’s post-meeting hawkishness to a prolonged stickiness in inflation readings, which markets are now more convinced will not materialise after the latest CPI reading. In the absence of such hints, there may not be much for risk bulls to cling on to, given that the November meeting was still a largely hawkish one and the post-meeting (and also post-CPI) Fedspeak has been rather cautious on a dovish pivot. In FX, the dollar has faced a new round of selling. We don’t exclude that this correction will run a little further, but we continue to expect a rather radical inversion in the bearish dollar trend in December as the Fed remains broadly hawkish, energy prices rise again and the global economy slows. Elsewhere in the G10, the Kiwi dollar was stronger after a 75bp rate hike by the Reserve Bank of New Zealand overnight. Policymakers signalled they will take rates to 5.5% in 3Q22, that the economy will enter a recession and that the housing market will contract by 20% (more than previously expected) from its 2021 peak. We remain doubtful that the RBNZ will ultimately deliver this much tightening and tolerate such a sharp house market contraction, but for now, it remains a clear hawkish standout in the developed market. Francesco Pesole EUR: Only a dollar function The risk rally sent EUR/USD back above 1.0300. Indeed, some improvement in China-related sentiment is a positive development for eurozone assets and the euro, but swings in the pair remain primarily a function of broader dollar moves. The eurozone’s calendar includes November’s PMI numbers today. Which are expected to remain rather depressed despite the easing in energy prices. Barring a major upside surprise, it appears unlikely that the release will generate a strong market reaction. The same should be true for ECB speakers (Luis De Guindos, Pablo Hernandez De Cos, and Mario Centeno) today. The Fed minutes are the most important event for EUR/USD today, along with further changes in the market's sentiment on China. An extension of the rally to 1.0400/1.0450 is surely possible in the coming days, but a return to parity in the next few weeks remains our base case as we enter a challenging winter for the eurozone economy. Francesco Pesole GBP: Hunt to testify PMIs will be released in the UK today, and the consensus is looking for a further deterioration in both the manufacturing and composite gauges, possibly due to the prospect of austerity measures by the new UK government. On this topic, Chancellor Jeremy Hunt will testify before the Treasury Committee about his Autumn Statement this afternoon. The extended correction in the dollar is now pushing cable towards the 1.2000 gravity line. Expect some resistance around that level given the lack of strong domestic bullish drivers for the pound though. GBP’s greater sensitivity to risk sentiment compared to the euro means that further improvements in global risk sentiment can push EUR/GBP to test 0.8600 in the coming days. Francesco Pesole CEE: The region remains quiet Today, we expect a second round of monthly data from Poland, led by retail sales. Yesterday's data showed rather softer numbers. In our view, retail sales growth has slowed to low single-digit growth as wages are no longer keeping up with rising prices. We forecast growth of 3.8% year-on-year as high inflation is undermining consumers' purchasing power to such an extent that they are more cautious in their purchasing decisions. However, the attention grabber will be the POLGBs auction. Yields have moved down massively over the past month, completely changing the market picture. In the Czech Republic, we will see the Czech National Bank conference, including an opening speech by the governor, who rarely appears in public. In Hungary, the central bank left rates unchanged yesterday as expected. The National Bank of Hungary repeated its "whatever it takes" stance and the short-term focus remains on market stability until an improvement in risk perception occurs. The Hungarian forint ended slightly stronger after the press conference, but the EU story holds the main role here. Thus, we continue to wait for the European Commission's decision, which should have a positive impact on the market and move the forint closer to 400 EUR/HUF. Elsewhere, this week is more the domain of the rates market and FX remains without much enthusiasm. Impulses for bigger moves are hard to find both on the domestic and foreign side. Thus, our view hasn't changed much since Monday, and we can't expect much momentum from the region today either. The focus will thus be on the global story. Frantisek Taborsky Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Technical Outlook Of The EUR/JPY Pair Movement In Short Term

The EUR/JPY Pair May Test To Downtrend Again

InstaForex Analysis InstaForex Analysis 24.11.2022 08:38
EUR/JPY looks ready to challenge the downside again. A break below minor support at 144.29 will call for renewed downside pressure towards 142.56 and below here. It confirms the completion of the ending diagonal and a return to the origin of the ending diagonal at 133.36. That said, we have to recognize that there is an outside chance for a final rally to a new high above 148.40 to complete the ending diagonal. If this scenario unfolds, than the rally to just above 148.40 will be very short-lived and the turn lower will be quick and swift.   Relevance up to 06:00 2022-11-25 UTC+1 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/302308
Tight Monetary Policy Is Already Weighing On The Swedish Housing Market

Riksbank Monetary Policy Decision Ahead

TeleTrade Comments TeleTrade Comments 24.11.2022 09:30
Riksbank is expected to hike its key rate by 75 basis points. The decision is unlikely to provide lasting support to the Krona, but another leg higher in SEK could be seen in the coming days, economists at ING report. Riksbank to hike by 75 bps “We expect a 75 bps hike, which appears to be very much a consensus call. We did see the RB surprise with a 100 bps move earlier this year, but that would likely be a risky move given the strains in the Swedish housing market.” “We don’t expect major and long-lasting implications from today’s policy decision for the Krona, which is currently enjoying a rather unique combination of positive factors (on the European and global risk sentiment side).”  “We could see a further leg higher in SEK in the coming days, but our longer-term view remains that the Krona will underperform as the eurozone enters a prolonged recession in 2023. We forecast a sustained return to levels below 10.50 in EUR/SEK only in the second half of next year.” See – Riksbank Preview: Forecasts from five major banks, another big rate hike
Assessing 'Significant Upside Risks to Inflation': Insights from FOMC Minutes

FX: The Fed Minutes Surprised On The Dovish Side

ING Economics ING Economics 24.11.2022 11:55
The Fed minutes surprised on the dovish side, signalling strong support for slower rate hikes and weaker support for Powell's higher-for-longer rhetoric. The dollar could stay pressured for a bit longer, but it's probably embedding a good deal of Fed-related negatives now. US markets are closed for Thanksgiving. Elsewhere, expect a 75bp hike in Sweden In this article USD: Dovish feeling EUR: Enjoying an ideal mix for now SEK: Riksbank to hike by 75bp CEE: Consumer confidence at freezing point   USD: Dovish feeling If the November FOMC event failed to convincingly signal a dovish shift, the minutes of that meeting – released yesterday – were surely more effective in that direction. There are two key points in the minutes that markets are interpreting as dovish statements: 1. “A substantial majority of participants judged that a slowing in the pace of increase would likely soon be appropriate”. 2. “Various participants noted that […] their assessment of the ultimate level of the federal funds rate that would be necessary to achieve the Committee's goals was somewhat higher than they had previously expected”. Point one simply indicates that there is a larger-than-expected (“substantial”) majority of the Committee that is backing a slower pace of tightening. When adding the lower-than-expected October CPI reading to the equation, expecting more than 50bp in December would look quite counterintuitive now, and a switch to 25bp increases from the January meeting appears increasingly likely. In point two, markets may have focused on the term “various”, which indicates a rather vague consensus backing Chair Jerome Powell’s post-meeting “higher-for-longer” statement. This is very relevant, as Powell pushing longer-term rate expectations higher in the November press conference was the main counterargument to the “dovish pivot” narrative: now, it looks like his approach might not have had much backing from other FOMC members. The market reaction has been quite straightforward: risk-on, dollar-off. As we had signalled in recent commentaries, the minutes were set to be a key risk event for the dollar, and we are not surprised to see another leg lower in the greenback in an environment where markets are already shifting away from a longer-term structural long-dollar positioning. Fed funds futures are currently embedding a peak rate at 5.0%, but it might prove harder to see further re-pricing higher in rate expectations after the dovish minutes. At the same time, the degree of cautiousness manifested by Fed officials after the softer CPI figures means that markets may be reluctant to further revise their peak rate bets lower in the near term. This means that one-way traffic in FX, with the dollar staying on a downtrend for longer, still appears unlikely. The greenback has now absorbed a good deal of negatives when it comes to the Fed story, and in our view can still benefit from the deteriorating outlook outside of the US (especially in Europe and China) in the coming months. While we don’t exclude the dollar contraction to take DXY below 105.00, we struggle to see sub-105 levels holding for very long. US markets are closed for Thanksgiving today, and will be open for only half a day tomorrow. There are no data releases or Fed speakers until Monday. Expect a significant drop in liquidity into the weekend. Francesco Pesole EUR: Enjoying an ideal mix for now European currencies are enjoying a strong rally, as lower energy prices (crude was hit by the EU oil price cap proposal) and higher-than-expected PMIs yesterday had already offered some support to European sentiment before the Fed delivered some dovish minutes. We remain doubtful that it will be a smooth ride to recovery for European currencies, and our commodities team continues to see upside risks for energy prices into the new year despite recent developments. EUR/USD has broken above 1.0400 and may extend its rally to 1.0500/1.0550 in the near term, but we suspect the bullish trend may start to run out of steam as we approach year-end. A return towards parity remains our base case for December. Today, the Ifo numbers will be watched in the eurozone, as investors will scan for further evidence of slight improvements in the business outlook. European Central Bank member Isabel Schnabel will speak at a Bank of England event today, where the BoE’s Dave Ramsden, Huw Pill and Catherine Mann will also deliver remarks. Francesco Pesole SEK: Riksbank to hike by 75bp Scandinavian currencies have been the best G10 performers since yesterday, due to the Swedish krona's high sensitivity to EU sentiment and the Norwegian krone's high sensitivity to global liquidity conditions.   SEK is facing an important risk event today, as the Riksbank is set to deliver another rate hike at 0830 GMT. As per our meeting preview, we expect a 75bp hike, which appears to be very much a consensus call. We did see the RB surprise with a 100bp move earlier this year, but that would likely be a risky move given the strains in the Swedish housing market. From an FX perspective, we don’t expect major and long-lasting implications from today’s policy decision for the krona, which is currently enjoying a rather unique combination of positive factors (on the European and global risk sentiment side). We could see a further leg higher in SEK in the coming days, but our longer-term view remains that the krona will underperform as the eurozone enters a prolonged recession in 2023. We forecast a sustained return to levels below 10.50 in EUR/SEK only in the second half of next year. Francesco Pesole CEE: Consumer confidence at freezing point On the calendar today, we have a series of second-tier data prints from the region. Consumer confidence will be published in the Czech Republic and Poland. In both cases, the indicators are currently at record low levels, well below the pandemic years. However, no significant improvement can be expected for November either, given persistent inflation and energy prices. In Hungary, labour market data for September will be published. We expect wage growth of 16.7% YoY, basically the same pace as in August, slightly above market expectations. On the political front, the main focus remains on Hungary. Yesterday, we heard unofficial reports from journalists that the European Commission will recommend freezing part of the cohesion funds with the condition of further reforms, but will also recommend adopting the Hungarian RRF plan. In the end, this gives more flexibility in further negotiations, but the key will be the Ecofin meeting in two weeks' time. Today the saga will continue in the European Parliament, which has on its agenda a vote on Hungary's rule-of-law progress, which, although non-binding, could make a lot of noise in the markets. There is also a V4 meeting scheduled in Slovakia, which the Hungarian PM is expected to attend. The forint jumped up to 410 EUR/HUF after yesterday's news, which the market initially assessed as negative. But in our view, it mitigates the risk that Hungary could lose some money and opens up room for longer negotiations. Hence, we expect the forint to correct down again today closer to 400 EUR/HUF. The potential headlines from the EP meeting, which already caused considerable pain in the FX market last week, are a risk. Frantisek Taborsky Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
French strikes will cause limited economic impact

France: The Economic Picture Is Deteriorating

ING Economics ING Economics 24.11.2022 11:59
In November, the French business climate remained stable and above its long-term average, depicting a very different situation than the PMI indicators. We continue to believe that the economic picture is deteriorating Business climate and PMI moving in opposite directions The business climate in France remained stable in November at 102, above its long-term average. The economic situation deteriorated somewhat in industry, construction and services, but improved in wholesale trade. Industrial order books and the expected demand in services are deteriorating, while inflationary pressures seem to be building up. The data is surprising as it contrasts sharply with the PMI indices for November, released yesterday. The composite PMI for France fell below the 50 threshold for the first time since February 2021, which is synonymous with a contraction in economic activity, standing at 48.8. While the index for the manufacturing sector continued the descent that began in June, reaching 49.1, it is the evolution in the services sector that is noteworthy: for the first time in 20 months, the index fell into contraction territory, to 49.4. The PMI thus indicates that high inflation and reduced purchasing power have put an end to the growth in the services sector that had been made possible by the lifting of Covid-19 restrictions. This marks the end of the support of services to French economic growth, which should lead to a contraction of GDP in the fourth quarter. In terms of inflation, the situation portrayed by the PMI indices is also fundamentally different from that which has emerged from the business climate indicator: according to the PMI indices, inflation in purchase prices and in prices paid has fallen to its lowest point in nine months, although still well above its long-term average. The decline is even more marked in the manufacturing sector. Although still very high, inflationary pressures seem to be reducing. Uncertain outlook With two indicators that are supposed to depict the same situation evolving in such different ways, it is difficult to draw clear conclusions in terms of forecasts for the French economy. While the more optimistic will probably prefer to believe in the business climate, the PMI indices seem to have been better at predicting French economic activity in recent months. We continue to believe that the French economic outlook is marked by weakening domestic and foreign demand, declining new businesses and uncertainty. The momentum in activity provided by the services sector seems to have ended and industry does not seem ready to become the new engine of growth. The labour market is beginning to show the first signs of weakness, which should result in slower employment growth. As a result, GDP growth is expected to be weaker in the fourth quarter than it was in the third. For 2023, we still fear a small GDP contraction for the year as a whole. TagsPMI GDP France Eurozone Business climate Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
German Export Weakness In The Fourth Quarter Suggests That Recession Fears Are Real

Expectations That The German Economy To Return To Average Quarterly Growth Rates

ING Economics ING Economics 24.11.2022 12:01
The strong improvement of the Ifo index adds to recent glimmers of hope. However, this simply reflects a stabilisation at low levels and there is no reason to change the recession call, yet. The sheer fact that things are no longer getting worse doesn't mean that improvement is around the corner iStock     Germany’s most prominent leading indicator, the Ifo index, staged a strong rebound, increasing to 86.3 in November, from 84.5 in October. While the current assessment component continued to weaken, expectations improved significantly to 80.0, from 75.9 in October. This Ifo index reading shows that hope is back, even if the current situation is deteriorating further. Glimmer of hopes come too early Today's Ifo index adds to recent glimmers of hope that the German economy might avoid a winter recession. These hopes are built on the back of several government stimulus packages, filled national gas reserves, a better and faster adaption of businesses and households to reduce gas consumption, and hopes that consumers will simply spend away the energy crisis. However, the downsides still outweigh the upsides: new orders have dropped since February and inventories have started to increase again, a combination that never bodes well for future industrial production. Despite some relief in global supply chain frictions, early leading indicators from Taiwan and Korea point to a weakening of global trade in the winter. High energy prices are gradually being passed through to consumers, therefore gradually weighing on private consumption.   The government’s fiscal stimulus, currently amounting to some 2% of GDP, will come too late to prevent the economy from contracting in the fourth quarter. However, it is substantial enough to cushion the contraction and to turn a severe winter recession into a shallow one. The next question will be whether the economy can actually avoid a double dip in the winter of 2023/24. Currently, many official forecasts expect the German economy to return to average quarterly growth rates by mid-2023. We are more cautious and think that the series of structural changes and adjustments will keep the recovery subdued, with a high risk of a double dip. For now, the winter of 2023/24 is still far away. This year’s winter has just started, and a few warm November weeks do not automatically make for a warm season. Today’s Ifo index gives hope for some stabilisation, nothing more, nothing less. Stabilisation is clearly not the same as a significant improvement. Returning to recent optimism, it is tempting to revive soccernomics: a 1-0 lead and a decent performance for 65 minutes can unfortunately still end in a 1-2 defeat. Not all optimism leads to success. At the current juncture and despite today's encouraging Ifo index reading, the question is what is more likely: the German economy avoiding recession or the German national football team still making it into the next round. We wouldn’t put much money on either of the two. TagsIfo index Germany Eurozone   Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Hungary's Central Bank to Maintain Base Rate at 13%, Eyes on Effective Rate Amid Forint's Performance

The Actions Of The ECB May Be A Factor Providing Some Support For The EUR/GBP Cross

TeleTrade Comments TeleTrade Comments 25.11.2022 09:35
EUR/GBP stages a modest recovery from the monthly low touched on Thursday. A combination of factors underpins the shared currency and offers some support. Rising bets for additional BoE rate hikes benefit the GBP and seem to cap gains. The EUR/GBP cross gains some positive traction on Friday and reverses a part of the overnight slide to a fresh monthly low. The cross maintains its bid tone through the early European session, though seems to struggle to capitalize on the strength beyond the 0.8600 mark and remains below the 100-day SMA. The shared currency's relative outperformance could be attributed to talks of a more aggressive policy tightening by the European Central Bank (ECB). This, in turn, is seen as a key factor offering some support to the EUR/GBP cross. The ECB Governing Council member Isabel Schnabel said on Thursday that the central bank will probably need to raise rates further into restrictive territory. Schnabel added that the incoming data suggests that the room for slowing down the pace of interest rate adjustments remains limited. Adding to this, the prevalent selling bias around the US Dollar, along with an upward revision of the German Q3 GDP print, benefit the Euro and act as a tailwind for the EUR/GBP cross. According to the final reading, the Eurozone's economic powerhouse expanded by 0.4% during the three months to September and the annual growth rate in Q3 2022 stood at 1.3% vs. the 1.2% estimated. The intraday uptick, however, lacks bullish conviction and remains capped amid the underlying bullish sentiment surrounding the British Pound. The recent sharp decline in the UK government bond yields represents an easing of financial conditions, which should allow the Bank of England to continue raising borrowing costs to tame inflation. This, in turn, is seen underpinning the Sterling Pound and keeping a lid on any further gains for the EUR/GBP cross, at least for the time being. Hence, it will be prudent to wait for strong follow-through buying before confirming that spot prices have bottomed out and positioning for any meaningful appreciating move.
The Turkish Central Bank Cut Its Policy Rate by150bp | Credit Suisse Outflows Benefit UBS

The Turkish Central Bank Cut Its Policy Rate by150bp | Credit Suisse Outflows Benefit UBS

Swissquote Bank Swissquote Bank 25.11.2022 10:49
Markets were quiet yesterday, as the US was closed for Thanksgiving. European markets mostly surfed on the positive reaction from the US equities to the Federal Reserve (Fed) minutes released a day earlier. EU Stocks The German DAX advanced to a fresh 5-month high, as the French CAC40 hit a fresh 7-month high, thanks to the euro’s appreciation against the greenback, which somehow eases the inflationary pressures for the European companies, along with the falling energy prices. Central Banks Elsewhere, the latest minutes from the European Central Bank (ECB) released yesterday revealed that ‘a few’ officials favored a smaller rate increase, than the 75bp that the bank delivered last month, citing the other monetary tightening measures that would help restricting the monetary conditions. The Swedish Riksbank raised its interest rates by 75bp yesterday and said that the monetary tightening will continue to tame inflation in Sweden. The Korean Central Bank raised its interest rates by another 25bp to the highest levels since 2012 and the won gained, whereas the Turkish Central Bank CUT its policy rate by another 150bp points, but said that the easing is perhaps enough at 9%, and that risks on inflation – which stands around 85% officially, and 185% unofficially – increase from here. China In China, the central bank signals lower reserve ratios for banks, and conducts reverse repo operations to boost liquidity in the system, as news of fresh Covid restriction measures creep in. The Chinese news certainly prevent oil bulls from jumping in the market right now, and the American crude consolidates below $80pb this morning, with solid offers seen at $82/85 range. Credit Suisse In Switzerland, Credit Suisse continues making the headlines. The stock price flirts with all-time-lows, as UBS sees its share price extend gains as outflows from CS reportedly benefit UBS. Watch the full episode to find out more! 0:00 Intro 0:32 Soft USD boosts European stocks 4:02 Will the USD further soften? 5:40 Central bank roundup 7:44 China re-closing weighs on oil 8:11 Credit Suisse outflows benefit UBS Ipek Ozkardeskaya  Ipek Ozkardeskaya has begun her financial career in 2010 in the structured products desk of the Swiss Banque Cantonale Vaudoise. She worked at HSBC Private Bank in Geneva in relation to high and ultra-high net worth clients. In 2012, she started as FX Strategist at Swissquote Bank. She worked as a Senior Market Analyst in London Capital Group in London and in Shanghai. She returned to Swissquote Bank as Senior Analyst in 2020. #DAX #CAC #FTSE #EUR #GBP #USD #FOMC #ECB #minutes #Riksbank #CBT #SEK #TRY #China #Covid #crudeoil #CreditSuisse #UBS #Thanksgiving #BlackFriday #SPX #Dow #Nasdaq #investing #trading #equities #stocks #cryptocurrencies #FX #bonds #markets #news #Swissquote #MarketTalk #marketanalysis #marketcommentary _____ Learn the fundamentals of trading at your own pace with Swissquote's Education Center. Discover our online courses, webinars and eBooks: https://swq.ch/wr _____ Discover our brand and philosophy: https://swq.ch/wq Learn more about our employees: https://swq.ch/d5 _____ Let's stay connected: LinkedIn: https://swq.ch/cH
The Drop In German Inflation Is Welcome News, But It Is Mean That Can We Say That Inflation Has Peaked?

German GDP Showed Favorable Results | Switzerland Employment Level Keeps Its Trend

Kamila Szypuła Kamila Szypuła 25.11.2022 12:03
The end of the week is quiet due to America's lack of activity due to Thanksgiving. The market's attention will be focused mainly on the Asian and European markets. Today, an important report turns out to be the result of the German GDP. Tokyo CPI At the beginning of today, Japan, and more specifically Tokyo, published its inflation report. In this city, Core CPI increased from 3.4% to 3.6% and it was a higher than expected reading (3.5%). The upward trend of this indicator has been going on since the beginning of May, but since May Core CPI has been above 1.0%. Also CPI increased significantly from 3.5% to 3.8%. The consumer price index only in Tokyo excluding fresh food and energy prices held its previous level of 0.2%. In this city, the rate peaked this year in May (0.4%), and then fell twice. After that, from July to September it held the level of 0.3%. Singapore Industrial Production Singapore Industrial Production MoM increased significantly. Comparing October to September, the change in the total inflation-adjusted value of output produced by manufacturers, mines, and utilities was 0.9%, which is a good result as another decline was expected. The same index comparing the result from October 22 to October 21 has fallen. The fall was expected. The current reading is -0.8%, it is the first result in a year that was below zero, but it was higher than the expected -0.9%. This means that the change in the total inflation-adjusted value of output produced by manufacturers, mines, and utilities has decreased significantly, but not as much as expected. Source: investing.com German GDP In Germany, both the quarterly and annual change in gross domestic product turned out to be a positive surprise. GDP Q3 YoY was 1.2%. Unfortunately, it was a decrease in comparison to the previous period, the reading of which was at the level of 1.8%. This time it was expected to score 0.1% lower. A very positive result for the German economy as well as for the euro zone turns out to be the reading of GDP Q3 q/q. The index increased by 0.3% compared to the previous period and reached the level of 0.4%. An increase to 0.3% was expected, but the result higher than expected may raise some optimism. German GDP figures show the country’s economy has grown slightly more in the third quarter than anticipated on the back of consumer spending. Switzerland Employment Level The Employment Level measures the number of people employed during the previous quarter. As the current reading shows, the exemplary trend is successively maintained. Employment increased this time to the level of 5,362M. The previous reading was about 46M than (5,316M). Such results show the good condition of the economy, because employment increases household income, and thus these households are able to spend more, which drives the economy because money remains in constant circulation. ECB’s speeches Markets expect only two speeches at the end of the week, and this time only from the European Central Bank (ECB). The first speeches took place at 9:50 CET. The European Central Bank Supervisory Board Member Kerstin af Jochnick spoke. The second and final speech of the day will take place at 18:00 CET, with Luis de Guindos, Vice-President of the European Central Bank The speeches of the ECB's officials often contain references to possible future monetary policy objectives, assessments and measures. What's more, statements can give strength to the euro (EUR), or set it in the opposite direction. Summary: 0:30 CET Tokyo CPI 0:30 CET CPI Tokyo Ex Food and Energy (MoM) (Nov) 6:00 CET Singapore Industrial Production MoM 8:00 CET German GDP (Q3) 8:30 CET Switzerland Employment Level 9:50 CET ECB's Supervisory Board Member Jochnick Speaks 18:00 CET ECB's De Guindos Speaks Source: https://www.investing.com/economic-calendar/
Italian headline inflation decelerates in January, courtesy of energy

In Italy Consumer Confidence Gained Eight Points

ING Economics ING Economics 25.11.2022 14:07
In Italy, business and consumer confidence rebounded in November. The scope of the rebound comes as a surprise, given the high inflation and geopolitical backdrop. This suggests that the GDP contraction, which we still pencil in for the fourth quarter, might be very small Giorgia Meloni, the new prime minister of Italy, has boosted consumer confidence by announcing continued energy support for households     November confidence data marks a widespread improvement both among consumers and businesses, interrupting a decline that started in July. We remain extremely cautious in interpreting the November reading as a sign of reversal, but it shows that the deceleration brought about mostly by the impact of higher inflation might turn out – for the time being – to be a soft one. Consumer confidence gained eight points in November, reaching back to August levels. Interestingly, the main driver of the rebound was a big improvement in the future climate component. Consumers seem to expect an improvement in Italy’s economic conditions, with a positive bearing on future unemployment. Looking at the current environment, with inflation still on the increase and subdued wage dynamics, it is not easy to justify such a reversal. A possible explanation could be post-election relief, as the new Meloni government has announced its continued support to households to compensate for the negative consequences of the energy shock on disposable income. In the business domain, the scope of the rebound in confidence has been widespread, with the exception of construction, where confidence continued its downward trend from historic highs. As with consumers, there seems to be a clear distinction between the present state of business and expectations about it. Taking manufacturers as an example, they see orders deteriorating and highlight an increase in stocks of finished goods, implicitly signalling soft current demand, but at the same time signalling a strong increase in expected production. When looking at services, what stands out is the driving role of tourism. After declining sharply in both September and October, confidence in the tourism sector has rebounded strongly, reaching back to August levels. Interestingly, the improvement is propelled by both current and expected orders, which both post similar substantial gains. On the back of previous confidence data we had anticipated the disappearance of tourism over the fourth quarter; November data seems to suggest that inertia in the sector is strong and that the expected drag on growth might consequently be smaller. All in all, notwithstanding today’s surprisingly strong confidence data, we do not believe an economic turnaround is in the making, as yet. The negative impact of inflation remains in place both for consumers and businesses and we suspect that the refinanced compensation measures will not be enough to prevent a GDP contraction in the fourth quarter of this year. But this will likely be a very small contraction, adding upside risks to our current forecast of a 3.6% GDP growth in 2022.    TagsItaly   Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Monitoring Hungary: Glimmering light at the end of the tunnel

Next Week: Industrial Production In Hungary May Show A Better-Than-Expected Performance

ING Economics ING Economics 25.11.2022 14:16
The market is firmly backing a 50bp hike from the Fed in December, and with US economic data so far proving to be resilient, all eyes are on next Friday's jobs report and the core personal consumer expenditure deflator. We expect the number of vacancies to exceed unemployed people by a ratio of 1.9:1 and for the PCE price index to be at 0.3% month-on-month In this article US: Fed may need to toughen its stance Eurozone: All eyes on inflation Hungary: Third-quarter GDP supported by industrial and services sectors   Shutterstock   US: Fed may need to toughen its stance The market remains firmly behind the view that the Federal Reserve will raise interest rates by 50bp on 14 December given Fed speakers have indicated the likelihood of less aggressive step increases in interest rates after four consecutive 75bp hikes. However, the economic data is proving to be pretty resilient and we are a little nervous that a 7% fall in the US dollar against the currencies of its main trading partners, and the 45bp drop in the 10Y Treasury yield, is leading to a significant loosening of financial conditions – the exact opposite of what the Fed wants to see as it battles inflation. Consequently, we wouldn't be surprised to see the Fed language become more aggressive over the coming week, talking about higher terminal interest rates – with some of the more hawkish members perhaps even opening the door to a potential fifth consecutive 75bp hike in December (although we don’t think they would actually do it) to ensure the market gets the message. Currently, only three officials are scheduled to speak, but we wouldn’t be surprised to see more make sudden appearances in the media.  Data-wise, the jobs report on Friday will be the focus, but there will also be interest in the ISM manufacturing index and the Fed’s favoured measure of inflation – the core personal consumer expenditure deflator – both of which are published on Thursday. The ISM is likely to drift just below the break-even 50 level given the softening trend seen in regional manufacturing indicators. The PCE deflator could be interesting too since it doesn’t always match what happens in core CPI. If you remember, that rose “only” 0.3% month-on-month versus expectations of a 0.5% increase and was the catalyst for the recent drop in Treasury yields, as expectations for Fed rate hikes were scaled back. A 0.4%+ print for MoM core PCE deflator could generate quite a sizeable reverse reaction. Meanwhile, the jobs numbers should hold around 200,000 given the number of vacancies continues to exceed the number of unemployed people by a ratio of 1.9:1. Nonetheless, there are more firings going on in the tech sector and the increase in initial claims also points to softer employment growth in the coming months. Eurozone: All eyes on inflation Has a eurozone inflation figure ever been more important than the November reading that is due out on Wednesday? With the ECB focusing more on current inflation developments for determining when to move to smaller rate hikes, the November inflation figure will be very relevant for the December rate hike decision. While energy prices have been moderating and other supply shocks are fading, the question is how quickly this impacts consumer prices. Also keep an eye out for unemployment on Thursday. Any sign of the labour market slowing will also be taken into account at the next policy meeting. Hungary: Third-quarter GDP supported by industrial and services sectors Next week’s events calendar for Hungary is focused on one day. On the first day of December, we are going to see detailed GDP data from the third quarter. Here we expect that industrial production will show a better-than-expected performance, giving support to the net export which has suffered under the pressure of the energy crisis. Along with industry, the services sector is expected to be a key driver, which was able to limit the quarter-on-quarter drop in GDP. The manufacturing PMI has shown significant monthly volatility recently thus we see a down month in November after a significant upside surprise in October. Key events in developed markets next week Refinitiv, ING Key events in EMEA next week Refinitiv, ING TagsUS Inflation Eurozone EMEA Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
The Japanese Yen Retreats as USD/JPY Gains Momentum

Zoom Video EPS beat market expectations. Next week's Eurozone CPI and the US GDP releases are going to attract investors' attention

Conotoxia Comments Conotoxia Comments 25.11.2022 16:16
Sunday marked the start of the World Cup in Qatar. It seems that it could not have taken place without controversy over the preparations for the event. After yesterday's Thanksgiving holiday in the United States, today we may see increased shopping traffic in celebration of Black Friday. A weakening dollar and falling bond yields may have driven the broad market this week.  Macroeconomic data On Wednesday, we learnt about the PMI reading on managerial sentiment in German industry. The reading of 46.7 points surpassed the expected 45 points and came as a positive surprise over the previous reading of 45.1 points. We could also see values for the same indicator from the UK, with a reading of 46.2 points (45.7 had been expected), against the previous reading of 46.2. From this we could see a warming of the market climate, which appears to have caused a 1% rise on the main German DAX index (DE40) since the start of the week.  Source: Conotoxia MT5, DE40, Weekly On the same day, we learned about the number of building permits issued in the United States. Here, the data turned out to be more modest than expected, amounting to 1.512 million (1.526 million was expected). There was also news from the US economy on crude oil inventories, which fell by 3.69 million barrels (a drop of 1 million barrels was expected).  On Thursday, Americans celebrated the Thanksgiving holiday. In Europe, on the other hand, data from the Ifo index measuring expectations for the next six months among German entrepreneurs may have come as a positive surprise. The index came in at 86.3 points, while 85 points were expected, which, like the PMI index, may have comforted markets in their expectations for the future. The stock market Analysts may have been positively surprised by Q3 earnings this week. Among others, we saw better-than-expected earnings per share from technology, software and laboratory equipment maker Agilent Technologies (Agilient), whose EPS came in at 1.53 (expected 1.38). Zoom Video (Zoom), a popular company during the pandemic, also surprised positively, with EPS of 1.07 (expected 0.83).  On Tuesday, US semiconductor company Analog Devices (AnalogDev) showed EPS of 2.73 (2.58 expected), and the maker of software for industries including architecture, engineering and construction showed earnings per share in line with EPS guidance of 1.7.  Of the 11 sectors of the US economy, consumer goods sales grew strongest. The Consumer Staples Select Sector SPDR Fund (XLP) index has gained more than 3% since the start of the week, which may have been influenced by Friday's Black Friday. Source: Conotoxia MT5, XLP, Weekly Currency and cryptocurrency market For another week in a row, we could see a weakening of the US dollar. The valuation of the EUR/USD pair has risen by 0.7% since the beginning of the week and currently stands at 1.04. The weakening of this largest reserve currency was also evident on the GBP/USD pair, which rose by 2% to around 1.21. The other currencies do not seem to show increased volatility. Source: Conotoxia MT5, EURUSD, Weekly There could still be a gloomy mood in the cryptocurrency market. Not even the reports that the largest exchange Binance has set up and contributed USD 1 billion to a fund to support crypto projects are helping. The price of bitcoin is hovering around US$16500 and ethereum around US$1190. Source: Conotoxia MT5, BTCUSD, Daily What could we expect next week? Next week's key macroeconomic data will start with Tuesday's German CPI inflation reading. On the same day, we will learn the previously discussed Chinese manufacturing PMI. On Wednesday, the Eurozone CPI inflation readings appear to be particularly important. On this day, we will also learn the quarterly change in GDP for the United States. On Thursday, we will learn the PMI values for Germany, the United Kingdom and the United States. At the end of the week, we will find out the unemployment rate in the USA. Tuesday will see Q3 financial results from business software developer Intuit (Intuit). Wednesday will bring a report from cloud software company Salesforce (Salesforce). We will end the week with a report from semiconductor company Marvell (MarvelTech). Grzegorz Dróżdż, Junior Market Analyst of Conotoxia Ltd. (Conotoxia investment service) Materials, analysis and opinions contained, referenced or provided herein are intended solely for informational and educational purposes. Personal opinion of the author does not represent and should not be constructed as a statement or an investment advice made by Conotoxia Ltd. All indiscriminate reliance on illustrative or informational materials may lead to losses. Past performance is not a reliable indicator of future results. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75,21% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. Read the article on Conotoxia.com
The EUR/JPY Pair Is Expected To Start A New Zig-Zag Correction

The EUR/JPY Pair Continue To Look For More Downside Pressure

InstaForex Analysis InstaForex Analysis 28.11.2022 08:28
Our preferred scenario remains firmly in place. We continue to look for more downside pressure as the ending diagonal completed with the test of 148.30 and we are looking for a return to the origin of the ending diagonal at 132.66. Short-term, we would like to see a break below minor support at 142.56 as confirmation that the 5-wave rally from 114.42 indeed completed with the test of 148.30 and a corrective decline to 132.66 is unfolding.   Relevance up to 06:00 2022-11-29 UTC+1 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/302686
FX Daily: Asymmetrical upside risks for the dollar today

FX: Data In The US This Week May Deliver A Little Support To The US Dollar (USD)

ING Economics ING Economics 28.11.2022 09:09
A very inverted US yield curve and Brent crude trading down near $80/bbl tell us that markets are growing more concerned about global demand trends. And uncertainty in China does not help either. We feel scheduled events and data in the US this week may also deliver a little support to the dollar. In general, we favour defensive positions in FX this week In this article USD: Fed-speak, prices and employment to dominate EUR: Waiting for the next inflation print GBP: Settling down CEE: Hungary remains topic number one     USD: Fed-speak, prices and employment to dominate The week starts with a focus on events in China as local authorities struggle to battle rising daily case numbers and enforce lockdowns. While a disorderly exit from China's Covid Zero policy could ultimately prove a positive for global demand, getting to that point will be an exceptionally bumpy ride for the world's financial markets. As it stands currently, events in China are being read negatively for demand trends, where for example Brent crude and industrial metal prices are under pressure. Brent at $80/bbl is a little surprising given what should be the 2mn barrel per day production cut undertaken by OPEC+ this month.  Another big read for global demand trends is the shape of the US Treasury yield curve. The current 2-10 year inversion of the curve to -80bp is exceptional and aptly reflects investors' views that recession is coming but the Fed will not be cutting rates anytime soon. On the subject of the Fed, the week ahead sees Federal Reserve Chair Jerome Powell speaking on Wednesday evening (hawks James Bullard and John Williams speak tonight also). Currently, we would pin Chair Powell to the hawkish end of the Fed spectrum and our colleague, James Knightley, thinks Chair Powell this week could push back against the recent (and perhaps premature in the Fed's mind) easing of financial conditions.  In addition to Fed-speak, the US data calendar picks up again this week, with readings on house prices, confidence, PCE inflation and Friday's release of the November jobs report. The more important data releases come on Thursday and Friday, where any uptick in the core PCE price data or strong job numbers could support potentially hawkish rhetoric from Chair Powell and send US yields and the dollar higher again. As we outlined in our 2023 FX Outlook, we just do not see conditions in place for a benign dollar bear trend - even though the buy-side is desperate to put money to work away from the dollar. Seasonally, the dollar is weak in December, but our call is that this year, the dollar can strengthen into year-end. We continue with the view that any weakness in DXY towards the 105.00 area this week (DXY now 106.18) will prove short-lived and favour a return to 108-110 into year-end. Chris Turner EUR: Waiting for the next inflation print The highlight of the eurozone data calendar this week will be November price data - released for Germany tomorrow and for the eurozone on Wednesday. The question is whether inflation will fall back from the highs (not far from 11% year-on-year) and allow the European Central Bank to potentially soften its hawkish rhetoric a little. Currently, the market prices a 62bp rate hike on 15 December.  EUR/USD is consolidating at higher levels - having been buoyed by the 20% recovery in European equity markets amidst declining energy prices. Equally, business confidence has been holding up a little better than expected. We cannot rule out EUR/USD trading back up to the 1.0480/1.0500 area again (though the reasons for that are far from obvious) but reiterate that the second half of the week could potentially push EUR/USD back to the 1.02 area. Chris Turner GBP: Settling down Three-month GBP/USD traded volatility prices are now under 12% having been near 19% in late September. Clearly, sterling trading conditions have settled down even as recession expectations solidify. Our view is that these GBP/USD gains will not last and we would not be surprised to see fresh selling interest emerging near the 200-day moving average at 1.2177 or at best the 50% retracement of the 2021-22 drop - at 1.2300.  The current inversion in yield curves around the world does, for a change, look to be a likely harbinger of recession. And with its large current account deficit, sterling should be expected to remain vulnerable. The UK data calendar is light this week, but there are a few Bank of England (BoE) speakers who may reiterate hawkish leanings. The market currently prices a 52bp BoE rate hike on 15 December. Chris Turner CEE: Hungary remains topic number one The Central and Eastern Europe (CEE) region will become more interesting in the second half of the week, while today and tomorrow will be more about global numbers. On Wednesday, Poland will see the release of inflation for November and a detailed breakdown of 3Q GDP, which positively surprised a couple of weeks ago in the flash estimate (0.9% quarter-on-quarter). Of course, given the pause in the central bank hiking cycle, the CPI print will get a lot of market attention. We expect an unchanged 17.9% YoY reading, more or less in line with market estimates. On Wednesday, we could hear something new from the European Commission (EC) on Hungary, progress with the rule-of-law and access to EU funds. Thursday will see the release of PMI indicators across the region. While we expect a rebound from the lows in Poland and the Czech Republic, we forecast a drop below the 50-point level in Hungary. Also on Thursday, the 3Q GDP breakdown will be published in Hungary, which was the only country in the region to surprise negatively in the flash reading (-0.4% QoQ). On Friday, the Czech Republic will also release the detail of 3Q GDP, which was -0.4% QoQ in the first estimate as the market expected.  In the FX market, conditions for the CEE region improved again last week. The dollar index touched new lows and sentiment improved again in Europe. On the other hand, local conditions remain negative. Interest rate differentials across the region have reached new lows again in recent days. This week, we see a chance for a reversal in the US dollar and a reality check inflation story at the global and regional level, resulting in negative pressure on the region. The European Commission decision will be a key market mover for the Hungarian forint. Although last week's news was mixed, we see it as rather positive. Thus, confirmation that Hungary no longer faces a permanent loss of EU funds should help the forint move back closer to 405 EUR/HUF. Inflation in Poland will be key for the zloty and the possibility for the market to reassess the priced-in cuts next year, which could add short-term support for the zloty. However, we see the zloty as the most vulnerable to the global story at the moment, so we remain bearish. Frantisek Taborsky Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Mexican Rate Spread: Tight vs. Central Bank's Rate Spread and Implications for Dis-inversion

A Bleak Outlook For The UK Economy Acts As A Tailwind For The EUR/GBP Cross

TeleTrade Comments TeleTrade Comments 29.11.2022 09:39
EUR/GBP lacks any firm intraday direction and remains confined in a narrow trading band. Talks for more aggressive rate hikes by the ECB underpin the Euro and lend some support. Traders look to the flash German CPI and BoE Governor Bailey’s speech for some impetus. The EUR/GBP cross struggles to capitalize on a two-day-old recovery move from the 0.8575-0.8570 support zone and oscillates in a narrow trading band on Tuesday. The cross, however, manages to hold above the 100-day SMA and trades around mid-0.8600s during the early European session. The downside for the EUR/GBP cross remains cushioned in the wake of more hawkish comments by European Central Bank (ECB) policymakers recently, which point to a series of interest rate hikes ahead. In fact, ECB President Christine Lagarde said on Monday that Eurozone inflation has not peaked yet. Adding to this, Dutch central bank chief Klaas Knot noted that the risk of doing too little is clearly more pronounced than doing too much. This, along with the emergence of fresh US Dollar selling, continues to underpin the shared currency and offers support to the cross. Adding to this, a bleak outlook for the UK economy contributes to the British Pound's underperformance and acts as a tailwind for the EUR/GBP cross. This, however, is offset by expectations that the Bank of England (BoE) will continue to raise borrowing costs to combat stubbornly high inflation. The mixed fundamental backdrop, in turn, is holding back traders from placing aggressive directional bets and capping the upside for the EUR/GBP cross. Market participants also seem reluctant ahead of the flash German CPI figures and BoE Governor Andrew Bailey's scheduled speech on Tuesday. From a technical perspective, repeated failures to find bearish acceptance below the 100 DMA warrants some caution for bearish traders. That said, the EUR/GBP pair's inability to gain any meaningful traction makes it prudent to wait for strong follow-through buying before confirming a near-term bottom and positioning for further gains.
German industry rebounds in January

Germany: Consumer price index shrank by 0.5%

Alex Kuptsikevich Alex Kuptsikevich 29.11.2022 16:25
Germany's consumer price index fell by 0.5% in November, slowing the year-on-year gain to 10.0%, according to the published Destatis preliminary estimate. The fall exceeded the expected 0.2% m/m decline and maintained the year-over-year rate at 10.4%. We previously pointed out that the October data was the peak of inflation in the eurozone. Fresh data from Germany strengthens this hypothesis. However, this reversal will draw more attention to the ECB's stance. Is this data a reason to lower the rate hike step? Recent comments from ECB members suggest that this is unlikely. Read next: Steen Jakobsen: ECB strategy is praying, hoping and waiting... not exactly action which gives hope for real economy| FXMAG.COM Central banks in the G7 are working to contain the unwinding of inflation. By starting too late, they have faced a rise in core inflation, excluding volatile and problematic food and energy, rising 21% and 38.4% y/y, respectively. In such circumstances, monetary policy at the central bank must remain restrained for an extended period. That means raising rates above neutral (around 2% in the eurozone) for an extended period. History has ample examples where policy easing too early led to repeated inflation shocks, which further strengthened consumer confidence in perpetually high inflation and changed consumer behaviour accordingly.
Decarbonizing Steel: Contrasting Coal-based and Hydrogen-based Production Methods

Forex Market: The Inflation Print Will Be Key For The Polish Zloty (PLN)

ING Economics ING Economics 30.11.2022 09:20
Fed Chair Jerome Powell will remind the market of the central bank's hawkish determination today, supporting the dollar. Meanwhile, softer inflation is trimming expectations in the eurozone. Polish inflation will test the central bank's decision not to raise rates. And the EC will publish a statement on Hungary and its rule-of-law progress In this article USD: Holding pattern EUR: Inflation plays second fiddle to Powell GBP: Lack of domestic drivers CEE: Polish inflation will test central bank dovish camp   Federal Reserve USD: Holding pattern Despite geopolitical challenges to the East, it has been a quiet start to the week for FX markets. The trade-weighted dollar index DXY is tracing out a relatively narrow range in the 105.30 to 108.00 area. The next clear catalyst on the agenda is a speech by Fed Chair Powell tonight at 1930CET discussing the economy and the labour market. This comes at a time when the buy-side report two of their top three tail risks as: i) inflation staying high and ii) central banks staying hawkish. (The third being geopolitics.) We would say that Chair Powell has recently shown to be at the more hawkish end of the spectrum and that tonight’s event risk is a positive one for the dollar. Dollar price action after Chair Powell’s speech should also tell us something about FX positioning. If the dollar fails to rally on a hawkish speech it may continue to tell us that the market is caught long dollars at higher levels and that some further consolidation may be due into December. For the time being, however, we think the macro environment continues to favour the dollar and see Powell’s speech, the October PCE price data (Thursday) and November jobs data (Friday) as upside risks to the dollar. Chris Turner EUR: Inflation plays second fiddle to Powell Spanish and German inflation came in lower than expected yesterday. The German CPI fell 0.5% to 10.0% in November, thanks primarily to the energy base effect and lower prices for leisure and entertainment following the autumn holiday period, while food prices continued to rise. Our economics team remains sceptical that this is the series' peak, and we expect inflation to accelerate again in December. Yesterday’s numbers mean that markets are expecting a lower reading in the eurozone-wide CPI today. However, some impact on European Central Bank rate expectations has already occurred, as markets have trimmed around 7bp from December pricing, which is now at 54bp. President Christine Lagarde is scheduled to speak at least twice more before the 15 December policy announcement, but she may not change markets' expectations of a 50bp hike. The impact of the inflation story on the EUR/USD has been, predictably, limited. External factors and dollar dynamics continue to drive the pair's performance, and we see downside risks today given that Fed Chair Powell is scheduled to speak later. A break below 1.0300 could fuel more bearish momentum, bringing EUR/USD back to the 1.0200/1.0250 levels seen earlier this week. This morning, Norges Bank will publish daily FX sales for the month of December. Higher-than-expected NOK sales in 3Q22 contributed to NOK weakness, but the Bank unexpectedly reduced them in November from NOK 4.3 billion to 3.7 billion. Any further reductions may support the currency today. Francesco Pesole GBP: Lack of domestic drivers Yesterday’s testimony by Bank of England Governor Andrew Bailey did not yield any market-moving headlines. Today we’ll hear from Chief Economist Huw Pill, who recently pushed back against a 75bp hike and may therefore keep BoE rate expectations in check. Cable to test 1.1800 as Powell’s speech may support the dollar today. Francesco Pesole CEE: Polish inflation will test central bank dovish camp Today's calendar offers November inflation in Poland, the first print in the CEE region. We expect inflation to be unchanged at 17.9% year-on-year, close to market expectations. However, as usual, the range of surveys is wide, and in addition, Polish inflation has by far posted the biggest surprise in the region over the past three months. Given the pause in the National Bank of Poland's hiking cycle, we can expect a lot of market attention. We will also see the second release of Poland's 3Q GDP, which surprised positively in the flash reading (0.0% vs 0.9% quarter-on-quarter) a few weeks ago. In Hungary, PPI for October will be published and later today the European Commission is expected to release a statement on the progress made in the rule of law dispute and Hungary's access to EU funds. The statement should have been published last week; however, the EC requested more time. Reports from journalists suggest that the EC will recommend freezing part of the cohesion funds with conditions to be met by Hungary but will also recommend approval of the Recovery Plan. Yesterday's reports also suggest that the Ecofin decision will be postponed from 6 December to 12 December, but Hungarian officials remain optimistic about the final decision. In the Czech Republic, the Czech National Bank will publish its semi-annual Financial Stability Report including possible changes to macroprudential tools. We do not expect significant changes to the current mortgage rules or capital requirements for the banking sector, but we will see a press conference later today, which should be attended by the governor, who has not been seen in public very often in recent months. In the FX market, the inflation print will be key for the Polish zloty, which could revive market expectations and support the zloty in the short term. However, unchanged inflation would leave the zloty under pressure from a stronger dollar, moving back above 4.70 per euro, in our view. The Hungarian forint should benefit from the normalisation of EU relations and the end of the risk of a permanent loss of EU money. This should help the forint below 405 per euro. Frantisek Taborsky Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Britain's Rishi Sunak And EU's Ursula Von Der Leyen Will Meet Today To Finalize The Northern Ireland Drama

EUR/GBP Cross Pair Is Likely To Remain The Latest Recovery

TeleTrade Comments TeleTrade Comments 30.11.2022 10:14
EUR/GBP teases confirmation of a bullish chart pattern, reverses the previous day’s losses. 200-SMA adds to the upside filters, 0.8570 restricts short-term downside. RSI, MACD suggests further upside momentum toward the monthly high. EUR/GBP picks up bids to reverse the previous day’s losses around 0.8650 during the initial European session on Wednesday. In doing so, the cross-currency pair extends Friday’s rebound from the lowest levels since September while poking the neckline of a short-term inverse head-and-shoulders (H&S) bullish chart formation. It’s worth observing that the upward-sloping RSI (14), not overbought, joins the bullish MACD signals to suggest a clear break of the 0.8660 hurdle. Following that, the 200-SMA level of 0.8685 could probe the advances toward the theoretical target surrounding the monthly high near 0.8830. On the contrary, pullback moves remain elusive unless staying beyond the latest swing low of 0.8607. Even so, the lows marked during late October and in the last week, around 0.8570, appear a tough nut to crack for the EUR/GBP bears. In a case where the pair remains weak past 0.8570, September’s bottom near 0.8565 may act as a buffer as sellers aim for the August 19 peak of 0.8511. Overall, EUR/GBP is likely to remain firmer and can extend the latest recovery as the inverse H&S formation joins upbeat oscillators, namely the RSI and MACD. EUR/GBP: Four-hour chart Trend: Further upside expected  
Italian headline inflation decelerates in January, courtesy of energy

Italy: Consumer headline inflation hits 11.8% year-on-year amounting to October print

ING Economics ING Economics 30.11.2022 13:16
Headline inflation in Italy stabilised in November, still very much driven by goods, with the energy component starting to reflect an improving base effect. Beware core inflation, though, as its persistence will likely slow down the decline in headline inflation over the first part of 2023 Consumer headline inflation came in at 11.8% year-on-year in November, unchanged from October, and in line with our forecasts. This results from a decline in the non-regulated energy component, of fresh food and transport services, and an acceleration of regulated energy goods, transformed food, other goods and recreational and cultural services. The wide gap between goods inflation (at 17.5% YoY) and services inflation (at 3.8% YoY) remains stable from October. The harmonised HICP measure was also stable at 12.5% YoY. Favourable base effects in energy, but the core measure continues to inch up We are at a time of the year when the base effect starts to be favourable. This was the case with aggregated energy goods, where inflation declined to 67.3% in November from 71.1% in October. However, this is not the case with underlying inflation, which accelerated to 5.7% (from 5.3% in October) signalling that the pass-through of past energy inflation pressures is not over yet. As wage dynamics have so far remained almost unaffected (1.2% YoY in September is the latest reading), risks of further gains in the core component over the next few months should not be dismissed. Peak possibly close, but pace of decline still uncertain Looking ahead, we suspect that the energy component might have reached its peak, but will remain exposed to the vagaries of administrative decisions. For instance, the current €0.30 rebate on fuels will be reduced to €0.18 from December, which will have an impact on the headline measure. More encouragingly, in October producer price inflation recorded a clear deceleration to 28% YoY from 41.7% in September, suggesting that price pressures in the pipeline started to finally cool down. November business surveys seem to confirm this, with the selling price component (over the next three months) declining both in manufacturing and services. This does not mean that the headline peak has now passed. We currently project inflation to remain at the current level into December, and to start a gradual decline thereafter as the deceleration in the energy component should outweigh the inertia in the core measure. For the time being, we are sticking with our average yearly inflation forecast at 8.2% in 2022 and 6.7% in 2023.   Read this article on THINK TagsItaly Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
FX: The Gap Versus The FX spot Rate In Poland Is Already The Largest In The CEE Region

FX: The Gap Versus The FX spot Rate In Poland Is Already The Largest In The CEE Region

ING Economics ING Economics 01.12.2022 10:02
The dollar is around 1% lower across the board after what was seen as a less hawkish speech from Fed Chair Powell softened US interest rates. A softening of China’s Covid policy is also helping emerging market currencies today. The relatively large adjustment in US rates and the dollar on Powell’s speech probably says a lot about positioning In this article USD: Overreaction? EUR: 1.05/1.06 is the risk for EUR/USD GBP: 1.22/1.23 for cable CEE: Hard to be positive on the zloty   Federal Reserve Chair Jerome Powell speaking at the Hutchins Center on Fiscal and Monetary Policy at the Brookings Institute, in Washington USD: Overreaction? The dollar came off sharply late yesterday on comments from Federal Reserve Chairman Jerome Powell which signalled that December would probably be the occasion to shift to a slower pace of rate hikes. The market has been expecting the shift to a 50bp versus 75bp rate hike for a while, although it felt the need to price the terminal rate next summer some 10bp lower at 4.90%. Indeed, US yields came off quite a sharp 20bp across the curve. We are tempted to say that looks an overreaction in that while Chair Powell did acknowledge the slowing in the pace of hikes, his core message was one of stubbornly high core inflation, particularly in the core services ex-housing category. This category is largely driven by wages and an area where the Fed struggles to see labour supply improving anytime soon. Inputs into this story will come today and tomorrow in the form of the October core PCE deflator and the November jobs report, respectively. On the former, consensus expects October core PCE to decelerate to 0.3% month-on-month from 0.5%. This basket is different from the national CPI basket, where the 0.3% MoM release on 11 November triggered a huge drop in the dollar and rally in risk assets. Any upside surprise in today’s core PCE reading could see the dollar reverse overnight losses. In the bigger picture, we continue to take the view that a trade-weighted measure like DXY can hold support levels around the 105 area (or at least will not sustain any break under it). One challenge, though, is the EM picture. If we are seeing a sea-change in China’s Covid stance – e.g., a shift to home quarantine from city lockdowns, EM currencies may be due a re-rating. On the day then, the core PCE inflation data is the biggest input, and we prefer DXY to find support near 105.00. Chris Turner EUR: 1.05/1.06 is the risk for EUR/USD EUR/USD weakness in late Europe yesterday looked a function of end-month portfolio rebalancing (European equities had vastly outperformed) and it is no surprise to now see EUR/USD well above 1.04 on the sharp drop in US yields. Resistance is clearly set at the 1.0480/1.0500 area, above which we could see a spike to the 1.0600/0620 area. That is not our preferred view, but thinning December markets and seasonal dollar weakness mean that such a scenario cannot be ruled out. Bigger picture, however, weak global demand (note Korea’s poor November export data overnight) is not a good story for the pro-cyclical euro. Additionally, colder weather coming to northern Europe is starting to push gas prices higher again and keep the eurozone trade balance under pressure. We would like to think that 1.05/1.06 is as good as it gets for EUR/USD in December. Elsewhere, look out for Swiss November CPI today. We have been bearish EUR/CHF on the view that the Swiss National Bank wants a stronger nominal Swiss franc to fight inflation. That view will be challenged, of course, should inflation surprise on the downside.  Please also see Francesco Pesole’s article on the Norwegian krone. Yesterday, Norway’s central bank announced it will trim daily FX purchases from NOK 3.7bn to 1.9bn, which sent NOK rallying across the board. As discussed in the article, we see the two consecutive cuts in FX purchases as an indication of higher appetite for a stronger krone, which would help combat inflation at a time when economic woes and property market fragility may curb the appetite for monetary tightening. Chris Turner GBP: 1.22/1.23 for cable The softer dollar environment is giving cable another lift. This rally could extend to the 1.22/23 area unless either today’s US core PCE data or tomorrow’s US jobs data can put a floor back under US yields. EUR/GBP continues to hold support near 0.86 and that may well be the case into year-end. Both the Bank of England (BoE) and the European Central Bank (ECB) should be hiking by 50bp in December. But we are taking the view that risk assets will come under more pressure over coming months – which will lead to renewed – if mild – sterling underperformance. Chris Turner   CEE: Hard to be positive on the zloty Today, we will see PMI numbers across the region. We expect a rebound from lows in Poland from 42.0 to 42.6 and in the Czech Republic from 41.7 to 42.7, following the trend in Germany. On the other hand, in Hungary we forecast a drop below the 50-point level. As in Poland yesterday, the GDP breakdown for the third quarter will be published today in Hungary, which was the only country in the region to surprise negatively in the flash reading (-0.4% quarter-on-quarter) a few weeks ago. Later today, the Czech Republic's state budget result for November will be published. Given the recent increase in the deficit for this year and the question marks over funding, the number will get more attention than usual. However, the start of pre-funding needs for next year through CZGBs switches in recent days indicates a better-than-expected MinFin situation. On the FX front, two main topics remain on the table in the region: the Polish zloty and the Hungarian forint. Yesterday's downside inflation surprise pushed down the interest rate differential in Poland by around 25bp, further widening the gap versus the FX spot rate, which is already the largest in the CEE region in our view. So, it is hard to be positive on the zloty, but for now, apart from any rally in the US dollar, we don't see a trigger for a correction. Until then, the zloty is likely to remain below 4.70 EUR/PLN. Meanwhile, the market seems to be running out of patience in Hungary and the normalisation of relations with the EU is not progressing as fast as expected. Although yesterday's news did not bring anything really new in our view, the forint returned to the 410 EUR/HUF range, which probably cleared the long positioning built up in recent weeks. Thus, in our view, it is still worth waiting for the final decision of the European Council in December and we expect the forint back to stronger levels. Frantisek Taborsky Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
The USD/CHF Pair Returned To Its Previous Three-Day Recovery

The SNB Has Quietly Accepted The Franc’s Depreciation

TeleTrade Comments TeleTrade Comments 01.12.2022 10:28
On the Swiss franc front, investors keep an eye on Consumer Price Index (CPI) data. As the SNB is set to continue fighting excessive inflation, the EUR/CHF is unlikely to trade above parity, economists at Commerzbank report. Swiss inflation stands at 3% “Swiss inflation stands at 3%, as inflation data for November due today is likely to confirm. That means that inflation exceeds the Swiss National Bank’s target. The Vice-President of the SNB Martin Schlegel has made clear that the SNB will not lean back and do nothing, but will instead continue to take action against excessive inflation levels.” “Even though the SNB has quietly accepted the Franc’s depreciation of just over 3.5% against the Euro since the end of September, the FX market can never be entirely sure when the SNB’s patience will run out while inflation remains well above its target. Hence, we assume that it will still take some time before EUR/CHF will seriously tackle parity.”  
EUR/USD Pair May Have A Potential For The Further Rally

Eurozone: Unemployment rate decreases to 6.5%. What may it mean for ECB

ING Economics ING Economics 01.12.2022 11:27
The unemployment rate dropped from 6.6% to 6.5% in October, showing that the labour market remains resilient despite the slowing economy. This will keep the European Central Bank on high alert in its fight against inflation Unemployment in the eurozone is at a record low Another upside surprise from the labour market. Despite an economy moving into recession, unemployment continues to trend down to new records. While German unemployment seems to have bottomed, southern Europe is still experiencing declining unemployment. Spain, Greece and Italy all saw the rate drop in October. The current rate of 6.5% is a new historic low since the series began in 1998 and is consistent with rising nominal wages. From here on, the labour market is set for a slowdown given our expectations of a winter recession. Surveys indeed suggest that the pace of hiring is slowing at the moment, which is set to come with a modest runup in unemployment. Given labour shortages, however, we don’t expect unemployment to increase much. Read next: Poland: Purchasing Managers' Index reached 43.4. The coming months will see a marked slowdown in industrial production growth says ING| FXMAG.COM When we hear ECB president Christine Lagarde say that a mild recession will not be enough to sustainably bring inflation down, this is likely a large part of the mechanism she is referring to. The question is whether that is the case when many supply-side factors are turning disinflationary – but that’s another matter. Expect the ECB to remain on high alert in its fight against inflation, although we do believe that it will opt for a slower pace of rate hikes in the coming months: we're expecting a 50 basis point rise for December. Read this article on THINK TagsGDP Eurozone Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
"A notable risk facing credit markets next year is the potential for the European Central Bank (ECB) to reduce the size of its balance sheet via the tapering of the asset purchase programme"

"A notable risk facing credit markets next year is the potential for the European Central Bank (ECB) to reduce the size of its balance sheet via the tapering of the asset purchase programme"

ING Economics ING Economics 01.12.2022 14:06
Tapering of the corporate sector purchase programme (CSPP) and the third covered bond purchase programme (CBPP3) is on the cards for 2023 and will likely be discussed at the ECB's December meeting. Naturally, this is a negative driver for credit, specifically the corporate credit and covered bond markets A notable risk facing credit markets next year is the potential for the European Central Bank (ECB) to reduce the size of its balance sheet via the tapering of the asset purchase programme (APP). This will have rather significant negative effects on the corporate bond and covered bond markets. Our economists expect the ECB to announce a gradual reduction of the reinvestments of its bond holdings under APP at the December meeting, with the aim of stopping the reinvestments by the end of 2023, as highlighted in the report: ECB minutes show tentatively growing recession concerns. This could potentially be in the form of: 1Q - 80% of reinvestments. 2Q - 60% of reinvestments. 3Q - 40% of reinvestments. 4Q - 20% of reinvestments. In addition, pandemic emergency purchase programme (PEPP) reinvestments are set to continue until the end of 2024 but it is possible that in the course of 2023, the ECB will announce a similar quantitative tightening for PEPP as well, starting in early 2024. An abrupt stop or actual bond selling of APP (or PEPP) are risk scenarios but are highly unlikely at this point in time. Corporate bonds and covered bonds will be worse off in the case of tapering If tapering were to happen, this would be a negative driver for corporate bonds, but with many other drivers in the market, it won't move the needle substantially. Covered bonds may be under more pressure from this tapering, as they are already seeing little positivity. Of course, in the case of quicker tapering or an earlier stop to the programme, the effect will be much more severe in both markets. Read next: Hungary: GDP declines by 0.4% in the third quarter. What's behind the drop?| FXMAG.COM The continuation of PEPP reinvestments means relatively little for corporates and covered bonds compared to public debt. CSPP accounts for around 11% of the total APP and CBPP3 accounts for 9%. Meanwhile, corporate bonds account for just 3% of PEPP and covered bonds account for less than half a percent of PEPP. Thus, with a tapering of APP, public debt will be more supported by PEPP, but private debt will see much less support and will subsequently underperform. Corporate bonds – another ingredient in the cocktail of negative drivers Tapering CSPP can be added to the list of risks and drivers of increased volatility in credit, alongside the recessionary environment, high inflation, the Russia/Ukraine war, the energy crisis and supply chain shortages. We foresee the following: The lower level of support will add to the turbulence and increase volatility, but will not necessarily move markets wider. Although this does add to the expectation of further turbulence and increased volatility. More pressure and spread widening in the case of a faster tapering or an abrupt stop as the market becomes more exposed, with a large participant no longer active at all (we see this as less likely). Based on current oversubscription levels, deals can still get done even with lower CSPP participation. Thus, primary market activity shouldn’t struggle to price, meaning less pressure on spread widening. An indirect implication may be supply indigestion, as many corporates may push to issue earlier in the year for a better chance of having the ECB involved in the deal (this may mostly be seen in January). This will add some extra volatility and perhaps underperformance. The tapering of CSPP would strengthen our call for financials over corporates. However, for 2023 we find the call between corporates and financials a hard one to make. For 2022 we saw more value in corporates due to the stronger technical, particularly driven by CSPP. For 2023, we have the following considerations: CSPP reinvestments offer more support for corporates but the tapering of reinvestments is on the cards for 2023. This may lead to some supply indigestion for corporates as many issuers may fund sooner (in the first quarter) if they pre-empt a tapering or stop to reinvestments. The net supply story is more positive for corporates with expected net negative supply, whilst financials will see almost €100bn in positive supply. The duration of non-financial corporate sectors is higher than for the financials, which is in line with our call that 2023 will see longer duration credit show additional relative value. However, looking at the trading ranges, we see that financials have underperformed and are trading at or even above our defined recessionary spread range. There is more value in financials currently. In general, higher interest rates are set to be good for bank earnings. Having said all that, it will be a close call between financials and corporates next year as it’s all about Alpha in 2023 and the external factors that will contribute to earnings sensitivity such as energy usage, supply chain risks, cyclicality, and even geography. Whether it's financial or corporate, doing the credit work and avoiding too much volatility in margins/earnings will drive performance. But with lower reinvestments, we see an additional positive driver for potential being titled towards financials for 2023. In the case of tapering in the potential form as stated above, the below chart illustrates how low reinvestments would be. Initially, reinvestments would pick up in 2023 and support with between €2-4bn per month. Now reinvestments will be notably lower between €1-2bn per month, offering very little support from August onwards.   Full and tapered CSPP reinvestments per month Source: ING, ECB In addition, as we have previously mentioned in our report Decarbonising Corporate Sector Purchase Programme credit: Our take, the ECB has just begun to incorporate climate change considerations into corporate bond purchases, via reinvestments. In the case of tapering reinvestments and an ultimate end to the programme, decarbonising becomes somewhat redundant. This is of course not good news for the environmental, social, and corporate governance (ESG) angle, but we expect ESG credit will outperform nonetheless, albeit perhaps to a lesser extent. Moreover, the effects of decarbonising and focussing on ESG have been rather limited so far. Both corporate ESG and covered bond ESG have not seen any outperformance this year, while the ineligible financials have seen ESG outperformance, particularly in the primary market. Thus relative to holdings, it suggests the ECB has not been a strong catalyst for ESG outperformance. Demand from investors seems to be the larger driver, as illustrated by the substantial inflows into ESG funds.  Covered bonds – a bearish view The scenario plotted here towards the end of the reinvestments of redemptions under the APP is faster than the one assumed in our Covered Bonds Outlook 2023. It means that CBPP3 reinvestments will fall from €36bn to €21bn instead of €28bn in 2023. Reinvestments of 80% in 1Q23 will represent just 26% of the €50bn eurozone-covered bond supply in the first quarter instead of 33%. On the assumption that the ECB reinvests 40% through the primary market and order books will be at least 1.5x, this would mean that primary order sizes from the CBPP3 will likely fall to 15% from 20% in the first quarter of the year. It will likely decline further to 10% in the second quarter and 5% towards year-end under our supply estimate for 2023. Covered bonds will be under more pressure in the case of faster tapering or an abrupt stop to reinvestments. A more rafpid tapering will likely not only have a negative impact on new issue premia against the backdrop of the anticipated heavy supply, but also limit the subsequent secondary performance potential of these transactions. This adds to our already bearish view on covered bonds, which we believe to be expensive in comparison to bank bond instruments further down the liability structure. A quicker-than-anticipated tapering increases the odds that spreads will widen more than anticipated in the first half of the year. We still believe, however, that the impact of tapering on sovereign and SSA spread levels will have the strongest impact on covered bond spreads, more so than the more moderate outright purchases of covered bonds by the CBPP3. Reinvestments by the CBPP3 will be €15bn lower under the 1Q-4Q 2023 tapering scenario Source: ING Read this article on THINK TagsECB Tapering ECB CSPP Credit CBPP Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Rates and Cycles: Central Banks' Strategies in Focus Amid Steepening Impulses

Soft US Data Helped US Yields Lower All Along The Curve

Saxo Bank Saxo Bank 01.12.2022 14:28
Summary:  Fed Chair Powell’s speech on the economy, inflation and the labor market yesterday only confirmed the market’s forward expectations for Fed policy. The lack of notable pushback from Powell on the market’s pricing of eventual Fed easing saw equity markets in a celebratory squeeze and the USD taken down a few notches as weak data prior to his speech added to the reaction and the drop in US treasury yields. But now that we have the binary reaction, cue the incoming data. Today's Saxo Market Call podcastToday's Market Quick Take from the Saxo Strategy TeamFX Trading focus: USD dumped on Fed Chair Powell speech, but cue the incoming data. Fed Chair Powell failed to deliver the kind of pushback against easy financial conditions that many had the right to expect in his speech yesterday, as the policy guidance was rather light in the speech. Most of the speech centered on a discussion of inflationary risks and where the Fed felt comfortable with the trajectory and outlook, and where it felt less certain, which was especially notable in the labor market/wage dynamics. The heart of the speech discussed the likely permanent reduction in the potential labor force due to older workers leaving the work force during the pandemic and the uncertainty of how quickly the wage pressures would ease. Near the end of the speech, Powell said “Given our progress in tightening policy, the timing of that moderation is far less significant than the questions of how much further we will need to raise rates to control inflation, and the length of time it will be necessary to hold policy at a restrictive level. It is likely that restoring price stability will require holding policy at a restrictive level for some time.” The lack of certainty and Powell suggesting it may be appropriate to reduce the size of Fed hikes to 50 basis points at the December FOMC meeting emboldened the market. The question is whether the very “binary” interpretation of his speech will feed a new extended sell-off in the US dollar, as incoming data could quickly reject the narrative. Soft US data added to the reaction function yesterday and helped US yields lower all along the curve, although this did not unfold until the market had a look at what the Fed Chair had to say. The November Chicago PMI plunged to a scary 37.2 (vs. 47 expected and 45.0 in October) and the November ADP private payrolls change were out at a 21-month low of +127k vs. the +200k expected. Today’s key event risk is the core month-on-month PCE inflation print, expected at +0.3% MoM and 5.0% year-on-year. Any upside surprise would sit very poorly with yesterday’s reaction, as would a stronger than expected November jobs and/or earnings data tomorrow. Chart: USDJPYUSDJPY plunged down through the 137.50 area recent pivot low yesterday in the wake of Fed Chair Powell’s speech as US yields dropped all along the curve, with the US 10-year benchmark yield hitting 3.60%, a new local low ahead of the important 3.50%. The 200-day moving average, currently near 134.50 and rising rapidly, is zooming into view and will be a key test that might be hard to break unless US yields continue lower, which will be far more down to incoming data in coming weeks. The pain trade across markets now will be either a) stronger than expected US data and/or b) more inflationary data regardless of the strength in the real economy (that would require the Fed to remain higher for longer and for the market to eventually reset forward inflation expectations). Also watch global energy prices, a second source of vulnerability for the JPY due to its import of nearly all energy supplies. Some BoJ member jaw-boning overnight on an eventual policy shift also helping the JPY at the margin. Source: Saxo Group Not a big focus for traders, but EURSEK is still up in the high part of the range despite what has normally been a supportive backdrop for SEK (the historic SEK sensitivity to risk sentiment). Why? Likely, as the market shields its eyes at the implications of the rate hike cycle into the Swedish domestic economy on the one hand. We recently saw that staggering 7.7% drop in real volumes of Retail Sales for October and the country’s consumers have yet to feel the brunt of higher mortgage payments as the impact on discretionary spending mounts in coming months (well over half of mortgages taken out in 2020-21 were on floating rates of a year or less). As well, European PMIs are weak and are unlikely to pick up significantly as long as energy prices remain an issue, with the Swedish economy traditionally leveraged to the EU economy. The Swedish November Manufacturing PMI was also out this morning and hit a new cycle low at 45.8. Table: FX Board of G10 and CNH trend evolution and strength.The US dollar down-trend re-intensified yesterday after Fed Chair Powell’s speech, with the USD breaking to new cycle lows in places, but will the incoming data continue to support both risk on and lower US yields, the ideal combination for USD bears? Elsewhere, note the NZD continuing its remarkable run while the JPY has perked up as a function of falling US treasury yields. Source: Bloomberg and Saxo Group Table: FX Board Trend Scoreboard for individual pairs.AUDNZD hits new cycle lows today as the market may be fretting RBA dragging its heels on rate tightening more than the supportive news out of China on the trend toward reopening. If there is a pair ripe for mean reversion on the one-month time frame or less, it might be NZDCAD, the trending outlier in absolute value terms. Source: Bloomberg and Saxo Group Upcoming Economic Calendar Highlights 1230 – US Nov. Challenger Job Cuts 1330 – US Oct. PCE Inflation 1330 – US Weekly Initial Jobless Claims 1420 – US Fed’s Logan (Voter 2023) to speak 1500 – US Nov. ISM Manufacturing 1645 – ECB Chief Economist Lane to speak   Source: https://www.home.saxo/content/articles/forex/fx-update-usd-bears-celebrate-lack-of-powell-pushback-01122022
Market Focus: US Rate Hikes, Eurozone Inflation, and UK Monetary Policy Uncertainty

There are quite strong indications that Fed and ECB will go for 50bp rate hikes

ING Economics ING Economics 01.12.2022 15:16
Fed Chair Powell has a clear ambition to hike by 50bp in December, and likely the same in February 2023, and maybe more. Given that, and a likely terminal funds rate of at least 5%, the drift lower in the US 10yr yield looks anomalous. Then again, year end can be like that. A move back above 4% still looks probable – it just might take a bit longer to achieve A hawkish hike (even if smaller) now needed to help re-tighten conditions If Chair Powell wanted to use yesterday’s speech to help re-tighten financial conditions, then he won’t be very happy with the impact market reaction. Market rates have fallen, credit spreads are tighter and effectively we’ve gone “risk on”. Financial conditions started out at about 0.6 of a standard deviation tight versus normal pre-Powell. They are now at closer to 0.5 of a standard deviation tight. We think it needs to be a full standard deviation tight, to be at least somewhat statistically meaningful. The reason we are not tighter is (mostly) lower market rates and tighter credit spreads. The US 10yr is now down to 3.7%, more than 50bp below the peak seen at end-October / early-November. Some 8bp of that has come in the wake of Chair Powell’s speech today. At 3.7%, the 10yr yield is some 130bp below the discounted terminal rate of 5%. That’s quite a spread. We think it’s far too wide. It’s telling us one of two things: (1) If the Fed hits 5%, then it’s not sustainable and a cut is coming really soon after that, or (2) The Fed will in fact not hit 5% at all, and they are done in December. The flip from 22 to 23 does not magically rid us of inflation risks Our view? We think the Fed does hit 5% (in February), and that the 10yr should be comfortably back above 4% in anticipation of that. This can happen soon, but could also morph into a turn of the year call, as we're now in this weird end of year swing where anything can happen. There can be some net buying going on as investors square books into year end, often buying back duration that had been shorted during the year. The first quarter of 2023 will bring the realization that the flip from 22 to 23 does not magically rid us of inflation risks that the Fed will feel emboldened to continue to address. Market rates are not fully reflecting this; but they will. Real Treasury yields are positive across the curve, the Fed will want to avoid an early drop Source: Refinitiv, ING EUR inflation solidifies expectations for a 50bp hike The eurozone flash CPI sees inflation having decelerated to 10% in November versus expectations of only a moderate slowing to 10.4% had surprisingly little effect on the market. Our economists also see this report having strengthened the case for a 50bp hike in December after the series of 75bp over the past meetings, but the market has been leaning to a slowed pace already in the wake of the first country readings at the start of the week, reducing the discount to only slightly more than 20% for still another larger 75bp hike after around 50% previously. The more relevant core measure of inflation remains at a painfully elevated 5% Yet away from the energy price-induced, headline-grabbing drop to 10%, the more relevant core measure of inflation has not budged and remains at a painfully elevated 5% year over year, in line with the consensus. The European Central Bank has rightly shifted the focus of the policy debate to underlying inflation and its persistence, being well aware that drops in the volatile headline can lead to false dawns. The bond rally has limited - but not reversed - ECB and Fed hike expectations Source: Refinitiv, ING   The ECB’s Isabel Schnabel has been the most vocal about still worrying underlying trends in her latest speech last week. Chief Economist Lane has employed a more measured tone in his latest expansive blog, though, warning not to read too much into current measures of underlying inflation. In particular he cautioned that the staggered adjustment of wages to the increase in the cost of living can play out over several years, but shouldn’t automatically signal a change in overall wage dynamics, i.e. the onset of a much feared wage-price spiral. The ECB should still have qualms about letting financial conditions ease too much, too early That the ECB isn’t done raising rates is clear. While it is widely accepted that the ECB will have to move into restrictive territory is also widely accepted, the latest inflation data has taken the edge off calls for more larger pre-emptive hiking. This also means that the tailwind for a further curve flattening dynamic is fading, but it should not distract from the prospect of rates possibly staying higher for longer. Similar to the Fed, the ECB should still have qualms about letting financial conditions ease too much, too early in its battle with inflation.   Today's events and market view US rates should remain in the driving seat given the busy data slate and the mixed signals that come from them. Yesterday's US GDP revisions for instance have pointed to a more resilient underlying demand, while last night’s Fed Beige Book hinted at slowing price pressures. Prices will remain in focus with today’s PCE deflator. That could be interesting as it is the Fed’s preferred inflation measure and does not always match what happens in core CPI. Today’s ISM manufacturing could drift just below the break-even 50 level, while the employment component, which markets will draw on ahead of tomorrow’s jobs data, is seen stable at 50. Even after Fed Chair Powell’s speech yesterday, some attention should still fall on Fed speakers in the final days ahead of the pre-meeting black out period. Today will see appearances of the Fed’s Logan, Bowman and Barr.   In secondary markets France and Spain will auction their final bonds for the year. Read this article on THINK TagsRates Daily Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Rates and Cycles: Central Banks' Strategies in Focus Amid Steepening Impulses

Weak US Data Took US Yields Lower All Along The Curve

Saxo Bank Saxo Bank 02.12.2022 08:52
Summary:  Risk sentiment fizzled after the strong from the prior day on Fed Chair Powell’s less hawkish than feared speech. That was despite softer than expected October PCE inflation data that helped US treasury yields trade to new local lows all along the curve. Today’s US November jobs report will carry a bit more weight for the treasury market, where yields have helped drag the US dollar to new lows.   What is our trading focus? Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) U.S. stocks fluctuated between modest gains and losses and finished the session nearly flat. Investors weighed the decline in bond yields from softer US data (see below). Eight of the eleven sectors within the S&P 500 were lower except for communication services, healthcare, and information technology which registered modest gains. Salesforce (CRM: xnys) dropped 8% after the enterprise software maker reported earnings miss, a weak outlook, and CEO resigning. Dollar General (DG:xnys) shed 7.5% on disappointing results and an outlook cut. Snowflake (SNOW:xnys) gained 7.8% on an earnings beat. Netflix (NFLX:xnas) gained 3.7% on news that the company is expanding a program to seek comments from preview audiences. Hong Kong’s Hang Seng (HISX2) and China’s CSI300 (03188:xhkg) Hang Seng Index and CSI300 Index consolidated and were modestly lower on Friday after the recent rally on signs of further easing of Covid restrictions in mainland China. Profit-taking selling weighed on Chinese property developers, with leading names dropping 4-5%. Online health platform stocks surged. Alibaba Health (00241:xhkg), JD Health (06618:xhkg), and Ping An Healthcare and Technology (01833:xhkg) gained 9-13%. USD lower still on falling treasury yields, fresh incoming data Weak US data, including a slightly softer than expected core PCE inflation reading and ISM Manufacturing survey, took US yields lower all along the curve and took the US dollar lower as well, with EURUSD trading above the psychologically key 1.0500 area this morning. The next important resistance there is perhaps the pandemic-outbreak low around 1.0636 or the 38.2% retracement of the entire sell-off from the 1.2350 top at 1.0611. The yield-sensitive USDJPY continued lower as well, nearly hitting the 135.00 level overnight after a chunky further drop yesterday and not far from its 200-day moving average at just above 134.50. An important test for US yields and the US dollar today with the November jobs data releases. Strong week for precious metals on Fed pivot speculation Gold rose above $1800 on Thursday supported by softer US data sending the dollar and yields lower, thereby underpinning speculation about a slower pace of future rate hikes. US 10-year real yields have fallen to a two-month low at 1.14% after hitting 1.82% in October while the Bloomberg Dollar Index has lost close to 8% during the past month alone. A break above resistance at $1808 may add further fuel to an ongoing sentiment change towards the metal but with ETF investors not yet engaging the importance of the dollar and yield developments remain key. Silver, supported by a firmer industrial metal sector, trades above $22.25 with the next level of interest being $23.36. Focus today on the US job report given its potential impact on the dollar and yields. Crude oil (CLF3 & LCOF3) trades up on the week Crude oil is heading for its best week in two months following another roller coaster week that saw Brent test support at $80 before finding resistance at $90. From an early lockdown scare in China on Monday, the sentiment improved ahead of Sunday’s OPEC+ meeting and the beginning of an EU embargo on Russian seaborne oil from Monday. Additional support was provided by a weaker dollar, China softened its virus approach and Washington calling for halt to further sales from its Strategic Petroleum Reserves. Ahead of the OPEC+ meeting a Bloomberg survey found that OPEC, led by the four major Gulf producers cut production by 1 million barrels a day last month. We expect the online meeting is likely to be strong on words but low on actions. Focus on today’s US job report given its potential impact on the dollar. US treasury yields edge lower still on weak US data. (TLT:xnas, IEF:xnas, SHY:xnas) The weak US data (see below) took US treasury yields lower all along the curve, with the 10-year benchmark within a basis point of the important 3.50% area yesterday. That level was a major pivot high posted around the time frame of the June FOMC meeting. But the weak data has not seen much steepening in the US yield curve, even if 2-year yields dropped to new lows cine early October yesterday near 4.25% as the market prices in a slightly lower Fed cycle peak next year (currently 4.87% peak priced) and steeper pace of cuts by late 2023 and especially into 2024. The US November jobs report later today offers an important test for the treasury market as the 10-year has hit this pivotal level. What is going on? Weaker US data continues to take the air out of US yields The October PCE inflation data came in softer than expected for the core month-on-month reading at +0.2% vs. +0.3% expected, while the year-on-year level of 5.0% was expected. Another soft data point was the November ISM Manufacturing survey which came in at 49.0 vs. 49.7 expected and suggesting modest contraction in US manufacturing activity for the first time since the pandemic outbreak months. The New Orders component of that survey dropped to 47.2, Prices Paid plunged further to 43.0 and Employment nudged lower to 48.4. Sterling boost yesterday on hopes for Northern Ireland deal EU Commission president Ursula von der Leyen said that Britain and the EU said that the latest talks with UK Prime Minister Rishi Sunak were “encouraging” and that she is “very confident” a solution is possible if the UK government is on board, with Sunak seen as motivated to iron out a deal with a more pragmatic approach to the issue than former Prime Ministers Boris Johnson and Liz Truss. EURGBP briefly touched a multi-month low yesterday below 0.8560 and traded within 10 pips of the the 200-day moving average before rebounding overnight. Blackstone limits withdrawals from large property fund The company said it would limit how much the wealthy individual investors in its $69 billion real estate fund can withdraw funds to 2% of the net asset value of the fund monthly and 5% quarterly. Real estate is a notoriously illiquid asset. What are we watching next? US November Jobs report on tap The November jobs data is up today, theoretically expected to show payrolls growth of +200k, but with the market perhaps leaning a bit lower after the softest ADP private payrolls growth number in more than 20 months. The Unemployment Rate is seen steady at 3.7%, and Average Hourly Earnings are anticipated to rise +0.3% month-on-month and +4.6% year-on-year after the October data point at 4.7% YoY was the lowest year-on-year reading in just over a year. The Atlanta Fed’s median wage tracker, meanwhile, has shown entirely different levels of earnings growth, with +6.4% in October and 6.7% in both of the prior two months. Earnings to watch Earnings next week are a mish-mash of companies, and include high-end homebuilder Toll Brothers on Tuesday, as it will be interesting to hear their outlook on the new home market after the enormous surge in US mortgage rates and collapse in home sales activity. Broadcom (AVGO: xnas) is the market cap giant of the week to report, with the CEO of the company having said that the semiconductor market will not be affected by the US’ new export restrictions on technology to China. Tuesday:  MongoDB, AutoZone, Toll Brothers, Ferguson Wednesday: Brown Forman, Campbell Soup, GameStop Thursday: Broadcom, Costco, Lululemon, Chewy Friday: Oracle Corp, Li Auto Economic calendar highlights for today (times GMT) 1330 – Canada Nov. Employment Change / Unemployment Rate 1330 – US Nov. Change in Nonfarm Payrolls 1330 – US Nov. Unemployment Rate 1330 – US Nov. Average Hourly Earnings 1415 – US Fed’s Barkin (non-voter) to speak 1900 – Us Fed’s Evans (voter 2023) to speak Follow SaxoStrats on the daily Saxo Markets Call on your favorite podcast app: Apple  Spotify PodBean Sticher Source: https://www.home.saxo/content/articles/macro/market-quick-take-dec-2-202-02122022
Hungary's Central Bank to Maintain Base Rate at 13%, Eyes on Effective Rate Amid Forint's Performance

The EUR/GBP Pair Will Be Corrected Downwards For A Moment

InstaForex Analysis InstaForex Analysis 06.12.2022 08:16
With the emergence of deviation in the price movements of the EUR/GBP cross currency pair with the CCI indicator and the formation of the Bullish 123 pattern followed by the appearance of Ross Hook (RH) on the 4-hour chart, practically EUR/GBP has the potential to appreciate upwards to the 0.8634 level as a target. especially and if the momentum and volatility are sufficiently supportive, it is possible that the 0.8675 level will be the next target to be tested but before that happens it seems that EUR/GBP will be corrected downwards for a moment where the level to be tested is the Bullish Fair Value Gap area and/or or the Bullish Orderblock level is at the 0.8579 level but if the correction to fall below it still continues to break below the 0.8569 level then it is very likely that the Bull scenario described earlier will cancel and become invalid by itself. Relevance up to 04:00 2022-12-07 UTC+1 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/115199
The EUR/JPY Pair Is Expected To Start A New Zig-Zag Correction

Analysis Of The Euro To Japanese Yen Pair (EUR/JPY)

InstaForex Analysis InstaForex Analysis 06.12.2022 08:34
EUR/JPY has now broken nicely below the ending diagonal support line calling for a continuation lower to the origin of the ending diagonal at 132.66. Short-term we expect a re-test of the broken support line near 142.57. The former support line should now act as resistance. Once the temporary setback is complete, renewed downside pressure will push the price towards the 132.66 target. On the way down to 132.66, support is seen near 138.46 and 134.89. Relevance up to 07:00 2022-12-07 UTC+1 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/303817
The US Dollar Index Is Producing A Reasonable Bullish Divergence

Saudi Arabia And Hong Kong End Their Currency Pegs To The USD

Saxo Bank Saxo Bank 06.12.2022 09:28
Summary:  Recognising the ongoing weaponisation of the USD by the US government, non-US allied countries move to leave the USD and the IMF to create an international clearing union (ICU) and a new reserve asset, the Bancor (currency code KEY), using Keynes’ original idea from the pre-Bretton Woods days to thumb its nose at the practices of the US in leveraging its power over the international monetary system. While less than a fifth of international trade is destined for the US, over a third of international trade is invoiced in USD and nearly 60 percent of global foreign exchange reserves are USD. The ban on transactions with Russian sovereign entities in February 2022 after Russia’s invasion of Ukraine sent shockwaves across countries not allied militarily with the US as the magnitude of the ban far exceeded sanctions on Iran, Venezuela and other countries in recent decades. These countries wonder whether their US assets—and even EUR, JPY and GBP assets—could be subjected to freeze orders imposed by the US Treasury and other US allies overnight.   Many have speculated that the Chinese renminbi might become the new reserve currency, but China has shown no interest in abandoning cross-border capital controls. Another important aspect hampering the use of CNH in trade is that many non-US allies are wary of China’s rise in influence and power.   Rather, a natural solution for China and its many trading partners, particularly energy and other commodities exporters, would be to find a new non-national currency reserve asset upon which to trade. They find inspiration in British economist John Maynard Keynes’ playbook for reconstructing a post-World War II international monetary system without a hegemon. In an epochal conference convened in Astana, Kazakhstan, leaders from OPEC+ countries, mainland China, Hong Kong, India, Brazil, Pakistan, Central Asia countries, and tens of African Union countries gather to establish an ICU based on a new accounting unit and reserve asset: the Bancor (currency code KEY). The KEY can only be held by member central banks and is used as an accounting unit to settle international trades and as a reserve asset. The new KEY is indexed to a basket of traded commodities with crude oil having the largest weight. The currencies of member countries are backed by the KEY at fixed exchange rates and are adjusted according to relative current account shifts among member countries. All the ICU member countries of the newly created monetary union withdraw from the IMF. Saudi Arabia and Hong Kong end their currency pegs to the USD.  Market impact: Non-aligned central banks vastly cut their USD reserves, US Treasury yields soar and the USD falls 25 percent versus a basket of currencies trading with the new KEY asset.    Source: OPEC+ and Chindia walk out of the IMF - Saxo Outrageous Prediction | Saxo Group (home.saxo)
FX: The SNB Is Getting Its Stronger Swiss Franc Via Gains Against The Dollar

The Swiss Franc Has Been One Of The Strongest Currencies

InstaForex Analysis InstaForex Analysis 07.12.2022 08:22
The Swiss Franc has been one of the strongest currencies over the last one and a half years, but that seems to be over. A firm bottom is in place at 0.9403 and a rally back to the 2013 high at 1.2650 is in progress. Short-term we would like to see a break above minor resistance at 0.9885, which will open the way for a rally towards the trendline resistance near 1.0531. This resistance line is likely to reject the first attempt to break above it, but the second attempt should prove successful and will call for more upside towards the long-term target near 1.2650.   Relevance up to 06:00 2022-12-08 UTC+1 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/303969
WTI Oil Shows Signs of Short-Term Uptrend Amid Medium-Term Uptrend Phase

FX: Financial Markets Now Seem To Be Settling Into The View Of A 2023 Recession

ING Economics ING Economics 07.12.2022 11:23
After the broad-based risk rally seen over the last six weeks, financial markets now seem to be settling into the view of a 2023 recession. And as long as the Federal Reserve stays hawkish, the dollar should perform well. For today, look out for policy rate meetings in Canada and Poland, where we expect a 50bp hike and unchanged rates respectively USD: Recessionary fears should keep the dollar in demand After a positioning-led rally in risk assets over the last six weeks, financial markets seem to be settling back into a macro-led environment where the 2023 global slowdown is front and centre. Brent crude is dipping sub $80/bbl despite the OPEC+ supply cut, bonds are rallying and equities are starting to hand back some of their impressive rally from October lows. Importantly, the US yield curve continues to deeply invert. The 2-10 year Treasury curve is now inverted by a staggering 82bp. This is by far the best representation of the macro view that recessionary fears are building, yet the Fed has yet to cave in. We continue to see this as a positive environment for the dollar and a negative one for commodity and pro-cyclical currencies. DXY has found support under 105 and could well make a run to 107 ahead of next week's FOMC meeting, where we think it is too early for the Fed to signal the 'all-clear' on inflation with its influential Dot Plots. The main threat to our bullish dollar view comes from the risk of any softer US November price data (PPI released tomorrow, CPI next Tuesday) or a more positive re-assessment of Chinese growth prospects on the back of relaxed Covid measures. However, poor Chinese trade data released overnight serves as a reminder that the export environment will remain exceptionally challenging for China into 2023.   Chris Turner The Bank of Canada (BoC) will announce monetary policy today. As discussed in our meeting preview, the consensus is split between a 25bp and 50bp hike, but we believe a half-point move looks more appropriate given strong economic activity and a very tight labour market. Still, we admit it is a very close call given that the expected economic slowdown and fragility of the Canadian housing market argue for a smaller rate increase. Markets are pricing in 35bp for this meeting, so slightly leaning in favour of a quarter-point hike: in our base-case 50bp scenario, the Canadian dollar should rally on the back of the hawkish surprise. However, we don’t see the BoC impact on CAD to be very long-lasting, as external factors remain more important. A sustained recovery in CAD from these levels undoubtedly requires a rebound or at least a stabilisation in oil prices. Today, USD/CAD could trade back below 1.3600, but short-term upside risks remain high.  Francesco Pesole EUR: Sideshow It has felt like EUR/USD trading has become more settled over the last week, yet one week and one month realised EUR/USD volatility are still above 13%. This could be a precursor to one of the main themes we outlined in our 2023 FX Outlook, one of less trend and more volatility in FX markets.  There is a case that last week's 1.0595 print was the corrective high in EUR/USD - we should know a lot more by next Wednesday evening after the FOMC meeting - and it will be interesting to see what the European Central Bank has to say on the 15th. Some are speculating that the current calm in European bond markets could prompt the ECB to be slightly more aggressive in its quantitative tightening plans - so let's see. We have a couple of ECB speakers today, Philip Lane at 0810CET, and Fabio Panetta at 1530CET, but neither looks likely to knock the market off its consensus of a 50bp hike next week. For today, EUR/USD could drift down to 1.0400 in quiet markets. Chris Turner GBP: Mildly bearish Trading conditions have certainly settled down for sterling where one-month traded volatility is pretty steady in the 12-13% area having traded above 20% in late September. It looks like the Gilt market has rallied enough for the time being, with spreads to German Bunds now starting to widen again. In other words, the fiscal rectitude rally has run its course and sterling will not find any more positives here. If, as above, we are turning to a more macro-led trading environment, then sterling should underperform. A Fed staying hawkish into a recession should see equity markets come under renewed pressure. Typically, this is a negative environment for sterling, where the UK's large current account deficit is penalised. GBP/USD has turned from a strong resistance level at 1.23 and our bias into next week would be for a return to the 1.19 area. Chris Turner CEE: NBP closing the tightening cycle Top of today's agenda is the monetary policy meeting of the National Bank of Poland (NBP). After last week's surprisingly low inflation, it is hard to expect any outcome other than stable interest rates. Although we think the peak in inflation is still ahead and inflation will slow only very gradually next year, the prospect of a weak economic performance will prevail at the MPC and we expect the same story next year. However, for now, the bigger focus will be on tomorrow's press conference by Governor Adam Glapinski and any potential mention of interest rate cuts, which could be a red rag to a bull for the markets. As we mentioned on Monday, the gap between the zloty and the interest rate differential is the largest in the region at the moment and together with EUR/USD heading lower, this is not good news for FX. EUR/PLN is thus vulnerable, especially to the upside in our view and we could see a move above the 4.720 level which was already tested on Monday. On the EU/Hungary story, as expected yesterday's Ecofin meeting did not bring a resolution to the current saga. The Ecofin was due to discuss both the recovery funds to Hungary and the European Commission's proposal for sanctions under the rule of law mechanism. EU member states have requested a new assessment of Hungary from the EC given that the original version did not include the latest changes on the Hungarian side. According to reports, the new assessment is expected to be discussed at an additional Ecofin meeting on 12 December and formally approved on 19 December. On the one hand, the EU's timing problems play into Hungary's hands, as the rule-of-law procedure will end without sanctions if the European Council does not decide on the issue; on the other, the EU may block the disbursement of cohesion funds after that date. However, after yesterday, it seems that the situation will be tense until almost the final day of the year. On the FX side, the Hungarian forint touched its weakest levels since mid-November yesterday, but the currency erased some of its losses after the Czech finance minister, who is leading the current negotiations, said he believes a deal will be reached in the coming days. Thus, positioning continues to clear and in our view, the trend is tilting more towards the negative side of this story now. Hence, tangible progress should bring a significant rally, while further negative news may result in only slight weakening. Nevertheless, for today we expect a partial calming of the situation after yesterday's headline storm and we expect the forint closer to 410 EUR/HUF. Frantisek Taborsky Read this article on THINK Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
The EUR/AUD Pair May Have The Potential To Continue Its Decline

FX: EUR/USD Remains Reasonably Supported, The Forint Has Stabilised Around 410 EUR/HUF

ING Economics ING Economics 08.12.2022 09:12
December is normally a weak month for the dollar, having declined this month in eight of the last ten years. Market sentiment still feels slightly negative on the dollar, where it falls far more easily than it rises. We cannot see an immediate catalyst for another dollar decline today and would expect more consolidation ahead of event risks next week USD: Holding pattern As above, December is normally a weak month for the dollar. January and February are typically much better months. Thus for dollar bulls like ourselves, December is proving a month of damage limitation. Dollar price action is still soft. Any whiff of softer price data - e.g. yesterday's downward revision to US 3Q unit labour cost data - sees the dollar easily slip. Dollar gains remain hard to come by. Beyond today's US initial claims (remaining remarkably low in the 220-240,000 region) will be November PPI data tomorrow (core expected to fall to 5.9% year-on-year from 6.7%) and then an incredibly busy week into Tuesday's CPI release and Wednesday's FOMC meeting. Preventing an even large dollar correction this month is the fact that Fed expectations have not yet crumbled. The terminal rate is still priced above 4.90% for next spring and this is just about keeping US two-year Treasury yields above the 4.25% area. Short-end yields holding up here and the ongoing inversion of the US curve is key to our call that the dollar can hold gains/bounce back into 1Q23. Clearly, next week's FOMC meeting will have a big say here - we will publish our FOMC preview shortly. DXY looks like it will continue to trade on a soft footing near 105.00, but should meet demand below there. Chris Turner  EUR: ECB focus moves onto QT EUR/USD remains reasonably supported near 1.05 - helped largely by the dollar's soft performance across the board. We may be reading too much into it, but the pricing through the OIS market for next week's European Central Bank rate meeting yesterday edged up to a 67bp hike from 54bp a day earlier. The move may be a function of some more hawkish remarks from ECB Chief Economist Philip Lane and seems to be putting the risk of a 75bp hike back on the agenda. Our house call is for 50bp. Our base case view assumes that this EUR/USD corrective rally stalls in the 1.05/1.06 area this month. The bigger risk of a rally probably comes more from a less hawkish Fed than a more hawkish ECB. Equally, we do see European gas prices edging higher again as a cold snap hits northern Europe. TTF natural gas prices are now back up to EUR150/MWH from 100 earlier this month. This will again pressure the trade balance and higher gas prices are one of the key reasons we are not more bullish on EUR/USD next year. Expect another narrow EUR/USD range today centered around 1.05. The data calendar is quite light and ECB speakers are President Christine Lagarde at 1300CET, Pablo De Cos at 1315CET and Francois Villeroy at 17CET - all seen on the dovish end of the spectrum. Elsewhere, we have the Swiss National Bank's (SNB's) Andrea Maechler speaking at 1530CET. In addition to Fed, ECB and Bank of England rate meetings next week we also have the quarterly SNB policy decision. It looks like market pricing is split between a 25bp and 50bp hike (taking rates to 0.75-1.00%). Let's see what she has to say today. EUR/CHF has been a bit stronger than we had expected, but assuming the SNB stays hawkish, we continue to see downside risks here. Chris Turner  GBP: Housing downturn starting to gain momentum The latest RICS survey on house price expectations shows respondents the most negative on the outlook for UK house prices since May 2020. That is not a surprise given the cost of living crisis and policymakers in the process of tightening, not loosening, fiscal and monetary conditions. Despite seasonal weakness in the dollar, we really struggle to see GBP/USD trading much higher and for those corporates with USD needs or GBP receivables, we see these 1.22/23 levels as perhaps the best GBP/USD levels for the next three to six months. Chris Turner CEE: Zloty will follow the NBP press conference As expected, the National Bank of Poland left rates unchanged at 6.75% yesterday. This is the third meeting in a row when the council did not raise rates. The post-meeting statement did not bring much new. The council's assessment remained unchanged compared to November and given that, as in November, the decision was announced after the close of trading, we have to wait for the market reaction. However, the main event, Governor Adam Glapinski's press conference, will come later today and we can expect another dovish outcome. In Hungary, we will see inflation for November today. We expect the headline number to exceed 22% and core inflation at 23% YoY, slightly above market expectations. We see food prices rising further as domestic producer prices are skyrocketing in the food industry (close to 50% YoY). Still, the strengthening of the forint may ease some pressure on imported inflation, and as aggregate demand retreats, inflation in services could also slow down. On the FX side, the forint has stabilised around 410 EUR/HUF after a barrage of EU headlines in recent days and we expect it to stay there until next week when we should hear new headlines from Brussels. The Polish zloty will be tracking the NBP governor's press conference and thus will hardly see reasons to strengthen. On the other hand, we expect the zloty to retest 4.72 EUR/PLN. The Czech koruna strengthened yesterday to its strongest levels since mid-November, probably in response to the Czech National Bank's confirmation of zero activity in the FX market in October and the erasing of the last hopes for the central bank's exit from this regime, and can be expected to remain in this range of 24.25-35 EUR/CZK. Frantisek Taborsky Read this article on THINK Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
The EUR/USD Price May Fall Under 1.0660

Euro Credit Supply: "We don’t expect much more supply to come in December, as primary markets have already began to close"

ING Economics ING Economics 08.12.2022 13:48
Rates stability and spread tightening opened a decent issuance window. As a result, corporate supply increased up to €30bn, supply is now at €255bn on a YTD basis. Financials saw €42bn in November, which is the highest figure of this year.   Corporate supply now sitting at €255bn YTD Corporate supply amounted to €30bn in November, a €7bn increase on September’s figure. Rates stability and spread tightening offered a decent window for issuers to hit the market Supply is now at €255bn on a YTD basis, higher than previously anticipated. We don’t expect much more supply to come in December, as primary markets have already began to close. TMT and Autos issued the most in November, at €8bn and €7bn respectively. On a YTD basis, Utilities have supplied the most this year, totalling €57bn and up marginally from last year. Most other sectors are down compared to last year, but none more than Real Estate - falling from €59bn to €24bn. In 2023, we expect lower Real Estate supply again, as well as lower Oil & Gas supply. All other sectors should see a small increase next year as we expect a small increase in supply overall in 2023. We are forecasting a 10% increase, totalling €275bn. This is still well below the historical average. Redemptions are up in 2023, pencilled in at €246bn, the highest year on record. Corporate hybrid supply amounted to €2bn in November, pushing YTD supply up to €12bn, down 68% on last year’s €36bn. We forecast just €15bn for corporate hybrids next year. We expect rather low supply due to the massive change in the arithmetic for the attraction of hybrid capital. Naturgy, Engie and Heimstaden have shown that calls or tenders can be done with no effect on supply, so calls due in the next 18 months becomes a less effective input. We expect all-in funding levels to drop in 2023 and as such that could add some refinancing opportunities. We estimate supply at just €15bn. Substantial financial supply in November leads to €280bn YTD supply Financials supply amounted to €42bn in November, the highest figure of this year. Banks senior supply accounted for €30bn of last month’s supply. Bank capital supply was €7bn. Financial supply is now at €280bn YTD, still notably ahead of previous years. Bank senior has supplied €194bn on this, up 34% YoY. Bank capital is at €27bn YTD, behind last year’s €39bn. Financial services and insurance supply are also down relative to last year at €38bn and €20bn respectively. Read this article on THINK Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
US Stocks Extend Rally Amid Optimism Over Fed's Monetary Policy

FX: EUR/USD Will Struggle To Trade Sustainably, Price Action In G10 Currencies Has Been Quite Mixed

ING Economics ING Economics 09.12.2022 08:52
The US dollar is still battling December seasonality, which is leading it to weaker levels. However, the market will mainly focus on next week rather than going in one direction. The European Commission may release a new assessment of Hungary USD: Still fighting seasonal trends Global risk sentiment recovered yesterday after a few grim sessions for global equities, and the dollar faced some broad-based depreciation. As highlighted in our recent FX commentaries, the dollar tends to be seasonally weak in December, so this is a month of damage limitation for dollar bulls like ourselves. Price action in G10 currencies has been quite mixed, with the best performers being AUD, CHF and CAD yesterday. Among the pro-cyclical currencies, we continue to think that CAD has a better chance of outperforming next year thanks to limited exposure to China and Europe’s economic woes while being positively correlated to a rise in energy prices, which is our commodity team’s baseline scenario. The US calendar includes PPI and University of Michigan survey numbers today. With markets being focused on various gauges of inflation, expect dollar sensitivity to these data releases. The dollar could stabilise around current levels as markets gear up for the last week of action (Fed, ECB and BoE meetings) of 2022. DXY may stay around 104.50/105.00 today. Francesco Pesole EUR: Rally above 1.06 would be premature Markets are pricing in around 55bp of tightening ahead of the ECB meeting next week, and with no more speakers before the rate announcement and no key data releases except for the ZEW surveys on Tuesday, we doubt that rate expectations will move much in the coming days. Our base case is still that EUR/USD will struggle to trade sustainably above 1.0600, and is mostly facing downside risks into year-end as the dollar could regain some ground on global risk uncertainty and rebounding energy prices. Francesco Pesole GBP: Keeping an eye on key technical levels The only release to highlight in the UK calendar today is the Bank of England’s inflation attitude survey. Still, markets appear to have cemented their expectations around a 50bp rate hike by the BoE next week, and this may not change drastically before the policy announcement. GBP/USD could hover around 1.22 today, but risks are tilted to the 1.2126 200-day Moving Average being tested soon, in our view. EUR/GBP is trading around the 0.8630 100-day MA, and while we have less of a clear directional call on this pair in the short term, we see upside risks in the longer run. Francesco Pesole CEE: European commission may issue new assessment on Hungary Another tough week in the CEE region is behind us, but Friday has a lot to offer. Apart from the global story, we will be watching the market reaction to yesterday's National Bank of Poland press conference, which was not as dovish as expected. Governor Glapinsky said that the end of the hiking cycle has not yet been decided. On the other hand, he also mentioned falling inflation and a return to single digits numbers. That said, we believe the cycle has been closed and we do expect higher inflation than the central bank. Today the economic calendar is thin in the region, but we may hear more headlines from the European Commission regarding Hungary. An updated European Commission assessment could be released today, which should take into account the newly passed laws on the Hungarian side and thus be more in line with EU requirements. This follows the Commission's follow-up to Tuesday's Ecofin meeting and the member countries that made the request. The outcome of the assessment should be positive for Hungary and for the markets, but there've been plenty of surprises so far in this story.  Frantisek Taborsky Read this article on THINK Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Serious liquidity crisis? According to Franklin Templeton, a massive, but unlikely deposit flight from Credit Suisse would have to happen

The SNB Stays Hawkish And Wants To Keep The Real CHF Stable

ING Economics ING Economics 09.12.2022 14:02
The Swiss National Bank (SNB) meets on 15 December and is expected to decide on a third rate hike, this time probably by 50bp, in the context of a stabilisation of inflation at 3%. A further rate increase could then take place in March 2023, after which rates are likely to remain unchanged. We forecast further nominal CHF appreciation in the first half of 2023 New tightening to come After years of fighting deflation with a very accommodating monetary policy, including interventions in the foreign exchange market to weaken the Swiss franc and the lowest policy interest rate in the world, the SNB began a normalisation of monetary policy in June 2022 to fight inflation. After a 50bp increase in June and a 75bp increase in September, the Swiss policy rate returned to positive territory at 0.5%. In November, inflation in Switzerland stabilised at 3%, down from the August peak of 3.5%. Inflation is therefore still above the SNB's target of between 0-2%, but well below that of neighbouring countries, thanks to a more favourable energy mix, a lower share of energy in consumption and the strength of the Swiss franc, which limits imported inflation. At its December meeting, the SNB is expected to acknowledge that Swiss inflation has probably passed its peak and that the deceleration observed since the summer is a good thing. It will provide new inflation forecasts, with a likely downward revision for 2022 (it was expecting 3.0% on average for the year at its September meeting, but 2.8% now seems more likely). At the same time, it will probably also warn against celebrating victory too soon and insist that inflation is still well above its target and that second-round risks remain significant. As a result, we expect the SNB to raise its policy rate by 50bp at the December meeting, leading to a total rate increase over the year 2022 of 175bp in Switzerland, against probably 250bp in the eurozone and 425bp in the US over the same period. Going forward, we expect price growth to decelerate gradually but slowly, remaining above target for the first half of the year, before falling back below 2% by the end of 2023. We expect the SNB to make a final 50bp hike at its March 2023 meeting, bringing the rate to 1.5% and leaving it there for an extended period. FX: Does the SNB still want a firmer Swiss franc? EUR/CHF goes into the December SNB meeting not far from second-half highs at 0.9900/9950. Recent trading ranges have been relatively subdued after the volatility seen throughout the summer. Interestingly the FX options market seems to be taking a keen interest in the upcoming meeting, where traded volatility for the 15 December event risk has picked up. The FX options market now prices 0.75% moves for EUR/CHF and USD/CHF on the day itself. While the SNB will say that it does not target the exchange rate, earlier this year it had been happy to announce it had backed nominal appreciation in the Swiss franc. And a core piece of communication during this second half has been that the SNB is prepared to intervene on both sides of the market. Historically it had only been happy to sell the Swiss franc as it battled deflation. Its stance on intervention is now more equivocal. As far as we can understand, the SNB’s FX policy now is to keep the real exchange rate stable as it wrestles with above-target inflation. As our chart shows, the real trade-weighted Swiss franc has been relatively stable this year (down 1.5% year-to-date). Given Switzerland’s far lower inflation than trading partners, the real CHF has been kept stable by allowing nominal CHF appreciation (+3.6% YTD). SNB delivers real CHF stability and nominal CHF appreciation Trade-weighted indices Jan 2010 = 100 Source: SNB, ING   Assuming the SNB stays hawkish and wants to keep the real CHF stable, further nominal CHF appreciation is our call in the first half of 2023. The weaker dollar (a 12% weight in the CHF basket) has contributed to some of the nominal CHF appreciation recently. If we are right with our call for a stronger dollar into the first quarter of 2023, and the SNB still wanting to keep the real CHF stable, then a lower EUR/CHF will be the requirement for early next year. That – and the Swiss franc’s defensive properties in a difficult 2023 – are factors behind our forecast for EUR/CHF heading back to the 0.95 area next spring. Read this article on THINK TagsSwitzerland Swiss National Bank SNB CHF Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Dutch transport & logistics outlook 2023: Aviation rebound continues, freight logistics slows

Netherlands: the third quarter sees mixed retail sales data

ING Economics ING Economics 09.12.2022 22:13
The pressure on consumer spending in early 2023 will lead to a further volume contraction in Dutch retail sales. But price increases will be lower next year (+3.5%), resulting in a turnover growth of about 2.5% There are positive signals from the markets that Black Friday sales in the Netherlands were strong Lower turnover growth in the retail sector in 2023 Estimated sales growth in %, year-on-year Source: Estimates ING Research on the basis of data Dutch Central Statistical Office, * Food, non-food + webshops Consumer willingness to buy at rock bottom Consumer confidence indicators have been in freefall since the last quarter of 2021, reaching the lowest levels since the start of these statistics in October 1986. Pessimism eased somewhat in November, but when it comes to making large purchases, consumers were as negative as they were in October. The decline in willingness to purchase since the fourth quarter of 2021 can be put down to the uptick in Covid-19 cases in the autumn of 2021, the subsequent reintroduction of restrictions, the war in Ukraine, and persistently high inflation (particularly in energy and food) this year. Consumer confidence plummeted in 2022 Indicator of consumer willingness to buy, seasonally adjusted Source: Dutch Central Statistical Office; edit ING Research Drop in the value of debit card transactions ING's debit card data shows that the total value of transactions (debit card, ATM and iDEAL) have fallen since June 2022. The value of transactions was 1.5% lower in the third quarter than in the second. Price increases have prevented a further fall. The year-on-year decline in retail sales volumes was more than 3% in both the second and third quarters. Further contraction is expected in the fourth quarter. Positive market signals of Black Friday sales are hopeful, but may also be the result of pre-emptive Christmas and “Saint Nicholas” purchases, facilitated by the €190 energy compensation paid to many Dutch households. Rising energy bills are expected to dampen purchases in early 2023, despite the energy price cap. Value of transactions in 3Q are 1.5% lower than in 2Q Total value of domestic debit card payments, money withdrawals and iDEAL-payments as index (2Q22 = 100), seasonally adjusted Source: ING data, calculations ING Research Limited growth recovery in online revenue in 2023 The lockdowns in 2020 and 2021 gave a huge boost to online sales, with high growth rates. Since Covid-19 restrictions eased in early 2022, some of those online purchases moved to shopping centres and high streets. This resulted in sales growth for physical stores in the first half of 2022 but a sales decrease in the online segment. In the second half of 2022, there was a (limited) increase in turnover in both online shops and multichannel retailers. However, this is mainly due to price increases. On balance, the revenue reduction will be about 3% overall in 2022. In 2023, online revenue may continue to grow (by 5-10%), helped by sustained inflation. Thanks to investments in logistics and data analysis, a significant part of retail turnover has been transferred to the online channel. Only online-only stores are estimated to have an estimated €6bn higher turnover in 2022 than in 2019. A further shift to online seems feasible, as consumers increasingly value the convenience of online shopping and stock levels in stores are increasingly too low. Decline in online sales in 2022 after high growth during lockdown years 2020/21 and a normalisation of sales growth in 2023 Growth in retail sales in %, year-on-year Source: Dutch Central Statistical Office; edit and estimate ING Research Shop viability under increasing pressure Prime locations in large cities were especially vulnerable during the Covid-19 lockdowns due to the loss of window shopping and the absence of (foreign) tourists. Some retailers managed to maintain profits through government support packages, tax deferrals and rental and banking arrangements. This minimised the number of bankruptcies. However, the difference between retail sectors is considerable. Food retail, drugstores and DIY stores performed better than clothing, footwear and electronics stores. Although the number of bankruptcies is still lower than pre-Covid, the number is increasing. The pressure on consumer spending and further cost increases, plus aid repayment obligations, will put pressure on the viability of an increasing number of shops compared to the period 2020-22. More online shops than non-food stores One in six physical Dutch stores disappeared in the period 2010-21, which is 14,000 stores. In 2021, the number of non-food shops remained stable thanks to Covid-19 support measures, but this is likely to be a one-off. In the last decade, for example, about 4,000 fashion and 1,500 shoe shops disappeared, half of toy stores (from 1,400 to 700) and a quarter of electronic stores (from 4,200 to 3,100). The number of supermarkets increased (+10%), particularly in 2021 (from 6,100 to 6,400). Since 2010, the number of online retailers has increased from 12,500 to more than 80,000. A large proportion of online retailers have minimal sales, but of course there are also some very large online businesses. In both 2020 and 2021, the number of online shops increased by almost 30%. In early 2022, for the first time, there were more online shops than physical non-food stores (22% more). There are now more online stores than physical non-food shops Number of non-food shops and online stores on 1 January 2022 Source: Dutch Central Statistical Office; edit ING Research Further volume contraction in food segment The turnover of food retail is estimated to be 12.5% higher in 2022 than in 2019, an increase of around €5.5bn. More than €3bn of revenue growth was in the Covid-19 year of 2020 and €2bn in 2022 due to high inflation. However, since mid-2021 there has been a downward trend in volume development. Part of consumer spending has moved back from food retail to the hotel and catering industry, events and holidays. However, consumer prices in food retail substantially increased (+10% in the third quarter of 2022) to compensate for increased energy, procurement, transport and personnel costs. These cost items are also under upward pressure in 2023, while overall retail turnover will be dampened as consumers opt to shop in discount supermarkets. As a result, supermarkets, particularly smaller food specialists, will see their already-tight margins fall. A volume contraction of 1% is projected for 2023, resulting in an estimated 5% higher output prices leading to about 4% sales growth. Growth in food retail sales in 2022/23 due to price increases Turnover development in %, year-on-year Source: Dutch Central Statistical Office, *estimate ING Research High turnover growth in non-food retail in 2022 The turnover trend in the non-food segment in the Covid-19 period 2020/21 was strongly determined by the restrictive measures for non-essential stores. For 2022, although an average of 7.5% growth in volume and 13.5% growth in turnover is expected for non-food retail, the difference between the first and second half of the year is huge. In the first quarter, there was a 40% increase in turnover for total non-food, rising to 70% for footwear and 90% for clothing stores. Growth rates normalised in the second quarter and shows lower volumes and sales in euros in the DIY and electronics segments compared to the same period in 2021. In the second half of the year, sales continued to be under pressure, as shown by ING debit card data. Decrease mainly for non-essential consumer purchases Change in transaction value, 3Q towards 2Q, seasonally adjusted Source: ING data, calculations ING Research Downturn is already underway and will continue in 2023 In the third quarter, the transaction value in the fashion, furnishings and electronics retail segments was lower than in the second quarter, ranging from -1% for electronics stores to -6% for fashion (ING payments data via iDEAL). On the other hand, there are also increases, namely for spending in the food retail sector and in drugstores. The latter segment was identified as essential stores during lockdowns but continue to do well, thanks in part to the high sales of self-testing. CBS figures also show that non-food retail is struggling. In the second half of 2022, volume and turnover growth is expected to be significantly lower than in the first half of the year. In furniture and electronics segments, there is even a contraction. Thanks to widespread price increases, there is still some growth in turnover in the second half of the year, except for furniture and DIY shops. A further but lower price increase is also expected in 2023. However, the (mild) recession threatens to reduce volume, despite energy compensation schemes already in place. This is expected to result in minimal revenue growth for non-food retail (+1%). Much lower sales growth in 2023 for non-food shops Turnover development per sector, year-on-year Source: Dutch Central Statistical Office; estimate ING Research Read this article on THINK TagsRetail Netherlands Consumer Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Monitoring Hungary: Glimmering light at the end of the tunnel

FX: More Pain For The Forint (HUF) Can Be Expected, The Correlation Between US 10-year Yields And G10 Dollar Crosses Has Picked Pp

ING Economics ING Economics 12.12.2022 12:31
A heavy event risk calendar this week stands to define the core themes for 2023. First and foremost is the question of how quickly US inflation decelerates (CPI on Tuesday) and how the Fed will respond (FOMC Wednesday.) A whole host of central bank meetings around the world, including the ECB on Thursday, will provide insights on how long policy stays tight USD: How long does policy need to stay tight? A pivotal week for FX and global asset markets lies ahead of us. The week will play a major role in determining whether central banks (particularly the Federal Reserve) need to keep policy tighter for longer, or can (as the market prices) start to relax a little over inflation and can consider rate cuts in the second half of next year to ensure a soft landing. The two key event risks here are tomorrow's US November CPI reading and Wednesday's FOMC meeting - including the release of a fresh set of dot plots. Going into these event risks the market is pricing the Fed tightening cycle peaking in the 4.90/5.00% area next spring and then 50bp of rate cuts being delivered in the second half. And consensus is for another relatively soft 0.3% month-on-month core CPI release tomorrow, which would tend to support the market's pricing. We look at a range of Fed scenarios in our FOMC preview. As noted previously here, December is typically a soft month for the dollar and probably a more dovish set out of outcomes and a weaker dollar does the most damage to positioning, which is probably still long dollars. However, we do feel that market consensus still underappreciates the risk of inflation staying higher longer and also is dangerously second-guessing the Fed in terms of 2H23 rate cuts. The Fed has said that it feels there is good forward guidance value in its dot plots and it may choose to get across its current message of tight policy staying in place for longer through those dot plots. Our rates team also sees upside risks to US 10-year yields from the 3.50% area, with outside risk to the Fed discussing outright US Treasury sales (rather than just roll-offs) if it does think the long end of the curve is too stimulative. Notably, the correlation between US 10-year yields and G10 dollar crosses has picked up substantially since the soft October CPI release on 10 November. The long end of the curve is therefore going to be a key battleground for the dollar. Event risks this week will therefore determine whether 2023 starts with a focus on the inflation battle being won and the prospect of stimulative, reflationary policy coming through - a dollar negative. Or whether sticky inflation ties the hands of central bankers, the US yield curve remains steeply inverted and the dollar continues to perform well in a challenging risk environment. We do see the latter scenario as more likely, but this week should certainly give one of the scenarios a big lift. There is very little on the US calendar today and we would expect DXY to go into tomorrow's CPI release near its current 105 levels. Chris Turner EUR: A big week for central bank meetings in Europe This week sees central bank meetings in the eurozone, Switzerland and Norway, where 50bp hikes are expected in the former two and a 25bp hike in the latter. Please see our full European Central Bank preview here and our Swiss National Bank preview here. On the former, we note there is still a slight risk of the ECB doing 75bp rather than 50bp - which would probably help the euro. But this of course comes after the US CPI/FOMC risk. Given the 10% EUR/USD correction off the late September lows, our preference would be that EUR/USD struggles to hold any gains over 1.06 this week and could end the week lower should US events oblige.  Chris Turner GBP: BoE to hike 50bp this week This week's highlight will be the Bank of England meeting on Thursday. Please see our full preview here. We expect the BoE to revert to a 50bp hike (55bp hike priced) as it tries to balance high inflation against growing evidence of a prolonged downturn - with little signs of stimulus.  Our game plan assumes that GBP/USD struggles to hold any gains over 1.23, while EUR/GBP should find support in the 0.85/0.86 area. A winter of discontent should see sterling underperform should central bankers need to keep rates tight(er) into a recession.  Chris Turner CEE: Asymmetric response to global developments A busy week at the global level will be accompanied by several data points from the Central and Eastern Europe region. This week's headline number will be November inflation in the Czech Republic. We expect inflation to accelerate from 15.1% to 15.9% year-on-year, slightly above market expectations. The number will have the market's attention not only because of the Czech National Bank meeting next week but also because of the surprising slowdown in inflation in October when government measures against high energy prices came into play. After this number, we can then expect more headlines coming from the CNB given Thursday's start of the blackout period. Also today, Hungary's assessment is expected to be discussed at the European Council level. However, early rumours suggest that the European Commission's conclusion remains unchanged. November inflation in Romania will be published on Tuesday. We expect an increase from 15.3% to 16.6%, above market expectations. Although we have already seen inflation slowing in previous months, this result would thus raise the peak again. We do not expect another rate hike from the National Bank of Romania in January, but either way, it will be a close call, and tomorrow's number could be key. In the second half of the week, we will then see secondary data across the region such as the current account balances in Poland and the Czech Republic and the final inflation estimate in Poland, including the core number. In the FX market, this week we will be watching the impact of global events on the region. Our baseline scenario of a stable EUR/USD should not bring too much change for the region, but risks both ways are significant and higher volatility compared to previous rather quiet weeks in the CEE FX market can be expected. As we mentioned earlier, interest rate differentials have fallen significantly over the past weeks in the region leaving FX vulnerable to global shocks. Also, the gas story is creeping back and with higher gas prices we see growing signs of a renewed relationship with FX. The region's reaction would thus be asymmetric in the direction of weaker FX in our view, if the US dollar ends up as a winner this week. The Hungarian Forint will be following a separate story in addition to the EU developments and the newly lifted fuel caps. Given the negative rumours, more pain for the forint can be expected and the question is whether EUR/HUF will make another march towards the 430 level as it did in October, which led the central bank to an emergency rate hike in the middle of that month. In our view, the long positioning has fully unwound, and the market is leaning towards the short side again, but we don't think that the negative outcome of the EU story is fully priced in, so it is likely that we will test new highs this week. Frantisek Taborsky Read this article on THINK Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Hungary's Central Bank to Maintain Base Rate at 13%, Eyes on Effective Rate Amid Forint's Performance

The EUR/GBP Pair Is Displaying A Sideways Auction Profile

TeleTrade Comments TeleTrade Comments 13.12.2022 09:40
EUR/GBP is auctioning below 0.8600 as investors await UK Employment data. Increment in households’ earnings data could be a double-edged sword for the UK economy. The ECB is expected to hike its interest rates by 50 bps to 2.50%. The EUR/GBP pair is displaying back-and-forth moves marginally below the crucial hurdle of 0.8600 in the early European session. The cross is displaying a sideways auction profile as investors are awaiting the release of the United Kingdom Employment data. The asset remained topsy-turvy on Monday despite upbeat UK Gross Domestic Product (GDP) data. The monthly GDP data (October) reported an expansion of 0.5% while the street was expecting a contraction of 0.1%. Also, Industrial and Manufacturing Production data remained better than anticipation but were contracted on an annual basis for October month. Now, investors have shifted their focus to the UK Employment data. As per the projections, the jobless claims gamut will witness a decline of 13.3K. While the quarterly Unemployment Rate (October) is seen higher at 3.7% against the former release of 3.6%. Apart from that, Quarterly Average Earnings data excluding Bonuses is seen higher at 5.9% vs. the former release of 5.7%. An increment in households’ earnings could be a double-edged sword. No doubt, higher earnings will delight households in offsetting inflation adjusted-payouts but will also increase retail demand, which will escalate inflation further. This week, the interest rate policy by the Bank of England (BOE) will hog the limelight. Analysts from Danske Bank are expecting a 50 basis point (bps) rate hike announcement.  On the Eurozone front, investors are awaiting a monetary policy announcement from the European Central Bank (ECB), which is scheduled for Thursday. Analysts at Rabobank think that the ECB is likely to raise the policy rate by 50 basis points in December but note that they are not fully discounting the possibility of a 75 bps hike. They have forecasted a terminal rate of 3%.
The EUR/USD Pair Has A Potential For The Breakout Mode

FX: The Lagarde Effect On EUR/USD Pair Should Be Significantly Smaller And Shorter-Lasting Than The Powell Effect

ING Economics ING Economics 14.12.2022 10:47
The Fed's job today was made harder by yesterday's drop in US inflation, but we still think Chair Powell will try to deliver a credible rate protest and push back against easing financial conditions after delivering a 50bp rate hike. This could take some pressure off the dollar, but downside risks remain - admittedly - quite high Federal Reserve building in Washington, DC USD: In need of some Powell "magic" Yesterday’s US inflation reading made the Federal Reserve's job even harder as it prepares to announce another rate hike at 1900 GMT today. Core CPI dropped to 6.0% year-on-year, and headline to 7.1% in November, prompting a new round of dovish speculation on the Fed’s rate path. As discussed here by James Knightley,  we are not changing our call for a 50bp hike today, but the chances of the peak rate reaching 5.0% have admittedly shrunk. The market’s pricing for today’s announcement has also remained anchored to 50bp, and it’s fair to believe that investors’ reaction will be primarily driven by the forward-looking language of the statement and of Powell’s press conference. Our perception is that the Fed will want to deliver some sort of “rate protest”, essentially pushing back against the recent easing in financial conditions. To do that, Powell will need to downplay the recent abatement in price pressure, stick to the view that the inflation battle is still to be won and ultimately try to re-anchor peak rate expectations to the 5.00% handle. That is easier said than done. The unsuccessful reiteration of “transitory inflation” in 2021 served as a lesson to the Fed, and now warns against abandoning rate hikes too early or sticking too long to the notion that inflation isn’t yet on a reliable downward path. So, Powell will have to walk the fine line between credibility risk and the Fed’s explicit preference to overdeliver rather than underdeliver on policy tightening. While we are in the camp of higher interest rates and a stronger dollar, we have to admit the risk of wanted or unwanted dovish mis-steps is elevated. We knew December would be a challenging month for dollar bulls like ourselves, and downside risks remain significant today. Still, our base case is that the dollar can recover some of the lost ground as Powell works his magic to deliver a broadly hawkish – and above all credible – message. Francesco Pesole EUR: Powell effect larger than the Lagarde effect EUR/USD is consolidating above 1.0600 after the post-US CPI knee-jerk reaction brought it to a 1.0660 high. While positioning data suggests little room for more short-squeezing on the pair, markets appear more comfortable in laying down the basis for a more structural bullish approach. Today’s FOMC announcement will tell us whether the Fed can still offer some support to the dollar, and tomorrow’s European Central Bank announcement may give hints about balance sheet reduction. However – as discussed in our FX and rates preview – the Lagarde effect on EUR/USD should be significantly smaller and shorter-lasting than the Powell effect. A dovish Fed today could open the door for a rally to 1.0800 before Christmas, but we favour a correction to sub-1.05 levels instead, fuelled by a Fed rate protest and higher energy prices.   Francesco Pesole GBP: Inflation slowdown not that relevant now Inflation has also started to decelerate in the UK. The November reading, released this morning, showed a smaller-than-expected month-on-month CPI reading (0.4% vs expected 0.6%), which brings the YoY number to 10.7% from 11.1% in October. Core inflation slowed from 6.5% to 6.3%. The pound’s reaction to the data has been quite muted, which is not surprising given the wait-and-see approach ahead of today’s FOMC risk event and since the inflation figures do not suggest a different outcome for tomorrow’s Bank of England meeting. Consensus and markets are expecting a 50bp hike, and this is also our house call. Today, cable will be primarily moved by the FOMC reaction. We expect a correction below 1.2300, but the risks of a negative dollar reaction are – as discussed above – non-negligible: in that case, 1.2500 may be tested before the Christmas break. Francesco Pesole SEK: Inflation in Sweden going the wrong way While inflation shows signs of abating in some major economies, Sweden’s CPI report showed that – as expected – both core and headline rates kept rising in November. Core CPIF moved from 9.3% to 9.5% YoY, and CPIF, excluding energy, from 7.9% to 8.0% YoY. The krona is slightly stronger after the release, mainly because the rise in inflation was slightly smaller than consensus expectations. Still, this is enough to reinforce our view that Riksbank will have to deliver another 75bp of tightening in the first half of 2023. The next meeting is in February, and a few more data releases should offer markets and policymakers some clearer guidance. Incidentally, we’ll see a change at the helm of Riksbank, with Erik Thedéen taking over as governor from 1 January. EUR/SEK is trading in the 10.85/10.90 range at the moment, and we currently see some upside risks (to 11.00) for the pair in the short term driven by a renewed deterioration in market sentiment, especially in Europe. For 2023, we forecast a moderately bearish scenario for EUR/SEK, targeting 10.40/10.50 in the second half of next year. Francesco Pesole Read this article on THINK Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Serious liquidity crisis? According to Franklin Templeton, a massive, but unlikely deposit flight from Credit Suisse would have to happen

The SNB will want further nominal appreciation in 2023

ING Economics ING Economics 15.12.2022 12:27
  The Swiss National Bank (SNB) raised its key rate by 50bp as expected, bringing the total monetary tightening to 175bp. The upward revision of medium-term inflation forecasts signals a further rate hike in March A 50bp hike As widely expected, the SNB decided to raise its key rate by 50bp to 1% – following the 75bp increase in September and the 50bp increase in June – to combat the spread of inflationary pressures. The total monetary tightening in Switzerland will therefore have been 175bp in 2022, compared with probably 250bp in the eurozone and 425bp in the United States over the same period. The SNB also indicated that it is prepared to continue to be active in the foreign exchange market. In recent months, the SNB has sold foreign currencies, which has helped to strengthen the appreciation of the Swiss franc and limit imported inflation.  Read next: From the fundamental point of view, these facts may become a game changer, sending the EUR/USD pair to the parity level | FXMAG.COM Inflation expectations are above the medium-term target After years of fighting deflation with a very accommodating monetary policy, the SNB remains very uncomfortable with the current level of inflation, despite the stabilisation at 3%, down from the peak of 3.5% reached in August. It believes that "inflation remains well above the range that the SNB equates with price stability", which is between 0% and 2%, and that "while developments are pleasing, it is too early to let our guard down". Thanks to a more favourable energy mix, a lower share of energy in consumption, and above all the appreciation of the Swiss franc, which limits imported inflation, inflation in Switzerland is nevertheless much lower than in neighbouring countries. That said, the SNB considers that the risk of second-round effects is still present, which is why "it cannot be ruled out that further rate hikes will be necessary to ensure price stability in the medium term". The SNB's inflation forecast shows inflation at 2.1% at the end of its forecast horizon, the third quarter of 2025. It believes that "increased inflationary pressure from abroad and the spread of price increases to the various categories of goods and services in the consumer price index will push this forecast higher in the medium term". The SNB now expects inflation to average 2.9% in 2022, 2.4% in 2023 and 1.8% in 2024. These above-target inflation forecasts for the end of the forecast horizon signal that the SNB is not done with monetary tightening. We believe that a further 50bp rate hike could take place at the next meeting in March 2023, taking the rate to 1.5%. Rates will then remain stable for an extended period. Indeed, we expect price growth to decelerate gradually but slowly over the year. This will make it more comfortable for the SNB to intervene in the foreign exchange market afterwards, without changing the interest rate further. FX: SNB confirms it has been selling FX reserves recently In today’s communication, SNB President Thomas Jordan confirmed that the SNB had been intervening in FX markets to sell FX over recent months. This has got nothing to do with the SNB wanting to downsize its FX reserves for financial stability reasons, but everything to do with monetary policy. Here Jordan confirmed that a stronger Swiss franc has helped ensure that less inflation has been imported from abroad. This is all in keeping with this year’s policy of wanting to keep the real Swiss franc stable. To achieve that – and given that Swiss inflation is substantially lower than that overseas – the SNB requires nominal Swiss franc appreciation. The SNB confirmed the nominal franc has appreciated 4% this year. Read next: Given the peculiarities of the US labor market and the high labor mobility, the acceptable unemployment rate is considered to be 5.0%| FXMAG.COM On the assumption that inflation differentials between Switzerland and its trading partners do not immediately narrow, we assume that the SNB will want further nominal appreciation in 2023. The big question is through which channels this occurs. The recent sharp fall in USD/CHF has taken the pressure off the EUR/CHF axis to make the adjustment. But if we are right with our call for the dollar to strengthen into the first quarter of 2023, then EUR/CHF will have to come lower – helped in part by SNB intervention. Our call is that EUR/CHF continues to struggle to hold any gains over 0.99 and heads back to the 0.95 area into next spring. Read this article on THINK TagsSwitzerland SNB Inflation CHF Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
In December, the Fed maintained a tougher rhetoric than the market consensus, playing on the bears' side

In December, the Fed maintained a tougher rhetoric than the market consensus, playing on the bears' side

Alex Kuptsikevich Alex Kuptsikevich 15.12.2022 15:12
BoE is expected to hike the rate by 50bp on Thursday, but the day before CPI inflation data is published - would you expect a hawkish pivot if CPI bounces back above November print? The annual price growth rate in the UK fell slightly in November to 10.7% from a peak of 11.1% a month earlier. This reversal coincides with earlier trajectory estimates from the Bank of England, so it should not cause a meaningful change in the commentary. On the other hand, the Fed continues to surprise markets with more hawkish rhetoric, even with five months of slowing consumer prices under its belt. Key central bankers are pushing the idea of a more protracted and decisive fight against inflation into the markets at this stage. In contrast, markets are set to repeat post-2008 history, when the central banks' primary concern was stimulus but not suppression of inflation. Read next: The BoE And The ECB Raised Rate By 0.50% To 3.50% Today, Australian Dollar Falls After Disappointing Data From China| FXMAG.COM Santa Rally: Would Santa skip coming to town amid turbulent times and uncertain beginning of the next year? Turbulent times do not rule out periodic and strong rallies against the trend. However, the Fed could now be the Grinch who wants to steal the holiday in the markets. Since the second half of November, the broad stock indices (S&P 500, Russell 2000) have been struggling with resistance against the downtrend. In August, the Fed decided the fate of this battle by siding with the bulls. In December, the Fed maintained a tougher rhetoric than the market consensus, playing on the bears' side. However, market dynamics show that there are fewer sellers anymore.  ECB decides on interest rate this week - what do you expect from the Bank this time? When could the cycle come to an end? The ECB will raise the rate by 50 points, not wanting to surprise the markets. In addition, we should expect indications of further policy tightening via a plan for asset sales from the balance sheet and rate hikes. Currently we expect the ECB to raise rates up to Q3 2023. From the second quarter, it could be a rate hike of 25 points. At the same time, there are many surprises along the way as de-globalisation will contribute to higher inflation in the region and force the ECB to take a more hawkish approach in contrast with zero rates after 2016.
ECB cheat sheet: Wake up, this isn’t the Fed!

European Central Bank presented its economic projections. Inflation to slowdown to 2.3% in 2025

ING Economics ING Economics 15.12.2022 15:41
All good things come in threes…after the Federal Reserve and Bank of England, the European Central Bank has followed with a rate hike of 50bp. The ECB also announced it would start to reduce its bond portfolio, aka quantitative tightening, from March 2023 onwards Ahead of today’s meeting, the question was whether the ECB would opt for a larger-sized rate hike with a dovish message or for a smaller-sized rate hike with a hawkish message. The answer is clear: a smaller hike with a very hawkish message. In particular, the following phrases were surprisingly hawkish: “interest rates will still have to rise significantly at a steady pace to reach levels that are sufficiently restrictive to ensure a timely return of inflation to the 2% medium-term target. Keeping interest rates at restrictive levels will over time reduce inflation by dampening demand and will also guard against the risk of a persistent upward shift”. As regards the reduction of the ECB’s bond holdings, the reinvestments of maturing bonds under the asset purchase programme (APP) portfolio will decline to €15 billion per month on average until the end of the second quarter of 2023 “and its subsequent pace will be determined over time”. Read next: The BoE And The ECB Raised Rate By 0.50% To 3.50% Today, Australian Dollar Falls After Disappointing Data From China| FXMAG.COM The ECB also already published the results of its latest macroeconomic projections, expecting inflation to come down to 3.4% in 2024 and 2.3% in 2025. The 2024 number was revised upwards significantly. At the same time, the ECB expects only a short and shallow recession, forecasting eurozone growth to come in at 0.5% in 2023 and 1.9% in 2024. This is much more optimistic than our own growth forecast. All in all, the ECB’s crusade to not only fight inflation but to fight against any deterioration in its reputation and credibility continues. There is still very little the ECB can do to bring down actual inflation but it can contribute to re-anchoring inflation expectations. With today’s announcement, it is clear that the ECB wants to first fully exploit interest rates as the main instrument to fight inflation and that the balance sheet reduction will stay on the back burner. Needless to say that with the still relatively optimistic growth outlook, the risk increases that the ECB pushes the eurozone economy further into recession with every new rate hike. Read this article on THINK TagsMonetary policy Inflation Eurozone ECB Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Oanda expect next rate hikes as Bundesbank and ECB predicts will accelerate

EU economy expected to grow 0.8% in 2023. Following ECB hikes can be higher than Fed ones

Alex Kuptsikevich Alex Kuptsikevich 15.12.2022 16:44
The ECB raised key rates by 50 points, bringing the key rate to 2.5% - the highest in 14 years, but promising not to stop there. In addition to the rate decision, the ECB will start selling assets off the balance sheet from March 2023, starting at 15bn per month, promising to revise the parameters regularly. The commentary on the decision states upside risks for inflation and downside risks for the economy, expecting the economy to grow by 3.1% this year and 0.8% next year. This is noticeably better than the Fed's forecasts which expect GDP growth of 0.5% each in 2022 and 2023. A sharp cooling of GDP growth has not stopped the Fed and is unlikely to stop the ECB. The US business cycle is often 2-3 quarters ahead of the European one, which is why the Fed was the first to rush with rates. But now the ECB is starting to sound more hawkish than the Fed. During the press conference, Lagarde predicted more 50-point rate hikes, while the Fed is expected to raise rates by +25 percentage points next. EURUSD added significant news for the third day in a row, strengthening by 1% after the US inflation release, regaining initial losses and rewriting semi-annual highs after the Fed, and strengthening by almost 0.5% after the ECB rate decision. The EURUSD has been trading steadily above its 200-day average since the beginning of December, signalling a break in the downtrend. The pair has also crossed above the 61.8% mark of the declining amplitude from May 2021 to September 2022, and now it looks like it is about to start a long rally rather than a correction. The results of the most recent Fed and ECB meetings this year have underpinned this trend reversal by showing that the ECB is now catching up to the Fed. However, there is an essential technical test ahead at 1.0750-1.0800, where the 2020 lows are concentrated, a significant April-June consolidation area and local fatigue from an already past rally will accumulate.
ECB cheat sheet: Wake up, this isn’t the Fed!

ING Economics call contraction in eurozone economy 'likely mild'

ING Economics ING Economics 16.12.2022 11:45
Some good news for once, with the eurozone PMI ticking up in December. Inflation pressures continue to fade due to lower demand and moderating supply chain problems. For the ECB, the latter adds to doubts about yesterday’s hawkish tone The composite PMI improved from 47.8 to 48.8 in December. This still signals contraction, but as the quarter comes to a close, we can conclude that the contraction in the eurozone economy was likely mild. The easing of contraction was noted in both the manufacturing and services survey. For manufacturing, output fell less in part because the drop in new orders also eased a bit. Very importantly though, delivery times improved for the first time since the start of the Covid-19 pandemic. This indicates that supply chain problems are quickly fading at the moment due to a combination of low demand for inputs and improvements in production. For services, new business continued to contract at a similar pace to last month but recreation saw an uptick in activity again. For price growth, the easing of supply problems is adding to disinflationary pressures. Businesses reported a significant improvement in input cost inflation as they rose at the slowest pace since May 2021. Selling prices still increased at a fast pace, but the pace has been slowing. This is related to the declining need to price through higher costs to consumers and because of discount sales related to lower demand, according to the survey. For the ECB, this must be quite a difficult survey to interpret. Yesterday, the central bank revealed a particularly hawkish take on the economic situation and ECB President Christine Lagarde noted that a mild recession is unlikely to be enough to tame inflation. While the downturn seems to be easing according to the survey, we also see that inflationary pressures continue to cool. For the doves on the governing council, the latter will likely fuel concern that the ECB could end up doing too much. Read this article on THINK TagsInflation GDP Eurozone ECB Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Analysis Of The Euro To US Dollar Pair Situation - 30.01.2023

Craig Erlam talks euro against US dollar amid central banks decisions

Craig Erlam Craig Erlam 16.12.2022 23:41
OANDA Senior Market Analyst Craig Erlam discusses how EURUSD has traded in the aftermath of the Fed and ECB interest rate decisions.   This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds. EUR/USD - A bullish breakout? - MarketPulseMarketPulse
The Global Factor As The First Principal Component For The Weekly Movements Of The CEE4 Currencies

The Global Factor As The First Principal Component For The Weekly Movements Of The CEE4 Currencies

ING Economics ING Economics 17.12.2022 08:04
Since the beginning of the coronavirus pandemic in March 2020, the currencies of CEE4 countries (Czech Republic, Hungary, Poland and Romania) have exhibited similar short-term (weekly) dynamics[1] but diverse mid-term trends against the USD. In the period from 15 March 2020 to 27 November 2022, the HUF depreciated against the dollar by 23%, PLN by 13% and RON by 8%, whereas CZK appreciated by 1% (Figure 1). Such a divergence was barely observed prior to the Covid outbreak as, during the two years preceding it, the CEE4 currencies showed a relatively similar 13-17% depreciation against USD. This suggests that the post-Covid divergence is not a technical event but, rather, that it has fundamental roots. In this article we take a closer look at the common and individual drivers of these CEE4 FX movements to show that it’s highly likely that for the past two years fundamentals have played a more important role. Also, noteworthy, after March 2020, the CEE4 currencies differentiate in terms of their reaction to the initial one-month long risk off (from -3% for RON to -10% for HUF), the subsequent recovery of April 2020–June 2021 (from 10% for RON to 23% for CZK) and by the scale of subsequent depreciation (from -11% for CZK to -28% for HUF). It is also evident from Figure 1 that the difference in the relative performance of HUF against PLN and RON started to be more pronounced after the beginning of the war in Ukraine, suggesting some fundamental or political factors have been at play. Methodology of Global-Regional-Local decomposition Factors at play in divergence of CEE4 FX movements The divergence in the CEE4 FX movements since the Covid outbreak suggests that even though the pandemic was a powerful global event that had a similar effect on currency movements in the region, other factors have been at play, which deserves a closer look. In other words, in addition to global movements, domestic factors have played a role, and these are the key focus of this article. To distinguish the factors behind the CEE4 FX movements, we use the global-regionallocal (GRL) decomposition, which is based on the methods of Principal Component Analysis. According to the framework, the dynamics of the USD vs any CEE4 currency can be expressed as the sum of three uncorrelated components: global, regional and local. This statistical framework allows us to decompose the divergent trends of CEE4 currencies against USD presented in Figure 1, as well as to identify the sources of shortterm exchange rate co-movement. In the latter case, this can be done by computing the contribution of GRL factors to the variance of short-term fluctuations. We define the global factor as the first principal component for the weekly movements of the CEE4 currencies plus the other 14 EME currencies (RSD, TRY, ZAR, ILS, BRL, MXN, CLP, CNY, INR, IDR, KRW, PHP, SGD, TWD) against USD. Next, the regional factor is extracted as the first principal component of the remaining part of CEE4 currency movements. The local component is the remaining part of the exchange rate dynamics. GRL decomposition of weekly fluctuations – it’s almost all about the global factor Figure 2 reveals that the global factor, which accounts for between 64% for HUF and 82% for RON variability, is by far the most important determinant of weekly exchange rate fluctuations for all CEE4 currencies5. This very high correlation of the global factor with the US dollar index (DXY) indicates that, over the short run, the dollar’s value is driving CEE4 volatility. The contribution of the regional factor, which is correlated with the EUR/USD rate, ranges from 7 to 22%, whereas the role of the local component is relatively small, especially for PLN and CZK. FX weekly fluctuations Global = most important Regional = 7-22% impact Local = relatively small role Read the article on ING Economics   Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more The correlation of short-term (weekly) movements of CEE4 currencies ranged between 0.79 for HUF/USDRON/USD pair to 0.92 for PLN/USD-CZK/USD pair ↑
Czech Republic: Tax Revenues Should Be Higher Than MinFin Expects

FX: It Seems The Czech Economy Can Afford The Relative Strength Of Czech Koruna, Romanian Leu (RON) Seems To Be Overvalued Relative To Its Macro Fundamentals

ING Economics ING Economics 17.12.2022 08:04
Our conclusion is that, over recent years, the short-term fluctuations of CEE4 currencies have been driven predominantly by global factors, but medium-term trends have been strongly related to local fundamentals. In the current environment of elevated economic uncertainty and high inflation, this implies that economic policy affecting the fiscal position, the current account balance and inflation exerts a sizeable impact on the value of CEE4 currencies. Looking at the currencies case by case, it seems the Czech economy can afford the relative strength of CZK, though there might be signs of hot capital inflows playing a part in the recent appreciation. HUF weakness seems to reflect the macro fundamentals as well as the idiosyncratic risk premium and serve as a mechanism of maintaining competitiveness. By that logic, RON seems to be overvalued relative to its macro fundamentals, with weaker levels prevented by a more active central bank involvement on the FX market. At the same time, Romania is tactically benefitting from the stronger RON given lower imported inflation, and avoids higher financial costs related to the elevated share of FX public debt. Lastly, Poland’s fundamentals seem to be structurally closer to Czech fundamentals, but may have higher vulnerability to internal and international politics in the region. Read the article on ING Economics   Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
The German Purchasing Managers' Index, ZEW Economic Sentiment And More Ahead

A Very Low Difference In The Performance Between CEE4 And The Broader Set Of EMEA Currencies

ING Economics ING Economics 17.12.2022 08:04
GRL decomposition of trends – local is the most interesting Over the analysed period, the global factor was responsible for CEE4 currency depreciation against the USD of between -6% for RON and -10% for CZK (Figure 3). This element of the FX movement can be explained by the upward trend in the USD index of 7% over the period. We note the muted global influence on RON relative to other currencies in the group, which could be explained by its more tightly managed FX regime that aims to reduce RON short-term volatility. Regional factor resulted in a relatively small divergence between CEE4 currencies FX deviation between countries Global = most correlated Regional = relatively small role Local = main source of deviation Another observation is that the role of the regional factor was relatively small, standing at between 1ppt and 2ppt. This reflects a very low difference in the performance between CEE4 and the broader set of EMEA currencies over the analysed period. In our opinion, two opposing effects have been at play. On the one hand, CEE4 economies were quite overheated before the pandemic and provided a strong anticyclical policy response in reaction to Covid, which made them vulnerable to global inflation shock. Moreover, the fallout of the conflict in Ukraine caused an aversion to CEE4 assets, which undermined their currencies. On the other hand, EU membership makes CEE4 currencies less vulnerable to global risk compared to other EMEA currencies. Lastly, the local (country-specific) component was the main source of divergence in FX dynamics of CEE4 currencies. In the case of CZK, it made a positive 12ppt contribution, for PLN and RON it was responsible for a moderate -2ppt, but for HUF it knocked off 13ppt versus the dollar. Importantly, comparing the post March 2020 performance versus USD with the dynamics prior to the Covid outbreak, CZK has remained the strongest of the group, while HUF remained the weakest. That leads us to believe, that Covid was a global factor that pushed all currencies in the same direction, but at the same time made the local differences more visible and acute. Interpretation – making economic sense of domestic factors March Our view is that the divergent trends in the local component of CEE4 exchange rates are related to differences in macroeconomic fundamentals as well as the increased role of these fundamentals for FX markets in times of elevated economic uncertainty. This is illustrated by Figure 4, in which we collate a set of structural indicators relevant to understanding FX market developments. In our opinion, the arguments behind the relative strength of CZK are twofold. First, the Czech Republic is the most developed economy, both in terms of GDP per capita and the quality of institutions. It is the only CEE4 country classified by the IMF as an Advanced Economy rather than Emerging Economy. Second, the medium-term fundamentals of the Czech Republic are relatively sound. The international investment position and public debt are at sustainable levels, whereas inflation, albeit currently high, is forecast to return to target by 2025. For these reasons the Czech Republic has the highest credit rating among CEE4 economies and domestic fundamentals have been exerting a steady upward pressure on the value of CZK since the outbreak of Covid. When considering more forward-looking fundamentals, while having the lowest GDP growth rate in the group, the Czech Republic is somewhat insulated from potential external activity and current account shocks, among others thanks to the lowest share of the EU in exports (71%). The vulnerability of the current account from the imports side due to growth in energy prices seems not too high, given the moderate share of imports in the local energy mix. Also, there is lower evident dependence on the availability of EU funds, which is more of the case for the rest of the CEE4 group. Looking at the capital flows, there could have been an effect of hot capital inflows, as real estate prices seem to have been growing at elevated rates in recent years, meaning vulnerability of a reversal in the case of an economic downturn. Fluctuations in the CZK FX rate are not too relevant to the government given the low share of FX-denominated government debt (8%) and the declining non-resident share in gross public debt (30%). The local fundamentals for the relatively weak HUF are different and, in most cases, the opposite to the CZK. High levels of public and net foreign debt combined with fiscal and current account deficits6 potentially raise concerns about medium-term sustainability, especially in an environment of rising interest rates. This is reflected in the relatively low level of credit ratings issued by international credit agencies combined with a negative rating outlook. Apart from the above stock-flow issues, there are signals of inflation expectations de-anchoring, which is reflected in relatively high consensus inflation forecasts. Even though in the short-term upward inflation surprises usually lead to nominal FX appreciation, especially if they are accompanied by monetary policy tightening expectations, in the medium and long-term, high and persistent domestic inflation requires exchange rate depreciation to restore international price competitiveness. Our view is that for HUF, the latter channel dominated in 2022. Looking ahead, the risks of negative surprises on Hungary’s economic activity and finances are elevated, given the high dependence on the EU in terms of exports and financing (EU funds expected to be available for Hungary by 2027 are equivalent to almost 35% of its 2021 GDP, and are subject to political discussions), as well elevated dependence on non-EU energy imports. Also, Hungary has enjoyed even stronger capital inflow in the real estate market, meaning vulnerability to reversal. Local fundamentals of PLN and RON are sometimes closer to those for CZK and in other cases more similar to HUF Figure 4 also illustrates that the local fundamentals of PLN and RON, the mid-performers in terms of FX, are sometimes closer to those for CZK (eg, public debt) and in other cases more similar to HUF (eg, international investment position, sovereign ratings and outlook). Consensus forecasts for inflation in Poland and Romania in 2025 are slightly lower than in Hungary, but they are still above inflation targets of 2.5%. For these reasons, the impact of the local factor on PLN and RON has been broadly neutral. It can be added that for RON some of the market pressure on the FX market, related to Romania’s vulnerable fiscal and external positions as well as risky growth profile, could have been offset by the managed FX regime, which allows officials to protect the leu7. Moreover, Romania is the least dependent on energy commodity imports among CEE4 countries. From a forward-looking perspective, the mid-performers are facing challenges, such as Romania’s large twin deficit and therefore exposure to global downturn or Poland’s tensions with the EU and proximity to adverse geopolitical reality in the region. But at the same time, Romania’s lower energy import dependency and less hot real estate market, as well as Poland’s solid GDP growth trend and relatively stable structure of CA deficit8 could serve as mitigating factors. Read the article on ING Economics   Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Indonesia's Inflation Slips, Central Bank Maintains Rates Amidst Stability

FX Volatility Remains Subdued, The Investor Mood Seems To Be Leaning Towards A 2023 Slowdown

ING Economics ING Economics 19.12.2022 08:54
FX volatility remains subdued as financial markets lick their wounds ahead of year-end. This week's data calendar is relatively light in the G10 space, with a focus on the Bank of Japan (BoJ) meeting, US housing data and confidence readings on both sides of the Atlantic. We'll also see central bank meetings in Hungary and the Czech Republic, too   USD: Risk rolls over Looking across asset markets the investor mood seems to be leaning towards a 2023 slowdown. Bond markets remain bid, while both equity and commodity markets are rolling lower after a decent rally in October and November. Investors will continue to focus on China as a potential engine of growth in 2023, but for the time being, we have yet to see any material outperformance of the Chinese renminbi or local equity markets. This suggests that the risk of a disorderly exit from zero-Covid policies for the time being trumps the reopening story and perhaps Beijing's re-orientation to growth policies. That leaves the market to focus on the tight(er) monetary policy being implemented around the world. Last week's hawkish shift from the European Central Bank has dented eurozone and global growth prospects for 2023 and leaves the dollar in a rather mixed position. On the one hand, the ECB wants tighter monetary conditions - including a stronger euro. On the other, the Federal Reserve is not done with its tightening cycle and a global slowdown typically is not a good story for a pro-cyclical currency like the euro. Events this week look unlikely to break new ground on this story. In the US, we will see a variety of housing data (all expected to be soft), some consumer confidence data and on Friday the PCE personal income, spending and price data. The November core PCE deflator is expected at a subdued 0.2% month-on-month - in line with the softer CPI prints of October and November. None of this looks likely to provide much support to US bond yields, where the 10-year Treasury is hanging onto the 3.50% area by its fingernails. This all tends to suggest that DXY risks sinking back to the 104.00/104.10 area this week. Chris Turner EUR: Expect comparisons to 2007 Last week's hawkish tilt from the ECB wll invariably draw comparisons to the 2007 period, where EUR/USD enjoyed a strong rally. The Fed had concluded its tightening cycle at 5.25% in the summer of 2006 and the ECB was playing catch-up - a catch-up which resulted in former ECB President Jean-Claude Trichet's final and ill-fated rate hike to 3.25% in July 2008. Coincidentally, expectations now are that the ECB will also be taking the policy rate to 3.25% next summer. The difference this time is that global growth is much weaker now than in 2007 (5-6%) and we suspect high energy prices will continue eating into the eurozone's external position. On the agenda today is the Germany Ifo business confidence index for  December. Last week's release of the German PMI data showed a modest pick-up in business confidence - albeit still in recessionary territory. Today's Ifo data is expected to see the expectations component bounce up to 82 from 80 - still very low. Any upside surprise could give EUR/USD a modest boost in thin markets.  We doubt EUR/USD will break new ground this week, although it is hard to rule out a move back up the 1.0700 area. Chris Turner CEE: Last NBH and CNB meetings of the year  The CEE region will remain interesting until the last moment of the year. On Tuesday, the Hungarian National Bank (NBH) will hold its last meeting. The NBH has made it clear on several occasions that the temporary and targeted measures, introduced in mid-October, will remain in place until there is a material and permanent improvement in general risk sentiment. Although we've seen some progress here, we don't think enough has changed to trigger an adjustment in the monetary policy's hawkish "whatever it takes" setup. Nevertheless, Hungary will also be in the spotlight because of other milestones in the EU story. The European Council approved Hungary's recovery plan and suspended cohesion funds for 2021-2027 under the rule of law mechanism. The next step should be the signing of a partnership agreement between Hungary and the EC on the absorption of the cohesion funds. However, it is not clear how and when this will take place. The Czech National Bank (CNB) will hold its last meeting of the year on Wednesday. We expect it to be a non-event, with rates and FX regimes unchanged. The new forecast will not be released until February. Board members have been very open in recent days and hence there is minimal room for any surprises. The traditional dovish majority has publicly declared that interest rates are high enough and continue to choose the "wait and see" path. The governor also confirmed this week that the central bank will continue to defend the koruna. At the same time, another board member confirmed that the CNB has not been active in the market for some time. So it is hard to look for anything new here either.  In the FX market, as we mentioned last week, we believe that the global story has little positive to offer to the region this year. On the other hand, the deterioration in equity market sentiment late last week should have a delayed impact on CEE FX this week. Moreover, domestic rates with the exception of Hungary cannot support FX, so we should see some correction of previous gains in the region this week. We do not think central bank meetings will impact FX much and so the main story will be the Fed and ECB effect from last week. We see the Czech koruna as the most vulnerable as it hit new lows against the euro on Friday. A correction back to 24.250 EUR/CZK should thus not be a problem. On the other hand, we think the Hungarian forint can still benefit from the progress in the EU story for a while and get below 405 EUR/HUF. The Polish zloty remains trapped in the 4.680-700 EUR/PLN band, and we see it rather on the upper side for this week.  Frantisek Taborsky GBP: Sterling will be the main victim of euro strength The ECB would clearly like a stronger euro to help out with its battle against inflation and it was telling at last week's ECB press conference that President Christine Lagarde was keen to highlight that the ECB would be tightening longer than the Fed. If the ECB is to be successful in getting the euro higher, then the euro will need to rally against those currencies with major weights in the trade-weighted euro index. The biggest weights in this index are the US dollar (16%), the Chinese renminbi (14%) and then the British pound (12%). Of the three, we would say that sterling is the most vulnerable given that the Bank of England (BoE) is closer to ending its tightening cycle than the Fed and that the UK's large current account deficit leaves sterling vulnerable in a global slowdown. We suspect EUR/GBP finds good demand under 0.87 now and we remain happy with a 0.89 target for 1Q23. Chris Turner Read this article on THINK
Czech Republic: Tax Revenues Should Be Higher Than MinFin Expects

Czech National Bank is bound to keep the interest rate unchanged, Czech koruna expected to trade near 24.50

ING Economics ING Economics 19.12.2022 16:19
The last meeting of the Czech National Bank this year will bring nothing new. The traditional dovish majority on the Bank Board has already declared that rates are at a sufficiently high level and the current FX regime will continue. We believe that the next CNB move will be a rate cut The Czech National Bank in Prague No need to do anything The Czech National Bank will hold its last meeting of the year on Wednesday. We expect it to be a non-event with rates and the FX regime remaining unchanged. The new forecast will not be released until February, so it is hard to look for anything interesting at this meeting. Board members have been very open in recent days and hence there is minimal room for any surprises. The traditional dovish majority has publicly declared that interest rates are high enough and continue to choose the "wait and see" path. Of course, as always, we have heard the traditional warnings that interest rates could go up if necessary. However, the negligible market reaction shows that the dovish view is clear here. The governor also confirmed last week that the central bank will continue to defend the koruna. At the same time, another board member confirmed that the CNB has not been active in the market for some time. Thus it is hard to look for anything new here either. The most exciting thing here is the recent publication of the calendar of monetary policy meetings next year. 7.00% CNB's key policy rate We expect no change this week The next rate move will be a cut In the long term, nothing has changed in our forecast. The inflation picture remains mixed. Thanks to government measures, inflation fell well below the CNB's forecast in October but rose again in November, more than the market expected. At the same time, core inflation accelerated sharply to near year-to-date highs in October in both month-on-month and year-on-year terms, before slowing again in November. Overall, however, it is clear that inflationary pressures remain strong in the economy and the main test will be January's inflation. We think this could easily reach previous highs and go above 18% YoY. However, this is still below the CNB's earlier forecasts, which assumed inflation above 20% YoY, so the central bank is in a comfortable situation under the new reaction function. Thus, we think the CNB's next move will be to cut rates. CNB costs of FX intervention (EURbn) Source: CNB, ING estimate What to expect in rates and FX markets The Czech IRS curve as well as regional peers have been dragged down in recent weeks, particularly by global drivers. However, locally, the government's measures and artificially low inflation have also played a role, which we believe has given the market the false impression that the inflation problem has been solved. We think this is not the end and the market is pricing in rate cuts too soon. Although our forecast is on the dovish side of the market, we think it will be a more bumpy road ahead. Therefore, we think the market is too aggressive at the moment and we see a higher IRS curve in the coming weeks with a sweet spot in the 1-3y horizon. On the bond side, Czech government bonds (CZGBs) have finally become cheaper in asset spreads (ASW) in line with our expectations. However, the main pressure has come from the IRS side, which bounced off the bottom recently. We believe CZGBs should still get cheaper in the coming weeks. However, in the second half of January, next year's supply will come into play. While this should be significantly lower in net terms, it should rise significantly again compared to the last two months as the Ministry of Finance starts to fund next year's budget. On the FX side, the CNB's official numbers show that the last significant market intervention took place in September and by October, the central bank was essentially no longer active in the market. Moreover, our estimates suggest zero activity in November and December as well. In our view, the market has become accustomed to the CNB's presence in the market and is shifting from strong short positions to the long side given that it is a safe haven within the region at the moment. On the other hand, we expect this potential to be exhausted soon and for the koruna to remain near 24.50 EUR/CZK and not be a problem for the CNB. If the current market conditions persist and the central bank is not forced to intervene, we believe that in May, the board could discuss an exit from this FX regime. Read this article on THINK Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
UK GDP Already Falling And Continuing To Do So For This Calendar Year, Copper Is Still Within A Tightening Range

Bank of England decision wasn't unanimous as one member voted for a 75bp hike with two other opting for inaction

Enrique Díaz-Álvarez Enrique Díaz-Álvarez 19.12.2022 16:35
We’d been warning for some time about the large gap between market expectations for future ECB rates and the inflationary reality. The central bank swung clearly to our view at its meeting last week, warning of 50bp hikes for as long as is necessary and forcing European rates higher across the curve. The Federal Reserve was also hawkish, and the Bank of England maintained its unblemished track record of muddled messaging and general confusion. The euro benefited the most, while sterling, emerging market currencies and risk assets generally reacted badly to the news that the two most important central banks continue to focus exclusively on reining in inflation back to targets.   The week before Christmas tends to be on the dull side in financial markets, as traders wind down for the year. In fact, little news of note will come out next week, beyond the PCE inflation report in the US on Friday. However, the market is still digesting the hawkish surprises from last week’s central bank meetings so we still expect an interesting week in currency markets. Figure 1: G10 FX Performance Tracker [base: USD] (1 week) Source: Refinitiv Datastream Date: 19/12/2022 GBP While rates in the UK were hiked by 50bps as markets expected, there was a three-way split among Monetary Policy Committee members, with one member voting for a 75bp hike and two more voting for no change in rates. This was, at the margin, a dovish split, but on the other hand there seemed to be yet another swing in Bank of England communications, this time towards hawkishness and acceptance of higher market expectations of future hikes. Read next: EUR/USD Pair Looks Reasonably Well Supported | The Japanese Yen Galloped Higher In The Morning| FXMAG.COM Overall a muddle message that resulted in an underperforming currency as sterling finished the week right near the bottom of the G10 currency rankings. No major news will be released this week, so expect the pound to move off events elsewhere. EUR The ECB sent markets an unmistakably hawkish message last week, validating our view that there was a massive gap between expectations of future hikes and the inflationary realities in the Eurozone. President Lagarde warned of 50bp hikes, harsher and earlier quantitative tightening, and a higher terminal rate for the ECB. Another positive factor for the euro were the December PMIs of business activity, all of which improved measurably from the previous month. The worst-case scenarios for an energy crisis look increasingly remote, and China’s pivot away from zero-COVID policies only adds to the bullishness (relatively speaking) on the Eurozone economy. However, the common currency has already had a blistering rally of over 10% since its late-September low and perhaps a pause is to be expected in the lead up to the Christmas holiday. Figure 2: G3 PMIs (2020 – 2022) Source: Refinitiv Datastream Date: 19/12/2022 Aside from China, Japan has been one of the few countries in the world to adopt an easing bias in the current cycle, so a move away from this at a time when most central banks are delivering dovish pivots would be unambiguously bullish news for JPY. The BoJ will be announcing its latest policy decision on Tuesday, though we see very little chance of any policy changes, or tweak to the bank’s forward guidance. CHF The Swiss franc outperformed most G10 currencies last week, although it ended slightly lower against the euro. Last week’s Swiss National Bank meeting largely followed the script, and had little impact on the franc. As expected, the SNB raised its policy rate by 50 basis points to 1% and reiterated its pledge to intervene in the FX market as necessary. President Jordan confirmed that the bank has indeed sold foreign currency in the past few months and that it may intervene on both sides of the market. The bank’s conditional inflation forecast was little changed from September and the SNB continues to pencil in inflation of 2.4% in 2023. Moreover, the bank expects growth to decelerate from around 2% this year to 0.5% in 2023. Even though price pressures in Switzerland have moderated of late, the fight against inflation is not over and the bank signalled that it may hike rates again. We expect the SNB to maintain its hawkish stance in the near-term, but also think that it won’t be long until the bank considers ending the hiking process. With barely any news from Switzerland on tap this week, the franc may trade off events elsewhere, though volatility may be limited. AUD The Australian dollar was one of the underperformers in the G10 last week, with heightened uncertainty surrounding the covid situation in China keeping gains for AUD in check. While news of a possible move away from zero-covid should be keeping the currency well bid, reports of jumps in caseloads have soured optimism. Economic news out of Australia last week was mixed, with a strong jobs report offset by another drop in the composite PMI, which remains in contractionary territory. Most economists, ourselves included, expect Australia to avoid recession in the coming months, though a slowdown appears inevitable, particularly in light of the acute uncertainty abroad. The latest RBA meeting minutes will be released on Tuesday. Markets see a relatively low possibility of another rate hike at the next meeting in February, so we could see a bout of AUD strength if one were to be alluded to in tomorrow’s minutes. NZD Strong third quarter GDP data perhaps contributed to an outperformance in the New Zealand dollar relative to its antipodean counterpart last week. The New Zealand economy expanded by 2% on the previous quarter, more than double expectations, and by 6.4% year-on-year (5.5% consensus). The reaction in markets to the news was, however, rather limited, as economists believe that this jump in activity was driven largely by one-off factors, notably the reopening of borders in August. We suspect that volatility in NZD will be low this week as we approach the typically subdued Christmas period. Focus in the New Year will revert back to RBNZ monetary policy. The bank is expected to be the most active in the G10 next year, which may provide some scope for a dovish surprise. Figure 4: New Zealand GDP Growth Rate (2015 – 2022) Source: Refinitiv Datastream Date: 19/12/2022 CAD A lack of major domestic news caused CAD to put in a middling performance last week. The modest uptick in global oil prices should be supporting the Canadian dollar, although the Bank of Canada’s dovish policy stance has made gains hard to come in recent months. Inflation and GDP data out on Thursday and Friday respectively could receive some attention this week, though the BoC has indicated that it may have already ended its tightening cycle, which could mean that these data points become slightly less relevant. That said, economists are pencilling in a four-month high in the headline inflation numbers that, if confirmed, could raise the possibility of another 25bp hike in the first quarter of next year, even if we think this is doubtful. SEK The ECB’s hawkishness sent the krona to its lowest level in almost two months against the euro last week, although Sweden’s November inflation data perhaps prevented a more aggressive move lower in the currency. The annual inflation rate increased to 11.5% in November, its highest level since February 1991, following a 10.9% surge in October, while core inflation increased to 9.5%. The continued rise in inflation supports our view that the Riksbank will likely need to raise interest rates further during the next few meetings. This could support the krona, as most other major central banks appear to be nearing the end of their tightening cycles. November retail sales will be released this Thursday. Apart from that, there are no events that are expected to move the currency, and as we approach the festive period we expect market movements to abate. NOK The slight rebound in Brent crude oil prices, and last week’s rate hike by Norges Bank, allowed the Norwegian krone to post modest gains against the euro last week. As expected, Norges Bank raised rates by 25bps last week, lifting its key rate to 2.75%. The bank announced that it expects to continue hiking rates further at the next meeting, and that it expects rates to be close to 3% in 2023. As for the macroeconomic outlook, the bank expects inflation to remain higher than expected for a longer period of time, with the economy set to slow down more than initially expected. As inflation remains well above target, we now expect Norges bank to carry out two additional rate hikes of 25 basis points at the January and March meetings. However, this will depend entirely on the data available until then. The December unemployment rate will be released this Friday, although there are no other events that are expected to move the currency aside from that. CNY The Chinese yuan ended last week roughly in the middle of the emerging market currency dashboard, and just a touch lower against the US dollar. Initial optimism about China inching away from zero-COVID appears to be turning into caution as the country is battling through its first winter wave of covid. China’s chief epidemiologist Wu Zunyou expects two more to come, with the latter ending in mid-March. This casts a shadow on the near-term economic outlook – data in the last few days has certainly not helped allay this pessimism. Hard data published last week was overall weaker-than-expected. Perhaps the most disappointing was retail sales, which showed a slight contraction year-to-date. Following discussions at the Central Economic Work Conference last week, authorities telegraphed that economic stability is their top priority for next year, and also stressed a pursuit of steady progress. The messaging was in line with recent signals from authorities, and confirms they’ll be focused on reviving poor domestic demand and encouraging an expansion of the private sector. This week we’ll continue to focus on covid news, albeit we will also keep an eye on monetary policy. China’s medium-term lending facility rate was kept unchanged last week, albeit the PBoC injected a net 150 billion yuan into the banking system via the facility (after we consider maturing loans). On Tuesday, we await the decision on 1- and 5-year loan prime rates, albeit no change is expected there. Economic Calendar (19/11/2022 – 23/12/2022) To stay up to date with our publications, please choose one of the below: 📩 Click here to receive the latest market updates👉 Our LinkedIn page for the latest news✍️ Our Blog page for other FX market reports 🔊 Stay up to date with our podcast FXTalk Read the article on Ebury
Oanda expect next rate hikes as Bundesbank and ECB predicts will accelerate

Oanda expect next rate hikes as Bundesbank and ECB predicts will accelerate

Kenny Fisher Kenny Fisher 19.12.2022 20:54
EUR/USD has edged higher on Monday. In the European session, EUR/USD is trading at 1.0610, up 0.24%. The week started on a positive note as German business confidence climbed in December. The Ifo Business Climate index rose to 88.6, up from 86.4 in November and its highest level in five months. Bundesbank revision – growth down, inflation up The Bundesbank does not appear to share in the optimism. Its biannual economic forecast found that Germany’s economy will contract through the middle of 2023, and businesses and consumers will continue to be hit with high energy costs. The war in Ukraine has been weighing heavily on the German economy, and the Bundesbank’s latest economic projection sees a 0.5% decline in GDP in 2023, compared to a 2.4% gain in the June forecast. Inflation has been revised to 7.2% in 2023, up from 4.5% in June. The risk to economic growth has been tilted to the downside, due to possible shortages in energy supplies. As for inflation, the risk is tilted to the upside. The updated forecast mirrors the latest ECB projections for the eurozone, which raised inflation while lowering growth. Read next: John Hardy to FXMAG: The UK economy faces significant head-winds from supply side limitations| FXMAG.COM With the Bundesbank and the ECB projecting that inflation will accelerate, we can expect further rate hikes from the ECB, which delivered a 50-bp increase last week. The ECB rate statement said rates would have to “rise significantly” in order to curb inflation, and ECB President Lagarde said that the central bank could deliver up to three more rate hikes. Lagarde was hawkish, saying that the 50-bp hike, which came after two 75-bp hikes was not a pivot and that the ECB would not be slowing down. EUR/USD Technical EUR/USD tested resistance at 1.0610 earlier today. Above, there is resistance at 1.0714 1.0610 and 1.0484 are providing support This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds. Euro edges up as Business Climate improves - MarketPulseMarketPulse
Technical Outlook Of The EUR/JPY Pair Movement In Short Term

Technical Analysis Of The Euro To Japanese Yen Pair

InstaForex Analysis InstaForex Analysis 20.12.2022 08:36
EUR/JPY is unfolding the scenario according to expectations. After a temporary recovery in wave B to 146.73, we saw a strong decline as wave C took over. The ideal target for wave C is seen at the origin of the ending diagonal near 133.00. In the short term, we see resistance at 142.70. If broken, a retest of the former support line of the ending diagonal near 143.80 could be seen before renewed downside pressure towards the 133 target. Relevance up to 07:00 2022-12-21 UTC+1 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/305541
Australian dollar declines as RBA minutes suggest a pause in rate hikes may happen

Australian dollar declines as RBA minutes suggest a pause in rate hikes may happen

Jing Ren Jing Ren 20.12.2022 08:19
EURUSD consolidates gains The euro found support after ECB officials pledged to keep raising interest rates. The pair came under pressure near last June’s high of 1.0780. A RSI divergence shows a deceleration in the upward momentum and could be significant in this supply zone. After traders took some chips off the table, new buying interests will need to follow through to maintain the single currency’s edge. 1.0530 is a key level to make that happen or the price could tumble below 1.0440. A rally back above 1.0700 would keep the bulls in play. AUDUSD tests major support The Australian dollar slips as the RBA minutes hints at a possible pause in rate hikes. The pair has so far struggled to clear 0.6900 at the origin of the September sell-off. A combination of profit-taking and fresh selling has weighed on the aussie. A push under 0.6750 may have dampened the enthusiasm, putting the recent lows around 0.6670 at test. The bulls must lift offers in the newly formed supply zone around 0.6790 before they could regain control. Otherwise, a fall below said support could trigger a broader liquidation. US 30 seeks support The Dow Jones 30 falls as investors offload risk assets over the prospect of further rate hikes. Last week’s reversal has dented the short-term mood, forcing leverage positions to abandon 33400 and lifting volatility. The index is looking to secure a foothold at 32500 which is a 38.2% Fibonacci retracement of the rally from October. The 50% level and daily low at 31800 is critical in keeping the recovery intact in the medium-term. On the upside, 33500 then 34100 are two obstacles to clear before the uptrend could resume. Read next: The FCC Seeks More Than $200 Million From Four Cellphone Carriers| FXMAG.COM
From the fundamental point of view, these facts may become a game changer, sending the EUR/USD pair to the parity level

From the fundamental point of view, these facts may become a game changer, sending the EUR/USD pair to the parity level

Aleksandr Davidov Aleksandr Davidov 14.12.2022 19:48
The European Central Bank started to raise its key interest rate after the US Federal Reserve kickstarted its rate hikes. The record-high inflation forced the regulators to make such a decision. The ECB is expected to increase the interest rate to 2.5% from 2.0% during its December meeting to curb the double-digit inflation in the region. However, the markets are speculating about how long the ECB will continue rate hikes. The EU inflation rate is higher than in the US. Moreover, it does not decelerate as much. Two months ago, everyone believed the ECB would have higher interest rates than the Federal Reserve in 2023. Nevertheless, such expectations may prove to be wrong. The US Federal Reserve and the European Central Bank steer their monetary policies in slightly different environments. Notably, the markets pay close attention to inflation but the regulators also closely monitor the labor market when making decisions. In this connection, there is a huge gap between the United States and the European Union. The Fed has to combat inflation and deal with the overheated labor market at the same time. The US central bank managed to ease inflationary pressures but the labor market continues to raise woes. This fact leaves the regulator with insufficient room for action and rules out any reduction in the refinancing rate. At the same time, declining inflation is forcing the Fed to act more softly. The regulator is expected to moderate the pace of interest rate hikes. Meanwhile, it is likely to keep the rates high until unemployment starts to rise toward 5.0%. Read next: Given the peculiarities of the US labor market and the high labor mobility, the acceptable unemployment rate is considered to be 5.0%| FXMAG.COM In the EU, unemployment is considerably higher. As a rule, central banks stimulate job growth by lowering interest rates. However, rising inflation forces them to increase the rates. In other words, a 6.5% unemployment rate reduces the ECB's leverage for sharp rate hikes. Especially, when the unemployment rate is falling. If the refinancing rate is raised aggressively, the fragile employment growth is likely to be damaged. Therefore, one can hardly imagine that interest rates in Europe will be higher than in the US. The ECB may put brakes on the rate hikes before the Fed will do so. Meanwhile, there is another burning issue. In 2022, US President Joe Biden signed the Inflation Reduction Act. It includes direct subsidies for industries located in the US. The scale of the business support is so impressive that some major European industries have already openly announced that they are considering moving some of their production facilities from Europe to the US. The European Union is already voicing concerns. France is stating that the United States has declared a trade war on the European Union with this act. The country urges other EU members to take appropriate countermeasures. The problem is that the cost of energy in the European Union is several times higher than in the United States. This greatly affects the cost of production. Europe becomes less competitive. So, European companies have only two options left. They can either cut profits or cut costs by transferring production facilities out of Europe. Neither of these two options suits the largest EU countries. In the context of the enormous debt burden of the European Union, it is possible to subsidize businesses on such a large scale only when interest rates are extremely low or even negative. In addition to direct budget subsidies financed by government borrowing, since there are no alternative sources of income, it is also possible to facilitate business crediting. However, this may come true only when interest rates are low. In this relation, the ECB should consider lowering the refinancing rate rather than raising it. The European regulator may stop monetary policy tightening earlier than the Fed. Moreover, it may become the first regulator to start lowering interest rates. First of all, it needs to decrease inflation to appropriate levels. Notably, the central bank has already made some progress regarding this matter. Thus, in the middle of next year, the ECB is expected to gradually reduce the refinancing rate. From the fundamental point of view, these facts may become a game changer, sending the EUR/USD pair to the parity level.
Britain's Rishi Sunak And EU's Ursula Von Der Leyen Will Meet Today To Finalize The Northern Ireland Drama

