headline CPI inflation indicate lower gold pricesHigher than previous headline CPI inflation indicate lower gold prices and higher USD
the Nasdaq future and BTC should be expected to drop for the coming weeks and/or rest of the month.
CPI
Gold Under the weight of a hot CPIIn tomorrow's trading session, the spotlight is on XAUUSD as we consider a selling opportunity around the 2043 zone. To form a nuanced view, it's imperative to juxtapose the recent Consumer Price Index (CPI) data with preceding figures. The CPI figures from today—3.4% actual, 3.2% forecast, and 3.1% previous—demonstrate a slight uptick, indicating inflationary pressures persisting in the economy. Comparing this to the preceding months, we observe a gradual decline from 3.7% in October to 3.2% in August. Despite today's uptick, the overall trend signals a moderation in inflation.
Now, let's delve into the implications. The unexpected nature of today's CPI data, surpassing both expectations and the previous figure, introduces an element of surprise. Markets are sensitive to such surprises, particularly when it comes to inflation, as they can influence monetary policy decisions. A stronger-than-expected CPI could lead to speculations of a more hawkish stance from central banks, notably the Federal Reserve. Traders may anticipate a potential interest rate hike, a move that tends to strengthen the currency. Consequently, we can anticipate a favorable environment for the US dollar in tomorrow's session.
Adding a technical layer to our analysis, Gold is currently navigating a downtrend, with a correction phase approaching the 2043 support and resistance area. The technical outlook aligns with the fundamental expectation of a potentially stronger US dollar. Gold and the US dollar often exhibit a negative correlation, where a stronger dollar tends to put downward pressure on gold prices. Traders should bear this in mind when considering positions in XAUUSD.
In conclusion, the intersection of fundamental and technical factors paints a compelling narrative for tomorrow's trading session. The unexpected strength in CPI data introduces an element of uncertainty, and traders should remain vigilant to potential shifts in market sentiment. The technical setup in XAUUSD aligns with the fundamental expectation of a stronger dollar, emphasizing the importance of a holistic approach in navigating the markets.
Trade wisely,
Joe
EURUSD Breakout and Potential retrace with today's CPIIn today's trading session, our attention is focused on EURUSD, with a keen eye on a potential selling opportunity around the 1.09700 zone. After breaking out of its uptrend, the pair is currently in a correction phase, edging closer to the retrace area at the 1.09700 support and resistance zone.
Adding a fundamental layer to our analysis, the recent Consumer Price Index (CPI) data could play a pivotal role. The US dollar's strength, influenced by economic indicators such as CPI, may impact the overall direction of EURUSD. Traders should keep a close watch on the evolving market dynamics, especially considering the potential implications of USD strength on this currency pair.
As always, trade safe.
Joe
Core and Headline CPI RELEASED (Dec 2023 figures)Core and Headline CPI (Dec 2023 figures)
U.S. Headline CPI
Prev: 3.1%
Exp: 3.2%
Rep: 3.4% 🚨 HIGHER THAN EXPECTED 🚨
U.S. Core CPI
Prev: 4.0%
Exp: 3.8%
Rep: 3.9% 🚨 HIGHER THAN EXPECTED - but still fell
from 4% to 3.9%✅
CORE CPI FALLS BELOW 4% FOR THE FIRST TIME SINCE MAY 2021
We have a long way to go before we reach the Fed Target of 2%.
Additional info previously shared:
Core vs Headline (the difference)
You can clearly see how Core CPI is less volatile than Headline CPI on the chart. Core CPI removes the volatile food and energy expenditures to provide the underlying inflation trend. Food and Energy is included in the Headline inflation which as you can see from the chart is much more volatile and changes direction quicker than core inflation. Its almost like an oscillator around the core inflation line.
The Feds 2% Target
It is clear that we are not at the Federal Reserve’s target inflation rate of 2% on both fronts (purple line). It is critical to understand that we are still not at or below the target 2% level regardless of the FOMC’s determination of a likely hold on interest rates and reductions to interest rates in 2024. Lets see can the target be met first.
You can see that since 2002 Core CPI has fluctuated one standard deviation above and below the 2% inflation level between 1% and 3%. It is clear that we are not back into this standardised zone between 1 – 3%.