FX: The Last Czech National Bank Meeting Of The Year, Downside Risks For The Pound In The New Year

ING Economics ING Economics 21.12.2022 09:18
Markets are unlikely to be moved by any data release over the Christmas period, but a bumpy exit from the zero-Covid policy in China and developments in the energy market might cause a deterioration in global risk sentiment. We remain bullish on the dollar in early 2023. The Czech National Bank will close this year's meetings of central banks in the region.   This is the last FX Daily of 2022. We'll resume publication on Wednesday, 4 January 2023. We wish all our readers a happy holiday season! USD: No key data in the next two weeks Markets are still digesting yesterday’s hawkish surprise by the Bank of Japan as we approach the quietest period of the year. The market reaction to the BoJ shock has seen a widespread sell-off in bonds, but no negative spillover into Western equities. USD/JPY is trading around 131.80 at the time of writing: closing the year above 130.00 may be a welcome development at the BoJ as it could signal that speculation on further policy normalisation has – for now – been kept in check. Today, markets will look at the Conference Board consumer confidence as well as home sales data. Yesterday, housing starts came in above consensus while building permits plunged much more than expected. In neighbouring Canada, expect CPI data to impact the Canadian dollar this afternoon. Since this is the last FX Daily of the year, we should also look at potential FX drivers in the two weeks ahead. On the data side, the US calendar includes personal income, PCE and durable goods orders for November (on 23 December) as well as Dallas and Richmond Fed manufacturing indices on 27-28 December. For the time being, there are no scheduled Fed speakers until the Fed minutes release on 4 January. We doubt data will be able to shake markets in the low-volatility environment of the festive period. News from China and on the energy crisis is more likely to drive any significant move if anything. In China, an increasing number of unofficial reports suggest that the actual death toll may be considerably larger than the reported one: should this be backed by more evidence, markets may increasingly doubt the sustainability of China’s zero-Covid exit path, with negative implications for the yuan, Asian EMFX, and high-beta currencies. On the energy side, Russia’s potential retaliation to the EU cap on gas prices, a possible re-escalation in the conflict in Ukraine and weather-related news (which has been a key driver of gas prices lately) may all have repercussions on the FX market. European currencies continue to look quite vulnerable from this point of view. We think DXY could close the year around the current levels. In line with its seasonal trend, December has been a soft month for the greenback. It’s worth remembering that the dollar rose in each of the past four years in January. Our view for early 2023 is still one of dollar recovery. Francesco Pesole EUR: Keeping an eye on energy market volatility We think EUR/USD may find some stabilisation around 1.0600 into year-end as volatility starts to drop. A drop to sub-1.0500 levels is, however, possible should market sentiment deteriorate, especially on the energy side. There are no major data releases to highlight in the next two weeks for the euro, at least until the German CPI figures for December are released (3 January). No European Central Bank speakers are scheduled. Elsewhere in developed Europe, keep an eye on today’s release of the Swedish Economic tendency survey. In Norway, it will be worth keeping monitoring daily FX purchases published by Norges Bank on 30 December. The Bank has scaled down krone sales in the past two months, and – as discussed here – this may signal appetite for a stronger currency. Expect some NOK volatility around the release. We see EUR/SEK and EUR/NOK enter the new year from the 11.00-11.10 and the 10.45-10.55 ranges, respectively. Francesco Pesole GBP: Outlook for 2023 still looks challenging While dealing with multiple strikes, the UK will not see a lot of data releases in the coming two weeks, with tomorrow’s first GDP data unlikely to move the market. There are no scheduled Bank of England speakers until the first week of January. We continue to see mostly downside risks for the pound in the new year, as a recessionary environment and sensitivity to market instability may cause a return to the 1.15-1.18 range in cable. For this festive season, GBP/USD may hold around 1.2100-1.2250. Francesco Pesole CEE: CNB in a comfortable situation Yesterday's meeting of the National Bank of Hungary brought a surprisingly hawkish market reaction. The NBH managed to maintain its "higher rates for longer" stance while announcing that the programme of providing hard currency to energy importers will be extended for the coming months. Both represent positive news for the forint. Implied yields have risen again to near-record levels, providing a shield against potential sell-offs. In addition, falling gas prices have once again driven FX in the CEE region in recent days, and given that Hungary is the most energy-dependent country in the region, this is translating positively into a strengthening forint. Thus, all in all, everything speaks in favour of further strengthening of the forint, strengthening our view and we expect 400 EUR/HUF levels in coming days. Today, we will see the last Czech National Bank meeting of the year. In line with the market, we expect rates and the FX regime to remain unchanged. The board members have been very open in their talks over the past few days, so we are unlikely to see any surprises. Although inflation rose more than the market expected in November, it is still below the CNB's forecast due to government measures. Moreover, the koruna has been below the CNB's intervention level for a long time and in fact yesterday it reached its strongest level against the euro in 11 years. Thus, according to the new reaction function, the central bank is in a comfortable situation. For now, we believe the koruna is mainly supported by global conditions, falling gas prices and a weaker US dollar. In both cases, we believe this is temporary and moreover, the positioning seems mostly long within the region in the case of the koruna. Thus, we think koruna will hit its limit soon.  Frantisek Taborsky Read this article on THINK Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
The EUR/JPY Pair Is Expected To Start A New Zig-Zag Correction

The EUR/JPY Cross Currency Pair Is In Bearish Trend

TeleTrade Comments TeleTrade Comments 21.12.2022 09:33
EUR/JPY prints mild gains around the lowest levels in three months. 200-DMA probes bears but downbeat oscillators, key support break signal further downside. Early December swing low guards immediate recovery moves. EUR/JPY bears take a breather at a three-month low, picking up bids to 140.30 heading into Wednesday’s European session. In doing so, the cross-currency pair seesaws around the 200-DMA to pare the biggest daily slump since June 2016. Even so, bearish MACD signals, an absence of oversold RSI and sustained trading below the previous key support line from March 2022, now resistance around 141.85, keep the EUR/JPY bears hopeful. That said, the sellers need a daily closing below the 38.2% Fibonacci retracement level of March-October upside, close to 139.25, to retake control. Following that, September’s bottom surrounding 137.35 and 50% Fibonacci retracement near 136.40 could challenge the EUR/JPY bears before highlighting the golden ratio, namely the 61.8% Fibonacci retracement level at 133.55, will be in focus. Should the EUR/JPY prices remain bearish past 133.55, May’s bottom of 132.66 could act as the last defense of the bulls. Alternatively, recovery moves need to cross the December 02 low of 140.75 to convince short-term buyers. In that case, the support-turned-resistance trend line from March, near 141.85, could gain the bull’s attention. It’s worth noting that the EUR/JPY pair’s run-up beyond 141.85 could aim for the top marked in June and the monthly peak, respectively near 144.25 and 146.75. EUR/JPY: Daily chart Trend: Bearish
The EUR/USD Pair Chance For The Further Downside Movement

Euro and greenback - CB Consumer Confidence catched markets by surprise rising to 5-month high

Kenny Fisher Kenny Fisher 22.12.2022 14:51
EUR/USD continues to drift this week, content to stick close to the 1.06 line. There are no eurozone releases today, so I expect the euro to continue treading in place for the remainder of the day. This week’s data calendar in Europe has been very light, with mostly tier-2 releases. On Thursday, Germany and the US both released consumer confidence data, which pointed to very different consumer mindsets. Germany’s GfK Consumer Sentiment Index remained in deep freeze at -37.8, although the index has been inching higher, courtesy of energy prices stabilizing. Still, the German consumer is deeply pessimistic. At home, high inflation and rising interest rates are squeezing consumers, while the war in Ukraine, which has dampened economic activity, shows no signs of ending anytime soon. The German release mirrored Tuesday’s eurozone consumer confidence, which is also mired deep in negative territory. Contrast this gloomy outlook with the US, where CB Consumer Confidence surprised the markets by climbing to a 5-month high, with a reading of 108.3 in December. This blew past the November reading of 101.4 and the consensus of 101.0. The CB noted that inflation expectations fell to their lowest level since September 2021, in large part due to the drop in gas prices. The strong improvement in consumer confidence is interesting, as the US economy is expected to tip into recession – perhaps consumers are confident that the recession will not be all that bad. ECB’s De Guindos talks hawkish The ECB eased up on the pace of rates at the December meeting, as it delivered a 50-bp increase after two consecutive 75-bp increases. ECB President Lagarde warned that this was not a dovish pivot and that further rates hikes were coming. ECB Vice-President Luis de Guindos sounded hawkish on Thursday, saying, “Increases of 50 basis points may become the new norm in the near term.” De Guindos said the ECB had to do more in the fight against inflation and voiced concern that the markets might underestimate the persistence of inflation. Fed Chair Jerome Powell would likely agree, as the Fed has had a tough time trying to convince the markets that it plans to continue tightening in order to curb inflation. Read next: Tomorrow greenback and Canadian dollar meet key data - Canada's GDP and US Core PCE Price Index - Fed's preferred inflation indicator | FXMAG.COM EUR/USD Technical EUR is testing resistance at 1.0610. Above, there is resistance at 1.0714 1.0484 and 1.0380 are providing support This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds. Euro steady on light data calendar - MarketPulseMarketPulse
Italy: ING Economics expect quarter-on-quarter GDP in the fourth quarter may contract by 0.2%

Italy: ING Economics expect quarter-on-quarter GDP in the fourth quarter may contract by 0.2%

ING Economics ING Economics 23.12.2022 13:54
The last batch of confidence data for 2022 points to extra resilience in fourth quarter GDP. We are still pencilling in a small contraction, but a flat reading cannot be ruled out Source: Shutterstock The latest batch of confidence data for 2022 shows that both consumer and business sentiment has improved, with the sole exception of manufacturers. Consumers more upbeat and less concerned by future unemployment The consumer confidence index posted the second consecutive substantial improvement in December, reaching back to the level seen in May. The drivers of the four-point gain were sharp increases in the economic conditions and future climate components, reflected in a clear improvement in unemployment expectations. In our view, two factors can explain the surprisingly strong resilience of consumer spirits, irrespective of the ongoing erosion of real disposable incomes caused by the inflation spike. The first is a favourable development in the labour market, with an improving employment rate and a falling unemployment rate. Whilst a possible side effect of demand/supply mismatch and of unfavourable demographic developments, these are nonetheless positive short-term factors. The second is the fact that the Meloni government has prioritised providing continuous fiscal support to households to weather the energy inflation shock, refinancing most of the measures until the end of March 2023 in the budget. Interestingly, for the second month in a row, consumers express an increasing willingness to purchase durable goods. Manufacturers confirm they're not immune to external developments The business front looks more diversified, with manufacturers more pessimistic and builders, retailers, and, importantly, service providers, more upbeat. The fall in manufacturing confidence, more pronounced among producers of investment and consumer goods, reflects softening orders and increasing stocks of finished goods, consistently mirrored in declining production plans. Italian industry, still outperforming its big eurozone peers, is apparently not immune to recent unfavourable developments in global trade nor to growing uncertainty about the risk of renewed supply chain issues related to Covid developments in China. Services likely benefiting from stronger-than-expected reopening effects Perhaps the biggest surprise comes from the fourth consecutive confidence improvement in the service sector, notwithstanding an expected setback in the tourism component. The reopening effect seems to be lasting longer than expected, with a possible bearing on 4Q22 GDP developments.   Still pencilling in a negative 4Q22 GDP change, but a flat reading cannot be excluded All in all, the end-of-year confidence data release adds upside risks to 4Q22 GDP developments. We continue to believe that manufacturing will confirm a supply-side growth drag in the quarter, but acknowledge the risk that services might fare better than expected. The demand side counterpart might have a smaller negative correction in consumption than previously anticipated. We are currently pencilling in a 0.2% quarter-on-quarter GDP contraction in 4Q22, but a flat reading could be a distinct possibility.      Read this article on THINK Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Market Focus: European Data Releases, ECB Survey, US FOMC Minutes, and UK Bond Supply

The Kiwi (NZD) Saw A Sharp Further Run To The Downside Yesterday, The EUR/GBP Pair Tests The Highs

Saxo Bank Saxo Bank 23.12.2022 14:26
Summary:  After Q3 GDP data revision that reminds us that the UK is in the vanguard for economies lurching into recession, sterling has lurched into a new slide and is even threatening a break down versus the euro as EURGBP tests the highs since the Truss-Kwarteng mini-budget sterling wipeout. Elsewhere, a plunge in the kiwi is likely down to position squaring and rebalancing ahead of year end after a remarkable recent run. Today's Special Edition Saxo Market Call podcast: Investors' Wish List for 2023.  FX Trading focus: Sterling stumbles after weak GDP, Kiwi longs take profit. Last important US data point of the year up today: November PCE inflation. The latest Q3 UK GDP revisions suggest the economy is weakening even more quickly than previously thought last quarter, as growth was revised down to -0.3% QoQ from -0.2% previously, and the Private Consumption figures was revised to -1.1% QoQ vs. -0.5% previously. The combination of a Bank of England that wants to soft-pedal further tightening and the promises of fiscal austerity from the Sunak-Hunt duo are a powerful negative for sterling as we look ahead into the New Year, which will likely bring relative UK economic weakness even if our thoughts that  recession fears for next year globally are over-baked for the first two and even three quarters. The FX fundamentals are entirely the opposite for the euro, as the ECB attempts a maximum hawkish stance as it recognizes the risks that the fiscal impulse can keep inflationary pressures elevated from here. The two-year yield spread is close to its highest since October of last year. Chart: EURGBPA weak GDP revision yesterday didn’t appear to be the proximate trigger for sterling’s latest lurch lower, but does remind us of the relative weakness of the UK outlook and the combination of a heel-dragging BoE (on further tightening) and austere fiscal picture could set up further declines in the weeks and months. Worth noting that the key EURGBP is pushing on the top side of the range established since the volatile days surrounding the Truss-Kwarteng mini-budget announcement. A hold above 0.8800 could lead to a test of the higher end of the range since the 2016 Brexit vote above 0.9200. A higher euro is straightforward if ECB maintains its hawkish stance as the EU fiscal impulse is far stronger from here. The wildcard for the euro side of the equation is the usual existential one of peripheral spreads and whether these stay orderly if yields resume their rise next year. Source: Saxo Group Elsewhere, the kiwi saw a sharp further run to the downside yesterday with no proximate identifiable trigger. AUDNZD traded all the way to 1.0719 before backing off to below 1.0650 at one point this morning. I suspect that this was an extension of the position squaring after a the remarkable run higher in the kiwi over the last two months, driven both by relative RBNZ hawkishness, but in particular by RBA (and arguably BoC), sparking heavy flows in AUDNZD just after the pair had traded almost to a decade high on hopes for a Chinese reopening boosting the outlook for Australia. The current reality on the ground in China is even worse than during the zero Covid tolerance days, but we know that the Arguably, recent record low consumer confidence readings in New Zealand suggest that the RBNZ will need to climb down from its hawkishness, at least in relative terms to its peers, going into next year. After an incredible slide in AUDNZD and rally in NZDCAD, I suspect we will see powerful mean reversion in the coming three months in those pairs. It feels like USD traders have checked out for this year. Hard to tell if today’s US November PCE inflation data can generate any excitement on a soft print after the soft CPI print earlier this month generated a lot of fuss that quickly faded on the very same day. A more interesting development would be a slightly hot core set of PCE core readings than expected today (the month-on-month core reading expected at +0.2% and year-on-year expected to have decelerated sharply to 4.6% from 5.0% in October. EURUSD has traded within a 100-pip range for more than a week and the 1-month implied volatility has recently plumbed lows (around 7.50%) not seen since the beginning of this year and would probably be lower still had not the Bank of Japan roiled markets this week. But the USD will have a hard time ignoring any further slide in risk sentiment to close out the year. And the beginning of the calendar year is nearly always interesting for new themes and often for demarcating key highs or lows for the year. Consider the following from the last six years of the EURUSD trading history: 2022: High for the year in EURUSD posted in February, but that high was only a few pips above the 1.1483 high water mark of January. Low for year posted in September 2021: High for the year was in January, on the third trading day of the year, low in late November 2020: Exceptional pandemic year, low for year posted in March, high in December 2019: High for quite year posted on January 10, low on October 1 2018: High for year posted in February, but highest daily close not above intraday high in January. Low posted in November 2017: Low for year in January, high in September (December high less than a figure from September high water mark) Table: FX Board of G10 and CNH trend evolution and strength.The JPY still sits with a strong positive reading, but has yet to “trend” after the huge one-day move this week – a few more days of lack of movement and questions marks would begin to flourish around its status. Elsewhere, note the NZD going full circle and now broadly outright weak after its status as king of the G10 as recently as less than two weeks ago. Gold posted a sharp reversal yesterday. Source: Bloomberg and Saxo Group Table: FX Board Trend Scoreboard for individual pairs.Note that the weakness in risk sensitive currencies like SEK, NZD, AUD & GBP are seeing those edging into a downtrend versus the US dollar – worth watching for a deepening of these moves if risk assets continue south into the New Year. The EURCHF bears watching if the pair can take out 0.9900-0.9950 as currently the pair is caught in a very tight range. NZD is rolling over in many pairings. Source: Bloomberg and Saxo Group Upcoming Economic Calendar Highlights 1330 – Canada Oct. GDP 1330 – US Nov. PCE Inflation 1330 – US Nov. Flash Durable Goods Orders 1500 – US Dec. Final University of Michigan Confidence   Source: https://www.home.saxo/content/articles/forex/fx-update-sterling-and-kiwi-stumble-as-year-winds-down-23122022
The Crude Oil Market Situation Is Stable Despite Russia's Production Cuts

The Impact Of The EU Ban On Russian Crude Oil Is Still Playing Out

ING Economics ING Economics 24.12.2022 07:37
The key supply uncertainty for the oil market this year has been how well Russian supply would hold up following a number of countries banning Russian exports, along with an increased amount of selfsanctioning. Russian supply has held up better than many were expecting, with India, China and a handful of other smaller buyers increasing their purchases of Russian crude oil, given the steep discounts available. As a result, exports in October were 7.7 million barrels a day (MMbbls/d), down just one hundred thousand barrels per day (Mbbls/d) YearonYear (YoY). However, the impact of the EU ban on Russian crude oil is still playing out, and we will have to wait until early February for the ban on Russian refined products. The ability of India and China to absorb a still more significant amount of Russian oil is l As a result, we expect Russian supply to fall in the region of 1.6ikely limited. 1.8MMbbls/d Year Year in the first quarter of 2023. As for the G-- on7 price cap, we expect it to have little direct impact on Russian oil supply for now, given that at US$60/ Urals are trading. bbl, it is above where Russian How the Russia/Ukraine war evolves will be important for oil markets in 2023. While a de escalation might not lead to the return of pre lot of supply risk from the market. OPEC+ sticks to its guns war oil trade flows, it would remove a OPEC+ has largely ignored calls from the US and other key consumers to increase oil supply more aggressively this year amid higher prices and supply concerns. And the group’s decision to reduce output targets by 2MMbbls/ d from November 2022 until the end of 2023 has been criticised, particularly by the Amcericans. Although, with hindsight, the decision by OPEC+ might appear to be the right one, at least in the near term, as it offers stability to the market. Given that mo st of its members are producing well below their production targets, OPEC+ supply cuts work out to an effective cut of around 1.1MMbbls/d. In aggregate, OPEC+ production was 3.22MMbbls/d below target levels in October. However, the cuts may prove to be mo re destabilising in the medium term, given the expectation of a tighter market through 2023. US oil producers are not there to fill the gap The response from US producers to the higher price environment this year has been anything but impressive. And t his appears to have also given OPEC+ confidence to cut supply without the risk of losing market share. US crude oil supply is forecast to grow by less than 600Mbbls/d to average around 11.8MMbbls/d in 2022. While for 2023 supply is forecast to grow by less than 500Mbbls/d to around 12.3MMbbls/d. This growth is much more modest than the supply growth seen in previous upcycles. The mentality of US producers has changed significantly from producing as much as possible to focusing on shareholder returns and as a result, continuing to show discipline when it comes to capital spending. Supply chain issues, labour shortages and rising costs have also played a role in the more modest supply growth expected over the next year. Oil demand is weaker than expected High energy prices, a gloomier macro outlook and China’s zeroCovid policy have all weighed on oil demand this year. At the beginning of 2022, global oil demand was expected to grow by more than 3MMbbls/d YoY and hit predemand is e Covid levels. However, stimated to grow at a more modest 2MMbbls/d this year, leaving it below preCovid levels. While for 2023, demand is expected to grow in the region of 1.7MMbbls/d. recovery. Almost 50% of this growth is expected to come from China with the expectation of an economic recovery. Read the article on ING Economics   Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
August CPI Forecast: Modest Inflation Increase Expected Amidst Varied Price Trends

Nutanix declined 7.90% after Hewlett Packard Enterprise said there were no takeover discussions with the cloud company

Intertrader Market News Intertrader Market News 27.12.2022 10:18
DAILY MARKET NEWSLETTER December 27, 2022               Pre-Market Session News Sentiment Technical Views           EUR/USD   Euro Stoxx 50 (Eurex)   Brent (ICE)                 Please note that due to market volatility, some of the key levels may have already been reached and scenarios played out.                     Price Movement Analyst Views Target Pivot   Dax (Eurex) 14,103.00 +100.00 (+0.71%) Read the analysis 14,165.00 13,990.00     FTSE 100 (ICE Europe) 0.00 0.00 (0.00%) Read the analysis 7,500.00 7,455.00     S&P 500 (CME) 3,898.00 +28.25 (+0.73%) Read the analysis 3,920.00 3,850.00     Nasdaq 100 (CME) 11,178.00 +102.75 (+0.93%) Read the analysis 11,250.00 11,030.00     Dow Jones (CME) 33,563.00 +188.00 (+0.56%) Read the analysis 33,650.00 33,300.00     Crude Oil (WTI) 80.37 +0.81 (+1.02%) Read the analysis 81.00 79.10     Gold 1,805.86 +7.656 (+0.43%) Read the analysis 1,812.00 1,795.00                     MARKET WRAP           Market Wrap: Stocks, Bonds, CommoditiesOn Friday, U.S. stocks closed higher before the Christmas holidays. The Dow Jones Industrial Average climbed 176 points (+0.53%) to 33,203, the S&P 500 rose 22 points (+0.59%) to 3,844, and the Nasdaq 100 was up 29 points (+0.27%) to 10,985.Energy (+3.16%), retailing (+1.36%), and media (+1.24%) sectors led the market higher.APA Corp (APA) jumped 5.73%, Halliburton (HAL) rose 4.13%, Devon Energy (DVN) gained 3.99%, and Bath & Body Works (BBWI) was up 3.97%.Nutanix (NTNX) declined 7.90% after Hewlett Packard Enterprise (HPE) said there were no takeover discussions with the cloud company.AMC Entertainment (AMC) slumped 10.60% after the company announced a 10-to-1 reverse stock split.From a technical point of view, Chevron (CVX +3.09% to $177.4) and McDonald's (MCD +0.68% to $267.57) crossed above their 50-day moving average.Regarding U.S. economic data, durable goods orders declined 2.1% on month in November (vs -0.5% expected). Personal income rose 0.4% on month in November (vs +0.3% expected), and personal spending added 0.1% (vs +0.3% expected). Also, the number of new home sales increased 5.8% on month in November (vs -5.0% expected). The University of Michigan consumer sentiment index was finalized at 59.7 for December (vs 59.1 in the previous estimate).The U.S. 10-year Treasury yield slipped 1.04 basis points to 3.786%.U.S. markets were closed on Monday for Christmas holiday, and will be open on Tuesday.European stocks closed mixed. The DAX 40 gained 0.19%, while the CAC 40 fell 0.20%, and the FTSE 100 edged down 0.05%.U.S. WTI crude futures climbed $2.20 to $79.67 a barrel.Gold price increased $5 to $1,797 an ounce.Market Wrap: ForexThe U.S. dollar index slipped to 104.30.EUR/USD added 22 pips to 1.0618. France’s data showed that producer prices jumped 21.5% on year in November (vs +20.3% expected).USD/JPY gained 49 pips to 132.84.GBP/USD climbed 14 pips to 1.2052.AUD/USD increased 48 pips to 0.6718.USD/CHF added 19 pips to 0.9330, and USD/CAD was down 64 pips to 1.3592.Bitcoin held up well at $16,800.Morning TradingIn Asian trading hours, USD/JPY was steady at 132.80. Official data released this morning showed that Japan's jobless rate fell to 2.5% in November, compared with 2.6% expected and in October, while retail sales rose 2.6% on year, below 4.0% estimated.Meanwhile, EUR/USD climbed to 1.0645 and GBP/USD rose to 1.2098.Gold advanced to $1,806.Bitcoin edged up to $16,874.Expected TodayIn the U.S., wholesale inventories are expected to be up 0.3% on month in November, while goods trade deficit is estimated at 97 billion dollars. Also, December Dallas Fed manufacturing index is anticipated at -11.0. Meanwhile, October FHFA house price index is expected to drop 0.3% on month and S&P Case-Shiller home price index is estimated to fall 1.2%.           UK MARKET NEWS           Auto & Parts, travel & leisure and technology shares fell most in London on Thursday.From a relative strength vs FTSE 100 point of view, Aviva (-0.45% to 444p) crossed under its 50-day moving average.           ECONOMIC CALENDAR           Time Event Forecast Importance   19:00 Christmas (substitute day)   LOW     08:30 Retail Inventories Ex Autos MoM Adv (Nov) -0.2% MEDIUM     08:30 Goods Trade Balance Adv (Nov) -97B MEDIUM     08:30 Wholesale Inventories MoM Adv (Nov) 0.3% MEDIUM     09:00 S&P/Case-Shiller Home Price MoM (Oct) -1.2% MEDIUM     09:00 S&P/Case-Shiller Home Price YoY (Oct) 9.1% MEDIUM     09:00 House Price Index (Oct) 391.1 LOW     09:00 House Price Index MoM (Oct) -0.3% LOW     09:00 House Price Index YoY (Oct) 9.1% LOW     10:30 Dallas Fed Manufacturing Index (Dec) -11 MEDIUM     11:30 3-Month Bill Auction   LOW     11:30 6-Month Bill Auction   LOW     11:30 52-Week Bill Auction   LOW     13:00 2-Year Note Auction   LOW                                     NEWS SENTIMENT           Capita PLC CPI : LSE 24.86 GBp +3.93% In the last 5 days         NEWS SENTIMENT (24H) Negative       TECHNICAL SCORE Short-Term Medium-Term Long-Term                                   HSBC Holdings PLC HSBA : LSE 510.30 GBp +1.49% In the last 5 days         NEWS SENTIMENT (24H) Negative       TECHNICAL SCORE Short-Term Medium-Term Long-Term                                   CVS Group PLC CVSG : LSE 1,983.00 GBp -0.10% In the last 5 days         NEWS SENTIMENT (24H) Neutral       TECHNICAL SCORE Short-Term Medium-Term Long-Term                                   AstraZeneca PLC AZN : LSE 11,238.00 GBp +1.01% In the last 5 days         NEWS SENTIMENT (24H) Negative       TECHNICAL SCORE Short-Term Medium-Term Long-Term                                   Glencore PLC GLEN : LSE 558.00 GBp +1.82% In the last 5 days         NEWS SENTIMENT (24H) Very Negative       TECHNICAL SCORE Short-Term Medium-Term Long-Term                                   Angling Direct PLC ANG : LSE 25.00 GBp 0.00% In the last 5 days         NEWS SENTIMENT (24H) No Data       TECHNICAL SCORE Short-Term Medium-Term Long-Term                           TECHNICAL VIEWS           EUR/USD Intraday: supported by a rising trend line.   Pivot: 1.0630   Our preference: Long positions above 1.0630 with targets at 1.0670 & 1.0685 in extension.   Alternative scenario: Below 1.0630 look for further downside with 1.0615 & 1.0600 as targets.   Comment: A support base at 1.0630 has formed and has allowed for a temporary stabilisation.                     Euro Stoxx 50 (Eurex)‎ (H3)‎ Intraday: the upside prevails.   Pivot: 3830.00   Our preference: Long positions above 3830.00 with targets at 3875.00 & 3895.00 in extension.   Alternative scenario: Below 3830.00 look for further downside with 3805.00 & 3785.00 as targets.   Comment: The RSI advocates for further upside.                     Brent (ICE)‎ (G3)‎ Intraday: further advance.   Pivot: 83.00   Our preference: Long positions above 83.00 with targets at 85.70 & 86.50 in extension.   Alternative scenario: Below 83.00 look for further downside with 82.10 & 81.30 as targets.   Comment: The RSI calls for a new upleg.        
Tight Monetary Policy Is Already Weighing On The Swedish Housing Market

Economists At Danske Bank: "The EUR/SEK Uptrend In 3-6M Remains Intact"

TeleTrade Comments TeleTrade Comments 27.12.2022 11:47
Economists at Danske Bank expect EUR/SEK to move higher over the coming months to 11.20 due to weak growth dynamics, relative monetary policy and the Riksbank’s disregard for SEK weakness. Range-bound near-term, then higher “We stick to our non-consensus view on the SEK amid weak growth dynamics, especially for Europe, scope for another downturn in global equities and relative monetary policy where the Riksbank is far behind the Fed and treats the SEK with benign neglect. Furthermore, the interest-rate weapon is a double-edged sword for the SEK as too much tightening runs the risk of hurting the housing market and thus scaring away investors from SEK assets. These factors suggest that the EUR/SEK uptrend in 3-6M remains intact.” “In the 6-12M perspective, the Fed pivot and generally bigger optimism about the global economy may be real and with that a sustainable recovery in risk assets and the SEK.”  “Forecast: 10.80 (1M), 11.00 (3M), 11.20 (6M), 11.00 (12M).”
Apple Q3 2023 Results – Surpassing Expectations and Aiming for New Heights

Economists At Danske Bank Forecast The EUR/GBP Exchange Rate To Fall Slightly

TeleTrade Comments TeleTrade Comments 27.12.2022 12:03
Economists at Danske Bank forecast EUR/GBP at 0.85 in 12 months as global growth slowdowns and relative appeal of UK assets to investors are a positive for the Pound relative to EUR. Modestly lower in 2023 “In the very near-term, we expect fragile risk appetite and too aggressive market pricing on the BoE to keep EUR/GBP around current levels.” “Further out, we remain cautiously optimistic that the cross will head modestly lower as a global growth slowdown and the relative appeal of UK assets to investors are a positive for GBP relative to EUR.” “Forecast: 0.87 (1M), 0.86 (3M), 0.85 (6M), 0.85 (12M).”
Rates Spark: Nothing new on the dovish front

Euro: Orbex’s Jing Ren points to high energy costs as the reason of a gap between core and headline inflation

Jing Ren Jing Ren 27.12.2022 14:46
Back in October, the Euro fell below parity with the US dollar. Since then, it has rebounded, but hasn't returned to the levels at the start of the year. Naturally, the question is whether the pair will continue the trend higher, or turn around for another run at parity. And what does this mean for the Euro crosses? One of the main drivers of the fluctuation in the shared currency last year is likely to be the theme for next year as well. At least through the first half. And that is the ECB's unique approach to a unique challenge facing the Euro. Other currencies operate within a single economic jurisdiction, but the ECB has to balance the fiscal policy of 19 different countries. (20, next year, with the inclusion of Croatia.) An uncertain path The Euro's underperformance this year was primarily driven by the ECB being slow to rate hike party. Even when it finally got around to raising rates, it was so far behind everyone else that the currency continued to be weaker until it became relatively clear that the Fed was getting ready to slow down its hiking. The Euro then appreciated, understanding that the ECB still has more room to keep tightening. The expectation is that the ECB will keep hiking through the first quarter, and then start selling bonds in March. Meanwhile, the Euro's main trading partners, the US and UK, are seen to be slowing down if not stopping rate hikes. The US is expected to slip into recession during the first half, with inflation coming down quicker than expected over the last couple of months. The UK's inflation remains high, but it already is in a recession. Meanwhile, the EU is expected to manage modest economic growth in the first quarter, assuming there is no major disruption with energy supplies over the winter. Beyond the uncertainty March could be an inflection point for the Euro. By then, the worst of the winter is over, and the risk from a major energy disruption will be significantly reduced. The war in Ukraine is expected to reach an inflection point as well, since the geostrategic situation would be expected to normalize after the winter. Additionally, the ECB is set to take stock of the situation and decide on whether to double down on quantitative tightening, which is expected to start with the March meeting. Read next: USA: The weakest year since 1990 - IPO market acquired "only" $7bn| FXMAG.COM The pending issue is inflation. Through most of 2022, there was a wide gap between headline and core inflation, as Europe was particularly affected by the high cost of energy. However, crude prices came down at the end of the year. That implies less Euros were being sold to buy energy. If that trend continues, the downward pressure on the shared currency could be somewhat alleviated. However, the higher costs have been filtering through to core inflation. While not as high as the headline number, it is still well over twice the ECB's target. The issue is that this measure might be more 'sticky' than the headline figure. Which could keep pressure on the ECB to keep tightening, even if the economy starts to suffer. That could put Europe in line to follow the US and the UK into a recession, just later in the year.
Hang Seng Index Plummets -2% Amid Weak China Data, Short-Term Trend Intact

The EUR/GBP Cross Currency Pair Is Moving In A Bullish Channel

InstaForex Analysis InstaForex Analysis 28.12.2022 08:04
If we pay attention to the EUR/GBP price movements on its 4 hour chart It is clear that this cross currency pair is moving in a bullish channel and above its moving average where in the near future EUR/GBP is trying to break above the 0.8866 level as its main target and 0.9065 as its second target but considering the volatility and the number of participations There are still few market participants during the Christmas and New Year holidays, so it is wise to pay attention to the level below the current price, namely 0.8794 because if this level is broken, there is a high probability that the Bull scenario described earlier will cancel itself. Relevance up to 05:00 2022-12-29 UTC+1 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/116509
USDX Will Try To Test And Break Below The 103.50 Level

Euro benefits from ECB hawkishness, Dow Jones steady as macroeconomics don't encourage to trade

Jing Ren Jing Ren 28.12.2022 08:31
EURUSD consolidates gains The euro keeps the high ground thanks to the ECB’s hawkish approach. The euro has retained its upward trajectory, and the RSI returning to the neutral area on the daily chart has taken some heat off the rally. The current consolidation may allow the bulls to accumulate above the 20-day moving average. The recent high of 1.0700 is the first resistance and its breach would lift the pair to last May’s high of 1.0780 which is a major obstacle in the medium-term. 1.0570 is an important support to keep intraday buyers interested. USDJPY recoups losses The US dollar regained some lost ground on the back of rising Treasury yields. The price action is seeking to hold above August’s low of 130.80 as a bearish breakout could pave the way for sustained weakness in the new year. The bounce could be driven by sellers’ profit-taking in this critical demand zone. 135.00 at the confluence of a support-turned-resistance and the 20-day moving average might make it a tough level to crack. Its breach, however, would turn the tide in the bulls’ favour. 132.70 is the closest support. Read next: Dallas Mavericks' (NBA) owner, Mark Cuban, praises Bitcoin, willing to buy more when it gets cheaper| FXMAG.COM US 30 stays in range The Dow Jones treads water as thinning liquidity and few economic data keep investors at bay. The sell-off in mid-December has prompted short-term buyers to bail out. Though the latest retracement secured bids in the critical demand zone around 32500. A rally back above 33450 would help the bulls regain confidence. 34400 near the recent top is a major resistance and the recovery could be back on track should buyers succeed in lifting the last offers over there. On the downside, 32850 is the first support.
The EUR/USD Pair Has Key Support Is Near At The Price of 1.5075

Forex: What can we expect from euro to greenback? Orbex Analyst: "It is preferable to add this pair on our watchlist!"

Jing Ren Jing Ren 28.12.2022 13:07
In the long term, the EURUSD currency is expected to form a bearish cycle impulse, which consists of five main sub-waves I-II-III-IV-V Most likely, the cycle impulse sub-wave III was fully completed, after which the formation of a bullish correction IV began. This complex correction is similar to a triple zigzag consisting of primary sub-waves â“Œ-Ⓧ-â“Ž-Ⓧ-Ⓩ. The primary sub-waves â“Œ-Ⓧ-â“Ž-Ⓧ look complete. The development of the last sub-wave is expected in the near future. It may form a double zigzag pattern (W)-(X)-(Y) near 1.090. At that level, correction IV will be at 50% of impulse III. According to the alternative version, the cycle correction IV has already been fully completed and is a triple zigzag, as in the main version. In the last section of the chart, we can notice the development of the initial part of the cycle wave V, which may take the form of a primary impulse or an ending diagonal. It is assumed that the bears can re-go to the minimum of 0.953, at which a large impulse wave III was completed. Read next: Dallas Mavericks' (NBA) owner, Mark Cuban, praises Bitcoin, willing to buy more when it gets cheaper| FXMAG.COM It is preferable to add this pair on our watchlist!
The EUR/JPY Pair Is Expected To Start A New Zig-Zag Correction

The EUR/JPY Pair Is Likely To Approach The Uptrend Line

Ralph Shedler Ralph Shedler 29.12.2022 08:39
EUR/JPY Temporary Retreat The EUR/JPY dropped a little in the short term after reaching the 142.87 level. It is likely to approach the uptrend line which represents a downside obstacle. As long as it stays above it, the price could jump higher. Yesterday's high of 142.87 acts an upside obstacle. It declined after reaching this level. On the other hand, the 141.72 former low stands as a downside obstacle as well. So, only dipping below it activates a new downside movement and invalidated an upside continuation. EUR/JPY Trading Conclusion Testing and retesting the uptrend line, staying above this obstacle may indicate a new upwards movement at least towards the former high of 142.87. Relevance up to 07:00 2022-12-30 UTC+1 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/306701
Apple Q3 2023 Results – Surpassing Expectations and Aiming for New Heights

The EUR/GBP Pair Is Likely To Witness More Inaction

TeleTrade Comments TeleTrade Comments 29.12.2022 09:12
EUR/GBP struggles to extend pullback from 11-week high. US Treasury yields retreat from three-week top, EU bond coupons grind near 11-year high but Gilts stay depressed. Geopolitical fears from Russia join China Covid woes but lack of market participation, absence of major data bore momentum traders. EUR/GBP remains sidelined around 0.8825, after reversing from a nearly two-month high the previous day, as traders seek more clues amid the market’s indecision headline into Thursday’s London open. Even so, the cross-currency pair remains pressured as the geopolitical concerns surrounding Russia and fears of economic slowdown propel the Eurozone Treasury bond yields while the UK’s Gilts dropped to the lost levels for seven weeks. Russia’s rejection of peace with Ukraine unless it accepts the treaty allowing additional territories joins an escalated war in the city of Kherson to weigh on the sentiment. On the same line could be the major nations’ notification to require the Covid tests for Chinese travelers amid doubts over Beijing’s reporting of data and a hidden jump in the virus numbers. It’s worth noting, however, the comparatively stronger hawkish bias of the European Central Bank (ECB) policymakers versus the Bank of England (BOE) decision-makers challenge the EUR/GBP bears. Even so, the chatters surrounding the bloc’s recession seem to have gained more attention of late, which in turn should have recalled the bears the previous day. Against this backdrop, the US 10-year Treasury yields dropped 2.8 basis points to 3.86% by the press time, after rising the most since October 19 the previous day. That said, the Eurozone 10-year Treasury bond yields rose to the highest levels since July 2011 before retreating to 2.51% while the UK’s 10-year Gilt coupons dropped for the third consecutive day to refresh multi-day low. Looking forward, the EUR/GBP is likely to witness more inaction but the recent escalation in the Russia-Ukraine fight and the economic slowdown fears surrounding the bloc could weigh on the prices. Technical analysis Despite the failure to cross the 0.8855-65 resistance zone, comprising multiple levels marked since late September, EUR/GBP remains on the bear’s radar unless breaking the 200-DMA support, close to 0.8575 at the latest.
Kim Cramer Larsson's technical analyses of DAX and EuroStoxx 50

European stocks closed mixed. The DAX 40 fell 0.50%, the CAC 40 declined 0.61%, while the FTSE 100 rose 0.32%

Intertrader Market News Intertrader Market News 29.12.2022 10:20
DAILY MARKET NEWSLETTER December 29, 2022               Pre-Market Session News Sentiment Technical Views           EUR/USD   Euro Stoxx 50 (Eurex)   Brent (ICE)                 Please note that due to market volatility, some of the key levels may have already been reached and scenarios played out.                     Price Movement Analyst Views Target Pivot   Dax (Eurex) 13,937.00 -52.00 (-0.37%) Read the analysis 13,900.00 13,990.00     FTSE 100 (ICE Europe) 0.00 0.00 (0.00%) Read the analysis 7,500.00 7,450.00     S&P 500 (CME) 3,810.00 +2.50 (+0.07%) Read the analysis 3,788.00 3,837.00     Nasdaq 100 (CME) 10,796.50 +23.75 (+0.22%) Read the analysis 10,700.00 10,890.00     Dow Jones (CME) 33,021.00 -25.00 (-0.08%) Read the analysis 32,920.00 33,240.00     Crude Oil (WTI) 78.47 -0.49 (-0.62%) Read the analysis 79.10 77.90     Gold 1,808.20 +3.845 (+0.21%) Read the analysis 1,814.00 1,801.00                     MARKET WRAP           Market Wrap: Stocks, Bonds, CommoditiesOn Wednesday, U.S. stocks remained under pressure. The Dow Jones Industrial Average dropped 365 points (-1.10%) to 32,875, the S&P 500 fell 46 points (-1.20%) to 3,783, and the Nasdaq 100 was down 143 points (-1.32%) to 10,679.Technology hardware & equipment (-2.67%), energy (-2.22%), and consumer durables & apparel (-2.17%) sectors lost the most.Apple (AAPL) slid 3.07% on concerns that a potential recession would impact demand for the company's products. Amazon.com (AMZN) fell 1.47%.Southwest Airlines (LUV) declined 5.16% following its mass flight cancellations and delays due to winter storms in the U.S.MicroStrategy (MSTR), a big bitcoin-holding listed-company, sank 6.53% as the company sold some of its Bitcoins for the first time ever.From a technical point of view, Chevron (CVX), IBM (IBM), and Visa (V) crossed under their 50-day moving average.Regarding U.S. economic data, the number of pending home sales fell for a sixth consecutive month in November, declining 4.0% on month (vs -0.9% expected).The U.S. 10-year Treasury yield advanced 4.4 basis points to 3.885%.European stocks closed mixed. The DAX 40 fell 0.50%, the CAC 40 declined 0.61%, while the FTSE 100 rose 0.32%.U.S. WTI crude futures dropped $0.90 to $78.67 a barrel.Gold price was down $9 to $1,804 an ounce.Market Wrap: ForexThe U.S. dollar index climbed to 104.52.EUR/USD fell 29 pips to 1.0611.USD/JPY jumped 96 pips to 134.45. The Bank of Japan issued a summary of opinions from its latest policy meeting, showing that policymakers backed a continuation of ultra-accommodative policy. GBP/USD declined 7 pips to 1.2018.AUD/USD added 6 pips to 0.6738.USD/CHF edged up 4 pips to 0.9294, and USD/CAD gained 85 pips to 1.3608.Bitcoin traded further lower to $16,490.Morning TradingIn Asian trading hours, USD/JPY retreated to 133.72.Meanwhile, EUR/USD edged up to 1.0625 and GBP/USD climbed to 1.2035.Gold rebounded to $1,807.Bitcoin remained subdued at $16,523.Expected TodayThe eurozone's November M3 money supply is expected to grow 4.8% on year.In the U.S., weekly initial jobless claims are estimated at 220,000.           UK MARKET NEWS           Basic Resources, chemicals and insurance shares gained most in London on Friday.From a relative strength vs FTSE 100 point of view, Aviva (+0.81% to 447.6p), Barclays (+0.72% to 158.88p) crossed above their 50-day moving average.           ECONOMIC CALENDAR           Time Event Forecast Importance   08:30 Initial Jobless Claims (Dec/24) 220k MEDIUM     08:30 Jobless Claims 4-week Average (Dec/24) 225k LOW     08:30 Continuing Jobless Claims (Dec/17) 1.671M LOW     10:30 EIA Natural Gas Stocks Change (Dec/23) -201Bcf LOW     11:00 EIA Gasoline Stocks Change (Dec/23) 520k MEDIUM     11:00 EIA Crude Oil Stocks Change (Dec/23) -1.52M MEDIUM     11:00 EIA Refinery Crude Runs Change (Dec/23)   LOW     11:00 EIA Distillate Stocks Change (Dec/23) -2.05M LOW     11:00 EIA Distillate Fuel Production Change (Dec/23)   LOW     11:00 EIA Cushing Crude Oil Stocks Change (Dec/23)   LOW     11:00 EIA Gasoline Production Change (Dec/23)   LOW     11:00 EIA Heating Oil Stocks Change (Dec/23)   LOW     11:00 EIA Crude Oil Imports Change (Dec/23)   LOW     11:30 8-Week Bill Auction   LOW     11:30 4-Week Bill Auction   LOW     13:00 7-Year Note Auction   LOW                                     NEWS SENTIMENT           Argo Group Ltd ARGO : LSE 11.00 GBp 0.00% In the last 5 days         NEWS SENTIMENT (24H) Very Positive       TECHNICAL SCORE Short-Term Medium-Term Long-Term                                   AstraZeneca PLC AZN : LSE 11,250.00 GBp -0.50% In the last 5 days         NEWS SENTIMENT (24H) Positive       TECHNICAL SCORE Short-Term Medium-Term Long-Term                                   BP PLC BP. : LSE 480.40 GBp +0.52% In the last 5 days         NEWS SENTIMENT (24H) Negative       TECHNICAL SCORE Short-Term Medium-Term Long-Term                                   Diageo PLC DGE : LSE 3,668.50 GBp +0.15% In the last 5 days         NEWS SENTIMENT (24H) Very Negative       TECHNICAL SCORE Short-Term Medium-Term Long-Term                                   Fresnillo PLC FRES : LSE 891.60 GBp +2.37% In the last 5 days         NEWS SENTIMENT (24H) Neutral       TECHNICAL SCORE Short-Term Medium-Term Long-Term                                   CVS Group PLC CVSG : LSE 1,985.00 GBp +1.12% In the last 5 days         NEWS SENTIMENT (24H) Very Positive       TECHNICAL SCORE Short-Term Medium-Term Long-Term                           TECHNICAL VIEWS           EUR/USD Intraday: under pressure.   Pivot: 1.0645   Our preference: Short positions below 1.0645 with targets at 1.0605 & 1.0590 in extension.   Alternative scenario: Above 1.0645 look for further upside with 1.0660 & 1.0675 as targets.   Comment: As long as the resistance at 1.0645 is not surpassed, the risk of the break below 1.0605 remains high.                     Euro Stoxx 50 (Eurex)‎ (H3)‎ Intraday: under pressure.   Pivot: 3823.00   Our preference: Short positions below 3823.00 with targets at 3785.00 & 3770.00 in extension.   Alternative scenario: Above 3823.00 look for further upside with 3842.00 & 3858.00 as targets.   Comment: The RSI is below its neutrality area at 50%                     Brent (ICE)‎ (H3)‎ Intraday: the bias remains bullish.   Pivot: 83.00   Our preference: Long positions above 83.00 with targets at 84.10 & 84.80 in extension.   Alternative scenario: Below 83.00 look for further downside with 82.50 & 81.90 as targets.   Comment: The RSI is mixed with a bullish bias.        
Metals Market Update: Decline in LME Copper On-Warrant Stocks, Zinc and Lead Surplus Continues, Nickel Market in Supply Surplus

USD/JPY Pair Bounced Off Support Area, GBP/USD Pair Broke Bearish Out Of Its Rising Wedge

Saxo Bank Saxo Bank 29.12.2022 12:10
Summary:  USDJPY bounced from strong support but still in a down trend. The pair needs to break bullish out of falling channel for 140EURGBP testing key resistance at 0.8867. Upside potential to 0.92GBPUSD broken out of rising wedge but sellers have failed to take control. 1.19 support is key USDJPY bounced off support area 131.49-130.38 and the lower trendline in the falling channel like pattern. Divergence on RSI indicates that could have been the lows for now. There is still negative sentiment however, but if USDJPY breaks above the upper falling trend and back above 200 daily SMA there could be short-term upside momentum to 140-141.25.If USDJPY slides back and closes below 130.38 it is likely to fuel a sell-off down to around 126.35 . That scenario is likely to unfold if RSI also breaks below its lower rising trendline.   All charts and data : Saxo Group EURGBP has at first attempt been rejected at the resistance at around 0.8867. A close above could move the pair for 0.92 i.e., same distance a wide sideways consolidation area illustrated by the vertical arrows.However, if EURGBP slides back below 0.8754 it could stay range bound for quite some time.RSI is showing positive sentiment however and all Simple Moving Averages (SMA) are rising i.e., showing underlying bullish sentiment indicating we are to see higher levels in EURGBP. GBPUSD broke bearish out of its rising wedge like pattern now hovering around the 200 daily SMA. Bears don’t seem to be able to push the pair lower. RSI is still showing positive sentiment and there is no divergence indicating we could see a GBPUSD moving higher and have another attempt reaching resistance 1.2667.If sellers succeed in pushing GBPUSD below 1.19 that could change and give them more energy to push GBPUSD down to around 1.1629. Medium-term pictureGBPUSD got rejected at the 55 weekly SMA which is dropping sharply and has not managed to close a week above resistance at 1.2293. Weekly RSI is still showing negative sentiment indicating GBPUSD bounce from September trough has run its course and lower levels is in the cards. GBPUSD could slide back down to around 1.14For GBPUSD to gain further upside a weekly close above 1.2293 is needed combined with RSI closing above 60 threshold.       RSI divergence explained: When  price is making a new high/low but RSI values are not making new high/low at the same time. That is a sign of imbalance in the market and an weakening of the uptrend/downtrend. Divergence or imbalance in the market can go on for quite some time but not forever. It is an indication of an exhaustion of the trend Source: Technical Update - USDJPY, EURGBP & GBPUSD | Saxo Group (home.saxo)
Rates Spark: Nothing new on the dovish front

Eurozone: first days of the year are going to be action-packed

ING Economics ING Economics 29.12.2022 14:02
The New Year starts off with some key data releases. In the eurozone, we expect inflation to drop below 10% due to base effects and declining oil prices. Turkish December inflation is expected to be at 2.9% month-on-month, leading annual CPI to decline even further. In Hungary, we expect a negative reading in November's retail sector performance Eurozone: Energy inflation is set to drop The eurozone starts off the year with some key data releases. Energy inflation is set to trend lower on the back of base effects and declining oil prices. That makes a small drop below 10% quite possible but beware of developments outside of energy. The Economic Sentiment Survey, meanwhile, will give some insight into price expectations from businesses. It will also give a sense of how businesses have fared through the final month of the fourth quarter when we expect a contraction. Turkey: Annual CPI expected to maintain its downward trend We expect December inflation to be at 2.9% MoM, leading to a further decline in the annual figure, to 67% from 84.4% a month ago. Easing global commodity prices and strength in the currency will likely be supportive factors in the monthly reading, and along with favourable base effects, this will contribute to annual CPI continuing its downward trend in the near term, depending on the continuation of currency stability. Read next: EUR/USD Pair Remains Within Its Horizontal Trading Range, The Aussie Failed To Break The Resistance At 0.68| FXMAG.COM Hungary: Negative reading in November retail sector performance In Hungary, the New Year starts with some strong labour market data. Strong wage growth might come from the one-off, mid-year wage adjustment, which is reflected in inflation readings. The unemployment rate will show some short-term stability heading into year-end. But the real deal will be the retail sector performance in November, where we expect a negative reading, showing the impact of negative real wage growth and the changing propensity to consume. Key events in developed markets next week Source: Refinitiv, ING Key events in EMEA next week Source: Refinitiv, ING Key events in Asia next week Source: Refinitiv, ING Read this article on THINK TagsTurkey Hungary Eurozone Emerging Markets EMEA Asia week ahead Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
FX Daily: Euro’s attractiveness on the rise

Vice-President ECB's Luis de Guindos hints at 50bp rate hikes as "new norm"

Kenny Fisher Kenny Fisher 29.12.2022 22:51
We’re seeing limited movement in the currency markets this week, which is not uncommon during the week between Christmas and New Year’s. Trading volume remains thin and the data calendar is very light. In the North American session, EUR/USD is trading at 1.0649, up 0.35%. The US released unemployment claims today, one of the highlights in a quiet week. Initial jobless claims climbed as expected to 225,000, up from 216,000. A rise in week-to-week claims should not alarm investors, as there is bound to be some fluctuation in the releases. The 4-week moving average, which smooths out these fluctuations, remained virtually unchanged at 221,000. Will Spain’s CPI continue to decline? There are no tier-1 releases out of Germany or the eurozone this week. On Friday, Spain releases CPI for December, and inflation in the eurozone’s fourth-largest economy could signal what to expect from next week’s German and eurozone inflation releases. Inflation in Spain has been steadily dropping, from a peak of 10.8% in July to 6.8% in November. The downtrend is expected to continue in December, with a consensus of 6.1%. The ECB has sent out hawkish messages lately, with Vice-President Luis de Guindos saying last week that “Increases of 50 basis points may become the new norm in the near term.” De Guindos added that the ECB was concerned that the markets might underestimate the persistence of inflation. Fed Chair Jerome Powell would wholeheartedly agree, as the Fed has found it tough going to convince the markets that it remains hawkish and plans to continue raising rates into 2023. Read next: 2023 Predictions: EUR/USD will eventually fall once the penny drops that Fed rates will remain above 5% for the year. Ivan Brian talks cryptocurrencies and Forex in 2023 | FXMAG.COM The markets jumped on a couple of soft US inflation reports as an indication that the Fed would pivot and become dovish, sending the US dollar sharply lower. It was only after a hawkish Fed meeting earlier this month that the markets seemed to get Powell’s message. Still, the Fed remains concerned that such speculation could loosen market conditions and complicate the Fed’s painstaking battle to curb inflation. EUR/USD Technical EUR is testing resistance at 1.0660. Above, there is resistance at 1.0746 1.0574 and 1.0488 are providing support This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds. Euro higher as US jobless claims rise - MarketPulseMarketPulse
Technical Outlook Of The EUR/JPY Pair Movement In Short Term

Technical Analysis Of The Euro To Japanese Yen Pair (EUR/USD)

Torben Melsted Torben Melsted 30.12.2022 08:25
EUR/JPY continues to point lower toward the origin of the ending diagonal at 133.44. From the May 2020 low at 114.42, we have seen a five-wave rally to 148.40 and wave 5 of I turned into an ending diagonal. Once they complete, the target for the following correction is back to the origin of the ending diagonal, which in this case is 133.44. This is why we are looking for a corrective target. It doesn't mean that the correction can't be deeper than the 133.44 target, but that is the first logical target to look for and that's what we are doing.   Relevance up to 06:00 UTC+1 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/306829
EUR/USD Pair is Structurally Working On A Larger-Degree Upswing

Spain: Although headline CPI decreased, core inflation rose 0.6%. Euro hasn't moved significantly

Kenny Fisher Kenny Fisher 30.12.2022 16:18
It’s the last trading day of 2022, and EUR/USD is almost unchanged in what should be a quiet day in the currency markets. In the European session, EUR/USD is trading at 1.0674, up 0.13%. Spain’s CPI drops below 6%  The week between Christmas and New Year’s is usually very light on data, and there were no tier-1 events in Germany or the eurozone this week. Earlier today, Spain released the initial CPI estimate for December, which showed that inflation continues to weaken. CPI dropped to 5.8%, down from 6.8% and below the estimate of 6.0%. Inflation in Spain slowed for a fifth successive month, as energy costs keep coming down. Headline CPI is down sharply from a peak of 10.8% in July, but the news was not all positive, as core inflation rose to 6.9%, up from 6.3%. Read next: Real bargains on Wall Street, Barron's point to, i.a. Google and Amazon as undervalued stocks | FXMAG.COM The Spanish inflation report kicks off a host of eurozone inflation releases next week. Investors will be hoping that the German and eurozone CPI data will mimic the Spanish release and point to inflation heading lower. The ECB will be keeping a close eye on these inflation reports, and the data will be an important factor in the ECB’s decision as to the pace of future rate increases. The ECB delivered a 50-bp hike earlier this month, down from the 75-bp increase in October. ECB President Lagarde warned the markets not to view the move as a dovish pivot and said that more rate hikes were on the way. ECB Vice Vice-President Luis de Guindos reiterated Lagarde’s hawkishness last week, saying that 50-bp rate hikes “may become the norm in the near future.” EUR/USD Technical 1.0660 is a weak support line. Below, there is support at 1.0616 There is resistance at 1.0702 and 1.0778 This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds. Euro shrugs as Spain's inflation drops - MarketPulseMarketPulse
EUR/USD: Examples of things that could get the market moving are US treasury yields moving out of the range on data improving or deteriorating

EUR/USD: Chicago PMI above expectations. Vladimir Putin and Xi Jinping had a video call. Signs of potential further cooperation between Russia and China

FXStreet News FXStreet News 30.12.2022 16:16
EUR/USD is still rangebound, failing to crack the 1.0700 ahead of the year’s end. The Chicago PMI for December exceeded expectations and the previous month’s reading. EUR/USD Price Analysis: Upward biased, but failure to conquer 1.0700 would expose the pair to selling pressure. The EUR/USD advances modestly in the last trading day of 2022, during the North American session, though above its opening price by 0.13%. A light economic calendar keeps the EUR/USD pair within familiar ranges ahead of the week, month, quarter, and year-end. At the time of writing, the EUR/USD is trading at 1.0695. Wall Street is set to open lower as US equity futures tumble with no fundamental catalyst. The US economic calendar is light, with the release of Chicago’s Purchasing Managers Index for December at 44.9, beating an estimate of 40. Thursday’s release of unemployment claims exerted downward pressure on the US Dollar (USD), weakening against most of the G7 currencies. The US Dollar Index (DXY), a measure of the buck’s value against a basket of currencies, drops 0.33%, down to 103.634. Even though the greenback is falling, the US 10-year Treasury bond yield is rising five bps, at 3.869%. Aside from this, the European economic docket revealed that inflation in Spain dropped for the fifth consecutive month, to 5.6% YoY, below November’s 6.7% reading. However, due to thin liquidity trading conditions and 2023 around the corner, it failed to trigger any upside reaction that could break the EUR/USD 1.0600-90 trading range. Of late, ECB’s Stournaras said that rates should be restricted sufficiently, lifting the pair towards 1.0700, before erasing those gains. Meanwhile, on geopolitics, Russia and China continue to deepen their ties, as Russian President Vladimir Putin and China’s Xi Jinping videoconference showed intentions for further cooperation between both countries on trade, energy, finance, and agriculture. Read next: “Eat the Rich” – review and story behind the Netflix mini-series| FXMAG.COM Furthermore, Russia’s invasion of Ukraine continued during new year’s eve, as the fourth wave of drones attacked civilian buildings, as reported by Ukrainian authorities. Shelling continued in Kiyv and Kharkiv, killing at least two people. EUR/USD Price Analysis: Technical outlook From a technical perspective, the EUR/USD is still upward biased. Nevertheless, the inability to decisively crack the 1.0700 mark would expose the pair to selling pressure. Oscillators like the Relative Strength Index (RSI) and the Rate of Change (RoC) favor EUR/USD upside, but low volumes keep traders at bay. However, the EUR/USD key resistance levels lie at 1.0700, followed by the December 15 daily high of 1.0736 and 1.0800. On the other hand, if the EUR/USD drops below 1.0638, a test of 1.0600 is on the cards, followed by the 20-day Exponential Moving Average (EMA) at 1.0575.
Technical Outlook Of The EUR/JPY Pair Movement In Short Term

The EUR/JPY Pair's Investors Got Cautionary Ahead Of The Release Of The German HICP

TeleTrade Comments TeleTrade Comments 02.01.2023 08:56
EUR/JPY is likely to drop further to near 139.00 as investors are cautious about Euro ahead of German inflation. Rising wage growth is infusing fresh blood into the Eurozone inflation. The BOJ has raised inflation targets substantially for CY2023 and 2024. The EUR/JPY pair dropped to the psychological support of 140.00 as investors got cautionary ahead of the release of the German Harmonized Index of Consumer Prices (HICP), which will release on Tuesday. The cross dropped sharply late Friday as investors poured funds into the Japanese Yen led by the bond-buying program from the Bank of Japan (BOJ) last week. The Euro is likely to witness a power-pack action after the release of the German HICP. As per the projections, the inflation indicator is seen higher at 11.8% vs. the former release of 11.3%. Lately, European Central Bank (ECB) President Christine Lagarde cited the rising wage rate as responsible for the continuous escalation of inflationary pressures. ECB President cited that the central bank must prevent this from adding to already high inflation, as reported by Reuters. Meanwhile, analysts at Natixis believe that “In the Eurozone, the real long-term interest rate is well below potential growth, and the mortgage rate is lower than nominal wage growth; monetary policy is therefore completely expansionary.” Apart from the German Inflation data, investors will also focus on German Unemployment data. The Unemployment Change (Dec) is expected to escalate to 27K against the former release of 17K. While the jobless rate might trim to 5.5% from the former release of 5.6%. On the Tokyo front, the higher inflation forecast by the Bank of Japan (BOJ) is supporting the Japanese Yen bulls. Nikkei reported that the BOJ is considering raising its inflation forecasts in January to show price growth close to its 2% target in fiscal 2023 and 2024. While the core Consumer Price Index (CPI) is seen rising around 3% in fiscal 2022, between 1.6% and 2% in fiscal 2023, and nearly 2% in fiscal 2024
Eurozone inflation may reach less than 10% for the first time since Summer

Japanese yen feels better amid raised Japan's inflation prediction, Euro gains on the back of Lagarde's suggestion

Jing Ren Jing Ren 02.01.2023 08:29
USDJPY tests critical floor The Japanese yen rallies as the BOJ considers raising its inflation forecast. The dollar’s rebound came to a halt at a previous low (134.50) from early December, which has turned into resistance. Sentiment remains downbeat after the greenback gave up all the gains. 130.50 is a major level to see whether the buy side will be strong enough to contain the fall. A bearish breakout would pave the way for a slide to 127.00. The RSI’s oversold condition may attract some bargain hunters and 133.00 would be the first hurdle to test. EURGBP breaks higher The euro strengthened after ECB President Lagarde hinted at more tightening to cap wage growth. A bullish MA cross on the daily chart confirms the pair's recovery. A break above October’s high of 0.8860 might have put the euro on a fast track towards this year’s high above 0.9100. 0.8900 is the next resistance and 0.8970 at the start of a sell-off in September the last obstacle. An overbought RSI may trigger a limited pullback which could attract bids from trend-followers. Between 0.8820 and 0.8790 lies an important demand zone. Read next: Croatia introduces Euro – what are experts' approaches?| FXMAG.COM GER 40 remains under pressure The Dax 40 drifts lower as investors dread more aggressive moves from central banks. On the daily chart, after hitting last June’s peak of 14700, a bearish MA cross could foreshadow a deeper correction. Zooming into the hourly chart, the horizontal consolidation is a sign of momentary hesitation. 14150 at the top of the latest bounce coincides with the 20-day moving average and a failure to break higher by the bulls would mean that the path of least resistance would be down. 13850 is the immediate support.
Expect the ECB to keep increasing rates at the short-term, at least until the summer

IMF's Georgieva warns of further growth issues. Eurodollar: German Manufacturing PMI edges up, eurozone inflation to be released this week

Kenny Fisher Kenny Fisher 02.01.2023 12:19
Welcome to the first trading day of the New Year. Trading remains thin, as most markets are closed.  In the European session, EUR/USD is trading at 1.0679, down 0.23%. I expect a quiet day for the euro. German Manufacturing PMI improves There are no US events on the schedule. German Manufacturing PMI improved to 47.1 in December, up from 46.2 in November and shy of the consensus of 47.4 points. Manufacturing remains below the 50.0 level that separates contraction from expansion, and expectations remain pessimistic. The silver lining to a gloomy situation is that the outlook has improved slightly, as the December release was the strongest in three months. It was a similar pattern in the eurozone, as the Manufacturing PMI rose to 47.8, up from 47.1 in November, also a three-month high. Manufacturing in Germany and the eurozone has suffered a tough year, and demand remains weak. The global outlook remains uncertain and with the ECB promising further rate hikes, the risk-to-demand outlook is tilted to the downside. Still, December showed an improvement, as concerns over an energy crisis have lessened and inflation has eased. We’ll get a look at key inflation releases this week. German publishes December CPI on Tuesday, followed by eurozone CPI on Friday. Both indicators are pointing to inflation heading lower, which could have an impact on ECB rate policy. The ECB raised rates by 50-bp in December and meets next on February 2nd. Read next: Twitter Did Not Pay $136,260 Rent, Microsoft Reported Its Worst Quarterly Results In Years| FXMAG.COM If anyone needed a sober forecast for 2023, there was one today from the International Monetary Fund. The head of the IMF, Kristalina Georgieva, warned that 2023 would be tougher than last year, as the US, EU and China would see growth slow. Georgieva said that she expected one-third of the global economy to be in recession. In October, the IMF cut its growth outlook from 2.9% to 2.7%, due to the war in Ukraine as well as central banks around the world raising interest rates. EUR/USD Technical EUR/USD is testing support at 1.0674. Below, there is support at 1.0566 There is resistance at 1.0782 and 1.0852 This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.
The British Pound Is Showing Signs Of Exhaustion Of The Bullish Force

FX: The US Dollar And Sterling (GBP) Starting Off The Year In Worst Shape

Saxo Bank Saxo Bank 02.01.2023 14:08
Summary:  The year is starting off with the US dollar on its back foot even as US treasury yields rose into year end as the market continues to believe that we are nearing the end of the Fed rate hike cycle, with easing to follow, while the ECB has grown increasingly hawkish and the Bank of Japan is seen further adjusting its policy mix under new leadership from early Q2. Will the first key data of 2023 on Friday play well with the market’s strong convictions? Today's Saxo Market Call podcast.Today's Market Quick Take from the Saxo Strategy Team FX Trading focus: USD stumbles into the New Year, with sterling also on its back foot. The JPY has risen to the top of the heap on the anticipation of a further shift in BoJ policy after Governor Kuroda’s exit in early April. Even with US yields backing up into year – particularly at the longer end of the curve – the market continues to express view is that the Fed is set for peak policy rates at the March or May FOMC meeting, followed by eventual cuts as soon as Q4. This has been the case for some time, with the only new information available in the last days of 2022 a particularly strong US Consumer Confidence reading for December that is rather out of synch with an anticipated dip into recession in the US. End-of-quarter and end-of-year flows may have been behind the surge in treasury yields and the weakening of the greenback, so we will need at least this week for a sense of how things are shaping up, and the most interesting test of the market’s conviction would be another batch of stronger than expected jobs and especially earnings data and another strong ISM Services print this Friday. Another important factor for the US dollar in the opening weeks to a couple of months of this year is the debt ceiling fight and how much brinksmanship the weak GOP majority in the US House is willing to engage in. As the ceiling approaches, the US Treasury runs down its general account with the Fed, currently at $400+ billion and capable of being run down to $100 billion or less, which is a net boost to USD liquidity. Once the ceiling is inevitably raised, with or without concessions from the Biden administration, the opposite effect swings into gear as the Treasury then builds its account again, sucking liquidity out of the market. EUR and especially JPY strength. The drivers (and some of the irony) of sharp JPY strength are discussed with the look at the USDJPY chart below. The driver of a strong euro into year-end was ECB President Lagarde finally getting religion on the inflation fight here very late in the cycle. The strongest evidence of how the market sees a divergence in the Fed vs. ECB forward is in something like the far forward 3-month short-term-interest rate contracts, which suggest that by the end of 2024, the Fed policy rate will be little more than 50 basis points above the ECB’s policy rate, at something like 3.50% for the Fed and just under 3.00% for the ECB. This has narrowed from well over 100 basis points in early November and something like 180 basis points early in 2022. A factor tempering the upside euro potential is concern that the ECB won’t be able to deliver as much as it would like for the market to believe it is capable of without triggering an ugly new aggravation of peripheral spreads as a weak economy like Italy’s can’t fund itself at 3% without QE. Italian Prime Minister Meloni has already http:been out complaining against the ECB’s communication style and the ESM. Read next: The First Trading Day Of 2023: GBP/USD Is Trading 1.2051, USD/JPY Pair Below 131, The Aussie Pair Is Around 0.68 And EUR/USD Above 1.0680| FXMAG.COM Chart: USDJPY USDJPY tanked into year-end, nearing the recent cycle lows even as US long treasury yields climbed into year-end. For most of 2022, long US yields were a very reliable coincident indicator, but the market has its sights next year on the decelerating Fed hikes that it eventually sees turning into rate cuts, while the Bank of Japan is seen further tinkering with its policy in the direction of tightening, particularly once Governor Kuroda’s replacement is found after his early April exit. Ironically, the anticipation of a BoJ shift is resulting in enormous QE to enforce the current regime. When yields were on the rise last year and the US 10-year yield first hit the current level of 3.85% in late September, the USDJPY rate was near 145.00. From here, the current USDJPY trajectory can only find support from a follow through from the BoJ in the direction of tightening (incrementalism remains a risk there) and a world that is diving into a classic disinflationary recession, with the Fed continuing to get marked lower. The challenge for this assumption would be a far stronger than expected global economy, with resilient US activity for another couple of quarters and inflation and a fresh surge in energy prices. Source: Saxo Group Overnight, we got a miserable official Non-manufacturing PMI for December from China as the end of Zero Covid early last month is likely reaching peak impact now and through the next few weeks, followed by a likely strong resurgence in Chinese demand. How the Chinese policy and its economy shapes up on the other side of the early Lunar New Year holiday (January 23) will be an important factor in how 2023 shapes up. Table: FX Board of G10 and CNH trend evolution and strength.The US dollar and sterling starting off the year in worst shape. The latter may be a durable theme this year as the Bank of England is set for QT – a tricky proposition for a twin deficit country that will have to find buyers of its paper outside of the country. Elsewhere, the outsized JPY strength is the most prominent development as this year gets under way. It looks excessive relative to the recent rise in global bond yields. CAD is paying for the Bank of Canada’s dovishness, but oil is a bit resurgent. Source: Bloomberg and Saxo Group Table: FX Board Trend Scoreboard for individual pairs. Note that the “ATR heat” is fading to light orange (second quintile of last 1000 observations) for about half of the pairs tracked here as volatility has eased in recent weeks. Will be watching USD and JPY pair status over the coming week or two for developments, which are often important on calendar year rolls, as emphasized for EURUSD in my most recent FX Update. Source: Bloomberg and Saxo Group Upcoming Economic Calendar Highlights US Markets Closed 0145 – China Dec. Caixin Manufacturing PMI Source: FX Update: USD stumbles into the New Year. | Saxo Group (home.saxo)
What's ahead of Euro against greenback today? Let's look at Stefan Doll's review

What's ahead of Euro against greenback today? Let's look at Stefan Doll's review

InstaForex Analysis InstaForex Analysis 02.01.2023 15:34
Trend analysis (Fig. 1) EUR/USD may start moving downwards from the level of 1.0706 (closing of Friday's daily candle) towards the support level of 1.0673 (thick white line). Upon testing the level, it will resume going up to the target level of 1.0773, which is the upper fractal level (yellow dotted line).     Fig. 1 (daily chart) Comprehensive analysis: Indicator analysis - downtrend Fibonacci levels - downtrend Volumes - downtrend Candlestick analysis - uptrend Trend analysis - uptrend Bollinger bands - uptrend Weekly chart - uptrend Conclusion: EUR/USD will decline from 1.0706 (closing of Friday's daily candle) to the support level of 1.0673 (thick white line), then bounce up the upper fractal at 1.0773 (yellow dotted line). Alternatively, the pair could climb up from 1.0706 (closing of Friday's daily candle) to the upper fractal at 1.0735, then fall down to the support level of 1.0656 (thick white line). Relevance up to 06:00 2023-01-03 UTC+1 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/331261
USDX Will Try To Test And Break Below The 103.50 Level

Euro against dollar is ahead of an action-packed week with inflation and retail sales prints to be published

Paolo Greco Paolo Greco 02.01.2023 16:00
On Friday, the EUR/USD currency pair remained unchanged, but there was a slight upward bias throughout the day. As a result, the pair was unable to even begin to move below the moving average line after more than a month of growth and many weeks of flat. The European currency is once again getting close to the Murray level of "8/8," or 1.0742, where the previous advance came to an end. Therefore, last week's technical situation changed. Technically speaking, traders can still expect the European currency to expand because the price is unable to break through even below the moving average. The euro currency is still not growing for any fundamental or macroeconomic reasons, thus we remain certain that a significant correction will start shortly. It's also likely that the movement or correction we're seeing now is "inertial" to the overall downturn. Let's examine these two topics in more detail. This would explain a great deal if the movement was "inertial." The bulk of market players may choose to keep trading in line with the trend since there are currently no grounds for trend movement or growth. The majority continues to purchase since there is an upward tendency, which is why the euro is increasing. If most market participants now assume that the long-term downward trend is gone, then we have witnessed a decline in short positions that were established two years ago for several months. As a result, the current growth is closing short positions rather than purchasing the euro. Both in the first and second cases, this movement will eventually come to a stop, and the market will resume trading based on the fundamentals and macroeconomics. It will then recall that there was just no justification for the euro's rapid rise. The first week of 2023 promises to be fascinating. In general, traders will have access to macroeconomic indicators on the first day of every week. Today, the EU will release a report on business activity in the manufacturing sector for December. However, as the indicator's second value, it is unlikely to be different from the first. Additionally, the figure itself is not anticipated to rise above 50.0, indicating that the downward trend will persist. The final number for December as well as the service sector business activity index will be released on Wednesday. The most intriguing day will be Friday, when the December inflation report, retail sales, and several secondary reports and indices will all be released. Naturally, traders' attention will be drawn to the consumer price index, which is expected to decline to 9.7-9.8% y/y, according to experts. Read next: First Trading Day Of 2023: GBP/USD Is Trading 1.2051, USD/JPY Pair Below 131, The Aussie Pair Is Around 0.68 And EUR/USD Above 1.0680| FXMAG.COM In actuality, comparing inflation with ECB monetary policy is becoming increasingly challenging. Although inflation has only slowed once, the ECB has already started to slow the pace of tightening monetary policy. We think that the European regulator has made a hasty choice by not raising the rate as much as is necessary because it is concerned about the severity of a potential recession. If so, it might be a very long time before inflation reaches the desired level of 2%. Additionally, because the ECB would not stop accelerating rate hikes in this event, it will be challenging for speculators to assess the decrease in inflation. Although it is highly challenging to foresee the form of the market response, we think it should occur after this report. We also want to remind you that the market still reacts more strongly to data coming from abroad, so it won't surprise us if the EU inflation report continues to receive little attention. Of course, keep in mind that the forecast and actual values might be the same. In general, we think that American data will have a bigger impact on the market's sentiment this week than European ones. Do traders even need this info, is another query. We can currently only observe their urge to purchase euros; they are completely unconcerned about numbers. As of January 2, the euro/dollar currency pair's average volatility over the previous five trading days was 60 points, which is considered to be "normal." So, on Monday, we anticipate the pair to fluctuate between 1.0635 and 1.0755. The Heiken Ashi indicator's downward reversal will signal the beginning of a new phase of the corrective movement. Nearest levels of support S1 – 1.0620 S2 – 1.0498 S3 – 1.0376 Nearest levels of resistance R1 – 1.0742 R2 – 1.0864 R3 – 1.0986 Trading Suggestions: Although the EUR/USD pair is continuing to move higher, the trend is still weak and "flat." Trading can only be done on the lower TF inside the side channel because the 4-hour TF hardly ever moves. Explanations for the illustrations: Channels for linear regression - allow identifying the present trend. The trend is now strong if they are both moving in the same direction. Moving average line (settings 20.0, smoothed): This indicator identifies the current short-term trend and the trading direction. Murray levels serve as the starting point for adjustments and movements. Based on current volatility indicators, volatility levels (red lines) represent the expected price channel in which the pair will trade the following day. A trend reversal in the opposite direction is imminent when the CCI indicator crosses into the overbought (above +250) or oversold (below -250) zones. Relevance up to 08:00 2023-01-03 UTC+1 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/331271
Federal Reserve splits highlighted by May FOMC minutes

Euro against US dollar by Alexandros Yfantis - short-term technical analysis - January 2nd

InstaForex Analysis InstaForex Analysis 02.01.2023 16:08
Black lines- support trend lines Green line -resistance (broken) EURUSD is trading around 1.0680 after breaking last week above the short-term resistance 1.0660. Price back tested the break out level and has now started making higher highs and higher lows in the 4 hour chart. Short-term support is at 1.0660 where previously resistance was. Price has the potential to continue higher as long as we stay above 1.0660-1.0650. Key support remains at 1.0570. A break below 1.0650 would be a bearish sign, but the confirmation will come with a break below 1.0570. Until then bulls are in control. Relevance up to 15:00 2023-01-03 UTC+1 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/307045
The Pound Is Now Openly Enjoying A Favorable Moment

Forex: Euro against US dollar - technical analysis and forecast

InstaForex Analysis InstaForex Analysis 02.01.2023 22:34
Overview : The trend of EUR/USD pair movement was controversial as it took place in the downtrend channel. Due to the previous events, the price is still set between the levels of 1.0713 and 1.0682. Thus, it is recommended to be careful while making deals in these levels because the prices of 1.0713 and 1.0643 are representing the resistance and support respectively. Yesterday, the EUR/USD pair dropped sharply from the level of 1.0713 towards 1.0650. Now, the price is set at 1.0658. On the M1 chart, the resistance of EUR/USD pair is seen at the level of 1.0713 and 1.0682. It should be noted that volatility is very high for that the EUR/USD pair is still moving between 1.0682 and 1.0643 in coming hours. Moreover, the price spot of 1.0682/1.0713 remains a significant resistance zone. Therefore, there is a possibility that the EUR/USD pair will move downside and the structure of a fall does not look corrective. What is the secret of the strength of the U.S. dollar? The foundations of the global financial system. - United States of America founded the global financial system, which means continued American economic hegemony. The central determinants of the U.S. dollar. - The most important components of the dollar's centrality in global markets were the following: o Easy conversion. o Intensity of trading. o Stability of the cash reserve since there is global trust. The trend will be probbaly indicate the bearish opportunity below spot of 1.0682/1.0713, sell below 1.0682/1.0713 with the first target at 1.0643 in order to test yesterday's bottom. Also, it should be noted that the trend is still calling for a strong bearish market from the spot of 1.0713 - 1.0682 (sellers are asking for a high price). Additionally, if the EUR/USD pair is able to break out the bottom at 1.0574, the market will decline further to 1.0550 so as to test the weekly support 2. Also, it should be noticed that support 2 is seen at the level of 1.0550. Forecast: If the pair fails to pass through the level of 1.0713, the market will indicate a bearish opportunity below the strong resistance level of 1.0713. In this regard, sell deals are recommended lower than the 1.0713 level with the first target at 1.0643. It is possible that the pair will turn downwards continuing the development of the bearish trend to the level 1.0575 in order to test the weekly pivot point. However, stop loss has always been in consideration thus it will be useful to set it above the last double top at the level of 1.0737 (notice that the major resistance today has set at 1.0737). - Please check out the market volatility before investing, because the sight price may have already been reached and scenarios might have become invalidated. Relevance up to 21:00 2023-01-04 UTC+1 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/307069
FX Daily: Euro’s attractiveness on the rise

Forex: Euro against US dollar - technical analysis by InstaForex's Mourad El Keddani (January 3rd)

InstaForex Analysis InstaForex Analysis 03.01.2023 20:35
Overview : The EUR/USD pair drops sharply today but stays above 1.0520 resistance turned support. Intraday bias remains neutral first. On the downside, break of 1.0520 will confirm short term topping, on bearish divergence condition in 1 hour RSI(14). Deeper fall would be seen back to 1.0520 support and below. Focus stays on 38.2% retracement Fibonacci levels of 1.0594 (morning high) to 1.0548 at 1.0520. Rejection by 1.0594 will suggest that price actions from 1.0520 medium term bottom are developing into a corrective pattern. Thus, medium bearishness is retained for another fall through 1.0500 at a later stage. The EUR/USD pair traded lower and closed the day in the red near the price of 1.0548. Today it, on the contrary, grew a little, having risen to the level of 1.0594. On the hourly chart the EUR/USD pair is still trading below the moving average line MA (100) H1 (1.0594). The situation is similar on the four-hour chart. Based on the foregoing, it is probably worth sticking to the south direction in trading, and as long as the EUR/USD pair remains below MA 100 H1, it may be necessary to look for entry points to sell for the formation of a correction. The EUR/USD pair hit the weekly pivot point (1.0594) and resistance 1, because of the series of relatively equal highs and equal lows. But, the pair has dropped down in order to bottom at the point of 10520. Hence, the major support was already set at the level of 1.0520. RSI is still calling for a strong bullish market as well as the current price is also above the moving average 100 Moreover, the double bottom is also coinciding with the major support this week. Additionally, the RSI is still calling for a strong bullish market as well as the current price is also above the moving average 100. Therefore, it will be advantageous to sell below the resistance area of 1.0594 with the first target at 1.0500. From this point, if the pair closes below the weekly pivot point of 1.0594, the EUR/USD pair may resume it movement to 1.0500 to test the weekly support 1. the, continue towards 1.0450 (the weekly support 2). Read next: 2023 Predictions: Natural gas prices in Europe and the US may in the nearterm struggle to find upside momentum with inventories staying elevated due to mild winter weather and consumers curbing demand| FXMAG.COM Stop loss should always be taken into account, accordingly, it will be of beneficial to set the stop loss above the last bullish wave at 1.0639 . However, sustained break of 1.0594 will raise the chance of trend reversal and target 61.8% retracement at 1.0639. On the upside, however, firm break of 61.8% projection of 1.0639 to 1.0671 from 1.0671 at 1.0713 will pave the way to 100% projection at 1.0713. Relevance up to 18:00 2023-01-04 UTC+1 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 82.74% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. Read more: https://www.instaforex.eu/forex_analysis/307228
How to turn volatility into opportunity? Stephen Dover from Franklin Templeton offers some judicious perspective

Eurodollar: dominance of hawkishness in tomorrow's Fed minutes may support greenback

InstaForex Analysis InstaForex Analysis 03.01.2023 20:58
This morning, the euro/dollar pair abruptly collapsed to the base of the fifth figure, updating a three-week low in price. Although the price hit the 1.0700 support level (the top line of the Bollinger Bands indicator on the D1 timeframe) yesterday, the price has since retreated. Interestingly, there was no formal explanation of a fundamental nature for why there was such a rapid bend to the south. Unemployment in Germany maintained its November level in December (5.5%, with a modest increase, projected to 5.6%), and there were 13 thousand fewer unemployed people than expected, as opposed to projections for a 15 thousand increase Today's economic schedule for EUR/USD is relatively quiet: The crucial release on Tuesday will only be available in the afternoon. We shall learn the early figures for Germany's December inflation growth. German labor market data were released in the first half of the day, although this release is unrelated to the market's overall strengthening of the US dollar. In addition, the report was positive: unemployment in Germany maintained its November level in December (5.5%, with a modest increase, projected to 5.6%), and there were 13 thousand fewer unemployed people than expected, as opposed to projections for a 15 thousand increase. Trading in EUR/USD, however, disregarded this release. The pair moved in lockstep with the US dollar index, which in a matter of hours went from 103.23 to a daily high of 104.54. All currency pairs in the major group were impacted by these dynamics, and the euro/dollar pair was no exception. Regarding the nature of the US currency's behavior at the start of Tuesday's European session, there is no agreement on the market. I believe that several diverse basic reasons that were simmering last week and have now become apparent have increased demand for a secure dollar. Generally speaking, the strengthening of the dollar is advanced in character on the eve of the release of the minutes from the Fed and nonfarm meeting in December, as well as against the backdrop of rising anti-risk sentiment. Due to unstable market conditions, it is dangerous to initiate short bets on the EUR/USD pair at the moment. First of all, the suddenness of the price cut and the absence of a convincing explanation are concerning. There are numerous verbal explanations of the current situation available. It is clear that China indirectly supports the safe dollar. Let me remind you that the Chinese government repealed several restrictions associated with the "zero tolerance" COVID policy towards the end of last year. Following that, the prevalence of coronavirus in the country skyrocketed. Unofficial reports claim that between 250 and 300 million Chinese became ill in December, overwhelming the PRC's healthcare infrastructure. According to media reports, hospitals are congested in most areas. It is also reported how busy the crematoriums are (the WHO reports that in China, only 40% of those over 80 received the recommended three doses of the vaccine). The market's stance on the recent events in China has shifted multiple times during the past several weeks. At first, the safe dollar was supported by an anti-risk mentality. The markets' appetite for risk then rose once again when Beijing made it apparent that it would not tighten its COVID policy. However, it appears that the pendulum has now swung back toward panic, giving dollar bulls cause for increased confidence. Additionally, the rise in the number of cases is secondary; China is not likely unable to control a significant outbreak of the disease. The market is still seeing the situation in China through the lens of potential economic repercussions. And these repercussions appeared quickly. Read next: 2023 Predictions: Peter Garnry - Our target for S&P 500 is still around the 3,200 level sometime during the year leading to an overall drawdown of around 33% from the peak in early 2022 | FXMAG.COM Today's Caixin manufacturing PMI index for China dropped to 49.0, placing it in negative territory Thus, contrary to expectations of a reduction to 48 points, the manufacturing PMI for December in China decreased to 47.0 according to the data released today and on Saturday. For the third consecutive month, the indicator is below the critical 50-point threshold. Today's Caixin manufacturing PMI index for China dropped to 49.0, placing it in negative territory. This dynamic, according to many analysts, is brought on by the worsening of China's epidemiological situation, which is causing a temporary labor shortage and more supply chain disruptions. The Chinese factor is not the dollar's only ally, though. Before the release of the December Fed meeting minutes, in my opinion, the dollar is in high demand. Let me remind you that the December meeting's outcomes put pressure on the US dollar due to Jerome Powell's dovish remarks (which permitted a downward estimate of the PEPP's current tightening cycle's terminal point) and a pause in rate hikes. John Williams, the president of the Federal Reserve Bank of New York, addressed the audience after the meeting and shocked the markets with his hawkish stance. He specifically stated that the rate of increase in consumer prices in the United States is "stubbornly high." In addition, he said that the regulator would increase the base rate "as far as it takes to bring inflation under control," which might go over the proclaimed maximum of 5.1%. The United States inflation rate has started to decline, but, according to Williams, who has a permanent vote on the Open Market Operations Committee, "a considerably more significant slowdown is required so that the Fed may soften its position on the need to tighten policy." The dollar will get a lot of support if the document's wording is primarily hawkish The minutes of the December meeting have become more important in light of these contradictory signals. The dollar will get a lot of support if the document's wording is primarily hawkish. Now, the value of the dollar is rising in advance following the "buy on rumors, sell on facts." However, the fact that the EUR/USD price fell by 150 points without any discernible, tangible, or clear causes is concerning. Since the aforementioned fundamental elements grew in strength throughout the New Year period and now have the function of a trigger, it may be concluded that such dynamics are also caused by the fact that today is the first working day of 2023. Given that such impulsive moves on such fragile bases are typically unstable, it is impossible to discuss the priority of short positions on the EUR/USD pair in this instance. Right now, it is best to adopt a wait-and-see strategy, keeping an eye on how the price moves around the 1.0505 support level. The Fed procedure in this situation can play a significant role in the medium term, supporting or weakening the US currency. If the bears can break through this price barrier, then in this case it will be possible to talk about the first symptoms of a resumption of the southern trend. Relevance up to 12:00 2023-01-04 UTC+1 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 82.74% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. Read more: https://www.instaforex.eu/forex_analysis/331381
Lagarde's Dilemma: Balancing Eurozone's Slowdown and Inflation Pressure

Apple (AAPL) fell 3.74% as the stock was downgraded to "neutral" from "outperform" at Exane BNP Paribas

Intertrader Market News Intertrader Market News 04.01.2023 14:33
DAILY MARKET NEWSLETTER January 4, 2023               Pre-Market Session News Sentiment Technical Views           EUR/USD   Euro Stoxx 50 (Eurex)   Brent (ICE)                 Please note that due to market volatility, some of the key levels may have already been reached and scenarios played out.                     Price Movement Analyst Views Target Pivot   Dax (Eurex) 14,304.00 +46.00 (+0.32%) Read the analysis 14,360.00 14,210.00     FTSE 100 (ICE Europe) 0.00 0.00 (0.00%) Read the analysis 7,618.00 7,510.00     S&P 500 (CME) 3,850.25 +4.25 (+0.11%) Read the analysis 3,883.00 3,820.00     Nasdaq 100 (CME) 10,970.50 +25.00 (+0.23%) Read the analysis 11,070.00 10,850.00     Dow Jones (CME) 33,297.00 +19.00 (+0.06%) Read the analysis 33,460.00 32,980.00     Crude Oil (WTI) 76.66 -0.27 (-0.35%) Read the analysis 75.80 77.40     Gold 1,845.83 +6.34 (+0.34%) Read the analysis 1,872.00 1,839.00                     MARKET WRAP           Market Wrap: Stocks, Bonds, CommoditiesOn Tuesday, major U.S. stock indexes closed lower dragged by Tesla (TSLA) and Apple (AAPL). The S&P 500 fell 15 points (-0.41%) to 3,823, and the Nasdaq 100 slid 77 points (-0.70%) to 10,862, while the Dow Jones Industrial Average dipped 10 points (-0.03%) to 33,136.The U.S. 10-year Treasury yield dropped 11.3 basis points to 3.761%.Automobiles (-8.73%), energy (-3.63%), and technology hardware & equipment (-2.8%) sectors lost the most, while consumer durables & apparel (+1.52%), media (+1.42%), and telecoms services (+1.28%) sectors posted gains.Tesla (TSLA) plunged 12.24% as the market viewed the electric-vehicle maker's fourth-quarter deliveries as lower than expected.Apple (AAPL) fell 3.74% as the stock was downgraded to "neutral" from "outperform" at Exane BNP Paribas.On the other hand, Wynn Resorts (WYNN) rose 3.81% as the stock was upgraded to "overweight" from "equal-weight" at Wells Fargo. Regarding U.S. economic data, construction spending rose 0.2% on month in November (vs -0.4% expected).European stocks closed higher. The DAX 40 rose 0.80%, the CAC 40 gained 0.44%, and the FTSE 100 was up 1.37%.U.S. WTI crude futures fell $3.10 (-3.86%) to $77.13 a barrel.Gold price climbed $15 to $1,839 an ounce.Market Wrap: ForexThe U.S. dollar strengthened against other major currencies. The dollar index rose to 104.64. The Federal Reserve will release minutes of its December monetary-policy meeting later on Wednesday.EUR/USD declined 114 pips to 1.0553. Germany's data showed that the inflation rate slowed to 8.6% on year in December (vs +9.1% expected), and the jobless rate was stable at 5.5% (vs 5.6% expected).GBP/USD slid 75 pips to 1.1971.USD/JPY rose 13 pips to 130.93. The pair hit a six-month low of 129.51 within the session.AUD/USD dropped 75 pips to 0.6727.USD/CHF added 98 pips to 0.9359, and USD/CAD jumped 99 pips to 1.3672.Bitcoin traded slightly lower to $16,660.Morning TradingIn Asian trading hours, USD/JPY retreated to 130.75 from an intraday high near 131.44.Meanwhile, EUR/USD rebounded to 1.0565 and GBP/USD climbed to 1.1985.Gold rose to $1,844.Bitcoin edged up to $16,726.Expected TodayFinal readings of December S&P Global services purchasing managers index is expected at 49.1 for the eurozone, 49.0 for Germany and 48.1 for France.France's December consumer price index is expected to be up 6.3% on year.U.K. mortgage approvals are estimated at 56,500.In the U.S., December ISM manufacturing purchasing managers index is expected at 49.0, while November JOLTS job openings are estimated at 10.1 million. Also, the Federal Reserve will release its latest FOMC meeting minutes.           UK MARKET NEWS           RS Group, a distributor of industrial and electronics products, announced that it has completed the acquisition of Risoul.Auto & Parts, telecom and industrial goods & services shares fell most in London on Friday.From a technical point of view, CRH (+4.49% to E38.67) crossed above its 50-day moving average.           ECONOMIC CALENDAR           Time Event Forecast Importance   04:30 BoE Consumer Credit (Nov) 820M MEDIUM     04:30 Mortgage Approvals (Nov) 56.5k MEDIUM     04:30 Mortgage Lending (Nov) 3.5B MEDIUM     07:00 MBA 30-Year Mortgage Rate (Dec/23)   MEDIUM     07:00 MBA 30-Year Mortgage Rate (Dec/30)   MEDIUM     10:00 ISM Manufacturing PMI (Dec) 49 HIGH     10:00 JOLTs Job Openings (Nov) 10.1M HIGH     10:00 ISM Manufacturing Employment (Dec) 48 MEDIUM     14:00 FOMC Minutes   HIGH     16:30 API Crude Oil Stock Change (Dec/30)   MEDIUM                                     NEWS SENTIMENT           Barclays PLC BARC : LSE 163.60 GBp +2.97% In the last 5 days         NEWS SENTIMENT (24H) Very Positive       TECHNICAL SCORE Short-Term Medium-Term Long-Term                                   Cineworld Group PLC CINE : LSE 3.671 GBp -1.16% In the last 5 days         NEWS SENTIMENT (24H) Negative       TECHNICAL SCORE Short-Term Medium-Term Long-Term                                   Rolls-Royce Holdings PLC RR. : LSE 98.91 GBp +6.77% In the last 5 days         NEWS SENTIMENT (24H) Positive       TECHNICAL SCORE Short-Term Medium-Term Long-Term                                   Deutsche Bank AG DBK : XETRA 11.112 EUR +4.53% In the last 5 days         NEWS SENTIMENT (24H) Negative       TECHNICAL SCORE Short-Term Medium-Term Long-Term                                   Standard Chartered PLC STAN : LSE 640.20 GBp +1.75% In the last 5 days         NEWS SENTIMENT (24H) Very Negative       TECHNICAL SCORE Short-Term Medium-Term Long-Term                                   Bayerische Motoren Werke AG BMW : XETRA 85.83 EUR +3.09% In the last 5 days         NEWS SENTIMENT (24H) Very Positive       TECHNICAL SCORE Short-Term Medium-Term Long-Term                           TECHNICAL VIEWS           EUR/USD Intraday: rebound.   Pivot: 1.0540   Our preference: Long positions above 1.0540 with targets at 1.0615 & 1.0645 in extension.   Alternative scenario: Below 1.0540 look for further downside with 1.0515 & 1.0480 as targets.   Comment: The RSI shows upside momentum.                     Euro Stoxx 50 (Eurex)‎ (H3)‎ Intraday: intraday support around 3869.00.   Pivot: 3869.00   Our preference: Long positions above 3869.00 with targets at 3927.00 & 3959.00 in extension.   Alternative scenario: Below 3869.00 look for further downside with 3840.00 & 3815.00 as targets.   Comment: The immediate trend remains up but the momentum is weak.                     Brent (ICE)‎ (H3)‎ Intraday: under pressure.   Pivot: 82.70   Our preference: Short positions below 82.70 with targets at 80.80 & 80.10 in extension.   Alternative scenario: Above 82.70 look for further upside with 84.30 & 84.35 as targets.   Comment: The RSI is bearish and calls for further decline.        
The delayed release of Germany's inflation data should confirm the slowdown seen across the rest of the continent amidst falling energy prices due to a relatively mild winter

Softer German inflation print could underpin capital inflow to the euro

Alex Kuptsikevich Alex Kuptsikevich 04.01.2023 14:32
Inflation data from Germany yesterday and today reinforce hopes that the inflation wave is rolling back faster than expected. Whilst the early success does not promise a quick win, it does raise prospects that high inflation expectations have been avoided. According to a provisional estimate, consumer prices for December in Germany fell by 0.8% after falling by 0.5% the month before. Notably, we are seeing a fall rather than simple exhaustion of growth. Vendors have begun to reduce prices actively following the fall in raw materials and energy costs. Annual inflation has slowed from 10.4% in October to 8.6%. However, the high-base effect will begin to be felt in February. Import prices, an early indicator of inflation, accelerated their fall in November, losing 4.5% after decreasing by 1.2% and 0.9% in the previous two months. Import prices are 14.9% higher than a year earlier - a significant retreat after staying close to 20% y/y for the seven months to September. Read next: Investors should look for new stars in long-term portfolios, realising that the world began a new period in the long-term macro cycle last year says FxPro's analyst| FXMAG.COM Generally, weak inflation figures are bearish news for the currency as they suggest a sluggish economy and lead to lower interest rate forecasts. In this case, however, such an essential sigh of relief could support capital inflows into the euro. With lower inflation, the single currency retains more purchasing power. Furthermore, assuming less shock therapy from the ECB, investors may look more closely at purchases of European assets, expecting less dramatic degradation of local company earnings and not so steep a rise of debt service costs.
The GBP/USD Pair Did Not Reach The Nearest Target Level Of 1.2259

FX: The Fall In The Pound Also Saw Egyptian Hard Currency Foreign Debt Rally

ING Economics ING Economics 05.01.2023 10:49
The December FOMC minutes caused barely a ripple in the FX market. Instead, investors are left to interpret China's battle with Covid and plunging energy prices. The sharp fall in natural gas prices is a boon to European energy importers, but a Fed still concerned with tight labour markets suggests the European FX recovery against the dollar is limited USD: FOMC minutes barely move the needle Last night's release of FOMC minutes could have been perceived as slightly hawkish, yet FX and interest rate markets barely budged. At the heart of the 2023 story is the risk management trade-off of the Federal Reserve under-appreciating sticky inflation versus over-tightening and delivering weaker-than-needed growth. For the time being, the Fed is still more concerned by the former and plans ongoing rate increases. In practice, we think that means another 50bp hike from the Fed in February (the market seems to prefer 25bp hikes in February and March) and then rate cuts from the third quarter onwards. For rate markets the battle this year seems to be whether inflation will allow the Fed to deliver the roughly 50bp of easing expected in the second half of the year. For today's session, the focus will be on the December ADP jobs data, where a +150k number is expected after last month's 127k rise. Currently, the consensus expects tomorrow's December nonfarm jobs reading at +200k. Yesterday we highlighted the importance of the JOLTS job opening data. The December figure showed a surprise rise, which will fan Fed fears of the US labour market staying tight. A firm ADP number today could also deliver a little support to US yields and the dollar. Away from the Fed story, the market's early year focus is on China's Covid battle and slumping energy prices. Commodity markets - always very sensitive to the China demand story - are taking a cautious approach here. In other words, they are not prepared to look through (presumably) surging infections towards the second half growth story. Equally the China story, in addition to very warm weather, is weighing on energy prices where both oil and gas are plunging. Indeed, European natural gas now trades at a discount to Asian natural gas and warns that LNG shipments will be re-routed to Asia. For the time being this fall in natural gas is prompting a re-assessment of European growth prospects and supporting European FX - especially CE4 currencies. That may well remain the near-term trend unless US price data is sufficient to re-price the Fed tightening cycle to the 5.50% area and lift the dollar. As above, ADP will be key for the dollar today. A subdued DXY range well within 104-105 looks likely. Chris Turner EUR: A welcome reprieve from energy The sharp fall in energy prices is being welcomed across Europe. That is already showing up in softer-than-expected German and French inflation data. Today the focus will be on Italian inflation data ahead of tomorrow's eurozone December CPI release, currently expected at 9.5% year-on-year. As discussed yesterday, the sharp fall in natural gas is generating even further improvement in the euro's terms of trade and is a euro positive. However, EUR/USD may struggle to make further upside gains until key event risks have been surmounted such as tomorrow's December US jobs release and next Thursday's US December CPI reading. Expect EUR/USD to continue trading in a 1.0580-1.0640 range, though we would probably say the upside risks are greater given developments in the energy story and the re-rating underway of European equities. Elsewhere, the National Bank of Poland left rates unchanged at 6.75% yesterday. Our team feels that sticky inflation will not allow an easing cycle to materialise in the second half of this year, however. Look out for the press conference from NBP Governor Adam Glapinski at 15CET today. 7.5% implied yields for the zloty and a rally in European bond markets amid lower energy prices can probably keep EUR/PLN gently offered for the time being. Chris Turner GBP: PM Sunak's new targets The UK Conservative government came out on the offensive yesterday with Prime Minister Rishi Sunak announcing five strategic targets for this year, among which were halving inflation, stabilising debt to GDP and ensuring a return to growth. The reduction in inflation may be the most attainable of these three and the one over which the government has the least control.  On the subject of inflation, today sees the 1030CET release of the Bank of England's Decision Maker Panel (DMP) survey. This looks at inflation expectations in the business sector. The November survey, published in early December, saw one-year inflation expectations drop to 7.2% from 7.6% YoY. Presumably, this should fall again in today's survey. We still think the market is over-pricing the BoE tightening cycle at a peak near 4.50% (+100bp) in August this year. But that pricing has been resolute. EUR/GBP should continue in a 0.8800-0.8850 range for the time being, while cable can loiter well within this week's 1.19-1.21 range. Chris Turner EGP: Another devaluation in the Egyptian pound The Egyptian pound (EGP) sold off another 6-7% yesterday. This is a heavily managed exchange rate and the decline is taken as a controlled move by local authorities. The fall in the pound also saw Egyptian hard currency foreign debt rally on the view that authorities were conforming to IMF conditionality of a flexible exchange rate in return for the $3bn IMF facility agreed in October. The legacy of the 2022 inflation and interest rate shock to emerging markets continues to play out in Africa, where sovereign CDS premia remain among the highest in the world. Among those sovereign credits under pressure is Nigeria, which also has a heavily managed exchange rate. The Nigerian naira was allowed to depreciate 4% in December, but with implied yields still at 50% - expecting further naira depreciation - we can only think that lower energy prices will be heaping more pressure on this currency. Those forwards price USD/NGN at 500 in three months' time - which certainly looks to be the direction of travel. Chris Turner Read this article on THINK Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more  
Assessing Energy Price Dynamics and Their Impact on Inflation in the Short and Medium Term

Amazon, Apple, and Alphabet stocks currently seem largely dependent on the overall macroeconomic sentiment and the Fed’s possible and actual moves

Santa Zvaigzne Sproge Santa Zvaigzne Sproge 05.01.2023 13:27
The first trading week of the year is coming to an end and as we've already said, it hasn't been that boring as many have supposed. As we're after Fed minutes and German and Spanish inflation prints, but still before Eurozone inflation and NFP, we reached out to Santa Zvaigzne-Sproge, CFA, Head of Investment Advice Department at Conotoxia Ltd. to deliver you with her view on the most recent events like mentioned macro events and striking performance of popular stocks like Tesla, Amazon and Apple. Inflation in the Eurozone for the following months may largely be determined by how cold or warm the following months will be Spain has generally faced lower inflation than other EU member states during this inflationary period - it peaked in July at 10.8% and has since lowered to 6.8% in November, while it was still above 10% in the same period in the EU. Additionally, Spain is in a more advantageous situation in terms of geographical location and heating needs during the winter season and the country has introduced various reliefs such as limits on the increase of rents and energy bills pushing the inflation lower. Furthermore, while Spain’s consumer prices rose 5.8% (lower than before), its core inflation rose to 6.9% (from 6.3% a month ago), meaning that it may not be safe to say that Spain has retained its inflation. Germany may be a better indicator for the whole Eurozone, although it is in a better position than many other EU member states in terms of dealing with inflation (such as the newly introduced solidarity surcharge to finance the energy price cap, which not only supports the government’s budget to cover the energy price spikes for the households but also keeps companies’ profits lower and therefore limiting the “fuel” for further inflation). If we consider that one of the key inflation drivers in the EU is heating and energy prices, inflation in the Eurozone for the following months may largely be determined by how cold or warm the following months will be. Considering that heating will be needed for a large part of the EU for at least 3 more months, the ongoing geopolitical conflict leading to food supply difficulties, and the still decreasing unemployment rates in both the EU and Eurozone, there may not be any strong reason to believe that the Eurozone’s inflation data is headed for particular improvement. It's a quite long way to another Fed decision, would you consider this week's Fed minutes and NFP as real guideposts? The Federal Reserve’s minutes this week perpetuated the already expressed opinion of a restrictive policy stance, which may be confirmed by higher-than-expected non-farm payroll data on Friday. It would be useful to pay attention to the NFP data not only from the actual vs forecast perspective but also current vs a previous couple of months as well as revision of actual data perspectives – increases in both of these measures may be considered as another indicator of still overheating economy. Amazon’s stock price touched what seems to be an important support level on 28 December (closed at 81.82 USD) I would like to separate Tesla from the rest of the group as the company is considerably more unpredictable and seems to largely depend on Elon Musk’s activities. As investors are currently looking at safer investments, we may see further selloffs of Tesla stocks. Technically, besides the 100 USD level, the one last major support left for the stock price is its 100-month moving average currently standing at 88 USD. Amazon, Apple, and Alphabet stocks currently seem largely dependent on the overall macroeconomic sentiment and the Fed’s possible and actual moves in the following months. Based on the hawkish stance still held by the Fed officials, we may expect to see further lows also for these companies, but for different reasons in comparison to Tesla. Read next: Tesla rebounded 5.12%, General Motors rose 2.57%, Micron Technology traded 7.6% higher, and Meta Platforms rose 2.11%| FXMAG.COM Furthermore, Amazon’s stock price touched what seems to be an important support level on 28 December (closed at 81.82 USD) and since then has started moving higher. It is worth monitoring its further price movements and looking for a pivot in the current trend. Amazon also has fallen the most among these three stocks and currently trades at a 1.5x price to next year’s sales ratio. For comparison, Alphabet and Apple are still trading at 4x and 5x price to next year’s sales ratio accordingly. Santa Zvaigzne-Sproge, CFA, Head of Investment Advice Department at Conotoxia Ltd. (Conotoxia investment service) Materials, analysis and opinions contained, referenced or provided herein are intended solely for informational and educational purposes. Personal opinion of the author does not represent and should not be constructed as a statement, or an investment advice made by Conotoxia Ltd. All indiscriminate reliance on illustrative or informational materials may lead to losses. Past performance is not a reliable indicator of future results. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 76,41% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
EUR/USD Pair is Structurally Working On A Larger-Degree Upswing

Oanda's Kenny Fisher comments on Euro against US dollar - January 5th

Kenny Fisher Kenny Fisher 05.01.2023 19:44
EUR/USD is almost unchanged on Thursday. The economic calendar is light, with no tier-1 events out of the eurozone. The US releases the ADP employment report and unemployment claims, ahead of the jobs report on Friday. Will eurozone inflation dip? German inflation fell sharply in December, falling to 9.6% from 11.3% in November. This was a positive way to end what was a rough 2022 – annual inflation hit 7.9%, its highest level since 1951. France and Italy’s inflation levels also fell and investors are hoping for a repeat performance on Friday, when the eurozone releases the December inflation report. Eurozone CPI is expected to drop to 9.7%, compared to 10.1% in November. A drop into single digits will be welcome, but much of the decline could be a result of energy subsidies in Germany and elsewhere. ECB President Lagarde has noted that headline inflation could rise once the government subsidies come to an end. Core CPI provides a more accurate indication of whether inflation is really falling, and the forecast is for the core rate to remain unchanged at 5.0%. A decline in the CPI reading will create headlines but is unlikely to sway the central bank from raising rates at the February 2nd meeting, likely by 50 basis points. The ECB is committed to curbing inflation and is unlikely to ease up on rate hikes until it is convinced that inflation is on a sustained downturn. The Federal Reserve minutes reiterated the hawkish message that Jerome Powell had for the markets at the December meeting. FOMC members committed to maintaining a restrictive policy while inflation remained unacceptably high, saying that more evidence was needed to show that inflation was on a “sustained downward path to 2 per cent”. The minutes noted that several members warned against “prematurely loosening monetary policy”. The Fed has been consistent with its hawkish stance for some time, yet there is still a dissonance between the Fed’s message and market pricing. The minutes noted that no FOMC members expect any rate cuts this year, while the markets have priced in a possible small reduction by the end of 2023 and have forecast a funds rate peak at 4.5%-4.75%. The Fed, on the other hand, expects rates to hit 5% or higher. The Fed is not pleased with this disconnect and the minutes contained a warning to the markets not to underestimate the Fed’s resolve to maintain high rates in order to curb inflation. EUR/USD Technical EUR/USD is putting pressure on support at 1.0566, followed by support at 1.0487 There is resistance at 1.0636 and 1.0740 This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds. Euro calm as data calendar remains light - MarketPulseMarketPulse
BSP Maintains Rates Amid Moderate Inflation; Eyes Further Tightening if Needed

The Dollar Is Broadly Weaker, Inflation In The CEE Region Is Still A Problem

ING Economics ING Economics 09.01.2023 11:16
The dollar is broadly weaker after Friday's release of a sub-50 December ISM services reading added weight to the view that the US will enter a recession. At the same time, China's Covid pivot is sparking a re-assessment of activity currencies. We'll hear more from central bankers this week and the data highlight will be Thursday's December US CPI release USD: ISM services knocks stuffing out of the dollar The dollar starts the week under pressure and has seen some sizable losses over the last two trading sessions. Friday's price action proved instructive. The slightly lower-than-expected average hourly earnings data saw the dollar soften a little, but the sub-50 ISM services release really knocked the dollar hard. As our US economist, James Knightley, notes, ISM services readings under 50 are one of the most reliable indicators of a US economy headed into recession. This reading has not so much questioned whether the Fed will be taking rates close to 4.75/5.00% this spring, but rather added to the pricing of the subsequent Federal Reserve easing cycle. Growing convictions that the Fed will have to ease later this year come at a time when China is dismantling its zero-Covid architecture and policy measures - especially in the property sector - are reorienting towards growth. This combination is proving a very benign one for emerging currencies and commodity currencies in general. As usual, we think the FX markets will take their cue from the US yield curve, where Friday's bullish disinversion of the curve (as short-dated yields crumble) point to a more reflationary setting and a weaker dollar. Were US two-year Treasury yields to drop below the 4.10/20% area this week, we would expect another decent leg lower in the dollar. Whether those US short-end yields drop more this week will be determined largely by Thursday's US December CPI release. James Knightley is on consensus expecting core inflation at 0.3% month-on-month and 5.7% year-on-year. Downside surprises here were a big catalyst in the dollar reversing lower last year and this data point will remain one of the biggest FX triggers of the month. The week also sees Fed Chair Jerome Powell speaking at a Riksbank symposium on central bank independence. With concerns building around a US recession and price data easing, the tide seems to be turning against his hawkish rhetoric. In all, we suspect investors will be looking to add to positions in EM FX and the commodity complex this week. The Chinese renminbi is enjoying strong gains and Asia's high beta Korean won is flying. It seems very hard to fight this trend - especially in the second week of the year when money is being put to work. The recent DXY low at 103.45 looks vulnerable and 102.00 now looks to be the direction of travel as US recession fears build. Chris Turner EUR: Memories of 2007 EUR/USD has been participating in this dollar sell-off and the bias looks higher. Conditions here feel a little like the summer of 2007 when the slowdown in the US housing market saw the conviction build - especially from August 2007 onwards - that the Fed would have to ease. Having traded in a 4.50-5.00% range for the first half of 2007, US two-year yields crumbled to 2.70% by the end of 2007 and EUR/USD rallied around 10%. Of course, there are many differences between then and now, e.g. US sub-prime then, versus the US inflation battle now. But a surprisingly hawkish European Central Bank (both then and now) warns that EUR/USD could rally hard if the market is convinced the Fed will ease. Low gas prices and China reopening are also supportive for EUR/USD and we would say that, despite the bearish seasonals for EUR/USD, pressure is building for further near-term gains. With money probably flowing into emerging market funds now - and out of dollar deposits - we can see EUR/USD heading up to 1.0735/85, with outside risk to the 1.09 area should US price data soften again this week. Chris Turner GBP: BoE Chief Economist speaks at 1630CET Sterling has received some support from the better global risk environment. The highlight of today's session will be a 1630CET speech by Bank of England (BoE) Chief Economist, Huw Pill, with the title: 'The UK economic and Monetary Policy Outlook'. We have noted recently that the market has been locked onto expectations that the Bank rate will be taken to the 4.50% area (or +100bp from today's level) into the summer. This pricing has been resolute for several months. Recent job and wage data has yet to assuage the BoE's concerns over a tight UK labour market, thus we doubt Huw Pill will need to sound very dovish today.  With the dollar at risk of falling further, GBP/USD looks biased towards the 1.2350 area this week, while EUR/GBP should find support in the 0.8780 area. Chris Turner CEE: Inflation prints across the region We have a heavy calendar this week led by inflation numbers across the region. Today we start with Hungarian industrial production and foreign trade and in the Czech Republic, we will see the final estimate of 3Q GDP and labour market numbers. Tomorrow, the Romanian central bank is scheduled to meet, and we think it will raise interest rates for the last time to 7.00%, but give a 30% probability that rates will remain unchanged. December inflation in the Czech Republic will be released on Wednesday. We expect a further increase from 16.2% to 16.4%, slightly above market expectations. Then on Friday, we will see December inflation in Hungary and Romania. In Hungary, we expect a further rise from 22.5% to 25.9% YoY, also slightly above market expectations. In Romania, we think inflation has already peaked and expect a small decline from 16.8% to 16.6% YoY. The CEE markets experienced a massive rally in rates and bonds last week, but also in FX for most of the region. This week should show that inflation in the region is still a problem and this chapter is not over yet. Most interesting will be the Hungarian forint and another jump higher in inflation. Hungary is the only country in the region that has seen inflation surprise to the upside in each of the last three months. Thus, another surprise would likely push the forint back above 400 EUR/HUF. Overall, higher EUR/USD after Friday's US jobs report is good news for the region. On the other hand, the fall in market rates is again undermining domestic conditions for FX. As we mentioned earlier, the drivers of the previous rally have been exhausted in our view and we should see a quieter week in the FX market. Frantisek Taborsky Read this article on THINK Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
FX Daily: Euro’s attractiveness on the rise

2023 Predictions: Euro could trade back below parity at some point during the first half versus the USD, but may firm up later in the year once the Fed is eventually seen as beginning to soften its own stance

John Hardy John Hardy 03.01.2023 13:49
We're pleased to deliver our readers with 2023 predictions for currencies and Forex prepared by John J. Hardy, Head of FX Strategy at Saxo Bank. Let's take a look at his views on euro, pound and more. What do you expect from euro and pound in 2023? We ended 2022 with the euro riding high on the ECB's late-to-the-game hawkishness at the December 15 ECB meeting. But 2023 will see the ECB having a hard time delivering as much as the market is now expecting without getting aggravating peripheral spreads and bringing into question the degree to which the ECB can really achieve meaningful quantitative tightening, much less hiking the rate beyond perhaps 3.00%. Euro could trade back below parity at some point during the first half versus the US dollar, but may firm up later in the year once the Fed is eventually seen as beginning to soften its own stance as a recession is likely on the way in late 2023 or early 2024 (later than the market expects - data could prove far more resilient from the US than the market expects for much of this year). The outlook for the UK is far weaker due to the austerity programme of the new Sunak-Hunt government, so a meaningful weakening in sterling is a risk for the first half of the year in particular. One huge uncertainty in general and in particular for Europe is the price of oil and especially natural gas and the availability heading into next winter as the Russia-Ukraine war grinds on and with Chinese demand returning as it will fully open up its economy after the Chinese New Year, after which the Covid outbreak there will have hopefully largely run its course. What can we expect from EUR/USD, CHF/USD, USD/JPY, CNY/USD? What macroeconomic and geopolitical factors will be crucial for currencies in 2023? Some of these are mentioned above: the return of Chinese demand post Lunar New Year (early this year on January 23) and post-Covid impacts, the energy situation and war in Europe, and in the US, whether we see a more resilient US economy and stickier inflation from a tight jobs market than the market expects, with recession there coming far later than currently anticipated (as late as early 2024). This could mean far higher yields and another round of US dollar strength before  the Fed can afford to ease up on its tightening regime. So while the US dollar may end the year a bit lower, there may be room for another significant rally in the first half of the year and plenty of volatility. Read next: 2023 Predictions: Peter Garnry - Our target for S&P 500 is still around the 3,200 level sometime during the year leading to an overall drawdown of around 33% from the peak in early 2022 | FXMAG.COM What macroeconomic and geopolitical factors will be crucial for the dollar in 2023? US-China relations, Another random issue that will presumably be resolved before too much damage is done, but needs watching, is the "debt ceiling" issue in the US, which will be reached sometime in the spring/early summer time frame and must be raised to allow orderly functioning of US treasury markets and even the US economy ultimately.
Hang Seng Index Plummets -2% Amid Weak China Data, Short-Term Trend Intact

The EUR/GBP Pair Sticks To Its Modest Intraday Gains

TeleTrade Comments TeleTrade Comments 10.01.2023 09:57
EUR/GBP attracts fresh buying on Tuesday and recovers further from over a two-week low. Dovish BoE expectations weigh on the British Pound and remain supportive of the move. The recent hawkish ECB rhetoric underpins the Euro and supports prospects for further gains. The EUR/GBP cross regains positive traction following an early dip to sub-0.8800 levels and moves away from over a two-week low touched the previous day. The cross sticks to its modest intraday gains through the early European session and is currently placed near the top end of its daily range, around the 0.8825-0.8835 region. The British Pound's relative underperformance comes amid a bleak outlook for the UK economy, which has been fueling expectations that the Bank of England (BoE) is nearing the end of the current rate-hiking cycle. Apart from this, a modest pickup in the US Dollar demand is seen weighing on the Sterling and lending some support to the EUR/GBP cross. The shared currency, on the other hand, benefits from hawkish European Central Bank (ECB) rhetoric. In fact, ECB Governing Council member Francois Villeroy de Galhau said last Thursday that it would be desirable to reach the right terminal rate by next summer. Furthermore, ECB expects wage growth to be very strong over the next few quarters. In the absence of any major market-moving economic releases, either from the UK or the Eurozone, the aforementioned bullish fundamental backdrop supports prospects for additional gains. That said, any subsequent move up might continue to confront stiff resistance and is more likely to remain capped near the 0.8865-0.8875 heavy supply zone.  
Euro against US dollar and British pound - Technical Analysis - May 17th

Pound sterling affected by BoE's speaker hinting at persistent recession. DAX gains on the back of industrial production edges higher

Jing Ren Jing Ren 10.01.2023 10:14
USDJPY seeks support The Japanese yen rallied over better-than-expected Tokyo CPI in December. On the daily chart, a break below August’s low (130.50) has put the buy side under pressure. The latest bounce hit resistance in the supply zone 134.70-135.00 which coincides with the 30-day moving average. The bulls will need to clear the support-turned-resistance of 133.30 before they could turn short-term sentiment around. The psychological level of 130.00 at the bottom of the bounce is a critical floor to keep the dollar steady. EURGBP attempts to recover The pound softens as the BoE's chief economist warns of persistent inflation. On the daily chart, the euro is in a consolidation after it lifted last October’s high of 0.8860. A slide below 0.8780 may have prompted intraday traders to take profit, which could cause a choppy price action in the near term. 0.8770 is a fresh support and 0.8720 at the base of the bullish breakout is confluent with the 30-day moving average. Selling pressure could be expected between 0.8830 then 0.8870, but a breakout may trigger a bullish continuation. GER 40 breaks daily resistance The Dax 40 climbs as upbeat industrial output in Germany eases fears of a deep recession. A close above December’s high of 14660, a major daily resistance may have put the index back on track. Zooming into the hourly chart, momentum from 14400 is a sign of strong conviction, prompting sellers to cover. In case of a pullback, the fresh support is a key level to keep the bullish bias intact. A brief consolidation could be in play after the RSI went overbought. The psychological level of 15000 might be next when volatility returns.
Forex: Euro against US dollar - forecast on April 24th, 2023

European stocks and euro doing better amid brighter expectations

Alex Kuptsikevich Alex Kuptsikevich 10.01.2023 10:36
Europe is climbing out of its economic hole. At least, this applies to business and investor sentiment. A new assessment from Germany's Sentix marked a recovery of the investor confidence indicator from -21.0 a month earlier to -17.5 - a significant improvement from October's bottom at -38.9. The indicator's recovery exceeded expectations for the third month, surprising analysts. The increase is supported by milder weather, which allows for lower gas prices and boosts business confidence that it will survive this winter. But it is also noteworthy that the recovery is by no means hampered by the harsh tone of the monetary authorities, raising interest rates, and the strengthening of the euro by more than 12% from the September lows. The eurozone economy is recovering more strongly, despite the energy crisis and a tough reshaping of logistical links. It is more alive than it has been since the global financial crisis, which for the most part, has affected US and UK banks. Read next: Damage to the crypto industry increased by almost a half in 2022 | FXMAG.COM The outperformance of European equities and the rise of the single currency in recent weeks shows that investors realise that they were overly spooked by the start of the autumn, and expectations are now becoming a little rosier. A more rapid deceleration in inflation than previously feared is adding to the positive sentiment. However, it may be too soon to celebrate a victory for the European economy as the full effect of the interest rate increases is yet to be felt. On the other hand, it is positive for the Eurozone and the Euro exchange rate that China is switched to active stimulus. EURUSD is trading near 1.0740, near the highs since early June, and continuing positive economic surprises are setting the pair up for further gains towards the 1.09 area by the end of the month and at 1.12 by the end of the first quarter.
ECB enters final stage of tightening cycle

Euro: ECB's Schabel talks further rate hikes. Australian inflation hits 7.3% - Australian dollar can be supported by a 25bp rate hike

Ipek Ozkardeskaya Ipek Ozkardeskaya 11.01.2023 09:27
US equities first struggled to find direction, as the Federal Reserve (Fed) Chair Jerome Powell kept mum on monetary policy in Stockholm yesterday, worried about the World Bank's morose growth projections, but then turned north on hope that a softer US inflation print tomorrow could boost the Fed doves and enhance appetite in US equities.   The S&P500 found support at the 100-DMA and closed the session above the 50-DMA, while Nasdaq advanced 0.88%. We could see some more optimism into tomorrow's CPI print in the US.  Gold benefits from softer US yields, and softer dollar on expectation that a softer inflation could soften the Fed's policy stance. So, a softer inflation could indeed send the price of an ounce above $1900 to the end of the week.  Stop fighting the Fed!  What's happening right now is absurd. The market is fighting back the Fed. The Fed says 'we will hike the rates above 5%', and investors reply 'we don't believe you; we think that you will NOT raise the rates above 5%!'    As a result, the financial conditions in the US are now neutral, while inflation, though easing, remains more than three times higher than the Fed's 2% target. This means that the Fed will continue hiking rates even if it means slower economic growth.   World Bank forecasts aren't cheery  The World Bank predicts a global growth of about 1.7% this year, about half the pace it predicted last summer. It would also be the third worst year in three decades after 2009 and 2020 slowdowns.  Read next: According to Euromonitor, 2022 Value of Buy Now Pay Later transactions is predicted to hit $156bn| FXMAG.COM The US is expected to grow by only 0.5%, the Eurozone should not grow nor contract, while growth in China will be around 4.3% according to their latest forecasts for 2023.   Although the slowing economic growth softens the rate expectations – and boost equities, a weaker global economy should weigh on corporate profits and should not let the rally run too far.   Have you gone out of your mind, Goldman?!  Then you have Goldman Sachs, which predicts that the Eurozone will finally not enter into recession... after all.   The bank said yesterday that the European GDP should grow by around 0.6%, versus a 0.1% contraction predicter earlier. And oh, they also see inflation easing faster than expected to around 3.25% by the end of this year.   Why? Because the boost from Chinese post-Covid reopening, and the sharp fall in natural gas prices thanks to the Weather Gods which prevented the continent from cold weather so far should help tempering slow down. ¨  ... then unicorns will invade Europe and we will all leave happily ever after.   ECB remains determined to hike rates  European Central Bank (ECB) officials stand behind their hawkish view despite the latest softening in inflation. ECB's Schnabel said at her speech yesterday that the ECB will have to raise the rates much further because 'inflation will not subside by itself'.   The EURUSD tested the 1.0760 resistance again yesterday, forming a triple top since mid-December. The positive pressure is the fruit of the divergence between softening Fed expectations and hawkish ECB bets.   Read next: 2023 Predictions: Central banks were buying gold at the end of the year at the highest rate since 1955 | FXMAG.COM Strong Australian inflation revives RBA hawks   In Australia, inflation advanced more than expected to 7.3% in Q4 fueling the expectation that the Reserve Bank of Australia (RBA) could opt for another 25bp hike in its February meeting. The AUDUSD is ready for fighting the 0.70 offers, if, of course, tomorrow's inflation read in the US doesn't reveal a bad surprise.  Crude under pressure  In energy, crude oil is dragging its feet below the $75 this morning and will likely remain under pressure as yesterday's API data showed that the US oil inventories rose by a little less than 15 mio barrels last week as the refining activity returned to normal following weather-related shutdowns. I still believe that price pullbacks could be interesting dip-buying opportunities as there are many supportive factors, including the Chinese reopening, and the globally tight supply.
Forex: Euro against US dollar - forecast on April 24th, 2023

ING Economics: "The best the ECB can do to support the green transition is promote price stability"

ING Economics ING Economics 11.01.2023 15:15
Central banks ‘sticking to their (inflation management) knitting’ doesn’t seem to scare bonds any more. Supply does though. Even if quiet for Euro sovereigns today, pay more attention than usual to the US 10yr auction outcome. The recent flow into money market funds questions the demand for duration. The US 10yr auction will test that. US 10yr auction today is a key barometer for direction in the coming weeks It will be intriguing to see how the US 10yr auction goes today. The 3yr auction yesterday saw stellar demand, but that is to be expected as that's a value part of the curve given the extreme inversion. The 10yr is a different proposition. It requires investors to believe that market rates are set to fall, else why not buy shorter dates at a higher running yield? If you go short enough on the curve, that's where there is minimal price risk, and it comes with maximum running yield We also think that the run of cash into money market funds over the past number of weeks, and continuing in the first weeks of 2023, is not indicative of a market place that has a big demand to take down duration. Quite the opposite in fact; its a market place that prefers the higher running yield offered by the front end, and the shorter on the curve the better. Read next: The EUR/USD Pair Maintains A Steady Upward Trend, The Aussie Pair Keeps Close To 0.69| FXMAG.COM In fact, if you go short enough on the curve, that's where there is minimal price risk, and it comes with maximum running yield. The 10yr auction today will be a great test of appetite at current levels. The concession built yesterday should help to rescue demand, but it's an open question as to whether that will be enough. In fact the backup in yields makes the test even sterner - any hiccup at today's auction bodes very poorly for Treasuries in the coming weeks. Lets see ... HIgher yield and lower risk: short-end debt is increasingly popular Source: Refinitiv, ING Supply, not central banks, is what's keeping bonds up at night Contrary to our (misguided) expectations, the Riksbank symposium did produce prepared speeches by its participants. These, however contained little, if anything, by way of relevant policy hints. It was interesting to contrast Fed Chair Jerome Powell and European Central Bank Bank (ECB) executive board member Isabel Schnabel’s take on the role of central banks in the green transition. The former presented a short exposé explaining why it lays squarely outside of the Fed’s responsibilities. The latter favours a much more activist approach at the ECB. Luckily, it turns out the best the ECB can do to support the green transition is promote price stability. The upshot in both cases is that markets didn’t have much to worry about coming from this event. The best the ECB can do to support the green transition is promote price stability Today’s central bank speakers list (see events section) is heavily skewed towards ECB speakers. The tone has been overwhelmingly hawkish of late so officials stand a better chance to move the market in case of dovish comments in our opinion. No euro sovereign deal today in Europe to push rates higher It seems that after days of blissful ignorance, bonds noticed the wall of supply about to hit primary markets. The difference with previous days was two large euro sovereign deals (10Y from Belgium, 20Y green from Italy), presumably without swap hedges to dent the duration impact. This theory comes with two caveats. First, dollar-denominated bonds actually sold off more than their euro peers despite sovereign supply occuring later in the week, namely today and tomorrow. Second, Italy outperformed other euro sovereign despite seeing the largest deal in duration terms. No euro sovereign has mandated banks yesterday so we assume the lack of deals today mean a more constructive session for bonds. The lack of deals today mean a more constructive session for bonds Only sterling bonds escaped the generalised wave of selling thanks to strong demand at the Bank of England sale. The Bank sold £5.3bn of the long-dated gilts it bought in September/October for financial stability reasons. Gilts still face BoE sale operations today (unwind of financial stability portfolio) and tomorrow (sale of quantitative easing portfolio). A reduction in the Treasury general account would offset the QT liquidity drain Source: Refinitiv, ING US liquidity neutral for Treasuries until the debt ceiling is lifted The US Treasury upsizing its T-bill auctions means the federal government is one stop closer to the $31.4tn debt ceiling, $69bn close to be precise according to Bloomberg. The Treasury reducing net issuance until the ceiling is lifted, something that could take some time if the vote for House speaker is any guide, mean it will soon have to run down the treasury general account (TGA). The resulting injection in liquidity in the system, all else being equal, could go some way toward dampening the liquidity draining impact of quantitative tightening. This, in turn, would be another supportive development for Treasuries. Today's events and market view There is a long list of ECB speakers today, including hawks such as Robert Holzmann and Francois Villeroy, and historical doves such as Olli Rehn and Luis De Cos. It is usually dovish comments from hawks or hawkish comments from doves that have the most market-moving potential. We came out of the December ECB meeting with the strong impression that the hawkish shift in policy was widely supported. Any comments contradicting this would be most surprising to markets, especially if emanating from hawks. Economic releases are few and far between. They consist in Italian retail sales and US mortgage applications. Germany will launch a new 10Y benchmark for €5bn. The US Treasury will auction 10Y T-notes. Read this article on THINK TagsRates Daily Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
FX Daily: Resuming the Norm – Dollar Gains Momentum as Quarter-End Flows Fade

Tesla (TSLA) gained 3.68%. It was reported that the electric-vehicle maker is close to a preliminary deal to set up a factory in Indonesia that could produce up to one million cars per year

Intertrader Market News Intertrader Market News 12.01.2023 09:30
DAILY MARKET NEWSLETTER January 12, 2023               Pre-Market Session News Sentiment Technical Views           EUR/USD   Euro Stoxx 50 (Eurex)   Brent (ICE)                 Please note that due to market volatility, some of the key levels may have already been reached and scenarios played out.                     Price Movement Analyst Views Target Pivot   Dax (Eurex) 15,048.00 +45.00 (+0.30%) Read the analysis 15,095.00 14,954.00     FTSE 100 (ICE Europe) 0.00 0.00 (0.00%) Read the analysis 7,755.00 7,703.00     S&P 500 (CME) 3,988.75 -1.25 (-0.03%) Read the analysis 4,008.00 3,966.00     Nasdaq 100 (CME) 11,465.25 -11.25 (-0.10%) Read the analysis 11,540.00 11,375.00     Dow Jones (CME) 34,099.00 -11.00 (-0.03%) Read the analysis 34,330.00 33,830.00     Crude Oil (WTI) 77.54 +0.13 (+0.17%) Read the analysis 78.40 76.40     Gold 1,883.91 +8.22 (+0.44%) Read the analysis 1,892.00 1,872.00                     MARKET WRAP           Market Wrap: Stocks, Bonds, CommoditiesOn Wednesday, U.S. stocks posted further gains ahead of the closely-watched inflation data that will be released today. The Dow Jones Industrial Average rose 268 points (+0.80%) to 33,973, the S&P 500 rose 50 points (+1.28%) to 3,969, and the Nasdaq 100 was up 196 points (+1.76%) to 11,402.It is widely expected that the U.S. inflation rate eased further to 6.7% on year in December from 7.1% in November.The U.S. 10-year Treasury yield dropped 9.1 basis points to 3.528%.Real estate (+3.6%), retailing (+3.45%), and automobiles (+3.1%) sectors led the market higher.Tesla (TSLA) gained 3.68%. It was reported that the electric-vehicle maker is close to a preliminary deal to set up a factory in Indonesia that could produce up to one million cars per year.At the same time, other electric-vehicle makers Rivian Automotive (RIVN), NIO (NIO),and Lucid Group (LCID) rose 3.83%, 2.4%, and 10.29% respectively.Also, Apple (AAPL) increased 2.11%, Amazon.com (AMZN) rose 5.81%, Alphabet (GOOGL) climbed 3.51%, and Microsoft (MSFT) was up 3.02%.European stocks also closed higher. The DAX 40 rose 1.17%, the CAC 40 increased 0.80%, and the FTSE 100 gained 0.40%.U.S. WTI crude futures advanced $2.50 to $77.61 a barrel. The U.S. Energy Department reported that the latest crude oil stockpiles increased 18.96 million barrels, in contrast to a reduction of 2.24 million barrels expected.Gold price was little changed at $1,876 an ounce.Benchmark copper price on the London Metal Exchange (LME) exceeded $9,000 a tonne for the first time since June on hopes that Chinese demand will rebound.Market Wrap: ForexThe U.S. dollar index was stable at 103.25.EUR/USD climbed 23 pips to 1.0756, a 7-month high.GBP/USD declined 4 pips to 1.2150.USD/JPY added 20 pips to 132.46. AUD/USD rose 20 pips to 0.6909. USD/CHF gained 87 pips to 0.9314, while USD/CAD dipped 2 pips to 1.3424.Bitcoin posted a four-session rally trading at $17,900.Morning TradingIn Asian trading hours, AUD/USD edged up to 0.6920. Government data released this morning showed that Australia's trade surplus totaled 13.2 billion Australian dollars, above 10.9 billion Australian dollars expected.Meanwhile, USD/JPY slid to 131.55.EUR/USD rose further to 1.0768 and GBP/USD climbed to 1.2160.Gold bounced to $1,884.Bitcoin advanced to $18,272.Expected TodayIn the U.S., consumer price index is expected to be up 6.7% on year in December, while weekly initial jobless claims are estimated at 215,000.           UK MARKET NEWS           Tesco, a groceries and general merchandise retailer, reported retail like-for-like sales growth of 6.4% for the 19 weeks to January 7. The company reconfirmed its full-year retail adjusted operating profit guidance of between 2.4 - 2.5 billion pounds.Whitbread, a hotel and restaurant group, posted like-for-like sales growth of 18.3% for the 13 weeks to December 1, 2022, as compared to the prior-year period.Persimmon, a housebuilding company, said as a result of the lower sales rates and elevated cancellations in the second half, and against a strong comparative at the start of 2022, its forward sales position has reduced to 1.0 billion pounds from 1.6 billion pounds in the prior year.Centrica, an energy and services company, said it has continued to deliver strong operational performance from its balanced portfolio since its prior trading update in November, and currently expect to report full-year adjusted EPS of above 30 pence.Auto & Parts, food & beverages and telecom shares fell most in London on Tuesday.From a relative strength vs FTSE 100 point of view, Ashtead Group (+0.75% to 5102p) crossed above its 50-day moving average.From a technical point of view, BP (+0.73% to 478.55p), Croda International (+1.95% to 6906p) crossed above their 50-day moving average.           ECONOMIC CALENDAR           Time Event Forecast Importance   08:30 Inflation Rate MoM (Dec) -0.1% HIGH     08:30 Core Inflation Rate MoM (Dec) 0.2% HIGH     08:30 Inflation Rate YoY (Dec) 6.7% HIGH     08:30 Core Inflation Rate YoY (Dec) 5.8% HIGH     08:30 Initial Jobless Claims (Jan/07) 215k MEDIUM     08:30 CPI (Dec) 298 MEDIUM     08:30 Jobless Claims 4-week Average (Jan/07) 214.5k LOW     08:30 Continuing Jobless Claims (Dec/31) 1.691M LOW     10:30 EIA Natural Gas Stocks Change (Jan/06)   LOW     11:30 8-Week Bill Auction   LOW     11:30 4-Week Bill Auction   LOW     12:00 Quarterly Grain Stocks - Corn (Dec) 11.153B LOW     12:00 Quarterly Grain Stocks - Soy (Dec) 3.132B LOW     12:00 Quarterly Grain Stocks - Wheat (Dec) 1.344B LOW     12:00 WASDE Report   LOW     13:00 30-Year Bond Auction   LOW     14:00 Monthly Budget Statement (Dec) -73B MEDIUM                                     NEWS SENTIMENT           HSBC Holdings PLC HSBA : LSE 569.60 GBp +0.76% In the last 5 days         NEWS SENTIMENT (24H) Positive       TECHNICAL SCORE Short-Term Medium-Term Long-Term                                   Deutsche Bank AG DBK : XETRA 11.698 EUR +1.77% In the last 5 days         NEWS SENTIMENT (24H) Very Positive       TECHNICAL SCORE Short-Term Medium-Term Long-Term                                   Barclays PLC BARC : LSE 173.54 GBp +0.65% In the last 5 days         NEWS SENTIMENT (24H) Negative       TECHNICAL SCORE Short-Term Medium-Term Long-Term                                   Standard Chartered PLC STAN : LSE 687.40 GBp -2.52% In the last 5 days         NEWS SENTIMENT (24H) Positive       TECHNICAL SCORE Short-Term Medium-Term Long-Term                                   Volkswagen AG VOW : XETRA 162.40 EUR +1.72% In the last 5 days         NEWS SENTIMENT (24H) Very Negative       TECHNICAL SCORE Short-Term Medium-Term Long-Term                                   AstraZeneca PLC AZN : LSE 11,634.00 GBp -0.65% In the last 5 days         NEWS SENTIMENT (24H) Positive       TECHNICAL SCORE Short-Term Medium-Term Long-Term                           TECHNICAL VIEWS           EUR/USD Intraday: the upside prevails.   Pivot: 1.0740   Our preference: Long positions above 1.0740 with targets at 1.0785 & 1.0800 in extension.   Alternative scenario: Below 1.0740 look for further downside with 1.0725 & 1.0710 as targets.   Comment: The RSI shows upside momentum.                     Euro Stoxx 50 (Eurex)‎ (H3)‎ Intraday: bullish bias above 4089.00.   Pivot: 4089.00   Our preference: Long positions above 4089.00 with targets at 4131.00 & 4157.00 in extension.   Alternative scenario: Below 4089.00 look for further downside with 4070.00 & 4053.00 as targets.   Comment: Investors have to remain cautious since these levels may trigger profit taking.                     Brent (ICE)‎ (H3)‎ Intraday: the bias remains bullish.   Pivot: 81.80   Our preference: Long positions above 81.80 with targets at 83.40 & 84.40 in extension.   Alternative scenario: Below 81.80 look for further downside with 80.85 & 80.00 as targets.   Comment: Even though a continuation of the consolidation cannot be ruled out, its extent should be limited.        
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May And June Will Likely Be A Period Of Uncreased The EUR/HUF Pair Volatility

TeleTrade Comments TeleTrade Comments 13.01.2023 09:43
A gradual depreciation of HUF vs. EUR is likely, but analysts at TD Securities still expect the Forint to record positive returns when accounting for carry. May and June will likely be a period of increased EUR/HUF volatility “We don't see any room for EUR/HUF to permanently move below 400. We think that a gradual HUF spot depreciation in the order of magnitude of 5-10% is in the interest of the NBH. As such, we think that EUR/HUF will gradually move higher through 2023 and end the year at 425.” “Unless EUR/HUF falls notably below 400, the NBH will probably attempt to ease the longer-term rates first, rather than the overnight rate.” “May and June will likely be a period of increased EUR/HUF volatility as EU member states will need to extend the current sanctions on Russia linked to Russia's invasion of Ukraine.”
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The Bank Of England (BoE) Is Coming To The End Of The Current Cycle Of Interest Rate Increases And Support The EUR/GBP Rate

TeleTrade Comments TeleTrade Comments 13.01.2023 09:53
EUR/GBP struggles to gain any meaningful traction and oscillates in a narrow band on Friday. A bleak outlook for the UK economy undermines the Sterling and continues to lend support. The recent hawkish ECB rhetoric underpins the Euro and supports prospects for further gains. The EUR/GBP cross consolidates its recent gains to the highest level since September 29 touched earlier this Friday and seesaws between tepid gains/minor losses through the early European session. The cross remains below the 0.8900 round-figure mark following the release of the UK macro data, though seems poised to prolong the uptrend witnessed since the beginning of this week. The UK Office for National Statistics reported that the economy expanded a modest 0.1% in November as compared to estimates for a 0.2% contraction. This, however, marked a notable slowdown from the 0.5% growth recorded in October. Moreover, weaker-than-expected UK industrial and manufacturing production data adds to the bleak outlook for the UK economy, which has been fueling speculations that the Bank of England (BoE) is nearing the end of the current rate-hiking cycle. This, in turn, could undermine the British Pound and lend some support to the EUR/GBP cross. The shared currency, on the other hand, continues to draw support from more hawkish signals from the European Central Bank (ECB). In fact, several ECB officials spoke this week and confirmed that they will have to raise interest rates further in the coming months to tame inflation. That said, a modest US Dollar recovery keeps a lid on the Euro and holds back traders from placing aggressive bullish bets around the EUR/GBP cross. Nevertheless, the aforementioned fundamental backdrop suggests that the path of least resistance for spot prices is to the upside. Read next: The New Disney Drama: Disney Is Opposing Activist-Investor Nelson Peltz| FXMAG.COM Even from a technical perspective, the overnight convincing breakout through the 0.8865-0.8875 supply zone supports prospects for a further near-term appreciating move. Some follow-through buying beyond the 0.8900 round figure will reaffirm the positive outlook and allow the EUR/GBP cross to reclaim the 0.9000 psychological mark.
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Forex: CEE FX Will Be Driven Mainly By The Global Story, The Polish Zloty (PLN) Should See Slightly Stronger Levels

ING Economics ING Economics 16.01.2023 09:02
FX markets open the week on a quiet footing, but with core 2023 trends intact. Emerging market currencies remain bid on the China reopening story, plus the Japanese yen remains very much in demand ahead of Wednesday's BoJ decision. Softer China data this week will test the conviction of renminbi bulls, plus UK inflation and labour data will be key for GBP USD: Dollar to remain gently offered The week starts with DXY bouncing from a marginal new low at 101.80 in Asia overnight. Today marks a partial US market holiday to respect Martin Luther King day and could mean that trading conditions, which seemed quite illiquid last week, remain so. The US data calendar is relatively light this week but as our US economist, James Knightley, writes in our economic preview, retail sales, industrial production and existing home sales should all fall on the soft side. In theory, then, this should not impact too much the market expectations of two 25bp Federal Reserve hikes in February and March, both of which are expected to be reversed by year-end. The benign Fed story and the China reopening trade have kept emerging market currencies on the front foot. What seems a conviction call in the market now is that the dollar has turned, pressure to defend emerging market currencies with rate hikes has reversed and 2023 will mark the virtuous cycle of flows into emerging markets, currency gains, rate cuts and local currency bond markets performing well. Indeed, one of the benchmark EM local currency bond market indices is already up 4.2% this year and has retraced more than two-thirds of last year's decline. The further success of this story clearly relies both on a benign Fed and more positive news on China. On the issue of China, we are now starting to see local authorities admitting the rising death toll after abandoning the zero-Covid policy last November. Clearly, any renewed shut-down would dent this year's optimism. Equally, tomorrow sees the release of China's fourth-quarter GDP data, which is expected to have contracted on the quarter with an exceptionally low reading of 1.5% year-on-year. We presume that investors are looking through the fourth quarter and probably through the first quarter Chinese data and are positioning for the reopening benefits to appear from the second quarter onwards. So let's see how long Asian FX positioning copes with some softer Chinese data tomorrow. Also very much in focus this week is the Bank of Japan (BoJ) meeting on Wednesday. Further adjustments to its JGB targets are in focus and investors are positioning for this with higher longer-dated swap rates. 10-year Japanese swap rates have pushed another 5bp higher overnight to the highest levels in a decade. We suspect USD/JPY can trade down to 126.50 before Wednesday. The factors that have pressured DXY below 102 remain in place, but DXY may find support in the 101.30/50 region this week. Chris Turner EUR: 1.0900/1.0950 may be best EUR/USD levels of the week EUR/USD continues to trade comfortably above 1.09. The focus in Europe this week may be some key speakers at the World Economic Forum in Davos, where European Central Bank President Christine Lagarde speaks on Friday. We will also see some German data in final CPI and the ZEW investor expectations survey - which is expected to have improved. As above, EUR/USD will probably be driven by events in Asia this week. However, we suspect that 1.0900/1.0950 levels may be the best of the week.  Elsewhere this week we have a Norges Bank policy meeting. A final 25bp rate hike is expected to 3.00%. The oil market remains bid on the back of the foreseen pick-up in Chinese demand. And with investors taking a glass-half-full approach to risk assets this year, the EUR/NOK bias is probably lower this week. Chris Turner GBP: UK data will be key this week Sterling has taken rather a back seat so far this year. However, the UK data calendar picks up in the form of both labour market data and December CPI this week. Last week had seen the conviction of a further 100bp hiking cycle from the Bank of England (BoE) start to soften. 95bp of tightening is now priced in by August this year. It is not clear that this week's data will add to those softer expectations - wages and inflation could remain high- but we do see those BoE tightening expectations coming under pressure over coming months. That could see EUR/GBP continue to nudge up towards 0.89, which is our target for the end of this first quarter. Chris Turner CEE: Light calendar means stronger FX This week we are looking at a lighter calendar in the CEE region with rather secondary data prints. Today, we will see the release of the Czech Republic's PPI, Poland's state budget result for last year, and Poland's core inflation for December. The core CPI rose from 11.4% to 11.7% YoY, according to our estimates, despite a drop in the headline number. Romania's industrial production for November will be released on Wednesday. On Friday, we will see data from the Polish labour market, and after the close of trading Fitch will publish a rating review of Hungary. Given the drop in gas prices and the compromise found between the Hungarian government and the European Commission, we do not expect any changes. On the political front, we will follow the EU story and the government's efforts to unlock access to EU funds. Last week the lower house passed a law on judicial reform and now it is the turn of the opposition-controlled Senate. On the FX market, given the lack of regional momentum, CEE FX will be driven mainly by the global story. In general, we expect higher EUR/USD and good sentiment in Europe to keep CEE supported. Moreover, gas prices are testing lower levels again, which could be positive for the Czech koruna and Hungarian forint. In addition, the forint should still benefit from lower-than-expected inflation and could test lower levels below 394 EUR/HUF this week. On the other hand, we think the koruna has the strongest long positioning in the region at the moment and further gains will be difficult. Thus, we expect levels around 24.00 EUR/CZK for this week. The Polish zloty, which has lagged behind the region so far, should also see slightly stronger levels and could benefit from the regional optimism and move a bit lower below to 4.68 EUR/PLN. Frantisek Taborsky  Read this article on THINK Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
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Japanese yen rose, Canadian dollar increases, Gold gained on the back of the US CPI print

Jing Ren Jing Ren 16.01.2023 08:05
USDJPY falters over Japan’s rising inflation The Japanese yen extended gains as accelerating inflation may pressure the BoJ to act soon. One of the major themes of 2023 could be Japan finally normalising its monetary policy. Consumer prices have been rising steadily nationwide, with the latest CPI in Tokyo reaching 4%, above the central bank's 2% target for seven months in a row. The US dollar’s reversal from its 32-year peak against the yen suggests that the market believes that inflation is not transitory and has shrugged off Governor Haruhiko Kuroda’s dovish statements. Last May’s lows around 126.50 is the next support and 134.50 is the immediate resistance. USDCAD struggles on improved risk sentiment The Canadian dollar recovers as markets go risk-off. Domestically, a strong December jobs report gives reason for another rate increase by the Bank of Canada, with a 25 bp hike priced in by the market. However, overall sentiment since the start of the year may carry the risk-sensitive loonie. Outflows from the safe haven US dollar means that higher beta counterparts can enjoy a sustained recovery. Meanwhile, the price of oil, one of Canada's major exports, has settled in the green for a few days in a row, offering an effective support to the currency. November’s low at 1.3230 is a key support and 1.3680 is the first resistance. Read next: Lowering The Price Of Electric Vehicles Is Supposed To Be Tesla's Unusual Strategy To Generate Demand In The US Market| FXMAG.COM XAUUSD outperforms softer dollar Bullion strengthened as the US dollar slipped post-CPI. Traders have been repositioning themselves for a more dovish Fed in the coming months, starting with a 25 basis points hike in February. A cool-off in US CPI at a steady pace would eventually make the central bank reconsider its policy stance. The only billion dollar question is when. The US dollar’s sluggish performance has put gold on a springboard. As the dollar bulls locked in profits, traders are wondering whether the current correction would slide into a reversal, which in turn would benefit the precious metal. The price is pointing towards 1930 with 1830 as a fresh support. US 30 bounces as falling CPI rekindles pivot hope The Dow Jones 30 rallies as the market raises its bet of a policy pivot soon amid softer inflation. Despite the Fed’s repeated insistence not to lift the tightening prematurely, investors wager on seeing the terminal rate soon, which says a lot about policymakers’ credibility. A steady fall in consumer prices in December further cemented hopes of a dovish turn by the central bank, possibly at its February meeting. The prospect of interest rates plateauing means that equity markets may see the light at the end of the tunnel, or at least that is what the bulls want to believe. 34800 is the next hurdle and 32800 the first support. Key data release (GMT time) Tuesday, 17 January 07:00 ILO Unemployment Rate Harmonized Index of Consumer Prices 13:30 BoC Consumer Price Index Core Wednesday, 18 January 03:00 BoJ Interest Rate Decision BoJ Press Conference 07:00 Consumer Price Index 13:30 Retail Sales     Thursday, 19 January 00:30 Unemployment Rate   Friday, 20 January 13:30 Retail Sales  
Technical Outlook Of The Main EUR/USD Currency Pair

Ebury's Matthew Ryan talks Forex market - Euro, British pound and more - 16/01/23

Matthew Ryan Matthew Ryan 16.01.2023 21:43
The US inflation report confirmed the downward trend in price pressures and sent financial markets worldwide soaring on the hope that Fed hikes will soon stop. 2023 has gotten off to a very optimistic start, as the good news on inflation are added to fading fears of an European recession and the Chinese post-COVID reopening. Stocks worldwide soared, bonds rallied and the dollar suffered as traders sold-off safe-havens, ending the week down against every major currency except the Swiss franc. The 2023 party in emerging market currencies rolled on, fuelled by rising commodity prices and increased risk appetite.   This week is relatively light in data. A critical Bank of Japan meeting looms on Wednesday, given hints that the Bank of Japan is ready to ditch its position as a dovish outlier among the major central banks. The key question will be whether the trends in place so far for 2023, i.e. rallying risk assets, diminishing worries about the inflation outlook and a falling dollar, stay in place as markets digest the positive inflation news from last week. Traders’ attention will be focused on the numerous speeches by the world’s central bankers at the Davos economic forum later in the week. We expect diverging content and tone from ECB and Fed speakers, given the developing gap between the trends in core inflation in the Eurozone (still rising) and the US (slowly falling). Figure 1: G10 FX Performance Tracker [base: USD] (1 week) Source: Refinitiv Datastream Date: 16/01/2023 GBP The UK economy continues to outperform gloomy expectations. It managed to eke out 0.1% growth in the month of November, defying expectations for a mild contraction and casting doubt on calls that the UK is already in recession. Sterling did not react much to the news, and it largely tracked the euro in its rally against the dollar. Figure 2: UK GDP [% MoM] (2021 – 2022) Source: Refinitiv Datastream Date: 16/01/2023 The UK will provide a couple of the few major data points in the coming week, with the publication of the latest labour report on Tuesday, and the December inflation data on Wednesday. We will be paying particularly close attention to the core index. So far, as is the case in Europe, we have not seen this key indicator exhibit the kind of welcome downward trend we are witnessing in the US. EUR The main news of the week out of the Eurozone was the large upward surprise in industrial production for November. While the number is old by now, it makes it quite unlikely that the Eurozone entered recession in the winter of 2022, in line with our views and contrary to the gloomy sentiment. The continued fall in energy prices is further buoying sentiment on the Eurozone economy, and the common currency outperformed every G10 currency last week, save the yen. We will pay close attention to ECB President Lagarde’s speech at the Davos forum in the coming days. The need for Eurozone rates to catch up with those in the US, and the further upside to the bloc’s economy from China’s reopening, remain the pillars of the bullish case for the euro. USD Last week’s US inflation report came in almost exactly as expected, and that was good news for markets. The monthly headline number fell for the first time since May 2020, while the key core inflation index, more persistent and a better predictor of future inflation than the headline, rose by only 0.3%. The latter has been on a clear, albeit gentle, downward path since last summer, though it is still at levels far above the Fed targets. It now seems likely that overnight rates in the US will not rise above 5% before the Fed adopts a wait and see attitude, with financial markets eyeing two additional 25bp hikes in February and March before the FOMC ends its tightening cycle. That said, we still think that the prospect of rate cuts lies far into the future, certainly not before 2024. Figure 3: US Inflation Rate (2012 – 2022) Source: Refinitiv Datastream Date: 16/01/2023 JPY The yen was by far the best performer in the G10 last week, extending its recent rally and advancing to its strongest position on the US dollar since May. Investors are continuing to favour the yen in light of the hawkish policy shift from the Bank of Japan, which tweaked its yield curve control strategy in December. Speculation is rife that the BoJ could further adjust its YCC policy at its meeting this coming Wednesday. With indicators of both consumer and producer inflation on the rise, we think there is a possibility that it could scap it altogether, which would be a significant bullish signal for the yen. While we don’t expect the BoJ to open the door to raising its base rate just yet, we still see further room to run in the currency from current levels, and go into Wednesday’s meetings seeing risks to the yen as skewed firmly to the upside. CHF Last week marked a milestone for the EUR/CHF pair, as it rallied back above the parity level for the first time since July. This can be attributed to an improvement in market optimism, with risk sentiment supported by a further easing in US inflation. Indeed, the Swiss franc was one of the worst performers in the G10 last week. The recent move in the pair is in line with our view and we expect a continued, albeit gradual, depreciation of the franc against the euro in the coming quarters. Similar to the previous one, this week’s domestic economic calendar is rather light. Instead, we’ll be focusing on central bank communications, notably from Swiss National Bank governor Jordan, who will be speaking at the Davos conference on Friday. AUD Once again, the Australian dollar was one of the outperformers last week, with the currency continuing to take advantage of China’s reopening – a key stimulus to the Australian economy. Macroeconomic news out last week was also rather encouraging, raising the possibility of additional tightening from the Reserve Bank of Australia, potentially at its next meeting in early-February. November retail sales beat expectations, the trade balance swelled greater into surplus, while inflation data continued to trend higher, with the monthly print rising to 7.3% in November. Figure 4: Australia Trade Balance (2015 – 2022) Source: Refinitiv Datastream Date: 16/01/2023 As things stand, markets are torn as to whether the RBA will stand pat or deliver another 25bp hike next month. Upcoming data will be critical in guiding these expectations, starting with Thursday’s labour report for December. An easing in the pace of net job creation is expected, though this number has tended to surprise to the upside in the past few months. NZD The New Zealand dollar extended its recent underperformance against its Australian counterpart last week, perhaps partly a consequence of a previous strong rally and the lack of any major domestic developments. The Reserve Bank of New Zealand is expected to be one of, the not the most, active central bank in the G10 this year, but this already appears largely priced into NZD, which is limiting further upside in the currency. Activity should pick up modestly this week, with business confidence (Monday) and PMI data (Thursday) to be closely watched by market participants. We think that the latter may be particularly important – this key indicator has been on a downward trend for the past few months and a drop below 50 in the composite index isn’t out of the question. CAD CAD was one of the underperformers last week, which can perhaps be linked to the currency’s close tie with the US dollar more than anything else. This week looks set to be a far more eventful one. The December inflation report (Tuesday) could be a highly important one for the Canadian dollar. So far, we’ve seen signs of a very gradual downward trend in the headline inflation number, but economists are pencilling in a sharp drop to 6.3%, which would be the lowest level since February. Of greater importance for CAD will be the core inflation print. The lack of any clear signs that this has peaked could ramp up expectations for another 25bp rate hike from the Bank of Canada at its policy meeting next week (currently 70% priced in). Retail sales on Friday could also be a market mover, although this data is for November so will likely have a limited impact on the USD/CAD exchange rate. SEK Inflation data released in Sweden last week confirmed our view that the Riksbank still has some way to go in its fight against inflation. Even off the back of the data, and the general improvement in risk sentiment, the krona failed to benefit and ended the week lower against a broadly stronger euro. In contrast to other major economic areas, particularly the US, price pressure continues to rise in Sweden. Sweden’s inflation rate increased more than expected to 12.3% in December, its highest rate since 1991. The CPIF, the measure of inflation tracked by the Riksbank, also increased to 10.2%, reaching double digits for the first time in more than thirty years. In our view, an additional 50 basis point rate hike by the Riksbank is warranted in February. This could provide some support for the krona, particularly as most other central banks are slowing their tightening cycles. NOK In line with its Swedish counterpart, the Norwegian krone ended the week lower against the euro, with the EUR/NOK pair trading around the 10.7 level. We attribute this modest underperformance to the downward surprise in the Norwegian inflation data for December, released last week. Norway’s inflation rate decreased more than expected to 5.9% in December, its lowest level in seven months. However, the core inflation rate, more important for future monetary policy in our view given it strips out volatile components, increased slightly to 5.8%. Norges Bank will meet this coming Thursday, and looks likely to again raise rates by another 25 basis points, in its attempt to curb inflation. Markets are pricing a total of only 25bps of hikes for the next two meetings though, in our view, another 25bps rate hike in March cannot be ruled out, given high inflation and the resilience of the domestic economy. CNY The Chinese yuan continued rallying last week, rising to its strongest position against the US dollar since July this morning. The move in USD/CNY does, however, appear to be largely a consequence of the weaker US dollar, as the CFETS RMB index ended last week only a tad higher. Last week’s inflation data from China did not rock the boat. As expected, the headline rate ticked up slightly in December, although at 1.8% it remains far below the 3% target and is not expected to reach this level anytime soon. The inflation numbers, including PPI printing in negative territory, continue to point to weak demand. This week’s economic calendar is packed with data. Tuesday is set to be especially busy as we’ll receive key hard data prints for December and the GDP data for the fourth quarter. Moreover, loan prime rates are set to be announced on Friday. The PBoC kept the rate on its one-year medium-term lending facility (MLF) unchanged today. It also injected 79 billion yuan in fresh loans on top of the 700 billion yuan rollover. The base case is for no change in the loan prime rates (LPRs), albeit a change in the 5-year rate, which serves as a reference for mortgage rates, would not be a major surprise. Economic Calendar (16/01/2023 – 20/01/2023) Source: Dollar retreat continues amid inflation optimism | Ebury UK
EUR/USD: Examples of things that could get the market moving are US treasury yields moving out of the range on data improving or deteriorating

2023 Predictions: EUR/USD will eventually fall once the penny drops that Fed rates will remain above 5% for the year. Ivan Brian talks cryptocurrencies and Forex in 2023

Ivan Brian Ivan Brian 29.12.2022 15:13
Let's have a look at Ivan Cummins' predictions for 2023. In this article you will learn what Chief Equity Analyst at FXStreet expects from fiats - euro, dollar, pound and forex pairs and the leading cryptocurrencies like Bitcoin and Ethereum. How will the price of the most important cryptocurrencies change in 2023 - Bitcoin, Ethereum, Dogecoin? Please justify the forecast. Slight recovery stabilisation in H2 but still underperform other risk assets such as stocks. H2 will be negative with high rates and a looming recession. Also another looming black swan is probably still to be unveiled. Overall negative outlook for 2023. Which cryptocurrency may turn out to be the "dark horse" of 2023 and bring excessive profits to its owners? None, I think excessive speculation in crypto is now finished. What do you expect from euro and pound in 2023? I expect the Euro to fall below parity. The Euro is a cyclical currency so will hold up in H1but the world faces a recession in late 2023 or 2024 and the Euro will fall as a result Sterling is beset with problems still unwinding from Brexit. IT will continue to lose its investibality status and become less important as a global currency. It will fall 10% versus the Dollar and is unlikely to finish the year positively agaisnt any other major currency save perhaps the Euro if Italian/German spreads blow out. Read next: EUR/USD Pair Remains Within Its Horizontal Trading Range, The Aussie Failed To Break The Resistance At 0.68| FXMAG.COM USD/JPY will move back toward 150 as the BOJ panics in the face of a global recession and sticks at or clsoe to zero rates EUR/USD will eventually fall once the penny drops that Fed rates will remain above 5% for the year. The European economy will not be as bad as feared but the US will still outperform. A strong global recession in late 2023 early 2024 will see haven demand for Dollars increase and lead Euro/USD below parity and lower. USD/JPY will move back toward 150 as the BOJ panics in the face of a global recession and sticks at or clsoe to zero rates. CNY will weaken as the Chinese economy struggles with an overheated property sector and falling global demand for its exports. What macroeconomic and geopolitical factors will be crucial for the dollar in 2023? US economy to avoid recession until 2024 keeping interest rates higher for longer. Stronger than expected European economy to cap Dollar gains until second half of the year.
FX Daily: Euro’s attractiveness on the rise

Forex: What can we expect from Euro against US dollar - January 17th

InstaForex Analysis InstaForex Analysis 17.01.2023 08:43
As we expected in yesterday's review, due to the US holiday, the euro moved sideways, confirming the consolidation above the target range of 1.0758/87. But over the past 24 hours important nuances appeared, while the main idea of the price breakdown of t1.0990 is preserved.     Our traditional Marlin oscillator still has the potential to form a renewed flat divergence, which is marked with a dotted line, and the so-called slow Marlin managed to form a traditional divergence, which increases the probability of a price reversal from the current levels. This will be confirmed once the price crosses the lower limit of the support range at 1.0758/87. Crossing yesterday's high at 1.0874 will push the pair to rise towards the target at 1.0990.     On the four-hour chart, under the pressure of a double divergence, the signal line went under the zero line, into the area of the downtrend. Now the price will be under pressure in the short-term. On the current chart, we see that crossing the lower limit of the range at 1.0758 coincides with crossing the MACD indicator line, and this will enhance the signal for further downward movement. We wait for the development of events. Relevance up to 04:00 2023-01-18 UTC+1 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/332441
Hang Seng Index Plummets -2% Amid Weak China Data, Short-Term Trend Intact

Forex: The EUR/GBP Pair May Struggle To Trade Sustainably, The Reserve Bank Of Australia's Policy Remains An Open Question

ING Economics ING Economics 18.01.2023 09:55
The Bank of Japan defied hawkish speculation and held policy steady this morning, sending the yen lower. Some market confusion was also generated by a headline suggesting the European Central Bank is mulling slower rate hikes: clarifications may come from Davos by the end of the week, and the euro may recover. In the US, the data calendar picks up again The Bank of Japan in Tokyo USD: US data back in focus An exceptionally grim Empire Manufacturing reading for January has been the only noteworthy data release out of the US so far this week, and the dollar has continued to be a bystander as developments in Japan, Europe and China drive most market moves. Today, retail sales, PPI, industrial production and TIC flows data will be in focus. The market's scrutiny over the US economic outlook has grown exponentially since the ISM service report pointed to an imminent recession: expect more pain for the dollar should fresh signs of a slowdown emerge now that the US data calendar is picking up again. The Fed’s Raphael Bostic, Patrick Harker and Lorie Logan are set to speak today. The fall in the yen after the BoJ announcement (more details in the JPY section below) is offering some relief to the dollar this morning. However, we suspect this may only prove temporary and downside risks into the 101-102 area still prevail in the very near term. After all, the global environment continues to be rather benign for the ongoing rerouting of flows into emerging markets and high-beta currencies. The growing feeling that China may face a reality check on the sustainability of looser Covid rules may be contributing to halting CNY gains, but recent data gave reasons for optimism on Chinese growth, as noted by our colleague Iris Pang here. We are also approaching the lengthy Chinese New Year holiday season, which may be keeping some investors on hold before moving significantly into Chinese assets. Our commodities strategists have revised their forecasts for iron ore and copper prices higher on the back of China’s reopening. A demand-driven improvement in the metal price outlook is an ideal scenario for commodity currencies: the Australian dollar is a good example here, also considering the tentative conciliatory steps in Sino-Australian diplomatic relations. Indeed, the Reserve Bank of Australia's policy remains an open question: the resilience of inflation poses risks to our conservative call for only two more 25bp hikes before the end of the hiking cycle, and could add some more steam to the AUD rally. A 0.70-0.72 range could easily become the norm for AUD/USD in the next few weeks. Francesco Pesole EUR: Conflicting news Yesterday was a day of conflicting headlines for the euro. In a long interview to the Financial Times, Chief Economist Philip Lane offered elaborate reasoning to support the ECB’s recent hawkish rhetoric. However, later in the day, a Bloomberg report cited some ECB officials saying that Governing Council members are actually considering a slower pace (25bp) of tightening. EUR/USD dropped below 1.08 on the news. It does seem premature for the ECB to unwind its hawkish narrative just yet, and we would not be surprised to see some remarks aimed at “mitigating” yesterday’s dovish headline. Francois Villeroy (today) and President Christine Lagarde (tomorrow) have a chance to do so in Davos. Either way, the overall environment looks likely to stay largely supportive for EUR/USD and a return to 1.0850-1.0900 seems possible by the end of this week. Other conflicting headlines came from Germany. Chancellor Olaf Scholz said he’s sure that Germany will avoid a recession, while his finance minister suggested in a previous interview that there will indeed be a recession, but it should be very mild. The ZEW expectation survey (which spiked into positive territory yesterday) surely seemed to favour more optimism on the German outlook, and undoubtedly fed into the divergence in growth narratives between the eurozone (increasingly upbeat) and the US (increasingly downbeat). This ultimately makes us believe EUR/USD can stay mostly supported for now. Francesco Pesole GBP: Inflation matches expectations December CPI numbers were released in the UK this morning and largely matched consensus expectations. Headline inflation decelerated from 10.7% to 10.5%, while the core rate held at 6.3%. With the peak apparently past us, we could see headline inflation return to 6% in the summer and 3.5-4% by year-end, according to our economists. It’s important to note that core services jumped from 6.4% to 6.8%, a development that the BoE should particularly take into consideration, and when added to yesterday’s wage data should tilt the balance towards a 50bp hike in February. EUR/GBP is back to pre-Christmas – sub-0.8800 levels – thanks to some idiosyncratic EUR underperformance and a supported pound. As discussed in the euro section above, ECB-related weakness in the euro may not last long, and EUR/GBP may struggle to trade sustainably below 0.8800 for now – also given the lack of strong bullish forces in the pound. Francesco Pesole JPY: No hawkish surprise by the BoJ The Bank of Japan’s decision to leave its policy tools unchanged has seen USD/JPY live up to its pricing as one of the most volatile pairs in the G10 space. We expect that to continue. The big correction higher in USD/JPY may endure for a little while. This is because the BoJ’s forecasts for CPI ex-food remain below 2% for FY23 and FY24 and could make the case for the new BoJ governor in April to continue with the current ultra-loose policy. Yet USD/JPY is down at 130 on both the BoJ and the dollar story. We look for a broadly weaker dollar – especially in the second quarter when US core inflation should fall more quickly. This means USD/JPY should again come under pressure from the dollar side. And plenty of speculation over a BoJ policy shift in April should limit USD/JPY upside too. We see this correction stalling in the 132.50/133.00 area (outside risk to 135), with a bias to 126/128 for the end of the first quarter. Later in the year USD/JPY will probably be trading under 125. Chris Turner Read this article on THINK Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more  
Despite The Improvement In The Outlook Due To Falling Energy Prices, The Economic Environment In Britain Remains Difficult

Yields On JGB's Fell Back Sharply, Markets May Expect To See Another 50bps Rate Hike From The Bank Of England

Michael Hewson Michael Hewson 18.01.2023 11:34
Yesterday saw another positive session for European markets, although the FTSE100 underperformed despite hitting a new 4 year high. US markets returned from their long weekend break with a choppy and somewhat mixed session, with the Dow and S&P500 struggling while the Nasdaq 100 finished slightly higher, as various earnings announcements painted a mixed picture of the US economy. Bond yields also chopped between negative and positive territory as yields ended the day little changed. BoJ tweaks bond program Asia markets have spent the day still digesting yesterday's economic numbers from China, as well as today's Bank of Japan rate decision. The Japanese yen has seen some decent gains over the past few weeks, with those gains accelerating after the Bank of Japan caught markets by surprise last month by widening the band of its yield curve control to between -0.5% and +0.5%, from +/-0.25%. It would appear that with current governor Kuroda set to leave in April that the BoJ wanted to start seeding the ground for a possible shift in the coming months, however as with everything related to monetary policy markets have already started to front run any possible change.. The 10-year JGB has consistently tested above the upper bound of the 0.5% in the past few days testing the central banks resolve in the process. The central bank has been consistent in maintaining that they aren't in any rush to make major adjustments to its yield curve control policy yet, however events appear to have overtaken them, as volatility has increased. The Bank of Japan's challenge today has been to try and reset market expectations, as well as try to avoid a further rapid appreciation in the yen, in the same way they wanted to manage the declines in their currency over the past few months. Suffice it to say they appear to have succeeded, pushing back on the recent moves that have pushed the yen higher. This morning the Bank of Japan kept monetary policy unchanged, which wasn't a surprise, but they also announced they would continue large scale bond buying and be more flexible about duration in order to keep policy settings loose. Yields on JGB's fell back sharply from the 0.5% upper bound in the wake of the announcement. Today's pushback or reset whatever you want to call it, shouldn't have been too much of a surprise given recent yen moves. Japanese central bank officials have always been particularly sensitive to sharp short term moves in either direction where the yen is concerned in the same way they were about recent yen weakness. The direction of the move is less of a concern rather than the speed of it, and in slowing the yen move lower the BoJ is merely resetting market expectations about future policy change, with the US dollar rising back above 130.00 UK inflation set to slip back in December After the peak of 11.1% in October, headline CPI fell back to 10.7% in November in a welcome sign that we could well be past the peak, when it comes to price rises.Recent falls in oil and gas prices are also likely to start to feed into the underlying numbers, while PPI inflation has also been falling in recent months, though given problems with the PPI calculations we haven't had clear visibility on that in the past couple of months, as the ONS continues to review how that is calculated. Today's December inflation numbers are expected to show that inflationary pressures continue to subside, but are only expected to fall modestly to 10.5%, with core prices also still high at 6.2%. We already know that food price inflation is trending in the mid-teens, which means that headline CPI is expected to remain above 10% for a while. It's also important to remember that RPI is even higher. With average wage growth trending at 6.4% and unemployment still low, the gap between wages and inflation is still quite wide, although it is narrowing from both directions. This probably means we can expect to see another 50bps rate hike from the Bank of England when it meets in just over 2 weeks' time, although any decision is unlikely to be unanimous, given the 3-way split last time. Headline CPI in the EU is also expected to be confirmed at 9.2% in December with core prices at 5.2%. EUR/USD – has struggled to overcome the 1.0870 area, prompting a fall to 1.0780. Could see a deeper fall towards 1.0720. The key resistance sits at 1.0950 which is a 50% retracement of the move from the 2021 highs to last year's lows at 0.9536. A move through 1.0950 opens up a move towards 1.1110. GBP/USD – ran out of steam at 1.2300 yesterday, with the risk that the move above 1.2000 level is running out of steam, despite the decent rebound from the 1.1830/35 area. The next big resistance lies at the 1.2350 area. We need to hold above the 1.2000 area for further gains to unfold. EUR/GBP – the failure at the 3-month highs at 0.8895 this week has seen a drift back towards last week's low at 0.8770/80. Below 0.8770/80 retargets the 0.8720 area. USD/JPY – has recovered off 127.20 area this week, just shy of the 126.50 area which is the 50% retracement of the up move from 101.18 to the highs at 151.95. Has squeezed back above the 130.00 area and could extend back through 132.60 on towards 134.80 without undermining the downward momentum. FTSE100 is expected to open 10 points lower at 7,841 DAX is expected to open 32 points higher at 15,219 CAC40 is expected to open 11 points higher at 7,088 Email: marketcomment@cmcmarkets.comFollow CMC Markets on Twitter: @cmcmarketsFollow Michael Hewson (Chief Market Analyst) on Twitter: @mhewson_CMC
Federal Reserve splits highlighted by May FOMC minutes

Also if inflation is reported below 10% on Wednesday, the ECB may be hesitant to pivot its current policy of economic tightening

Santa Zvaigzne Sproge Santa Zvaigzne Sproge 17.01.2023 14:28
Santa Zvaigzne-Sproge (Conotoxia) answered some questions regarding recent macroeconomic events. FXMAG.COM asked Santa about China's GDP, Eurozone inflation and Bank of Japan. This week China's GDP is published - what do you expect from the economy, which suffered from COVID for a very long time all the 2022? China’s GDP has suffered considerably in 2022 due to the Covid-19 pandemic and the zero-Covid policy in its aftermath pushing the country’s growth below its target of 5.5%. The Chinese economy may not return to 2-digit growth numbers in the foreseeable future but returning to its target growth rate may be entirely plausible. The People’s Bank of China left the one-year MLF rate unchanged at 2.75% and injected less money into the economy as expected, meaning that the officials may not expect the need for more aggressive support to the economy at this moment. Besides China’s GDP, it may be useful to keep an eye on the developments within its tech sector. China’s government has been targeting all major technology companies with new regulations since 2020 with an aim to curb the country’s private enterprises. There are signs that the Chinese government may be changing its policy in order to boost growth this year. For example, last week, Alibaba’s affiliate company Ant group finally received long-awaited approval for capital expansion of its key consumer finance unit. Read next: GBP/USD Is Strengthening And Trading Above 1.2260, Investors Took A Breather Ahead Of The Bank Of Japan Meeting| FXMAG.COM Furthermore, the US ban on semiconductor chips and chipmaking devices export to China has motivated it to expand its national chipmaking companies, such as SMIC, offering various support packages to the industry. Russian oil’s recoil from the EU boosted its exports to China, allowing it to purchase its oil at a considerable discount. Overall, once China takes hold of the pandemic, it may be on a favorable path for further growth. Provided Eurozone inflation comes at less than 10% on Wednesday, would you expect ECB to go for a series of 25bp rate hikes? Also if inflation is reported below 10% on Wednesday, the ECB may be hesitant to pivot its current policy of economic tightening. With the key rate of 2%, ECB may still have plenty of room for further rate hikes (possibly even 50bp), in addition to the asset purchase program commencing in March 2023. Bank of Japan which has recently hinted at a monetary policy pivot, decides on interest rate this week. Will they escape ultraloose approach this very week? It is reasonable to assume that the Bank of Japan may take some steps in the direction of tightening its monetary policy. However, considering BoJ’s general dovish stance, widening its yield curve tolerance band may be a more plausible (and softer) scenario in comparison to abandoning it altogether. The surging yen for the last couple of months deepens the already large trade deficit by hurting exports and boosting imports. It is important to acknowledge that any type of action recognized as a tightening of the monetary policy may encourage further appreciation of the Japanese Yen and hurt its stocks. We may expect more perceptible changes in the BoJ’s monetary policy in the second quarter of 2023 once a new governor is elected. Santa Zvaigzne-Sproge, CFA, Head of Investment Advice Department at Conotoxia Ltd. (Conotoxia investment service) Materials, analysis and opinions contained, referenced or provided herein are intended solely for informational and educational purposes. Personal opinion of the author does not represent and should not be constructed as a statement, or an investment advice made by Conotoxia Ltd. All indiscriminate reliance on illustrative or informational materials may lead to losses. Past performance is not a reliable indicator of future results. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 76,41% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Forex: Most NOK Gains May Be Channelled Against The Dollar

Forex: Most NOK Gains May Be Channelled Against The Dollar

ING Economics ING Economics 19.01.2023 09:22
Intense scrutiny of the US growth story means that the dollar remains vulnerable to data releases as markets keep scaling back Fed rate expectations. We see more downside risks for USD in the near term. Elsewhere, hawkish ECB minutes and remarks by Lagarde could support the euro, and we expect a 25bp hike by Norges Bank despite rising bets of a hold Source: Shutterstock USD: Data continues to haunt the dollar In yesterday’s FX Daily, we flagged the risk of fresh US data hitting the dollar given the recent scrutiny (and pessimistic narrative) by the market of the US growth story. That risk materialised as retail sales and industrial production came in softer than expected, triggering another round of dovish repricing in Federal Reserve rate expectations. The USD 2-year swap rate hit 4.35% yesterday, the lowest since early October, and the differential with the corresponding EUR rate is now very close to the -124bp December high. Our US economist now sees growing risks that the Fed may stop hiking after a 25bp move in February. The correlation between the 2-year swap rate differential and EUR/USD has not been very strong in the past year but is picking up again. Most importantly, the weakness in the correlation largely derived from the euro’s low sensitivity to European Central Bank policy, rather than to the Fed’s. The fact that the ongoing dovish repricing is not only a consequence of slowing inflation but also of a worsening economic outlook in the US has exacerbated the negative implications for the dollar, especially as a positive re-rating of growth expectations is happening in Europe and China. One could argue that the dollar is facing a rather uniquely-timed combination of negative factors, and that the sustainability of the optimistic growth re-rating in Europe and China may be challenged by fresh commodity price volatility and high infection numbers – respectively. We see value in such an argument, and a straight-lined dollar depreciation in the first quarter is far from assured. But global and US-specific dynamics continue to suggest a bearish bias on the dollar in the near term. DXY may re-test yesterday’s 101.55 lows by the end of the week. Today, markets will watch the size of the increase in initial jobs claims, as well as housing data and the Philadelphia Fed survey. The Fed’s Susan Collins, Lael Brainard and John Williams are scheduled to speak. Elsewhere, Asian G10 currencies are following diverging paths this morning. The yen is recovering across the board as markets seem to cautiously re-enter long positions after the Bank of Japan defied the hawkish speculation yesterday. We continue to see downside risks for USD/JPY despite a dovish BoJ. The Australian dollar has come under pressure after a surprise contraction in employment in December, which endorses the recent cautious stance by the Reserve Bank of Australia. Still, we’d need to see inflation come off more convincingly before making strong calls about the end of the RBA hiking cycle. We continue to favour AUD/USD on the back of positive external developments (China, risk sentiment). The New Zealand dollar is suffering from some spill-over effects from AUD, while the news that prime minister Jacinda Ardern is resigning at the end of her mandate hardly seems like a key driver considering that her party is trailing in the polls ahead of the October election. Francesco Pesole EUR: ECB pushes back against dovish speculation Yesterday, ECB Governing Council member Francois Villeroy explicitly pushed back against recent reports suggesting a switch to 25bp increases and said that President Christine Lagarde’s 50bp guidance remains valid. Lagarde herself will speak in Davos today, and there is a good chance she will reiterate the ECB’s hawkish stance despite lower energy prices. Dovish speculation should be further challenged by the release of the December 2022 ECB meeting minutes, as the details of the dissent to a “too conservative” 50bp hike should emerge, as well as guidance to “multiple” 50bp increases. We expect to see some consolidation/further upside in EUR/USD by the end of the week when the pair could trade around 1.0850/1.0900. Francesco Pesole GBP: Starmer to pledge Brexit fix The leader of the opposition Labour Party, Keir Starmer, is reported to deliver a rather conciliatory speech in Davos today about the future of EU-UK relationships. In an interview with the Financial Times, Starmer criticised the Brexit deal and said he aims to rebuild good trade relationships with the bloc. The Labour party is leading by a rather large margin in the latest opinion polls ahead of next year’s general elections and evidence of a softer stance on Brexit should benefit the pound in the long run. Today, there are no events or data releases in the UK. Some recovery in the EUR may still send EUR/GBP back to 0.8800+ by the end of this week. Francesco Pesole NOK: Norges Bank may deliver last hike today Norges Bank announces monetary policy this morning, and the consensus is split between a 25bp and a hold. The latest projections saw the Bank signal a 3.00% peak rate (now at 2.75%) in early 2023, and a combination of resilient underlying inflation, growth and employment suggests – in our view – this should be the right time to deliver the last hike of the cycle. Indeed, concerns about slowing economic activity, lower energy prices and housing market vulnerability are all important factors in the Norges Bank’s decision-making process, and we admit it’s a rather close call. There will be no new projections today, but only a brief statement, so the krone's reaction will primarily depend on the hike/no-hike decision. In line with our call, we see upside risks for NOK today. EUR/NOK could trade close to 10.60-10.65 again today, but idiosyncratic EUR strength suggests most NOK gains may be channelled against the dollar. Francesco Pesole Read this article on THINK Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more  
The Market Expects Norges Bank To Keep Interest Rates Unchanged

The Market Expects Norges Bank To Keep Interest Rates Unchanged

TeleTrade Comments TeleTrade Comments 19.01.2023 10:51
Markets expect Norges Bank (NB) to keep rates unchanged. Thus, the Krone is unlikely to weaken as a result of the meeting, Antje Praefcke, FX Analyst at Commerzbank, reports. Norges Bank likely to leave everything on hold “Norges Bank was one of the first central banks that had started the rate hike cycle to fight inflation risk. That is why it could wait until March to hike its key rate again if necessary, based on more information on inflation rates and growth as well as its most recent projections. I, therefore, consider it to be quite likely that it will keep everything on hold today and will only issue a short statement, which will contain a reference to a further step.” “The market too expects rates to remain unchanged today and has already significantly adjusted its rate cut expectations for the longer-term. I, therefore, don't see a lot of downside potential for NOK as a result of the meeting.” See – Norges Bank Preview: Forecasts from three major banks, will this hike be the last?
Bitcoin needs to stay above $29k by the end of today's trading session to strengthen its positions and continue moving towards $30k says InstaForex's Petrenko

Just as we have seen a resurgence of stocks and risk assets coinciding with a drop in the US dollar, we are also seeing a significant bounce of Bitcoin which managed to break past the psychological barrier

Walid Koudmani Walid Koudmani 18.01.2023 21:41
European Central Bank decision, monetary policy of BoJ, fluctuating Bitcoin and earnings of Netflix, Procter&Gamble and others - as we've mentioned already, there's so much to talk about this week. Walid Koudmani answers our questions. Provided Eurozone inflation comes at less than 10% on Wednesday, would you expect ECB to go for a series of 25bp rate hikes? While the ECB and other central banks have been closely monitoring inflation figures in an attempt to determine their policy decisions, there has been a clear disparity between the FEDs approach and the ECBs which in part is due to the effects of the Russia-Ukraine conflict having a greater impact on the continent. Despite this, we can see a clear change in tone from central bankers and while it is unlikely that the ECB will adjust its rate below 50 bp in the first meeting of the year, a positive encouragement from lower than expected inflation data could lead to a 25 bp hike in the following meeting until the bank decides it is time to change its approach fundamentally once targets are reached. Bank of Japan which has recently hinted at a monetary policy pivot, decides on interest rate this week. Will they escape ultraloose approach this very week? The Bank of Japan has been an interesting example of a vastly different approach to policy as it has maintained its very loose and dovish approach while intervening on the markets a few times to support the Yen. However, it remains unclear how long it will be able to sustain this approach as pressure mounts and as the country's currency begins to suffer from the lack of tightening while other banks have proven to be quite aggressive. Despite this, the BoJ has reiterated its intentions and it might take a surprise event in order to spur a significant change in its approach which could take longer than expected. Read next: Also if inflation is reported below 10% on Wednesday, the ECB may be hesitant to pivot its current policy of economic tightening | FXMAG.COM Bitcoin had given back some of its spectacular gains - is it just a Correction? Just as we have seen a resurgence of stocks and risk assets coinciding with a drop in the US dollar, we are also seeing a significant bounce of Bitcoin which managed to break past the psychological barrier of $20,000 after several months of struggle and extremely negative sentiment surrounding the cryptocurrency market. However, while this is an encouraging sign for bitcoin and crypto investors, it could prove to be a short term correction if there is a significant shift in approach or expectation related to the macroeconomic situation or central bank approach which appears to be increasingly tied to market performance. Some big names report earnings this week. What do you expect from Netflix, PG and Goldman Sachs? There will be a lot of pressure on the big Wall Street names to perform as investors anxiously await results from the earnings season. Netflix, PG and Goldman Sachs are all highly anticipated reports and could give an idea of the conditions of consumers and trends for the last few months of 2022 as inflation continued to be a key issue impacting markets. However, after the struggles seen in the earlier parts of the year from many companies, some investors may be optimistic about a resurgence while others may expect a continuation of the negative performance. In either case, a significant surprise may cause additional volatility in the market as many of the companies reporting in the first few weeks of the earning season carry significant weight in the indices and in general market perception.
Crypto: according to Craig Erlam, there seems to be a gap between reality and prices

FxPro analyst: We are likely seeing the first, most fragile phase of the Bitcoin price recovery and the crypto market

Alex Kuptsikevich Alex Kuptsikevich 18.01.2023 15:33
Alex Kuptsikevich answers FXMAG.COM's questions related to China's GDP, Forex market this week and Bitcoin. This week China's GDP is published - what do you expect from the economy, which suffered from COVID for a very long time all the 2022? China's economy has so far enjoyed a complete lifting of restrictions, and this is boosting a few economic indicators, most notably, retail sales and industrial production. However, the surge in cases is a significant headwind for the economy. Of course, China may be another case, but in the US, people have avoided going to work for many months for fear of contagion. In addition, restrictions in China cannot be ruled out if the health system plunges into chaos during the peak of the disease, which is forecast for late January/early February. This could severely impact the world's second-largest economy, damaging its growth in the first quarter. If the restrictions are more like what we have seen in Europe or the US in the second half of 2021, GDP growth could exceed 6% at the end of 2023. How do you expect major Forex pairs to change this week amid Eurozone, UK and Japan inflation prints? Is PPI going to weigh on dollar noticeably? Inflation data is becoming increasingly mixed, with growth in Japan, resilience in the UK and a pronounced slowdown in the eurozone. After data on a slowdown in inflation in Europe, statistics from the UK came as a surprise to the foreign exchange market, creating demand for the pound. Speculators and traders are now actively pricing in a scenario of tighter monetary policy in the coming months than previously estimated. From the US, import price data last week surprised with a rise, contrary to expectations. And it could signal that prices have proved more responsive to the weakening of the dollar since October. Such a trend in producer prices has the potential to disappoint markets. It would essentially be a scenario where the Fed's nightmare that inflation turns out to be more "sticky" is realised. Investors are now actively betting against such a scenario, but these expectations are based on patterns of recent years and could change. Read next: Also if inflation is reported below 10% on Wednesday, the ECB may be hesitant to pivot its current policy of economic tightening | FXMAG.COM Bitcoin had given back some of its spectacular gains - is it just a correction?  We are likely seeing the first, most fragile phase of the Bitcoin price recovery and the crypto market. However, the best time for speculative buying is yet to come. Buying Bitcoin now is like buying it in March 2019. There may be a 2-fold rise from the lows ahead, that is, to the region of 30k before the summer even starts. But it will be risky as the market remains vulnerable to the sudden economic downturn and new turmoil caused by impending regulation or bankruptcies of crypto-related companies. The best time for speculative buying is yet to come when there is a FOMO stage like we last saw from December 2020 to April 2021. An even more colourful rise was from April to December 2017. In both cases, an acceleration and near-ubiquitous rise after surpassing previous historical highs.
ECB's Christine Lagarde not to announce the end of rate hikes?

Saxo's Macro Analyst about ECB: I think a 50 bp interest rate hike is still the best case for the February meeting

Christopher Dembik Christopher Dembik 19.01.2023 11:36
Eurozone inflation and next European Central Bank decisions are arousing interest as it's not obvious what's going to be. Christopher Dembik (Head of Macro Analysis at Saxo Bank) shares his thoughts on the interest rate with us. Provided Eurozone inflation comes at less than 10% on Wednesday, would you expect ECB to go for a series of 25bp rate hikes? Christopher Dembik (Saxo Bank): I think a 50 bp interest rate hike is still the best case for the February meeting. Actually, I expect at two more 50 bp hike in the coming months followed by a 25 bp in May. Then the ECB might be eager to pause. But I don't see any urgent need to lower the scope of the interest rate hike. The slowdown in inflation is actually not sharp enough. Read next: Matt Weller (City Index): Even if inflation continues to moderate, Madame Lagarde and company are likely to opt for at least one 50bps rate hike to start the year| FXMAG.COM We also share Saxo Asia view on ECB: ECB's dovish surprise likely as inflation slows The ECB is considering a slower pace of rate hikes than Christine Lagarde indicated in December. While a 50bps increase next month remains the most likely outcome, a 25bps move in March is gaining support. Inflation in the Eurozone is slowing, and a sharp drop in natural gas prices suggest that we can continue to expect lower inflation in the months to come atleast until the 2023 winter risks emerge. The final CPI print for December for the Euro-are will be released today and ECB's minutes of the December meeting are due tomorrow.
Rates Spark: Balancing data and risk factors

Matt Weller (City Index): Even if inflation continues to moderate, Madame Lagarde and company are likely to opt for at least one 50bps rate hike to start the year

Matt Weller CFA Matt Weller CFA 18.01.2023 10:32
What a week! UK inflation, eurozone inflation, bullish sentiment in crypto market - there's so much to talk about! That's why we reached out to analysts from FOREX.com and City Index to provide you with their views on the ongoing macro events and situation on crypto market, where Bitcoin has recently gained, given back some, but now seems to be cementing the $21,000 level. Provided Eurozone inflation comes at less than 10% on Wednesday, would you expect ECB to go for a series of 25bp rate hikes? Even if inflation continues to moderate, Madame Lagarde and company are likely to opt for at least one 50bps rate hike to start the year. The ECB feels it is behind its peers in fighting inflation, and the unseasonably warm weather to begin the winter has lessened the likelihood of a deep recession driven by an "energy crunch" in the first half of the year. However, if inflation continues to moderate in the coming months, the ECB is likely to shift to 25bps increases sooner rather than later. Read next: Forex: The EUR/GBP Pair May Struggle To Trade Sustainably, The Reserve Bank Of Australia's Policy Remains An Open Question| FXMAG.COM We still expect prices to at least retest the Q4 bottom below $20K in the coming weeks, but the longer that low holds Bitcoin remains in bullish short-term trend, with prices testing their highest level since September on the back of a big rally to start the year. We still expect prices to at least retest the Q4 bottom below $20K in the coming weeks, but the longer that low holds, the more confidence traders will have that this cycle's low may already be behind us.
ECB's Tenth Consecutive Rate Hike: The Final Move in the Current Cycle

The Fed Needed To Get Rates Above 5% Sooner Rather Than Later

Michael Hewson Michael Hewson 19.01.2023 13:34
Yesterday saw another broadly positive session for European markets, with the FTSE100 once again underperforming, after UK inflation data showed itself to be much stickier than was anticipated, putting upward pressure on the pound in the process.   US markets initially started the day on the front foot until a double punch of weak data saw yields slide sharply on both the short and long end, prompting concerns that US economic activity was being impacted by the lagging effects of multiple rate hikes.   This concern about the economic outlook, along with announcements from the likes of Amazon and Microsoft about job losses, saw US markets roll over after European markets had closed, closing sharply lower, as once again the S&P500 failed above the 4,000 level.   Yesterday's weakness came as a result of concerns about the health of the US consumer. After a strong performance throughout most of 2022, consumer spending appears to have run out of steam with November and December retail sales declining 1% and 1.1% respectively. US PPI for December also saw a lower-than-expected rise of 6.2%, a sharp drop from the 7.4% seen in November.   The Fed Beige Book added little to the picture when it came to how the US economy is doing, apart from an acknowledgement that price pressures are starting to slow, however St. Louis Fed President James Bullard added to the uncertainty by insisting that the Fed needed to get rates above 5% sooner rather than later. This view conflicts with the prevailing market narrative of a 25bps hike next month, as concerns rise that the Fed could well be hiking into a potential recession.   These economic concerns also translated into crude oil prices which having hit their highest levels since the beginning of December early on the day, promptly reversed course to close the day sharply lower.   One thing in the favour of the US economy in the face of disappointing economic reports is a resilient labour market, with today's weekly jobless claims expected to see a modest rise from 205k to 214k.   We also have housing starts and building permits data for December, with the recent cold weather not expected to offer much hope of a respite here.   Last night's weaker US close looks set to translate into a lower European open.   The US dollar had a mixed day slipping to a marginal 8 month low against the euro before recovering, while against the Japanese yen we saw a 400-point range, after the Bank of Japan pushed back on market expectations of further measures to tweak its monetary policy settings around yield curve control.   Governor Kuroda went on to say that a further widening of the YCC band wasn't needed yet, as he looked to finesse the central banks messaging around its next policy move. The BoJ's biggest problem is that yesterday's events only delay the inevitable, with national CPI for December expected to reach a 42 year high of 4% later today.   With the Fed closer to the end of its rate hiking cycle, and the Bank of Japan yet to start its tightening regime, the line of least resistance for USD/JPY is likely to be a move towards 120 and possibly lower in the coming weeks.   EUR/USD – made a marginal new high of 1.0887 yesterday, before sliding back again, as the market struggles for direction. Could see a deeper fall towards 1.0720. The key resistance sits at 1.0950 which is a 50% retracement of the move from the 2021 highs to last year's lows at 0.9536. A move through 1.0950 opens up a move towards 1.1110.   GBP/USD – ran out of steam just shy of the December peaks at 1.2440. Above 1.2450 could see a move towards 1.2600. We need to hold above the 1.2000 area for further gains to unfold or risk a return to 1.1830.   EUR/GBP – the failure at the 3-month highs at 0.8895 this week has seen a move below last week's low at 0.8770/80, with the risk we could see a move towards the 0.8720 area, and 50- and 100-day SMA. The next support below 0.8720 targets 0.8680.   USD/JPY – the failure to hold onto the gains above 130.00 yesterday suggests the prospect of further weakness and a move towards the 126.50 area which is the 50% retracement of the up move from 101.18 to the highs at 151.95. Below 126.50 targets the 120.60 area.   FTSE100 is expected to open 38 points lower at 7,792   DAX is expected to open 60 points lower at 15,121   CAC40 is expected to open 30 points lower at 7,081   Email: marketcomment@cmcmarkets.com   Follow CMC Markets on Twitter: @cmcmarkets   Follow Michael Hewson (Chief Market Analyst) on Twitter: @mhewson_CMC
ECB enters final stage of tightening cycle

European Central Bank's President Christine Lagarde warns, but...

Craig Erlam Craig Erlam 19.01.2023 22:23
It’s been a solid start to the year for equity markets but that optimism appears to be fading as policymakers queued up in Davos to push back against market interest rate expectations. Let’s be clear on this; the markets have a much better record over the last 18 months of anticipating shifts in interest rates than central banks so to some degree these warnings will fall on deaf ears. But then, they come at a time when stocks have had a good run so perhaps it’s a case of any excuse to lock in some profits. Lagarde’s warnings falling on deaf ears? ECB President Christine Lagarde was among those to warn about overly optimistic market expectations, insisting that she would “advise market participants to revise their positions”. It’s hard to take the advice too seriously considering how late to the party the ECB was. While every situation was different, to have seen the experience of most other central banks and think “that won’t happen to us” before diving into an aggressive catch-up tightening cycle doesn’t leave you with much credibility. CBRT holds for now Of course, compared with the CBRT the ECB looks like it’s doing a stellar job. While the latter was late to acknowledge that the house was on fire, the former decided the throw fuel on it and see what happens. After another series of rate cuts, the CBRT recently decided it was time to pause again and assess the damage. Official data recently showed inflation is falling but from extraordinarily high levels. I’m sure we’ll see further cuts at some point in the future but it would seem today was not the time. Although at this stage I have no idea exactly what they’re looking for and how they’re coming to the conclusions they are. Oil eases around prior highs It would appear the profit-taking we’re seeing elsewhere is weighing on oil as well, with Brent and WTI off around half a percentage point after reversing off their highs yesterday. The reversal occurred slightly above the late December and early January peaks so it’s perhaps a natural profit-taking zone, especially occurring around a broader risk reversal. Gold eyeing a correction? Gold is pushing higher again today but the broader rally appears to have stalled. That may not come as a big surprise, occurring in a zone between $1,880 and $1,920 where we’ve seen plenty of support and resistance in recent years. It had plenty of momentum going into these levels but that has now faded which could signal a potential correction. For a look at all of today’s economic events, check out our economic calendar: www.marketpulse.com/economic-events/ This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds. Central bank warnings - MarketPulseMarketPulse
Tight Monetary Policy Is Already Weighing On The Swedish Housing Market

Tight Monetary Policy Is Already Weighing On The Swedish Housing Market

ING Economics ING Economics 23.01.2023 08:39
We outline four different paths for EUR/SEK in 2023 based on developments in four key areas: global risk sentiment, Europe’s economic performance/energy prices, Riksbank-ECB policy divergence and Sweden's domestic economy. Our baseline scenario is moderately bearish for EUR/SEK, and expect to see sub-10.50 levels by 3Q23 before a 4Q rebound   We recently revised our EUR/USD forecast higher on the back of a radically changed global macroeconomic picture. Slowing inflation and a deteriorating data-flow in the US have forced a dovish repricing in Fed rate expectations, while the European Central Bank looks determined to keep hiking at a sustained pace. Meanwhile, a positive re-rating of growth expectations occurred in both China (thanks to the easing of Covid rules) and Europe (thanks to lower energy prices). All this points – in our view – to dollar weakness and a more benign environment for high-beta currencies in 2023. In this article, we outline four potential patterns for EUR/SEK based on four key factors set to drive the pair over the short and medium term: global risk sentiment, Europe’s economic performance/energy crisis, Riksbank-ECB policy and Sweden’s economy. The range of outcomes is derived from the expected volatility priced in by the options market. Four scenarios for EUR/SEK Source: ING, Refinitiv External environment The first two factors in our scenario analysis are purely external to Sweden. Global risk sentiment remains – statistically – the single most important driver of EUR/SEK in the medium term. The Fed’s policy is a key driver in this sense. Our economics team has recently highlighted how the deterioration in forward-looking data (like the ISM Services), combined with the easing in inflationary pressures, are shedding doubts on whether the Fed will be able to deliver another 50bp of total tightening and take rates to 5.00%. We now expect a larger easing package (100bp) in the second half of 2023 compared to what markets are pricing in (60bp). While lower rates should be a straightforward positive factor for global equities and high-beta currencies such as SEK, there is a key caveat. Should the easing cycle be triggered primarily by a pronounced US economic underperformance rather than primarily by falling inflation, the net positives for high-beta currencies would be offset. SEK should benefit from the improvement in the eurozone's growth picture SEK presents one of the strongest sensitivity in G10 to eurozone’s growth sentiment, which at this historical juncture is very strictly a function of energy prices and geopolitical developments in Ukraine. ING’s views on the eurozone’s economy can be found in our economics team's “Eurozone Quarterly”: one key point is that the abatement in gas prices (largely thanks to mild weather) has allowed a recovery in the euro area's economic outlook, and a recession can now be averted. The improvement in the eurozone’s outlook should have – in theory – weighed on EUR/SEK, since SEK tends to have a higher beta than the euro to the eurozone’s growth. However, this has not been the case lately. There are two reasons for this: first, the hawkish surprise by the ECB triggered EUR-specific strength; second, risk sentiment was rather weak into year-end and only margianlly recovered at the start of 2023. We discuss in the next paragraph the relevance of ECB and Riksbank policy for EUR/SEK, but an important takeaway is that SEK has some room to catch up with the improved eurozone growth picture, although that can only occur in a stable or recovering risk environment. Sensitivity to rate differential rising The sensitivity of EUR/SEK to the EUR-SEK two-year swap rate differential (which tracks the ECB-Riksbank policy divergence) has started to pick up again recently. This happened largely thanks to: a) gas prices abating and no longer being the key driver of short-term moves in European currencies; and b) the ECB turning increasingly aggressive on tightening. For most of last year, the correlation between EUR/SEK and its short-term swap differential was rather muted – as shown below. The large hikes by the Riksbank were not translating into a stronger krona: the 100bp hike in September was a case in point. This was observed across many developed central banks. We think that a generalised improvement in the global risk picture can keep rebuilding the FX-rate differentials relationship in 2023, including for EUR/SEK. Accordingly, the ECB-Riksbank policy divergence should regain relevance for the pair. EUR/SEK and short-term swap rate differential Source: ING, Refinitiv ECB and Riksbank policy We expect the ECB to hike by 125bp by mid-2023, in line with the Governing Council’s recent rhetoric and the improved economic outlook in the eurozone. That would take the deposit rate to 3.25%, which is currently what markets are pricing in. Unlike the Fed, we expect rate cuts will only be a 2024-2025 story in the eurozone. We expect 75bp of hikes by the Riksbank, but 100bp are also on the table The Riksbank’s policy rate is currently at 2.50% and our baseline scenario sees 75bp of additional hikes in Sweden and a peak rate of 3.25% like the ECB deposit rate. This is in line with market expectations. We see, however, an elevated risk of 100bp being delivered. The reasoning behind this is that: a) inflation is still very elevated in Sweden (CPIF 10.2% year-on-year, core CPIF 8.4% YoY) and proved rather sticky in latest reads; b) there is a rather explicit interest by the Riksbank to support the krona (which would help fight inflation). On this second point, the most straightforward approach to support SEK is not to underdeliver compared to market expectations on monetary tightening, especially at a time when the ECB is hiking aggressively. In our baseline scenario, we see the EUR-SEK short-term rate differential being capped as ECB tightening is fully priced in and the Riksbank can still moderately surprise markets on the hawkish side. The Riksbank explictly wants a stronger krona The timing of rate cuts is another important point, especially for the EUR/SEK outlook in 2H23. In our view, for the same reasons mentioned above – and especially the Riksbank’s preference for a stronger SEK – the discussions about monetary easing will be delayed as much as possible. We currently pencil in the first rate cut by the Riksbank in 2024, and we expect it to come a few months before a similar move by the ECB. Another approach to support the krona could go through FX reserves. The Riksbank accelerated the build-up of its FX reserves in early 2022, which essentially implied selling SEK to purchase foreign currencies (mainly USD and EUR). This seemed counterintuitive given the desire for a strong currency, but the Riksbank highlighted how reserve management was not part of the monetary policy framework. Pace of FX purchases slowing Source: ING, Riksbank   FX reserve data shows that the pace of purchases has abated recently, and that reserves are now above the 2019 recent peak. This is already good news for SEK, but it does not look hihgly likely – for the moment – that the Riksbank will start actively selling FX to support the krona. It could become a more viable option later this year should SEK feel more depreciating pressure despite a hawkish monetary policy or should the bank be forced to halt hiking earlier than expected. Some uncertainty around the Riksbank’s policy is also tied to the recent change of governor. Erik Thedéen took the role at the start of the year, but we do not have enough information about his stance on monetary policy to conclude he will bring any substantial changes in the bank. Riksbank facing a housing dilemma There is one key downside risk to our 'hawkish' scenario for the Riksbank. Unlike the ECB, the Riksbank has to deal with a very vulnerable property market. Indeed, tight monetary policy is already weighing on the Swedish housing market. Rising costs for debt servicing and construction had drastically reduced consumer and investors’ appetite, resulting in prices falling substantially. The headline Valueguard HOX index shows a peak-to-trough fall of 15.2%, and the Riksbank forecasts a further decline until the third quarter of 2023.   Swedish housing market under pressure Source: ING, Riksbank, Valueguard   Looking at the Swedish mortgage market, only 10% of new loans have a fixation period of longer than five years, and over half of the total loans are on variable. Together with the Swedish household debt proportion to net disposable income rising steadily over the past two decades to 200 percent, there are some limits to how far the Riksbank can go with tightening before triggering a fully-fledged property crash. Mortgage markets breakdown by interest rate type, new loans (%) Source: ING, European Mortgage Federation   A black-swan scenario for SEK could materialise if ultra-sticky inflation forces the Fed, the ECB and the Riksbank to push rates considerably higher than what markets are currently expecting, triggering a crash in the housing market. That could also lead to big rate cuts in late 2023 to support the economy. In our baseline scenario, the 75-100bp of tightening by the Riksbank should keep fuelling the property market correction, but in a controlled manner and not excessively exceeding the Riksbank’s estimates. Our forecast for EUR/SEK After discussing the range of possible patterns for EUR/SEK in 2023, it’s time to sum up our view, which corresponds to the "Cautious optimism" scenario above. We are moderately bearish on EUR/SEK in 2023 given the projected improvement in the eurozone’s economic outlook and in risk sentiment. More in details, we expect EUR/SEK to trend lower and move sustainably below 11.00 by the end of the first quarter as the Riksbank hikes by 50bp and signals more tightening, while European sentiment improves. Then, we expect EUR/SEK to test the 10.00/10.50 trading range in the third quarter, when Fed rate cuts could give high-beta currencies like SEK an advantage over the EUR, and the beneficial effects for the krona of an improved European economic outlook emerge. However, SEK could experience some weakness towards the end of the year – i.e. EUR/SEK moving back above 10.50 – as colder weather could bring higher energy prices and a deterioration in risk sentiment. It's important to note that this profile embeds our view for a rather strong EUR in 2023. We expect to see larger SEK gains against the dollar. ING forecasts Source: ING Read this article on THINK Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
The German Purchasing Managers' Index, ZEW Economic Sentiment And More Ahead

FX: Low Gas Prices Should Remain Supportive For FX In The CEE Region

ING Economics ING Economics 23.01.2023 09:17
Risk assets are largely holding onto their 2023 gains, buoyed by the view that recessions may be mild and that slowing price pressures could allow the Fed to respond if need be. This has left the dollar gently offered. Ahead of next week's Fed and ECB policy decisions, this week's focus will be on US 4Q GDP, PMI readings, and rate decisions in Canada and Hungary USD: Dollar to stay gently offered The dollar starts the week gently offered. Trading conditions in Asia overnight have been quiet as China starts a week of public holidays for the Lunar New Year. A quick review of asset market performance year-to-date shows equities performing well with European and Chinese equities leading the pack at +8%. Bond markets have also been performing well, led by the emerging market local currency sector. The big question for this year remains whether we will see a differentiation between equities and bond markets as the US and Europe go into recession. And indeed, it seems that credit market participants are reluctant to drive credit spreads any narrower at this stage in the cycle. Ahead of next week's Fed meeting, the US focus this week will be on the provisional January PMI readings, where both manufacturing and services sentiment are expected to continue with recessionary sub-50 levels. Thursday should see a reasonably strong 4Q22 US GDP figure of 2%+ quarter-on-quarter annualised, although as our US economist James Knightley writes, that strength may be driven by the trade side and on the back of weak US imports. Friday sees the December personal income data, including the Fed's preferred measure of inflation, the core PCE deflator. James is sub-consensus on this, looking for a 0.2% month-on-month reading and supporting the narrative that the US inflation threat is easing. The data calendar in theory should keep the dollar on the soft side this week. However, DXY has come quite a long way already and we doubt whether the market is ready to add to short dollar positions ahead of next week's FOMC meeting - which could pose a positive event risk to the dollar should the Fed push back on the 50bp of easing the market now prices for this year. As such, DXY may find support in the 101.30/102.00 range this week. Chris Turner EUR: ECB pushback successful Judging by the levels of the two-year EUR swap (3.19%) European Central Bank speakers have been successful in pushing back against last Tuesday's Bloomberg News story that the ECB wanted to slow the pace of its hikes after February. This story had sent this swap rate down to 3.05%, softening EUR/USD with it. Both of those trends have now been reversed. However, as above on the dollar story, we suspect investors may be reluctant to chase EUR/USD through resistance at 1.0950/1000 ahead of next week's central bank event risks. In terms of eurozone data, look for the provisional January PMI readings across the eurozone, Germany, and France (released tomorrow) and Germany's Ifo on Wednesday. The Ifo will be particularly interesting to see whether the expectations component picks up anywhere near as sharply as the German ZEW investor survey. Please see here for our eurozone macro team's latest views on the region. A bullish wildcard for the euro could come from any further comments on new joint EU bond issuance to support green investments, as European politicians attempt to support local industry in the face of President Biden's Inflation Reduction Act.  Elsewhere, Francesco Pesole has today published a scenario outlook for the EUR/SEK. Our core view is for a lower EUR/SEK this year. Chris Turner GBP: Holding its own Sterling continues to perform well and is holding onto the gains made last week on the back of high wage and core CPI readings. The market now prices a 45bp Bank of England (BoE) hike at next week's meeting. The firming up of BoE tightening expectations has allowed sterling to match this year's strength of the euro. And certainly, there has been a marked improvement in the perception of UK sovereign risk as evidenced by the five-year sovereign CDS trading back down to 22bp last week. This week's UK calendar mainly focuses on the January PMI readings, where again both the manufacturing and services components are expected to be in recessionary territory. Overall, we suspect GBP/USD might not have the momentum to sustain a break above 1.2450/2500 this week, while EUR/GBP should find support in the 0.8700/8730 area. Chris Turner CEE: All eyes on the Hungarian forint This week, the region gets interesting again. Today, we get a series of monthly indicators from the Polish economy, which should show further signs of slowing. The main focus will be on industrial production, which we estimate grew by 1.2% year-on-year, less than market expectations. Tomorrow, consumer confidence in the Czech Republic will be published and later we will see the decision of the Hungarian National Bank (NBH). We saw a downside surprise in December inflation, but believe the peak is still ahead. We do not expect any changes in monetary policy settings, but the market will be looking for some signs of an early interest rate cut. In our view, the NBH will maintain a hawkish tone and will not encourage speculation of premature action. On Wednesday, Poland will release labour market data. Besides the calendar, we can expect further statements from the Czech National Bank board members before the blackout period for the February meeting begins on Thursday. However, at the moment everything points to continued stability in interest rates. In Hungary, Fitch downgraded the sovereign rating outlook from stable to negative on Friday. The agency cites among the reasons the delay in payments from EU funds, which implies insufficient progress in the EU story. In addition, this Friday, S&P will publish a rating review of Hungary. The agency already downgraded its outlook in August.   In the FX market, at the global level, not much changed for the CEE region last week. Higher EUR/USD, improving sentiment in Europe and low gas prices should remain supportive for FX in the region. However, all eyes will be on the Hungarian forint this week as it faces an NBH meeting and rating risks. We believe the forint will find a way to maintain its current strong values at the end of the week despite higher volatility. A deterioration in the outlook should not be a major surprise for the market and we also expect the hawkish NBH to dampen the current market speculation on an early rate cut, which should be positive for the forint. On the other hand, positioning is on the long side according to our estimates though if everything goes according to plan, we could test 390 EUR/HUF. Elsewhere, we see the Czech koruna still near 24.00 EUR/CZK and the Polish zloty should go below 4.70 EUR/PLN. Frantisek Taborsky Read this article on THINK Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Saxo Market Call podcast Listeners' Edition - answers to listeners survey, Google AI, copper and more

EXMO CEO about Microsoft earnings: According to their financial report, a profit of $53.14 billion and an Earnings Per Share (EPS) of 2.33 are expected

Serhii Zhdanov Serhii Zhdanov 23.01.2023 12:34
  We're approaching the end of the first month of 2023, which seems to have been going by without any shocking events and spectacular game-changers so far. Eurozone inflation shrank, so now we're wondering what would be the next ECB's move, Bitcoin sentiment seems to be improving and the only events, which could turn the tide are at least two earnings reports of the tech companies - Tesla and Microsoft. Today, we publish some comments on these three threads prepared by Serhii Zhdanov, CEO of the crypto exchange, EXMO.com. Provided Eurozone inflation is less than 10% on Wednesday, would you expect the ECB to implement a series of 25bp rate hikes? At the moment, the Eurozone is not going through the best period. Many countries are on the verge of recession. For instance, the European Central Bank (ECB) is already taking steps to prevent the default of payments by Italy. Looking at the dynamics of the Consumer Price Index, there is a possibility that the ECB will still raise the rate by 50bp. After 3%, the regulator will most likely raise it by 0.25%. A strong labour market makes it possible for European Central Banks to act hawkish. Monetary policy will remain tight until at least the summer of 2023. The optimal price for bitcoin will be between the $25,000-$27,000 zone with a short-term correction to $20,000 For bitcoin and the entire crypto market, 2022 turned out to be a very difficult year. We saw a cascade of bankruptcies that hurt digital asset rates. However, this also contributed to the cleansing of the industry, making investors more responsible towards their investments and examining risk management. In the near future, we expect the price of Bitcoin to stabilise and enter the consolidation zone with periodic liquidations of long and short positions. The optimal price for bitcoin will be between the $25,000-$27,000 zone with a short-term correction to $20,000. Closer to summer, the first cryptocurrency can cost more than $30,000, provided that investors once again have faith in high-risk assets. The monetary policy will become softer due to the weakening of the labour market. Read next: There Have Been Concerns That Tesla Price Cut Could Trigger A Price War| FXMAG.COM As for Microsoft, the company will cut 11,000 jobs. This is approximately 5% of the total staff. It can be seen that the company feels the pressure of adverse economic factors This reporting season is expected to be challenging. Banks that reported first, presented mixed results (according to the old tradition: the banking sector sets the dynamics for the entire reporting season). Already, we now see how companies optimise their business. For instance, JPMorgan's board cut CEO Jamie Dimon's "special award". The board granted Dimon a base salary of $1.5 million and performance-based variable incentive compensation of $33 million. Reduction in payments also took place with Apple’s CEO, Tim Cook. As for Microsoft, the company will cut 11,000 jobs. This is approximately 5% of the total staff. It can be seen that the company feels the pressure of adverse economic factors. According to their financial report, a profit of $53.14 billion and an Earnings Per Share (EPS) of 2.33 are expected. If the figures are below expectations, then we can expect a decline in quotations. Much more interesting to see the forecast for the next quarter. The U.S. economy is slowing down, so the forecast may not be optimistic, which will create selling pressure. Tesla is also feeling bearish pressure. Starting with production problems in China, a slowdown in sales in the U.S. and problems with Elon Musk’s image caused by recent scandals. It can be seen how Musk himself is trying to reduce his stake in the company (for example, by buying Twitter), as he understood that Tesla shares are quite overbought. The company's shares have fallen by 75% from their peak, that’s why even a mixed or negative report can pump the price a little. There is a possibility of fixing short positions. EPS expectations of 1.16 are able to reach the target, but there are doubts that Tesla will be able to show income more than the expected $25.16 billion. There is a possibility that income will turn out to be even lower which was shown in the company’s previous report. It’s worth paying special attention to the level of $100 per share. Below this mark, investors can exit their positions and push the price closer to $90.
Apple earnings: Company did not give an outlook for the next quarter, which could prove even more challenging due to parts shortages and competition

Alphabet (GOOGL) rose 5.34% as the parent company of Google announced plans to cut about 12,000 jobs or over 6% of its global workforce

Intertrader Market News Intertrader Market News 23.01.2023 13:15
DAILY MARKET NEWSLETTER January 23, 2023               Pre-Market Session News Sentiment Technical Views           EUR/USD   Euro Stoxx 50 (Eurex)   Brent (ICE)                 Please note that due to market volatility, some of the key levels may have already been reached and scenarios played out.                     Price Movement Analyst Views Target Pivot   Dax (Eurex) 15,161.00 +80.00 (+0.53%) Read the analysis 15,095.00 15,220.00     FTSE 100 (ICE Europe) 0.00 0.00 (0.00%) Read the analysis 7,746.00 7,798.00     S&P 500 (CME) 3,983.75 -4.75 (-0.12%) Read the analysis 4,005.00 3,950.00     Nasdaq 100 (CME) 11,661.25 -15.75 (-0.13%) Read the analysis 11,720.00 11,580.00     Dow Jones (CME) 33,446.00 -28.00 (-0.08%) Read the analysis 33,620.00 33,280.00     Crude Oil (WTI) 81.33 -0.31 (-0.38%) Read the analysis 81.90 80.60     Gold 1,930.95 +4.87 (+0.25%) Read the analysis 1,936.00 1,920.00                     MARKET WRAP           Market Wrap: Stocks, Bonds, CommoditiesOn Friday, U.S. stocks closed higher after declining for most of the week. The Dow Jones Industrial Average climbed 330 points (+1.00%) to 33,375, the S&P 500 rose 73 points (+1.89%) to 3,972, and the Nasdaq 100 jumped 323 points (+2.86%) to 11,619.The U.S. 10-year Treasury yield rebounded a further 8.9 basis points to 3.481%.Media (+4.61%), automobiles (+3.78%), and semiconductors (+3.51%) sectors gained the most.NetFlix (NFLX) jumped 8.46% after the video-streaming company signed up more subscribers than expected in the fourth quarter. Also, company co-founder Reed Hastings will step down as chief executive.Alphabet (GOOGL) rose 5.34% as the parent company of Google announced plans to cut about 12,000 jobs or over 6% of its global workforce. Meanwhile, Tesla (TSLA) gained 4.91%, Nvidia (NVDA) jumped 6.41%, Amazon.com (AMZN) added 3.81%, Microsoft (MSFT) advanced 3.57%, and Apple (AAPL) was up 1.92%.Regarding U.S. economic data, the number of existing-home sales dropped at an annualized rate of 1.5% on month in December (vs -2.0% expected).European stocks also closed higher. The DAX 40 rose 0.76%, the CAC 40 gained 0.63%, and the FTSE 100 was up 0.30%.U.S. WTI crude futures increased $1.20 to $81.84 a barrel, as investors turned optimistic on higher oil demand coming from China.Gold price retreated $4 to $1,927 an ounce.Market Wrap: ForexThe U.S. dollar index dipped to 101.99.EUR/USD added 24 pips to 1.0857. Germany's data showed that producer prices grew 21.8% on year in December (vs +19.9% expected, +28.2% in November).USD/JPY surged 115 pips (+0.90%) to 129.58. Bank of Japan Governor Haruhiko Kuroda reiterated that the central bank will maintain its "extremely accommodative" monetary policy. GBP/USD edged up 8 pips to 1.2399. U.K. data showed that retail sales declined 1.0% on month in December (vs +0.3% expected).AUD/USD rose 63 pips to 0.6973.USD/CHF gained 42 pips to 0.9203, while USD/CAD fell 89 pips to 1.3377.Over the weekend, Bitcoin continued its recent rally striking $23,000, the highest level since August.Morning TradingIn Asian trading hours, EUR/USD advanced to 1.0895 and GBP/USD rose to 1.2425.Meanwhile, USD/JPY retreated to 129.15.Gold bounced to $1,933.Bitcoin held gains at $22,765.Expected TodayThe eurozone's January consumer confidence index is estimated at -17.0.In the U.S., leading index is expected to drop 0.7% on month in December.           UK MARKET NEWS           Endeavour Mining, a mining company, announced that 4Q gold production grew 4% on quarter to 355,000 ounces. Full-year output was 3% lower than the prior year at 1.4 million ounces, while all-in sustaining cost increased 5% to 928 dollars per ounce. The company expects 2023 production of 1.325 - 1.425 million ounces and all-in sustaining cost of 940 - 995 dollars per ounce.Retail, auto & parts and chemicals shares fell most in London on Thursday.From a relative strength vs FTSE 100 point of view, BAE Systems (+1.16% to 853.2p) crossed above its 50-day moving average.From a technical point of view, Ashtead Group (+1.32% to 4995p) crossed above its 50-day moving average.From a technical point of view, AstraZeneca (-1.93% to 11200p) crossed under its 50-day moving average.           ECONOMIC CALENDAR           Time Event Forecast Importance   10:00 CB Leading Index MoM (Dec) -0.7% LOW     11:30 3-Month Bill Auction   LOW     11:30 6-Month Bill Auction   LOW                                     NEWS SENTIMENT           Bayer AG BAYN : XETRA 56.39 EUR -1.83% In the last 5 days         NEWS SENTIMENT (24H) Very Negative       TECHNICAL SCORE Short-Term Medium-Term Long-Term                                   Tesco PLC TSCO : LSE 247.90 GBp +0.16% In the last 5 days         NEWS SENTIMENT (24H) Very Negative       TECHNICAL SCORE Short-Term Medium-Term Long-Term                                   Rio Tinto PLC RIO : LSE 6,213.00 GBp +1.92% In the last 5 days         NEWS SENTIMENT (24H) Negative       TECHNICAL SCORE Short-Term Medium-Term Long-Term                                   National Grid PLC NG. : LSE 1,035.00 GBp +1.27% In the last 5 days         NEWS SENTIMENT (24H) Negative       TECHNICAL SCORE Short-Term Medium-Term Long-Term                                   AstraZeneca PLC AZN : LSE 11,200.00 GBp -4.08% In the last 5 days         NEWS SENTIMENT (24H) Very Positive       TECHNICAL SCORE Short-Term Medium-Term Long-Term                                   BP PLC BP. : LSE 475.85 GBp -1.07% In the last 5 days         NEWS SENTIMENT (24H) Very Negative       TECHNICAL SCORE Short-Term Medium-Term Long-Term                           TECHNICAL VIEWS           EUR/USD Intraday: the bias remains bullish.   Pivot: 1.0855   Our preference: Long positions above 1.0855 with targets at 1.0945 & 1.0960 in extension.   Alternative scenario: Below 1.0855 look for further downside with 1.0835 & 1.0820 as targets.   Comment: The RSI shows upside momentum.                     Euro Stoxx 50 (Eurex)‎ (H3)‎ Intraday: choppy.   Pivot: 4167.00   Our preference: Short positions below 4167.00 with targets at 4124.00 & 4104.00 in extension.   Alternative scenario: Above 4167.00 look for further upside with 4184.00 & 4205.00 as targets.   Comment: As long as 4167.00 is resistance, look for choppy price action with a bearish bias.                     Brent (ICE)‎ (H3)‎ Intraday: towards 88.90.   Pivot: 86.20   Our preference: Long positions above 86.20 with targets at 87.80 & 88.90 in extension.   Alternative scenario: Below 86.20 look for further downside with 85.50 & 84.60 as targets.   Comment: The RSI advocates for further advance.        
Nasdaq 100 posted a new one year high. S&P 500 ended the day unchanged

The price of Tesla has gained over the past week as we approach its earnings release. The price of the stock climbed 12.50% over a 5-day period

Michalis Efthymiou Michalis Efthymiou 23.01.2023 10:39
Eurozone inflation slowed down and we're looking forward to the next ECB meeting, which may provide the markets with a 50bp rate hike. Bitcoin has been trading higher recently, while this week the hot topics this week are Tesla and Microsoft earnings. We asked Michalis Efthymiou, Market Analyst at NAGA, about his view on ECB, the leading crypto and tech companies. Let's find out what Michalis told FXMAG.COM Most economists continue to advise a 50 basis point hike,  as the ECB lags behind their competitors in terms of their Main Refinancing Rate and Inflation goals The EU inflation rate has indeed significantly declined from 10.6% to 9.2% over the space of 2-months. However, it is important not to compare the monetary policy of the UK and the US with the European Central Bank. The US is now predicted to lower the size and pace of their rate hikes for the reason that inflation has declined to 6.5% and the Federal Fund Rate is already at 4.5%. This is 2% higher than the ECB, which is currently lagging behind both the Fed and the Bank of England.Therefore most economists continue to advise a 50 basis point hike,  as the ECB lags behind their competitors in terms of their Main Refinancing Rate and Inflation goals. Currently, EU officials are keeping to their 50 basis point stance, and this has clearly priced into the Euro. Read next: For The First Time Since Last April The EUR/USD Pair Is Above 1.09| FXMAG.COMOn a last note, it is also important not to disregard the fact that over a third of the Monetary Policy Board during December’s meeting voted for a 75 basis point hike. In addition, the risks of a recession in the EU have also significantly declined over the past month. Bitcoin has given back some of its spectacular gains, but its price is still elevated. What do you expect from the leading crypto in the near future? Bitcoin and cryptocurrencies, in general, are volatile, so a strong retracement is not rare and should not be viewed as harsh as other instruments. The demand for the cryptocurrency market is growing, and this can be seen in the overall market capitalization. The market cap has increased to over $1.05 Trillion, which is the highest this year. Bitcoin’s demand had also increased compared to other competitors increasing to 41.4% share.The price of Bitcoin has been influenced by two main factors. The weakening monetary policy and the lower risk of recession. Overall this can trigger a higher risk appetite and investor confidence. However, traders should be cautious that the FTX bankruptcy has left the sector on shaky grounds. Genesis Global Capital is also currently preparing for bankruptcy which again does not support the industry’s confidence levels.Lastly, over the past 24 hours, the crypto market value measured only $52 billion, which is 13% lower and triggered a slight decline yesterday. This may be related to the lack of volume on a Sunday, but traders should monitor and ensure this does not develop into a trend. Some big names will report earnings soon. What do you expect from Microsoft and Tesla? The price of Tesla has gained over the past week as we approach its earnings release. The price of the stock climbed 12.50% over a 5-day period. For the fourth quarter of 2022, the company’s Earning Per Share is expected to increase slightly compared to the 3rd quarter. The figure is expected to read $1.13 while the revenue is expected to increase from $21.88 billion to $24.42B. So we can see from the figures that the report is expected to show a better quarter compared to October.However, investors should also be cautious about the latest company sales figures, which show 55,796 cars were sold in December. The figure is the lowest in 5 months and could concern some investors. Microsoft, on the other hand, is generally performing better than Tesla, with higher Earnings Per Share. It should also be noted that Microsoft has only declined by 21% in the past 12 months compared to Tesla’s 60% decline. However, the volatility and price condition over the next three months will largely depend on the next earnings report and the general stock market condition.
Apple Q3 2023 Results – Surpassing Expectations and Aiming for New Heights

The EUR/GBP Pair Looks Set For The Next Challenge Key Resistance

Torben Melsted Torben Melsted 24.01.2023 08:23
EUR/GBP has been consolidating within a rectangle since early October 2016 and looks set for the next challenge key resistance at 0.9306. A break above here should confirm the rally towards 1.0500. Short-term we are looking for EUR/GBP to break above minor resistance at 0.8786 and more importantly resistance at 0.8805 as confirmation that the next impulsive rally higher towards 0.9305 is in motion and ultimately a break above key resistance at 0.9306 is expected for a continuation higher towards 1.0500. Read next:British Pub Earnings Will Suffer Significantly| FXMAG.COM Relevance up to 06:00 2023-01-25 UTC+1 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/309729
Hang Seng Index Plummets -2% Amid Weak China Data, Short-Term Trend Intact

Analysis Of The Scenario Of The EUR/GBP Cross Pair

InstaForex Analysis InstaForex Analysis 24.01.2023 08:35
If we look at the 4 hour chart, We can scan the EUR/GBP cross currency pair for the appearance of: 1. The Deviation between EUR/GBP price movement with CCI indicator. 2. The appearance of Bulllish 123 pattern followed by the appearance of Ross Hook (RH). From the two things above, it can be seen that EUR/GBP is trying to break above the 0.8814 level. If it is successfully penetrated above, the first target to aim for is 0.8846 and 0.8872 as the second target, but if on its way to these level targets, suddenly EUR/GBP drops below the level of 0.8743, It can be sure that the bull scenario described earlier will cancel itself.   Relevance up to 06:00 2023-01-25 UTC+1 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/118061
The RBA Is Expected To Raise Rates By 25bp Next Week

Forex: AUD Has Cemented Its Position As The Most Popular Long Trade In 2023

ING Economics ING Economics 24.01.2023 09:52
The market is focused on the US growth story and the dollar is more and more influenced by data prints. Today's PMI numbers should help limit downside exposure for the dollar. The euro remains supported by ECB officials fighting speculation of a 25bp hike. Hungary's central bank tests market sensitivity on an upcoming rate cut Some improvement in the market's sentiment around the health of the service sector in the US should help limit downside exposure for the dollar USD: Data-related risks are back Risk assets have started the week on the front foot, with equities rising yesterday in Europe and the US while Chinese markets are closed for the whole week. The dollar remained moderately offered. It’s become increasingly clear that larger swings in the dollar are now driven by data releases given the market's heightened sensitivity to the US growth story ahead of next week’s Federal Open Market Committee (FOMC) meeting. Preliminary PMIs will be released across developed markets today, and despite the surveys not being as highly regarded as the ISM in the US, that elevated sensitivity to data likely makes today’s releases a risk event for the dollar. Consensus expectations are centred around a modest recovery in the service index and in the composite survey. Some improvement in the market’s sentiment around the health of the service sector in the US should help limit downside exposure for the dollar. In that case, DXY may hold around 102.00 today unless PMIs in Europe surprise to the upside. Richmond Fed manufacturing data is the other release in the US calendar today. In the rest of G10, AUD has cemented its position as the most popular long trade in 2023, breaking decisively above 0.7000 yesterday. Tonight’s fourth-quarter CPI data in Australia will be key, as evidence of sticky inflation may force a hawkish repricing across the AUD curve (which currently embeds 40bp of extra Reserve Bank of Australia tightening) and add steam to the AUD/USD rally. CPI figures are released also in New Zealand tonight, and we see a larger risk they could show a deceleration in price pressures compared to Australia. AUD/NZD may retest the recent 1.0950 highs soon as the NZD curve has more room for a dovish repricing. Francesco Pesole EUR: Reality check Given that part of the recent EUR strength has relied on a re-rating of growth expectations in the eurozone thanks to lower energy prices, today’s PMIs will likely be a reality check on the sustainability of this driver for the common currency. Consensus expectations are moderately upbeat and signal that the PMI services index could return above 50.00 for the first time since July. Still, it will now take quite a good deal of positive news to push another big idiosyncratic euro rally. It seems more likely that EUR/USD could test 1.1000 on the back of rising market risk appetite weighing on the safe-haven dollar, if anything. At the same time, the effective pushback by ECB officials against speculation around 25bp hikes is likely limiting downside risks for the pair. President Christine Lagarde has one last chance to deliver any remark today before the quiet period kicks in ahead of next week’s meeting. A mere reiteration of her recent rhetoric, however, seems highly likely at this stage. Francesco Pesole GBP: Limited upside room against the euro PMIs may look a bit grimmer in the UK compared to the eurozone today, which could hinder the modest rebound in EUR/GBP seen over the past two trading sessions. The pair may struggle to climb above 0.8830-0.8850 for now. Still, the pound should be able to count on a generalised alignment in market expectations around a 50bp hike by the Bank of England next week (45bp priced in at the moment), which suggests a smaller scope for a correction.  Francesco Pesole HUF: Central bank assesses progress at home and abroad This week's highlight in the region is the National Bank of Hungary (NBH) meeting today. The central bank has made it clear that it wants to see a tangible and permanent improvement in risk sentiment. This means an improvement on the geopolitical side and on internal issues such as the Rule of Law, the current account deficit, and inflation. While we have seen some progress on all of these issues, in our view it is not enough for the central bank. However, after the progress in the EU story and lower-than-expected inflation, markets are already looking for indications of the NBH cutting rates, which are the highest in the CEE region. We expect the central bank to confirm its intention to keep interest rates high for longer today. However, we concede that the current situation could be tempting for the central bank to test the market by sending a dovish message. Increasingly, the market is seeing signs of speculation of a too-early interest rate cut. If the NBH resists the temptation and confirms the hawkish tone, we expect the current speculation to cool down and the forint could get back on track. In addition, yesterday's reaction to Fitch's downgrade of the rating outlook to negative could slightly clear long positioning and clear the way for further forint appreciation. In that case, we expect that the forint could test 390 EUR/HUF soon. Otherwise, the current positioning favours a rather asymmetric reaction negatively towards EUR/HUF 400. Frantisek Taborsky Read this article on THINK TagsHungary FX Daily Dollar Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
The German Purchasing Managers' Index, ZEW Economic Sentiment And More Ahead

European Markets Have Started To Lose Some Of Their Early Year Momentum

Michael Hewson Michael Hewson 24.01.2023 11:32
US markets started the week very much on the front foot yesterday, with the S&P500 closing above the 4,000 level and the Nasdaq 100 leading the way higher with its second successive 2% daily gain.   The outperformance in tech appears to point to a growing conviction on the part of investors that the Fed will soon have to look at cutting rates before the end of the year, although to look at bond markets yesterday, yields also moved higher, as money flowed out of treasury markets.   With a lot of tech companies starting to announce job cuts, as well as other measures to rein in costs, and inflationary pressures showing further signs of easing, it would appear that US investors are starting to think in terms of the next move higher, despite concerns over lower profits   Given the uncertain economic backdrop this comes across as a bit of a leap of faith, and its also notable that while US markets have started to gain momentum in the past few days, European markets have started to lose some of their early year momentum.   While US markets surged higher yesterday it is notable that today's European market open is likely to be a much more tepid affair, suggesting perhaps that investors in Europe don't share the same enthusiasm about the economic outlook, despite the reopening of the Chinese economy, which may help to provide a demand boost.   This increase in optimism is likely to be reflected in today's flash PMI numbers for January, which have already seen a pickup in economic activity in the past few months due to the sharp declines in energy prices from the peaks in August and September.   In Germany manufacturing PMI fell to 45.1 in October, but has recovered since then, albeit is still very much in contraction territory. Services have seen a similar pattern, dropping to two-year lows of 45, before showing small signs of a recovery. We expect to see a further improvement in today's January numbers to 48 for manufacturing and 49.5 in services.     In France, we've seen a similar pattern in manufacturing, although services have been more resilient due to the energy price subsidies provided by the French government to cushion French households from the worst effects of higher prices. France manufacturing is expected to improve to 49.5 from 49.2, and services to 49.8 from 49.5.   In the UK, manufacturing has struggled over the past 3 months and looks set to continue to do so, while services have been slightly more resilient. As we head into 2023 the challenges for business will be whether we see new investment, and a pick-up in economic activity, after the rising pessimism seen at the end of last year. Manufacturing is expected to remain subdued at 45.5, while services could slip back from 49.9 to 49.5.   Public sector borrowing in December is expected to remain high on the back of rising debt interest and energy price support with expectations of a small fall from November's £22bn to £18bn.   US manufacturing and services are expected to remain weak at 46 and 45 respectively.      EUR/USD – a marginal new high at 1.0927 yesterday, before slipping back again. The main resistance remains at the 1.0950 area which is 50% retracement of the move from the 2021 highs to last year's lows at 0.9536. A move through 1.0950 opens up a move towards 1.1110. Support remains back at the 1.0780 area.   GBP/USD – ran out of steam just below the 1.2450 area yesterday slipping back towards the 1.2320 area. Has managed to hold above the 1.2300 area for the last three days. Above 1.2450 could see a move towards 1.2600. A move below 1.2290 could see a move towards 1.2170.   EUR/GBP – slid back from the 0.8815 area but while above the 50- and 100-day SMA which acted as support last week the bias remains for a return to the recent highs at 0.8890. The next support below 0.8720 targets 0.8680.   USD/JPY – has squeezed back above the 130.20 area, with a move through 131.60 and last week's high potentially targeting a return to the 132.50 area in the short to medium term. Support currently at the 128.20 area as well as the lows last week at 127.20.     FTSE100 is expected to open 20 points higher at 7,804   DAX is expected to open 47 points higher at 15,150   CAC40 is expected to open 23 points higher at 7,055   Email: marketcomment@cmcmarkets.com Follow CMC Markets on Twitter: @cmcmarkets Follow Michael Hewson (Chief Market Analyst) on Twitter: @mhewson_CMC
The Hungarian Central Bank Confirmed Its Commitment To Keeping Conditions Tight For A Longer Period

The Hungarian Central Bank Confirmed Its Commitment To Keeping Conditions Tight For A Longer Period

ING Economics ING Economics 25.01.2023 09:44
The Bank of Canada is facing a hike/no-hike dilemma today. Our view is that it will deliver the last 25bp hike of the cycle now, but retain some flexibility to avoid sounding too dovish. The CAD impact may be slightly positive. Elsewhere, there are no key data releases in the US, while the German Ifo index will be watched closely after yesterday's strong PMIs USD: No key US data today Yesterday’s PMIs painted a less dramatic picture of the US service sector compared to the latest ISM survey and triggered a positive reaction in the dollar. However, markets quickly sold the USD rally, confirming a rather pronounced bearish bias despite encouraging data. It does appear investors are happily buying the dip in EUR/USD around the 1.0850 handle at the moment, and that could prove to be a short-term floor for the pair. There are no data releases to highlight today and no Fed speakers due to the pre-FOMC blackout period. Markets have cemented their view that next week’s move will be a 25bp hike, but are still reluctant to fully price in another 25bp of tightening: the futures and swap market are embedding a 4.90% peak rate. This signals the perceived balance of risks is tilted to the dovish side ahead of next week’s FOMC. Should this narrative gain more traction this week, the dollar may remain gently offered. However, a sharper decline in the dollar may not be on the cards until other large event risks (European Central Bank, Bank of England meetings) are past us. Francesco Pesole EUR: 1.0850 emerging as a short-term floor A below-consensus reading in German manufacturing was the only flaw in an otherwise convincing set of PMIs in the eurozone yesterday. The eurozone composite PMI index moved back into expansionary territory (i.e. above 50.00) for the first time since June 2022, endorsing the ongoing re-rating of the growth outlook in the region. As mentioned in the USD section, 1.0850 has emerged as a buy-the-dip area in EUR/USD over the past two sessions. Good data out of the eurozone is likely keeping most investors on the bullish side of the euro for now, and downside risks for EUR/USD appear contained. A test of 1.1000 by the end of the week is looking more likely, although a decisive break higher is not our base case before the ECB. Today, the focus will be on the Ifo indices out of Germany. All three gauges (business climate, current assessment, and expectations) are expected to improve. Looking at the ECB pricing ahead of next week's meeting, it now seems very plausible that markets will not question a 50bp hike, although another half-point move in March is not fully priced in (around 80% implied probability). The degree of ECB President Christine Lagarde’s commitment to another 50bp move will be the key driver of the market reaction next week. Francesco Pesole CAD: BoC to hike one last time Once a hawkish stand-out, the Bank of Canada is facing a hike/no-hike dilemma today. This is, at least, what market pricing seems to suggest, with 17bp of tightening priced in for today’s announcement. Economists’ consensus is leaning more in favour of a 25bp move, which is also ING’s view. As discussed in our BoC preview, a still-tight jobs market is partly offsetting the decline in headline inflation and signs of economic slowdown, and probably suggests this is the right time to deliver the last 25bp hike of the cycle. Should the BoC surprise with a hold, there’s a good chance the bank will keep the door open for a move in March, which would match the market’s current pricing, and ultimately fail to hit the Canadian dollar. A 25bp hike but a strong signal that rates have peaked and growing concerns on the economic outlook (new economic projections are released today) could prove to be a more dovish outcome than a “hawkish hold”, as markets price in more rate cuts in the second half of the year. This is, however, hardly a desirable outcome for a central bank that is still fighting inflation, and our impression is that the BoC will want to retain some ambiguity around future moves for now. The impact on CAD may be positive but rather limited in the end. USD/CAD remains on track for a move to 1.30 in the coming months, in our view, but USD weakness should be the primary driver of such a move. Francesco Pesole HUF: Forint strongest since the middle of last year The Hungarian central bank yesterday confirmed its commitment to keeping conditions tight for a longer period and that it has taken a patient approach to monetary policy. Moreover, the NBH reiterated its intention to continue withdrawing liquidity from the market via the one-week discount bill and the long-term deposit tender. More interestingly, the NBH raised the reserve requirement ratio for banks to 10% effective from April. Overall, it has sent a very clear signal that the hawkish mode will last for an extended period of time and the central bank is not going to allow any hasty moves. The result is a forint slightly below 390 EUR/HUF at the end of yesterday's trading, higher rates at the short end of the IRS curve and FX implied yields climbing higher. The forint is thus the strongest since the middle of last year and we believe it could still benefit from yesterday's decision. Added to this is the higher EUR/USD level compared to last week and yesterday's renewed drop in gas prices back below €60/MWh. On the other hand, we may see some profit-taking today after the forint's multi-day rally and ahead of Friday's risky sovereign rating review from S&P. Overall, we expect the forint to stabilise around 390 EUR/HUF for now. Frantisek Taborsky Read this article on THINK Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Britain's Rishi Sunak And EU's Ursula Von Der Leyen Will Meet Today To Finalize The Northern Ireland Drama

The EUR/GBP Cross-Currency Pair Rises For The Fourth Consecutive Day

TeleTrade Comments TeleTrade Comments 25.01.2023 10:15
EUR/GBP grinds near weekly high, up for the fourth consecutive day. Clear rebound from 50% Fibonacci retracement, upside break of 100-SMA favor bulls. One-week-old resistance line restricts immediate upside ahead of monthly top. EUR/GBP picks up bids to 0.8845 as bulls poke intraday high, as well as the weekly top, heading into Wednesday’s European session. In doing so, the cross-currency pair rises for the fourth consecutive day after reversing from the 50% Fibonacci retracement of its run-up from early December to January 13. In addition to a successful rebound from the key Fibonacci retracement level of 0.8722, the EUR/GBP pair’s ability to cross the 100-SMA hurdle, as well as the bullish MACD signals, favor the bulls. It should be noted, however, that a downward-sloping resistance line from January 13, close to 0.8860 at the latest, guards the quote’s immediate upside. That said, the quote’s run-up beyond 0.8860 could enable the EUR/GBP bulls to refresh the monthly high, currently around 0.8900. In that case, the 61.8% Fibonacci Expansion (FE) of its moves between December 01, 2022, and January 13, 2023, close to 0.8955, will gain the market’s attention. Alternatively, pullback moves may initially aim for the 100-SMA level surrounding 0.8815 ahead of targeting the 0.8800 round figure. Following that, the 50% Fibonacci retracement level of 0.8722 should lure the EUR/GBP bears. In a case where the quote remains bearish past 0.8722, the 61.8% Fibonacci retracement level near 0.8680, also known as the “golden ratio”, will be crucial to watch. EUR/GBP: Four-hour chart Trend: Further upside expected
Hang Seng Index Plummets -2% Amid Weak China Data, Short-Term Trend Intact

Technical Analysis Of The EUR/GBP Cross Pair

Torben Melsted Torben Melsted 26.01.2023 08:34
EUR/GBP has seen an expanding leading diagonal as sub-wave i/, which has been followed by an expanding flat correction that still could move a bit lower into the support area between 0.8770-0.8785 before setting the stage for the next impulsive rally higher to at least 0.8994 and possibly even higher. Short-term a break above minor resistance at 0.8824 will be a strong indication that sub-wave ii/ has completed and sub-wave iii/ higher to 0.8994 is unfolding. Relevance up to 07:00 2023-01-27 UTC+1 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/310122
China Restricts Gallium and Germanium Exports, Heightening Global Tech War

FX Daily: US pessimism softens ahead of a busy week

ING Economics ING Economics 27.01.2023 09:15
Markets' concerns about the US growth picture seemed to have eased, paving the way for a modest recovery in the dollar. Next week could, however, see a larger upside USD correction as the FOMC appears to have more room to surprise on the hawkish side compared to the ECB. Elsewhere, SEK is benefitting from good eurozone data, but domestic figures have lagged A 50bp hike by the ECB next week looks like a done deal, and we expect President Christine Lagarde to maintain a hawkish tone USD: Gearing up for an upside correction? The year started quite poorly for the US growth story, but the past couple of weeks have – at least – not given reasons to be even more pessimistic. Yesterday, growth figures in the US were slightly above consensus, and durable goods orders came in strong. We recommend reading our US economist’s note on those releases though, as a deeper look tells a different story than what the headline figures suggest. The week ends with December data on personal income and spending, as well as the PCE deflator, which are all expected to have decelerated.  The dollar did find some support yesterday after markets read US data as encouraging, and should enter a week packed with less bearish momentum. There is probably more room for the FOMC to surprise on the hawkish side compared to the ECB next week, and we could see an upside correction in the dollar materialise. For today, we can expect some consolidation around 102.00 in DXY. Francesco Pesole EUR: Still counting on the 1.0850 floor We have highlighted over the past few days how levels around 1.0850 in EUR/USD seemed to have formed a buy-the-dip floor for the pair. Yesterday’s price action added evidence that this is indeed the case, and we may have to wait for some more sizeable downshifting in USD bearishness in the run-in or after the FOMC meeting next week to witness a decisive break to the downside in EUR/USD. There are no market-moving data releases in the eurozone today, and some focus may only be on Spanish growth numbers this morning. Our economics teams published the ECB preview yesterday. A 50bp hike next week looks like a done deal, and we expect President Christine Lagarde to maintain a hawkish tone and push back against rate cut speculation. The recent communication hiccups however suggest the impact on the euro may not be too pronounced. Francesco Pesole SEK: Dealing with softer domestic data Sweden’s jobs and retail sales were released this morning and came in on the weak side. Unemployment ticked higher to 7.5% and retail sales were down 8% year-on-year in January. Earlier this week, the Economic Tendency index had pointed to a deterioration in the growth picture at the start of the year (while surveys in the eurozone were quite upbeat), although consumer confidence rebounded. SEK has not experienced much weakness as the data flow seemed to deteriorate, even though markets are no longer fully pricing in a 50bp hike by the Riksbank at the 9 February meeting. The solid growth story in the eurozone is probably offsetting the repricing lower in rate expectations. We recently published a scenario analysis for EUR/SEK in 2023. Our core view is that a gradual descent towards 10.50 will materialise by the third quarter. Francesco Pesole HUF: Rating decision will determine the future path of the forint The calendar in the CEE region is empty for Friday and it will be more interesting after the end of trading today. In Hungary, S&P will publish a rating review that will have the market's attention more than usual. A week ago, Fitch – surprisingly for us – downgraded the rating outlook from stable to negative, which highlights the question of whether Hungary has made sufficient progress in negotiations with the European Union for rating agencies. It is the slower absorption of EU funds that seems to have been the main reason for Fitch's decision. S&P has already held a negative outlook since last August and it was the inflow of EU funds that was the main risk of the latest review. Moreover, we expect S&P's new forecast to be revised to the downside in both GDP growth and the fiscal outlook. While we see downgrade risks high, our base case is for an unchanged rating today. With Fitch's recent decision, we think today's review will attract a lot of market attention and will be key for the future development of the forint. Given the heavy long positioning, we can expect an asymmetric reaction in the 385-395 EUR/HUF range. Frantisek Taborsky Read this article on THINK TagsSEK HUF FX Dollar Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Apple Q3 2023 Results – Surpassing Expectations and Aiming for New Heights

The EUR/GBP Pair Is Likely To Witness Further Recovery

TeleTrade Comments TeleTrade Comments 27.01.2023 09:51
EUR/GBP takes the bids to refresh intraday low after snapping two-day downtrend. Convergence of 200-EMA, immediate descending trend line guards recovery moves. 50% Fibonacci retracement appears the key support for bears to watch. EUR/GBP bulls struggle to retake control as the cross-currency pair renews intraday high near 0.8785 heading into Friday’s European session. In doing so, the quote jostles with the 200-bar Exponential Moving Average (EMA) and a downward-sloping resistance line from Wednesday, close to the 0.8785-90 hurdle. It’s worth noting that the receding bearish bias of the MACD and the RSI (14) attempt to regain the 50 level keeps the EUR/GBP buyers hopeful. Also luring the EUR/GBP bulls could be the cross-currency pair’s bounce off the 50% Fibonacci retracement level of December 01, 2022, to January 13, 2023 upside, close to 0.8720. Hence, the quote’s one more attempt to break the two-week-old resistance line, around 0.8840 by the press time, can’t be ruled out. Following that, a run-up to the monthly peak of 0.8897 becomes imminent. Meanwhile, the EUR/GBP pair’s fresh weakness remains unimportant till it stays beyond the 50% Fibonacci retracement level of 0.8722. In a case where EUR/GBP remains bearish past 0.8720, the 61.8% Fibonacci retracement level, also known as the golden ratio, could act as the last defense of the buyers around 0.8680. Overall, EUR/GBP is likely to witness further recovery but the bulls are far from retaking control. EUR/GBP: Four-hour chart Trend: Corrective bounce expected
Despite The Improvement In The Outlook Due To Falling Energy Prices, The Economic Environment In Britain Remains Difficult

Four Bank of England scenarios for February’s meeting

ING Economics ING Economics 27.01.2023 12:35
Persistently high wage and service-sector price inflation points to another 50bp rate hike from the Bank of England next Thursday. If we're right, then we expect one final 25bp rate hike in March, marking the top of this tightening cycle Governor of the Bank of England, Andrew Bailey Four scenarios for the Bank of England meeting Market pricing based on spot values on 27 January Source: ING   The Bank of England looks more likely to follow the European Central Bank than the Federal Reserve next Thursday, and we expect a 50 basis point rate hike for the second consecutive meeting. While the minutes of the December meeting appeared to open the door to a potential downshift to a 25bp move in February – and this meeting looks like a closer call than markets are pricing – the reality is that the recent data has looked relatively hawkish. Wage growth is persistently high, looking both at the official numbers and the BoE’s own business surveys. Headline inflation came in a little lower than the Bank projected back in November, but services CPI – seen as a better gauge of domestically-driven inflation – has come in above expectations. Still, if we get a 50bp hike on Thursday then it’s likely to be the last. BoE officials have hinted previously that much of the impact of last year’s rate hikes is yet to hit, and cracks are forming in interest-rate-sensitive parts of the economy. Headline inflation should begin to come down more rapidly from March too, as the impact of last year's energy bill surges drop out, and core goods/food pressure begins to ease more noticeably.  We expect one final 25bp hike in March, taking the Bank Rate to a peak of 4.25%. The key question for Thursday is whether the Bank itself acknowledges its work is nearly complete. We suspect it’s more likely to keep its options open. Here's what we expect: 1 The vote split December’s meeting saw the number of policymakers voting for a 75bp hike drop from seven to one, and the committee’s two most dovish officials opted for no rate hike at all. The lesson then and throughout 2022 was that the committee tends to move by consensus, and that means that the vote split is unlikely to be particularly narrow, even if the meeting is a tough one to call. Either we’ll get a similar number of officials voting for 50bp again, or we’ll see the vast majority scale back their vote to 25bp, akin to the kind of shift we saw in December. Our base case is that we see six of the nine policymakers voting for a 50bp hike, one for 25bp and two for no change. How each official has voted on interest rate decisions since 2021 Dr Swati Dhingra joined the committee in August 2022 and began voting in September Source: Bank of England, ING 2 New forecasts Calmer markets and scaled-back rate hike expectations since the mini-Budget crisis last year mean we shouldn’t be surprised to see the Bank upgrade its growth forecasts. Lower gas prices should theoretically help too, though this is a little more awkward for the BoE given that the government hasn’t yet cancelled plans to increase household bills in April, even if such a move now looks unlikely. That also means we’ll have to take the new inflation forecasts with a slight pinch of salt, and our own view is that headline CPI will end the year 1pp lower if April's planned increase is scrapped and consumer bills return to levels consistent with market pricing from the third quarter.  Still, it's the medium-term story that matters more. Keep an eye on the so-called ‘constant rate’ inflation forecasts, where the Bank assumes the Bank rate will remain unchanged from now on. If these show inflation at, or very close to, 2% in a couple of years' time, then that would be a sure-fire sign that policymakers think we’re close to the peak for Bank Rate. 3 Guidance on future policy decisions Governor Andrew Bailey hinted recently that current market pricing, which sees a peak for Bank Rate at 4.4%, is in the right ballpark. That suggests little reason for the Bank to rock the boat too much on Thursday with new forward guidance, and we suspect it will want to keep options open. The Bank will likely repeat that it’s prepared to act ‘forcefully’ in future if required (though we learnt in December’s minutes that 50bp hikes classify as ‘forceful’). We also doubt Bailey will be willing to be drawn on whether the Bank could pivot back to a 25bp hike in March, nor indeed whether that would be the last move in the cycle. Where he may be tempted to push back is on policy easing, especially now markets are almost pricing in one 25bp rate cut by the end of this year. Chief Economist Huw Pill’s recent emphasis on the UK sharing the worst bits of the US and eurozone’s inflation problems – structural labour shortages with the former, the energy crisis with the latter – feels like a line we’ll hear a lot over the coming months as officials try to dampen expectations of policy easing. Sterling rates to tighten to euro, and a more inverted curve The sterling rates curve still trades with a remnant of the risk premium that appeared in the run-up to the September budget debacle, making it one of the few markets where we think rates are unjustifiably high. Things have changed since then, however. Markets have come around to our more benign view on the terminal rate in this cycle, now implying hikes will stop around 4.25%. Instead, the discrepancy is to be found in longer maturities where the curve implies the Bank rate will remain elevated longer than at other central banks. Read next: Ukraine Is Calling For More Sanctions Against Russia| FXMAG.COM What markets expect from the Bank of England over the coming months Source: Refinitiv, ING   That markets taking a more hawkish view of BoE policy than signalled, for instance in its forecast, is nothing new. What’s changed is the way participants look at inflation risk. This has prompted yield curves to take a much more benign view of Fed and ECB policy. Each country is different but we find the treatment of sterling rates increasingly at odds with that of the dollar and euro. As a result, we expect the differential between 5Y sterling and euro swap rates to shrink to 75bp. This convergence should also be helped by the worsening of UK economic surprise indices, just as their eurozone equivalent goes from strength to strength. The spread between euro and sterling swap rates is likely to narrow Source: Refinitiv, ING   We also think the GBP curve is due to flatten further. One likely driver is the market's growing confidence that the BoE, like the Fed, will soon be in a position to cut rates, although we wouldn’t expect this before 2024. Another less probable driver would be if the BoE feels the need to tighten policy more than expected in the coming meetings. We very much doubt that longer rates would follow the short end higher, pricing instead a growing risk of rate cuts down the line to cushion the economic hit. We think the GBP curve is due to flatten further Source: Refinitiv, ING GBP: Temporary strength The BoE’s broad trade-weighted measure of sterling has bounced around 6% since the dark days of September and will marginally ease the BoE’s fears of imported inflation. Given that a 50bp hike is not fully priced for Thursday, sterling could enjoy some limited and temporary strength should the BoE indeed hike 50bp. Depending on the post-FOMC state of the dollar, that could briefly send GBP/USD back into the 1.24/25 range and EUR/GBP back to the low 0.87s. However, the challenges facing sterling have not gone away. Large twin deficits, weak growth and what throughout the year should be building expectations that falling prices – especially from March/April onwards – will provide room for the BoE to cut rates around the turn of the year. In terms of a profile, we think a continued narrowing in GBP rates premium to the EUR can push EUR/GBP higher through the year towards the 0.90/91 area. GBP/USD should be supported by the better EUR/USD trend, but will probably struggle to hold any gains to the high 1.20s – potentially seen in the second quarter. Read this article on THINK TagsInterest rates Bank of England Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
The US PCE Data Is Expected To Confirm Another Modest Slowdown

The US PCE Data Is Expected To Confirm Another Modest Slowdown

Michael Hewson Michael Hewson 27.01.2023 13:26
European markets have struggled for direction this week, finishing the day modestly higher after two days of minor losses.   US markets on the other hand finished the day strongly higher, with the Nasdaq 100 leading the way higher on the belief, rightly or wrongly, that the US economy is heading for a soft landing whatever the Fed does next week.   Yesterday's Q4 GDP numbers showed the US economy expanded by 2.9%, while weekly jobless claims fell again to 186k from 192k the week before.   If there are any concerns that the US economy is on the brink of a recession it's certainly not being reflected in the economic data, which still looks solid, as we look towards next week's Federal Reserve rate meeting.   Today we get a look at the latest personal spending numbers for December, after seeing a sizeable slowdown in the November numbers to 0.1%, after a strong October showing of 0.9%.   If we get a similar weak reading today, and all the forecasts suggest we might, then that would suggest a rising caution amongst US consumers about how the economy is evolving as we head into 2023. We've already seen US banks setting aside hefty loan loss provisions in their most recent earnings numbers, a move which might suggest rising unease that consumers are becoming more frugal with their spending, or that a slowdown might result in credit losses.   Expectations are for December personal spending to decline by -0.1%, which seems somewhat conservative given that retail sales showed a decline of -1.1% a couple of weeks ago.   Whatever numbers we get today it seems almost certain that we will see the Federal Reserve raise rates by another 25bps next week, and judging by the rally in US stocks yesterday, the market has increasingly priced in that outcome instead of what might have been a 50bps move.   The big concern is what markets aren't pricing, and while the Bank of Canada earlier this week signalled a pause in its rate hiking cycle, that doesn't mean the Fed will follow a similar path, even though markets appear to be pricing exactly that sort of outcome.   While yesterday's GDP numbers increasingly appear to support the prospect of a soft landing, the labour market data also suggests that the Fed has the headroom to continue to be much more aggressive.   Today's PCE Core Deflator inflation data is expected to confirm another modest slowdown from 4.7% to 4.4%, and the lowest reading since October 2021. It would also support the case for a more modest 25bps next week, however as we get nearer to the end of the Fed's rate hiking cycle there is some divergence with respect to what might come next.   Judging by the bond market reaction which saw yields move higher there may be a realisation that rates are likely to remain higher for longer, while the strong close for stocks might suggest the market believes rate cuts might not be too far away.   That seems doubtful if last night's Tokyo CPI is any guide, after inflation there surged to a new 42 year high at 4.4%, well above expectations of 4%. This suggests that global inflation is likely to be stickier than markets are currently pricing.   We'll soon see who is right when Fed chair Powell speaks next week, but if markets think a pause is coming, they could be in for a bit of a wake-up call.   EUR/USD – another fairly tight range yesterday with resistance at 1.0927 and the highs this week, as well as wider resistance at the 1.0950 area which is 50% retracement of the move from the 2021 highs to last year's lows at 0.9536. A move through 1.0950 opens up a move towards 1.1110. Support remains back at the 1.0780 area.   GBP/USD – made another attempt to move towards the 1.2450 resistance area yesterday, before slipping back. We need to see a move through the 1.2450 area to target further gains towards 1.2600. A move below 1.2250 could see a move towards 1.2170.    EUR/GBP – the failure to make progress through the 0.8850 area has seen the euro slip back. Also have resistance at the previous highs at 0.8900. Still have support above the 50- and 100-day SMA which we saw last week at the 0.8720/30 area. Below 0.8720 targets 0.8680.   USD/JPY – needs to break through the 131.00 area to target a move back towards 132.60. While below the risk is for further declines towards the lows at 127.20. We have interim support at the 128.20 area initially.   FTSE100 is expected to open 13 points higher at 7,774   DAX is expected to open 44 points higher at 15,176   CAC40 is expected to open 3 points higher at 7,099   Email: marketcomment@cmcmarkets.com   Follow CMC Markets on Twitter: @cmcmarkets Follow Michael Hewson (Chief Market Analyst) on Twitter: @mhewson_CMC
Hang Seng Index Plummets -2% Amid Weak China Data, Short-Term Trend Intact

The EUR/GBP Pair Still Has The Chance To Continue Its Decline

InstaForex Analysis InstaForex Analysis 30.01.2023 08:22
Even though the EUR/GBP currency pair is currently being dominated by sellers who aim to bring this currency pair down to a level of 0.8743 on the 4-hour chart, the EUR/GBP needs momentum to continue its decline so that in the near future this currency pair has potential to be corrected upwards to the level of 0.8782 where this has been confirmed by the emergence of deviations between price movements and the MACD Histogram indicator where as long as the upward correction does not exceed the level of 0.8804, EUR/GBP still has the opportunity to continue its decline to the level of 0.8743 again.   Relevance up to 01:00 2023-01-31 UTC+1 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/118425
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FX Daily: Stress testing the consensus view

ING Economics ING Economics 30.01.2023 10:11
The week ahead sees several key event risks for FX markets - largely in the form of central bank meetings in the US, eurozone, and other parts of Europe. Fresh communication from central bankers will stress test investors' view that the peak in tightening cycles is close at hand. A Fed push-back against 2H23 easing expectations could support the dollar USD: Action kicks off tomorrow The dollar starts the weak in very narrow ranges and not far from the lows of the year. This week will stress test the consensus view amongst investors that i) the Federal Reserve will start to acknowledge easing price pressures and soon end its tightening cycle, ii) China reopening will support global growth and iii) that lower energy prices mean improved European growth prospects. Our macroeconomists discuss many of those themes in their week ahead preview, including links to full previews for this week's FOMC, European Central Bank and Bank of England meetings. Our FX contribution to the FOMC preview outlines a scenario where the dollar could sell off and EUR/USD trade over 1.10 were the Fed to hugely surprise by suggesting that any additional hikes, after this week's 25bp increase, would be data dependent. That seems unlikely. More likely is the Fed pushing back against the 50bp of easing priced into the second half of the year and the dollar enjoying a brief rally. In addition to Wednesday's FOMC meeting, the US data calendar contains two important pieces of US data. The first is Tuesday's release of the fourth quarter Employment Cost Indicator (ECI) - one of the Fed's preferred gauges of price pressures in labour markets. This had spiked to 1.4% in the first quarter of last year from the previous three months, but is expected to drop back to 1.1% in the fourth quarter from 1.2% in the third. Any upside surprise here could see expectations swing toward a more hawkish FOMC outcome. And Friday sees the US January jobs report. ING's US economist, James Knightley, sees the headline job creation starting to dip. And assuming there are no upside surprises in the average earnings figures, we assume this data release would continue to support the benign, dollar-bearish environment. Clearly, it is a busy week for FX with arguably most of the volatility coming between the FOMC meeting outcome on Wednesday evening and the ECB/BoE decisions and press conferences on Thursday lunchtime. In the background, this week also sees the reopening of Chinese markets after the Lunar New Year public holiday. Investors are very bullish on China reopening prospects and will need to be fed more supportive data points this week. Here, tomorrow sees the Chinese PMIs for January, where sizable rebounds are expected - and required to support bullish positioning. Our game plan sees the dollar staying supported into Wednesday's FOMC meeting (e.g. DXY holding support down here at 101.30/50), but any FOMC-inspired rally in DXY to the 102.50/103.00 area proving temporary. Chris Turner EUR: Drifting into Wednesday/Thursday As above, Wednesday/Thursday could prove the most volatile period of the week. Our core view for the ECB meeting is that the central bank will stay hawkish and push back against the easing priced in for 2024. That should see two-year EUR:USD swap differentials continue to narrow and be positive for EUR/USD. We had cited this narrowing in swap differentials as a major factor when revising our EUR/USD forecasts substantially higher.  Before Thursday's ECB meeting, today sees the release of January economic confidence readings for the eurozone. These are expected to have improved marginally, but any upside surprises would feed the narrative of lower energy and strong fiscal stimulus ensuring that recessions if seen, are mild.  Expect EUR/USD to drift in a 1.08-1.09 range - probably into the US ECI data release tomorrow. Chris Turner GBP: Bank of England could be supportive As we discuss in the BoE monetary policy preview, a 50bp rate hike could prove mildly supportive for sterling. Our base case of a 50bp hike is not fully priced by the market. And with wage pressures remaining firm and base effects not expected to see CPI rolling substantially lower until the second quarter, it looks too early for the BoE to be sounding the all-clear on inflation. Depending on the state of the dollar after the FOMC meeting, GBP/USD could be pressing 1.2500 by the end of the week. Chris Turner CEE: Czech National Bank to confirm stable rates After a busy two weeks in Poland and Hungary, the main focus will shift to the Czech Republic. But first, today, we will see the final GDP number for Poland for last year. On Tuesday, fourth quarter GDP for the Czech Republic will be released. On Wednesday, we'll see the Czech Republic's state budget for January and PMI numbers across the region. We expect sentiment to improve in Poland, to be unchanged in the Czech Republic, and to deteriorate in Hungary. The Czech National Bank is scheduled to hold its first meeting of the year on Thursday. We expect rates and the FX commitment to remain unchanged. The main focus will be on the central bank's new forecast and outlook for January inflation. Thus, given the risk of higher inflation in the first quarter, we expect the tone to remain unchanged with the Bank citing "higher rates for longer" and warning that it does not "rule out a rate hike at subsequent meetings". However, we expect that rates will remain stable at least until the second quarter. In Hungary, S&P on Friday decided to downgrade the rating by one notch to BBB- with a stable outlook, highlighting the impact on the economy due to Covid-19, the Ukrainian war, and delays in EU money flows. The FX market in the region this week will, of course, be driven mainly by the global story and high volatility will not be a surprise. However, overall global conditions should remain positive for the region. Moreover, gas prices are testing new lows again, which is always good news for CEE. On the local front, we expect the Hungarian forint to absorb the negative shock of the downgrade and move back towards 395 EUR/HUF. In our view, the Czech koruna has the heaviest long positioning at the moment and therefore we see no room for the CNB meeting to support a move lower. On the contrary, we believe the koruna is overvalued and should move back towards 24.0 EUR/CZK. Frantisek Taborsky Read this article on THINK Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
According to Althea Spinozzi, it's clear that inflation remains Fed most significant focus

There doesn't seem to be any reason for decoupling currently, with Bitcoin expected to mirror the price action of major US equities, namely the Nasdaq and S&P 500

M4Markets Analysis M4Markets Analysis 23.01.2023 13:39
FXMAG.COM team asked M4Markets to share their thoughts on the Eurozone inflation and European Central Bank interest rate decision, Bitcoin, Microsoft and Tesla earnings. M4Markets: From the last ECB meeting minutes, there is a stronger contingent looking for higher rates. Headline inflation came down from 10.10% to 9.20%, but that tends to be volatile, so the ECB doesn't pay as much attention to the headline figure as it does to the core. And core expanded from 5.0% to 5.2% year-on-year, so there would be even more reason to hike than the last meeting.  Given the high inflation, the main reason for the ECB not to raise rates as much would be lingering concerns about the impact on the Eurozone economy. As long as the economic indicators are positive and core inflation remains elevated, the ECB will likely be more inclined towards 50 bps or even 75 bps hikes. Note that European rates are still 2.0%, or 200 bps, behind the Fed's.  Bitcoin had given back some of its spectacular gains, but its price its still elevated. What do you expect from the leading crypto in the near future? Crypto has largely been responding to the actions of central banks, as would be expected of a relatively high-risk asset. There doesn't seem to be any reason for decoupling currently, with Bitcoin expected to mirror the price action of major US equities, namely the Nasdaq and S&P 500.  Read next: Bitget analyst about the US GDP: In my opinion, we will see higher GDP than expected 2% - in Q3 and Q4 revisions we’ve seen stronger economic momentum than expected | FXMAG.COM The recent 40% surge in BTC has recovered more than the loss suffered in the aftermath of the FTX scandal and could continue to follow the general risk-on-risk-off trend as the event is now fully dismissed. With the Fed expected to slow hiking and pause in the near future, BTC could get some more backing as the dollar weakens through the winter. Corrections must be expected, though, as we near last summer's high of $25200. Some big names report earnings soon. What do you expect from Microsoft and Tesla? Microsoft has been quite active lately, announcing a deal to invest in ChatGPT and reducing its workforce to cut costs. So there will likely be much attention on additional financial details about how these moves will affect the company. The issue is if there will be an impact on guidance since Microsoft typically provides it for the coming quarter.  Tesla is still all about deliveries, so the main thing would be to see if there has been any change in sales numbers due to the recently announced price cut. And then to see how much that might revise guidance. There has been much anticipation for a potential announcement of another Gigafactory, potentially in Mexico, and if that isn't announced, it could lead to further disappointment.
EXMO.COM analyst: Currently, Tesla is still trying to conquer the market by prioritising revenue over profit

Most probably, the ECB will not change the direction of its credit and monetary policy. Tesla report for Q4, 2022 might not live up to the expectations of analysts, though it should show much better revenue than in Q4, 2021

Andrey Goilov Andrey Goilov 23.01.2023 15:44
Last week we asked ROBOFOREX a few questions related to the recent and future events on the market. Here's what Andrey Goilov, analyst at RoboForex, said. President of the European Central bank Christine Lagarde aims at bringing inflation down to 2% over the nearest few months, and to achieve this, she needs to act aggressively Most probably, the ECB will not change the direction of its credit and monetary policy; instead, it is getting ready to raise the interest rate by 50 base points two times. Inflation of consumer prices in the Euro zone, indeed, demonstrates a decline from 10.1% in November last year to 9.2% in December; however, the fact that the index has stuck below 10% is no serious signal for slowing down growth of the interest rate. There is a viewpoint that base inflation is still growing, though the main index has slowed down its increase. President of the European Central bank Christine Lagarde aims at bringing inflation down to 2% over the nearest few months, and to achieve this, she needs to act aggressively. Moreover, in her speech at the World Economic Forum in Davos she called for heads of the ECBs to not stop fighting with inflation, though the peak of inflation seems to have passed. Thus she refuted the idea that the growth of the interest rate might low down. Some big names report earnings soon. What do you expect from Microsoft and Tesla?On 3 January, Tesla presented its report on electric car sales in Q4, 2022. According to the report, sales grew by 31% (compared to the results of Q4, 2021) and reached 405,278 vehicles. However, this result did not live up to the expectations of experts who had expected 431,117 electric cars to be sold. The company had also expected better results: growth of sales in 2022 by 50% (compared to 2021). Actually, yearly sales grew by only 41%. Read next: EXMO CEO about Microsoft earnings: According to their financial report, a profit of $53.14 billion and an Earnings Per Share (EPS) of 2.33 are expected | FXMAG.COMIn Q4 2022, Tesla gave a discount of 20% in the US, European and Chinese markets. This augmented consumer interest but might have an adverse effect on the company's quarterly revenue. Lockdowns in China were also a problem for Tesla.Keeping all this in mind, Tesla report for Q4, 2022 might not live up to the expectations of analysts, though it should show much better revenue than in Q4, 2021. Microsoft Corporation Increases in the interest rate made by the Fed resulted in tech companies actively cutting down on expenses. This is especially noticeable because companies are firing employees. Digital services are also prone to expenses cut-down, and one of the leaders in this sector is the Microsoft Corporation. On 18 January, its director-general Satya Nadella confirmed this trend, mentioning that the clients of the company were optimizing their digital spending.In the end, first the clients of Microsoft spoke about firings, and the company announced its plans to give sack to about 10,000 employees. This will have a negative effect on the company's revenue in the future, but in Q4, we are likely to see growth of revenue (compared to Q4, 2021); however, a slow-down of the growth might also become obvious. Visit RoboForex
China Restricts Gallium and Germanium Exports, Heightening Global Tech War

FX Daily: Bracing for volatility

ING Economics ING Economics 31.01.2023 09:18
There are some important data to watch today: the Employment Cost Index in the US, GDP in the eurozone and CPI in France. We think the dollar can stay broadly supported into tomorrow’s FOMC, but the euro could outperform other G10 currencies on the back of rebounding inflation. In the Czech Republic, we will see the last numbers before Thursday's CNB meeting The dollar may stay broadly supported going into tomorrow's FOMC meeting USD: Some support going into the Fed meeting European data and global risk sentiment drove G10 FX dynamics yesterday. A weak start to the week for risk assets kept the dollar supported, especially during the US session, and signalled some market cautiousness ahead of multiple risk events: the FOMC tomorrow, ECB and Bank of England on Thursday, and US payrolls on Friday. Today, the last few pieces of US data before the Fed decision will be watched quite closely. Particular interest will be on the Employment Cost Index (ECI), which is expected to have eased from 1.2% to 1.1% in the fourth quarter. This is a key input in the Fed’s policy equation, and we could see investors shift between pro-hawkish/dovish positions ahead of the FOMC if the ECI surprises on either side. Our view for tomorrow is that the Fed still has an interest in hanging on to a hawkish rhetoric and pushing back against speculation of an early peak and – above all – rate hikes in 2023. The net result for the dollar may be positive. The US calendar also includes the Conference Board Consumer Confidence index – which may have rebounded in January – and the Dallas Fed Services index. We think the dollar can hold on to yesterday’s gains going into the FOMC meeting, and high-beta currencies could remain key underperformers in a risk-off environment. Volatility looks likely to pick up quite markedly during the remainder of the week. Francesco Pesole EUR: Inflation headaches before ECB meeting European rates markets had to deal with a surprising acceleration in Spanish inflation yesterday, which reinforced expectations of multiple 50bp hikes by the ECB. At the same time, the growth picture seems to have deteriorated, as Germany recorded negative growth in the fourth quarter. Eurozone-wide GDP figures will be released today, and are expected to show a 0.1% quarter-on-quarter contraction. However, it seems more likely that CPI figures out of France this morning will have a bigger impact on the euro. After all, a rebound in inflation is a more concerning development for the ECB than soft growth data which were heavily impacted by energy prices. In the section above, we discussed how the dollar may stay broadly supported going into the FOMC meeting. The euro, however, may show more resilience than other G10 peers (especially high-beta currencies) given the shift in the inflation narrative in the eurozone which can surely fuel ECB hawkish speculation. EUR/USD may hover around the 1.0850 handle until tomorrow’s FOMC.  Yesterday, we published our scenario analysis for this week’s ECB meeting: the recent hiccups in communication have heightened the risk that markets have lost some trust in President Christine Lagarde’s guidance. Investors may keep tracking data (EZ-wide CPI data are released tomorrow) more closely than they track Lagarde’s remarks, and the ECB meeting may not have a big impact on the euro after all. Our commodities team just revised their gas price forecasts, now expecting TTF to stay below 80 EUR/MWh throughout 2023. This is a bullish scenario for eurozone sentiment and the euro in the medium term. Francesco Pesole GBP: Standing by before 'super Thursday' There are no key data releases in the UK before Thursday’s Bank of England meeting. Markets are currently pricing in 46bp (our call is for 50bp) at this meeting and an additional 25bp in March. We expect a broadly neutral impact on the pound, and GBP/USD moves may be mostly dictated by the FOMC reaction. EUR/GBP may hold below 0.8800 until “super Thursday” (ECB and BoE meetings), although inflation figures in the eurozone mean the balance of risk is tilted to the upside for the pair. Francesco Pesole CEE: Czech economy pulled down again by automotive Today in the region we will see the first estimate of GDP for the fourth quarter of last year in the Czech Republic. We expect a 0.8% QoQ decline, below market expectations. This would confirm a shallow recession in the Czech economy. Looking ahead, the outlook for the first quarter of this year also does not look good despite better numbers across the region and from the eurozone. Yesterday, the Czech Republic's largest carmaker announced production cutbacks at some of its factories due to chip shortages. The news comes just a week after the country's third-largest manufacturer made the same announcement. This marks the beginning of difficult times for the industry, which is mainly driven by the automotive sector. The situation is dangerously reminiscent of the end of 2021 when chip shortages and automotive production curbs dragged the industry into its biggest slump since the Covid-19 lockdowns. This may also be a piece of the puzzle for the Czech National Bank (CNB) meeting this week, however we will have to wait a few months for proof in hard data. For the koruna, a weaker economic number could be a trigger to correct recent gains and return to 24.00 EUR/CZK. We also see interesting developments in Hungary following the downgrade of the country's sovereign rating. The weakening of the forint that we mentioned yesterday did not materialise and, on the contrary, the currency ended roughly unchanged at the end of the day. It confirmed that the strengthening of the forint is not short-lived and its strengths are of a more permanent nature. In the long term, we expect further strengthening. For now, we see yesterday's market reaction as a possible clearing of long positions while attracting new buyers and consolidating around 390 EUR/HUF. Frantisek Taborsky Read this article on THINK TagsFX Dollar Czech National Bank Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Apple Q3 2023 Results – Surpassing Expectations and Aiming for New Heights

Eurozone GDP May Put Challenges For The EUR/GBP Buyers

TeleTrade Comments TeleTrade Comments 31.01.2023 09:49
EUR/GBP reverses the previous day’s corrective bounce off one-week low. Euro struggles to defend hawks after downbeat German data challenge hawkish ECB bias. IMF’s warning over the UK’s economic conditions challenge EUR/GBP bears. Preliminary readings of Eurozone Q4 GDP will be crucial for immediate directions, ECB vs. BoE battle eyed. EUR/GBP remains depressed around 0.8780, fading the week-start recovery, as traders await Eurozone Q4 GDP for fresh impulse during early Tuesday. The cross-currency pair managed to begin the key week comprising central bank announcements on a positive side amid fears of the UK drama over tax cuts. However, downbeat prints of German GDP, later on, weighed on the prices. That said, Economic Sentiment Indicator for the Euro area improved to 99.9 in January from an upwardly revised 97.1 prior and 97.0 market forecasts. The Consumer Confidence, however, matched 20.9 market forecast and previous readings during the stated month. That said, the Industrial Confidence and Services Sentiment also improved during January. On the other hand, the preliminary readings of Germany’s fourth quarter (Q4) Gross Domestic Product (GDP) came in softer than 0.0% expected and 0.4% prior to -0.2% QoQ. "After the German economy managed to perform well despite difficult conditions in the first three quarters, economic performance slightly decreased in the fourth quarter of 2022", Destatis noted in its publication. The same raises fears of downbeat Eurozone GDP and challenges the EUR/GBP buyers. Alternatively, the International Monetary Fund’s (IMF) downbeat economic projections for the UK seem to keep the EUR/GBP on the front foot. As per the latest forecasts, the IMF projects the British economy will mark the weakest performance among the Group of Seven (G7) nations. Read next: Glovo Is Planning To Layoff 250 Workers Worldwide, The Middle East Is Already Suffering From A Water Shortage| FXMAG.COM Also read: IMF: Emerging markets growth slowdown bottomed out in 2022, but risks remain Looking forward, the first readings of the Eurozone Q4 GDP, expected 0.0% QoQ versus 0.3%, will offer immediate directions to the EUR/GBP and is likely to witness further weakness unless marking a surprise. However, major attention should be given to Thursday’s monetary policy meetings of the European Central Bank (ECB) and the Bank of England (BOE) for clear directions. Technical analysis Although a convergence of the 100-DMA and the 50-DMA provides strong support to the EUR/GBP price around 0.8740-35, recovery remains elusive unless the quote stays below a 12-day-old resistance line, close to 0.8830 at the latest.
RBA Pauses Rates, Australian Dollar Slides 1.3% on Economic Concerns; ISM Manufacturing PMI Expected to Remain Negative

Weak Performance For EU Q4 GDP, The UK Economy Is Also Expected To Experience A Weak Quarter

Michael Hewson Michael Hewson 31.01.2023 13:10
European markets struggled for direction yesterday, after German Q4 GDP showed a surprise contraction of -0.2% and core CPI in Spain rose to a record high of 7.5%, pushing yields across the bloc sharply higher. With the ECB due to meet later this week and expected to raise rates by 50bps, yesterday's weakness appears to have been driven by concern that the EU economy might not be as strong as thought, and inflation a lot stickier.   US markets also continued their own Jekyll and Hyde behaviour with the Nasdaq 100 posting its biggest one-day loss this year, as the strong rally of last week gave rise to a more tempered approach as the Federal Reserve gets set to kick off its two-day meeting later today.   Yesterday's surprise increase in Spanish core inflation for January to record highs also appears to have raised concerns that high prices might not come down as quickly as thought, and growth a lot slower, despite the recent sharp falls in energy prices. With Asia markets also sliding back this morning, markets here in Europe look set to open lower as we come to the end of what has been a strong month.   Later today we should get a better idea of whether the contraction in the German economy in Q4 was a localised issue, or symptomatic of more widespread economic weakness across the EU.   The French economy is expected to slow in Q4, down from 0.2% in Q3, to 0%, while the Italian economy is expected to contract by -0.2% in Q4. This is expected to translate into a similar weak performance for EU Q4 GDP which is forecast to show a contraction of -0.1%.   The UK economy is also expected to experience a weak quarter, however we won't know the actual numbers on that until next week, but recent lending data has already shown that consumers have already started to rein back on their spending, although we did see a bit of a pickup in November.   Read next: The Government Pension Fund Global Suffers Losses| FXMAG.COM   Net consumer credit in November more than doubled from 700k in October, to £1.5bn. This may well have been driven by a surge of holiday bookings judging by the recent November GDP numbers, which showed a strong performance from the travel sector. This resilience may well extend into December with an expectation of £1.1bn.   Mortgage approvals on the other hand, have slowed sharply since the summer months, and are expected to remain subdued in December, with expectations of a fall from 46.1k to 45k.   In the US the latest consumer confidence numbers for January are expected to see another gain to 109, after a surprise surge in December saw this indicator rise sharply to 108.3 from 101.40. This rise in consumer confidence is a little puzzling given that retail sales in the US for both November and December showed sharp declines.   One indicator that is likely to be of particular interest to the Federal Reserve as they convene their latest meeting today is the employment cost index for Q4 which is expected to slow from 1.1% from 1.2% in Q3. This is another key indicator for the Federal Reserve after last week saw core PCE fall to its lowest levels in over a year.  An upside miss on the ECI would be bad news for any sort of dovish expectations from tomorrow's decision.   EUR/USD – we saw another failed attempt to push above the 1.0900 area before slipping back again. The main resistance remains at the 1.0950 area which is 50% retracement of the move from the 2021 highs to last year's lows at 0.9536. A move through 1.0950 opens up a move towards 1.1110. Support remains back at the 1.0780 area.   GBP/USD – has continued to struggle above the 1.2400 area after last week's failure to move through the 1.2450 resistance area. We need to see a move through the 1.2450 area to target further gains towards 1.2600. A move below 1.2250 could see a move towards 1.2170.    EUR/GBP – the failure to make progress through the 0.8850 area last week has seen the euro slip back. Key support remains at the 50- and 100-day SMA which we earlier this month at the 0.8720/30 area. Below 0.8720 targets 0.8680.   USD/JPY – needs to break through the 131.00 area to target a move back towards 132.60. While below 131.00 the risk is for further declines towards the lows at 127.20. We have trend line support at the 129.00 area initially.   FTSE100 is expected to open 18 points lower at 7,767   DAX is expected to open 50 points lower at 15,076   CAC40 is expected to open 22 points lower at 7,060     Email: marketcomment@cmcmarkets.com Follow CMC Markets on Twitter: @cmcmarkets Follow Michael Hewson (Chief Market Analyst) on Twitter: @mhewson_CMC
FX Daily: Resuming the Norm – Dollar Gains Momentum as Quarter-End Flows Fade

While market participants are rather certain about the size of the Fed rate hike, there is less consensus about the ECB rate hike

Santa Zvaigzne Sproge Santa Zvaigzne Sproge 30.01.2023 16:02
This week is like no other - earnings of major companies like Apple and Alphabet are released and major central banks decide on interest rates. For stock market, tomorrow Fed decision could be shocking if Federal Reserve goes for a 50bp, but until now, the 25bp rate hike seems to be almost sure, but does it mean market will do nothing about it? Speaking of ECB, at this central bank the situation isn't that clear according to Conotoxia's analyst comments. For the first time since summer, the Fed rate hike of 25 bp is indeed cemented. Are you of the opinion there will be no real market reaction though? Indeed, the majority of the market participants expect the Fed to increase the interest rate by 25 bp, the smallest increase since the meeting on 16 March 2022. This expectation is based on the seemingly slowing inflation in addition to other factors hinting in favor of the “soft landing” as well as the 5% ceiling set by the Fed themselves. As the current rate of 4.5% is rather close to 5%, Fed officials seem limited in their ability to raise the rates further. Meaning that a rate hike of 50 bp would already reach the set ceiling and would not allow room for action in the future. While we could say that a higher than 25 bp hike would shake the markets considerably, the currently expected 25bp hike may pose uncertainty. Typically, economic data reported exactly in line with expectations may be perceived with no major reaction from the market or even a slightly positive reaction (read: no news is good news). Meanwhile, financial markets are currently extremely volatile as investors are willing to believe that the stock market depreciation is over but still, they may be ready to jump out of it as soon as they feel any hint of a bearish trend returning. Read next: CMC analyst ahead of FOMC: I am surprised at how complacent markets are about this weeks Fed decision| FXMAG.COM I would also emphasize to keep in mind that last week saw a very bullish action within stock markets around the world. As any trend is more of a wavy pattern with corrections, the Fed interest rate announcement on Wednesday may be the one that triggers a short-term correction in the current uptrend. This, combined with the sentiment discussed above, indicate that there may be a potential for a market reaction to a 25bp rate rise. How do you see possible effects of the ECB decision? Is the hike in prices already? ECB interest rate decision is planned after the Fed announcement on the same subject later this week. While market participants are rather certain about the size of the Fed rate hike, there is less consensus about the ECB rate hike. There may be a higher possibility that the ECB raises the interest rate by 50 bp in comparison to the Fed. Firstly, the current eurozone interest rate is lower than in the US: 2.5% in the eurozone vs 4.5% in the US, giving the ECB room for more aggressive monetary policy. Secondly, Consumer Price Index data show that the eurozone has not managed to curb inflation as well as the US (the latest YoY reading for December 2022 was 9.2% in the eurozone versus 6.5% in the US and is forecasted to be 9% and 6.5% respectively in January 2023). Eurozone’s newest preliminary CPI YoY reporting will be released on February 1 and may impact the ECB’s decision on the interest rate hike size later this week. Read next: Over the past 30 days, Ethereum-based NFT trading volumes have grown by 45%. Google earnings: Wall Street's forecast for its report is EPS 1.18| FXMAG.COM If the ECB announces the interest rate increase of 50 bp versus Fed’s 25 bp, we may see a bullish effect on the Euro versus the US Dollar. Santa Zvaigzne-Sproge, CFA, Head of Investment Advice Department at Conotoxia Ltd. (Conotoxia investment service) Materials, analysis and opinions contained, referenced or provided herein are intended solely for informational and educational purposes. Personal opinion of the author does not represent and should not be constructed as a statement, or an investment advice made by Conotoxia Ltd. All indiscriminate reliance on illustrative or informational materials may lead to losses. Past performance is not a reliable indicator of future results. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 76,41% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Analysis Of The EUR/JPY Pair Movement

Analysis Of The EUR/JPY Pair Movement

Torben Melsted Torben Melsted 01.02.2023 08:54
It has been a while since we last looked at EUR/JPY, but then we have seen a triangle developing since late December 2022. This triangle is, however, nearing its completion. So, we should see a breakdown anytime now towards our long-term target near 134. This price action should complete the correction from 148.30 and set the stage for a new push higher towards this top and ultimately above here too, but for now, we will focus on the expected breakdown and a decline towards 134. Short-term a break below 140.53 will indicate that the triangle has been completed and the expected decline to 134 is in progress.   Relevance up to 07:00 2023-02-02 UTC+1 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/310933
BRICS Summit's Expansion Discussion: Impact on De-dollarisation Speed

FX Daily: Peak? What peak?

ING Economics ING Economics 01.02.2023 09:20
Everything is pointing to the fact that today's well-telegraphed 25bp hike by the Fed will be the penultimate move before ending the cycle. However, Chair Powell and the FOMC may see little interest in sounding materially less hawkish just yet. Ultimately, a push-back against a pivot and rate-cut speculation could hit risk assets and lift the dollar today Federal Reserve Chair Jerome Powell USD: Hawkish Fed can lift the dollar The dollar enters FOMC day after having shown some resilience over the past few sessions, which was likely the consequence of some defensive positioning ahead of key central bank meetings, which kept risk assets capped. Still, the last important piece of data before the Federal Reserve announcement – yesterday’s Employment Cost Index – offered more reasons to think the Fed is indeed close to the peak. Labour costs eased for a fourth consecutive quarter in 4Q, moving from 1.2% to 1.0%, the same levels as the fourth quarter of 2021. This is likely easing some concerns in Washington about inflation stickiness, and underpins a scenario where slowing price pressures favour less hawkish rhetoric. The question is whether such unwinding in the hawkish narrative will already emerge in today’s FOMC announcement. We doubt that. As discussed in our FOMC preview, we expect a 25bp rate hike today, which is the consensus view and is fully priced in by the swaps market. We think that Fed Chair Jerome Powell and his colleagues simply have little interest in sending strong signals that they are indeed close to the peak, which only risks generating a premature fall in interest rates. A reiteration that ongoing rate increases remain appropriate, inflation is high and that the jobs market remains tight despite slowing growth, seems to us the most likely content of today’s communication “package” by Powell. He will most likely be asked about the current market pricing for around 50bp of easing in the second half of the year. Using the same rationale, Powell still has all the interest in pushing back against rate cut speculation. In practice, we suspect the Fed will end up cutting more than 50bp as the US economic slack deepens, but that is not a story for today’s announcement. So, we are in the camp of expecting Powell to maintain his hawkish rhetoric despite this appearing less appropriate given the backdrop of slowing inflation and growth. This outcome may ultimately have some negative implications for risk and give the dollar some support, as bets on a pivot, and potentially on rate cuts, are scaled back. Any communication missteps or deliberate dovish tilts, on the other hand, can surely revive that dollar bear trend that appears to have halted lately. We also have some US data to watch today: ISM manufacturing, ADP payrolls and JOLTS jobs openings. Substantial surprises on those releases are likely needed to drive major dollar moves ahead of such a big event like the FOMC. Francesco Pesole EUR: Inflation surprise already priced in? EUR/USD will inevitably be heavily impacted by the post-FOMC reaction today. In line with our view for a positive impact on the dollar, we think the 1.0800 support could be heavily tested after the Fed announcement. Before that, however, all eyes will be on the eurozone inflation figures, which should show more stickiness than previously thought after evidence of persistent price pressure in Spain and France. We suspect much of this inflation story has now been priced in, and a still quite hawkish pricing for European Central Bank tightening (150bp of hikes by June) suggests the room for further increases in rate expectations – and by extension, for another big ECB-driven EUR rally - has shrunk for now. We think that EUR/USD will ultimately come out weaker from these two days of central bank activity (here’s our ECB market preview). An exploration of the 1.0700-1.0750 range is surely possible in the near term, even though the longer-term outlook keeps pointing to a dollar decline and EUR/USD strength. Francesco Pesole GBP: Downside risks from a hawkish Fed Stronger ECB rate expectations are likely to be blamed for the strengthening in EUR/GBP beyond the 0.8800 level. As discussed in the EUR section above, we think there is now less scope for the ECB to push the euro even higher, which means more fuel to the EUR/GBP rally may be mostly a function of risk sentiment rather than monetary policy divergence. Indeed, since the pound tends to be more sensitive to global risk sentiment than the euro, the risks are skewed to the upside for EUR/GBP today given our baseline scenario for a hawkish Fed weighing on risk assets. Cable may drop to the 1.2200 mark today. Francesco Pesole SEK: Krona undermined by domestic woes The Swedish krona has been a negative standout in the G10 space over the past few days, as unstable risk sentiment offered a breeding ground for rising bearish bets linked to a worsening domestic outlook in Sweden. We analyse this theme in more detail in “Sweden: Krona increasingly pricing in domestic woes”. In short, EUR/SEK is currently 2.5% overvalued in the near term as markets appear to be pricing in the increasing likelihood of a pessimistic scenario for the Swedish property market and the economy. Since we don’t believe the risk of a black swan scenario in Sweden has materially increased, we think that SEK will recover gradually over the coming months. Looking at the very short-term however, SEK’s sensitivity to risk sentiment still puts it in a vulnerable position today ahead of the Fed announcement. EUR/SEK is currently trading around 3% below its historic highs (11.68 in 2009), and risks that those levels will be tested in the short-term (although not our base case) have admittedly risen lately. We still target sub-11.00 levels before the summer, as recently discussed in our EUR/SEK scenario analysis. Francesco Pesole Read this article on THINK
Kiwi Faces Depreciation Pressure: RBNZ Expected to Hold Rates Amidst Downward Momentum

The MPC Is On The Horns Of A Dilemma But The ECB Will See Another 50bps Rate Hike

Michael Hewson Michael Hewson 02.02.2023 08:51
Having seen the Federal Reserve hike rates yesterday evening by 25bps and signal that they are far from done, equity markets reacted by rallying strongly with the Nasdaq 100 surging to its highest levels since early September.   For all of Fed chair Jay Powell's insistence that more rate hikes were coming, and that the Fed was not looking at cutting rates this year, his failure to push back emphatically on direct questions about market expectations of rate cuts this year, as well as the loosening of financial conditions has created an even greater divergence between market pricing on rates, and the Fed's expectations of how the economy is likely to evolve. To borrow a line from Cool Hand Luke, "what we've got here is a failure to communicate".    Long story short, the market thinks the inflation job is done, even if the Fed hasn't arrived at that conclusion yet. Consequently, this goes a long way to explaining why US markets closed strongly higher and yields and the US dollar plunged to 9-month lows, with the euro hitting 1.1000 for the first time since April last year. Last night's rally in the US looks set to translate into a higher European open as we now look towards the Bank of England and the European Central Bank to outline their messaging when it comes to the timeline of their own rate hiking cycle.   Starting with the Bank of England, the MPC is on the horns of a dilemma as the UK economy continues to struggle with double digit inflation, although the economy may well not be as bad as perhaps was thought at the end of last year, which could prompt a modest tweak to some of its economic forecasts.   The slide in energy prices in recent months has alleviated some of the pressure on wage packets, when it comes to petrol prices, however with food price inflation still at 16%, they will also be acutely aware that a weak pound will make headline inflation much sticker than it needs to be if they show any indication, they are going soft when it comes to hit its inflation target.   There will be the usual concerns about the impact on mortgage costs from another 50bps move but 5-year gilt yields have barely moved since the lows set back in November, although 2-year yields are higher.   Whatever we get today we are likely to see a split again, with the likes of Tenreyro and Dhingra likely to be the most averse to another hike given that they voted for no change in December.   The likes of Catherine Mann are likely to push for another 50bps, while the rest of the committee are expected to split between 25bps and 50bps, from the current 3.5%. If we do get 50bps will the Bank of England signal it is done, and signal a pause, or will they move by 25bps and signal there is more to come. With core prices looking sticky and wages rising at over 7% any procrastination on the MPC's part when it comes to forward guidance could well do more harm than good.   Whatever we get from the MPC today history has taught us it's unlikely to help the pound in the short term given the Bank of England's propensity to talk the pound lower whenever they meet. There is also the fact that the pound has been under pressure on the back of the belief that the Bank of England is much closer to the end of its rate hiking cycle than the ECB.     After the Bank of England, it is the turn of the European Central Bank and here there is little doubt that we will see another 50bps rate hike later today. It is what comes next that is likely to dominate the discourse today.   When the most recent ECB minutes were released, it became apparent that a raft of ECB governing council members wanted a much more aggressive approach, pushing for a 75bps move.   In the wake of the recent Davos Economic Forum ECB President Lagarde doubled down on her December messaging of multiple successive rate hikes, saying that inflation is still way too high, and markets are underestimating the ECB's resolve to drive prices back towards their 2% inflation target. This hawkish message is unlikely to be softened despite the recent fall in headline inflation to 8.5%, given core prices have remained steadfast at record highs of 5.2%.   When the ECB met in December, Lagarde more or less pre-committed the ECB to at least another 3 50bps rate hikes at the next 3 meetings, in a move that has seen the euro push higher and which has finally seen it break above the 1.1000 level, although that has mainly come about as a result of the market reaction to last night's Fed decision, rather than any intrinsic euro strength.   This would suggest that markets are still not convinced the ECB will be able to follow through on the number of hikes indicated given the risks it might pose to the borrowing costs of the more highly indebted members of the euro area.   EUR/USD – finally pushed through the 1.0930 area and the 1.0950 area which is 50% retracement of the move from the 2021 highs to last year's lows at 0.9536. Yesterday's move through 1.0950 now opens up a move towards 1.1110. Support now comes in at 1.0920.   GBP/USD – the recent lows at 1.2260 remain a key support after another failure last week at the 1.2450 resistance area. A move below 1.2250 could see a move towards 1.2170.    EUR/GBP – edging back towards the recent highs just below the 0.8900 area. A move through these highs could trigger a move towards 0.9000. Key support remains at the 50- and 100-day SMA which we saw earlier this month at the 0.8720/30 area. Below 0.8720 targets 0.8680.   USD/JPY – slipped below trend line support at 129.00 from the recent lows at 127.20, raising the prospect of a retest of those lows, and potentially on towards 126.50. Resistance now at 129.30.   FTSE100 is expected to open 30 points higher at 7,791   DAX is expected to open 102 points higher at 15,282   CAC40 is expected to open 35 points higher at 7,112   Email: marketcomment@cmcmarkets.com Follow CMC Markets on Twitter: @cmcmarkets Follow Michael Hewson (Chief Market Analyst) on Twitter: @mhewson_CMC
If The Bank Of England Hike Interest Rates Again Later This Month Will Exert Downward Pressure On The EUR/GBP Cross

The Key Central Banks Event Risk Keeps A Lid On Further Gains For The EUR/GBP Cross

TeleTrade Comments TeleTrade Comments 02.02.2023 09:29
EUR/GBP scales higher for the fourth straight day and touches a fresh multi-month top. Expectations for additional jumbo rate hikes by the ECB continue to underpin the Euro. Speculations that the BoE is nearing the end of the rate-hiking cycle weigh on the GBP. Traders now seem reluctant as the focus shifts to the BoE and the ECB policy decisions. The EUR/GBP cross gains traction for the fourth successive day and climbs to the 0.8900 neighbourhood or its highest level since late September on Thursday. The shared currency continues to draw support from expectations for additional jumbo rate hikes by the European Central Bank (ECB) in the coming months. The bets were reaffirmed by the recent hawkish commentary by several ECB officials, which, in turn, acts as a tailwind for the EUR/GBP cross. The British Pound's relative underperformance could further be attributed to speculations that the Bank of England (BoE) is nearing the end of the current rate-hiking cycle. That said, the prevalent US Dollar selling bias lends some support to the Sterling Pound. Furthermore, signs of inflationary pressures in the Eurozone might have forced investors to scale back expectations for a more aggressive policy tightening by the ECB. This, along with reluctance ahead of the key central bank event risk, keeps a lid on any further gains for the EUR/GBP cross. This warrants some caution before positioning for an extension of the ongoing move-up. Both the BoE and the ECB are scheduled to announce their policy decisions during the mid-European session this Thursday. The market focus, however, will be on clues about the future rate hike path, which will determine the next leg of a directional move for the EUR/GBP cross. Nevertheless, the fundamental backdrop favours bullish traders, though a sustained move beyond the 0.8900 round-figure mark is needed to support prospects for a further near-term appreciating move.
Australian dollar against US dollar - "It seems that the currency will soon hit a price above 0.68"

Australia: It is better to be prepared for lower data and a slowdown in CPI to 7.2-7.3%

Alex Kuptsikevich Alex Kuptsikevich 24.01.2023 15:38
Let's hear from Alex Kuptsikevich, Senior Financial Analyst at FxPro, who answers FXMAG.COM team questions. We asked Alex about Australian CPI, UK PMIs, British pound and the US GDP. This week Australian CPI goes public what do you expect from the print and the RBA decision on February 7th? On average, market analysts expect inflation to accelerate to 7.5%. It is better to be prepared for lower data and a slowdown in CPI to 7.2-7.3%. The Australian dollar has risen more than 14% from its October lows, helping to reduce external price pressures. Also worth noting is the 14.6k drop in employment in December and the stubborn unemployment rate of 3.5% for the past six months. In other words, the labour market needs to do more to accelerate inflation. At the same time, the construction market has been in steady decline since October 2021, which is a significant negative signal for the economy. As in most developed countries, such a disposition could already be working towards lower annual price growth. If we are right, AUDUSD could give back some of January's gains as the market reassesses the outlook for monetary policy. The weak data reinforced the double top formation signal in the GBPUSD The UK PMI indices recorded another month of declining activity. However, the rise in the manufacturing PMI from 45.3 to 46.7 suggests that the rate of decline is slowing. The services PMI fell from 49.9 to 48.0, clearly indicating that the recession is spreading to the broader economy. The CBI's industrial orders balance was also a nasty surprise, falling from -6 to -17, the lowest since February 2021. The weak data reinforced the double top formation signal in the GBPUSD, which is turning lower for the second time since mid-December as it approaches 1.2450. Traders are likely betting that the Bank of England will struggle to maintain the pace of policy tightening in light of the economic data released. This is not for nothing, given the reversal in the inflation trend. Read next: The Aussie Pair Is Above 0.70$, GBP/USD Pair Lost Its Level Of 1.24$| FXMAG.COM The GDP report has a good chance of delivering an unpleasant surprise, pushing the dollar further down The impact of US GDP on the markets isn't a trivial issue. Much depends on the balance between growth and inflation. If US growth comes in at or above expectations, the Fed may have more incentive to keep raising rates for longer than the markets are currently pricing in. This would be negative for equities and oil but positive for the dollar. Such a market reaction is long overdue. However, it is still too early to confidently bet on the Fed's hawkishness to take on the entire market. The GDP report has a good chance of delivering an unpleasant surprise, pushing the dollar further down. Still, it is highly likely to push equities and metals higher in the short term. 
BRICS Summit's Expansion Discussion: Impact on De-dollarisation Speed

FX Daily: Eyes back on data after Fed and ECB communication troubles

ING Economics ING Economics 03.02.2023 11:06
Markets questioned the hawkish message by both the Fed and the ECB this week, but we think Powell gave more reasons to reasonably fuel dovish expectations. Still, the ECB communication hiccups mean that EUR/USD may struggle to break higher before the end of the first quarter. Today, eyes on payrolls and ISM services: the dollar likely faces downside risks ECB President Christine Lagarde and Fed Chair Jerome Powell USD: Downside risks from data today The dollar has essentially erased all the post-FOMC losses after markets questioned the hawkish rhetoric by the ECB and European rates went on a huge rally yesterday. We analyse what the last two days of central bank meetings have meant for EUR/USD in this note.   It’s been quite clear that markets have doubted both Fed Chair Jerome Powell’s and ECB President Christine Lagarde’s attempts to hang on to hawkish communication, although dovish bets on the Fed appear more strongly founded at this stage. This is both because Powell seemed more relaxed about the easing in financial conditions and did not convey urgency in pushing back against rate cuts, and because the Fed has taken rates into a much more restrictive territory which inevitably leaves a larger room for easing in 2023. What is clear is that markets will continue to focus heavily on data. With volatility abating after the key Fed and ECB announcements and some of those defensive trades (due to the imminence of key risk events) being unwound, today’s non-farm payrolls release in the US brings mostly downside risks for the dollar, in our view. After all, a tight jobs market has already been factored in by the Fed (Powell even admitted inflation might fall without hurting employment), but it’s really the declining inflation story that is suggesting a peak in Fed funds rates is imminent. Accordingly, markets may focus more on the wage growth figures rather than the headline employment print. Any evidence that wage growth is losing pace and/or that hiring is slowing down materially would likely fuel rate cut expectations further, and hit the dollar. US 2-year rates are currently trading 10bp above the psychological 4.00% mark: a break below may exacerbate a dollar slump. Should such dollar weakness materialise, we think that high-beta currencies may emerge as key winners thanks to the positive impact on risk assets. ISM service numbers will also be closely watched after the latest release was a key driver of the negative re-rating in US growth. Francesco Pesole Read next: Starbucks Revenues Are High Despite High Costs| FXMAG.COM ECB: Dealing with unclear communication Should today’s payrolls trigger a dollar contraction, the euro may emerge as a laggard in the G10 space. Markets are strongly questioning the ability of the ECB to keep hiking at a “stable” pace (as the ECB said in its statement) beyond the March meeting. Here are the review notes from our economics team of yesterday’s statement and press conference. As our ECB watcher puts it, Lagarde’s press conference brought more fog than clarity. And we think it is indeed the communication hiccups in Frankfurt that is driving EUR/USD weakness. We remain of the view that at least 75bp of extra tightening will be delivered by the ECB, which still puts EUR/USD in a position for a big rally in the second quarter – when US short-term rates may come off more steadily. The ECB communication troubles may cap EUR/USD before then. Today, the balance of risks is still tilted to the upside for EUR/USD as US jobs data will be the key driver. The question is how comfortable markets are with re-testing 1.1000: we suspect a break above that level is a bit premature unless US figures come in very weak. Francesco Pesole GBP: BoE close to the peak The Bank of England hiked rates by 50bp yesterday, but offered a number of signals that it is indeed close to the peak. As discussed in our economics team’s reaction piece, a key hint that the MPC is laying the groundwork for the end of its tightening cycle is that it has dropped its pledge to raise rates “forcefully” (i.e. by 50bp). Incidentally, the BoE’s two-year inflation projection – a key driver of policy decisions – is now well below target. We still doubt this was the last hike of the cycle, and expect another 25bp move at the next meeting in March. Markets are torn around a move in either March or May, but are still fully pricing in an additional 25bp of tightening. The pound was slightly weaker after an initially positive reaction to the BoE statement. In practice, it appears that the BoE is not diverging much from market expectations, which means that it may be up to data in the UK to drive any large swings in the pound rather than surprises from the BoE. With markets doubting the ECB's hawkishness, EUR/GBP may manage to stay below 0.9000 for now, although a break higher seems highly likely over the coming months. Francesco Pesole CZK: CNB continues to support FX but is not a decisive factor The Czech National Bank (CNB) left rates and the FX intervention regime unchanged yesterday, in line with expectations. However, there was still room for a hawkish surprise. During the press conference, the Governor said that the record-strong koruna is not a problem for the economy and on the contrary, it is a welcome inflation-fighter. He thus implicitly confirmed that the intervention regime will be with us for a long time despite the fact that the CNB last intervened in September last year. Moreover, he told reporters that current expectations of significant rate cuts this year are wrong and rates will remain at higher levels for longer. However, the main driver at the moment, in our view, are global factors – falling gas prices and a higher EUR/USD – and the CNB is more of a complementary factor for the positive koruna. Moreover, the koruna still offers decent and stable carry. Thus, the main enemy at the moment is the market positioning, which was already the longest in the CEE before the CNB meeting in our view. Thus, the koruna may test 23.70 levels in the short term but the EUR/CZK move lower is limited in our view and the koruna will be rather stable compared to CEE peers. Frantisek Taborsky Read this article on THINK TagsFX EURUSD Dollar Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
The EUR/JPY Pair Is Expected To Start A New Zig-Zag Correction

The EUR/JPY Pair Is Expected Limited Upside Movement

TeleTrade Comments TeleTrade Comments 06.02.2023 09:49
EUR/JPY buyers keep the reins at five-week high despite recent struggle to overcome 100-DMA. Bullish MACD signals, sustained rebound from multi-day-old horizontal support keeps buyers hopeful. Convergence of previous support line from March, descending resistance line from late October appears crucial resistance. EUR/JPY grinds higher past 142.00 as bulls struggle to cross the 100-DMA heading into Monday’s European session. In doing so, the cross-currency pair justifies the bullish MACD signals, as well as a clear bounce off a horizontal support line, stretched from late September 2022, to lure the pair buyers. However, the 100-DMA challenges the EUR/JPY upside around the 143.00 threshold. In the case where the EUR/JPY prices remain firmer past 143.00, a convergence of an 11-month-old previous support line and a downward-sloping resistance line from late October 2022, around 145.00, could challenge the pair’s further upside. It’s worth noting that the EUR/JPY run-up beyond 145.00 won’t hesitate to challenge the late 2022 peak surrounding 148.40 while aiming for the 150.00 psychological magnet. On the flip side, pullback moves may initially aim for the 140.00 round figure before testing the 38.2% Fibonacci retracement of the pair’s March-October 2022 upside, near 139.23. Following that, the aforementioned horizontal support line comprising lows marked since late September 2022, near 137.35-30, will be in focus. Even if the EUR/JPY bears conquer the 137.30 support, the 61.8% Fibonacci retracement level near 133.55 can act as the last defense of the buyers. EUR/JPY: Daily chart Trend: Limited upside expected
Federal Reserve preview: A final hike as US recession fears mount

FX Daily: The dollar comeback hinges on Powell, again

ING Economics ING Economics 07.02.2023 09:24
The current market enviornment resembles last week's pre-FOMC one: the dollar is regaining ground as markets position themselves for a hawkish tone from Powell. The difference is that, today, strong jobs gains give Powell an extra incentive to push back against lower rates. The dollar recovery may run a little longer. Expect ECB hawkish comments as well. Source: Shutterstock   We have published our latest FX views and forecasts in the February edition of FX Talking: "Soft landing, hard landing, no landing?" USD: Powell's second hawkish attempt can support the dollar One week ago, we were observing how the dollar had regained the favour of the market as investors were positioning for a reiteration of the hawkish rhetoric by Fed Chair Powell after the FOMC meeting. As we now know, Powell actually conveyed the message of being relatively relaxed with loosening financial conditions last Wednesday. Today, however, we are looking at a market environment that highly resembles last week’s pre-FOMC one. Markets have been squaring short-dollar positions in the past two sessions as expectations have grown that Powell will deliver a hawkish speech at the Economic Club in Washington today. The key difference with last week is that Fed hawkish bets are now backed by a shockingly strong January jobs report (we recommend looking at our economics team’s note on the US labour market published yesterday). Let’s assume that a goldilocks scenario where inflation declines without seriously harming employment is becoming a more central scenario for the Fed. Well, even so, it seems a rather appropriate time for Powell to deliver one last hawkish “hurrah” today. In a way, many are seeing at least some degree of protest against the market reaction to last week’s FOMC as necessary. Yesterday, Atlanta Fed chief Raphael Bostic said that strong job gains could mean a higher peak rate. Indeed, it looks like markets have already positioned themselves for some pushback against easing rate expectations, but the surprise strength of the US jobs report gives Powell ample room to sound more hawkish than expected. Ultimately, the ongoing upward correction may run a little longer before losing steam. Incidentally, the overall environment is doing little to lure markets back into risk assets and away from the safe-haven dollar. US-China tensions are a source of concerns and likely weighing on global sentiment, and the eurozone cannot count on a supportive data flow to keep the growth re-rating process going. It looks like only another under-delivery (i.e. dovish surprise) by Powell can hurt the dollar today. Francesco Pesole EUR: ECB hawks to the rescue EUR/USD has pressed lower and may re-test the 1.0700 support today. There isn’t a whole lot driving the euro slump from the domestic side. In what is now becoming an increasingly common occurrence, ECB members appear to be rushing to the rescue in the week after the ECB meeting. The goal is simple: convince markets the hawkish bias is untouched, hoping to regain some of the market’s trust that President Lagarde seems to have lost. We’ll hear from three ECB hawks - Schnabel, Knot and Kazimir – and one “dove” – Villeroy – who recently aligned its view with the broader ECB message on further tightening. All in all, a slew of hawkish comments and rate protests should be on the cards today. This could give some modest support to the euro, but we believe this evening’s speech by Powell will have broader and longer-lasting implications for EUR/USD. A contraction to the 1.0600-1.0650 area by the end of this week is now looking increasingly likely. A pushback against the dovish market reaction is also what we have seen from BoE officials so far, with Caroline Mann (a hawk) firmly ruling out the peak rate has been reached. Today, we’ll hear from MPC members Ramsden, Pill and Cunliffe. With the rate protest coming from both the UK and the eurozone, EUR/GBP may hover around 0.8900-0.8950 for now.   Francesco Pesole AUD: RBA deliver hawkish hike The Reserve Bank of Australia raised rates by 25bp, in line with consensus, and signalled more rate increases are on their way. As we expected, sticky inflation has forced the RBA to sound more hawkish and to push rate expectations higher. Here is our economist’s review of the meeting. Markets are now pricing in a peak rate at 3.9% from around 3.6% before the announcement, but we think this is still underestimating how far the RBA will go. Our projections see rates hit 4.1% in the second quarter, and a potential first rate cut only in the fourth quarter. We continue to see AUD as the most attractive currency in G10 in the months ahead. Indeed, recent deterioration in US-China relations are a concern, but Australia still seems on track to easing trade tensions with Beijing, and the room for further hawkish repricing in RBA rate expectations means that 0.75 in AUD/USD could be reached during a soft-USD environment in 2Q22. Francesco Pesole CEE: The US dollar brought pain to the region The EUR/USD decline hit CEE FX hard yesterday. The US Dollar may cause pain to the region for a while longer and the local calendar has little to offer today. This morning's data showed Hungary's industrial production for December and the Czech Republic will release retail sales. Later today the Czech National Bank (CNB) will release FX reserve statistics including FX transactions for December. However, we don't suspect the CNB has intervened in this period. In our view, we may have last seen the central bank in the market in late September. However, we think the total intervention bill has reached CZK25.6bn since mid-May last year, roughly 16% of the CNB's FX reserves, and today's numbers won't change that. On the FX front, the key will be which direction EUR/USD goes and regional factors won't do much about it. After yesterday's 1.9% depreciation, the main focus today will be on Hungarian forint. Yesterday's move has certainly eased the pressure on heavy long positioning, but that may not mean the end of the upward journey. In our view, the Hungarian forint has gone too far and our model linked to EUR/USD indicates levels more around 392 EUR/HUF. However, the US dollar move will be decisive factor today. Frantisek Taborsky Read this article on THINK Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
National Bank of Romania preview: waiting for inflation to fall

Romanian National Bank preview: time to talk the talk

ING Economics ING Economics 07.02.2023 12:04
The Romanian National Bank (NBR) will announce its latest policy rate decision on 9 February. We don’t expect any change in the key rate level, but a mildly cautious tone could be employed to balance the obvious easing of monetary conditions since the last meeting The Romanian National Bank in Bucharest 7.00% NBR's key policy rate We expect no change   Looking solely at the market data, one might find it hard to believe that the 10 January policy decision in Romania was in fact a rate hike. Pretty much all of the main developments since then have pointed to a relaxation of monetary conditions: the 3-month rate dropped by some 30 basis points and is now trading quite close to the 7.00% policy rate, carry rates in FX swaps have traded consistently below the 6.00% deposit facility, with only a short-lived spike around the beginning of the new reserve maintenance period, while 10-year government bonds dropped by some 25-30 basis points to the current 7.40% on record high demand. On top of that, the EUR/RON not only departed from the 4.95 resistance area but has even tested consistently below 4.90, likely related to local bond inflows. The root cause for the drop in market rates has undoubtedly been the massive liquidity surplus which, according to our estimates, reached historic highs in January, at over RON21bn. This beats by a wide margin our initial estimates, which were somewhat closer to the December surplus of around RON11bn. It also explains why carry rates remain close to, or even below the 6.00% deposit facility despite a record issuance month for the Ministry of Finance which managed to sell some RON26bn worth of bills and bonds in January.   A no-change decision is widely anticipated, but considering the above, we tend to expect a relatively cautious tone from the NBR which might be fearful of the market being too complacent given these recent developments. Possibly more important than the decision itself will be the February Inflation Report which will contain the updated NBR forecasts. We expect the 2023 year-end inflation rate to be revised much closer to our 7.4% estimate. It will also be interesting to watch for the longer-dated NBR estimates, particularly whether they see inflation entering the 1.5%-3.5% target range over the two-year forecast horizon. Our base case is that headline inflation will not dip below 4.0% over the next two years. What to expect in rates and FX markets On the bond side, Romanian government bonds (ROMGBs) have become rock stars within the CEE region since the beginning of the year. MinFin has taken advantage of record demand and good market levels to secure nearly 30% of ROMGBs issuance and 75% of ROMANI issuance since the beginning of the year. On the local currency side, this is by far the most within the CEE region, which together with a heavy cash buffer puts MinFin in a comfortable position. The potential for a sell-off is thus limited in our view given that MinFin can easily avoid issuing bonds if market conditions deteriorate. We can expect auction results to return to normal in the coming weeks, but the ROMGB picture remains positive. Fiscal policy and FX are basically fixed and, unlike some CEE peers, Romania does not face political conflicts with the EU and is not exposed to energy import dependence. Although the level of ROMGB yields is not as attractive as at the beginning of the year, in relative terms against CEE peers, we still do not find them expensive. Overall, we thus remain positive on ROMBGs. The record demand for ROMGBs is also having a positive impact on the Romanian leu, which has been below the NBR's intervention level most of the time since the beginning of the year. Massive inflows into bonds have helped the RON to test levels below 4.90 EUR/RON several times. Plus, global conditions led by falling gas prices and a higher EUR/USD are positive for FX. On the local side, the FX implied yield remains attractive as well, fluctuating steadily in the 6.60-7.00% range for the 3M tenor, comparable to the Czech koruna and Polish zloty. However, given the NBR's solid track record of managing the RON, potential FX depreciation losses look limited, which gives a distinct advantage, especially against the Hungarian forint and Polish zloty. Thus, we continue to expect the RON to hold below the EUR/RON 4.90 level depending on further inflows into RONGBs. Read this article on THINK Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Gold Trading Analysis: Technical Signals and Price Movements

FX Daily: Dodged bullet

ING Economics ING Economics 08.02.2023 09:14
Jay Powell did not rock markets as he acknowledged more strong data can imply a higher peak rate but still appeared to be hanging on to the disinflation story. The dollar still faces moderate upside risks this week, but stabilisation looks more likely today. Separately, Poland may confirm stable rates, with the zloty set to further underperform the region Jerome Powell at the Economic Club of Washington USD: No hawkish surprise by Powell Yesterday’s speech by Federal Reserve Chair Jerome Powell did not include the hawkish surprise some had feared. Ultimately, Powell probably delivered the minimum amount of pushback against dovish speculation required by the strong January jobs report. As we observed yesterday, there was ample room to surprise on the hawkish side, but it clearly seems that Powell is reluctant to drop his relatively sanguine stance on the disinflation narrative. Risk assets probably dodged a bullet yesterday, and the dollar momentum softened for the first time in three days. So, what now for the dollar? We think markets may feel relatively comfortable with the current pricing for a 5.15% peak rate for now, even though risks are skewed towards another 10bp of tightening being added into the curve. This means that the dollar’s upward correction may have a bit more to run, but we doubt this will morph into a sustained USD uptrend from this point on. If nothing else because Powell and other Fed speakers indicated that more evidence from the data is needed to shift to more hawkish guidance. So once again, it will all be about data. Today, the US calendar is rather quiet on this front but there is plenty of Fedspeak. We’ll hear from John Williams, Lisa Cook, Raphael Bostic, Neel Kashkari and Christopher Waller. There is room for the general Fed rhetoric to stay on the hawkish side and while we think the absence of key data can favour some stabilisation in the dollar today, risks are skewed towards another small leg higher in the greenback. Francesco Pesole EUR: EUR/USD mostly a dollar story Yesterday’s decision by the European Central Bank to cut rates on government deposits to encourage fund withdrawals should not have strong implications for the euro for the moment. The policy discussion remains much more central, with Isabel Schnabel delivering hawkish statements yesterday and warning against the risk of inflation becoming entrenched in the medium term. The process of hawkish re-tuning by ECB officials after last week’s market reaction to President Christine Lagarde's press conference looks likely to continue, although it appears to have been largely factored in by markets. There is only one speaker scheduled today, Klaas Knot (a hawk) and no interesting data releases in the eurozone. EUR/USD broke below 1.0700 yesterday before rebounding. We think that further explorations below 1.0700 are possible in the coming days, but it looks like they will mostly depend on dollar moves. Francesco Pesole GBP: Don't read too much into a weaker EUR/GBP Yesterday’s comments by MPC member Jon Cunliffe were mostly focused on paving the way for a “digital pound”, rather than on monetary policy. Despite being a rather interesting discussion for the future, this is not impacting the pound’s exchange rate at the moment. EUR/GBP is pressing through the 0.8900 support this morning, but we doubt this is the start of a longer downtrend in the pair. The Bank of England’s pushback against dovish rate speculation is happening in tandem with the ECB and we don’t see a key catalyst for the two currencies to dramatically diverge in the current environment. The UK data calendar is empty today, and there are no scheduled BoE speakers. Tomorrow, Governor Andrew Bailey will testify to parliament.  Francesco Pesole PLN: NBP to confirm stable rates Today we have a meeting of the National Bank of Poland (NBP) on the agenda. We expect rates to remain unchanged, as they have for the last four meetings. This is in line with market expectations and it is hard to expect any surprises. However, more interesting will be Governor Adam Glapiński's press conference, which we will see tomorrow. Looking ahead, the key to the next steps in monetary policy will be the inflation number for January, which will not be released until next week. Markets are currently pricing in the first rate cut for the September NBP meeting and nearly 100bp by year-end. We do not expect a rate change this year, but today's meeting is unlikely to change those expectations and we will have to wait until next week. In the FX market, the Polish zloty has moved to its weakest level since last October following the US dollar rally, and it is hard for us to find reasons to be positive at the moment, at least until the Court of Justice of the European Union's decision on FX mortgages. Until then, we cannot rule out EUR/PLN touching 4.80. In the short term, the rise in PLN market rates and improvement in the interest rate differential should stop further depreciation for now. Unless we see more pressure from the US dollar side, we believe the zloty will erase some of the recent losses and return to the 4.72-74 EUR/PLN range. Frantisek Taborsky Read this article on THINK Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
If The Bank Of England Hike Interest Rates Again Later This Month Will Exert Downward Pressure On The EUR/GBP Cross

The EUR/GBP Pair Is Pressing Through The Support Level

TeleTrade Comments TeleTrade Comments 08.02.2023 10:01
EUR/GBP is hovering around the 0.89 support. However, economists at ING doubt that the pair is to sustain more losses.  Don’t read too much into a weaker EUR/GBP “EUR/GBP is pressing through the 0.8900 support, but we doubt this is the start of a longer downtrend in the pair.” “The Bank of England’s pushback against dovish rate speculation is happening in tandem with the ECB and we don’t see a key catalyst for the two currencies to dramatically diverge in the current environment.”  
Riksbank hikes by 50bp amid concerns about weak krona

Riksbank hikes by 50bp amid concerns about weak krona

ING Economics ING Economics 09.02.2023 10:53
Policymakers are trying to stem currency weakness but a housing market correction and weaker economic activity suggest there are limits to the number of future rate hikes. The positive reaction by the krona is encouraging, but it will now be up to data to support a further SEK recovery. Short-term turmoil is still a possibility Source: Shutterstock   Sweden’s Riksbank has hiked its policy rate by another 50 basis points, and has made it abundantly clear that it’s worried about the ongoing weakness in the krona. Yet the reality is the Riksbank will need to tread more carefully on rate hikes from now on. That’s clear from its new interest rate projection which points to another 25bp hike in April, and implies there’s a chance it could do the same in July, but that this is likely to be it. The impact of past policy tightening is becoming increasingly evident, in particular in the housing market. Prices are down 15%, and we know Sweden has a comparatively high proportion of households that have a mortgage, and on top of that, the majority are on variable rates. Growth is suffering too, and we’re likely to see a wider impact of the housing problems in consumption and construction as the year goes on. Sweden is likely to be an economic underperformer within Europe. For now, policymakers have half an eye on wage negotiations, which are likely to settle on a higher settlement than in the past. And the near-term policy outlook undoubtedly hinges on the krona, as well as what the European Central Bank decides to do beyond its March meeting. For now, we’re pencilling in one final 25bp hike in March, but wouldn’t totally rule out another over the summer. Read next: Disney Plans To Cut Costs And Jobs, Google Is Now Rolling Out AI Chatbot| FXMAG.COM Riksbank interest rate projections over time Source: Riksbank SEK reaction is encouraging We argued in recent commentaries how a hawkish hike was a necessary step by the Riksbank to help restore confidence in SEK-denominated assets and halt the slump in the krona. The initial market reaction seems to be rewarding today’s rate decision, as EUR/SEK dropped nearly 1% to the 11.25 mark. If those levels hold, we’d be looking at a 40+ big-figure cushion to those March 2009 record highs, which would probably mark a fully-fledged currency crisis in Sweden. Now, the data needs to play its part. We have reasons to believe inflation will start easing in the coming months, although the outcome of wage negotiations could see the jobs market working against a deflationary path. This, and the soft patch of growth data, argues against a straight-line recovery in SEK and short-term turmoil for the krona is still a possibility. We think the Riksbank can be satisfied with EUR/SEK staying around 11.20-11.40 for now.   A sustainable reappreciation of SEK beyond the 11.00 mark against the euro remains the base case for this year, although the path for the Riksbank to fight inflation without triggering an uncontrolled property and economic slump has got narrower, and downside risks remain meaningful. Read this article on THINK Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Technical Outlook Of The EUR/JPY Pair Movement In Short Term

The EUR/JPY Pair Remains Locked Inside The Triangle

Torben Melsted Torben Melsted 10.02.2023 08:20
It has been a while since we have looked at EUR/JPY and for a good reason. EUR/JPY remains locked inside the triangle, that has dominated the picture since mid-December 2022. However, we are in the final stages of this triangle. EUR/JPY is likely to move lower towards 137.55 and the target area between 134.55 - 135.00 to complete the ongoing correction and set the stage for a new impulsive rally towards 170 as the next major target. Read next: Credit Suisse Reported Its Biggest Annual Loss Since The 2008, Ukrainian President Is Asking For Help And More Weapons In Brussels| FXMAG.COM Relevance up to 06:00 2023-02-13 UTC+1 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/312177
Gold Trading Analysis: Technical Signals and Price Movements

FX Daily: The waiting game is on

ING Economics ING Economics 10.02.2023 10:26
Now that markets have absorbed hawkish reactions by central bankers after the latest rate announcement and data releases, the focus will shift back to data. We think the dollar may lack clear direction until next week’s inflation data. Canadian jobs numbers have the potential of driving large CAD swings today USD: Lack of direction The dollar is struggling to find clear direction in the current market environment. Federal Reserve officials continued to push their hawkish rhetoric this week but had to implicitly and explicitly acknowledge more evidence from data must be gathered before debating the size of further tightening. This is essentially leaving the market with one conviction - a 25bp hike in March - and one outstanding doubt about whether that will mark the peak. Fed funds futures are mirroring this uncertainty by pricing in a 5.14% peak rate. We suspect key dollar crosses will stay rangebound until the next key data releases. While today’s University of Michigan survey could have some market impact, next week’s CPI is the real risk event. And if the general risk environment proves resilient for another session today, the dollar should still find a floor on the back of some defensive positioning ahead of next week’s inflation data, as happened in the run-up to the Fed meeting. Fed communication remains important, but secondary to data. After all, markets have already had the chance to assess the reaction function of the Fed to strong economic data after the latest jobs report and another round of Fedspeak. Additional policy remarks from the Fed’s Christopher Waller and Patrick Harker today are not likely to be a game changer for the dollar. DXY may keep hovering around the 103 handle into next week’s CPI report. The latest jobs figures in the US likely raised the bar for a positive surprise in Canada today, even though the consensus is centred on a rather small increase in the headline hiring figure (+15k). Unlike the Fed, the Bank of Canada has signalled its tightening cycle is probably over, even though it left the door open for more hikes should data argue against the disinflationary narrative. Markets are pricing little to no chance of further rate hikes, but equally seem reluctant to factor in any rate cuts by year-end. This leaves some room on both ends for a pronounced CAD impact from a data surprise today. A weak number could fuel easing bets (risk of cuts is higher than expected anyway, in our view), while a strong number – paired with the recent revision higher in Fed rate expectations – could encourage markets to contemplate one last hike by the BoC. We still expect USD/CAD to test 1.3000 in the coming months, but the key driver may be USD weakness rather than loonie outperformance.  Francesco Pesole EUR: Rangebound for now A brief rally failed to propel EUR/USD back above 1.0800 yesterday, and the pair may mostly trade in the 1.07-1.08 range until next week’s data offers clearer direction to the dollar. Despite an improved risk environment helping the pro-cyclical euro, below-consensus inflation in Germany yesterday may have made investors more cautious about another EUR rally. In this sense, the ability of European Central Bank speakers to lift the euro appears diminished. One of the most prominent hawkish voices in the ECB, Isabel Schnabel, will participate in a live Q&A today, although her message on the need for more tightening has already been passed through to asset prices. Pablo Hernandez de Cos is also scheduled to speak today. Elsewhere in Europe, Norwegian CPI saw a significant upside surprise. We expect a final 25bp hike at the March meeting, though the surprise surge in underlying inflation suggests the committee could add another 25bp move in June. However this is only one input into Norges Bank's thinking, and the fall in oil prices since the middle of last year, and the fact the Fed is reaching the peak, suggest Norway is unlikely to move as aggressively as some of its European peers over coming months. Francesco Pesole GBP: First-quarter contraction looks more likely The UK published GDP numbers this morning and it's a very tough read. Most, if not all, of that 0.5% contraction can be blamed on either strikes (transport & health were both heavy drags) or a lack of Premier League football games in December due to the World Cup. However, the fact that the weakness in the fourth quarter was concentrated in December means the starting point for the first quarter is lower, and almost certainly means we'll get a contraction even if activity through the quarter effectively stagnates. Our own view is we'll get a 0.3-0.4% fall in GDP in the first quarter, and probably a slight fall in the second. Recession still looks narrowly the base case. However, next week’s wage figures are what the Bank of England policymakers will watch much more closely as they assess signs of “inflation persistence”. As discussed by our economics team here, wages and developments in the service sector can make or break a March rate hike. For now, our house call is one last 25bp increase in March. EUR/GBP seems to have lost some of its bearish momentum. As discussed recently, we do not see clear drivers of GBP outperformance and a return to levels above 0.8900 in the pair is our base case. Francesco Pesole Read next: Twitter Co-Founder Jack Dorsey Comments New Twitter's Owner| FXMAG.COM CEE: Inflation reminder Today, we have the first January inflation figures in the calendar. In Hungary, inflation rose from 24.5% to 25.7% year-on-year, beating all estimates, which means an upside surprise by 0.5pp. Later, we will see inflation in the Czech Republic, also expected to rise from 15.8% to 17.6% YoY, above market expectations. As always in recent months, the main issue is energy prices, which we believe saw a massive repricing in January. Also today, the Czech National Bank will publish the minutes of its last meeting as well as the complete new forecast including the alternative scenario preferred by the Board at the moment. This assumes a longer period of stable rates and a first cut only at the end of the year. In the FX market in the region, global factors were again in charge in recent days and apart from the Polish zloty, the CEE region returned to gains. The turnaround in EUR/USD together with gas prices testing new lows and further improvement in sentiment in Europe drove the Czech koruna and Hungarian forint to new lows against the euro. Moreover, higher inflation today should support domestic rates in our view and support both currencies. However, in both cases we see heavy long positioning already, which will make the path to further gains more complicated. Frantisek Taborsky Read this article on THINK Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
If The Bank Of England Hike Interest Rates Again Later This Month Will Exert Downward Pressure On The EUR/GBP Cross

The EUR/USD Pair Is Expected A Further Upside Movement

TeleTrade Comments TeleTrade Comments 13.02.2023 09:02
EUR/GBP fades bounce off monthly support, grinds near intraday high of late. Sustained trading beyond 200-SMA, looming bull cross on MACD favor buyers. Weekly resistance line guards immediate upside ahead of monthly high. EUR/GBP grinds near an intraday high surrounding 0.8850 during the initial hours of Monday morning in London. In doing so, the cross-currency pair stays above the 200-Simple Moving Average (SMA) despite fading bounce off the monthly support line. It’s worth noting that the impending bull cross on the MACD and steady RSI (14) joins the quote’s successful trading above the key moving average to keep buyers hopeful. That said, a one-week-old descending trend line restricts the EUR/GBP pair’s immediate upside to near 0.8870. Following that, the 0.8900 round figure and multiple hurdles near 0.8910 could act as the last defense of the pair buyers before directing the quote toward the monthly high of near 0.8980. It should be observed that the EUR/GBP run-up beyond 0.8990 will need validation from the 0.9000 psychological magnet to aim for the previous yearly high surrounding 0.9250. Read next: Campbell Bought A $100,000 Plane To Live In It| FXMAG.COM On the contrary, the 200-SMA and an ascending trend line from January 19, close to 0.8835 and 0.8828 in that order, restrict the short-term downside of the EUR/GBP pair. Following that the 61.8% Fibonacci retracement level of the pair’s January-February upside and the late January swing low, respectively near 0.8820 and 0.8760, will be in focus. Overall, EUR/GBP is likely to remain firmer unless offering clear trading below 0.8828. EUR/GBP: Four-hour chart Trend: Further upside expected remaining time till the new event being published U.S.: Leading Indicators
Decarbonizing Steel: Contrasting Coal-based and Hydrogen-based Production Methods

FX Daily: Preparing for deflation reality checks

ING Economics ING Economics 13.02.2023 09:18
Asset markets have now fully absorbed the re-tuning of communication by central banks over the last two weeks. Now, it’s time for data to offer some direction, especially in the US. CPI data tomorrow may help build expectations around a May hike, and the dollar could find a bit more support. On Thursday we will see the ECJ's decision on Polish FX mortgages USD: Data in the driver's seat A key takeaway from the recent fluctuations in major G10 pairs is that, at this stage, data matters much more than central bank communication. The mass of hawkish comments - ranging from modest to aggressive - seems rather predictable in light of the markets’ early-February dovish run and strong jobs data in the US. However, more than providing direction to the market in terms of the next central bank moves, recent communication merely offered some tools to assess central bankers’ reaction function to data, and reinforced the notion that data-dependency is still the name of the game. Arguably, February’s price action so far has been mostly a reaction to strong nonfarm payrolls data in the US rather than to Federal Reserve and European Central Bank meetings: as long as central banks remain data-dependent in the short term, it's really up to the data to drive trends in FX. At this stage, this should be especially true for the Fed and the dollar.  This week sees the release of US inflation, retail sales and industrial production figures. A note of warning: US data in January should be strong throughout, largely thanks to greatly improved weather conditions compared to December. The big jump in hiring seen in the latest jobs report also suggests increased demand. Indeed, the most important piece of data will be inflation (tomorrow). Our in-house projections are in line with the market consensus for a month-on-month rise of 0.5% and 0.4% for headline and core rates, respectively. Auto sales and shelter should contribute to put a floor under core inflation for now, but we think these two components will start declining more sharply from mid-second quarter, which should fuel a more sustained downward trend in inflation. In other words, we don’t expect this setback in the deflationary path to suggest the trend is inverting. Still, this - with the aid of strong retail sales and industrial production figures - will likely be enough to allow markets and FOMC hawks to fully expect a 25bp rate hike in May after the one in March. Any upside surprise may push the peak rate pricing towards the 5.50% mark. From an FX perspective, the dollar appears in a position to at least hang on to recent gains this week. We could see a return to 105.00 in DXY soon. Today’s price action may follow a wait-and-see approach given there are no data releases, but we have observed a tendency of markets to move closer to defensive long-dollar positions into key risk events. The balance of risks appears skewed to the upside for the dollar today. Francesco Pesole EUR: Lacking the domestic push In the midst of the dollar's upward correction, the euro has also lost its idiosyncratic bullish momentum. Hawkish comments by ECB members seem to have only offset the communication hiccups on the day of the ECB meeting but have failed to lift the euro as rate differentials swung back in favour of the dollar. The EUR-USD 2-year swap rate spread is back to 145-150bp in favour of USD, around the lowest this year after having shrunk to the 110bp area in the aftermath of the Fed meeting. Our medium-term view is still one of EUR/USD appreciation over the course of 2023, but we don’t see clear drivers for a EUR/USD rebound this week, especially from the eurozone side. It would probably require a rather low US CPI figure to send the pair sustainably back above 1.0800-1.0850. We see a greater chance of the pair coming under some additional pressure, and a strong US CPI read could mean the 1.0500 support (1.0490 is the 2023 low) is tested. This week does not include key data releases in the eurozone, but just a few more ECB speakers. President Christine Lagarde will speak on Wednesday: expect another attempt to build market expectations around more tightening, although other ECB members have already gone a long way communication-wise and we don’t see her speech as a big risk event for the euro. Francesco Pesole Read next: UK Economy Suggest That Inflation Will Drop| FXMAG.COM GBP: Some key data for the BoE this week The UK dodged a technical recession according to last week’s fourth quarter figures, but that was hardly the key data point the Bank of England was focused on. This week sees the release of jobs, wages, CPI and retail sales. Among those, tomorrow’s wages should be the most important release for the BoE's next policy moves. Our UK economist discusses the relevance of this week’s data releases in this article. We think markets will be given reasons to consolidate their view around a 25bp hike in March, but expectations of further tightening may ultimately prove unfunded. The EUR/GBP drop could extend to 0.8800 but we think markets are running out of reasons to stay bearish on the pair for longer. We continue to see euro outperformance from the second quarter and 0.9000 is our target level in EUR/GBP in the second half of 2023. Francesco Pesole CEE: Zloty is waiting for the ECJ decision This week, we start with the current account December figures from Poland and the Czech Republic. On Tuesday, we will get the GDP numbers for the fourth quarter. For Poland, we expect 2.3% year-on-year in line with expectations, for Hungary 0.4% YoY, below market expectations, and for Romania 5.1% YoY, above market expectations. Also, on Tuesday we will see January inflation in Romania and we expect a slowdown from 16.4% to 15.4% YoY, implying Romania is the only country in CEE where inflation fell in YoY terms in January. January inflation in Poland will be released on Wednesday. We expect inflation to have jumped from 16.6% to 18.1% YoY, above market expectations. And Poland will also be in focus on Thursday when we should see the European Court of Justice's (ECJ) decision on the FX mortgage case, which will impact the local banking sector and Polish assets. In the FX market, it will be challenging for the market to balance between the local and global calendar this week. A higher US dollar should be rather negative for the region. On the other hand, the heavy economic calendar in the region should push the focus onto local drivers. The Polish zloty will be the main focus this week. A jump in inflation should support market rates and interest rate differentials. On the other hand, Thursday's ECJ decision brings a lot of uncertainty and is probably one of the main reasons why the zloty has underperformed within the region this year. However, the outcome may not bring much clarity to the situation. Therefore, the zloty is likely to be very volatile this week, but we remain rather bearish. On the other hand, the Czech koruna and Hungarian forint should stabilise at current levels. Frantisek Taborsky Read this article on THINK Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Bank of England is expected to hike the rate by 25bp. Kelvin Wong talks Euro against British pound

The EUR/GBP Cross-Currency Pair Remains On The Buyer’s Radar

TeleTrade Comments TeleTrade Comments 14.02.2023 09:18
EUR/GBP reverses bounce off key support confluence on strong UK employment data. UK Unemployment Rate stays unchanged but Claimant Count Change drops. Divergence between ECB and BoE policymakers may recall pair buyers if EU Q4 GDP improves. EUR/GBP reverses from intraday high while declining nearly 20 pips to 0.8830 on the upbeat UK jobs report during early Tuesday. In doing so, the cross-currency pair reversed the early-day run-up from the key 0.8830 support confluence. UK’s Unemployment Rate matches market forecasts and reprints the 3.7% figure for three months to December. However, a slump in January’s Claimant Count Change to -12.9K versus -3.2K prior, as well as strong prints of the  Average Earnings Excluding Bonus for the said month seemed to have favored EUR/GBP bears of late. In contrast to the upbeat UK data, a comparatively more hawkish bias at the European Central Bank (ECB) versus the Bank of England (BoE) joins the upbeat European Commission (EC) economics forecasts to underpin the regional currency’s bullish bias. On Monday, the European Commission (EC) released its quarterly economic projections for the Eurozone wherein it revised up the economic growth forecast to 0.9% for 2023 from 0.3% previously expected, projecting 2024 growth unchanged at 1.5%. The EC, however, lowered the Eurozone inflation forecast for 2023 to 5.6% YoY from 6.1% earlier expected. Further, the EC also cut 2024 inflation predictions to 2.5% for 2024, versus 2.6% previously anticipated. That said, European Central Bank (ECB) Vice-President Luis de Guindos said on Monday, “Rate increases beyond March are to depend on data.” On the same line, ECB policymaker Mario Centeno said, “Inflation is going down faster than we expected,” while adding that smaller hikes would need mid-term inflation nearing 2%. On the other hand, Bank of England’s (BoE) policymaker Jonathan Haskel cited a rise in inactivity in the UK labor market and challenged the British Pound (GBP) buyers previously. BoE’s Haskel also mentioned, “I would prefer to make policy with much more attention on the data flow over the next few months.” On a broader front, the cautious mood ahead of the top-tier data/events joins softer US Treasury bond yields to favor the mild optimism in the market, which in turn seems to favor the Euro (EUR). Having witnessed the initial reaction to the British data and EU fundamentals, EUR/GBP pair traders should wait for the preliminary readings of the fourth quarter (Q4) Gross Domestic Product (GDP) data for the Eurozone for clear directions. Given the recently upbeat economic projections from the European Commission and the ECB’s hawkish bias, the EUR/GBP pair is likely to remain firmer unless the EU GDP disappoints. Technical analysis Unless breaking 0.8830 support confluence comprising the 21-DMA and a one-month-old ascending trend line, the EUR/GBP remains on the buyer’s radar.
FX Daily: Asymmetrical upside risks for the dollar today

FX Daily: Asymmetrical upside risks for the dollar today

ING Economics ING Economics 14.02.2023 10:25
Today's US CPI report looks like a rather binary event for markets. With the deflationary story having come under increased scrutiny, we suspect that a consensus 0.4% MoM read in core inflation may be enough to weigh on risk assets and support the dollar. We still see room for USD outperformance in the near term. In the UK, wage data endorsed a BoE march hike US consumer spending slowed sharply in the fourth quarter of 2022 USD: A consensus reading may be enough to support the dollar We are a bit surprised to see markets have started the week with some (cautious) optimism despite the big risk event represented by today’s US inflation report. A rise in global equities meant the dollar is trading weaker across the board with the exception of the yen, which continues to see elevated volatility as markets struggle to assess the implications of the Bank of Japan appointing – now officially – Kazuo Ueda as next governor. We expect JPY volatility to stay high as Ueda may refrain from offering clear direction on any policy shift before taking the role in April. For now, there are no indications he will favour an abrupt end to the BoJ’s ultra-dovish policy stance. Back to the US, January’s inflation report will be an important litmus test for the disinflation story that has driven the slowdown in Federal Reserve tightening. The market's reaction will likely be driven once again by the month-on-month figure, which our economist expects to match consensus expectations at 0.5% for the headline rate and 0.4% for core inflation. This should translate into year-on-year reads of around 6.2% and 5.5%, respectively. Such a consensus read may be enough to weigh on risk assets and support the dollar, as it should allow markets to fully price in 50bp of additional tightening by the Fed and offer the chance to scale back rate cut expectations (around 50bp priced in for 2H23). Given that core inflation in December came in at 0.3%, a 0.2% print (or below) today should be enough to trigger a dollar correction, and a 0.5% (or above) could trigger a dollar rally. We’ll be paying close attention to the details of today’s releases. Auto sales and shelter are two components that may contribute to a higher reading. The former may boost the CPI number on the back of a reported jump in auto auction prices by 2.5%: this may translate into 0.15pp added to MoM core CPI, given the high weighting of this component on the reference basket. Shelter accounts for approximately a third of the inflation basket and may prove sticky given the lagged effect on data of contracting house prices and new rental agreements. We still think these two components will drive a big chunk of the deflationary effect from the second quarter, but for now may work against any dovish narrative. We see the balance of risks as tilted to the upside for the dollar and to the downside for pro-cyclical currencies. A return to the 2023 highs in DXY (at 105.00) is still a tangible possibility in the near term, even though we continue to favour USD underperformance in the remainder of this year. Francesco Pesole EUR: No other drivers than US CPI EUR/USD should be moved almost solely by the US inflation report today, as the preliminary (i.e. second) release of eurozone growth numbers looks unlikely to impact markets and there is only one scheduled European Central Bank speaker (Gabriel Makhlouf). As discussed in recent notes, we expect to see a rather contained impact from additional ECB commentaries (even from those by Christine Lagarde tomorrow) from now on, as markets have probably absorbed in full the pushback against the dovish reaction to the February ECB press conference and are now switching their focus to key data releases. In line with our dollar view ahead of today’s US CPI, EUR/USD may slip back to 1.0650/1.0700 should core inflation come in at 0.4% or 0.5% MoM. Anything above that would likely trigger a larger contraction and 1.0600 should be tested. We continue to see downside risks for EUR/USD in the very near term as US data may endorse further Fed hikes and the euro lacks any solid domestic support. Francesco Pesole GBP: Sticky wages cement BoE March hike expectations Wage data released this morning in the UK came in higher than expected, lifting the pound. The Bank of England’s preferred measure of wage growth, the 3-month/3-month annualised change has now been consistently above 7% for a few months, and there is very little evidence of that wage slowdown suggested by some surveys. Tomorrow’s CPI release will be another key event for the pound, but we think that given the increased focus of the Bank of England on wage dynamics, today’s data strongly endorses a March 25bp rate hike (which is our base case). EUR/GBP may well break below 0.8800 this week, while GBP/USD could fall back below 1.2100 after the US CPI print. Francesco Pesole CEE: Break-up within the region Before we see any key releases on a global level, the CEE region also has something to say today. We will see GDP numbers across the region for the fourth quarter and an inflation number for January in Romania. The main focus will of course be on the confirmation of the technical recession in Hungary but also on the consumer side of GDP across the region given that January inflation has already surprised to the upside in Hungary and the Czech Republic. In the FX market, the Polish zloty and Hungarian forint secured the main attention at the start of the week. The zloty reached its weakest levels since mid-October last year weighed down by negative EU money prospects and Thursday's looming European Court of Justice (ECJ) ruling in the FX mortgage case. For now, we have not heard from officials how long it will take for the Constitutional Court to review the legislation after President Duda said he would not sign the bill and sent it instead to the court for review. However, the likelihood is growing that Poland will not get EU money before the October general elections. Moreover, there is a risk that Thursday's ECJ ruling will impose additional costs on the banking sector. Overall, it will thus be difficult for the Polish zloty to resist further losses in the days ahead. For now, we expect the zloty to test 4.80 EUR/PLN. On the other hand, the Hungarian forint has reached its strongest levels since last May. Drivers are the same as in recent weeks in our view - falling gas prices and by far the highest carry in the region. In particular, after Friday's upside inflation surprise, the short end of the IRS curve is up roughly 50-60bps, which has brought the interest rate differential back to levels seen at the start of the year and erased bets on an early central bank rate cut. Although in our view, heavy long positioning on HUF is still the main risk and profit-taking cannot be ruled out, we remain bullish on the forint. We expect further gains to be slower, however, the mentioned conditions should persist at least until the March National Bank of Hungary meeting. Thus, we see a good chance for the forint to beat our forecast of 385 EUR/HUF at the end of the quarter. Frantisek Taborsky Read this article on THINK Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
US core inflation hits 5.5% and it's the second lowest reading since November 2021

Like geopolitics in general, it's unlikely that American politics will strongly affect the dollar in 2023

Michael Stark Michael Stark 14.02.2023 12:05
After hearing from Michael Stark from Exness about stock market, precious metals and crypto, it's time to discover his views on the Forex market - euro, pound, US dollar and pairs. What do you expect from euro and pound in 2023? The euro's recovery against the dollar seems likely to continue. While the situation for the economy in the eurozone isn't rosy by any means, it seems to be a lot less bad now than had been expected over the last couple of quarters. The ECB also probably has some way to go on rates and is likely to go above 3.5%, even if not for very long.The outlook seems to be more negative for the pound given that inflation in the UK is higher and overall economic conditions, particularly the job market, are weaker compared to the EU and the USA. Whether that actually translates into another sustained downtrend for the pound is an important question because the dollar index probably also has more room to fall in the next few months. What can we expect from EUR/USD, CHF/USD, USD/JPY, CNY/USD? What macroeconomic and geopolitical factors will be crucial for currencies in 2023? In general, the dollar's losses are likely to continue to some degree against most other currencies unless there's some significant change in the outlook for inflation or monetary policy. The possible exception is dollar-yen because the Bank of Japan's interventions and general comments and statements have been more unpredictable than usual so far in 2023. There's also April's change in leadership at the BoJ which might bring a shift in policy.The focus for most participants in forex markets this year will probably remain on economic conditions, specifically possible early signs of the severity of the recession, such as job data, PMI and similar. However, monetary policy and inflation are still on the radar too given that the ECB and others are gradually catching up to the Fed. Read next: Bartosz Milczarek, CEO at Cryptiony: Customers settle the crypto tax in annual returns, so our business model is also based on annual subscriptions | FXMAG.COMIt's difficult to predict how geopolitics will develop this year, but a sudden denouement in the Russo-Ukrainian war seems very unlikely in the next few months at least. Increasing tension between China and Taiwan is always a possibility but this probably wouldn't have a strong effect on forex markets. What macroeconomic and geopolitical factors will be crucial for the dollar in 2023? As noted earlier, the main focus for the dollar is the possible recession and how severe it might be, or indeed whether it will occur at all. The Fed's slowing down of rate hikes and decreasing rates of inflation are also important, with the main question here specifically how long the Fed can sustain rates around 5% or more given the size of the USA's national debt.Presidential elections coming up next year are likely to be in focus later in 2023, specifically whether President Biden will stand for reelection and who will challenge Donald Trump for the Republican nomination. Like geopolitics in general, it's unlikely that American politics will strongly affect the dollar in 2023 unless there's some major surprising event but developments might give hints on what to expect next year.
If The Bank Of England Hike Interest Rates Again Later This Month Will Exert Downward Pressure On The EUR/GBP Cross

Analysis Of The EUR/GBP Cross Currency Pair Movement

InstaForex Analysis InstaForex Analysis 15.02.2023 08:09
On the 4-hour chart, the EUR/GBP cross currency pair can be seen that the price movement is continuing its decline to go to the target level 0.8771 as the main target and the 0.8721 level as the second target where this can be seen as confirmation from the movement of the candlestick moving below the moving average. because of the appearance of deviations in price movements with the MACD Histogram indicator, in the near future there will be a upward correction movement to test the 0.8836 level before returning to the original downward movement but the important thing is as long as the upward correction movement does not exceed the 0.8874 level, then a bearish scenario will occur. has been described is still valid.   Relevance up to 02:00 2023-02-16 UTC+1 This information is provided to retail and professional clients as part of marketing communication. It does not contain and should not be construed as containing investment advice or investment recommendation or an offer or solicitation to engage in any transaction or strategy in financial instruments. Past performance is not a guarantee or prediction of future performance. Instant Trading EU Ltd. makes no representation and assumes no liability as to the accuracy or completeness of the information provided, or any loss arising from any investment based on analysis, forecast or other information provided by an employee of the Company or otherwise. Full disclaimer is available here. Read more: https://www.instaforex.eu/forex_analysis/119497
USDX Will Try To Test And Break Below The 103.50 Level