GBPUSD - SELL CPIGood morning, everyone! Today, we're going to dive into an intriguing aspect of the forex market, focusing on how the US Consumer Price Index (CPI) impacts the GBP/USD currency pair. Understanding this relationship is crucial for traders and investors who navigate the complexities of forex markets.
Understanding US CPI
First, let's understand what the US CPI is. The Consumer Price Index is a vital economic indicator in the United States, measuring the average change over time in the prices paid by consumers for a basket of goods and services. It's a key measure of inflation in the US economy.
US CPI's Impact on Currency
Now, how does the US CPI affect the GBP/USD pair? When the US CPI data is released, it can have a significant impact on the value of the US Dollar. A higher-than-expected CPI suggests rising inflation in the US, which could lead the Federal Reserve to increase interest rates. Higher interest rates typically strengthen the Dollar, as they attract investors looking for higher returns on their investments in US assets.
In contrast, if the US CPI comes in lower than expected, indicating lower inflation, it might lead to a weakening of the Dollar. This is because lower inflation could signal a delay in interest rate hikes by the Federal Reserve.
Technical Analysis: Resistance Levels
In addition to the CPI, technical analysis plays a crucial role in forex trading. For GBP/USD, multiple rejections at resistance levels can be a key indicator. Resistance levels are price points at which a currency pair has difficulty rising above. If GBP/USD has faced multiple rejections at certain resistance levels, it indicates a strong selling pressure at those levels.
Combining CPI and Technical Analysis
When we combine the insights from the US CPI data with technical analysis, we get a more comprehensive view. For instance, if the US CPI is higher than expected and GBP/USD is experiencing rejections at resistance levels, it could signal a potential drop in the pair. This is because a strong US Dollar (due to high CPI) and technical selling pressure at resistance levels can jointly push GBP/USD lower.
GBPUSD : Reversal trading cpiHello hello reversal occur happening in 7:00 p.m.
CPI unemployment rate core CPI CPI
Gold Setup H1 Time Frame | CPI Data NewsGold Setup H1 Time Frame | CPI Data News
Hey Traders ❗️
Welcome back hope you're doing well
This is our 5 analysis on Gold Setup
These idea not based on sell or buy
Its based on #Levels and prediction
On this Setup we catched more then 700 #pips
As you guys seem #Gold currnet point at 2033.65
We draw the two circles at 2040 and draw the line at 2047.00
#CPI fundamental high news impact might be tried to break these resistance at 2040-2047 🔵
Overall we are on #Bearish
Although gold overall view is at 2020-2019 then 2005 ❗️
So enjoy the Gold H1 setup with us 🙌
Cheers....
A clear direction of EURUSD in January. 1. The price was trapped inside an Oder block shaded yellow but also notice how it was respecting the IFVG which then acts as support.
2. The price is not likely gonna break out the OB and IFVG areas.
3. My bias will depend on lower timeframes but I'm only for buys at this moment.
4. Today is CPI and the dollar is more likely to weaken based on my analysis
Thoughts?
CPI Outlook - EURUSD Hello traders, as analysis for DXY still holds true. I would like to see higher prices on euro going into CPI. Be careful with large wicks. Ideally, I would like to see price trade back into our refined entry to take it higher. Still bearish below 1.10530. We could see a reaction at the breaker once more. I am overall bearish but I'm hoping CPI can give us that buy to sell setup we are looking for. Good luck traders and trade safely!
- CipherFX Team
CPI Outlook - NZDUSDGoing into CPI tomorrow I am favoring buys to sells on NU. DXY is respecting resistance and we can see a push higher with xxx/USD pairs. Let's see how we react during London. Ultimately trading into 4hr FVG and taking out buyside would be ideal. This pair is a little slower in movement but price action is clean. Good luck tomorrow traders and trade safely!
- CipherFX Team
GOLD| Time to evaluate a short entry!Analyzing XAU/USD, we can outline a detailed picture of the current situation and future prospects:
Current Situation:
Gold is struggling to make a decisive move in any specific direction mid-week.
After rising above $2,030, gold lost momentum and retreated towards $2,020.
The markets are awaiting the outcome of the 10-year US Treasury note auction.
Macro Factors and Upcoming Events:
A sparse macroeconomic calendar and upcoming top-tier events are keeping investors in cautious mode.
Wall Street opened positively, attempting to reverse some of its recent losses, but trading remains uneventful.
Influence of US Inflation Data:
The US Consumer Price Index (CPI) for December, set to be released on Thursday, could significantly impact gold prices.
An annual CPI increase of 3.2% is expected, slightly higher than the previous 3.1%, but the core CPI increase is expected to decline.
Market Expectations Regarding the Fed:
Market participants are betting that the Federal Reserve (Fed) might start cutting rates as early as March.
This expectation is due to decreasing inflationary pressures, despite recent data showing a tight labor market.
Recent Price Dynamics:
Gold price (XAU/USD) saw a pause in its recovery on Wednesday, with investors focusing on US inflation data.
The gold price recovery is expected to be short-lived due to investor confidence that the Fed will begin rate cuts starting in March.
Technical Analysis:
Gold price is aiming for stability above $2,030.
It found intermediate support after correcting more than 3% from the high of December 28, 2023, around $2,090.
Short-term demand for gold is no longer bullish, with the 20-day Exponential Moving Average (EMA) around $2,038 acting as a strong barrier.
The broader trend remains bullish, with the 50- and 200-day EMAs sloping upwards.
Further downside may occur if gold falls below the three-week low around $2,016.
External Factors and Future Indications:
The 10-year US Treasury yields have dropped to near 4.04% in anticipation of inflation data.
The options market is showing signs of hedging against a negative outcome.
Remarks by the President of the New York Federal Reserve, John Williams, could further influence gold prices.
Conclusion:
Currently, gold prices are influenced by a combination of expectations about the Fed's interest rates, US inflation data, and market sentiment. The future direction of the price will likely be determined by upcoming inflation data and Fed policies. My personal expectation is the 62% Fibonacci level at 1966.
Core and Headline CPI (Release Tomorrow Thurs 11th Jan 2024)Core and Headline CPI
NEW CPI Figures released tomorrow Thursday 11th Jan 2024 @ 7:30am Central (for the December 2023 month)
U.S. Headline CPI
Prev: 3.1%
Exp: 3.2%
Rep: TBC Tomorrow
U.S. Core CPI
Prev: 4.0%
Exp: 3.8%
Rep: TBC Tomorrow
Will the US Core CPI finally fall below 4% for the first time since May 2021?
Core vs Headline (the difference)
You can clearly see how Core CPI is less volatile than Headline CPI on the chart. Core CPI removes the volatile food and energy expenditures to provide the underlying inflation trend. Food and Energy is included in the Headline inflation which as you can see from the chart is much more volatile and changes direction quicker than core inflation. Its almost like an oscillator around the core inflation line.
The Feds 2% Target
It is clear that we are not at the Federal Reserve’s target inflation rate of 2% on both fronts (purple line). It is critical to understand that we are still not at or below the target 2% level regardless of the FOMC’s determination of a likely hold on interest rates and reductions to interest rates in 2024. Lets see can the target be met first.
You can see that since 2002 Core CPI has fluctuated one standard deviation above and below the 2% inflation level between 1% and 3%. It is clear that we are not back into this standardised zone between 1 – 3%.
I’ll update you tomorrow with the released figures
PUKA
short idea on XAUUSD H4 and H1 timeframethe price quite reacted to the strong resistance zone after touching all time high 2147 usd per troy ounce. now we are seeing the price corrective move is on going, while the bearish correction now pushing gold, it creates a bullish flag. me personally expecting a bullish impulse if cpi later this week is against us dollar. we need to put attention at 2007-2010 zone and 1985-1990 zone later to long this trade with a tight sl aiming for another all time high price for gold
Could USD/CAD Retain It's Bullish Move?Firstly, fundamental economic indicators suggest that the US economy has been exhibiting signs of strength, which tends to favor the USD. Positive economic data releases, coupled with the ongoing efforts to boost economic recovery, contribute to a bullish sentiment surrounding the US dollar. As the USD is the base currency in the USD/CAD pair, any positive developments on the US economic front tend to drive the pair higher.
Investors and traders often pay close attention to inflation data, such as the CPI, as it provides insights into the purchasing power of a currency. In anticipation of Thursday's release, market participants may be adjusting their positions, taking into account the potential impact of the CPI figures on the USD/CAD pair. A higher-than-expected CPI could further fuel the bullish momentum, as it may signal a potential tightening of monetary policy, which tends to support the currency.