FX Daily: Short end continues to drive the dollar

ING Economics ING Economics 16.02.2023 08:53
The dollar is holding onto recent gains. The continuation of better US activity data this quarter provides leeway for the Fed to remain hawkish and is keeping short-dated US yields firm. It is hard to see this changing in the short term. The data calendar is quiet today, but we have several Fed and ECB speakers. Look out for more on Polish FX mortgage news today USD: A delicate balance Another day and another piece of positive US activity data. Yesterday saw a strong January retail sales release. Though boosted by warmer weather, the data still positively contributes to the first quarter activity story where the Atlanta Fed's GDPNow measure for the first quarter has been revised up to 2.4% from 2.2%. 'Wot recession?' some might ask. The data provides ammunition for the Fed to remain in hawkish mode and for the market to continue to price two to three more 25bp Fed rate hikes by the summer. February's hawkish re-assessment of Fed policy has lifted short-dated US yields by 50bp over the last two weeks and reinserted a little volatility back into the interest rate and FX space. The 2-10 year US Treasury curve remains as inverted as at any point in this cycle - providing the dollar with support. Arguably the dollar could/should have traded even stronger given the backup in US rates. The reason it has not traded stronger is probably down to the risk environment. Equity markets are holding onto early-year gains and recent buy-side investor surveys show that cash levels - though dipping - are still far from levels to suggest the buy-side is fully invested in this equity rally. Indeed, surveys still point to underweight positioning in equity markets.   We suspect this delicate balance between a hawkish Fed and a buy-side still looking to add to risk assets will leave the dollar range-bound for the rest of this quarter. 1.05-1.10 could be the broad range in EUR/USD and something like 128-136 for USD/JPY - the latter also having to deal with a new Bank of Japan governor. For today, the US focus will be on the January PPI numbers (core expected to decelerate to 4.0 from 4.6% year-on-year), initial claims and the Philly Fed business outlook. We will also hear from the Fed hawks Loretta Mester (1445 CET) and James Bullard (1830). DXY should trade within a narrow 103.50-104.00 range. Chris Turner EUR: 1.08 remains our 1Q forecast It looks like EUR/USD is settling into a broad 1.05-1.10 trading range this quarter - leaving us comfortable with the EUR/USD profile we outlined in our latest FX talking publication: 'Soft landing, hard landing, no landing?'. That profile saw EUR/USD ending the first quarter near 1.08 before pushing decisively above 1.10 in the second as the US disinflation story accelerated at a time when China was reopening. The European Central Bank hiking a further 75bp - taking the deposit rate to 3.25% in May - certainly helps too, although the recent repricing in the Federal Reserve cycle is somewhat muting this story. There is not much in the way of eurozone data today and perhaps the most interesting ECB speaker will be Chief Economist, Philip Lane. A 1600CET he delivers the Dow Lecture at the NIESR in London - the lecture entitled: 'The Euro Area Hiking Cycle: An Interim Assessment'. Presumably, he will not want to push back too much against the 115bp of tightening priced by the markets this summer - even though we think it will be closer to 75bp.  EUR/USD is bouncing off the recent 1.0650/0660 lows helped by a slightly positive risk environment coming out of Asia. We would expect it to continue trading well within the confines of a 1.0650-1.0750 range today. Chris Turner GBP: Gains proving hard work Sterling continues to show high sensitivity to monetary policy. This week's slightly softer-than-expected wage and core CPI data have seen sterling hand back a budding rally. We suspect this will be the story for most of this year, where we see EUR/GBP trading in the 0.89/90 area. GBP/USD may, however, get a lift in the second quarter if we are right with our dollar call. The UK data calendar is quieter today ahead of tomorrow's release of January retail sales. Bank of England Chief Economist, Huw Pill, speaks at 1800CET, where he delivers a fireside chat on monetary policy. He's been seen as a little more hawkish recently and may choose to maintain that position until the BoE has finished its tightening cycle. We look for one last 25bp hike at the 23 March meeting - taking Bank Rate to 4.25% - where it will be left until summer 2024.   For today, cable should continue to find support in the 1.1950/2000 area. Chris Turner PLN: FX mortgage saga strikes back Today is a big moment for the Polish banking sector. This morning we should hear the decision of the European Court of Justice (ECJ) in the FX mortgage case. As we mentioned earlier, this dispute is probably one of the main reasons why the zloty has significantly underperformed the CEE region this year. Thus, today's result should show whether the market's fears were real. And what is actually on the table? The ECJ was asked by a local court whether or not banks should receive interest on mortgage capital even when the loan contract had been invalidated by the court due to abusive clauses. Domestic courts are still struggling to judge how mutual obligations should be resolved if the loan is ruled to be invalid. In the event of a negative ruling for the banking sector, this would mean additional losses for the banks, which would of course have negative implications for Polish assets. It is hard to say what to expect today and how clear the decision will be. Another uncertainty is how much this risk is priced in. However, in any case it is an important tail risk for the zloty and Polish government bonds. Our Warsaw team covered all the details of the FX mortgage case in a recent article. It will be tough for the zloty to navigate through this news flow but as we mentioned earlier, we retain a bearish bias and expect the zloty to test 4.80 EUR/PLN. Frantisek Taborsky Read this article on THINK Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Kelvin Wong talks JGB, US dollar against Japanese yen and more

Japan's trade deficit reached about $26bln. Weaker US dollar and softer monetary policy are playing in favor of gold

Marc Chandler Marc Chandler 16.02.2023 13:07
February 16, 2023  $USD, Australia UK, China, Currency Movement, Federal Reserve, Italy, Japan, Switzerland, US Overview:  On the heels of a dramatic jump in US job creation and firmer than expected year-over-year CPI, the US reported a larger than expected jump in retail sales and a strong recovery in manufacturing output. Few think that economic momentum that the recent data implies can be repeated, the "no landing" camp has gained adherents. We suspect that says more about psychology than the economy. The US two-year note is threatening to snap a five-day 20 bp advance today and is coinciding with a somewhat heavier dollar tone. There is a batch of US economic data today, including PPI, weekly jobless claims, and housing starts and permits. Several Fed officials speak today, including St. Louis Fed's Bullard, who is among the leading hawks. China reported new house prices did not fall last month. It is the first time it has said this since August 2021. Nevertheless, mainland equities bucked the strong regional advance following the recovering of US equities yesterday. Europe's Stoxx 600 is extending its advance for the fourth consecutive session, while US futures are slightly softer. Benchmark 10-year yields are mostly 1-2 bp lower, putting the US 10-year around 3.78%. A softer US dollar and interest rates are helping gold stabilize after falling to $1830 yesterday. The low for the year is closer to $1825. April WTI is steady after initially extending yesterday's recover from about $77.50 to about $79.75 today. Asia Pacific Japan reported a record trade deficit last month of about JPY3.5 trillion (~$26 bln), which was still a little smaller than expected as exports rose 3.5% year-over-year rather than fall 1.7% as the median forecast in Bloomberg's survey had it. In December exports has risen 11.5%. And Japanese imports rose a milder 17.8% rather than 20.6% as economists expected. Of note exports to China fell a little more than 17%, led by autos, parts, and notably chip-making equipment. Exports to the US rose 10.2% and by 9.5% to the eurozone. Separately, the Ministry of Finance reported that Japanese investors bought JPY716 bln of foreign bonds last week. It was the second consecutive week of purchases, and in the two weeks, Japanese investors bought the most amount of foreign bonds since August (JPY1.8 trillion). Australia's jobs data disappointed, and the Australian dollar initially fell in response before recovering in the face of a broader pullback in the US dollar. Australia reported a loss of 11.5k jobs. Economists had expected a 20k increase. Moreover, it lost 43.3k full-time positions after growing a revised 14.4k in December (initially17.6k). The unemployment rate rose to 3.7% from 3.5%. The central bank delivered a 25 bp hike last week and the next meeting is on March 7. The futures market does not have another 25 bp hike fully priced in until the April 4 meeting. The US dollar reached JPY134.35 yesterday, its best level since the year's high was set on January 6 slightly above JPY134.75. It is consolidating in a narrow range and held above JPY133.60, with chart support seen around JPY133.50. There are options for $3.2 bln that expire tomorrow at JPY135. The poor jobs data saw the Australian dollar retest yesterday's low near $0.6865, holding above the month's low set closer to $0.6855. Session highs were record in late Asia Pacific turnover around $0.6935, which stretched the intraday momentum indicators. Yesterday's high was by $0.6990. The greenback reached CNY6.8640, its best level since January 6 but retreated below yesterday's settlement to test the CNY6.8550 area in late dealings.  Of note, the 50-day moving average has fallen below the 200-day moving average for the first time since May of last year. Meanwhile, the PBOC set the dollar's reference rate a little stronger than expected (CNY6.8519 vs. CNY6.8508). Lastly, as expected the Philippines central bank raised its policy band 50 bp to 5.50%-6.00%.  Europe Recent developments provide an opportunity to review two internal European market developments. First, we note that the rightist government in Italy carried the local elections in Lombardy and Lazio. In the latter, it turned out the center-left government. Salvini's League gained ground in Lombardy, but the strain in the coalition is coming from Berlusconi blamed Ukraine war on Zelenskyy. Prime Minister Meloni has supported the EU's criticism of Putin and efforts to defend Ukraine. Still, the latest polls suggest Italian support for Ukraine as slipped over the past year, and slightly more than 40% support sending weapons to Ukraine. Still, Berlusconi's comments caused saw teeth-gnashing and cries of protest from within the EPP (European People's Party, the center-right coalition in the EU parliament). According to Politico, at members from at least nine countries have threatened to boycott the gathering planned shortly in Naples, if Berlusconi attends. Ahead of next year's EU parliament elections, there was a desire reach out to Meloni. Tajani, an ally of Berlusconi, Italy's foreign minister and deputy PM, has reiterated the government's support for Ukraine, which is endorsed by the EPP. EC President von der Leyen and the president of the EU parliament Metsola hail from the EPP. Italy's 10-year premium over Germany fell from a little above 250 bp in late September to almost 170 bp in mid-January. It spiked back to 200 bp at the start of February but is hovering in the 180-185 bp area. The two-year premium peaked around 70 bp in late September and fell to almost 27 bp in mid-January. It has traded mostly between 35-45 bp this month. Read next: Tesla Will Make Supercharger Network, Visa Will Allow The Use Of Cryptocurrencies To Settle Transactions| FXMAG.COM Second, after the euro rose above CHF1.0 for the first time since last July, the single currency has pulled back to around CHF0.9850. Switzerland reported higher than expected January CPI (3.3% year-over-year for 2.8%) and the core rate is above 2% (2.2%) for the first time this century. The SNB meets on March 23. It will have another inflation report (March 6) in hand before it meets. Still, a 50 bp move is expected, which lift the policy rate to 1.5%. The swaps market is pricing in one more quarter point hike, possibly in June, to reach the peak.  The euro has steadied after falling from $1.08 on Tuesday to $1.0665 yesterday. It reached almost $1.0725 today. Resistance is seen in the $1.0735-50 area, which may be tested in the North American session. The euro has set a few lows in the $1.0655-65 area this month, and stops are likely building below there. Sterling has also steadied today. It briefly traded below $1.20 yesterday for the first time in a week, though it has not settled below there since January 5. It recovered to around $1.2075 today. Initial resistance is seen by $1.21. The intraday momentum indicators are stretched late in the European morning, suggesting it may struggle as North American activity resumes.  America  Since the monster January jobs report and strong services ISM on February 3, the markets have been in a new phase. Short-term US rates have surged and the dollar, which had peaked in late September/early October has bounced smartly. Retail sales had collapsed by a little more than 1% last November and December jumped 3% last month, blowing past expectations. Similarly, manufacturing output slumped by 0.8% and 1.8% in November and December, respectively, rose by 1% last month.  Ironically, the unusually warm weather may have helped lift retail sales and weighed on industrial output via weaker utility output. Industrial output was flat last month.   Until February 3, the swaps market was not convinced that the Fed funds target would peak above 5% and now it is flirting with 5.25%. The prospect of a rate cut this year has fallen from a sure thing to about a 50/50 proposition. The upside correction in the dollar we anticipated may be of a greater duration and magnitude.  The Dollar Index, which we had projected to test 103.80-104.00 could extend toward 105.50-106.50, for example.  Still, we suspect the talk of "no landing" says more about market psychology that the real economy. January's snap back was outsized and unlikely to be repeated. The inversion of yield curves and fall of M2 herald foretell of economic challenges, even if with a lag. Tomorrow, the US reports the index of leading economic indicators. It has not risen since last February. It is off 7.5% over the past six months annualized and such weakness has clearly been associated with recessions (see above chart).  The Fed's Mester, Bullard, and Cook speak today. The key issue is whether the recent data has swayed officials to change what they saw as the terminal rate in December. Recall that seven officials thought it ought to be above the median 5.1%. Lastly, we note that President Biden will shortly nominate a candidate to replace Brainard, and vice chair of the Fed. Brainard, was rumored to have been a likely candidate to be Treasury Secretary if Clinton won in 2016 and is seen as a possible replacement if Yellen steps down next year. Reports speculate that the new Chicago Fed president Goolsbee, a former adviser to Obama, is a likely candidate for the vice chair role. Although the US talks about reforming the multilateral organizations, it seems most likely that the changes will not include breaking from tradition that lets an American lead the World Bank. The current president, Malpass has indicated plans to resign around mid-year, nearly a year before his term expires.  Before we get to the LEI, there are today's reports of PPI, housing starts and permits, weekly jobless claims and the Philadelphia Fed's February business survey. Producer prices have some components that economists use to fine-tune expectations for the PCE deflator due at the end of next week. In and of themselves, though producer prices may generate a muted market response. Sequentially prices may rise (in December the headline fell by 0.5% and the core rose by 0.1%), but the year-over-year pace is expected to continue to slow. Still, what is driving consumer prices are not so much goods as services (which typically are not resource intensive). Housing start are expected to have declined last month, which would be the fifth consecutive monthly fall, but permits, a leading indicator, are expected to snap a three-month decline with a 1% gain. Meanwhile, weekly initial jobless claims may have bottomed in late January around 183k. They rose for the first time in six weeks in the week ending February 3 and are expected to have risen to 200k last week. If true, that would translate into the first increase of the four-week moving average since early December. That said, it is this week's activity that will be reported next week that coincides with the monthly February jobs report.  The US dollar recovered from CAD1.3275 on Tuesday to CAD1.3440 yesterday, seemingly driven by US data and the volatility of US equities. A quieter tone has emerged today, and the greenback barely traded above CAD1.3400, where options for $470 mln expire tomorrow. Support is seen around CAD1.3340-50 today. The US S&P 500 still offers a reasonably good direction cue. The US dollar spiked from MXN18.50 to about MXN18.75 yesterday. But once again a bounce in the greenback was sold and it settled close to MXN18.5855. It is hovering near there and has spent little time above MXN18.60 today. It looks set to consolidate after setting 4 1/2-year lows. Chart resistance may be closer to MXN18.65, while the MXN18.55 area looks firm.     Disclaimer
Gold Trading Analysis: Technical Signals and Price Movements

FX Daily: Hawks in the ascendancy

ING Economics ING Economics 17.02.2023 09:43
It is a familiar story in FX, but the strong run of US price and activity data has provided a tailwind to Fed hawks. Yesterday it was the turn of Fed's Mester and Bullard to put the idea of more aggressive 50bp rate hikes back on the table. We have another couple of Fed hawks speaking today, Barkin and Bowman, suggesting the dollar can hold gains The Fed's James Bullard said he would not rule out supporting a half-percentage-point hike at the March meeting USD: First quarter of 2023 is proving to be the push-back quarter The dollar continues to quietly reclaim some of the heavy losses seen since last October. DXY has now reclaimed about a quarter of that sell-off. The move has clearly been driven by the re-assessment of the Fed cycle, where the 'higher for longer' camp is in the ascendancy. Yesterday, it was the turn of Loretta Mester and James Bullard to outline how they had favoured a 50bp hike earlier this month instead of the 25bp which was delivered. Equally, they both implied they could support a 50bp hike at the 22 March meeting.  Their comments coincided with an above-consensus US January PPI release and pushed 10-year US Treasury yields a further 6-7bp higher. At 3.89%, the US 10-year yield is now the highest since November. The higher rates for longer thesis has also seen some substantial re-pricing of the Fed curve this month where market pricing for the December 2023 Fed Funds rate has risen to 5.10% from 4.35%. Financial markets are making these substantial adjustments to the Fed cycle – i.e. markets are listening to the Fed hawks – because US activity and price data are coming in stronger than expected. We think the better activity data is partly weather-related and had always thought that the next leg of the US disinflation story would be in the second rather than the first quarter. In short, we think the current dollar rally is probably a correction to an underlying bear trend in 2023. This 1Q23 dollar correction may have a little further to run, however. Today we will also hear from Fed hawks Thomas Barkin and Elizabeth Bowman, plus receive an update on January import prices. We see a scenario where DXY continues to edge up to 105.00, with outside risk this quarter to strong resistance at 106.50 (about 1.8% above current levels), which may then prove the best dollar levels of the year. The next big input to the story will be the FOMC minutes released next Wednesday. Chris Turner EUR: Temporary downside to EUR/USD The hawkish re-pricing of the Fed curve dominates markets and even though eurozone money market rates have risen too, the two-year EUR/USD swap differential has widened back out to levels last seen in mid-December. This now stands at -150bp having narrowed to -110bp at the start of this month. Arguably this spread should not narrow in too much more (unless the market thinks that Fed Funds will end the year near 5.50%), meaning that EUR/USD may not have to fall too much more. We would, however, say the direction of travel is to the 1.0450/1.0500 area, which may be the strongest dollar level of the year for eurozone corporates. There is not too much on the eurozone calendar today apart from the December current account figure and the market seems to be ignoring yesterday's comments from ECB dove, Fabio Panetta, favouring the ECB to move in 25bp rather than 50bp increments. Today we hear from ECB's Francois Villeroy (1230CET), seen more as a centrist these days. Chris Turner GBP: BoE slowdown softens the pound In contrast to the hawkish Fed rhetoric yesterday, comments from Bank of England chief economist Huw Pill pointed towards the BoE shifting towards a slower pace of tightening. As mentioned yesterday, we look for one final 25bp BoE hike to 4.25% next month. The comments have seen sterling very marginally underperform – consistent with our preferred view of EUR/GBP drifting into a 0.89/90 range this year. Away from central banking, the UK press is focusing on a surprise trip by Prime Minister Rishi Sunak to Northern Ireland today. The presumption is that he is trying to win over the DUP nationalist party in support of changes to the Northern Ireland protocol, which could see improved trading relations with the EU. We suspect sterling does not get much of a bounce were a new EU deal announced, with investors quite fatigued on this subject. Chris Turner  PLN: The FX mortgage saga remains on the table Yesterday, the European Court of Justice (ECJ) gave its opinion on the FX mortgage issue in Poland. According to the statement, European Union law does not prevent local law from allowing consumers to claim compensation over and above the compensation already common today. On the other hand, banks cannot charge capital costs if the contract with the client is terminated. However, it seems that a clear interpretation of the ECJ's opinion is yet to be found before assessing whether yesterday's statement is negative or not. From the market reaction, it seems that the first direction was negative, however, during the day the Polish market was rather hit by the global story, and in fact, banking stocks in Poland reversed their direction and erased their initial losses. Of course, this story did not end yesterday, and we will probably see more headlines from local banks and the government in the coming days as to what the expected impact on the banking sector is. As for the market, we are unlikely to see a clear sell-off and a jump-up in the Polish zloty, but the issue remains on the table, and we are more likely to see constant pressure on the zloty to continue to underperform the CEE region. For now, we expect EUR/PLN to stabilise around 4.77. Also today after the end of trading we will see a rating review of Poland by S&P. We expect the rating to remain unchanged and yesterday's decision should not affect the review. However, the August review assumed a smooth drawdown of EU money, which has emerged as a problem for the Polish government in recent weeks. Moreover, the macro picture is also mixed and after the experience with the recent downgrade in the case of Hungary, the market cannot ignore this review. Frantisek Taborsky Read this article on THINK TagsFX Federal Reserve Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more    
Bank of England is expected to hike the rate by 25bp. Kelvin Wong talks Euro against British pound

The Bank Of England's (Boe) Current Rate-Hiking Cycle Might Be Nearing The End And This Acts As A Tailwind For The EUR/GBP Cross

TeleTrade Comments TeleTrade Comments 17.02.2023 10:01
EUR/GBP gains positive traction for the third straight day and climbs to over a one-week high. The upbeat UK Retail Sales for January fail to impress the GBP bulls or provide any impetus. Bets for additional jumbo rate hikes by the ECB support prospects for further near-term gains. The EUR/GBP cross builds on this week's goodish bounce from the 0.8800 mark and edges higher for the third successive day on Friday. Spot prices hold steady above the 0.8900 round figure through the early European session and react little to the latest UK macro data. The UK Office for National Statistics reported that domestic Retail Sales grew 0.5% in January against consensus estimates for a 0.3% fall. Furthermore, sales excluding fuel also surpassed market expectations and rose by 0.4% during the reported month. The better-than-expected prints, however, were offset by a downward revision of the previous month's already weaker readings. This, in turn, fails to provide any meaningful impetus to the British Pound or move the EUR/GBP cross. That said, the softer UK consumer inflation figures released earlier this week fueled expectations that the Bank of England's (BoE) current rate-hiking cycle might be nearing the end. This continues to weigh on the Sterling and acts as a tailwind for the EUR/GBP cross. That said, broad-based US Dollar strength exerts some follow-through downward pressure on the shared currency. This, in turn, holds back bulls from placing aggressive bets and caps the upside for the cross, at least for now. Meanwhile, bets for additional jumbo rate hikes by the European Central Bank (ECB) might contribute to the Euro's relative outperformance against its British counterpart. This, in turn, supports prospects for a further near-term appreciating move for the EUR/GBP cross. Hence, some follow-through strength back towards the 0.8975-0.8980 region, or the highest level since September 2022 touched earlier this month, looks like a distinct possibility. Technical levels to watch remaining time till the new event being published U.S.: Leading Indicators
If The Bank Of England Hike Interest Rates Again Later This Month Will Exert Downward Pressure On The EUR/GBP Cross

The EUR/GBP Pair Is Expected Limited Downside Movement

TeleTrade Comments TeleTrade Comments 20.02.2023 08:46
EUR/GBP fades bounce off immediate horizontal support, 200-HMA. Sluggish oscillators suggest limited downside room but bulls need validation from 0.8930. Monthly low lures bears past 200-HMA buyers have a bumpy road to the north to track. EUR/GBP holds lower ground near 0.8880 during the early Monday morning in Europe. In doing so, the cross-currency pair fades bounce off the 200-HMA and eight-day-old horizontal support. Also teasing the pair sellers is the lower high formation, marked since February 07. However, the aforementioned support line, close to 0.8875 at the latest, precedes the 200-Hour Moving Average (HMA) level surrounding 0.8865, to put a floor under the EUR/GBP prices. In a case where the EUR/GBP pair drops below 0.8865, the odds of witnessing a slump toward the monthly low near the 0.8800 round figure can’t be ruled out. It’s worth noting, though, that January’s low near 0.8720 could challenge the pair sellers afterward. Meanwhile, the 50% and 61.8% Fibonacci retracement levels of the EUR/GBP pair’s fall between February 03 and 14, near 0.8890 and 0.8910 in that order, could challenge the short-term upside of the pair. Following that, a downward-sloping resistance line from February 07, close to 0.8930 by the press time, will be the key as a clear break of the same towards the north might endanger the monthly peak of 0.8978. Overall, EUR/GBP is likely to grind lower amid mixed catalysts and sluggish prints of the MACD and RSI. Though, the downside room appears limited. EUR/GBP: Hourly chart Trend: Limited downside expected
ECB cheat sheet: Difficult to pull away from the Fed

Irina Manzenko (InstaForex) calls market 'frozen', as Tuesday is packed with important events

InstaForex Analysis InstaForex Analysis 20.02.2023 16:22
At the start of the new trading week, the EUR/USD pair demonstrates low volatility, trading in a narrow price range. The price is balancing on the border of 6 and 7 figures, reflecting the indecision of both buyers and sellers. Today's economic calendar is almost empty. European session was marked with minor releases (Bundesbank monthly report and Eurozone Consumer Confidence Index), while American trading floors are closed today as the U.S. celebrates a national holiday—Presidents' Day.     Moreover, the market is frozen in anticipation of high-profile political events on Tuesday: U.S. President Joe Biden is expected to give a speech, while Russian President Vladimir Putin will address the Federal Assembly. Their respective messages may increase or decrease the level of anti-risk sentiment in the markets (which will definitely have an effect on the U.S. currency). But if the overall geopolitical situation does not change dramatically after the speeches, the focus of the market will shift back to "classic" fundamental factors. Rising hawkish expectations Following the results of the last two weeks, a general opinion has crystallized that the Fed will raise the rate in a 25-point step over the next few months—at least at the next two meetings. More aggressive scenarios are also possible. For example, prior to the publication of the latest U.S. inflation report, the probability of a 25-point rate hike in March was 95% (according to the CME FedWatch Tool). Now, the chances of implementing this scenario are estimated at 80%, while the probability of a 50-point increase (up to 5.25%) is already 20%. If we talk about the May meeting, market participants estimate the probability of a rate increase to 5.25% (assuming a March increase of 25 points) at 74%, up to 5.5% – at 16%. Well, according to the results of the June meeting, the rate is expected to increase to 5.5% (assuming a measured pace at previous meetings) – the probability of this scenario is already estimated at 55%. At the same time, traders do not exclude the possibility that the rate will be at the level of 5.75% in June. As you can see, the market revised its forecasts, strengthening hawkish expectations. In my opinion, this revaluation looks absolutely justified, given the latest macroeconomic reports and comments from the Fed. The flywheel of hawkish expectations began to unwind the week before last, when nonfarm payrolls report was published. The half-million increase in the number of employed in January and the decline in unemployment to 3.5% surprised investors. Inflation reports published last week completed the puzzle, forming a new fundamental picture. Recall that the January consumer price index and the producer price index came out in the "green zone." The pace of inflation slowed down, and this fact became an alarming signal for the Fed. Back in early February, Powell, speaking at the Economic Club of Washington, said that it could take a long time for consumer price growth to slow down—according to him, inflation in the United States could slow down to the target level only in 2024. He also made it clear that the Fed would continue to raise the rate "which has not yet reached an acceptable level for fighting inflation" (without specifying what level of the rate is "acceptable") Read next: Despite the rise in interest rates, we’ve seen over the past few months, the US economy has held up reasonably well, with strong growth in Q3 as well as Q4| FXMAG.COM Rate up, EUR/USD down Powell announced the above theses even before the publication of data on the growth of January inflation. We can assume that now the rhetoric of the head of the Fed will become tougher again – the leitmotif of his speeches will be a message that the American regulator will not curtail the hawkish strategy in the foreseeable future. Actually, many of his colleagues have already conveyed this idea to the public: John Williams, Loretta Mester, Lorie Logan, Michelle Bowman, Patrick Harker, Lisa Cook. All of them, in one form or another, stated that the Federal Reserve is ready for a longer fight against high inflation, taking into account recent trends. In practical terms, this means that the regulator will revise the level of the final rate upward—presumably up to 5.5%. The corresponding messages are being heard more often, in particular, the "5.5%" target was voiced by Williams and Harker, who have the right to vote in the Committee. Hence the rise of hawkish expectations—according to many experts, the Fed will maintain a 25-point rate hike, but the "length of the distance" has not been determined yet. However, now we can say with confidence that the central bank will exceed the previously declared final point (5.1%). Conclusions There are growing hawkish expectations in the market regarding further actions of the Fed. This fundamental factor will provide background support to the bears of EUR/USD, which are now trying to keep the pair within the 6th figure. Technically, the price is located between the middle and bottom lines of the Bollinger Bands indicator, under the Tenkan-sen and Kijun-sen lines, but above the Kumo cloud. The nearest support level is at 1.0650, which is the upper boundary of the cloud. It is advisable to consider short positions in the pair only after overcoming this price barrier. The main downward target in the medium term is at 1.0590, which is the bottom line of the Bollinger Bands indicator on the same timeframe.     Relevance up to 12:00 2023-02-21 UTC+1 This information is provided to retail and professional clients as part of marketing communication. It does not contain and should not be construed as containing investment advice or investment recommendation or an offer or solicitation to engage in any transaction or strategy in financial instruments. Past performance is not a guarantee or prediction of future performance. Instant Trading EU Ltd. makes no representation and assumes no liability as to the accuracy or completeness of the information provided, or any loss arising from any investment based on analysis, forecast or other information provided by an employee of the Company or otherwise. Full disclaimer is available here. Read more: https://www.instaforex.eu/forex_analysis/335575
Bank of England is expected to hike the rate by 25bp. Kelvin Wong talks Euro against British pound

Bears Of The EUR/GBP Pair Keep The Reins For The Third Day

TeleTrade Comments TeleTrade Comments 21.02.2023 09:34
EUR/GBP retreats from intraday high to extend Friday’s U-turn from two-week high. Full market’s return, cautious mood probe Euro bulls ahead of Eurozone ZEW Sentiment data, monthly PMI. The British Pound braces for UK PMI amid mixed concerns surrounding Brexit. EUR/GBP holds lower ground around 0.8870, after recently reversing from the daily top, as bears keep the reins for the third consecutive day to early Tuesday in Europe. In doing so, the cross-currency pair portrays the broad retreat in the Euro, as well as the recovery in the British Pound (GBP), ahead of the key data for the bloc and Britain. That said, a fresh run-up in the US Treasury bond yields, and the fears emanating from China, North Korea and Russia seemed to have underpinned the market’s rush for the US Dollar as traders from Washington return after a long weekend. As a result, the Euro witnesses a pullback in the demand due to its contrast with the greenback. It’s worth noting that the recent statistics from the Euro area have been firmer while those from the UK have been mixed, which in turn keeps the pair buyers hopeful ahead of the key numbers. Additionally teasing the EUR/GBP buyers are the hawkish comments from the European Central Bank (ECB) official. That said, ECB governing council member and Finnish central bank Chief Olli Rehn recently said, per Reuters, “ECB should keep raising interest rates beyond March and the rate peak, which should be stuck to for some time, could be reached over the summer.” On the same line, upbeat prints of Eurozone Consumer Confidence matched the market forecasts of -19 versus -20.9 prior. Further, Germany's Bundesbank released its monthly report and noted that the economic outlook was somewhat brighter with the short-term outlook turning more favorable than seen just a few months ago. Alternatively, fears of no imminent Brexit deal should have weighed on the British Pound (GBP) as the UK’s Conservative Members of the Parliament (MPs) dislike the deal with the European Union (EU) on Northern Ireland (NI). Some of them are threatening to resign, per The Times, amid fears of the compromised deal. The news also mentioned that UK Prime Minister Rishi Sunak spent notable time in the House of Commons to convince the MPs that no deal had yet been agreed and talks were continuing. “He was told he ‘hasn’t got a hope’ of succeeding without the support of the Democratic Unionist Party,” per The Times. Amid these plays, stock futures are down and the Treasury bond yields, as well as the US Dollar, are firmer, which in turn weigh on the Euro amid a sluggish start to the key day. Looking forward, Eurozone ZEW sentiment figures for February will precede the preliminary readings of the bloc’s, as well as the UK’s, Purchasing Managers Index (PMI) data for the said month to direct short-term pair moves. Given the cross-currency pair’s latest retreat, backed by the market speculations that the Euro rally is about to end amid the European Central Bank’s (ECB) inability to offer higher rates, the sellers may keep the reins unless the scheduled data mark any surprise. Technical analysis EUR/GBP fades bounce off the 50-day Exponential Moving Average (EMA), around 0.8815 by the press time, which in turn joins bearish MACD signals and failure to cross the 0.8915-10 horizontal hurdle to keep bears hopeful.
The EUR/JPY Pair Is Expected To Start A New Zig-Zag Correction

Technical Outlook Of The EUR/JPY Cross Pair

Torben Melsted Torben Melsted 23.02.2023 08:17
EUR/JPY has likely seen a small overthrow to complete the ending diagonal in wave c of B and should be ready to challenge the downside for a break below minor support at 142.82 indicating a top being in place, while a break below support at 142.33 will confirm the top and renewed downside pressure as wave C continues lower towards the ideal target seen at 134.10. Read more: https://www.instaforex.eu/forex_analysis/313749 Relevance up to 07:00 2023-02-24 UTC+1 This information is provided to retail and professional clients as part of marketing communication. It does not contain and should not be construed as containing investment advice or investment recommendation or an offer or solicitation to engage in any transaction or strategy in financial instruments. Past performance is not a guarantee or prediction of future performance. Instant Trading EU Ltd. makes no representation and assumes no liability as to the accuracy or completeness of the information provided, or any loss arising from any investment based on analysis, forecast or other information provided by an employee of the Company or otherwise. Full disclaimer is available here. Read more: https://www.instaforex.eu/forex_analysis/313749
If The Bank Of England Hike Interest Rates Again Later This Month Will Exert Downward Pressure On The EUR/GBP Cross

The EUR/GBP Cross Pair Is Expected To Display More Weakness

TeleTrade Comments TeleTrade Comments 23.02.2023 08:32
EUR/GBP looks vulnerable around 0.8800 as hawkish BoE bets soar after a recovery in UK preliminary PMI data. UK’s Hunt is facing calls from within his Conservative Party to cut taxes and raise pay for public service workers. ECB Lagarde is set to continue its policy tightening spell of 50 bps to March. The EUR/GBP pair is struggling to find any direction in the Tokyo session amid the absence of a potential trigger. The cross is juggling around 0.8800 and is expected to display more weakness as an economic recovery in the United Kingdom and a shortage of labor is demanding the continuation of policy tightening by the Bank of England (BoE). Investors were in a dilemma whether the Bank of England (BoE) should pause policy contraction as the economic outlook was expected extremely bleak or continue pushing rates higher to tame stubborn inflation. Shortage of labor and escalating food inflation is continuously maintaining havoc that the inflation could be underpinned anytime to new highs. No doubt, the UK Consumer Price Index (CPI) has eased in the past few months, however, the headline CPI figure is still in double-digit and sufficient to trouble households. Meanwhile, a recovery in the economic activities shown by the preliminary S&P Global PMI (Feb) data, released this week, indicates that labor demand could be fueled further and BoE Governor Andrew Bailey should consider continuation of policy tightening. A figure below 50.0 for the preliminary Manufacturing activities indicates contraction, however, the pace of decline in activities has squeezed significantly. BoE panel sees the interest rate peak around 4.5% and the continuation of the rate hike in the March monetary policy meeting looks warranted. Meanwhile, UK Finance Minister (FM) Jeremy Hunt is facing calls from within his Conservative Party to cut taxes in his March 15 budget and from trade unions to raise pay for public service workers, as reported by Reuters, which could propel inflationary pressures further. On the Eurozone front, clarity on the extent of the rate hike by the European Central Bank (ECB) President Christine Lagarde has eased some uncertainty. ECB Lagarde has announced a continuation of 50 bps rate hike spree for March to keep the downside momentum in Eurozone inflation intact.
National Bank of Hungary Review: A new beginning without commitment

National Bank of Hungary preview: Not there yet

ING Economics ING Economics 23.02.2023 12:09
We are seeing tentative signs of improvement in Hungary's economy, but it's still early days and so we expect central bank policymakers to continue adopting a wait-and-see approach The National Bank of Hungary in Budapest 13% ING's call No change in the base rate The rationale behind our call The National Bank of Hungary (NBH) has made it clear on several occasions that the temporary and targeted measures (introduced in mid-October) will remain until there is a material and permanent improvement in the general risk sentiment. This general risk sentiment is defined by the combination of external risks (war, global monetary policy, energy, general investor sentiment) and internal risks (EU funds, current account imbalance). There has been a lot of improvement in the general situation. When it comes to market sentiment, the market’s view is clearly positive about Hungary; EUR/HUF is now flirting with 380, in contrast with the 400 seen before the last rate-setting meeting. The emerging market relief rally on dropping energy prices has fuelled an improvement in global sentiment as well. However, Hungary is still experiencing high energy prices at the back end, so there has been little relief, so far. And the improved global sentiment around energy prices has only just started to translate into hard evidence: the December trade balance showed a deficit of only €154m (vs €1.2bn in November). The fourth quarter (preliminary) current account deficit came in at €3.95bn, showing a €0.52bn improvement over a quarter. This is the impact of lower energy prices. There is also anecdotal evidence that food prices have started to drop, alongside fuel prices, which makes us think that we’ve already seen the peak in inflation in January of 25.7% year-on-year. Because of this, we expect the National Bank of Hungary to keep its composure at its 28 February meeting and wait for more hard evidence before it starts to communicate about any upcoming pivot. ING's inflation and base rate forecasts for Hungary Source: NBH, ING   Even if the data suggest that the time is right for a change, there is a need to be patient due to the ongoing debate over the reforms needed to unfreeze access to EU funds. Though we see the government settling the dispute regarding the judiciary reform (a horizontal issue, which needs to be cleared before meeting other super milestones), there is just too much uncertainty still about the deal. In such an environment, we see the central bank keeping its guard up, sending hawkish messages and patiently waiting for more proof of improvement regarding external, internal and political topics. In our view, the base rate remains unchanged at 13.00% with no change to the interest rate corridor as well. The targeted, temporary measures will continue as well, as any abrupt change to the structure or to rates could reverse the gains made by the forint, which would hinder the central bank’s task to reach the inflation target over the monetary policy horizon. A trend-like change in external and internal risk sentiment could lead to a better situation by the time the March rate-setting meeting takes place. However, we think that the NBH will wait at least until April to deploy any changes to the targeted, temporary measures. Even if easing starts during the second quarter, the process will be gradual and slow with a pause after the rates merge at 13%. We see the central bank starting regular rate cuts during the fourth quarter, strictly taking care of the real interest rate to remain positive. The main interest rates (%) Source: NBH, ING Our FX and rates call On the rates and bonds side, the global sell-off has hit the Hungarian market hard over the last few days, and the high CPI number and hawkish NBH pushed the whole interest rate swaps (IRS) and Hungarian bonds (HGBs) curve up, disrupting the normalisation process. The NBH appears to be serious about its hawkish tone, and in our view it will be a challenge for the market to start pricing in a central bank rate normalisation again. On the other hand, in the interim, core rates should ease their pressure on the long end of the curve. The question mark is whether we will see a steeper or flatter curve first. At the moment, we are leaning more toward the latter. In either case, however, the direction of the curve movement should be downward. Hungarian yield curve Source: GDMA, ING   On the bond side, although the beginning of the year showed a surprising deficit in the state budget, we remain optimistic that the MinFin target will be met this year. On the funding side, we estimate that the Government Debt Management Agency AKK has issued about 14.2% of planned HGBs, a bit behind Central and Eastern European (CEE) peers. On the other hand, issuance is strong on the retail and FX bond side, so overall we see AKK in a comfortable position. After the global sell-off, the 10y HGB yield got as high as 8.85%, correcting down a bit later, but these levels should attract new buyers again. We still see a better story in the Czech Republic and Romania in the CEE space but remain constructive on HGBs and the positive normalisation story in Hungary. CEE currencies vs EUR (1 Feb = 100%) Source: NBH, ING   The forint continues to maintain a number one position within the CEE region and in our view the reasons why the forint should outperform persist. Higher EUR/USD should improve the outlook for the region as a whole, gas prices are again testing new lows, plus the recent sell-off in the rates space has once again pushed the rate differential in Hungary back to levels from the beginning of the year and pushed FX implied yields back to record levels. Overall, we continue to see a positive story supporting further gains in the forint. However, heavy long positioning remains an obstacle on the way down. In the short term, we expect the NBH meeting may only deliver a small boost to the forint given the clearly hawkish message in January. On the other hand, Moody's ratings review in early March may bring a reminder of the issues still on the table. Moreover, the EU story could again bring some headlines that may not be positive for FX at first glance. Overall, we expect the forint to peg toward the 380 EUR/HUF level in the coming weeks. Read this article on THINK TagsNBH National Bank of Hungary Monetary policy Hungary FX Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Rates Spark: Balancing data and risk factors

ECB suffers financially under its own rate hikes

ING Economics ING Economics 23.02.2023 14:49
By using former risk provisions, the European Central Bank avoided presenting a loss in its 2022 financial accounts Christine Lagarde, president of the European Central Bank   The ECB’s own financials suffered from the monetary policy paradigm shift in 2022. As reported in the ECB’s financial statement for 2022, the ECB had to use €1.6bn from risk provisions made in the past in order to avoid reporting a loss. Now the ECB has reported zero profit. The ECB’s actual losses stem from unrealised price losses on securities held in the own funds and US dollar portfolios owing to increased bond yields. In other words, the sharp increase in bond yields on the back of a broader paradigm shift to fight inflation forced the ECB to make write-downs on its own bond holdings. Even after the 2022 operations, the ECB still has €6.6bn worth of provisions, €8.9bn of capital and €36.1bn in a "revaluation account" designed to cover market losses. In the past, these reserves or risk provisions were used to lower official profits. Now they come in handy. Some national central banks will not be so lucky and are likely to present losses. In recent weeks, some national bank governors have already hinted at potential losses. At first glance, central banks recording losses is nothing to worry about and is a rather technical issue. Central banks can hardly go bust as they can print money or can be recapitalised by shareholders, i.e in a European context in most countries' governments. Read next: Tesla Opens Its Global Engineering Headquarters In Palo Alto, California| FXMAG.COM At second glance, however, in times of rate hikes and quantitative tightening, central banks running losses face credibility issues and could also trigger new speculations about whether or not the ECB should ever return to a “whatever it needs” approach in case new tensions within the eurozone arise again. Read this article on THINK TagsMonetary policy Inflation Eurozone ECB Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Sharp drop in Canadian inflation suggests rates have peaked

Eurodollar may rise to 1.0655, but then resume falling to 1.0575. Pressure from greenback and another decline in crude oil, could make USD/CAD decrease to 1.3670

InstaForex Analysis InstaForex Analysis 23.02.2023 16:35
Markets remain under strong pressure due to expectations of higher Fed interest rates. The released Fed protocol did not show any discrepancies with the resolution that was issued following the last meeting, indicating an almost unanimous decision from the members to raise the key interest rate by 0.25%. It also mentioned that the bank is prepared to continue fighting inflation, which means that if the figure continued to decelerate, interest rates will continue to be raised until it falls to 2%. Such a content could not please market players, but there is one phrase in the minutes that kept the US financial market from continuing its heavy fall. According to the document, inflation seems to have reached its maximum value, so the US equity market closed with mixed dynamics after a very volatile trading session. This indicates that the market assumes that the Fed is likely to act according to circumstances, not hike rates for the sake of mindless pressure on inflation. In fact, if they wanted to, the Fed could have immediately raised rates by 5%. However, the bank wants to bring inflation down to 2% without harming the economy. Markets understand this, which is why there was a prolonged period of consolidation in US stock indices and a halt in dollar. Read next: Tesla Opens Its Global Engineering Headquarters In Palo Alto, California| FXMAG.COM Now, the Fed will act according to incoming economic data, so tomorrow's release of core PCE and US income and expenditures will certainly be taken into consideration. If those show growth, the central bank will continue its rate hike cycle, while markets will resume selling risky assets and government bonds. This will push yields up and support dollar. But if the figures show inflation stagnating or falling slightly in line with expectations, markets will stay afloat and a prolonged period of consolidation should be expected before the release of US inflation data for February. Forecasts for today:     EUR/USD The pair remains under pressure as risk appetite continues to deteriorate due to increasing expectations of further aggressive Fed policy. However, the pair may get some support today if eurozone inflation data shows an increase. The quote may rise to 1.0655, but then resume falling to 1.0575, as the pressure of dollar remains quite strong. USD/CAD The pair is trading above 1.3510. Another decline in oil prices, as well as pressure from dollar, could push the quote to 1.3670. Relevance up to 08:00 2023-02-25 UTC+1 This information is provided to retail and professional clients as part of marketing communication. It does not contain and should not be construed as containing investment advice or investment recommendation or an offer or solicitation to engage in any transaction or strategy in financial instruments. Past performance is not a guarantee or prediction of future performance. Instant Trading EU Ltd. makes no representation and assumes no liability as to the accuracy or completeness of the information provided, or any loss arising from any investment based on analysis, forecast or other information provided by an employee of the Company or otherwise. Full disclaimer is available here. Read more: https://www.instaforex.eu/forex_analysis/335898
Bank of England is expected to hike the rate by 25bp. Kelvin Wong talks Euro against British pound

The EUR/GBP Cross Pair Is Expected Further Downside Movement

TeleTrade Comments TeleTrade Comments 24.02.2023 08:46
EUR/GBP retreats from intraday high, snaps two-day rebound from monthly low. One-week-old resistance line, key Fibonacci retracement level challenge immediate upside. 0.8840 appears a tough nut to crack for the EUR/GBP bulls. Multiple levels surrounding 0.8760 can probe bears afterward. EUR/GBP bears return to the table, after a two-day absence, as the quote eases from the intraday high to 0.8815 during the initial hour of Friday’s European session. In doing so, the cross-currency pair fades bounce off the lowest levels since January 31 while retreating from the convergence of the one-week-long descending trend line and 61.8% Fibonacci retracement level of January 19 to February 03 upside, close to 0.8820 at the latest. Adding strength to the pullback moves is the sluggish RSI (14) near the 50 levels, as well as the pair’s previous downside break of the support lines from late January. As a result, the EUR/GBP bears are all set to revisit the latest trough surrounding 0.8780. However, multiple levels marked during late January could challenge the pair sellers near 0.8760 then after. Should the quote remains weak past 0.8760, the odds of witnessing a fresh low of the year 2023, currently around 0.8720 can’t be ruled out. On the contrary, a successful break of the 0.8820 resistance confluence isn’t an open welcome to the EUR/GBP bulls as the previous support line from January 30, around 0.8830 by the press time, could challenge the upside moves. It’s worth noting that the support-turned-resistance from January 19 joins the 200-Simple Moving Average (SMA) to highlight the 0.8840 as the key upside hurdle. EUR/GBP: Four-hour chart Trend: Further downside expected
Technical Outlook Of The EUR/JPY Pair Movement In Short Term

Technical Outlook Of The EUR/JPY Pair Movement In Short Term

Torben Melsted Torben Melsted 24.02.2023 09:56
EUR/JPY was rejected nicely after the throw-over failure and should continue lower in the days ahead. We are looking for wave C lower towards 134.10 to complete the corrective decline from 148.30 and set the stage for the next impulsive rally higher. Short-term we expect minor resistance at 143.03 to be able to cap the upside for a continuation lower to strong support near 140.00 and ultimately a break below here too for the expected decline towards 134.10.     Relevance up to 09:00 2023-02-27 UTC+1 This information is provided to retail and professional clients as part of marketing communication. It does not contain and should not be construed as containing investment advice or investment recommendation or an offer or solicitation to engage in any transaction or strategy in financial instruments. Past performance is not a guarantee or prediction of future performance. Instant Trading EU Ltd. makes no representation and assumes no liability as to the accuracy or completeness of the information provided, or any loss arising from any investment based on analysis, forecast or other information provided by an employee of the Company or otherwise. Full disclaimer is available here. Read more: https://www.instaforex.eu/forex_analysis/313939
FX Daily: Euro’s attractiveness on the rise

In other words, by the time EU CPI is announced on Thursday, EUR/USD exchange rate may already reflect a slight increase in inflation from 8.5% to 8.6%

Santa Zvaigzne Sproge Santa Zvaigzne Sproge 20.02.2023 15:13
We had an opportunity to ask Santa Zvaigzne-Sproge about the incoming EU CPI release. A slight uptick in Eurozone inflation is expected, but would the euro care about it on Thursday? Inflation is one of many factors that may have an effect on the euro. Generally, higher inflation puts downward pressure on the domestic currency as its purchasing power diminishes. On the other hand, the ECB has stipulated that its fundamental goal is to reduce inflation via monetary tightening, which includes rising interest rates. Rising interest rates have the opposite effect – it pushes the domestic currency higher as the money becomes “more expensive” and less available. If the reported EU CPI data is reported at the expected level of 8.6%, it may not have any additional effect on the euro Another factor to remember is that markets tend to react not only to the absolute numbers of macroeconomic news (such as EU CPI) but also to the surprise compared to the expected data. This means that if the reported EU CPI data is reported at the expected level of 8.6%, it may not have any additional effect on the euro despite an uptick in inflation compared to the previous month. This goes hand in hand with the opinion that in case a scenario is possible to come true, the markets may already reflect this scenario before the actual news comes out. In other words, by the time EU CPI is announced on Thursday, EUR/USD exchange rate may already reflect a slight increase in inflation from 8.5% to 8.6% – and therefore may not have a considerable effect on the euro once the news comes out. As higher inflation may push the ECB to continue rising interest rates – and therefore eliminate the downward pressure on the euro – higher-than-expected CPI data may have a limited downward effect on the euro. Read next: The US manufacturing and services PMIs are expected to reach 47.4 and 47.3 respectively| FXMAG.COM Taking into consideration all of the above, the largest potential effect on the euro may have an unexpected decrease in inflation pushing the euro higher as it may indicate that the ECB’s monetary tightening is working, and the potential for a “soft landing” may be increasing. Santa Zvaigzne-Sproge, CFA, Head of Investment Advice Department at Conotoxia Ltd. (Conotoxia investment service) Materials, analysis, and opinions contained, referenced, or provided herein are intended solely for informational and educational purposes. The personal opinion of the author does not represent and should not be constructed as a statement, or investment advice made by Conotoxia Ltd. All indiscriminate reliance on illustrative or informational materials may lead to losses. Past performance is not a reliable indicator of future results. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 76,41% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Central Bank Policies: Hawkish Fed vs. Dovish Others"

FX Daily: Sticky inflation keeps dollar higher for longer

ING Economics ING Economics 27.02.2023 09:00
The dollar remains broadly bid after Friday's release of US PCE inflation data argued that the Fed needed to push rates higher and for longer. 25bp Fed hikes are now priced for March, May and June. Expect the dollar to hold gains this week, although China's February PMIs (Wednesday) and the US ISM Services (Friday) may prove a challenge USD: Hard to argue with dollar strength near term Friday's release of US core PCE inflation data for January completed what has been a very bond bearish/dollar bullish set of US data this month. We have learned that US inflation is proving much stickier and US activity firmer than we were led to believe in December and January. Understandably, investors are now taking the Federal Reserve hawks more seriously and have priced three more 25bp rate hikes from the Fed in March, May, and June. This hawkish run of data also questions what the new set of Fed Dot Plots will look like when they are released on 22 March. The Fed's current median expectation sees Fed Funds at 5.00-5.25% by the end of 2023 and 4.00-4.25% by end-24. Both of these projections could be revised higher. This prospect could well dissuade investors from re-entering dollar short positions over the next few weeks. At the same time, the US 2-10 year yield curve is now inverted the most since the Paul Volcker tightening of the mid-1980s - creating a headwind to risk assets. It is hard to see global equity markets pushing much further ahead until there are clearer signs that the Fed - and other central banks - can relent in their tightening cycles. For this week, we think the macro highlights will be the ISM business confidence data in the US. The manufacturing component (released Wednesday) is expected to remain soft at 48. More interesting will be Friday's release of ISM services. Was the bounceback in the January services release merely weather-related or did it reflect much better optimism? This could help set the trend in US data through March. Investors will also be looking at the Chinese February PMIs released on Wednesday. A strong showing here could provide some support to the renminbi and to activity currencies in general - although as we discussed on Friday, geopolitics does seem to be weighing on the renminbi too. What does this all mean for the dollar? DXY broke above 105.00 on Friday and the multi-week bias looks towards resistance at the 106.20/106.50 area - some 1.00/1.20% above current levels. Through March we will better assess whether these prove the best dollar levels of the year. Chris Turner EUR: Dollar strength to keep EUR/USD heavy Like the Fed, the European Central Bank remains very much in hawkish mode. Investors fully subscribe to the ECB's message of a 50bp hike on 16 March and then price a further 80bp of tightening into year-end. This should be the key difference between the Fed and the ECB cycles. We think the Fed could be in a position to cut by year-end, while the ECB looks likely to keep rates at their peak throughout the majority of 2024. There is not too much eurozone data this week but today sees eurozone business and consumer confidence for February - all expected to improve modestly. For EUR/USD, we think the strong dollar view will dominate. Expect 1.0500 to be tested, with a chance that it briefly trades down to the 1.0460 area.  Chris Turner Read next: The Effect Of Shifting The Aggregate Demand Curve - Demand Shocks| FXMAG.COM GBP: Northern Ireland trade deal yet to provide a sterling boost So far, sterling seems to be taking little notice of potentially improved trading and political relations between the UK and the EU. Later today, expectations are building that a deal will get announced between the two to soften the trade barriers on the Irish sea. It will be interesting to see whether this will be sufficient to get the DUP back into government in Northern Ireland.  An improvement in UK-EU relations probably does little for sterling in that it will not improve the broader trading environment between the UK and the EU. Instead, the macro-monetary settings of the two will continue to dominate. The ECB looks like it has much further to hike than the Bank of England and suggests that EUR/GBP continues to find support under 0.88. GBP/USD will be vulnerable to continued dollar strength and risks a move to 1.1850 this week. Chris Turner CEE: NBH to assure market that it is too early for change More action returns to the region this week. We start on Tuesday with the National Bank of Hungary meeting. In line with the market, we expect rates to remain unchanged. There is no discussion on the macro side. Central bankers are waiting for a tangible and sustained improvement in domestic and external risks and it is clear that the developments so far are positive but still insufficient for the NBH to reverse course. From a market perspective, however, the main question is whether the central bank can maintain the hawkish tone it set in January. PMI indicators for February across the region will be released on Wednesday. We expect a slight improvement in sentiment in Poland and the Czech Republic and a deterioration in Hungary. We will also see the final GDP numbers for the fourth quarter of last year across the region during this week. On the ratings side, we have two interesting reviews in the CEE region this week - Moody’s in Hungary and Fitch in the Czech Republic. More interestingly, Hungary received a negative outlook and rating downgrade recently from Fitch and S&P and we expect a negative outlook from Moody’s as well. In the Czech Republic, Fitch downgraded the outlook already last year to negative. In our view, the risk of a rating downgrade has diminished since the last review in October but is still significant. In the FX market, this week the main focus will be on the Hungarian forint to see if it can extend its rally. The main driver will be NBH and its efforts to maintain a hawkish tone. Given market expectations, the central bank may only deliver a small push to the forint, but it's still worth being bullish and testing new levels below 380 EUR/HUF, in our view. However, at the end of the week, Moody’s will remind us that there are still a number of issues on the table in Hungary led by EU money access, which should bring the forint back to or above 380 EUR/HUF. Frantisek Taborsky Read this article on THINK Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more  
UBS buys Credit Suisse for $3.2bn. Last week was the worst one for equity markets in 2023

Analysis Of The EUR/CHF Pair By Economists At Commerzbank

TeleTrade Comments TeleTrade Comments 27.02.2023 09:59
Economists at Commerzbank see upside potential in EUR/CHF, but only moderately. CHF is likely to be less in demand as a safe haven “With the ECB likely to raise its key rate more strongly by the middle of the year, we see depreciation pressure on the Swiss Franc against the EUR in the coming months.” “Moreover, due to easing concerns about an energy crisis and recession in Europe, the CHF is likely to be less in demand as a safe haven.” “The depreciation potential of the Franc is likely to remain limited in view of the SNB and possible interventions against an excessively weak franc though, especially if the inflation picture should cloud over again contrary to our forecasts.” Source: Commerzbank Research
EUR/USD: Examples of things that could get the market moving are US treasury yields moving out of the range on data improving or deteriorating

Eurozone monetary tightening progresses at the start of the year

ING Economics ING Economics 27.02.2023 10:35
The January snapshot of monetary policy at work continues to show that tightening efforts are having a clear effect on money supply and private-sector borrowing, which will have a dampening impact on economic growth and inflation in 2023. We consider the impact of the hike cycle an underappreciated downside to economic activity for this year   Looking at the January numbers in more detail, we see continued rapid declines in the growth of the money supply. Broad money (M3) grew by 3.5% year-on-year, down from 4.1% in January. The more narrow money aggregate M1, which is considered to be a good leading indicator of economic activity, contracted for the first time in the history of the series, by -0.7%. Business (non-financial corporate) borrowing saw a sharp contraction in December and stagnated at that level in January (month-on-month growth of 0%). Business borrowing continued to remain strong in the second half of 2022 as working capital needs caused lending to surge, but we now see a correction that is more in line with recession worries and higher rates as supply chain problems are fading. Household borrowing slightly ticked up in January but remains on a strong downward trend. Year-on-year growth rates fell from 3.8 to 3.6% as borrowing demand for house purchases continues to weaken. The monthly growth rate is just 0.2% at the moment. Read next: Pfizer Is In The Early Stages Of An Acquisition Of Biotech Company Seagen, Twitter's Staff Has Shrunk Since Elon Musk Took Over| FXMAG.COM Overall, this shows that the impact of monetary tightening is steady so far and is set to continue from here on. The ECB's own bank lending survey indicated a further tightening of credit standards and weaker demand for borrowing going forward. Also, the bank will start quantitative tightening in March, which will have a further dampening effect on the money supply. With more interest rate hikes to come, expect the impact of tightening efforts on economic activity to be felt more as 2023 progresses. Read this article on THINK TagsGDP Eurozone ECB Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
ECB's Christine Lagarde not to announce the end of rate hikes?

Eurozone sentiment stable in February

ING Economics ING Economics 27.02.2023 13:19
The economic sentiment indicator showed a slight decline from 99.8 in January to 99.7 in February. This broadly stable reading casts some doubt on the pace of recovery in the first quarter. The inflation outlook from the survey is a mixed bag with continued high services inflation in the making, but goods inflation is set to drop from here Goods inflation is set to drop from here   The economic sentiment indicator for February seems slightly less optimistic than the PMI. The broad picture that remains is one that shows an economy still struggling with high inflation but profiting from fading supply-side problems. This leaves economic growth around stagnation for the winter months. The industrial survey was slightly less optimistic than in January, the index stood at 0.5 compared to 1.2. This was mainly because of weaker production expectations and a contracting order book component. Recent production surged though, from 0.6 to 5.2 in February, likely related to supply chain problems easing, which causes some catch-up production. That will boost first-quarter growth, but the survey does not give the impression that this is a trend that can last much longer. Read next: Earnings season isn't done yet! HP, AMC, Rivian and Target to report this week| FXMAG.COM For services, we saw a more cautious survey altogether. Both recent demand and expected demand weakened in February, though moderately. While employment has recently surged in services, more moderate hiring is on the cards for the months ahead. This is a bit at odds with a more optimistic PMI from last week, so we’re cautious about over-interpreting either but it does somewhat dampen expectations for the near-term outlook. Selling price expectations show a clear divergence between goods and services, which is key for core inflation developments ahead. We see a strong decline in the indicator for goods price expectations as easing supply chain problems and lower energy costs have caused input price growth to plummet. Services expectations are higher and more influenced by increasing wage costs, which should be a key factor for the ECB to focus on moving forward. Perhaps some good news there as well; while the number of businesses increasing prices remains at a high level, the indicator did reach its lowest level since August. Read this article on THINK TagsInflation GDP Eurozone Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
ECB enters final stage of tightening cycle

Bank of Japan capped the 10-year on-the-run bond at 0.5%, Eurozone money supply growth last month was weaker than expected

Marc Chandler Marc Chandler 27.02.2023 15:07
February 27, 2023  $USD, Canada, China, Currency Movement, Eurozone, Federal Reserve, Germany, Japan, Mexico, Northern Ireland protocol, UK Overview: After last week's flurry of activity that saw the US dollar extend its recovery, it has begun off the new week largely consolidating in relatively narrow ranges. The Australian and New Zealand dollar's remains softer, and the Swiss franc is virtually flat, but the other G10 currencies, led by sterling are posting small gains. A break-through on the Northern Ireland protocol, which has been rumored for a more than a week may be announced shortly. The news stream is light and conducive to the consolidative tone, but the dollar's recovery does not seem complete. Despite weekend protests against AMLO's downsizing of the electoral watchdog and rising tensions with the US over its steel exports, the Mexican peso is the strongest of the emerging market currencies, outside of the Russian rouble and is near the five-year highs set last week.  Asia Pacific equities were mostly lower after the pre-weekend losses in North America and Europe. Europe's Stoxx 600 has recouped its decline from the end of last week, and US index futures are trading with a firmer bias. Benchmark 10-year yields are firmer, mostly 1-3 bp higher in the US (near 4.84%) and Europe. UK Gilts are an exception and are five basis points higher near 3.65%. Gold is flat near $1811. It is off about 3% over the past two weeks. April WTI is also flat near $76.30. It has fallen by around 4.5% over the past couple of weeks. News of the US 200% tariff on Russian aluminum (and derivatives) seem to be having little immediate impact. Asia Pacific The BOJ caps the 10-year on-the-run bond at 0.50%. The generic yield has not settled below there since February 9. The presumed near governor of the Bank of Japan, Ueda spoke for the second day before the Diet. He did not add much to what he said last week. He is prepared to adjust monetary policy when inflation is sustainably above 2%. Yet, Ueda agrees that despite the headline being more than twice as high, it is not sustainable as it reflect cost-push inflation and not strong demand. Moreover, he expects inflation to begin falling. Tokyo's January CPI at the end of the week will be the first test of this hypothesis, which we share. It is a very good indicator the national figures. We identified three forces that should begin easing Japanese price pressures:  government subsidies, falling energy prices, and the appreciation of the yen on a trade-weighted basis.  During the 2008-2010 Global Financial Crisis, a common meme was to draw comparisons between the US/Europe and Japan. While Japan had already been there in terms of expanding the central bank's balance sheet as the zero-bound of interest rates were approached. It was not, though, the first country to adopt a negative policy rate. That dubious honor goes to Denmark in 2012. A op-ed in the Financial Times, citing bank research, suggests it is now China who is turning Japanese.  Of course, the collapse of Japan's property bubble more than three decades ago still seems to be the go-to comparison. Japan and China (along with several countries in East Asia) shared a common development model, which in political economy is known as export oriented. Import substitution, the other major model was favored after WWII, but the experience of several Latam countries that were arguably large enough to try it, further encouraged East Asian model of export-driven industrialization. The scale that China must operate on given its size is overwhelming. And it would be regardless of its political structure. One key difference is what comes next. Japan has a lost decade. China most likely will not. The IMF projects Chinese will expand by 5.2%, which is also the median forecast of economists in Bloomberg's survey. We suspect that if they are wrong, it is on the low side. Coming from the annual National People's Congress (starting March 5) new economic targets will announced. The dollar is consolidating the pre-weekend gain that carried it to about JPY136.50 and is in a little more than half of a yen range above JPY136.00. The JPY136.65 area corresponds to the (38.2%) retracement of the dollar's decline since the multiyear high set in late October near JPY152.00 and the 200-day moving average is near JPY137.15. A break of JPY136.00 could see a pullback toward JPY135.35-50. That said, we like it higher and suggest potential toward JPY140.00. The Australian dollar is seeing last week's 2.2% drop extended. It had begun last week testing the $0.6900-20 area and today slipped slightly below $0.6700. The low for the year set on January 3 a little above $0.6685. The lower Bollinger Band is around $0.6705. The selling pressure does not appear exhausted, and the $0.6720-40 area may now cap upticks. The dollar is snapping a four-day advance against the Chinese yuan, and it is only the second decline since February 9. The pullback is only after the greenback poked above CNY6.9730, a two-month high. The PBOC set the dollar's reference rate at CNY6.9572, well above the pre-weekend fix of CNY6.8942. This reflects the dollar's rally after the mainland's regular session ended on Friday. The fix was tight to market expectations (CNY6.9570). The yuan has fallen by about 2.9% here in 2023, which is a middling performance in Asia and among emerging market currencies. Europe Part of the narrative that helped feed the euro's recovery, especially its latter phase, from the multi-year low in late September (~$0.9535) to the early February high (~$1.1035) was reduced left-hand tail risk (dramatic negative outcome). The relatively warm winter, conservation, lower energy prices eased fears. Now as the market is pricing the outlook for Fed policy, the economic outlook in Europe is less certain. Initially, Q4 22 German GDP was expected to be flat. It came in at -0.2%. At the end of last week, it was revised to -0.4%. Consumption and capital spending were weaker than projected. Although the flash February composite PMI jumped back above the 50 boom/bust level for the first time since last June, and the confidence measures have been tracking improvement, the economy may still be contracting. The median forecast in Bloomberg's survey projects a 0.4% contraction this quarter. The German 2-year yield rose nearly 12 bp before the weekend and after GDP report and is up a few more basis points today. The yield has risen by 50 bp in its three-week advance. Read next: EUR/USD Pair Is Trading Around 1.0560, USD/JPY Is Above 136.20, GBP/USD Gained| FXMAG.COM The data highlight of the week is the preliminary February CPI. Given the base effect, the 0.5% monthly rise will allow the year-over-year headline rate to ease to 8.2% from 8.6%. Recall in February 2022, the eurozone's CPI rose by 0.9%. More significantly, in March 2022 consumer prices surged by 2.4%. As this drops out of the 12-month comparison, the headline rate will fall sharply. The more pressing problem comes from the core rate, which reached a new cyclical high in January of 5.3%. The median projection in Bloomberg' survey is for it to be unchanged in February. Eurozone money supply growth last month was weaker than expected (3.5% vs. 3.9% median forecast in Bloomberg's survey and 4.1% in December) and business confidence reports were softer than expected. However, the euro is stabilizing in a narrow range after making a marginal new low closer to $1.0530. It has approached $1.0570. Resistance may extend to $1.0580. There are options for around 1.65 bln euros that expire today at $1.05. There is another set of options (~1.3 bln euros) that expire there tomorrow. A break-through on the Northern Ireland protocol may be announced shortly but the prospects do not appear to be lending sterling much support. It is holding below $1.20 after taking out the pre-weekend low by a few hundredths of a cent as it frayed the 200-day moving average (slightly below $1.1930). The intrasession momentum indicators are over-extended, warning of the follow-through buying in North America may be limited. America The strength of personal consumption last month (1.8% in nominal terms and 1.1% in real terms) coupled with firmer than expected deflators strengthen the conviction of the direction the market was already moving. The two-year note yield jumped almost 12 bp to rise above 4.80%, for the first time since 2007. The swaps market pushed a little closer to a 5.50% terminal Fed funds rate. Good economic news is still seen as negative for the equity market and the major US indices fell by at least one percent ahead of the weekend. The 2-10-year inversion is testing the area (a couple basis points around -85 bp) that held in early December and earlier this month, which is the most in more than 40 years. On the other hand, of note is Fed Chair Powell's preferred measure the three-month bill yield compared with its 18-month forward rate. It is about 21 bp inverted but is has climbed steadily as the economic data strengthened. It has been around -100 bp before the January employment report. We expect the next batch of high-frequency data to provide evidence for our hypothesis that the market is getting carried away by the recent reports. The next batch of data begins today with the January durable goods orders. Due to the volatility of commercial aircraft orders, the headline rate is seen falling by 4% after a 5.6% rise at the end of last year. However, excluding aircraft and military, capital goods orders are expected to have fallen for the third consecutive month and the fourth time in the past five months. Although auto sales likely slowed and the ISM services, which provided a 1-2 punch with the jobs report on February 3, the market may need to see the next employment report (March 10) to take the January-fluke hypothesis more seriously.   Canada reports Q4 current account figures. A deficit in line with the Q3 shortfall of C$11 bln is expected. It would translate into about an CAD18 bln deficit for the year. It recorded a nearly C$20 bln merchandise trade surplus. It will feed into the Q4 GDP estimate due tomorrow. Still, the Canadian dollar may see marginal impact from the report. It is consolidating last week's losses that saw the greenback climb to CAD1.3665. It had begun the week near CAD1.3440. Mexico reports its January trade balance. Last year, Mexico recorded a trade deficit of about $26.5 bln. It has run a small deficit in 2019 and large surplus in 2020. The deficit returned in 2021. Recall that January 2022, Mexico posted a record deficit of nearly $6.3 bln. Note that Mexico's steel exports to the US have become a potential flashpoint, and there were large demonstrations over the weekend against the dilution of the electoral watchdog. The dollar's surge saw it test MXN18.50 at the end of last week. It has come back offered and is probing the MXN18.35 area. The greenback appeared to carve out a little shelf near MXN18.30-MXN18.33 last week. Stops below there still seem vulnerable.      Disclaimer
Bank of England is expected to hike the rate by 25bp. Kelvin Wong talks Euro against British pound

The EUR/GBP Cross Pair's Recovery Remains Elusive

TeleTrade Comments TeleTrade Comments 28.02.2023 08:43
EUR/GBP remains depressed around 0.8790, refreshing the monthly low, as traders brace for Tuesday’s European session. In doing so, the cross-currency pair extends the previous day’s pullback from the 50-DMA hurdle amid bearish MACD signals. Also keeping the EUR/GBP sellers hopeful is the pair’s lower high formation, as portrayed by a three-week-old descending resistance line surrounding 0.8850 by the press time. That said, the pair sellers appear well-set to drop towards an upward-sloping support line from December 19, 2022, close to 0.8760. However, the pair’s further downside is likely to be limited by the 100-DMA support level near 0.8750. In a case where the cross-currency pair remains weak past 0.8750, the lows marked in January 2023 and late December 2022, respectively near 0.8720 and 0.8690, could act as additional downside filters. Meanwhile, EUR/GBP recovery remains elusive unless the quote stays below the 50-DMA hurdle of 0.8831. Even if the quote rises past 0.8831, the aforementioned three-week-old resistance line could challenge the pair buyers near 0.8850. Following that, the mid-February swing high surrounding 0.8930 appears the last defense of the EUR/GBP bears. EUR/GBP: Daily chart Trend: Further downside expected
Impact of Declining Confidence: Italian Business Sentiment in August

FX Daily: Risk sentiment too fragile for a big dollar correction

ING Economics ING Economics 28.02.2023 09:16
The dollar is restrengthening this morning after a soft start to the week. Still, the data flow is not endorsing any unwinding of Fed hawkish bets and further improvements in risk sentiment may become harder to sustain. Today, keep an eye on French and Spanish inflation, and on the Norges Bank FX purchases announcement UK PM Rishi Sunak and EC President Ursula von der Leyen at a press conference on a new post-Brexit trade arrangement for Northern Ireland USD: Not trusting a big rebound in risk sentiment The dollar is trading stronger across the board this morning after suffering a correction yesterday that was due to a rebound in global equities and probably some month-end flows. We have recently highlighted how the narrative for the greenback has turned more structurally supportive, meaning that a return to a USD downtrend will take time and may only be very gradual. That is unless incoming data start painting a different picture for the US economic and inflation outlook, which would force some unwinding of recent hawkish bets on the Fed. This week’s key data releases will be the ISM surveys, and in particular Friday’s ISM services index, which served as a benchmark for the rapid swings in US growth sentiment over the past two prints. Still, we have some interesting data points to monitor today. The Conference Board consumer confidence indicator is expected to rise after a small contraction in January, the Richmond Fed Manufacturing Index is also expected to improve, while wholesale inventories may hold at 0.1% month-on-month in the January read. US data may not move the market dramatically today, so the dollar may be primarily driven by global risk sentiment. We struggle to see a material and sustained recovery in global equities in such a worsening valuation environment, and with data still supporting the Fed’s hawks for now, the dollar’s short-term bias still appears neutral/modestly bullish. A return above 105.00 in DXY seems possible in the ISM services release on Friday. Francesco Pesole EUR: Regional CPI figures in focus Inflation figures for January are the main highlight of the week in the eurozone, and today’s numbers out of France and Spain may already start moving the market. Remember that inflation rebounded in both of those countries in January, which underpinned the recent ECB hawkish narrative. Today, consensus sees a stabilisation in the EU-harmonised French inflation at 7.0% and a slowdown from 5.9% to 5.7% in Spain. Unless we see a material surprise on the downside – that would suggest a more widespread easing in price pressures across the eurozone – today’s regional CPI figures may fail to dent hawkish expectations for ECB tightening. Markets are currently pricing in around 130-140bp of tightening before reaching the peak. This could offer some floor to the euro, and we expect any re-strengthening of the dollar to see high-beta commodity currencies more at risk than the euro for the time being. Still, the risks of 1.0500 being tested in the near term remain elevated. Francesco Pesole GBP: Impact of new Northern Ireland deal may be only short-lived The pound is one of the best-performing currencies since the start of the week after the confirmation of a new UK-EU deal on Northern Ireland. The “Windsor Framework” reviews some sticky points of the existing NI protocol, essentially reducing the number of checks on trade between Northern Ireland and the rest of the UK. The direct impact on the UK economy should not be significant, but markets are probably welcoming the conciliatory steps in UK-EU trade relationships. It seems hard, however, that the pound will find sustained support simply based on the new NI deal. The central bank story should instead remain the most central driver of GBP, and given the lack of data today, markets will watch three Bank of England speakers today: Jon Cunliffe, Huw Pill and Catherine Mann. A 25bp move in March is fully in the price, and the debate appears to be much more centred on whether the Bank will need to keep tightening beyond March: markets are definitely swinging on the hawkish side, expecting a total of 80bp of tightening before reaching a peak. For now, the global central bank narrative and improving UK data are not giving many reasons to unwind such hawkish expectations, and the pound may continue to prove more resilient than other pro-cyclical currencies. Francesco Pesole Scandinavia: Grim data in Sweden and Norges Bank FX sales in focus Swedish growth data came on the soft side this morning. The second print of fourth-quarter data showed a larger contraction (0.9%) than previously estimated (0.6%). Although this is clearly backward-looking data, the ongoing tightening by the Riksbank, a very fragile housing market and high inflation continue to point to a rather grim economic outlook in Sweden. Remember that we are approaching the end of wage negotiations in Sweden, which may suggest even more monetary tightening will be required. We see the recent good performance of SEK as unsustainable unless data start pointing at an improvement in the growth outlook. A return to 11.10+ in EUR/SEK (paired with elevated volatility) is a tangible possibility in the coming weeks. In Norway, we’ll keep a close eye on Norges Bank’s announcement of daily FX purchases for the month of March this morning. Net purchases were increased to 1.9bn NOK for February after three months of reductions from the 4.3bn peak in October 2022. With NOK being the worst-performing currency in G10 this year and risk sentiment instability continuing to pose downside threats (remember the krone is the least liquid currency in G10), some support in the shape of lower FX purchases may come from Norges Bank today. This may avert – or at least delay – another decisive break above 11.00 in EUR/NOK. Francesco Pesole Read this article on THINK TagsFX Dollar Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
ECB cheat sheet: Difficult to pull away from the Fed

New Zealand dollar did better than AUD last week. Riksbank's minutes were seen hawkish

Enrique Díaz-Álvarez Enrique Díaz-Álvarez 28.02.2023 09:33
Evidence continues to accumulate that inflation worldwide is far from tamed, and that increases in rates so far have been inadequate to the task of bringing it back to target. Inflation data is again surprising to the upside, economic growth is rebounding worldwide and labour markets remain very tight. In this context, a 6% handle in terminal rates remains a distinct possibility, and not just in the US. Markets are not taking it well. Bonds and stocks are again falling together, and the dollar is rallying on the back of rising expectations for Federal Reserve rates and its status as a safe-haven. The dollar rallied strongly against all G10 currencies, and most major emerging market ones.   This week, attention will be focused on key economic data coming out later in the week, particularly out of the Eurozone. The global PMIs of economic activity will be out on Friday, though this should move little from the preliminary numbers already released. The day before, a critical flash inflation report out of the Eurozone for the month of February. Another upward surprise here may propel market pricing of the Eurozone terminal rate past the 4% level, which we think is still modest considering the task at hand for the ECB. We would expect that to buoy the euro back towards the top of the recent range. Figure 1: G10 FX Performance Tracker [base: USD] (1 week) Source: Refinitiv Datastream Date: 27/02/2023 GBP Last week’s UK PMIs of business activity provided a strong positive surprise, swinging back squarely towards expansion for the first time in eight months and contradicting directly the recent recession narrative. While sterling lost ground against the US dollar, as did every other G10 currency, it managed to end up near the top of the performance rankings. Figure 2: UK PMIs (2021 – 2023) Source: Refinitiv Datastream Date: 27/02/2023 Sentiment seems so bearish on the pound that it’s hard to see who the next seller will be, and there is also some optimism in the air around talks to finalise a Brexit agreement on trade arrangements with Northern Ireland with the European Union. There isn’t much on the docket this week in the UK, so expect the pound to trade off events elsewhere. EUR Data flow out of the Eurozone last week should have put to bed any notions that the European Central Bank is near the end of the hiking cycle. The PMIs of economic activity for February surprised squarely to the upside and effectively ended any possibility of a Eurozone recession, in our view. Further, the inflation report was revised upwards, both in its core and headline components. This week we expect more of the same, with a flash prices report that will show, again, no sign of a downward trend in core inflation. The ECB, as we expected, is flagging increasingly the stickiness of this key inflation sub index as a source of concern and justification for its hawkish rhetoric. We expect this to put a floor under the common currency soon. USD Economic data out of the US confirmed that the economy is still firing on all cylinders. Data on the housing market and business and consumer sentiment all surprised to the upside. More importantly, so did the Federal Reserve’s preferred inflation gauge, the PCE index, which has erased any sign of a downward trend and actually appears to be on the rebound. Figure 3: US PCE Index (2016 – 2023) Source: Refinitiv Datastream Date: 27/02/2023 There isn’t much on the calendar in the US this week, and markets are focusing on the next critical data point in the week following, the labour market report for February. Therefore, speeches from Federal Reserve officials will be in focus this week. We expect most communications to once again strike a hawkish tone, keeping the door open to at least three more 25bp rate hikes from the FOMC at the next three policy meetings in March, May and June. JPY The yen was one of the underperformers in the G10 last week. Newly appointed Bank of Japan governor Ueda, who will assume the post in April, struck a rather dovish tone during the Lower House hearings on Friday. There has been intense speculation that the BoJ will begin normalising rates later in the year, though Ueda stressed that policy will remain loose for the time being, while failing to comment on the possibility of higher rates. This lack of a hawkish shift has somewhat alarmed yen bulls, and partly contributed to the recent sell-off in the yen. February inflation data will be released in Japan on Friday, with investors bracing for another fresh multi-dace high in the critical core index. CHF Despite a good start, the Swiss franc ended last week lower against the euro and underperformed most of its G10 peers. At least part of this underperformance may be due to the widening gap in interest rate expectations between Switzerland and its peers. The market expects higher rates than before, but the extent of recent repricing has been less significant than in the US or the Eurozone. Read next: Pfizer Is In The Early Stages Of An Acquisition Of Biotech Company Seagen, Twitter's Staff Has Shrunk Since Elon Musk Took Over| FXMAG.COM In contrast to the previous rather quiet week, this one promises to be quite interesting in terms of macroeconomic releases from Switzerland. The focus will be on the fourth quarter GDP data (Tuesday) and retail sales and PMI data (Wednesday and Thursday respectively). Solid readings may support the currency, as on the one hand, they could point to a ‘soft landing’, and on the other add the arguments in favour of more aggressive monetary policy tightening. AUD Risk-sensitive currencies sold off hard against the US dollar last week, led by the Australian dollar in the G10, which sank by around 3%. Last week’s Reserve Bank of Australia meeting minutes were actually rather hawkish. RBA members stressed their view that additional rate hikes would likely be required in the coming months, citing the upside surprises in wages and inflation. The bank even acknowledged that discussions were had on the possibility of a 50bp hike at the last meeting, and that a pause in the tightening cycle was not an option on the table. Investors shrugged off these hawkish remarks in favour of news elsewhere, notably the waning in optimism surrounding China’s economic recovery. Fourth quarter GDP data will be released in Australia on Wednesday, as will the monthly CPI print for January. Upside surprises in either or both of the upcoming growth and inflation readings would reinforce the narrative that the RBA still has some way to go in raising rates, and could provide some respite to the recent move lower in AUD. NZD The New Zealand dollar held up better than its Australian counterpart last week, in no small part due to the hawkish message from the RBNZ. New Zealand’s central bank raised rates by another 50bps last week, while noting that core inflation remains too high and that near-term inflation expectations were elevated. The bank noted that it was too soon to ascertain the economic implications of the recent cyclone, though the weather disaster is likely to keep price pressures elevated and make it harder to the RBNZ to bring down rates of inflation in a sustainable manner. Figure 4: RBNZ Base Rate [%] (2010 – 2023) Source: Refinitiv Datastream Date: 27/02/2023 Markets are currently only pricing in a 25bp move at the next meeting in April, though we suspect that the central bank will place greater emphasis on the inflation implications of the cyclone, rather than growth, and that another 50bp hike is very much on the table. CAD Continued signs of a downtrend in last Tuesday’s inflation data can be seen as a bearish signal for CAD, as it should take some pressure off the Bank of Canada to continue raising interest rates. Markets see an outside chance of one more hike from the BoC at the next couple of meetings, though we continue to think that it will stand pat for now, particularly given that core inflation has shown encouraging signs of trending back towards the bank’s target. Attention this week will be on a handful of macroeconomic data releases in Canada, notably Tuesday’s Q4 GDP data print and Wednesday’s manufacturing PMI. SEK Last week’s meeting minutes from the Riksbank were seen as hawkish, reinforcing the recent shift from new governor Thadeen. The krona outperformed its high-risk major peers in response to heightened rate hike bets, and was able to end the week around the middle of the G10 performance tracker. We suspect that volatility levels in SEK could be ratcheted up a notch or two this week, with a handful of data releases likely to be closely watched by market participants. We will be keeping a close eye on Tuesday’s fourth quarter GDP print and, perhaps more importantly given their timeliness, the latest manufacturing and services PMIs on Wednesday and Friday respectively. NOK There was little in the way of major market moving news out of Norway last week, with the krone largely driven by general market sentiment. Global oil prices, which tend to be a key factor underlying NOK performance, also ended the week more-or-less unchanged. This can also partly explain the limited volatility in EUR/NOK. We should have slightly more to report next Monday, with a handful of economic data releases scheduled for this week. This includes January retail sales (Monday), the manufacturing PMI (Wednesday) and labour report (Friday). CNY The yuan spent last week on the backfoot, selling off by more than 1% against a broadly stronger US dollar. USD/CNY rose to its highest level since December, continuing its move toward the key psychological level of 7.0. The yuan also underperformed most of its emerging market peers. While a large part of the shift in USD/CNY can be attributed to the stronger greenback, some of it appears to be due to concerns over US-China relations in the context of Taiwan. The topic came back into focus after the Wall Street Journal reported that the US is positioning to increase its military presence on the island to 100-200 troops from around 30 a year ago. This week will be a treat for China watchers, as fresh PMI data will give us a better idea of the pace of recovery in the Chinese economy. January data was impressive, and we have reasons to believe February’s readings will indicate a vigorous rebound after the end to zero-COVID. The NBS data will be released on Wednesday, and the Caixin PMIs on Wednesday and Friday. To stay up to date with our publications, please choose one of the below: 📩 Click here to receive the latest market updates👉 Our LinkedIn page for the latest news✍️ Our Blog page for other FX market reports 🔊 Stay up to date with our podcast FXTalk Source: Dollar rebound continues as inflation fears return to markets | Ebury UK
Rates Spark: Nothing new on the dovish front

Jason Sen talks NZD/USD, USD/JPY, EUR/USD and more - February 28th, 2023

Jason Sen Jason Sen 28.02.2023 10:10
Failure to hold above 6730 risks a retest of 6700/6695. A break lower can target 6670/60. NZDUSD made a low for the day 11 pips below 38.2% support at 6150/40 & the pair is recovering towards first resistance at 6190/6200. A high for the day possible here but shorts need stops above 6215. A break higher can target 6145/55. Shorts at 6190/6200 can target 6150/40 for profit taking. Longs need stops below 6125. (Let's see if we establish a new range from 6150/40 up to 6190/6200). Be ready to sell a break below 6125 to target 6100/6090, probably as far as 6040/30 for profit taking on shorts. CADJPY took a long time to finally reach my target & Fibonacci resistance at 100.55/65. A Doji yesterday suggests we will struggle here in overbought conditions. Shorts need stops above 100.80. A break higher sees 100.65/55 act as support to target 101.25/35. Shorts at 100.55/65 can target 100.00/9990, perhaps as far as a buying opportunity at 9950/40. Longs need stops below 9920. USDJPY longs at buying opportunity at 134.10/133.90 hit my target of 135.45/55 & 135.80/90 before reaching strong resistance at 136.65/85. What a great run for our longs!! Shorts need stops above 137.10. A break higher is a buy signal for this week targeting 138.00/20. Read next: Altria Is Trying To Purchase E-Cigarette Startup NJOY| FXMAG.COM Shorts at 136.65/85 can target 136.00, perhaps as far as first support at 135.50/30 for profit taking. Longs need stops below 135.15. NZDJPY remains in a tight sideways range - only useful for scalpers. Resistance again at 8450/80. A break above 8510 therefore should be a buy signal. Shorts at 8450/80 can target 8400/8390 & 8370/60, perhaps we can fall as far as 8310/8290 eventually. EURUSD unexpectedly bounced from 1.0534 & beat strong resistance at 1.0575/85. I think today's resistance is at 1.0590/1.0610. Shorts need stops above 1.0630. A break higher can target 1.0650/60, perhaps as far as 1.0675/85. Shorts at 1.0590/1.0610 can target 1.0580/75 & 1.0545/35. If we continue lower look for 1.0510/00, perhaps as far as strong support at 1.0470/50. Longs need stops below 1.0430. USDCAD beat 4 month trend line resistance at 1.3570/90 so we must obviously hold above here this week to maintain a buy signal targeting 1.3700. Longs at 1.3590/70 stop below 1.3550. This was nasty yesterday because we spiked down to 1.3533 then immediately recovered. USDCAD remains difficult to read. We have been in a bull trend for 2 weeks but with deep pullbacks making it tough to hold a long position. (Which is why I am not adding USDCAD trades to the sheet). Dollar Index higher last week as predicted on Monday. By Friday we hit my first target of for the 105.15 & should be headed for 105.80 this week, perhaps as far as 106.10/30. First support at 1.0505/104.95 broke but we saw a low for the day at strong support at 104.75/60. However a break lower meets strong support at 104.30/20. Longs need stops below 104.00. EURCAD I am going to wait to see if a head & shoulders forms. A high for the week exactly at the 50 day moving average at 1.4440/50 helps this pattern to develop. A break below support at 1.4230/20 this week will be the sell signal targeting 1.4150 & 1.3980. GBPUSD bounce from strong support at 1.1960/40 has reached 1.2068. I expect strong resistance at 1.2090/1.2110. Shorts need stops above 1.2130. Shorts can target 1.2040/20, perhaps as far as strong support at 1.1960/40. Longs need stops below 1.1910. A break below 1.1910 is a sell signal for this week targeting 1.1865/55, perhaps as far as 1.1810/00.
French Outlook: Weak Economy Amid Social Tension

France: Inflation continues to rise while consumption rebounds slightly

ING Economics ING Economics 28.02.2023 10:53
French inflation has not yet peaked; it rose again in February and both headline and core inflation will probably creep higher in the coming months. Household consumption of goods rebounded in January, but this increase is partly misleading February data indicate that French inflation has still not peaked Inflation is still rising The time for inflation to recede has not yet come in France. In February, consumer price inflation stood at 6.2%, up from 6% in January, as a result of accelerating food and services prices. The harmonised index, which is important for the ECB, stood at 7.2% compared to 7% in January. Month-on-month, consumer prices rose by 0.9% compared to 0.4% in January. While in other European countries, the contribution of energy to inflation is becoming negative, energy continues to make a significant positive contribution to inflation in France. Despite the fall in oil prices, energy inflation is now at 14% over one year, compared to 16.3% in January. This is due to the revision of the tariff shield, which led to a 15% increase in household electricity bills in February (compared to 4% in 2022), in addition to a 15% increase in gas bills compared to 2022 prices since January. While government measures on energy prices had brought down inflation in France by almost 3 percentage points in 2022, French households are finally facing sharp increases in their energy bills, well behind their European neighbours. In France, energy inflation will probably continue to contribute positively to inflation throughout 2023. As in other countries, food inflation in France continues to rise, posting a 14.5% year-on-year increase in February, up from 13.3% in January. As the annual negotiations between supermarkets and food industry suppliers are due to end tomorrow, further food price rises are expected in the coming months (there is talk of an additional 10% price increase). Food inflation is therefore expected to rise further until the summer, contributing more and more to French inflation. With the end of the winter sales on 7 February, prices of manufactured goods are rising again, reaching a 4.6% growth over one year. Despite the normalisation of supply chains, the producer price index does not indicate a slowdown in inflationary pressures. On the contrary, French industrial producer prices accelerated again in January, by 1.6% over the month, compared to +1% in December, due to the strong acceleration of prices for products destined for the French market, while those destined for foreign markets are falling. Over one year, the growth of producer prices is 14.9%. In addition, the price intentions of manufacturers are only slightly down, according to the surveys. We should therefore expect a further acceleration in the prices of manufactured goods in the coming months, before a probable slowdown in the second quarter. Finally, services inflation is rising to 2.9% from 2.6% in January, due in particular to a series of price revisions in transport. We will have to wait until the summer to see inflation go down February data indicate that French inflation has still not peaked. Both headline and core inflation are likely to continue to rise in the coming months, giving the ECB further reason to continue raising rates beyond the first quarter. Despite a favourable base effect for petroleum products, it will probably take until the second quarter to see the peak in inflation in France and until the summer to see inflation really come down. Average inflation in 2023 will therefore probably be higher than in 2022. We expect 5.5% for the year, and 6.3% for the harmonised index, against 5.2% and 5.9% respectively in 2022. At the end of 2023, inflation will probably still be above 4%, a level higher than the European average. The deceleration in price developments is expected to continue in 2024, but will still be slow, averaging 2.6% over the year (3.5% for the harmonised index). Household consumption of goods rebounds Besides the inflation figures, INSEE is taking advantage of this last day of February to publish two other interesting statistics. First, the final estimate of GDP growth for the fourth quarter, which definitively determines the starting point for 2022 growth, was confirmed at +0.1%. Second, the household consumption of goods figures for January are particularly interesting as this is the first indicator of activity for 2023. The big question was whether the overall improvement in sentiment indicators since the beginning of the year would be reflected in the real data. It turns out that household consumption of goods rose by 1.5% in volume terms in January, compared with a fall of 1.6% in December. This increase is partly misleading. It is caused by a 4% increase over the month in energy consumption, which is mainly explained by the decrease in state aid for the payment of household energy bills. The reduction of the "energy voucher" has reduced the share of energy expenditure borne by the public authorities, which in turn has increased the share borne by households. According to INSEE, actual household consumption of both electricity and gas fell in January. The figure for consumer spending, therefore, paints an overly positive picture of the situation. Nevertheless, the data indicate a rebound in consumption of manufactured goods (+1.3% compared to -1.7% in December) and food consumption (+0.6% compared to -1.9% in December), suggesting that consumption has started the year on a slightly better note than at the end of 2022.  Recession risk recedes, but growth momentum will remain weak These data suggest that GDP growth should be a little better than expected in the first quarter and remain in positive territory. The risk of a recession this winter is receding. Nevertheless, there are many risks to the French economy for the rest of the year. The inflationary peak has not yet been reached in France, so the shock to purchasing power is not over. Consumer confidence remains at a very low level and households' willingness to save is at its highest since May 2021. It seems that, in the face of inflation, households would rather strengthen their savings than dip into them. The increase in the interest rate on the Livret A (the most popular savings product for households) to 3% in February is likely to further reinforce this mechanism. All of this will continue to impact on consumption, which will remain weak. In addition, the support of fiscal policy for purchasing power will become less important in the coming months. At the same time, the construction sector remains under pressure and the rise in interest rates is likely to continue to weigh on household and business investment spending. Ultimately, the French economy is likely to remain weak throughout 2023, but also in 2024. We expect growth of 0.7% both in 2023 and 2024. Read this article on THINK TagsInflation GDP France Eurozone Consumption Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
FX Daily: Upbeat China PMIs lift the mood

FX Daily: Upbeat China PMIs lift the mood

ING Economics ING Economics 01.03.2023 09:50
Financial markets are caught between the two narratives of a softer landing (helped by China's reopening) and sticky inflation keeping policy rates higher for longer. That will probably keep bond markets on the back foot and FX markets volatile in ranges. Today's highlights will be PMI releases around the world and presumably high German inflation USD: Foreign Direct Investment trends of interest The dollar has softened marginally in Europe and emerging market currencies are generally bid after China released an encouraging set of February PMIs. There were strong rebounds for both the manufacturing and service sectors which are feeding the narrative that a 2023 China recovery is the real deal. The PMIs come ahead of this weekend's 'Two Sessions' political gathering where we expect a growth target of 5.5-6.0% to be outlined. So far, so good and the China PMI data trumped some local news where AUD/USD has ended up higher on the session despite some softer-than-expected GDP and CPI data. Catching our eye this morning has been a survey by the US Chamber of Commerce (AmCham) that only 45% of American companies see China as their top three investment destination, compared to 60% a year ago. Clearly, geopolitics is driving this. Of the 24% of companies which said they might relocate out of China, one-third said they would relocate to the US. This topic of re-shoring/friendshoring will be an important multi-year factor driving Foreign Direct Investment (FDI) trends and could provide some resistance to those looking for the secular decline of the dollar. On that subject, we also note that Tesla will be building its next plant in Mexico. That only adds to the attraction of the Mexican peso, which remains our high yield/EM currency of choice. Back to today. The US releases ISM manufacturing data which should remain soft at 48. More interest will be had in Friday's services ISM. We suspect the China PMI story might dominate FX trading today and maintain a slightly offered tone for the dollar. Yet DXY will probably trade well within Monday's range of 104.55-105.35. Chris Turner EUR: Inflation, inflation, inflation EUR/USD got a lift yesterday from data showing Spanish February core inflation pushing to a new cycle high. The fact that Spanish core inflation includes food may not mean such a large read-through to tomorrow's eurozone core CPI data which is expected at 5.3% year-on-year. Yet our team thinks that this figure could now push up to a new cycle high of 5.4/5.5%. The worrying trend in prices continues to feed into European Central Bank expectations where the market looks to be pricing an extended tightening cycle into 2024, with the deposit rate (now 2.50%) possibly being raised as high as 4.00%. Feeding into that story today will be German CPI, which is released around 14CET. The continued re-pricing of the ECB curve is providing EUR/USD with some support against higher US rates and suggesting 1.05 will be the bottom of the EUR/USD's first quarter range after all. Certainly, the disinflation story is taking a back seat this month.  Today, we have a few ECB speakers and we should expect a relatively quiet 1.0565-1.0645 range for EUR/USD. The more aggressive ECB pricing is also providing some support to EUR/CHF, which looks like it might end March near our 1.00 target. Chris Turner GBP: More focus on the Northern Ireland deal Yesterday, we wrote a piece on what the new Northern Ireland deal - or 'Windsor Framework' - meant for sterling. While welcome news, we doubted that it would prove a game changer for sterling. Some other FX strategists felt that the news could be a lot more positive for sterling - even triggering a 2/3% rally in the pound were the DUP to come on board, support the deal and return to government in Northern Ireland.  We think the small rally in the pound that was seen (and has since partially reversed) is probably sufficient in that it reflects a warmer political relationship between the UK and the EU. We doubt any approval by the DUP makes much difference to the pound. As we discussed in the article, weak UK growth and an increasingly hawkish ECB will probably keep EUR/GBP supported for most of the year.  We do note, however, that some of last year's policy uncertainty is still being taken out of sterling via the FX options market. For example, the one-year EUR/GBP risk reversal - the price for a EUR call option over an equivalent EUR put option - has fallen to 0.95% from 2.5% last September. And one-year EUR/GBP traded volatility has fallen to 7% from 11%. But those moves may well have come far enough for the time being. Our baseline sees EUR/GBP staying supported under 0.88. Look out for a speech by Bank of England Governor Andrew Bailey at 11CET today. Money markets price the Bank Rate at 4.75% into September. Our team thinks that BoE rates will not need to be hiked that far, yet with inflation staying high for the time being, Governor Bailey may find it too early to disabuse the markets of that pricing. GBP/USD could drift back to 1.2100 on the slightly softer dollar today. Chris Turner CEE: Gas prices support the region again The National Bank of Hungary (NBH) left rates unchanged yesterday. Even though at face value it looks like nothing has changed, our impression is that the central bank still means business when it comes to fighting inflation and was able to sound a bit more hawkish. The central bank will not be distracted by promises and outliers. The NBH wants to see a permanent improvement in every aspect and will not rush policy easing. However, looking at the market reaction, it is clear that the market already understood the NBH's message in January and the February meeting did not bring much fresh news. As we mentioned in our NBH preview, we expect the forint to take a break in March and the central bank meeting is the last chance for gains below 380 EUR/HUF for now. We remain positive on the forint, but the current drivers have run out of steam. Plus we could see some negative news in the EU story in the coming days and a downgrade in the outlook from Moody's this Friday.  Today, we will see the PMIs across the region for February. We expect a slight improvement in sentiment in Poland and the Czech Republic and a deterioration in Hungary. In Hungary, the PPI for January will be published. The Czech Republic's state budget numbers for February will also be revealed, which could shed more light on the financing and issuance of CZGBs.  In the FX market, we have seen new gains for CEE again in recent days. The Czech koruna, in particular, has attracted attention, breaking below 23.50 EUR/CZK for the first time since 2008. The main reason, in our view, is the renewed decline in gas prices and the testing of new lows. However, the rest of the market does not indicate favourable conditions for the koruna and the region. With core rates rising further, interest rate differentials have compressed across the board and the US dollar is once again on the stronger side. Thus, we are hard-pressed to find reasons to see the current gains as sustainable.  Frantisek Taborsky  Read this article on THINK Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
German economy not out of recessionary danger, yet

German inflation stable in February

ING Economics ING Economics 01.03.2023 23:38
February inflation data shows very few to no signs of any disinflationary process outside of energy and commodity prices Inflationary pressure is far from over in Germany   February's headline inflation came in at 8.7% year-on-year, unchanged from January. The HICP measure came in at 9.3% YoY, from 9.2% in January. The sharp monthly increase by 1% month-on-month shows that the inflationary pressure is far from over. The discrepancy between the national and European measures can be explained by a rebasing of the national time series and changes in the weights. No start of disinflationary trend, yet Available regional components suggest that core inflation has remained broadly unchanged. While food price inflation increased, energy price inflation continued to come down. At the same time, service price inflation remained high and increased in, for example, packaged holidays and leisure activities. Last month, only very few services had inflation rates of below 2%. Among these were services like insurance or communication but also paramedic services. Overall, there are few to no signs of any disinflationary process outside of energy and commodity prices. Inflation data in Germany and many other European countries this year will be surrounded by more statistical noise than usual, making it harder for the European Central Bank to take this data at face value. Government intervention and interference, this year and/or last year, sometimes temporarily, sometimes more permanently, will often blur the picture. In Germany, for example, the Bundesbank estimated that energy price caps and cheap public transportation tickets will lower average German inflation by 1.5 percentage points this year. The energy price cap will come into effect as of 1 March but will be paid retroactively. And there is more. Negative base effects from last year’s energy relief package for the summer months should automatically push up headline inflation between June and August. Looking ahead and beyond the statistical noise, the German and European inflation outlook is highly affected by two opposing drivers. Lower-than-expected energy prices due to the warm winter weather could, if they remain at current levels, push down headline inflation faster than recent forecasts suggest. On the other hand, there is still significant pipeline pressure stemming from energy and commodity inflation pass-through. In Germany, selling price expectations, the best proxy for the pass-through of higher energy and commodity prices in recent years, have dropped significantly since last summer and currently stand at levels last seen in the spring of 2020. At the same time, however, selling price expectations in services remain close to historic highs. Combined with expected nominal wage growth of more than 5% year-on-year this year, this means that core inflation will remain stubbornly high. Read next: Euro Is Rising, USD/JPY Falls Below 136.00, The Aussie Pair Also Gains| FXMAG.COM ECB will continue to hike The downside of government support schemes and the fact that the eurozone has avoided falling into a severe recession is that what started as supply-driven inflation could morph into demand-driven inflation. And not only in Germany. This is probably a bigger concern for the ECB than just one month of increasing headline inflation. As long as core inflation remains stubbornly high in the eurozone, the ECB will continue hiking rates and will not consider future rate cuts. A 50bp rate hike at the March meeting has been pre-announced and looks like a done deal. Beyond the March meeting, the ECB seems to be entering a new game in which further rate hikes will not necessarily get the same support within the governing council, as hiking deep into restrictive territory increases the risk of adverse effects on the economy. The main question beyond the March meeting will be whether the ECB will wait to see the impact of its tightening on the economy or whether it will continue hiking until core inflation starts to substantially come down. We currently expect a compromise: two additional rate hikes by 25bp each in May and June, before pausing the hiking cycle and entering a longer wait-and-see period. Financial markets, which only a couple of weeks ago were still betting on rate cuts at the turn of the year, have now once again turned around and are expecting the ECB to hike by a total of 150bp over the next few months. Not impossible, but clearly a recipe for more bad macro news in 2024. Read this article on THINK TagsInflation Germany Eurozone ECB Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
ECB enters final stage of tightening cycle

French and Spanish inflation prints make markets think about a 4.0% ECB terminal rate

FXStreet News FXStreet News 01.03.2023 23:44
The Eurozone February inflation is foreseen at 0% MoM and at 8.2% annually. Higher ECB peak rate bets strengthened after hot French and Spanish inflation data. The EUR/USD recovery could gather steam on the hotter-than-expected HICP report. The optimism surrounding peak inflation seems to be fading, as persistent price pressures in the Euro area’s leading economies are likely to compel the European Central Bank (ECB) to keep up its rate increases this year. The Eurostat is due to publish the preliminary estimate of the Eurozone Harmonised Index of Consumer Prices (HICP) for February this Thursday at 10:00 GMT. Hot Eurozone HICP to bolster hawkish ECB bets The Eurozone annualized Harmonised Index of Consumer Prices is seen softening to 8.2% in February, compared to the 8.6% increase reported in January. Meanwhile, the core HICP is seen steady at 5.3% YoY in the reported period. The focus, however, is likely to be on the monthly figures, with the HICP in the old continent seen dropping by 0.3% last month as against the previous decrease of 0.2%. The core HICP is likely to show no growth at 0% in February vs. -0.8% prior. Eurozone Core HICP MoM Source: FXStreet The Eurozone inflation data will follow the French, Spanish and German inflation reports. On Tuesday, French and Spanish inflation data rebounded in February across the time horizon, suggesting that there are clear upside risks for the bloc’s HICP in February. French Consumer Prices Index (CPI) unexpectedly rose 7.2% in the year to February, hitting the highest level since the Euro was launched in 1999. Spanish Consumer Price Index in February also surprised to the upside, arriving at 6.1%, up from January’s 5.9%. Faster increases in food and services prices offset the steeper decline in energy prices in these leading economies, implying that the Eurozone inflation is also likely to be more sticky than previously thought. Also, it would leave markets wondering how long it will take for inflation to come down to the ECB’s 2.0% target. Read next: Rivian Automotive estimates production of 50,000 vehicles in FY23 | FXMAG.COM European Central Bank President, Christine Lagarde, and her colleagues continue to press on a 50 basis points (bps) rate hike for the March meeting, noting that the rate hike outlook will likely remain data-dependent thereafter. Hotter-than-expected inflation readings from France and Spain combined with an upside on core inflation led markets to price a 90% probability of a 4.0% terminal rate, a positive shift considering that a 3.75% terminal rate was fully baked just a week ago. Trading EUR/USD with Eurozone inflation EUR/USD is struggling to initiate a meaningful recovery above the 1.0600 threshold despite the hawkish ECB expectations. The focus will be on Germany’s HICP release due on Wednesday ahead of Thursday’s Eurozone inflation data. On Tuesday, Euro area peripheral yields shot through the roof on the French and Spanish inflation surprise. The yield on Germany’s rate-sensitive two-year bund climbed 3.15%, its highest level since the 2008 financial crisis. Hot German HICP data could also see a fresh leg up in the Euro alongside the yields. On a potential upside surprise to the Eurozone inflation data, the Euro buyers could continue to pile on, providing the much-needed leg to the EUR/USD recovery from 2023 lows of 1.0532. Any disappointment in the HICP figures could reinforce sellers, sending EUR/USD back toward the 1.0500 mark.
Federal Reserve splits highlighted by May FOMC minutes

Rates Spark: Inversion stretches deeper

ING Economics ING Economics 02.03.2023 07:17
Curve inversions tell us that we're approaching the end of the rate hike cycle. But that conclusion to hikes is being pushed further into the future, and that is placing upward pressure on long dated rates. Deeper inversions and further upward pressure on long rates remains likely in the coming weeks. This will change, but not just yet given latest CPI data A deeper US inversion also point to bigger US cuts down the line... The terminal Fed funds rate hike discount continues to ratchet higher, now at 5.45%, and attaching a 40% probability to a 25bp hike in July (following 3*25bp through Mar, May and June). This is coinciding with upward pressure on the US 10yr, which has now re-touched 4%. Even at 4%, it’s almost 150bp below the market-projected funds rate. That’s unprecedented versus previous cycles over the past four decades (you have to go back to the 1970’s to see something different). And even then, the biggest discount is when the Fed is about to cut, not as the Fed is still hiking. That ensures that every build in the projected terminal rate directly impacts the 10yr rate. Hence the touch at 4%. US inversion is unprecedented versus previous cycles Upward pressure dominates in Europe too. New cycle highs have been seen this week on both ends of the curve, with the German 2yr now at 3.2% and the 10yr at 2.7%. The inversion is less dramatic, but is deepening all the time. Pressure on the European Central Bank to keep hiking is coming from the run of individual country inflation data so far this week, the latest being Germany. Eurozone inflation may be off the highs hit late in 2022, but has blipped up again for February, and a handle of 8% for German inflation (and closer to 9%) continues to touch a nerve. There’s a terminal Refi rate of 3.75% now priced. That can be compared with a 10yr Euribor rate now at 3.25%. Again the inversion here is far less dramatic than the US one. The eurozone curve is inverted by less, but the inversion will likely deepen Relative inversions tell us something about the market discount for interest rate cuts down the line. So the 10yr Euribor rate 1yr forward is priced at 3.2% (5bp lower versus spot), while the 10yr SOFR rate 1yr forward is priced at 3.5% (23bp lower versus spot). There is a slight credit inflation in the Libor rate (Euribor) versus the risk free rate (SOFR), but even accounting for this the market discounts bigger future cuts from the Fed (relative to the ECB) and a convergence of dollar market rates to euro ones. We’d agree with this, and in fact we’d have a more pronounced and quicker convergence later in 2023 (more aggressive than the forward discount). This reflects a likely higher degree of stickiness attached to eurozone inflation.   Ahead we’ll get the eurozone inflation estimate for February, with the market expecting core to stay steady at 5.3% year-on-year and headline slowing to 8.3% YoY. Based off recent releases, an upward surprise would not in fact be a surprise, and would keep the rising rates narrative to the fore. Meanwhile, in the US we get jobless claims that continue to show labour market strength at sub-200k in initial claims. At the same time latest ISM readings point to contraction in manufacturing, employment and new orders; these remind us of the bigger picture slowdown narrative. Based off this, deeper inversions are probable in both the US and the eurozone in the coming weeks. Read next: Rivian Automotive estimates production of 50,000 vehicles in FY23 | FXMAG.COM This won't last though. The most striking changes on curves as we progress through the coming quarters will be pronounced dis-inversion. Longer tenor rates can go higher first, but then later, front-end rates will collapse lower as the peak in official rates is eventually discounted with more conviction. We're just not there yet. Read this article on THINK Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Brazilian President suggesting replacing US dollar with own currencies of developing countries

ISM manufacturing index shrinks less than in February. Fed members comment on hikes

Ipek Ozkardeskaya Ipek Ozkardeskaya 02.03.2023 08:49
Europe is not having a good week in terms of economic news.   Today, investors will be focused on the flash CPI estimate for February, but there is not much suspense about the fact that the data will disappoint. On Tuesday, the data showed that French inflation hit a record, Spanish inflation ticked higher as well, and yesterday, it was Germans' turn to announce the bad results. Inflation in Germany ticked higher to 9.3% last month, even after the country limited household heating costs. Therefore, it's very likely that the Eurozone CPI, due this morning, is not going to hit the 8.2% mark expected by analysts.   The euro depreciation is to blame.  But the pricing in European markets already reflect, at least, a good part of the inflation disappointment: the European Central Bank's (ECB) peak rate is expected to reach 4% into next year, and some ECB members now back the idea of a more rapid reversal in bond buying to tighten the financial conditions faster. Bundesbank Nagel is one of them. He also thinks that the ECB should speed up the rate hikes and reach the peak rate around September.   As a result, the hotter-than-expected inflation data pushes the European yields higher. The higher yields support recovery in the euro. The EURUSD spiked to 1.0690 yesterday, while the European stocks fell after the German CPI figures and the disappointing PMI data flashed the bulls out of the market.   Note that today's inflation data may not make things worse; we could even see 'buy the rumour sell the fact' type of move, where the yields soften, the euro gives back some strength and equities rebound.   But the medium-term outlook for the European yields remains tilted to the upside. The latter should support the euro, but not the stock valuations.   The grass is not greener elsewhere.  Across the Atlantic Channel, the news is not great, either. The ISM manufacturing index revealed a slower contraction in February, but the improvement compared to the last month was less than expected.   A slowing economic growth is not bad news for the Federal Reserve (Fed), but the mounting price pressure is. This is what the ISM report revealed yesterday.  Fed's Neel Kashkari, who was once one of the most dovish Fed members, said that he may back a 50bp at this month's FOMC meeting, while Raphael Bostic said that the Fed should hike the rates to 5-5.25% territory, and keep them there until next year.   Activity on Fed funds futures now gives more than 30% chance for a 50bp hike at the next meeting, and Fed swaps price in a peak Fed rate of around 5.5%. This number was around 4.9% at the start of the year.  Consequently, the US 2-year yield continues its steady climb toward to 5% mark, and the 10-year spiked above the 4% psychological level yesterday.  Read next: Stock market has been calm thanks to a belief that peak rates are near. The US jobless claims are forecast to hit 196K| FXMAG.COM  The S&P500 tested the critical 200-DMA to the downside. There is major speculation about an aggressive selloff below this 200-DMA level. And given the persistent positive pressure on the yields, clearing the 200-DMA support is not a matter of if, but a matter of when.   The higher yields are supportive of the US dollar. The dollar index swings up and down, above the minor 23.6% Fibonacci retracement on the September to February retreat.   If the dollar's reaction to the hawkish Fed expectations is not more aggressive, it's certainly because other major central banks are also gearing up the rate talk. The Bank of Japan's 8BoJ) Ueda said he would consider normalizing policy if inflation remained sticky in Japan, while the Bank of England's (BoE) Bailey warned that if they do 'too little with interest rates now', they will 'have to do more later on.' Sure thing. The latest BRC report showed that shop prices in the UK indeed hit a record. But traders are not necessarily in to keeping the pair above the 1.20 level. The next natural target for the Cable bears stands at 1.1920, near the 200-DMA, and if cleared could pave the way for a further slide to 1.1650/1.17 region.   In energy and commodities, US crude jumped more than 1% yesterday as the EIA data was much less scary than the API data released a day before. While the API hinted at around a 6-mio-barrel build in US inventories last week, the EIA printed a 1.2-mio-barrel build.   But the 50-DMA is still not cleared, and even if it did, offers into the 100-DMA, slightly below the $80pb level, still look particularly strong.   As a result, the energy stocks were the worst performing in February, despite their record profits. There are worries that the Chinese reopening may not be enough to push prices higher... after all, and latest news suggest that Western companies are racing to quit the country, as tense geopolitical relations with China, and Xi Jinping's economic and political agenda don't inspire confidence. 
Producer Price Fall and Stickier Services Inflation: Impact on CPI and Resilient Consumption

Italian headline inflation continues to slow

ING Economics ING Economics 02.03.2023 13:15
Headline inflation in Italy fell in February, but core inflation continues to accelerate  Headline inflation decelerates to 9.3%, driven by energy According to preliminary data from the Italian National Institute of Statistics, headline inflation for February came in at 9.3% (from 10% in January) and the harmonised measure at 9.9% (from 10.7% in January), in line with our forecasts, confirming that the disinflationary process is still in place. At the heart of the deceleration in the headline measure was, as in January, the energy component (both regulated and non-regulated), which more than compensated for increasing price pressures in food, tobacco and recreation and transport services. The decision to update retail gas price bills on a monthly basis (previously it was done on a quarterly basis) has made the transmission of wholesale market developments faster than in the past. February data reflected the decline in wholesale gas prices, the key parameter for determining monthly gas price dynamics. Core inflation accelerates, showing that pass-through is still in place Crucially, core inflation, which excludes energy and fresh food, inched up at an accelerating pace, reaching 6.4% (from 6% in January). Clearly, the pass-through of past energy price pressures has not finished, and some core inflation stickiness seems highly likely. The acceleration in services inflation suggests that transmission has still some way to go. With wage inflation also still very low – in the 1.5% area – and a relatively tight labour market in January, it seems reasonable to expect that upward adjustments over the next few months will also put upward pressures on costs. Read next: Tesla Intends To Cut Assembly Costs, The White House Released The National Cyber Strategy | FXMAG.COM An inflation shift from goods to services Looking ahead, we believe that the divergence between decelerating headline inflation and stickiness in core inflation will persist over the first half of the year. The energy disinflation looks set to continue in March, when the last leg of the decline in gas prices will show up in monthly bills, and in April when the quarterly adjustment of electricity prices will also incorporate lower generation costs. At the same time, the pass-through will likely continue, particularly in the service sectors. February business surveys showed a deceleration in surcharges on output prices in the industrial domain, but there have been no signals as of yet of a deceleration in services. The shift in the consumption pattern towards services is also possibly supporting such a pricing pattern.   All in all, today’s release holds few surprises. The disinflationary process continues, but the peak in core reflation is not yet in sight. Italian inflation does not offer the European Central Bank any reason to change its monetary tightening plans. Read this article on THINK TagsItaly inflation Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Technical look: Euro against US dollar - what can we expect from the pair?

Euro against US dollar shaped by inflation prints. Eurozone CPI reached 8.6%

Kenny Fisher Kenny Fisher 02.03.2023 13:55
The euro remains busy and is down 0.40% on Thursday, trading at 1.0624. This follows the euro gaining 0.90% a day earlier. Eurozone inflation falls to 8.6% The euro’s moves today and yesterday have in large part been dictated by inflation releases. Earlier today, Eurozone Final CPI came in at 8.6% for January, down sharply from 9.2% in December. Headline inflation eased for a third straight month, after hitting a peak of 10.6% in October. The core rate has not followed this downward trend and ticked higher to 5.3% y/y in January, up from 5.2% in December. The improvement in headline inflation eased worries that the ECB would have to deliver another 50-basis point hike in May, after the expected 50-bp increase at the March 16 meeting. These concerns that the ECB would remain aggressive pushed the euro almost 1% higher on Wednesday after German inflation edged up to 9.3% in February, up from 9.2% in January and above the estimate of 9.0%. The usual suspects were at play in driving inflation higher – food and energy. The government has provided energy subsidies, but energy prices still shot up in January by 23.1% y/y, while food prices surged 20.2% in January y/y. In addition to the German inflation report, France and Spain also recorded unexpectedly strong inflation. The eurozone data calendar will wrap up with German and eurozone Service PMIs, which have been showing improvement and are back in expansion territory, an indication of a pickup in economic activity. The German PMI is expected at 51.3 and the eurozone PMI at 52.3 points. Read next: Patrick Reid on Kazuo Ueda's testimony: the speech did not give any clues away and kept many of us guessing| FXMAG.COM In the US, the Federal Reserve remains hawkish with its message that higher rates are on the way. Fed member Bostic reiterated this stance, saying that the terminal rate would be between 5% and 5.25% and have to remain at that level well into 2024. The markets have priced in a terminal rate of 5.50%, but worries over sticky inflation have led to some calls for rates to rise as high as 6%. EUR/USD Technical EUR/USD is testing support at 1.0655. Below, there is support at 1.0596 There is resistance at 1.0765 and 1.0894 This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds. EUR/USD dips as eurozone inflation eases - MarketPulseMarketPulse
Rates Spark: Balancing data and risk factors

Minutes of ECB’s February meeting show determination to hike rates beyond March

ING Economics ING Economics 02.03.2023 14:36
The just-released minutes of the European Central Bank's February meeting reflect a very hawkish debate and a clear intention to continue hiking rates Source: Shutterstock   It is always useful to understand where the ECB is coming from when looking ahead to the next policy meeting. The minutes of the February meeting stress the ECB’s clear intention to continue hiking interest rates, beyond the March meeting. Here are the most important comments made in the minutes: The ECB was surprised by the resilience of the eurozone economy and believes more strongly in a soft landing. While the ECB assessed that the risks to the inflation outlook had become more balanced, it was “much too early to declare victory”. The main reason for the ECB’s hawkishness seems to be the risk of higher wage growth and stickier-than-expected core and underlying inflation, as well as “only limited evidence of a stabilisation so far”. However, not all ECB members seemed to agree as there was a longer discussion on whether there wasn’t too much focus on core inflation. The discussion on where the terminal rate could be remained rather vague. The minutes state that “any assessment of what level of rates could be seen as excessively restrictive was complex and uncertain, although it was generally felt that concerns of 'overtightening' were premature at the present high levels of inflation and in view of the likely persistence of underlying price pressures. It was emphasised that policy rates were, at present, barely consistent with the range of estimates for the neutral rate”. Interestingly, the ECB tried to downplay the current pace of monetary policy tightening, calling it “a reversal of previous loosening and was a necessary normalisation to address high inflation, it was not viewed as a severe squeeze by the banks or their customers”. What to expect next from the ECB? Exactly two weeks from today, the ECB will get together again. The macroeconomic background will hardly have changed by then compared with the February meeting. Energy prices were already low in February, confidence indicators had already started to improve and headline inflation had just come off record highs. If anything, the downward revisions of German GDP growth in the fourth quarter have shown that the eurozone might not have avoided recession after all. And even though confidence indicators have improved, still weak current assessments and the high inventory build-up simply preclude too much optimism. Still, a fresh round of ECB staff forecasts will have to take into account the sharp drop in energy prices and the increase in bond yields compared with the December forecasts. However, no matter what the new staff projections show, another 50bp rate hike looks like a done deal. Read next: Twitter Employees Are Overburdened As Elon Musk Tries To Run Twitter With Fewer Staff| FXMAG.COM It's not so much today’s February headline inflation that is the biggest concern for the ECB but rather the more general risk that what started as supply-driven inflation could morph into demand-driven inflation. Beyond the March meeting, the ECB seems to be entering a new game in which further rate hikes will not necessarily get the same support within the governing council, as hiking deep into restrictive territory increases the risk of adverse effects on the economy. We expect the ECB to stop its back-and-forth on forward guidance at the March meeting and to shift towards a real meeting-by-meeting approach. The main question beyond the March meeting will be whether the ECB will wait to see the impact of its tightening on the economy or whether it will continue hiking until core inflation starts to substantially come down. In this regard, don’t forget that between March and the next meeting in May, important data releases like an update of the Bank Lending Survey and tentative first-quarter GDP growth data will be available. These are two important pieces of evidence that could tilt the balance in either direction; continue hiking rates until actual inflation comes down or prepare to pause to better assess the impact of the rate hikes so far. We currently expect a compromise: two additional rate hikes by 25bp each in May and June, before pausing the hiking cycle and entering a longer wait-and-see period. This would still bring ECB rates close to historic highs. All in all, the minutes of the ECB's February meeting underline the ECB's determination to continue hiking interest rates beyond the March meeting. Read this article on THINK TagsMonetary policy Inflation Eurozone ECB Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
EUR/USD: Examples of things that could get the market moving are US treasury yields moving out of the range on data improving or deteriorating

NAGA analyst on Eurozone inflation: This is likely to trigger a more restrictive monetary policy from the ECB for two reasons

Michalis Efthymiou Michalis Efthymiou 02.03.2023 17:40
Yesterday Eurostat released inflation data. Year-on-year consumer price index came at 8.5% beating expectations. Let's have a detailed look at the data with Michalis Efthymiou, Market Analyst at NAGA. Previously, the European economy was successfully able to bring down the overall inflation rate down from 10.6%, but struggled to bring down core figures. The core CPI figures are mainly related to services as they do not include food, drinks and energy. However, the region is growingly struggling to bring down inflation and has been unable to stop core inflation figures from rising.This is likely to trigger a more restrictive monetary policy from the ECB for two reasons. First is that the ECB will be looking to put further pressure on demand in order to bring inflation down and second in order to protect the value of the Euro as other central banks are also battling with resilient inflation levels. Read next: "Green" cryptocurrencies - would Elon Musk become a market mover once again? | FXMAG.COM The Euro’s price movement is less certain as the Federal Reserve also is considering a more restrictive stance and the Dollar’s safe haven status is again coming into play. However, higher interest rates have a clear effect on the stock market such as the DAX, CAC and IBEX. If the ECB’s terminal rate does increase to 4% and above, the stock market will be pressured by less consumer spending, an increase in the cost of debt and higher bond yields.Risk Warning: "Derivatives are complex instruments and come with a high risk of losing money rapidly due to leverage. 88.11% of retail investor accounts lose money when trading derivatives with this provider. This is not investment advice."Content is approved.
ECB cheat sheet: Difficult to pull away from the Fed

Euro and british pound strengthen against greenback. US dollar index may test 100.06 before the end of April

Alex Kuptsikevich Alex Kuptsikevich 03.03.2023 16:53
The S&P500 and Nasdaq100 indices staged a solid intraday rebound yesterday, digesting the initial drop and closing the day higher. Along with the rebound in equities, a reversal to the downside is forming in the Dollar Index. Technically, the dollar's rebound in February has cleared the oversold conditions accumulated during the decline since late September last year. The RSI on the daily timeframe touched the overbought territory and was turned down precisely a week ago, leaving room for further declines. Strictly speaking, the pullback is below 61.8% of the initial decline that passes through the 106 level. Just below that is the 200 SMA, but it looks like the USD bulls didn't have enough power to push the American currency into the area now, as in January. The 105 territory is interesting, as it has seen several reversals in the past. Read next: USD/JPY Pair Comes Under Some Selling Pressure, EUR/USD Holds Above 1.06 While GBP/USD Remains Below 1.20| FXMAG.COM US dollar index reaching 103? A possible intermediate target for the US currency is 103.2, the 50-day average. Also, here, the DXY stopped rising in March 2020. It is very likely that the dollar will not stop its slide at this level and will test the February lows of 100.6 before the end of April. The view that the dollar is weakening against its major rivals fits well with historical examples. Often the Fed is the first to tighten monetary policy, triggering a wave of dollar strength. But a few months later, other central banks followed suit or moved ahead of the Fed. Compared with January, the bond markets have priced in the Fed's expectations quite well. In turn, the ECB and the Bank of England continue to push up expectations in their markets. As in previous similar episodes, this reassessment of expectations by the Fed's "competitors" promises to be a driving force in the currency markets. The picture in EURUSD and GBPUSD is also bullish, as the pairs received strong support from buyers on dips to psychological and technical levels near 1.05 and 1.20, respectively.
If The Bank Of England Hike Interest Rates Again Later This Month Will Exert Downward Pressure On The EUR/GBP Cross

The Price Movement Of The EUR/GBP Cross Currency Pairs

InstaForex Analysis InstaForex Analysis 06.03.2023 08:06
On the daily chart EUR/GBP cross currency pairs you can see that the price movement is moving in a downward channel and the appearance of deviations between price movements and the MACD indicator strengthens the potential for a decline in EUR/GBP in the future where currently the 0.8754 level will try to be broken down if this level is successfully broken down and there is no upward correction that passes level 0.8928, EUR/GBP in the next few days will potentially fall down to the 0.8721 level as the first target and the 0.8546 level as the second target. (Disclaimer)   Relevance up to 03:00 2023-03-11 UTC+1 This information is provided to retail and professional clients as part of marketing communication. It does not contain and should not be construed as containing investment advice or investment recommendation or an offer or solicitation to engage in any transaction or strategy in financial instruments. Past performance is not a guarantee or prediction of future performance. Instant Trading EU Ltd. makes no representation and assumes no liability as to the accuracy or completeness of the information provided, or any loss arising from any investment based on analysis, forecast or other information provided by an employee of the Company or otherwise. Full disclaimer is available here. Read more: https://www.instaforex.eu/forex_analysis/120657
Metals Market Update: Decline in LME Copper On-Warrant Stocks, Zinc and Lead Surplus Continues, Nickel Market in Supply Surplus

FX Daily: Climbing the wall of worry

ING Economics ING Economics 06.03.2023 09:10
FX markets have opened the week on a steady footing, buoyed by a strong end to last week from equities and appearing to shake off a slightly lower-than-expected growth target from China. This week's focus will very much be on central bankers and activity data - the highlights being Fed Powell testimony (Tuesday and Wednesday) plus US jobs growth (Friday) USD: How strong is the US economy and what will the Fed do about it? After a few weeks where US price data has taken centre stage, this week will all be about activity data and Fed speak. On the activity side, Friday's release of February US jobs data should shed light on whether January's +517,000 surge was an aberration powered by seasonal adjustment factors or a genuinely strong number. Our US economist, James Knightley, tends to favour the former interpretation - although conviction levels are low. Running up to Friday's job data will be Wednesday's release of JOLTS and ADP data - again providing insights as to whether tight conditions in US labour markets are starting to ease. The other US highlight this week will be testimony to the Senate (Tuesday) and House (Wednesday) from Federal Reserve Chair Jerome Powell. He will be testifying on the Fed's semi-annual monetary policy report which was released on Friday. The market will be interested to hear what he thinks about re-accelerating the pace of hikes to 50bp from 25bp (+30bp is priced for the 22 March meeting) and any indication on what the terminal rate might be. Recently, we have been writing that an upward revision to the Dot Plots on 22 March will discourage investors from aggressively re-establishing dollar short positions. This week also sees central bank policy meetings in Japan, Australia, Canada, and Poland. Of these, the Reserve Bank of Australia (RBA) is the only one expected to hike rates (+25bp). However, Friday's Bank of Japan (BoJ) meeting will prove interesting as will tomorrow's release of Japanese wage data for January. Another widening of the BoJ's 10-year JGB target band on Friday would be a big surprise and drag USD/JPY lower. What does this all mean for the dollar? In today's session, the dollar has not found too much support from a slightly lower-than-expected Chinese growth target for 2023 at 5.0% (5.5-6.0% had been expected). Equally, equities continue to hold up quite well despite last week's big rise in bond yields and are providing a little support to pro-cyclical currencies. In all, we suspect it is another range-bound week for the dollar, where DXY continues to trade in a 104.00-105.50 range and local stories can win out.  Chris Turner EUR: ECB helps build the 1.05 EUR/USD floor European Central Bank speakers continue to point to a 50bp hike at the 16 March meeting as being a done deal. The market then prices a further 150bp of tightening by year-end - which looks a little aggressive. Still, the tough ECB talk has kept the EUR:USD interest rate differential supported at the short end of the market and firmed up the 1.05 support zone for EUR/USD this month. We think EUR/USD probably ends March in the 1.07/1.08 area. For today, the eurozone focus will be on January retail sales and the March Sentix Investor survey. Improvements are expected for both, although may not move markets. We also have ECB Chief Economist, Philip Lane, speaking in Dublin at 11 CET. He has recently shifted over to the hawkish side and it is probably too early for him to push back against the market's pricing of the ECB deposit rate at 4.00%. EUR/USD probably trades well inside a 1.0600-1.0700 range today. Elsewhere in Europe, Switzerland sees February CPI. The market expects some deceleration from January's firm readings. Any upside surprise could pressure EUR/CHF in its latest 0.9900-1.0000 range. Chris Turner GBP: Steady sterling this week This week it is hard to find a UK catalyst for sterling to break out of recent ranges. We doubt any further progress on the Windsor Framework deal is worth much more to sterling. And having heard from Bank of England big hitters (Andrew Bailey and Huw Pill) last week, we doubt that this week's BoE speakers make much of a dent in market pricing of the BoE cycle. Activity data for January looks like it could come in on the softish side, although the services sector will be in focus following the recent jump in the services PMI reading. In all, EUR/GBP should trade well within a 0.8800-0.8900 range, while GBP/USD will be bounced around on this week's big inputs from the US events calendar. Chris Turner CEE: Inflation numbers leave no room for rate cuts A busy calendar awaits us this week in the CEE region. Today, we start with labour market data in the Czech Republic, key for the Czech National Bank, and retail sales in Hungary. On Tuesday, industrial production for January will be released, which should confirm a weakening economy. On Wednesday, we will also see February inflation in Hungary, as the first number within the CEE region. We expect only a slight drop from 25.7% to 25.4% year-on-year, in line with market expectations, but also slightly higher core inflation. Later on, we will see the decision from the National Bank of Poland. In line with the market, we expect interest rates to remain unchanged. However, the main focus will be Governor Adam Glapinski's press conference a day later. The central bank will also publish a new forecast. While inflation was lower than expected in January, core inflation remains high. So the question will be how the governor's tone will change since the last forecast and whether he will officially announce the end of the hiking cycle or mention a possible rate cut later this year. We then move to the Czech Republic on Friday, where industrial production and inflation data will be published. CPI, in our view, fell slightly from 17.5% to 16.9% YoY, above the market and CNB forecasts.  In the sovereign rating space, Fitch maintained a negative outlook for the Czech Republic on Friday. In Hungary, Moody's again did not publish a rating review as it did in September, which means that the outlook and rating remain unchanged, and presumably, the agency is waiting further for developments in the negotiations between the Hungarian government and the European Commission regarding access to EU money.  On the FX side, global conditions for the CEE region remain mixed. The US dollar will hamper EM currencies, on the other hand, gas prices broke 45 EUR/MWh on Friday indicating a further rally in the Hungarian forint and Czech koruna. February inflation data should be a boost to both currencies, confirming the current hawkish market pricing, leaving no room for early rate cuts. On the other hand, a dovish NBP may bring pain to the Polish zloty. Thus, it will be key to watch for indications of a first rate cut during the governor's press conference on Thursday. The Czech koruna could retest levels below 23.40 EUR/CZK and the Hungarian forint below 375 EUR/HUF. However, the Polish zloty should test weaker levels above 4.740 EUR/PLN again.  Frantisek Taborsky Read this article on THINK Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
ECB's Christine Lagarde not to announce the end of rate hikes?

Eurozone retail sales tick up less than expected in January

ING Economics ING Economics 06.03.2023 12:14
A small increase in retail sales in January suggests a weak start to the year for the consumer amid stubbornly high prices. While surveys about the first quarter have been relatively upbeat so far, these sales data don’t give much evidence that a rebound has started. We expect GDP growth in the first quarter to be flat The Mall of Berlin, one of the city's largest shopping centres   After the sharp decline in retail sales in December, a bounce back was expected in January, but the 0.3% month-on-month increase still leaves retail trade volumes well below the November figure. This is a weak start to the first quarter and makes growth over the quarter a challenge. Retail sales have been on a declining trend since November 2021, but taking the latest data into account, we can see that there has been a more rapid decline since the autumn of last year. For the consumer, the positive thing is that the inflation peak is behind us, wages are improving, and the economy has not dipped into a material recession, which supports the outlook for employment. This has helped confidence to improve a little, but with purchasing power still being squeezed, it does not seem like there is a lot of momentum for a quick bounce back in 2023. Read next: Demand For Automotive Chips Will Continue To Grow As The Outlook For The Electric Vehicle Market Looks Solid| FXMAG.COM Overall, surveys are suggesting somewhat better economic activity in the first quarter, but given fourth-quarter weakness and surveys missing the mark recently, performance at the start of the year is clouded in uncertainty. This makes it hard to get a strong view of where the economy is headed in the short term, but if today’s release on retail sales is anything to go by, it doesn’t look like the economy has started a rebound just yet. Read this article on THINK TagsGDP Eurozone Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Euro and European bond yields decreased after the ECB decision. The end of tightening may be close

Euro Credit Supply

ING Economics ING Economics 06.03.2023 13:03
Pre-funding before CSPP & CBPP3 tapering Decent supply in February as pre-funding comes before CSPP tapering • Corporate supply amounted to €27bn in February, up on last year’s €14bn but in line with February 2021. Supply on a year-to-date basis is still decent, following the heavy supply in January, currently pencilled in at €68bn. This is running ahead of last year’s €52bn and is more in line with, or slightly ahead of, previous years. The funding environment has been more conducive for issuance, as spreads are stuck around these arguably tight levels. The ECB was still purchasing under its reinvestments, which we expected would push some issuers to pre-fund in the past two months - the central bank will begin tapering its reinvestments now in March, resulting in much less CSPP purchasing. Furthermore, the ECB will put focus on the secondary market, only purchasing green bonds and high ESG-scoring corporates in the primary market. Therefore, we could see supply slow slightly in the coming months. We forecast a small increase on last year’s €258bn, up to closer to €275bn this year. This is still a historically low yearly supply level. • Reverse Yankee supply totalled another €5.5bn in February, now €11bn for the year thus far. The cross-currency basis swap has tightened since October - by about 15bp in the 5yr and 8bp in the 10yr. The cross-currency basis swap is also not historically that wide. At the same time, the USD EUR spread differential has widened, particularly on the 5yr, albeit marginally tighter on the past week. As a result, the 10yr area has opened up an even larger cost-saving advantage for US issuers to issue in Euro and swap back to USD. This is now the case for 5yr too. This creates an attractive cost-saving advantage for Reverse Yankee supply Record-breaking covered bond supply • Covered bond supply remains on record-breaking track with €27bn covered bonds printed in February, resulting in YTD supply reaching a substantial €65bn thus far. Unsurprisingly, this month’s supply is heavily dominated by eurozone banks taking the opportunity to come to the market before the ECB ends its reinvestments of redemptions through the primary market, starting in March. This probably also explains why supply this month is focusing mostly on covered bonds and not so much on unsecured deals, with only €18bn issued in senior unsecured and just €4bn in bank capital. Read the article on ING Economics Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Issue on the US debt ceiling persists, Joe Biden goes back to the US

Rates Spark: Powell takes markets for a spin

ING Economics ING Economics 07.03.2023 10:37
Powell’s spin on the latest economic data matters less than the data itself. Don’t expect much clarity on 50bp hikes or the terminal rates but note that the hawkish re-pricing is helpful. At the ECB, data dependence is mainly wage dependence and on consumer inflation expectations US Federal Reserve Chair Jerome Powell Don't expect Powell to rule anything out Jerome Powell’s Congressional testimony is today’s main event. It is near certain that the Fed chairman’s tone will reflect better economic data since January, and more specifically inflation. Both make his disinflation optimism at the February meeting look misplaced. What markets would like to know is something more specific. Firstly, how high will the Federal Open Market Committee revise its estimate of the terminal rates in this cycle? Secondly, is the Fed going to revert to 50bp hike increments in March after a downshift to 25bp in February? On both counts, we think markets will be disappointed. There is still one jobs and one inflation report before the next Fed meeting so it wouldn’t make sense for the Fed to give up some optionality by guiding markets on one outcome or the other. Even if our hunch is that reverting to 50bp hikes is still the minority outcome compared to a longer string of 25bp hikes at the coming meetings, it is fair to say that the recent hawkish re-pricing is helpful in the fight against inflation. This is one more reason for Powell not to take anything off the table. Central bank commentary should lose its importance compared to the economic data guiding it The last point to make is that the Fed’s professed data dependence means central bank commentary should lose its importance compared to the economic data guiding it. The caveat is of course that this supposes market participants are understanding the Fed’s reaction function correctly. Given the shift in tone from late 2022 to early 2023, we wouldn’t blame investors for being confused. Given recent data, whatever Powell says, we wouldn’t be surprised if markets conclude that erring on the hawkish side is the correct strategy. Even if we find dollar rates high, we doubt today’s speech will prove the catalyst of a reversal of the February Treasury sell off. Don't expect Powell to rule anything out as inflation break-evens are rising again Source: Refinitiv, ING ECB: Data dependence is wage dependence As the self-imposed European Central Bank’s pre-meeting quiet period is due to start on Thursday, we’re likely to see more unscheduled attempts to skew expectations. There is clearly a range of opinions between the doves (eg, Mario Centeno yesterday) and hawks (Robert Holzmann). On the dovish side, focus seems to increasingly be on celebrating the drop in headline inflation forecast owing to the fall in energy prices, while the hawks flagged the acceleration of core inflation to push for further 50bp hikes beyond the one already signalled in March. ECB has struggled to kick its forward guidance habit Despite the stated data dependence aim, the ECB has struggled to kick its forward guidance habit. This is to say that we do not rule out further attempts to guide markets towards certain outcomes at the May and later meetings. One key variable going forward, as chief economist Philip Lane highlighted in a speech yesterday, will be wages. A jump in inflation expectations was another risk he stressed, which means today’s ECB survey of consumer expectations should receive a great deal of attention. Meanwhile, market-based inflation compensation are on a tear. Barring a sudden turn of event, these risks are going to keep EUR rates high. In fact, we would expect them to narrow the gap with their US peers. The EUR curve is power-flattening, with core inflation keeping the ECB hawkish Source: Refinitiv, ING Today's events and market view An upside surprise in German factory orders in January on better foreign demand should further slow the bond rally. Today’s economic calendar is relatively thin with only Spain’s industrial production in the morning and the US wholesale inventories in the afternoon. The ECB’s survey of consumer expectations, including questions on inflation, will probably gather more attention. Read next: In crude oil, we are increasingly likely to see a year of two distinctive halves| FXMAG.COM Instead the focus in European hours will be on supply. The European Union mandated banks for the launch of a long 10Y benchmark. This will be alongside auctions from Austria (10Y/30Y) and Germany (10Y Linker). Away from the eurozone, bonds supply will be short in maturity, with a 2Y gilt and 3Y T-note auctions in the UK and US respectively.   Last but not least, Fed Chair Powell is on the docket for the first day of his two days of testimony before Congress. Dollar rates are close to the top of their range for this year but we doubt Powell's intervention is what will make them come down. Read this article on THINK TagsRates Daily Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Forex: Euro against US dollar - forecast on April 24th, 2023

Eurozone data play in favour of ECB hawkishness, which decides on interest rate hikes next week

Alex Kuptsikevich Alex Kuptsikevich 07.03.2023 15:02
Europe continues to surprise with statistics, suggesting more room for a hawkish tone from the ECB next week. In addition to hawkish inflation readings, data from Germany today highlighted a continued recovery in industrial orders. Destatis reported a 1% rise in manufacturing orders in January, after +3.4% in the previous month. This sharply contrasts the expected 0.6% m/m correction and adds to market optimism. The new orders index has returned to the level of August last year, although it is still down 10.9% year-on-year. However, the worrying pattern of year-on-year declines is primarily a high base effect. The post-squeeze recovery coincides with a rush to place orders on fears that the military conflict in Ukraine could soon disrupt supplies. Read next: In crude oil, we are increasingly likely to see a year of two distinctive halves| FXMAG.COM On Monday, Holzmann said four more 50-point hikes and an accelerated sell-off of assets from the balance sheet would be needed. Strong Eurozone data strengthens the hawkish case for the ECB Governing Council, which meets next week for another policy decision. Options for a 50 or 25-basis-point rate hike will likely be on the table for the ECB. On Monday, Holzmann said four more 50-point hikes and an accelerated sell-off of assets from the balance sheet would be needed. Such a scenario is hardly a base case, but the general tone of commentary continues to shift in favour of further tightening. This is probably the most critical driver for the FX market. Throughout 2021 and 2022, the dollar has rallied as the Fed's tone has become more hawkish round after round. Now it is the ECB's turn, and the fundamentals are in place for EURUSD to rise.
German industry rebounds in January

German industry rebounds in January

ING Economics ING Economics 08.03.2023 09:37
Industrial production rebounded strongly from the December crash but weak retail sales show that growth optimism is still premature   German industrial production rebounded strongly in January, more than offsetting the dramatic December crash, increasing by 3.5% month-on-month from -2.4% MoM in December. On the year, industrial production was down by 1.6%. Production in the energy-intensive sectors rebounded by 6.8% MoM but is still down by some 13% compared with January. Activity in the construction sector surged by almost 13% MoM. This strong rebound is not so much a reflection of the overall strength of the economy but rather a sign that the sharp plunge in economic activity in December was a temporary (perhaps also technical) glitch. Industrial relief but consumer pain Despite the January improvement, German industry continues to sputter. Even three years since the start of the pandemic, industrial production is still almost 5% below its pre-pandemic level. Looking ahead, yesterday’s increase in industrial orders brought some relief but it is weak relief as both domestic and eurozone demand fell sharply and only bulk orders from non-European countries increased. Still, lower wholesale energy prices and the reopening of China could give German industry some tailwind. On the other hand, however, the lack of skilled workers, high interest rates and a high level of uncertainty are likely to undermine investment activity. The inventory build-up in recent months adds to concerns about a still weak outlook for industry. Finally, and as if there haven’t been enough challenges so far, water levels are currently again at record low levels for this time of the year, potentially creating the next supply chain friction. Read next: Jerome Powell wasn't that dovish yesterday, hinting at acceleration of rate hikes and higher rate peak| FXMAG.COM Today’s industrial production data brings some welcome relief but is no reason to cheer. It is mainly a correction of the December plunge. What is also remarkable is the fact that January retail sales did not correct but continued their downward trend from the end of last year. While industry could become a mild growth driver in the first quarter, private consumption looks set to be a drag. Read this article on THINK TagsIndustrial Production Germany GDP Eurozone Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
FX Daily: Hawkish Powell lends his wings to the dollar

FX Daily: Hawkish Powell lends his wings to the dollar

ING Economics ING Economics 08.03.2023 09:50
Fed Chair Powell opened the door to a 50bp hike and hinted at a higher peak rate in his semi-annual testimony. This was a reminder that picking the top in the dollar rally remains too risky. Short-term volatility and weak sentiment can drive EUR/USD below 1.0500 into Friday’s US jobs data. Elsewhere, we expect the BoC to stay put today, but no rates pushback Powell testified before the Senate Banking Committee on Tuesday as part of his semiannual visit to Capitol Hill   Join our economists and strategists for a live discussion of the upcoming US Federal Reserve, European Central Bank and Bank of England meetings. We’ll run through our expectations and what the meetings could mean for financial markets. Tomorrow, 09 March 2023, 15:00-15:40 CET, via MS Teams. REGISTER HERE USD: Powell's hawkishness boosts the dollar Yesterday’s semi-annual Senate testimony by Federal Reserve Chair Jerome Powell surprised on the hawkish side and triggered a large dollar rally. As discussed by our US economist here, Powell hinted both at a higher peak rate ( “that the ultimate level of interest rates is likely to be higher than previously anticipated”) and opened the door for a return to 50bp hikes (“we would be prepared to increase the pace of rate hikes”). This marked another key step in a month-long process of re-pricing rate expectations after the February FOMC press conference had led markets to bet on an early end to the tightening cycle. The two-year USD swap rate has now risen by a full 100bp since the 4.32% 2 February low, and DXY is trading at the November highs. The question now is, can the Fed continue to push the dollar higher? The short answer is yes, essentially because even assuming markets won’t price in a higher peak rate than the current 5.75%, a 50bp move in March isn’t fully priced in (40bp embedded in the OIS curve) and there is ample room to scale back rate cut expectations for end 2023 and early 2024. That is, however, not a given. We have observed high “elasticity” of Fed communication to data: strong inflation, jobs and activity numbers have allowed a radical hawkish re-tuning in the FOMC rhetoric. Our economics team has recently been highlighting how seasonal and weather-related factors may have helped paint an excessively rosy picture for the US economy, and some reality checks may well be on the cards. For example, this week’s payrolls may come in weaker than expected. One could argue that the Fed’s communication may not be as “elastic” on a potential dovish re-tuning if the data disappoints, and members will prefer to err on the hawkish side to keep financial conditions tighter for longer. We agree, and it is hard to imagine a straight-line downward path for the dollar from these levels even if data starts to soften (barring substantial data weakness). However, we keep warning against building bullish-dollar views beyond the short-term: markets may be underestimating the risk of a hard landing for the US economy, and we remain of the view that a broad-based dollar decline is only delayed (more in our latest FX Talking). For now, volatility should remain elevated, and the dollar’s balance of risks is moderately tilted to the upside ahead of Friday’s jobs numbers. Today, we have the second round of Powell’s testimony (to the House), a speech by Thomas Barkin and the release of the Fed’s Beige Book. On the data front, ADP jobs figures will be published - they have not had good predictive power for official data - as well as JOLTS jobs openings. DXY may well break above 106.00 before Friday, although we expect a correction with the NFP release. Francesco Pesole EUR: 1.0500 can be broken today or tomorrow The Powell-led EUR/USD drop yesterday means that the next key support for the pair is now 1.0500. That is a key benchmark level for the pair, and the elevated volatility – combined with deteriorating risk sentiment - raises the chances of a break lower. Such a break lower would however continue to mirror primarily dollar strength as opposed to a lack of faith in the euro’s fundamentals. Let’s remember that the euro is the best-performing G10 currency after the dollar in the past month, and we doubt fresh idiosyncratic EUR weakness is on the cards. The European Central Bank continues to propel rate expectations higher, and the recent inflation readings give President Christine Lagarde all the incentive to sound hawkish when she delivers another 50bp hike next week. Incidentally, the latest PMIs have been pointing to an improved eurozone outlook. Read next: In crude oil, we are increasingly likely to see a year of two distinctive halves| FXMAG.COM The euro hasn’t got many weapons to fight the dollar strengthening at the moment, though. The eurozone’s data calendar lacks market-moving releases and a speech by Lagarde today does not seem to have much to do with monetary policy. Two of the most dovish ECB members – Ignazio Visco and Fabio Panetta – are the other scheduled speakers today, so expect little support to the euro on that front. Today and tomorrow will offer the best opportunity – in our view – to press below 1.0500, while we favour a EUR/USD rebound on a softer US jobs report on Friday. Francesco Pesole GBP: Still upside risks for EUR/GBP EUR/GBP faces upside risks every time the Fed’s hawkish messaging hits risk sentiment: this is because the pound has a higher sensitivity to risk sentiment. Incidentally, at the current juncture, the euro is looking more attractive than the pound, thanks to the ongoing hawkish repricing in ECB rate expectations and a more encouraging domestic outlook. Like the euro, the pound is lacking internal drivers this week, but in light of the deterioration in sentiment and the euro’s better fundamentals, we continue to see moderate upside risks for the pair, with a break above the near 0.8922 17 February high setting the next key resistances at 0.8950 first, and the 0.8970 February high then. Francesco Pesole CAD: BoC to hold, but should leave door open for hikes The Bank of Canada announces monetary policy today, and is widely expected to keep rates unchanged. As discussed in our BoC preview, the “pause” narrative was recently endorsed by disappointing growth and slower-than-expected inflation. However, the jobs market has remained tight, and data show that there are over 800k more employees in Canada than before the pandemic. Some cooling off in the jobs market will likely be required to make the BoC relaxed with some re-easing of financial conditions, and for now, it’s likely that Governor Tiff Macklem wants to keep the door open for more tightening if needed, also because inflation remains significantly above target. There are 25bp of tightening in the CAD OIS curve which is mostly a spillover of higher Fed rate expectations: unlike what we observed in Australia, where the central bank's chief pushed back against further tightening, Macklem may not sound uncomfortable with the current market pricing. At the same time, more rate hikes in Canada will hardly be priced in without clear hints of a resumption of the tightening cycle. This means that CAD may see – if anything – only some short-lived benefits from the BoC announcement today, since the BoC pause makes the loonie more vulnerable to USD appreciation compared to other currencies that can count on hawkish central banks. We continue to expect a return to 1.3000 by the second half of the year, but that would almost solely be a matter of improved risk sentiment and a weaker USD, rather than a stand-out CAD outperformance.   Francesco Pesole Read this article on THINK Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
ECB's Christine Lagarde not to announce the end of rate hikes?

Stagnating eurozone GDP is worse than it seems

ING Economics ING Economics 09.03.2023 09:35
GDP growth in the eurozone was revised down from 0.1% to 0% in the fourth quarter. Poor household consumption and investment data show that underlying developments are weaker than expected, adding concern about eurozone economic performance   Sentiment about the eurozone economy has been more upbeat of late as many bad economic scenarios have been avoided. However, as more data comes in it is clear that the eurozone economy is struggling, with GDP growth revised down to 0.0% in the fourth quarter. This in itself is concerning, but when we look deeper into the GDP release a bleaker picture is revealed. As expected, growth was revised down thanks to weaker than initially released German and Irish data, but even stagnation seems to overstate the real performance of the eurozone economy in the fourth quarter. Household consumption contracts Household consumption in the fourth quarter of 2022 saw the largest decline since the start of the eurozone in 1999, with the exception of during the Covid-19 pandemic. The decline was not the same across countries; the Netherlands and Belgium, for example, saw healthy growth, but France, Germany and Italy all saw declines of around -1%, while Spain experienced a drop of -2.4%.  Household consumption saw the largest decline, with the exception of the Covid-19 pandemic Source: Eurostat, ING Research   When looking at a breakdown of consumer categories to see what caused this drop, we see that a large decline in non-durable goods consumption led the way. This is likely due to a large adjustment in energy consumption, which is a positive development. The declines in services and semi-durable goods consumption are more worrying though. Durable goods consumption did continue to grow, likely mainly due to older orders being fulfilled now that supply chain problems and input shortages have faded. Most consumption categories showed declines in 4Q Source: Eurostat, ING Research calculations Weak investment reflects economic concerns and higher rates Investment dropped sharply as well in the fourth quarter, by 3.5% quarter-on-quarter. It's important to note, however, that Irish intellectual property investments, related in large part to multinational accounting activity, had a big negative impact on this figure. Stripping this out, we still note a decline of -0.7%. This is the first decline since the third quarter of 2021. Read next: ECB preview: 50bp next week but how far will the ECB still go?| FXMAG.COM Germany, Spain and Belgium saw declines in investment, France and the Netherlands were roughly stable, and Italy and Greece saw increases – the latter in part due to EU recovery fund support. Overall, the lower investment appetite from firms is likely related to concerns about economic growth and uncertain prospects for the months ahead, while higher interest rates are also starting to bite. Investment has also dropped, but less markedly Source: Eurostat, ING Research calculations Government and weak imports pushed the GDP growth figure up to 0% With household consumption and investment down so sharply and together contributing -1.2 percentage points to the GDP growth figure, it’s important to look at offsetting factors. Government consumption is a key one, contributing 0.2 ppt positively, while inventories still added 0.1 ppt to the GDP figure. The main contribution came from net exports though as imports declined sharply in the fourth quarter while exports growth slowed markedly to 0.1%. In total, that resulted in a 0.9 ppt positive contribution from net exports. This means that the main positive contributor to GDP in the fourth quarter was the sharp decline in imports – this is hardly a sign of strength. Weaker imports contributed positively to GDP, masking very weak domestic demand Source: Eurostat, ING Research   For the ECB, the release of the underlying components of GDP actually provides a dovish signal. Stagnation in GDP at face value is not a sign that demand is cooling rapidly, but the underlying components show that economic conditions did deteriorate more markedly than initially expected. It’s hard to read where economic activity is headed in the short term, with both positive and negative news coming in about the first quarter of this year. On the back of that, we expect another quarter of stagnating GDP. Read this article on THINK TagsGDP Eurozone Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
US core inflation hits 5.5% and it's the second lowest reading since November 2021

FX Daily: Biden’s budget serves as debt ceiling reminder

ING Economics ING Economics 09.03.2023 09:54
The dollar heads into Thursday's European session near recent highs, buoyed by hawkish Powell testimony and the resultant spike in short-dated US Treasury yields. Expect a quiet session ahead of tomorrow's February US jobs release. Of interest, however, may be the White House's new budget plan. This will serve as a reminder of US debt ceiling event risk Source: Shutterstock USD: Expect consolidation ahead of jobs data tomorrow The dollar is consolidating near recent highs and one can see why. Hawkish testimony this week from Fed Chair Jerome Powell has seen market pricing of the terminal Fed rate push up to 5.65% for a peak in September. US two-year Treasury yields are now 5.05% with the US 2-10 year curve inverted close to 110bp and prompting growing fears of a Fed-induced recession. In short, this is a far cry from the Fed disinflation/Rest of World recovery story that drove the dollar 10% weaker between November and January.  We cannot really look for a broad dollar decline until that disinflation story returns and acute US yield curve inversion breaks by the short end coming lower. This looks more like a story for the third quarter now. Before that, however, the market will take great interest in US activity and price data - hence the strong interest in tomorrow's US jobs number. More on that tomorrow. For today, the US focus may be on headlines emerging from the White House regarding the new budget. Reports suggest the Biden Administration will present a fiscally conservative budget plan to cut the deficit by US$3tn over 10 years, helped in part by tax increases on the wealthy - both income and capital gains tax increases are being touted. However, this budget has no chance of seeing the light of day given that Republicans control the House of Representatives. The budget does seek, however, to position the Democrats as fiscally conservative ahead of a challenging debate over raising the $31.4tn debt ceiling. We suspect this comes to a head in the July-August window when stop-gap funding measures are exhausted. The debt ceiling is certainly a live event risk for 3Q and probably one which is dollar negative - despite some touting a flight-to-safety dollar rally. Expect DXY to stay supported into the US nonfarm payrolls tomorrow. We doubt the dollar will turn substantially lower ahead of the 22 March FOMC meeting and indeed there is an outside risk that DXY could push up to 107.80 were US February activity and price data not to slow as much as expected. Chris Turner EUR: ECB division could prove costly The European Central Bank's hawkish turn since late last year has certainly provided support to the euro in the face of higher US rates. The ECB's trade-weighted euro is now up close to 5% from the lows seen in late August. Lower natural gas prices have certainly helped here, too. However, we were surprised to see comments from ECB dove, Ignazio Visco, yesterday openly criticising ECB colleagues for making forward-looking statements about monetary policy. Presumably, he was taking aim at remarks made on Monday by ECB arch hawk, Robert Holzmann, saying he favoured four 50bp hikes. Read next: ADP payrolls report hit 242K. Japan: YCC may remain unchanged| FXMAG.COM Public dissension amongst monetary policymakers is never welcomed by currency markets. The euro was plagued in its early years under President Wim Duisenbrg, who struggled to corral diverging views. And presumably, ECB President Christine Lagarde's job will only become harder on this front as the ECB takes rates higher into the summer. Please see a full preview of next week's ECB meeting here.  For the time being expect EUR/USD to trade in a 1.0500-1.0600 range and tomorrow's US jobs report will determine whether it needs to break below 1.0500. Elsewhere, the National Bank of Poland (NBP) held interest rates unchanged at 6.75% yesterday - as expected. NBP Governor Adam Glapinski speaks today. Presumably, he will be a little dovish. We would be wary of chasing any zloty gains near term given the risk of further negatives emerging on the FX mortgage story this month. Please see our March edition of FX talking for more on the EUR/PLN story. Chris Turner GBP: Sterling risks getting run over by more hawkish central banks elsewhere UK Monetary Policy Committee (MPC) member Catherine Mann's comments from earlier this week are resonating in FX markets. She said sterling risked coming under pressure from hawkish policy overseas. And certainly hawkish Fed remarks this week have taken their toll on GBP/USD which has traded down to 1.1800. In the March FX talking, we highlighted the outside risk of GBP/USD trading down to 1.1650. This certainly looks like the direction of travel looking at the stronger Fed policy trajectory now. We continue to favour EUR/GBP trading up to and staying near 0.90 over coming months given the risk of the Bank of England shifting to a pause far earlier than the Fed or the ECB. Chris Turner CHF: SNB may increase FX sales In a speech on Tuesday evening, Swiss National Bank President, Thomas Jordan, said the Bank's monetary policy was still too loose and that it could raise rates again, ‘but also sell foreign currency’. As we have discussed on these pages before, the SNB is trying to deliver a stable real exchange rate by delivering nominal Swiss franc appreciation. The fact that we are probably looking at the dollar holding its gains through a large part of the second quarter means that a weaker EUR/CHF will have to pick up a larger share of the CHF nominal appreciation. This is where FX intervention comes in. The SNB has been selling FX since 3Q last year and given Swiss inflation is still proving very sticky, it looks like the 1.0050/1.0100 area is becoming a hard ceiling for EUR/CHF in the first half of the year. We would say the direction of travel here is back towards the 0.9800/0.9825 area over the coming months. It could even be lower were the SNB to surprise with a 75bp hike on 23 March. Chris Turner  Read this article on THINK Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
US Flash, that is to say preliminary, PMI for April came in at a better-than-expected 50.4 versus a downwardly revised 49.2 in March and a forecast 49

Fed Chair Jerome Powell said that no decision has been made yet

Ipek Ozkardeskaya Ipek Ozkardeskaya 09.03.2023 10:00
Bulls in European equities didn't' really get washed out by the Federal Reserve (Fed) hawks; the DAX index closed higher at the wake of Powell's first day of testimony before the Senate – which went badly hawkish on the other side of the Atlantic.   The better-than-expected jump in January industrial production in Germany may have helped send the DAX higher on Wednesday, along with a further decline in the German 10-year yield from the March peak levels.   But beyond Germany, the GDP growth in the Eurozone was null in Q4, and slowed more than expected on a yearly basis, and the European Central Bank 8ECB) won't move a finger to boost economy because all the European policymakers want is... to abate inflation.   And the expectation is that, not only that the ECB will hike by 50bp at this month's meeting, but there will be 150bp hike from now till summer.   The ECB hawks fueled the European yields to fresh highs since the Eurozone's debt crisis– which is fundamentally not good news for equity traders.   And the euro is losing ground against the US dollar, as the hawks on the other side of the Atlantic Ocean look very threatening.   Even though a softer euro could be good for some businesses as a cheaper euro boosts sales abroad, it is obviously bad for abating inflation; it makes the cost of energy and raw materials more expensive for European businesses and boosts inflation. And rising inflation means higher rate hikes, and prospects of slower economy.  As a consequence, the European stocks should be more worried faced with a sinking euro and rising yields.  No decision yet.  Fed Chair Jerome Powell's second day of testimony was as hawkish as the first one, with one little exception.   Powell added a very small tweak to his Tuesday language, and said that the data will determine whether the Fed would increase the pace of the interest rate hikes, BUT that 'no decision has been made on this' yet.   If Powell's intention was to cool down the 50bp hike bets yesterday, it didn't go according to the plan. That probability went above 80% yesterday, as both the ADP report and the JOLTS data came in hotter-than-expected. The ADP printed 242K new private job additions in February versus 200K expected by analysts, while job openings in the US eased from last month's peak, but not as much as expected.   In other words, the jobs data was again too strong to soften the Fed hawks' hand.   Read next: ADP payrolls report hit 242K. Japan: YCC may remain unchanged| FXMAG.COM The US 2-year yield extended its advance above the 5% mark, the 10-year yield hovered around the 4% level. The widening gap between the 2 and the 10-year yield boosts recession odds.   Note that the 4% mark for the US10-year yield  has become a line in the sand that bond investors don't want to breach.   The S&P500 swung between small gains and small losses yesterday, as the strong jobs data didn't let much space for funded gains, but Powell's 'indecision' about the next rate hike helped the S&P500 eke out a small gain to the end of the session.   In the FX, the US dollar index extended gains above the 100-DMA.   Catch your breath before Friday!  Today, investors will mostly spend the session digesting Powell's hawkish testimony, the major shift in US rate expectations, and the strong jobs data. They will also watch the US weekly jobless claims and pray that the February NFP print doesn't surprise to the upside as did the ADP report.   As such, we could see some relief, and correction after two difficult days for risk assets, but investors will likely refrain from opening fresh positions before Friday's US jobs data, because only God knows what could happen when the data falls in. Risks are two-sided, as soft data could easily spur a risk rally.  Gold and energy  The rapid surge in the US dollar and the rising US yields weigh on precious metals. Gold, which was supposed to have a great year, is now in the bearish consolidation zone, below the major 38.2% Fibonacci retracement on November to February rally, and is now testing the 100-DMA, which stands a couple of dollars above the $1800 level, to the downside. A strong data between today and Tuesday could rapidly send the price of an ounce below the $1800 mark. The next natural target for gold bears is the 200-DMA, at $1775 per ounce.  American crude on the other hand failed big time holding on to the gains above the 100-DMA and dropped nearly $5 per barrel although crude oil inventories in the US unexpectedly fell last week.   Rising recession odds due to hawkish Fed expectations is why the bears are out and selling.
The EUR/JPY Pair Is Expected To Start A New Zig-Zag Correction

The EUR/JPY Pair Is Expected To Start A New Zig-Zag Correction

Torben Melsted Torben Melsted 10.03.2023 08:06
EUR/JPY is correcting the rally from 114.42 to 148.40 and has likely just completed an X-Wave. The instrument is expected to start a new zig-zag correction towards 134.00 anytime now. Short-term we would like to see a break below minor support at 143.60 to confirm that wave X has completed at 145.32 and the expected zig-zag towards 134.00 is unfolding. Only a break above resistance at 145.32 will keep the X-wave alive.   Relevance up to 06:00 2023-03-13 UTC+1 This information is provided to retail and professional clients as part of marketing communication. It does not contain and should not be construed as containing investment advice or investment recommendation or an offer or solicitation to engage in any transaction or strategy in financial instruments. Past performance is not a guarantee or prediction of future performance. Instant Trading EU Ltd. makes no representation and assumes no liability as to the accuracy or completeness of the information provided, or any loss arising from any investment based on analysis, forecast or other information provided by an employee of the Company or otherwise. Full disclaimer is available here. Read more: https://www.instaforex.eu/forex_analysis/315602
Bank of England is expected to hike the rate by 25bp. Kelvin Wong talks Euro against British pound

Analysis Of Price Movement Of The EUR/GBP Cross Pair

TeleTrade Comments TeleTrade Comments 10.03.2023 09:02
EUR/GBP takes offers to refresh intraday low, prints three-day downtrend. UK GDP improved in January, Industrial Production, Manufacturing Production deteriorated. Hopes of Britain’s economic rebound due to the latest reshuffle in governing policies, Brexit allow GBP to remain firmer. BoE versus ECB drama could check pair sellers as the key data begins in London. EUR/GBP slides 10 pips to refresh intraday low near 0.8860 as the UK’s Office for National Statistics releases the monthly Gross Domestic Product (GDP) on early Friday. It should be noted that the optimism surrounding the British economic transition and mixed sentiment, as well as likely challenges for the Euro, seem to exert additional downside pressure on the cross-currency pair. UK GDP grew 0.3% MoM in January versus 0.1% expected and -0.5% previous, which in turn pushes back the recession woes and propels the British Pound (GBP) despite mixed readings on the other fronts. That said, UK Industrial Production figures reversed the 0.3% previous expansion with -0.3% MoM marks whereas the Manufacturing Production growth dropped to -0.4% compared to -0.1% market forecasts and 0.0% prior. Also read: UK Manufacturing Production declines 0.4% MoM in January vs. -0.1% expected Elsewhere, hopes of economic recovery and more stock market listings seem to help the Cable pair amid a light calendar during the week. “The country's economy is on track to shrink less than expected this year and avoid the two-quarters of negative growth which mark a technical recession,” the British Chambers of Commerce (BCC) forecast on Wednesday per Reuters. Further, Britain’s finance ministry said on Wednesday it will launch a review into how investor research on companies could be improved to attract more listings, a step that follows a decision by UK chip designer Arm Ltd to only list in New York, reported Reuters. On the same line, Britain's revamped financial market rules will largely be aligned with U.S. and European Union regulations to minimize disruption to global companies, its financial services minister Andrew Griffith said on Thursday per Reuters. It should be noted that Bank of England (BoE) policy maker Swati Dhingra warned against interest rate hikes on Wednesday while saying that overtightening poses a more material risk at this point. On the other hand, fears of more economic pain for the bloc amid geopolitical tensions with Russia and sticky inflation, as well as higher rates, seem to drag the Euro. It should be noted that the risk-off mood underpins the US Dollar’s haven demand and reduces the demand of its major rival, namely the EUR. Having witnessed the initial market reaction to the UK’s data dump, EUR/GBP pair traders may concentrate on European Central Bank (ECB) President Christine Lagarde for clear directions. Also important to watch will be a slew of top-tier data from the US and Canada that can entertain the momentum traders across the board. Technical analysis Failure to overcome the 0.8930 horizontal hurdle joins the EUR/GBP pair’s clear downside break of a one-week-old ascending trend line, around 0.8895 by the press time, to direct bears towards the 100-DMA support of 0.8765.
EUR/USD: Examples of things that could get the market moving are US treasury yields moving out of the range on data improving or deteriorating

FX Daily: US banking stress sends ripples across FX markets

ING Economics ING Economics 10.03.2023 17:22
The S&P 500 closed down 1.8% yesterday led by financials (-4%). Heavy losses for SVB Financial, a California-based lender to the venture capital industry, are raising questions over the unrealised losses on bond portfolios amongst US banks. This and today's US February jobs release are creating dangerous cross-currents for FX markets USD: Making sense of overnight moves Making headlines over the last 24 hours have been developments in the US banking system, where Californian lender SVB Financial has come under stress after realising losses on its bond portfolio. Driving it to realise those losses, apparently, was pressure on its deposit base as higher rates across the system have encouraged depositors to switch and forced banks to compete harder for deposits. Developments at SVB Financial have raised questions on the subject of unrealised losses on bond portfolios and what it means for bank capitalisation levels. Financials led the S&P 500 index lower yesterday. Earlier this week the Federal Deposit Insurance Corporation (FDIC) Chairman, Martin Gruenberg, said that US banks had around US$620bn of unrealised losses on securities that were held to maturity or available for sale accounts. This seems like a big number, but as the Financial Times reports today, equity capital amongst US banks stood at $2.2tr at the end of 2022. It is hard to say how far this story will run, but we can try to make sense of what it means for FX markets. The first impact seems quite clear – the news has encouraged deleveraging of open FX positions. Hence the two darlings among the FX investment community this year – the Mexican peso and the Hungarian forint – have led losses in the EMFX space at -2.2% and -0.8% respectively. This theme could continue should the story run. The G10 FX performance has been more mixed, but makes some sense too. Modest losses have been seen among the higher-beta currencies, such as the Canadian dollar and Norwegian krone (down 0.3% versus the dollar). The outperformer has been the Swiss franc (+1.1%) against the dollar. In addition to its traditional role as a safe haven currency, we have been highlighting recently that the Swiss National Bank has the Swiss franc's back – i.e. is prepared to sell FX reserves to prevent weakness in the franc as it uses the exchange rate as part of its monetary policy regime. The dollar story is a lot more mixed and is complicated today by the big release of the February jobs data. Pressure on the US banking system is questioning whether the Fed can push ahead with such an aggressive tightening cycle. This has seen US two-year Treasury yields drop 25bp over the last two days alone. This is dollar bearish. Yet one would normally think that a sell-off in equities is dollar bullish, perhaps not, however, if the epicentre for current stress is the US banking system. That leads us to today's NFP release. Our US economist James Knightley takes us through the preview here. As James asks: "Was January's 517k jobs release a fluke?'. The consensus is around +200k, with most estimates in the +100-300k range. Such an outcome looks unlikely to unwind the new-found hawkishness demonstrated this week by Fed Chair Jerome Powell. But a big dip in the headline number and any big backward revisions lower – especially were the wage data benign – could see the dollar come off 1%. Clearly a day then of many cross-currents. Given the stress in financials, we would probably prefer to be overweight Swiss franc and Japanese yen (despite the Bank of Japan not adjusting policy overnight) and slightly underweight the dollar heading into the NFP release. DXY could head back towards where it started the week at 104.10/20. Chris Turner EUR: Caught in the cross-fire The SVB Financial-inspired repricing of the Fed curve has seen the two-year EUR:USD swap differential narrow by 20bp in favour of the euro over the last two days. This is providing some support to EUR/USD. A soft NFP job release – questioning whether the Fed has to be as hawkish as Jerome Powell sounded earlier this week – could send us all the way back to where we started the week near 1.0700. Read next: Surprise UK growth rebound means technical recession could be avoided| FXMAG.COM We have highlighted above the pressure of deleveraging on the forint. The Czech koruna – also a favourite of the market – has held up slightly better. Look out for February Cezch CPI today. We see upside risks, though doubt this will have much bearing on Czech National Bank policy settings. Chris Turner GBP: Vulnerable to financial sector stress The UK has just released a marginally better-than-expected January GDP release. But the numbers are very volatile and a better read comes from the 3m/3m release at 0.0%. Our UK economist James Smith thinks "today's figures suggest that first quarter GDP could come in flat or only a touch negative, raising the possibility of the UK avoiding a recession in the first half (a rather moot point given that we are talking very small quarterly decreases in output if it does happen)". In short, not a big driver of sterling. Sterling has been performing a little better over the last 24 hours. However, if the banking stress story has a little further to run we can expect a little sterling under-performance, given the relatively large size of financial services in the UK economy. EUR/GBP can turn big again above 0.8900, while GBP/CHF should make a run at 1.10. Chris Turner CAD: Less relevant payrolls Jobs figures will be released in Canada as well today. Consensus expectations are centred around a very small headline increase (10k) after the very strong 150k January read, while the rather volatile wage growth index is seen accelerating beyond 5.0% once again. This week’s policy announcement by Bank of Canada policymakers fully endorses the disinflationary narrative (here is our meeting review), and while there is still the door open for more tightening if needed, the lack of a hawkish twist in the message despite January’s strong jobs data means that labour factors alone are insufficient to prompt new hikes. So, today’s jobs data out of Canada may well matter less than the US payrolls for CAD, given the loonie’s elevated exposure to global risk appetite. We continue to see short-term upside risks for USD/CAD, but remain bearish over the medium term, largely on the back of a projected USD decline, rather than CAD outperformance compared to other pro-cyclical currencies. Francesco Pesole Read this article on THINK TagsFX Dollar CAD Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
ECB cheat sheet: Difficult to pull away from the Fed

Euro against US dollar: According to NAGA, SVB case is mainly linked to the US market, while Europe may remain untouched

Michalis Efthymiou Michalis Efthymiou 13.03.2023 11:46
The latest NFP figures have been released, but all investors are focusing on the US banking sector this morning. The collapse of SVB, the US’s 16th largest bank, has caused distress in the US markets and globally. Silicon Valley is the US’s tech center and accounts for a 1/3 of the US’s venture capital. The SVB last week aimed to raise capital while voicing some concern over its performance and the effect of higher interest rates. This triggered a lack of confidence, and many depositors looked to withdraw deposits. However, by Friday, depositors could no longer access their funds. A real sign of relief for depositors is the Federal Reserve, and the US Treasury has announced that all deposits will be guaranteed. Wells Fargo has come out advising there seems to have been a clear lack of fund diversification, leading to the bank’s failure. So how is SVB influencing tradable assets? EUR/USD - Higher Rate Hikes in Doubt? Investors can see a clear correlation between the SVB developments and the US Dollar largely. First, investors are contemplating whether the Federal Reserve will keep raising interest rates to 6%. The chief Economist at Goldman Sachs, Jan Hatzius, is advising the bank no longer believes the Fed will hike interest rates at the next FOMC rate decision. If the Fed does indeed take a more dovish stance, the US Dollar can be negatively affected. However, this cannot be certain unless we receive confirmation from the Fed. Read next: To Protect Customer Deposit, SVB UK Will Be Sold To HSBC, The Food Crisis Is Getting Worse| FXMAG.COM The SVB development is also mainly linked to the US market, and Europe has more or less zero exposure. Again, this is considered negative for the Dollar. The exchange rate price during this morning’s Asian session continues to move against the Dollar. The EUR/USD has increased in value for 4 consecutive days and is now trading at almost a 4-week high. The decline in the US Dollar largely drives the price movement. The US Dollar Index declined by 0.60% during this morning’s trading session. Read the second part of the update by NAGA: Total cryptocurrency market capitalization has increased, so has BTC market share| FXMAG.COM Regarding technical analysis, indicators and price action signal an upward trend and a retracement. The EUR/USD opened on a bullish price gap measuring 0.39%, and the price has crossed a new high. Currently, the price is trading within the upper Bollinger band and above the Ichimoku trading cloud, which indicates an upward trend. However, the price has formed divergence at the stochastic oscillator in the 15-minute timeframe, which is why a retracement may form. Currently, the volatility levels are likely to remain high, and traders will be monitoring the direction of the price. EUR/USD 1-Hour Chart on March 13th Most economists have advised that the Federal Reserve hopes for a low CPI reading tomorrow afternoon. If the CPI announcement is lower than 0.4%, the Fed may opt not to hike 0.50%. The less hawkish Fed is only due to the risk to the banking sector. The employment figures on Friday continue to point towards a strong employment sector. The NFP figure remained high, reading 311,000, and the unemployment rate was confirmed as 3.6%.
Forex: Euro against US dollar - forecast on April 24th, 2023

ECB Cheat Sheet: Predictably unpredictable

ING Economics ING Economics 14.03.2023 08:14
Inflation data support ongoing hawkish rhetoric at the ECB but financial stability risk has markets substantially re-price the path for policy rates lower. The risk of miscommunication is high at this meeting; our call for one last spike in rates before the end of this cycle is now conditional. The other side of the Atlantic should keep driving EUR/USD Source: ING   Given the ECB’s strong guidance around a 50bp hike at the March meeting, all our scenarios in this edition of the ECB Cheat Sheet imply a 50bp move, and the degree of data dependency, forward guidance, along with views on inflation and growth should drive the market reaction within the dovish/hawkish spectrum. The recent developments in the US banking sector and large swings in rate expectations both mean that a 75bp move is looking even less likely and that 25bp may be discussed. Our economics team does not see a very material risk of a 25bp hike this week and only expects recent market developments to affect the debate about the path beyond March, but should the ECB surprise with such a smaller move, it would entirely be due to financial risks as opposed to a more constructive view on inflation.   The European Central Bank signalled a 50bp hike at the March meeting and an update to its staff economic forecast suggest the debate about further policy steps will become more heated. That debate is further complicated by fears of US regional banks facing deposit outlflows. On paper, the central bank is data-dependent, and so future moves will only be decided at each meeting, but President Lagarde and colleagues are struggling to kick the forward-guidance habit. Previous attempts at communicating the nuances of monetary policy decisions in the press conference have resulted in outsized, and quickly reversed, market reactions. This is to say nothing of financial stability risk spreading from the US financial system. The ECB is now torn between adding fuel to the fire by delivering the promised hike, and further falling behind in a fight against inflation it is already losing. Markets see rising financial stability risk as a brake on the ECB's ability to hike Source: Refinitiv, ING Buckle up! Near-term jitters as the ECB struggles for a common stance A good starting point in trying to predict the near-term market impact of the March ECB meeting is how far the market has gone since the last one. In a nutshell, they moved a lot, and with reasons. Core inflation continues to rise, and to surprise to the upside. This has been a key driver of the swap curve moving its implied deposit rate at the end of this year by 75bp after the last meeting to over 4% at some point last week. Our own call is slightly lower, around 3.5%. Recent history is full of examples of markets mis-reading the ECB's hawkish intentions Difficulties in finding a common ground, let alone communicating it, could result in markets getting the impression that the ECB is wavering. To put it bluntly, this would not necessarily be the right conclusion: the ECB can be trusted to continue hiking until it is confident inflation is coming back under control. Recent history is full of examples of markets mis-reading its hawkish intentions, however. The latest example to date is February 2023, but October 2022 also comes to mind. Given the jump in rates and increasingly vocal doves, we think the risk of a drop in front-end rates around this meeting is high. This would be the wrong reaction in our view, and the move may well be retraced. It is a fool’s errand to try to predict Lagarde’s exact message, but with higher rates than at the last meeting, and rising stress in financial markets, pressure to sound hawkish is that much lessened. We'd expect one more peak in EUR yields before the end of this ECB tightening cycle Source: Refinitiv, ING Longer term, higher rates and more bear-flattening are on the cards One shouldn’t mistake a knee-jerk drop in front-end rates, and associated curve steepening, for the beginning of a new trend. Even after their re-pricing, we continue to see a case for higher yields. Based on historical relationships to domestic financial indicators alone, we would expect long-term yields to continue rising until much closer to the end of the ECB’s hiking cycle. At face value, we could well see 10Y Bund yields stabilise around 3% for most of this year but this is premised on the ECB actually deliver hikes, something financial markets are increasingly doubting. In practice, a slowing economy and Fed cuts coming into view by year-end means we expect the Bund to end the year closer to 2.25%. Read next: The softening in some of the metrics in the February jobs report is easing fears of a more hawkish Fed, especially in light of the failure of SVB| FXMAG.COM Translating this into 10Y EUR swap rates, this should mean a jump towards 3.5% is not out of the question, before a drop back through 3% by the end of the year, in fact to 2.75%. Needless to say, our call for higher EUR rates is contigent on worries about one US bank's failure not escalating into durable system-wide angst.  The ECB has to sound like it is on its front foot to avoid another jump in inflation expectations One key variable to look at to see if long-end bonds find support at current yields levels is inflation swaps. The upside surprise to eurozone inflation in February sent them higher, while a barrage of hawkish ECB comments staved off further rises. Therein lies the key to long-end rates remaining in check: the ECB has to sound like it is on its front foot to avoid another jump in inflation expectations. Judging from a wide range of diverging opinions going into this meeting, and in the difficulty for Lagarde in finding a common message to communicate, we see more near-term upside to EUR rates. Even if contagion risk is still small, the ECB is unlikely to accelerate QT Source: Refinitiv, ING The quantitative tightening bargaining chip Our impression has long been that the ECB’s balance sheet, and the roll-off of its asset portfolios in particular, has been used by the ECB’s hawks as a bargaining chip in trying to elicit bolder action on the rates front. Normalisation is an important aspect, but interest rates are still the ECB’s main policy tool. In that case Bundesbank’s Nagel, calling for a moderately faster reduction of the Asset Purchase Programme portfolio starting in the third quarter while still urging action on rates, sounded more like an early concession. The amount of €20bn per month he called for is not yet in effect a full stop of reinvestments and is also in line with the market consensus. We think Austria’s Holzmann calling for the inclusion of the Pandemic Emergency Programme (PEPP) in quantitative tightening in autumn can also be viewed against the backdrop of pre-positioning for heated Council discussions. However, his remarks do stand out as being the first time that an ECB member has openly questioned the current forward guidance on PEPP reinvestment – this still foresees full reinvestments until at least the end of 2024. Flexible reinvestment of PEPP maturities forms the ECB’s first line of defence against sovereign spread turmoil Yet the PEPP is more than just another sizeable balance sheet item waiting to be wound back. The flexible reinvestment of PEPP maturities forms the ECB’s first line of defence against sovereign spread turmoil. Unlike the much touted and in theory certainly powerful Transmission Protection Instrument, it comes with a relatively low bar for deployment and has actually been used and tested already. Sovereign spreads have proved remarkably resilient during the ECB’s tightening drive, but especially considering the latest stress surfacing in corners of the US banking system we think the ECB will not want to rock the boat. FX: ECB not the primary driver of EUR/USD EUR/USD approaches the ECB March meeting with a big deal of volatility and external factors affecting it. The two-year EUR-USD swap rate differential has narrowed from the 140bp area to the 90-95bp area (at the time of writing) following the SVB collapse and rising bets on a Fed U-turn. However, EUR/USD has only risen modestly, and this is because global risk sentiment also took a hit and that is statistically the most important driver for the pair while short-term differentials have lost predictive power recently. We estimate only a 1.5% short-term undervaluation in EUR/USD. Where does this leave EUR/USD when it comes to the ECB impact on Thursday? While FX volatility will be higher into the ECB announcement, the latest price action clearly confirmed that EUR/USD is much more closely tied to risk sentiment than it is to short-term rate dynamics. In the current environment, decisions taken in Washington and incoming news on the health of the global banking sector are more important drivers for sentiment than the degree of ECB hawkishness. So, even if a volatile FX market will be inevitably sensitive to Lagarde’s words, we suspect the impact on EUR/USD may be out-shadowed by news on the banking front. In terms of the direction of the ECB impact, we outlined in this preview how there are still non-negligible risks of communication missteps by the ECB, which are probably exacerbated by the recent turmoil. Accordingly, the balance of risks based only on the ECB-reaction appears tilted to the downside for EUR/USD. However, should we see the Fed reassure markets with a more dovish tone, and global sentiment rebound, it would take a big dovish ECB surprise to prevent a EUR/USD rally. Read this article on THINK TagsInterest Rates Foreign exchange ECB meeting Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
ECB's Christine Lagarde not to announce the end of rate hikes?