Additionally, considering the historical seasonal trends, the USD/CAD pair has shown a tendency to be bullish during the months of January and February. Seasonal factors, such as weather-related impacts on economic activities and market participants returning from holiday breaks, can influence trading patterns. Traders often take these seasonal trends into account when making investment decisions.
It's essential to note that while historical patterns and fundamental analysis provide valuable insights, the financial markets are dynamic and subject to sudden changes. Therefore, traders should exercise caution, consider risk management strategies, and stay informed about any unforeseen events that could influence the market dynamics. Monitoring economic indicators, geopolitical developments, and market sentiment will be crucial in navigating the potential opportunities and risks associated with the USD/CAD pair in the coming days.
USDX: Thoughts and AnalysisToday's focus: USDX
Pattern – Minor Support.
Support – 102.06
Resistance – 102.52
Hi, and thanks for checking out today's update. Today, we are looking at USDX on the daily chart.
Today's video asks if USDX will continue to hold short-term support at 106.06 and make a new move at testing resistance, or is this just descending triangle price action, which in time will resume the overall downtrend with a new breakout lower.
Traders will also be watching this week's CPI data, which could have some influence on Fed members depending on what we see come in. In the meantime, we will contnue to watch buyers from 102.06 support.
US CPI data will be released this Friday at 12:30 am AEDT.
Good trading.
Fed Policy Trajectory and Interest Rate OutlookCBOT: Micro 2-Year Yield ( CBOT_MINI:2YY1! ), Micro 10-Year Yield ( CBOT_MINI:10Y1! ) and Micro 30-Year Yield ( CBOT_MINI:30Y1! )
The latest US jobs report showed that employers added 216,000 jobs for December while the unemployment rate held at 3.7%, reported by the Bureau of Labor Statistics (BLS). That compared with respective market estimates of 170,000 and 3.8%.
On Thursday, the BLS will release December’s CPI data. The prevailing market expectation is 0.3% monthly increase for headline CPI, up from 0.1% in November.
The Federal Reserve sets monetary policy to support price stability and full employment. New data shows that the US economy is very resilient, and maybe slightly overheated with the upbeat job market.
After hiking interest rates 11 times and pausing for 2 times, the Fed now has a dilemma. “To cut, or Not to cut”, this is a trillion-dollar question.
In this 3rd installment of new year outlook for major asset classes, I will discuss what opportunities may lie ahead for bonds and interest rate derivatives.
FYI: The first writing was a year-end review for metal commodities – Gold, Copper, and Aluminum. If you haven’t read it yet, you may follow the link here:
The second writing was New Year outlook for US equities – the benchmark market indexes Dow, S&P 500 and Nasdaq 100.
2023: what’s the dominating market narrative?
Last year, the Fed raised interest rates four times for a total of 100 bps. This was a slower pace comparing to the year before, where we saw seven rates hikes and 400 bps in total.
To the surprise of most analysts, businesses continue to expand and hire new workers under tightened credit. Inflation could creep up with higher wages and a strong job market.
US stock market rose for most of the year, shaking off bad news along the way. Despite interest rates are 5% higher than two yeas ago, major market indexes reached all-time-high records last December. The S&P 500 gained 23.9% for the year, and the Nasdaq Composite more than doubled that at 53.9%.
2024 Outlook for US Interest Rates
Most investors agree that the Fed will cut rates in 2024. But the expectations for the timing and scope vary significantly.
According to CME Group’s FedWatch Tool, the first rate-cut could occur at the March 20th Fed meeting, with a 69.2% probability. For June 12th, the odds of two or more rate cuts increase to 85.9%. By December 18th, investors expect the Fed Funds rate to fall between 1% to 2% lower than the current 5.25-5.50% range, with a 97.9% odds (Data as of January 7th).
(Link: www.cmegroup.com)
Treasury prices and yields move in opposite directions. Current bond prices reflect the market expectations of 5-8 rate cuts in 2024. Lower yields, higher prices.
The January 2nd CFTC Commitments of Traders report (COT) shows that “Leveraged Funds” hold the following open positions on CBOT interest rate futures:
• Fed Funds: 224,772 longs and 489,204 shorts
• 2Y Treasury: 775,882 longs and 2,266,563 shorts
• 5Y Treasury: 844,600 longs and 2,821,682 shorts
• 10Y Treasury: 285,598 longs and 775,882 shorts
• 30Y Treasury: 79,124 longs and 497,636 shorts
The overwhelmingly Net short positions indicate that the “Smart Money” considers the rate cuts being oversold. Why do they want to short Treasury futures? If the Fed keeps the interest rates higher for longer, or implements fewer rate cuts, Treasury yields would be higher than the current price indicated. Higher yields, lower prices. Shorting Treasury futures expresses the viewpoint that Treasury bond prices would fall.
In my opinion, the bond market tends to tell a better story, compared to the stock market. The institutional nature of most participants allows the bond market to be less prone to irrational hypes and price bubbles.
Trading with CBOT Micro Yield Futures
Micro Treasury Yield Futures are low-cost instruments to participate in the bond market. Micro yields are quoted by treasury yield directly. Higher yields, higher futures prices. This would ease the burden from working the complicated price and yield conversion.
Last Friday, the February contract of Micro 2Y Yield futures (2YYG4) were settled at 4.186%. Each contract has a notional value of 1,000 index points, or $4,186 at current price. To acquire 1 contract, a trader is required to deposit an initial margin of $340.
The February Micro 10Y Yield (10YG4) was settled at 4.008%. Notional value is 1,000 index points or $4,008. Initial margin is $320.
The February Micro 30Y Yield (30YG4) was settled at 4.221%. N notional value is 1,000 index points or $4,221. Initial margin is $290.
My reasoning:
We just had a hotter than expected jobs report for December. If CPI data shows inflation rebound this week, the whole Fed cut narrative could be derailed. The January 30th Fed meeting could have a surprised rate decision, or a more hawkish Fed statement.
To replicate the short bond futures strategy used by Leveraged Funds, investors could long the micro yield futures to express the same view of higher yields. Initial margins for 10Y Micro Yield are $320, compared to $2,125 for 10Y treasury notes futures (ZN).
Hypothetically, if the yield goes up by 25 bps, a long Micro Yield futures position would gain $250 (= 0.25 x 1000). This would be the same for 2Y, 5Y, 10Y and 30Y micro yield futures, as they all have a 1,000-point multiplier.
On the other hand, if investors continue to ignore the Fed, as they have often been in the past two years, short futures will lose money.
Happy Trading.
Disclaimers
*Trade ideas cited above are for illustration only, as an integral part of a case study to demonstrate the fundamental concepts in risk management under the market scenarios being discussed. They shall not be construed as investment recommendations or advice. Nor are they used to promote any specific products, or services.
CME Real-time Market Data help identify trading set-ups and express my market views. If you have futures in your trading portfolio, you can check out on CME Group data plans available that suit your trading needs www.tradingview.com
Gold Puzzles: ISM Downturn, NFP Beats, and Thurday's CPI.In today's trading session, our attention is directed towards XAUUSD, where we're eyeing a buying opportunity around the 2008 zone. Gold, emblematic of a broader uptrend, currently finds itself in a correction phase, steadily approaching the key trend at the 2008 support and resistance area. This technical perspective serves as our initial guide.
Diving into the specifics, the recent ISM figures revealed a notable downturn, falling from the forecasted 52.5 to the actual 50.6, signaling a slower expansion in the manufacturing sector than anticipated. This unexpected contraction has cast a shadow on the US economic outlook. Coupled with the recently released NFP data, where the actual job gains surpassed both the forecast (184k) and the previous (150k), a nuanced economic landscape is emerging.
This intricate scenario, where manufacturing lags while employment gains outpace expectations, introduces a level of uncertainty. The mixed signals within the labor market further underline the potential for a dovish Fed. Adding to this equation, the CPI data becomes a pivotal factor. In this intricate dance of numbers, the potential for a softer CPI reading aligns with the narrative of a cautious Federal Reserve.
Now, weaving these numbers into the fabric of our analysis, the combination of weak ISM figures, strong NFP job gains, and the prospect of a softer CPI contributes to the argument for USD shorts. As we traverse the complex economic landscape, gold emerges as a candidate for potential upside movements amid the increasing likelihood of USD weakness.
Stay vigilant, Joe, and trade safe.