Here's why EUR/USD is not trading higher on the Fed re-pricing

ING Economics ING Economics 14.03.2023 08:20
The recent failure of two US banks, SVB and Signature, have understandably triggered a major re-appraisal of Fed tightening prospects. This has seen two-year EUR:USD swap rate differentials move to the narrowest levels since October 2021. One could expect EUR/USD to be trading substantially higher than this, but risk sentiment is likely holding it back Market is close to pricing the Fed tightening cycle as over In a complete U-turn from its reaction to hawkish Powell testimony last week, markets today struggle to price one further 25bp hike from the Fed. This is a far cry from the +75-100bp of extra tightening seen last week. The re-pricing of the Fed is understandable as US authorities struggle to put a floor under the evolving banking crisis. Indeed, the KBW regional banking index is off another 10% today – not what authorities wanted to see after promising at the weekend to make all depositors whole and introducing new liquidity provisioning schemes. This dramatic re-pricing of the Fed cycle has outpaced anything seen amongst European monetary cycles and delivered a huge narrowing in two-year EUR:USD swap differentials. Normally rates at the short end of the curve are solid drivers of exchange rates (signifying the path of respective monetary policy) and the sharply narrower spread would be expected to drive EUR/USD a lot higher. EUR/USD has turned around from its 1.0525 lows seen last week, but what is stopping it from trading substantially through 1.08? We think a look at the key short-term drivers of EUR/USD provides the answers. Equities have out-shadowed rate differentials as EUR/USD drivers... Our financial fair value model takes into account an array of market factors to estimate mis-valuation in FX in the short-term. A closer look at the swings in the coefficients of the EUR/USD model helps us understand why the pair has been capped despite falling US rates. Back in late 2021, the last time when the two-year swap spread was as narrow as 80-90bp, EUR/USD was trading around 1.15. However, short-term rate differentials back then where the single most important driver of EUR/USD (chart below), while the coefficient of two-year swap spreads is now very close to zero, meaning that even a very large move in the spread statistically implies only a small move in EUR/USD. And this is exactly what we are observing now. Rolling betas of our EUR/USD short-term fair value model Source: ING   At the moment, equity factors – both global (i.e. risk sentiment) and relative (i.e. performance of European equities versus US equities) – are steadily on the driver’s seat when it comes to EUR/USD. Risk sentiment, in particular, determines the majority of the pair’s moves: that’s probably because we’re at the end of a unique business cycle and investors are more fearful about stagflation and central bank over-tightening than they are about relative yield differentials. ... but a clean EUR/USD rally is possible The fact that EUR/USD cannot benefit from the large move in its favour in the short-term rate differential does not intrinsically exclude a short-term EUR/USD rally though. The conditions for such a rally would simply be different. A Fed nod to markets can trigger a clean EUR/USD rally At the moment, markets are speculating on a Fed’s U-turn, but are equally pricing in a greater degree of contagion in the banking sector turmoil, which is ultimately weighing on risk sentiment and preventing EUR/USD to break higher. This does not appear like a sustainable environment: markets will either receive a nod or a disapproval by the Fed when it comes to a sudden re-calibration of the tightening path to ease systemic financial risks. Should the Fed accommodate market hopes, there would be ample room for market sentiment to rebound, as risk assets would benefit from the combination of significantly lower rate expectations and systemic financial risks being priced out. That is what a clean EUR/USD positive scenario would look like. Read next: The softening in some of the metrics in the February jobs report is easing fears of a more hawkish Fed, especially in light of the failure of SVB| FXMAG.COM Our base case: a moderately bullish bias for EUR/USD As discussed in our ECB market preview, the recent developments suggest the impact of this week’s ECB announcement and press conference on EUR/USD may be less pronounced and short-lived than the February meeting. In other words, if the positive scenario highlighted just above materialises, it would take a very big dovish surprise by the ECB to prevent a EUR/USD rally.   Drawing a base case in such a noisy market environment is not easy. As we said, the Fed role is key: central bankers, just like governments and market participants are still making a full assessment about the effective health of the US and global financial sector. The size of a EUR/USD rally depends on the Fed's "overreaction" Based on the information we have at the time of writing, we would expect at least some unwinding of the recent hawkish rhetoric by the Fed, which could help stabilise sentiment and translate into a stronger EUR/USD. The size of a EUR/USD rally entirely depends – in our view – to the Fed’s “overreaction” to the recent turmoil. For now, we target 1.08-1.09 by the end of this week.   In the rest of G10, expect other safe-haven currencies (CHF and JPY) to remain in demand until the Fed has effectively restored confidence. After that point, here AUD and NZD remain the two currencies that can probably offer the best combination of fundamentals in a risk-on rally, thanks to exposure to China and undervaluation. CAD’s vicinity to the US financial turmoil means it could lag other high-beta currencies. Read this article on THINK Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
ECB enters final stage of tightening cycle

Traders see less than a 50% chance for a 50bp European Central Bank rate hike

Ipek Ozkardeskaya Ipek Ozkardeskaya 14.03.2023 08:44
Monday was yet another ugly day for bank stocks around the world, as the selling pressure continued following the SVB debacle in the US last week.   The money flew into the safe havens.  Treasury yields around the world tumbled sharply. The US 2-year yield tipped a toe below the 4% mark, from above the 5% level last week, after Federal Reserve (Fed) Chair Jerome Powell hinted at potentially faster rate hikes in the US to abate inflation.   That expectation is no longer on the menu du jour.   On the contrary, there is now a massive lack of consensus in the market regarding what the Fed should do, and what the Fed will do. Some think that if today's inflation data is not sufficiently soft, the Fed should continue hiking by 50bp. Some others think that the Fed should simply hike by another 25bp this month and signal a pause starting from the next meeting – which would be the smoothest solution of all for the market. An increasing number of investors and bank analysts including Goldman Sachs believe that the Fed will skip the March rate hike. Others stretch the 'no rate' idea further and think that we will finally get the pause in the US rate hikes that many were hoping for as soon as this month – meaning that the rate hikes will be over for this cycle for the US. And there are some extreme opinions, like Nomura, which think that the Fed could cut by 25bp at next week's meeting to contain the crisis in the banking sector.   Now, in theory, the worst of the crisis should be behind us, as the US government guaranteed all depositors of the banks that collapsed last week. But the crisis will surely get the Fed to think twice about what to do at next week's meeting.   For now, the pricing on Fed funds futures suggests that there is slightly more than 70% chance of a 25bp hike next month, and slightly less than 30% chance for no rate hike.   This is a big, big change since last week.   How will the market react to US CPI?  The US CPI data due today could reshuffle the Fed expectations regarding what will happen next week.   Both headline and core inflation are expected to have eased in February, but investors are cautious given that last month's disappointment could be repeated this month, as the base effect – where we will finally start comparing the war months to the war months won't be in play until March – as Russia invaded Ukraine by end of February last year.   Read next: The softening in some of the metrics in the February jobs report is easing fears of a more hawkish Fed, especially in light of the failure of SVB| FXMAG.COM Plus, Manheim's used car index, that serves as an indicator of US inflation (though much less powerful than it used to be during the pandemic months) spiked significantly higher in February.   Therefore, it could be another month of a challenging CPI read for the US.   But the logic this time could be different than before last week. A CPI data in line, or ideally softer-than-expected could fuel the expectation of 'no hike' from the Fed this month, whereas a stronger-than-expected CPI figure may not fuel the expectation of a rate hike from the Fed, as many investors will be urging the Fed to stop hiking the interest rates and be patient about the impact on inflation that could come with delay.   Volatility mounts but we are nowhere close to panic levels.  Turmoil in the market is also reflected through the spike in the volatility index. The VIX hit 30 level yesterday, the highest since October, but note that we are nowhere near the levels that were seen during the 2007/2008 subprime crisis, or the European debt crisis, or the pandemic selloff.   The S&P500 gapped lower on Monday, gained, then gave back gains to close the session slightly in the negative, while Nasdaq 100 – which also gapped lower at the open - closed the session 0.79% higher as the technology stocks rallied on the back of tumbling rate hike expectations and tumbling yields as a result of it.   Apple for example gained 1.33%, while Microsoft rallied more than 2% yesterday. And indeed, a surprise pause in Fed's rate tightening could further boost the tech stocks that are rate-sensitive, and that have been hammered by the higher rate expectations over the past year.  Another asset that benefits from the sharp decline in risk appetite, and the sharp decline in US yields is gold. The price of an ounce rallied by more than $100 since last week, and hit $1914 per ounce yesterday. Yet, the rally will likely lose its power as soon as the calm returns to the market. A correction below the 50-DMA, around $1875, is likely in the next few sessions.  What about the ECB's 50bp hike?  When the US sneezes, the world catches a cold. The tumbling rate hike expectations in the US are spreading through other parts of the world.   Traders now see less than a 50% chance for another 50bp hike from the European Central Bank (ECB) this Thursday, and the expectation of the peak ECB rate fell below 3.5%, from around 4% last week.   But despite the softening ECB expectations, the EURUSD flirted with 1.0750 yesterday, as the US dollar sank deeper across the board.   And well, in periods of strong price action in the US dollar, the dollar is the main catalyzer of market pricing. Therefore, the ECB expectations could temper the FX moves, but could hardly reverse the direction of the market dictated by the USD.
Gold Trading Analysis: Technical Signals and Price Movements

FX Daily: What to expect from another day of market mayhem

ING Economics ING Economics 14.03.2023 10:02
As markets continue to address the fallout of the SVB and Signature collapse and monitor US regional banks, a big question is emerging: will the Fed stop early? Markets are betting heavily it will, and this can mean a much weaker USD, but it’s not worth looking any further than the very short term for now. US CPI today will obviously have a much smaller impact HSBC has bought the embattled UK arm of Silicon Valley Bank USD: Risks of another leg lower The fallout of the collapse of Silicon Valley Bank and Signature Bank is still unfolding. Let’s start by taking stock of what's happened since markets reopened after the weekend: Depositors at SVB and Signature could access their funds on Monday thanks to intervention by US regulators, which aimed at preventing contagion. The Fed’s $25bn Bank Term Funding Programme came into action, offering advantageous conditions for banks that can get loans with collaterals valued at par – therefore avoiding incurring losses when selling securities that have lost in value. It remains to be seen to what degree this will ultimately be leveraged. The repricing in rate expectations has been titanic. In the US, markets now see only a 50% chance of a 25bp hike in March, and fully price in 67bp of cuts by year-end. US 2-year yields edged below 2.0%, more than 100bp below Thursday’s levels. US equities have steadied but failed to rebound despite the Fed’s moves to calm investors. In FX, the dollar drop has been quite contained: in this article, we explain why EUR/USD hasn’t spiked on the huge Fed repricing. So, what can we expect today? Volatility is likely to remain the name of the game. US stock futures point at a marginally positive open this morning, but markets are constantly monitoring incoming news on the health of other financial institutions, in particular US regional banks. It’s worth keeping an eye on the share price of First Republic Bank (another Californian institution) today, after a 62% drop in yesterday’s trading session. Inflation data will be released in the US today: consensus is for a 0.4% month-on-month, 5.5% year-on-year read. Should we see some “orthodox” reaction in rates to a potential data surprise, this could be a signal that some degree of confidence has returned to the market. In FX, we think the balance of risks is tilted towards another leg lower in the dollar. The Fed and US regulators have taken decisive steps to restore market confidence and may be ready to do more (on the monetary side, when it comes to Fed) should financial risks fail to abate. While it is true that the move in rates appears overblown, there is ample room for a bounce in risk sentiment, and FX is currently much more sensitive to equities than rates. AUD and NZD still look attractive in a risk recovery. Should equities fail to rebound, CHF and JPY may emerge as outperformers. It will be interesting to follow where the political discussion goes when it comes to banking regulation. Clearly, this has now become a very central topic in Washington. Francesco Pesole EUR: Capped, for how long? EUR/USD is holding up at 1.07 despite the huge move in US rates. Admittedly, eurozone rates have also followed with a mammoth repricing, and markets are now even doubting the 50bp hike which was “promised” by Christine Lagarde for the March meeting. We teamed up with our rates colleagues and tried to give some clarity about the market impact of Thursday’s ECB announcement in our ECB cheat sheet. Despite markets only pricing in 38bp of tightening this week, our economics team only expect the recent financial turmoil to impact the discussion on the rate path beyond the March meeting, and we therefore stick to our original 50bp call as the ECB remains – on paper – focused on fighting inflation. Read next: The softening in some of the metrics in the February jobs report is easing fears of a more hawkish Fed, especially in light of the failure of SVB| FXMAG.COM From an FX perspective, this would be good news for the euro, but: a) a repricing higher in rate expectations would still require President Lagarde to convince markets at the press conference (which will prove exponentially more challenging given recent developments); b) rate differentials remain an absolute secondary driver of EUR/USD, and the direction for the pair is set to be determined almost solely by how the Fed reacts – or “overreacts” – to the SVB fallout. For now, we target 1.08-1.09 by the end of this week. Francesco Pesole GBP: Upside despite potential hold by the Bank of England Market focus in the UK has been centred around HSBC’s purchase of SVB UK, an operation which was championed by the UK government. It is hard to draw any obvious conclusions from an FX perspective, especially in the current market environment where we could see large daily swings in equities driving a pro-cyclical currency like the pound. On the data front, data released this morning show clear signs that wage growth might have finally peaked, as recent BoE surveys previously hinted. The 3M/3M annualised rate of growth – one of the better measures of momentum in the pay numbers – has slowed noticeably over recent months. This will be welcome news for the BoE and does question whether the Bank will indeed hike by 25bp next week amid the SVB fallout. Even if the BoE decides to hold, this should not prevent Cable from testing the January 1.2450 highs if the Fed pivots to the dovish side and risk sentiment bounces back. Francesco Pesole CEE: This market leaders remain most sensitive Today's regional calendar does not have much to offer. This morning, we saw industrial production data from Romania, which posted a decline of 6.1% YoY for January. Later, retail sales for January in the Czech Republic will be released, which should confirm the sharp year-on-year decline. In the FX market, the Hungarian forint and the Czech koruna remain the main focus again, failing to reverse further losses yesterday. On the other hand, the Polish zloty and Romanian leu have maintained admirable resilience to global turbulence. The Hungarian forint seems to be the most sensitive to market sentiment and energy prices in the region at the moment, with the koruna a close second. Both factors have pushed the forint and the koruna higher in recent days, but yesterday's US trading and the reversal in gas prices indicate that the sell-off should end today and both currencies should at least stabilise at current levels, supported by a higher EUR/USD. Frantisek Taborsky Read this article on THINK TagsFX Dollar Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
If The Bank Of England Hike Interest Rates Again Later This Month Will Exert Downward Pressure On The EUR/GBP Cross

If The Bank Of England Hike Interest Rates Again Later This Month Will Exert Downward Pressure On The EUR/GBP Cross

TeleTrade Comments TeleTrade Comments 14.03.2023 10:31
EUR/GBP drifts lower for the fifth straight day and drops to a nearly two-week low on Tuesday. The GBP’s relative outperformance comes amid rising bets for additional rate hikes by the BoE. The mixed UK jobs data fails to push back against hawkish BoE expectations or lend any support. Speculations for more jumbo rate hikes by the ECB warrant caution for aggressive bearish traders. The EUR/GBP cross remains under some selling pressure for the fifth successive day on Tuesday and drops to a nearly two-week low during the early European session. The selling bias remains unabated following the release of the mixed UK monthly employment details and drags spot prices below the 0.8800 mark, with bears now eyeing to challenge a technically significant 100-day Simple Moving Average (SMA). In fact, the UK Office for National Statistics reported that the number of people claiming unemployment-related benefits fell by 11.2K in February, less than the 12.4 decline anticipated. The slight disappointment, however, was offset by a sharp downward revision of the previous month's reading to show a drop of 30.3K in the Claimant Count Change against the 12.9 fall estimated. Furthermore, the jobless rate held steady at 3.7% during the three months to January as compared to a modest uptick to 3.8%, while the rolling three-month average indicated that the UK wages are cooling. Nevertheless, the data is strong enough to allow the Bank of England (BoE) to hike interest rates again later this month, which continues to underpin the British Pound and exerts downward pressure on the EUR/GBP cross. Apart from this, a goodish pickup in the US Dollar demand is seen weighing on the shared currency, which further contributes to the heavily offered tone surrounding the EUR/GBP cross. That said, the recent hawkish comments by several European Central Bank (ECB) officials, stressing the need for more interest rate hikes beyond March, could lend some support to the Euro. Traders might also refrain from placing aggressive bearish bets ahead of the ECB monetary policy meeting, scheduled on Thursday. The focus will then shift to the BoE meeting next week, which should help determine the next leg of a directional move for the cross. Hence, any subsequent decline is more likely to find decent support near the 100-day SMA, which should act as a pivotal point ahead of the key central bank event risks.
Gold Trading Analysis: Technical Signals and Price Movements

UK economy: according to Ebury analyst, recession is becoming increasingly less likely

Enrique Díaz-Álvarez Enrique Díaz-Álvarez 14.03.2023 22:23
Inflation data and central bank policy took a back seat late last week to the news coming out of California that the record fast increase in US rates had claimed its first major victim: a mid-size bank that had severely mismanaged its interest rate management. Stocks fell into Friday close, and the traditional risk havens in currency markets, the Swiss franc and the Japanese yen, topped the charts. Notably, the euro was flat and sterling managed even a small rise, in a sign that markets see the problems circumscribed to the US. The collapse of SVB, combined with Friday’s mixed US payrolls report, has also led to a violent downward repricing in US rate expectations in the past few days, which has further weighed on the dollar. A 50bp hike from the Fed in March, which appeared to be telegraphed by FOMC chair Powell on Tuesday, now appears firmly off the table.   Since Friday close, we have seen forceful intervention to stem any potential bank runs by US bank authorities, while HSBC has stepped in to buy the UK arm of Silicon Valley Bank. We think that the intervention will be sufficient to restore calm to US regional bank depositors, and currency markets will go back to focusing on inflation data and central bank policy. This week is a critical one on that front, as the February CPI inflation report is released on Tuesday. This will be followed by the ECB March meeting on Thursday, where a 50bp hike is widely expected and unlikely to be derailed by US bank troubles. GBP Newsflow out of the UK continues to confirm a resilient economy, and a recession there is becoming increasingly less likely. This, combined with sticky inflation, leads us to believe that the Bank of England will be forced into yet another volte face away from its recent dovishness, in line with the increased concern we are seeing out of the ECB. This week’s UK labour report is likely to be likewise strong, in terms of both job creation and wage increases. We remain positive on the pound over the medium-term, and think the two further rate increases priced in by the markets are insufficient. EUR The European economy continues to outperform expectations, as do inflationary pressures, and this means a 50bp is all but certain at this week’s European Central Bank meeting. We expect a sharp upward revision to the 2023 core inflation expectations in the staff forecasts, a thoroughly hawkish press conference, and clear indications that another jumbo hike is in the cards at the next meeting. Read next: Pfizer Will Buy Biotech Seagen For $43 Billion| FXMAG.COM In line with the dialling back in US rate expectations, we have seen a similar, albeit more modest, retracement in the expected terminal ECB rate. As mentioned, we think that the impact of the SVP collapse will be contained to the US, and this ensures that we still think expectations for the terminal euro rate are too low. As and when these are correct, we expect the euro to resume its upward trend. USD While it was overshadowed by the news from SIlicon Valley Bank, the US payrolls report for February contained some tentative, but meaningful, signs of labour market loosening, news that the Fed should welcome. Banking fears should probably be assuaged by the decisive measures taken over the weekend, including a full deposit guarantee, but this probably makes the Fed more reluctant to hike rates, which is providing clear headwinds for the dollar. This Tuesday’s US inflation report remains an important one for Fed policy. We expect to see further signs that the core inflation rate is stabilising around an unacceptable 5% annualised rate, which means the above mentioned reluctance to hike may not be long lived. That said, we will now need to see a sizable surprise to the upside for investors to again consider the possibility of a 50bp hike from the Fed later this month. To stay up to date with our publications, please choose one of the below: 📩 Click here to receive the latest market updates👉 Our LinkedIn page for the latest news✍️ Our Blog page for other FX market reports 🔊 Stay up to date with our podcast FXTalk Source: Silicon Valley Bank failure hammers risk assets, drives safe-haven flows | Ebury UK
According to InstaForex analyst, demand for British pound may not increase soon

On Tuesday S&P 500 increased by 1.65%, Nasdaq gained 2.30%. US inflation in line with expectations

Ipek Ozkardeskaya Ipek Ozkardeskaya 15.03.2023 10:56
Global banks, including the US regional banks, rebounded sharply on Tuesday.   As such, the past days' banking stress has been rapidly contained after the US government put in place the necessary measures to restore confidence.  The return of confidence in the banking sector sent the US bond prices lower, and the yields higher. But the big jump in US yields was the countercoup of a historic slump and didn't prevent the S&P500 from recording a 1.65% advance on Tuesday. Nasdaq 100 rallied 2.30%.  A collision between a Russian jet and a US drone over the Black Sea – denied by Russia, and the US inflation report came to tame a part of the joy over the banking relief.   US futures hint at a flat open.  US inflation cements 25bp hike expectations  The US inflation data came in line with expectations on a yearly basis. The headline inflation fell from 6.4% to 6% as expected, and core inflation eased from 5.6% to 5.5%, as expected.   Yet, the uptick in core inflation on a monthly basis to 0.5% - a five-month high, and the stickiness of services inflation above the 7% mark, revived the Federal Reserve (Fed) hawks on fear that we may no longer see inflation trend lower in the coming months, if the Fed stopped tightening now and here.   Read next: Aluminium smelter shutdowns threaten Europe's green transition| FXMAG.COM Discomfort regarding the US inflation data, combined with the gently waning stress in banks, brought the expectation of a 25bp hike back on the table.   Note that, if we hadn't had the SVB debacle, that expectation would've easily been stuck around 50bp. And this is something that we could see reflected in the Fed's March dot plot.    Today, investors will keep an eye on US PPI data and the Empire Manufacturing index.  ECB will likely stick to 50bp hike  The EURUSD is drilling above its 50-DMA, 1.0730, in the run up to Thursday's European Central Bank (ECB) meeting.   Many wonder whether the ECB will soften its tone in the wake of tensions across bank stocks over the past week.   But the chances are that the ECB will maintain its plan to raise the rates by 50bp at tomorrow's policy meeting, and the divergence between a more dovish Fed due to the US banking stress, and a confidently hawkish ECB could help the euro recover against the greenback, and bring the 1.10 target back in sight.   Budget Day!  In the UK, the Chancellor of Exchequer will make a budget statement to the MPs in the House of Commons today.  At today's statement, there will likely be no tax cuts despite a terrible cost-of-living crisis, however the government will likely keep the £2500 per year limit on energy bills for three more months, instead of letting them run to £3000 from April.   The latter would be good news for inflation as inflation in Britain is worse than in Europe or in the US. Goldman Sachs predicts that if the government kept the limit at £2500, inflation in Britain would fall to 1.8% in the Q4, which is below the Bank of England's (BoE) 2% target.   On the investment side, Jeremy Hunt will likely announce measures to boost investment in the UK, including generous tax incentives to attract businesses back to the UK to make sure that growth in Britain catches up its European peers, now that Sunak's government seemed to have eased a part of the Brexit headache that prevented investors from full heartedly invest in the UK.   What's important for investors today is how the UK will boost growth, how it will finance it, and how the bond markets will react to the budget statement. There will probably not be an unexpected reaction, or a meltdown as was the case in September with Liz Truss' budget disaster. The confidence in Sunak's government is strong and the actual government's sense of budget discipline should ensure a smooth budget day.   On the currency front, Cable jumped above the 50-DMA as a result of a broadly weaker US dollar on the US banking stress, but a correction in the dollar's value will likely keep the topside limited at 1.22 and encourage a correction toward the 100-DMA, which stands a couple of pips below the 1.2050 mark.
Bank of England raised the interest rate for the 12th meeting in a row

FX Daily: A nervous calm returns to FX markets

ING Economics ING Economics 15.03.2023 12:59
Measures of stress in financial markets have eased back from their spike on Monday - but remain elevated. Investors remain nervous over deposit flight from the less well-scrutinised US regional banks and whether any more of those banks will run into trouble. Expect another rangy session for FX markets and focus on today's UK 'budget for growth' USD: Dollar takes a trip across its 'smile curve' Financial market conditions have settled a little. Without any further public policy pronouncements yesterday, US regional banks reclaimed some of Monday's heavy losses, US bond yields reversed some of their enormous drop, and measures of money market stress such as the 3m FRA-OIS spread or the 3m EUR cross-currency basis swap partially eased back from stressed levels. However, it seems far too early to sound the 'all-clear' on this topic. The genuine fear is that depositors in these less scrutinised and less regulated banks (the 2018 roll-back of regulation in the Dodd-Frank reforms is being blamed here) will choose to migrate deposits to more highly scrutinised, highly regulated, and better-capitalised banks. Overnight Bloomberg reports that $15bn of deposits have flowed to Bank of America, one of the Financial Stability Board's 30 Global Systemically Important Banks (G-SIBs).   Investors will probably continue to monitor the stock prices of these US regional banks for signs of stress and might also gain some insights on deposit flight by Thursday's release of Federal Reserve borrowing data. Borrowing through the primary credit facility at the Fed's discount window will be scrutinised - last week's reading saw $4.4bn being borrowed versus a March 2020 pandemic peak of $50bn. Presumably, we might also get a read on Thursday evening of banks' use this week of the Fed's new Bank Term Funding Program. This offers funds for 90 days- one year at 10bp over one year USD OIS - currently at 4.68%. This is marginally cheaper than the 4.75% rate through the primary credit facility at the discount window. The size of any borrowing could have a say on market sentiment. This brings us to the Fed and the dollar. As our US economist, James Knightley, wrote after the release of the February CPI yesterday, inflationary pressures are still evident but are expected to fall. The Fed must be praying that market pricing of the 22 March FOMC meeting moves back to a +25bp hike (+20bp now priced) such that it can deliver a no-fuss hike and, like an Olympic high-diver, adjust rates without barely making a ripple in the pool of financial markets. Read next: On Tuesday S&P 500 increased by 1.65%, Nasdaq gained 2.30%. US inflation in line with expectations| FXMAG.COM For the dollar - more settled financial conditions should allow it to reconnect with softer rate differentials and leave the dollar slightly offered. Our concern is, however, that the dollar could easily cross its 'smile curve' should US banking sector stress re-appear and banks want to hoard dollars - that is why we should focus on the EUR cross-currency basis swap now. The idea of the smile curve is that the dollar does well when things are very good or very bad (e.g. start of the financial crisis in 2008 or the start of the pandemic in March 2020) and tends to gently sink at any conditions in between. Expect a further day of consolidation in the dollar, although softer US retail sales figures at 1330CET could give it a gentle downside bias. DXY could nudge down to 102.75 should conditions allow. Chris Turner EUR: Settling in for the ECB After the wild swings in short-dated bond yields this week, the two-year EUR:USD swap differential seems to be settling around the -100bp area - some 40bp narrower than last week. Should equities settle down a little, EUR/USD could start to reconnect a little with yield differentials and head up to the 1.08 area. As above, any severe signs of US money market stress could easily see these EUR/USD gains reverse. The mood in EUR/USD may also be subdued ahead of the European Central Bank's expected 50bp hike tomorrow. Elsewhere, we have just seen an above-expected February CPI release for Sweden. This should cement 50bp hike expectations for the 26 April Riksbank meeting. This would take the policy rate to 3.50%. EUR/SEK has sold off 0.4% on the news, but we would be wary of holding the Swedish krona at the current time. The Swedish banking system is one of the more dependent on wholesale funding markets and also has sizable exposure to the Swedish residential and in particular commercial property sector. Ever higher rates in Sweden only stand to heap more pressure on the property sector, on the banks, and on the SEK. Chris Turner GBP: A 'Budget for growth' At 1330CET today, UK Chancellor Jeremy Hunt will present what has been billed as a 'budget for growth'. At the heart of the budget seems measures to ameliorate the cost of living crisis (caps on energy bills), measures to address the decline in the UK labour force (childcare support and pension reform) plus perhaps some incentives on investment (new forms of tax breaks). While the UK's near-term growth forecasts may be revised higher, ING's UK economist James Smith argues that medium-term growth prospects will be revised lower. And we suspect that Chancellor Hunt may be saving more overt fiscal stimulus for the Autumn Statement or the Budget this time next year ahead of elections later in 2024. We doubt anything in the Budget will be sterling negative - after all taxation levels are near the limit - but equally we do not see it as especially sterling positive either. With the Bank of England nearer to a pause than most, we think EUR/GBP can reclaim recent losses and head back to 0.89, while cable may struggle to break 1.22. Chris Turner CEE: First inflation reminder after SVB Today, we will see an inflation test in the Central and Eastern Europe (CEE) region after the recovery of global markets. In the Czech Republic, PPI numbers will be released, which surprised massively to the upside in January. Although PPI has been falling since last July in year-on-year terms, surveys suggest that a significant drop is not in place, as already indicated by the CPI numbers. In Poland, we will later see CPI numbers for February, the latest in the CEE region. We expect the February number to show a rise from 17.2% to 18.7% YoY, slightly above market expectations. The February CPI reading is highly uncertain due to the annual update of basket weights, however in any case it should be this year's peak. At the same time, core inflation is projected to remain sticky and elevated as the earlier energy shock should continue feeding into the prices of other goods and services. In our view, the path of core inflation will not allow the National Bank of Poland to start cutting rates this year and the easing cycle may start late next year. In the FX space, yesterday we saw the CEE currencies find a floor and stabilise a bit. The Hungarian forint, the biggest underperformer in recent days, even posted a 0.7% gain yesterday. We believe that it is the Hungarian forint and the Czech koruna that should benefit the most in the region from the calming global markets. If the euro maintains its dominance over the US dollar we should see further gains for these two currencies, supported by a return of gas prices to previous lows and higher market rates. Thus, we expect a move to 385 EUR/HUF and 23.70 EUR/CZK for now. Frantisek Taborsky Read this article on THINK Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
FX Daily: Euro’s attractiveness on the rise

FX Markets: Pressure switches to Europe

ING Economics ING Economics 15.03.2023 15:01
Fast-moving financial markets have today seen attention switch from the (ongoing) banking crisis in the US towards Europe. Credit Suisse shares have fallen 23% and the Eurostoxx Banks Index is off 8%. Stress in money markets is moving back to Monday’s levels and the euro is softening Markets remain nervous Earlier today we had described a ‘nervous calm’ returning to financial markets. That has not lasted long at all as attention has switched to Europe and the pressure on Credit Suisse’s (CS) share price after The Saudi National Bank, one of CS’s top investors, said it was not open to a further capital injection into CS. Heavy losses in CS have un-nerved European bank stocks in general at a time when the failure of SVB, formerly the United States' 16th largest bank, is still being assessed. Heavy losses in European banks have raised stress levels in money markets. The 3-month USD FRA-OIS spread has widened back out to +57bp (near Monday’s peak) and the 3m EUR cross-currency basis swap has widened to 38bp from 15bp at the start of European trading. Remember that the cross-currency swap represents the extra cost the interbank market is prepared to pay to secure USD funding using the EUR swaps market. It was a key measure of stress both during the 2008 financial crisis and again during the start of the pandemic in March 2020. FX markets switch mode Having traded for many quarters off the macro influences of the US inflation/Fed tightening story, FX markets are now trading off financial stress. EUR/USD is selling off today as the dollar benefits from the extreme (market dislocation) end of its smile curve. The pressure on European banks has also sparked a repricing of tomorrow’s European Central Bank meeting. What was seen as a solid 50bp hike from the ECB has today been cut to a 35bp hike. Read next: The payrolls bump was mostly witnessed in leisure, hospitality, retail trading, government and health care| FXMAG.COM Standout FX performers remain the Japanese yen (global interest rates are now converging on those in Japan) and to a lesser degree the Swiss franc – although USD/CHF is now higher today as money market stress is leading to broader dollar strength. As we discussed last week, it seems investors are still unravelling some of their favourite trades in the Mexican peso and the Hungarian forint (both off 2%+ today). Renewed financial stress is clearly not good news for commodity currencies either, where the Norwegian krone, which along with the Swedish krona trades at the highest volatility in the G10 space, is also off close to 2% against the dollar today. What next? Clearly, it looks like it will take some time for financial conditions to settle. The Fed announcing greater oversight for mid-sized US banks may not be enough and investors may want to hear of more support from monetary and regulatory authorities. Investors will also be looking out for the take-up of the Fed’s new liquidity scheme, data on which should be available tomorrow evening. With the US MOVE index for US Treasury volatility now spiking above March 2020 levels and the VIX (US equity volatility) heading back to 30%, now is not the time to be looking for carry/yield in FX markets. Instead, a safety-first approach will dominate until developments in the banking system become clearer. That should mean the JPY continues to outperform on the crosses and may even continue to outperform the dollar, too. But a re-pricing lower of the Fed curve will not take the dollar lower until money market conditions smooth out and some confidence is restored to the bank sector. In short, do not be too quick to resell the dollar.   Read this article on THINK Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
EUR/USD: Examples of things that could get the market moving are US treasury yields moving out of the range on data improving or deteriorating

Euro: European Central Bank interest rate hike of 50bp seems to be sealed

FXStreet News FXStreet News 15.03.2023 16:47
On Thursday, the ECB will announce its monetary policy decision. A 50 basis point hike in key interest rates looks like a done deal, despite banking-industry jitters. Focus is on the forward guidance, “course in raising interest rates significantly” could be challenged. XAU/USD volatility might receive more fuel. On Thursday, the European Central Bank (ECB) will announce its monetary policy decision at 13:15 GMT. Later, at 13:45 GMT ECB President Christine Lagarde will deliver a press conference. Back on February 2, the ECB raised rates by 50 bps as expected. In the first sentence of the statement, the central bank said “the Governing Council will stay the course in raising interest rates significantly at a steady pace and in keeping them at levels that are sufficiently restrictive to ensure a timely return of inflation to its 2% medium-term target.” The forward guidance has been challenged during the last weeks by some members. They argue decisions should be taken data-dependant and meeting by meeting. And then came the Silicon Valley Bank drama. And then, Credit Suisse shares tumbled. High inflation vs banking industry concerns The ongoing turmoil in the banking system has become a factor of uncertainty. One more. Its impact is not yet defined. Contagion fears appear partially contained at times. But it could all change in the near future. The ECB has to decide on Thursday what to do with the mentioned context. The damage so far from the SVB drama is unknown. Such circumstances look unlikely to change the course of the 50 bps rate hike expected. ECB members are surely looking at recent developments, and the banking crisis could become the main focus; however, that will not change the fact that inflation is still very high. In February, the annual Consumer Price Index dropped modestly from 8.6% to 8.5%. The impact of the SVB and Credit Suisse crisis is not enough, at the moment, to change the outcome on Thursday. It could change the projected path, the forecast of the terminal rate and the words of the statement. Banking jitters are fresh arguments for the doves at the ECB in their debate against the hawks. With high inflation and interest rates well below inflation, it seems likely that not even the doves will want to make a pause on Thursday (maybe a smaller hike), unless more banks hit the headlines over the next hours. For the next meetings, the situation is evolving so fast that there could even be some hawks asking for a pause. Lagarde’s press conference will be watched closely as usual, with the “extra” of the situation of the banking sector. Will she be able to lead the ECB to another significant rate hike after March? Will her message be conditioned by the opposition to “significant rate hikes ahead”? Gold in the current context The reaction in the currency market to the banking crisis has been milder compared to other markets, particularly bonds and commodities. Gold price jumped to the strongest level in a month, with a rally of more than $100. The run could be attributable to the sharp decline in global government bond yields. The yellow metal held on to most of its gains despite the rebound in yields seen on Tuesday; yields resume the decline on Wednesday, boosting Gold to fresh highs. XAU/USD has been volatile in one direction. The yellow metal usually offers impressive corrections. The ECB meeting arrives after a 7% rally in XAU/USD from last week's low. For Gold traders, it represents a factor that should be taken into consideration, that could add fuel to volatility. Considering the last five ECB meetings, Gold reacted considerably in two. ECB’s decision could have a large impact on Gold price through yields. If what the central bank says creates noise in the bond market, gold will likely follow. Largade has the capability of influencing interest rate futures. Gold is unlikely to remain steady at times when EUR/USD makes big swings.
Euro and European bond yields decreased after the ECB decision. The end of tightening may be close

S&P 500 shrank 0.7% yesterday, Nasdaq gained 0.42%. European Central Bank decides on the interest rate today

Ipek Ozkardeskaya Ipek Ozkardeskaya 16.03.2023 10:24
Banks were on the chopping block on Wednesday, after Saudi National Bank's Chairman Mr. Al Khudairy told Bloomberg TV that they wouldn't inject more money to Credit Suisse (CS) as they already hold 9.9% of the bank and going above 10% would mean further regulatory and statutory requirements.   Credit Suisse stock sold off to a fresh record. At its worst, the stock was down by more than 30% and closed the session with a 24% loss.   The selloff in CS shares spread to other bank shares as well, and the bank stocks pulled the market down with them.   The SMI index lost 1.87%, the Stoxx 600 dived 2.92%, the DAX plunged more than 3%, the bank-heavy FTSE 100 shed almost 4%. In the US, the S&P500 was also under a decent selling pressure led by banks, yet the news that the Swiss National Bank (SNB) would provide liquidity to Credit Suisse in case of need, and the confirmation from the Swiss watch-dog FINMA that CS meets the higher capital and liquidity requirements applicable to systemically important banks – that both came after the European market close - helped the US stocks paring some losses.   The S&P500 closed the session only around 0.70% down, while Nasdaq gained 0.42%. If the bank risk is contained, the falling yields look appetizing for stock investors.  The global yields were on a sharp decline again yesterday. The US 2-year yield slumped more than 8.5% to 3.72%, while the German 2-year yield fell to the lowest since the beginning of the year, to around 2.35% as investors cut their European Central Bank (ECB) rate expectations, again.  According to the latest news, Credit Suisse agreed to borrow as much as 50 billion francs from the SNB and offered to repurchase debt to improve market confidence.  What will the ECB do?!  With yesterday's fresh stress on bank stocks, a 50bp hike from the ECB at today's monetary policy meeting is less than certain.   Although the hotter-than-expected inflation data from France would've granted a 50bp hike, and a few more to come, the ECB may opt for a softer rate hike, or no rate hike at today's meeting, to let the dust settle before acting further.   But maybe, the ECB will remain on course and hike by 50bp today.   It's hard to tell. The visibility on monetary policies from the big central banks is heavily lessened by the banking stress and it's difficult to foresee how much weight the policymakers will give to the bank stress versus inflation.   Read next: Meta announced another job cuts. New Zealand releases Q4 GDP tonight, FedEx reports on earnings tomorrow| FXMAG.COM Today, the ECB has the difficult task to be the first major central bank to decide what to do amid the banking crisis. It's decision could change the expectations for other central banks.   For now, the base case scenario for next week's Bank of England (BoE) meeting is no hike.   While activity on Federal Reserve (Fed) funds futures still points at a 25bp hike next week, with around 65% chance, as of this morning.   But swaps now price in a 100bp cut from the Fed by December, and the peak rate is now seen at 4.85%, down from 5.6% last week, after Fed Chair Powell's speech to the US Senate, when Powell didn't know that winds would abruptly change direction a few hours later.  On the data front, happily for the Fed, a soft set of data from the US yesterday showed that the producer price inflation unexpectedly fell in February. Retail sales, which jumped 3.2% last month and fueled inflation fears, fell more than expected in February. And the Empire Manufacturing index plunged to -24, much worse than a decline to -8 expected in March.   FX and energy  The US dollar index rebounded after hitting 50-DMA earlier this week.   The rebound in the US dollar sent the EURUSD shortly below its 100-DMA. The pair is around the 1.06 mark at the time of writing.  Where the euro is headed next will depend on the ECB decision. A 50bp hike from the ECB should help the single currency extend gains against the greenback, while anything less than a 50bp hike today could encourage a further selloff. The major support on the EURUSD daily chart stands at 1.0473, the major 38.2% Fibonacci retracement on September to February rally. A fall below this level will send the euro into the bearish consolidation zone against the greenback.   On the energy front, the bank stress weighed heavily on energy prices as it worsened the prospects of global growth – and that despite the set of good economic data from China.   The barrel of American crude slumped to $65 per barrel yesterday. Saudi Arabia energy minister Prince Abdulaziz bin Salman said that OPEC+ will stick to production cuts agreed upon in October until the end of the year, but the attention is heavily on the demand side right now. Therefore, it is well possible that the $70pb level, which acted as a strong support since the end of last year becomes the new resistance.
Forex: Euro against US dollar - forecast on April 24th, 2023

Rates Spark: ECB, part of the solution or part of the problem

ING Economics ING Economics 16.03.2023 10:34
The more seriously the European Central Bank takes financial stability worries, the better the chance of a stabilisation in yields. Much depends on sentiment towards banks. We discuss a number of steps the ECB can take Today, the ECB balances inflation and financial stability risks Based on economic data alone, the ECB should be hiking 50bp today. And indeed, this is what it signalled to markets at its last meeting. Today, however, the ECB is not making decisions just based on economic data. The rapid contagion from a US regional bank failure to European banks cannot completely be ignored. It is extremely difficult to say how far this contagion will go, and so how far it will end up tightening financial conditions in Europe, and so how much this could ‘substitute’ for ECB hikes. There is a level of market stress where the ECB no longer needs to hike because of its impact on the economy And yet the ECB has to make a call. In theory, a response where it delivers the 50bp hike to fight still-rising core inflation, whilst providing a comfort blanket (see below) to market participants is the best course of action. In practice, the two are interconnected. There is a level of market stress where the ECB no longer needs to hike because of its impact on the economy. Neither can the ECB completely ignore the impact higher rates would have on confidence. The prudent course of action would be to pause and resume hikes later, but the ECB might judge that its already battered inflation-fighting credibility cannot afford it. Swaption volatility exploded upwards, reflecting lower liquidity and the drastic change of market direction Source: Refinitiv, ING Comfort blanket needed, urgently As with any crisis of confidence, the main task of authorities is to provide reassurance to market participants in order to stop self-fulfilling market panics. From the ECB, the first port of call would be to provide, or promise to provide, liquidity to banks under generous conditions if needed. Quantitative tightening, a process started just two weeks ago could also be seen as fanning the flames of the market crisis. None of these tools is perfect, and the ECB might be reluctant to interrupt a tightening process it has painstakingly started, but these are potential signals the ECB can send to markets. This is especially true if it still decides to hike. Read next: Australia: Employment surges| FXMAG.COM The psychological barrier to rate cuts is probably too high for today. After all, the ECB is facing an acceleration of core inflation and its forecast should show it taking longer to converge to target than anticipated. For the subsequent meetings, however, market conviction is growing that central banks will no longer be able, or need, to hike as much as previously thought. The nearly 50bp rally in 2Y US and German govies yesterday shows the magnitude of the reversal in market sentiment. We wouldn’t overstate the importance of the ECB’s response compared to confidence towards banks The fate of bonds today is pretty binary, and we wouldn’t overstate the importance of the ECB’s response compared to confidence towards banks. A hike (our base case), could well precipitate a fall in interest rates if market sentiment continues to deteriorate. Inversely, some measures could go some way towards reassuring the market, and so prevent a further fall in yields. The more seriously the ECB takes the situation in our view, the more likely we are to see a stabilisation in yields. Flight to quality and rate cut expectations sent short-end bonds on a record-breaking rally Source: Refinitiv, ING Today's events and market view How to factor in the risk of a failure of a G-SIB (globally systemic bank) into monetary policy decisions? This is the question the ECB will try to answer today. As we highlighted above, there is a range of measures it can take to calm markets while still focusing on its inflation fight, but that distinction is only valid up to a point. Our base case is for a 50bp hike but there is a chance it only delivers 25bp, or decides to sit on its hands and wait to see how the situation unfolds. The rates decision is due at 2:15pm CET, President Christine Lagarde will hold a press conference 30 minutes later. Spain and France are due to sell bonds in a fraught environment. Auctions are in the 5Y/10Y/30Y and 3Y/5Y/7Y sectors, respectively. France will also sell inflation-linked debt. US data releases include jobless claims, housing starts, building permits, and the Philly Fed index. Important data points but the focus will largely be on the banking sector once more. Read this article on THINK TagsRates Daily Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Gold Trading Analysis: Technical Signals and Price Movements

FX Daily: Confidence crisis sparks wrong kind of dollar rally

ING Economics ING Economics 16.03.2023 10:43
FX markets will be nervously assessing the overnight news that Credit Suisse has tapped a new Swiss National Bank facility for CHF50bn. Expect confidence to remain fragile - not least because pressure on US regional banks is unresolved. And the ECB faces a very difficult decision today, where market conditions are interfering with plans to hike 50bp USD: Policy makers scramble to restore confidence Despite much discussion of the unique problems facing the US regional banking system after SVB's failure, pressure in the banking sector did cross the Atlantic yesterday and asked questions of the European banking system. All eyes are on the health of Credit Suisse (CS) - one of the world's 30 Global Systemically Important Banks (G-SIBs). Late yesterday CS did receive the support it was looking for from Swiss authorities and overnight announced it had tapped a CHF50bn liquidity line from the Swiss National Bank (SNB). It also announced it planned to buy back some of its senior debt at 'attractive' levels. The travails of CS are of a very different nature to that of SVB, but the trigger for yesterday's CS sell-off was a remark from one of its top investors over capital injections - SVB's problems crystallised last week when it struggled to raise capital. The SNB has made it clear that it believes Credit Suisse is appropriately capitalised for a G-SIB. And certainly, the Financial Stability Board's creation of G-SIBs was to avoid the kind of public sector bailouts seen through the global financial crisis. The question now is whether investors will be happier that CS has access to liquidity or will continue to focus on the CS business model and the trend in capital levels. Pressure on a G-SIB has understandably unnerved global financial markets, which are clearly trading at stressed levels. Implied option volatility in the US Treasury market is now above that seen in March 2020 and dollar funding markets continue to show signs of stress. It seems unlikely that one single corporate finance event can put this genie of banking sector stress back in the bottle, but the market will be on the lookout for a series of supportive measures - perhaps some consolidation in the US regional banking sector under better-rated names? Expecting another nervous day in FX markets, we suspect investors will want to hang onto defensive trades such as long Japanese yen on the crosses and probably long dollar balances in case financial conditions deteriorate further. The market will also take its cue from the European Central Bank today. Pushing on with a 50bp rate hike will prove difficult and we should expect more volatility immediately after the 1415CET decision. Expect DXY to remain highly volatile in a 104-106 range - but the upside could come into focus (for the wrong reasons) if stress in the dollar wholesale funding market were to spike again. Chris Turner  EUR: ECB will struggle to thread the needle Today’s ECB rate announcement will depend on a different set of factors than what the market – and the ECB itself – would have expected only a week ago. If recent inflation data clearly underpinned the ECB’s pledge to hike rates by 50bp in March, the ongoing turmoil in the financial sector is casting doubts on whether policymakers will raise rates at all: the OIS curve is pricing only 28bps for today’s meeting. In our ECB cheat sheet, published on Monday, we analysed four different 50bp outcomes within the dovish-hawkish spectrum, based on the ECB’s assessment of the inflation and growth outlook and above all the balance between data dependency and forward guidance. In light of yesterday’s developments, those scenarios are possible only under the condition that the ECB can feel comfortable that going ahead with tightening will not come at the cost of excessive pain for the financial sector. In other words, the ECB will be monitoring the Credit Suisse news and by extension the environment for European banks before pressing ahead with its promised hike. The time window is very narrow, and while our call is for a 50bp hike, we wouldn’t be shocked to see an ECB hold today. A 25bp move seems the least likely scenario. What about the EUR impact? If the ECB 50bp hike comes in an environment where markets are scaling back concerns on the banking sector thanks to the support from the SNB, then this may actually be read as a signal of confidence by Frankfurt on the health of the eurozone banking system, and can ultimately lift the euro. Should the ECB force a hike in a still fragile environment for the European banking sector, the impact on EUR/USD may actually be negative, as investors see this as another major risk for the financial stability in the area, while the simple repricing higher in ECB rate expectations is statistically not enough to boost the euro (as discussed in this article).  Clearly, a tricky path for the ECB and we suspect EUR/USD will continue to be driven by the risk environment and the relative performance of the European financial sector. Elsewhere in European FX, Norway's krone is emerging as the worst-performing G10 currency. This is far from surprising, as the krone is the least liquid G10 currency and generally performs very poorly during tumultuous times for markets, especially when the risks are concentrated in Europe. While EUR/NOK upside has been relatively capped by the EUR’s own weakness, the USD/NOK rally has been fierce. The pair is now close to a key level, the 10.8860 September 2022 high, after which NOK would default to the weakest since the 2020 pandemic shock, when a liquidity crisis sent it on an uncontrolled spiral to touch the 11.70 level. NOK weakness remains highly likely until central banks successfully restore market confidence.  Francesco Pesole GBP: Budget overshadowed by banking sector stress Chancellor Jeremy Hunt's budget delivered yesterday was generally seen to strike the right notes - albeit within the restraints he was given. It has been hard to pick out any sterling reaction to the budget given all the stress in financial markets. Instead, EUR/GBP seemed to come lower yesterday on stress in the Europan banking sector, recalling the weakness seen in EUR/GBP during the various eurozone crises of 2012-2015. Once again, the performance of the European banking sector will probably determine the EUR/GBP performance over the near term - although should the ECB be able to credibly hike 50bp today without unnerving banking stocks, EUR/GBP can push back above 0.8800. Expect GBP/USD to bounce around in a 1.20-1.22 range until this banking sector crisis calms down. Chris Turner JPY: Remaining the outperformer The return of financial crisis conditions has seen the Japanese yen return as the clear outperformer. The yen has normally played the role of safe haven currency during times like these because of Japan's large current account and net foreign asset position (years of surpluses). While Japan's current account surplus is smaller than it was because of the energy crisis, its large foreign asset position wins out. The yen will also be winning from the macro side too. The US banking crisis stands to tighten US credit conditions, hit US growth, and accelerate the timing of the Fed easing cycle. The same is true for other major central banks and, in effect, will drag global interest rates closer to the rock bottom rates in Japan.   USD/JPY could easily trade under 130 should banking sector conditions deteriorate again and recent events on both sides of the Atlantic only give us greater confidence in our year-end USD/JPY forecast of 120. Chris Turner Read this article on THINK Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Small factors combine to pressure credit

Craig Erlam comments on recent market events and various variants of the European Central Bank decision

Craig Erlam Craig Erlam 16.03.2023 11:44
It’s been another remarkable day in financial markets and it, unfortunately, doesn’t feel like the worst is behind us. Fear has once again gripped the markets, concerned about a repeat of past crises – one in particular, for obvious reasons – and the implications for the financial system and the global economy. Of course, this is natural when so little is known about the situation and what it ultimately means for the health of the rest of the system. In the absence of facts, everyone is left with little choice but to speculate and frankly, what little commentary we’ve had hasn’t really helped. Quite the opposite, in fact. Ignoring the expected comforting words from Credit Suisse Chief Executive, Ulrich Koerner, and Chairman, Axel Lehmann, those of its largest shareholder, Saudi National Bank, and the lack of input from the central bank and regulator have only fueled fears. We’re now left in a situation in which stock markets have tumbled, banks around the world have been pummeled and everyone is wondering just how bad the situation is going to get. The bill may be coming due for more than a decade of rock-bottom interest rates and a massive quantitative easing experiment. Read next: S&P 500 shrank 0.7% yesterday, Nasdaq gained 0.42%. European Central Bank decides on the interest rate today| FXMAG.COM Perhaps the market reaction and all of the speculation today are overblown but in the absence of action or clarity from the relevant authorities, which is lacking currently, it’s hard to imagine the panic subsiding. Perhaps the silence is evidence of them attempting to get that clarity themselves and deal with it but I get the feeling it’s going to be a very eventful end to the week. European Central Bank decision Against this backdrop, it’s anyone’s guess what the ECB will do tomorrow. Markets are currently anticipating a 25 basis point hike but we’ve seen how much rate expectations have changed over the last week. And then you have to wonder what exactly would soothe market jitters? No change? Or does that suggest something deeply concerning is occurring? Or stick to 50 and pretend like nothing is going on? I just don’t know at this point. For a look at all of today’s economic events, check out our economic calendar: www.marketpulse.com/economic-events/ This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.
ECB cheat sheet: Difficult to pull away from the Fed

Credit Suisse, which decreased by 25% on Wednesday, dragged the euro lower

Kenny Fisher Kenny Fisher 16.03.2023 14:15
The euro has rebounded on Thursday after sliding 1.5% a day earlier, its worst daily showing since September 2022. In the European session, EUR/USD is trading at 1.0613, up 0.35%. The financial markets are in turmoil, with fears growing that the Silicon Valley collapse could lead to a full-blown banking crisis. Stock markets have fallen sharply and global banks took a hit on Wednesday after Credit Suisse stocks plunged by 25%. Credit Suisse dragged the euro sharply lower and US Treasury yields and eurozone bond also tumbled. Investors are understandably jittery and the lack of any action from the authorities is not helping matters. ECB meets in midst of market turmoil How will this volatile situation impact on the ECB decision later today? Given all the market turmoil, it’s anyone’s guess what ECB policy makers will do. Just last week, the markets had priced in an 85% chance of a 50 basis-point increase, but that has been shaved to 25 bp since the SVB collapse. ECB President Lagarde had signalled very clearly that the central bank would raise rates by 50 bp, and if the ECB doesn’t deliver it risks damaging credibility. A pause in rates is unlikely, but given the ugly economic backdrop, such a move cannot be discounted. Read next: Is the end of NFT flipping and speculation near? LiveArt announces an NFT membership card| FXMAG.COM Inflation in the eurozone is red-hot at 8.50% and remains the ECB’s number one concern. The current banking crisis may have shifted attention away from inflation, but the ECB will have to continue raising rates to bring inflation closer to the 2% target. The current market turmoil could lead the ECB to be more cautious at today’s meeting, but I expect that policy makers won’t shift their aggressive rate policy. The ECB will release an updated inflation forecast at the meeting, and if, as expected, the core rate projection is revised upwards, hawkish policy members at the ECB will be calling for more rate hikes. EUR/USD Technical EUR/USD is testing resistance at 1.0718. The next resistance level is 1.0798 There is support at 1.0622 and 1.0542 This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds. EUR/USD - Credit Suisse woes knock down euro, will ECB hike today? - MarketPulseMarketPulse
FX Daily: Time for the dollar to pause?

Euro against US dollar - technical analysis - March 16th, 2023

InstaForex Analysis InstaForex Analysis 16.03.2023 14:53
Violet lines- Fibonacci retracement Black line- support neckline EURUSD is trading around 1.06 after yesterday's sell off from 1.0760 to 1.0517. Price briefly made new lows but at the end of the day price closed above the neckline support of 1.0540. Price today bounced towards 1.0636 but bulls remain weak as the daily candlestick has now an upper long tail. Recent price action has confirmed the importance of support around 1.0510-1.0530. Yesterday bears were not strong enough to break below it. Price tested the neckline support and thus far support remains intact. A daily close below 1.0510-1.0530 would be a sign of further weakness to come. Resistance remains key at the 38% Fibonacci retracement. Read next: Is the end of NFT flipping and speculation near? LiveArt announces an NFT membership card| FXMAG.COM Relevance up to 14:00 2023-03-17 UTC+1 This information is provided to retail and professional clients as part of marketing communication. It does not contain and should not be construed as containing investment advice or investment recommendation or an offer or solicitation to engage in any transaction or strategy in financial instruments. Past performance is not a guarantee or prediction of future performance. Instant Trading EU Ltd. makes no representation and assumes no liability as to the accuracy or completeness of the information provided, or any loss arising from any investment based on analysis, forecast or other information provided by an employee of the Company or otherwise. Full disclaimer is available here. Read more: https://www.instaforex.eu/forex_analysis/316421
EUR/USD: Examples of things that could get the market moving are US treasury yields moving out of the range on data improving or deteriorating

ECB hikes rates by 50bp - 16.03.2023

ING Economics ING Economics 16.03.2023 19:22
The European Central Bank (ECB) continues to fight inflation and has announced a rate hike of 50bp. Price stability concerns clearly trump any financial stability worries – at least for the time being European Central Bank President Christine Lagarde   With the latest financial market developments, there were doubts about whether the ECB would continue its hiking cycle today. But it has. With the latest inflation projections forecasting both core and headline inflation close to 2% in 2025, the ECB could easily present some dovishness during the Q&A session, hinting at a slowdown in the pace and size of further rate hikes. Since the financial crisis in 2007 and 2008, financial markets have gotten used to the idea that central banks will always play the lender of last resort. In a European context, be it a financial crisis, a euro crisis or a pandemic, the ECB has always been there to help. “Whatever it takes”, if needed. However, the big difference between the last 15 years and now is that there is a severe inflation problem. The ECB cannot simply return to its role of firefighter as it has to fight inflation. The fact that balancing between financial stability and price stability can be quite a conflict of interest for the ECB has already been clear since European bank supervision, in the wake of the euro crisis, was moved to the ECB. Read next: According to Franklin Templeton's Stephen Dover, focusing on the detail of each bank failure can make us miss the broader view| FXMAG.COM What markets and central bankers are currently experiencing is actually what undergraduate students learn at college in their first year of studying economics: monetary policy has an impact on the economy. It shouldn’t be a surprise to anyone that the most aggressive monetary policy tightening since the start of the eurozone in 1999 has and will have adverse effects. The last few days have been a good reminder to the ECB that the next steps in fighting inflation will be much harder than the steps taken so far. The first phase of exiting the so-called unconventional measures (negative interest rates and bond purchases) went relatively smoothly, but now that interest rates are in restrictive territory, every additional rate hike increases the risk of breaking something. As a result, we expect the ECB to turn more dovish today and in the coming weeks, probably hinting at a slowdown in the pace and size of any further rate hikes. Read this article on THINK TagsMonetary policy Inflation Eurozone ECB Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
ECB enters final stage of tightening cycle

ECB hikes by 50bp and drops forward guidance, while keeping the door open to more hikes

ING Economics ING Economics 16.03.2023 21:47
The ECB continues to fight against inflation and seems unperturbed by the market turmoil of the last few days. Dropping forward guidance, lowering inflation projections, and a growing awareness that the tightening so far can have adverse effects all suggest that today's meeting probably marks the final phase of ECB tightening European Central Bank President Christine Lagarde at today's press conference   In light of the latest financial market developments, there were doubts about whether the European Central Bank would continue its hiking cycle today. But it has. As we expected, the ECB didn’t want to risk damaging its inflation-fighting credibility and delivered the pre-announced 50bp rate hike. The ECB did not give any forward guidance on rates. The reaction to current financial market turmoil was to reference a resilient European banking sector and to stress that the ECB stood ready to “respond as necessary”. New staff projections point to dropping inflation The big caveat when looking at the ECB’s newest round of macro forecasts is that the cut-off date was two weeks ago. So, the latest market turmoil has not been factored in. Still, these forecasts reveal some interesting insights. Both headline and core inflation are expected to come down significantly over the next years, reaching 2.1% for headline and 2.2% for core in 2025. Still, the ECB calls inflation too high for too long. With regards to growth, the ECB remains in our view slightly too optimistic with an upward revision of its growth forecast for this year to 1% and further strengthening to 1.6% in 2024 and 2025. Even though the ECB mentions the tightening of monetary policy as a reason for a slight downward revision of growth in 2024 and 2025. However, we think that the latest market developments are another reminder of the fact that the most aggressive monetary policy tightening since the start of the monetary union will have only marginal effects on the eurozone economy. The ECB's view that eurozone growth will return to a trend of 0.4% quarter-on-quarter from 2024 onward looks optimistic. No longer an unconditional lender of last resort Today’s decisions illustrate that the ECB is no longer the unconditional lender of last resort for the eurozone. Since the financial crisis in 2007 and 2008, financial markets have gotten used to the idea that central banks will always play the lender of last resort. In a European context, be it a financial crisis, a euro crisis or a pandemic, the ECB has always been there to help. “Whatever it takes”, if needed. Read next: Surprising surpluses in Poland’s current account and trade balance| FXMAG.COM However, the big difference between the last 15 years and now is that there is a severe inflation problem. The ECB cannot simply return to its role of firefighter as it has to fight inflation. The fact that balancing between financial stability and price stability can be quite a conflict of interest for the ECB has already been clear since European bank supervision, in the wake of the euro crisis, was moved to the ECB. ECB President Christine Lagarde said several times during the press conference that there wasn’t any trade-off between monetary policy and financial stability and that the ECB would tackle both separately with separate instruments. Today's meeting could mark the start of the final phase of monetary policy tightening What markets and central bankers are currently experiencing is actually what undergraduate students learn at college in their first year of studying economics: monetary policy has an impact on the economy. It shouldn’t be a surprise to anyone that the most aggressive monetary policy tightening since the start of the eurozone in 1999 has and will have adverse effects. The last few days have been a good reminder to the ECB that the next steps in fighting inflation will be much harder than the steps taken so far. The first phase of exiting the so-called unconventional measures (negative interest rates and bond purchases) went relatively smoothly, but now that interest rates are in restrictive territory, every additional rate hike increases the risk of breaking something. Lagarde today tried to convey the message that the ECB was not yet done with hiking interest rates, saying that there was still “a lot more ground to cover”. However, Lagarde also said that this applied to the current base case scenario, which in fact is already outdated with the latest market woes. The fact that the ECB also (rightly) refrained from presenting any new forward guidance and stressed data dependency shows that the peak in interest rates might be nearer than many think. Today, the ECB didn’t blink in light of the recent market turmoil. The next hours and days will show whether the ECB can stick to this stance. All in all, today’s decision and communication leave the door open to heated debates at the next meetings. It should be clear that with any further rate hike the risk that something breaks increases. Therefore, today’s decisions could mark the start of the final phase of the ECB’s tightening cycle: a slowdown in the pace, size and number of any further rate hikes. We stick to our view that the ECB will hike two more times by 25bp each before the summer and then move to a longer wait-and-see stance. Read this article on THINK TagsMonetary policy Inflation Eurozone ECB Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
FX Daily: Time for the dollar to pause?

According to InstaForex's Irina Manzenko euro against US dollar may get bearish

InstaForex Analysis InstaForex Analysis 16.03.2023 23:42
The European Central Bank implemented the base scenario by raising interest rates by 50 basis points as a result of the meeting's results in March. A few days before today's meeting, the market began to question the determination of ECB members. Several analysts and market participants were confused by the failure of numerous large banks in the United States (mainly SVB) as well as the concern surrounding the Swiss bank Credit Suisse. For instance, on the day of the meeting, experts at Deutsche Bank predicted that the ECB would raise interest rates by merely 25 basis points or perhaps adopt a wait-and-see attitude. Barclays Bank economists issued a similar forecast yesterday. In particular, Barclays stated that there is a 60% possibility of a 25-point rate increase, a 20% risk of a 50-point rise, and a 10% chance of the rate remaining the same. Yet, the European Central Bank has disregarded investor requests to delay policy tightening or slow the rate of rate increases (at least until sentiment stabilizes). Today, the regulator put into practice a hawkish scenario that was first announced in February. It cannot be said that today's judgment turned out to be dramatic if there is no irony. On the eve of the meeting, critical insider information was released to the media. For instance, Reuters journalists on Wednesday reported a rate rise of 50 points; according to anonymous sources in the ECB camp, the regulator's members are not exploring alternative scenarios because they are worried about damaging their credibility and causing market volatility. Not to mention the infamous inflationary factor, which continues to cause the Central Bank "headaches." Market reaction The hawkish situation did not benefit EUR/USD buyers, which is significant. The pair experienced a sharp decline to 1.0550 before briefly reclaiming some of the lost positions. Nonetheless, despite the northern pullback, a northward breakthrough is unquestionable. Despite its determination, which some currency experts questioned, the ECB did not support the euro. The market's reaction ultimately failed, primarily as a result of the Central Bank's inconsistent signals. On the one hand, the regulator was worried about inflation, which in February started to increase at a rapid pace once more across the nations of the eurozone. On the other hand, during the following meeting, the Central Bank opted not to announce an increase in interest rates. According to Christine Lagarde, the relevant decisions will be made by "evaluating the prospects for inflation in light of incoming economic and financial data, the dynamics of core inflation, and the efficacy of monetary policy." For instance, it should be noted that the President of the ECB informed the markets about the impending "substantial" rise after the meeting's outcomes in February. As we can see, the situation has changed today. The fate of the rate is currently in the "hands" of inflation, according to the economists of the Swedish financial group Nordea. In addition, based on Christine Lagarde's rhetoric, the European Central Bank will largely concentrate on the movements of the core consumer price index, which excludes prices for food and energy. Let me remind you that the core CPI ended February at 5.6% (with an anticipated fall to 5.2% from the previous number of 5.3%) and updated the historical record once more, demonstrating upward dynamics. The overall consumer price index was down 8.5%, compared to the 8.2% that most experts had predicted. According to Nordea economists, the ECB will raise the rate by 25 points in May and continue to base its decisions on new data if the core inflation index rises once more in March (or even if it stays at the same level). Several analysts predict that the European Central Bank will advance at its meeting in May only if March inflation is higher than in February. Any signs of a standstill or a slowdown in growth will be used to support the status quo. Conclusions Despite recent developments in the U.S. and European financial sectors, the European Central Bank adopted a "hawkish" scenario in response to the meeting's outcomes. The ECB stepped on the gas and increased rates by 50 points, ignoring the current developments and retaining an "unperturbed look," in contrast to the requests of several economists to maintain a wait-and-see stance. This factor helped the euro, which allowed the pair to leave the area of the fifth figure. Yet, Lagarde's rhetoric as well as that of the supplementary statement in general were highly vague. About its future actions, the ECB has maintained uncertainty. All of this suggests that the EUR/USD pair is likely to see a strong bearish mood. While the dollar is steadily improving its position as a result of the rise in hawkish expectations regarding the Fed's future activities, the European Central Bank has not turned into an ally of the euro. The market anticipated immediately after the US "bankfall" that the Federal Reserve could temporarily hold off on hiking rates in March. Nevertheless, once the first emotions dissipated, traders started to look at the issue more realistically. The current consensus forecast predicts a rate increase of 25 points following the outcomes of the March meeting. In terms of technology, the price on the daily chart is placed under all of the lines of the Ichimoku indicator (including the Kumo cloud), as well as between the middle and lower lines of the Bollinger Bands indicator. All of this points to the southern scenario as having priority. The initial and current key target is the 1.0510 mark (the lower line of the Bollinger Bands indicator on the same timeframe). Relevance up to 17:00 UTC+1 This information is provided to retail and professional clients as part of marketing communication. It does not contain and should not be construed as containing investment advice or investment recommendation or an offer or solicitation to engage in any transaction or strategy in financial instruments. Past performance is not a guarantee or prediction of future performance. Instant Trading EU Ltd. makes no representation and assumes no liability as to the accuracy or completeness of the information provided, or any loss arising from any investment based on analysis, forecast or other information provided by an employee of the Company or otherwise. Full disclaimer is available here. Read more: https://www.instaforex.eu/forex_analysis/337835
Rates Spark: Balancing data and risk factors

Marek Petkovich says that Christine Lagarde's comment on stability of sector of credit institutions compared to one from 2008 calmed the markets

Marek Petkovich Marek Petkovich 16.03.2023 23:54
It has happened! The ECB did what it was supposed to do - raised the deposit rate by 50 bps, to 3%, and abandoned the obligation to raise the cost of borrowing at a steady pace. Initially, this was perceived by investors as a "dovish" signal and caused the EURUSD to fall. Moreover, forecasts for consumer prices have been lowered, which suggests less room for maneuver in the field of tightening monetary policy. However, the markets were frightened by something else entirely. In fact, the ECB is not to be envied. Cracks in the banking system appeared first in the United States, and then in Switzerland, and the markets demand explanations from the European regulator. It just so happened that his meeting was the first on the calendar. At the same time, the phrase of the accompanying statement that the increased level of uncertainty reinforces the importance of a data-based approach has become bad news for EURUSD. For a long time, central banks chose between determination and caution, and the latter created a headwind for their currencies. ECB inflation forecasts   Now the main factor of uncertainty is the banking system, and investors demanded clarifications from Christine Lagarde. It seemed that the head of the ECB calmed the markets with the phrase that the sector of credit institutions is much more stable than in 2008, which temporarily returned EURUSD above 1.06. Nevertheless, the words that there is no compromise between price and financial stability scared investors. Will the European Central Bank put the suppression of high inflation on the back burner and start using tools to rescue Credit Suisse and other troubled banks? I believe that he is ready to do both, while Lagarde stressed that the ECB has even more opportunities than the Fed. It seems that a serious discussion broke out inside the Governing Council, and it was extremely difficult for the Frenchwoman to find a compromise. Judging by the reaction of EURUSD, not everything worked out. But it is difficult to expect anything else if investors see a direct discrepancy between the ECB's intentions to suppress inflation and stabilize the banking system. It will be even more difficult for the Fed to do this a week later, because the main source of ignition is in the United States. Unsurprisingly, derivatives lowered expectations of a peak in the federal funds rate from 5.7% to 4.7%. This means that no one expects her to rise at the March FOMC meeting. For the deposit rate, the assumed ceiling fell from 4.2% to 3.2%, which also signals the end of the monetary policy tightening cycle. The situation looks very confusing, is it any wonder that EURUSD is wobbling from side to side? Read next: We may say that Bitcoin's rally sustainability is questionable| FXMAG.COM From a technical point of view, the ability of the main currency pair to cling to the lower limit of the fair value range of 1.0575-1.0715 is of fundamental importance. It will turn out - the chances of growth in the direction of 1.0665 and 1.0715 will increase significantly. As, however, at the end of the correction to the uptrend for EUR USD. Otherwise, the rollback will continue. Relevance up to 15:00 UTC+1 This information is provided to retail and professional clients as part of marketing communication. It does not contain and should not be construed as containing investment advice or investment recommendation or an offer or solicitation to engage in any transaction or strategy in financial instruments. Past performance is not a guarantee or prediction of future performance. Instant Trading EU Ltd. makes no representation and assumes no liability as to the accuracy or completeness of the information provided, or any loss arising from any investment based on analysis, forecast or other information provided by an employee of the Company or otherwise. Full disclaimer is available here. Read more: https://www.instaforex.eu/forex_analysis/337825
ECB's Christine Lagarde not to announce the end of rate hikes?

Rates Spark: Almost there, but still hiking

ING Economics ING Economics 17.03.2023 10:50
The European Central Bank managed to deliver a 50bp hike without a hitch and we expect 25bp from the Fed next week. Sure, there's still a focus on the potential vulnerabilities of some banks. But a veneer of liquidity support does seem to have calmed things for now. It leaves market rates vulnerable after falling too far, too fast and too soon Rate hikes remind us that market rates are vulnerable to the upside now We saw more stable conditions evolve through yesterday. Credit Suisse now has a CHF50bn line to the Swiss National Bank, and First Republic has access to $30bn in deposits from US SIBs. This is unlikely to be the end of it for these two names but it has, importantly, taken the sting from wider banking angst. The ECB went ahead and hiked by 50bp without any particular hitch; the Fed likely delivers a 25bp hike next week. Put simply, if central banks can hike, there is no perceived system threat. The bank risk uncovered so far is proving to be idiosyncratic in nature. If central banks can hike, there is no perceived system threat That said, the blanket response from the US last weekend was remarkable – all deposits insured, and cheap 1yr loans for banks. Banks that access such loans no doubt would open themselves to heightened scrutiny by the regulator, and in that sense, the facility should help to uncover future problem banks. We’re in a better place than we were at the beginning of the week, but this remains a day-by-day scrutiny exercise. Risk barometers are in off highs, but not in by enough to declare the all clear. And even if they were, an undercurrent of angst will remain for some time. At the same time, there has been a deep dive in market rates over the course of just a couple of weeks back. From here, we doubt there is huge room to the downside in terms of the level of rates... that is until something really breaks. This market is vulnerable to a re-focus on some of the macro positives for a little while to come. Discount window borrowing from the Fed (primary credit) surges to record Source: FRED, ING ECB data dependence is dovish as markets see more lasting effects from the financial shock Amid the market turmoil, the ECB stuck to its guns and raised all policy rates by 50bp – underlying inflation remains too high. However, what gives this hike clearly a dovish tilt this time around was the absence of any guidance for action at the upcoming meetings. Finally, it seems the ECB has switched to a more pure form of data dependence. It's also understandable in light of the many occasions that the ECB had previously painted itself into a corner, including going into today’s meeting. It can still take a good while before a shock and its cascading effects wash out of the system Immediately after the press conference, rates dropped moderately. The view is now that the ECB can, at most, push through another 25bp of tightening until summer. This showed that the market’s key concern remains the heightened risks in the banking system. Mind you, the market did not react in any risk-off fashion to the hike, which itself signals sentiment is on the mend,. But it can take a good while before a shock and its cascading effects wash out of the system, be it only that it has instilled greater awareness for risk and a sense of caution, which can lead to a more lasting tightening of financial conditions, even if solutions are found to address the immediate problems. Read next: Oil caught up in broader market weakness| FXMAG.COM ECB President Lagarde has sought to make clear that there wasn’t any trade-off between monetary policy and financial stability. The ECB would tackle both separately with different instruments, but she also admitted that financial conditions would feed into the projections on which ultimately policy is decided. With regard to the market fears at hand, she offered no new instruments or liquidity lines but instilled confidence by pointing out the ECB always stood ready to intervene quickly if needed. There were no changes made to the communication around quantitative tightening or the targeted longer-term refinancing operations (TLTROs). Even as a semblance of calm returns, ECB rate hike expectations remain lower Source: Refinitiv, ING Today's events and market view Today’s data calendar features US industrial production and the preliminary University of Michigan consumer sentiment index. The latter also includes surveyed inflation expectations. In the eurozone, we will see the final inflation readings for February. Both may help remind the market that central banks still have another important task at hand. The ECB, for one, has just shown that it is undeterred from its inflation fight and that further substantial hikes are possible, and the Fed will follow next week. Sentiment is slowly on the mend. At the same time, last night’s Fed borrowing data is indicative of the efforts it took to achieve this feat. In the eurozone, we will be watching the amount that banks want to repay from ECB TLTRO borrowings at the end of March. The general expectation is that banks will have chosen to hold on to the liquidity – in particular as their decision had to be communicated by Wednesday late afternoon to the ECB. Also, as usual after an ECB meeting, we should see a pickup in ECB officials' public remarks again. The hawks may be encouraged if sentiment further recovers, seeing how far front-end rates have dropped.     Read this article on THINK TagsRates Daily Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
FX Daily: Euro’s attractiveness on the rise

FX Daily: Data dependent or financial stability dependent?

ING Economics ING Economics 17.03.2023 11:28
The ECB pressed ahead with a 50bp hike but turned fully data-dependent on the back of higher financial market instability. This adds a new degree of uncertainty about the future path of monetary policy and leaves market pricing very sensitive to incoming news on the banking sector. However, EUR/USD remains primarily a risk-sentiment story USD: FX hit the pause button The turmoil in financial markets continues to follow two parallel tracks: news on distressed banks and central bank action. As we approach the end of the week, it’s quite clear that the two epicentres of financial stability tumult – Credit Suisse in Europe and regional banks in the US – remain unresolved. In both cases, the respective central banks have stepped in with significant support: the SNB with a $54bn loan to the troubled bank and the Fed with its two borrowing facilities which, according to data released yesterday, saw as much as $165bn being used. The borrowing from the discount window reached a new high at $152.85bn. It is clear, however, that markets remain rather nervous about the banking story. First Republic Bank is under increased scrutiny as its share price experienced high volatility and it emerged that the bank will receive around £30bn in deposits from other banks. On the other side of the Atlantic, speculation about a potential acquisition of Credit Suisse by other institutions remains high (despite an official statement by UBS and CS opposing any forced consolidation). Despite the SNB intervention, Credit Swiss bonds continue to show elevated signs of distress. It appears that central bank action was a necessary but not sufficient condition to bring back markets to normality, so expect more turbulence into the weekend. Meanwhile, speculation about the Fed’s decision next week is very much open. Yesterday’s ECB 50bp hike (more in the EUR section below) may suggest the Fed may follow suit with a hike (likely 25bp) of its own. Markets have crawled back towards this scenario in the past 24 hours and now price in 19bp for next week. Large rate cuts – around 90bp between May and January – remain embedded in the Fed Funds futures curve: regardless of whether the Fed will hike or not next week, the degree of pushback against monetary easing will inevitably drive a big deal of the market reaction, and potentially the implications for financial stability. G10 FX took a big pause yesterday despite the still elevated volatility in the debt market. It does appear that currencies are the odd ones out among asset classes in recent market turbulence. This is partly due to the financial shocks being concentrated in the US and Europe, which implies that the dollar struggles to emerge as the straight-out safe-haven currency (Fed rate bets are scaled back) and high-beta FX that are far away from Europe’s sphere of influence – like AUD and NZD – seem to have detached themselves from their canonical correlation with risk sentiment. FX is the laggard now, so big moves and big pauses may be the norm for a little longer. We think a gradual dollar weakening – and we are starting to see moves in this direction this morning - is more likely in the near term, but the upside risks remain very tangible in such a volatile environment. Today’s data calendar in the US includes industrial production for February and University of Michigan inflation figures (with a particular focus on inflation expectations). Francesco Pesole EUR: A new kind of central bank dependency The ECB defied some dovish speculation and hiked by 50bp yesterday. The move appeared appropriate not just from an inflation-battling and credibility perspective but also given a pause might have sent a signal of mistrust to a market that is nervously assessing the contagion risk of the US and Swiss banking troubles. That said, it created a whole new set of communication issues for President Lagarde and her colleagues. The heightened uncertainty related to financial market instability was - by Lagarde’s own admission – a great incentive to abandon any trace of forward guidance in favour of a full data-dependent approach. This, in practice, means that the ECB is now both data-dependent and financial-stability-dependent. Lagarde clarified there is no trade-off between price stability and financial stability, although one could argue this is exactly what we are witnessing right now, considering how much the ECB and Fed narrative has changed in only a week: e.g. 3-4 members of the Governing Council actually wanted to keep rates on hold yesterday. The message, however, was clear: the focus remains on inflation. At the same time, one “hope” could be that instability in the financial sector does some of the monetary tightening itself, ultimately offering an economic reason to slow tightening. For now, our economists' base case is still two more 25bp hikes by the ECB. EUR/USD traded slightly lower after the ECB announcement, probably due to the adverse reaction in European bank stocks. The EUR-USD 2-year swap rate dropped yesterday, both as markets saw the ECB data-dependent approach as dovish and because a Fed rate hike was being priced back in. Short-term rate spreads are, however, a very marginal driver for EUR/USD (as discussed here from a statistical standpoint), especially when compared to equity dynamics. A de-escalation in the tension within the financial sector and stabilisation in sentiment continue to constitute the clearest pattern for a EUR/USD rally from the current levels.        Read next: Rates Spark: Almost there, but still hiking| FXMAG.COM Today, keep an eye on the announcement of the amount repaid by banks under the ECB TLTROs. It is looking increasingly likely that we could see smaller repayments as banks try to retain more liquidity as a precautionary measure. On the data side, there is the final read of the euro area inflation for February and the OECD interim Economic Outlook projections to watch for. We’ll also continue to hear post-ECB comments from governing council members. This morning, Madis Muller made the first remarks after the announcement, saying that the inflation forecasts imply more hikes. Francesco Pesole GBP: BoE hike looking slightly more likely now The ECB hike may have slightly increased the chances of the Bank of England delivering a 25bp hike next week. Our base case is a hike, although it’s admittedly a close call as we acknowledge it will depend on financial market developments and CPI numbers next week. The BoE is probably more relaxed than the ECB and the Fed, so the bar for pausing is lower. For now, EUR/GBP is a thermometer of the Credit Suisse saga. Markets probably deem the UK banking sector less exposed than the eurozone one and are punishing the euro much more than the pound when risks to the Swiss lender escalate. A rebound beyond 0.8800 likely requires more improvement in European banking sentiment. Francesco Pesole CEE: Dose of relief The region got a welcome dose of relief after yesterday. Declining risk aversion and a restart in market rates should support FX across the CEE region today. Despite the mountain ride in recent days, we still favour the Czech koruna and Hungarian forint as the best candidates for a recovery. Both currencies have lost the most in recent days, which in our view has significantly cleared heavy long positioning, opening up space for new buyers. Moreover, the recent moves confirm that both currencies are the most responsive to global sentiment within the region. Moreover, gas prices are again well below EUR 50/MWh. Of the pair, we prefer the Czech koruna, which additionally benefits from the Czech National Bank's hawkish tone and potential central bank intervention. In our view, the bank board continues to maintain its intervention mandate at 24.50-70 EUR/CZK and it cannot be ruled out that it would enter the market at lower levels in the event of further weakening of the koruna, which is not welcome in the fight against inflation. In addition, next week we will see more statements from the board ahead of the blackout period before the CNB's March meeting, which should support koruna gains. Thus, for the rest of the week, we expect the koruna to return below 23.90 EUR/CZK. In the case of the Hungarian forint, we expect a return to stronger levels, but the brake on the pedal may be the return of the EU money issue to the table and the potential renewed conflict with the European Commission in the coming weeks. For now, we could at least see the forint return below 395 EUR/HUF. Frantisek Taborsky Read this article on THINK Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Rates Spark: Balancing data and risk factors

According to Ipek Ozkardeskaya, European indices reacted positevely to yesterday's ECB decision

Ipek Ozkardeskaya Ipek Ozkardeskaya 17.03.2023 11:39
The European Central Bank (ECB) decision yesterday was important as it offered a first indication of what the banking stress meant for the monetary policy.   And it did not mean much –  a relaxing news for markets.   The ECB chose not to fan the banking worries and went ahead and announced a 50bp hike at yesterday's policy decision pointing at high inflation.   The opening sentence of ECB Chief Christine Lagarde's speech was that the bank predicts 'inflation to remain too high for too long'.   And indeed, the final CPI data due out today is expected to confirm a February inflation at around 8.5% - which is high, but not bad compared to double-digit levels printed a couple of months earlier, but core inflation is now at record, and it needs to be addressed.   Regarding the bank turmoil, Lagarde said that the European banks are strong and resilient, they have ample liquidity, and, in all cases, the ECB has a toolkit – other than the interest rates and broad monetary policy - that could help address liquidity issues if needed.   That was clear, and well played.  What was unclear however was, what will happen next to the ECB policy. Lagarde gave no indication on the future. She said the future decisions will depend on economic data.  The lack of conviction for further 50bp hikes is certainly what held the euro back from recording a better rally after the ECB's 50bp hike yesterday.   The EURUSD gained ground, but the advance was barely noticeable. The next natural target for the bulls is the 50-DMA, which stands around the 1.0730 level, and whether the pair could break it depends on what will happen on the Fed front.   What will the Fed do?  The ECB's clear focus on inflation, and not on bank stress, reinforced the expectation of a 25bp hike from the Federal Reserve (Fed) next week.   The ECB decision came as a hint that the Fed could also play down stress in banking sector, highlight that the liquidity issues could be addressed with available tools and keep focus on economic data.  At the wake of the ECB decision, activity on Fed funds futures gives more than 80% chance for a 25bp hike. This probability was around 65% before the ECB's decision.   What does that mean for the US dollar? It probably means a further wind down of the early-year gains as we are now back to the scenario where the Fed would hike by a final 25bp and pause. That was the expectation as we stepped into this year, before the Fed's peak rate expectations shot up to 5.6%. That bet is nearly dead. It could come back to life, but the impact of Fed tightening on banks could help to restrict borrowing from here and ease inflation, and need for further Fed action.  There's your pivot, ladies and gentlemen.   Licking the wounds  The US bond markets are now licking the past week's wounds. The US 2-year yield is up but remains well below the pre-SVB collapse levels. BoFA's MOVE index, which is the implied treasury volatility, hasn't been this high since the 2008 subprime crisis, which calls for caution.   Caution, but stock markets are on a full-cheer mood. European indices loved the dovish 50bp hike from the ECB yesterday.  Plus, the relief on Credit Suisse in Switzerland and the First Republic Bank boosted sentiment across the Atlantic as well. The Stoxx 600 bounced off the goal post and rebounded after testing  the major 38.2% Fibonacci retracement on October to February rally, the S&P500 rebounded around 1.75% and closed the day above the 200-DMA, whereas Nasdaq 100 spiked nearly 1.70% higher, as Amazon, Alphabet and Microsoft jumped more than 4%, Nvidia gained above 5%, Intel above 6%, and AMD nearly 8% after US big banks decided to deposit $30 billion with First Republic Bank as a show of support.   Bitcoin – which tends to move closely with the tech stocks, rallied more than 30% since last week and is now above the $25K psychological level, looking for a further advance to the $30K mark.  Will the joy last? Jim Cramer tweeted 'short this Nasdaq and invite me to your funeral'.  The volatility index on stocks is at reasonable levels, but a 4, 5, 6, 8% jump in big stock prices is a sign that volatility is threatening and calls for caution.   Anyway, the last trading day of a chaotic week could be a calm one (tough you never know !) Investors will monitor the US industrial production and the University of Michigan's sentiment index, expect some further, upside correction in yields and pray that nothing major happens before next Wednesday's FOMC decision.
EUR/USD: Examples of things that could get the market moving are US treasury yields moving out of the range on data improving or deteriorating

Maybe inflation isn't stealing the show as before, but for ECB it's still the key thing

Kenny Fisher Kenny Fisher 17.03.2023 12:06
It has been a busy week for the euro, reflective of the gyrations we’re seeing in the financial markets. EUR/USD has bounced back from a mid-week slide and is trading at 1.0661, up 0.46% on the day. ECB moves full steam ahead In the midst of market turmoil and fears of a full-blown financial crisis, the ECB held its rate meeting on Thursday and had everyone guessing about its intentions. The central bank had strongly signalled it would raise rates by 50 basis points but the bank crisis certainly complicated matters. Credit Suisse shares tumbled by as much as 30% a day before the meeting, weighing on the euro and eurozone bonds. It would have been understandable if the ECB had opted for a 25-bp move due to the market mayhem, but the central bank kept its word and delivered a 50-bp hike, bringing the main rate to 3.0%. Was the 50-bp hike risky in these volatile conditions? Yes, but policy makers may have been encouraged by the Swiss National Bank stepping up and lending Credit Suisse $53 billion, and there was the issue of the ECB’s credibility, after President Lagarde had essentially pledged a 50-bp increase. Also, a 50-bp was the strongest medicine the central bank could deliver in the fight against sticky inflation. Read next: Kim Cramer Larsson takes a technical look at Nasdaq 100, S&P 500, Dow Jones and Russel 2000| FXMAG.COM Inflation may have been knocked out of the headlines this week, but it hasn’t gone anywhere and remains the ECB’s number one priority. There was good news as the ECB’s inflation projections were revised downwards from December. Currently, inflation is expected to average 5.3% in 2023 and 2.9% in 2024, compared to the December estimate of 6.3% in 2023 and 3.4% in 2024. In her press conference after the meeting, President Lagarde was careful not to commit to further rate hikes, saying that rate decisions will be “entirely data dependent.” Still, with inflation well above the 2% target, it’s a safe bet that the ECB is not done with the current rate-tightening cycle. EUR/USD Technical 1.0622 has been a key level throughout the week. EUR/USD is testing resistance at this line. Next is 1.0718 There is support at 1.0542 and 1.0446   This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds. EUR/USD - Euro heads higher as ECB delivers 50-bp hike - MarketPulseMarketPulse
Federal Reserve splits highlighted by May FOMC minutes

FX Daily: Gear up for another rough week

ING Economics ING Economics 20.03.2023 10:17
The UBS acquisition of Credit Suisse over the weekend is not giving enough of a respite to market sentiment this morning, with stress now shifting to the AT1 bond market. Meanwhile, the Fed boosted its USD swap lines. We have the FOMC announcement, as well as other key central bank meetings in the G10 this week, but the focus will remain on banking turmoil UBS has bought Credit Suisse in a Swiss government-backed deal USD: UBS-CS deal no boost for sentiment The weekend brought two very important developments for global markets. The acquisition of Credit Suisse by UBS, orchestrated by Suisse authorities, was announced. While this surely offers a breather to global markets as a black swan scenario is ruled out, it came at a rather hefty cost for some categories of investors, which is ultimately showing its negative impact on markets this morning. The acquisition price was CHF 0.76 a share, well below CS’s CHF 1.86 closing price on Friday, and around CHF 16bn worth of CS Additional Tier 1 capital bonds are being wiped out. Other lenders’ AT1 bonds are coming under pressure this morning, bringing respective shares lower, on fear of contagion. In other words, black swan risks may be lower, but financial turmoil is not over. This is one of the reasons why the Federal Reserve and five other central banks announced a coordinated action yesterday to provide extra liquidity to money markets by increasing the frequency of its USD swap lines operations from weekly to daily. As noted by our rates colleagues here, this appears to be a purely precautionary measure by the Fed, considering that there was no material evidence of outsized demand for dollars last week. There is currently $470bn being drawn through swap lines, which is modestly higher than $390bn a month ago, but nothing compared to the $5tn seen at the peak of the pandemic shock. One could speculate this is a step by the Fed to separate price stability and financial stability, having a secondary goal to go ahead with a 25bp rate hike this week. As discussed in our preview, a quarter percent move remains our base-case scenario, even though volatility in the US and global financial sector make it a very close call. The Fed funds futures curve is pricing in only a 50% probability of a hike this week, raising the chances of a positive dollar reaction in our base-line scenario. More broadly, we suspect that despite some respite in markets from the UBS-Credit Suisse news this morning, lingering stress in the financial sector and defensive positioning ahead of the FOMC event risk should offer support to the dollar. We could, ultimately, see a 25bp move as a sign of confidence in the market’s solidity and along with some gradual easing in global banking turmoil, dollar losses might start to emerge towards the back of the week. In the rest of the G10, we continue to see the yen stay in demand for now. Still, we have learned how news can change market conditions very rapidly in the current environment, so caution around clear directional views remains warranted. Francesco Pesole EUR: More pressure into the FOMC possible EUR/USD is trading in the 1.0650/1.0700 range this morning after absorbing the Credit Suisse acquisition news, as markets clearly remain very cautious about the health of the European banking sector. In line with our dollar view discussed above, we think the pair may face more pressure into the FOMC meeting but may find more strength in the second half of the week. Incidentally, we’ll see preliminary PMI readings for March on Friday, which have recently painted a rather encouraging picture for eurozone growth prospects and may endorse the recent decision by the European Central Bank to keep tightening despite financial turmoil. Read next: The Commodities Feed: Speculators pull back| FXMAG.COM There are three other G10 central bank meetings this week in Europe: the Bank of England (more in the GBP section below), the Swiss National Bank and Norges Bank. The SNB meeting appears very ill-timed: the recent rise in inflation, aggressive tightening by the ECB and the low frequency of SNB rate announcements (once a quarter) would all point to a 50bp hike, but the recent turbulence in the Swiss banking sector may argue against such a large move. Our economics team’s call is still for a 50bp hike, but it’s a very close call. Elsewhere, Norges Bank should hike by 25bp as previously announced, but the recent developments will likely reduce the willingness to sound hawkish on the future path of rate hikes. Francesco Pesole GBP: Pound resilience in doubt UK stock futures point to a weaker opening than other European markets as markets see some contagion risks for AT1 bondholders at some UK institutions. Still, the pound seems to be holding up surprisingly better than other G10 peers this morning. We had previously deemed GBP resilience versus the euro during the banking turmoil as markets seeing the UK banking sector as not as vulnerable as the eurozone one. Given GBP is generally more sensitive to risk sentiment than the euro, and the UK banking sector is coming under scrutiny this morning, we see risks of a EUR/GBP rebound back above 0.8800 today. On Thursday, the Bank of England will announce monetary policy and while we expect a 25bp rate hike, it’s closer to a 50/50 call, as it is for other central banks meeting in the current highly volatile environment. Market implied probability of a hike is 57% at the time of writing, although a big GBP rally may be prevented by policymakers strongly signalling a pause. Francesco Pesole CEE: Following the global story It is hard to see the CEE region taking the initiative and we expect the global story to be closely followed this week as well. Today, we will see industrial, labour market and PPI data in Poland. We expect another weak number for industry while still remaining in positive territory as PMI indicators have indicated for some time. Tomorrow, retail sales in Poland may be slightly weaker for February. Then on Thursday, we will see unemployment data in Poland which could show a one-tenth increase to 5.6%. We expect the Hungarian unemployment rate to come in at 4.1%. In the Czech Republic, Friday will also see the release of consumer confidence for March, which has seen a strong recovery since the start of the year. We also have two interesting sovereign rating reviews in Romania and Poland on Friday. Fitch has held a negative outlook on Romania BBB- since April 2020 and we see more than a 50% chance that we could see a return to a stable outlook. Moody's holds a stable outlook on Poland A2 and we do not expect any changes this time. However, it will be interesting to follow the agency's view on recent developments in the government's relations with the European Commission, access to EU money and the FX mortgage saga. In the FX space, global market sentiment will be key for the CEE region, led by the Fed decision and EUR/USD levels. However, as mentioned earlier, we remain positive on the CEE region, which should see a decent recovery if the global story calms down. Our favourites remain the Czech koruna and Hungarian forint, which lost most of their position last week. Both are also benefiting from record-low enegy prices and hawkish central banks keeping a close eye on FX levels. However, Monday's opening indicates that the market will be looking for safe ground for a while yet and we may see more weakness in CEE in the meantime. However, unless the Fed surprises with a 50bp hike, higher EUR/USD levels and improved sentiment should be positive for the region. The key level for the Czech koruna remains 24.10 EUR/CZK and for the Hungarian forint 402 EUR/HUF, which should limit losses. The Polish zloty confirms decent resilience to global turbulence and should hold below 4.72 EUR/PLN. Frantisek Taborsky Read this article on THINK Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Small factors combine to pressure credit

Euro against US dollar: what were the reasons of a 50bp ECB rate hike?

Kenny Fisher Kenny Fisher 20.03.2023 12:54
After a tumultuous week in the financial markets, things appear to have settled down. The euro is showing limited movement, trading at 1.0655. Central banks move in unison to contain contagion It was anything but a quiet Sunday, as the Swiss government engineered an emergency bank merger, with UBS agreeing to buy Credit Suisse, the second largest bank in Switzerland. At the same time, six major central banks, including the Federal Reserve and the ECB, announced a joint move to ensure liquidity in the financial system. Both moves were aimed at restoring confidence after two US banks collapsed and Credit Suisse shares plunged. This has caused market turmoil and battered the global banking system, with European, Japanese and US bank shares all down by around 10%. The palpable fear is that the contagion could spread and trigger a full-blown financial crisis and it remains to be seen if the Credit Suisse merger and the central banks’ move will calm the markets. Read next: UBS Take over of Credit Suisse means over 50% of deposits will be held by a single institution| FXMAG.COM The ECB kept the pedal on the floor last week, delivering a 50-basis point rate hike which brought the cash rate to 3.0%. The move came in the middle of the banking crisis, and there was speculation that the Bank would opt for a modest 25-bp increase. There were two strong reasons for the oversize rate hike. First, ECB President Lagarde had stated that the ECB would raise rates by 50 bp, and not following through could have damaged the Banks’ credibility. Second, inflation remains high at 8.5%, and with Germany and the eurozone showing some decent economic numbers, the conditions were ripe for a 50-bp move. The ECB is lagging behind other central banks with a cash rate of 3.0% and will have to continue raising rates to lower inflation closer to the target of around 2%. EUR/USD Technical 1.0622 has been a key level throughout the week. EUR/USD is testing resistance at this line. Next is 1.0718 There is support at 1.0542 and 1.0446 This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds. Euro edges lower, ECB and other central banks take joint action - MarketPulseMarketPulse
FX Daily: Resuming the Norm – Dollar Gains Momentum as Quarter-End Flows Fade

JP Morgan, GS and Morgan Stanley ended the day above the line. On Monday, S&P 500 increased by almost 1%, Nasdaq gained 0.34%

Ipek Ozkardeskaya Ipek Ozkardeskaya 21.03.2023 09:55
Bank stocks had a volatile session on Monday. UBS lost up to 16% after the Credit Suisse deal but closed the session more than 1% higher.   In the US, JP Morgan, Goldman Sachs and Morgan Stanley closed the day with 1 to 2% of gains. The regional US banks also had a calm session, except for the First Republic Bank - which plunged 47% after a second credit downgrade in just a week from S&P.   JP Morgan is reportedly in talks with other leading banks to do more, after big US banks put a combined $30 billion in the First Republic Bank as a show of support last week.  In bonds, the announcement of full write-down of Credit Suisse's AT1 bonds got bond investors confused, as equities should be written down before any other paper in the 'bonds' category. Authorities said that equities will be written down first to end confusion. JP Morgan and Morgan Stanley said that they are willing to buy CS's AT1 bonds for 2 cents to sell them back 'somewhere' for 5 cents.  The BoFA's implied bond volatility index MOVE is lower than last week's peak but is still at the highest levels since 2007/2008 subprime crisis.   Equity traders, however, are focused on waning bank stress; the S&P500 closed the day 0.89% up, as Nasdaq 100 gained 0.34%.   Fed meets.  The Federal Reserve (Fed) begins its two-day policy meeting today in the middle of a storm.   If the European Central Bank (ECB) decision serves as a cheat sheet, the Fed could hike by 25bp and say that it has tools to inject liquidity in the system to contain crisis.   Investors are also focused on what the Fed will do with the Quantitative Tightening (QT). I don't think that the Fed will reverse its balance sheet unwinding strategy, or to pause it – because the crisis intervention is a tactical and a short-term move, while the Fed's huge $8.6 trillion balance sheet must be unwound sooner rather than later.  In this context, the Fed's balance sheet ticked higher since the SVB collapse, but the Fed members couldn't comment on the latest events, because the trouble hit the fan while they were in their pre-Fed quiet period.   Read next: Dow Jones and S&P 500 closed near the recent highs. Positive finish of the US markets has helped Asian markets| FXMAG.COM As a result, all the comments that have not been made since the SVB collapse will come out from Fed Chair Jerome Powell's mouth, and the March dot plot tomorrow after the decision.   This morning, activity on Fed funds futures assesses a 75% chance for a 25bp hike. This probability tipped a toe below 50% yesterday. In the FX, the US dollar index slipped below the 50-DMA yesterday on expectation that the Fed will stay cautious at this week's meeting given the turmoil across the financial place.   Gold traded above the $2000 psychological mark on Monday, but the price of an ounce is back to below $1980 this morning, thanks to the calming nerves regarding the price action on the banks front. A further improvement in sentiment could rapidly pull the price of an ounce to $1900 mark.
Gold Trading Analysis: Technical Signals and Price Movements

FX Daily: Testing the market’s cautious optimism

ING Economics ING Economics 21.03.2023 10:23
Yesterday’s tentative recovery in risk sentiment will be tested today as investors still deal with the unresolved regional bank crisis in the US and AT1 bond market turmoil in Europe. Barring clearly positive developments in the banking sphere, we suspect the approaching Fed announcement (tomorrow) could favour some defensive dollar positions today US Federal Reserve building in Washington, DC USD: FOMC risk event draws closer Today’s session will really be a test of the sustainability of yesterday’s rebound in risk sentiment and pro-cyclical European currencies. The market’s focus in Europe appears to be on the vulnerability of Additional Tier 1 bondholders after the Credit Suisse acquisition deal by UBS saw AT1 bonds being wiped out. European regulators and central bankers are now attempting to restore confidence in the AT1 bond market, which now poses a major threat to any extension of the recovery in investor sentiment in the region. In the US, the regional bank turmoil remains far from resolved. The Treasury is reportedly seeking legal paths to expand the FDIC insurance to all deposits greater than $250,000 following requests by multiple banks concerned about contagion risks and further deposit outflows. The core of the issue is whether the Treasury ultimately holds the authority to expand that insurance without the approval of Congress. The market impact of such emergency measures has not proven to be unilateral during the ongoing banking crisis, as officials are often walking a very thin line between offering a backstop against systemic risk and risking an exacerbation of the ongoing banking turmoil by sending the “wrong message” of mistrust in the banking system. This is a similar kind of conundrum to that faced by the FOMC as it starts its two-day meeting today. A 25bp move, which is still narrowly our base case, can either be read as a sign of confidence in the financial sector and a reiteration of the inflation focus – remember the Fed already deployed a funding facility and boosted USD swap line to ease financial stress -  or as a policy misjudgement that could accelerate banking troubles. On the flip side, a hold may either reassure investors or be interpreted as a de-facto sign of alarm. What is undoubtful is that tomorrow’s rate announcement will be a big risk event, and markets are only pricing in a 60% chance of a hike. From an FX perspective, we wouldn’t be surprised to see the dollar – which fell yesterday as risk sentiment rebounded –find some support into the FOMC announcement as markets turn more defensive and potentially factor in a greater risk of a hawkish scenario. Francesco Pesole EUR: Lagarde has a new motto The post-European Central Bank meeting period has been a rather crucial one for the Bank’s communication in recent times, and the current fast-developing environment makes incoming comments highly valuable for markets. Yesterday, President Christine Lagarde reiterated her new motto: there is no trade-off between financial stability and price stability. The recent big change in rate expectations across major central banks during the ongoing banking crisis might argue against her point, but her message is a clear one (and to a certain school of thought, a necessary one): the ECB will keep the monetary (inflation-oriented) and financial stability tools separated – at least as long as it is feasibly possible. We’ll see whether the Federal Reserve repeats this rhetoric tomorrow. Still, the impact on the euro of ECB speakers is probably not very significant at the moment. First, unlike in other instances, it seems like there has been no communication gap between markets and Lagarde at last week’s press conference. Second, higher rate expectations on the back of hawkish rhetoric are not a short-term EUR driver in the short-term at the moment, as the common currency is trading strictly in line with risk sentiment and on news about the banking sector. The ability of European regulators to restore some calm to the AT1 bond market appears a necessary condition to keep EUR/USD supported, even though we think some USD recovery is possible into the Fed meeting. Read next: Asia Morning Bites - 21.03.2023| FXMAG.COM Lagarde will speak again today, along with French governing council member Francois Villeroy, although both are participating at an event about CBDC, where monetary policy may be only a side topic, if anything. On the data side, we’ll start looking at a some March activity surveys ahead of Friday’s PMIs: the German ZEW is released today, and expected to show a mixed picture after recent improvements. Francesco Pesole CAD: Inflation a secondary factor Inflation data for February will be published in Canada today. Consensus expectations are for a 0.5% month-on-month reading and a deceleration from 5.9% to 5.4% in the year-on-year CPI. The Bank of Canada's preferred measure of inflation should also decelerate. All this should endorse the BoC decision to stop tightening and give very few hints that there is a need to reconsider this policy pause. The bigger incentive to stay put from now on is, however, the recent banking crisis in the US, which is seeing the Canadian dollar perform quite poorly compared to other high-beta currencies, likely due to Canada’s vicinity and exposure to the US financial system. Today’s inflation may have a very limited impact on CAD given the BoC's recent stance. CAD should continue to lag other pro-cyclicals on any rebound in risk sentiment unless there is a clear stabilisation in market sentiment on the US banking sector. At the same time, the BoC's dovishness is likely lowering the medium-term attractiveness of CAD: we continue to expect a drop below 1.30 in USD/CAD by the second half of this year, but that should primarily be a consequence of USD weakness rather than idiosyncratic CAD strength. Francesco Pesole CEE: Forint signals a turnaround in the region Yesterday's monthly industrial and PPI data in Poland reflected a stagflationary picture rather than a disinflationary one. Today's releases will also again come from Poland. Retail sales fell 1.4% YoY in February according to our estimates, roughly in line with market expectations. However, we can expect the CEE region to continue to be driven mainly by the global story. The FX market yesterday showed signs of relief coming from the core markets as the Hungarian forint closed trading with a 0.75% gain and the rest of the region was essentially flat, showing that unless the global situation escalates further, we have peaked in the region. As we mentioned earlier, the Hungarian forint currently has the highest beta to global sentiment and risk aversion and should be the first to signal a turnaround in CEE FX. Yesterday's move could thus be the first hope for easing conditions in the region. In addition, the National Bank of Hungary and the Czech National Bank will get their say as early as next week. We think both central banks will maintain a hawkish tone given the currently weaker FX in an effort to support currencies and help each other fight inflation. Thus, unless the global story brings further negative surprises in the meantime, both currencies, in our view, have decent potential for a recovery in the days ahead. However, we will need to see a more pronounced decline in risk aversion for bigger gains. For now, we see room for a move to 393 EUR/HUF and 23.85 EUR/CZK. Frantisek Taborsky Read this article on THINK Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Brazilian President suggesting replacing US dollar with own currencies of developing countries

Credit chaos: is the worst behind us?

ING Economics ING Economics 21.03.2023 17:28
It's been anything but a dull week in the markets. And the distress in the banking system after the forced rescue of Credit Suisse in Europe and the demise of Silicon Valley Bank in the States has led to severe volatility and, of course, increased uncertainty. And while the mood is now calmer, this story is far from over Spread widening and curve flattening across the board Increased uncertainty in the global banking system and violent swings in rates markets have led to weakness in credit. Statistically, spreads are looking cheap, but we argue that risks remain high and market direction is still uncertain. Additionally, there may be more 'hunting for weakness'. So, here's a warning: don't try to catch any falling knives. EUR corporate spreads are 12bp wider since the tights on Friday 10th EUR financial spreads are 46bp wider since the tights on Friday 10th USD corporate spreads are 23bp wider since the tights on Thursday 9th USD financial spreads are 58bp wider since the tights on Thursday 9th Furthermore, the short end of (both EUR and USD) credit curves have been underperforming, drastically pushing curves much flatter. The AT1 market fell drastically Chaos continued yesterday in bank-subordinated bond markets. Subordinated debtholders should be prepared to face losses in times of trouble; the complete wipeout of Credit Suisse’s AT1 layer as part of the emergency rescue deal orchestrated with UBS came, however, as a shock to many. The Swiss authorities didn’t respect the normal creditor 'waterfall'. While AT1 bonds will be wiped out, shareholders get to walk away with CHF3bn. Other European bank regulators rushed to confirm that the Swiss way should not be seen as the blueprint for future bank trouble in Europe as a whole. This has calmed the AT1 markets somewhat but is unlikely to remove all the uncertainty hanging over these markets for now. Read next: Sharp drop in Canadian inflation suggests rates have peaked| FXMAG.COM Spillover into credit The rescue of Credit Suisse and, subsequently, the debacle in the AT1 market has, of course, sent shockwaves across other areas of credit. Corporate credit has felt the pinch as the bearish run continues. Initially, the rest of the banking liability structure widened rather notably, but there was a turn in spread direction on Monday afternoon. The high-yield credit space was also under a lot more pressure, widening by 146bp since the tights seen on 6 March. Corporate hybrids have also been under pressure, widening by 44bp in the past two weeks.  Concerns on regional banks in the US Another drag on bank risk comes from the US regional banks. After three banks failed in the past couple of weeks, US regional banks have remained under strain. Silicon Valley Bank and Signature Bank were labelled earlier as systemic on-the-go to allow for support for their complete deposit bases. In contrast to her earlier remarks, the US Treasury Secretary Janet Yellen notes in a speech today, Tuesday, that if deposit runs of smaller banks pose the risk of contagion, similar actions could be warranted again. The US officials are also said to study ways to extend the FDIC deposit coverage on a temporary basis, according to media sources. If extended, these types of measures should help alleviate bank risk and provide more stability for (uninsured) deposits. Large deposit shifts increase the risk of liquidity-driven bank collapses. Yellen earlier spooked the markets by indicating that the government is willing to step in only for the uninsured depositors of banks that pose systemic risk to the financial system. The more limited size of regional banks means that it is less straightforward to assume they would then be extended this support. This would create pressure for uninsured depositors to move from smaller non-systemic banks to larger systemic ones.  Tighter lending standards will widen spreads long term Lending standards have been tightening in both Europe and the US. This will have a negative credit effect on credit spreads. As the availability of liquidity lowers, the demand for a higher spread will follow. As such new issue premiums on newly issued bonds will increase, and ultimately spreads will need to be priced wider long term. This will particularly be the case for the high-yield market. This isn’t necessarily driving spreads right now but does add an additional negative factor in a secondary effect. Primary markets remain closed The large turbulence in the rates and credit markets has left primary markets shut for the past week. Supply is still sitting rather high on a YTD basis, with: EUR corporate supply sitting at €81bn, up on €65bn last year, EUR financial supply at €108bn, up on €76bn last year, EUR covered bond supply at €76bn, up on €69bn last year, USD corporate supply at US$207bn, up on US$156bn last year and USD financial supply at US$107bn, down on last year’s US$176bn. The funding environment has been more conducive for issuance in January and February, as spreads were stuck around much tighter levels. However, the cost of debt has yet again jumped higher with volatile rates and wider spreads. There are indeed some issuers side-lined for now, waiting for the primary markets to re-open, but as long as rates remain volatile and spreads widen, primary markets will remain shut for now. Read this article on THINK TagsMarkets Credit Suisse Credit Banks AT1 Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Forex: Euro against US dollar - forecast on April 24th, 2023

First Republic bank received $30bln from other US banks. ECB's primary focus remains containing inflation

Kenny Fisher Kenny Fisher 21.03.2023 17:47
The euro has put together a 3-day rally and is up again on Tuesday. In the European session, EUR/USD is trading quietly at 1.0756, up 0.30%. Financial markets settle down Let’s start with some good news. European stock markets have settled down and are in positive territory. The euro took a bath last Wednesday and plunged 1.47% as Credit Suisse shares tumbled, but the currency has battled back and recovered these losses. The emergency takeover of Credit Suisse by UBS and the joint announcement by six major central banks to boost liquidity have provided some reassurance to the markets that the banking system is not in danger of collapse. That’s not to say that this nasty bank crisis is behind us. Investors are still trying to come to terms with the lightning collapse of three US banks and Credit Suisse, the second-largest bank in Switzerland, all in just 11 days. Another US bank, First Republic, received an emergency injection of $30 billion from some major US banks, but this may not prove to be enough, as depositors are estimated to have removed $89 billion and the bank’s shares are in freefall. Read next: Weak Polish retail sales add to gloomy outlook| FXMAG.COM In light of the bank crisis, central banks will have to weigh their moves carefully and re-evaluate rate policy. The ECB didn’t flinch and delivered a 50-basis point move as promised. Had the ECB decided not to go ahead with the 50-bp hike, it risked losing credibility. As well, the ECB’s primary focus remains containing inflation. With eurozone inflation running at an 8.5% clip, the ECB needed another oversize rate hike. Could the financial crisis turn out to be a blessing in disguise? Perhaps, according to ECB President Lagarde. On Monday, Lagarde told European lawmakers that market turmoil could dampen demand and “might actually do part of the work that would otherwise be done by monetary policy and interest rate hikes”. Lagarde reiterated that more rate hikes were needed to curb inflation, but didn’t make any commitments as to the pace of rate hikes, which makes sense, given that the current crisis is not over. EUR/USD Technical EUR/USD is putting pressure on resistance at 1.0778. Next is 1.0890 There is support at 1.0647 and 1.0535 This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds. EUR/USD - euro extends rally, market turmoil eases - MarketPulseMarketPulse
How investors can best position themselves amid unclear Federal Reserve rate outlook?

FX Daily: Hiking confidence

ING Economics ING Economics 22.03.2023 13:21
It’s a close call, but we expect a 25bp hike by the Fed today. Ultimately, Powell’s primary goal is to restore investor confidence and a hold might signal a lack of trust in the financial system. The dot plots may also be revised slightly higher, and the dollar could recover a bit. Still, the gradual improvement in sentiment points to another USD decline ahead   Federal Reserve Chair Jerome Powell USD: Fed to hike by 25bp Late last week, we published our FOMC meeting preview and discussed how our base case was for a 25bp rate hike if market conditions didn't deteriorate further. Since then, the US regional banking crisis has remained broadly unresolved, but the Treasury is now examining an extension of the FDIC deposit guarantee (Secretary Janet Yellen pledged intervention if needed) and the Federal Reserve itself boosted money market liquidity via higher-frequency USD swap line operations. In Europe, sentiment appears to be stabilising after markets digested the fallout of the UBS-Credit Suisse deal for some categories of bondholders (AT1, in particular). We recommend reading this note from our credit colleagues on the topic “Credit chaos: is the worst behind us?”. Ultimately, two straight days of gains in global equities tell us that investors have indeed turned tentatively more optimistic about the financial turmoil. In other words, even if it is still a close call, market conditions have – if anything – become slightly more favourable and a 25bp hike is our base case for today’s FOMC announcement. We think such a move is not purely motivated by the inflation battle, but probably fits the need to send a message of confidence to the financial system. Pausing rates after having opened the door to a 50bp hike only a few weeks ago might be read as an emergency move and risks exacerbating market concerns about financial stability. Markets have also moved closer to pricing in such a scenario as sentiment recovered and currently factor in around 20bp (or an 80% implied probability). If a 25bp hike is now a more widely expected outcome, markets will zoom their lenses on: a) financial stability assessment and tools; b) forward guidance, especially the dot plots. On this first point, a lot of focus will be on details about the new Term Funding Facility, fundamentally because this will re-build bond holdings into the Fed balance sheet, which may appear inconsistent with the Fed’s quantitative tightening policy. When it comes to the dot plot, our economics team expects the FOMC median projections to signal a 5.4% policy rate for 2023, up from 5.1% from the December update. This could also have a symbolic value: signalling that the Committee is confident the banking crisis will be resolved and the inflation battle can return as the priority. Finally, it will be important to see how much Fed Chair Jerome Powell stresses how the current financial turmoil is by itself a tightening of financial conditions and can accelerate the disinflationary process. In terms of the FX impact, we think there is room for the dollar to recover some ground on the back of a moderate hawkish surprise by the Fed. However, we are observing a gradual improvement in investor sentiment on the global financial situation – and especially in Europe – which makes us tilt to a bearish short-term bias in the dollar. That is, naturally, highly conditional on no further setbacks in the ongoing banking crisis – which is a big caveat. Francesco Pesole EUR: Equities behind the euro rally A soft ZEW print yesterday was not enough to halt the good EUR/USD momentum, which boils down to European equities’ outperformance versus US stocks as well as the general improvement in risk sentiment. We are observing how markets are returning to some pro-cyclical European currencies to the detriment of those Asian G10 currencies (JPY, AUD, NZD) that appeared as safe havens last week. We think that today’s FOMC announcement can trigger some recovery in the dollar, and therefore see mostly downside risks for EUR/USD. At the same time, regulators’ efforts to contain the adverse side-effects of the UBS-CS deal for some bondholder categories appear to be yielding some positive effects for European sentiment, and possibly means that the balance of market concern is now tilted to the US given the still unresolved regional banking crisis. Beyond the FOMC impact, we think there is room for a break above 1.0800 in the near term as long as sentiment continues to stabilise. The European Central Bank is playing a role in this, by staying rather hawkish on monetary policy while opening the door to deploying financial stability tools. There are a lot of speakers today, as the ECB holds a conference in Frankfurt: President Lagarde, Chief Economist Philip Lane, and then members from all parts of the dove-hawk spectrum. Still, the impact on the euro may ultimately be small given the proximity to the FOMC announcement. There are no market-moving data releases to flag in the eurozone calendar today. Francesco Pesole GBP: Surprise acceleration in inflation On Monday, we had called for a break higher in EUR/GBP as we deemed the recent resilience in the pound versus the euro as hardly sustainable. The pair traded close to 0.8850 yesterday but dropped back below 0.8800 this morning after a surprise acceleration in UK inflation. Headline CPI year-on-year rose from 10.1% to 10.4%, defying expectations for a drop below 10.0%. Core inflation also accelerated, from 5.8% to 6.2%. This morning’s data – along with the tentative recovery in market sentiment - reinforces the prospect of a Bank of England rate hike tomorrow (which is also our base case). Still, our economics team still deems a May pause as highly likely, and we continue to see the direction for EUR/GBP as bullish over the coming weeks.  Francesco Pesole CEE: US dollar will slow recovery Yesterday's prints from Poland finished the monthly set of data confirming the weak economy. Today we will see only consumer confidence in Poland while in the Czech Republic, the Ministry of Finance will test the primary bond market for the first time since the recent rally to see whether Czech bonds are still attractive with yields well below 5%. The FX market in the region yesterday confirmed the positive sentiment coming from the core market, supported by a higher EUR/USD. The rally led by the Hungarian forint and the Czech koruna will follow a further decline in risk aversion, in our view. However, the Fed and a stronger US dollar may be a drag on the EM recovery in the days ahead. Even so, we should see further gains in the CEE region. In our view, the Hungarian forint should settle below 390 EUR/HUF and the Czech koruna below 23.75 EUR/CZK. The Polish zloty and Romanian leu are likely to continue to stagnate at current levels and as we mentioned earlier, this part of the region will have to wait for a stronger move higher in EUR/USD. Frantisek Taborsky Read this article on THINK Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Euro and European bond yields decreased after the ECB decision. The end of tightening may be close

In conclusion, the ECB was balanced enough to please the markets

Nour Hammoury Nour Hammoury 17.03.2023 16:51
We're after the ECB interest rate decision, which turned out to be a 50bp rate hike. Let's hear from Nour Hammoury, Chief Market Analyst at SquaredFinancial, who comments on the ECB move.  Nour Hammoury (SquaredFinancial): Despite Credit Suisse's situation and the banking incidents in the US, the ECB had no other options but to stick to its policy and hike by 50bps as inflation is still at a record high. However, it was a dovish hike as the bank did not mention anything regarding the next meeting. In the previous decision, the bank mentioned that in the next two meetings, large rate hikes could be appropriate, but after what happened over the past few days, the ECB will be more careful going forward. Moreover, the decision was not unanimous as there were 3 to 4 members who voted against the decision. after what happened over the past few days, the ECB will be more careful going forward. Read next: USA: PPI data is another confirmation that inflation remains on the right track| FXMAG.COM Nour Hammoury (SquaredFinancial): In conclusion, the ECB was balanced enough to please the markets. The question now is if this is the end of the banking issues, or if we will hear about more banks in the coming days.
Worst behind us for UK retail despite fall in sales

Yesterday's UK inflation prints have undermined previous MPC narrative

Michael Hewson Michael Hewson 23.03.2023 11:15
Despite the recent turmoil in the US banking system the Federal Reserve went ahead and raised rates by 25bps at its meeting last night. While this was broadly in line with expectations, a tweak to the statement was perceived to be more dovish, moderating the language by removing the reference to "ongoing increases will be appropriate", with "some additional policy firming may be appropriate". This helps to give the Fed wriggle room to pause at the next meeting if the data permits, as well as indicating that the end of rate rises could be close. This change saw yields, as well as the US dollar fall sharply, however, US markets after initially pushing higher also fell back and closed lower, after comments from US Treasury Secretary Janet Yellen, in separate comments to US lawmakers, said that there was no commitment to extending banking deposit insurance beyond the current $250k cap.     Powell also admitted that a rate pause was considered due to the banking crisis, while also going on to say that the prospect of rate cuts this year was not being considered. A cursory analysis of the latest dot plot chart confirmed that thought process, even as markets continued to price that very possibility.   Powell also admitted that a rate pause was considered due to the banking crisis, while also going on to say that the prospect of rate cuts this year was not being considered   With US markets closing sharply lower after Yellen's comments, European markets look set to pick up on that negative read across, with a similarly weaker open. Before yesterday's hotter-than-expected UK CPI number for February, the main question facing UK markets was how close the Bank of England was to its terminal rate, and whether recent events across the banking sector would temper its decision to raise rates today. That question got a whole lot more complicated yesterday with a surprise surge in headline CPI in February to 10.4%, driven primarily by food and services prices. What was even more worrying for the central bank was that core prices also surged higher, rising from 5.8% to 6.2%, and undermining the recent narrative from MPC officials that inflation was on its way back down again. The MPC has remained split in recent months split with Tenreyro and Dhingra both opposed to further rate hikes even with headline CPI still above 10% and core prices now on the rise again at 6.2%, and wages at 6.5%. Back in February Bank of England governor Andrew Bailey insisted that the MPC was seeing "powerful downward forces on inflation now" when he testified to the Treasury Select Committee, saying that "I do think we have turned the corner". Those comments haven't aged well even if he did caveat them with concerns about inflation stickiness and serve to give the impression that the Bank of England is almost making it up as it goes along. Read next: The Commodities Feed: Fed hikes| FXMAG.COM Bailey followed up those February remarks with further comments at the start of this month saying he had not seen any data to justify markets pricing in the prospect of further rate hikes, insisting that markets were getting ahead of themselves in pricing a terminal rate of 4.75%. Judging by yesterday's jump in core CPI, that is no longer the case showing that markets had a better idea of what might happen to rates than the Bank of England did at the start of the month. The splits on the MPC while welcome in the context that there isn't a groupthink consensus also serve to give that impression, especially when you have two policymakers leaning away from hikes, and more towards rate cuts at some point in the future. Earlier this month Swati Dhingra was claiming that there was no evidence of persistent cost-push inflation becoming embedded and that inflation would fall back sharply over the rest of the year. That claim is hard to square with monthly price rises in excess of 1%, on both CPI and RPI inflation measures. On the other side of the spectrum, you then have external MPC member Catherine Mann making the case that more hikes are warranted given stickier inflation dismissing the idea of a pivot to a looser policy. She also went on to insist that rates would likely have to stay higher for longer in order for inflation to return to target. Mann's stance seems entirely more credible than the dovish stance of Tenreyro and Dhingra given how stickier UK inflation has always tended to be historically. This is mainly down to the transmission mechanism of a weaker pound, which tends to put a floor under prices. While some have suggested the Bank of England might pass up on another rate rise today, most sensible people think that at the very least we can expect to see another rate hike of 25bps after yesterday's inflation numbers, although we could well see another split decision. It would be a huge surprise if we got no change and would hammer yet another nail in the central bank's credibility when it comes to its inflation-fighting credentials. Before the Bank of England, we have the latest rate decision from the Swiss National Bank, who are expected to raise rates by 50bps to 1.5%, despite the recent turmoil in its own banking backyard with the shotgun marriage of Credit Suisse with UBS. It will be interesting if policymakers there have any postscripts to recent events in terms of their guidance around further rate increases.   Forex EUR/USD – moved through the 1.0800 area and looks set for a retest of the recent range highs at 1.1030. Support should now come in at the 1.0760 area, with stronger support at the March lows at 1.0520. GBP/USD – continues to struggle to push through the 1.2300 area despite a brief push up to 1.2335 yesterday. The pound continues to feel vulnerable to slipping back especially given that the Bank of England tends to lean towards dovish language when it does meet. Currently have support at 1.2170. EUR/GBP – feels like we could see a move towards 0.8900 where we have resistance. Still have strong trend line support at 0.8720, from the lows last August. Support also at 0.8780. USD/JPY – ran out of steam at the 133.00 area and support at 131.00. Below 130.80 targets a return to the 130.00 area.    FTSE100 is expected to open 25 points lower at 7,542 DAX is expected to open 36 points lower at 15,180 CAC40 is expected to open 34 points lower at 7,097
Euro against US dollar and British pound - Technical Analysis - May 17th

FX Daily: A spoonful of sugar

ING Economics ING Economics 23.03.2023 13:36
Whether it’s a song or a slightly ominous bank run scene, the Fed brought back memories of a famous 1964 film this morning. In essence, Powell’s attempt to sweeten the pill for markets came at the cost of unclear communication, so the market’s pricing and the dollar will remain a function of banking stress. Today, expect hikes in the UK, Switzerland and Norway Mary Poppins statue at Leicester Square USD: Compromise comes at a price The well-known verse “a spoonful of sugar helps the medicine go down” might have inspired Jerome Powell yesterday as he and his FOMC colleagues offered markets a few dovish hints while delivering a potentially painful 25bp rate hike. As discussed in our meeting review note, those hints primarily consisted of the view that “some additional policy firming may be appropriate" - not  “will be appropriate” as before - and on keeping the median dot plot estimate for 2023 unchanged at 5.1%. The statement was paired with a well-telegraphed message of trust in the solidity of the US banking system, and Powell did offer modest pushback against rate cut expectations during the press conference. However, we doubt the dovish market reaction was either a surprise or an unwanted development for the Fed.   Many had argued that one objective of the Fed yesterday was to avert a major setback in financial market sentiment, the market reaction would suggest this was achieved, and the drop in equities might actually be mostly a function of Secretary Janet Yellen dismissing speculation that the Treasury is planning to provide “blanket” deposit insurance to banks. However, that came at a price: a considerably less clear Fed communication. No trade-off between price and financial stability is essentially possible only if financial conditions tighten (due to banking stress) enough to bring down inflation, or if regulators and other institutions effectively manage to restore market confidence without anything more than the financial stability tools offered by the Fed. This second scenario requires indeed that, as Powell stated, the US banking system is very solid. Markets are, so far, not trusting the ability of the Fed to treat inflation and financial stability independently. This looks unlikely to change soon, which means that rate expectations should remain strictly tied to developments in the banking crisis. And this brings us to the FX implications. The dollar weakened on the back of the moderate dovish surprise by the Fed yesterday, and reluctance from the Treasury to consider an extension to the deposit insurance. At the same time, a new regional lender, PacWest is facing increasing turmoil on deposit outflows and First Republic’s rating was cut from BB to B by Fitch. So, with a market not trusting the more ambiguous Fed communication and the US regional banking crisis far from resolved, it looks like investor bias on the Fed may stay on the dovish side. This should translate into a continued bearish bias for the dollar, primarily against European currencies should the stabilisation in European sentiment continue. Still, we see a high chance of seeing small USD upside corrections on the way, rather than a straight-line USD depreciation.  Francesco Pesole EUR: Central bank meetings in Switzerland and Norway EUR/USD is now officially eyeing the 1.1000 level. We discussed yesterday how that is a key benchmark level for the pair, and we think a break higher would likely mark a rather strong conviction call from the market that the Credit Suisse shock has been successfully absorbed by European markets. That may be a bit premature, and we flagged in the USD section above how the USD bearish bias surely doesn’t prevent EUR/USD corrections on the way. In the current elevated volatility environment, those corrections can be quite pronounced, even if short-lived. Today’s eurozone calendar includes consumer confidence data for March as well as a few European Central Bank speakers, although our focus in Europe today will mostly be on central bank meetings in Switzerland and Norway. The Swiss National Bank faces a monetary policy decision in a very turbulent time, as it faces the challenging aftermath of the Credit Suisse rescue deal. Originally, this had appeared to be a no-brainer for the SNB – a 50bp rate hike – and consensus expectations are still pointing at such a move. Despite admitting this has become a much closer call recently, we think the past few days of tentative calm in markets will allow the SNB to deliver the half-point increase today. We must remember that policy meetings in Switzerland occur only once a quarter and that the latest inflation readings surprised on the upside. Read next: Singapore: Core inflation steady while headline inflation decelerates further| FXMAG.COM We expect a hike in Norway as well, but by 25bp, as previously announced and widely expected. Norges Bank will also publish the updated rate projections, which currently embed only another 10bp worth of tightening. We think NB could revise the peak rate higher on the back of higher inflation and despite the recent turmoil, if nothing else to counter the recent NOK weakness. We expect gains in both the Swiss franc and krone today. Francesco Pesole GBP: BoE to hike The ECB and Fed rate hikes mean that the chances of the Bank of England following suit with a 25bp move today are quite high, even more so following the surprisingly high inflation readings published yesterday. Here is our full market guide to today’s BoE meeting. Markets are now fully pricing in a 25bp scenario and will therefore look for some indications that the further 40bp currently embedded in the GBP OIS curve is warranted. The division within the BoE’s MPC may be nothing but exacerbated by the recent market turmoil, the risk is that markets may receive very little guidance on future policy paths. Ultimately, the pound may rapidly default to being driven by external factors: primarily the banking situation and global risk sentiment. A test of 1.25 in cable in the coming days is looking quite likely. Francesco Pesole CEE: Strong euro a welcome boost for region Today's calendar in the region is basically empty and hence the main focus will be on the reaction to yesterday's Fed decision. Higher EUR/USD is good news for FX and the CEE region should thus continue to rally. On the other hand, the negative sentiment left by the Fed could put a bit of a damper on the positive push coming from EUR/USD. However, today should not be all about the Hungarian forint and the Czech koruna as in the last few days. As we mentioned earlier this week, the Polish zloty and the Romanian leu just needed a stronger euro to strengthen, in our view. Unless negative market sentiment prevails today, the entire region could see decent gains. Still, the previous leaders, the forint and the koruna, should remain at the forefront of the region and move towards 385 EUR/HUF and 23.60 EUR/CZK. The Polish zloty could finally trade out of the March range of 4.680-4.720 EUR/PLN and test lower levels. The Romanian leu could look lower below 4.91 EUR/RON for the first time since the middle of February. Frantisek Taborsky Read this article on THINK Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Rates Spark: Nothing new on the dovish front

FX Daily: Trading places

ING Economics ING Economics 24.03.2023 09:20
The Fed’s ambiguous communication has left rate expectations being driven no longer by Jay Powell, but by Secretary Janet Yellen and her stance on extending bank deposit protection. We saw a dollar rebound yesterday, but that may not last long as the Fed emerged as a dovish outlier while European hawks took centre stage. Today, PMIs may have limited impact President Joe Biden with Fed Chairman Jerome Powell, left, and Treasury Secretary Janet Yellen USD: Yellen is the new Powell As discussed in yesterday’s FX daily, the Federal Reserve’s unclear communication may have set the stage for a dollar decline by leaving market pricing of rate expectations strictly tied to news on the banking crisis and the regional bank turmoil which is still looking unresolved in the US. At the same time, we highlighted how a further depreciation in the greenback is unlikely to look like a straight line: in an environment where news flies and changes rapidly, corrections – even of large magnitudes – are the norm. The most obvious symptom of how the Fed has lost its grip on the market is US Treasury secretary Janet Yellen “stealing” Fed Chair Jerome Powell’s spotlight as a market driver. This happened blatantly on Wednesday when a dovish Fed hike was out-shadowed by Yellen’s backtracking on a “blanket” bank deposit insurance. Yesterday, she offered some reassurance to markets in that sense, saying: “Certainly, we would be prepared to take additional actions if warranted”. This was enough to offer some relief to market concerns on the US regional banking troubles and take some pressure off rate cut speculation and off the dollar. And it is another testament to how markets seriously struggle to see the US small bank troubles being resolved without substantial support from the government. Ultimately, this continues to endorse our baseline bearish bias on the dollar, as a situation that neither develops into a fully-fledged systemic crisis (which would be USD positive) nor significantly improves on the US regional banking side which should keep markets betting on Fed easing later this year. At the moment, there are around 90bp of cuts priced in, starting in July, and the unclear Fed communication is doing very little to reliably push back against those. Today, we’ll hear from Fed hawk James Bullard, and monitor PMI releases across the world. US figures are expected to stabilise around February’s levels. Anyway, data are playing a secondary role now. Francesco Pesole EUR: Hawks fly high in Europe Since the onset of the banking crisis, central banks in the eurozone (last week) and in Switzerland and Norway (yesterday) all surprised on the hawkish side. This shows how the restoration of investor sentiment has come a long way in Europe since the fear of a black-swan Credit Suisse collapse a couple of weeks ago. Here are our review notes of the SNB (50bp) and Norges Bank (25bp) rate hikes. The latter went a step further into hawkish territory as it announced another hike in May, and projected a total of 50bp of extra tightening before reaching the peak this summer. The ultimate goal is clearly to offer support to the krone and limit imported inflation. The focus today will be on PMI readings in the eurozone today. Like in the US, expectations are for a stabilisation in the survey around February’s numbers, and barring huge surprises, the releases may not have a major market impact given how macro fundamentals are playing second fiddle to financial market stress at the moment. EUR/USD pulled back after breaking above 1.0900 as the dollar staged a comeback, but we think that 1.1000 can be tested quite soon as the dollar bias should stay mostly bearish and European currencies are backed by hawkish central banks and a quieter banking environment. Francesco Pesole GBP: BoE hiked but gave very little guidance The Bank of England hiked by 25bp yesterday, which was fully in line with expectations. We only got a statement this time (no press conference), and it appears quite clear that the MPC has tried to keep all options open. We strongly suspected the BoE would refrain from offering any real bit of guidance to markets and that would have meant that the impact on the pound would have been very short-lived. This indeed appears to be the case. Read next: Asia Morning Bites - 24.03.2023| FXMAG.COM Our economics team thinks that a May pause is likely despite the recent rise in inflation: with around 30bp of tightening in the price, there is room for a repricing lower to favour a modestly higher EUR/GBP. Looking at Cable, the BoE does not appear to be much of a factor, and our view for dollar downside risks means that the key 1.2420 and 1.2500 levels can be tested quite soon. Today, UK PMIs will be watched after significantly stronger-than-expected retail sales this morning. Bank of England policymaker Catherine Mann speaks this afternoon. Francesco Pesole CEE: Ready to rally further Today's calendar offers only Czech consumer confidence data, the first leading indicator for March. We are seeing a strong rebound from historically record lows this year and further improvement can be expected this time around. We will see more interesting news after the end of trading today. We have sovereign rating reviews in Romania and Poland. Fitch has held a negative outlook on Romania BBB- since April 2020 and we think there's more than a 50% chance that we could see a return to a stable outlook. Moody's holds a stable outlook on Poland A2 and we do not expect any changes this time. However, it will be interesting to follow the agency's view on recent developments in the government's relations with the European Commission, access to EU money and the FX mortgage saga. On the FX market, our bullish view on the Hungarian forint and the Czech koruna is materialising, benefiting all week from higher EUR/USD, reduced risk aversion and record-low gas prices. We expect this trend to continue in the coming days and especially next week when the National Bank of Hungary and the Czech National Bank are both scheduled to hold meetings. Both central banks should confirm stable rates and a hawkish tone and push back against the dovish market pricing coming from the global story. In our view, this should extend the rally in the forint and the koruna. Frantisek Taborsky Read this article on THINK TagsFX Daily Federal Reserve Dollar CEE Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Gold Trading Analysis: Technical Signals and Price Movements

Eurozone bank lending dampened by ECB’s monetary tightening

ING Economics ING Economics 27.03.2023 13:54
Jitters in European banks on Friday fuelled a recovery in the dollar against pro-cyclical European FX. Markets are once again forced to re-assess the risks in the two epicentres of the banking crisis (US and Europe), and that will drive much of the G10 FX swings this week. Still, monetary policy differentials seem to point more clearly to a higher EUR/USD USD: Dollar support comes from Europe The dollar regained some ground in the past two trading sessions, largely thanks to developments overseas (in Europe) rather than any material improvement in US-related drivers. This safe-haven demand is mostly related to banking stress on the other side of the Atlantic. As widely discussed last week, the Federal Reserve has likely failed to offer clear enough communication and this leaves rate expectations – and by extension, the dollar – very strictly tied to US financial stress. Markets have turned increasingly doubtful that the Fed will be able to tighten policy any further, and have simultaneously speculated on an early start to the easing cycle. Fed funds futures currently price in only a 30% chance of a rate hike in May while fully pricing in a 25bp cut in July, and a total of 80bp of easing by year-end. The variables that currently drive that pricing for Fed hikes/cuts are the following: a) developments with US regional banks; b) the stance of the US Treasury on extending deposit insurance; c) Fedspeak. On the first two – interconnected – points, the newsflow may still be rather volatile. The US regional banking crisis has not gone away, with deposits either leaving the banking system altogether or being moved to larger institutions, and there are still multiple banks being highly scrutinised and likely to hit the headlines and market sentiment at any time. On the Fedspeak, we heard from Neel Kashkari over the weekend. While being normally one of the most hawkish voices in the FOMC, he sounded quite alarmed about the risks of a credit crunch hitting the economy and generating a deeper economic slump. In a week without much exciting data in the US – consumer confidence and PCE are the only highlights – Fed speakers will be in focus. Read next: Czech National Bank preview: No action, with a preference for stability| FXMAG.COM From an FX perspective, the resurgence in banking stress in Europe forces some softening of our bearish dollar view for the moment, at least until we can get more clarity on the stability of the EU banking sector. Still, we continue to see the Fed as mostly carrying downside risks for the greenback, as the lack of clear communication leaves the door open for dovish speculation as the US regional crisis remains unresolved and is keeping the monetary policy outlook in the US in stark contrast (for now) to that of most European central banks. On balance, we see more balanced risks for DXY this week, but volatility may remain elevated, and if anything our preference remains for a higher EUR/USD.   Francesco Pesole EUR: Reassessing risks? A jump in markets’ perceived risk on Deutsche Bank and other European lenders last Friday brought financial stress back to Europe after a prolonged period of tentative calm as markets digested the fallout from the Credit Suisse takeover. Futures today point to a rebound in European equities, possibly suggesting last week's concerns may have been overdone. At the same time, we have learned how market conditions can change extremely rapidly in the current environment, and Friday’s turmoil suggests that confidence among European bank bondholders is far from fully restored after the Credit Suisse saga. While our general view favours a higher EUR/USD on the back of monetary policy divergence, last Friday brought a warning not to jump to the conclusion that this banking turmoil is turning into a US-only story – and therefore into a straight-line bullish EUR/USD. Still, a move to 1.10 in the coming weeks remains a very tangible possibility. For this week, re-testing 1.0900 would already be a very welcome sign for EUR/USD bulls. Today’s Ifo reading in Germany is the main highlight of the week until Friday’s CPI flash estimates in the eurozone. In the meantime, the focus will be on the many European Central Bank speakers. Francesco Pesole GBP: All eyes on Bailey Domestic drivers for the pound are concentrated at the front this week. Today and tomorrow, we’ll hear from Bank of England Governor Andrew Bailey, and his words will be weighed very carefully by markets given that the March BoE meeting did not include a press conference. He will speak today at a BoE event and testify tomorrow to the Parliament’s Treasury Committee about the Silicon Valley Bank collapse. Markets are already pricing in another hike by the summer, so the bar for a hawkish surprise to lift GBP does seem relatively high. Our economists do not expect any more hikes. With virtually nothing to highlight on the data side, GBP may be moved by Bailey’s words but should rapidly default to being driven by external factors. Essentially, GBP/USD is a USD story and EUR/GBP is a EUR story. We still think cable can reach 1.2500 this quarter, and that the EUR looks marginally more attractive than GBP, and EUR/GBP should move back to 0.8900. Francesco Pesole CEE: Hawks return to stage For the first time since the recent global turmoil, attention returns to the region this week. Two new MPCs are scheduled to hold hearings today in Hungary's parliamentary economic committee. A meeting of the National Bank of Hungary is scheduled for the day after. In line with surveys, we expect rates to remain unchanged and central banks to maintain a hawkish tone, especially with the recent forint sell-off and weaker levels. In addition, Friday marks the end of the non-binding deadline for the approval of the legislative package to unlock some of the EU money. Thus, some headlines on this topic can be expected in the coming days. We expect the government to find an agreement with the European Commission (EC), but the EC's first reactions to Hungary's progress may be negative, bringing uncertainty to local markets. The Czech National Bank (CNB) will meet on Wednesday, and we expect unchanged rates and a hawkish tone here as well. As in Hungary, weaker FX and still too high inflation do not allow the CNB to ease up on rhetoric despite dovish expectations priced in by the markets. March inflation in Poland will be released on Friday and should show the first slowdown since the February peak. The market expects a drop from 18.4% to 16.1% however we expect a lower number around 15.5% year-on-year. No doubt the FX market in the region will again be driven mainly by the global narrative. However, we should see some local stories as well. The main focus will be on the Hungarian forint, which may find it very hard to find its way between the possible dovish worldview of new MPCs, the hawkish NBH and the mixed headlines coming from the EU story. Moreover, the forint maintains the highest beta to global news, which may result in high volatility this week. We remain bullish on the forint and should head back below 380 EUR/HUF, however this week may bring more pain on the way lower. We see a much clearer picture for the Czech koruna, which should be supported by the CNB's hawkish tone. The market is currently pricing in a roughly 130bp rate cut by the end of the year and the CNB meeting should be a catalyst to reassess these expectations. If the global story allows it, we should see the koruna below 23.50 EUR/CZK. Frantisek Taborsky Read this article on THINK TagsInflation GDP Eurozone ECB Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
German economy not out of recessionary danger, yet

German Ifo continues upward trend

ING Economics ING Economics 27.03.2023 13:59
Another improvement in sentiment in the German economy as the Ifo index increased for the sixth month in a row in March. However, we fear that the latest financial turmoil will reach the real economy in the coming months Source: iStock   In March, Germany’s most prominent leading indicator, the Ifo index, increased for the sixth month in a row, coming in at 93.3 from 91.1 in February. Lower wholesale gas prices and the reopening of the Chinese economy have boosted economic confidence. Both the current assessment and expectations component increased significantly. Divergence between financial markets and real economy The financial market turmoil of the last few weeks has not yet affected economic sentiment - at least not economic sentiment measured by company surveys. The latest economic sentiment indicators nicely illustrate that for now, financial market turmoil appears to be ringfenced and has not affected the real economy: while the ZEW index, filled in by financial analysts, dropped, PMIs and now the Ifo index increased. We are more careful, however, and remind everyone that the Ifo index can react with a delay of one to two months to unexpected events and financial market turmoil can clearly affect the real economy over time. Read next: Eurozone bank lending dampened by ECB’s monetary tightening| FXMAG.COM The German economy will continue its flirtation with recession. But what is more important: the ongoing war in Ukraine, ongoing structural changes, an ongoing energy transition and the impact of the most aggressive monetary policy tightening in decades are the main drivers of what looks like subdued growth for a longer while. Read this article on THINK TagsIfo index Germany GDP Eurozone Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Rates Spark: Nothing new on the dovish front

FX Daily: Policy divergence leaves dollar vulnerable

ING Economics ING Economics 28.03.2023 10:05
Markets have reassessed the risks to European lenders and looked considerably less concerned as markets re-opened on Monday. If this calm in Europe continues, monetary policy divergence is what may be left driving most FX dynamics, and the stark divergence between Fed and European central banks’ narratives points to dollar downside risks We think that as long as fears of banking contagion remain relatively quiet in Europe, the balance of risks for the dollar should remain tilted to the downside USD: Fed rate expectations keep bouncing around Risk sentiment recovered yesterday as markets appeared calmer about the health of European lenders which had generated a sell-off on Friday. The narrative that banking turmoil was shifting back from the US to Europe was the key driver of a dollar rebound at the end of last week, and we are not surprised to see investors’ tentative optimism at the start of this week coincide with USD weakness. The key reason is that, when stripping out the risks of financial contagion in Europe, monetary policy still seems to be heading in two different directions in Europe and the US. We’ll expand on ECB and Bank of England comments in the EUR and GBP sections below, but we can definitely see how European central bankers are more comfortable than their US counterparts when pushing ahead with a hawkish narrative. A case in point: Neel Kashkari – one of the FOMC’s biggest hawks – warned about the economic impact of a credit crunch and implicitly suggested less need for tightening. Since the Fed is not offering a hawkish narrative to lean on, market pricing of future rate moves remains strictly tied to news on financial stability. Consequently, Fed rate expectations have become an accurate measure of market sentiment about the banking turmoil. Since the end of last week, markets have priced out a rate cut in July (pushed it to September), and now expect 60bp of easing by year-end as opposed to almost 90bp. That is probably due to the beneficial effect of First Citizens acquiring Silicon Valley Bank over the weekend. Today, the US data calendar includes the Conference Board consumer confidence figures for March, the Richmond Fed manufacturing index (also for March) and February’s wholesale inventories. Fed Vice Chair for Supervision Michael Barr will testify before the Senate Banking Committee. In FX, we think that as long as fears of banking contagion remain relatively quiet in Europe, the balance of risks for the dollar should remain tilted to the downside. We could see markets once again favour JPY for tactical defensive positions. Francesco Pesole EUR: Schnabel keeps hawkish tone going Isabel Schnabel reinforced her profile as one of the most hawkish members of the ECB governing council yesterday, as she said she wanted the ECB March statement to include a reference that more hiking was possible. Her comments likely helped push market rate expectations in the eurozone a little further: 46bp of tightening is now priced in by September. Today, we’ll hear from other ECB members. President Christine Lagarde will speak at a BIS event this afternoon, where Joachim Nagel and Francois Villeroy will also participate. We’ll also hear from Madis Muller, Bostjan Vasle, Gabriel Makhlouf and Pablo Hernandez De Cos. On the data side, the German Ifo index came on the strong side yesterday (at 93.3 from 91.1 in February), but the calendar does not include market-moving releases today. We think EUR/USD can retain some bullish momentum on the back of the ECB's hawkish narrative and calmer investor nerves on the European banking situation. Our view remains that 1.10 can be reached quite soon, although bumps along the way are highly likely. Francesco Pesole GBP: Bailey helping the pound Bank of England Governor Andrew Bailey sounded relatively hawkish in his remarks yesterday. While saying that rates should not be taken to the 2008 peak, he stressed how the UK banking system is in a sound position and that inflation remains the key focus, and that further rate hikes are possible if inflationary pressures persist. Bailey will testify today about the SVB collapse and we may hear some details about the Bank’s macroprudential measures. With BoE rate expectations now supported, we think GBP/USD can head towards the key 1.2426 (December high) and 1.2500 resistances on the back of USD weakness and policy divergence relatively soon. Francesco Pesole HUF: NBH to confirm hawkish tone The National Bank of Hungary (NBH) is meeting today for the first time since the start of the recent turbulence in global financial markets. We expect rates to remain unchanged, in line with market surveys, and a hawkish tone. Although we have already seen the peak in inflation and an improvement in the current account deficit, the forint's return to the 400 EUR/HUF level again will not allow the NBH any hints of dovish signals, in our view. The meeting will also bring an updated central bank forecast, however, we are unlikely to see any game-changer today. On the FX side, the Hungarian forint has maintained the highest beta against the global story, which, assuming favourable global conditions, creates room for a significant recovery. We believe the recent sell-off has cleared the very heavy long positioning that previously blocked further forint appreciation. The renewed rally is also supported by the energy story with the gas price testing new lows. Moreover, with the forint having by far the highest carry within the Central and Eastern Europe region, it will once again attract investors to the HUF market. Thus, in our view, today's hawkish meeting should support the new gains and push the forint below 385 EUR/HUF. Frantisek Taborsky Read this article on THINK TagsNational Bank of Hungary FX Daily Fx Dollar Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Small factors combine to pressure credit

Rates Spark: Your timely inflation reminder

ING Economics ING Economics 30.03.2023 10:01
While the Fed and Bank of England have provided hints that they are near the end of their hiking cycles, the European Central Bank's policy stance remains too easy for comfort in light of still hot inflation. Hawks may reassert their posture with upcoming inflation data, and render end-of-cycle curve dynamics premature for EUR rates  ECB's stance likely too easy for comfort Expectations of further ECB policy tightening are still under the spell of this month’s banking turmoil. Only cautiously are markets baking rate hikes back into curves. The ECB terminal rate is now seen at 3.37%.Compare that to early March where it was around 4.1%. Thisimplies the market is currently looking at most for another 50bp of tightening from the ECB. Of course there is still a chance that the turmoil will have a more lasting impact as banks' appetite for risk is diminished and credit conditions are tightened. This scenario has also seeped into inflation expectations - the 5y5y forward inflation swap is at 2.4%, just ahead of the turmoil it was on a march towards 2.6%. Real rates look hardly restrictive given the ECB still has an acute inflation problem One way to gauge a central bank’s overall policy stance in this context is to look at real rates. Especially the shorter to intermediate real rates out to 5y are now closer to the bottom of this year’s ranges. That looks hardly restrictive when keeping in mind that the ECB still has an acute inflation problem at hand. If the consensus is right, tomorrow’s core inflation print will rise to another record of 5.7%.   Some dovish leaning ECB officials have argued recently that the ECB targets headline inflation, and that is indeed moving in the right direction in big steps. But we would also refer to Chief Economist Lane, who pointed out at the beginning of March that underlying inflation gives “an estimate of where headline inflation will settle in the medium term after temporary factors have vanished”. A headache for the ECB: short real EUR rates have eased to the bottom of this year's range Source: Refinitiv, ING Limited financial stress means interest rates will have to rise further After having been forced into a defensive position by the market turmoil, ECB officials themselves are currently re-focussing on their inflation mandate. There are still some elements of caution and added caveats. For sure, the ECB is now talking more in terms of scenarios and stresses data dependency. Some usually hawkish leaning ECB members such as Slovakia’s Kazimir yesterday suggested that perhaps a slower pace of hiking is now warranted. But behind that curtain of caution, there is still a view that the ECB should not back down on rates.   ECB's Lane: More hikes are needed in the baseline scenario The ECB’s Lane also acknowledged that we were currently “probably in the most intense phase of inflation.” He does have the outlook that it will come down significantly, but crucially to ensure that this actually happens, he also sees more hikes – note the plural – being needed in the baseline scenario. His outlook for interest rates still needing to go up remains if the “financial stress is non-zero”, though “still fairly limited”. ECB rate hike expectations have rebounded, but remain well below their early March levels Source: Refinitiv, ING Today's events and market view Especially for the ECB, inflation will remain key. Starting today we will receive CPI estimates from individual countries – Germany, Spain and Belgium – ahead of tomorrow’s estimate for the euro area. Markets should take the data as a reminder that the ECB is still far from meeting its inflation mandate and that the ECB could well reassert it hawkish poise – inflation is too high today, and knock-on effects to the euro area from the turmoil will only gradually materialise, if ever.    Read next: The Commodities Feed: Supply disruptions persist| FXMAG.COM While we see end of cycle dynamics taking hold in USD and GBP, we still think EUR curves stand more of a chance to re-flatten first – if only on a relative basis – as policy tightening is more likely to be priced back into the front end. Aside from the euro area country CPI readings we will be watching the US data. We will get the weekly initial jobless claims which have painted a relatively resilient picture of the job market so far. The third print of fourth quarter 2022 GDP will give us a rear mirror view of the economy. Closely watched will be the Fed's update later in the day on the aggregate recourse to the discount window and the new bank term funding programme. Fed speakers scheduled for the day are Barkin, Collins and Kashkari. In primary markets Italy will auction 5Y and 10Y bonds as well as floating rate notes for a total of up to €9bn. Read this article on THINK TagsRates Daily Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Australian dollar was boosted by record low Australian unemployment rates, historical local budget surplus and a surprising resumption of cash rate

FX Daily: Unorthodox correlations

ING Economics ING Economics 30.03.2023 10:08
With the yen bearing the brunt of the risk rally, the dollar saw some delayed benefits from the re-tuning in Fed rate expectations and enjoyed a modest recovery yesterday. Today, all eyes will be on CPI data from Germany and Spain. Elsewhere, USD/MXN could break below 18.00 today as Banxico hikes and oil stays supported USD: Dollar takes a breather as yen takes a hit Yesterday’s moves in the FX market provided another confirmation that we cannot apply the traditional frameworks to the interaction between currencies and other assets. If diverging monetary policy paths (at least as perceived by the market) in the US and Europe are gradually reconstructing the link between USD/European FX and front-end rate differentials, the interactions between safe-havens, high-beta currencies and swings in the equity market continue to prove rather unorthodox. An important point is that the dollar’s safe-haven status was perhaps dented by the fact that the banking turmoil has primarily been a US story. Furthermore, another safe-haven currency, the Swiss franc, got caught up with idiosyncratic banking stress, leaving the yen to benefit widely from the initial shock – especially considering its high inverse correlation with Federal Reserve rate expectations. This helps us understand the underperformance of JPY since the start of this week and especially yesterday. Improving sentiment asymmetrically hits the yen given it is accompanied by an unwinding of dovish Fed bets: the USD/JPY level might rebound to the 135.00 area, even though we favour another decline in the pair beyond the short term. The bloc of pro-cyclical currencies remains extremely homogeneous. Markets have fallen out of love with the Aussie dollar as lower inflation points to a stronger chance of a pause in rate hikes and the New Zealand dollar is now looking like a more attractive option in the region. Oil-sensitive currencies may continue to enjoy decent momentum as we see more upside risks to oil prices. The Canadian dollar is also benefiting from the general improvement in American (North and Latam) sentiment but lacks a domestic tightening story, so its rally may start to run out of steam sooner than other peers (like MXN and NOK). We think the Mexican peso has more room to rise, as discussed in the MXN section below. We see Norway's krone as more attractive than Sweden's krona in the near term. Back to the dollar, we think the small recovery seen yesterday could be one of many along a gradual decline path, but would favour some consolidation around current levels today. Today’s calendar sees the third release of fourth-quarter GDP figures, plus speeches by the Fed's Thomas Barkin, Susan Collins and Neel Kashkari. Francesco Pesole EUR: First CPI readings in focus Preliminary March inflation readings in Spain and Germany will be closely watched today. The German figures will obviously draw greater interest, and consensus expectations are for a deceleration from 8.7% to 7.3% in the headline rate. Spanish numbers will be published earlier this morning and we must remember that they did trigger some market shake-up recently. Expectations are for a flat core rate at 7.6%, but a sharp deceleration in headline inflation from 6.0% to 3.7%. Read next: Rates Spark: Your timely inflation reminder| FXMAG.COM With the European Central Bank explicitly data-dependent despite an implicit hawkish bias, this week’s inflation figures are set to be an important driver of the market’s rate expectations. There are currently two 25bp rate hikes fully priced in by September in the OIS curve, and the bar for another hawkish repricing is set quite high. However, ECB speakers have leaned on the hawkish side of late and the EUR OIS curve is not discounting banking stress in the same way the USD OIS curve is. The EUR/USD rally took a break around 1.0840 and we could see it hover around those levels today, but we still favour a break above 1.0900 and ultimately a test of 1.1000 in the near term. Francesco Pesole MXN: 25bp hike by Banxico, and maybe a break below 18.00 We think the Mexican peso’s bullish momentum may have further to run. Today, Banxico will announce monetary policy and we expect a 25bp rate hike to 11.25%. This is a consensus view and markets are almost fully pricing in this outcome, so most of the focus will be on forward-looking language. Recent banking turmoil would suggest policymakers will hold a more cautious stance on the future path of monetary policy. However, market pricing suggests investors have already scaled back expectations for additional Banxico tightening beyond today’s hike. If anything, leaving the door open for more tightening if needed as the Bank reiterates its resolution to fight inflation might see some positive impact on the peso. Beyond the central bank risk event, we think MXN remains attractive in an environment where markets favour currencies with high carry and positive exposure to rebounding crude prices. A break below 18.00 in USD/MXN may be on the cards soon, potentially today on a hawkish surprise by Banxico. Francesco Pesole CZK: Koruna welcomes hawkish Czech National Bank The CNB board decided yesterday to keep the key interest rate at 7.00%, in line with expectations. Also, unsurprisingly, six of the seven members were in favour of the decision, while one voted for a 25bp rate hike. The board also confirmed that it would "continue to prevent excessive fluctuations of the koruna". The governor during the press conference commented on market expectations of a peak in interest rates at current levels and a significant rate cut this year (roughly 125bp in cuts priced in before the meeting). However, according to the governor, a rate hike cannot be ruled out and rate cut expectations are premature at this point. The Czech koruna visibly welcomed the CNB's hawkish tone and moved below 23.60 EUR/CZK for the first time since the sell-off in global markets two weeks ago. The central bank has confirmed that it is ready to intervene if needed, but current levels are far from where the CNB was last active. On the other hand, the central bank's statement is clearly supportive for the koruna and implies that the currency is safe in the event of a global sell-off. Moreover, with the prospect of higher rates for a longer period of time, a solid FX carry is also certain. Overall, the koruna thus offers decent risk/reward and we expect it to strengthen further. Frantisek Taborsky Read this article on THINK Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Forex: Euro against US dollar - forecast on April 24th, 2023

EM Credit Supply: Lightning start to year but slowdown begins

ING Economics ING Economics 30.03.2023 15:38
EM sovereign issuance has started 2023 at a record pace, driven by the CEE region and higher-rated countries. We expect a slower pace for the rest of the year, with single-B issuance remaining quiet even if global market conditions stabilise from the recent banking system volatility Emerging markets sovereign issuance had a strong start to 2023 but is expected to slow down later in the year New issuance has record start to the year as sovereigns seize window of opportunity Emerging market (EM) primary markets have started 2023 at a frantic pace after a quiet 2022. EM sovereign and quasi-sovereign (state-owned) bonds have already seen the strongest first quarter on record for USD and EUR issuance (including a bumper January of $55.4bn), with year-to-date issuance of $90.8bn over 70% of last year’s annual total and almost 55% of the 10-year annual average. Despite the slowdown relative to January, February was also the strongest on record, with a further $21.1bn issued and quasi-sovereigns particularly active. March has been quieter (notwithstanding a recent $5bn deal for Poland), understandably given the ongoing volatility in global markets, while we generally expect a slower pace of issuance going forward given the significant front-loading of financing needs for the larger sovereigns. EM sovereign & quasi-sovereign (agency) USD & EUR issuance by year Source: Bond Radar, ING; 2023 data is as of 29th March; *Based on 10-year average share of 34% for 1Q issuance in the annual total   Higher quality EM sovereigns have seized on a perceived window of opportunity to come to the market, with many having effectively been locked out for much of last year by high borrowing costs and volatile markets. The index level yield for EM sovereigns on average fell by over 150bp from the peak in late October to early February, on the back of tighter credit spreads and lower UST yields, lowering potential borrowing costs for new issues. More broadly, sentiment towards EM also improved given the less pessimistic outlook for global growth (in particular in Europe on the back of lower gas prices, along with for China given the easing of Covid measures), hopes that inflation has peaked in the US, and a softening in the US dollar. That being said, recent weeks have seen much more volatility, with the 10Y UST yield bouncing from around 3.5% to over 4% and back again, with borrowing costs creeping up again since early February for EM sovereigns while credit spreads have widened – this points to a likely further slowdown in the pace of issuance as sovereigns reassess market conditions and the potential cost of borrowing. The EM sovereign USD bond index yield has actually been fairly steady amid the recent stresses in the global banking system in March, with spread widening offsetting the fall in underlying UST yields. EM USD sovereign index yield breakdown Source: ICE, Refinitiv, ING   Early January deals for Romania and Hungary offered attractive new issue premiums of around 30-50bp (relative to the sovereigns’ outstanding spread curves in the secondary market), while the flood of new supply saw the spread level on the EM USD IG sovereign index reprice around 30bp wider over the first two weeks of the year, highlighting some investor nervousness to start the year. However, spread levels consequently recovered, with later deals offering little or no premium when priced, even in smaller and lower-rated sovereigns such as Serbia, Morocco, and North Macedonia. On the whole, new issuance has therefore been comfortably absorbed by the market, with investors heading into this year with large cash balances in anticipation of attractive opportunities in the primary, along with signs of some inflows returning to EM funds at the beginning of the year albeit there has been a clear shift to outflows in recent weeks. Regional breakdown: CEE has led the way When breaking down the issuance seen this year so far, a dominant theme has been the uptick in supply from Central and Eastern Europe (CEE) relative to recent years (in particular versus pre-Covid years), with early deals for Hungary, Romania, Bulgaria, Serbia, Poland and North Macedonia in the sovereign space already. CEE sovereigns and quasi sovereigns have issued $30.4bn YTD, compared to $18.5bn in all of 2019 (all of which was in euros). This year’s issuance has come in both dollars and euros, while standing in contrast to the longer-term trend seen in the region in the past decade of most sovereigns shifting to mostly local currency issuance (and away from dollars in particular). We expect the trend of increased hard currency issuance from the region to continue, given ongoing funding needs for energy and possibly military spending, while local currency borrowing costs are likely to remain elevated relative to pre-Covid levels. For the rest of this year, the significant frontloading of financing needs from sovereigns in the region such as Romania, Poland, Hungary and Serbia should be viewed as positive in providing flexibility to issuance plans and acting as a technical tailwind (given the likelihood of lower supply later in the year). EM sovereign & quasi (agency) USD & EUR issuance YTD by region Source: Bond Radar, ING; Data is as of 29th March; CEE includes Slovenia, Slovakia & Latvia; MENA includes Turkey   Outside of CEE, issuance from the Middle East and North Africa (MENA) has been robust, but largely dominated by Saudi Arabia ($15.5bn from the sovereign and sovereign wealth fund PIF) and Turkey ($5.5bn from the sovereign and Eximbank). Other issuers from the Gulf Cooperation Council, such as Qatar, the UAE, Oman, and Bahrain have been much quieter, in contrast to their heavy issuance schedule in recent years. This can largely be explained by the elevated oil price environment boosting government revenues for these energy producers, meaning they have been able to be far more selective in deciding when to come to the international bond market. Elsewhere, issuance from Latin America has been minimal, while understandably non-existent in Sub-Saharan Africa given the region’s generally lower credit ratings and elevated bond yields in the current environment. Higher quality issuers have dominated the primary markets Another clear theme of this year’s issuance has been the dominance of higher-quality, investment grade (IG) issuers. Over half of EM sovereign and quasi-sovereign issuance this year has come from nations rated single-A or higher, while over three-quarters has been from IG issuers (BBB-rated and above). EM sovereign & quasi (agency) USD & EUR issuance YTD by rating bucket Source: Bond Radar, ING; Data is as of 29th March; Credit ratings are S&P/Moody's/Fitch   High-yield issuance has been much more subdued. In the BB space Colombia, Dominican Republic, Serbia, North Macedonia, and Morocco have come to market, two of which are fairly recent downgrades from IG ('fallen angels'). Single-B issuance has been sparse, with Turkey the key name, along with Costa Rica this week, an Islamic sukuk for Egypt and a small refinancing deal for Mongolia. For most lower-rated issuers, refinancing in the current market remains almost prohibitively expensive, with the average yield on single-B USD sovereign bonds around 10%, well above an average coupon of under 7% on outstanding bonds. We would therefore expect issuance from these lower-rated sovereigns to remain subdued through to the end of the year. Average yield and coupon on outstanding single-B rated sovereigns Source: ICE, Refinitiv, ING Looking ahead: Who might still come to the primary market this year? As a positive for EM sovereigns in this tricky environment for refinancing, the maturity schedule for HY sovereigns is fairly light in 2023, with just under $10bn left to mature in the rest of this year. In addition, half of this is from Turkey, which has already issued $5bn this year and shown it has market access, albeit with a risk event of elections in a few months. However, this maturity wall picks up in 2024, and further in 2025, so a more prolonged period without market access would be of more concern for the lower-rated tiers of the EM sovereign universe. Read next: FX Daily: Unorthodox correlations| FXMAG.COM EM HY hard currency sovereign bond maturity schedule by year Source: Refinitiv, ING   When looking in more detail at the breakdown of these upcoming maturities to see where risks may lie, the chart below shows refinancing needs on maturing external bonds by HY country and year until the end of 2025, scaled by FX reserves. Bahrain is the outlier with limited reserves and large refinancing needs, as has been the case in recent years, but strong support from peers such as Saudi Arabia mitigates some of this risk. This support means appetite from investors for a potential new issue would likely be higher than most single-B peers. Tunisia’s 2023 and early 2024 maturities present a risk given its CCC rating and distressed yields, while refinancing risks for other CCC-rated sovereigns El Salvador and Pakistan are slightly further away in 2024/25. Despite the sizable refinancing needs, risks for Oman are offset by its strong current account surplus and additional foreign assets held in its sovereign wealth fund. Elsewhere, refinancing pressures will likely remain for larger stressed African issuers, such as Kenya, Egypt and Angola in the coming years, despite Egypt recently demonstrating at least partial market access (with a short-dated sukuk). The likes of Mongolia, Turkey, North Macedonia and Costa Rica have done well in meeting much of their refinancing needs for this year in advance. Eurobond refinancing needs by year for HY sovereigns (% of FX reserves) Source: National Sources, Refinitiv, IMF, Macrobond, ING; Note: Excludes countries with pooled FX reserves, Central bank foreign assets used when reserve data not available; Bahrain annual split is 40% in 2023, 54% in 2024, 50% in 2025   More broadly, we see a few candidates remaining for potential further issuance this year. Higher-rated names with upcoming maturities include Qatar, China, Abu Dhabi, Croatia, and Kazakhstan, while Bahrain is one of the few single-B rated sovereigns we see as likely to come to the market. Large issuers Turkey and Indonesia have the potential to return to the market. Outside of just 2023 Eurobond refinancing needs, we expect Romania to return to the international market at least once more this year (around 70% of planned Eurobond issuance completed YTD), while Hungary has spoken of a potential euro issuance in the second half of the year to pre-finance its needs for 2024. Elsewhere, Albania has reportedly selected lead managers for a €500mn bond issue this year, along with buying back €250mn of its outstanding 2025 notes, potentially following in the footsteps of Balkan peers Serbia and North Macedonia. There could also be issuance from oil-exporting BB sovereigns Azerbaijan and Oman to pre-finance their 2024 maturities given relatively tight spreads on the back of improving fundamentals, while Uzbekistan’s authorities ruled out issuance in the first half of 2023 but could return to the primary market later in the year. EM hard currency sovereign bond maturities remaining in 2023 Source: Bond Radar, Refinitiv, ING; Data is as of 29th March Read this article on THINK TagsSovereign rating Markets Emerging Markets Credit CEE region Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
ECB cheat sheet: Difficult to pull away from the Fed

Has the eurozone economy started a quiet revival?

ING Economics ING Economics 31.03.2023 09:08
The small drop in the economic sentiment indicator for the eurozone is at odds with the PMI and suggests relatively weak economic activity in March. We therefore remain cautious about GDP growth for the first quarter. Dropping selling price expectations confirm a view of moderating inflation for the months ahead Does anyone dare to predict a soft landing for the eurozone economy at this point?   The economy is undoubtedly in a volatile phase at the moment, illustrated by confusing recent survey data about the first quarter. The PMI (which jumped from 52 to 54.1 in March) has been a lot more upbeat than the economic sentiment indicator, which fell from 99.7 to 99.3 this month. Both surveys share a concern about manufacturing production, but the European Commission survey seems more cautious about how services are performing. The manufacturing survey shows slightly improving performance of new orders, but at a low level. Similarly, inventories remain rather high. The production trend previously observed dropped in March, but remained above levels seen in the second half of last year. Overall, it looks like industry has profited from easing supply chain strains, which has helped reduce backlogs of work. With weak orders, it makes sense that production expectations are falling again. Read next: Asia week ahead: Policy rate decisions from Australia and India| FXMAG.COM For services, we see a decline in the development of the business situation. Demand saw a small drop, but overall it looks like the recovery in demand seen in December and January has now ended. Businesses in services are getting more upbeat about the outlook, but for now the survey suggests moderate activity in the sector. In retail, we see that high inventory levels add to a drop in sentiment. The sales indicator remained at high levels in March but ticked down slightly compared to February. Selling price expectations dropped across the board in March. Industry and construction price expectations are falling rapidly and could soon reach levels seen prior to the Covid-19 pandemic. For retail and services, we see that so far the drop is smaller and a large percentage of businesses still intend to raise prices, but the trend has been down for a few months now. Does anyone dare to predict a soft landing at this point? We’ll believe it when we see it, but recent survey data at least do point in that direction with slowing inflation expectations and economic activity picking up a bit – although at weak levels. Read this article on THINK TagsInflation GDP Eurozone Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
ECB enters final stage of tightening cycle

Stock market: GER40 may finish the quarter 10% above-the-line

Michael Hewson Michael Hewson 31.03.2023 10:28
As we come to the end of March and the first quarter of 2023, the last two weeks have taken some of the gloss off the FTSE100, after a strong January and February. The German DAX, on the other hand, has managed to reverse most of the losses in the aftermath of the collapse of Credit Suisse and looks set to finish the quarter over 10% higher.   Even US markets have undergone a bit of a crisis of confidence with concern about the effects of much higher rates giving way to concern about the health of the US banking system, which has seen a somewhat choppy quarter, with the Dow looking set to finish where it started the quarter. The Nasdaq 100 on the other hand has managed to defy gravity by rallying an impressive 18%. Putting to one side the performance of the Nasdaq 100, European markets have largely outperformed their US counterparts, as a sharp fall in energy prices and big falls in headline inflation has forced markets to reassess the outlook for the European economy. Nonetheless despite the sharp falls being seen in headline CPI, the stickiness of core prices is prompting concern amongst ECB policymakers, with yesterday's Spanish core CPI numbers a timely reminder, of how sticky that part of the equation is. At its last meeting, the ECB raised rates by another 50bps, in line with its previous guidance in January, although the timing was slightly unfortunate as it came in the teeth of a banking crisis that saw Swiss bank UBS absorb its rival Credit Suisse. Against such a backdrop the arguments for taking a more measured approach were quite high, especially since core prices saw a rise to a new record high back in February to 5.6%, however, the governing council held its nerve.   Read next: Has the eurozone economy started a quiet revival?| FXMAG.COM Headline inflation has been coming down, falling to 8.5% in February, and looks set to fall even more sharply in today's March flash numbers to 7.1%. In recent weeks the noises from various ECB policymakers have been becoming increasingly hawkish, however recent events have tempered that somewhat with the last meeting placing much greater emphasis on data dependence. The bigger question remains about what data the ECB is now concerned about, whether it is core CPI, which is set to edge even higher today to 5.7% and a new record high, or whether their focus has now shifted to financial stability. If we are to believe ECB President Christine Lagarde there isn't a trade-off between the two, however, history has taught us that is rarely true. The two are inextricably linked and no central bank will continue to hike rates when financial stability is at stake.   Before today's flash CPI from the EU, we get the final Q4 GDP numbers out of the UK, which a lot of people in government will be hoping don't get a downward revision this morning. When the numbers were last adjusted the UK economy managed to avoid a technical recession by the skin of its teeth, coming in at 0%, after a -0.2% contraction in Q3.    The rebound in Q4 was helped in some part by a strong rebound in consumer spending due to the Football World Cup in Qatar, and today's final adjustment will hope that this holds, with personal consumption expected to come in at 0.1%.   Recent retail updates have offered encouragement that consumers are still spending, albeit more cautiously, while the construction sector has also shown signs of some improvement. Business investment also saw a rebound in Q4 after a slowdown in Q3. Even with the optics of avoiding a technical recession, the outlook for the UK economy remains challenging with headline inflation still close to 10%, and consumer confidence still very fragile, but the rebound seen in retail sales seen in January and February offers hope that Q1 could see some growth after a difficult end to 2022.  As we bring down the curtain on Q3 we also have the latest US core PCE inflation numbers for February, and here the Federal Reserve will be hoping that there are signs that inflation is cooling here as well after the surprise spike to 4.7% in the January numbers, which prompted a sharp spike in US rate hike expectations just prior to the meltdown that we saw at the beginning of this month. The jump higher in PCE core deflator also happened to coincide with a surge in January personal spending, which rose 1.8%.   Since then, yields have collapsed on concerns over the stability of the banking system, with US 2-year yields set to see their biggest monthly fall since the financial crisis. While personal spending is expected to slow from the 1.8% gain seen in January to 0.3%, the bigger question is whether we'll see a similar slowdown in headline core PCE, or at the very least that we don't move higher.   EUR/USD – retested the highs last week at 1.0930 yesterday, which is the next barrier for a move towards 1.1000. Still feels rangebound with support at the 50-day SMA at 1.0730. a move through 1.0940 opens up the previous highs at the 1.1030 area.  GBP/USD – continues to edge higher and currently has support at the 1.2280 area. The next key resistance comes in at the recent peaks at 1.2445/50. Below 1.2280 targets the 1.2170 area. EUR/GBP – currently finding support at the 0.8770/80 area and the 100-day SMA. A break below here opens up the risk of a move towards strong trend line support at 0.8720, from the lows last August. On the upside, we have trend line resistance at the 0.8870/80 area. USD/JPY – currently finding resistance at the 133.00 area with the next main resistance at 133.20.  Support is now back at the 130.00 area. A move below 130.00 retargets the 129.30 area.    FTSE100 is expected to open 10 points higher at 7,630 DAX is expected to open 53 points higher at 15,575 CAC40 is expected to open 23 points higher at 7,286
Unraveling the Path Ahead: Gold and Silver Prices Amidst Fed Expectations

The US GDP release points to a 2.6% economy growth in Q4. PCE data to be released later today

Ipek Ozkardeskaya Ipek Ozkardeskaya 31.03.2023 11:33
First CPI figures from Spain and Germany confirmed that headline inflation in Europe eased by a big chunk in March, thanks to the base effect - as we now compare war months to war months.   Released yesterday, the German inflation fell from 9.3% to 7.8%, and inflation in Spain halved, from 6% to 3.1%.   Chic, but not enough.  When we filter out the energy and food prices – which exploded with the war – the inflation picture is not as optimistic. In fact, core inflation in Spain barely fell this month, from 7.6% to 7.5%.  And core inflation in the Eurozone is expected to rise to a fresh record high.   If the upside pressure in core inflation persists, no matter how fast we see the headline inflation fade, the European Central Bank (ECB) will stick to its guns to abate inflation and the euro will continue its journey higher.   The EURUSD will likely win over the 1.10 offers in the next few sessions, partly because the ECB hawks remain in charge of the market with the solid inflation, but also partly because the US dollar remains under a decent selling pressure.   The US dollar index is sitting at the low levels of the Silicon Valley Bank (SVB) collapse, and despite hawkish comments from Federal Reserve (Fed) officials – hinting at further rate hikes to tame inflation – the banking stress and soft economic data prevent the hawkish Fed pricing from taking effect.  Released yesterday, the US GDP data showed that the US economy grew 2.6% in Q4, slightly less than the 2.7% penciled in by analysts. Yet, the GDI – the gross domestic income – fell 1.1% during the same quarter, down from 2.8% printed in Q3. That was the largest decline since the pandemic.   Read next: Stock market: GER40 may finish the quarter 10% above-the-line| FXMAG.COM Moreover, the US corporate profits fell 2% in Q4 – the most in the past two years – and the profit margins fell from around 15% to 14%.   As a result of soft economic data, the US 2-year yield stagnates a touch above the 4% mark – rejecting the further rate hike comments.   Soft yields continue giving support to stock indices despite warnings from the economic data front. The S&P500 will be closing the month with gains and Nasdaq 100 will step into the new quarter having stepped into the bull market.   Quarter in a nutshell  We had a quarter full of surprise and unexpected events.   We expected recession to show up, equities to fall and sovereign bonds to rally.   Instead, equities rallied, sovereign bonds fell until the SVB collapse and recession was ... clearly not on the menu of the Q1.   Energy and commodities didn't get the boost we expected from the Chinese reopening, and more importantly, money flew into money market funds with investors seeking higher returns with low-risk assets.   The technology stocks did the heavy lifting this quarter, as the Big Tech names like Apple, Microsoft and Google gained big. The FAANG stocks rallied almost 30% since the start of the year. That rally partly hid the bank selloff and saved the quarter for the S&P500. The S&P500 would be in the negative year-to-date, if Big Tech was not part of the game.   That, to me, means that the actual stock rally is certainly too sensitive to yields. If the yields push higher, due to an undesirably high inflation for example, we could see the recent equity gains crumble.  And the higher yields, which also boosts appetite for cash could be the next headache for banks, and for equities.  One last thing before we go...  Today, the US will release the February PCE data – the Fed's favourite gauge of inflation. Core inflation may have eased on a monthly basis but is expected to remain steady on a yearly basis around the 4.7% mark. A read in line with expectations, or ideally lower than expected could keep the Fed hawks at bay, and let the dollar further relax.  In the dollar-yen, we see the quarter end flows feed into a softer yen and a stronger dollar-yen. The pair is testing an important resistance zone, around 133, including the 50-DMA and the minor 23.6% Fibonacci retracement on October to January retreat.  With the softening Fed expectations, and increasingly pressure on Bank of Japan (BoJ) – to end its no-longer-adopted easy monetary policy under the new Governor Ueda, there is certainly not much positive potential in the dollar yen. The price rallies could be interesting top selling opportunities for a fall toward the 125/127 range.
Impact of Declining Confidence: Italian Business Sentiment in August

FX Daily: EUR/USD zeroing in on 1.10

ING Economics ING Economics 31.03.2023 12:13
We think EUR/USD may break 1.10 next week before the US payrolls, as the dollar remains vulnerable despite some repricing of dovish Fed expectations, and confirmation that core inflation remains sticky in the eurozone today should endorse ECB hawkishness. If that's the case, Cable should follow with a break above 1.25 USD: Struggling to find support The dollar has continued to lose ground across the board. The pause in the greenback decline only lasted for one day (Wednesday) but resumed yesterday. Interestingly, we are once again observing dollar weakness in tandem with a repricing higher in Fed rate expectations – a May hike is now 60% priced in – and evidence of improving liquidity conditions among US banks. US institutions had $152.6bn in outstanding borrowing in the past week, a decrease from $163.9bn in the week before. In our view, all this continues to point to how markets are “punishing” the dollar for the unclear Fed communication and instead favour the currencies – like the euro – where there is a clearer (and hawkish) policy direction. We have been highlighting recently how the calm in markets and the marginal improvement in liquidity conditions among US banks does offer room for Fed officials to sound more hawkish, and indeed we heard from Susan Collins yesterday calling for more tightening. But we suspect markets need some clarifications in this sense from Fed Chair Jerome Powell himself, and we do not see any scheduled speech from him in the foreseeable future. Meanwhile, we’ll hear from two voting FOMC members today: John Williams and Lisa Cook. They are not known hawks so any tilts towards more hikes in their rhetoric could have some impact. On the data side, the focus will be on February’s PCE deflator, the Fed’s preferred measure of inflation. Our economists are aligned with consensus in expecting the core measure to come in at 0.4% month-on-month, which should translate into a stabilisation of around 4.7% YoY. The headline rate should decelerate but may stay above 5.0%. Personal spending data for February will also be released. Barring a major upside surprise, we don’t expect a material impact on the dollar from PCE data today. As we have seen, higher chances of a May hike don’t automatically translate into a stronger dollar in the current market environment. We could see some dollar stabilisation after a week of losses, but the short-term bias remains negative for the greenback. Francesco Pesole EUR: A pause before another jump? We have been calling for 1.10 in EUR/USD for some time now, and with yesterday’s leg higher in the pair having seen a break above 1.0900, we should probably suggest a time for when that level will be reached.   We think today the risks are more skewed toward consolidation in the pair, and have indeed seen some pullback from the 1.0930 levels back to 1.0900 during the Asian session on the back of a slight dollar recovery. Inflation data in the eurozone will be an important driver, but a big chunk of the move already happened after yesterday’s German figures were released. This morning, Dutch inflation dropped more than expected, to 4.5% (Harmonised CPI YoY) from 8.9% in February. French data are also due early this morning, followed by Italian and finally eurozone-wide numbers. The consensus for the flash estimate is set for 7.1%, a much-anticipated energy-driven drop from 8.5%. However, core inflation is seen ticking higher from 5.6% to 5.7%, which is probably what the market should tilt the balance for markets. Read next: South Korea: Industrial production contracts more than expected in February| FXMAG.COM Ultimately, even if a CPI-led rally may have already happened yesterday, EUR/USD may find some floor around 1.0870/1.0880 in the face of a potential dollar recovery with eurozone-wide data confirming core inflation requires more ECB tightening. Anyway, our bias remains bullish for EUR/USD, and we think that 1.1000 can be broken sometime next week, barring surprisingly strong ISM data out of the US and amid an otherwise broadly quiet data calendar until Friday’s non-farm payrolls. We have some ECB speakers to keep an eye on today: President Christine Lagarde, Latvia’s Martins Kazaks, Italy’s Ignazio Visco and Croatia’s Boris Vujcic. Francesco Pesole GBP: No reasons to diverge from EUR The pound is set to be the best-performing currency of the first quarter of 2023, having gained 2.5% against the dollar. Along with the improvement in the economic outlook, sterling is definitely drawing benefits from the market’s conviction that the Bank of England will need to continue raising rates. Indeed, Monday’s comments by Bank of England Governor Andrew Bailey did lean on the hawkish side and largely endorsed market pricing, but our economics team remains doubtful that the data will ultimately underpin the need for additional tightening. This morning’s revision of fourth-quarter GDP data on the strong side is probably too outdated to have a material impact in this sense. Still, we have been stressing how markets are rewarding currencies that can count on domestic tightening prospects despite financial turmoil, and the pound is indeed one of those. While our more dovish view for the BoE compared to the ECB keeps us bullish on EUR/GBP for the remainder of the year (we still target 0.90 in the second half of the year), there aren’t clear short-term drivers to buck the bullish GBP trend at the moment. Cable is approaching some important levels. First of all, the 1.2426 December 2022 high, and then the key 1.2500 benchmark level. With no obvious catalyst driving divergence between EUR and GBP at the moment, a high chance of 1.1000 being tested next week in EUR/USD equals a high chance of 1.2500 being tested next week in Cable. Francesco Pesole CEE: Zloty may join the club again Today, the market's attention in the region will shift to Poland where we will see the March inflation numbers, the first inflation numbers in the CEE region. We expect CPI to slow from 18.4% to 16.0% YoY, in line with market expectations. Although this should be the first drop since February's peak, prices are being pushed up by the core component as well as food prices.   Elsewhere in the region, we will see the final estimate of GDP in the Czech Republic, which will show the full detail of the economy's decline at the end of last year by 0.4% quarter-on-quarter. On the political front, the non-binding deadline for the Hungarian government to approve the necessary legislation to gain access to read EU money ends today. However, it is not very clear when we could hear more, especially from the European Commission.  The positive conditions for FX that we highlighted earlier prevail in CEE markets and we expect the good mood to continue into the end of the week. Our favourites continue to be the Hungarian forint and the Czech koruna, which should post further gains. However, the Polish zloty is coming to life, as we highlighted last week that its time is coming. Yesterday, the zloty closed below the 4.680-4.720 EUR/PLN range for the first time in the last two weeks. Our models imply that over the past three weeks, the zloty has re-established its relationship with global after a long period, and its beta is approaching that of the forint and the koruna. It seems that the market wants to put aside the domestic problems and perceives the zloty as part of a region that currently has ideal conditions for recovery, as we mentioned before. Overall, the zloty could finally see some gains and get rid of the label of the only underperformer in the region this year. Today, of course, the March inflation number will be decisive, but for the following weeks, global conditions could be the main driver. For now, we see 4.670 as the next level for the test.  Frantisek Taborsky  Read this article on THINK TagsZloty FX Dollar Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
FX Daily: Euro’s attractiveness on the rise

Eurozone inflation drops as expected but core continues to rise

ING Economics ING Economics 03.04.2023 10:35
Headline inflation fell from 8.5% in February to 6.9% in March, but core inflation ticked up to 5.7% in a sign that the fight against inflation is not over. For the European Central Bank, we expect two more 25bp hikes before a peak is reached The March decline in inflation was widely expected due to energy price developments   Many of us saw this coming. The March decline in inflation was widely expected due to the energy price developments, which spiked in March last year. The base effect is therefore currently very favourable for energy developments. Energy inflation fell from 13.7% to -0.9% in March, which is the first decline in energy inflation since February 2021. Because it was so widely known that energy inflation would drop like a stone, the bigger concerns remain around the other components. This is where a lot more work needs to be done. Core inflation increased from 5.6% to 5.7% in March with services inflation increasing from 4.8% to 5% while goods inflation fell from 6.8% to 6.6%. Food inflation – which has been the largest contributor to headline inflation in recent months – increased from 15% to 15.4%. This indicates that price pressures remain high for the moment, although this should improve in the coming months. Read next: Japanese recovery continues, but weakening labour data is a concern| FXMAG.COM Forward-looking data are starting to become less concerning from an inflation perspective though. Futures prices for energy look manageable, while producer prices for food have also come off peaks. Transport costs and supply chain problems have eased substantially, which had led to manufacturers seeing a drop in selling price expectations. The main concern seems to be around wage developments. Wage growth has been rising and with unemployment still at a low of 6.6%, the chances of there being upward pressure on wages remain. This could result in somewhat stickier inflation, mainly on the services side. So while March has seen a large drop in inflation, core inflation remains a concern for the ECB. The potential for core inflation to remain stickier than hoped will be the main reason for the ECB to continue to hike in the near term. We expect another 25bp hike in May and another in June. As the inflation outlook is starting to look more benign, and recent banking turmoil serves as an illustration that aggressive hikes are not without cost, we expect a peak to be reached thereafter. Read this article on THINK TagsInflation Eurozone Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Producer Price Fall and Stickier Services Inflation: Impact on CPI and Resilient Consumption

Italian inflation continues to fall as energy costs subside

ING Economics ING Economics 03.04.2023 10:41
Headline inflation in Italy came in at 7.7% in March, down from 9.1% in February. The disinflationary process is still in place and is mainly driven by the energy component Energy disinflation is set to continue in April Headline inflation decelerates to 7.7%, driven by energy According to preliminary data from the Italian National Institute of Statistics, headline inflation came in at 7.7% in March (from 9.1% in February) and the harmonised measure at 8.2% (from 9.8% in January), which was lower than expected. The disinflationary process is still in place and is mainly driven by the energy components which more than compensated for increasing price pressures in unprocessed food, tobacco and recreational services. Interestingly, non-durable goods and processed food inflation seem to be topping. Apparently, the monthly billing of gas (done quarterly) is helping to accelerate the pass-through of sharp declines in wholesale gas prices (now hovering around €42MWh) to the retail energy component. Core inflation is still up, but decelerating Core inflation, which excludes energy and fresh food, inched up slowly in March, reaching 6.4% (from a revised 6.3% in February). The pass-through of past energy price pressures has not been completed yet, and some core inflation stickiness remains. The ongoing acceleration in services inflation suggests that transmission has still some way to go. Energy disinflation set to continue... Looking ahead, we believe that the gap between decelerating headline inflation and relatively sticky core inflation will close over the second quarter. Energy disinflation will likely continue in April due to the electricity price component. Arera, the Italian energy regulator, announced yesterday that the regulated electricity price will fall next month by 55% compared to the previous quarter. The fall in the energy component will more than compensate for the inflationary impact coming from the end of temporary cuts in the VAT rate. As the new tariff will apply throughout the second quarter, the net effect should thus contribute to further pushing down the energy component in May and June as well. ...and the gap between headline and core inflation could close soon In the meantime, stubborn core inflation is unlikely to cool down, at least in the very short term. The pass-through of the energy price shock looks set to continue, particularly in the service sectors. March business surveys showed a deceleration in surcharges intentions on output prices in the industrial domain, but there are no signs of deceleration as yet in services. Read next: Eurozone inflation drops as expected but core continues to rise| FXMAG.COM The ongoing deceleration in industrial producer prices (in February they came in at 9.6% year-on-year, the first single-digit reading since July 2021) suggests that non-energy goods inflation will soon decelerate, taking some heat off core price dynamics. On balance, we might not be far from an inversion in core inflation as well, but wage developments might delay it a bit. With employment at record-high levels and the vacancy ratio hovering at its historical high, wage dynamics might still add some momentum to core inflation. Indeed, contractual hourly wages came in at 2.2% YoY in February, and look set to creep up further.   All in all, today’s release confirms that the disinflationary process is ongoing, still driven by the energy component. The peak in core inflation has not been reached yet, but could not be far away. The chance of a sub-6% average 2023 inflation reading has now clearly increased. Read this article on THINK TagsItaly inflation Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
ECB's Christine Lagarde not to announce the end of rate hikes?

FX Daily: OPEC+ output cut gives dollar a lifeline

ING Economics ING Economics 03.04.2023 15:28
We had called for EUR/USD to break 1.10 this week. This is still a possibility, but the surprise oil production cut announced by OPEC+ is raising inflation fears and – by extension – reducing Fed easing bets, ultimately offering the dollar support. This week, focus will be on US data: the ISM surveys today and Wednesday, and the payrolls on Friday The OPEC+ move may have given the dollar a temporary lifeline USD: OPEC+ forces a rate cut rethink Over the weekend, OPEC+ surprised with the announcement of a more than a one million barrel-a-day output cut, only a few days after delegates had signalled no intentions to change production limits ahead of the cartel’s monitoring committee this week. Saudi Arabia alone pledged to cut 500,000 bbl/day, and Russia will extend the output cuts until year-end. Oil futures initially rose by as much as 8% and are now trading around 4% higher (Brent around $83.8/bbl this morning). Our commodities team has revised our 2023 average Brent price forecasts for $93/bbl. All of this has fuelled fears that inflation will prove to be a longer-lasting problem for central banks. And while many central banks (like the ECB) have managed to reliably convey a hawkish message despite recent market turmoil, the ultra-volatile market pricing for the Fed’s rate path is once again set to be one of the most impacted. The Fed Funds future curve is currently pricing in a 63% implied probability of a May hike and less than 40bp of cuts by year-end in the US. By comparison, on 24 March, the same curve was embedding a 24% chance of a May hike and 88bp of cuts by year-end. In FX, we are seeing the unwinding of this dovish narrative being translated into a higher dollar this morning. This follows some decent momentum for the greenback at the end of last week on the back of some position squaring and catch-up with previous moves in Fed rate expectations. With crude prices being the driver of today’s FX moves, oil-sensitive currencies (NOK, CAD) are also being supported in the crosses, while the likes of JPY, GBP and the euro are paying the price of shrinking monetary policy divergence.   We have been holding a bearish bias on the dollar on the back of the unresolved US regional banking crisis, diverging monetary policy paths in Europe and the US and the rising risks of a hard landing for the US economy. The OPEC+ move may have given the dollar a temporary lifeline, but we still think that markets will want to hear more reassurance from Fed Chair Jerome Powell that the Fed will indeed go ahead with more tightening in spite of recent financial turmoil to allow the dollar some more stabilisation. Read next: China’s PMIs show growing risk from slowing external demand| FXMAG.COM We don’t see any scheduled Powell speech in the coming week, but the focus will be on data in the US, with ISM manufacturing today, ISM services (more important) on Wednesday and jobs figures on Friday (when markets are closed for the Easter holidays), as well as some Fedspeak. Any signs of weakness in the data will likely push dovish bets back higher after the recent big unwinding of rate-cut bets.) Solid data and hawkish Fed comments may help reinforce May Fed hike expectations and help build a floor below DXY around 103.00/103.50. Looking ahead, lacking a hawkish tilt in the Fed message, a move to 102.00 remains a tangible risk. Francesco Pesole EUR: Move to 1.10 delayed It’s going to be a rather quiet week in the eurozone. The data calendar does not include any key release, and some focus will only be on some ECB speakers – although there has been an abundance of comments by Governing Council members in the past few weeks. In this sense, remarks by President Christine Lagarde and French Governor Francois Villeroy on Friday endorsed market expectations for another hike in May (around 90% priced in). The OPEC+ production cut is another bit of bad news for eurozone inflation and raises the risk of higher-for-longer rates by the ECB. We had called for EUR/USD to break above 1.10 sometime this week, but the asymmetrically positive impact on the USD of the OPEC+ surprise cut means that such a call now likely requires some disappointing data out of the US, given the lack of euro-specific drivers this week. This is not necessarily our base case, and EUR/USD bulls would probably welcome the pair ending the week around 1.0850/1.0900. Strong US data and hawkish Fed commentary can see the pair test the 1.0700 and 1.0600 supports. Francesco Pesole GBP: A quiet week in the UK The pound should continue to move in tandem with the euro, given few catalysts to drive a consistent divergence from the common currency and external (dollar) factors dominating in FX. So, EUR/GBP may keep hovering around 0.8800 in a week where both the UK and eurozone’s economic calendars are pretty much empty. On the Bank of England side, we’ll hear from a few MPC speakers, including Chief Economist Huw Pill tomorrow. If a move to 1.10 in EUR/USD was delayed by OPEC+, the same could be said about a move to 1.25 for Cable. The dollar leg of GBP/USD will keep driving most moves in the pair this week and US data will be in focus. Francesco Pesole CEE: NBR and NBP to confirm stable rates We expect another busy week in the region. PMIs across the CEE for March will be published today, and we don't expect many changes in Poland and the Czech Republic, on the other hand, we can see some deterioration in sentiment in Hungary. A meeting of the National Bank of Romania (NBR) is scheduled for tomorrow. We expect rates to remain unchanged, however Robor is below the policy rate and in recent days we see pressure on RON weakening, so we can hear a more hawkish tone. On Wednesday we will see industrial production in Hungary and the decision of the National Bank of Poland (NBP), where we do not expect any change in rates. The governor's communication may be a bit mixed given inflation remaining persistent and the economy slowing sharply. However, we do not see room for rate cuts this year despite the dovish market pricing. Industrial production in the Czech Republic and retail sales in Hungary and Romania for February will be published on Thursday, which may highlight slowing momentum in the region. Friday is a public holiday in the Czech Republic and Hungary and local markets will be closed. Global conditions for the CEE region remain positive. EUR/USD is gradually moving higher, and we still see some room for a reduction in the risk premium after the recent turbulence. In addition, the level of gas reserves in the region at the end of winter indicates that the situation should be under control in the future. Central banks in CEE are maintaining a relatively hawkish tone compared to global players. Thus, high FX carry and balanced positioning will continue to attract CEE FX buyers in our opinion. For some time, we have preferred the Czech koruna and the Hungarian forint, however, as we mentioned on Friday, we expect that the Polish zloty could also join the club. On the other hand, the Hungarian forint could be hampered by headlines coming from the European Commission this week if any problems are found in the Hungarian government's progress in trying to unlock access to EU money. So, if favourable conditions persist globally we expect further gains across the region this week. For the koruna, we see 23.40 EUR/CZK as the next checkpoint on the swift way down. On the other hand, the forint should slow down a bit and touch 378 EUR/HUF. The Polish zloty is retesting 4.670 EUR/PLN, which should also be the task for this week to settle below this level. The Romanian leu reached NBR intervention levels for the first time this year and is likely to stay at 4.95 EUR/RON for a while. Frantisek Taborsky Read this article on THINK TagsOPEC+ FX Daily FX Dollar CEE region Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Gold Trading Analysis: Technical Signals and Price Movements

FX Daily: Crisis playbook keeps dollar offered

ING Economics ING Economics 04.04.2023 11:02
The dollar continues to trade on a soft footing as measures of dollar money market stress gradually ease. The Fed's crisis playbook of dollar liquidity supplying operations allows investors to focus on the 2H23 Fed easing cycle. For today, look out for the US Jolts jobs data, a speech from BoE's Huw Pill and also what should be hawkish comments in Romania. The Reserve Bank of Australia governor, Philip Lowe USD: Will Jolts job opening data finally drop sharply? The DXY dollar index is now around 3% below its stressed peak of mid-March. Casting across financial markets we see (i) levels of interest rate volatility (MOVE index) and FX volatility continuing to fall, (ii) measures of dollar funding stress (cross-currency swaps and interbank credit spreads) narrowing a little further, but (iii) no rebound at all in the KBW US regional banking index, which suggests it is too early for investors to find value there. Actions by the Fed to address dollar money market stress (the new Bank Term Facility and the increased frequency of dollar swap auctions) have allowed investors to (correctly) draw the conclusion that tighter credit conditions make a US hard landing and a sharp Fed easing cycle more likely - a cleanly bearish story for the dollar. Helping the Fed in this task would clearly be some welcome US data. This would ideally show both easing price pressures and signs of easing constraints in the US labour market. On that front, today sees the release of US Jolts Job Opening data for February. A sharp decline here would probably be read as a mildly bearish dollar factor - adding support to the 2H23 Fed easing cycle. DXY can probably stay offered near 102.00 ahead of Friday's NFP and further readings (on Thursday evening) on US bank takeup of Fed funding facilities. Elsewhere, AUD/USD is mildly lower overnight after the Reserve Bank of Australia left the policy rate on hold at 3.60% and softened its forward guidance. Tonight will also see a Reserve Bank of New Zealand policy meeting. Here we look for a 25bp hike, which could provide some support to NZD/USD. Chris Turner EUR: ECB hawks still pushing for a 50bp hike in May EUR/USD remains well supported and not far off recent highs at 1.0900/0930. It seems investors are happy to differentiate between the health of the banking sectors in the US and Europe - a point that our team made in this article. Calming tensions in US money markets are allowing a refocus on narrower EUR;USD rate differentials - having narrowed around 50bp since early March. On that subject, ECB hawks such as Austria's Robert Holzmann overnight suggested that a 50bp ECB hike was 'still in the cards for May'. That would seem unlikely (a 22bp hike is currently priced), but serves as a reminder that the ECB lags the Fed in its tightening cycle and that the ECB will be a lot slower to ease policy. There is not much Eurozone data today, but a further decline in PPI - expected at 13.3% YoY in February - would be welcome. Overall we suspect that the market will be reluctant to chase EUR/USD above 1.10 yet given concerns about the regional US banking system. But a higher EUR/USD certainly looks the direction of travel for the rest of the year. Chris Turner GBP: Look out for a speech from Huw Pill Sterling continues to perform well and is certainly taking advantage of a weaker dollar. GBP/USD is now approaching strong resistance in the 1.2450/2500 area. These levels could be tested today should the US data come in on the soft side. For today, the market will be interested in a 1630CET speech from Bank of England Chief Economist Huw Pill. Read next: OPEC+ shocks market with supply cuts| FXMAG.COM ING's UK economist, James Smith, thinks the BoE tightening cycle may well have concluded with the 25bp hike to 4.25% last month. This is at odds with market pricing of an 18bp hike at the May meeting and a further 41bp of tightening this summer. Should Huw Pill choose to play up the welcome signs of easing constraints in the UK labour market, expectations of future BoE tightening may dwindle and sterling should weaken. For that reason, we are reluctant to call for an early GBP/USD break above 1.25 and equally we think EUR/GBP should stay supported ahead of 0.8750. We continue to target 0.90 later this year for EUR/GBP. Chris Turner RON: Mildly hawkish tone from NBR On today's agenda is the meeting of the National Bank of Romania (NBR). We expect rates to remain unchanged, but also a bit more hawkish tone. The macro picture remains relatively positive compared to CEE peers and inflation, while on a bumpy road, is clearly headed lower. The main theme at the moment is rather  market liquidity and pressure on FX. Robor, the money market rate, has fallen below the key central bank rate. The RON has come under pressure recently, reaching NBR intervention levels for the first time since the beginning of the year. It is possible that the central bank will have to return to hawkish communication and be more aggressive in the FX market. Yesterday saw a slight EUR/RON reversal, suggesting that selling pressure on the RON does not have a very strong base. Perhaps part of the market was betting on the possibility that the NBR will let FX go higher - the last few days have shown that it is too early for this move which, together with tighter liquidity conditions, may drive the EUR/RON market lower. Frantisek Taborsky Read this article on THINK Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Orbex analyst on the EU inflation: This leads me to believe that the lower-than-expected CPI figure is heavily attributed to the decline in energy costs

Orbex analyst on the EU inflation: This leads me to believe that the lower-than-expected CPI figure is heavily attributed to the decline in energy costs

David Kindley David Kindley 04.04.2023 10:07
FXMAG.COM asked David Kindley to comment on the March Eurozone CPI. The print showed a noticeable decline of 1.6% coming in at 6.9%. David Kindley (Orbex): Europe’s latest Consumer Price Index (CPI) figures pointed to a considerable slowdown in inflation to its lowest level for more than a year, after a decline in energy costs. Specifically, consumer prices rose 6.9% in the year to March, down from 8.5% the previous month. The drop was sharper than consensus, resulting in an EU stock market rally on Friday, March 31st. It should be noted however, that core inflation, which excludes energy and food costs, hit a new Eurozone high of 5.7% in March, up from 5.6% the previous month. Food price inflation also rose, from 15% to 15.4%, while services inflation was up from 4.8% to 5%. This leads me to believe that the lower-than-expected CPI figure is heavily attributed to the decline in energy costs. As demand for heating slows over the summer months, reining in on inflation will come down to the ECB’s next monetary steps and whether the Russia-Ukraine conflict is finally resolved by next winter. Food price inflation also rose, from 15% to 15.4%, while services inflation was up from 4.8% to 5% Read next: The UK's economic output remains 0.6% below its late 2019 level, making it the only G7 nation yet to recover from the pandemic| FXMAG.COM
FX Daily: Time for the dollar to pause?

Eurozone: Inflation is driven by skyrocketing food prices. This is not just a problem in the Eurozone and EU, but the whole world

Andrey Goilov Andrey Goilov 04.04.2023 17:26
We're some time away from the next European Central Bank decision, but still inflation print temains crucial. Last week Eurozone CPI hit 6.9%, slowing down again. We asked Andrey Goilov from RoboForex for a comment. Here's what we got. Andrey Goilov (RoboForex): Consumer prices in the Eurozone in March slowed down for the fifth month in a row. The region's annual inflation rate reached 6.9% in March, falling from the February level of 8.5%. Inflation in the Eurozone is almost three times higher than the European Central Bank's target level. At 2%, it has remained unchanged for a long time. Prices in Austria, Slovenia, and Croatia are rising faster than in other countries, while price increases are reported to be the slowest in Spain and Luxembourg. Inflation is driven by skyrocketing food prices. This is not just a problem in the Eurozone and EU, but the whole world. Supply chains were disrupted during the pandemic, and have not recovered yet. The world is struggling to establish new logistics, and this process needs time. Meanwhile, prices remain high. On China's side, there is a decline in the supply of components, fertilisers, and animal feeds. This also has a negative impact on prices. Read next: Orbex analyst on the EU inflation: This leads me to believe that the lower-than-expected CPI figure is heavily attributed to the decline in energy costs| FXMAG.COM For European countries in particular, the limited supply of energy carriers, mainly gas, is also a notable factor that fuels widespread price increases. And this not only affects food prices but also the cost of services.Moreover, it should be remembered that the ECB in its attempt to beat the pandemic and its consequences and stimulate the economy, has printed huge amounts of money. And these finances were not fully supported by the supply of goods. As a result, the ECB itself created an inflation shock, which it is still unable to deal with. Visit RoboForex
Unraveling the Path Ahead: Gold and Silver Prices Amidst Fed Expectations

The U.S. dollar has weakened across the board in recent weeks in response to a dovish repricing of the Fed's monetary policy outlook

Diego Colman Diego Colman 05.04.2023 10:09
The US dollar has been attracting traders attention recently. Diego Colman from DailyFX shares his view on the pairs with US dollar. Diego Colman, Contributing Strategist for DailyFX comments: The U.S. dollar has weakened across the board in recent weeks in response to a dovish repricing of the Fed's monetary policy outlook following the U.S. banking sector turmoil. Meanwhile, EUR/USD has also broken out and may be on its way to recapture its 2023 highs in short order This situation has boosted both the euro and British pound, pushing both currencies to multi-month highs. In the case of GBP/USD, the pair has cleared technical resistance at 1.2450, an event that could pave the way for a rally towards 1.2680. Meanwhile, EUR/USD has also broken out and may be on its way to recapture its 2023 highs in short order. Key technical levels for top FX pairs can be found at DailyFX's trading tools page. Read next: Orbex analyst on the EU inflation: This leads me to believe that the lower-than-expected CPI figure is heavily attributed to the decline in energy costs| FXMAG.COM
Impact of Declining Confidence: Italian Business Sentiment in August

FX Daily: Data adds pressure to fragile dollar

ING Economics ING Economics 05.04.2023 14:36
A fall in US job openings yesterday put recessionary fears back in focus. Today, we think USD is highly vulnerable to sub-consensus readings in the ISM services index. EUR/USD may break 1.10 at any time but could struggle to rally much further. Elsewhere, the RBNZ shocked markets with a 50bp hike; while it may tighten again, rate cuts now look much more likely USD: All eyes on ISM after job openings drop The rapid repricing in Federal Reserve rate expectations in the second half of March had very little to do with data but was driven by fears of a deeper slowdown in the US economy because of the financial turmoil. In the run-in to yesterday’s US JOLTS data, markets had refined their views on the Fed’s policy path, thanks to the abatement in banking concerns and some hawkish comments by Fed officials, which had ultimately allowed some dovish bets to be gradually scaled back. The reaction to the 630k drop in US job openings in February (much more than expected) saw a sudden resurgence of those easing bets: markets are currently pricing in around 80bp of cuts by year-end, compared to around 60bp before the JOLTS data. The implied probability of a May rate hike dropped from 65% to 47% after the release. We think this is a testament to how Fed expectations remain highly volatile – in our view, due to the Fed’s unclear communication. This is especially true considering that despite the large drop in job openings, there are still 1.67 jobs available for each unemployed person in the US: this ratio was 1.2 before the pandemic, when the US labour market was in a strong position. In FX, the dollar took another hit, and its outlook for the rest of the week still looks quite binary. Markets are clearly attaching more recessionary risks to the dollar, but – we want to reiterate this point – it appears that the Fed has not provided any solid anchor to rate expectations so more subdued readings in key releases can definitely bring more downward pressure to the dollar. On the contrary, above-consensus readings could prompt a rapid rebound in the very volatile Fed funds pricing and trigger a dollar correction. Today, the ISM services index will be the big market mover, and the consensus is looking for a decline from 55.1 to 54.4. Back in December, a one-off drop below 50 sparked recessionary panic and crippled the dollar. Now, the combination with yesterday’s decline in job openings could mean that even prints in the 52-53 area could have a similar effect, as markets see more than one high-frequency piece of data moving in the direction of economic slowdown. With that in mind, we think the balance of risks is skewed to the downside for the dollar today. ADP jobs numbers will also be examined quite closely. Despite not being statistically a very good predictor of official payrolls, they will probably be watched more closely today after yesterday’s JOLTS data put the focus on jobs. Francesco Pesole EUR: European currencies still driven by the dollar There is no market-moving data in the eurozone today, and the dollar will once again be driving EUR/USD. A below-consensus ISM services reading could trigger a break above 1.1000, although the sustainability of rallies beyond that level in the coming weeks would need to be tested against the markets’ confidence to consistently unwind defensive dollar positions at a time when fresh financial turmoil and tighter liquidity remain non-negligible risks. On the European Central Bank side, we’ll hear from the ECB Governing Council members Boris Vujcic and Bostjan Vasle, as well as Chief Economist Philip Lane. The risks of surprise remarks by ECB officials appear to have moderated lately as most key speakers have recently aligned (in line with their position in the dovish/hawkish spectrum) with a pledge to keep raising rates. Elsewhere in Europe, the G10 top performer of 2023, the pound, hit a 10-month high by breaking the 1.2500 resistance yesterday. That initially caused EUR/GBP to fall to 0.8730, although it then rebounded back to 0.8770. While we don’t see reasons to dislike cable in the very near term as long as the dollar momentum remains soft, we continue to favour a higher EUR/GBP in the remainder of the year on the back of our view that Bank of England tightening expectations are overdone. We target 0.89 by the summer, and 0.90 by the second half of the year. Francesco Pesole NZD: RBNZ shocks markets with a 50bp hike The Reserve Bank of New Zealand surprised markets with a 50bp rate hike overnight. Despite the quite evident downside risks to the economic outlook, policymakers highlighted how “Inflation is still too high and persistent, and employment is beyond its maximum sustainable level”. Interestingly, the impact of recent severe weather events in parts of the country was also seen as primarily inflationary, and the Bank actually pointed to the rebuilding effort supporting demand. Read next: Saxo analyst: Crude oil traded firm ahead of month-end with the recent recovery being driven by continued supply disruptions from Northern Iraq, a weaker dollar and more| FXMAG.COM When it comes to two key drags on New Zealand’s economy - slowing global demand and housing - the assessment was also far from alarming, as the statement mentioned tourism as an offsetting factor for declining export revenues and the fall in property prices being consistent with tighter monetary conditions. In terms of forward guidance, the tone was somewhat softer: “Looking ahead, the Committee is expecting to see a continued slowing in domestic demand and a moderation in core inflation and inflation expectations. The extent of this moderation will determine the direction of future monetary policy.” NZD/USD jumped more than 1.0% after the hike but then halved its gains. While markets almost fully price in another 25bp rate hike, this is not a given. There is a chance the RBNZ has front-loaded tightening but may struggle to push tightening further if inflation fails to stay high. That said, even in the event of another hike and the 5.50% projected peak rate being reached, we think the chances of rate cuts by the end of the year have now increased materially, and markets are likely underestimating them. This is why we would be wary about chasing NZD rallies, especially in the crosses. Francesco Pesole CEE: NBP follows stable rates in region Yesterday's decision by the National Bank of Romania (NBR) to leave rates unchanged did not bring much new. The statement did not show many new views or hawkish bias as we expected. At least on the macro side, the NBR confirmed the positive surprises coming from the economy. Otherwise, inflation is in line with the central bank's expectations and so overall we cannot expect any changes in monetary policy. The next meeting will be in May, but at the moment we cannot expect any changes going forward either. From an FX perspective, as we mentioned earlier, the pressure on a weaker RON has subsided and if anything we see a global story following, i.e. a higher EUR/USD, which is positive for the whole CEE region including the leu. However, we do not expect the leu to break out of earlier ranges and given that inflows into ROMGBs have weakened compared to January and February, we do not find support for a larger EUR/RON move lower here either. Today it is the turn of the National Bank of Poland (NBP) to complete the April round of central bank meetings in the region. We don't expect any changes in rate settings here either. The incoming data points to a weakening economy but at the same time to persistent inflationary pressures. Today we will only see the NBP decision and statement. Tomorrow at 3pm local time we will see governor Glapinski's press conference, which is sure to draw the main market attention. The market is pricing in about a 60bp rate cut by year-end at the moment, while we don't expect a change in rates this year. The governor normally tends to be on the dovish side however it is hard to move current market expectations in an even more dovish direction, but at the same time it is hard to imagine any NBP support for the Polish zloty. The zloty unsuccessfully tested the 4.670 EUR/PLN level and is unlikely to get the impetus to go lower these days. Therefore, we expect it to remain in the 4.670-4.690 range. Frantisek Taborsky Read this article on THINK Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
FX Daily: Time for the dollar to pause?

Rates Spark: Data catches up to the market

ING Economics ING Economics 05.04.2023 14:41
US data is converging fast towards the market’s bearish expectations but there are still some important releases to come this week, starting with ISM services today. Treasury yields should continue to converge lower but 10Y should prove stickier below 3%. USD-EUR rates differentials should continue to narrow US macro vindicates our call for lower Treasury yields It is tempting to conclude from economic data released so far this week that the world economy is turning a corner, and that the market’s bearish expectations are being fulfilled. Indeed, the subsequent release of disappointing ISM manufacturing and job openings in the US suggests that the lag between the US regional bank crisis and the time when data starts falling (regardless whether the two are related) may not be so long after all. This view matches ours, but we would caution that this week still has a lot in store, starting with the ISM services today (a greater portion of the economy than manufacturing) and the jobs report (on Friday, when markets are closed). Caution is not the market’s default mode Caution is not the market’s default mode, however. 10Y Treasury yields are flirting with their lowest closes since September 2022, which would be a break through a floor that has held on at least four occasions since. As Fed cuts become more probable, yields should continue to fall. Indeed, we forecast 3% for year-end but don’t expect any fall below that level to be longer-lasting, as inflation expectations and term premia should recover with lower policy rates. The extent of the fall in 2Y yields will depend on the size of the Fed cutting cycle and it doesn’t benefit from the inflation expectation cushion that protects 10Y bonds. 2Y Treasury yields are converging fast to 10Y as the end of the Fed's tightening cycle approaches Source: Refinitiv, ING European rates prove stickier, more spread tightening is on the cards We would be remiss if we did not mention that Europe is doing its part in feeding the deflationary narrative. The European Central Bank’s consumer expectations continue to converge downwards. The tone at the ECB, rightly or wrongly, remains hawkish however. Where the US swap curve assigns less than a 50% probability to a final 25bp hike at the Fed’s May meeting, the EUR curve still bakes in two more 25bp hikes in this cycle with a high degree of confidence. This in itself justifies a convergence between dollar and euro rates, but the policy difference might become even starker in the following quarters. By end-2024, the differential in policy rates would have narrowed by 150bp We see the Fed cutting rates 100bp this year, whereas the market has over 75bp priced. In comparison, we expect ECB cuts to only start in the third quarter of 2024, and to only amount to 50bp by end-2024. By that point, the differential in policy rates with thr Fed would have narrowed by 150bp. By some measures, the eurozone will have the same policy rate as the US. This last happened in the 2008-2012 period. This should drive a narrowing of US-eurozone rates differentials across maturities. Read next: FX Daily: Data adds pressure to fragile dollar| FXMAG.COM At the 10Y point, Bund-Treasury spreads reached their tightest level since 2020 yesterday, but we expect them to narrow to 90bp by year-end. A more steadfast ECB may well push this to 75bp temporarily. Indeed, the narrowing should be even more impressive at the front-end but we think this is already expected to an extent, in with for instance 1Y1Y Estr trading only 28bp lower than its USD equivalent. Forwards are pricing a convergence between US and European policy rates Source: Refinitiv, ING Today's events and market view The European economic calendar features industrial production from France and Spain, as well as final readings of service PMIs for the eurozone and the UK. Spain and Italy’s will be first readings. Italian retail sales conclude the list. The US data docket brings ADP employment, trade, services PMIs and the ISM services. After the fall in the ISM manufacturing new orders sub-index, its services counterpart may well confirm that the prospects for the US economy are getting dimmer. Its employment component also carries weight into Friday’s jobs report. Philip Lane is the main ECB speaker on the schedule. Bond supply mostly consists in the UK and Germany selling 6Y bonds via auction. Read this article on THINK TagsRates Daily Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Rates Spark: Balancing data and risk factors

Rising food price inflation to play in favour of further rate hikes from the European Central Bank?

Michael Hewson Michael Hewson 06.04.2023 11:54
Further weakness in US economic data drove the price action yesterday, with markets in Europe closing modestly lower, and US markets following suit after the March ISM services survey saw a larger-than-expected fall in the headline number to 51.2, with the Nasdaq 100 leading the declines. The ADP payrolls report also saw a slowdown in jobs growth, however, it was the ISM survey that prompted some pockets of concern and further weakness in US treasury yields. Not only did the headline number fall from 55.1 to 51.2, but we also saw prices paid slip to 59.5 from 65.6 and the employment component weaken to 51.2 from 54. Delving a little deeper and it was also apparent that the banking turmoil fallout from SVB was starting to have some ripple effects on the wider economy. Coming on top of the weaker manufacturing data earlier in the week there appears to be a feeling that markets want to believe that the economy is slowing, which it probably is, that recent rate rises are to blame, and that the Fed will need to reverse course soon when it comes to rate policy. The last option is probably the most debatable. Non-farm payrolls Tomorrow's non-farm payrolls report is the next catalyst for that narrative, although judging by recent weekly jobless claims data the US labour market still seems pretty solid. Today's claims are expected to show a modest rise to 200k from 198k, however, the market picture is unlikely to become any clearer until next week when US markets will get the first chance to react to tomorrow's payrolls report, as well as the March CPI report. In contrast to the US, in Europe service sector picked up from the numbers in February with strong gains in Spain and Italy as we head into the summer tourist season. Spain's services sector activity hit its best levels since late 2021, while Italy's services activity hit an 11-month high. In Asia, or China more specifically there is a similar trend, with the latest Caixin services PMI number also surging in March, in line with its official counterpart as economic activity picks up post-economic reopening. Further rate hikes from the ECB? With ECB Chief Economist Philip Lane warning yesterday that food price inflation in the EU was still rising the pressure is building for further rate hikes from the ECB in the coming weeks, even as expectations around future US rate rises diminish on the back of recent weaker data. The next few days will be key for whether we could see another 25bps rate rise from the Fed in May. A soft jobs report tomorrow, along with a weak CPI print next week could call time on the prospect of another 25bps hike at the next meeting. Read next: Bitcoin is gradually going up, what could send the price above $30,000? | FXMAG.COM What it is unlikely to do is precipitate a shift in Fed thinking when it comes to a rate cut, which is what markets are increasingly pricing. Inflation would need to fall much further from current levels for that to happen and that doesn't appear to be happening at the moment. The pound saw a bit of a pullback yesterday after hitting 9-month highs against the US dollar earlier this week. Recent comments from Bank of England chief economist Huw Pill suggest that another 25bps rate rise remains on the card when the MPC next meets. Recently better-than-expected economic data shows the UK economy has improved considerably from the end of last year, with today's construction PMI for March expected to round off a decent end to Q1. A modest slowdown from 54.6 to 53.4 is expected. We also have the Canada jobs report for March which is expected to show 10.2k new jobs added and the unemployment rate to tick up to 5.1%. Tomorrow's US payrolls data is expected to see 236k jobs added, down from 311k with the unemployment rate set to remain unchanged at 3.6%. Any miss to the downside will add to the confirmatory bias of the markets that a slowdown is coming. A beat to the upside will put the cat amongst the pigeons and could cause a bit of a repricing.  EUR/USD – has slipped back from the 1.0980 level with the 1.1030 area as the next key resistance. We could slide back towards the uptrend from the March lows which comes in at the 1.0830 level. GBP/USD – slipped back to the 1.2420/30 level yesterday which needs to hold for a move toward the 1.2660 area in the short term. Below 1.2400 argues a move back towards 1.2270.  EUR/GBP – found support at the 0.8720/30 area yesterday. Below 0.8720 could see a move toward 0.8680. Still has resistance at the 50-day SMA. On the upside, we have trend line resistance at the 0.8870/80 area. USD/JPY – fell for the third day in succession yesterday as we look to close in on the 130.000 area. Currently has resistance at the 132.00 area. FTSE100 is expected to open 3 points lower at 7,660 DAX is expected to open 25 points lower at 15,495 CAC40 is expected to open 10 points lower at 7,306
ECB enters final stage of tightening cycle

FX Daily: Is gold telling us something about the dollar?

ING Economics ING Economics 06.04.2023 11:58
FX markets are reasonably quiet ahead of public holidays and tomorrow's March US jobs report. Despite another sharp drop in US short-dated yields yesterday, the dollar actually rallied – suggesting investors remain nervous about the risk environment. Gold above $2000/oz may be telling us something as well. Look out for speakers in the US and Poland today Gold is doing well compared to the near 5% rates available in overnight dollar deposits USD: What does gold above $2,000/oz mean? Catching some attention has been the move in gold above US$2,000/oz. Normally, gold is seen as the flip side of the dollar trend and of course a key hedge against inflation. True, the dollar has lost around 3.5% from its distressed peaks in early March, but US inflation expectations have not picked up. In other words, there does not yet seem to be much weight to the narrative that a US banking crisis is going to undermine the Fed's battle against high and ingrained inflation. And certainly gold – as a non-interest bearing asset – is doing well compared to the near 5% rates available in overnight dollar deposits. Read next: The Commodities Feed: Gold approaches all-time high| FXMAG.COM What also may be at work in favour of gold are FX reserve management trends. The increasingly bipolar geopolitical world – exacerbated by the war in Ukraine – means that BRICS+ central banks will be keeping a greater share of their international reserves in gold. This is a structural positive for gold and a structural negative for the dollar, one to add to the cyclical negative of what should be a Fed easing cycle later this year. Back to the short term. Another big drop in short-dated US yields yesterday did not carry the dollar to a new low. Either short dollar positioning is too heavy or – as we like to think – investors feel it is too early to default to a 'buy risk, sell dollars' mentality given what could be further skeletons in the banking closet. Any sharp rise in initial jobless claims could slightly soften the dollar today, plus we will be watching for comments from Fed's James Bullard at 16CET. Does the Fed need to hike one last time in May? DXY to hover around 102.00 into tomorrow's US March jobs report. Chris Turner EUR: The first run at 1.10 fails for EUR/USD EUR/USD reversed quite sharply from a high of 1.0970 yesterday. This was despite the US services ISM falling sharply and an 11bp drop in short-dated US yields. Indeed the two-year differential between EUR and USD swap rates is moving back toward the narrowest levels seen in early March. Price action yesterday tentatively confirms our thinking for EUR/USD over this next quarter. Despite the building macro negatives for the dollar, we suspect a challenging risk environment can keep EUR/USD bouncing around in a 1.05-1.10 range. As above, EUR/USD probably hovers around the 1.0900 area today. Elsewhere, we see that EUR/CHF is drifting a little lower. Switzerland today releases FX reserve data for March. These fell CHF15bn in February suggesting that the Swiss National Bank (SNB) could have been selling FX to keep EUR/CHF below 1.00, in line with monetary goals. Given the huge volatility in asset prices over the last month, it will be very hard to read from the March reserve data what is intervention or what is the re-valuation effect. We suspect the SNB will want to keep EUR/CHF quite stable, and given the possible de-leveraging of balance sheets following the UBS-Credit Suisse deal, the SNB might end up having to be a buyer of FX reserves to hold EUR/CHF above 0.98. Chris Turner CEE: NBP unlikely to support zloty As expected, yesterday's meeting of the National Bank of Poland (NBP) did not bring any change. Rates remained unchanged and the statement did not offer much news. The Monetary Policy Council (MPC) seems satisfied with the expected pace of disinflation. Apparently, the MPC judges that monetary policy has done the bulk of the work in cooling demand and that the pace of disinflation will depend primarily on supply-side factors, such as energy commodity prices and global supply chains. March CPI data in the country confirmed the turning point in CPI, but the pace of CPI decline is slow for now, and core inflation rose again. Governor Adam Glapinski will hold a press conference today at 3pm local time. The main focus will be his comments on a possible rate cut this year, which he mentioned previously. Elsewhere in the region, we have several pieces of macro data from Romania, Hungary and the Czech Republic on the calendar today. The most interesting will probably be the Czech industrial data. First, the Czech economy is showing the weakest performance in the region. And second, the industrial data also includes wage numbers, which are now the main risk for the central bank. In addition, yesterday's news from the automotive sector suggests that wage growth may surpass 10%, which the Czech National Bank previously mentioned as a pain threshold for a possible additional rate hike at the May meeting. In the FX market, EUR/HUF and EUR/CZK should continue to slide lower against the euro. However, deteriorating global market sentiment may slow their path, but the interest rate differential and EUR/USD still point to stronger levels. For now, we see a gravity point of 375 EUR/HUF and 23.40 EUR/CZK. The Polish zloty will be watching the press conference today, which is unlikely to bring positive momentum for FX. We expect the zloty to remain in its long-term range of 4.67-4.69 EUR/PLN. Frantisek Taborsky MXN: AMLO's 'new nationalisation' shouldn't be a peso negative Now that we have all concluded that the Mexican peso is justified as being one of the best currencies in the world, the peso is selling off. Driving this correction looks to be a corporate finance deal announced this week that the Mexican government is buying 75% of the Mexican gas and wind facilities from Spain's Iberdola in a deal worth nearly US$6bn. Mexican President AMLO describes this as a 'new nationalisation' – although that term may not be as scary for investors as it sounds. It seems this move is consistent with Mexico's policy of securing strategic reserves in the resource sector – e.g. recent moves to secure lithium deposits for the nation. We do not read the deal as negative for Mexico's potential to attract nearshoring FDI inflows and suspect that there will be very good demand for the peso should USD/MXN correct to the 18.50-19.00 region. We see the potential for USD/MXN to trade to 17.50 and even 17.00 later this year. Chris Turner Read this article on THINK TagsPeso Gold FX Dollar Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Fed's Kashkari is open to a rate pause next month. Hopefully, this week's minutes give us a few more details

Rates Spark: When it rains it pours

ING Economics ING Economics 06.04.2023 12:25
Rates are being pressured lower by growing recession angst. Against the backdrop of the banking stress markets appear to display an assymetric reaction function to weaker data. That looks to hold for toromorrow's US jobs release, and likely also next week's key CPI data. EUR rates levels should remain more resilent with banking stess less prevalent Market reaction is increasingly sensitive to weaker data Recession fears are taking over following a string of US data disappointments that extended yesterday with a low ADP payrolls estimate and more importantly an ISM services printing its lowest value since July 2020. The employment component of the index also dropped more than expected from 54 to 51.3, raising concerns ahead of the official jobs report due on tomorrow. Markets are focussed on what lies beyond the peak of the current hiking cycle 10Y UST yields have dipped below 3.3%. But the extent of the initial market reaction especially at the front end, peak-to-bottom a drop of 25bp in the 2Y US Treasury yield before some of the gains were later pared, highlights a market that is increasingly focussed on what lies beyond the peak of the current hiking cycle. At the moment the market is looking for the Fed to cut rates by at least 75bp from their peak before the year is out. The banking turmoil has added a large downside risk to the economic outlook, crucially with lagged data impact. That in mind we suspect that upside surprises would not have seen a symmetric move in yields, and that presumption likely holds ahead of Friday’s payrolls report. Anything above 200k in non-farm payrolls growth is likely to raise the chances for a final Fed hike in May, but markets will be cautious in extrapolating any data strength beyond that. In the week after Easter the Fed will receive one more key data input: The month-on-month core CPI rate for March is seen decelerating to 0.4%, the year-on-year rate still inching up slightly to 5.6%. Both likely still too high for the taste of the Fed, but then the growing risks for a hard landing of the economy also raise the chance of inflation coming down more quickly going forward. The Federal Open Market Committee minutes of the 22 March meeting may give insight on the Fed's already shifting assessment of the economic backdrop as it came across more dovish at that meeting than expected. Even if the Fed hikes once more in this cycle, the focus is firmly on future cuts Source: Refinitiv, ING Euro rates follow the US rally but not quite as fast, nor as furious EUR rates are in the passenger seat of US dynamics. The narrative that the end of the cycle is near is catching on, leaving markets open to ponder what lies beyond here as well. Croatia’s Vujcic was the latest European Central Bank member to highlight that the biggest part of the rate hiking cycle was now behind. As ECB chief economist Lane has laid out in a recent speech, the central bank sees itself on the right track with inflation dynamics to turn for the better soon. Pipeline inflation pressures are close to peaking and there are no signs of wage-price spiral – everything in the base case of course.  that the ECB is close to its peak, too, should not stand in the way for further convergence However, the notion that the ECB is close to its peak should not stand in the way for further convergence of USD and EUR rates. Keep in in mind that the projections of the ECB are predicated on policy rates still moving a little higher and more importantly remaining there for a while. Banking system stresses, which have become a growing concern in the US and have pushed markets towards focussing on Fed rate cuts, are less prevalent in the eurozone. Read next: Singapore’s central bank faces tough balancing act| FXMAG.COM EUR rates are still being dragged lower, but especially at the more policy sensitive front end, levels are holding up better. This has resulted in a further convergence of 2Y UST Bund spread, which briefly dipped to a low of 116bp yesterday, the lowest since late 2021. US yields are quickly converging to their German equivalents as the US economy decelerates Source: Refinitiv, ING Today's events and market view Ahead of Good Friday's US non-farm payrolls the market is looking at further job market indicators today – the Challenger job cuts as well as the initial jobless claims. It appears that the market is at a point where it can only get worse from here on – maybe in different shades and perhaps with some delays as the banking turmoil only slowly feeds through to the real economy – and that clearly points to lower rates ahead. The bull steepening reflexes are there – we saw a 10bp intraday swing of the US 2s10s yesterday – but  may have to wait for the first actual Fed cut being imminent to fully unfold. EUR rates will likely remain in the passenger seat of US markets for a while with little data on the euro area calendars to show for next to the US key CPI. That leaves the focus here more on communication from ECB officials of which we will hear more next week to drive the rates differential.    In other events today we will see the Fed's Bullard speaking on the economic outlook in the afternoon and later in the day the Fed will publish its regular update on the usage of its liquidity facilities – one gauge for ongoing banking stresses.  In primary markets France will launch a new 10Y benchmark today alongside 20Y and 30Y bond taps. Overall for €10-11bn. Read this article on THINK TagsRates Daily Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Small factors combine to pressure credit

Judging from Koning's advices, ECB may hike the rate by 50bp and abandon previous rates targets

Michalis Efthymiou Michalis Efthymiou 06.04.2023 16:00
US equities decline for a second consecutive day as the market prepares for the US employment data being released tomorrow afternoon. Both the SNP500 and the NASDAQ are experiencing downward price movements. The SNP500 has declined by 0.25% and the NASDAQ by just over 1%. The global index which managed to hold onto gains was the Dow Jones which climbed 0.24%, and the FTSE100, up 0.35%. European Indices also declined, with the DAX 0.54% lower and the French 40 declining to a weekly low. The main reason for the decline is poor economic data and lower investor confidence at current price levels. The past 24 hours have also been busy for global central banks, which have given traders clear indications of how interest rates will likely develop over the next quarter. Most signals from the Central Banks around the globe are not dovish, but neither indicates a hawkish policy. EUR/USD The price of the EUR/USD came under pressure as the US market opened, and the exchange rate formed a full price correction. As a result, the exchange rate gave up previous gains from earlier in the week. Nonetheless, the US Dollar remains relatively weak and has not yet obtained significant bullish signals. However, investors are contemplating whether this may change as the European Central Bank becomes less hawkish than in the previous two months. The European Central Bank’s monetary policy committee members have locked horns over the Eurozone’s monetary policy. The difficulty for the EU and the ECB is each State has different economic requirements and inflation levels. For example, the Bank of Greece governor is pushing to halt interest rate hikes as his country’s inflation rate has declined and is lower than in German. However, employment and economic growth remain poor and require monetary policy support. Therefore Mr. Stournaras is pushing for a halt to the cycle, as are the heads of Lithuania, Croatia, and France. At the same time, Germany continues to support interest rate hikes. The Euro has come under pressure from a potentially weaker interest rate cycle. Boris Vuscic has advised, “The biggest part of the cycle is behind us”. Macro Strategist, Mrs. Koning, has advised most economists to believe the ECB may hike a further 50 basis points and will likely abandon previous rate targets. The Federal Reserve, on the other hand, is the Federal Fund Rate will most likely increase a further 0.25% before the committee halts the cycle. This is also something that FOMC member, President Mester, has confirmed in her latest interview with Bloomberg. Mester also advises that any rate cuts in the coming months would be a mistake. EUR/USD 30-Minute Chart on April 6th Price action and technical indicators are currently pointing towards a bullish trend forming in the short term. The exchange rate is now at a critical level where the price has created a retracement, but traders will be looking to see if the instrument breaks to a lower low or a higher high. The Euro has gained momentum over the past hour as the European markets open. Read the second part: The US Non-farm payrolls expected to hit 235K, unemployment rate forecast to remain at 3.6%| FXMAG.COM
Forex: Euro against US dollar - forecast on April 24th, 2023

FX Daily: Conditions continue to settle ahead of US data

ING Economics ING Economics 11.04.2023 09:06
Financial markets are reopening with a mildly positive mindset after a long weekend in many countries. Measures of emergency dollar borrowing are starting to slow and equities appear on a slightly steadier footing. Today's session will focus on US small business optimism ahead of important US releases later in the week. Dollar to stay mildly offered USD: Cautious optimism prevails A sense of cautious optimism remains in financial markets as various measures of financial stress modestly ease back after last month's US banking crisis. Evidence for those of a bullish mindset is the small drop in emergency dollar demand through the Fed's discount window and the fact that the Federal Home Loan Bank system has had to issue much less debt in support of US regional lenders. It remains a very tricky trading environment, however, given many experienced commentators are refusing to dismiss last month's events as a one-off and instead prefer to see bank failures as a harbinger of forthcoming stress in the global financial system. What will be key to the bullish story is the Fed's ability to cut rates later this year to offset the impending credit crunch. This week's events calendar will shed some light on that. Tomorrow will probably be the most interesting day of the week, where the US March CPI should make the case for a 25bp Fed hike on 3 May (18bp currently priced), while the FOMC minutes will reveal some of the Fed's thinking behind March's 25bp hike in the midst of a banking crisis. Any signs that the Fed is very close to a peak in rates – and that it will have the ability to cut rates if need be – would be seen as risk-positive and dollar negative. For today, the focus will be on the NFIB small optimism index. Any sharp fall in optimism and especially a further drop in pricing intentions could soften the dollar slightly. DXY can probably drift back to the 102.00 area. Chris Turner EUR: 1.10 is holding EUR/USD for now Recent public holidays may well have played a factor in keeping EUR/USD below 1.10 and the pair only saw a muted reaction to what was a good US March NFP release last Friday. Potentially, EUR/USD could have come a lot lower on this after it firmed up expectations for a 25bp Fed hike on 3 May. Instead, EUR/USD is trading in a narrow range and waiting for its next major input, probably from the western side of the Atlantic. Read next: USA: Core inflation is forecast to hit 5.6%, noticeably less than a month before| FXMAG.COM More locally, the eurozone today sees the April Sentix Investor Confidence survey and February retail sales. The week will also see several ECB speakers – especially at the Spring IMF meetings in Washington. Here the market currently prices a 25bp ECB hike in May (we agree) but only 12bp of further tightening in June. Our team thinks we could see a further 25bp tightening in June too – leaving the ECB deposit rate at 3.50% – which would then mark the plateau and unchanged rates into the second half of 2024.   EUR/USD can edge back up to the 1.0930/50 area today assuming that equities stay mildly bid and the US NFIB data emerges on the soft side. Chris Turner GBP: BoE Governor Bailey in Washington this week Markets currently price a further 25-50bp of Bank of England (BoE) tightening this summer. We think the risk of a pause at the current 4.25% Bank Rate is under-priced. Shedding light on this topic will be UK data and speeches from key BoE officials this week. On the former, Thursday sees the UK February monthly GDP and also the BoE credit conditions survey. Tomorrow sees the BoE Governor speaking on the subject of the 'The shifting risk landscape', where he perhaps can shed some light on the balance between getting inflation under control and the risk of over-tightening. EUR/GBP has just about been keeping its head above the 0.8750 support level. We favour a return to the 0.89 area. And our base case is that GBP/USD may struggle to sustain a break above 1.25 this quarter – whilst the Fed is still in the last stages of tightening. Chris Turner CEE: Rally is slowing down Today's calendar is basically empty in the region, but things will get more interesting in the coming days. March inflation in Hungary will be released tomorrow. We expect a drop from 25.4% to 24.8% year-on-year, slightly below market expectations. Hungary will also release state budget data, which has come under pressure in the first two months, and Czech labour market data. On Thursday, we will see March inflation in the Czech Republic. We expect a drop from 16.7% to 14.8% YoY, slightly below market expectations. And March inflation will also be released in Romania where we also expect a drop from 15.5% to 14.2% YoY, slightly below market expectations. On Friday, the inflation saga will end with final numbers in Poland, which should confirm the 16.2% posted earlier. We will also have two interesting sovereign rating reviews on Friday in Romania and the Czech Republic. In Romania, S&P maintains BBB- with a stable outlook. We do not expect any changes, but at the same time we see a 25% chance of an upgrade in the outlook to positive. In the Czech Republic, S&P holds AA- with a stable outlook and we do not expect any changes here either. However, Fitch and Moody's has already downgraded the outlook to negative in the past year and the risk is thus down. Positive conditions still prevail in the CEE FX market, however, we expect the current rally to start running out of steam. EUR/USD is struggling to reach 1.10 and we don't see much room for further risk premium reduction in the EM space. Moreover, inflation numbers this week may return dovish expectations to the region, which should put the brakes on the current FX rally. The Czech koruna and the Hungarian forint remain our favourites, but the room for appreciation is getting thinner. For now, we see a gravity point at 23.30 EUR/CZK and 375 EUR/HUF. Frantisek Taborsky Read this article on THINK TagsFX Dollar CEE Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Rates Spark: Balancing data and risk factors

European Central Bank meets in the beginning of May. Eurozone Sentix Investor Confidence rises to -8.7

Kenny Fisher Kenny Fisher 11.04.2023 15:37
EUR/USD has climbed around 0.60% today and pushed above the 1.09 line Eurozone Sentix Investor Confidence improved to -8.7 Eurozone retail sales fell by 0.8% US releases inflation on Wednesday Eurozone Sentix Investor Confidence rises The Eurozone economy continues to recover, but there is plenty of work ahead. The Sentix Investor Confidence index improved to -8.7 in April, above the March read of -11.1 and better than the estimate of -11.7 points. The concerns over an energy crisis in Europe this winter failed to materialize and Germany and the rest of the eurozone came out of the winter better than many had expected, given the weak global economy and the Russia-Ukraine war. Still, the economic outlook remains pessimistic, as Sentix Investor Expectations remain negative in both Germany and the eurozone, at -13 and -11.5, respectively. Still, the markets were pleased with the slight improvement in investor confidence and the euro has responded with gains of around 0.60%. Read next: US inflation is released on Wednesday. Bank of Canada decides on the interest rate the same day| FXMAG.COM Eurozone retail sales slipped to -0.8% in February, matching the forecast but contracting after an upwardly revised 0.8% gain in January. Consumers are struggling with high inflation, rising interest rates and uncertain economic conditions and are keeping a tight grip on their wallets and purses. The ECB meets next on May 4th and all indications are that it will deliver another oversize rate hike. The central bank has been aggressive, raising rates by 50 and 75 basis points in recent months. The ECB was very slow to join the rate-hiking party and the benchmark rate is only 3.50%, compared to 4.25% for the Bank of England and 5.00% for the Federal Reserve. Inflation in the eurozone has proven to be a tougher foe than expected, and core inflation surprised by accelerating in February. The US releases the March inflation report on Wednesday. Inflation has been falling, albeit at a slower pace than the Fed had expected. This has necessitated additional rate hikes, with a 25-bp increase expected at the May meeting. Headline inflation is expected to fall to 5.4% in March, down from 6% in February. The core rate is projected to inch higher to 5.6%, up from 5.5%. EUR/USD Technical EUR/USD is testing support at 1.0889. Below, there is support at 1.0804 There is resistance at 1.0989 and 1.1074 Content is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Business Information & Services, Inc. or any of its affiliates, subsidiaries, officers or directors. If you would like to reproduce or redistribute any of the content found on MarketPulse, an award winning forex, commodities and global indices analysis and news site service produced by OANDA Business Information & Services, Inc., please access the RSS feed or contact us at info@marketpulse.com. Visit https://www.marketpulse.com/ to find out more about the beat of the global markets. © 2023 OANDA Business Information & Services Inc. EUR/USD - Euro gains ground as investor confidence improves - MarketPulseMarketPulse
ECB's Christine Lagarde not to announce the end of rate hikes?

Stalled European recovery

Alex Kuptsikevich Alex Kuptsikevich 11.04.2023 16:15
Investor confidence and retail sales data released on Tuesday beat average market forecasts but showed no improvement over recent months. The Sentix investor confidence index rose from -11.1 to -8.7 in April. This is roughly where the index was in February. However, it has been in negative territory for 13 months and has shown no positive trend in the last three months. Eurostat reported that retail sales fell by 0.8% in February, after the same increase in the previous month. On a yearly basis, sales are down by 3%. The retail sales index has been downward since November 2021, breaking the long-term upward trend that began around ten years ago. Read next: European Central Bank meets in the beginning of May. Eurozone Sentix Investor Confidence rises to -8.7| FXMAG.COM Melting retail sales and investor pessimism cast doubt on whether the ECB still needs to raise interest rates. However, everything is relative in the currency market, and expectations are now much higher that the Fed will end its hikes sooner and be the first to start easing, supporting the euro's rise against the dollar.
Fed pause may not save the day for risky assets like equities

Today's FOMC minutes may help us to judge how seriously was the pause discussed

Michael Hewson Michael Hewson 12.04.2023 10:21
European markets have got off to a solid start to the week despite a warning from the IMF about the wider banking sector, and risks to growth more broadly. Painting a bleak outlook for the global economy, the IMF laid out the possibility that interest rates could eventually fall back to the levels they were a few months ago, although declined to lay out a timeline for that. US markets underwent a mixed finish with the Nasdaq 100 slipping back on the back of rising yields, while the Dow finished higher. With markets currently in a bit of a "twilight zone" between Friday's US payrolls report and today's March CPI numbers, the picture with respect to the Fed's next move on rates could well become a little bit clearer, even as last week's economic data largely pointed to some softening in the US economy.  Friday's jobs report reset the bad data narrative of last week that had driven bond yields sharply lower, with the March payroll numbers seeing 236k jobs added, while the unemployment rate fell to 3.5% even as the participation rate rose to 62.6%. Last week's data appear to suggest that people are finally returning to the workforce as the cost of living continues to squeeze consumer finances. It also suggests that the JOLTs numbers will continue to come down, as more people return, having seen these numbers fall below 10m for the first time since May 2021 in February. Wages data fell from 4.6% to 4.2%. Market reaction over the past couple of days has been for US 2-year yields to push back above 4%, after falling as low as 3.65% at one point last week.   Friday's jobs report also saw an upward revision to February to 326k, while seeing a downward revision to January to 477k from 504k. All in all, despite some of the weakness seen in last week's ISM numbers the US labour market continues to look resilient, with little sign of weakness at the moment, thus casting further doubt on the narrative that we'll see rate cuts by the second half of this year. Judging by the bond market reaction, Friday's data also keeps the prospect of another 25bps rate hike on the table ahead of today's US CPI numbers for March, which are expected to see core prices edge higher to 5.6% from 5.5%. This is what the Fed is most concerned about, particularly in services which has continued to rise, and will likely drive policy decisions going forward. This is where the main focus of the central bank is likely to be from here on in even as today's headline number is expected to improve with a fall from 6% to 5.1%. Tomorrow's March PPI numbers might add extra weight to the dovish narrative if they continue to fall sharply given that they tend to be much more forward-looking and act as a forward indicator for CPI. While today's CPI numbers are set to keep the pot boiling on the likelihood of a pause or a further 25bps rate hike at the start of May, tonight's Fed minutes could also offer a useful insight into the discussions at the previous Fed meeting, when the US banking system was undergoing significant turbulence due to the collapse of Silicon Valley and Signature Bank. There had been some speculation in some quarters that the Federal Reserve might have looked at the possibility of a rate cut. In a lot of respects, any notion of a rate cut would have been absurd and could well have made matters even worse and spooked the market even further. Nonetheless, the turmoil did mean the Fed had to be much more careful about its messaging and despite going ahead with a 25bps rare rise, there was a notable shift in tone in the statement. The removal of the reference to "ongoing increases will be appropriate", with "some additional policy firming may be appropriate", was a sensible change, helping to give the Fed wriggle room to pause at the next meeting, if the data permits, as well as indicating that the end of rate rises could be close. Today's minutes are also likely to be instructive as to how seriously the option of a pause on rates was discussed, and whether in going down that route may have sent a signal that the Fed was more concerned with the current situation than markets would have liked. Powell did admit that a rate pause was considered due to the banking crisis, however, the challenge for the Fed would always have been how to present this change without spooking the markets even more. Powell did go on to say that the prospect of rate cuts this year was not being considered, which had been touted in some quarters as an option. A cursory analysis of the latest dot plot chart confirmed that Fed officials were not considering cutting rates in the near future, although markets continued to stubbornly price that very possibility. We also have the latest monetary policy decision from the Bank of Canada, who are expected to keep rates unchanged at 4.5%, for the second month in a row, as they continue to assess the ongoing effects of previous rate rises on the Canadian economy. Thus far we've seen the latest jobs data hold up well, while headline CPI has continued to come down, even as the economy has managed to hold its own. Today's decision is likely to be an "as you were" decision with little distinction from the language seen last month. Forex EUR/USD – still a rangebound market with resistance at the highs last week at 1.0980, with the 1.1030 area as the next key resistance. Found support at the 1.0830 area at the start of the week, with key support just below that at 1.0780. GBP/USD – rebounded from the 1.2340 area after 4 days of declines, with the main resistance back at the highs of last week at 1.2530. Strong support is currently at 1.2270, with further gains towards 1.2660 still preferred while above 1.2250.   EUR/GBP – trend line support from the August 2022 lows continues to hold, currently at 0.8740. Below 0.8720 could see a move toward 0.8680. Currently need a close above the 50-day SMA at 0.8790. On the upside, we also have trend line resistance at the 0.8870/80 area. USD/JPY – has broken above the highs of last week at 133.80 and is now looking to test cloud resistance at 134.50. Currently has cloud support at 132.20. FTSE100 is expected to open 5 points lower at 7,780 DAX is expected to open 5 points higher at 15,660 CAC40 is expected to open 5 points higher at 7,395
How to turn volatility into opportunity? Stephen Dover from Franklin Templeton offers some judicious perspective

FX Daily: IMF warns of a ‘perilous phase’

ING Economics ING Economics 12.04.2023 10:31
In releasing its latest World Economic Outlook earlier this week, the IMF warned that the global economy was entering a 'perilous phase'. One of the reasons cited was sticky inflation. Today's US March CPI release will shed light on whether inflation has turned the corner or the Fed needs to tighten further. A high number risks supporting the dollar into May USD: US March CPI to set the tone In releasing its World Economic Outlook earlier this week, the IMF warned that slowing global growth, sticky inflation, the risk of financial instability coupled with structural factors like climate change and global fragmentation all contributed to the global economy entering a 'perilous phase'. Notably global growth was going to be led lower by declines in the Advanced Economies as recent tightening cycles hit home. And the IMF felt that tight monetary policy was still the appropriate course of action now. Financial markets are probably a little further ahead than the IMF and while allowing perhaps for one last Federal Reserve rate hike over coming months are very much focused on the US hard landing and a 200bp Fed easing cycle over the next 24 months. Important for that benign outcome will be the path of inflation and today sees the latest update from the US. Core US CPI has been one of the biggest FX movers over the last 12 months and today's March release is expected to show another sticky 0.4% month-on-month reading. Sticky inflation is probably the biggest risk to the consensus views in the FX market right now that EUR/USD and USD/JPY end the year at 1.12 and 125, respectively.  Read next: China’s very strong loan growth in March signals more investment| FXMAG.COM Tonight also sees the release of the 22 March FOMC minutes, where the Fed pushed ahead with a 25bp hike after recently announcing new dollar liquidity programmes. Undoubtedly there will be a lot of noise in the minutes and it is unclear what they will mean for current market pricing of a final 25bp hike in May (75% priced) and a subsequent 60bp easing cycle by year-end. Expect DXY to be driven by any surprises on the March CPI today and the sharper reaction (risk negative, dollar rally) would probably come on an upside surprise. Chris Turner EUR: 1.10 should prove a tough nut to crack EUR/USD is enjoying some gentle support as investors return from their Easter break. As above, US core CPI will be the key event of the day and will determine whether EUR/USD has a chance of breaking above 1.10. Two-year EUR:USD swap differentials are pretty steady at near 100bp in favour of the dollar. Perhaps we should not expect too much further narrowing now. Two-year US Treasury yields are already trading at a 100bp discount to the Fed funds rate, a discount which could move to 125bp if the Fed hikes in May. Historically, the 125-150bp marks a deep historic discount for US two-year yields, and much substantial further downside for two-year yields may only emerge when the Fed is ready or has started easing - probably in the fourth quarter. In short, our base case is that EUR/USD will struggle to sustain a break above 1.10 this quarter.   Apart from the US CPI, look out for several European Central Bank speakers today. The mood music seems to be that inflation remains sticky, meaning that expectations for a further 50-75bp of ECB tightening this year will hold. EUR/USD to trade a 1.0900-1.0950 range into the pivotal US CPI release. Chris Turner GBP: New MPC member probably less dovish Megan Greene has been announced as the new external member of the UK's Monetary Policy Committee. We doubt she can be anywhere near as dovish as Silvana Tenreyro, whom Greene is replacing. However, the main focus for sterling markets in the near term is whether the Bank of England (BoE) will push ahead with one last 25bp hike on 11 May. This would take the Bank Rate to 4.50%. The market prices an 80% chance of such an outcome, while our team thinks the BoE could stay on hold. Providing insights into the latest BoE thinking will be Governor Andrew Bailey, who speaks in Washington today at 15CET. There is a risk that he hints at a pause, having seen fellow central bankers in Australia and Canada do so over recent months. On that subject, the Bank Of Canada is widely expected to keep the policy rate at 4.50% when it meets today, with the market pricing a 25bp cut by the end of the year. Back to sterling. US CPI and Governor Bailey's speech should be the key drivers today. We see 1.25 as a strong barrier for GBP/USD and favour EUR/GBP higher - especially if the BoE governor gives a nod to a pause in May. Chris Turner HUF: Room for rally is shrinking but still the currency of choice Today's main numbers in the CEE region were released this morning. Hungarian inflation fell from 25.4% to 25.2% year-on-year in March, slightly above market expectations. This implies a second consecutive month of decelerating inflation since the January peak at 25.7% YoY. The market is currently pricing in a rapid rate cut essentially from the next meeting of the National Bank of Hungary at the end of April. However, we believe that the central bank wants to see more evidence that the situation is under control, and we expect the first changes in monetary policy only in the middle of the year. Since mid-March, the Hungarian forint has made by far the biggest gains against the euro (5.8% excl. carry) in the EMEA space and remains our favourite currency together with the Czech koruna. However, as we mentioned yesterday, the room for a further rally is getting smaller. At the global level, EUR/USD will not deliver another significant boost anytime soon and the market has almost fully normalised after the March turmoil. At the local level, we won't get much more positive from the energy story either. Moreover, the market positioning is becoming heavily long again in our view. We believe the forint may touch 370 EUR/HUF in the foreseeable future, but 375 EUR/HUF will remain the point of gravity. Nevertheless, by far the highest carry in the region and the normalisation story after a negative year will, in our view, keep the forint popular within the CEE region and thus continue to be our currency of choice. Frantisek Taborsky Read this article on THINK Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
UK Gfk Consumer Confidence index got better fourth month in a row

Forex Update by John J. Hardy from Saxo Bank - April 12th, 2023

John Hardy John Hardy 12.04.2023 15:40
Summary:  Market participants have hit the pause button, hoping that today’s US March CPI release will provide a sufficiently large surprise to drive the narrative for at least a few sessions as it is one of the last few major data points out of the US ahead of the May 3 FOMC meeting. Failing a surprise, we may remain adrift here for now. JPY bulls are certainly adrift as some JPY pairs challenge the top of the range. Our Q2 Outlook, titled The Fragmentation Game is now out.Today's Saxo Market Call podcastToday's Global Market Quick Take: Europe from the Saxo Strategy Team   FX Trading focus: USD primed to react to March US CPI release today, market feels very indecisive without a strong directional surprise from the data. The market action of the last week for most USD pairs has proven woefully indecisive as most developments seem to fall short of a breakout and mean revert within the safety of the range. That’s largely been the case elsewhere as well, with a few partial exceptions - the Scandies and EURJPY  - discussed below. As the market narrative is one of wondering whether the inflation and labor market data will remain sufficiently hot for the Fed to hike “one last time” in May or June (about 18 basis points priced for the May 3 FOMC and 22 basis points priced for the June FOMC meeting suggest some see the risk that the Fed holds off on a hike in May, preferring June). Ahead of May 3, we really only have today’s CPI, the March Retail Sales up on Friday, three more initial weekly claims releases and the March PCE inflation data ahead of that May 3 meeting. Woe for traders if today’s data is conflicting or perfectly in-line rather than providing an obvious strong directional indication. A strong surprise in the core month-on-month CPI data (more than 0.2% below or above the 0.4% expected) likely needed for a strong reaction function. Read next: Did you know that Warren Buffet has more than a 5% stake in Mitsui, Itochu, Mrubeni, Sumitomo and Mitsubishi?| FXMAG.COM We have the FOMC minutes up later as well, but the debate on the implications for policy from the banking turmoil in the minutes may be discounted significantly, given that the Fed has had three more weeks to digest the follow-on impact and that the market has already priced 100 basis points of Fed “easing” relative to prior expectations before the March 9 unraveling of the SVB. But as we await the short term potential for the US March CPI to move the needle, it is perhaps worth rounding up a few long term observations: Extreme Scandie weakness. Interesting to note the aggravated SEK and especially NOK weakness of late despite a constructive backdrop for risk sentiment (normally SEK positive) and the recent jump higher in oil prices (normally associated with NOK strength). What gives? Not entirely sure, but I did take a stab in my Q2 outlook piece in discussing whether the key here is simply an insufficient supply of domestic risk-free assets, in this case sovereign bonds, in which to park excess funds. This means that in the case of Norway that much of the oil and gas fund profits that are saved end up in offshore assets. Norway’s sovereign debt is a paltry 13% of GDP – down from a peak of 19% during the pandemic response. The longer term trajectory of the SEK fits quite well with the long term trajectory of Sweden’s sovereign debt as well, which is down to 18.5% of GDP (down from peak of 25+% during the pandemic response and nearly 33% back in 2015. Some enormous irony could lie ahead in which the expansion of domestic bond markets to address eventual economic weakness – particularly in Sweden due to housing distress, could mean a stronger currency via the provision of deeper local currency sovereign bond markets. Something structural to watch for even if we have no signs of this now. Sweden and Norway need to wake up – it’s bordering on a national emergency when your currency falls 15% in the space of six months as NOK has against the EUR. Chart: EURNOKThe EURNOK rally accelerated yesterday on the release of the slightly hot Norwegian CPI (in-line with expectations at 6.2% YoY at the core vs. 5.9% in Feb and hotter than expected on the headline at 6.5% vs 6.1% expected and 6.3% in Feb. Traders should note how little traction NOK has gotten from the recent jump in oil prices. Norway’s approach to addressing increased fiscal outlays in recent years has leaned far more on “raiding” the Wealth fund rather than raising the funds via the issuance of sovereign debt. A deeper low risk NOK-denominated government bond market with reasonable yields would probably go a long way to arresting the NOK’s fall and better addressing high inflation than any monetary policy move. Until then, how high can EURNOK go? The only time NOK has traded weaker versus the Euro was in the brief period of extremely low oil prices during the pandemic outbreak months of early 2020.   Source: Saxo Group EURJPY extraordinarily stretched – when does the convergence trade engage? The EURJPY rally has pulled above 146.00 today, leaving only the last shreds of the range to the high of 148.40 last October, which is also the highest level since a 149.78 high of 2015. The new high is in large part a disappointment on the signal of policy continuity from new Bank of Japan Governor Ueda on Monday. But looking out over the next couple of months, I’m not sure I understand how the situation gets any more stretched than it has become for the 2-year yield spread – currently at 280 basis points and actually down from the high of 325 basis points before the recent banking turmoil. Either the BoJ begins to adjust to the rest of the world or the ECB has to back off due to mounting recession risks down the road. The difficulty is understanding the timing of this developments – something that will engage in coming weeks or not until well into the second half of this year? The first sanity check will be over the April 28 Bank of Japan meeting. Why is the China re-opening story refusing to get traction? The about-face in China’s zero Covid policy and ensuing policy signals have encouraged interest in the China “re-opening” story. And the numbers in China are responding, with huge improvements in measures of services sector activity and a pick-up in activity metrics like airline passenger traffic (frustratingly slow to come out, but domestic passenger traffic has picked back up to about 80% of pre-pandemic levels as of the end of February. The international numbers have ramped over 100% in two months through the end of February, but that end-Feb number is still down nearly 90% from pre-pandemic levels.) But key commodity prices, especially metals prices, and key currencies like AUD and NZD, have not responded meaningfully to this story. The recent very cool Chinese inflation numbers suggest room for China to pull harder on the stimulus levers, but the expression of this trade in G10 FX and in CNH is almost entirely absent. Table: FX Board of G10 and CNH trend evolution and strength.Watching and waiting here as recent market move have proven treacherous and we have an important macro data point up today from the US.   Source: Bloomberg and Saxo Group Table: FX Board Trend Scoreboard for individual pairs.AUDNZD neutralized the recent downside attempt after seeming divergence in the RBA/RBNZ meetings that didn’t play out in the relative rate spread. Building a new up-trend will take some doing, however. Note the NZDUSD downtrend attempt here… still a bit more range to work with and needs some confirmation from other USD pairs after the key US data.  Source: Bloomberg and Saxo Group Upcoming Economic Calendar Highlights 1230 – US Mar. CPI 1300 – UK Bank of England Governor Bailey to speak 1300 – US Fed’s Barkin (Non-voter this year) to speak 1400 – Canada Bank of Canada Rate Decision 1700 – US Treasury auctions 10-year T-notes 1800 – US FOMC Minutes 2301 – UK Mar. RICS House Price Balance 0130 – Australia Mar. Employment Change/Unemployment Rate Source: FX Update: Longer term observations beyond US CPI distraction. | Saxo Group (home.saxo)
Small factors combine to pressure credit

Rates Spark: Compression pressure

ING Economics ING Economics 13.04.2023 11:46
Current market themes have crystallised around the US CPI release. The market swings were testament to elevated short-term volatility while the data itself does not stand in the way of rates ultimately converging lower, in our view. Most notable was the narrowing of the UST Bund spread, where more could be in store as the ECB recovers its hawkish poise The Fed minutes nod in the direction of tighter lending conditions being a material factor It’s clear from the Fed minutes that the recent turmoil in the banking sector matters. And so it should, especially as history shows that material tightening in lending standards typically end up with a recession and higher unemployment. And that combination typically results in eventual interest rate cuts and a much steeper curve. The part of the curve bucking the re-steepening trend right now is the 2/5yr The part of the curve bucking the re-steepening trend right now is the 2/5yr, which is in fact re-inverting, and re-richening the 5yr on the 2/5/10yr fly. So the belly of the curve is getting richer. But this is more a reflection of quite low long tenor rates, relative to where the funds rate is pitched. Our analysis shows that current 10yr yields are fully discounting a move back to the 2.5-3.0% area for the funds rate in the coming 18-24 months. That reverse engineers a period of macro pain ahead, and the Fed won’t cut for the fun of it. And the tight lending standards and banking troubles are the catalyst. A 25bp hike is getting discounted for May, just about, but that really should be it. Then the front end will really start to discount cuts ahead, re-steepening the curve. The re-flattening of the US 2s5s curve is at odds with an imminent end of the Fed's hiking cycle Source: Refinitiv, ING Looking for lower rates beyond the near term volatility... The US CPI was seen as one of the key data points to determine the Fed’s next steps. It wasn’t so much the pricing of the May hike chances that were impacted. These were relatively stable surrounding a 75% probability for a 25bp given a core rate still running hot at 0.4% month over month.    US CPI data has cleared the path for rates to converge lower It is the price action in longer tenors surrounding the release that has crystallised some of the main themes of current markets. For US rates the CPI data has further cleared the path for rates to converge lower going forward. Digging into the components of the CPI data showed some encouraging evidence of a slowing trend in the rate of price increases, which should allow the Fed to step down its hawkishness on inflation and zoom out on the broader picture. According to the March FOMC minutes, Fed staff have made a mild recession part of their baseline scenario now, though they note a higher degree of uncertainty surrounding this outlook, crucially depending on how the banking tensions would evolve. For now the situation there has stabilised, but going forward this conditionality can still cut both ways. Read next: Czech inflation likely moderated in March| FXMAG.COM The size of the market swings, top to trough almost 20bp in the 2Y and almost 10bp in the 10Y US Treasuries, is testament to the elevated short-term volatility markets still have to go through as they grapple with central banks’ on the verge of calling an end to their hiking cycles and the substantial uncertainty surrounding the magnitude of the economic fallout from the recent banking turmoil. Ultimately, we think the case for faster rate cuts by the Fed and for 10Y rates to converge to 3% has only strengthened. The convergence in dollar and euro yields accelerates Source: Refinitiv, ING ... and more convergence between US and EUR rates The other important market theme that has crystallised surrounding the CPI release is that of further convergence between US and EUR rates – while the UST curve bull steepened, the Bund curve bear flattened. The 10Y UST- Bund spread has briefly dipped below 103bp during yesterday’s session, an impressive 9 basis points of tightening. Limited banking fall-out has allowed ECB officials to focus on sticky core inflation In contrast to the US, the European Central Bank is finding some comfort in the fact that financial stresses have remained relatively contained in the euro area. Prospects of limited banking fall-out has allowed ECB officials to refocus their attention on the issue of sticky core inflation again. It is noticeable that even herswhile doves such as VP De Guindos seem to be on board with this message. Hawks like Austria’s Holzmann have reiterated their calls for another 50bp hike in May. He also flagged the possibility to speed up the process of quantitative tightening in the second half of the year given how well markets have coped with the reduction of the ECB’s balance sheet thus far. But also more moderate members such as France’s Villeroy have signalled the possibility of further hikes – in plural – noting inflation has become more broad-based and potentially more persistent. Markets are adjusting their hike expectations higher. They are now fully pricing in a peak ECB deposit rate of 3.75%, i.e. the ECB will deliver another 75bp of rate increases between now and October. The 10Y Bund yield was not immune to the initial drawdown in yields surrounding the CPI release, but ended the session 7bp higher.    Today's events and market view Today’s data could deliver mixed signals. Although markets see a lower year-on-year PPI reading, producer prices are seen picking up again in March on a month-on-month basis. The weekly initial jobless claims rising further above 200k could be seen as more indications of impending softness in the labour market. On the back of recent banking tensions and the expected detrimental impact on growth prospects markets appear to have become more sensitive to emerging soft spots in the data. Main focus outside the US is on central bank speakers and bond supply. With regards to the ECB we will hear from the Bundesbank’s Nagel, an outspoken policy hawk. We will also hear from the Bank of England’s Huw Pill. Eurozone bond supply comes from the periphery with Italy auctioning up to €9.5bn in 3Y to 30Y bonds and Spain up to €7.25bn in 3Y to 20Y bonds plus an inflation linked bond. The UK sells £3.25bn in 10Y gilts. Read this article on THINK TagsRates Daily Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
InstaForex's Irina Manzenko talks British pound amid latest events

FX Daily: Dollar softening through some big psychological levels

ING Economics ING Economics 13.04.2023 12:16
A sharp fall in US headline CPI yesterday helped the dollar soften across the board. In Europe, dollar weakness means big levels at 1.10 and 1.25 are in focus for EUR/USD and GBP/USD. While in the EM space USD/BRL has crashed below 5.00. Some better March trade data out of China overnight suggests the dollar may stay soft in the short term The second half of this year favours the dollar staying supported USD: FX moves more than rates on US CPI data It seemed that FX markets took far more interest than rates markets in the March US CPI release yesterday. Looking at EUR/USD testing 1.10, and USD/BRL crashing below 5.00, one might have thought it a very dovish number - where headline March CPI fell to 5% YoY from 6%. However, as our US economist James Knightley points out, while the data was encouraging, core inflation is still running at 5.6%, barely budging over the last four months. This slow pace of disinflation has been worrying the Federal Reserve as was seen in the minutes of the 22 March meeting released last night. Were it not for the failures of Silicon Valley Bank and Signature earlier in the month, it seems quite clear the Fed would have raised rates 50bp last month. Where does that leave FX? It seems that investors are very much welcoming the forthcoming Fed easing cycle (after one last hike in May), they have a conviction call that the dollar will weaken, and are looking for opportunities - including in this year's laggard the Brazilian real. Investors understand that weaker US regional banks pose a threat to their investment theses, but for the time being, are prepared to write off the failures as some poor risk management amongst a few smaller institutions rather than seeing this as a systemic crisis. In short, it seems investors are content to sell dollar rallies. Back to the short term, the overnight news is mildly positive for risk in that the China March trade data has surprised on the upside. Both imports and exports were better than expected - dampening the views that China's rebound from Covid has been lukewarm. Also on the positive side of the risk ledger has been some very positive Australian jobs data (the Reserve Bank of Australia's pause could be a short one) and some huge foreign investment into Japanese equities - potentially also a play on a firmer Japanese yen? We doubt today's US data has much say in FX markets, but given market sentiment, any large rise in initial claims or sharp falls in March US PPI data could nudge the dollar lower still. It seems the early February low of 100.80 beckons for DXY. Chris Turner EUR: ECB will not be blown off course It seems the message coming through from the IMF and both the Fed and the Bank of England is that policymakers will not be blown off their monetary tightening course by the recent banking turmoil. In its Financial Stability Report published earlier this week, the IMF noted that the threat of unrealised losses on securities in Hold-to-Maturity accounts was a much bigger issue for the US than European banks. Hence, less pressure on the European Central Bank to drop its tightening plans. Look out today for comments from ECB hawk, Joachim Nagel, who may still be pushing for a 50bp ECB rate hike in May. Also, today look out for eurozone February industrial production. Activity in the eurozone has been holding up a little better than expected and provides a supportive backdrop to the ECB story and the euro. Read next: The Commodities Feed: US CPI pushes oil higher| FXMAG.COM For EUR/USD itself, there is a little feeling of 2007 about all this. That year, the first signs of US financial stress started to emerge in securities backed by subprime loans, and EUR/USD pushed sharply ahead as the ECB tightened policy. Investors may not want to miss out on a modest repeat - after all the Fed staff forecast is now for a mild US recession later this year. In general, we think 1.10 will be a hard nut to crack for EUR/USD. But it is certainly not impossible. Resistance is at 1.1030, above which it is hard to rule out 1.12. Chris Turner GBP: 1.2500 under pressure The soft dollar story is keeping GBP/USD bid near 1.2500 and pressure seems to be building for a move to 1.2650/2750 - again driven from the dollar side. Locally, today's February UK activity data has been flat and will have little bearing on the BoE's monetary policy thinking. Also look out for a BoE quarterly credit conditions survey at 1030CET, where any signs of tighter conditions will be examined closely. In his speech yesterday, BoE Governor Andrew Bailey spoke little of monetary policy - except to hint that it should not be blown off course by financial stability concerns, We will get more direct references to policy today from Chief Economist, Huw Pill. Presumably, he will echo those remarks as the BoE waits on next week's release of wage and jobs data for input into the 11 May MPC meeting. Chris Turner CEE: Global story propels region to new gains This morning's data in Romania showed March inflation falling from 15.5% to 14.5% year-on-year, slightly above market expectations, reaffirming the downward trajectory after February's small pick-up in inflation. Later today we will also see inflation numbers from the Czech Republic for March to complete the CEE inflation picture. We expect a drop to  14.8% YoY from 16.7%, in line with the Czech National Bank's forecast but slightly below market expectations. Thus, the March numbers should show some bifurcation in the region's pace of inflation, with a lower profile in Romania and the Czech Republic and a higher rate in Hungary and Poland. Later today, we will also see current account statistics across the region. In the FX market in the CEE region, the main news is EUR/USD touching 1.10. Moreover, coupled with the positive sentiment following soft CPI numbers in the US, further gains can be expected for the region. As usual, high beta currencies like the Hungarian forint and the Czech koruna should benefit the most. It should be interesting to test levels below 374 EUR/HUF and 23.30 EUR/CZK. The March inflation result will be interesting for the koruna, however, the global story has been playing a major role in recent weeks. The surprise of the week could be the Polish zloty, which yesterday settled below 4.660 EUR/PLN for the first time since December. As we mentioned earlier, the zloty has been tracking global events more than local stories over the last two weeks, which could help it to come out of the shadow as the only underperformer in the region. For now, the key will be whether the zloty breaks through 4.650 EUR/PLN, confirming that local risks are no longer a drag on the market. Frantisek Taborsky Read this article on THINK Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
EUR/USD: Examples of things that could get the market moving are US treasury yields moving out of the range on data improving or deteriorating

Eurozone industry shows strong production growth in February

ING Economics ING Economics 13.04.2023 18:28
Strong industrial production figures for February boost first-quarter GDP expectations, as lower energy costs and fading supply chain problems provide a tailwind for industry. Still, with demand remaining relatively weak, we are cautious to call this the start of a fast rebound   Eurozone production increased by 1.5% in February after January already saw a 1% improvement. Industrial production has been broadly stagnant since the start of 2022 as negative effects from the energy crisis and positive effects from reopening after lockdowns have broadly kept each other in check. Today’s numbers suggest that fading supply chain problems have helped industrial output improve recently. Expect production to contribute positively to first-quarter GDP. Read next: Romanian inflation continues to soften| FXMAG.COM The improvement in production in February was broad-based but led by Germany which saw production increase by 2.1%. Out of the larger economies, only Italy saw a small decline of -0.2%. All production categories also experienced higher output. The Purchasing Managers' Index (PMI), which gives an indication of economic trends, suggested that output ticked up slightly in March, but we are careful to overinterpret that reading. Broadly speaking, it looks like manufacturing production is not set for a fast rebound in the months ahead as signs about new orders coming in remain weak. Fading supply chain problems and lower energy costs are a clear boon to production, but demand for goods remains weak for now. Read this article on THINK TagsGDP Eurozone Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Brazilian President suggesting replacing US dollar with own currencies of developing countries

Forex: Euro against US dollar - Overview of the pair on April 14th

Paolo Greco Paolo Greco 14.04.2023 09:16
  On Thursday, the currency pair EUR/USD continued its upward movement. There are probably no longer any people who would find the constant growth of the European currency surprising. A lot of various macroeconomic statistics have been published recently. But what's the difference? What is the nature of these statistics if the market interprets everything in favor of the euro? The US non-farm payrolls showed good value once again. The dollar rose by 20 points. The unemployment rate in the US decreased instead of showing growth. The dollar increased by another 20 points. As everyone expected, US inflation fell by 1%, and the dollar fell by 100 points. Industrial production in the European Union, usually not paid attention to, grew stronger than expected. Another +100 points for the euro. This is how the market trades now, and nothing can be done about it. By the way, yesterday, the euro added about 40 points even before the publication of the first report of the day. We have repeatedly said that any report or event can be "explained" in any direction. Have traders ignored industrial production reports in the last 12 months? The report is not the most significant! Do traders work on the industrial production report? Now it's significant, and its value has surprised market participants! At this time, the growth of the European currency is too strong and unfounded, given the fundamental background. It should be understood that local macroeconomic reports are important, but if the euro adds 50–60 points to each report, it will soon be worth 2 dollars. Yesterday's growth was almost non-stop; the Heiken Ashi indicator did not even try to turn down. The 1.1000 level is a psychological mark, and traders didn't even notice. In the 24-hour timeframe, traders have finally overcome the important Fibonacci level of 50.0%. Now growth can continue with the target level of 61.8% - 1.1272. Since the movement now resembles that of Bitcoin and is simply inertial, this mark can be reached relatively easily. So, what triggered the next rise in the euro? In short, the publications on Thursday had the potential to support the bulls. Industrial production in the EU indeed exceeded forecasts, and the US Producer Price Index declined more than expected. Yesterday, we said we did not expect a reaction to these reports unless their values differed significantly from the forecasted ones. However, they were different. EU production was forecast at +0.8% in February but amounted to +1.5%. The difference is almost twofold. The US Producer Price Index was -0.5% with a forecast of +0.1%. Once again, the market had formal reasons to buy, but we would not bet on the euro's growth even if we knew what the values would be. These data are too secondary. The market regularly ignores GDP reports, but now it seeks any reason to buy even more euro currency. The ECB may lower the pace of monetary policy tightening to 0.25% in May. The majority of economists surveyed by Reuters concur with this opinion. This means that the moment when the rate stops growing is approaching. However, the market is not interested in this fact at the moment. Recall that last fall, when the first signs of US inflation slowing down began to appear, the dollar had already started to decline. The ECB is preparing to end the tightening program, but the euro currency is growing like yeast. There is no logic in the movements. On the 4-hour timeframe, in the last few days, it has been profitable to trade, as the Heiken Ashi indicator has constantly been pointing upwards. Still, the best decision now is to trade on the youngest timeframes. The growth of the European currency may end suddenly and unexpectedly with a collapse. It is already visible that after growing by 500 points within a month, the euro currency is also accelerating its upward movement.     The average volatility of the euro/dollar currency pair for the last five trading days as of April 14 is 78 points and is characterized as "medium." Thus, we expect the pair to move between 1.0968 and 1.1124 on Friday. A reversal of the Heiken Ashi indicator downward will indicate a downward correction. Nearest support levels: S1 – 1.0986 S2 – 1.0925 S3 – 1.0865 Nearest resistance levels: R1 – 1.1047 R2 – 1.1108 R3 – 1.1230 Trading recommendations: The EUR/USD pair continues its upward movement. You can stay in long positions with targets of 1.1108 and 1.1124 until the Heiken Ashi indicator reverses downward. Short positions can be opened after the price consolidates below the moving average, with targets of 1.0864 and 1.0742. Read next: Canadian dollar: Next week, all eyes will be on the inflation data, which is expected to cool down further to as low as four percent| FXMAG.COM Explanations for the illustrations: Linear regression channels - help determine the current trend. The trend is strong now if both are directed in the same direction. Moving average line (settings 20,0, smoothed) - determines the short-term trend and direction in which trading should be conducted now. Murrey levels - target levels for movements and corrections. Volatility levels (red lines) - the likely price channel the pair will spend the next day, based on current volatility indicators. CCI indicator - its entry into the oversold area (below -250) or overbought area (above +250) means a trend reversal in the opposite direction is approaching. Relevance up to 02:00 2023-04-15 UTC+2 This information is provided to retail and professional clients as part of marketing communication. It does not contain and should not be construed as containing investment advice or investment recommendation or an offer or solicitation to engage in any transaction or strategy in financial instruments. Past performance is not a guarantee or prediction of future performance. Instant Trading EU Ltd. makes no representation and assumes no liability as to the accuracy or completeness of the information provided, or any loss arising from any investment based on analysis, forecast or other information provided by an employee of the Company or otherwise. Full disclaimer is available here. Read more: https://www.instaforex.eu/forex_analysis/340417
Forex: Euro against US dollar - forecast on April 24th, 2023

Rates Spark: Divergent paths

ING Economics ING Economics 14.04.2023 09:31
Risk sentiment remains supported, but this also limits the potential for further US curve re-steepening as it puts a brake on the desire to price rate cuts. European Central Bank hike discussion remains more relevant for EUR rates and can drive their relative underperformance Risk sentiment puts a brake on bull-steepening reflexes Risk sentiment, judged at least by stock market performance and credit spreads, appears to be further on the mend following last month’s banking turmoil. The read-across for rates is a moderate bear-steepening via the long end as classic safe havens underperform. At the same time recovering risk sentiment can keep a brake on bull-steepening reflexes taking hold as it limits the desire for now to price in more aggressive cuts in the not too distant future. Eventually we think these will be the main drivers of any larger re-steepening. Yesterday’s data did provide further hints that the Fed is close to the end of its tightening cycle. The initial jobless claims rose further above 200k indicating that the sizeable layoffs that made the headlines earlier in the year are starting to show up in the data. Producer prices decelerated a tad more than markets anticipated, even if overall levels remain outside the Fed's comfort zone. The system is slowly weaning itself off from the central bank life-line More relevant to set a curve re-steepening in motion are clues with regards to the actual degree of additional financial tightening triggered by the banking turmoil and its impact on the real economy. For now the Fed's data on discount window borrowing suggests that the system is slowly weaning itself off from the central bank's life lines. In the latest week even the borrowing via the Bank Term Funding Program declined for the first time. However, inflows into money market funds, which are seen as a counterpart to bank outflows, continue albeit at a slower pace. Emergency borrowing from the Fed gradually eases Source: Federal Reserve, ING Deposit flight eases but credit contraction is now the main worry The above data suggests some tentative easing of tensions, but markets will keep an eye on actual bank deposit flows. The Fed’s official data will be released tonight. It comes with a two week lag, but more crucially it does not offer the full granularity to gauge flows from smaller banks to the few large systemically relevant banks – so far there have only been limited anecdotal reports. The first quarter results of JP Morgan today should offer a more concrete data point. The Fed is rearranging the deck chairs on the Titanic heading towards a credit crunch iceberg More attention should also be paid to the asset side of the Fed's weekly data release on banks balance sheet. The last two weeks of March saw banks pull lending back, presumably in response to financing stress. Commercial real estate and small lenders are particular worries and another week of lower lending would reinforce the market, and our, conviction that the US economy's woes will be exacerbated by a credit crunch. Read next: Singapore’s central bank maintains policy settings as growth slows| FXMAG.COM Policymakers are still discussing whether to hike at the May meeting, in all likelihood they will as current inflation still runs hot and too much uncertainty still surrounds the outlook. But markets are seeing this more as the Fed rearranging the deck chairs on the Titanic heading into the credit crunch iceberg. EUR long-end rates are still sensitive to the ECB's next moves Source: Refinitiv, ING Discussions ahead of the May ECB meeting get a hawkish tilt The debate of near-term policy moves remains more relevant for EUR rates markets. There is still a clear read-across to long end rates from the ECB interest rate outlook for the next few months. Central bank officials have started to give the discussions ahead of the May ECB meeting a hawkish tilt with the debate now clearly between a 25bp or 50bp move. That also gives market rates some room to move higher with 29bp prices, i.e. so far only a 20% chance for larger 50bp hike and in turn could drive further underperformance of EUR rates versus the US. The debate of near-term policy moves remains more relevant for EUR rates markets Mind you, a larger move is not our base case, but that does not mean markets cannot lean towards a larger move in the meantime. The ECB’s Holzmann continues to beat the drum for a 50bp hike. Latvia’s Kazaks saw no need to slow down hikes as inflation remains persistently high. More measured tones came from Slovenia’s Vasle. Banking tensions have subsided and rates will have to rise further in his view, the choice being between 25bp and 50bp. While it is too early to decide now, he indicated that the key to a smaller rate increase would be a turnaround in the core inflation trend. This gels with an earlier Reuters report that put emphasis on the April inflation data and the bank lending survey that will become available shortly before the May rate decision.   Today's events and market view We have seen a moderate US curve steepening yesterday, but not yet of the kind which we think will be the driver of the next steepening leg. This will occur when markets are free to price in cuts. Markets are already eyeing them, but for now the Fed is still busy pushing through one final hike. Today’s data releases remain US focussed with retail sales, industrial production and University of Michigan consumer sentiment survey. The latter includes surveyed consumer inflation expectations.  For a market still grappling with the potential fall-out of the banking turmoil, the Fed’s data on deposits and lending, as well as crucially upcoming banks’ quarterly results will help judge to what degree the wider banking system has been affected. Read this article on THINK TagsRates Daily Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Euro's Rally Stalls as Focus Turns to Inflation and Data Disappointments

FX Daily: Dollar decline gains some momentum

ING Economics ING Economics 14.04.2023 10:30
Thursday’s FX session saw the dollar decline pick up a little steam and break some key levels. It is hard to fight the trend even if today’s session does pose a threat to the risk environment in the form of US bank earnings. Sovereign rating reviews in Romania and the Czech Republic should not bring any changes, but we see risks in both directions Soft US March retail sales should be a dollar negative USD: Retail sales and first quarter bank earnings in focus The DXY dollar index yesterday dropped close to the lows seen in early February. The catalyst for the move was a slight pick-up in initial claims (easing supply constraints in the labour market) and softer PPI (welcome disinflation). Again, we get the sense that the FX market was moving more than rate markets – suggesting that investors are sinking their teeth into the forthcoming dollar bear trend. The dollar decline will not be a one-way street, however, and could be buffeted today by a number of factors. Soft US March retail sales (ex-autos expected at -0.4% month-on-month) should be a dollar negative. Read next: The Commodities Feed: OPEC sees tighter market| FXMAG.COM What could confuse matters, however, is the release of first-quarter results from major US banks such as JP Morgan, Citi and Wells Fargo. The focus here is going to be on their deposit base in light of last month’s developments. A big exodus in deposits to government-backed Money Market Funds might be seen as a negative. Equally, a big increase in deposits could also be seen as a negative if it is read as a weakening of the deposit bases of the troubled US regional banks. The risk here is of another leg lower in equities, which might undermine some of the rallies seen in commodity and emerging market currencies this week. In the bigger picture, however, investors look in the mood to sell dollars (USD/JPY would be our preference) and DXY may well struggle to make it back above 102. Chris Turner EUR: Advance has so far been orderly So far the EUR/USD advance has been reasonably orderly at around 70 pips per day this week. Speaking to our FX options trading team, the sense seems to be that FX options barriers have yet to be triggered – the barrier being a key level above which the spot move would accelerate. This could be one of the reasons why EUR/USD could move up to the 1.1180/1250 area over the next week. As above, however, the path higher may not be a straight one and we want to see how financial markets trade around US earnings releases this lunchtime. Supporting the euro, however, has been slightly better-than-expected industrial activity – with a solid eurozone industrial production figure in February softening fears for the German industrial sector. The eurozone calendar is very light today and a speech from European Central Bank arch-hawk Joachim Nagel is only delivered after Europe closes. 1.0980/1.1000 could hold intra-day EUR/USD dips. Chris Turner GBP: A 'positive demand shock' to help sterling In a speech in Washington yesterday, Bank of England Chief Economist, Huw Pill, said that the UK could be experiencing a ‘positive demand shock’ from low unemployment supporting consumption. That suggests Pill may not be shifting into ‘pause’ mode when it comes to monetary policy. Here financial markets now price an 80% chance of a 25bp BoE hike on 11 May. Expect a lot more focus on the BoE story next week with the release of jobs and inflation data. For the time being, GBP/USD can continue to grind higher on the soft dollar story (support now 1.2480), while EUR/GBP should stay bid near 0.8800. Chris Turner CEE: Rating reviews in Romania and Czech Republic Today's calendar offers only the final inflation numbers in Poland for March and we expect confirmation at 16.2% year-on-year. This should close out the round of March inflation numbers from the CEE region. And as we mentioned yesterday, the distinct inflation profiles in the region are starting to emerge. Just to recap, inflation fell to 14.5% in Romania and 15.0% in the Czech Republic, while Poland fell to 16.2% with much stickier core inflation, and Hungary to 25.2% YoY. And our economists expect a similar pattern going forward, with the Czech Republic and Romania expected to be the best countries to play the disinflation story in the coming months. It will be more interesting today after the end of trading. We have two sovereign rating reviews on the agenda, both from S&P. In Romania, S&P has a BBB- rating with a stable outlook. We do not expect any changes, but at the same time we see a 25% risk of an upgrade in the outlook to positive. In the Czech Republic, S&P has an AA- rating with a stable outlook and we do not expect any changes here either. However, Fitch and Moody's has already downgraded the outlook to negative in the past year and the risk is thus down. In the FX market, the CEE region delivered new gains yesterday as expected, supported by the global story. On a local level, the Czech koruna was the biggest gainer, supported by hawkish comments from the Czech National Bank. The koruna closed below 23.30 EUR/CZK for the first time since the summer of 2008, and given the higher EUR/USD levels and positive sentiment, some further gains can be expected today. As we mentioned earlier, we think the next move from 23.30 to 23.00 will be more complicated due to heavy long positioning and potential profit taking. However, for now, conditions remain positive for the entire region, which could see further gains today. Frantisek Taborsky Read this article on THINK TagsFX Dollar CEE Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
EUR/USD: Examples of things that could get the market moving are US treasury yields moving out of the range on data improving or deteriorating

FX Daily: Choppy trading

ING Economics ING Economics 18.04.2023 22:34
FX markets continue to be buffeted by opposing forces and are struggling to define short-term trends. Despite some positive Chinese activity data overnight, Asian currencies are not rallying, suggesting that the recent rebound in the dollar should not be dismissed. Elsewhere, sterling can enjoy some short-term gains on stronger February wage data Tiff Macklem, Governor of the Bank of Canada. Signs of faster-decelerating inflation could weigh on the loonie today USD: Unmoved by China GDP On another day, an upside surprise in Chinese GDP data would have provided a bid to emerging market and commodity currencies and left the dollar slightly offered in a pro-risk mood. That dollar sell-off has been conspicuous by its absence overnight, perhaps for two reasons: i) the 4.5% year-on-year rise in China's GDP was always coming off a low base and ii) the industrial data came in on the soft side suggesting the manufacturing sector might be struggling with weak external demand. Additionally, we speculate whether some of the dollar strength over the last two trading sessions owes to dollar repatriation for the US federal tax deadline of 18 April. Looking at the seasonality of EUR/USD over the last 20 months of Aprils, however, we would say that the dollar looks more minded to weaken than strengthen. Thus, if the tax issue is relevant, it will only be a short-term factor.  Read next: Rates Spark: Range trading within a declining channel| FXMAG.COM Today's session is exceptionally light in terms of US data and Fed speakers. Yesterday, the dollar again rallied on the back of a sharp rise in US two-year yields – accompanied by some strong NY manufacturing sentiment data. Today sees March housing starts and also the April NY services activity data. Additionally, we need to keep an eye on how US financials are trading as earning releases emerge. State Street sold off sharply yesterday on news of large outflows from its investment products in the first quarter. However, the financials component of the S&P 500 rose and even the KBW regional bank index edged higher.  In the absence of strong drivers today, expect DXY to hang around this 102.00 area. Chris Turner EUR: Lagarde warns of multi-polar world Speaking to the Council of Foreign Relations in New York yesterday, ECB President Christine Lagarde echoed recent warnings from the IMF that a geopolitically fragmented world posed a risk to world growth, inflation, and to the dollar's dominance in world trade. We mention this here because we expect these structural factors to combine with cyclical ones over the next couple of years and take the dollar broadly lower. Again on another day, we could have been talking about the overnight release of US TIC data showing another $10bn decline in China's US Treasury holdings, sending China's holdings to the lowest since 2010. All this will add fuel to the fire of whether the US will continue to enjoy the 'exorbitant privilege' of issuing in dollars. Back to the short term, EUR/USD struggled to hold last week's gains above 1.10 and for the time being, seems to be consistent with the view recently published in our FX talking that the second quarter of this year may be too early to expect the dollar decline to unfold. Today's eurozone data calendar should see a modest pick up in German ZEW investor expectations and perhaps even a rare eurozone trade surplus as lower gas prices finally feed through. 1.0975/1.1000 may now prove a tough nut to crack intra-day for EUR/USD. Chris Turner GBP: Strong wage growth is supportive We have been discussing recently whether softening UK data will mean the Bank of England pauses at its 11 May policy meeting. Today's wage data suggest probably not. There was a big upside surprise to the February UK earnings data (at 5.9% 3m/3m annualised versus 5.1% expected). Unless we see some significant slowing in UK March services inflation released tomorrow, it increasingly looks like the BoE will hike 25bp after all. Sterling has enjoyed a modest lift from today's data which now sees a May 25bp hike priced with an 82% probability. GBP/USD looks like it wants to trade in a 1.2350-1.2500 range near term, while EUR/GBP could edge back to the 0.8800 area today. Chris Turner CAD: CPI data today, USD/CAD largely a dollar story March inflation data will be released in Canada today and the consensus call is a drop to 4.3% in the headline rate, with core measures also decelerating. All this should be welcome news at the Bank of Canada (BoC), which kept rates unchanged last week and looks likely to stay put until being forced to cut by a deteriorating economic backdrop. The timing of a first rate cut is what can drive some CAD moves for the moment, and the way CPI data can impact the CAD swap curve. For the moment, 15bp of easing is priced in by year-end, but we think markets may be underestimating the chances of BoC rate cuts this year. BoC Governor Tiff Macklem recently said that halting quantitative tightening may be the first measure to counter an economic slump, but that may prove insufficient especially should the Fed step in with large rate cuts. Signs of faster-decelerating inflation could favour a more aggressive dovish repricing and weigh on the loonie today, although USD/CAD remains primarily a USD story given the BoC policy is a secondary driver. The soft start to the week for oil prices and risk appetite may help build a floor around 1.3400 for now. We only expect a decisive move below 1.30 in the second half of the year.  Francesco Pesole Read this article on THINK TagsFX Dollar Canadian dollar Canada inflation Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Impact of Declining Confidence: Italian Business Sentiment in August

FX Daily: Time for some stabilisation?

ING Economics ING Economics 19.04.2023 12:56
With two weeks to go before the Fed and ECB meetings, central bank speakers have their last chances to steer market expectations before the quiet periods start. However, it appears markets have fully cemented their views around 25bp increases by both central banks in May, and lower volatility in rate expectations could favour a quieter FX environment Chicago Fed President Austan Goolsbee - a more dovish voice, and a voter in 2023 – is scheduled to speak today USD: A few more Fed speakers to watch Two weeks away from the FOMC May announcement, and markets are now fully almost fully pricing a rate hike (22bp), but the dollar is struggling to lay the basis of a sustainable recovery. We have continued to hear comments from Federal Reserve officials in the meantime, although markets are reacting in a much more contained fashion compared to the big moves seen after Chris Waller’s hawkish remarks on Friday. Another arch-hawk, James Bullard, said he still favours multiple rate hikes and a higher-for-longer approach, although he will only become a voter again in 2025, so his comments tend to have less market impact. The more moderate Raphael Bostic, who returns as a voter next year, said his expectations are in line with the median dot plot projections: endorsing one last 25bp hike and then holding rates at that level for some time. There are only three more days for Fed speakers to steer market expectations before the quiet period: today, only Chicago Fed President Austan Goolsbee – a more dovish voice, and a voter in 2023 – is scheduled to speak. It does not look likely there will be any pushback against the market’s conviction call on the May rate hike – which is simply in line with the dot plot projections – and we could see a bit of stabilisation in Fed rate expectations after the big volatility that lasted until late last week as the pre-FOMC silent period kicks off. In FX, this could translate into a quieter environment and lower volatility for USD crosses in the run-up to the FOMC announcement. Today’s US data calendar is not very busy: MBA mortgage applications and the Fed Beige Book are the only two highlights after yesterday’s housing figures for March came in mixed (housing starts were better, building permits worse than expected). The lack of clear catalysts may leave DXY hovering around the 101.50/102.00 area for now, even though the short-term balance of risks for the dollar appears slightly tilted to the downside given lingering vulnerability to a potential improvement in risk sentiment now that the May Fed hike is fully priced in. Francesco Pesole EUR: No fresh drivers for a big move EUR/USD is struggling to find clear direction this week, probably lacking a big fresh driver to stage a sustained rally beyond 1.1000 whilst staying supported thanks to a softish dollar environment. There are some data releases worth monitoring in the eurozone this week, but the euro has not shown great reactiveness. Yesterday’s ZEW surveys in Germany were mixed, with expectations dropping sharply but the current situation index recovering much more than expected. This morning, we’ll see March’s final CPI figures for the euro area as well as current account figures. The European Central Bank will hold a “non-policy” meeting today (so, no statement or press conference), but some information about policy discussion being held could transpire via media outlets. There is also a long list of ECB speakers: Chief Economist Philip Lane, hawks Klass Knot and Isabel Schnabel as well as dove Pablo Hernández de Cos. Markets are pricing in 30bp of tightening in May, and a total of 82bp by October, which sets the bar quite high for a hawkish surprise: essentially, ECB members would need to open the door to another 50bp hike. The proximity to the May meeting suggests a more cautious approach to communication, and if anything merely reinforces the existing hawkish rhetoric which implicitly embeds 25bp rate increases. Ultimately, the euro may not be impacted by the ECB story today and EUR/USD should keep following risk sentiment and USD dynamics. The trading range for the pair may narrow further around 1.09/1.10 in the coming days. Francesco Pesole GBP: Inflation resilience adds pressure to the BoE UK data has continued to point to resilience in inflation and markets are increasingly inclined to bet on Bank of England tightening. Yesterday’s surprise pickup in wages was followed by above-expectations inflation figures this morning. The March report showed headline inflation decelerating from 10.4% to 10.1% versus an expected 9.8% reading, with the core rate holding steady at 6.2%. In light of this data, a 25bp rate hike by the Bank of England looks more likely. The lack of evidence of desirable descending paths in inflation and wages will make a hold a harder sell even though we doubt (and we think MPC members do too) that the resilience in inflation will last. Markets are pricing in 23bp of tightening in May, and 60bp in total before reaching the peak. We don’t think the BoE will hike beyond May, which should limit GBP appreciation in the crosses further down the road. But for now, we could see EUR/GBP press again towards the 0.8800 level on BoE hawkish bets.   Francesco Pesole CEE: Zloty is the focus of attention Today's calendar in the region offers only the PPI in the Czech Republic, which has been falling since the middle of last year and surprised to the downside in February and March. This could bring a bit of a cool down this time on the hawkish statements from the Czech National Bank and the paying flow in the rates market. In the FX market, the situation remains unchanged from last week. At the beginning of the week, we expected the rally to stop or at least slow down. This happened only in the case of the Czech koruna, where profit-taking sent EUR/CZK above 23.40 again. On the other hand, the Hungarian forint continues to rally and is within reach of 370 EUR/HUF. We previously mentioned this level as a low point that the forint could reach in the first half of the year. We continue to believe that positioning will be the main issue for further forint gains, but it seems that the situation may not be as dramatic as we previously thought. Overall, however, we see 370 EUR/HUF as a key threshold that, as in the case of the Czech koruna, could trigger profit-taking after a month-long rally. Thus, from this perspective, the Polish zloty remains the most interesting, as it is not burdened by heavy long positioning, and we think the market would like to see the zloty rally. Thus, if the global conditions remain positive in the coming days, the zloty has an open door to new gains most of all within the CEE region. Already yesterday the zloty tested the 4.620 level, the strongest since the middle of last year, and we can expect to see another attempt today. Frantisek Taborsky Read this article on THINK Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Gold Trading Analysis: Technical Signals and Price Movements

FX Daily: A glimpse of future easing

ING Economics ING Economics 20.04.2023 12:58
The Hungarian forint sold off 2% yesterday after a local central banker surprised markets by suggesting Hungary could make preparations to start easing interest rates. Central banks in Eastern Europe and Latin America were some of the most hawkish heading into this cycle. Will foreign exchange markets allow them to be the first to start cutting rates?   The National Bank of Hungary in Budapest USD: Fed's Beige Book won't stand in way of Fed hike in May The highlight of yesterday's session was a 2% fall in the Hungarian forint after a local central banker suggested that the top rate (25%) of its policy corridor could be cut at next week's policy meeting (see more on this below). While not an effective rate cut, the comments still saw 2-year Hungarian swap rates drop 50bp. We mention this here because some of the central banks in Eastern Europe (Hungary and the Czech Republic) and in Latin America (especially Brazil) were the earliest and most aggressive in their tightening cycles and a key story for the second half of this year will be whether these central banks can be the first to cut rates without their currencies selling off too hard. The evidence from yesterday suggests foreign exchange markets remain very sensitive to any suggestions of any early easing and that there might need to be stronger evidence of the turn in rate cycles in core markets before some central bankers in EM can push through with easing cycles.  Back to core markets and last night's release of the Fed's Beige Book ahead of the 3 May FOMC meeting did not show a material weakening in activity after the failures of two US banks in early March. Several Fed districts did note tighter credit conditions but as yet no significant weakening in activity. The report should not interfere too much with the market's 89% probability pricing of a 25bp Fed hike on 3 May and does not seem to provide much fuel yet to the bearish dollar narrative. Read next: Eightcap analyst after UK CPI: It is an interesting position now for the Bank of England., do they need to go back to a few 50-point hikes to cut into the CPI rate?| FXMAG.COM For today, all the Fed speakers are after the European close (Christopher Waller speaks at 18CET) and instead, the market will have second-tier data to digest such as weekly initial jobless claims and existing home sales. The Beige Book did hint at a softening in the tight labour market and any big upside jump in initial claims could be worth a 0.5% drop in the DXY dollar index - i.e. a drop back to the 101.50 area. Chris Turner EUR: Pricing of ECB hikes edging back to early March highs Looking at the pricing for the October European Central Bank policy meeting, we now see the market pricing the deposit rate at 3.87%. This pricing has recovered from the low of 3.00% priced on 20 March and is now not far from peak hawkishness of 4.07% priced on 8 March - before the two US banks failed.   Clearly, the market has taken the view that the US banking crisis - as yet anyway - has not been severe enough to push the ECB off course. Certainly in its recent Global Financial Stability Report, the IMF made the case that euro-area banks were far less exposed to the risk of unrealised losses on Held-to-Maturity securities than the US banking system. Additionally upside inflation surprises and re-pricing of tightening cycles in European peers (UK) have also nudged ECB tightening expectations higher. This all looks supportive for the euro - as long as the ECB delivers on what is priced. We could see some insights into the latest ECB thinking with the 1330CET release today of the minutes of the 16 March meeting. Here, the ECB pushed ahead with a 50bp hike in the midst of banking turmoil. Presumably, the ECB will be reluctant to give any signals today of an early pause. Also today, look for April eurozone consumer confidence and some more ECB speakers - Ignazio Visco (dove) at 1515CET and Robert Holzmann (hawk at 1700CET). The ECB story is a mildly supportive one for the euro, but the international environment is yet to favour a big push above 1.10 in EUR/USD. Just look at how EM and commodity currencies have failed to advance after this week's better-than-expected 1Q23 China GDP release. And as energy markets seem to be showing us, investors still seem to be focused on the global demand slowdown ($ positive) than a forthcoming global recovery ($ negative).  EUR/USD could drift to the top of a 1.0900-1.1000 range were US data to come in on the soft side today. Chris Turner GBP: Re-thinking the BoE profile Yesterday's release of higher-than-expected March UK inflation has seen the pricing of the Bank of England cycle push up to a new cycle high. The market now prices the current 4.25% Bank Rate being taken close to 5.00% by November. The BoE may not choose to push back against this pricing until the 11 May rate meeting - where a 25bp hike looks likely. Also, tomorrow does see the release of March retail sales and the April PMI numbers - which could shed light on how the economy is coping with higher rates. With the ECB still expected to tighten more than the BoE over the remainder of this year, we would expect EUR/GBP to continue finding demand under 0.8800. But a more aggressive BoE may force us to lower our second-half EUR/GBP targets of 0.90. GBP/USD could creep back to 1.2500 should any of today's US data add to some early indications of a slowing US economy. Chris Turner HUF: Forint will be key for next week's NBH meeting Yesterday, the National Bank of Hungary (NBH), specifically Deputy Governor Barnabas Virag, hit the headlines. He said in an interview that the central bank may lower the upper end of the rate corridor next week, a big turnaround from previous statements from the NBH. It seems that market sentiment has improved enough that the NBH is willing to start considering a real rate cut. For now, the main reason for these statements seems to be to test the waters and see the market reaction before next week's meeting. In our view, EUR/HUF is the main variable the central bank is watching right now. So the question is, where we will find the forint at the end of this week? Of course, EUR/HUF has moved up significantly (+2%) after the NBH statements, but it is still not that severe. For now, the forint has moved back to the levels of early April which, looking at the last few months, is not too bad. On the other hand, the positioning is very long HUF and the forint may sell off further in the coming days. In our view, levels in the 385-390 EUR/HUF band could already be a warning sign for the central bank to reconsider some of the statements made yesterday. Frantisek Taborsky Read this article on THINK Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Euro against US dollar - Jakub Novak's trading tips and analysis

Euro against US dollar - Jakub Novak's trading tips and analysis

InstaForex Analysis InstaForex Analysis 20.04.2023 14:07
Euro continued to rise even though producer prices in Germany dropped sharply amid lower energy carriers and reduced company costs. The speech of ECB President Christine Lagarde has been postponed to the afternoon, so it will coincide with the release of data on US jobless claims and volume of home sales in the secondary market. The former may be of little interest, but the latter could return demand for dollar, provided that the figure exceeds expectations. The Philadelphia Fed manufacturing index and speeches of FOMC members Christopher Waller and Michelle Bowman may also help dollar, as recently, US politicians continue to insist on raising rates. There were no market signals this morning due to low volatility and volume. EUR/USD - For long positions: Buy euro when the price hits 1.0980 (green line on the chart) and then take-profit when the quote reaches the level of 1.1020. Growth will occur if Lagarde says hawkish comments about monetary policy. However, before buying, make sure that the MACD line is above zero and is starting to rise from it. Read next: Earnings season: Tesla stock price slipped after yesterday's news. The best selling car in Q1 was Model Y| FXMAG.COM Euro can also be bought if the level of 1.0950 is tested twice, but the MACD line should be in the oversold area as only by that will the market reverse to 1.0980 and 1.1020. EUR/USD - For short positions: Sell euro when the price reaches 1.0950 (red line on the chart) and take-profit at the level of 1.0906. Pressure will return if the US reports good statistics. However, before selling, make sure that the MACD line is below zero and is starting to drop down from it. Euro can also be sold if the level of 1.098 is tested twice, but the MACD line should be in the overbought area as only by that will the market reverse to 1.0950 and 1.0906. What's on the chart: Thin green line - entry price at which you can buy EUR/USD Thick green line - estimated price where you can set Take-Profit (TP) or manually fix profits, as further growth above this level is unlikely. Thin red line - entry price at which you can sell EUR/USD Thick red line - estimated price where you can set Take-Profit (TP) or manually fix profits, as further decline below this level is unlikely. MACD line- it is important to be guided by overbought and oversold areas when entering the market Important: Novice traders need to be very careful when making decisions about entering the market. Before the release of important reports, it is best to stay out of the market to avoid being caught in sharp fluctuations in the rate. If you decide to trade during the release of news, then always place stop orders to minimize losses. Without placing stop orders, you can very quickly lose your entire deposit, especially if you do not use money management and trade large volumes. And remember that for successful trading, you need to have a clear trading plan. Spontaneous trading decision based on the current market situation is an inherently losing strategy for an intraday trader. Relevance up to 13:00 2023-04-21 UTC+2 This information is provided to retail and professional clients as part of marketing communication. It does not contain and should not be construed as containing investment advice or investment recommendation or an offer or solicitation to engage in any transaction or strategy in financial instruments. Past performance is not a guarantee or prediction of future performance. Instant Trading EU Ltd. makes no representation and assumes no liability as to the accuracy or completeness of the information provided, or any loss arising from any investment based on analysis, forecast or other information provided by an employee of the Company or otherwise. Full disclaimer is available here. Read more: https://www.instaforex.eu/forex_analysis/341036
Impact of Declining Confidence: Italian Business Sentiment in August

What does Fed Beige Book released yesterday suggest? RBA to create a new monetary policy board?

Saxo Bank Saxo Bank 20.04.2023 15:52
Summary:  Difficult terrain lies ahead for US dollar traders as the US debt ceiling issue nears crunch time, possibly as soon as early June. Elsewhere, a lower than expected Q1 CPI number knocks NZD lower, while the RBA is set for major structural changes that will bring its structure and meeting frequency in line with global peers. Today's Saxo Market Call podcastToday's Global Market Quick Take: Europe from the Saxo Strategy Team FX Trading focus: A difficult terrain ahead as debt ceiling crunch time approaches. RBA set for big structural changes. The House Republicans came up with a complete non-starter of a budget bill that Senate Democrats will never pass, much less the veto-holding Biden administration. The bill looks to raise the debt limit by $1.5 trillion and reduce some $130 billion in spending next year, including axing many of the Biden administration’s hallmark initiatives, like canceling student debt and some of the climate- related programs (although details can be hammered out later). House speaker McCarthy claimed that the bill could save the government $4.5 trillion over the next decade. The House Republicans would have to show extreme discipline to get it passed even in the house as it can’t pass if they lose more than four votes from 222 possible. What to do with the US dollar then? On the one hand, liquidity headwinds lie ahead and threaten risk sentiment headwinds and possibly USD upside. These come from the Fed continuing its QT while the US Treasury is set to drive a net liquidity drain from here. (Backgrounder: US treasury has been providing extensive liquidity as it drained hundreds of billions of USD from its account at the Fed. That account has now dwindled to about as low as it can go now, stopping that source of liquidity for now. And once the debt limit issue is cleared, the Treasury will set about rebuilding the account by hundreds of billions, driving even tighter liquidity.) But if the Biden administration and Congressional Republicans play a game of brinksmanship, it’s hard to imagine that process as a USD positive and will keep the Fed in a cautious stance. The situation could come to a head as soon as early June because of weaker than expected tax revenues, while otherwise late July has been considered the more likely pinch point at which time the US Treasury runs out of room with its special maneuvers. If sanity prevails and a handful of Republican House members cross the line, the issue can be avoided until possibly 2025, if the “Problem Solvers” caucus discussed in this article can get an alternative passed. Sterling failed to get much out of yesterday’s hot CPI print, even as 2-year UK swap rates jumped 15 basis points on the news. GBPUSD couldn’t convincingly challenge the 1.2500 resistance again despite the yield spread widening to new extremes for the cycle. At present, the market is pricing BoE rates to be 25 basis points above Fed rates by year end. This is already difficult to swallow, much less any significant extension of the difference. Driving GBPUSD more than a figure or so higher at this point in the cycle would likely require some major US debt-limit related incident requiring eventual Fed liquidity injection. Expecting sterling to ramp higher because the BoE is finally getting more inflation-fighting religion is far less likely. EURGBP is back in the middle of the range it has traded within all year – still a non-story, though upside is likely the side of least resistance. GBPNOK has my contrarian warning lights flashing… Chart: AUDNZDWhile we await for something to give in either direction in the major USD pairs, the relative merits of AUD and NZD are worth consideration here after the kiwi was knocked lower in the wake of a lower than expected inflation number for Q1 at 1.2% QoQ and 6.7% YoY vs. 1.5%/6.9% expected, respectively and vs. 7.2% the prior quarter. This capped NZ yields and lowers the odds of a May rate hike from the RBNZ. From here, if inflation reheats, the RBA will have more work to do than the RBNZ to fight inflation. Meanwhile, an economic slowdown scenario would leave. With China’s economic activity picking up is normally an added potential benefit for the Aussie, although the key commodity prices coincident to that story are not offering much support to that story. See below for more on the RBA, which is set for a changed structure and meeting frequency that brings it into line with global peers. Next steps for firmly shifting focus back to the upside would be clearing the 200-day moving average and 1.1000 area.   Source: Saxo Group Big changes ahead for the RBA: Following an independent review of the RBA ordered by the Australian government, sweeping recommendations for change were handed down today. Among these are that the RBA should create a new monetary policy board and meet less frequently (eight meetings per year, down from eleven), in better alignment with international counterparts. These were just some of the recommendations and were “welcomed” by the RBA. The report criticized the RBA’s board composition, which includes one economist and six independent directors who are mainly from business. The recommendations include a dilution of the Governor’s powers as more economist expertise would be brought onto the board. The changes could start from July 2024 and see the RBA governor speaking at a press conference after policy meetings. Current Governor Lowe’s term expires in September. The Fed Beige Book released late yesterday suggests the US economy is in a holding pattern, with Fed observers claiming that consumer spending was flat to down slightly, while wage growth showed som moderation, while increasing slack in the labor market (evident in the recent rise in jobless claims) was also noted. A moderation of price increases was noted, while “several districts noted that banks tightened lending standards amid increased uncertainty and concerns about liquidity”. The banks reporting thus far show no general patterns of suffering deposit flight, though they may have compete more for retaining deposits than previously, and this will tighten the screws on overall credit growth. Read next: US stocks, VIX, megacap companies earnings, metals and more in today's Saxo Market Call| FXMAG.COM Today’s Philly Fed worth watching: after the stunning April Empire Manufacturing survey, which came in at a stunning +10.8 versus expectations for –18 and –24.6 in March, it is worth watching today’s Philly Fed. More positive surprises in the regional surveys leading up to tomorrow’s preliminary S&P Global Apr. US Manufacturing PMI and the BLM’s ISM Manufacturing survey the week after next might indicate something is afoot in the US manufacturing sector. If so, is it the beginning of a turnaround due to huge announced investments in manufacturing that have been encouraged by the most sweeping US industrial policy initiatives since the second World War, including the Inflation Reduction Act and the CHIPS and Science Act? The setup for today’s April Philadelphia Fed survey is similar to the Empire number, with expectations for a reading of –19.3 after –23.2 in March. If the number comes in as weak as expected, then there is no corroboration of the Empire survey number, but if it swings into positive territory after the deepening negative prints in the last several months, it may point to a major reversal in the outlook for US manufacturing. Table: FX Board of G10 and CNH trend evolution and strength.NZD and especially NOK weakness worth noting, but CAD has also lost a lot of altitude here over the last couple of sessions as oil prices corrected lower. On the plus side, the Swiss franc continues its serene strength.   Source: Bloomberg and Saxo Group Table: FX Board Trend Scoreboard for individual pairs.Note that EURCHF is approaching a pivot low near 0.9800, the low area since the zany swings during the March banking turmoil. USDCAD is trying to cement the reversal of the attempt through the 1.3400 area and 200-day moving average. Elsewhere, my contrarian pick for the next three months has to be GBPNOK, which just look so absurdly extended. Source: Bloomberg and Saxo Group Upcoming Economic Calendar Highlights 1230 – US Weekly Initial Jobless Claims 1230 – US Philadelphia Fed Survey 1400 – US Mar. Existing Home Sales 1400 – Eurozone Apr. Flash Consumer Confidence 1530 – Bank of Canada’s Macklem and Rogers to epsak  1600 – US Fed’s Waller (Voter) to speak 1620 – US Fed’s Mester (Non-voter) to speak 1900 – US Fed’s Bowman and Logan (both voters) in Fed Listens event 2015 – ECB's Schnabel to speak 2301 – UK Mar. GfK Consumer Confidence 2330 – Japan National CPI 2345 – US Fed’s Harker (Voter 2023) to speak on economic outlook Source: FX Update: Difficult terrain for USD ahead on US debt ceiling crunch time. | Saxo Group (home.saxo)
According to Althea Spinozzi, it's clear that inflation remains Fed most significant focus

Federal Reserve is at risk of... overtightening? Bitcoin seeing some support around $29K

Craig Erlam Craig Erlam 20.04.2023 16:02
European markets are in the red on Thursday in what continues to be a choppy week of trading driven by economic and interest rate uncertainty. We’re now at a pivotal point in the tightening cycle, one made all the more difficult by the mini-banking crisis last month and the ripple effects it will have on credit and the economy over the course of the rest of the year. Central banks, the Fed in particular, are now at even greater risk of overtightening just as the data may show price pressures easing considerably. The fear of that not materializing will probably drive another round of rate hikes next month, after which discussions will likely be far more balanced. It’s this uncertainty that appears to be driving the most recent period of choppy trading, especially when the economic data is not yet playing ball; the UK this week is a prime example of that. Justifying a pause in tightening when inflation is above 10% on the belief it will fall rapidly after being terribly wrong about it being transitory not long ago is tough and I’m not convinced central banks have it in them or feel there’s enough credit in the bank to take the risk. It’s going to be an anxious couple of months. The ECB decision-making is made slightly less complicated by the fact that interest rates haven’t risen quite as far after being so late to the party and the minutes may well reflect that. Of course, they may also highlight anxiety within the committee in relation to the proximity of the meeting to those bank failures. EUR/USD Technical Are we finally seeing profit-taking in bitcoin? Bitcoin is slipping again on Thursday after breaking back below $30,000 a day earlier, following a few choppy days of trade. It’s now seeing some support around $29,000 where it saw resistance in late March and early April but after such a prolonged rally since early January – more than 80% – the recovery may be running on fumes. BTC/USD Technical For a look at all of today’s economic events, check out our economic calendar: www.marketpulse.com/economic-events/ Content is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Business Information & Services, Inc. or any of its affiliates, subsidiaries, officers or directors. If you would like to reproduce or redistribute any of the content found on MarketPulse, an award winning forex, commodities and global indices analysis and news site service produced by OANDA Business Information & Services, Inc., please access the RSS feed or contact us at info@marketpulse.com. Visit https://www.marketpulse.com/ to find out more about the beat of the global markets. © 2023 OANDA Business Information & Services Inc. Rally stalls amid uncertainty over interest rates and the economy - MarketPulseMarketPulse
Forex: Euro against US dollar - forecast on April 24th, 2023

ECB minutes signal growing divide about size of future rate hikes

ING Economics ING Economics 20.04.2023 16:55
The just-released minutes of the European Central Bank's meeting in March suggest there is a growing divide within the Governing Council. A 50bp rate hike is still on the table next month but the split among members argues in favour of a 25bp compromise European Central Bank President Christine Lagarde   The ECB's March meeting took place against the background of banking and market turbulence, a new set of macro projections – which were already outdated as they had been prepared prior to the banking turmoil – and an end to the ECB’s forward guidance. In the end, the central bank decided to hike interest rates by another 50bp and did not show any concern about the banking turmoil and speculations of a smaller-sized hike or even a pause. With only two more weeks to go until the next ECB meeting, there is little doubt that it will continue hiking rates. The only question seems to be whether the ECB will opt for 25bp or 50bp. With the recent calming of financial market stress, pausing the hiking cycle is unlikely to get any support from the Governing Council. Let’s have a quick look at the main factors determining the ECB’s decision at the May meeting, based on the just-released minutes of the March meeting and recent developments. Inflation developments Headline inflation in the eurozone has started to come down but almost exclusively due to energy price base effects. Core inflation remains stubbornly high and has recently even increased. Back at the March meeting, the ECB had a discussion on whether core inflation was already at a turning point but couldn’t identify any hard evidence. At the same time, there were “a number of members seeing risks as tilted to the upside over the entire horizon”, adding doubt to the staff projections of inflation converging to 2% in 2025. Over the last year, inflation has morphed from a supply-side issue to a demand-side issue. Yesterday, ECB Executive Board member Isabel Schnabel gave a speech and presented a chart showing that current inflation can almost entirely be explained by demand factors. This change in the nature of inflation is still the most convincing argument for more rate hikes. Read next: Riksbank preview: A hawkish 50bp hike to support the krona| FXMAG.COM Given that interest rates and market prices are almost back to where they were prior to the banking turmoil, the March staff projections are currently probably more accurate than they were during the March ECB meeting. There is, however, one striking element: while the ECB expects the eurozone economy to return to its potential growth rate at the start of 2024, inflation will continue to come down until 2025. We doubt that this combination is feasible, but think that either inflation will remain stickier if the ECB’s growth forecast is correct or that growth will have to be weaker to get inflation back to target. Banking turmoil The minutes of the March meeting confirm the message sent at the March press conference: the banking sector in the eurozone is resilient, with strong capital and liquidity positions. The ECB was confident that announced liquidity measures and the general resilience of the banking sector would “alleviate the current market tensions”. An interesting point was made, namely that “the transmission of monetary policy impulses was likely to be stronger at times of market stress than in calmer times”. It wasn't a problem in March and it will not be a big issue in May. The ECB will only focus on the impact of the recent turmoil on lending and activity. Transmission of monetary policy tightening so far The minutes reveal a first discussion on lags of the transmission of monetary policy, leading to a broader debate in two weeks on how far rates should still be hiked. There seems to be a growing divergence between ECB members favouring the view that “in the past, the effect of monetary policy had been continually overestimated, which might happen again”, while others argued that there was a risk “that the impact of monetary policy tightening was being underestimated”. This growing split was also illustrated by the fact that some ECB members preferred to pause the rate hike cycle at the March meeting, according to the minutes. What to expect from the ECB May meeting As the banking crisis seems to be contained, the ECB will stick to the widely-communicated distinction between using interest rates in the fight against inflation and liquidity measures plus other tools to tackle any financial instability. The fact that there are still no signs of any disinflationary process, discounting energy and commodity prices, as well as the fact that inflation has increasingly become demand-driven, will keep the ECB in tightening mode. We still think that the turmoil of the last few weeks should have been a clear reminder for the ECB that hiking interest rates, and particularly the most aggressive tightening cycle since the start of the monetary union, comes at a cost. In fact, with any further rate hike, the risk that something breaks increases. However, judging from the latest comments, the ECB is currently rather back to where it was prior to the March meeting: strictly determined to break inflation. The rather benign view on potential adverse effects from the current tightening seems to be back. At the current juncture, both a 25bp and a 50bp rate hike seem to be on the table for the May decision. The next inflation print and the latest Bank Lending Survey, both to be released only a few days ahead of the May meeting, will tip the balance. The growing divide within the ECB, signalled in today's minutes, is probably the best argument for a compromise of a 25bp rate hike. In fact, it would also make more sense as the ECB has already entered the final phase of its tightening cycle. A phase that should be characterised by a genuine meeting-by-meeting approach and a slowdown in the pace, size and number of any further rate hikes. Still, despite growing opposition by the doves, we definitely cannot rule out a 50bp rate hike. It wouldn’t be the hawkish surprise. Read this article on THINK TagsMonetary policy Inflation Eurozone ECB Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Forex: Euro against US dollar - forecast on April 24th, 2023

Forex: Euro against US dollar - forecast on April 24th, 2023

InstaForex Analysis InstaForex Analysis 24.04.2023 09:40
EUR/USD On the weekly chart, the divergence between the price and the Marlin oscillator has slightly intensified over the past week. The price going below the Fibonacci 138.2% level (1.0902) will obviously cement this formation. On the daily chart, the MACD indicator line coincides with the Fibonacci level (1.0900). The 1.09 level is quite strong, so it can trigger a reversal into a medium-term downtrend. The nearest target is 1.0804 – the February 14th high. Price resistances are 1.1033, 1.1057 – the upper limit of the descending price channel. The Marlin oscillator is pointing downward, it also wants to move into the area of the downtrend. Read next: IG analyst to FXMAG.COM: In my opinion commodity prices already reflect higher oil prices| FXMAG.COM On the four-hour chart, the price still cannot break away from the MACD line, creating a horizontal range on this line. The most important European Central Bank and Federal Reserve meetings will take place next week, which will determine the direction of global currencies. We assume that the dollar will strengthen. The euro will probably be at the 1.0900 level during the Fed meeting. Relevance up to 04:00 2023-04-25 UTC+2 This information is provided to retail and professional clients as part of marketing communication. It does not contain and should not be construed as containing investment advice or investment recommendation or an offer or solicitation to engage in any transaction or strategy in financial instruments. Past performance is not a guarantee or prediction of future performance. Instant Trading EU Ltd. makes no representation and assumes no liability as to the accuracy or completeness of the information provided, or any loss arising from any investment based on analysis, forecast or other information provided by an employee of the Company or otherwise. Full disclaimer is available here. Read more: https://www.instaforex.eu/forex_analysis/341207
Euro's Rally Stalls as Focus Turns to Inflation and Data Disappointments

FX Daily: European FX showing some resilience

ING Economics ING Economics 24.04.2023 10:19
The Fed has now gone into a blackout period ahead of its rate meeting on 3 May. Investors will therefore this week be left to focus on 1Q23 US GDP, core PCE inflation, and the latest on the debt ceiling. European currencies have been showing some slight outperformance amid lower energy. Look out for big rate meetings in Japan, Sweden and Hungary this week USD: Debt ceiling negotiations coming into focus Volatility levels in FX markets remain relatively subdued ahead of next week's central bank policy meetings in the US and the eurozone. Regarding short-term FX trends, we would continue to describe the mood as 'defensive'. Commodity currencies are under pressure in line with weaker oil prices. Our commodities team thinks Brent could stay on the back foot this week given that refinery margins are trending lower - suggesting recent weakness in the Canadian dollar and Norwegian krone may not reverse.  At the same time, US sovereign CDS spreads continue to rise as investors take out hedges against messy negotiations over the US debt ceiling. This week the House Republicans may well vote through a debt ceiling extension into next year - but one which the Democrat-controlled Senate has vowed to reject given the embedded spending reductions. Therefore, we can expect little progress on the debt ceiling this week. Unless Friday's US March core PCE inflation markedly surprises above the consensus 0.3% month-on-month figure, expectations for one last Fed hike look locked in and we doubt the dollar needs to rally too much further. Which currencies should outperform? Friday sees the first Bank of Japan policy meeting under new governor, Kazuo Ueda. The consensus expects it is too early to see any adjustments yet to the BoJ's Yield Curve Control policy - though changes may be forthcoming at the June meeting. However, given the still bubbling US banking crisis (First Republic Bank reports first quarter earnings today), we think the recent USD/JPY rally stalls under 135 and we remain happy with our 128 target for the end of the second quarter. Given a DXY heavily weighted towards Europe and Japan currencies, we would favour DXY drifting back to the recent 101.50/65 lows, with a bias towards 101.00 later in the week.   Chris Turner EUR: European FX holding up well European FX has outperformed in the G10 FX space over the last week, with the Swiss franc the strongest. EUR/USD continues to hold gains, with the market seemingly settled on the view that at least three more 25bp hikes from the European Central Bank will be forthcoming. Our macro team feels that next week's ECB credit/lending conditions survey will have a big say in whether the ECB hikes 25bp or 50bp.   But it is not just the ECB versus Fed tightening profile that is helping EUR/USD. The eurozone April composite PMI is pointing to a weak, services-led recovery and more insights on eurozone GDP growth will come with the 1Q GDP releases towards the end of this week. And today sees the German April Ifo - expected to hold onto recent improvements.  In all, we suspect EUR/USD can hold recent gains - even if the international environment (soft global growth and weak emerging market currencies) does not argue for a strong EUR/USD rally right now. EUR/USD can perhaps trace out a 1.0950-1.1050 range through the early part of this week. Elsewhere, the Swedish krona has been enjoying a little more stability too. The Riksbank meets this Wednesday. Our team looks for a hawkish 50bp hike, which should help keep EUR/SEK near this 11.30 area. Yet the fears of a banking crisis and greater scrutiny of the commercial real estate sector, where Swedish banks are heavy lenders, should mean that the krona will struggle to deliver outsized gains just yet. Chris Turner Read next: Poland’s labour market cools but wage pressures persist| FXMAG.COM GBP: Slow-burn re-assessment of sterling Sterling was part of the European outperforming FX bloc last week, helped in part by sticky price data which has prompted quite an aggressive repricing of the Bank of England tightening cycle. Three further 25bp hikes are now priced. That re-assessment of UK factors was also echoed in the S&P rating agency on Friday, moving the UK sovereign rating outlook back to stable from negative - effectively acknowledging the changes in policy after the departure of former Prime Minister Liz Truss. The UK data calendar is quieter this week, but it seems the re-balancing out of short sterling positions by asset managers is ongoing - which could lend further support to GBP/USD in a quiet week. This could see GBP/USD edging back to the 1.2500/2550 area if we are right with our slightly bearish stance on the dollar this week. Chris Turner CEE: It's getting more complicated This week, the market's attention will once again return to the regional story. Today, we will see March industrial and retail sales data and PPI in Poland, and consumer confidence in the Czech Republic. Our economists in Warsaw expect a 1.5% year-on-year decline in industry and a 6.2% YoY decline in retail sales, more or less in line with market expectations. Tomorrow's National Bank of Hungary (NBH) meeting will be the main market focus this week. As hinted last week, the central bank plans to start the process of monetary policy normalisation. If the forint does not sell off by then we think the NBH will make a bold move in cutting by 700bp in the overnight deposit rate to match the effective rate at 18%. On Wednesday, we will see data from the Polish labour market and then on Friday, Poland's April inflation figures will be released. We expect a further decline from 16.1% to 14.8% YoY, which is in line with market expectations. But core inflation will likely remain close to the March reading of 12.4% YoY. Last week we highlighted that the rally in the region is running out of steam and we are likely to see the same scenario this week. Although conditions for CEE FX, in general, remain positive we are looking in vain for fresh momentum for new gains. The main focus this week will be on the Hungarian forint which will face NBH efforts to start normalising monetary policy. Further forint depreciation could be expected depending on the extent of the rate cut. However, we expect rather a minor second round of depreciation followed by stabilisation slightly above 380 EUR/HUF. The market was taking profits last week in the Czech koruna after a multi-week rally and we think it should not break above 23.600 EUR/CZK this week. On the other hand, further hawkish statements from the CNB ahead of Wednesday's start of the blackout period could help the koruna back to stronger levels. Frantisek Taborsky Read this article on THINK Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Expect the ECB to keep increasing rates at the short-term, at least until the summer

Bank of England, Fed, ECB - Are we going to see a quite long break of rate hiking after next round?

Michael Hewson Michael Hewson 24.04.2023 10:40
As we look ahead to the rest of the year and look back at Q1, there's been a sizeable shift in sentiment from the cautious optimism of January and February to the banking shock in March, which prompted some sharp volatility in both share and bond markets. Against that backdrop, there is much to ponder as we look toward the rest of the year, especially around the prospects of future rate hikes, and the outlook for stock markets. In the space of a few weeks, we've gone from pricing in the prospect of further rate hikes in the coming months, to the prospect of rate cuts before the end of this year, and in some cases as soon as this summer. Whatever your thoughts on the economic outlook the prospect of rate cuts as soon as the summer comes across as wishful thinking when core inflation is still well above the central bank's 2% target rate. While we've seen some sectors of the economy come under pressure due to the sharp rise in inflation pressures, inflation continues to look sticky, with core prices showing little signs of coming down. Before the recent sell-off, there was little sign that markets were overly concerned about the risks of central banks aggressively hiking interest rates.  While the subsequent collapse of Silicon Valley Bank in the US, has prompted some contagion that has spread to the rest of the US regional banking sector, there is thus far little evidence that it is systemic, which is reassuring. That doesn't mean we won't see further stresses emerge in the coming weeks and months given the sharp rise in rates we've seen in the past 12 months.  The uncertainty in the US was quickly followed by the collapse in confidence in Credit Suisse which prompted Swiss authorities to step in with a bailout package from UBS, as concerns about the viability of the business got bigger after one of the bank's largest shareholders, decided not to inject fresh capital into it. The resulting fallout saw a temporary pullback in some sectors of the European and US equity market, however, while recession risks have risen there is little evidence thus far of a notable rise in unemployment, which would signal the prospect of a sustained economic slowdown. So far equity markets have managed to get off to a solid start to Q2 with steady gains for markets in Europe, even though certain parts of the US stock market might start to struggle. Earlier this month the IMF chimed in with its own forecasts for the global economy, painting the bleakest outlook for global growth in over 30 years. The fund went on to warn of significant risks to the global banking system as higher rates squeeze credit conditions. Coming on top of multiple shocks to the global economy in the form of the aftermath of the Covid pandemic and Russia's invasion of Ukraine the outlook for a return to normal is replete with risks. Throw in the risk of further geopolitical turmoil between the US and China and it's hard to see an imminent return to any semblance of normality, although, after 15 years of dealing with the aftermath of the 2008 financial crisis, it's hard to determine what normal looks like. One could argue that 15 years of ultra-low and in some cases negative interest rates isn't normal and we are merely returning to where rates were pre-2008. On a historical basis, rates at current levels aren't particularly high, however, the risk comes from how much higher debt levels are, and the risks entailed in rolling over that debt. This is why central banks now need to be careful how they proceed from here on in and could determine how the rest of the year pans out, however, given all of the talk of a transition to a greener global economy it's hard to see how inflation can return to the levels we saw throughout most of the previous decade. The zealous pursuit of net zero and the transition to renewables will mean demand for commodities will only head in one direction as countries around the world vie for security of supply for the likes of copper, cobalt, lithium, and other metals used in the construction of batteries, solar panels, and wind turbines.  Read next: US Flash, that is to say preliminary, PMI for April came in at a better-than-expected 50.4 versus a downwardly revised 49.2 in March and a forecast 49| FXMAG.COM Given the misguided determination to discourage the pursuit of more transitional capacity, the price of oil and gas is likely to remain high. That is likely to mean keeping a lid on prices will become more difficult in the face of a continued increase in global demand, which means the prospect of inflation coming down quickly becomes much more daunting. A changing climate also presents challenges for global food supply and with food price inflation already in some cases at well over 15% it's quite likely that inflation is likely to remain sticky for quite some time. This is likely to mean interest rates will have to remain at or close to current levels in the short term at the very least and while we might start to see gradual reductions in 2024 it's unlikely, we'll see a return to pre-Covid levels. That is likely to entail a painful wake-up call for some of those in the market who think the Fed will pivot and start cutting rates later this year. For now, we can probably expect to see one more hike of 25bps from the Federal Reserve as well as the Bank of England, while the European Central Bank may well have to pump in another 50bps. After that rates are likely going to have to stay at current levels until well into 2024. For US markets that might present a problem for the more highly valued areas of the market, however, it shouldn't present the same sort of headwind for markets in Europe, which should remain resilient.
InstaForex's Ralph Shedler talks Euro against Japanese yen

InstaForex's Ralph Shedler talks Euro against Japanese yen

Ralph Shedler Ralph Shedler 25.04.2023 22:06
Relevance up to 20:00 2023-04-26 UTC+2 This information is provided to retail and professional clients as part of marketing communication. It does not contain and should not be construed as containing investment advice or investment recommendation or an offer or solicitation to engage in any transaction or strategy in financial instruments. Past performance is not a guarantee or prediction of future performance. Instant Trading EU Ltd. makes no representation and assumes no liability as to the accuracy or completeness of the information provided, or any loss arising from any investment based on analysis, forecast or other information provided by an employee of the Company or otherwise. Full disclaimer is available here. EUR/JPY downside reversal The EUR/JPY pair crashed today. It was trading at 146.38 at the time of writing. Dropping below the uptrend line signaled that the uptrend ended and that the sellers could drive it towards new lows. The former low of 146.47 represented a downside obstacle as well. Now, the price tries to ignore this downside obstacle and resume its downside movement. Read next: It should be noted that BoJ’s decade-long ultra-loose stimulus program has drawn intense criticism for broadening price pressures in the world's third-largest economy | FXMAG.COM   EUR/JPY trading conclusion If the price stabilizes below the former low of 146.47, it may activate a further drop and provide a new selling opportunity. Read more: https://www.instaforex.eu/forex_analysis/321101
ECB enters final stage of tightening cycle

Euro against US dollar: On Wednesday, we should be wary of the preliminary estimate of the US first-quarter GDP, expected to come at an annualised rate of 2.0%

Alex Kuptsikevich Alex Kuptsikevich 25.04.2023 16:30
Thanks to Alex Kuptsikevich from FxPro, we're able to publish his view on EUR/USD. FXMAG.COM: What do you expect to be the next EUR/USD mover? Alex Kuptsikevich (FxPro): It would not be surprising to see the quiet trading pattern of the first half of the week replaced by a significant recovery towards the end of the week. On Wednesday, we should be wary of the preliminary estimate of the US first-quarter GDP, expected to come at an annualised rate of 2.0%. As a rule, it often deviates from forecasts and provokes a market reaction. We believe Friday's German inflation and labour market estimates for April are more attractive. Inflation is expected to slow from 7.4% to 7.3%. Inflation is expected to slow from 7.4% to 7.3%. Alex Kuptsikevich (FxPro): But this is an early estimate, so there is considerable room for surprises. This report could set the tone for other releases from the major eurozone countries and determine their momentum. A sharp slowdown could put pressure on the EUR/USD as it would increase speculation that the ECB will reduce the pace of rate hikes. On the other hand, strong data could trigger impulsive buying of the single currency and send it to new 13-month highs Alex Kuptsikevich (FxPro): On the other hand, strong data could trigger impulsive buying of the single currency and send it to new 13-month highs. This would be an essential milestone in the trend that began at the end of September last year. The market will then shift to US interest rate expectations, with a decision expected mid-next week. The short-term decision is unlikely to be interesting, with the market pricing in a 90% chance of a 25-point hike. The main market driver will likely be clues about the Fed's next steps: Whether policy tightening will end there and when to expect a reversal. Read next: Cryptocurrency payments are steadily increasing, particularly as the DeFi market rebounds from the ‘crypto winter’| FXMAG.COM
FX Daily: Hawkish Riksbank can lift the krona today

FX Daily: Hawkish Riksbank can lift the krona today

ING Economics ING Economics 26.04.2023 13:22
We expect a 50bp hike by Sweden’s Riksbank today, and despite the domestic economic woes, signals that rates will peak at close to 4.0%. This can trigger a krona rally today. Elsewhere, we’d be wary of chasing the dollar rebound seen yesterday, given the raising bets on Fed rate cuts after fresh US banking concerns USD: Be careful chasing the dollar rebound The release of quarterly earnings in the US continues to paint a better picture for American corporates, with big tech companies beating estimates yesterday. However, concerns about the US banking sector have returned after First Republic’s shares dropped 49% following the larger-than-expected drop in deposits and announced restructuring plans. Ultimately, a risk-off mood has prevailed, despite the overall contagion effect having been significantly more contained than in previous instances in March: the 3-month FRA-OIS spread ticked higher to 32bp, but is a far cry from the 50bp and 60bp peaks seen last month. In FX, this still translated into a fully-fledged flight to safety, with the yen outperforming and the dollar recovering ground yesterday. High-beta currencies came under pressure, particularly the Norwegian krone, which is the least liquid currency in G10 and inevitably very vulnerable to adverse swings in risk sentiment. The dollar’s rebound followed its natural correlation with risk aversion yesterday, although we signal how in multiple instances when concerns about the stability of the US banking system rose in the past month-and-a-half it was the dovish repricing in Fed rate expectations that had a more tangible short-term impact on the dollar. We would therefore warn against chasing a dollar rally that is fuelled by idiosyncratic negative news on a US bank, especially in the run-up to the FOMC meeting. Read next: Base effects distort Hungarian wages data| FXMAG.COM The dollar hasn’t really connected with the dovish repricing in Fed rate expectations, with rate cut expectations that have risen steadily since the end of last week. From 55bp of easing priced in by year-end on Friday to 75bp this morning. We suspect that some help to the dollar momentum shown yesterday would need to come from good US data over the remainder of the week. Ahead of the more important GDP and PCE figures tomorrow and Friday, we’ll take a look at durable goods orders and wholesale inventories today. All in all, we think the balance of risk is tilted to the downside for the dollar today, as some stabilisation in sentiment would pave the way to at least partly re-link with falling Fed rate expectations. DXY may slip back to the 101.00/101.50 range by the end of the week. Francesco Pesole EUR: Narrow rate differential still points higher EUR/USD continues to hover around the 1.1000 mark, and we think it can find some fresh support above that level if some risk sentiment stabilisation offers a chance to reconnect with a favourable rate differential. The eurozone calendar is quite empty and the predominance of news coming from the US on the banking and equity sector leaves EUR/USD even more driven by the dollar leg. As discussed in yesterday’s FX Daily, the 2-year EUR-USD swap spread has narrowed further thanks to the combined effect of rising dovish bets on the Fed and the reinforcement of hawkish pricing in the EUR curve. The spread is currently at -66bp, the narrowest since 2020 when it peaked at -53bp. Elsewhere in Europe, the National Bank of Hungary walked the talk yesterday (here is our full meeting review note), beginning its dovish pivot with a rather symbolic step. We believe the 450bp technical cut in the top end of its rate corridor might be followed by cuts in the effective rate in the coming months, based on the re-tuned forward guidance. However, a more cautious approach by the central bank means good news for the Hungarian forint. Francesco Pesole GBP: Room to climb back The pound moved broadly in line with other pro-cyclical European currencies yesterday, and we see room for a recovery as the dollar’s good momentum may struggle to last. As is the case for EUR/USD, GBP/USD can count on an improved rate differential, which has recently moved back into positive territory (2-year swap rate as reference) by around 25bp and is at its highest since October 2022. We see room for Cable to re-test the recent 1.2543 highs by the end of the week in a less unfavourable risk environment, and thanks to the pre-Bank of England meeting hawkish narrative which is still offering decent support to the pound. Francesco Pesole SEK: Riksbank hike can help SEK The Riksbank will raise interest rates again this morning, and the consensus is centred around a 50bp hike to bring the policy rate to 3.50%. This is also our call (here is our full preview) and what markets are fully pricing in, so the market impact will mostly be driven by: a) the new economic projections and b) any forward-looking language. When it comes to the projections, core CPIF inflation forecasts will need to be revised higher, since it has overshot the Bank’s previous projections, although the really important bit for the market will be the updated rate path projections. Here, we think that the Riksbank will be wishing to sacrifice a bit of credibility to maintain a very hawkish tone, and we expect them to signal a peak rate close to or at 4.0% and no rate cuts for the whole projection period. This should, in practice, prove unfeasible. Even one more rate hike – despite being our base case – would be very easy to deliver given ongoing economic strains in Sweden, and rate cuts will likely need to be delivered next year. However, the Riksbank needs to focus on its short-term goal, which at the moment is to support its currency and send a signal of trust in its economy and financial system by staying resolutely hawkish. The decent performance of SEK compared to peers in the past few days suggests that markets had started to position for a hawkish Riksbank today, but EUR/SEK still trades in modest overvaluation (around 0.5%) according to our short-term fair value model and we think the Riksbank can push the pair to the 11.20 mark with a convincing hawkish message today. We remain doubtful that the pair can fall much further in the near term given lingering headwinds to the krona (global risk sentiment, concerns about the Swedish housing and economic situation). Francesco Pesole Read this article on THINK TagsRiksbank FX Daily FX Dollar Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Yesterday DAX closed at its highest level this year. Today ECB's Lagarde and Fed's Powell speak

ECB preview: a 25bp compromise rate hike

ING Economics ING Economics 27.04.2023 12:13
With only one week to go until the next European Central Bank meeting, there is little doubt that it will continue hiking rates. The only question seems to be whether the ECB will opt for 25bp or 50bp. We think that 25bp is the most likely outcome but might revise our call after Tuesday’s Bank Lending Survey and inflation data Christine Lagarde, president of the European Central Bank   Let’s have a quick look at the main factors determining the ECB’s decision at the 4 May meeting: Inflation developments Headline inflation in the eurozone has started to come down but almost exclusively due to energy price base effects. Core inflation remains stubbornly high and has even increased recently. Back at the March meeting, the ECB discussed whether core inflation was already at a turning point but couldn’t identify any hard evidence. At the same time, there were “a number of members seeing risks as tilted to the upside over the entire horizon”, adding doubt to the staff projections of inflation converging to 2% in 2025. ECB Executive Board member Isabel Schnabel recently hinted in an interview with Politico that even reaching the peak in core inflation was not necessarily a sufficient condition to alter course. More generally speaking, the ECB’s main concern is that inflation has morphed from a supply-side issue to a demand-side issue. This change in the nature of inflation is still the most convincing argument for more rate hikes. Given that interest rates and market prices are almost back to where they were prior to the banking turmoil, the March staff projections are currently probably more accurate than they were during the March ECB meeting. There is, however, one striking element: while the ECB expects the eurozone economy to return to its potential growth rate at the start of 2024, inflation will continue to come down until 2025. We doubt that this combination is feasible, but think that either inflation will remain stickier if the ECB’s growth forecast is correct or that growth will have to be weaker to get inflation back to target. Banking turmoil The minutes of the March meeting confirmed the message sent at the March press conference: the banking sector in the eurozone is resilient, with strong capital and liquidity positions. The ECB was confident that announced liquidity measures and the general resilience of the banking sector would “alleviate the current market tensions”. An interesting point was made, namely that “the transmission of monetary policy impulses was likely to be stronger at times of market stress than in calmer times”. It wasn't a problem in March and it will not be a problem in May. The ECB will only focus on the impact of the recent turmoil on lending and activity. Transmission of monetary policy tightening so far The minutes revealed the first discussion on lags of the transmission of monetary policy, leading to a broader debate in two weeks on how far rates should still be hiked. There seems to be a growing divergence between ECB members favouring the view that “in the past, the effect of monetary policy had been continually overestimated, which might happen again”, while others argued that there was a risk “that the impact of monetary policy tightening was being underestimated”. This growing split was also illustrated by the fact that some ECB members preferred to pause the rate hike cycle at the March meeting, according to the minutes. Read next: Australia: March inflation falls further| FXMAG.COM Still, the narrative in official comments has now finally convincingly shifted to a meeting-by-meeting approach. Next Tuesday – when eurozone inflation, credit growth and the results of the last Bank Lending Survey are released – will be a crucial day for assessing the current state of play of how much of the tightening so far, and the latest banking turmoil, are already affecting the real economy. 25bp rate hike is a good compromise, but Tuesday could still tip the balance As the banking crisis seems to be contained, the ECB will stick to the widely-communicated distinction between using interest rates in the fight against inflation and liquidity measures plus other tools to tackle any financial instability. The fact that there are still no signs of any disinflationary process, discounting energy and commodity prices, as well as the fact that inflation has increasingly become demand-driven, will keep the ECB in tightening mode. If the hawks were to remain in the driver’s seat, the terminal rate would probably be at 3.75% or 4%. However, we still think that the turmoil of the last few weeks should have been a clear reminder for the ECB that hiking interest rates, and particularly the most aggressive tightening cycle since the start of the monetary union, comes at a cost. It is also a strong argument for the doves at the ECB. In fact, with any further rate hike, the risk that something breaks increases. Still, judging from the latest comments, the ECB is currently rather back to where it was prior to the March meeting: strictly determined to break inflation. The rather benign view on potential adverse effects from the current tightening seems to be back. Consequently, with the continuing and gradual impact of monetary policy tightening so far, a looming recession in the US and a potential credit crunch in the eurozone, the risk is high that every next rate hike could turn out to be a policy mistake. For next week, both a 25bp and a 50bp rate hike seem to be on the table. The next inflation print, credit developments and the latest Bank Lending Survey, all to be released next week, will tip the balance. We think that given the growing divide within the ECB, a rate hike of 25bp would be a typical European compromise. However, we will revisit our call after Tuesday’s data flood. Read this article on THINK TagsMonetary policy Inflation Eurozone ECB Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
FX Daily: Euro’s attractiveness on the rise

FX Daily: Euro’s attractiveness on the rise

ING Economics ING Economics 27.04.2023 14:28
The big drop in the dollar yesterday was, in our view, a re-linking between FX and short-term rate differentials. In this sense, markets are finding the euro quite attractive given it can offer not only an ongoing domestic tightening cycle, but also still room to speculate on a hawkish surprise at the coming meetings. Today, US GDP may come in below consensus USD: Earnings versus banks and Fed expectations In yesterday’s FX Daily note, we discussed how the rally in the dollar in the first part of the week appeared unlikely to be sustainable. Indeed, we then observed a reconnection between FX and short-term rates in yesterday’s price action. The recent dovish repricing in Fed rate expectations eventually caught up with the dollar, which sold off across the board yesterday despite global equities remaining under some pressure on lingering concerns over regional banks in the US and weak earnings in Europe.   Positive news has come from the tech sector in the US, where earnings have surprised on the upside, and this has offered some floor to US equities. While it’s true that there was a large gap in terms of short-term rate differentials to be covered by the dollar against the euro and other European currencies, relative equity dynamics have remained more relevant from a statistical standpoint, and a better performance in US stock markets compared to European ones today could help the dollar at least stabilise. Data-wise, we’ll see the release of first-quarter growth figures in the US. Our economics team expects a below-consensus 1.5% quarter-on-quarter annualised print (consensus is 1.9%). Consumer spending should be strong in line with robust retail sales in January which were boosted by unseasonably warm weather. However, weaker net trade and inventory performance should offset that story. Like any Thursday, some focus will also be on initial jobless claims, which we expect to come in at 250k, in line with consensus. If some positive news on the US earnings side can offset the impact of US regional bank concerns on the dollar today, our expectations for a sub-consensus GDP reading suggest the balance of risks is still slightly tilted to the downside today. Francesco Pesole EUR: Market's favourite The big rally in EUR/USD yesterday was a testament to how markets seem to favour the euro among other currencies in instances when the dollar falls on the back of Fed dovish repricing and US banking concerns. Our perception is that investors favour currencies that can offer both an ongoing domestic tightening cycle and still some room for a hawkish surprise at the coming meetings. In that sense, the euro is one of the very few currencies that can offer this combination at the moment, and we don’t fail to see its attractiveness compared to peers. Our eurozone economist published his European Central Bank preview yesterday, discussing our call for a 25bp rate hike at next week’s meeting. However, he highlights how the chances of a 50bp move are non-negligible and we might revise our call after inflation data and the Bank’s Lending Survey. Markets are currently pricing in 30bp of tightening, so there is still room for the euro’s rate attractiveness to rise, and we cannot exclude that we’ll find ourselves with a much stronger EUR/USD as key central bank meetings kick off next week. Today, a stabilisation around 1.1050/1.1100 seems plausible, although a break above 1.1100 could trigger another substantial rally in the pair. On the data side, the eurozone’s calendar only includes the economic confidence data for April, which is not very market-moving. Individual countries' CPI figures will start to be released tomorrow. Read next: The Commodities Feed: Oil sell-off continues| FXMAG.COM Elsewhere in Europe, the Riksbank hiked by 50bp, but the emergence of two dissenters on the Board and the signal that rates will peak after the next 25bp rate hike translated into a dovish surprise for markets. As discussed in this note, it will be harder for Governor Erik Thedeen to prop up the krona from now on. Francesco Pesole JPY: Don't rule out a hawkish tilt in the BoJ message The Bank of Japan will announce monetary policy tomorrow, for the first time under new Governor Kazuo Ueda. In line with the consensus call, we expect no changes to the policy settings for interest rates and asset purchases. The release of the new outlook report and specifically inflation forecasts will drive a big part of the market reaction. However, there is a possibility that the BoJ will tweak forward guidance, in particular, the very last part of the statement which reads, “interest rates to remain at their present or lower levels". It could also possibly drop the “lower levels” bit, ultimately switching to a more flexible approach and laying the groundwork for a policy adjustment in the future. With not much priced in in terms of policy shift this summer by the BoJ and given the dollar’s weak momentum seen yesterday, USD/JPY looks vulnerable ahead of tomorrow’s risk event in Japan. We still target 128 for the end of the second quarter. Francesco Pesole CEE: Unexpected push from EUR/USD The region received an unexpected positive push from EUR/USD yesterday and despite a slight deterioration in global market sentiment, conditions for CEE FX look quite good. Although energy prices are not playing as much of a role for the region as in the past, gas prices hit record low levels again yesterday. Overall, the CEE region may thus look for new gains in the second half of the week if the euro maintains its push towards stronger levels. We also see a positive picture at the local level where we have seen the first signs of a reversal in the negative trend of falling interest rate differentials after two weeks. Although core rates eventually erased their decline and the differential remained almost unchanged yesterday, we think this should be a local low and rates can support CEE FX again. From this perspective, we think the Czech koruna and Polish zloty may be interesting in coming days. The koruna should start to return to stronger levels in our view as the Czech National Bank meeting approaches, and with a higher EUR/USD at least 23.30 EUR/CZK should not be a problem in the coming days. The Polish zloty continues its two-week rally and should continue its trajectory in the conditions we have described here. Given the region's underperformance over the past few months, we think there is still plenty of room for a rally, and the market can unwind the risk premium built up in the first quarter. A test of 4.580 EUR/PLN can be expected for today. Frantisek Taborsky Read this article on THINK Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
UK Gfk Consumer Confidence index got better fourth month in a row

British pound against US dollar - trading plan by Gven Podolsky

InstaForex Analysis InstaForex Analysis 28.04.2023 13:08
Details of the economic calendar on April 27 The first estimate of the United States GDP for the first quarter showed growth of only 1.1%, while analysts expected 2%. The steady slowdown of the economy and the potential slide into recession are undoubtedly not the best factors for the U.S. dollar, although the U.S. currency did not react at the time of data publication. At the same time as the GDP data, figures for jobless claims in the U.S. were published, where the overall index was forecasted to rise, but actual data recorded a decline. The details of the statistical data show that the volume of continuing claims for benefits fell from 1.861 million to 1.858 million, while the volume of initial claims for benefits fell from 246,000 to 230,000.     Analysis of trading charts from April 27 EURUSD again rebounded from the high of the medium-term trend, and now sellers have a support at the level of 1.1000, which is already known in the market. GBP/USD this week continued to fluctuate within the side channel 1.2350/1.2550 without radical changes. Such situation allows traders to work on the rebound tactic. Economic calendar for April 28 Today, the publication of E.U. GDP data is expected, which may reflect a slowdown in the pace of economic growth. This is not yet a recession, but such a sharp slowdown in growth rates may indicate its approach. Time targeting: EU Q1 GDP – 09:00 UTC EUR/USD trading plan for April 28 In this scenario, the pullback can be considered a transitional stage for the regrouping of trading positions. If the price returns above the 1.1100 level, it may lead to new growth and the prolongation of the medium-term upward trend. However, if the price returns below the 1.1000 level during the day, it may lead to a new stagnation stage and a reduction in long positions volume.     GBP/USD trading plan for April 28 While the quote is within the sideways channel, the rebound tactic remains optimal for traders. However, attention should be paid to the breakout tactic, which can lead to significant price changes and indicate the further direction of movement. If the price holds above the 1.2550 level for 4 hours, a prolongation of the medium-term upward trend is possible. In turn, if the price holds below the 1.2350 level, it may lead to the construction of a corrective movement.     What's on the charts The candlestick chart type is white and black graphic rectangles with lines above and below. With a detailed analysis of each individual candle, you can see its characteristics relative to a particular time frame: opening price, closing price, intraday high and low. Horizontal levels are price coordinates, relative to which a price may stop or reverse its trajectory. In the market, these levels are called support and resistance. Circles and rectangles are highlighted examples where the price reversed in history. This color highlighting indicates horizontal lines that may put pressure on the asset's price in the future. The up/down arrows are landmarks of the possible price direction in the future. Relevance up to 10:00 2023-04-29 UTC+2 This information is provided to retail and professional clients as part of marketing communication. It does not contain and should not be construed as containing investment advice or investment recommendation or an offer or solicitation to engage in any transaction or strategy in financial instruments. Past performance is not a guarantee or prediction of future performance. Instant Trading EU Ltd. makes no representation and assumes no liability as to the accuracy or completeness of the information provided, or any loss arising from any investment based on analysis, forecast or other information provided by an employee of the Company or otherwise. Full disclaimer is available here. Read more: https://www.instaforex.eu/forex_analysis/341727
EUR/USD: Examples of things that could get the market moving are US treasury yields moving out of the range on data improving or deteriorating

Improvement in eurozone economic sentiment starts to level off

ING Economics ING Economics 28.04.2023 14:21
The European Commission's economic sentiment indicator stabilised in April, although the manufacturing sector is struggling. Inflation expectations have eased, suggesting that the peak in underlying inflation has been reached Consumer confidence increased by 1.6 points in April, with people more optimistic about their financial situations Consumption saves the day The European Commission’s economic sentiment indicator stagnated at 99.3 in April, following a reading of 99.2 in March.   Industrial confidence declined for the third month in a row (-2.1) and is unlikely to see much of an improvement in the coming months. Order books have deteriorated, inventories are still at too high a level and production plans have been scaled down. Interestingly, employment expectations have also started to soften. Confidence stabilised in construction. While order books softened, employment expectations still improved. However, with real estate markets tanking in a number of member states and mortgage demand falling, it seems likely that the construction sector will see some weakness in the second half of the year. Read next: Asia week ahead: RBA policy meeting plus regional trade data| FXMAG.COM At the same time, sentiment improved in both the services sector (+0.9) and the retail sector (+0.5), both of which depend strongly on domestic consumption. And indeed, consumer confidence increased by 1.6 points in April, with a better assessment of the financial situation as one of the main drivers. The strong decline in energy prices and rising wages are certainly contributing to this. So, for the time being, eurozone growth is being driven by stronger consumer demand, especially for services, while the manufacturing sector is struggling. However, the positive energy shock will likely peter out, while employment expectations have now been falling for two consecutive months. A softening labour market will probably lead to higher savings, while tighter monetary policy in the eurozone will prove to be a strengthening headwind for the economy. In that regard, we still feel comfortable with the expectation of decelerating growth in the second half of the year. Inflation expectations easing Lower energy prices, improving supply chains and weaker demand are leading to softening selling price expectations in manufacturing, which have fallen back to the lowest level since January 2021. And while selling price expectations in services remain high, they also fell for the third month in a row. That seems to point to some easing in underlying inflation in the months ahead. This is the first set of important data released ahead of the May European Central Bank meeting. However, it doesn’t look as if the current figures will have made the ECB any wiser about the wider economic picture, which is of an ongoing, though uneven, recovery, with inflationary tensions only slowly subsiding. This begs the question whether a rate hike of 25bp or 50bp will be the most appropriate next week. Based on today's data, we have a small preference for a 25bp hike, but more important data will be published before the meeting of the Governing Council. (Read our ECB preview here.) Read this article on THINK TagsInflation GDP Eurozone ECB Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Temporary Investment Slowdown Due to RRF Implementation, Friction with EU Reform

Italy: April confidence data point to a decent second quarter

ING Economics ING Economics 28.04.2023 14:28
April's confidence data report is a relatively positive one, with confidence improving among consumers, builders and service providers, while falling back among manufacturers and retailers. Interestingly, they now all share expectations of a deceleration in inflation Italian consumers are more upbeat Consumers are more upbeat and less concerned about future unemployment Consumer confidence in Italy rose in April for the fourth consecutive month, pushed up by an improvement in the perception of the current economic environment. While consumers are less optimistic about future economic developments, they don’t believe this will translate into higher unemployment risks, according to the index sub-components. This might be due to the belief that there is increasing tightness in the labour market. Interestingly, this confidence has not yet translated into an increased willingness to buy durable goods; consumers are instead choosing to save right now. This could suggest that the sharp decline in the saving ratio seen over the second half of last year (it fell to 5% in the fourth quarter of 2022) possibly reached alarming levels.   Builders still helped by incentive schemes The increase in confidence in the construction sector, more marked among residential builders, suggests that the impact of generous tax incentive schemes (chiefly the so-called super bonus) is still translating into higher activity. With incentives remaining in place and the backlog ample, we expect such resilience to last throughout the year. Services still improving, driven by tourism Confidence in services improved again in April, reaching the highest level since July 2022. Unsurprisingly, the gain was driven by the tourism component, but services to businesses are also reportedly more upbeat. The long-lasting reopening effect seems to be still fully in place, and points to an ongoing re-composition in consumption patterns out of goods and into services. This is reiterated by softening confidence among retailers, who are reporting slower sales and slightly increased inventories. Read next: Improvement in eurozone economic sentiment starts to level off| FXMAG.COM Manufacturing confidence remains soft After posting a temporary rebound in March, manufacturing confidence set back to January/February levels, confirming that the sector is still going through a relatively soft patch. Muted orders and slightly increasing inventories translate into slightly softer current production and production expectations. With the international backdrop still uncertain, industrial production is unlikely to accelerate meaningfully over the second quarter, notwithstanding the ongoing normalisation in supply chain conditions and declining gas prices, which are now flirting with the €40/MWh level. Today’s report also includes the first quarter’s update on capacity use and production constraints for manufacturers. Capacity utilisation was stable at 77.5% and the constraints front confirms that in the current environment, the availability of plants and materials is the main obstacle, followed closely by insufficient demand (stable over the last three quarters) and by an increasing lack of manpower. Interestingly, the increasing relevance of the labour factor at a time when the post-Covid rebound has softened suggests that structural factors and possible supply-demand mismatch in the labour market are currently at play. Somewhat surprisingly, access to funding is still not deemed to be an obstacle to production. At least for industry, the full impact of higher funding costs is failing to show up in the numbers. All sectors now expect declining inflation A common feature among all sectors was the decline in price expectations. While this was, until recently, relegated to manufacturers, which are more exposed to energy price developments, it now also affects services. This is good news for core inflation developments over the second half of 2023. April confidence data tentatively point to positive GDP growth in 2Q23 All in all, today’s confidence report still supports the idea that the Italian economy could post positive GDP growth in the second quarter (we expect a positive reading in tomorrow’s preliminary release for the first quarter). For the time being, indications are that this will be down to services, while the possibility of a positive push from industry is much more uncertain. The ongoing decline in inflation will obviously help, but for a more visible acceleration to materialise we will have to wait for an inversion of the core measure profile as well.      Read this article on THINK TagsItaly inflation Italy Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Gold Trading Analysis: Technical Signals and Price Movements

FX Daily: BoJ asks markets for patience

ING Economics ING Economics 28.04.2023 14:54
European FX markets start the day analysing the Bank of Japan's announcement of an 18-month review of monetary policy. We suspect a change in policy can come sooner. Elsewhere, it is a busy day of key inflation gauges in the US and Europe, plus the first look at 1Q23 GDP across the eurozone. We suspect the dollar can hold up a little longer New Bank of Japan governor Kazuo Ueda USD: Market refocuses on US price data The Bank of Japan (BoJ) has announced it is undertaking an 18-month review of how it has conducted monetary policy over the last 25 years - that is how long Japan has been struggling with deflation. This has disappointed some looking for some early (less dovish) change from the new regime of Kazuo Ueda. The yen has softened modestly and the 10-year JGB yield - a policy target - has dropped 7-8bp. These are not particularly large moves. ING's Min Joo Kang thinks that high inflation and probably a shorter time frame on the review may mean an adjustment in policy comes earlier - and speculation could rebuild over some tweaks in policy ahead of the 16 June BoJ meeting. More will be revealed at Governor Kazuo Ueda's press conference today at 0830CET. In short, we do not think the yen should collapse on this seemingly dovish continuity of policy. Instead, we think the market will prefer to continue holding defensive FX positions, which up until recently has favoured the yen and European FX (backed by a hawkish European Central Bank). US banking stress continues to simmer as seen by a further rise ($7bn) for the Fed's Bank Term Funding Programme and speculation over First Republic's future. Adding to this defensive stance is the view that the Fed may not be quick to cut rates because of sticky inflation. This brings us to US price data. Yesterday, the 1Q23 US GDP figures revealed a firmer-than-expected core PCE price release. That means today's March core PCE figure could surprise the consensus 0.3% month-on-month estimate to the upside and argues that inflation is remaining more stubborn than feared. Today we will also see the 1Q Employment Cost Index.  This is expected at 1.1% quarter-on-quarter and again will be a key input into next week's Fed's decision. The dollar has shown great sensitivity to this price data recently and any upside surprise could trigger bearish US curve flattening and further dollar strength against commodity currencies and emerging market high yielders. European FX should remain a little more insulated given a hawkish ECB and some modest improvement in eurozone GDP data. We have a slight bias that DXY edges up to 102 and does not stray too far from there heading into next Wednesday's FOMC meeting. USD/JPY will want to test higher today, but we suspect the 135/137 region will find good sellers ahead of the second half US recession. Chris Turner EUR: 0.2% all round EUR/USD is consolidating not far from 1.10 as sticky US price data provides something of a pushback to ECB hawkishness and keeps the risk environment fragile. In focus today will be European 1Q23 GDP data. France has already released an on-consensus 0.2% QoQ reading - with the same expected for both Germany and the eurozone a little later. In addition, we will see German April CPI data - expected at an unchanged 7.8% YoY on an EU harmonized basis. We doubt this will really change the market's current pricing of a 30bp at next Thursday's ECB meeting. Our team looks for a 25bp hike.   With US banking stress still bubbling and perhaps some firmish US price data still coming through, it seems EUR/USD bulls will need some patience. EUR/USD could remain stuck around this 1.10 area and be buffeted by month-end flows - especially around the 17CET London WMR fix. Chris Turner GBP: Further consolidation sub 1.2500 for GBP/USD GBP/USD is starting to trade in some tight ranges under 1.2500 as late-cycle US inflation data will keep Fed hawks preoccupied. Pressure does look to be building for a move higher later in the year, however. In the UK, the mood music is slightly improving with business confidence edging higher. Warmer relations with the EU seem to be helping the tone and the UK's competition authority's blocking of Microsoft's takeover of Activision has not hit UK asset markets in a noticeable manner. Read next: Improvement in eurozone economic sentiment starts to level off| FXMAG.COM Today the focus will be on US and European data - which can probably leave GBP/USD in a 1.2400-1.2525 range. EUR/GBP looks comfortable above 0.8800 and may be more driven by what European price data means for next week's ECB meeting. Chris Turner CEE: Another drop in Polish inflation Inflation figures in Poland are on the calendar today. Our team in Warsaw is expecting a further fall from 16.1% to 14.8% year-on-year in April, slightly below market expectations. Disinflation is expected to continue due to the reversal of the energy shock, but core inflation is likely to remain close to the March reading of 12.4% YoY as cost increases continue to feed through to the broader price of goods and services. On the FX market, the CEE region was struggling yesterday to make new gains and the volatile EUR/USD was not making the situation any easier. If Polish inflation surprises to the downside, it may be a confirmation of dovish expectations for the market, adding to the sense that inflation is finally coming under control. This may ultimately push the Polish zloty to further gains. However, in any case, we see that the zloty should benefit from positive global conditions as we mentioned yesterday. Thus, another test of 4.580 EUR/PLN is very likely today. We see the same case for the Czech koruna, however, the main boost for it should come next Wednesday when the Czech National Bank meets. For now, we see that EUR/CZK should not get above 23.50, and on the contrary, we may see some small gains today in preparation for the central bank meeting. The Hungarian forint is back on a trajectory of following global sentiment again since the start of monetary policy normalisation and is regaining its beta against the global story. This could take the forint to 372 EUR/HUF, but we think the next move will be conditional on the EU story. Frantisek Taborsky Read this article on THINK Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
EUR/USD: Examples of things that could get the market moving are US treasury yields moving out of the range on data improving or deteriorating

Stability and Growth Pact set for another makeover

ING Economics ING Economics 28.04.2023 16:33
The European Commission proposed a new reform of the Stability and Growth Pact, putting the emphasis on a more tailor-made medium-term budget consolidation. While there might still be some tinkering on the detail, we believe that the proposal will eventually be adopted The never-ending reform Remember the time that the then president of the European Commission, Romano Prodi, called the Stability and Growth Pact “stupid” because it was too rigid? That was in 2002. Since then, an almost countless number of reform proposals have been advanced and a significantly lower number of actual changes have been made to finetune the pact. Over the last 20 years, there has been a never-ending debate on rules vs discretion, how to implement and enforce the rules, how to ensure sustainable government debt and how to keep the rules ‘breathing’, ie how to avoid pro-cyclical tightening. As regards the avoidance of pro-cyclical fiscal tightening, the so-called ‘escape clause’ was introduced as part of the ‘Six-Pack' reform of the Stability and Growth Pact in 2011. This ‘escape clause’ allows for a temporary deviation from the normal fiscal surveillance in a situation of “general crisis caused by a severe economic downturn of the euro area or the EU as a whole”. At the start of the pandemic, the European Commission activated this general escape clause for the period 2020-2023. This basically put the Stability and Growth Pact on hold, but there was an agreement that from 2024 onwards, some form of fiscal discipline should be reintroduced to guarantee the stability of the monetary union. The European Commission seized the occasion to come up with a proposal to reform the SGP once again. In essence, the European Commission this week proposed reforms, which aim to transform the SGP into a more risk-based surveillance framework that puts public debt sustainability at its core while promoting sustainable and inclusive growth. Important to notice is that the medium-term plans, which will be key, are tailor-made to take into account differences that exist between the different member states. Government expenditure becomes the single most important policy driver. But the hardline number watchers don’t have to worry: the 3% norm for budget deficits and 60% for the debt-to-GDP ratio will still be there! How will this work in practice? At the start of the process, member states will have to design and present plans setting out their fiscal targets, measures to address macroeconomic imbalances and priority reforms and investments over a period of at least four years. These plans will be assessed by the Commission and endorsed by the Council based on common EU criteria. In fact, these national programmes simply bring together already existing plans like the stability programmes, national reform programmes and the latest national plans to apply for funds from the European Recovery Fund. Member states' plans will have to set out their fiscal adjustment paths. These will be formulated in terms of multi-year expenditure targets, which will be the single operational indicator for fiscal surveillance. For countries with a government deficit above 3% of GDP or public debt above 60% of GDP, the ratio of public debt to GDP will have to be lower at the end of the period covered by the plan than at the start of that period; and a minimum fiscal adjustment of 0.5% of GDP per year as a benchmark will have to be implemented so long as the deficit remains above 3% of GDP. A more gradual fiscal adjustment path, extending the adjustment period up to seven years, is possible if a country commits to specific reform and investments. Read next: Federal Reserve preview: A final hike as US recession fears mount| FXMAG.COM Interestingly, the European Commission also proposed a revision to the so-called excessive deficit procedure (EDP); the instrument to enforce compliance with the Stability and Growth Pact. The EDP applies to both the deficit and the debt criteria, even though it has never been triggered by excessive government debt. Why? Because in that case, highly indebted countries would have been under strict fiscal surveillance forever. The European Commission’s proposals keep the rules for government deficit breaches of the 3% of GDP reference value broadly unchanged, while the excessive deficit procedure for public debt breaches of the 60% of GDP reference value is strengthened for both activation and abrogation. It will focus on departures from the net expenditure path that the member state has committed itself to and which was endorsed by the Council under the preventive arm of the Stability and Growth Pact. For a country that faces substantial public debt challenges, a deviation from the agreed net expenditure path will by default lead to the opening of an EDP. Next steps The European Commission aims for the legislative proposal of the new EU fiscal framework to be approved by the European Parliament and the Council by the end of 2023, so that member states and the Commission may discuss draft plans in the first quarter of 2024. 2023 will likely be a transitory year when the existing Stability and Growth Pact legislation still applies, but the fiscal country-specific recommendations for 2024 will already consider some elements of the proposed reform. The aim of the proposals is clear: it is an attempt to combine the almost impossible: investing, reforming economies and still keeping public finances sustainable. The proposals also give the European Commission even more influence and power vis-a-vis the individual countries and capitals. The option to more easily start excessive-deficit procedures on debt can be regarded as a giveaway to the fiscal conservatives. The fact that the European Commission already presented fully written out legislative acts for new regulations will make it harder for member states to make significant changes. To be sure, the Commission has had extensive discussions with member states since presenting its reform orientations in November 2022. These discussions had already resulted in a consensus emerging on some core elements of the reform orientations, adopted by the Council on 14 March and endorsed by EU leaders on 23 March. It could very well be that the discussion now will be an “all or nothing” discussion at the Eurogroup and European Council levels. Interestingly, there hasn’t been a full refusal of the proposals by any member state, yet. It is hard to predict how the discussion will evolve. While some small changes are still possible, we think that eventually the proposal to change the SGP will be adopted. An end to the escape clause and reinstatement of the SGP, be it in its existing or modified form, means that the budgets that have to be drafted this year for 2024 will need to foster some budget consolidation. As budget deficits for the eurozone as a whole are still likely to hover around 3.5% of GDP for 2023, fiscal policy will at least become less expansionary or even slightly contractionary in 2024. Which, in combination with a tight monetary policy, is a recipe for subdued growth next year. Read this article on THINK TagsGDP Eurozone Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Rates Spark: Crunch time

Forex: InstaForex's analyst presents Euro against US dollar trading tips

InstaForex Analysis InstaForex Analysis 02.05.2023 12:04
Good day, traders! There was a massive decline in EUR/USD during yesterday's US session, which broke the bullish momentum that has been going on for the past few days. Now that there is a three-wave pattern (ABC), where wave A represents the downward movement seen on Monday, it would be best for traders to take up short positions up to the 50% retracement level. Set stop loss at 1.10300, and then take profit upon the breakdown of 1.09600 and 1.09000 This trading idea is based on the "Price Action" and "Stop hunting" methods. Good luck and have a nice day! Don't forget to control the risks. Read next: According to InstaForex's analyst, $25K is key for building a bullish trend | FXMAG.COM Relevance up to 09:00 2023-05-03 UTC+2 This information is provided to retail and professional clients as part of marketing communication. It does not contain and should not be construed as containing investment advice or investment recommendation or an offer or solicitation to engage in any transaction or strategy in financial instruments. Past performance is not a guarantee or prediction of future performance. Instant Trading EU Ltd. makes no representation and assumes no liability as to the accuracy or completeness of the information provided, or any loss arising from any investment based on analysis, forecast or other information provided by an employee of the Company or otherwise. Full disclaimer is available here. Read more: https://www.instaforex.eu/forex_analysis/341963
Rates Spark: Balancing data and risk factors

This week Federal Reserve and ECB decide on rates. US Labour market data go public on Friday

Michael Hewson Michael Hewson 02.05.2023 13:33
Federal Reserve rate decision – 03/05 – a lot has happened since the Fed last raised rates by 25bps in March in the teeth of concern over financial stability and the US banking system. While this is still reverberating it seems to be being contained and there is little evidence it is materially affecting the US economy. While some of the recent manufacturing data has shown increasing signs of disinflation, the same can't be said to the same extent in services and food prices. This is likely to temper any sort of guidance that Fed officials might deign to offer in the aftermath of this week's decision. The consensus would appear to be that the jobs market is starting to slow but not by enough to suggest that it is likely to see a drag on demand. The recent earnings numbers from the likes of JPMorgan Chase and Bank of America suggest that the consumer remains in decent shape and one year inflation expectations did show a sharp rise in March. This would suggest that we are likely to see a 25bps rate hike this week, with the main challenge facing Powell set to be keeping his options open about further moves. It's unlikely that Powell will row back on his view that there won't be any rate cuts this year.  US non-farm payrolls (Apr) – 05/05 – last month's jobs report reset the bad data narrative of a slowing US economy that had driven US 2-year yields to a low of 3.65% in early April, with the March payroll numbers seeing 236k jobs added, while the unemployment rate fell to 3.5% even as the participation rate rose to 62.6%. The March jobs data appeared to suggest that people are finally returning to the workforce as the cost of living continues to squeeze consumer finances. It also suggests that the JOLTs numbers will continue to come down, as more people return to the work force, having seen these numbers fall below 10m for the first time since May 2021 in February. Wages data fell from 4.6% to 4.2%. With the Federal Reserve expected to announce another 25bps rate hike this week, the April payrolls report should inform whether we can expect to see another 25bps in June or whether the Fed is done.  Read next: Monitoring Hungary: Gloom with some silver linings| FXMAG.COM ECB rate decision – 04/05 – Tuesday's EU flash CPI numbers for April could be the swing factor as to whether we get a 25bps move or a 50bps move by the ECB when it meets this week. We've had a raft of ECB officials over the past few weeks say that there remains a long way to go before the ECB starts to consider a pause in its rate hiking cycle, and this week's core CPI print could prompt a continued aggressive approach. There is a risk that the ECB could over play its hand given what is already happening with PPI, having seen sharp falls from highs of 43.3% back in August last year, and are now down at 13.2%, with month-on-month readings now starting to come in negative.
Yesterday DAX closed at its highest level this year. Today ECB's Lagarde and Fed's Powell speak

Negative impact of ECB tightening cycle and banking turmoil is unfolding

ING Economics ING Economics 02.05.2023 23:15
Weaker demand for loans, tighter lending standards and already muted loan growth support our view of a 25bp rate hike at Thursday's European Central Bank meeting Christine Lagarde, president of the European Central Bank   We have just seen two of the three pieces of data being published today that are likely to tilt the balance at Thursday’s ECB meeting towards either a 50bp or a 25bp rate hike. Just-released loan growth data and the results of the Bank Lending Survey support our call for a compromise 25bp hike. Weaker demand for loans points to subdued growth The March ECB meeting took place at the height of the banking turmoil without a direct or visible impact on the eurozone banking sector or the real economy. Still, the discussion at the March meeting showed growing concern amongst ECB officials, putting more focus than ever on today’s data releases and any hints at the potential impact on the transmission of monetary policy tightening so far. And indeed, credit conditions have clearly tightened since the start of the banking turmoil, according to April's Bank Lending Survey results. At the same time, demand for loans also dropped strongly, driven by higher interest rates, lower investments and the weakening housing market. The pace of net tightening in credit standards is at the highest level since 2011 as the net percentage of banks reporting a tightening stands at 27%. Surveyed banks also reported a strong net decrease in demand from firms for loans or drawing of credit lines. At the same time, the net decrease in demand for housing loans remained strong and was close to the drop reported in the last quarter. Interestingly, the drop in demand for corporate loans was much more spread across eurozone countries; in the first quarter of the year, it was mainly German banks which reported a drop in demand for corporate loans, now France, Italy and Spain are also reporting a sharp drop. Read next: How the EU's carbon border tax will affect the global metals trade| FXMAG.COM This slump in demand for new loans was also reflected in the March monetary developments. The annual growth rate of adjusted loans to households decreased to 2.9% in March from 3.2% in February, while the annual growth rate of loans to corporates dropped to 5.2% in March, from 5.7% in February. More importantly, after the February drop in monthly flows, the monthly flow of credit to the private sector was only marginally positive. The outflow of deposits also continued in March. While this outflow in February was driven by retail deposits and financial corporations, it is now also corporates withdrawing deposits. Weaker demand for loans, tighter lending standards and already weak loan growth all point to a weakening of growth momentum in the eurozone economy in the months ahead. Very strong transmission of current tightening cycle Back at the March meeting, ECB president Christine Lagarde said that three factors were key in the ECB’s current policy decisions: “The inflation outlook in light of the incoming economic and financial data, the dynamics of underlying inflation, and the strength of monetary policy transmission”. The first part of today’s super data Tuesday suggests that in regards to the current ECB’s tightening cycle, the transmission is strong with this one… Read this article on THINK TagsMonetary policy Inflation Eurozone ECB Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
FX Daily: Time for the dollar to pause?