AUDUSD Chronicles: Linking CPI, FOMC, and DXY TrendsGreetings Traders,
In today's trading session, our attention is focused on AUDUSD, where we are actively monitoring for a potential buying opportunity around the 0.66200 zone. As AUDUSD navigates an uptrend, the ongoing correction phase positions it in proximity to the trend at the 0.66200 support and resistance area. This in-depth analysis will explore the fundamental landscape, drawing insights from the Consumer Price Index (CPI) and Federal Open Market Committee (FOMC) data, and connecting this idea to the previously discussed DXY analysis.
Starting with the FOMC decisions, the most recent meeting held on December 13, 2023, maintained the interest rate at 2.00%. The dovish stance articulated by the Federal Reserve underscores their commitment to accommodating economic growth while navigating inflationary pressures. This has broader implications for AUDUSD, as a weaker USD often contributes to the strength of commodity currencies like the Australian Dollar.
Analyzing the CPI data for AUDUSD, the inflation rate in Australia has shown resilience. The most recent figures for Q4 2023 indicate a 2.0% year-over-year increase. This steady inflation, coupled with the dovish stance of the Federal Reserve, can contribute to a positive environment for AUDUSD, potentially supporting its upward trajectory.
Linking this idea to the previously discussed DXY analysis is crucial. DXY, representing the strength of the US Dollar against a basket of major currencies, exhibits an inverse relationship with AUDUSD. As DXY weakens, AUDUSD tends to strengthen, creating a favorable environment for a buying opportunity. Traders should monitor DXY movements for additional insights into the potential direction of AUDUSD.
Examining interest rate differentials between the Reserve Bank of Australia (RBA) and the Federal Reserve adds another layer to this analysis. As of the latest available data, the RBA's cash rate is at 0.10%, significantly lower than the Federal Reserve's 2.00%. This interest rate gap can further contribute to the attractiveness of AUDUSD for investors seeking higher yields.
Considering the overall economic backdrop, Australia's strong ties to commodity exports, particularly in metals and minerals, can enhance the appeal of the Australian Dollar. As global economic conditions improve, the demand for commodities may rise, positively impacting AUDUSD.
In conclusion, as we explore a buying opportunity in AUDUSD around the 0.66200 zone, the interplay of FOMC decisions, CPI data, and the inverse relationship with DXY provides a comprehensive understanding. Traders should remain vigilant, considering the broader market context, and keep an eye on DXY movements for nuanced insights into the potential direction of AUDUSD.
Best of luck in your trades,
Joe
Interest Rates and Inflation: Shaping GBPUSD's TrajectoryGreetings Traders,
As we delve into the intricacies of GBPUSD for potential trading opportunities, the convergence of fundamental factors takes center stage. This analysis encapsulates the interplay between interest rates, Consumer Price Index (CPI) data, and central bank decisions for both the Bank of England (BoE) and the Federal Reserve.
Examining the BoE's CPI data provides insights into the inflationary pressures faced by the UK. The most recent CPI figures on December 20, 2023, indicate a year-over-year inflation rate of 3.9%, slightly below the forecasted 4.3% and notably lower than the previous 4.6%. The gradual decrease in inflation suggests a potential easing of price pressures. However, it's crucial to note that even with this decline, inflation remains elevated.
In tandem with the CPI, the BoE's interest rate decisions are instrumental in understanding the monetary policy landscape. As of December 14, 2023, the BoE has maintained a benchmark interest rate of 5.25%. This consistent stance signals the central bank's commitment to addressing inflation while providing stability to the economy. The interest rate differential between the BoE and the Federal Reserve plays a pivotal role in shaping GBPUSD dynamics.
Contrasting this with the Federal Reserve's interest rate decisions, the FOMC has maintained a steady interest rate of 2.00% as of December 13, 2023. The relatively lower interest rate in the United States compared to the UK creates an environment where traders need to carefully navigate the potential impact on GBPUSD.
Analyzing the broader context, the comparative interest rates and inflation trends suggest a nuanced landscape for GBPUSD. While the BoE grapples with elevated inflation, its commitment to a higher interest rate provides a counterbalance. On the other hand, the Federal Reserve's dovish stance, despite rising inflation, signals a cautious approach. This divergence in monetary policy contributes to the potential for GBPUSD upsides.
In conclusion, traders eyeing GBPUSD for a buying opportunity around the 1.25900 zone should consider the complex interplay of interest rates, inflation, and central bank decisions. The nuanced analysis presented here aims to equip traders with a comprehensive understanding of the macroeconomic factors shaping GBPUSD's prospects, pointing towards potential upsides in the current market environment.