Eurozone inflation surprisingly increased in April

ING Economics ING Economics 02.05.2023 23:24
Headline inflation was slightly up while core inflation was slightly down. This makes April inflation in the eurozone sticky and underlines the need for further rate hikes, albeit at a slower pace and smaller magnitude than before Eurozone inflation surprised to the upside in April   Eurozone inflation surprised to the upside and came in at 7.0% year-on-year in April, from 6.90% YoY in March. Core inflation dropped marginally to 5.6%, from 5.7% in March. The unexpected increase is the result of a bounce back in energy price inflation, after the strong negative base effect in March, and slightly higher service price inflation. As with GDP growth last week, inflation divergence across the monetary union is high, reflecting different government energy price caps, subsidies and pass-throughs from wholesale to retail energy prices. In April, headline inflation ranged from 2.7% YoY in Luxembourg to 15% YoY in Latvia. In April, headline inflation ranged from 2.7% YoY in Luxembourg to 15% YoY in Latvia. Looking ahead, inflation developments in the eurozone will be determined by two rather opposing forces: on the one hand, negative base effects on energy and food prices as well as dropping selling price expectations in industry argue for a further drop in headline inflation. On the other hand, still high selling price expectations in services as well as wage increases are likely to fuel underlying inflationary pressures. As a consequence, we expect headline inflation to continue falling, while core inflation will remain sticky. As ECB Executive Board member Isabel Schnabel said recently: “I would not overemphasise the peak [in core inflation] as such, because what really matters is that inflation is returning to our two percent target over the medium term. We need to see a sustained decline in core inflation that gives us confidence that our measures are starting to work”. Today's data strengthen our call of a 25bp rate hike on Thursday Over the last year, inflation in the eurozone, which started as a supply-side issue, has become a demand-side issue. This is a clear invitation for the ECB to continue hiking interest rates. While there is very little a central bank can do to lower oil prices or to stop a war, there's a lot a central bank can do to stop too much money chasing too few goods: bring down demand. And this is exactly what the ECB will continue doing on Thursday. Even if headline inflation has come down and will come down further, this is not yet the moment of relief. The ECB doesn’t want to repeat the previous mistake of underestimating inflation and will therefore be willing to go too far, even if this eventually turns out to be a policy mistake.   Read next: Negative impact of ECB tightening cycle and banking turmoil is unfolding| FXMAG.COM The only open question is whether the ECB will go for 25bp or 50bp. Out in the open, only Austrian central bank governor Robert Holzmann has been advocating 50bp. The other hawks, like Isabel Schnabel, recently left the option of 50bp open but didn’t officially subscribe to it. Sticky inflation data clearly stresses the need to continue hiking but with last week’s weaker-than-expected GDP growth report and today’s weak loan growth and loan demand data, the case for slowing down the pace and size of rate hikes has become stronger. We stick to our call of a 25bp rate hike on Thursday. Read this article on THINK TagsMonetary policy Inflation Eurozone ECB Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
ECB cheat sheet: Difficult to pull away from the Fed

ECB cheat sheet: Difficult to pull away from the Fed

ING Economics ING Economics 04.05.2023 10:30
The European Central Bank looks set to deliver at least two more hikes in this cycle. EUR swap forwards roughly agree with our forecast but EUR rates can only de-couple from their USD equivalents for so long. We see some downside risks for EUR/USD ahead of a 25bp compromise hike by the ECB this week, especially after the FOMC risk event Source: ING No clear mispricing at the front-end of the EUR curve... Assuming the upcoming inflation data and Bank Lending Survey (BLS) don’t give more ammunition to the hawks, the 25bp ‘compromise hike’ shifts the focus to how long the current hiking cycle will go on. We think one more hike after this week’s, but markets are open to a further additional hike, presumably in July. From there, the curve implies pressure on the ECB to reverse these hikes will build pretty much immediately, likely due to Federal Reserve rate cut expectations. This is where the greatest difference with our own view lies. The end of the Fed’s own hiking cycle and the rise in EUR/USD (see next section) certainly lessens the pressure on the ECB to keep hiking past the summer, but core inflation won’t allow it to cut until at least the second half of 2024. What should increasingly drive the level of long-end interest rates is expectations about how far the ECB will cut rates in the next cycle The above doesn’t translate into a clear signal for EUR rates with forwards slightly above our forecast in the near term and slightly below next year. Instead, what should increasingly drive the level of long-end interest rates is expectations about how far the ECB will cut rates in the next cycle. Barring a severe recession, our view – and the market’s – is that this cutting cycle will prove a shallow one, with the deposit rate stabilising at 2.5%. As usual this is, in effect, an average of two scenarios, one where the ECB cuts rates aggressively, and one where inflation prevents it from cutting altogether. The swap curve implies that the room for the ECB to cut rates is limited Source: Refinitiv, ING ... but pay attention to the downside risk at longer tenors Given growing recession fears in the US, and doubts about the banking system’s ability to provide credit to the economy, we think the downside scenario warrants more attention. In a world where the ECB were to cut interest rates all the way down to zero by end-2025, even followed by a slow hiking cycle afterwards, we would see 5Y and 10Y swap rates bottom between 1.5% and 2% in the second half of 2024. This compares to a trough of around 2.5% and 3% in our base case. Of course, the above is an extreme scenario but it illustrates the downside risk to European rates in the coming months as the Fed ends its hiking cycle, and shifts to easing. The crucial question is to what extent European rates can decouple from their US counterparts. Our view is that the ECB will keep rates at their peak for around a year before cutting them, but this won’t prevent forwards from pricing more and more aggressive rate cuts, the way the US curve has done in anticipation of rate cuts starting in 2023. Only in the most dire economic scenario would swap rates return to the sub-1.5% area Note that the above estimate differs from its historical relationship. In our view, only in the most dire economic scenario would swap rates return to the sub-1.5% area as markets have durably shifted higher their estimate of the long-term neutral interest rates. This means that, in the same way that the higher the peak, the more subsequent cuts the curve implies so the deeper the bottom in the future cutting cycle, the more hikes the market will imply. Sharper rate cut expectations would send swap rates down but not as low as in the previous cycle Source: Refinitiv, ING FX: Moderate downside risks for EUR/USD From an FX perspective, we need to assess the impact on EUR/USD given the combination of both the Fed (Wednesday) and the ECB (Thursday) policy announcements. If our baseline scenario for both central banks proves right, we would see the Fed hike by 25bp and say that rate increases “may yet be appropriate” (here is our full FOMC preview), and the ECB follow with the same rate increase, stick to data dependency but hint at more tightening. Rate expectations indicate that markets are convinced this will be the peak of the Fed’s tightening cycle and price in around 50bp of cuts by year-end, while the ECB is expected to hike by another 50bp after this week’s increase and keep rates at the peak at least into year-end. This means that the bar for a hawkish surprise by the ECB is significantly higher, and we suspect President Christine Lagarde and her colleagues would probably struggle to exceed hawkish expectations. Read next: Eurozone inflation surprisingly increased in April| FXMAG.COM Incidentally, EUR/USD positioning has been quite stretched on the long side lately, which points to some short-term upside resistance for the pair. EUR/USD net long positions were worth 22% of open interest, which is significantly above its recent average and standard deviation, and close to the five-year highs (27% of open interest). EUR/USD positioning Source: CFTC, Macrobond, ING   On balance, we see room for EUR/USD to pull back to the 1.0900 mark as a result of the combined effect of the FOMC and the ECB impact. The stretched positioning and very hawkish expectations on ECB tightening suggests the balance of risks for the euro ahead of the ECB is slightly tilted to the downside. Read this article on THINK TagsInterest Rates Foreign exchange ECB meeting Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Rates Spark: Nothing new on the dovish front

Even if a 25bp ECB rate hike is the most probable variant, 50bp still seems to be on the cards

ING Economics ING Economics 04.05.2023 11:26
Last night's market reaction to the Federal Reserve's 25 bps rate hike was a relatively benign one with US stocks finishing the day lower on disappointment that Powell ruled out the prospect of rate cuts soon, although the fall in yields suggests that bond markets believe they are coming. European markets managed to finish the day cautiously higher, although the gains were modest compared to the declines seen the day before. In light of yesterday's negative US finish, today's open looks set to be a negative one. US futures have also slipped back after PacWest Bancorp became the latest regional bank to say it was looking at strategic options in light of recent share price weakness, following First Republic last weekend, as it looks to secure new capital, or some sort of rescue package. The removal of the language that signalled that more hikes were coming was a notable omission from the Fed statement, and while not inherently dovish, struck the right tone in acknowledging the recent change in financial conditions. Powell's press conference was uneventful, and while markets appear to be reading the Fed's actions as a pause, the Fed chairman was quick to push back on the idea that rate cuts were on the way, although bond markets still appear to think otherwise. Powell also said that the Fed's next move would depend on how the data and events evolved, but in the context of a tight labour market and high inflation levels, which the Fed doesn't expect to come down quickly, it appears policymakers want markets to believe that rates are likely to remain high for some time to come. The big question for markets now given last night's decision is what comes next, with the next key economic announcement due tomorrow in the form of the April payrolls report, which is yesterday's ADP and ISM reports suggests that the labour market still has plenty of scope to add new jobs, and service level inflation remains sticky. We also have weekly jobless claims which are expected to rise to 240k, from 230k. Before that we have the ECB rate decision, which is expected to follow suit with a 25bps rate hike of its own, although there is a chance, we could see them move by 50bps. Earlier this week flash CPI in the euro area for April edged higher to 7%, while core CPI slipped back to 5.6% from the record high of 5.7%. Many have suggested that this means it is more likely that the ECB will take a step down from its 50bps rate increase increments, and hike by 25bps later today. While that may well still happen, it doesn't chime with recent comments from a number of ECB governing council members over the past few weeks who have said that there remains a long way to go before the ECB starts to consider a pause in its rate hiking cycle. The ECB is already well behind other central banks in its rate hiking cycle and yesterday EU unemployment fell to a new record low of 6.5%. That might prompt a more aggressive posture today and a 50bps move on the basis that it is better to do too much when it comes to inflation than do too little. That is certainly the German view, and it's not a minority one so how ECB President Christine Lagarde navigates this particular maze will be instructive, when she holds her press conference. Read next: Expect the ECB to keep increasing rates at the short-term, at least until the summer| FXMAG.COM A more aggressive hike might come with a similar tone to Powell yesterday, rather than a more tepid 25bps move, which would probably have to come with a slightly more hawkish tone.     There is a risk that the ECB could overplay its hand given what is already happening with PPI, having seen sharp falls from highs of 43.3% back in August last year, and could fall to 5.8% for March later this morning, with the month-on-month readings now starting to come in negative. With unemployment where it is, and this morning's April services PMIs expected to be strongly positive, there may be a feeling that the ECB can afford to take the risk of a more aggressive hike. In the UK, the economy has managed to get off to a better-than-expected start to the year, with today's April services PMI expected to be similarly positive with an improvement to 54.9. UK mortgage approvals are also expected to improve in March with a rise to 46k from 43.5k, while net consumer credit is expected to slow to £1.2bn from £1.4bn. Forex EUR/USD – failed again just shy of the 1.1100 area yesterday with a break above 1.1120 needed to signal further gains towards 1.1200. The bottom of the range remains at the 1.0940 level. Below 1.0940 retargets the 1.0870 level. GBP/USD – pushed up to a new 11-month high at 1.2590 yesterday with key resistance remaining at the 1.2630 area. We need to see a move through 1.2630 or risk a return to the 1.2340 area.  EUR/GBP – still chopping with support at the 0.8760 area this week, falling back from the 0.8840 area yesterday. We still have potential for further declines towards the 200-day SMA at 0.8730. A break above the 0.8870 area suggests a retest of the March peaks of 0.8925. USD/JPY – continues to look soft after this week's push up to the 137.80 area, giving up the move above the 200-day SMA, which suggests we could see further losses. The fall below 135.20 to 134.80 could be a signal for a return to the 132.80 area. FTSE100 is expected to open 20 points lower at 7,768 DAX is expected to open 6 points lower at 15,809 CAC40 is expected to open 9 points lower at 7,394
ECB's Christine Lagarde not to announce the end of rate hikes?

ECB's Christine Lagarde not to announce the end of rate hikes?

Ipek Ozkardeskaya Ipek Ozkardeskaya 04.05.2023 11:34
As expected, the Federal Reserve (Fed) raised the interest rates by another 25bp yesterday, and hinted at an eventual pause 'to wait and see' what happens from now.   Fed Chair Powell said that the Fed is 'prepared to do more', and that a decision on a pause 'was not made' this week, and that the future of the US rate policy would depend on the economic data.   And he said that 'conditions in the banking sector improved since early March'.   BUT PacWest, another US regional bank, saw its share price slump by more than 50% in the afterhours trading, after the bank announced that it considers strategic options like a breakup, capital raising or a sale. It looks like more trouble is brewing for the US banking sector, on the contrary of what Powell said yesterday.   Anyway, the idea of a pause may have pleased investors - because the bank failures help tightening the lending conditions and throw a solid ground for a pause in rate hikes. But what pleased investors less is Powell pushing back on a potential rate cut later this year. It's normal. For him, there is no problem with the US regional banks, and all is fine.   The problem is, yes, the equity markets sold off on the very-predictable announcement that there would be no rate cuts, and yes, the S&P500 slid 0.70%, and Nasdaq 100 gave back 0.64% yesterday, but there are two markets that don't believe Powell.   One is the US sovereign bond market, where the US 2-year yield plunged to 3.80% yesterday, as traders priced in at least three rate cuts in the second half of this year.   And two: oil markets, that fully take into account the banking crisis and that refuse to buy the idea of a possible 'soft landing' in the US economy.   The barrel of US crude slumped to $63pb yesterday; even the EIA revealing a 1.3-mio-barrel fall in US inventories, or the blowout ADP report showing that the US economy added almost 300'000 new private jobs in April, almost double the 150'000 penciled in by analysts didn't help.   ECB to hike, but not hint at a pause.  In Europe, the European Central Bank (ECb) is also expected to announce a 25bp hike when it meets today. The strong decline in bank lending – as a result of bank stress, and signs of slowing inflation – despite last month's rally in energy prices, hint that a 25bp hike could be more appropriate in Eurozone this week than a 50bp hike.   This being said, ECB Chief Christine Lagarde will certainly not announce the end of the rate hikes in the Eurozone. She will likely stay firm on the ECB's determination to fight inflation, and insist that the economic data will determine the size of the upcoming ECB actions.   Read next: Expect the ECB to keep increasing rates at the short-term, at least until the summer| FXMAG.COM The EURUSD rallied to 1.1090 after the Fed decision, as the US dollar sold off on the idea that the Fed will now take a breather and pause the rate hikes, and perhaps on the idea that the ongoing bank stress will likely make the Fed change its mind regarding a rate cut later this year.   While I still don't believe that a Fed rate cut will be on the menu for this year, the back-to-back US regional bank failures make me wonder if I am not too stubborn.   Anyway, the divergence between a softer Fed, and a fairly decided ECB to fight inflation, should continue pushing the EURUSD higher. The next target for the euro bulls stands at 1.1254, the major 61.8% retracement on 2021-2022 selloff.  Across the Channel, Cable rallied past 1.2590 as Credit Suisse increased its estimate for the peak Bank of England interest rate from 4.50% to 4.75% saying that recent positive surprises to growth, high inflation and labour market do back a higher end rate. The BoE will announce its own decision next Thursday.   In precious metals, gold spiked to $2080 on the back of a slide in US yields, the softer dollar after the Fed announcement and further bank stress. At the current levels, the upside potential depends mostly on what will happen on the US yields front. There is a strong negative correlation between the US yields and gold's valuation. It's normal. Lower yields decrease the opportunity cost of holding the non-interest-bearing gold and increases appetite for gold investors. And we see that this correlation is even stronger at the time of rising bank stress. Therefore, a potential escalation in bank stress could support gold, but gold needs persistent downside pressure in the US yields to reach and to breach the $2100 resistance.
Small factors combine to pressure credit

Rates Spark: No peak rate in Europe, not yet anyway

ING Economics ING Economics 04.05.2023 11:46
The Fed did what was discounted, and the challenge now is to prevent market expectations for cuts from going too deep. We find that low inflation breakevens support cuts, and we still expect these in 4Q. The ECB tightening cycle will continue after today’s 25bp hike. If calls for Fed cuts are right, USD-EUR rates convergence should reverse late this year Market breakeven inflation rates support a Fed pause here, and indeed support future cuts The impact reaction to the FOMC outcome was more downward pressure on market rates, driven by lower real rates, as breakeven inflation rates have edged higher. But that morphed into upward pressure on market rates, dominated by rises in breakeven inflation. This is an interesting reaction, suggesting a rise in market inflation concern remains in the period ahead. At the same time, the 10yr breakeven inflation rate at 2.2% is at a very tolerable level, impliedly discounting a return to 2% inflation. It's even more striking when you look at the 2yr breakeven, which is now at 2.05% and looking like it could dip below 2% if it keeps up the pace of decline seen in recent weeks. These breakeven trends support the Fed pause, and indeed provide room for eventual cuts, should delivered inflation actually trend towards the breakeven expectations. The 10yr breakeven inflation rate at 2.2% is at a very tolerable level We also note that all rates are up 25bp, including the rate on the reverse repo facility, now at 5.05%. Also the rate on the standing repo facility is up to 5.25%. And the rate on excess reserve is up to 5.15%. So no surprises there. All bands have been kept intact right through the rate hiking cycle. The Fed has concentrated on getting all rates higher throughout the process as opposed to any finessing of the different rates that it employs to manage other aspects of policy. Meanwhile, some US$3trn remains in bank excess reserves at the Fed and over US$2trn continues to go back to the Fed on the reverse repo facility. These are measures of the ongoing elevated size of the Fed’s balance sheet. The Fed’s reversal policy here also remains as was, as it continues to allow some US$60bn of Treasuries and US$35bn of mortgage backed securities to roll off their balance sheet on a monthly basis. That also tightens conditions. No material directional impulse from this outcome. We continue to view 3% as a medium-term level that market rates can aspire to getting towards. The 10yr yield should get there first, while the 2yr will be constrained by Federal Reserve reluctance to nod towards cuts too soon. The 5yr area of the curve should remain quite rich in the months ahead, as the inversion on the 2/5yr segment remains deep. That will change later in the year though as the 2yr finally becomes untethered from the fund rate as cuts are more clear and imminent. Falling break-even inflation is a comforting sign for the Fed as it signals a possible pause Source: Refinitiv, ING ECB: Inflation outlook in lieu of forward guidance Economic data of late, disappointing first quarter growth and tighter lending conditions, allow the European Central Bank (ECB) to ‘downshift’ from a 50bp hike in March to 25bp today. This is not to say the inflation fight is over. There isn’t much cause for celebration in the most recent inflation report and the central bank very much remains in a tightening mode. We don’t expect it to give much indication on its next policy steps, but inflation worries should make it clear enough that at least one more hike is needed after today. Inflation worries should make it clear enough that at least one more hike is needed after today It will also be interesting to see how prominent is the debate on the speed at which policy tightening is reaching the economy, the famed 'transmission mechanism'. Judging by the most recent Bank Lending Survey (BLS), the answer seems to be fairly quickly. One should be wary of relying on a single indicator, however. This will take time to affect inflation in any case and,  in the meantime, the ECB can ill afford a dovish policy error. This is the key reason why we see the differential between US and European policy rates narrow this year. US-Germany yields differentials can keep tightening for a few more months, until the Fed starts cutting Source: Refinitiv, ING The Fed and risk appetite as breaks on the ECB's ability to hike It is an open question how much longer euro rates can decouple from their dollar counterparts, however. There are historical precedents where the ECB’s hiking cycle went on for around a year after the end of the Fed’s (in 2006-2007), but the more severe the recession in the US, and so the greater the contagion to Europe, the shorter that lag. Rates convergence looks set to continue over the coming weeks and months, as 10Y Treasury yields dip towards 100bp above Bund, and is now more than 12bp below that of 10Y gilts. Our guess is that once Fed cuts become a reality, it will be difficult for the euro and sterling curves not to price more rate cuts. Once Fed cuts become a reality, it will be difficult for the euro and sterling curves not to price more rate cuts Besides the Fed, another important factor on the ECB’s next policy steps will be how risk appetite develops. Sovereign spreads have got over the ECB’s tightening, with realised volatility at its lowest level in a year. Other indicators of financial conditions, for instance money market spreads, send a similarly sanguine signal, despite recent banking worries. In a special question as part of the BLS, banks responded that the ECB’s bond portfolio is contributing to a worsening of their liquidity position and of market financing positions. This might give the ECB pause as it nears a decision on a potential acceleration of quantitative tightening (QT), currently running at a modest €15bn per month. Sanguine sovereign and money market spreads might embolden the ECB to accelerate QT Source: Refinitiv, ING Today's events and market view European services PMIs will set the stage for today’s ECB meeting. Only the Spanish and Italian ones are first readings. The picture, judging by consensus estimates, is still one of ongoing expansion (in contrast to the manufacturing sector). Eurozone PPI is expected to confirm the dis-inflationary trend. The ECB is not the only central bank on the calendar - the Norges Bank will meet in the morning. Bond supply will come from Spain (3-7Y and linkers) and France (10-50Y). Our call for the ECB is to hike rates by 25bp hikes but amid vocal hawkish pushing for a larger 50bp move. There was little to celebrate in the recent inflation data but the tightening of credit conditions might feature more prominently in its outlook following the result of the recent BLS. US data won’t be any lighter with Challenger job cuts, trade balance, jobless claims, productivity, and unit labour costs. Read this article on THINK TagsRates Daily Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
According to InstaForex analyst, demand for British pound may not increase soon

FX Daily: Transatlantic divergence keeping EUR/USD bid

ING Economics ING Economics 04.05.2023 11:51
EUR/USD remains close to the highs of the year as a Fed pause and simmering banking crisis cut the dollar's short-term yield advantage over the euro. Today should see a 25bp ECB hike and it is now probably stretched positioning which is the biggest headwind to further EUR/USD gains. Also, look out for a 25bp hike from Norges Bank today USD: That's all folks When contributing to ING's Fed review comment last night, the dollar was only slightly weaker at the end of Chair Jerome Powell's press conference and the US yield curve had barely budged on the news that the Fed was shifting to a meeting-by-meeting approach to monetary policy setting. However, in the final few hours of US equity trading, US regional banks - especially PacWest - came under renewed pressure on reports that Pacwest was 'exploring options'. Given that First Republic equity and bondholders were wiped out this week, that clearly caused some concerns. The point here is that the 15bp decline in US two-year yields overnight seems to have been driven by the banking crisis - not the Fed commentary. Nonetheless, the dollar's yield advantage continues to dwindle, leading to some modest weakness in the DXY - now down around 0.5% on the week. The nature of the decline in US yields has relevance for the FX market as this is not the kind of benign dollar decline that benefits all currencies. Those currencies with the highest correlations to US equities look more exposed (e.g. the commodity currencies of the Canadian and Australian dollars), while the least correlated - such as the Japanese yen and Swiss franc should outperform. This would be our near-term preference given that the US banking crisis is showing no signs of slowing. This also raises the question of what US policymakers can do here with an increasing focus on whether the FDIC can somehow increase deposit insurance coverage - at least for transactional or business accounts. Watch this space. For today, a lot of the focus will be on the European Central Bank meeting. But in the US, there will again be focus on the initial jobless claims numbers and whether any substantial rise (dollar bearish) signals some easing in US labour supply. The big data comes with the April nonfarm payrolls report released tomorrow. Overall expect DXY to stay soft - unless we start to see any dislocation in US money markets again such as a sharp widening in the euro cross-currency basis swap or a much higher FRA-OIS money market spread. The DXY year low is around 100.75/80, below which 100 beckons. Chris Turner EUR: Positioning is probably the biggest headwind to EUR/USD EUR/USD remains close to the highs of the year - but has yet to take out the 1.1100 level. Today should see the ECB hike rates 25bp (taking the deposit to 3.25%) and the language should remain quite hawkish given sticky core inflation. Markets price, after today, two further 25bp rate hikes into October - at a time when the market is also pricing Fed cuts. This is helping to narrow two-year EUR:USD swap differentials. At 65bp in favour of the dollar these are at the narrowest levels of the year and EUR/USD supportive. There is a risk that the hawkish ECB sends EUR/USD through 1.1100 today, but a) long positioning is quite stretched and b) a hawkish ECB is priced. This warns that EUR/USD could hang around this 1.10 area a little longer - particularly were the US equity sell-off to gain momentum. Also, watch out for how EUR/USD trades after the 16CET FX options expiry today. There is some talk that an FX options barrier is being protected at 1.1100. Chris Turner Elsewhere, Norges Bank is due to hike its policy rate by 25bp, in line with its recent commitment to take rates a few notches higher as inflation has remained sticky and – above all – the krone has remained weak. Since the latest policy meeting in March, NOK has continued to depreciate, although largely in line with the bank’s projections. So, a surprise larger hike seems unlikely, also considering the vulnerability of the domestic property market. We discuss the relevance of the krone for Norges Bank’s policy and the outlook for NOK in this note published earlier this week. In a nutshell, we expect limited NOK impact today, NOK volatility and vulnerability to remain the norm in the near term, but a recovery in the second half of the year, when we target sub-11.00 levels in EUR/NOK.  Francesco Pesole GBP: Softer dollar helping GBP/USD One could be forgiven for thinking that there has been a major re-appraisal of sterling now that GBP/USD is trading closer to 1.26. In fact, this is mostly a dollar move and trade-weighted sterling has not moved much this week. It seems that the view that European banks, including the UK, are better regulated than those in the US is providing some insulation to European currencies. This is also helping to keep expectations alive (expectations with which we disagree) that the Bank of England can hike rates two to three more times this year. Our latest views are that the BoE may not push back against these expectations next week - which would see sterling hang onto recent gains. Expect EUR/GBP to remain steady (slight upside bias) near 0.8800, while GBP/USD could trade up to 1.2650/2750 - should EUR/USD manage to break through 1.1100 with momentum. Chris Turner  CEE: Post-Fed sentiment will decide whether region can rally The Czech National Bank (CNB) delivered the most hawkish message possible without hiking rates. For the first time since August last year, there was more than one vote for an interest rate hike and the governor said there is a possibility that the CNB will hike rates at its June meeting. With two new inflation numbers in hand by then, which should show a big downward slide, we do not think a rate hike will happen. However, the CNB will remain the most hawkish central bank in the region. Read next: Rates Spark: No peak rate in Europe, not yet anyway| FXMAG.COM Of course, the global story today will be more important for FX in the region, but we still believe the CZK will catch up with the massive interest rate increase in the market. For now, according to our models, the higher interest rate differential points to a range of 23.30-40 EUR/CZK. However, we can expect rates to rise further in the market today before the dust settles and we will see more headlines from the CNB. On the other hand, if global market sentiment turns negative after the Fed meeting, it may slow or halt the koruna's rally. However, a higher EUR/USD indicates stronger levels for the rest of the region as well. Frantisek Taborsky Read this article on THINK Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Euro and European bond yields decreased after the ECB decision. The end of tightening may be close

Euro and European bond yields decreased after the ECB decision. The end of tightening may be close

Ed Moya Ed Moya 04.05.2023 15:57
ECB will ensure that the policy rates will be brought to levels sufficiently restrictive ECB expects to discontinue the reinvestments under the APP as of July ECB slows rate hiking pace to 25bps (as expected), bringing key rate to 3.75% The ECB kept the door open for more hikes but it looks like they are positioning for the June or July meeting that takes rates to a restrictive level.  They will be data-dependant as they are aware that the lags and strength of transmission to the real economy remain uncertain. Inflation is too high so they had to say that they will ensure that the policy rates will be brought to levels sufficiently restrictive to achieve a timely return of inflation to the 2% medium-term target. The ECB slowed their rate hiking pace to a quarter-point, bringing the Main Refinancing Rate to 3.75%, one of the lowest rates against the other major central banks.  These last few meetings were supposed to be the time when the ECB plays catch up with their rate hikes, but it is starting to look like they might be done tightening soon. Read next: Earnings season: Shell profits hit $39.87bn beating 2008 record of $28.4bn| FXMAG.COM The euro tumbled alongside European bond yields after the ECB statement.  US jobless claims posted the biggest rise in six weeks and a hot unit labor cost report for the first quarter also gave the dollar some support.  Jobless claims rose 242,000, slightly above the 240,000 consensus estimate and an increase from the prior 230,000 reading.  The US labor market is softening, albeit not quickly enough to justify rate cuts. Sticky US inflation should keep the Fed on hold until year end. All eyes will be on ECB’s Lagarde press conference as she will have a lot to clarify from the statement. Content is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Business Information & Services, Inc. or any of its affiliates, subsidiaries, officers or directors. If you would like to reproduce or redistribute any of the content found on MarketPulse, an award winning forex, commodities and global indices analysis and news site service produced by OANDA Business Information & Services, Inc., please access the RSS feed or contact us at info@marketpulse.com. Visit https://www.marketpulse.com/ to find out more about the beat of the global markets. © 2023 OANDA Business Information & Services Inc. Euro craters after the ECB signaled they are almost done tightening - MarketPulseMarketPulse
Rates Spark: Crunch time

ECB cuts rate hike, but unlikely to stop

Alex Kuptsikevich Alex Kuptsikevich 04.05.2023 15:14
The European Central Bank raised interest rates by a quarter of a percentage point to 3.75%, duplicating the Fed's move the day before. This was the move that market analysts had been predicting, although some central bank officials had been talking about the need for a 50-point hike for weeks. The market may have priced in some probability of such a move, which put pressure on the Euro following the rate announcement. In a published commentary, the ECB reiterated that inflation has been "too high for too long". The bank continues to focus on solid underline price pressures despite the decline in the headline annual rate. Like the FOMC, the ECB today reminded us of the time lag between interest rate changes and their economic impact. The market took this as a willingness to pause on further hikes. However, we must be cautious with this interpretation, as this comment could also justify a smaller hike rather than signalling a pause. The ECB has started to raise rates later than the Fed, with higher peak inflation. From this point of view, it is logical to expect that rate hikes will also end later. In 2007-2008, the ECB had a rate of 4% before raising it to 4.25% for six months in response to a surge in energy prices. This time, the ECB will likely continue raising rates sooner than in 2008. The potential for further hikes in Europe and a pause in America could drive a gradual rise in European currencies against the dollar in the near future.
Small factors combine to pressure credit

Lagarde keeps door open for further rate hikes

ING Economics ING Economics 04.05.2023 16:21
At the press conference following the 25bp rate hike, European Central Bank President Christine Lagarde tried to send a rather hawkish message, keeping the door open for further hikes ECB President Christine Lagarde   The ECB has entered the final stage of its rate hike cycle. As expected, the central bank increased its main policy interest rates by 25bp, bringing the deposit rate to 3.25%. Since July last year, the ECB has hiked interest rates at every single policy meeting, by a total of 375bp. This is by far, the most aggressive monetary policy tightening cycle since the start of the monetary union. While today’s hike is the seventh increase in a row, it is the smallest in the current cycle, suggesting that the ECB has entered the final stage of this tightening cycle. Although recent data has confirmed that underlying inflationary pressure is stickier than expected, weak credit growth and the latest results of the Bank Lending Survey have indicated that the rate hikes so far are leaving clear marks on the financing of the economy. Or as the ECB put it and unsurprisingly for all Star Wars fans on May the 4th: “the past rate increases are being transmitted forcefully to euro area financing and monetary conditions, while the lags and strength of transmission to the real economy remain uncertain”. At the same time, however, today’s decision was not only a dovish twist but a good European compromise. The fact that the ECB de facto announced that the reinvestments of its Asset Purchase Programme (APP) will be stopped in July looks like a bargaining chip for hawks in order to agree to a 25bp increase instead of a 50bp hike. According to ECB President Lagarde, stopping the APP reinvestments would be equal to a €25bn reduction of the portfolio on average every month. Where will the ECB go from here? The press conference made clear that the ECB’s job is not done, yet. The key sentence was probably that “the inflation outlook continues to be too high for too long”. Lagarde had some trouble signalling whether today’s decision was dovish or hawkish as she reiterated that more ground had to be covered and that today’s decision was not a pause. The longer the press conference lasted the more Lagarde seemed to emphasise the need for further rate hikes and increasingly sounded hawkish. In all honesty, what started off as a clear message of a meeting-by-meeting approach and data dependency ended with more questions than answers. Maybe it was just a sign of the fact that the ECB is increasingly divided about what to do next. Read next: ECB enters final stage of tightening cycle| FXMAG.COM Leaving aside the press conference, it will be hard for the ECB to return to 50bp rate hikes in the current macro environment with the lagged impact from previous hikes, banking turmoil, and subdued growth but still sticky inflation. In this base case scenario, it will be equally difficult to hike rates more than one or at most two times. In fact, the risk is high that every single additional rate hike from here could turn out to be a policy mistake further down the road. Instead, keeping interest rates high for longer after another rate hike in June will probably be the next compromise between the doves and hawks. It would buy the ECB time to see its tightening up to now fully unfolding. The decision to stop APP reinvestments as of July also points in this direction. All in all, with today’s decision, the ECB has clearly entered the final stage of its tightening cycle and the peak of interest rates might be nearer than ECB President Lagarde tried to make markets believe at the press conference. Read this article on THINK TagsMonetary policy Inflation Eurozone ECB Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Yesterday DAX closed at its highest level this year. Today ECB's Lagarde and Fed's Powell speak

Eurozone retail sales fell more than expected in March

ING Economics ING Economics 05.05.2023 13:49
Retail sales in the eurozone fell by -1.2% in March, which means that retail once again contributed negatively to GDP growth in the first quarter. This adds to other weak eurozone March data, indicating that the bloc ended the first three months of the year on a weak note Spain bucked the trend with retail sales increasing by 0.7% in March   Retail continues to struggle with the loss of consumer purchasing power and a shift in preference away from goods and towards services, now that the Covid-19 pandemic has ended. The volume of sales has been on a declining trend since late 2021 and the March 2023 data are consistent with a continuation of the downward trend. Declines in March were particularly large in Germany, France and the Netherlands at -2.4%, -1.4% and -1.3% respectively, while Spain saw an increase in sales of 0.7%. With inflation falling, wage growth picking up and unemployment remaining low, the outlook for sales should show some bottoming out in the months ahead, particularly once the catch-up demand for services weakens again. Read next: National Bank of Romania preview: waiting for inflation to fall| FXMAG.COM For the second quarter, though, it looks like the correction in sales could continue as real wages are still falling in the eurozone. This disappointing March figure adds to some individual countries posting weak industrial data this morning and indicates that the first quarter ended on a weak note despite some upbeat survey data. While it looks like the second quarter was off to a better start, it is important to keep in mind that the eurozone is starting to feel the effect of tight monetary policy and still faces high inflation. We, therefore, expect a modest bounce-back in economic activity for the current quarter. Read this article on THINK TagsGDP Eurozone Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Rates Spark: Balancing data and risk factors

Euro against US dollar lost 0.55% on Thursday despite Christine Lagarde's hawkish message

Kenny Fisher Kenny Fisher 05.05.2023 15:36
Eurozone, German data disappoint ECB raises rates by 25 bp US nonfarm payrolls expected to decline EUR/USD is drifting on Friday. In the European session, EUR/USD is trading at 1.1028, up 0.13% on the day. Today’s eurozone and German data were a disappointment. Eurozone retail sales for April declined 1.2% m/m, following a downwardly revised -0.2% in March and below the consensus of 0.0%. German Factory Orders for March plunged 10.7% m/m, versus a downwardly revised 4.5% in February and a consensus of -2.2%. The weak numbers were a reminder of weakness in the German and eurozone economies, but the euro shrugged off the data. Investors are preoccupied with digesting the ECB’s modest rate hike of 25 basis points and are waiting for the US nonfarm payrolls release later today. ECB raises rates, keeps door open to further increases The ECB mimicked the Federal Reserve and raised rates by 25 bp on Thursday. This marked a seventh straight rate increase from the ECB, but it was the smallest hike in the current tightening cycle. The ECB is trying to chart a rate path amidst weak growth and stubbornly high inflation and had to choose between hikes of 25 or 50 basis points. In the end, the central bank opted for the smaller increase, but ECB President Lagarde had a clear message that the Bank was not pausing and rates were not yet “sufficiently restrictive” to bring inflation down to the 2% target. EUR/USD fell by 0.55% on Thursday despite Lagarde’s hawkish message, possibly on disappointment that the rate hike was not 50 basis points. Inflation has been moving lower but upside risks remain, and that means that there is a good chance that the ECB will raise rates at least once or twice more. The markets have priced in a terminal rate of 3.65%, indicating that one more 25-bp hike is fully priced in but a second hike is less certain. Read next: Kenny Fisher from Oanda talks US dollar against Canadian dollar - May 5th| FXMAG.COM The US wraps up the week with nonfarm payrolls for April. The estimate stands at just 179,000, following 236,000 in March. The strong labour market, which has withstood the Fed’s tightening remarkably well, appears to be showing cracks. Unemployment claims jumped to 242,000 last week, up from a downwardly revised 229,000 and above the consensus of 240,000. Business optimism remains weak and that could translate into less hiring. If NFP falls to 180,000 or lower, the US dollar could lose ground on expectations that the Fed will ease its rate policy. EUR/USD Technical EUR/USD is testing resistance at 1.1022. The next resistance line is 1.1146 1.0956 and 1.0839 are providing support Content is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Business Information & Services, Inc. or any of its affiliates, subsidiaries, officers or directors. If you would like to reproduce or redistribute any of the content found on MarketPulse, an award winning forex, commodities and global indices analysis and news site service produced by OANDA Business Information & Services, Inc., please access the RSS feed or contact us at info@marketpulse.com. Visit https://www.marketpulse.com/ to find out more about the beat of the global markets. © 2023 OANDA Business Information & Services Inc. EUR/USD -Euro shrugs off weak eurozone, German data - MarketPulseMarketPulse
FX Daily: Time for the dollar to pause?

According to InstaForex's analyst, Euro against US dollar is vulnerable to a move towards 1.08

InstaForex Analysis InstaForex Analysis 05.05.2023 16:07
Blue lines- bullish channel Red lines- bearish RSI divergence EURUSD is trading once again below 1.10 after making a move towards 1.11 earlier this week. Price remains inside the medium-term upward sloping blue channel and continues to provide bearish RSI divergence warnings. With NFP numbers announced better than the market expected, USD is strengthening. and EURUSD is under pressure today. Price is challenging recent lows at 1.0942. A break below this recent low would be a sign of weakness. EURUSD is vulnerable to a move towards 1.08. Read next: Forex: InstaForex's analyst presents Euro against US dollar trading tips| FXMAG.COM Relevance up to 15:00 2023-05-06 UTC+2 This information is provided to retail and professional clients as part of marketing communication. It does not contain and should not be construed as containing investment advice or investment recommendation or an offer or solicitation to engage in any transaction or strategy in financial instruments. Past performance is not a guarantee or prediction of future performance. Instant Trading EU Ltd. makes no representation and assumes no liability as to the accuracy or completeness of the information provided, or any loss arising from any investment based on analysis, forecast or other information provided by an employee of the Company or otherwise. Full disclaimer is available here. Read more: https://www.instaforex.eu/forex_analysis/322400
Expect the ECB to keep increasing rates at the short-term, at least until the summer

Expect the ECB to keep increasing rates at the short-term, at least until the summer

Christopher Dembik Christopher Dembik 04.05.2023 10:47
Right before the ECB decision, we asked Christopher Dembik from Saxo Bank why does ECB consider expected by markets 25bp hike. Christopher Dembik (Saxo Bank): Basically this is a compromise between the hawks and the doves among the GC. Inflation is receding but not as fast as expected while credit data point out to slower growth in the coming quarters - we are however very far from a recession in the EZ. Expect the ECB to keep increasing rates at the short-term, at least until the summer. (...) we are however very far from a recession in the EZ Read next: Indeed, as shown in the graph below, Bitcoin’s Q1 2023 ROI outperforms 5 major indexes’ average ROI by 170% | FXMAG.COM
FX Daily: Testing the easing pushback

FX Daily: Testing the easing pushback

ING Economics ING Economics 09.05.2023 13:31
Last week, the Fed traded the explicit openness to a pause with a pushback against rate cuts. Now, with US banking turmoil lingering and some key data on the horizon, markets may be tempted to price in more cuts. However, EUR/USD faces some stretched positioning in the near term. Elsewhere, a Swedish real estate firm's trouble may cause fresh issues for SEK The short-term outlook for the dollar remains neutral in our view USD: Three drivers of rate expectations FX liquidity was reduced yesterday due to a national holiday in the UK, and while major pairs did not move dramatically, we saw quite significant gains in some G10 commodity currencies: NZD, NOK and AUD. Driving the move was the rebound in oil prices from the March bottom after Canada’s wildfires generated supply disruptions. This morning, some weaker-than-expected import data (-7.9% year-on-year) out of China seem to be softening the tone for the commodity space and maintaining a not-so-constructive picture on the demand side. Still, exports (+8.5 YoY) and the trade balance (US$90.2bn) beat expectations. This will be a rather crucial week for markets to fine-tune their Fed rate expectations after Chair Jerome Powell seemed to trade the explicit openness to a pause in tightening with some pushback against rate cut speculation last week. There are currently 68bp of easing priced into the USD curve by year-end, with three drivers set to influence further swings: US banking developments, data and Fedspeak. While data would intuitively be the most important driver, the now well-established link between the depth/length of banking turmoil and economic downturn is keeping a forward-looking market highly sensitive to incoming news, despite the Fed’s more resolute attempts to provide an anchor to rate expectations. A report published by the Fed yesterday flagged increasing concerns about credit tightening by financial institutions, which can only worsen as the turmoil continues. This week’s calendar includes the release of US inflation for the month of April, which is expected to have steadied at 5.0% while the core rate may have slowed from 5.6% to 5.5%. So far, data are the missing bit in the market’s dovish rhetoric, with last week’s payrolls beating estimates, both on the headline numbers and on wage growth. Today, the NFIB survey will be in focus. In terms of Fed speakers, we’ll hear Philip Jefferson and John Williams today, and many others are lined up later this week. While the short-term outlook for the dollar remains neutral in our view, thanks to positioning skewed to the short-side (more in the euro section) and unstable risk sentiment, markets remain ready to price in more Fed rate cuts, so downside risks are non-negligible. We favour a stabilisation around 101.50, but a drop below 101.00 and a test of 100.00 in DXY are tangible possibilities in the near term. Francesco Pesole EUR: Positioning, positioning The euro is the most overbought currency in G10 according to CFTC data and speculators continued to add net-long positions in EUR/USD in the week ending 2 May – when the latest data are reported. Net long positions are now worth 22% of open interest, the highest since January 2021 and not far from 27% five-year highs. This mostly has implications for the near term, so, while we remain resolutely bullish on EUR/USD in the longer run on the back of US-eurozone (and Fed-ECB) divergence and pronounced undervaluation, we flag positioning as one reason to be cautious on the short-term outlook. This week’s eurozone calendar is not very exciting, although there are many ECB speakers to keep an eye on. Olli Rehn, Constantinos Heredotou, Mario Centeno, Philip Lane, Bostjan Vasle, Boris Vujcic, Francois Villeroy and Isabel Schnabel are speaking today. While President Christine Lagarde clearly stated that the ECB is not pausing at last week’s press conference, the statement included some new reference to “past rate increases being transmitted forcefully to euro area financing and monetary conditions". This has somewhat softened the overall hawkish tone, so we’ll hear whether the block of ECB hawks has started to lose some support or has indeed slightly tweaked its rhetoric. We expect 1.10 to keep being the anchor for EUR/USD this week. Francesco Pesole Read next: Poland central bank preview| FXMAG.COM GBP: Waiting for the BoE There are no key data releases before the Bank of England meeting on Thursday. As discussed in our meeting preview, we expect a 25bp rate hike, with a 7-2 vote split, an upward revision in growth projections and a reiteration that further tightening is possible if “persistent” inflation signs emerge. We don’t expect to see huge volatility on the pound around the release, and see GBP/USD consolidating at levels above 1.25 in the aftermath of the BoE meeting. Francesco Pesole SEK: Real estate troubles as Riksbank's minutes due SBB, one of Sweden’s largest landlords, postponed the payment of dividends and revoked rights issue yesterday, after S&P lowered the company's rating to BB+ with a negative outlook. This is sending shockwaves to the real estate sector in Sweden (and also spreading across Europe) and once again raising questions about the path of monetary policy in Sweden in light of the large slumps in house prices. Interestingly, troubles for SBB coincided with some encouraging housing data in Sweden, with apartment prices rising for a third straight month. That is, however, largely seen – including by the Riksbank – as a temporary relief, as the continued tightening of financial conditions suggests a resumption of the property price downturn. Today, we’ll see the release of the minutes from the Riksbank meeting in April, when the Bank increased rates by 50bp but two members dissented (more in our latest SEK note). One of those two members, Martin Floden, will speak shortly after the release of the minutes. All in all, negative news on the SBB story, signs of growing dissent within the Riksbank Board, and the speech by a dove suggest downside risks for SEK today. A rebound to 11.25-11.30 in EUR/SEK seems plausible this week. Francesco Pesole Read this article on THINK TagsSEK FX Daily Dollar Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
FX Daily: Time for the dollar to pause?

FX Daily: Debt-limit impasse giving dollar a lifeline

ING Economics ING Economics 10.05.2023 14:39
Negotiations on the US debt ceiling have yielded very little progress so far and there is now a growing concern that it might take a market sell-off (in equities and/or money markets) to break the impasse. This would be a very bullish scenario for the dollar in the near term. For now, this story is offering the dollar a floor as CPI figures come into focus Pictured: The Capitol. President Biden and congressional leaders failed to resolve the impending default crisis at a meeting yesterday USD: CPI in focus as debt-limit impasse continues The impasse over the US debt ceiling increase is emerging as an increasingly short-term supporting factor for the dollar. A meeting between President Biden and Congress Republicans did not yield much progress on a potential agreement, and while Republican leader Mitch McConnell dismissed the risk of a US default, he admitted the negotiations were at a stalemate. For now, a short-term debt-limit extension, which would be the quickest solution, has been ruled out. The current situation is inevitably weighing on risk sentiment and offering support to the dollar. There is now growing concern that it might actually take a market sell-off (in the equity or money markets) to break the impasse. This would be a scenario where the dollar would get a significant near-term boost, also considering USD speculative shorts have risen steadily in the past few months, and one of the reasons why we favour a delay in the start of the greenback’s downtrend to the third quarter. In such an unstable risk environment, the US will see the release of the April inflation report today. Our economist’s call is aligned with consensus: a 0.4% month-on-month read in core CPI, translating into a marginal deceleration from 5.6% to 5.5%. Headline inflation may stabilise at 5.0% or slightly decelerate to 4.9%. If these are the numbers we see in today’s print, we think the Fed will be allowed to leave the door open to a potential revamp of tightening (even though we think the peak has been reached) and most importantly have some support – also offered by strong jobs data – to keep pushing back against rate cut expectations. All in all, today’s inflation may also contribute to putting a floor under the dollar in the near term, even though we remain resolutely bearish on the greenback for the second half of the year. Francesco Pesole EUR: An unusual underperformer We have not been very used to seeing the euro score towards the bottom of the G10 daily scoresheet without a strong idiosyncratic event lately. After all, the common currency is around 2.5% higher against the dollar this year, and only GBP and CHF have performed better so far this year (in the G10). We attribute yesterday’s euro underperformance to some position-squaring: remember that the latest CFTC positioning data indicate that EUR/USD is the most overbought pair in G10, with net-long positions amounting to 22% of open interest, the highest since early 2021. In terms of domestic news, some ECB hawks have come to the fore in the aftermath of last week’s ECB meeting, which probably did offer some hints of a shift to a more neutral stance (especially in the statement). Governing Council member Martins Kazaks hit the headlines by saying that he does not assume rate hikes will end in July, and the de-facto “leader” of the hawkish bloc, Isabel Schnabel, stated that rates will be raised with “full determination until there are signs that core inflation is also falling on a sustained basis”. The debate about headline versus core inflation, given the pronounced energy base effect and the resilience of core measures, looks set to be a key leverage point for the hawkish rhetoric within the ECB. Today, we’ll hear from Madis Muller and Mario Centeno, while the euro remains without a clear domestic driver and news from the US will drive most EUR/USD moves. There are lingering downside risks for EUR/USD, which might extend the correction to 1.0900 today. Francesco Pesole Read next: Rates Spark: US CPI looks sticky, but primed to fall| FXMAG.COM GBP: EUR/GBP weakness not very sustainable The pound showed very good resilience yesterday despite a destabilised risk sentiment and an appreciating dollar. This may boil down to markets holding on to some long GBP positions ahead of the Bank of England announcement tomorrow. Here is our full preview and scenario analysis ahead of the meeting. EUR/GBP has now broken below 0.8700, the lowest level since December. A good part of sterling’s outperformance over the euro relies on the market’s hawkish expectations on the BoE, with 70bp of tightening still priced in this year. In our view, there are good chances this week will mark the last rate hike of this cycle, and the pound will struggle to hold on to its strength against the euro as its rate advantage gradually erodes. We continue to target 0.90 by year-end. Francesco Pesole NOK: High volatility continues (in both directions) The Norwegian krone came under pressure yesterday as risk sentiment deteriorated, US debt-limit concerns rose, and the illiquid character (relative to its G10 peers) came back to haunt NOK. This followed a quite sharp correction in EUR/NOK late last week, which was driven by some recovery in commodity prices and possibly some position-squaring effect. There is also a chance that the very vocal FX protest by Norges Bank around the latest policy meeting yielded its desired effect, albeit with some delay. We still think the chances of a higher terminal rate by Norges Bank have risen and that daily FX purchases will be trimmed more aggressively in June to support NOK. Still, with external headwinds driving the vast majority of NOK’s moves, volatility and downside risks will remain elevated for the krone in the near term, and a return to the 11.90 peak in EUR/NOK is a tangible risk. Here is our latest note on NOK and Norges Bank.  Francesco Pesole Read this article on THINK TagsNOK FX Daily FX Dollar Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
What are the possible scenarios for EUR/USD? Euro against US dollar - inidicator analysis

Ralph Shedler comments on Euro against US dollar. What's the forecast for EUR/USD?

Ralph Shedler Ralph Shedler 10.05.2023 23:26
The EUR/USD pair continues to move sideways in the short term. It's trading at 1.0977 at the time of writing. The price registered sharp movements in both directions today as the US reported high-impact events. The bias is still bullish despite minor retreats as the DXY could drop again anytime. Fundamentally, the US inflation data brought high action in the last hours. The CPI m/m rose by 0.4% as expected, CPI y/y reported a 4.9% growth less compared to the 5.0% growth estimated, while Core CPI increased by 0.4% beating the 0.3% growth forecasted. Tomorrow, the US is to release high-impact data again, such as the PPI, Core PPI, and Unemployment Claims. EUR/USD Sharp Movements Post US CPI!   The EUR/USD pair is trapped between 1.1000 and 1.0941 in the short term. It has rallied right after the US inflation data but now it has turned to the downside again after registering only false breakouts through the 1.1000 psychological level. Read next: Gold: A price of $2000 per ounce may attract investors this week| FXMAG.COM It has dropped within the descending pitchfork's body between the median line (ml) and the upper median line (uml). Technically, this could represent a bullish pattern. Still, this is far from being confirmed. EUR/USD Forecast! A new lower low, a bearish closure below 1.0941 activates more declines and is seen as a short opportunity. A new higher high, a bullish closure above the 1.1000 psychological level activates further growth. This is seen as a bullish signal. Relevance up to 18:00 2023-05-11 UTC+2 This information is provided to retail and professional clients as part of marketing communication. It does not contain and should not be construed as containing investment advice or investment recommendation or an offer or solicitation to engage in any transaction or strategy in financial instruments. Past performance is not a guarantee or prediction of future performance. Instant Trading EU Ltd. makes no representation and assumes no liability as to the accuracy or completeness of the information provided, or any loss arising from any investment based on analysis, forecast or other information provided by an employee of the Company or otherwise. Full disclaimer is available here. Read more: https://www.instaforex.eu/forex_analysis/322940
German economy not out of recessionary danger, yet

German inflation is slowing, but ECB wants to do more

Alex Kuptsikevich Alex Kuptsikevich 10.05.2023 13:03
German consumer inflation slowed to 7.2% y/y in April, Destatis said in its final estimate. The trend of decelerating price increases continues, although it remains well above the ECB's target. March data for other price indicators point to further easing of pressure. For example, the wholesale price index rose by only 2% y/y in March, and import prices were 4.8% lower than 12 months earlier. Gas prices at the European hub continue to fall, reaching $403 per 1,000 units. This is the lowest level since July 2021 and the upper limit of the typical price range since 2011. The slowdown in inflation allows the ECB to hold back and end the hiking cycle sooner, which is potentially negative for the euro. But now investors should pay more attention to how ECB officials assess the situation, as their job of taming inflation is not yet considered done. Read next: Bitcoin lurks at a local bottom| FXMAG.COM In her speech today, Lagarde once again reminded us that more action needs to be taken to curb inflation, which implies further rate hikes. This stance is more hawkish than the Fed, hinting at a pause and an end to the tightening cycle.
What are the possible scenarios for EUR/USD? Euro against US dollar - inidicator analysis

FX Daily: Bank of England still averse to the dovish pivot?

ING Economics ING Economics 11.05.2023 11:00
We expect a 25bp hike (7-2 vote split) by the BoE today, in line with market pricing and consensus. Focus will be on new forecasts (especially 2-year CPI) and forward guidance. Despite a lot more tightening priced into the Sonia curve, the MPC may resist the temptation to push back against hawkish bets, and sterling may hold on to recent gains for a bit longer Governor of the Bank of England, Andrew Bailey USD: Glimmers of hope from April inflation report Our economics team dissects yesterday’s US inflation report in this article, highlighting how price pressures remain elevated (another 0.4% month-on-month core print, in line with expectations), but also how there are some signs that service sector inflation is moderating, with used cars doing the heavy lifting in keeping prices sticky. With the Fed having focused on the ex-energy and ex-housing service inflation developments, markets probably read those encouraging signs and took the opportunity to increase their easing bets in the latter part of the year. Now, three full 25bp rate cuts are priced into the USD OIS curve by December. Such a benign move in swaps and FX would have normally coincided with an improved environment for equities, but stocks have struggled to recover, with stalling debt-limit negotiations in the US still weighing on sentiment. The market’s sensitivity to this topic is growing each day and there may be growing fears that an adverse market event might be ultimately needed to break the political stalemate. Such a scenario would see a material upward correction in the dollar in the near term, even though the long-term outlook for the greenback would not really turn any less negative – in our view – given the prospect of large cuts by the Fed starting from late this year. Today, PPI and jobless claims data, as well as speeches by FOMC members Neel Kashkari and Chris Waller will be in focus in the US. Still unstable risk sentiment suggests that any drops in the dollar may not have legs until there are positive developments on the debt-ceiling negotiations. Francesco Pesole EUR: Contained impact from ECB speakers European Central Bank speakers are the only highlight in an otherwise empty calendar in the eurozone in the second half of the week. The most prominent hawkish member, Isabel Schnabel is due to speak today, along with Pablo De Cos and Luis de Guindos. However, the latest ECB remarks have not had a huge impact on the euro. After all, a 25bp hike in June is highly likely after President Christine Lagarde explicitly said the ECB is not pausing, and it is almost fully priced in; beyond that, there is around 22bp of additional tightening embedded into the EUR curve. The hawks are openly suggesting more hikes are possible beyond June, and the data-dependent approach (as well as common sense given still elevated inflation) is preventing the doves from explicitly calling for an end to the tightening cycle in June. Markets probably feel quite comfortable with the current pricing, and the euro’s sensitivity to the September/October pricing has not been very high anyway. Ultimately, EUR/USD remains a dollar – and primarily a US debt ceiling – story for now. There are downside risks that extend below the 1.0900 mark in our view in the coming days, and well below such level should money market liquidity start to dry up. That is not our base case, but a resolution to the debt-ceiling chaos may still follow a bumpy road and this does not appear to be the ideal time for a big rally above 1.1000 for the overbought EUR/USD. Francesco Pesole GBP: Pound may hold on to gains after BoE hike Markets approach the Bank of England decision day with rather aggressive pricing on future rate hikes. A 25bp move is fully priced in today, although the Sonia curve includes nearly two more 25bp increases before reaching the peak around September/November. As discussed in our BoE meeting preview, we think markets have got ahead of themselves, and today’s 25bp hike (7-2 vote split, two members voting for no change) may well be the last one in this cycle. The main reasoning behind our conclusion is that the drivers of higher-than-projected inflation have primarily been food prices and some surprising stickiness in core goods inflation: neither of those trends look likely to be long-lasting, and we still forecast a fast deceleration in CPI later this year. Some MPC members may definitely agree with us and expect this to be the last rate hike, but the question is whether they are ready to push back against market pricing and offer dovish hints to the market just yet. Our suspicion is that they are not, and we think the BoE should keep the door open to more tightening if inflation proves “persistent”, essentially retaining a data-dependent approach. The new forecasts will also play a role in driving the market reaction: growth should be revised up, but inflation may be projected to fall below target in two years. From an FX perspective, we do not expect this meeting to be a game-changer for sterling. We acknowledge that part of GBP’s recent strength has been due to the market’s aggressive expectations about BoE tightening, and therefore recognise there are downside risks as those (excessive, in our view) hawkish expectations are scaled back. However, we suspect the BoE will neither offer enough dovish hints today to trigger that dovish repricing, nor enough of a hawkish narrative to match the amount of tightening already priced into the GBP curve. If anything, the balance of risks is skewed to the downside, but our call is for this meeting to have a relatively contained directional impact on the pound today. Cable may stabilise around 1.26 and EUR/GBP around 0.8700 for now. Francesco Pesole Read next: Rates unchanged in Poland; balance of risks skewed to earlier cuts| FXMAG.COM CEE: Doves and hawks In Poland, as expected, the National Bank of Poland left interest rates unchanged yesterday, but the main event is scheduled for today; a press conference by Governor Adam Glapinski at 3pm local time. The commentary following the May meeting hardly changed. It underlined the deterioration of the domestic economic situation, including declines in retail sales, industrial production and construction output on an annual basis in March. The main changes in the post-meeting statement concern the update on new data regarding the external and Polish economy, while the summary with policy guidance remained unchanged. In recent weeks, some of the Council, including its chairman, have again begun to suggest interest rate cuts before the end of 2023. This may be a harbinger of a slightly more dovish tone from Glapinski, although still with some caution. Yesterday, the Polish zloty moved to its strongest level since March last year. From a long-term perspective, the zloty still has a lot of room to catch up with the region in our view, but for today the dovish press conference should halt the current rally and return to 4.540 EUR/PLN.  In the Czech Republic, April inflation will be released today. We expect a jump from 15.0% to 13.5% year-on-year with risks seen to the downside. The Czech National Bank expects a decline to 13.2% in its new forecast. Later today we will see a government press conference at 11.55am local time where the austerity package for next year's state budget is expected to be unveiled. Local media is talking about a CZK120bn (1.6% of GDP) deficit reduction, which is more than expected. Of this, 70bn is expected to be on the expenditure side and 50bn on the revenue side. From the Czech National Bank's perspective, it will be interesting to see if the government wants to increase VAT, which was previously discussed. Meanwhile, the CNB deputy governor mentioned that such a move would be inflationary and would be a reason to hike interest rates. The 2y market rate differential reached its highest levels this week yesterday and the prospect of fiscal policy consolidation and a potential interest rate hike should be positive for the koruna, in our view. We expect the koruna to move into a 23.30-40 EUR/CZK range today.  Frantisek Taborsky Read this article on THINK Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Bank of England is expected to hike the rate by 25bp. Kelvin Wong talks Euro against British pound

Bank of England is expected to hike the rate by 25bp. Kelvin Wong talks Euro against British pound

Kelvin Wong Kelvin Wong 11.05.2023 12:55
EUR/GBP is still evolving within a major sideways range since August 2017 with its key resistance and support at 0.9300 and 0.8300. A minor downtrend phase has started to develop from its 3 February 2023 high of 0.8979. Short-term downside momentum remains intact below 0.8750 key short-term resistance. Since the start of this week, the EUR/GBP cross pair has continued its drop by 0.9% to print its current intraweek low of 0.8671 where market participants anticipant that the Bank of England (BoE) is likely to maintain its hawkish monetary policy stance throughout 2023 after its monetary policy decision due later today. It is widely expected that BoE will hike its policy interest rate by another 25 basis points to 4.5%, its 12th consecutive rise and it is still way behind a red-hot March CPI print of 10.1% year-on-year inflationary growth for the UK. Let’s now take a look at the recent EUR/GBP movements from a technical analysis perspective. Fig 1:  EUR/GBP trend as of 11 May 2023 (Source: TradingView, click to enlarge chart) Since its 3 February 2023 high of 0.8979, the EUR/GBP cross rate has started to evolve into a minor downtrend phase with the upper and lower limits of its short-term descending channel at 0.8865 and 0.8630 respectively. In the longer-term (monthly chart), it is still trapped inside a major sideways range configuration since August 2017. Since last Friday, 5 May, its price actions have broken and traded below the key 200-day moving average now acting as a resistance at around 0.8730. In addition, the 4-hour RSI oscillator has rebounded from its recently reached oversold region (below 30%) but has not formed any bullish divergence signal yet. In addition, the 4-hour RSI is still capped below by a corresponding descending resistance at the 50% level. These observations suggest that short-term downside momentum remains intact. The next intermediate support to watch will be at 0.8630 and a break below it exposes the next support at 0.8570. However, a clearance above 0.8750 short-term pivotal resistance negates the bearish tone to see the descending channel resistance coming in at around 0.8865 which also confluences with the minor swing high areas of 23 March/27 April 2023. Content is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Business Information & Services, Inc. or any of its affiliates, subsidiaries, officers or directors. If you would like to reproduce or redistribute any of the content found on MarketPulse, an award winning forex, commodities and global indices analysis and news site service produced by OANDA Business Information & Services, Inc., please access the RSS feed or contact us at info@marketpulse.com. Visit https://www.marketpulse.com/ to find out more about the beat of the global markets. © 2023 OANDA Business Information & Services Inc. EUR/GBP Technical: Minor downtrend intact - MarketPulseMarketPulse
Impact of Declining Confidence: Italian Business Sentiment in August

FX Daily: Washington holds the key to the dollar's correction

ING Economics ING Economics 12.05.2023 12:07
The dollar rebounded yesterday, likely aided by some position-squaring, as US data disappointed and risk sentiment remained unstable. Markets are set to remain very sensitive to US debt ceiling news into the weekend, and the dollar’s support may linger barring positive developments. The Czech National Bank will unveil its hawks  A key meeting between President Biden and Congress leaders has been put off until next week USD: All eyes on debt ceiling talks The dollar bounce seen yesterday was the result of some position-squaring and below-consensus data, while the still unstable risk environment caused by recessionary fears and the US debt ceiling stalemate keeps creating a breeding ground for more defensive positions in FX. Unsurprisingly, high-beta currencies (Scandies and Antipodeans) took the biggest hit yesterday, while the yen showed resilience. On the debt limit saga, there have been some tentatively encouraging comments by Republican negotiators, but a key meeting between President Biden and Congress leaders was put off until next week. We still think investors are worryingly eyeing a scenario where it would ultimately take an adverse market reaction to break the impasse, and lack of any progress towards a deal can definitely continue to offer some support to the dollar. On the other hand, a benign scenario where a bipartisan deal has a positive impact on sentiment can leave the dollar quite vulnerable given the quite aggressive rate cuts being priced into the USD curve, which the dollar is not currently negatively discounting thanks to safe-haven demand. On the data side, jobless claims surprised on the upside and PPI to the downside yesterday – both adding to rate cut bets – while today’s focus will be on the import price index and the University of Michigan inflation and sentiment gauges. FOMC member Mary Daly is scheduled to speak this evening. Francesco Pesole EUR: No domestic drivers EUR/USD continues to follow primarily USD dynamics, and a quiet calendar in the eurozone (final CPI reads are not normally market-moving) means this should continue to be the case today. For now, the USD appreciation was not enough to trigger a break below 1.0900 in the pair, but the lack of some encouraging news on the US debt ceiling story means – in our view – that 1.0900 will hardly prove to be a sturdy support for much longer. Read next: The Commodities Feed: Renewed pressure| FXMAG.COM On the ECB side, we’ll hear from Germany’s Governing Council member Joachim Nagel. ECB speakers have had a limited impact on the euro after the latest ECB meeting and this should not change for now. Francesco Pesole GBP: BoE offered few reasons to turn bearish on the pound As we expected, the Bank of England’s 25bp rate hike did not have any major implications for GBP. The drop in Cable yesterday was almost entirely due to the USD rally and was in line with the move in other dollar crosses. As discussed by our economist in our BoE review note, the BoE retained its flexibility and kept the door open for more rate hikes if inflation proves persistent. While we don’t exclude one final June hike, our base case is that we have reached the peak of the BoE tightening cycle as inflation will start to rapidly decelerate this year. Still, the Sonia curve continues to price in around 38bp of tightening to the peak, which leaves the pound at risk of a rate-driven negative impact down the stretch. We feel this will materialise in EUR/GBP, which should climb back to 0.9000 in the second half of the year as EUR and GBP rates re-converge, in our projections. For now, however, there aren’t many convincing reasons to call for GBP underperformance against its main peers in the near term. Francesco Pesole CZK: The koruna less attractive than expected Inflation in the Czech Republic surprised significantly to the downside yesterday with a drop from 15.0% to 12.7% year-on-year vs. 13.2% in the Czech National Bank forecast. In addition, the government unveiled a fiscal package aimed at reducing the state budget deficit in the coming years. Nothing has been approved yet, but the first proposals look ambitious. Thus, the government would like to bring the public deficit from this year's 3.5% of GDP to 1.8% next year and 1.2% in 2025, resulting in by far the lowest public deficit in the CEE region. For Czech government bonds (CZGBs), this means that for next year supply could reach almost half of this year's levels. Overall, this is clearly a positive direction, but the government now faces a complex legislative process, during which we may yet see some changes. From the CNB's perspective, the tax changes introduced are rather anti-inflationary, which should calm down the hawks on the board and prevent an interest rate hike at the June meeting. Speaking of the central bank, the CNB minutes will be released today, which should reveal the names of the board members who voted for rate hikes last week. Overall, lower-than-expected inflation and the prospect of low CZGBs supply pushed market rates down and the interest rate differential thus returned almost to pre May-meeting levels. Moreover, the lower EUR/USD is pushing the entire CEE region to weaker levels. Thus, the Czech koruna erased almost all the gains it made after the CNB meeting last week. Thus, today's minutes could revive the CNB's hawkish tone and help the koruna return below 23.50 EUR/CZK. However, it seems that the koruna is no longer as attractive as we previously thought and we are hardly looking for a significant catalyst for a new rally until the June CNB meeting. Frantisek Taborsky Read this article on THINK Tags Koruna FX Dollar Czech National Bank Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Impact of Declining Confidence: Italian Business Sentiment in August

FX Daily: Conflicting forces, but debt ceiling dominates

ING Economics ING Economics 15.05.2023 10:12
There is still a rather convincing bearish story on the dollar as US short-term rates remained under pressure on the back of Fed rate cut speculation. But FX is looking at the debt ceiling concerns, and the impact on sentiment, with more urgency and interest. Negotiations restart on Tuesday, but more upside risks for the dollar look to be on the cards USD: Debt ceiling jitters raise upside potential in near term The dollar enters a new week with a broadly unchanged set of sharply contrasting factors which saw it test the lows, first, and then rebound quite sharply in a rather eventful month of May. The two main opposing forces at the moment are the declining short-term US rates (as more Federal Reserve rate cuts are priced in) and the debt-ceiling impasse in Washington. The first force will be driven by data and Fedspeak today; the second by negotiations which should resume on Tuesday. When it comes to data, the strong jobs figures for April were followed by inflation figures that did offer some tentative signs of cooling-off in service inflation, below-consensus PPI, and higher-than-expected jobless claims ( a signal that lay-offs are surging). This week, we have retail sales and industrial production as the highlights. Our US economist thinks that retail sales will probably get a lift from the robust auto sales numbers for April, while industrial production will be held back by the fact that manufacturing surveys continue to point to falling production with lower energy prices limiting the upside for oil and gas extraction. Some specific focus will inevitably be on the new jobless claims report. Today, Empire manufacturing and TIC data are on the calendar. The pricing for the December contract in the Fed funds futures market continues to oscillate between 65bp and 75bp of cuts. Of all data this week, jobless claims may be the bit that could move rate expectations more than the rest, but expect some sensitivity to Fed speakers as well. Today alone we’ll hear from FOMC members Raphael Bostic, Austan Goolsbee, Neel Kashkari and Lisa Cook. The Fedspeak calendar peaks with a speech by Chair Jay Powell on Friday. Some pushback against rate cut expectations may well be on the cards this week, and while this could offer the dollar some support, it’s not the rate side that seems likely to be a sustainable positive driver for the dollar. Two-year dollar swap rates are still close to the lows, around 20bp above the key psychological 4.00% mark, and markets have shown a strong tendency to price in rate cuts quite aggressively. What is really keeping the dollar afloat at this stage is the debt-ceiling impasse in Washington, in our view. Negotiations between President Biden and congressional leaders should resume on Tuesday, but unless we see truly encouraging progress, investors’ fears may keep growing. Barring positive news on this end, we think the balance of risks remains tilted to the upside for the dollar for now, which should see safe-haven flows as risk sentiment stays subdued. The rebound in DXY could extend to the 103.50/104.00 area in the coming days. Francesco Pesole EUR: Looking across the Atlantic In EUR/USD, the dollar leg will probably keep driving the majority of the moves. Admittedly, most of the interesting stories for the FX markets come from the US, with the debt-limit impasse in focus and markets quite active in speculating on the size of Fed easing later this year. Incidentally, the eurozone calendar is rather empty this week, except for the ZEW surveys and preliminary (second) 1Q GDP figures on Tuesday. It will be interesting to hear what European Central Bank speakers have to say, although we recently noted how they have had a rather limited impact on the euro, and markets’ pricing for the July meeting (the one after the well-telegraphed June hike) has been broadly unchanged since the ECB meeting, with around 15bp of extra tightening expected. We’ll hear from arch-hawk Joachim Nagel today, and from President Christine Lagarde plus other Governing Council members later this week. Our EUR/USD view for this week mirrors our USD view above, given we see limited domestic drivers in the eurozone. Downside risks persist for the pair on the back of the US debt ceiling impasse, and we could see a break below 1.0800 (a key level, also the 100-day moving average) followed by another leg lower to the 1.0700/1.0750 area should the risk environment deteriorate much further. Still, we don’t expect EUR/USD weakness to last beyond the near term. Francesco Pesole Read next: Disinflation in Romania is becoming more evident| FXMAG.COM GBP: Wage data is key for sterling The Bank of England made quite clear that its next policy move in June will largely depend on two releases: wages and inflation data. The former will be released on Tuesday, and we must remember that the wages series has been rather volatile lately. This increases the range of outcomes for sterling, which will likely be ultra-sensitive to the releases. Our economics team expect some moderation in the wage growth figure after last month's jump, which may ultimately push the MPC in the direction of a hold at the June meeting. Markets are pricing in 20bp of tightening, and the downside risks are quite material for sterling. We expect this to be mirrored in a higher EUR/GBP, which we expect to rebound to above 0.8800 by the end of this month. Francesco Pesole CEE: US dollar puts the region on the defensive Today, we get the final inflation figures for Poland for April. It can be assumed that a flash print of 14.7% year-on-year will be confirmed. Tomorrow, GDP numbers across the region for 1Q will be released. We expect a drop in the YoY rate from 2.0% to -1.5% in Poland, from 0.4% to -0.8% in Hungary and from 4.5% to 3.7% in Romania. In Poland and Romania, our expectations are slightly below market expectations, and vice versa in Hungary. Also on Tuesday, we will see core inflation in Poland, which is expected at 12.2% YoY and thus remains very sticky. Wednesday will see the release of industrial production data in Romania and Thursday will see the release of industrial producer prices in the Czech Republic.  In the FX market, the lower EUR/USD has been dragging the entire region down for the last few days and the region is not expected to return to gains in the coming days either, in our view. And even on the local side, we can't expect much positive momentum given the negative GDP numbers released this week. At the moment, the Czech koruna is showing the highest beta against a strengthening US dollar, so it will continue to suffer and may likely test levels above 23.60 EUR/CZK again. The Hungarian forint, in our view, is reaching its current limits at 370 EUR/HUF and may suffer in the coming days due to the strong US dollar. And in our view, the Polish zloty is in a similar situation. While it still has a lot of room to catch up with the region, global conditions may put a foot on the brake and keep the zloty above 4.520 EUR/PLN.  Frantisek Taborsky  Read this article on THINK Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Eurozone industrial production falls to the lowest since October 2021

Eurozone industrial production falls to the lowest since October 2021

Alex Kuptsikevich Alex Kuptsikevich 15.05.2023 13:50
Eurostat today reported that eurozone industrial production fell by 4.1% in March, the most significant drop since July last year. Compared with the same month of the previous year, output fell by 1.4%, instead of the expected +0.9%, whereas in February, it was up +2.0%. Euro area Industrial Production Index The seasonally adjusted industrial production index fell to its lowest level since October 2021, failing to stick to a steady growth path and reversing down from roughly the same level it has been at since 2008. The following manufacturing report promises to be quite interesting, as it will help determine whether we see a reversal to decline, as we did in 2008 and 2018, or just a tactical retreat. In a separate publication, German wholesale prices fell by 0.4% m/m, against expectations for a rise of 0.3%. Year-on-year, the decline is 0.5%. Import prices are also in negative territory year-on-year, which should contribute to a fall in consumer inflation. Read next: Bitcoin attracts buyers on the dip to 200-week MA| FXMAG.COM Trends in industrial production are often ahead of the economy and determine long-term trends and the performance of the euro against the major currencies. However, they rarely cause an immediate market reaction immediately after publication. Euro The single currency suffered short-term losses due to weak industrial production data and falling wholesale prices in Germany. This publication did not disrupt the EURUSD's overall intraday trend, with buying interest increasing as the pair touched its 50-day moving average near 1.0850.
Small factors combine to pressure credit

Small factors combine to pressure credit

ING Economics ING Economics 16.05.2023 08:18
Weakness in credit markets in the form of wider spreads and the primary market struggling, begs the question of what is driving the recent weakness in credit markets? The answer to the question seems to be a combination of many smaller factors including credit looking expensive, a shift from yield buyers to spread buyers, and limited issuance windows   From a technical perspective credit markets should be well supported, but that is not the case, so what is going on? After a long period of limited supply, earnings blackouts, mutual fund inflows and volatility, liquidity should be plentiful. The abundant cash should be put to work in primary markets, but the opposite is true. Primary is struggling, which begs the question what is driving the recent weakness in credit markets? We currently see both secondary market spread widening and less demand in primary (in conjunction with higher new issue premiums and lower subscriptions levels). The answer to the question seems to be a combination of many smaller factors. EUR credit is expensive. EUR corporate spreads are trading in overbought territory, below the trading range we have outlined. EUR financials and USD corporates trade in the middle of their trading range, whereas USD financials actually trade wider than the range. EUR corporate spreads are looking very expensive compared to EUR financials, USD corporates and USD financials. Taking last week as a proxy, financial spreads tightened and much of the primary market deals were met with a stronger appetite compared to corporates. High Yield has been under the most pressure, namely off the back of comments regarding the significant tightening of lending standards.  Illiquid market resulted in a squeeze that primary is widening out to true levels. Credit (particularly EUR corporates) has been very illquid over the past number of months, as the corporate sector purchase programme (CSPP) holds a large portion of the market and supply has been minimal. Therefore, investors are long on cash, as not too many bonds are available. This has resulted in secondary markets becoming too squeezed, and thus spreads do not reflect the true value of where spreads need to be. As such, primary markets will continue to drive secondary spreads by pushing secondary spreads wider to match the primary levels, which is the true place where substantial supply meets substantial demand. Are yield investors saturated or taking a breather? Thus far in 2023, it has been yield investors that have been driving credit markets. With the much higher yields being offered in credit, there was very strong inflows and decent demand. This recent weakness could be signalling a saturation, as rates have dropped from their peaks, resulting in less yield being offered. Therefore, we need to see a shift from yield buyers to spread buyers meaning a repricing is needed to create more value for spread investors. Concerns on the external environment. Risks and negative drivers still remain high, thus turbulence and volatility is expected. Concerns on inflation, recession around the corner and importantly tightening bank lending conditions will all weigh on credit. Tightening lending standards will have a negative credit effect. The feedback loop to credit spreads is evident and thus should be a negative driver for spreads. New issue premiums (NIPs) on newly issued bonds will increase and, ultimately, spreads will need to be priced wider long term. This will particularly be the case for the high yield market. This isn’t necessarily driving spreads now but does add an additional negative factor in a secondary effect. More sector diversification and alpha driven investment. As economic background becomes more questionable, sector diversification has risen and becomes more important (certain sectors will see low demand in primary and secondary, for example autos). Certain sectors have created losses. The real estate sector continues to be under pressure, with spreads 60bp wider from 3 months ago, while the rest of the market is closer to 5bp wider. We continue to underweight the rates sensitive sector and expect a continuation of underperformance.  The primary market is now fully based on windows of opportunity. The macro environment has become ever so important for credit and rates thus primary markets will remain closed during economic data publications, central bank meetings and holidays. Therefore, when an issuance window is open, there is a big rush of new deals, from corporates, financials and sovereigns, supranationals and agencies. Saturated primary markets therefore results in very heavy days of supply indigestion. It becomes too much for one day, rather than a pure lack of value. Lower demand for new issues. Furthermore, primary market tickets have not just reduced in size, but also have become fewer. This gives us a real bearish feel, as both liquidity is drying up and there is an active preference to not participate. CSPP is basically non-existent in credit. CSPP being tapered and ultimately ending fully in July, has left reinvestments very low, meaning no added buyer of credit. Reinvestments have been only around €1bn per month in April, May and June. Mutual funds flows have faltered over the past month. Mutual funds were negative again last week with outflows of 0.4% from EUR IG. This marks the third week of consecutive outflows. Flows on a year-to-date basis are still positive at 3.8% of AuM, and inflows are very much skewed towards the belly of the curve, with the short end seeing outflows, in both EUR and USD. Reverse Yankee supply is adding to the barrage. Reverse Yankee supply was also plentiful last week, with €8bn issued. The calculation is now very favourable for a cost saving advantage for US issuers to bring a EUR bond to the market, namely on the back of USD spread underperformance versus EUR. There is roughly 10bp or so on average cost saving advantage on the 5yr and a substantial 45bp on the 10yr area. Deals included Booking, AT&T, Corning and American Tower. These deals were priced very much in line with the market, as stated above NIP is higher due to some supply indigestion. Reverse Yankee deals tend to offer a more attractive NIP, particularly when the cost saving advantage is decent. This adds to the barrage of EUR supply we are seeing, further adding supply indigestion pressure. Read next: Synthetic fuels could be the answer to shipping's net-zero goals, but don’t count on them yet| FXMAG.COM All in all we are still constructive on credit markets long term but we do feel a repricing in the short term is necessary as the dynamics of the market changes. We expect to see more turbulence and weakness in credit over the coming weeks. Moreover, we will continue to see days with very heavy supply indigestion. Credit remains much an alpha game, with sector and name selection being of utmost importance. Read this article on THINK Tags Markets Inflation Federal Reserve ECB Credit Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Technical look: Euro against US dollar - what can we expect from the pair?

Technical look: Euro against US dollar - what can we expect from the pair?

InstaForex Analysis InstaForex Analysis 16.05.2023 09:33
EUR/USD On Monday, the euro went through a calm correction after sharply falling in the last two days. On the daily chart, there is no sign of the end of the correction, so it could continue to the resistance line of the price channel at the 1.0900 mark. It is possible to overcome this line, and then the price will be stopped by the MACD indicator line, located 15 points higher. Then the price could reverse into a new wave of decline with the nearest target of 1.0804. On the 4-hour chart, the accelerated growth of the Marlin oscillator catches the eye. This could be a sign of oscillator discharge before further subsequent decline, or the euro is waiting for a more complex correction from the new local low with the formation of convergence, as shown on the chart with dashed lines. Perhaps, until the end of the month, the euro will spend in a sideways wide-range. Read next: Yesterday GBP gained 80 points. British pound against US dollar - what can we expect from the pair?| FXMAG.COM Relevance up to 04:00 2023-05-17 UTC+2 This information is provided to retail and professional clients as part of marketing communication. It does not contain and should not be construed as containing investment advice or investment recommendation or an offer or solicitation to engage in any transaction or strategy in financial instruments. Past performance is not a guarantee or prediction of future performance. Instant Trading EU Ltd. makes no representation and assumes no liability as to the accuracy or completeness of the information provided, or any loss arising from any investment based on analysis, forecast or other information provided by an employee of the Company or otherwise. Full disclaimer is available here. Read more: https://www.instaforex.eu/forex_analysis/343211
Impact of Declining Confidence: Italian Business Sentiment in August

FX Daily: A key day for debt-limit negotiations

ING Economics ING Economics 16.05.2023 09:55
President Biden and Speaker McCarthy are expected to hold another round of key debt ceiling negotiations today. Some are eyeing this as the last real chance to break the impasse, and given the high risk that no tangible progress is made, upside risks for safe havens (USD and JPY) are elevated today. In the UK, a small decline in wage growth is hitting the pound Republican Speaker of the House Kevin McCarthy is expected to meet with President Biden today to discuss the debt limit USD: Last real chance to make progress on the debt ceiling? The dollar has started the week on the soft side as risk sentiment enjoyed some stabilisation and the FX market followed a playbook risk on dynamics, with safe havens under pressure and commodity currencies strengthening. Within this last group, we are keeping a close eye on AUD this week. The Reserve Bank of Australia (RBA) minutes opened the door to more tightening if necessary, and tomorrow we’ll see the first quarter wage price index in Australia, which is expected to rise from 3.3% to 3.6% year-on-year. Any upside surprise may prompt some bets on further tightening by the RBA, and offer some support to AUD: at the moment, markets are not expecting any more hikes. On Thursday, April employment figures will also be released and could confirm a still very tight jobs market. Back to the US, this should be another pivotal day in Washington for debt ceiling negotiations, with President Joe Biden expected to meet Speaker of the House Kevin McCarthy. While Biden expressed some optimism during the weekend, McCarthy said yesterday that the two sides were still far apart after staff-level talks. He also said that a deal should probably be reached by the end of this week to have a realistic timeline to pass it in both houses. Biden is still scheduled to leave for the G7 meeting in Japan tomorrow, and the White House has so far said there are no plans to curtail the trip for the debt ceiling impasse. Should we see no progress towards a debt-limit deal today, we could definitely see markets price a greater deal of the US defaulting on its debt. The potentially very negative spill-over into risk sentiment and money markets means that the upside risks for the dollar and the yen are quite significant in such a scenario. On the data side, retail sales and industrial production will be in focus in the US today. Strong auto sales should have helped lift retail sales in April, but outside of this component, credit card figures point to very modest growth on most items. Industrial production should be held back by lower energy prices limiting the upside for oil and gas extraction. Finally, we’ll hear from FOMC members Loretta Mester, Michael Barr, John Williams, Austan Goolsbee and Lorie Logan. Yesterday, Neel Kashkari tried to push a hawkish rhetoric forward, suggesting the Fed probably has more work to do in its inflation battle.    Francesco Pesole Read next: Asia morning bites - 16.05.2023| FXMAG.COM EUR: Watch the pivotal 1.0800 level This morning, we’ll have the only potential market-moving data release out of the eurozone this week: the German ZEW surveys. Consensus is leaning towards a pessimistic read, with the expectations index falling again below zero and the “current situation” index declining from -32.5 to -37.0. Still, the market impact shouldn’t be very material barring a sizeable deviation from consensus. On the ECB side, President Christine Lagarde will participate in an event this afternoon but may not touch upon monetary policy. EUR/USD should remain primarily driven by the USD leg and the US debt-limit saga: we see 1.0800 as the key benchmark support, and a break below that level would probably signal a significant deterioration in market sentiment. Francesco Pesole GBP: Start of longer-lasting rise in EUR/GBP After last month's unexpected surge in the level of UK average pay, the growth rate on a monthly basis slowed once again. Averaging out recent volatility, the change over the past three months relative to the month before was 6.3% annualised, still too elevated, but lower than what we had seen throughout most of 2022. Incidentally, Bank of England surveys suggest that wage growth has peaked. With the BoE having put a lot of weight on this release, as well as the next CPI print, the chances of a pause at the June meeting have slightly increased. The price action in the pound this morning is mirroring this: EURGBP has broken back above 0.8700 and we think there is still ample upside room as further BoE tightening is priced out of the Sonia curve. Francesco Pesole ZAR: Fracturing along geopolitical lines After last year’s Russian invasion of Ukraine, the fear in FX markets was always that currency trends could fracture by geopolitical groupings. For example, outside of the Russian ruble, would the currencies of the other BRICS nations be treated differently by international investors? The neutrality on the war expressed by the likes of Brazil, India and South Africa was certainly noted, but events took a decisive turn in South Africa last week. Here, the US ambassador to South Africa accused the country of shipping arms (or allowing the shipment of arms) to Russia last December. USD/ZAR traded to a new record high on the news, with investors fearful that South Africa could lose access to various US trade incentives. The US ambassador has since backtracked on those comments – although it is unclear whether the accusation still stands. It will probably be hard to put this particular genie back in the bottle anytime soon. And even though we think a broad dollar bear trend will carry USD/ZAR lower later this year, in the nearer term – a febrile environment suggests USD/ZAR may challenge 20.00. Chris Turner Read this article on THINK Tags Yen FX Dollar Debt ceiling Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
EUR/USD: Examples of things that could get the market moving are US treasury yields moving out of the range on data improving or deteriorating

EUR/USD: Examples of things that could get the market moving are US treasury yields moving out of the range on data improving or deteriorating

John Hardy John Hardy 16.05.2023 16:47
Forex market seems to be quite resilient and we're wondering what's ahead EUR/USD. Let's hear from Saxo Bank's John Hardy who we reached out to. FXMAG.COM: Do you expect any radical moves of EUR/USD price in the near future? What can cause such fluctuations? John Hardy (Saxo Bank): We are awaiting more market volatility. The EURUSD has come down as the market excitement about the anticipation that the ECB is set to continue hiking while the Fed is headed for a pause has died down (and looking forward, it is hard to stretch the market's anticipated relative policy rates any further, with the Fed and ECB supposedly having approximately the same policy rate by late 2024 according to current market forward pricing). Examples of things that could get the market moving are US treasury yields moving out of the range on data improving or deteriorating. The debt ceiling issue is also very important and causing everyone to pause at the moment. Once the debt ceiling debate is resolved, I would expect that the US dollar rallies for a time because USD liquidity will decrease as the US treasury rebuilds its reserves John Hardy (Saxo Bank): Once the debt ceiling debate is resolved, I would expect that the US dollar rallies for a time because USD liquidity will decrease as the US treasury rebuilds its reserves. And I have a hard time understanding what the US dollar does if the debt ceiling stand-off gets particularly bad – no big EURUSD angle on that – perhaps more of a USDJPY impact (lower). Read next: Australian dollar against US dollar decreased amid weak China CPI data| FXMAG.COM
Euro against US dollar and British pound - Technical Analysis - May 17th

Euro against US dollar and British pound - Technical Analysis - May 17th

InstaForex Analysis InstaForex Analysis 17.05.2023 14:25
EUR/USD     Higher timeframes The pair continues to remain in the lower part of the current attraction and influence zone of 1.0864 – 1.0901 (weekly short-term trend + monthly medium-term trend). If the low (1.0846) is updated, the decline may continue, with the daily cloud (1.0814 – 1.0775) and monthly support (1.0763) as its targets. However, if the bulls manage to rise above 1.0901, their attention will then be focused on overcoming the resistance of the daily Ichimoku cross (1.0941 – 1.0981 – 1.1000) and the local high (1.1096).     H4 – H1 On the lower timeframes, the bears are close to updating the low (1.0846). The completion of the corrective rise will help them continue the downward trend. The next bearish targets within the day are the supports of the classic pivot points (1.0844 – 1.0826 – 1.0795). The key levels of the lower timeframes are acting as the resistances today, they will defend the interests of the bears at 1.0875 (central pivot point) and 1.0903 (weekly long-term trend). Overcoming these resistances and a secure consolidation above can change the current balance of power. Further, for the rise, resistances R2 (1.0924) and R3 (1.0942) may be of importance. GBP/USD     Higher timeframes The daily cross is holding back the development of the movement, so the pair has been working in the zone of attraction of its levels (1.2477 – 1.2515 – 1.2561) for several days now. To change the situation, the market needs to leave the zone of influence of the daily golden cross of Ichimoku and overcome the nearest lines. The bulls need to consolidate above the local high (1.2678), which will help to complete the current corrective decline, while after the liquidation of the daily cross, the bears need to take over the weekly short-term trend (1.2421).     H4 – H1 The rise that the bulls implemented earlier did not lead to the loss of the weekly long-term trend. Now the bears have already been able to update the low and continue to decline. The bearish targets within the day today are the supports of the classic pivot points (1.2416 – 1.2368) and the target for the breakdown of the H4 cloud (1.2392 – 1.2360). The key levels of the lower timeframes currently form a resistance zone around 1.2497 – 1.2525 (central pivot point of the day + weekly long-term trend), the breakthrough of which could be a good basis for changing the current balance of power. Read next: Issue on the US debt ceiling persists, Joe Biden goes back to the US| FXMAG.COM The technical analysis of the situation uses: Higher timeframes - Ichimoku Kinko Hyo (9.26.52) + Fibo Kijun levels Lower timeframes - H1 - Pivot Points (classic) + Moving Average 120 (weekly long-term trend) Relevance up to 10:00 2023-05-18 UTC+2 This information is provided to retail and professional clients as part of marketing communication. It does not contain and should not be construed as containing investment advice or investment recommendation or an offer or solicitation to engage in any transaction or strategy in financial instruments. Past performance is not a guarantee or prediction of future performance. Instant Trading EU Ltd. makes no representation and assumes no liability as to the accuracy or completeness of the information provided, or any loss arising from any investment based on analysis, forecast or other information provided by an employee of the Company or otherwise. Full disclaimer is available here. Read more: https://www.instaforex.eu/forex_analysis/343398
FX Daily: Time for the dollar to pause?

FX Daily: Time for the dollar to pause?

ING Economics ING Economics 18.05.2023 12:14
Equities and yields are rebounding on the back of gradually improving optimism on US debt-limit negotiations. However, the dollar remains bid and pro-cyclical currencies under pressure. We could see a pause in the dollar appreciation today as EUR/USD approaches the 1.0800 support and jobless claims might deliver another bad surprise to the greenback USD: FX stays more pessimistic on debt ceiling The narrative around US debt-limit negotiations has continued to gradually improve. President Biden has remained optimistic about reaching a deal, but markets are primarily following House Speaker Kevin McCarthy’s comments on the issue. He has changed his own rhetoric from stressing the two sides remained far apart to saying that achieving a deal is doable. Currently, staff-level talks are being held while President Biden is attending the G7 summit in Japan. We are seeing diverging reactions in asset classes: US equities rebounded, treasuries remained under pressure, but the dollar – which should underperform in a risk-on repricing – continued to appreciate. We are witnessing an unusual combination of the most high-beta currencies like Norway's krone falling in line with the safe-haven Japanese yen. The yen’s weakness primarily mirrors the recent US Treasury’s underperformance while the dollar’s strength, paired with pressure on commodity currencies, signals how the FX markets seem to be lagging the cautious optimism shown in other asset classes like equities. At the same time, with EUR/USD close to the pivotal 1.0800 support level and the news coming from Washington admittedly more encouraging, we could see a stabilisation, or a small correction in the dollar, rather than further appreciation today. Data will also be in focus in the US with jobless claims, which surprised on the upside recently, expected to decline from 264k to 252k, possibly carrying some downside risk to the greenback. Home sales data from April and the Philadelphia Fed Business Outlook will also be published, while the Fedspeak calendar includes Philip Jefferson, Michael Barr and Lorie Logan. Francesco Pesole EUR: Chances of a break lower have declined Recently, we have been stressing the relevance of 1.0800 – in our view – as the benchmark level in EUR/USD to gauge market sentiment about the US debt-limit story. As briefly discussed in the USD section above, the improvement in the rhetoric by Biden and McCarthy and the positive reaction in US equity markets suggests we could see a stabilisation in EUR/USD today. The chances of 1.0800 being tested remain tangible, but those of a decisive break lower have likely declined. Markets will keep drawing very little information on the domestic side from the eurozone, with the data calendar being rather empty – only the European Central Bank economic bulletin today – and two ECB speakers (Luis de Guindos and Madis Muller) which may not drive any real market impact. Francesco Pesole GBP: Another speech by Bailey today Some comments from Bank of England Governor Andrew Bailey yesterday did not add much to the recent BoE rhetoric. Expectations are for a rapid decline in inflation, but policymakers remain ready to react to signs of persistence in price pressures and will be closely monitoring wages, services and labour tightness. We recently discussed how UK wage data marginally pointed towards a pause at the June meeting, in our view. Given the Sonia curve currently prices in around 19bp of tightening for June and 40bp in total before the peak, we think there is plenty of dovish repricing to be passed through to sterling, and we expect EUR/GBP to climb from these levels: we target 0.88-0.89 this summer. Read next: Rates Spark: Yields are looking up again| FXMAG.COM Today, the UK data calendar is empty, but we’ll hear from BoE Governor Bailey again as he testifies – along with Ben Broadbent and Dave Ramsden – to the Treasury Select Committee about quantitative tightening. This morning, there is also a scheduled speech by Chief Economist Huw Pill. Francesco Pesole AUD & NZD: Flipping narrative First-quarter wage data offered - in our view - enough motive for the Reserve Bank of Australia to keep tightening policy despite not coming in at screamingly elevated levels, but today’s employment figures in Australia may complicate any plans to hike again. Employment dropped 4k in April (expected +25k), which led the unemployment rate to rise from 3.5% to 3.7%. The details of the report are rather grim too: the drop was all due to full-time employment (-27k), while part-time hiring actually accelerated (+23k).  The release probably flips the narrative for AUD/NZD: from a potentially bullish opportunity to a growing chance that the recent 1.0600 recent lows (and important support) will be heavily tested. Still, we must remember there is close to nothing priced in terms of RBA tightening, so the room for a dovish re-pricing to hit AUD is limited. On the NZD side, the Treasury announced its budget today, which came with a larger deficit, with a focus on reconstruction spending after the recent severe weather events. Somewhat surprisingly, the Treasury now sees the extra spending, combined with the tourism boost, as allowing New Zealand to dodge a recession – which is instead the Reserve Bank of New Zealand's baseline scenario, according to February’s projections. An improved economic outlook, and expansionary fiscal policy – paired with a surge in migration - also means price pressures may last longer, and puts pressure on the RBNZ to stay hawkish next week. A 25bp hike is our (and consensus) call, but the focus will mostly be on the new rate projections: more tightening may now be pencilled in after the budget, and this could lead to NZD outperforming AUD. Francesco Pesole Read this article on THINK Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Spanish Elections and Growth Outlook: Limited Impact Expected

Spanish construction sector growing strongly, but challenges remain

ING Economics ING Economics 18.05.2023 13:29
Despite higher interest rates and prices of building materials, the Spanish construction sector started the year well, growing by 2.5% quarter-on-quarter between January and March. The biggest challenge for the sector is falling productivity. On the other hand, stricter building energy efficiency regulations will drive the renovation market Despite a strong start to the year, we expect growth in Spain's construction sector to moderate in the second quarter of 2023 Spanish construction sector starts the year strongly According to the latest data released by Spain's statistics service INE in late April, the country's construction sector expanded by 2.5% in the first quarter of the year, compared to the fourth quarter of 2022. This growth rate was significantly higher than the 0.6% quarter-on-quarter growth rate recorded for the wider Spanish economy, which was also robust. According to the breakdown based on the spending component of GDP, investment in housing increased by 1.3% quarter-on-quarter, while investment in other buildings and structures rose by 1.6%QoQ. In addition, net exports of construction-related products and services may also have contributed to the strong performance. Despite the economic uncertainties, business confidence in the sector remains positive, as shown in the chart below. This optimism is due to several factors, including well-filled order books, easing price pressures, improvements in global supply chains and a stable property market. Although the property market is cooling significantly, there is no indication that the country is heading towards a housing market crash. Given the close correlation between the prices of existing homes and new construction, a soft landing in the property market will also support the construction sector. Sharp falls in the prices of existing homes would put pressure on house builders to lower the prices of new homes, which would curb the new-build market. Construction company confidence still positive Source: Eurostat   Despite this strong performance in the first quarter, the construction sector has still not fully recovered from the impact of the Covid-19 pandemic, as illustrated in the chart below. Activity in the Spanish construction sector is still 9.2% below the level of the last quarter of 2019. This contrasts with the rest of the Spanish economy, which is almost back to its pre-Covid level: in the first quarter of 2023, economic activity was only 0.2% lower than in the fourth quarter of 2019. The Spanish construction sector has been severely affected in recent years by a series of global events; the Covid pandemic, the war in Ukraine and the significant rise in interest rates. Moreover, sharp increases in the prices of construction materials and energy have led to many projects being postponed or cancelled. Gross value added of the entire Spanish economy and the construction sector, Q4 2019 = 100 Source: INE The pace of input price increases in construction will gradually slow Since January 2021, the Spanish construction cost index has risen sharply, primarily driven by the strong global demand recovery and the conflict in Ukraine. The index showed that construction prices were on average 17.7% higher in the second quarter of 2022 compared to the same period the previous year. The index, which is based on a quarterly survey of construction companies, covers the costs of materials, labour, and other inputs that go into building new residential properties. Spain's construction cost index peaked in the second quarter of 2022, but has since cooled Source: Eurostat   After peaking in the summer of 2022, the prices of various construction materials, including wood and metals, have steadily declined. This can be attributed to improved global supply chains and reduced demand. Although the reopening of the Chinese economy early this year led to an increase in prices for materials such as copper and steel, they remain below their peak levels of the summer. On the other hand, the prices of energy-intensive building materials, such as concrete, cement and bricks, have continued to rise, despite falling energy prices – although we note that the pace of price increases has slowed down recently. Read next: Nothing in UK wage data that screams the need for another rate hike| FXMAG.COM We expect price pressures for construction materials to ease on the back of a weakening global economy. With the US economy falling into recession, the European economy slowing significantly and China's manufacturing and construction sectors failing to pick up, it seems unlikely that global commodity prices will rise again later this year. Prices of energy-intensive building materials are also expected to start falling slightly soon due to lower energy prices. Although gas prices may rise during the injection season, they are unlikely to rise sharply for the rest of the year. The outlook for the energy market is more positive than last year, thanks to well-stocked European gas supplies, which would allow producers of these energy-intensive building materials to gradually lower their prices. Building permits rose strongly in 2022 despite rising interest rates Despite challenges due to higher interest rates and building material prices, the number of licensed square metres increased by 43.4% in 2022 compared to 2021, according to Eurostat data. Building permits rose strongly in both residential (+44.2%) and non-residential building sectors (+41.7%). The growth in the number of licensed square metres for residential construction was mainly due to strong growth for single-family homes in the first half of the year. The non-residential sector also recorded a strong increase in the permits issued, particularly in the office building segment. The number of licensed square metres for office buildings almost tripled in 2022 compared to the previous year. The Spanish office market was hit hard by the pandemic with many companies implementing remote work policies and reducing their office space requirements. However, there are some indications that the Spanish property market is picking up again. Year-on-year growth in building permits in 2022, in m2 of useful floor area Source: Eurostat   The number of residential building permits is likely to fall in 2023. In the residential construction market, strong growth was seen in the first half of 2022 but has been declining since last summer due to rising interest rates and the increased cost of building materials. As the property market cools, sales of new buildings will also decline, so the number of residential building permits is likely to fall further in 2023. In addition, growth in non-residential building permits is also likely to slow down this year due to a weakening economy. Productivity falls much more sharply than euro area average since 2015 The construction sector traditionally suffers from lower productivity than other sectors, such as manufacturing. One reason is that the sector consists of many small and medium-sized enterprises, making it more difficult to unify construction processes. Smaller companies are less inclined to invest in large digitisation and automation projects because of significant start-up costs, which hampers productivity growth. Remarkably, since 2015, productivity in Spain has fallen much more than in other countries. Eurostat figures show that Spanish labour productivity has fallen by 18% since 2015, compared with an average decline of only 5% in the eurozone. In Italy, it has actually increased thanks to a number of regulatory reforms that have led to more competition and less bureaucracy. There are several reasons for the downward trend. In recent years and especially during the pandemic, Spanish activity in the construction sector fell more sharply than in other countries. Since the workforce tends to fall more slowly than activity, this leads to falling labour productivity. Another possible explanation is that the number of non-registered workers in the sector has decreased in recent years, which also reduces the productivity of the legally registered workforce. Real labour productivity in construction, 2015 = 100 Source: Eurostat Stricter energy regulations will give renovation market a solid boost In the coming years, the Spanish construction and real estate sector will be significantly affected by stricter regulations on the energy efficiency of buildings. The European Union aims for climate neutrality by 2050, and since buildings account for 40% of energy consumption and 36% of greenhouse gas emissions in the EU, they are a major focus of these regulations. However, the current European renovation rate is insufficient to meet the targets; estimates suggest an annual renovation rate of only 1%. To increase the renovation rate, the European Parliament adopted in March an ambitious revision of the 2010 Energy Performance of Buildings Directive, on which the European Council must now decide. If adopted, the proposal would replace the current energy performance certification system with a more holistic assessment of the environmental performance of buildings. The proposal focuses on ambitious targets for the renovation of existing buildings, including the setting of minimum energy performance thresholds that all buildings must meet within a certain timeframe. However, the proposal goes beyond improving the energy efficiency of buildings. The proposal also envisages the creation of a certification for the environmental performance of buildings throughout their life cycle, taking into account emissions generated during the production of construction and insulation materials, the construction itself, and the renovation and operation of buildings. In the coming years, developers will be required to meet higher standards of sustainability and energy efficiency throughout the entire life cycle of a building, which will lead to a shift in mindset, as the long-term ecological impact must be taken into account at every stage of a project. Stricter regulations may also drive up the cost of new construction projects due to the more selective choices of building materials. On the other hand, the regulations are expected to boost the renovation market in Spain, as they will trigger a renovation wave, creating a greater demand for energy-efficient renovations. Overall, the stricter regulations are expected to support the Spanish construction sector in the near future. Spanish construction sector likely to lose momentum later this year The Spanish construction sector started the year on a positive note with a 2.5% increase in gross value added in the first quarter. Despite this strong performance, we expect growth to moderate in the second quarter, followed by a possible contraction later in the year, due to slowing economic growth and rising interest rates dampening demand for investment in construction projects. This trend is particularly evident in the housing sector, where a decline in building permits was already recorded in the second half of 2022 and is likely to continue. Read this article on THINK Tags Spain Real Estate GDP Construction Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Forex: Euro against US dollar - technical analysis - May 18th

Forex: Euro against US dollar - technical analysis - May 18th

InstaForex Analysis InstaForex Analysis 18.05.2023 16:16
Red lines- bearish channel Blue line - bullish RSI divergence Short-term trend is bearish in EURUSD. Price continues making lower lows and lower highs inside the red downward sloping channel. Price has reached our target area for the first pull back around 1.08. The RSI has started providing bullish divergence signals in the 4 hour chart. This is not a reversal signal. This is only a warning. Current market conditions justify a bounce higher maybe towards 1.0850-1.09 but we do not believe this is a tradeable bounce, as the market can go even deeper in oversold territory. Read next: Euro against US dollar and British pound - Technical Analysis - May 17th| FXMAG.COM Relevance up to 15:00 2023-05-19 UTC+2 This information is provided to retail and professional clients as part of marketing communication. It does not contain and should not be construed as containing investment advice or investment recommendation or an offer or solicitation to engage in any transaction or strategy in financial instruments. Past performance is not a guarantee or prediction of future performance. Instant Trading EU Ltd. makes no representation and assumes no liability as to the accuracy or completeness of the information provided, or any loss arising from any investment based on analysis, forecast or other information provided by an employee of the Company or otherwise. Full disclaimer is available here. Read more: https://www.instaforex.eu/forex_analysis/323958
Rates Spark: Nothing new on the dovish front

Rates Spark: Nothing new on the dovish front

ING Economics ING Economics 19.05.2023 10:31
Of the three factors pushing yields up, only the lack of clearly dovish data is a significant one in our view. Powell and Lagarde could aggravate the bond sell-off today but next week’s sentiment indicators may paint a less rosy picture Three factors pushing yields up, but only one really matters Bonds continue to trade on their back foot on a combination of factors, which we will divide into three groups. First, flow. A week of relative calm has proved a cue for borrowers to come to primary markets, saturating demand in some places and pushing yields up. Second, sentiment towards a number of tail risks, mostly US regional banks and the debt ceiling, seems to have improved. Third, a slowdown in economic data that would justify the rate cuts priced by yield curves, especially in the US, still elude the market. We’re still in the period after a lot of monetary tightening has been implemented, but before it actually bites We tend to dismiss the first as a mostly temporary factor, not least because the supply window may not remain open very long, and because a supply indigestion might deter opportunistic issuers. Tail risks are more complicated because they are – by their very nature as low probability but high impact events – eminently difficult for markets to price correctly. The third factor is more significant in our view. In our assessment, we’re still very much in the misleadingly calm period after a lot of monetary tightening has been implemented, but before it actually bites. 10Y yields are pushing higher as data fails to validate dovish expectations Source: Refinitiv, ING Drift higher could continue but the reversal may be violent 10Y Treasuries just crossed the top of range in place since mid-March. This is something 10Y gilts did a long time ago, while 10Y Bund yields are still off their April highs. Supply calming down should provide a relief to markets but today’s central bank speakers (chiefly Christine Lagarde and Jerome Powell) stand a better chance of moving the market when they keep the option to hike open. At face value, the USD curve is more vulnerable to Powell’s ‘higher for longer’ message as it still prices 46bp of cuts this year. The EUR curve on the other hand, with 50bp more hikes priced by September is more in line with the European Central Bank’s message that more tightening is required. The USD curve is more vulnerable to Powell’s ‘higher for longer’ message The few positioning data available to us still suggest a decent short-base among leveraged investors, the category most liable to cover in a hurry if data or tail risks send yields lower. Our view is thus that the drift higher in rates continues in the near term, but we’re fully aware that any reversion lower could be a violent one. The catalyst for this could be economic data. This week’s Zew survey suggests a deterioration in sentiment in May, and it is entirely possible the same happens to PMIs and Ifo next week. We’re more doubtful that the May Federal Open Market Committee (FOMC) minutes, due to be released next Wednesday, will contain much hint of a pause, but the prospect could at least pause the bond sell-off early next week. Leveraged shorts in 2Y Treasury futures suggest any drop in yields will be violent Source: Refinitiv, CFTC, ING Today's events and market view Overnight inflation data in Japan showed another acceleration again to 3.5% year-on-year in April, prompting thoughts of policy adjustment from the Bank of Japan. Another increase in the headline could be in store in June on the back of rising power bills. Our economists think inflation will probably come down only gradually, and more slowly than BoJ is expecting. Read next: Asia Morning Bites - 19.05.2023| FXMAG.COM There isn’t much on today’s calendar, but markets have been primed for a hawkish re-pricing of late, so central bankers on today’s schedule stand a better chance to move the market. Christine Lagarde and Isabel Schnabel of the European Central Bank are due to speak, while Jerome Powell of the Federal Reserve is also going to make a public appearance. The lack of economic publications today will allow macro-minded investors to turn their focus to next week’s busy slate, including a look at European PMIs and Ifo, the May FOMC minutes, and April UK CPI. Read this article on THINK Tags Rates Daily Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
What are the possible scenarios for EUR/USD? Euro against US dollar - inidicator analysis

What are the possible scenarios for EUR/USD? Euro against US dollar - inidicator analysis

InstaForex Analysis InstaForex Analysis 19.05.2023 11:16
Trend analysis (Fig. 1). The market may move upward from the level of 1.0769 (closing of yesterday's daily candle) to 1.0851, the 14.6% pullback level (red dotted line). When testing this level, the price may continue to move up. Fig. 1 (daily chart). Comprehensive analysis: Indicator analysis - up; Fibonacci levels - up; Volumes - up; Candlestick analysis - up; Trend analysis - up; Bollinger bands - up; Weekly chart - up. General conclusion: Today, the price may move upward from the level of 1.0769 (closing of yesterday's daily candle) to 1.0851, the 14.6% pullback level (red dotted line). When testing this level, the price may continue to move up. Read next: Stock market: DAX index - "Short-term trend remains bullish as price continues making higher highs and higher lows"| FXMAG.COM Alternatively, the price may move upwards from the level of 1.0769 (closing of yesterday's daily candle) to 1.0851, the 14.6% pullback level (red dotted line). When testing this level, the price may move down. Relevance up to 08:00 2023-05-20 UTC+2 This information is provided to retail and professional clients as part of marketing communication. It does not contain and should not be construed as containing investment advice or investment recommendation or an offer or solicitation to engage in any transaction or strategy in financial instruments. Past performance is not a guarantee or prediction of future performance. Instant Trading EU Ltd. makes no representation and assumes no liability as to the accuracy or completeness of the information provided, or any loss arising from any investment based on analysis, forecast or other information provided by an employee of the Company or otherwise. Full disclaimer is available here. Read more: https://www.instaforex.eu/forex_analysis/343643
FX Daily: The ideal mix for the dollar – for now

FX Daily: The ideal mix for the dollar – for now

ING Economics ING Economics 19.05.2023 13:20
A US debt ceiling deal is inching closer, and while the rebound in equities has been somewhat contained, pressure on bonds remains substantial. Contributing to that were hawkish comments by Fed's Logan and lower-than-expected jobless claims, which translated into another round of Fed hawkish repricing. It’s an ideal mix for the dollar – for now Source: A US debt ceiling deal inches closer as talks continue USD: Rates lifting the dollar The dollar has continued to build bullish momentum, drawing strength from the repricing in Federal Reserve rate expectations now that risk sentiment seems to stabilise as a bi-partisan deal on the debt ceiling looks more feasible. Republicans are demanding stricter work requirements for social safety net programmes, a point the most liberal branches of the Democratic parties have firmly opposed. It seems, however, that President Biden may ultimately budge on this point, and House Speaker McCarthy said yesterday that an “agreement in principle” may be ready by this weekend.   The market reaction to the optimistic turn in the US debt ceiling story seems to be perfectly fitting a bullish dollar narrative as equities have stabilised, but failed to show a substantial rebound (the Dow Jones remains below the levels it was trading at 10 days ago). The clearest reaction has been once again in the bond market, with yet another bearish session for Treasuries. 10-year yields pressed above the 3.60% mark, the highest since March; 2-year USD swaps have risen to 4.45%, highest since mid-April. Against this market backdrop, a stronger dollar across the board is a natural reaction in FX. The large move in rates was the consequence of markets seeing a potential debt-ceiling deal as a positive development for the US economy, but there were other contributing factors at play: initial jobless claims fell more than expected yesterday, and Federal Open Market Committee (FOMC) member Lorie Logan hinted that another hike is still possible given sticky inflationary pressures. The re-pricing in Fed rate expectations has been substantial. Only a week ago, markets were pricing in no chances of a rate hike in June and 75bp of cuts in December. Now, the Fed Funds Future curve embeds a 33% implied probability of a 25bp hike in June, and around 50bp of cuts by December. It's hard to buck the dollar's bullish momentum now, as we also think some substantial squeezing of short USD positions can be behind the move. Today. We’ll hear from Fed Chair Jerome Powell and he will probably have some interest in keeping a hawkish rhetoric alive, ultimately adding a bit more pressure on bonds and support to the dollar. A US debt-ceiling deal may be announced, but that appears to be mostly priced in by now.   Read next: Rates Spark: Nothing new on the dovish front| FXMAG.COM We argue that the sustainability of this kind of dollar trend strongly relies on hard data confirming price pressure remain elevated and the US economic outlook stable. This may be a story for the near-term, where the dollar can still find some support, but we see the second half of the year as the period where evidence of sharply slowing US economic activity will force large cuts by the Fed and cause a rapid dollar depreciation. Francesco Pesole EUR: Squeezing still in progress EUR/USD broke below the key 1.0800 level, although – as highlighted above – largely mirroring some drastically changed picture in terms of Fed rate expectations and rising USD rates. A key driver of the EUR attractiveness over the USD recently was indeed the notion that the Fed had reached the peak while the European Central Bank had still some way to go with tightening. The latter remains true, but a market that is now re-entering bets on a June hike by the Fed after Logan’s comments seriously dents the underlying bullish narrative for EUR/USD. We must remember that EUR/USD was the biggest G10 long positions entering the US debt-ceiling chaos, and since the latest development turned out to be positive for the dollar, we are probably seeing a substantial long-squeeze in the pair. There is considerable room for a hawkish repricing in Fed rate expectations, so it’s risky to pick a bottom in EUR/USD. The next real support level will probably be at 1.0700. Domestically, ECB President Lagarde and Isabel Schnabel will speak today, but the impact on the euro will likely be relatively contained. Francesco Pesole GBP: Quiet domestic drivers GBP/USD is being driven almost entirely by the dollar leg at this stage, with comments by some Bank of England officials yesterday not having a sizeable FX impact. Governor Bailey said the BoE balance sheet will not return to pre-2008 levels, and Dave Ramsden signal a potential acceleration in the pace of quantitative tightening. EUR/GBP has remained quite depressed, we think that EUR is probably still experiencing some bigger long-squeezing effect, but the UK inflation next week (24 May) is a major risk event for the pair and we see upside risks given considerable room for markets to price out BoE tightening. We still target 0.88-0.89 this summer. Francesco Pesole SEK: Left without a floor We published a note yesterday discussing how the Riksbank has made the krona’s path to recovery even narrower. The core of the issue for SEK is that the two votes against a 50bp hike back in April thwarted the main tool that the Riksbank was using to offer SEK a floor against adverse market moves: its own hawkish stance. Now that those adverse market moves are materialising, we are seeing SEK matching the losses of NOK, something that was not happening until the April Riksbank meeting. With recent CPI data endorsing the narrative of the Riksbank’s doves, it seems increasingly unlikely the Bank will be able to establish that SEK-supportive hawkish narrative in June. That is, unless we see an above consensus read in the May CPI figures. Until then, SEK should remain vulnerable. EUR/SEK may break above the 11.43 April highs and explore the 11.50/11.60 area, last seen in 2009. Francesco Pesole Read this article on THINK Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
EUR/USD Price Analysis: Initial support turns up near 1.0760

EUR/USD Price Analysis: Initial support turns up near 1.0760

FXStreet News FXStreet News 19.05.2023 16:03
By Pablo Piovano EUR/USD attempts a mild bounce after testing lows around 1.0760. There is a temporary hurdle at the 55-day SMA near 1.0870. EUR/USD rebounds from new 2-month lows in the 1.0760/55 band and manages to briefly surpass the 1.0800 hurdle at the end of the week. While initially supported by the 1.0760 region, occasional bullish attempts could see the pair confront the temporary hurdle at the 55-day SMA at 1.0865 ahead of the more significant 1.1000 mark. Extra losses are not ruled out in the current context, although a sustained retracement to the March bottom of 1.0516 (March 15) is not favoured for the time being. Looking at the longer run, the constructive view remains unchanged while above the 200-day SMA, today at 1.0465. EUR/USD daily chart  
Impact of Declining Confidence: Italian Business Sentiment in August

FX Daily: This could be another good week for the dollar

ING Economics ING Economics 22.05.2023 10:45
The debt-ceiling roller coaster continues, but markets remain cautiously confident Biden and McCarthy will reach a deal by the end of this week. This, combined with hawkish hints by Fed officials and minutes could prompt another repricing higher in US rate expectations, and keep the dollar supported a bit longer. Elsewhere, UK CPI will be key for sterling  USD: Dollar can find more support The most bullish expectations were probably for a debt ceiling deal to be on the table by today. This hasn’t been the case following a partial breakdown in negotiations on Friday, but a reconciliation and new staff-level talks over the weekend are keeping hopes alive that President Joe Biden and Speaker Kevin McCarthy will reach an agreement by the end of this week. We discussed late last week how the dollar was enjoying a rather ideal mix of factors. Progress on debt ceiling talks was prompting some re-rating of US growth expectations, and paired with hawkish comments by some Fed officials, markets were shifting towards a more hawkish set of expectations for the near- and medium-term. However, the volatility in the debt-limit sentiment also means volatility in rate expectations and the dollar. On Friday, the temporary setback in debt-ceiling negotiations saw markets fully unwind 10bp of tightening that had been priced in for June. This morning, the Fed funds future curve still embeds around 50bp of easing by year-end, considerably less than the 75bp from around 10 days ago. All this signals that markets remain cautiously optimistic about a deal, but Friday’s setback is probably preventing the Fed hawks' rhetoric from being passed through to the June pricing just yet. With Biden and McCarthy expected to meet in person again today, headlines on the debt limit will likely drive most FX moves today. The US calendar is empty today, and may not offer major drivers for the market until Friday, when April PCE deflator (the Fed’s favourite inflation measure) numbers are released. Activity on the Fed side will be more interesting to monitor. The minutes (out on Wednesday) will be scanned closely for hints about a pause, while hawkish hints from the document could help rebuild some tightening expectations for June (should debt ceiling talks progress) and keep supporting the dollar. There are also some Fed speakers to watch this week, starting today, with James Bullard, Raphael Bostic and Mary Daly. All in all, given the recent positive short-term reaction of the dollar to progress on debt-ceiling news and assuming the stalemate will finally be resolved some time this week, we could see the greenback staying supported, especially given that the lack of key data releases should not particularly challenge another hawkish repricing of Fed expectations. A key risk would only come in the form of particularly dovish FOMC minutes, although recent comments by FOMC members are pointing in the opposite direction. We still think that the Fed has already hit the peak, and our US economist expects as much as 100bp of cuts in late 2023 as the economic outlook deteriorates. With this in mind, we expect any dollar resilience to prove unsustainable beyond the short term. Francesco Pesole EUR: Watch eurozone surveys this week EUR/USD has been moved almost entirely by the dollar in the past week or so, as debt-ceiling news dominated. While this will remain the primary driver this week, some domestic news is likely to come into the mix on the euro side as well. On the data side, we’ll take a look at two important surveys, which are largely expected to show a slowdown in growth sentiment in the eurozone. PMIs will be released tomorrow, and the Ifo on Wednesday. German’s growth prospects recently displayed some slightly worrying signs, as discussed by our economics team here, after ZEW numbers were released. On the European Central Bank side, we heard some rather hawkish comments by President Christine Lagarde, who reinforced her pushback against the notion of a pause: she will speak again on Wednesday, and on the same day, the ECB will hold a non-policy meeting (no statement, no press conference). Today, Philip Lane, Luis de Guindos, François Villeroy and Pablo Hernandez De Cos are scheduled to speak, and many other members are scheduled to deliver remarks throughout the week. Still, with markets fully pricing in two more 25bp rate hikes by September, it now seems unlikely that ECB speakers can push short-term EUR rates much higher. The partial re-widening in the EUR-USD 2-year swap rate gap from the -62bp level in early May to the current -87bp is entirely a Fed hawkish repricing story. The stretched long EUR/USD positioning coming into the debt-ceiling negotiation period meant the pair was vulnerable to corrections, but we still expect a rebuild of long-term bullish positions in the second half of the year as markets rotate back away from the dollar and into European currencies. For this week, the balance of risks appears tilted to the downside for EUR/USD as the dollar may find a bit more support from a debt-ceiling deal and hawkish Fed rate expectations. We can’t exclude the drop extending to sub-1.0700 levels at this stage, although opportunistic buying would probably start to emerge more prominently around such levels. Francesco Pesole Read next: US home sales hit by affordability and supply constraints| FXMAG.COM GBP: All about inflation Wednesday’s inflation data in the UK will be a make-or-break event for the pound. Markets are pricing in 19bp of tightening, and if our expectations are correct and CPI data indicates enough of a cool-down in prices to convince the Bank of England to pause tightening in June, the downside risks for sterling are quite sizeable. We keep pointing to EUR/GBP as the best pair to play GBP weakness. Should the dollar find more support this week, we could see a decisive acceleration in cable’s correction on diverging Fed-BoE diverging narratives and the 1.2250-1.2300 region being explored, while we see upside risks for EUR/GBP into the 0.8750-0.8800 area in the near term. Francesco Pesole CEE: US dollar to remain main driver Today, we will see industry and labour market numbers in Poland. We expect industrial production to fall by 2.5% year-on-year in April, less than market expectations. Industry remained in the red and the only bright spot so far is the automotive industry, but it is expected to start shining less brightly when the backlog of work is filled and previous orders executed. On the other hand, we expect the unemployment rate to have fallen from 5.4% to 5.3% in April. Tomorrow, Polish retail sales will follow, which we estimate fell 8.6% in April, a bit more than the market expects. Also scheduled for tomorrow is a meeting of the Hungarian National Bank. We expect central bankers to deliver the first effective rate cut of 100bp to 17%, starting a gradual normalisation of monetary policy. On Wednesday, consumer confidence will be released in the Czech Republic and on Friday we will see labour market data in Hungary. On the sovereign rating side, on Friday, Moody's rating review of the Czech Republic will be published. The agency cut the outlook to negative (Aa3) last August and we expect it to remain unchanged this time. On the FX side, the US dollar, which moved the entire region significantly weaker last week, will remain the main driver this week as well. In this environment, the Czech koruna is showing the highest beta and we think it has even slightly overshot its reaction. Unless we see another significant EUR/USD move downwards, EUR/CZK should not exceed 23.80 and, conversely, stabilisation in global markets should take the koruna back below 23.70. The Hungarian forint will also be in focus this week. Although market expectations have shifted towards our expectations in recent weeks we can still expect a rather weaker forint after the NBH meeting tomorrow. Nevertheless, given the sell-off last week, positioning can be assumed to be light and the 378 EUR/HUF level should be the cap at the moment. Moreover, we believe that any further weakness in the forint will be used by the market to re-enter long positions to benefit from the significant carry that will be with us for some time despite the start of rate cuts. Frantisek Taborsky Read this article on THINK Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
Australian Dollar's Decline Persists Amid Evergrande Concerns and Economic Data

UK Inflation Dilemma: Can Rate Hikes Tackle Soaring Prices and Avert Recession?

InstaForex Analysis InstaForex Analysis 31.05.2023 09:00
On Tuesday, the demand for the pound was significantly higher than that for the euro. As soon as this happened, many analysts began to pay attention to the report on prices in UK stores, as shop price inflation accelerated to 9% this month. This indicates that UK inflation is decreasing slowly or not decreasing at all, despite the benchmark interest rate being raised to 4.5%.   The consensus forecast for the Bank of England's rate currently suggests two more quarter point rate hikes in June and August.   This would bring the rate to 5%. Any further tightening without alternatives would push the British economy into a recession, and even the current rate could potentially cause it, despite the BoE's optimistic forecasts. But how can inflation be combated if it hardly responds to the actions of the central bank?     I believe there can only be one disheartening answer: it cannot. If further rate hikes lead to a recession, the Brits, clearly dissatisfied with recent events within the country, may start a new wave of mass strikes. Take note that in the past year, many Brits have openly criticized the British government for the sharp decline in real incomes and high inflation.   If the rate increases further, the economy will contract, leading to an increase in unemployment. If the rate is kept as it is, it might take years for inflation to return to the target level. The BoE is in a deadlock. BoE Governor Andrew Bailey expects inflation to start decreasing rapidly from April. He noted the decline in energy prices, which will somewhat dampen inflationary pressure on all categories of goods and services. However, the April inflation report was unusually contradictory. While headline inflation showed a significant slowdown, core inflation continues to rise.   Therefore, it is not possible to conclude that inflation is slowing down in the general sense. We can only wait and observe. If Bailey turns out to be right, then the BoE will not need to raise the rate to 5.5% or 6%, which currently seems like a fantasy.   However, if inflation continues to hover around 10%, the BoE will need to devise new measures to address it without exerting serious pressure on the economy. It might require patience for several years. It is entirely unclear which option the central bank will choose.   The demand for the British pound may increase as market expectations of a hawkish stance grow. But will these expectations be justified? The pound may rise based on this, but fall even harder when it becomes clear that the BoE is not ready to raise the rate above 5%. I believe that wave analysis should be the primary tool for forecasting at the moment.     Based on the analysis conducted, I conclude that the uptrend phase has ended. Therefore, I would recommend selling at this point, as the instrument has enough room to fall. I believe that targets around 1.0500-1.0600 are quite realistic.   A corrective wave may start from the 1.0678 level, so you can consider short positions if the pair surpasses this level. The wave pattern of the GBP/USD pair has long indicated the formation of a new downtrend wave. Wave b could be very deep, as all waves have recently been equal.   A successful attempt to break through 1.2445, which equates to 100.0% Fibonacci, indicates that the market is ready to sell. I recommend selling the pound with targets around 23 and 22 figures. But most likely, the decline will be stronger.    
Forward-looking data suggests domestic demand will soften

Analysis: Pound's Impressive Growth Contradicts Macroeconomic Data and Overbought Dollar

InstaForex Analysis InstaForex Analysis 02.06.2023 10:33
Yesterday, the pound showed impressive growth. Similarly, the euro also showed significant gains. Considering that there was no macro data from the UK, unlike the eurozone, it is more accurate to say that the pound followed the euro. However, this growth contradicted all the macro data.   After all, eurozone inflation slowed down significantly more than expected, while employment in the United States increased substantially more than anticipated. So, the dollar should have extended its growth. But the market went in a different direction, and the formal reason for this was the minutes of the European Central Bank's governing council meeting, which mentioned the possibility of more interest rate hikes. However, the meeting itself took place before there were even rough forecasts for the current inflation.   Just a couple of days ago, several ECB officials explicitly stated that the cycle of interest rate hikes may have come to an end. So, the rise of the euro and, along with it, the pound, goes against common sense. Unless we consider the excessive overbought condition of the dollar, which became the main reason why European currencies increased.   However, there is a high probability that today everything will return to the values at the start of yesterday's trading. Employment data clearly suggests that the content of the US Department of Labor report will be slightly better than expected. In particular, unemployment, which was expected to increase from 3.4% to 3.5%, may well remain unchanged. But if unemployment does increase, the dollar may continue to lose its positions, primarily due to the persistent overbought condition.       During the intense upward movement, the GBP/USD pair jumped above the 1.2500 level. This served as the primary signal of the pound's recovery process relative to the recent corrective move. Due to the sharp price change, on the four-hour chart, the RSI reached the overbought zone, which indicates that long positions are overheated in the intraday period. On the four-hour period, the Alligator's MAs are headed upwards.   This indicates a shift in trading interests. Outlook In this situation, the sharp price change from the day before is a signal of the pound's overbought conditions in the intraday and short-term periods. The target level is set at 1.2550, around which the upward cycle slowed down, which reduced the volume of long positions and resulted in a stagnation. We can assume that the process of the pound's recovery will be temporarily interrupted by a pullback.   However, if the price remains stable above 1.2550, speculators may ignore the technical signal of overbought conditions. In this case, the pair can rise towards the peak of the medium-term trend. The complex indicator analysis unveiled that in the short-term and intraday periods, points to the pound' recovery process.  
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Unexplained Surge of GBP/USD: Market Confusion and Fundamental Disconnect

InstaForex Analysis InstaForex Analysis 02.06.2023 11:17
The GBP/USD currency pair calmly continued its upward movement on Thursday. And we are forced to state that the rise of the British currency is once again completely illogical. The market is returning to its favorite activity of the past few months - buying the pound regardless of its fundamental background. And if that's the case, we can do nothing about it. It is worth noting that at the same time, the euro continues to trade below the moving average and shows no signs of growth.   At most, a correction may occur soon due to the CCI indicator entering the oversold area. In other words, the pound and the euro do not correlate this week, which always raises questions. The fundamental background has indeed been very different for these pairs. We have received diverse news, statements, speeches, and reports from the European Union. The market has not yet figured out which of this data is primary and which can be disregarded.       However, at the same time, from the UK, we have only received the report on business activity in the manufacturing sector for May in its final assessment. This secondary indicator could not have caused a strong British currency rise yesterday. What could be the problem? We can only assume one thing. The market believes that the ECB is approaching the end of its tightening cycle. Still, at the same time, it expects several more rate hikes from the Bank of England, which puts the British pound in a more favorable position than the dollar or the euro.   It is worth noting that the probability of an interest rate hike by the Federal Reserve in June has sharply increased this week, as several members of the monetary committee have expressed their readiness to support a "hawkish" decision without pausing. But yesterday, Thomas Jefferson and Patrick Harker, on the contrary, spoke in favor of a pause, which further confused traders. If the market is confused, seeing flat or cautious movements would be more logical. However, the pound is rising again like yeast. Therefore, the issue lies in the CCI indicator entering the oversold area and maintaining a bullish sentiment in the market. The pound should resume its decline, but strong bearish signals are now needed, which are currently lacking.   Nonfarm payrolls and unemployment can pleasantly surprise the market. On the last trading day of the week in the United States, the publication of the nonfarm payroll reports is scheduled. Since the British pound is rising again for unclear reasons, these reports are intended to set everything straight. The dollar may resume growth if they show good values (not below forecasts).   If the values are weak, the pound may rise even stronger in joy. And it doesn't matter that globally, it should decline by another 500-600 points to contemplate new growth. It is worth noting that we did not receive any "hawkish" signals from the United States this week. And if so, there are no strong reasons for the pound to rise.   On Thursday, the ADP report on changes in the number of private sector employees in the United States showed a higher value than expected - 278,000 against the forecast of 170-200. However, this report is rarely perceived by traders as important. They usually prefer to wait for the Nonfarm Payrolls. Moreover, the nature of the ADP and NonFarm reports rarely coincides. Thus, today's NonFarm report may be weaker than the forecasts (180-190 thousand), and the bulls will have a new legitimate opportunity to buy the pound and sell the dollar.   Therefore, the week may end unexpectedly. The fact that the euro and the pound are already trading in different directions causes surprise, but the current week shows that there have been and will be surprised. Volatility has started to rise again, but at the same time, frequent corrections and pullbacks occur. It is worth noting that there are better types of movement for trading in the 4-hour timeframe.     The average volatility of the GBP/USD pair over the past five trading days is 92 pips. For the pound/dollar pair, this value is considered "average." Therefore, on Friday, June 2nd, we expect movement within the channel bounded by the levels of 1.2424 and 1.2608. A downward reversal of the Heiken Ashi indicator will signal a correction against the recent upward trend.   Nearest support levels: S1 - 1.2482 S2 - 1.2451 S3 - 1.2421   Nearest resistance levels: R1 - 1.2512   Trading recommendations: On the 4-hour timeframe, the GBP/USD pair has settled above the moving average line, so long positions with a target of 1.2608 are currently relevant, which should be held until the Heiken Ashi indicator reverses downwards. Short positions can be considered if the price consolidates below the moving average with targets at 1.2360 and 1.2329.   Explanation of illustrations: Linear regression channels - help determine the current trend. If both channels are directed in the same direction, it indicates a strong trend. Moving average line (settings 20.0, smoothed) - determines the short-term trend and direction for trading. Murray levels - target levels for movements and corrections. Volatility levels (red lines) - the probable price channel in which the pair will move the next day, based on current volatility indicators. CCI indicator - its entry into the oversold region (below -250) or overbought region (above +250) indicates an upcoming trend reversal in the opposite direction.    
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Market Volatility Ahead: US Debt Ceiling Agreement and Wave Patterns in Currency Markets

InstaForex Analysis InstaForex Analysis 29.05.2023 11:35
Both instruments continue to decline steadily even with the news background, which is not always "strong". Over the weekend, however, there was quite expected news from the U.S. Congress about the national debt limit.   US Treasury Secretary Janet Yellen reaffirmed June 1 as the "hard deadline" for the US to raise the debt ceiling or risk defaulting on its obligations. Since no one in the market doubted that the Democrats and Republicans would eventually find common ground, the decision and its announcement were just already expected.   US President Joe Biden's press office reported that the White House and House Republicans have striked an agreement, meaning an official bill will be passed by June 1 that would raise the debt ceiling by another $2 trillion. Problem solved, and the week could start volatile for the markets.       There is nothing scheduled for Monday. Nevertheless, many instruments can show good activity as they haven't had the opportunity to react to the news of raising the debt limit over the weekend. Since this decision is positive for the US economy, it is reasonable to expect an increase in demand for the US currency. However, some analysts believe that the recent appreciation of the US dollar was driven by rising risk aversion sentiment.   Despite the default risk that threatened the US and the dollar, many investors may have used it as a "safe haven." Personally, I don't believe in such an assumption, but I can't speak for every individual. I expect active movements on Monday, but it doesn't make sense to guess the direction. In any case, regardless of the direction of both instruments, we can assume that this movement will not disrupt the overall wave pattern. If the euro and the pound rise on Monday-Tuesday, it can be considered as a corrective wave within a downtrend.   In the opposite case, the main wave will continue to form. We have much more important news and reports, such as the US labor market or inflation in the European Union. The wave pattern is highly important for the market right now, as instruments can move in a certain direction based solely on it. The topic regarding central bank rates is currently losing some of its appeal.   Last week, there were many speeches by European Central Bank and Federal Reserve members, but we did not receive any clarity on the topic. I believe that there is a consensus on this issue, and the new speeches did not change it.     Based on the analysis conducted, I conclude that the uptrend phase has ended. Therefore, I would recommend selling at this point, as the instrument has enough room to fall. I believe that targets around 1.0500-1.0600 are quite realistic. These are the targets I suggest for selling the instrument.   The wave pattern of the GBP/USD pair has long indicated the formation of a new downtrend wave. Wave b could be very deep, as all waves have recently been equal. A successful attempt to break through 1.2445, which equates to 100.0% Fibonacci, indicates that the market is ready to sell. I recommend selling the pound with targets around 23 and 22 figures. But most likely, the decline will be stronger.    
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GBP/USD Pair Faces Uncertainty Amid Strong US Data: Technical Analysis and Bearish Sentiment

InstaForex Analysis InstaForex Analysis 05.06.2023 09:02
On Friday, the GBP/USD pair fell after strong US data. The first half of the day saw a similar flat movement as the euro, while the second half witnessed a decline. However, the GBP/USD pair maintains an uptrend, with the price still above the Ichimoku indicator lines. Therefore, it could trade higher this week, despite the complete absence of fundamental and macroeconomic reasons for such a move. We still believe that both the pound and the euro should be falling. It is possible that they corrected last week so that it can continue moving downward.       The trading signals for the pound were almost identical to those for the euro. During the European trading session, the price rebounded from the level of 1.2520 but failed to move in the right direction even by 20 pips. It was advisable to close the long position before the release of US data. Later, two sell signals formed near the same level, which traders could use to open a short position. Long positions were not recommended at that time as the reports clearly favored the dollar. Subsequently, the price dropped to the level of 1.2445, where the shorts should have been closed. The profit from them amounted to around 60 pips.     According to the latest report, non-commercial traders opened 1,100 long positions and closed 500 short ones. The net position increased by 600 and remained bullish. Over the past 9-10 months, the net position has been on the rise despite bearish sentiment. The pound is bullish against the greenback in the medium term, but there have been hardly any reasons for that. We assume that a prolonged bear run has begun. COT reports suggest a bullish continuation. However, we can hardly explain why the uptrend should go on.   Both major pairs are in correlation now. At the same time, the positive net position on EUR/USD shows the end of the uptrend. Meanwhile, the net position on GBP/USD is neutral. The pound has gained about 2,300 pips. Therefore, a bearish correction is now needed. Otherwise, a bullish continuation would make no sense even despite the lack of support from fundamental factors. Overall, non-commercial traders hold 57,000 sell positions and 70,300 long ones. We do not see the pair extending growth in the long term.     In the 1-hour time frame, the pair has started an upward movement, and even after Friday's decline, it remains above the Ichimoku indicator lines. The pound doesn't exactly have grounds to buy the pound, which remains heavily overbought. However, take note that the market has the right to trade regardless of the fundamental and macroeconomic backdrop.   For now, let's consider that we have seen a strong correction last week and expect a revival of the downward movement. On June 5, trading levels are seen at 1.2269, 1.2349, 1.2429-1.2445, 1.2520, 1.2589, 1.2666, 1.2762. The Senkou Span B line (1.2408) and the Kijun-sen line (1.2434) lines may also generate signals when the price either breaks or bounces off them.   A Stop Loss should be placed at the breakeven point when the price goes 20 pips in the right direction. Ichimoku indicator lines can move intraday, which should be taken into account when determining trading signals. There are also support and resistance which can be used for locking in profits.   Today, both the UK and the US will release their respective Services PMIs for May. The UK data can influence traders' sentiment, as well as the US ISM data. Of course, it would be nice for the values of these data to deviate from the forecast, and the stronger the deviation, the stronger the market reaction may be.   Indicators on charts: Resistance/support - thick red lines, near which the trend may stop. They do not make trading signals. The Kijun-sen and Senkou Span B lines are the Ichimoku indicator lines moved to the hourly timeframe from the 4-hour timeframe. They are also strong lines. Extreme levels are thin red lines, from which the price used to bounce earlier. They can produce trading signals. Yellow lines are trend lines, trend channels, and other technical patterns. Indicator 1 on the COT chart is the size of the net position of each trader category. Indicator 2 on the COT chart is the size of the net position for the Non-commercial group of traders.  
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Analyzing the EUR/USD: Euro's Decline Expected as ECB and Fed Monetary Policies Diverge

InstaForex Analysis InstaForex Analysis 06.06.2023 08:08
The EUR/USD currency pair continued its downward movement on Monday. Not as strong as on Friday, but still a decline. Thus, the pair spent less than a day above the moving average line and now may drop to the last local minimum and continue its movement to the south. We have repeatedly mentioned that we expect a decline in the past two months. And in the last month (when the pair was already actively falling), we constantly repeated that the decline should continue.   There have been no grounds for the euro to rise in the past three months, during which it enjoyed active demand. Now it's time to "repay debts." The minimum target for the decline is 1.0500. On the 24-hour timeframe, the pair ended only one day out of the last 25, with a significant increase. It might have seemed that a new upward movement would begin, leading to a resumption of the upward trend, but last Friday and Monday show that such a conclusion is premature. The euro currency rose within the last upward trend by almost 1600 points, which implies a correction of at least 600–700 points. That is, to the range of 1.03–1.04.   And because there are no grounds for resuming the movement to the north, these targets look even more convincing. Thus, we expect the continuation of a calm decline. All the movements of the past months are very similar to consolidation - a type of movement when the pair does not have a clear trend but is not in a flat state either. Consolidation will continue until the first signs of readiness to soften monetary policy from the Fed or the ECB appear. In principle, everything written below is not "big news." Over the past few weeks, we have witnessed many speeches by ECB and Fed representatives. And if unexpected information came from anyone, it was from the members of the FOMC. Recall that the market fervently believed that the last planned increase in the key rate in the United States took place in May.       However, several Fed representatives immediately indicated that the rate could be raised again in June, and some stated that the regulator could now raise the rate once every two meetings. However, the rate will continue to rise, which the market did not anticipate. The situation with the ECB and its monetary policy is much simpler. Almost all monetary committee members insist on further tightening, so there is no doubt that the rate will increase by another 0.5% at the next two meetings. However, some analytical agencies and major banks believe that we will see the last rate hike in June, which raises doubts about a rate hike after August 2023.   If so, the ECB's rate will remain much lower than the Fed's rate, and in 2023, it will increase by approximately the same value. Thus, the euro currency loses the growth factor that could help it in the coming months. Bostjan Vasle stated last Friday that it is necessary to continue raising the rate to combat high inflation effectively. He also noted that core inflation needs to be higher. His colleague Gabriel Makhlouf confirmed that the ECB intends to continue tightening its monetary policy.     He also noted the high level of core inflation and that the end of the tightening cycle has yet to come. Mr. Makhlouf said the current picture is quite blurry, besides the confidence in two more rate hikes. It is worth adding that the market has long worked out the rate hikes mentioned above. We have already mentioned many times that after slowing down the pace of tightening to a minimum, we can expect three more 0.25% rate hikes.   Thus, two rate hikes in June and August are logical and expected. They could have been anticipated several months ago. Therefore, the current "hawkish" sentiment of the ECB representatives does not provide any support for the euro currency. In the 4-hour timeframe, the downward trend is visible. The oversold condition of the CCI indicator has been worked off, so now the pair can continue to decline with a calm mind.   The average volatility of the EUR/USD currency pair over the last five trading days as of June 6th is 81 points and is characterized as "average." Thus, we expect the pair to move between the levels of 1.0631 and 1.0793 on Tuesday. A reversal of the Heiken Ashi indicator back upwards will indicate a possible resumption of the upward movement.   Nearest support levels: S1 - 1.0681 S2 - 1.0620   Nearest resistance levels: R1 - 1.0742 R2 - 1.0803 R3 - 1.0864   Trading recommendations: The EUR/USD pair has dropped below the moving average line. It is advisable to stay in short positions with targets at 1.0681 and 1.0631 until the Heiken Ashi indicator reverses upward. Long positions will become relevant only after the price firmly reclaims above the moving average line, with targets at 1.0793 and 1.0803.   Explanations for the illustrations: Linear regression channels - help determine the current trend. If both channels point in the same direction, it indicates a strong trend. Moving average line (settings: 20.0, smoothed) - determines the short-term trend and direction for trading.   Murray levels - target levels for movements and corrections. Volatility levels (red lines) - the probable price channel the pair is expected to trade in the next 24 hours, based on current volatility indicators. CCI indicator - its entry into the oversold area (below -250) or overbought area (above +250) indicates an approaching trend reversal in the opposite direction.  
Eurozone Inflation Softens: Impact on European Currencies

Eurozone Inflation Softens: Impact on European Currencies

ING Economics ING Economics 07.06.2023 08:46
EUR: European currencies still unloved The euro continues to suffer from a softening inflation story in the eurozone. Yesterday, April’s report on consumer expectations showed a considerable drop (12-month gauge down to 4.1% from 5.0% in a month), which triggered a rally in the euro area’s front-end yields. This has prevented any re-tightening in the 2-year EUR-USD swap rate gap, despite the slight decline in Fed hawkish expectations after Monday’s US ISM numbers.   While easing inflation should build a case for the doves, ECB communication has not seen drastic changes as we head into next week’s policy announcement. Yesterday, President Christine Lagarde reiterated her call for more tightening, and her hawkish tone is probably a key factor keeping markets attached to the 40-45bp pricing for the July meeting. We have other speakers to keep an eye on today. Barring major dovish remarks, and unless a BoC hike has a positive spill-over on the dollar, we feel EUR/USD can remain anchored to 1.0700 for now.   Elsewhere in Europe, pressure on Scandinavian currencies has resumed. EUR/SEK is trading at 11.684 this morning: the intra-day all-time print is at 11.79, and as we have reiterated multiple times in recent publications, the lack of any support from the Riksbank is making it hard to pick a top for the pair in the near term. The financially-distressed Swedish landlord SBB is reportedly denying rumours about discounted sales of its business units, but a default warning from creditors has emerged and the centrality of the firm in the Swedish real estate space means more risk premium (related to a property market collapse) could be priced into SEK now. A recovery for the krona seems unlikely in the near term.
Euro's Rally Stalls as Focus Turns to Inflation and Data Disappointments

EUR/USD Analysis: False Breakout at Key Level Sets the Tone for Trading Amid US Inflation Data

InstaForex Analysis InstaForex Analysis 13.06.2023 14:16
In my morning forecast, I highlighted the level of 1.0800 and recommended making entry decisions based on it. Let's look at the 5-minute chart and analyze what happened there. The rise and formation of a false breakout at 1.0800 provided a sell signal for the euro, but there was no significant downward movement. The technical picture remained largely unchanged in the second half of the day.       Everyone awaits the US inflation figures, which will determine the market and the Federal Reserve's actions. If prices drop more than economists' expectations, the euro will have a chance to continue rising against the US dollar, as the central bank is likely to take the first pause in the interest rate hike cycle since 2021. If inflation remains high, we can expect renewed pressure on EUR/USD and a decline in the pair. In that case, I will act on the decline and the false breakout around the support level of 1.0767, formed based on yesterday's close and where the moving averages, favoring buyers, are located.   This will provide an opportunity to enter long positions with the target of another rise towards the level of 1.0800. A breakthrough and top-down test of this range are necessary for buyers, as it will strengthen the demand for the euro, creating an additional entry point for increasing long positions with an update to the next level of 1.0830. The ultimate target remains around 1.0870, where I will take profits. In the case of a decline in EUR/USD and the absence of buyers at 1.0767, the pressure on the euro will return. Therefore, only the formation of a false breakout around the next support level of 1.0734, the weekly low, will provide a signal to buy the euro.   I will open long positions after a rebound from 1.0705, with a 30-35 point upward correction target within the day. To open short positions on EUR/USD, the following is required: Bears managed to defend the market around the resistance level of 1.0800, but there was no significant downward movement. The US inflation data will determine everything. However, considering the bullish market with selling pressure in the second half of the day, it is better to take your time.   I will act only after another unsuccessful consolidation above the resistance level of 1.0800. A false breakout at this level will provide a sell signal capable of pushing the pair back to 1.0767, where the moving averages favoring bulls are located. Consolidation below this range and a reverse test from below to above will lead straight to 1.0734. The ultimate target will be around 1.0705, where I will take profits.       If EUR/USD moves upward during the American session and there are no bears at 1.0800, which is likely to be the case, the demand for the euro will only strengthen, potentially leading to a more powerful upward surge in the pair. In that case, I will postpone short positions until the new resistance level of 1.0830.   Selling can be done there, but only after an unsuccessful consolidation. I will open short positions immediately on a rebound from the maximum of 1.0870, with a 30-35 point downward correction target.   The Commitment of Traders (COT) report for June 6 showed a decrease in long positions and a slight increase in short positions. Despite this, the Federal Reserve's decision on interest rates this week can significantly change the market dynamics, so paying much attention to the abovementioned changes may be optional. If the Fed decides to pause the rate hike cycle, the euro will gain significant weight, and the US dollar will weaken.   Along with the European Central Bank's aggressive policy, despite the first signs of a slowdown in underlying inflationary pressure, all of this will lead to a continued rise in risk assets against the US dollar. According to the COT report, non-commercial long positions decreased by 5,757 to 236,060, while non-commercial short positions increased by 1,457 to 77,060. The overall non-commercial net position decreased to 158,224 from 163,054 by the end of the week. The weekly closing price decreased to 1.0702 from 1.0732.   Indicator signals: Moving averages. Trading occurs above the 30-day and 50-day moving averages, indicating a likelihood of the euro's rise. Note: The author considers the period and prices of the moving averages on the hourly chart (H1), which differs from the general definition of classical daily moving averages on the daily chart (D1).  
Unleashing the Potential: The Czech Koruna's Strong Stand and Market Expectations

Unleashing the Potential: The Czech Koruna's Strong Stand and Market Expectations

ING Economics ING Economics 14.06.2023 14:46
The Czech koruna reached essentially its strongest levels against the euro in history in 2Q and remains below EUR 24/CZK. However, the attractiveness of the koruna declined in May as the CNB hawkish story came to an end and attention shifted elsewhere in the region. We think the koruna still has a lot to offer - high carry, balanced market positioning and a central bank ready to intervene in the FX market if the koruna weakens. In addition, the CZK has by far the highest beta against EUR/USD in the region, making it a good proxy for a global story view with a high CEE carry element.   Financial markets are currently pricing in too much rate cutting this year. Thus, any central bank hints of rate cuts, which is not a topic for the CNB at the moment, or lower inflation numbers should not threaten the crown, unlike other currencies within the region. Moreover, in our base case scenario, we expect EUR/USD to rebound in the coming months, which should benefit the koruna the most in the region. This is also helped in many ways by a more balanced market positioning versus PLN or HUF, for example. Thus, we expect the koruna to stay in the current range of 23.50-24.00 EUR/CZK with trips to lower levels depending on the global story.   FX – spot vs forward and INGF   CNB FX reserves declined but remain significant (€bn)   Fixed Income strategy The financial markets are pricing in a first 25bp rate cut in September and 95bp overall this year, while we see room for only one or at most two 25bp rate cuts this year. Thus, we think the market has gone too far and the CNB meeting should be a reminder of CNB hawkishness despite lower inflation numbers, which are not sufficiently low for the central bank yet. Overall, we see the market calling for an upward correction in rates.   Foreign holders of CZGB (%)   CZGBs issuance (CZKbn)    
ECB Decision Day: Lagarde Faces Challenges in Conveying Hawkish Tone

ECB Decision Day: Lagarde Faces Challenges in Conveying Hawkish Tone

ING Economics ING Economics 15.06.2023 13:15
EUR: No easy task for Lagarde today It’s European Central Bank decision day, and our call for a 25bp rate hike is fully in line with consensus and market expectations. In our ECB Cheat Sheet, we outline four different scenarios along with implications for EUR rates and EUR/USD: in our base case, today’s rate increase will be paired with an attempt to convey a hawkish tone and leave the door open for more tightening ahead. Markets are almost fully pricing in another hike in July, and the focus will primarily be on President Christine Lagarde’s press conference and whether she will offer hints that the Governing Council is leaning in favour of a July move. Staff projections will also be released but may not gather too much attention or drive much of the market reaction.   Given the market's strong conviction about another 25bp hike in July (or September at the latest), the bar for a hawkish surprise is probably set quite high today. The ECB may need to signal several more hikes to trigger a significant jump in the euro and that does not look very likely considering the recent signs of decelerating inflation and deteriorating growth outlook. In other words, there is still the interest for the ECB to sound hawkish today, but we suspect that might not be enough to send the euro higher, and we see some moderate downside risks for EUR/USD today. We could see EUR/USD drop back to the 1.0750 handle today, although developments on the US data side will continue to drive the large majority of trends in the pair moving ahead, with ECB policy playing second fiddle, in our view.
Euro Surges on Hawkish ECB and Favorable Risk Environment

Euro Surges on Hawkish ECB and Favorable Risk Environment

ING Economics ING Economics 16.06.2023 09:55
EUR: Hawkish ECB and better risk environment helps the euro The trade-weighted euro pushed up around 0.2/0.3% yesterday on the hawkish ECB, but the better global growth environment and softer dollar generated a 1% rally in EUR/USD. As our readers hopefully know by now, we are bullish on EUR/USD in the second half, but we are not sure which month exactly the bull trend would take off. Could it be June? The hawkish ECB – especially the upward revision to the 2025 CPI forecast – adds weight to our core house view that the central bank will say hawkish for longer and cut rates later than the Fed. At the same time, it looks like investors are gearing up for another expression of faith in Chinese growth prospects. Expectations are now growing that some fiscal support measures can be announced over the coming weeks to back up the recent monetary easing. This week's important turn-around in USD/CNH looks like an encouraging sign for the pro-cyclical EUR/USD. For EUR/USD today, let us see whether the US data and Fed speakers make much of an impression. In addition, we have four ECB speakers from the more hawkish end of the spectrum. We prefer to back the bullish momentum here and can see EUR/USD pushing on to the 1.1000/1030 region today. Chris Turner   In Norway, Norges Bank (NB) reported the results of a regional survey yesterday: the main takeaway was that price pressures continue to grow. This will ultimately help the central bank build its case for pushing rates beyond 3.50%, even though a much more important input to the NB decision-making process is NOK weakness. The next policy meeting is on Thursday when rates are expected to be raised by 25bp to 3.50%, although at this stage we cannot exclude a surprise 50bp hike.   
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Central Banks, Mortgage Rates, and Market Volatility: Challenges Ahead

Ipek Ozkardeskaya Ipek Ozkardeskaya 20.06.2023 07:46
Asian stocks were moody, European indices traded lower, and US futures were under pressure on Monday. The rest of the week will likely prove to be challenging both in the US and elsewhere, as central bankers continue pressing economies like lemons, while signs of pain are just before their eyes. It's not because the stock markets are driven higher by the AI-speculation that the underlying fundamentals are doing well. Average mortgage rates in the US are at the highest levels since the subprime crisis whereas mortgage rates in the UK are again above 6%. The last time we saw these levels was back during Liz Truss mini-budget crisis.   The UK 2-year yield spiked above 5% and has more to rally given the expectation of at least another 125bp hike from the Bank of England (BoE) before the end of this year, the first 25bp being due this Thursday.    What's funny is that the Reserve Bank of Australia (RBA) minutes released earlier today showed that the RBA rate hike – which was the first hawkish shock in a series of hawkish central bank decisions this month – showed that the decision to hike rates by a surprise 25bp was 'finely balanced' and further decisions will depend on inflation outlook and home market. The minutes softened the RBA expectations but will likely undo the pledges of more policy action from the other central banks.    The central-bank-induced stress has been well visible in the sovereign bond yields. Besides the sharp rise in UK yields, the US 2-year yield pushes decidedly toward the 5% mark, and the German 2-year yield tops at around 3.20%, the highest levels since the March banking stress. The Stoxx 600 fell more than 1% yesterday and slipped below the 50-DMA. It's yet too early to call for a peak in equities, both in Europe and across the Atlantic, but there are all the reasons to believe that the rally could not carry on given the morose economic outlook and the aggressive central bank stances.     In China, the People's Bank of China (PBoC) cut its one- and five-year LPR rates for the first time in ten months in hope to bolster economy, boost inflation and reverse the property crisis. But a targeted fiscal support is most probably needed because slashing rates when investment and consumption weaken due to a confidence crisis may not do much alone. Chinese stocks are under pressure since yesterday as investors were expecting stimulus measures last Friday, and they got nothing instead, as a proof that Xi remains against the Chinese kind of stimulus that we got used to. But that could be the only way to post the kind of Chinese growth numbers that we used to.       European nat gas prices correct, but...  The European nat gas prices fell nearly 15% on Monday, after they almost doubled since the start of the month on the back of hot weather and a series of outages. The beginning of this summer reminds us of last summer, when the water levels in European rivers and dams fell alarmingly, causing drought and risk of energy shortage.    Pricewise, we are at about a tenth of last summer's peak levels, but the extreme weather conditions will likely keep the pressure to the upside, which in return keep inflation worries alive, the European Central Bank (ECB) hawks alert, and the euro bid.    We see the EURUSD's positive momentum post the ECB meeting gently fade into the 1.10 mark, and we could see some more profit taking before Jerome Powell's testimony this week, but the medium-term outlook remains positive for the EURUSD. 
Trade conditions will improve due to soft commodity prices

Pound Sterling at a Crossroads: Consolidation or Medium-Term Decline?