Wishing you successful trades,
Joe.
Fed's Hope in 2024 - Their Projection & PlanDuring the December FOMC conference, the fed said the appropriate level for interest rate or the fed funds rate will be 4.6% at the end of 2024 from current 5.5%, 3.6% at the end of 2025, and 2.9% at the end of 2026.
Many reporters take that as Fed’s hint to cut rate in 2024, but the Fed added saying these projections are not the committee decision or plan.
So what is the difference between a projection and a plan? And how will the market performance in 2024?
Dow Jones Futures & Options
E-mini Dow Jones
Ticker: YM
1.00 index point = $5.00
Micro E-mini Dow Jones
Ticker: MYM
1.0 index points = $0.50
Disclaimer:
• What presented here is not a recommendation, please consult your licensed broker.
• Our mission is to create lateral thinking skills for every investor and trader, knowing when to take a calculated risk with market uncertainty and a bolder risk when opportunity arises.
CME Real-time Market Data help identify trading set-ups in real-time and express my market views. If you have futures in your trading portfolio, you can check out on CME Group data plans available that suit your trading needs www.tradingview.com
EUR/USD steady as Spanish CPI lower than expectedThe euro is calm in Friday trade. In the European session, EUR/USD is trading at 1.1053, down 0.08%.
Spain released the December inflation report today, with CPI dipping to 3.1% y/y, down from 3.2% in November. This was better than expected as the consensus estimate stood at 3.4%. The reading was the lowest rate since August, with the drop attributed to lower prices for fuel, food and electricity. Monthly, CPI rose from -0.3% to 0.0%, but this was lower than the consensus estimate of 0.3%. Core CPI dropped to 3.8% y/y, down from 4.5% in November.
Germany, France and the eurozone will follow with their inflation releases next week. If the data shows that inflation eased in December, it will put pressure on the European Central Bank to cut rates in the first half of 2024. The ECB has not followed the Federal Reserve and continues to push back against rate-cut expectations. The markets have priced in 150 basis points from the ECB next year, with an initial cut expected in April.
ECB President Lagarde has poured cold water over rate-cut fever, saying that the ECB should "absolutely not lower its guard". Lagarde may have to shift her hawkish stance or risk tipping the weak eurozone economy into a recession. If next week's inflation report indicates that inflation is falling, we can expect the voices in the ECB calling for looser policy to get louder.
The US releases Chicago PMI, an important business barometer, later today. The PMI shocked in November with a reading of 55.8, which marked the first expansion after fourteen straight months of contraction. The upward spike may have been a one-time blip due to the end of the United Auto Workers strike as activity rose in the auto manufacturing industry. The consensus estimate for December stands at 51.0, which would point to weak expansion.
EUR/USD continues to put pressure on resistance at 1.1086. Above, there is resistance at 1.1171
1.1116 and 1.1031 are providing support
HEADLINE/CORE PCE - Inflation dips down into to historical normsU.S. Headline PCE - Lower than Expected ✅
Actual: 2.64%
Exp: 2.8%
Prev: 3.0%
US Core PCE - Lower than Expected ✅
Actual: 3.16%
Exp: 3.4%
Prev: 3.5%
As highlighted on my recent Macro Monday post Core PCE is the Feds favorite metric for measuring inflation (as it excludes volatile price swings from the likes of energy and food and gives a good indication of the underlying inflation trend). PCE is also considered more comprehensive and a more consumer led report than CPI which focuses more on a lessor altered fixed basket of goods (compared month to month).
CORE PCE
Core PCE has come in this month lower than expected at 3.16% (expected 3.4%). This is great news for the fight against inflation.
HEADLINE PCE
Separately, Headline PCE has just dipped under the 3% level down to 2.64% which is getting very close to the Federal Reserves long term target of 2%.
Historical Core PCE Norms
On the chart you can see that since 1990 the typical Core PCE range is between 1 - 3% (red dotted lines on chart). We are slowly getting back down into this more historically moderate level. A sub 3% Core PCE next month would be ideal and demonstrate further easing of inflationary pressures.
For the full breakdown of the Core and Headline PCE and to know the differences between PCE and CPI, please review this weeks Macro Monday released earlier this week.
PUKA