InstaForex Analysis InstaForex Analysis 28.06.2023 09:15
Yesterday, the British pound edged up following the euro, trading freely within the consolidation range of 1.2678-1.2785. This morning, the price and the Marlin oscillator turned downwards. The pound sterling should break below the support level of 1.2678 to gain momentum for medium-term decline.     The first target is 1.2600. If the price breaks above the nearest resistance level at 1.2785, it will change the main scenario to an alternative one, with the pair rising towards 1.2870. On the 4-hour chart, the price stopped rising by the balance indicator line.     The signal line of the Marlin oscillator is trying to return to negative territory as quickly as possible. If it does, the oscillator's move into the positive area will prove to be false, further fueling the downward movement.
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Sintra's Hawkish Message: Impact on Major Central Banks and FX Market

ING Economics ING Economics 29.06.2023 09:13
FX Daily: How “contagious” are Sintra's hawks? The ECB’s message in Sintra has been firmly hawkish and has helped the euro. Today, a panel with Lagarde, Powell, Bailey and the BoJ’s Ueda will tell us if other major central banks will follow such hawkish rhetoric. It should be the case for Powell (backed by strong data) and Bailey (too early to push back against hike bets), but is Ueda ready to talk up the yen?   USD: Room for rebound The dollar has traded on the soft side since the start of the week, but US data has come in on the strong side, which makes us reluctant to think the dollar has much further to fall in the second half of the week and ahead of today’s Sintra speech by Federal Reserve Chair Jerome Powell.   Yesterday, all US data releases beat consensus. Durable goods orders rose in May despite expectations for a drop and the S&P Case Shiller US house price index rose for a third month in a row in April as tight supply keeps prices supported despite weak buyer demand in response to surging mortgage rates. Home sales also rose more than expected and consumer confidence jumped to 109.7, the highest since January 2022 (despite being considerably below pre-pandemic levels). Today, the US data calendar is lighter: MBA mortgage applications and wholesale inventories.   While those are not the set of data points either the markets or the Fed primarily focus on, they surely point to some resilience in key parts of the US economy and would underpin a reiteration of a hawkish message by Powell today. That would probably take the shape of a further endorsement of dot plot rate hike projections (two more before the peak) with potentially an additional pushback against rate cuts.   Markets continue to price only another 28bp of tightening and a 73% implied probability of a July hike, so there is still ample room for a hawkish repricing in the USD curve. We’d be cautious when jumping on a dollar bear trend before the data gives a more solid basis to justify the market's dot plot gap.
Sintra Symposium Signals: ECB's Hawkish Stance Faces Challenges and Euro's Rally at Risk

Sintra Symposium Signals: ECB's Hawkish Stance Faces Challenges and Euro's Rally at Risk

ING Economics ING Economics 29.06.2023 09:14
EUR: Sintra's effect may not last too long President Christine Lagarde and other European Central Bank officials continued to signal more tightening ahead at the Sintra symposium yesterday. Markets received some more detailed inputs from other Governing Council members aside from Lagarde herself. For example, Belgian central bank chief Pierre Wunsch said the next three inflation readings will need to “give a clear signal that core is indeed going down” to convince the ECB to pause. Latvian hawk Martins Kazaks said earlier that the slowdown in the eurozone economy is not enough to bring inflation down and also explicitly pushed back against rate cut expectations before mid-2024.   A newswire report this morning suggested that some hawkish members are considering a faster reduction of the Bank’s bond portfolio, shifting to a phase of active bond sales of assets. The euro’s reaction to the news was limited: we’ll see whether this has any impact on peripheral spreads when European markets open.     On the dovish front, Fabio Panetta is set to move from the ECB Executive Board to the Governing Council as he replaces Ignazio Visco as Bank of Italy governor. Panetta has stood out as an even more dovish voice than Visco (Italian members have generally swung on the dovish side), although that hardly changes the balance at all within the GC at this particular point in time.   Today, we’ll see Italy release June CPI numbers, ahead of other member countries’ and eurozone-wide figures tomorrow. Lagarde is set to deliver another speech in Sintra, and markets will keep an eye on more side-line comments by other officials. The euro has been on the strong foot, but a sustainable rally above 1.10 may be premature considering markets are already fully pricing in two hikes by the ECB and the risks of an upside correction in the dollar are non-negligible.
GBP: Modest Performance Amidst Rate Hike, Equities Lag Behind Eurozone Peers

GBP: Modest Performance Amidst Rate Hike, Equities Lag Behind Eurozone Peers

ING Economics ING Economics 29.06.2023 09:40
GBP: Some underperformance The Bank of England's broad trade-weighted index for sterling has barely budged since last Thursday's 50bp BoE rate hike, where sterling strength against some currencies presumably makes up for some modest weakness against the dollar and the euro. 10-year UK gilt yields - which had briefly fallen on the large hike - equally have barely budged. Where sterling bears may find some solace is that UK large and mid-cap equities have only rallied 0.7% this month - compared to 3% gains for their European peer group. In short, we think it is too soon to start selling sterling on hard landing fears. We think sterling only sells off when the data - both inflation and labour market data - suggest the BoE can ease up in its hawkishness. Until then GBP/USD might find some support near 1.2600 and EUR/GBP could easily drift back under 0.8600.
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EUR: Core inflation concerns persist as ECB awaits July hike

ING Economics ING Economics 03.07.2023 09:37
EUR: Core inflation issues continue for the ECB The decrease in headline inflation in June was likely insufficient for the European Central Bank given the tick-up in core prices (from 5.3% to 5.4% for the whole euro area). With President Christine Lagarde having pre-committed to a July hike, the discussion is currently around a move in September. Markets are fully pricing in two final hikes, but not by September. Either way, the stickiness in core inflation will give the ECB hawks a chance to reinforce their message. With ECB members having had the opportunity to clarify their rhetoric at the Sintra symposium last week, this week’s speakers may not have a very strong impact on the euro, even though markets will be interested in comments following the inflation report for June. It seems likely that the USD leg will drive most of the EUR/USD moves this week, especially once US data starts to come in. There is some room for the pair to decline modestly on the back of some dollar strength, although a big drop below 1.0800 may be premature.
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EUR/USD Trend Analysis: Anticipating an Upward Movement with Key Resistance Levels

InstaForex Analysis InstaForex Analysis 03.07.2023 11:16
Trend analysis EUR/USD may continue moving up this week, starting from the level of 1.0909 (closing of the last weekly candle) to the upper fractal located at 1.1011 (blue dotted line). Upon reaching this price, the pair will resume an upward movement towards the 85.4% retracement level at 1.1028 (red dotted line).     Fig. 1 (weekly chart) Comprehensive analysis: Indicator analysis - upward Fibonacci levels - upward Volumes - upward Candlestick analysis - upward Trend analysis - upward Bollinger bands - upward Monthly chart - upward   Conclusion: All this points to an upward movement in EUR/USD.     Overall conclusion: The pair will most likely have a bullish trend, with a first lower shadow on the weekly white candle (Monday - downward) and no second upper shadow (Friday - upward). So during the week, euro will rise from 1.0909 (closing of the last weekly candle) to the upper fractal at 1.1011 (blue dotted line), and then go further to the 85.4% retracement level at 1.1028 (red dotted line). Alternatively, the quote may climb from 1.0909 (closing of the last weekly candle) to the upper fractal at 1.1011 (blue dotted line), followed by a fall to the 23.6% retracement level at 1.0958 (blue dotted line).  
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Eurozone Manufacturing Contracts as Euro Remains Steady; US ISM Manufacturing PMI Weakens; US PCE Index Slows, Fed Rate Hike Still Expected

Kenny Fisher Kenny Fisher 04.07.2023 08:40
Manufacturing PMIs point to contraction across the eurozone but euro remains steady US ISM Manufacturing PMI weakens US PCE Index slows but Fed still expected to hike in July EUR/USD is almost unchanged on Monday, trading at 1.0909.   Eurozone manufacturing continues to sputter The eurozone manufacturing sector has been in poor shape for months and the downturn worsened worse in June. The eurozone PMI slowed to 43.4 in June, down from 44.8 and shy of the consensus of 43.6 points. Germany, the largest economy in the bloc, looked even worse, as the PMI fell to 40.6, down from 43.2 and below the consensus of 41.0 points. Spain, Italy and France also reported readings below 50, which separates contraction from expansion. Manufacturing in the eurozone has now contracted for 12 straight months and the PMI reading was the lowest since May 2020. Customer demand has fallen sharply and manufacturing employment declined in June for the first time since January 2021. These latest numbers indicate that manufacturing is in trouble, but this is nothing really new and the euro shrugged off the weak numbers. The news wasn’t much better in the US, as ISM Manufacturing PMI eased to 46.0 in June, down from 46.8 in May. ISM Manufacturing Employment contracted as well, falling from 51.4 to 48.4 and missing the consensus of 50.5 points. The week wrapped up with inflation releases showing that deceleration is alive and well. On Friday, the PCE Price Index, which is the Fed’s preferred inflation indicator, declined from 0.4% to 0.1% in June. As well, UoM Inflation Expectations dropped to 3.3% in June, down from 4.2% in May and the lowest since March 2021. Inflation may be headed in the right direction, but the Fed is still widely expected to raise rates at the July 12th meeting. Traders have priced in a 25-basis point hike at 86%, according to the CME FedWatch tool.   EUR/USD Technical EUR/USD is putting pressure on support at 1.0908. This is followed by support at 1.0838 1.0980 and 1.1050 are the next resistance lines    
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Euro Resilient: Seeking Breakout Above 1.0930 Level amidst Market Volatility

InstaForex Analysis InstaForex Analysis 04.07.2023 09:25
Yesterday, the euro showed a range of 60 points, closing the day at the opening level. The upper shadow tested the 1.0930 level, and this morning the price is headed towards this mark again, not giving up hope of reaching the upper band of the green descending price channel around 1.0990.       This is possible if the euro follows the stock market and employment data turn out worse than expected. For now, the price needs to consolidate above 1.0930.   Surpassing yesterday's low at 1.0871 will be a signal for a decline. On the 4-hour chart, the price could not consolidate below the balance indicator line and returned to the 1.0910/30 range. Here, it can linger for a while and try to overcome the MACD line around 1.0952.   The Marlin oscillator in the positive area is ready to join the growth at any moment.     Given that we accept the bearish scenario for the euro as the main plan, the price may not overcome the MACD line and return below the range. Like yesterday, uncertainty persists in the short-term perspective.    
EUR/USD: Outlook and Potential for Dollar Growth

EUR/USD: Outlook and Potential for Dollar Growth

ING Economics ING Economics 10.07.2023 11:51
EUR/USD As a result of Friday, the euro grew by 76 points after reacting to moderately positive US employment data. The unemployment rate slipped to 3.6% from 3.7% in May, although Non-Farms showed that the US economy added 209,000 jobs in June 2023, following a downwardly revised 306,000 in May, and below market forecasts of 225,000. This was reflected to some extent in the broad unemployment index – it rose from 6.7% to 6.9%. The overall labor force participation rate was unchanged for the fourth consecutive month at 62.6%, and there is room for growth to around 62.8-62.9%, where this share of the active population was quite stable in 2015/19. Therefore, the labor market is not yet saturated, even the average hourly earnings for all employees rose by 0.4% in June.   If we consider Friday's data in conjunction with Thursday's ADP data, the picture seems favorable for dollar growth. In fact, after a little hesitation with the release of data, the dollar strengthened, but as on Thursday, it was speculatively bought out. The trading volume was less compared to Thursday. And this could mean that the resistance of dollar buyers has been broken, or the bulls themselves are close to completing such a two-day speculative operation. In the first case, the euro's growth will extend at least to 1.1028 (and then the price will diverge from the oscillator on the daily chart), or higher, to 1.1085, or, in the second case, the euro will still grow a little for technical work out of the upper band of the price channel to 1.0980 and will turn to depreciation in the medium-term.     Whatever the case may be, buying the EUR/USD pair right now is risky, we are still waiting for the euro to turn to a 4-5 figure drop, we just have to wait for this turn to form. On the four-hour chart, the price is rising above the balance and MACD indicator lines, the Marlin oscillator is in a position to grow, we have an uptrend in the short-term.  
EUR/USD Targets 1.1275 as Soft US Inflation Boosts Euro

EUR/USD Targets 1.1275 as Soft US Inflation Boosts Euro

ING Economics ING Economics 13.07.2023 08:51
EUR: 1.1275 is the next target for EUR/USD Soft US inflation data has been good news for all the pro-cyclical currencies including the euro. EUR/USD is comfortably trading at new highs for the year and the next technical target would be 1.1275 as it continues to retrace the 2021-2022 decline. For today, look out for the account of the 15 June European Central Bank meeting. Presumably, the ECB will see no advantage in trying to diffuse market pricing of two further 25bp rate hikes this year. Elsewhere, we note EUR/CHF breaking down to some new lows. We would not chase this too much lower since the Swiss National Bank will be getting a lot of their desired appreciation in the nominal trade-weighted Swiss franc from the big move lower in USD/CHF.
Euro's Outlook: Factors Impacting Performance in Eurozone's Evolving Landscape

Euro's Outlook: Factors Impacting Performance in Eurozone's Evolving Landscape

VT Markets VT Markets 11.07.2023 10:33
Euro's Outlook: Factors Impacting Performance in Eurozone's Evolving Landscape Based on the latest data and statements from Eurozone policymakers, the forecast for the EUR remains subject to several factors. The slowdown in economic growth and easing inflationary pressures in the Euro Area may weigh on the euro's performance in the short term. The decline in headline inflation and contraction in producer prices indicate a potential weakening of inflationary pressures.     However, it is important to note that core indicators, which remain persistently elevated, could provide some support to the euro. These indicators surpass the European Central Bank's (ECB) target of 2% and suggest a sustained level of inflationary pressures. The stance of Eurozone policymakers will be crucial in determining the future trajectory of the EUR. The belief of Joachim Nagel, the President of the Deutsche Bundesbank, in the need for further interest rate increases indicates a potential upward pressure on the euro. Conversely, the suggestion by Italian counterpart Ignazio Visco, the Governor of the Bank of Italy, that the ECB could maintain rates for a specific duration rather than continuing to raise them introduces an element of uncertainty. Overall, the forecast for the EUR will depend on the interplay between economic data, inflationary pressures, and the ECB's monetary policy decisions. Monitoring key indicators, policymakers' statements, and any developments impacting the Eurozone economy will be crucial in shaping a more accurate forecast for the EUR in the coming period.
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Examining Eurozone's Industrial Production: Insights into the State of the European Economy and Industry

Antreas Themistokleous Antreas Themistokleous 13.07.2023 14:04
Recent industrial production data from the Eurozone paints a concerning picture for the European economy and industry. According to Eurostat data, industrial production in Europe declined by 2% year over year in May, exceeding expectations of a 1% decrease. This raises questions about the broader impact on the European economy. The industrial sector plays a crucial role in any economy as it encompasses the processing and transformation of raw materials into finished and semi-finished products. This sector significantly influences other parts of the economy, including the housing market, retail sector, consumer spending, and ultimately, inflation. Changes in industrial production directly affect the supply and availability of products, which can have broader implications for the overall economic landscape.     FXMAG.COM: What does the industrial production reading from the Eurozone tell us about the state of the European economy and European industry?   Antreas Themistokleous: The industrial production in Europe for the month of May has declined by 2% year over year according to Eurostat data. This came out to be worse than the expectations of only 1% so how does that affect the European economy?    First of all the industrial sector is a major component of an economy since it's responsible for the processing and the transformation of natural products (raw materials) into other finished and semi-finished products which in turn assist in other parts of the economy such as the housing market, the retail sector. In addition it affects the consumer spending and inevitably inflation since it directly affects the supply and availability of products to be consumed.    Inflation data is another major component that affects an economy and the European inflation rate has shown some steady decline since the high of 10.6% in October 2022. Currently the rate is at 6.1% and on the 19th the official rate for the month of June will be published. Expectations are for a further decline of around 0.6% which if confirmed could influence the decisions of the European Central Bank in regards to their monetary policy and inevitably their interest rate decision on their next meeting on the 27th of July.    The interest rate set by the ECB is currently at 4% while the market is expecting the central bank to proceed with another step hike , 0.25%, at their meeting in late July. If the expectations are correct then we might see some boost for the Euro against its pairs while unemployment is holding stable at 6.5% for the last two months.   All in all the European economy seems to be at a stagnant phase. Inflation seems to be stickier than expected resulting in continued hawkish stance by the central bank to increase interest rates in an effort to discourage economic activity in the market. On the other hand unemployment is near a 25 year low adding to the buying power of consumers pushing inflation figures to the upside creating what temporarily seems to be a never ending cycle when it comes to fighting inflation.   
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CE4 Currencies Remain Resilient, Limited Scope for PLN Gains

ING Economics ING Economics 14.07.2023 15:34
CE4 currencies are expected to remain well supported despite the prospect of broader monetary easing across the CEE region. Stronger levels against the euro, however, may be hard to achieve. Elsewhere, the softer dollar environment may paper over a few cracks in the domestic stories for both the South African rand and the Israeli shekel     Scope for further PLN gains seems limited. According to the central bank’s estimates, profitability of Polish exporters ceases around 4.30. €/PLN moving below 4.40 should encourage the Ministry of Finance to refrain from converting FX proceeds via the market. Also, based on our estimates (relative value model, gauging €/PLN against other market variables) the zloty is currently somewhat overvalued against the euro. Based on available market comments, we fear that investors may be overly confident in a market-friendly conclusion to this year’s parliamentary elections. Also, with recovering internal demand, the current account surplus should vanish next year. This calls for a higher €/PLN in the fourth quarter and in 2024.\    
Euro Continues to Rise Despite Weak Euro Area Industrial Production Keywords

Euro Continues to Rise Despite Weak Euro Area Industrial Production Keywords

InstaForex Analysis InstaForex Analysis 14.07.2023 16:22
Despite the fact that industrial production fell by 2.2% in the euro area, while in the previous month it grew by 0.2%, the euro still rose for another day. And this raises many questions since the euro did not have any reason to rise on Thursday. t was actually the opposite. Apparently, this is not just due to momentum or speculation. It seems that the latest US inflation report convinced many investors of the possibility that the interest rate level of the European Central Bank will be higher in the near future than that of the Federal Reserve. So there is a kind of global reassessment of positions. It doesn't make any sense to discuss the realistic possibility of such a scenario.   All answers will be given after the upcoming meetings of both central banks. For now we can take note of the fact that the dollar is extremely oversold. Therefore, a rebound is simply inevitable. The question is when exactly that will happen.   Clearly, economic data failed to do the job. Although it may be because it hasn't been long since the US inflation report was published. Maybe the market simply ignored yesterday's data. Today, the macroeconomic calendar is absolutely empty, and this is quite suitable for a rebound. But do not forget about the trend, which may persist and continue to push the euro upwards. Moreover, if the reassessment of expectations regarding the disparity of interest rates really is the main driving force, then there's a high degree of probability that we will see an extension of the euro's uptrend.   The EUR/USD pair strengthened in value almost by 300 points since the beginning of the trading week. Such an intense price change over a short period of time indicates that the euro is extremely overbought. On the four-hour chart, the RSI shows a strong signal of the euro's overbought conditions. The indicator moves at the values of 2017, which points to aggressive long positions. On the same time frame, the Alligator's MAs are headed upwards, which corresponds to an uptrend.   Outlook In this situation, a pullback would be the next logical step, however, speculative frenzy could well ignore signals from technical analysis. In this case, this will fuel the momentum of the uptrend, adding to the euro's overbought conditions. The complex indicator analysis unveiled that in the short-term, medium-term and intraday periods, indicators are pointing to an uptrend.    
ECB's Rate Hike Decision and US Inflation Report Shape EUR/USD Outlook

ECB's Rate Hike Decision and US Inflation Report Shape EUR/USD Outlook

Ed Moya Ed Moya 18.07.2023 08:24
The euro is showing little movement on Monday. In the North American session, EUR/USD is unchanged at 1.1226. The US dollar was broadly lower against the majors last week and on Friday the euro hit its highest level since February 28th.   Will ECB continue hiking after July? The ECB holds its next meeting on July 27th, a day after the Federal Reserve meeting. Similar to the Fed, a rate hike is widely expected in July but there is uncertainty about what happens after that. Eurozone inflation is not expected to fall as quickly as expected, which would support the ECB continuing to deliver more rate hikes. The ECB has signalled that it will hike in July but hasn’t said much about September, other than the decision will be data-dependent. ECB Governing Council member Boris Vujcic, head of the Croatian central bank, said that the September decision remains “very open”, a nod towards a divergence of opinion at the Bank. The hawkish members want to see a rate hike in September while the doves are worried about the damage to the fragile eurozone economy, which tipped into recession in the winter. The US dollar’s downturn last week against the major currencies was intensified by the US inflation report, which was softer than expected. The headline and core rates both eased in June, raising market speculation that the Fed may finally wrap up its rate-tightening cycle after the July 26th meeting. The markets have priced in a July hike at 98% and a pause in September at 85%, according to the CME tool. Once again, the money markets are marching to their own tune. Fed members have sounded hawkish, saying that inflation remains too high and Fed Chair Powell has hinted at further tightening after the July meeting.   EUR/USD Technical EUR/USD tested support at 1.1210 earlier. The next support level is 1.1139 1.1289 and 1.1335 are the next resistance line  
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ECB Decision – 27/07: Pressure Eases on Aggressive Rate Hikes Amidst Deflationary Concerns

Michael Hewson Michael Hewson 24.07.2023 10:03
ECB decision – 27/07  If the Fed is close to the end of its rate hiking cycle which appears to be looking increasingly likely then the pressure for the ECB to be more aggressive in its own battle against inflation could recede. We've already seen the euro rise sharply against the US dollar which is in itself deflationary and will help. Furthermore, factory gate prices in German and Italy have been in freefall for months now, so while core CPI has remained sticky and close to record highs, it's also important to remember that the ECB has pushed rates from 2% to 4% this year already. We expect to see another 25bps this week, however the consensus that was so prevalent at the start of this year of more aggressive rate hikes is already starting to fray on the governing council, with the Stournaras of the Bank of Greece pushing back strongly against the idea of more aggressive action. He hasn't been the only one however, and we've also started to see more vocal political opposition to further tightening from Italian Prime Minister Giorgia Meloni who has been publicly critical of the ECB when it comes to recent rate hikes.
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FX Daily: Dollar to Stay Supported into the Fed, DXY to Trade in 101.00-101.50 Range

ING Economics ING Economics 26.07.2023 08:38
FX Daily: Dollar to stay supported into the Fed Fed day has arrived. A 25bp hike is widely expected and it looks far too early for the central bank to soften up its FOMC statement by embracing recent disinflationary trends. This should see the dollar holding onto some of its modest gains made over the last week. Elsewhere, the EM and commodity complex will want to be fed more news on China stimulus.   USD: Dollar to hold gains A look at FX performance over the last five trading sessions provides a good insight into the market's mindset and echoes the themes we highlighted yesterday of European pessimism and Chinese optimism. In the G10 space, the dollar has been the strongest currency but able to withstand that modest dollar strength the best has been the commodity complex of the Australian and Canadian dollars, plus the Norwegian krone. Underperforming has been the euro, with EUR/USD down 1.3% over the week. Indeed, we have seen independent euro weakness on the back of the soft PMI data and European Central Bank (ECB) lending survey. In the EM space, a similar story is playing out. Outperforming is the renminbi and its two most correlated currencies in the EM space, the South African rand and the Brazilian real. Underperforming on the back of the weak European story are the Hungarian forint and the Czech koruna. Also underperforming is the Chilean peso, where the central bank has recently announced a programme to replenish sorely depleted FX reserves. Important drivers of the FX story near term will therefore be whether the Federal Reserve stays hawkish, whether the ECB stays hawkish in the face of softening data and whether Chinese authorities follow through with detailed and sufficiently powerful stimulus to see the commodity currencies hold onto recent gains. Regarding the Fed, we think it is too early to remove key language from its statement that further tightening may be appropriate after today's 25bp hike. And we wonder whether it wants to push back against the 100bp of easing priced in for 2024. We see the Fed event risk as a mildly positive one for the dollar. DXY to trade 101.00-101.50 into the Fed, with risks of a breakout to 102.00 today.
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GBP: Sterling Benefits from Euro Weakness, EUR/GBP to Face Further Downside

ING Economics ING Economics 26.07.2023 08:40
GBP: Sterling enjoys the travails of the euro Having traded as high as 0.87 last week on the back of the softer UK CPI data, EUR/GBP is now back at 0.8570. This is entirely a euro-driven move and does not represent some bullish re-appraisal of sterling's prospects. Indeed, the UK calendar looks very light until the Bank of England (BoE) rate meeting on August 3rd. Here, the market is now pricing 33bp of tightening in the policy rate, down sharply from the 50bp of tightening that was priced in mid-June. Given that we are mildly negative on the euro going into tomorrow's ECB meeting and that UK rates might be dragged higher by US rates later today, we would say EUR/GBP could have a little more downside to the 0.8520 area over the next couple of sessions.
The Euro Dips as German Business Confidence Weakens Amid Soft Economic Data

The Euro Dips as German Business Confidence Weakens Amid Soft Economic Data

Kenny Fisher Kenny Fisher 26.07.2023 09:15
The euro continues to lose ground and is in negative territory on Tuesday. In the European session, EUR/USD is trading at 1.1036, down 0.26%. German Ifo Business Climate dips Germany continues to post soft numbers this week, pointing to weakness in the eurozone’s largest economy. The Ifo Business Climate index fell from 88.6 to 87.3 in July and missed the consensus estimate of 88.0. This was the lowest level seen since November 2022. Business Expectations also slowed slightly, from 83.8 to 83.5 points. This was just above the consensus of 83.4 points. The soft business confidence reading comes a day after disappointing PMI releases, which saw a deceleration in manufacturing and services in June. The numbers could impact the ECB’s rate policy after a widely expected hike at the Thursday meeting. The ECB has aggressively raised interest rates in order to curb inflation but runs the risk of tipping the weak eurozone economy into a recession. The ECB has signalled that it will raise rates on Wednesday, which would bring the main rate to 3.50%. What happens after July is less certain. This week’s soft German data will provide support to dovish ECB policymakers who want the ECB to ease up on rate hikes, even though inflation remains well above the 2% target. In the US, we’ll get a look at consumer confidence and manufacturing data later on Tuesday, with both expected to improve. The Conference Board Consumer Confidence index, which rose sharply in June to 109.7, is expected to rise to 111.8 in July. The Richmond Fed Manufacturing index, which has been mired in negative territory, is expected to improve in July to -2, up from -7 in June.   EUR/USD Technical EUR/USD is putting pressure on support at 1.1063. The next support level is 1.1002 1.1170 and 1.1231 are the next resistance lines  
Key Economic Events and Corporate Earnings Reports for the Week Ahead – September 5-9, 2023

ECB Set to Follow the Fed with 25bps Rate Hike as European Markets Look to React

ING Economics ING Economics 28.07.2023 08:25
ECB set to follow the Fed and raise rates by 25bps   European markets underwent a disappointing session yesterday, while US markets also underperformed after the Federal Reserve raised interest rates by 25bps as expected, pushing them to their highest level in over 20 years. At the ensuing press conference chairman Powell reiterated his comments from June, that additional rate rises will depend on incoming data.     In the statement it was restated that inflation remained elevated, and that the committee was highly attentive to the risks that prices might remain high. Powell was non-committal on whether the Fed would raise rates again in September, merely restating that if the data warranted the central bank would do so. US yields finished the day mixed, as did US stocks with little in the way of surprises from last night's meeting, as we look ahead to today's ECB rate meeting. If the Fed is close to the end of its rate hiking cycle which appears to be looking increasingly likely, despite Powell's determination to keep markets guessing, the pressure on the ECB to be more aggressive in its own battle against inflation, is also looking as if it might recede.     We've already seen the euro rise sharply against the US dollar in the last few weeks, which is deflationary and will help. Furthermore, factory gate prices in German and Italy have been in freefall for months now, so while core CPI has remained sticky and close to record highs at 5.5%, it's also important to remember that the ECB has pushed rates from 2% to 4% this year already.     We expect to see another 25bps later today, however the consensus that was so prevalent at the start of this year of more aggressive rate hikes is already starting to fray on the governing council, with Stournaras of the Bank of Greece pushing back strongly against the idea of more aggressive action.     He hasn't been the only one however, and we've also started to see more vocal political opposition to further tightening from Italian Prime Minister Giorgia Meloni who has been publicly critical of the ECB when it comes to recent rate hikes. If, as expected last nights Fed hike is the last one then it is entirely feasible that the ECB could similarly be close to the end of its own rate hiking cycle.     EUR/USD – we've seen a modest rebound from levels just above the 1.1000 level, having retreated from the 1.1275 area which is 61.8% retracement of the 1.2350/0.9535 down move.  A break below 1.0980 could see a move towards 1.0850. Currently have resistance at the 1.1120 area.     GBP/USD – continues to pull away from the recent lows at 1.2795/00, having broken a run of 7 daily losses. While above the 50-day SMA the uptrend from the March lows remains intact with the next resistance at the 1.3020 area.         EUR/GBP – continues to look soft with support remaining at the recent lows at 0.8500/10. Resistance currently at the 0.8600 and the highs last week at 0.8700/10.     USD/JPY – continues to drift down away from the 142.00 area, with support at 139.70. A move below 139.50 opens up the risk of a move back towards the 200-day SMA at 137.20.     FTSE100 is expected to open 18 points higher at 7,695     DAX is expected to open 52 points higher at 16,183 CAC40 is expected to open 35 points higher at 7,350
Soft US Jobs Data and Further China Stimulus Boost Risk Appetite

ECB Raises Rates by 25 Basis Points; Eurozone Yields Fall as Euro Slides

Craig Erlam Craig Erlam 28.07.2023 08:46
ECB hikes rates by 25 basis points Signals the central bank may pause at the next meeting in September Euro slides as eurozone yields fall   The ECB raised rates for potentially the final time in the tightening cycle on Thursday, although it refused to give any indication of what will happen going forward. Instead, the central bank is insisting that decisions will be guided by the economic data and that interest rates will need to remain sufficiently restrictive for some time. This is consistent with what we heard from the Fed a day earlier and what most major central banks will be communicating soon enough if they aren’t already. We remain in a period of uncertainty on the economic data, despite the progress that has already been achieved and the further moves that are expected over the rest of the year. If the inflation data continues to improve as many expect, there’s every chance the ECB pauses in September and doesn’t then feel it necessary to hike further by October. There are, of course, an abundance of upside risks to the inflation data from the economy continuing to display significant resilience, as we’ve already seen this year, or fresh energy or food price shocks. These things and more could tempt the ECB to hike further later in the year.     Euro falls below 1.10 against the dollar The lack of commitment to further rate hikes from the ECB today weighed on the euro and saw eurozone yields decline. The single currency plunged against the dollar, slipping back below 1.10 after coming close to 1.1150 earlier in the day.       It would appear the ECB has failed to open the door to a pause without triggering too much excitement, as it would have preferred. President Lagarde was desperately trying to avoid doing so in the press conference, repeatedly referring back to previous comments rather than directly answering questions, and it seems in doing so, traders have instead opted to read between the lines. We may see efforts to correct this in the weeks ahead.  
Bank of England: Falling Corporate Price Expectations May Signal Peak in Rate Hike Cycle

Fed Takes Data-Dependent Approach: Chance of September Hike Diminishes

Ed Moya Ed Moya 28.07.2023 08:51
Fed swaps show only an 18% chance of a hike in September (under 50% for November) FOMC to take data-dependent approach on future hikes Fed no longer forecasting a recession   The dollar declined as US stocks embraced a patient Fed Chair Powell that will remain dependent with the next two inflation reports before committing to what they will do in September.  The Fed is probably done raising rates and that is keeping soft landing hopes alive. Fed Decision The Fed raised rates by a quarter-percentage point, bringing the target range to 5.25% to 5.50%, a 22-year high.  This was an easy FOMC decision as economic growth remains impressive, which is why the Fed will try to keep the door open for one last hike. The US economy is starting to feel the impact of the Fed’s rate hiking campaign and unless the housing market continues to heat up, the disinflation process should help bring rates back to target.   FOMC Statement The statement did not deliver any surprises as the Fed emphasized that inflation remains elevated and they will continue to assess additional information and its implications for monetary policy.  Economic growth is softening as the June statement said economic activity is expanding at a modest pace, while now it is at a moderate one.  The Fed is keeping optionality for future rate increases but it probably won’t need them.  The disinflation process will remain as the economy is weakening and the corporate world should start feeling the impact of tighter credit conditions.    FOMC press conference Powell noted that the FOMC will take a data-dependent approach on future hikes.  He acknowledged the rebound with housing and highlighted that they are waiting for the full effects of their tightening.  Powell clearly stated that it is possible that they’d raise or hold in September if data warranted it.  The Fed is going to be locked in with all the key inflation data points.  The June CPI report was cooler-than-expected, so if that trend continues, the Fed will probably skip in September.  The Fed will have two inflation reports before it meets again, with the core remaining quite elevated.  The Fed clearly believes a soft landing is achievable as the staff no longer is forecasting a recession.   FX The dollar softened as the Fed signaled they will be patient with future rate hikes, which suggests if they deliver one more hike that will most likely be in November. The economy should weaken going forward and that should support a shifting of the focus from just inflation to also including recessionary fears.  Both the euro and pound rallied against the dollar as their respective central banks have clearly signaled more tightening will occur beyond the summer.  EUR/USD has clearly found support ahead of the 1.10 handle, which suggests prices could stabilize until we get to the ECB meeting.  The 1.1150 remains key short-term resistance.      
Bank of England: Falling Corporate Price Expectations May Signal Peak in Rate Hike Cycle

Diverging G3 Trends Dominate: USD Steady on US Data, JPY Stronger as BoJ Softens YCC, EUR Weaker on Doubtful September Rate Hike

ING Economics ING Economics 28.07.2023 10:40
FX Daily: Diverging G3 trends dominate Closing the week, we have the Japanese yen a little stronger as the BoJ softens up YCC control, the dollar is steady-to-stronger on good US activity data, and the euro is weaker as the ECB throws a September rate hike into doubt. After the BoJ press conference, today's highlight will be the US Employment Cost Index data. A soft number could hit the dollar.   USD: The ECI will be in focus today The combination of some stronger US activity data and some independent euro weakness on the back of yesterday's ECB meeting has seen the trade-weighted DXY dollar push a little higher. DXY would be even higher were it not for the lower USD/JPY we have seen today on the back of the Bank of Japan's tweak to its Yield Curve Control (YCC) target.  Regarding the BoJ, we think the market is right to have taken USD/JPY a little lower after this surprise adjustment to how it manages its 10-year Japanese government bond (JGB) yield target. What has probably prevented USD/JPY from dropping harder are the new BoJ core CPI forecasts, where FY24 and FY25 CPI are still only forecast at 1.9% (April forecast 2.0%) and 1.6% (1.6%) respectively. This hardly provides a firm foundation to conclude that CPI will now sustainably run near 2.0%. Instead, the tweak to the YCC programme may reflect BoJ Governor Kazuo Ueda's preference to take baby steps away from the heavy control of the JGB market - i.e. maybe he's more of a free marketeer.  However, we do think the drop in USD/JPY might get some support from the dollar side today. Undoubtedly, US activity data has been holding up well, and based purely on the activity data alone one would argue that the Fed had the strongest case for another rate hike, yet Fed Chair Jerome Powell acknowledges that US monetary policy is already in restrictive territory and the focus is on disinflation.  On Wednesday, Powell said there would be important data prints before the September FOMC meeting – two CPI prints, two jobs reports and the Employment Cost Index (ECI). Well the second-quarter ECI figure is released today and is expected at 1.1% – a drop from 1.2% in the first quarter and a peak of 1.4% in the first quarter of 2022. My colleague James Knightley thinks the risks are skewed to a sub-consensus 1.0% reading today given the softer average hourly earnings and survey evidence both from the Fed's Beige Book as well as the NFIB data that the US labour market is coming better into balance. A soft ECI number can wipe out the final 8bp that is priced for the US tightening cycle this year and will probably knock the dollar 0.5-1.0% lower. This would be a good story for risk assets, where both the Fed and seemingly the ECB would be closer to ending tightening cycles. If we are right with our call on the ECI, DXY could head back to yesterday's low near 100.50.
Record High UK Wages Raise Concerns for Bank of England's Rate Decision

EUR/USD: ECI Softens Blow, but Confusion Persists in CEE FX

ING Economics ING Economics 28.07.2023 10:42
EUR: ECI to the rescue Thursday proved a bad day back in the office for EUR/USD. The ECB press conference proved a negative for the euro as ECB President Lagarde backed away from a September rate hike and seemed to acknowledge both softer activity data and welcome disinflation. This was not really a bloodbath for the euro – indeed the trade-weighted euro did not move too much, nor did two-year rate differentials. It just so happened that we had some strong US data coming out at the same time. If we are right today with our call for a soft ECI number, we could see EUR/USD breaking back above 1.1000 and starting to trace out the kind of 1.1000-1.1150 range over the coming sessions. Chris Turner As usual this week, the calendar in the CEE region doesn't have much to offer. But still, like yesterday, CEE will have to consume the global story, which brought a lot of new news again. The main news here is of course the lower EUR/USD, which complicates the positive picture we described yesterday for CEE FX. But on the other hand, positive market sentiment is going full speed ahead with the end of the global hiking cycle in sight. Thus, FX in the region has every right to be confused about which direction to go now. We are leaning more on the bullish side again, but EUR/USD will be a problem and hold back further gains for CEE FX today.
Australian Employment Surprises with 64,900 New Jobs in August, Boosting AUD, While AUDUSD Charts Show Potential for Double Bottom

EUR/USD Analysis: ECB Rate Hike Sparks Euro's Sharp Decline as US GDP Report Adds to Selling Pressure

InstaForex Analysis InstaForex Analysis 28.07.2023 15:52
EUR/USD The euro is once again (after 20 days) disrupting the market. The European Central Bank raised its rate by 0.25% yesterday, and ECB President Christine Lagarde indicated that this increase may be the last one (similar to the Federal Reserve) in the current tightening cycle. The euro lost 0.95% or 108 pips.   Media reports that such a sharp decline was caused by the US Q2 GDP report, which showed that the economy expanded by 2.4% against the expected 1.8%. In addition, durable goods orders in June added 4.7% (forecast was 1.0%). Only the S&P 500 fell by 0.64%, reflecting expectations of a recession in the US and an expansion in the yield curve inversion in the government bond market.     The volume of yesterday's trades was the largest in the last 4 months, which means there is still potential for further decline. The 1.0924 level is an important support on the daily chart, which the MACD line is approaching. Consolidating below it will initiate a new downtrend in the medium-term. The Marlin oscillator has settled in the negative area. If the euro does not fall below 1.0924, it may rise again, even against unfavorable grounds. We are expecting a significant reversal of the euro that is in sync with the stock market decline (in September).     On the four-hour chart, the situation is bearish: the price is developing below both indicator lines, and the Marlin oscillator has settled in the downtrend territory. Consolidating below yesterday's low at 1.0966 opens up the target at 1.0924. Some kind of price convergence with the oscillator supports the euro's consolidation in the 1.0966-1.1012 range  
AUD Surges on Strong Employment Gains, RBA's Hawkish Outlook

EUR/USD Faces Resistance Amid Weak Economic Reports and Political Tensions

InstaForex Analysis InstaForex Analysis 01.08.2023 13:36
EUR/USD Euro failed to approach the target range of 1.1068/92 yesterday, in part due to the large distance to cover and the technical resistance on lower timeframes. Key economic reports also came out rather weak, with Germany's retail sales for June showing a decrease of 0.8%. Meanwhile, the Chicago Business Activity Index for July increased from 41.5 to 42.8, collectively offsetting the eurozone's GDP growth for the 2nd quarter by 0.6% y/y (0.30% q/q).     The political factor also intervened, as China decided to reduce the export of unmanned aerial vehicles to the US, citing national security reasons. Furthermore, the forecasts for key economic indicators in the US came out optimistic. Currently, the price approaches the target level of 1.0924, along which the MACD line also converges. There may be a breakout around the speculative buying range of July 6-7, or a correction from the entire decline since July 18.   On the four-hour timeframe, the balance indicator line capped yesterday's growth, pushing the price below 1.1012. The Marlin oscillator also fell under zero, showing a downward trend.    
Copper Prices Slump as LME Stocks Surge: Weakening Demand and Economic Uncertainty

Dollar Rises to Three-Week High amid Cooling Labor Market, while Fed Rate Hike Odds Decline

Ed Moya Ed Moya 02.08.2023 08:53
Dollar rises to three-week high (low for euro) as labor market cools Atlanta’s GDPNow index rises to 3.87%, up from 3.55% Manufacturing contracts for a ninth straight month The US dollar pared some its earlier gains after the JOLTS and ISM manufacturing employment component supported a Fed skip in September, possibly confirming hopes that they could be done tightening.  The dollar was rallying against the euro as equities tumbled over mixed earnings and over concerns the US soft landing needs to be confirmed before we return to record levels.   US Data The ISM Manufacturing reported contracted for a ninth straight month, as demand remains weak, but could be showing signs it is bottoming out.  The headline ISM index report came in at 46.4, higher than the 46.0 prior reading, but a miss of the 46.9 consensus estimate.  The prices paid component rose from 41.8 to 42.6, but was below the eyed 44.0 expectation.  New orders improved from 45.6 to 47.3, while employment dropped from 48.1 to 44.4. US job openings declined from 9.616 million openings to 9.582 million, which is the lowest levels since February 2021.  JOLTS data also showed hiring decreased and the quit rate declined.  The quit rate hit fell to 2.4%, the lowest level since February 2021.  The ratio of job openings still makes it a job searcher market as there still remains more than 1.6 jobs for unemployed job seekers .     The labor market is clearly weakening and that is good news for the Fed.  Post ISM Manufacturing and JOLTS, Treasury yields at the short end of the curve gave up some of their earlier gains. The dollar index chart is showing that the dollar rebound over the past few weeks is facing massive resistance at around the 102.50 region.  If the NFP report at the end of the week confirms that the labor market is weakening, the dollar rebound might be over. A dollar floor could be in place as Fed rate hike odds decline and rate cut odds move forward. Fed swaps will likely show  the market is pricing in a coin-flip chance of a rate hike over the next two FOMC meetings or if the market grows more confident that the Fed is done.  
Unlocking the Future: Key UK Wage Data and September BoE Rate Hike Prospects

EUR/USD: Euro's Swings Amid Soft German Data and Awaited US Nonfarm Payrolls

Ed Moya Ed Moya 07.08.2023 09:27
German Factory Orders jump 7.0% US nonfarm payrolls expected to dip to 200,000 The euro is almost unchanged on Friday, trading at 1.0952. We could see some movement in the North American session, with the release of US nonfarm payrolls. The euro has shown sharp swings lately.  EUR/USD climbed to 1.1275 on July 18th, its highest level since February 2022. It has been all downhill since then, with the euro tumbling over 300 basis points.   Soft German PMIs reflective of weak eurozone economy It hasn’t been the best week for Germany, the largest economy in the eurozone and the bellwether of the bloc. The July PMIs pointed to deceleration in both services and manufacturing. The Services PMI remained in expansion territory but slipped from 54.1 to 52.3, its lowest level since February. Manufacturing is in terrible shape, with the PMI falling from 40.6 to 38.8, its weakest reading since May 2020. German retail sales declined 0.8% in June, down from 1.9% in May. The week did end with some good news, as German Factory Orders jumped 7.0% m/m in June, up from 6.2% in May and blowing past the consensus estimate of -2.0%. We’ll get a look at German Industrial Production on Monday and CPI on Tuesday. For the ECB, the weak numbers out of Germany are an indication that the central bank’s tightening cycle is working, but what comes next is a tricky question. Inflation has slowed to 5.5%, but that is much higher than the 2% target. The ECB hasn’t paused its rate hikes since the tightening cycle began in July 2022 but there is some pressure on the ECB to take a break at the September meeting in order to avoid a recession. ECB President Lagarde is keeping mum, saying that a pause or a hike are both on the table. With no guidance from the ECB, about all investors can do is keep an eye on inflation and employment releases, which will be crucial to the ECB’s decision at the next meeting.   Markets expect soft US nonfarm payrolls All eyes are on nonfarm payrolls, one of the most important US releases. In June, a massive ADP employment report fuelled expectations that nonfarm payrolls would also soar. In the end, nonfarm payrolls fell to 209,000, down sharply from a downwardly revised 306,000. ADP again soared this week with a reading of 324,000. We’ll have to wait and see if nonfarm payrolls come in around the consensus estimate of 200,000 or follow ADP and move sharply higher. . EUR/USD Technical 1.0924 remains under pressure in support. Below, there is support at 1.0831 There is resistance at 1.1037 and 1.1130  
Fed's Bowman Highlights Potential for More Rate Hikes; German Industrial Production Dips to 6-Month Low

Fed's Bowman Highlights Potential for More Rate Hikes; German Industrial Production Dips to 6-Month Low

Kenny Fisher Kenny Fisher 08.08.2023 08:47
Fed’s Bowman reiterates that more hikes might be need to bring down inflation German Industrial Production fell to a 6-month low US inflation data expected to support a September pause, but possible coin flip for the November meeting   The US dollar is stronger across the board as the bond market selloff returns, sending the 10-year Treasury yield 6.9 basis points higher to 4.103%. After a mixed jobs report (slower job growth pace but higher wages) this week is all about an inflation report that will probably show moderate price growth.  The focus for many traders is all about the end of tightening and this weekend’s Fed speak supported the higher for longer stance.  Fed’s Bowman noted that it will likely need to raise interest rates further to bring down inflation.  A New York Times article this morning reported that Fed’s Williams stated that the central bank’s work to cool the economy is almost done and that he expects rate cuts could happen next year.    Heading into Thursday’s US inflation report, expectations are for headline CPI to rise from 3.0% to 3.3%, mainly due to base effects, but snapping a long streak of declines that has been in place since last August. Fixed income markets are growing confident that the September FOMC will support a rate pause.  The core readings are also expected to hold steady, but any hot surprises could keep the pressure on for a November hike.    At the end of last week, the euro saw some volatility after the Bundesbank said domestic government deposits would not receive any interest, sparking a move into bills and other high-yielding markets.  This decision surprised many traders and could lead to significant outflows for German debt.  Today’s disappointing German industrial production data also sent the euro lower as recession risks continue to rise.  Output continues to drop, falling to a 6-month low.   The weekly EURUSD chart shows price is approaching key trendline support at 1.0930. If downward momentum accelerates, downside targets include the 1.0850 region followed by 1.07667 level.  To the upside the 1.1050 provides initial resistance followed by the 1.1135 level.    
Steady BoE Rate Expectations Amid Empty Event Calendar in the UK

Steady BoE Rate Expectations Amid Empty Event Calendar in the UK

ING Economics ING Economics 10.08.2023 08:46
GBP: Unusually stable BoE rate expectations The data and Bank of England event calendars are empty today and tomorrow in the UK, and will only pick up again on Friday with the release of GDP and industrial production. The lack of domestic events in the UK has helped an unusual period of very stable BoE rate expectations: markets appear rather anchored to the prospect of a peak rate around 5.70-5.75% for now. EUR/GBP has faced some downward pressure, likely due to the negative impact of the Italian bank windfall tax announcement on the euro, but looks unlikely to break out of recent ranges. 0.8600 should continue to be the gravity level for now.      
ECB's Tenth Consecutive Rate Hike: The Final Move in the Current Cycle

BRICS Summit: Exploring Expansion, Currency Dynamics, and the US Dollar's Role

ING Economics ING Economics 17.08.2023 09:16
Executive summary The BRICS grouping of major emerging economies, Brazil, India, China, South Africa and Russia, is holding its fifteenth summit later this month. Up for discussion: an expansion of the bloc, greater use of local currencies and the possibility of a BRICS currency which may have the potential to challenge the dominance of the US dollar. Any expansion of the BRICS grouping could determine the speed with which the bloc adopts commercial and financial systems outside of the dollar sphere. Speculation is rife as to how many countries, if any, will join the club – for the first expansion in a decade.    In order to evaluate how the political ambitions correlate with underlying economic trends, we take a closer look at the overall evolution of the US dollar’s role in the various areas of the global economy and markets. Here are the observations so far: There has been a drop in the dollar’s share of central banks’ FX reserves, but dollar usage has held up very well in commerce, private assets, debt issuance, and generally on the global FX market. Among the potential dollar challengers, the euro may seem like a runner-up, but its dominance is seen only in Europe. Looking at the BRICS, China’s amplification of renminbi swap lines seems to have helped promote the use of its currency in trade and international reserves, and Russia’s geopolitical aversion to the dollar gave CNY an additional boost, but China’s capital controls and low issuance of panda bonds remain an obstacle. The rising usage of alternative currencies does not seem to be threatening the dollar but rather increasing the competition among the regional currencies amid fragmentation of the trade and capital flows. No currency has made any inroad to the dollar’s pre-eminent status as the issuance currency of choice. Having been a major factor in removing sterling’s crown last century, challenging the dollar’s status in the international debt market has to be a central strategy for the young pretenders. Overall, we do not see any conclusive evidence that the dollar is on the path of structural decline at this point. However, it is still facing challenges, stemming from both economics and geopolitics.
BRICS Summit's Expansion Discussion: Impact on De-dollarisation Speed

BRICS Summit's Expansion Discussion: Impact on De-dollarisation Speed

ING Economics ING Economics 17.08.2023 09:20
Would a larger bloc mean faster de-dollarisation? The BRICS grouping of major emerging economies, Brazil, India, China, South Africa and Russia, is holding its fifteenth summit later this month. Up for discussion: an expansion of the bloc, greater use of local currencies and the possibility of a BRICS currency which may have the potential to challenge the dominance of the US dollar. Any expansion of the BRICS grouping could determine the speed with which the bloc adopts commercial and financial systems outside of the dollar sphere. Speculation is rife as to how many countries, if any, will join the club – for the first expansion in a decade.   In order to evaluate how the political ambitions correlate with underlying economic trends, we take a closer look at the overall evolution of the US dollar’s role in the various areas of the global economy and markets. Here are the observations so far: There has been a drop in the dollar’s share of central banks’ FX reserves, but dollar usage has held up very well in commerce, private assets, debt issuance, and generally on the global FX market. Among the potential dollar challengers, the euro may seem like a runner-up, but its dominance is seen only in Europe. Looking at the BRICS, China’s amplification of renminbi swap lines seems to have helped promote the use of its currency in trade and international reserves, and Russia’s geopolitical aversion to the dollar gave CNY an additional boost, but China’s capital controls and low issuance of panda bonds remain an obstacle. The rising usage of alternative currencies does not seem to be threatening the dollar but rather increasing the competition among the regional currencies amid fragmentation of the trade and capital flows. No currency has made any inroad to the dollar’s pre-eminent status as the issuance currency of choice. Having been a major factor in removing sterling’s crown last century, challenging the dollar’s status in the international debt market has to be a central strategy for the young pretenders.     Overall, we do not see any conclusive evidence that the dollar is on the path of structural decline at this point. However, it is still facing challenges, stemming from both economics and geopolitics.
Currency Choice in International Debt Issuance: USD Dominance and Emerging Trends

Currency Choice in International Debt Issuance: USD Dominance and Emerging Trends

ING Economics ING Economics 17.08.2023 09:40
One of the most compelling reasons offered for sterling’s fall from grace in the interwar period was the surge in international USD debt issuance. The denomination of international debt can deliver all kinds of leverage – including feeding back into trade. And one commonly hears that the composition of a central bank’s FX reserves is partially a function of the sovereign’s currency mix of international debt. Evidence suggests that the dollar very much retains its crown as the preferred issuance currency – in fact it has become even more popular for EM issuers over recent years. The euro remains a distant challenger and despite the renminbi’s entry into the SDR in 2015, the Panda bond market – international debt issued in renminbi – remains exceptionally small. It seems that both issuers and investors remain concerned over both liquidity issues and China’s capital controls.   Looking at the global level, BIS data suggests the share of USD in cross-border liabilities seems to be relatively stable, with minor declines in banks and corporates recently (Figure 21). The role of USD-denominated international debt securities has been stable in recent years (Figure 22).     The subject of the currency choice of international debt issuance bears greater scrutiny. A European Central Bank working paper from 2012 made the compelling argument that sterling’s loss of supremacy in the inter-war years was a function of the surge in international debt issuance in dollars. In fact, the first ‘Strategic Target’ for the BRICS New Development Bank is to ensure that 30% of its total financing is done in local currencies. Looking deeper into this subject, currencies other than the USD and EUR have yet to make a significant impact in international debt markets, with ‘other’ currencies outside the USD, EUR and GBP making up just 6% of the outstanding stock, or US$1.8tn (Figure 23).   When drilling down further into these ‘other’ currencies, we can see a slight uptick in the use of the CNY over the past decade from almost nothing, which shows a slight increase in interest in the renminbi from investors, issuers, and perhaps Chinese officials too. But generally, this appears to have come at the expense of less use of other G10 currencies outside the USD and remains a tiny part of the international bond universe, with just under US$200bn outstanding (Figure 24).  
Examining Recent Trends in Currency Dynamics and De-Dollarisation Efforts

Examining Recent Trends in Currency Dynamics and De-Dollarisation Efforts

ING Economics ING Economics 17.08.2023 09:44
However, more recently even this dynamic has become less certain when looking forward. Issuers in the CEE region (that over the past decade had largely shifted to local debt, or in EUR when needed) have ramped up their USD sovereign bond issuance since late 2022, preferring the large potential investor base and better liquidity in this market. While it is unlikely to mark a long-term trend and reverse the dynamic seen in the past decade, in the coming few years USD bond issuance will remain an active area for most EM sovereigns.   Another area of ‘de-dollarisation’ that can be observed across some emerging markets in within domestic banking systems (Figures 29 and 30). A key aim for many governments in reducing vulnerabilities to a crisis has been to reduce the share of FX loans and deposits within their banking systems, which in practice has been reducing the role of the dollar (or the euro for some EM Europe economies). Within the BRICS economies, we can observe a general downtrend in the FX share of loans within the banking system since around 2015, and a similar story for Russia, India and South Africa in terms of FX liabilities.        
BRICS Expansion and De-Dollarisation: Assessing the Potential Impact

BRICS Expansion and De-Dollarisation: Assessing the Potential Impact

ING Economics ING Economics 17.08.2023 09:53
The BRICS grouping of major emerging economies is holding its fifteenth summit later this month. Up for discussion: an expansion of the bloc, greater use of local currencies and the possibility of a BRICS currency which may have the potential to challenge the dominance of the US dollar. We'll outline here the key points and link to our major new report.   Would a larger bloc mean faster de-dollarisation? The challenge to the dollar  It's all about the speed of any BRICS expansion   Would a larger bloc mean faster de-dollarisation? The BRICS grouping of major emerging economies, Brazil, India, China, South Africa and Russia, is holding its fifteenth summit later this month. Up for discussion: an expansion of the bloc, greater use of local currencies and the possibility of a BRICS currency which may have the potential to challenge the dominance of the US dollar. Any expansion of the BRICS grouping could determine the speed with which the bloc adopts commercial and financial systems outside of the dollar sphere. Speculation is rife as to how many countries, if any, will join the club – for the first expansion in a decade. In order to evaluate how the political ambitions correlate with underlying economic trends, we take a closer look at the overall evolution of the US dollar’s role in the various areas of the global economy and markets. Here are the observations so far: There has been a drop in the dollar’s share of central banks’ FX reserves, but dollar usage has held up very well in commerce, private assets, debt issuance, and generally on the global FX market. Among the potential dollar challengers, the euro may seem like a runner-up, but its dominance is seen only in Europe. Looking at the BRICS, China’s amplification of renminbi swap lines seems to have helped promote the use of its currency in trade and international reserves, and Russia’s geopolitical aversion to the dollar gave CNY an additional boost, but China’s capital controls and low issuance of panda bonds remain an obstacle. The rising usage of alternative currencies does not seem to be threatening the dollar but rather increasing the competition among the regional currencies amid fragmentation of the trade and capital flows. No currency has made any inroads to the dollar’s pre-eminent status as the issuance currency of choice. Having been a major factor in removing sterling’s crown last century, challenging the dollar’s status in the international debt market has to be a central strategy for the young pretenders.     Overall, we do not see any conclusive evidence that the dollar is on the path of structural decline at this point. However, it is still facing challenges stemming from both economics and geopolitics.
Market Risk Sentiment Adjusts as Investors Eye US Inflation Data

GBP: Disappointing Retail Sales Amidst Supportive Data

ING Economics ING Economics 18.08.2023 09:55
GBP: Retail sales disappoint The UK released retail sales data for July this morning, and the numbers came in quite markedly below expectations. Retail sales including fuel dropped 1.2% month-on-month, and the ex-auto fuel gauge was down 1.4%. The release is in contradiction with a slew of quite supportive data releases for the pound. However, the FX impact has been quite contained given the very little weight that retail sales are given in the Bank of England’s monetary policy decision equation compared to wage and inflation figures, which instead surprised on the upside this week. The Sonia curve is fully pricing in a 6.0% peak rate in the UK, while markets are not convinced the ECB will hike rates at all. Incidentally, the euro is more exposed to China than the UK. That would suggest the 0.8500 support in EUR/GBP is under threat, and we definitely don’t exclude it will be tested or broken temporarily in the coming days. However, the short-term swap differential when the pair last traded at 0.8500 (mid-July) was around 20-25bp wider in favour of GBP, meaning that a further widening of the monetary policy divergence may well be needed to keep EUR/GBP sustainably depressed.
European Markets Face Headwinds Amid Rising Yields and Inflation Concerns

CEE Market Update: Higher Rates Counterbalance Stronger US Dollar

ING Economics ING Economics 18.08.2023 09:57
CEE: Higher rates offset stronger US dollar Today's calendar in the CEE region has little to offer. FX seems untouched after the FOMC minutes, although there are a few things we should highlight. On one hand, the US dollar and equity markets are still pointing to weaker CEE FX. On the other, rate differentials are climbing higher across the board, especially in the Czech Republic and Poland. In addition, the US rate spike just after the FOMC minutes has added impetus to this. Thus, in the Czech Republic, the 2y rate spread against the euro reached its highest level since the beginning of July. In Poland, the spread jumped to the highest levels in a week. This should at least offset the negative impact of a stronger US dollar. However, at least in the Czech Republic, the effect of higher rates could outweigh and EUR/CZK could finally get below 24.0 for the first time since early August.CEE Market Update: Higher Rates Counterbalance Stronger US Dollar
Euro Gets a Boost from ECB's Inflation Forecasts

EUR/USD Analysis: Euro Shows Resilience Amidst Mixed Price Action

InstaForex Analysis InstaForex Analysis 18.08.2023 11:38
EUR/USD As a result of yesterday, the euro fell slightly, jumping to the resistance level of 1.0924 with its upper shadow. The bears showed strength, but the bulls also showed persistence. Similar price spikes to the upside have been happening for three consecutive days. The signal line of the Marlin oscillator starts to turn upward.     Apparently, the price will stay in the 1.0865-1.0924 range, consolidating below the MACD line (blue moving average). We generally have a downtrend, so if the price breaches the support level at 1.0865 again, it can also aim for 1.0834.     On the four-hour chart, the price and the oscillator have made something similar to a double convergence. In the first stage, consolidating above the MACD line (1.0889) will allow the price to aim for 1.0924. Then, the price may try to overcome the MACD line on the daily chart (1.0942). But for now, the sideways movement has a bigger chance.
Market Reaction to Eurozone Inflation Report: Euro Steady as Data Leaves Impact Limited

Market Reaction to Eurozone Inflation Report: Euro Steady as Data Leaves Impact Limited

Kenny Fisher Kenny Fisher 22.08.2023 09:12
The euro started the week on a stable note, with little response to the eurozone inflation report released on Friday. In the North American session, EUR/USD is trading at 1.0886, reflecting a minor increase of 0.13%. Given the sparse data calendar for Monday, it is expected that the euro will maintain its calm trajectory for the rest of the day. Eurozone Inflation Trends: Headline Falls, Core Remains Unchanged The past week concluded with a eurozone inflation report that brought about a mixed reaction. The euro displayed minimal volatility in response to the data. The headline inflation rate for June was confirmed at 5.3% year-on-year (y/y), down from 5.5% in the previous month. This decline marked the lowest level observed since January 2022, primarily driven by a drop in energy prices.     Markets show little reaction to Friday’s eurozone inflation report Headline inflation falls but core rate unchanged The euro is steady at the start of the week. In the North American session, EUR/USD is trading at 1.0886, up 0.13%. With a very light data calendar on Monday, I expect the euro to remain calm for the remainder of the day.   Eurozone headline inflation falls, core inflation unchanged The week ended with a mixed inflation report out of the eurozone and the euro showed little reaction. Inflation was confirmed at 5.3% y/y in June, down from 5.5% in June. This marked the lowest level since January 2022 and was driven by a decline in energy prices. Core CPI remained unchanged at 5.5% in July, confirming the initial reading. The news was less encouraging from services inflation, which rose from 5.4% to 5.6% with strong wage growth driving the upswing. The labour market remains tight and inflation is still high, which suggests that wage pressure will continue to increase. Inflation has been moving in the right direction but core inflation and services inflation remain sticky and are raising doubts, within the ECB and outside, if the central bank’s aggressive tightening cycle can bring inflation back to the 2% target. The deposit rate stands at 3.75%, its highest level since 2000. The ECB’s primary goal is to curb inflation but policy makers cannot ignore that additional rate hikes could tip the weak eurozone economy into a recession. The ECB meets next on September 14th and there aren’t many key releases ahead of the meeting. ECB President Lagarde has said that all options are open and investors will be listening to any comments coming out of the ECB, looking for clues as to whether the ECB will raise rates next month or take a pause.   EUR/USD Technical EUR/USD tested resistance at 1.0893 earlier. Above, there is resistance at 1.0940 There is support at 1.0825 and 1.0778    
Market Trends and Currency Positioning: USD Net Short Position, Euro and Pound Analysis - 22.08.2023

Market Trends and Currency Positioning: USD Net Short Position, Euro and Pound Analysis

InstaForex Analysis InstaForex Analysis 22.08.2023 14:49
The net short position in USD grew by $490 million to -$16.272 billion over the reporting week after a strong correction a week earlier. The decline is largely related to long positions on the euro, and in terms of other major currencies, the notable trend is selling across all significant commodity currencies (Canadian, Australian, New Zealand dollars, and also the Mexican peso). The yen and franc are slightly doing better, i.e., there is demand for safe-haven currencies and a sell-off in commodity currencies. Since long positions in gold have decreased by $4.5 billion, we can expect increasing demand for the US dollar.     PMIs for the eurozone, the UK, and the US will be published on Wednesday, which can significantly influence the rate forecasts of the European Central Bank, the Bank of England, and the Federal Reserve. Last week, we witnessed a clear uptrend in bond yields, suggesting increased demand for risk amid more upbeat economic reports. At the same time, we see a sharp deterioration in China's economy, which, on the contrary, points to slowing demand. This dilemma may be resolved after the release of the PMIs, so we can expect increased volatility.   EUR/USD The final estimate confirmed that the euro area annual inflation rate was 5.3% in July 2023, with core inflation unchanged at 5.5%. Since there are no seasonal factors that could explain the price increase at the moment, it would be best to assume the most obvious explanation - price growth is supported by broad price pressures in the growing services sector. Stubborn inflation supports market expectations that the ECB will raise rates in September, and this increase is already reflected in current prices. The strong labor market is also in favor of a rate hike. After a sharp decrease a week earlier, the net long position in the euro grew by $1.275 billion, putting the bearish trend into question. The settlement price is below the long-term average, giving grounds to expect a continuation of the euro's decline, but the momentum has noticeably weakened.   A week earlier, we assumed that the bearish trend would continue. Indeed, the euro consistently passed two support levels, but did not reach the 1.0830 level. The resistance at 1.0960, which the euro can reach if a correction develops, is still considered in the long term. We assume that the trend remains bearish, and the 1.0830 level will be tested in the short term. GBP/USD Inflation in July fell from 7.9% to 6.8%. This is mostly due to the fall in the marginal price of OFGEM (Office of Gas and Electricity Markets) from 2500 pounds to 2074. Without this decline, inflation would have still fallen, but much less - to 7.3%. Despite the sharp decline, inflation remains at a very high level, and further falls in the marginal price of energy carriers are unlikely. The NIESR Institute suggests that, among the possible scenarios for future inflation behavior, we should choose between "very high", assuming an average annual inflation of around 5% over 12 months, and "high persistence", which is equivalent to an annual level of 7.4%. Needless to say, both scenarios imply inflation higher than in the US, so the likelihood of a higher BoE rate remains, leading to a yield spread in favor of the pound. These considerations do not allow the pound to fall and support it against the dollar, while against most major currencies, the dollar continues to grow. After three weeks of decline, the long position in GBP grew by $302 million to $4.049 billion. Positioning is bullish, the price is still below the long-term average, but, as in the case of the euro, an upward reversal is emerging.       In the previous review, we assumed that the pound would continue to decline, but UK inflation pressure remains stubborn, which changed the rate forecast and supported the pound. A correction may develop, and the nearest resistance level is 1.2813. If the pound goes higher, the long-term forecast will be revised. At the same time, we still consider the bearish trend, and the chances of restoring growth are high, with the nearest target being the support area of 1.2590/2620.  
Unlocking the Future: Key UK Wage Data and September BoE Rate Hike Prospects

EUR: ECB Braces for Impact of PMIs on Outlook

ING Economics ING Economics 23.08.2023 10:19
EUR: ECB cannot ignore PMIs Any forward-looking economic indicator is, at this stage, quite important for the euro and the European Central Bank. The bank is officially fully focused on inflation, but evidence of a slowdown in key parts of the euro area has mounted and is now too blatant to be overlooked. Core inflation dynamics will still remain the main input for the ECB – but should we see more indications from today’s PMIs that the eurozone outlook is deteriorating, then policymakers might see the window for one last hike closing rapidly and opt for a September hike rather than delaying it until the fourth quarter.  The focus will also be on Germany’s PMIs. Manufacturing is expected to have flattened in August at 38.8, and services to have declined modestly to 51.5. Overall, the eurozone numbers are not expected to show any further material deterioration. Later today, the euro area consumer confidence will also be published. EUR/USD came under pressure yesterday and unless we receive some encouraging news from PMIs, or a drop in the dollar (e.g., caused by an equity rally after Nvidia results), we suspect markets may marginally prefer to stay bearish on the pair as for some pre-Jackson Hole positioning.   EUR/USD is testing the early-July 1.0834 low this morning, a break lower puts the next support at 1.0800 (200-day MA).
FX Daily: Lagarde and Powell Address Jackson Hole – Hawkish Expectations and Eurozone Concerns

Subdued Euro Reaction to Weak German and Eurozone PMIs; US Unemployment Claims and Durable Goods Orders Awaited

Kenny Fisher Kenny Fisher 24.08.2023 14:11
Euro yawns after weak German and eurozone PMIs US to release unemployment claims and durable goods orders on Thursday The euro has edged lower on Thursday. In the European session, EUR/USD is trading at 1.0851, down 0.11%. On the data calendar, there are no releases from the eurozone. The US releases unemployment claims and durable goods orders and we could see some movement from EUR/USD in the North American session. On Friday, Germany releases Ifo Business Climate. The index has decelerated for three consecutive months and the downturn is expected to continue (87.3 in July, 86.7 expected).   Euro pares losses after dismal PMIs Eurozone and German PMIs were nothing to cheer about, as the August numbers pointed to contraction in the manufacturing and services sectors. Germany’s manufacturing sector has been particularly weak, although the Manufacturing PMI rose slightly to 39.1 in August, up from 38.8 in July and the consensus estimate of 38.1. Eurozone Manufacturing PMI climbed to 43.7 in August, higher than the July reading of 42.7 and the estimate of 42.6 points. The services sector is in better shape and has been expanding throughout 2023. That trend came to a screeching halt on Wednesday when German and Eurozone Services PMIs fell into contraction territory in August (a reading of 50.0 separates expansion from contraction). Germany dropped to 47.3, down from 52.3 in July and below the estimate of 51.5. Similarly, the eurozone slowed to 48.3, down from 50.9 and shy of the estimate of 50.5 points.   The weak PMI reports pushed the euro lower but it managed to recover without much fuss. As for the ECB, the data supports the case for a pause, as the softness in manufacturing and services is evidence that the eurozone economy is cooling down. A pause would give the ECB some time to monitor the impact of previous rate hikes are having on the economy and on inflation. Future market traders are viewing the September meeting as a coin toss between a 25 basis point hike and a pause.     EUR/USD Technical There is resistance at 1.0893 and 1.0940 EUR/USD has support at 1.0825 and 1.0778    
Eurozone PMIs Weigh on Euro as US Data Awaited

Eurozone PMIs Weigh on Euro as US Data Awaited

Kenny Fisher Kenny Fisher 25.08.2023 09:32
Euro yawns after weak German and eurozone PMIs US to release unemployment claims and durable goods orders on Thursday The euro has edged lower on Thursday. In the European session, EUR/USD is trading at 1.0851, down 0.11%. On the data calendar, there are no releases from the eurozone. The US releases unemployment claims and durable goods orders and we could see some movement from EUR/USD in the North American session. On Friday, Germany releases Ifo Business Climate. The index has decelerated for three consecutive months and the downturn is expected to continue (87.3 in July, 86.7 expected).   Euro pares losses after dismal PMIs Eurozone and German PMIs were nothing to cheer about, as the August numbers pointed to contraction in the manufacturing and services sectors. Germany’s manufacturing sector has been particularly weak, although the Manufacturing PMI rose slightly to 39.1 in August, up from 38.8 in July and the consensus estimate of 38.1. Eurozone Manufacturing PMI climbed to 43.7 in August, higher than the July reading of 42.7 and the estimate of 42.6 points. The services sector is in better shape and has been expanding throughout 2023. That trend came to a screeching halt on Wednesday when German and Eurozone Services PMIs fell into contraction territory in August (a reading of 50.0 separates expansion from contraction). Germany dropped to 47.3, down from 52.3 in July and below the estimate of 51.5. Similarly, the eurozone slowed to 48.3, down from 50.9 and shy of the estimate of 50.5 points.   The weak PMI reports pushed the euro lower but it managed to recover without much fuss. As for the ECB, the data supports the case for a pause, as the softness in manufacturing and services is evidence that the eurozone economy is cooling down. A pause would give the ECB some time to monitor the impact of previous rate hikes are having on the economy and on inflation. Future market traders are viewing the September meeting as a coin toss between a 25 basis point hike and a pause.   EUR/USD Technical There is resistance at 1.0893 and 1.0940 EUR/USD has support at 1.0825 and 1.0778    
Understanding the Factors Keeping Market Rates Under Upward Pressure

Swedish Krona's Plunge Amid Economic Challenges: Riksbank Rate Hike Expectations and Uncertain Future

Ed Moya Ed Moya 25.08.2023 09:39
Governor Thedeen say krona is fundamentally undervalued Markets fulling pricing in September Riksbank quarter-point rate hike Sweden’s government expects economy shrink by -0.8% in 2023 (previously eyed -0.4%) Sweden’s krona has been punished as the economy appears to be headed for a tough recession. Core inflation is coming down too slowly and that will keep the Riksbank hiking even as expectations grow for a lengthy recession.  The krona has not been getting any relief as many Swedes have started to embrace holding euros given the krona’s record plunge this year. Riksbank Governor Thedeen Riksbank governor Thedeen said that “the krona is too weak and it is fundamentally undervalued.” He added that “it should strengthen and we think that it will, but we know that it is almost impossible to predict currency moves over the short and medium term.” It is tough to call for a reversal after watching the krona fall to a fresh all-time low against the euro.  The current market expectations for the September meeting is to see the Riksbank raise rates by 25bps to 4.00%.  A freefalling krona is complicating the inflation fight, but that could see some relief as the outlook for the eurozone deteriorates. Expectations for the Sweden’s GDP are not seeing a strong consensus emerge.  Given the currency and inflation situation, it seems that the economy could be entering a recession that last more than a handful of quarters. The Swedish government is expecting a 0.8% decline in 2023 and a 1.0% growth for 2024.  It seems hard to believe that households will be a better position anytime soon, so a recession extending beyond 2024 seems likely.   The EUR/SEK weekly chart     EUR/SEK (weekly chart) as of Thursday (8/24/2023) shows the uptrend to record high territory is showing overbought conditions have arrived.  If the krona is able to firm up here, a mass exodus of EUR/SEK bullish bets could see price action tumble towards the 11.7118 region. If the plunge deeper into record low territory continues, EUR/SEK could make an attempt at the 12.000 which is just below the 141.% Fibonnaci expansion level of the 2020 high to 2021 low move. Last week, the krona was the most volatile G10 currency, so we should not be surprised if that volatility extends further given the chaos in the bond markets.    
Analyzing Central Bank Statements: Powell vs. Lagarde and Their Impact on EUR/USD and GBP/USD

Analyzing Central Bank Statements: Powell vs. Lagarde and Their Impact on EUR/USD and GBP/USD

InstaForex Analysis InstaForex Analysis 25.08.2023 10:01
While we've understood Federal Reserve Chair Jerome Powell's potential rhetoric, what about European Central Bank President Christine Lagarde's statement? That's much more complicated. The ECB's rate is below the Fed's, yet inflation in the European Union is higher. This single factor suggests that the ECB should agree to additional tightening. However, in recent months, we've repeatedly heard that a pause is needed. A pause doesn't mean the end of the tightening process, but, in a manner of speaking, its final stretch. If Lagarde hints at such a scenario in her speech, the euro will dip even further in the market.     The second crucial factor is the state of the European economy. GDP has been stagnant for almost four quarters, and PMIs keep falling. As a result, every new rate hike will push the European economy into an even deeper hole. It's important for the ECB to maintain a balance between the rate and the economy. Every subsequent ECB meeting is now a mystery. Some members of the Governing Council believe in another rate hike, while others insist on a pause. Lagarde is set to guide the market on Friday. In my opinion, the chances of a dovish stance from Lagarde is much higher. Even if she announces that the current course will be maintained, it doesn't mean all members of the Governing Council will support her stance. From this perspective, the Fed appears to be a more cohesive entity, so the preliminary verdict is as follows: Powell's hawkish stance is more likely, while Lagarde's is "conditionally-hawkish".   This means a further decline for the EUR/USD. As for the GBP/USD, a lot hinges on the 1.2618 mark. A successful attempt to break through it will signal the market's readiness to continue selling, regardless of Powell's remarks in Jackson Hole. Based on all the above, I don't expect the market mood to change on Friday. Both instruments might start forming corrective upward waves, but so far, there are no signs for either. Hence, it's too early to talk about a strong increase in demand for the euro and the pound.     Based on the conducted analysis, I came to the conclusion that the upward wave pattern is complete. I still believe that targets in the 1.0500-1.0600 range are quite realistic, and with these targets in mind, I advise selling the instrument. The a-b-c structure appears complete and convincing. Therefore, I advise selling the instrument with targets set around the 1.0788 and 1.0637 marks. I believe that the bearish segment will persist, and a successful attempt at 1.0880 indicates the market's readiness for new short positions. The wave pattern of the GBP/USD pair suggests a decline within the downtrend segment. There is a risk of ending the current downward wave if it is wave "d" and not "1". In that case, wave 5 could start from current levels. However, in my opinion, we are currently seeing the construction of a corrective wave within a new downtrend segment. If this is the case, the instrument will not rise much above the 1.2840 mark, and then a new downward wave will commence. We should brace for new short positions.  
Declining Bank Lending and Negative Money Growth Raise Concerns for Eurozone Economy

Euro Slides Below 1.08 Mark for First Time Since June, Fed's Harker Suggests Peak in Interest Rates

Kenny Fisher Kenny Fisher 28.08.2023 09:24
Euro falls below 1.08 for first time since June Fed’s Harker says interest rates may have peaked The euro has extended its losses for a second straight day. In the European session, EUR/USD is trading at 1.0785, down 0.23% and falling below the 1.08 line for the first time since June. Later today, Germany’s Business Climate is expected to ease for a fourth straight month. It has been a nasty slide for the euro, which has been unable to find its footing and has plunged a staggering 500 points over the past six weeks. EUR/USD is down 0.80% this week, in large part due to soft eurozone manufacturing and services PMI readings on Wednesday. The eurozone economy has been damaged by the war in Ukraine and Germany, known as the locomotive of Europe, is in trouble as well. The deterioration of China’s economy is more bad news for the eurozone’s export sector. The ECB’s rate-tightening cycle, aimed at curbing high inflation, has also dampened economic activity. Lagarde & Co. have a tricky task in charting out a rate path. If rates remain too low, inflation will remain well above the 2% target. However, too much tightening raises the risk of tipping the weak eurozone economy into a recession. Lagarde has a difficult decision to make and the markets are uncertain as well – ECB rate odds for the September meeting are around 50-50 between a hike or a pause. Harker says Fed could be done Investors are anxiously awaiting Jerome Powell’s speech at Jackson Hole later today. Meanwhile, Philadelphia Federal Reserve Harker made headlines on Thursday when he said that the Fed may have reached the end of its current rate-tightening cycle. Harker said that he didn’t see a need to raise rates further “absent any alarming new data between now and mid-September”.   At the same time, Harker stressed that he expected rates to remain at high levels for “a while” and ruled out rate cuts anytime soon. This was a pointed message to the markets not to assume that rate cuts are just around the corner.  I expect Fed Chair Powell to be even more cautious in today’s speech, perhaps with a reminder that inflation remains above target and that the door is still open to further tightening.   EUR/USD Technical There is resistance at 1.0893 and 1.0940 EUR/USD has support at 1.0825 and 1.0778    
ECB Signals Rate Hike as ARM Goes Public: Market Insights

EUR/USD Reacts to Mixed Economic Data: Euro Recovers from Dip Below 1.08

Craig Erlam Craig Erlam 30.08.2023 10:04
Euro slips below 1.08 but recovers German GfK consumer climate falls US consumer confidence and job openings decelerate The euro fell below the 1.08 line on Tuesday after a weak German consumer confidence report but has recovered in the North American session after soft US data. EUR/USD is currently trading at 1.0840, up 0.20%. Germany is the eurozone’s largest economy and is considered the powerhouse of the bloc. That has changed dramatically as the German economy is looking more like a dead weight than a locomotive. With the economy sputtering, it’s no surprise that German business and consumer confidence is in the doldrums. Germany’s GfK Consumer Climate is forecasting a reading of  -25.5 for September, down from the revised downward figure of -24.6 in August and below the consensus estimate of -24.3. This was the lowest reading since May, with consumers pointing to high inflation and concern about potential unemployment as key reasons for concern. Last week, German Ifo Business Climate fell in August for a fourth straight month to 85.7, down from an upwardly revised 87.4 and shy of the market consensus of 86.7 points.   German CPI expected to fall to 6.0% Germany will release the July inflation report on Wednesday. Inflation is currently at 6.2% and is expected to dip to 6.0%, considerably higher than eurozone inflation which is at 5.3%. The ECB is committed to bringing inflation back to the 2% target but it’s unclear if the central bank will raise rates for an eighth straight time or take a pause and monitor how the economy is performing. The benchmark rate is relatively low at 3.75%, but the eurozone and German economies aren’t in the best shape and higher interest rates would raise the likelihood of a recession. In the US, it was a bad day at the office.  The Conference Board Consumer Confidence Index fell sharply to 106.1 in July, compared to 116.0 in August. JOLTS Jobs Openings slowed to 8.82 million in July, down from 9.16 million in June and well off the estimate of 9.46 million. The data is further evidence that the US economy is slowing as high rates continue to filter through the economy.   EUR/USD Technical EUR/USD is testing support at 1.0830. The next support line is 1.0731 There is resistance at 1.0896 and 1.0996    
Euro's Rally Stalls as Focus Turns to Inflation and Data Disappointments

Euro's Rally Stalls as Focus Turns to Inflation and Data Disappointments

Kenny Fisher Kenny Fisher 30.08.2023 13:27
Germany to release CPI on Wednesday, Eurozone on Thursday US consumer confidence and jobs data disappoint   The euro’s mini-rally has run out of steam. EUR/USD climbed 0.80% over the past two days but is trading in negative territory on Wednesday. In the European session, the euro is trading at 1.0867, down 0.11%. The markets will be keeping a close eye on European inflation releases today and Thursday. Germany releases the July CPI report later today, with a consensus estimate of 6.0%, compared to 6.2% in July. The once-formidable German juggernaut is in trouble and inflation remains high. The eurozone releases July CPI on Thursday, which is expected to drop from 5.3% to 5.1%. The ECB meets next on September 14th and ECB President Lagarde may have signalled that another rate hike is coming. Lagarde attended the Jackson Hole summit last week and said that interest rates would remain high “as long as necessary” in order to bring inflation back to the ECB’s 2% target. Lagarde’s hawkish remarks were more hawkish than her comments at the July meeting, where she said that ECB policy makers had an “open mind” about the September decision.   There’s no arguing that eurozone inflation remains too high, but the argument against raising rates even higher is that the eurozone economy is not in great shape, and nine straight rate hikes from the ECB have cooled economic growth. Further hikes could tip the economy into a recession, which means that the ECB has its work cut out in deciding whether to raise rates again or take a pause in September. The Federal Reserve is widely expected to hold rates at next week’s meeting, and disappointing data on Tuesday may have cemented a pause. The Conference Board Consumer Confidence Index fell sharply to 106.1 in July, compared to 116.0 in August, marking a two-year low. As well, JOLTS Job Openings slowed to 8.82 million in July, down from 9.16 million in June and well off the estimate of 9.46 million. This was the sixth decline in the past seven months, a sign that the resilient US labour market is showing cracks.   EUR/USD Technical EUR/USD is putting strong pressure on resistance at 1.0896. The next resistance line is 1.0996 1.0831 and 1.0731 are providing support    
Eurozone PMI Shows Limited Improvement Amid Lingering Contraction Concerns in September

Eurozone Economic Focus: Navigating Through August CPI and ECB Signals

ING Economics ING Economics 31.08.2023 10:32
EUR: Focus on the eurozone August CPI Flash August CPI data for the eurozone is released at 11:00 am CET today and is expected to show a gradual decline in both headline and core YoY readings to 5.1% and 5.3%, from 5.3% and 5.5% respectively. However, the decline is proving gradual and we are actually starting to see expectations of one more rate hike from the European Central Bank firm up a little. These peak at around 21bp of tightening priced in for January next year. Our macro team feels that the chances of a September rate hike are under-priced (now a 43% probability) meaning that EUR/USD could get a little support from the ECB story over the coming weeks. Today, also look out for a 09:00 am CET speech from ECB hawk Isabel Schnabel, speaking at a conference on 'Inflation: Drivers and Dynamics'. We will also see the ECB minutes for the July policy meeting released at 1:30 pm CET. EUR/USD has turned a little more bid over the last few days as US jobs data has softened the front end of the US yield curve and sticky inflation has kept EUR short-dated interest rates supported. Our short-term Financial Fair Value model sees EUR/USD fairly priced near 1.0900 - suggesting a probably range-bound session into tomorrow's US NFP release. Elsewhere, we note that Switzerland is planning some new large-scale Anti Money Laundering measures for 2024. This may be a slow-burn story, but one which may ultimately weigh on the Swiss franc in 2024.
National Bank of Poland Meeting Preview: Anticipating a 25 Basis Point Rate Cut

Eurozone Inflation Mixes Signals as ECB Faces Tough Decisions

Kelvin Wong Kelvin Wong 01.09.2023 11:28
The euro is lower on Thursday, after a 3-day rally which pushed the currency 1% higher. In the European session, EUR/USD is trading at 1.0861, down 0.57%.   Eurozone CPI steady, core CPI falls Eurozone inflation was a mixed bag in August. Headline inflation was unchanged at 5.3%, missing the consensus estimate of a drop to 5.1%. There was better news from Core CPI, which dropped from 5.5% to 5.3%, matching the estimate. The ECB will be pleased with the decline in core inflation, which excludes food and energy and provides a more accurate estimate of underlying press pressures. Many central banks, including the Federal Reserve, have taken pauses in the current rate-tightening cycle, but the ECB has raised rates 13 straight times. Will we see a pause at the September 14th meeting? The answer is far from clear. Inflation remains above 5%, more than twice the ECB’s target of 2%. The central bank is determined to bring inflation back down to target, but that would require further rate hikes and the weak eurozone economy could fall into a recession as a result. ECB member Robert Holzmann said today’s inflation report indicated that inflation remained persistent and admitted that the latest inflation numbers pose a “conundrum” for the ECB. The markets aren’t clear on what to expect from the ECB, with the odds of a pause at 67% and a 25-basis point hike at 33%. ECB President Lagarde hasn’t provided much guidance, perhaps because she’s as uncertain as everybody else about the September rate decision.   Germany’s numbers continue to point downwards, as the eurozone’s locomotive has become an economic burden. The latest release, July retail sales, declined by 2.2% y/y, sharply lower than the revised -0.9% reading in June and below the consensus estimate of -1.2%. . EUR/USD Technical EUR/USD is testing support at 1.0831. Below, there is support at 1.0780 1.0896 and 1.0996 are the next resistance lines
EUR: Stagflation Returns Amid Weaker Growth and Sticky Inflation

EUR: Stagflation Returns Amid Weaker Growth and Sticky Inflation

ING Economics ING Economics 04.09.2023 10:54
EUR: The return of the 'S' word Very quietly we are seeing the return of the term 'stagflation' to describe prospects for the eurozone economy. The European Central Bank (ECB) is finally acknowledging that growth is going to be a lot weaker than their official forecasts while core inflation remains sticky above 5%. We think the ECB will push ahead with their final 25bp hike at their September meeting, but many think this will be a mistake. In the background, eurozone politicians are still debating a return to Maastricht debt and budget deficit criteria, which had been suspended during the pandemic. While this may be good for eurozone government bond markets, its impact on the euro (tighter fiscal, less tight monetary policy) would be negative.  We do not see any range-breaking eurozone data on the agenda this week. However, there are plenty of ECB speakers jostling for position over the final 25bp hike in September.  EUR/USD is looking fragile and while it may not go anywhere today, a speculative market that is still long EUR/USD might have to cut positions if modest support levels at 1.0760/85 give way. Intra-day resistance may be found at 1.0820. Chris Turner 
UK GDP Revised Up, Boosting Economic Outlook

UK GDP Revised Up, Boosting Economic Outlook

ING Economics ING Economics 04.09.2023 10:55
GBP: A welcome revision to GDP The UK national data office – the Office for National Statistics (ONS) – gave UK policymakers a welcome boost on Friday by revising up GDP growth in 2021 by 1.7%. That means that the UK returned to pre-pandemic growth much earlier than believed and that the revision leaves Germany exhibiting the weakest post-pandemic performance in the G7. The revision could also provide a little more fiscal headroom for the government, and we would not be surprised if speculation grew over some fiscal giveaways in the Chancellor's Autumn statement due in November.  Sterling has turned marginally better bid against the euro over recent days. Expect it to trade towards the lower end of a 0.8500-0.8600 range in the near term. It is a quiet week for UK data, but there may be some interest in Thursday's release of the Bank of England Decision Make Panel survey. Lower inflation expectations would be welcome but will not be enough to prevent the BoE from hiking 25bp on September 21st.      We do still, however, believe that the market prices about 20bp too much into the BoE tightening cycle and that sterling can soften a little in the fourth quarter. Chris Turner
EUR/USD Flat as Eurozone and German Manufacturing Struggle Amid Weak PMI Reports

EUR/USD Flat as Eurozone and German Manufacturing Struggle Amid Weak PMI Reports

Kenny Fisher Kenny Fisher 04.09.2023 10:58
The euro is flat on Friday, after sustaining sharp losses a day earlier. In the European session, EUR/USD is trading at 1.0844. Eurozone, German manufacturing struggling There wasn’t much to cheer about after today’s Manufacturing PMI reports for Germany and the eurozone. Although both PMIs improved slightly in August, business activity continues to decline in the manufacturing sector. The Eurozone PMI came in at 43.5 in August, up from 42.7 in July and just shy of the consensus estimate of 43.7. In Germany, manufacturing is in even worse shape – the August reading improved from 38.8 to 39.1, matching the consensus. Manufacturing is in deep trouble in the eurozone and in Germany, the largest economy in the bloc. The PMIs point to a constant string of declines since June 2022. The volume of new orders is down and exports, already struggling in a weak global environment, have been hit by the slowdown in China which has reduced demand. Germany’s weak manufacturing data is particularly disturbing. Once a global powerhouse, Germany has seen economic growth slide and is officially in a recession, with two consecutive quarters of negative growth in the fourth quarter of 2022 and the first quarter in 2023. US nonfarm payrolls expected to ease In the US, the nonfarm payroll report is expected to decline slightly to 170,000, compared to 187,000 in the previous reading. If nonfarm payrolls are within expectations, it will mark the third straight month of gains below 200,000, a clear signal that the US labour market is cooling down. A soft nonfarm payrolls report would cement an expected pause by the Federal Reserve next week and also bolster the case for the Fed to hold rates for the next few months and possibly into 2024. . EUR/USD Technical EUR/USD is tested support at 1.0831 earlier. Below, there is support at 1.0731 1.0896 and 1.0996 are the next resistance lines Content  
The Euro's Fate Hangs in the Balance: Will the ECB Raise Rates Amid Stubborn Inflation?

The Euro's Fate Hangs in the Balance: Will the ECB Raise Rates Amid Stubborn Inflation?

Kenny Fisher Kenny Fisher 05.09.2023 11:47
The euro has started the week with gains, after falling around 1.3% over the past two days. In the North American session, EUR/USD is trading at 1.0795, up o.19%. With US markets closed for the Labour Day holiday, we can expect an uneventful day from the euro. Will she or won’t she? ECB President Christine Lagarde has avoided giving a clear signal about the ECB rate decision on September 14th. At the Jackson Hole symposium, Lagarde said that rates would have to remain at “sufficiently restrictive levels for as long as necessary” in order to bring down inflation to the ECB’s 2% target. Eurozone inflation remained stuck at 5.3% in August, which is more than double the target. Given that disparity, one could be forgiven for assuming that Lagarde would have followed up with a heavy hint about a rate hike in September. Instead, she steered clear of the rate debate. Fast forward to today, when Lagarde delivered a speech in London. The pattern was the same – a declaration that “we will achieve a timely return” to the 2% inflation target, but no mention of the September meeting. The lack of direction from Lagarde could mean that the doves and hawks continue to push their agendas and Lagarde hasn’t decided which way to roll the dice. Inflation remains high, but the eurozone economy is not in the best shape, which means that further rate hikes could trigger a recession. On Monday, ECB Governing Council member Mario Centeno, the head of the Bank of Portugal, warned there was a risk of “doing too much” by continuing to raise rates.   The manufacturing sector in Germany and the eurozone remains mired in contraction, as last week’s PMIs indicated. The services sector has been in better shape with readings above 50.0, which indicates expansion. Still, Service PMIs have been weakening in recent months and are expected to fall into contraction territory in both Germany and the eurozone on Tuesday.  The consensus for September stands at 47.3 in Germany and 48.3 in the eurozone, which would confirm the initial estimates last month. If investors show jitters over contraction in the services sector, the weak euro could lose ground. . EUR/USD Technical There is resistance at 1.0831 and 1.0889 1.0716 and 1.0658 are providing support    
Europe's Economic Concerns Weigh as Higher Rates Keep US Markets Cautious

Europe's Economic Concerns Weigh as Higher Rates Keep US Markets Cautious

Michael Hewson Michael Hewson 08.09.2023 12:15
Economy concerns weigh on Europe, as higher rates keep US markets on the back foot By Michael Hewson (Chief Market Analyst at CMC Markets UK)     Yesterday was another mixed bag for European markets, with the DAX closing lower for the 5th day in a row, while still closing well off the lows of the day in another choppy session.  The FTSE100, on the other hand, managed to break a 3-day losing streak, helped by a slightly weaker pound. US markets had a slightly more negative tone to them with the Nasdaq 100 closing lower for the 4th day in a row, with weakness in the Apple share price acting as the main lag on the index, while weekly jobless claims fell to their lowest levels since February.       The overall mood amongst investors does appear to be becoming gloomier, however despite recent price moves we're still within the price ranges we've been in over the past 6 months. With some key central bank meetings looming in the next 2 weeks we might find the catalyst that breaks us out of these choppy ranges. It's been another strong week for the US dollar, set for an eight successive weekly gain, and its highest level in over 6 months as it recovers back to the levels it was just prior to the March regional banking crisis.     One of the main reasons why the US dollar is doing so well is largely down to the performance of the US economy relative to its peers. Recent economic data has shown that the economy remains resilient, so much so that there is a feeling that the Federal Reserve might be able to get away with one more rate hike before year end, probably in November.       The same cannot be said anywhere else with weakness in China, Europe and the UK holding back any prospect of further rate hikes against a backdrop of a deteriorating economic outlook, This change in sentiment has seen the pound and the euro slide back, with the euro slipping below 1.0700 for the first time since June, along with the pound which has slipped below 1.2500. The economic data seen this week, especially from Germany and the rest of the euro area has been extremely disappointing, from some dreadful factory orders data for July, to a sharp downgrade to EU Q2 GDP from 0.3% to 0.1%, which meant that since Q3 of last year the euro area has barely grown at all.     It would take a brave central bank to hike rates further when economic activity is collapsing in one the biggest economies in Europe.   The weakness in the pound has been much more notable as traders pare bets on the likelihood of the Bank of England hiking rates by as much as expected over the coming weeks and months. Judging by recent comments from the likes Governor Bailey earlier this week, as well as deputy governor Broadbent and chief economist Huw Pill at the end of August, there is a sense the market is being softened up for a rate pause later this month, with the narrative likely to be that rates are likely to stay at current levels until 2025 at the very least.     This in turn has seen gilt yields slide across the board, as future rate hike bets get priced out, and investors turn their attention to which central bank might have to cut rates first, with opinion split between the ECB, or the Bank of England.   On the data front it's set to be fairly quiet day, with little way of data on the docket, as we look towards a modestly cautious, but positive European open.   EUR/USD – slipped below the 1.0700 area yesterday, with the May lows at 1.0635 the next key support. Resistance comes in at the 1.0760/70 and the August lows.     GBP/USD – closing in on the 200-day SMA at the 1.2410 area. Below 1.2390 argues for a move towards the 1.2300 area. Only a move back above the 1.2630/40 area, stabilises and argues for a return to the highs last week at 1.2750/60.         EUR/GBP – squeezed back to the 0.8600 area breaking above the 50-day SMA in the process. The 100-day SMA and 0.8620/30 area is also a key resistance. Support lies back at the lows this week at 0.8520.     USD/JPY – had 3 attempts at the 147.80/90 area this week and failed. A break above 148.00 targets the 150.00 area. Only a move below last week's low at 144.50 targets a move back towards 142.00.     FTSE100 is expected to open 7 points lower at 7,434     DAX is expected to open 12 points higher at 15,730     CAC40 is expected to open 5 points higher at 7,201  
Doubts Surround Euro Amid European Economic Concerns and Political Speeches

Doubts Surround Euro Amid European Economic Concerns and Political Speeches

InstaForex Analysis InstaForex Analysis 08.09.2023 13:54
While the euro is actively trying to find some kind of bottom against the US dollar, the speeches of European politicians are coming to an end. Perhaps after that, the pressure on the single currency will somehow decrease, but personally, I have strong doubts about this, as there are absolutely no reasons for it. And if we also consider the first possible pause in the cycle of interest rate hikes from 2022, as well as the actively shrinking European economy, then we can deduce that there will be fewer reasons to buy risky assets.   However, some hawkish European politicians continue to "stick to their guns." According to a member of the Executive Board, Klaas Knot, investors betting against the European Central Bank raising interest rates next week may underestimate the likelihood of it happening. While a slowdown in the eurozone's 20-nation economy is sure to damp demand, updated inflation projections won't differ much from the last round in June, the Dutch central bank chief said. "I continue to think that hitting our inflation target of 2% at the end of 2025 is the bare minimum we have to deliver," said Knot.   As I mentioned earlier, he made such statements before a week-long period of calm preceding the September meeting of the ECB Governing Council. Knot also noted that the markets are currently experiencing difficulties, which are also experienced by the central bank. Just recently, the central bank governors of Germany, Belgium, Austria, and Latvia expressed support for another quarter-point rate hike, likely the last in this cycle. However, their colleagues from Italy and Portugal are among those emphasizing that economic risks are starting to emerge. Recent eurozone PMI data and today's revised downward GDP report for the eurozone in the 2nd quarter clearly indicate this. ECB President Christine Lagarde, speaking earlier this week, also did not make any commitments, simply stating that inflation is too high, and the central bank is determined to tame it, with decisions based on appropriate data. Obviously, it's also challenging to assess the current progress in inflation. Underlying pressure has decreased, but the overall reading has increased due to a sharp spike in non-oil prices. European politicians have also recently discussed this, lamenting issues with the energy market. Wage negotiations and corporate price behavior will be crucial in determining how quickly inflation returns to the target level. As for today's technical picture for EUR/USD, the bears have slightly eased their grip. To maintain control, bulls need to stay above 1.0700. This will allow them to break back to 1.0750. From there, they can climb to 1.0770, but it will be quite difficult to do so without support from major players. In the event of a downtrend, I only expect significant action from major buyers around 1.0700. If there's no significant support there, it would be a good idea to wait for a new low at 1.0665 or open long positions from 1.0635. Regarding the technical picture for GBP/USD, the pound will continue to fall. We can only bet on a recovery once traders take control of the level at 1.2530. Returning to this range will restore hope for a recovery towards 1.2560, after that we can talk about a more significant surge towards 1.2700. In case the pair falls, bears will try to take control below 1.2484. If they succeed in doing so, breaking through the range will hit bullish positions and push GBP/USD towards the low at 1.2440 with the potential to reach 1.2400.
The American Dollar's Unyielding Strength Amidst Market Surprises and Economic Divergence

The American Dollar's Unyielding Strength Amidst Market Surprises and Economic Divergence

InstaForex Analysis InstaForex Analysis 08.09.2023 14:06
The time is coming when the strongest trend is coming to an end. But this does not apply to the American dollar. In 2021, it strengthened due to expectations of monetary tightening by the Federal Reserve, and in 2022, due to its implementation. In 2023, investors expected the trend in the USD index to be broken. And at first, everything was going according to plan. However, in the summer, there was a 180-degree turnaround, which came as a real surprise to hedge funds. They remain short sellers of the American currency and are losing money.   Dynamics of the U.S. dollar and hedge fund positionsej     The September survey of Reuters experts suggests that in the short term, "bears" on EUR/USD will maintain their strength due to a strong economy and high U.S. Treasury bond yields. However, over the next three months, the euro will rise to $1.09. In 6 months, it will be worth $1.10, and in 12 months, $1.12. This forecast is based on the idea of a dovish pivot and the central bank's move towards reducing federal funds rates. Derivatives indicate that it will drop by 100 basis points in 2024. The same opinion was held about the U.S. dollar at the beginning of the year, but its opponents were proven wrong. At that time, investors were worried about a recession.   It was supposed to force the Federal Reserve to loosen its monetary policy. In the early autumn, markets began to fear not an economic downturn but its overheating. If the United States maintains its strength, inflation could accelerate, prompting the Federal Reserve to return to monetary tightening and further strengthen the American dollar. If we also consider that the American economy is the cleanest shirt in the basket of dirty laundry, the decline in EUR/USD seems logical. Indeed, following new manufacturing orders in Germany, German industrial production disappointed.   In July, it contracted by 0.8%. The leading economy in the eurozone has still not emerged from the slump. Is it surprising that the GDP of the currency bloc grew by only 0.1% in the second quarter? Less than the 0.3% in the initial estimate.     Thus, if in 2021-2022, the focus in the Forex market was on monetary policy and fear of high inflation, in 2023, they gave way to economic growth divergence. Judging by the strong labor market positions and the surge in business activity in the services sector to a six-month high, the U.S. GDP in the third quarter may expand by 3% or more. What's the point of selling the dollar? It's much more interesting to acquire securities denominated in it. The capital flow to North America has supported and will continue to support the "bears" on EUR/USD.     The ECB, on the other hand, can only sympathize. On the one hand, the European Central Bank is obliged to maintain "hawkish" rhetoric in the face of inflation exceeding 5%. On the other hand, the higher the interest rates rise, the greater the chances of a recession in the eurozone economy. Technically, on the daily chart of EUR/USD, the inability of the "bulls" to hold onto the key pivot level of 1.0715 indicates their weakness. The decline of the pair to 1.066 and 1.0595 continues. The recommendation is to hold shorts.  
EUR/USD Faces Resistance at 1.0774 Amid Inflation and Stagflation Concerns

EUR/USD Faces Resistance at 1.0774 Amid Inflation and Stagflation Concerns

InstaForex Analysis InstaForex Analysis 08.09.2023 14:09
EUR/USD On Thursday, the euro dipped a bit further and reached the target level of 1.0692. The convergence between the price and the Marlin oscillator on the daily chart is getting stronger and becoming more pronounced.     Now, the main concern is on inflation figures in China and the US, which is related to the global inflation issue. This is because a spike in oil prices is preventing a significant decline in inflation. There is talk about a stagflation looming over the world. Investors will pay attention to China's CPI figures, to be released on Saturday, and the main event will be the US inflation data for August on Wednesday.   It's possible that oil prices have not yet been included in the CPI (although they have already affected producer prices), in which case it may create the impression that concerns about stagflation are exaggerated. Today, for instance, the forecast for Germany's CPI is a drop from 6.2% YoY to 6.1% YoY. As a result, the dollar may weaken and we might see a corrective growth in the euro. This could persist until the next Federal Reserve meeting. On the 4-hour chart, the price and the oscillator have formed a convergence. The euro started to rapidly rise, and we have all the conditions for the pair to reach the first target at 1.0774. The MACD indicator line is approaching this level. Overcoming it may provide additional strength for the upward movement. Let's also take a look at the weekly chart. The pair has continued to fall for the eighth consecutive week, and the current candle is on the 5th Fibonacci timeline. Two scenarios are possible: either it continues to fall for another 2-3 candles (making it 11 candles in total), or the next candle and the following ones (up to the 6th line) will be white.            
ECB Inflation Projections: Euro Gains Support on Higher CPI Forecast

ECB Inflation Projections: Euro Gains Support on Higher CPI Forecast

ING Economics ING Economics 13.09.2023 08:53
EUR: High ECB inflation forecasts provide a little support The euro received a little support overnight on a Reuters report that the new European Central Bank staff projections being released tomorrow would forecast CPI above 3% next year, compared to expectations of 2.7%. The implication here is that, based on these forecasts, the ECB would likely be more hawkish and supportive of the euro. As we discuss in our ECB cheat sheet, there are many moving parts to tomorrow's meeting. However, the biggest part should be a 25bp rate hike – which is only 54% priced – and a factor that should see EUR/USD hold support down at 1.0700.
Euro Gets a Boost from ECB's Inflation Forecasts

Euro Gets a Boost from ECB's Inflation Forecasts

ING Economics ING Economics 14.09.2023 08:41
EUR: High ECB inflation forecasts provide a little support The euro received a little support overnight on a Reuters report that the new European Central Bank staff projections being released tomorrow would forecast CPI above 3% next year, compared to expectations of 2.7%. The implication here is that, based on these forecasts, the ECB would likely be more hawkish and supportive of the euro. As we discuss in our ECB cheat sheet, there are many moving parts to tomorrow's meeting. However, the biggest part should be a 25bp rate hike – which is only 54% priced – and a factor that should see EUR/USD hold support down at 1.0700. Chris Turner    
The ECB to Hike, But Euro Rally May Be Short-Lived as Dollar Strength Persists

US CPI Data Indicates Hawkish Stance Remains, Dollar Strengthens

Craig Erlam Craig Erlam 14.09.2023 10:11
September still a hold, while swap contracts suggest odds a 49.3% chance of a hike at the November 1st FOMC meeting Supercore inflation rate rises most since March Two-year Treasury drifts lower by 2.1 bps to 4.999% Inflation is not easing enough for the Fed to abandon their hawkish stance.  The upside surprises might be small, but that should keep the hawks in control.  Core inflation heated up for the first time in six months and that should have markets leaning towards one more Fed rate hike in November.  Inflation will likely still be running well above the Fed’s 2% target for the rest of the year, but a weaker consumer supports the case the disinflation process will remain intact. ​   US CPI   Source: BLS This was a complicated inflation report. Everyone knew that gas prices were sharply higher and that the housing market is still seeing elevated prices(house prices are now rising, while rents have eased).  The headline inflation read showed CPI increased 0.6% in August from a month ago, which was the highest reading since June 2022.  The annual inflation reading rose from 3.2% to 3.7%, a tick above expectations.   Market reaction A weakening US consumer will continue as they battle surging gasoline prices, stubborn shelter prices, and increasing medical costs. US stocks are wavering as this inflation report will keep the Fed pushing the ‘higher for longer’ narrative. If Wall Street remains convinced that the labor market is cooling, that will do the trick for getting inflation closer to the Fed’s target. The US dollar and Treasury yields were initially higher given the core CPI delivered an upside surprise, but once traders digested the entire report, the bond market reversed course. Core inflation rose 0.3%, which was due to the rounding of 0.278% which somehow makes it a lot less hot.  Rent makes up 40% of Core PCE and prices posted the smallest gain since the end of 2021. Expectations are elevated for the consumer to be significantly weaker and that we could have a soft holiday spending season, which should support the disinflation process.   Dollar  5-minute Chart The dollar is wavering as Wall Street wasn’t able to come up with any definitive stances on when the Fed will signal the all clear that policy is restrictive enough.  The dollar’s strength is most notably against the Japanese yen, while the euro will likely react to Thursday’s ECB rate decision.  Following yesterday’s Reuters report that the ECB will have inflation projections above 3%, markets appear to be leaning towards a rate hike.          
US Inflation Rises but Core Inflation Falls to Two-Year Low, All Eyes on ECB Rate Decision on Thursday

US Inflation Rises but Core Inflation Falls to Two-Year Low, All Eyes on ECB Rate Decision on Thursday

Kenny Fisher Kenny Fisher 14.09.2023 10:12
US inflation rises but core inflation falls to two-year low All eyes on ECB rate decision on Thursday The euro is trading quietly on Wednesday. In the North American session, EUR/USD is trading at 1.0739, down 0.16%. The August US inflation report today was an interesting mix. Headline inflation rose for a second straight month, from 3.2% y/y to 3.7% y/y and above the consensus estimate of 3.6% y/y. On a monthly basis, headline inflation rose 0.6% in August, while core CPI came in at a modest 0.3%. The jump in headline inflation will no doubt grab the headlines and cause some groans.  Nobody wants to see inflation rise, but the main driver of the upswing was higher gasoline prices, which can change quickly from one month to the next. If gasoline prices reverse direction and fall sharply, that will be weigh on headline inflation. The Federal Reserve will be paying more attention to Core CPI, which fell to 4.3%, down from 4.7% in July. This matched the consensus estimate and notably, marked the lowest level since September 2021. The inflation report should cement a pause from the Fed at next week’s meeting.   Will the ECB raise rates? The European Central Bank meets on Thursday and it remains unclear whether policy makers will raise rates by a quarter-point or pause for the first time after nine straight hikes. Interest rate futures have priced in a hike at 65% but both the hawks and doves at the ECB have persuasive arguments. The hawks will argue that inflation has fallen to 5.3% in the eurozone but it’s unrealistic to expect inflation to fall back to the ECB’s 2% target without further rate hikes. With a deposit rate of 3.75%, there is still room for the ECB to continue raising rates and push inflation lower, which is the central bank’s number one priority. The doves will respond that inflation is moving in the right direction and a pause will give the central bank time to monitor the effects of rate hikes. The eurozone economy is sputtering and Germany, the bloc’s largest economy is now expected to fall into a recession, according to the European Commission. If the ECB continues hiking, it will only worsen economic conditions. I don’t envy ECB President Lagarde, who will have to decide which position to adopt and may face criticism no matter what she does.   EUR/USD Technical EUR/USD tested support at 1.0732 earlier. Below, there is support at 1.0654 There is resistance at 1.0777 and 1.0855          
The ECB to Hike, But Euro Rally May Be Short-Lived as Dollar Strength Persists

The ECB to Hike, But Euro Rally May Be Short-Lived as Dollar Strength Persists

ING Economics ING Economics 14.09.2023 10:46
FX Daily: ECB to hike, but don’t get too excited for the euro It’s a close call, but we expect a 25bp hike by the ECB today. Markets are pricing in a 65% implied probability of a hike, so EUR/USD should rise after the announcement if we are right. However, a full 25bp are factored in by year-end, and it will be hard for Lagarde to convince markets the ECB can push rates even higher. Any EUR rally may be short-lived.   USD: Muted reaction to CPI, but still good news for the dollar US inflation came in slightly hotter than expected in the August report released yesterday. As noted by our US economist here, the core print was 0.278%: not a terrible miss to the 0.2% consensus, but probably enough to convince the majority of FOMC members to keep one rate hike in their end-2023 dot plot projections. The headline surprise was, instead, primarily driven by the 10% jump in gasoline prices. The market reaction was, however, quite muted. We could speculate on some extremely forward-looking interpretation of the data, but we think it was just a case of rates and FX having priced in an above-consensus CPI ahead of the release. Still, the broader dollar story is firmer now heading into next week’s Federal Reserve meeting. A hike is unlikely, and dot plots will move the market. If the blip in the disinflation process that emerged in these August figures prevents a big dovish revision of the 2023 dots, then the evidence of US economic resilience since the last projections (June) means the 2024 dots could be revised higher. It all argues against any near-term turn lower in the greenback; that is, unless US activity data starts to disappoint. Today, markets will closely watch the European Central Bank, but the US calendar is also quite busy. Along with the jobless claims – which dropped much more than expected last week – retail sales, PPI and Empire Manufacturing figures for August will be released. We see DXY contracting on the back of the ECB hike, but as we discuss below, we don’t expect the EUR/USD rally to be long-lived: the dollar index could be trading back around 104.50/105.00 before the Fed meeting.
ECB's 25bp Rate Hike Signals End to Hiking Cycle Amid Inflation and Growth Concerns

Cautious Optimism Boosts US and European Equity Futures, Asian Markets Climb

Saxo Bank Saxo Bank 14.09.2023 15:27
US and European equity futures markets trade higher with Asian markets also climbing on cautious optimism the Federal Reserve may decide to pause rate hikes after US core inflation advanced the least in two years. The dollar and Treasury yield both trade softer ahead of US retail sales with the euro ticking higher as traders' price in a two-third chance of a rate hike from the European Central Bank later today. Crude trades near a ten-month high on concerns about a supply shortfall, copper higher on yuan strength while gold prices have steadied following a two-day decline.   Equities: S&P 500 futures are holding up well against recent weakness trading around the 4,530 level despite yesterday’s higher-than-expected US inflation opening the door for the Fed to hike interest rates one more time in December. Arm IPO was priced at the top end of the range at $51 per share with trading set to being today. Adobe earnings after the US market close could be a key event for the AI-related cluster of stocks. FX: The US dollar wobbled on the CPI release but could not close the day higher with Treasury yields slipping. EUR in the spotlight today as ECB decision is due, and EURUSD has found support at 1.07 for now with a rate hike priced in with over 65% probability. USDJPY trades softer after government minister talked about the need for strong economic measures. Yuan strengthened further with authorities increasing bill sales in Hong Kong to soak up yuan liquidity making it more expensive to short the currency. Commodities: Brent holds above $92 and WTI near $90 after the IEA joined OPEC’s warnings of a supply shortfall in the coming months, thereby supporting a rally that started back in June when Saudi Arabia curbed supply to boost prices. Softening the rally was a weekly US stock report showing rising stocks and production near the 2020 record. Near-term the market looks overbought and in need of a pullback. Gold looking for support ahead of $1900 with a hawkish FOMC pause back on the agenda while copper trades firmer with a stronger yuan offsetting a rise in LME stocks to a two-year high Fixed income: The US yield curve bull-steepened yesterday despite higher-than-expected CPI numbers, indicating that the Federal Reserve might be approaching the end of the hiking cycle. Yet, long-term yields remained flat as the 30-year auction showed a drop in indirect demand and tailed by 1bps despite pricing at the highest yield since 2011. Overall, we remain cautious, favouring the front part of the yield curve over a long duration. Bonds will gain as the economy starts to show signs of deceleration. Still, larger coupon auction sizes and a hawkish BOJ will support long-term yields unless a tail event materializes. We still see 10-year yields rising further to test strong resistance at 4.5%. Today, the focus will be on the ECB, which markets expect to hike. Due to a recession in Germany and in Netherlands, we believe that the ECB will deliver a hawkish pause today, which might result in a short-lived bond rally. Macro: US CPI surprised to the upside, but it did not alter the markets thinking around the Fed. Core CPI rose 0.3% MoM, or +0.278% unrounded, above the prior/expected +0.2%, with core YoY printing 4.3%, down from July's 4.7%, and in line with expectations. Headline print was in line with expectations at 0.6% MoM, up from +0.2% on account of energy price increases, with YoY lifting to 3.7% from 3.2%, above the expected 3.6%. The PBoC announced plans to issue RMB15 billion Central Bank Bills in Hong Kong on September 19, which is going to tighten CNH (offshore renminbi) liquidity further In the news: Asset managers BlackRock and Amundi are warning that US recession risks are rising – full story in the FT. Germany is facing big structural problems in its manufacturing sector with gloom taking over among workers – full story in the FT. The EU is weighing tariffs against China over flooding the market with cheap electric vehicles – full story on Reuters. Technical analysis: S&P 500. Key at resistance at 4,540. Key Support at 4,340. Nasdaq 100 15,561 is key resistance. EURUSD downtrend, support at 1.0685, Expect short-term bounce to 1.08. AUDJPY testing resistance at 95.00. Crude oil uptrend stretched, expect a correction lower Macro events: ECB Main Refinancing Rate exp. unchanged at 4.25% (1215 GMT), US Retail Sales (Aug) exp. 0.1% vs 0.7% prior (1230 GMT), US Initial Jobless Claims exp. 225k vs 216k prior (1230 GMT), US PPI (Aug) exp. 0.4% vs 0.3% prior (1230 GMT), Commodities events:  EIA’s Weekly Natural Gas Storage Change (1430 GMT) Earnings events: Adobe reports FY23 Q3 earnings (ending 31 August) after the US market close with analyst expecting revenue growth of 10% y/y and EPS of $3.98 up 63% y/y. Read our earnings preview here.  
Euro Plummets After 25bp Rate Hike, Lagarde's Reassurance Falls on Deaf Ears: Market Analysis

Euro Plummets After 25bp Rate Hike, Lagarde's Reassurance Falls on Deaf Ears: Market Analysis

Ipek Ozkardeskaya Ipek Ozkardeskaya 15.09.2023 08:25
Euro tanks after 25bp hike, Lagarde goes unheard By Ipek Ozkardeskaya, Senior Analyst | Swissquote Bank   Investors didn't buy the rumour of a European Central Bank (ECB) rate hike but heavily sold the ECB's intention to stop hiking the rates in the close future. The ECB raised the rates by 25bp yesterday and said that it 'now considers that the key ECB rates reached levels that, maintained for sufficiently long duration, will make a substantial contribution to the timely return of inflation to the target'. And that was it for the euro bears. ECB Chief Christine Lagarde tried to convince investors that the ECB rates are not necessarily at their peak and that the future decisions will depend on the incoming data. But in vain. The EURUSD sank below 1.07 after the decision and the EZ yields melted as many were rubbing their eyes to understand why a 25bp hike didn't even spark a minor rebound given that the decision was not warranted, on the contrary, the expectations were mixed into the meeting!   In fact, many euro bears also jumped on a trade yesterday as Lagarde announced that the ECB significantly pulled its economic projections to the downside. BUT, in the meantime, the ECB revised its inflation expectations higher as well. Therefore, it's naïve to think that the ECB can't continue hiking rates with such a sour economic outlook. They can. They can, because they have a single mandate – price stability. As such, the market certainly remains too enthusiastically, and unrealistically dovish about the ECB. When I hear 'data dependency', I immediately look at energy prices and you know what I see there: further inflation pressures and a real possibility for further rate hikes.   Oil extends gains The barrel of US crude traded past $91 yesterday, and Brent is getting ready to test the $95pb level. The better-than-expected industrial production, retail sales data from China this morning and news that the People's Bank of China (PBoC) cut the required reserves for banks for the second time this year to boost market liquidity are giving a further support to the oil bulls looking for reasons to ignore the overbought market conditions.   But the rising oil prices are not benign, and the hawkish ECB is not necessarily positive for the euro, and here is why: the data released in the US yesterday showed that both retail sales and PPI got a decent boost because of higher gasoline prices in August. But it also showed that spending more on gasoline didn't get Americans to spend less elsewhere. And that's inflationary. Consequently, the latest developments will, at some point, awaken the Federal Reserve (Fed) hawks, and increase the risk of a further selloff for the EURUSD. There is no chance that Jerome Powell will announce the end of the rate hikes next week. He will only say that the trajectory of core inflation is soothing, but rising energy prices is a risk that they must manage. The dollar index could soon take out a major Fibonacci resistance, the 38.2% retracement on last year's meltdown (near 105.40), and step into the medium-term bullish consolidation zone. Hence the EURUSD could well be forced below a critical Fibonacci retracement, its own 38.2% level, near 1.0615.   PS: US government drama and shutdown risk could eventually soften US outlook and temporarily prevent the Fed hawks from forcefully coming back.   ARM gains 25%   In the equity markets, ARM went public yesterday, and nailed its first day on Nasdaq. The share price rose 25% and closed above $63. It wasn't as impressive as Rivian, for example which had jumped more than 50% during its first hours of trading, But hopefully, ARM will have a more stable cruise. Arm currently estimates that '70% of the world's population uses Arm-based products', in their PCs, cars, smartphones and so. And growth is the only possible direction for the chip designer with AI's sudden arrival to our lives. 
Euro Hits May-Like Lows as ECB Hikes Rates, Slashes Growth Forecasts, and Upgrades Inflation Outlooks

Euro Hits May-Like Lows as ECB Hikes Rates, Slashes Growth Forecasts, and Upgrades Inflation Outlooks

Ed Moya Ed Moya 15.09.2023 08:34
Euro falls to the lowest levels since May after ECB hikes rates and delivers an abysmal growth forecasts, while upgrading 2023 and 2024 inflation outlooks Post ECB decision – October 26th ECB rate hike odds hover around 35.4% US retail sales remained strong on back-to-school spending and despite the extra energy costs at the pump The euro initially spiked after the ECB raised rates, but quickly tumbled after traders digested the ECB forecasts that suggest stagflation might be here.  Shortly after, the US posted robust retail sales and jobless claims data, which basically drove home the message that the US economy will easily outperform the eurozone economy throughout the rest of the year.  Investors were thinking that the US might be poised to deliver more rate cuts than the eurozone, but that seems like that won’t be happening anytime soon.   EUR/USD – 30 minute chart   ECB The summer break is over for the ECB and they have a tough job ahead.  Inflation remains too high and that is forcing the ECB to signal that they ” will ensure that the key ECB interest rates will be set at sufficiently restrictive levels for as long as necessary.” The market was split on whether they would raise rates, but when they processed the forecasts, they realized stagflation risks are here.   ECB Forecasts:  2023 GDP forecast cut from 0.9% to 0.7% 2024 GDP forecast cut from 1.5% to 1.0% 2023 GDP forecast cut from 1.6% to  1.5% 2023 Inflation forecast raised from 5.4% to 5.6% (core steady at 5.1%) 2024 Inflation forecast raised from 3.0% to 3.2%(a tick lower to 2.9% 2025 Inflation forecast lowered from 2.2% to 2.1%(core a tick lower to 2.2%) ECB’S Lagarde Press Conference When asked if she was done with rate hikes, Lagarde noted that some members preferred to pause, but that still a solid majority of members agreed with the decision.  One of the key takeaways from Lagarde is that they won’t be cutting rates anytime soon as inflation is still far from target.  Lagarde repeated this quote a few times, “based on current assessment…. the key ECB interest rates have reached levels that, maintained for a sufficiently long duration, will make a substantial contribution to the timely return of inflation to the target.” EUR/USD – Daily Chart   The euro might not be ready to punch a one-way ticket to the 1.05 level, but it sure seems like it is heading there.  Price action on the EUR/USD daily highlights the bearish trend has firmly been in place since mid-July.  As the risks for growth continue to deteriorate even further, the euro could see short-term weakness before a bottom is put in place.  Major long-term support could be provided by the 1.04 level, which is the 50% Fibonacci retracement of the September low to July high move. On the other side of the Atlantic, another round of US data supported USD strength after it reminded investors how strong the US economy remains; retail sales ex-auto had a fifth straight increase, producer prices came in hotter-than-expected, and jobless claims remained low.    
ECB Raises Rates by 25 Basis Points but Hints It May Be the Last in the Cycle

ECB Raises Rates by 25 Basis Points but Hints It May Be the Last in the Cycle

Craig Erlam Craig Erlam 15.09.2023 08:37
ECB raises rates another 25 basis points but signals it may be the last New forecasts show stubborn inflation but weak growth Close above 55/89-day SMA band suggests breakout still valid   The ECB raised interest rates again today, probably for the last time in the tightening cycle although it did leave itself some flexibility on that front. This certainly falls into the dovish hike category, with the ECB acknowledging inflation remains too high but also that growth is suffering. What’s more, it clearly indicated that it believes the current stance should be tight enough to return inflation to target, given time. It would appear the decision wasn’t unanimous though, with only a solid majority backing the decision. Again, we shouldn’t be surprised at this stage of the cycle that, considering the uncertain outlook, not everyone is in agreement on their assessment of the situation. The euro slipped after the decision and following comments from President Christine Lagarde, as did euro area yields. Further progress on inflation over the coming months, as the ECB anticipates, should enable pauses over the coming meetings, at which point the focus will gradually shift to the timing of the first rate cut.   Does the dovish hike change the outlook for the pair? Not necessarily. While markets were leaning towards a pause today, it was always expected to be either a dovish hike or a hawkish hold.   EURGBP Daily Source – OANDA on Trading View   The difference that would mean for the euro probably isn’t enormously different as the terminal rate would highly likely have been the same. But does the chart confirm this or not? It’s hard to say whether it confirms it but what I would say is the decline we’ve seen in the pair doesn’t necessarily change it in a bearish way. The pair had already broken 55/89-day simple moving average band and closed above it so, in my opinion, this corrective move does invalidate that. The fib levels for the September lows to highs may offer clues on whether the decline we’ve seen today and yesterday is corrective or just bearish.        
FX Market Update: Calm Before the Central Bank Storm

FX Market Update: Calm Before the Central Bank Storm

ING Economics ING Economics 19.09.2023 13:35
FX Daily: One last quiet day This will be the last day of relative calm in markets, ahead of two days packed with big central bank action. Investors are holding on to the dollar into the Fed, which signals expectations for a hawkish hold, while the euro is finding some modest support from speculation of ECB addressing excess liquidity. Canadian CPI may put a BoC hike back on the table.   USD: Positioning consolidates in favour of dollar ahead of key events Investors are consolidating their positions ahead of a slew of risk events for markets this week. This will be the last quiet day before the action begins with the Fed meeting and UK CPI tomorrow, and then four central bank meetings in Europe (in chronological order: Sweden, Norway, Switzerland, UK) on Thursday. The dollar traded a little softer in yesterday’s afternoon session but has remained close to the March highs (DXY has stayed above 105.00). The rally in oil prices – Brent at $95/bbl – has been helping the dollar, both because the US is a net oil exporter and because it adds an argument against turning too optimistic on US inflation. It appears markets are happy to hold on to recently built dollar longs ahead of tomorrow’s FOMC, which suggests expectations are generally for a hawkish hold. CFTC data show that the net dollar positioning has increased for eight consecutive weeks and has now moved into net-long territory. Speculators remain net-long EUR/USD at +15% of open interest as of last week, which was however the lowest level since October 2022. That may cap the upside potential for the dollar, but as discussed in our Fed preview, there should still be enough in the dot plot projections to keep the dollar supported. Today, the US calendar includes housing starts and building permit figures for the month of August, which are unlikely to impact markets. DXY should keep trading close to 105.00 into the Fed.
Euro-dollar Support Tested Amidst Rate Concerns and Labor Strikes

Euro-dollar Support Tested Amidst Rate Concerns and Labor Strikes

Ipek Ozkardeskaya Ipek Ozkardeskaya 25.09.2023 11:28
Euro-dollar at important support By Ipek Ozkardeskaya, Senior Analyst |Swissquote Bank   The week started on a cautious note as stocks in Asia mostly sold off following a rough week in the US, where the Federal Reserve's (Fed) hawkish pause triggered a fresh wave of worries that the rates would stay higher for longer. The US 2-year yield bounced lower after hitting 5.20%, yet the US 10-year continues its journey higher and hit 4.50% on Friday. The S&P500 slipped below its ascending base since last October, fell below its 100-DMA, and closed the week at the lowest levels since June, having recorded the worst performance over the week since the banking crisis in March. BoFA said that equity investors are dumping stocks at the fastest level since last December, and Morgan Stanley warned that stocks are now 'fragile'. Indeed! More fragile than the S&P500 are the rate sensitive technology stocks, and the small cap stocks. The growing divergence between the S&P500 and Russell 2000 index is also flashing 'recession', on top of the heavily inverted US yield curve.  Elsewhere, the UAW strikes will broaden to all GM and Stellantis parts plants in the US, which means that 5600 more workers will join the movement (Ford will likely be spared, for now, as some good progress is made on negotiations with the UAW) and the US will shut down by the end of the week if politicians fail to pass a dozen of bills. The latest US GDP update will fall in this chaotic environment, but the expectation is a positive revision from 2.1% to 2.3%.  In the currency markets, the US dollar extends gains. The dollar index entered the bullish consolidation zone after the Fed kept the possibility of another rate hike before the year ends on the table when it met last week, and said that the rates will likely stay higher for longer next year.   The EURUSD tested an important Fibonacci support last week, the major 38.2% retracement level which should distinguish between the positive trend building since last year, and a slide into the bearish consolidation zone. There is a stronger case for further euro weakness than the contrary. Released last Friday, the preliminary September PMI figures were mixed; the Eurozone manufacturing further slowed but German numbers hinted at some improvement. This week, we will see how the recent slowdown impacted the inflation dynamics in September. Headline inflation in the euro area is expected to have slowed from 5.2% to 4.5% this month, a slowdown that would defy the rising energy prices and the euro depreciation. Core inflation is seen softening from 5.3% to 4.8%. Any softness in inflation figures should give further support to the euro bears, while higher than expected numbers, which I believe could be the surprise of this week could revive the European Central Bank (ECB) hawks, but will hardly prevent the euro from seeking into a deeper depression, as further ECB action would also mean a bigger hit on economies. That's a fear that will likely keep euro bulls away from the market for now.  On the corporate calendar, Micron Technology and Nike will be releasing their latest quarterly results, and TotalEnergies Investor Day Event will gather happy industry players as US crude consolidates gains above $91pb with no big sign of a significant downside correction.  
The Eurozone's Trade Woes and Their Impact on EUR/USD

The Eurozone's Trade Woes and Their Impact on EUR/USD

ING Economics ING Economics 26.09.2023 14:49
EUR: Falling world trade does not help Not helping the euro has been data released showing that world merchandise trade volumes fell another 0.6% month-on-month in July. As a relatively open economy, the eurozone suffers from a declining trade environment, as does the euro. Our banking analysts have also written that the ECB is considering raising the Minimum Reserve Requirement for the banks that it supervises. This would tighten conditions still further and add more growth pessimism in the euro area. The Eurostoxx 50 index is now down nearly 8% from its highs at the start of August. EUR/USD remains soft having broken below support at 1.0600/0610. Without support from extreme under-valuation or existing heavy short positioning, EUR/USD looks as though it could sink into the 1.0480/1.0510 support area. Elsewhere, the Swedish krona is performing surprisingly well given this high interest rate environment. Unlike the euro, the krona is backed by extreme fundamental under-valuation. Additionally, news that the troubled Swedish property developer, SBB, has secured liquidity by selling some of its property portfolio alleviates some fears of a funding crisis. And the market will no doubt be speculating that the Riksbank has started hedging its FX reserve portfolio, as promised last week. While tough external conditions hardly make it the occasion to chase EUR/SEK lower, the factors above could mean NOK/SEK drops back to the 1.01 area.
Fed Rate Hike Expectations Wane, German Business Climate Declines

Fed Rate Hike Expectations Wane, German Business Climate Declines

Ed Moya Ed Moya 26.09.2023 14:57
Fed rate hike expectations for November 1st stand at 18.6% vs 30% from a week ago Germany IFO Business climate declines for a fifth straight month 10-year Treasury yield surges 7.7bps to 4.511% The euro softened earlier after an uninspiring German business outlook suggests the eurozone’s largest economy still has a rough road ahead.  This was the fifth straight month of declines for Germany’s business confidence. Investors focused on the expectations survey’s slight miss. The IFO economists believe that a third quarter contraction is likely.  As long as the ECB is done raising rates, the outlook should gradually improve for Germany.  US dollar strength remains as global bond yields shift higher on fears that central banks will follow the Fed’s lead and keep rates higher over the long-term. It is a slow start to Monday, with one economic release and one Fed speaker, but right now it seems a weaker consumer is steadily getting priced in.  The Chicago Fed National Activity index showed slower growth in August, which didn’t surprise anyone. Fed’s Goolsbee, one of the more dovish members, noted that the risk of inflation staying too high is the bigger risk. He is still holding onto hopes that a soft landing is possible, but he will likely be data dependent. Inflation flare up risks are growing and that still suggests the Fed might have to do more tightening despite the trajectory of the economy. Retail/US consumer Retail stocks, Foot Locker and Urban Outfitters both got downgraded to hold by Jefferies as the consumer is faced with headwinds. Softer spending with apparel and footwear will be driven on the resumption of student loan repayments.  Last week, Bankrate’s survey noted that 40% of Americans feel financially burdened by holiday shopping.  Two weeks ago, Deloitte forecasted soft holiday sales.   It is no surprise that the consumer won’t be spending as much this holiday season given excess savings will have disappeared, credit card balances will become crippling with higher rates, and the labor market will be seeing some type of a slowdown. Sticky inflation which comes with renewed dollar strength risks remain a risk on the table as oil prices appear poised to remain elevated all the way through the winter. Also on the minds of traders is the rising risk of a government shutdown next week. EUR/USD Daily Chart The dollar remains king but that could show some signs of exhaustion once the euro falls towards the 1.05 handle.  As long the global outlook doesn’t fall apart, the dollar should be nearing a peak.    
The Complex Factors Influencing Gold Prices in 2023: From Interest Rates to China's Impact

EUR/USD: Exploring the Potential Bottom at 1.0200 Amid US Treasury Yield Surge

ING Economics ING Economics 27.09.2023 12:54
EUR: 1.0200 is the outside risk bottom In the article mentioned above, we estimate that an extension of the run in US treasury yields to the 5.0% mark would take EUR/USD to 1.02. That is not our base case, but the ongoing pressure on the euro is clearly not confined to the US rates story. The ongoing re-rating of growth expectations in the eurozone has ultimately come through to the FX market and taking a toll on the common currency. Developments in the US activity story remain much more important, and if signs of weakness emerge across the Atlantic (and markets price in more Fed tightening) we expect a swift turnaround in EUR/USD, but that may not be a story for the near-term. Holding at the key 1.0500 support will be a success for those hoping for that turnaround to happen anytime soon. Today, the eurozone calendar is light until tomorrow’s CPI figures start to come in, and there are no scheduled European Central Bank (ECB) speakers after Austrian hawk Robert Holzmann said it was unclear whether the peak in rates had been reached yesterday. Across the British channel, the economic calendar is also looking empty today, with no scheduled central bank speakers. We continue to flag downside risks to the 1.2000 area in Cable, while EUR/GBP may struggle to hold on to recent gains as sterling’s recent underperformance relative to the euro starts to look a bit overdone now that the big bulk of the Bank of England repricing has happened.
Stocks Down, USD Up Amid Looming Government Shutdown Concerns

Stocks Down, USD Up Amid Looming Government Shutdown Concerns

Ipek Ozkardeskaya Ipek Ozkardeskaya 27.09.2023 13:04
Stocks down, USD up By Ipek Ozkardeskaya, Senior Analyst | Swissquote Bank     Investors continue to dump stocks and buy US dollars on looming uncertainty regarding whether the US government will be shut in three days. There is progress regarding a 6-week short-term funding deal, but getting an approval from the Senate will be a challenge. In the meantime, falling savings, rising theft and delinquencies hint at the growing cost-of-living crisis whereas the central banks' inflation fight is certainly not over just yet.  The looming government shutdown talks continue feeding into a stronger US dollar. US politicians have agreed to a 6-week short-term funding to keep the government running for another month and a half, but getting approval from the full Senate will be a challenge with far-right Republicans' determination to 'shoot it down if it reaches the floor'.   The S&P500 fell to the lowest levels since the beginning of June and the Stoxx 600 could slip below 445 due to slowing European activity, waning Chinese demand, the European Central Bank's (ECB) pledge to keep the monetary policy tight until inflation comes down significantly. The euro's depreciation makes inflation harder to ease along with rising energy prices.     After a few sessions of consolidation, and despite a more than 1.5-mio-barrel build in US crude inventories last week, US crude is upbeat this morning, again. The barrel of American crude is trading above the $92 level, as the European nat gas futures flirt with the 200-DMA. The EURUSD lost around 6.5% since the July peak. Oversold market conditions call for consolidation, or recovery, yet appetite in the US dollar remains too strong to let the other currencies breathe. And if this is not enough bad news, the EU is now investigating the degree to which China has subsidized EV manufacturers. Tesla is clearly in a hot seat, but not only. Some European carmakers including Renault and BMW also have joint ventures in China and will be probed. The cherry on top, VW announced to cut EV output at German sites due to lacking demand. All this to say, there is little place to go in the market other than the FTSE 100, which could at least take advantage of the energy rally.     The combination of higher energy and stronger dollar has well pushed inflation in Australia to 5.2% in August, up from 4.9% printed a month earlier -which was a 17-month low. We could see a similar upturn in global inflation metrics due to rising oil prices. The Eurozone data will soon be coming in. Unfortunately for the Aussie, the uptick in inflation won't prevent it from getting smashed against the US dollar. The pair will likely test and take out the September support of 0.6360
EUR/USD Faces Ongoing Decline Amid Budget and Market Turbulence

EUR/USD Faces Ongoing Decline Amid Budget and Market Turbulence

InstaForex Analysis InstaForex Analysis 27.09.2023 14:05
EUR/USD A significant decline in stock markets, gold, and several commodities on Tuesday helped boost the counter-dollar currencies as investors await the budget-parliamentary crisis in the United States. Yesterday, the S&P 500 lost 1.47% and gold dropped by 0.88%. Yields on 5-year U.S. government bonds edged up, but this only confirms the investors' bets on a budget "short squeeze." This is particularly noticeable against the backdrop of reduced attention to the "government shutdown." The euro has been declining for the eleventh consecutive week. From a technical perspective, a turbulent correction begins after twelve weeks of either rising or falling. This pattern is rare; the last time it occurred with the euro was in the summer and fall of 2014 during the height of the European crisis, with a caveat related to the candle of the second week of September. Prior to that, with a similar caveat, the pattern occurred in the fall of 2004 when the euro rose for 11 consecutive weeks.     On the daily chart, the price has come very close to the magnetic intersection point of three lines: the Fibonacci ray, the Fibonacci channel line, and the target level of 1.0552. The signal line of the Marlin oscillator is in no hurry to exit the wedge. In the eleventh week, the price may still dip below this support, but in such a situation, time becomes the main factor - Monday of the following week.   On the 4-hour chart, the Marlin oscillator has turned the convergence into a wide range within a downtrend. The price has approached the lower band of the 1.0552 range and may now edge up. One reason for the rise could be a decrease in orders for durable goods in the United States, expected at -0.5% for August.      
FX Daily: Fed Ends Bank Term Funding Program, Shifts Focus to US Regional Banks and 4Q23 GDP

EUR/USD Trading Analysis: Navigating Market Volatility Amid Crucial US Economic Data

InstaForex Analysis InstaForex Analysis 06.10.2023 15:22
Early in the European session, EUR/USD is trading around 1.0541, above the 21 SMA, and above the downtrend channel that was broken yesterday in the American session. In the next few hours during the American session, data of crucial importance for the US economy will be published, namely, Non-Farm Payrolls (NFPs).   This data could generate strong volatility in the market and we could see bullish movement in the EUR/USD pair. This data, if negative, could give bullish momentum to the euro so that EUR/USD could reach 3/8 Murray and even the 200 EMA located at 1.0675. As the euro is exiting the overbought zone, a technical correction from current price levels towards the psychological level of 1.0500 could be seen as an opportunity to resume buying. The 2/8 Murray zone could be seen as an opportunity to buy just in case a technical bounce occurs above this area. On the other hand, if EUR/USD falls below 1.0500 (21 SMA), we could expect a bearish move to occur. The instrment could reach the October 3 low around 1.0447 and even 1/8 Murray at 1.0385. The daily pivot point is located around 1.0532 which favors a positive outlook. However, with a bounce around the daily S_1 support, we could expect an opportunity to buy the euro above 1.0513. The eagle indicator has been giving a positive signal since October 3. However, any pullback and while the euro trades above 1.0450 will be seen as an opportunity to buy with the target at 1.0675 (200 EMA).  
Shift in Central Bank Sentiment: Czech National Bank Hints at a 50bp Rate Cut, Impact on CZK Expected

Tepid Start for Euro and Pound as Corrective Waves Unfold: Market Analysis and Outlook

InstaForex Analysis InstaForex Analysis 17.10.2023 15:39
Both instruments were relatively muted on Monday. The euro and the pound started a new upward movement, presumably as part of the third wave within wave 2 or b. I previously mentioned that wave 2 or b should be a three-wave structure because the first wave was extended for both instruments. Therefore, the price increase at the beginning of the week was expected. If it hadn't happened today, it would have occurred tomorrow. Moreover, there was no significant news. Therefore, I conclude that positive news is not necessary for building the corrective waves for the euro and the pound.     Over the weekend, European Central Bank President Christine Lagarde delivered a speech. As I previously mentioned, Lagarde did not say anything that was particularly important. The members of the ECB Governing Council have not been providing any interesting or critical information for the markets. This is easily explained by the fact that the ECB has generally completed the process of tightening monetary policy and does not intend to ease it in the near future. Consequently, the market does not expect any changes either, so what can de Guindos, Lagarde, and others report in such a case? Lagarde mentioned wages and inflation with no significant consequences, so to speak. She noted that the pace of wage growth remains too high, and core inflation is far from the target. At the same time, the EU labor market shows no signs of weakening, but the European economy may slow down even further as the global economy could weaken due to new geopolitical conflicts. Economic growth could be stronger if consumer confidence rises due to a stronger labor market, income growth, and reduced uncertainty. Regarding monetary policy, the ECB plans to maintain a cautious approach. Based on everything, it will be very difficult for the euro to find support until a downtrend is fully developed. I believe that the news background will not affect the framework of the corrective wave 2 or b. It won't impact the next, third wave either.     Based on the analysis conducted, I conclude that a bearish wave is currently being built. The targets around the 1.0463 level have been achieved, and the fact that the market has yet to breach this mark indicates that it is prepared to build a corrective wave. In my recent reviews, I warned you that it would be wise to consider closing short positions because there is currently a high probability of constructing an upward wave. The unsuccessful attempt to break the 1.0637 level, corresponding to the 100.0% Fibonacci, indicates the market's readiness to resume the decline, but I believe that wave 2 or b will be a three-wave structure. The wave pattern of the GBP/USD instrument suggests a decline within a new downtrend segment. The most that the British pound can hope for in the near future is the construction of wave 2 or b. However, as we can see, even with the corrective wave, significant challenges are currently emerging. I wouldn't recommend opening new shorts at this time, but I also don't advise buying because the corrective wave may turn out to be relatively weak.  
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How do beginners invest in commodities?

FXMAG Team FXMAG Team 18.10.2023 13:10
Investing is an essential part of securing your financial future, and the first step to creating a sound investment portfolio is educating yourself on the different types of investments available. Commodities can be an excellent option for those who want to diversify their investment strategies beyond stocks and bonds. Commodities are often seen as risky investments due to their high volatility. Yet, if you're willing to take the time to understand how they work and develop some strategies for trading them long-term, they can be advantageous additions to any portfolio. Here, we will discuss how beginners can start investing in commodities and help create a successful portfolio with minimal risk involved.   Understand the different types of commodities available for investment  Investing in commodities can be an attractive financial opportunity for those looking to diversify their investment portfolio or hedge against inflation. Many commodities include precious metals, energy sources like crude oil and natural gas, and agricultural products such as wheat, corn and soybeans. Each commodity has its unique market dynamics, which supply and demand, geopolitical tensions, and weather conditions can affect it.     Understanding the different types of commodities available for investment can help investors make informed decisions about where to allocate their money, depending on their goals and risk tolerance. With the proper knowledge and approach, commodity investing can be valuable to an individual's investment strategy. Learn more here about the different commodities available for investment.     Research current market trends and the supply/demand dynamics of commodities  Before investing in commodities, it is essential to research and analyse the current market trends and supply/demand dynamics of the specific commodities you are interested in. It can involve keeping up-to-date with global news, geopolitical events, and economic indicators that could impact commodity prices.    It is also essential to understand how supply and demand affect commodity prices. For example, if there is an increase in demand for a particular commodity but a decrease in supply, the cost of that commodity will likely go up. Conducting thorough research and staying informed can help investors make well-informed decisions when investing in commodities.    Learn about the risks associated with investing in commodities and how to manage them  Investing in commodities comes with its fair share of risks, and beginners must understand them before diving into the market. One common risk associated with commodity investing is volatility. Commodities are known for their volatile nature, and prices can fluctuate significantly in a short amount of time.    Another risk is the influence of external factors such as weather conditions, geopolitical tensions, and economic policies. These factors can impact the supply and demand dynamics of commodities and, in turn, affect their prices.    To manage these risks, beginners should consider diversifying their investments across different types of commodities to minimise their exposure to a single commodity's price fluctuations. Additionally, conducting thorough research and staying informed about market trends can help mitigate risks associated with commodity investing.    Determine an investment strategy that fits your budget and risk tolerance  Once you understand the different types of commodities, market trends, and risks associated with investing in commodities, the next step is to determine an investment strategy that fits your budget and risk tolerance. It is important to remember that commodity investing should only be considered part of a well-diversified portfolio and not the sole focus of an investment strategy. Consider the amount of capital you are willing to invest and your risk tolerance before deciding on a method.     Some common strategies for commodity investing include buying physical commodities such as gold or silver, trading futures contracts, or investing in commodity ETFs (exchange-traded funds). It is also essential to regularly review and adjust your investment strategy as needed.    Choose a reliable broker to execute trades on your behalf  To invest in commodities, you must use a broker to execute trades on your behalf. Choosing a reliable and reputable broker with experience in commodity trading is crucial. Look for brokers that offer competitive fees, have a user-friendly trading platform, and provide access to various types of commodities.    It is also essential to do your due diligence and research the broker before deciding. Reading reviews and seeking recommendations from experienced commodity investors can also help you choose the right broker for your investment needs.    Open an account and begin trading commodities  Once you have chosen a reliable broker, the next step is opening an account and trading commodities. Most brokers will require you to fill out an application and provide identification documents before opening an account. Some brokers may also need a minimum deposit amount to start trading.    Before making any trades, it is essential to thoroughly understand the trading platform and any associated fees or charges. Start with small investments and gradually increase your exposure to commodities as you gain experience and confidence in the market.  //
The December CPI Upside Surprise: Why Markets Remain Skeptical About a Fed Rate Cut in March" User napisz liste keywords, oddzile je porzecinakmie ChatGPT

EUR/USD Faces Resistance at 1.0765, Downside Risks Loom Amid Hawkish Fed and Weak Eurozone Data

ING Economics ING Economics 07.11.2023 15:52
EUR: Resistance holds In the end, EUR/USD did not even get to test resistance at 1.0765 before falling back. 1.0650 seems the risk today given the event risk of hawkish Fed speakers. Locally, the focus will be on the eurozone PPI figures, another set of weak German industrial production figures and some European Central Bank speakers later in the day. As we have been saying recently, the euro story looks weak and EUR/USD will only rally if the US story is weak enough to trigger some clear bullish flattening of the US yield curve. That scenario looks premature. The baseline may be some kind of 1.0550-1.0750 range now unless the US data takes a decided turn for the worse. Elsewhere, the Scandi FX story has been interesting. The Swedish krona understandably did well in the lower rate, risk-on environment. The Norwegian krone performance has been very underwhelming and warns that EUR/NOK could be banging on the door at 12.00 again if US rates move higher again. Here, look out for event risks from US Treasury auctions this week. Three, ten and thirty-year Treasuries are auctioned today through Thursday.
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EUR/USD Analysis: Navigating Market Pressures and Consolidation Ranges

InstaForex Analysis InstaForex Analysis 08.11.2023 13:46
EUR/USD On Tuesday, the euro continued to face pressure from Monday, even slightly more so due to the decline in commodity prices (crude oil down 2.1%) and as U.S. Treasury yields fell. German industrial production dropped in September by 1.4% compared with the previous month (-3.86% YoY), which fueled concerns about a European recession. Now we are waiting to see if other news will support the euro's upward movement. However, we don't expect to receive any news today or tomorrow, unless Federal Reserve Chair Jerome Powell or John Williams suggests an the end to the rate hike cycle. On the other hand, a certain event that could exert pressure on the dollar would be the so-called U.S. "government shutdown", as the emergency 45-day funding measure is set to end on November 16. Congressional leaders struggle to reach an agreement over the 2024 budget year limit. Take note that market participants may already be preparing for this event.   On the daily chart, the lower shadow carefully tested the support of the MACD line. Now, the euro has established a consolidation range between yesterday's low and the Fibonacci level at 1.0665-1.0750. Settling below 1.0665 could lead to a decline towards the price channel line around the psychological level of 1.0500, while a move above 1.0750 opens the target range of 1.0834/57. The uptrend remains intact. On the 4-hour chart, the bullish momentum remains intact. After retreating, the price is now staying above the indicator lines, and the Marlin oscillator may form a bullish reversal from the neutral zero line.  
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EUR/USD Reaction to Dollar Surge: Eurozone Tiptoeing into Slightly Better Data

ING Economics ING Economics 16.11.2023 11:18
EUR: Eurozone tiptoeing into slightly better data It is hard to argue that the huge EUR/USD jump had much to do with the euro itself yesterday. In the havoc of a huge dollar correction, markets flooded into high-beta currencies, and in Europe Scandinavian currencies (Swedish krona and Norwegian krone) were naturally favoured to the more defensive euro. Still, before the US CPI figures, EUR/USD was finding some support after ZEW expectations surprised on the upside in Germany with a bounce from -1 to 10 (first positive reading since April). The same index for the whole euro area reached the highest level since February. That probably puts more emphasis on upcoming data to gauge whether there are any more tentative signals of “peak pessimism” that may bring along some idiosyncratic EUR support.   Today, eurozone industrial production figures for September should be largely overlooked, but some greater focus will be on the EU Commission's economic forecasts. There are no scheduled European Central Bank speakers today before two consecutive days of President Christine Lagarde speeches. In line with our dollar view discussed above, we are inclined to think a pull-back to the 1.0800 mark is appropriate given short-term valuation (EUR/USD 1.5% overvalued). Conversely, a break above 1.0900 (probably on more US data weakness) would be significant and make 1.1000 the next key resistance.    
Euro Holds Steady Amidst Absence of Key Eurozone Data: What to Expect Next

Euro Holds Steady Amidst Absence of Key Eurozone Data: What to Expect Next

ING Economics ING Economics 16.11.2023 12:08
EUR: No news is good news Perhaps helping the euro this week has been the lack of key eurozone data. Over the last couple of months, eurozone data releases have pulled the rug from under any emerging EUR/USD rally and have emphasised the pessimism in this trading bloc. Looking at the calendar, we cannot see any important releases until the November PMIs next Thursday. This suggests EUR/USD could hang onto this week's gains for a few more days.  We could see a 1.0800-1.0900 range develop over the next few days and certainly, a move back under the 1.0765 area would undo all of this week's positive developments. In terms of the bigger picture, we doubt EUR/USD will lead next year's dollar bear trend. And we favour benchmark cross rates, such as EUR/AUD to come lower. Before that, however, we currently forecast EUR/USD staying quite steady - not far from current levels - into year-end.
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German Debt Brake Ruling Sparks Concerns for the Euro: Impact and Expectations

ING Economics ING Economics 22.11.2023 14:40
EUR: German debt brake causes some headaches The uncertainty over Germany’s fiscal headroom, after last week’s Constitutional Court ruling, has yet to have any significant impact on the euro. On the one hand, it could limit Germany’s room for fiscal manoeuvre next year, but at the same time, it might deliver a softer interpretation of fiscal rules across the whole region. Indeed recently, the European Commission agreed that the Excessive Deficit Procedure will not be applied before European parliamentary elections next June. Locally, the focus will be on eurozone consumer confidence today, but the bigger driver for the euro should be tomorrow’s November flash PMIs – which are expected to be soft.  
FX Daily: Resilient Dollar Faces Light Trading Post-Thanksgiving, Eyes on PMIs and Global Developments

FX Daily: Resilient Dollar Faces Light Trading Post-Thanksgiving, Eyes on PMIs and Global Developments

ING Economics ING Economics 27.11.2023 14:22
FX Daily: Is less growth pessimism enough? PMIs came in stronger than expected in the eurozone and the UK yesterday and will be released in the US today. Despite the notion that eurozone growth pessimism may have peaked, rate differentials still point to a weaker EUR/USD. We see EUR/GBP staying pressured. Riksbank FX sales will be in focus after yesterday's hold, and we don't expect any more hikes.   USD: Half-day trading US markets reopen today after the Thanksgiving holiday, but only for a half-day session. Expect volumes to be very thin again. On the data side, we’ll see the release of US S&P PMIs, a piece of data that has triggered a growing market impact, but may fail to decisively steer the dollar in a low-volume day. As we had expected, the dollar is stabilising amid reduced Thanksgiving flows, and an attempt to rally from the euro and sterling following somewhat encouraging PMIs didn't last much longer.  The quieter US calendar has seen market focus being re-directed, namely on oil market developments, a ceasefire in the Israel-Hamas conflict and Chinese real estate news. On the former, the decision by OPEC+ to delay its meeting scheduled for this weekend due to disagreement on output cuts took a brief hit on crude earlier this week. Our commodities team notes that the ongoing disagreement between members will likely increase volatility within the market over the course of the next week, although it is unclear how this will affect broader policy. In China, we saw an unprecedented policy discussion by the central government to support the real estate sector, as it reportedly planning to allow banks to issue unsecured short-term loans to qualified developers. We would be cautious to think that this will spur a round of optimistic buying on Chinese assets. While it is a positive development on paper, it does signal a very concerned mood in Beijing about the developers' crisis. It should be a relatively quiet day in FX today. We expect the dollar to keep stabilising around current levels. The next two weeks will set the tone for FX markets into Christmas, with key data (like payrolls) published in the US.
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EURGBP Faces Pressure as Germany Nears Double-Dip Recession and Grapples with Budget Uncertainty"

Kenny Fisher Kenny Fisher 27.11.2023 15:40
German double-dip recession likely after 0.1% contraction in Q3 UK consumer confidence improves but remains weak EURGBP appears to fail again near range high German uncertainty weighing on the single currency The euro is slipping against the pound at the end of the week with economic data highlighting the challenges facing the bloc. Nowhere is that more evident than in Germany which appears to be on the brink of a double-dip recession and facing immense uncertainty over its budget for next year as it scrambles to patch up finances for this one. A supplementary budget next week alongside a proposal to suspend the debt brake now looks likely but even this is just a temporary solution that won’t give investors much confidence in the outlook for an economy already under significant strain. The economy was confirmed to have contracted by 0.1% in Q3 this morning and as we move into the final month of Q4, it’s looking likely data early next year will confirm the country is back in recession. The Ifo business climate survey was a little better and appears to be turning a corner which is hopefully a good sign but at 87.3, it’s still printing figures near historical lows. The early months of the pandemic were understandably much worse, as you’d imagine, but that aside, recent readings have fallen close to 2001 and 2009 levels. UK consumers buoyed by improving real earnings UK consumer confidence is also gradually improving, albeit from very weak levels. At -24, the Gfk survey is 25 points from last September’s lows but still some way below all surveys from mid-2013 through to the pandemic. Still, the direction of travel is more promising and inflation is now running below wage growth which should continue to support that.     A big test of technical support The euro has been struggling near range highs against the pound for a number of weeks but that now appears to be turning into some weakness in the pair. EURGBP Daily Source – OANDA on Trading View Not only did it not break the range highs, it’s now trading at a more than two-week low and testing what could prove to be a key support level. The lower part of the rising channel coincides with the bottom of the 200/233-day simple moving average band. A move below here could be viewed as a very bearish signal and would take the pair much deeper into correction territory. Arguably it could just reaffirm its position in a sideways channel, where it’s traded since May. And based on the size of the rising channel which could be viewed as a slanted double top, a breakout could be seen as a sign of a much deeper correction to come.  
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Turbulent Times: German GDP Contracts in Q3, US PMIs Awaited

Kenny Fisher Kenny Fisher 27.11.2023 15:44
German GDP shrinks in Q3 US to release manufacturing and services PMIs The euro is almost unchanged on Friday. In the European session, EUR/USD is trading at 1.0903, down 0.03%. German economy declines German GDP posted a minor drop in the third quarter, coming in at -0.1% q/q. This was down slightly from -0.1% in the second quarter and matched the market consensus. On an annualized basis, GDP declined by 0.4%, down from a revised o.1% gain in Q2 and missing the market consensus of -0.3%. The consumer spending component of GDP decelerated in the third quarter and was a key driver of the decline in GDP. German consumers remain in a sour mood and are being squeezed by rising interest rates and a high inflation rate of 3.8%. The German business sector is also pessimistic about economic conditions. The Ifo Business Climate index managed to climb to 87.3 in November, up from 86.9 in October but below the market consensus of 87.5. A reading below 100 indicates that a majority of the companies surveyed expect business conditions to deteriorate in the next six months. Earlier this week, German services and manufacturing PMIs pointed came in below 50, which points to contraction. The manufacturing sector is particularly weak and has been in decline since June 2022. It has been a relatively light week for US releases, with markets back in action after the Thanksgiving holiday. Later today, the US releases manufacturing and services PMIs, with little change expected. Still, the markets will be watching carefully, as the data will provide insights into the strength of the US economy. The consensus estimates for November are 49.8 for manufacturing (Oct: 50.0) and 50.4 for services (Oct. 49.8). If the readings diverge significantly from the estimates, we could see some strong movement from the US dollar before the weekend.   EUR/USD Technical There is resistance at 1.0943 and 1.0997 1.0831 and 1.0748 are providing support  
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FX Weekly Outlook: Euro Remains the Weakest Link, Dollar Finds Support from Powell's Speech

ING Economics ING Economics 04.12.2023 13:52
FX Daily: Euro remains the weakest link The dollar starts the week in mixed fashion. USD/JPY is trading at a new corrective low, while EUR/USD continues to lick its wounds after a torrid session on Friday. The highlight of this week's data calendar will be the November US jobs report on Friday; there are also central bank policy meetings in Canada and Poland USD: Powell speech provides some support The dollar turned a little higher on Friday - largely led by the drop in European currencies after investors latched onto some dovish comments from ECB officials. Also supporting the dollar later in the day, however, were comments from Fed Chair, Jay Powell.  He was much more equivocal than his colleague, Christopher Waller, who earlier in the week had signalled that the inflation battle was nearly won. Indeed, Powell's comments left in the prospects of further rate hikes - which very few in the market believe will materialise.  Against this backdrop will the dollar trade on US data this week. Given the blackout period ahead of the FOMC meeting on December 13th, there will be no Fed speakers this week. Instead, the focus will be on some quite important data. Beyond today's Durable Goods Orders, tomorrow sees the release of US services ISM and the JOLTS job opening data. Do job openings correct back lower and suggest a better balance in the US labour market - a mild dollar negative? Wednesday then sees the discredited ADP jobs data ahead of Thursday's initial claims. But the main event of the week is the November NFP report on Friday. Consensus expects a modest +180k, an unchanged unemployment rate and steady average earnings. Given a propensity for investors to put money to work outside of the dollar, we think a consensus outcome would be a mild dollar negative. We think it would really have to be a strong number to put the idea of another Fed rate hike back on the table. We favour DXY trading a 103-104 range through the week and suspect that investors will have a bias to sell in the 104.00/104.20 area.
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Pound Resilient Against Euro's Inflation Woes, Eyes on ECB's Lagarde Speech

InstaForex Analysis InstaForex Analysis 04.12.2023 15:12
Unlike the euro, the pound has returned to the levels it was at before the release of preliminary inflation data in the eurozone. This is somewhat logical due to the fact that the data mounted pressure on the euro, while there were no economic reports or news from the UK. Today, the situation is quite similar. The economic calendar is basically empty, and only European Central Bank President Christine Lagarde's speech can affect the market. Primarily, it will affect the euro.   The impact on the pound will be significantly less noticeable. The question is, where will all this lead? Most likely, Lagarde will take note of the slowdown in inflation and maybe even suggest the possibility of a rate cut. Of course, she will not mention any specific timing. But it could be clear that she is already starting to make a hint in December. The euro will fall further, pulling the pound along with it. However, the decline in the British currency will be much less pronounced and possibly short-term.   Last Friday, the GBP/USD pair managed to recover relative to the recent corrective move. A s a result, the quote returned to the area of the resistance level of 1.2700. On the four-hour chart, the RSI technical indicator is hovering in the upper area of 50/70, thus reflecting bullish sentiment among traders. On the same chart, the Alligator's MAs are headed upwards, which corresponds to the upward cycle. Outlook The EUR/USD kicks off the new week with a decrease in the volume of long positions, accompanied by a rebound from the level of 1.2700. In this case, hitting the 1.2700 mark indicates a prevailing bullish sentiment. In perspective, this could extend the upward cycle in case the pair tests last week's high. The bearish scenario will come into play in case the pair trades sideways between the levels of 1.2600/1.2700. Comprehensive indicator analysis indicates a downward cycle in the short term due to the rebound. Meanwhile, the bullish sentiment remains in force in the intraday and medium-term periods.   Read more: https://www.instaforex.eu/forex_analysis/362129
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FX Daily: Dollar Resilient Post-JOLTS, Euro Faces Headwinds

ING Economics ING Economics 12.12.2023 12:43
FX Daily: Hard to buck the euro downtrend The dollar has shown resilience after disappointing JOLTS job openings data yesterday, leaving EUR/USD under pressure as the euro’s idiosyncratic negatives fuel bearish momentum. Today, the Bank of Canada may deliver a hawkish hold despite worsening growth, giving some help to the Canadian dollar.   USD: Showing resilience The larger-than-expected drop in October’s JOLTS job openings has offered new reasons to speculate on more rate cuts from the Federal Reserve next year, but the stronger ISM services figures in November have worked as an offsetting factor in terms of FX impact. AUD and NZD are rallying this morning, helped by stronger fixing for the yuan from the People's Bank of China (PBoC) after yesterday’s downgrade of China’s outlook by Moody’s. However, the dollar has remained rather supported across the board even after the disappointing JOLTS figures, a signal that markets are taking a less aggressive stance in FX following non-conclusive evidence of deterioration in the US outlook.   Speaking of non-conclusive evidence, it’s worth noting that the ADP payrolls being released today have no predictive power for actual payrolls. Still, markets have often moved on out-of-consensus ADP numbers. Today, expectations are 130k. MBA mortgage applications, final third-quarter labour cost data, and October trade balance figures are also on the calendar today but should not move the market. We suspect markets are holding a more cautious stance as we head into the key US payroll figures on Friday and the Fed meeting next week, where there is a good probability the FOMC will deliver a protest against rate cut bets – especially if data fails to turn lower. When adding the soft idiosyncratic momentum faced by the euro, we remain modestly bullish on the dollar into the FOMC.
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EUR Struggles: Seeking the Bottom Amidst Hawkish Rhetoric and Weak Economic Data

ING Economics ING Economics 12.12.2023 12:46
EUR: Not easy to pick a bottom Shorting the euro appears to be one of the most popular bets in FX at the moment. Comments by hawkish hardliners like Isabel Schnabel yesterday – who suggested that another hike is now off the table and essentially moved the discussion to rate cuts – have added further pressure on the euro. We continue to point to how the current downward correction in EUR/USD is not out of line with short-term rate differentials; when taking the two-year swap rate gap (-130bp) as a driver, a further leg lower to the 1.06 area would not be an aberration. That makes us reluctant to call for the bottom in EUR/USD just yet, and even more so in EUR-crosses, especially against the likes of AUD and NZD. A catalyst for an idiosyncratic euro rebound is not in sight, at least for today, when there are no scheduled European Central Bank speakers and the eurozone’s data calendar only includes the October retail sales – hardly ever a market mover in the region. The big slump (7.3% YoY) in Germany’s factory orders for October (data released this morning) is likely to keep the negative euro narrative alive at the start of the European session. EUR/USD is now trading very close to the 1.0770 100-day MA support, and a break lower can further fuel the bearish momentum. A test of 1.0700 before the weekend is entirely possible if the dollar remains bid.
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ECB December Meeting: Balancing Dovish Expectations with a Cautious Reality Check

ING Economics ING Economics 12.12.2023 13:53
December’s ECB cheat sheet: A reality check for ultra-dovish expectations The ECB will almost surely keep rates on hold at the December meeting. The question is to what extent it will align with the market's aggressive pricing for rate cuts in 2024. We suspect it will fall short of endorsing ultra-dovish expectations. There is some upside room for EUR rates and the battered euro.       Heading into the European Central Bank's December meeting, there is growing evidence that the Governing Council is split about the messaging being presented to markets. The generally arch-hawk Isabel Schnabel dropped strong dovish hints by ruling out rate hikes this week, and markets are now pricing in 135bp of cuts in the next 12 months. We see a good chance that the overall message at this meeting will fall short of endorsing aggressive rate cut expectations. Above are the market implications in various scenarios. Our full ECB preview can be found here. A still-cautious ECB may not validate aggressive front end pricing A reassessment of inflation expectations has been in the lead in driving rates lower and raising the expectations of first rate cuts at the end of the first quarter next year. From next summer onwards, market indications point to anticipated headline inflation fixes below 2%. Indeed, the 2Y inflation swap has dropped to 1.8%. It is easy to overlook that at the same time, core inflation is currently still running at an elevated 3.6% year-on-year, giving the ECB enough reason to remain cautious. However, the pushback against aggressive market pricing has been half-hearted at best, with officials’ remarks having put cuts in the first half of next year clearly into the realm of possibility. But whether they're likely is a different question. The ECB may well decide to let the data be the judge – but at the same time, it remains more reluctant to extrapolate to the extent that the market does. Its own inflation forecast may come down next week, but potentially not to the degree that markets are discounting. We see a good chance that the rally in front end rates – which currently discounts a 75% probability of a cut next March – stalls, if not unwinds to some extent. The longer end may see less upward pressure, though. In the extreme, the Governing Council coming across as overly hawkish and brushing off the faster disinflationary momentum could push markets into the belief that a policy mistake is in the making.   ECB rate expectations   Lagarde can throw a lifeline to the unloved euroThe idiosyncratic decline of the euro has been one of the key themes in FX lately, with the common currency being the worst-performing currency so far in G10. The aggressive dovish repricing of ECB rate expectations has been the main driver, and the comments by Isabel Schnabel right before the pre-meeting quiet period have fuelled the bearish narrative further. With 125bp of cuts priced in by October and markets actively considering a start to the easing cycle already in March, it's difficult to see a bigger dovish repricing happening at this stage. That would suggest the euro does not have to fall much further from the current levels. Still, if only short-term rate differentials are taken into account, a decline to the 1.06 area in EUR/USD would not be an aberration. What is already halting the euro slump is the upbeat risk sentiment, which favours pro-cyclical currencies like the euro and caps the upside for the safe-haven dollar. We expect the ECB to continue its transition to a dovish narrative, but that will – in our view – happen at a slower pace than what markets are implying. We see tangible risks that the the central bank will push back against aggressive dovish speculations at this meeting, and the market may be forced to unwind some of those rate cuts bets, offering room for a EUR/USD rebound. That said, a EUR/USD recovery would struggle to extend much longer after the meeting due to the short-term EUR-USD swap spreads still pointing to a lower exchange rate.
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EUR Outlook: Gauging ECB Pushback Amid Dovish Market Expectations

ING Economics ING Economics 14.12.2023 14:19
EUR: Gauging the ECB pushback Attention turns to the ECB today. Investors are currently pricing in over 125bp of rate cuts next year, with the first full cut priced for the April meeting. We think that is far too early. However, the question today is how far ECB President Christine Lagarde wants to push back against that. Feeding into the story will be revisions to ECB staff growth and inflation forecasts. The larger the downward revisions to both growth and inflation (e.g. if the 2025 CPI forecast gets cut below 2%), the more euro money market rates will soften, and the euro will lag other currencies as they advance against the softer dollar.  Our ECB market preview felt there were upside risks to EUR/USD going into this ECB meeting. EUR/USD has already enjoyed a strong rally on the back of the softer US rate view, and assuming the ECB does not fully embrace dovish expectations for next year, we would say the bias for EUR/USD lies towards 1.0945/65 and probably 1.10 multi-day. Over recent months, we have been forecasting EUR/USD to end the year somewhere near 1.07. After last night's Fed shift, we expect EUR/USD ends the year closer to 1.10 now. Also, today look out for the Norges Bank and Swiss National Bank meetings. Presumably, the SNB will cut its inflation forecasts. Having consistently sold FX since last year – delivering nominal Swiss franc appreciation and keeping the real Swiss franc stable – we are interested to hear today whether the SNB has been both buying and selling FX. If it confirms it is on both sides of EUR/CHF, rather than just being a EUR/CHF selle, and we suspect EUR/CHF can jump back up to the 0.9550 area.
Crude Oil Eyes 200-DMA Amidst Positive Growth Signals and Inflation Concerns

EUR: Poised for 1.10 Breakthrough Amid Domestic Challenges

ING Economics ING Economics 18.12.2023 13:50
EUR: Still eyeing 1.10 The euro stands a chance to end the year above 1.10, which seemed quite unlikely only a few weeks ago when the dollar was restrengthening and ECB rate cut bets were rising rapidly. Despite the diverging narratives which emerged from the ECB and Fed meetings last week, probably favouring more attempts at the 1.1000 key resistance into Christmas, a break higher is far from guaranteed. Firstly, the euro still has to deal with the domestic factors that triggered its previous underperformance. Today, the IFO figures will be watched quite carefully, while the rest of the week sees the final release of CPI figures. We’ll also need to see whether post-meeting comments by ECB officials diverge in some way from last week’s pushback by President Lagarde.
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Eurozone, German Service PMI Ease in December, Euro Snaps Four-Day Rally

Kenny Fisher Kenny Fisher 18.12.2023 14:07
Eurozone, German Service PMI ease in December Euro snaps four-day rally The euro has snapped a four-day winning streak on Friday. In the European session, EUR/USD is trading at 1.0949, down 0.38%. The euro has enjoyed a strong week, with gains of 1.77%. Soft Eurozone, German services PMIs weigh on euro Eurozone Services PMI eased in December, indicating that the economy continues to struggle. The PMI fell from 48.7 to 48.1 and missed the consensus estimate of 49.0. This marked a fifth straight month of contraction in the services sector, with 50 separating contraction from expansion. Germany, the largest economy in the eurozone, also reported a decline, with the PMI falling to 48.4, down from 49.6 in November and short of the consensus estimate of 49.8. Euro soars after ECB pause The European Central Bank held the benchmark rate at 4.0% for a second straight time on Thursday. This move was expected, but the central bank pushed back against market expectations for interest rate cuts next year, sending the euro soaring 1.09% against the US dollar after the announcement. ECB President Christine Lagarde reaffirmed that the Bank would continue its “higher for longer” stance, saying that the Bank was not about to let down its guard and lower rates. Lagarde sounded hawkish even though the ECB lowered its inflation forecast at the meeting. Inflation has fallen to 2.4% in the eurozone, within striking distance of the 2% target. Lagarde acknowledged that inflation was easing but said that domestic inflation was “not budging”, largely due to wage growth.   There is a deep disconnect between the markets and the ECB with regard to rate policy. ECB President Lagarde poured cold water on expectations for rate cuts, arguing that inflation had not been beaten. The markets are marching to a very different tune and have priced in at least in around six rate cuts in 2024 and are confident that Lagarde will have to change her stance, with inflation falling and the eurozone economy likely in recession. . EUR/USD Technical EUR/USD is testing support at 1.0957. Below, there is support at 1.0905 1.1044 and 1.1096 are the next resistance lines    
Federal Reserve's Stance: Holding Rates Steady Amidst Market Expectations, with a Cautionary Tone on Overly Aggressive Rate Cut Pricings

GBP/USD Outlook: Navigating Chaotic Year-End Movements and Anticipating Potential Trends

InstaForex Analysis InstaForex Analysis 02.01.2024 14:15
GBP/USD exhibited quite chaotic movements during the last trading day of the previous week, month, and year. The price constantly changed direction, but at the end of the day, it stayed above the trendline that has suggested an uptrend for the past couple of months. Therefore, the pair could resume its upward movement as early as Tuesday.   However, at the same time, the euro has settled below the trendline, indicating a good chance for a downward move. Take note that the euro and the pound often (almost always) trade in the same direction. Therefore, it wouldn't be surprising if the pound also settles below the trendline today. This would open up possibilities for the pound to fall towards the Senkou Span B line. Of course, any downward movement can easily come to an end near this line since the dollar is still weak, and market participants are not eager to buy it. However, this week will bring plenty of important information from the U.S., and if it turns out to be positive, the dollar could significantly strengthen its positions, especially amid a three-month decline and oversold conditions. Therefore, we believe that the pair could potentially start a downward movement as early as tomorrow, which we could work with. The main condition is for the pair to breach the trendline. Speaking of trading signals, there were quite a few on Friday, but volatility was weak, and the movements were chaotic. On the last day of the year, hardly anyone wanted to enter the market, especially since last week's movements were absolutely unpredictable. Therefore, we believe that the year has ended and it's best to leave it in the past.  
EUR/USD Faces Pressure: Analyzing Rate Differentials and Equities

EUR/USD Weekly Trend Analysis: Anticipating a Pullback and Potential Reversal

InstaForex Analysis InstaForex Analysis 02.01.2024 14:29
Trend analysis EUR/USD may pull back this week, falling from 1.1036 (closing price of the last weekly candle) to the 23.6% retracement level of 1.0975 (yellow dotted line). It may go upwards after testing the level.   Comprehensive analysis: Indicator analysis - downward Fibonacci levels - downward Volumes - downward Candlestick analysis - downward Trend analysis - downward Bollinger bands - upward Monthly chart - upward Conclusion: The indicators point to a downward movement in EUR/USD. Overall conclusion: The pair will have a bearish trend, with no first upper shadow on the weekly black candle (Tuesday - downward) and a second lower shadow (Friday - upward). Therefore, during the week, euro will decline from 1.1036 (closing price of the last weekly candle) to the 23.6% retracement level of 1.0975 (yellow dotted line), and then go upwards after testing the level. Alternatively, it could move from 1.1036 (closing price of the last weekly candle) to the 61.8% retracement level of 1.0959 (red dotted line), and then go upwards after testing the level. Read more: https://www.instaforex.eu/forex_analysis/364727
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EUR: Lagarde's Potential Hawkish Shift in Davos Amidst Market Skepticism

ING Economics ING Economics 16.01.2024 12:20
EUR: Lagarde may sound more hawkish in Davos The data inputs for EUR/USD will mostly come from Germany this week, with 2023 GDP figures today and the ZEW survey tomorrow along with final CPI numbers. We have often discussed how European Central Bank rate cut expectations appear way too aggressive (150bp by year-end), although the dovish members of the bank have failed to deliver a coordinated pushback. Despite ECB hawks' protests against dovish expectations having had little impact on the market, the WEF event in Davos this week – which sees many ECB speakers including President Christine Lagarde – should not be overlooked. Lagarde has a greater potential to influence markets given a clearly divided Governing Council, and we suspect that she will opt for a more hawkish tone compared to last week’s comments. There may be some help for the euro coming from Davos, although we should be wary. Fed expectations have been resistant to data and the same could hold true for the ECB as well. The minutes from the December policy meeting are also released this week. We still think it is premature for EUR/USD to trade sustainably above 1.10. Elsewhere, Sweden published inflation figures today. CPIF declined to 2.3% from 3.6% (consensus 2.2%), although the core measure excluding energy remained high, slowing from 5.4% to 5.3% versus a consensus of 5.2%. Despite this, it remains unlikely that the Riksbank will tighten policy again. If anything, this modestly raises the chances that another round of FX sales will be started after the current reserve hedging programme ends in early February (in our view).
All Eyes on US Inflation: Impact on Rate Expectations and Market Sentiment

CEE Region's Borrowing Outlook: Lower Needs, Broader Sources, and FX Market Dynamics

ING Economics ING Economics 25.01.2024 16:36
Borrowing needs will fall this year, meaning a lower supply of LCY bonds, but there is still a long way to go given the slow fiscal consolidation. Central and Eastern Europe should remain more active in the FX market than pre-Covid, while a busy January and the broadening of funding sources offer flexibility for the rest of the year Borrowing needs this year will be down on last year in the whole CEE region, with the exception of Poland. The decline is due to both lower budget deficits and redemptions. In contrast, in Poland, both have increased year-on-year. Overall, the supply of local currency bonds should fall but remain well above pre-Covid levels. Given lower yields, this supply may prove more difficult to place in the market compared to last year, which saw strong market demand despite record supply. This time is different, and we expect financial markets to be tougher and punish more budget overruns and additional issuance. Local currency issuance: Improvement but still a long way to go From a positioning perspective, we find the Romanian government bond (ROMGBs) market to be overcrowded after the significant inflows last year. On the other hand, the significantly underweight Polish government bond (POLGBs) market should help cover the historically record borrowing needs. Czech government bonds (CZGBs) and Hungarian government bonds (HGBs) remain somewhere in between with steady foreign inflows into the market. On the sovereign ratings side, all the obvious changes happened last year and should stabilise this year with only some adjustments in outlooks in the pipeline, unless a more significant shock arrives. On the local currency supply side, we see a clear improvement from last year in the Czech Republic, as it was a bright spot in the CEE region with credible public finance consolidation. In addition, we see it as the only country in the region with positive risks of a lower supply of CZGBs than the Ministry of Finance indicates. Hungary has also made great progress here, of course, with the traditional broad diversification of funding sources that should keep the pressure off the HGB market in the event of an overshoot of the projected deficit. In contrast, we see only a relatively small improvement in Romania, where the supply of ROMGBs will fall only a little. The supply of Polish government bonds, meanwhile, was already at a record-high last year and is set to rise a little more this year. In addition, the use of additional sources to avoid flooding the local currency bond market will increase significantly, which we believe represents the biggest challenge for the bond market in the CEE region this year.   FX issuance: Fast start and diverse funding sources offer flexibility On the FX side, CEE sovereigns are set to remain active in the Eurobond primary market in 2024 and beyond, with the overall trend driven by recent external shocks from Covid and surging energy prices, along with structural factors such as the energy transition in Europe. A key theme that unites regular issuers Romania, Poland, and Hungary is the diversification of funding sources, with more consistent interest in the US dollar, as well as alternative currencies such as the Japanese yen and Chinese yuan, alongside the more traditional euro for the region. The growing green bond market is also an area of focus, with Hungary leading the way, and Romania set to follow this year. At the same time, 2024 should see some divergence, with Poland taking the lead in the region for Eurobond issuance and set to be one of the largest EM sovereign issuers globally this year. Hungary should see a slight reduction in Eurobond supply compared to recent years, with its strategy of diversifying funding sources and front-loading supply providing plenty of flexibility for the rest of the year. Romania should retain its position as a regular issuer, although net supply will be lower this year, while catching up with Poland and Hungary in terms of diverse funding sources via green issuance and alternative currencies. A strong start to the year, with almost $15bn in issuance for CEE in January so far, should mean less pressure on the region to issue later in the year if market conditions turn.  
Market Echoes: USD Gains Momentum Amid ECB Presser, PCE Numbers Awaited

Market Echoes: USD Gains Momentum Amid ECB Presser, PCE Numbers Awaited

Ipek Ozkardeskaya Ipek Ozkardeskaya 26.01.2024 14:17
Market echoes The US dollar index ticked higher yesterday, as the euro fell across board during ECB Lagarde's presser. But any further weakness in today's PCE numbers could limit the upside move in the dollar index and throw a floor under the EURUSD's weakness around the 200-DMA. It would sure be absurd if the Fed started cutting the rates with such a strong underlying US economy before the ECB, which, in opposition, deals with a serious economic slowdown across the euro area. But the Fed doesn't (need to) decide based on other central banks' actions. As such, a possible earlier Fed cut could slow down the euro depreciation but should not stop it. In equities, the good data gave a positive spin to the S&P500 and Nasdaq 100, but Tesla's 10% slump limited gains. Intel tumbled 10% in the afterhours trading following a disappointing forecast as it has hard time fighting back the all-strong Nvidia and AMD which are catapulted to the moon on the AI craze. The good news is, Nvidia and AMD lovers will barely react to Intel news.    

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