Get started

CPI

Nasdaq Momentum ahead of bearish DXYIn anticipation of tomorrow's trading session, our focus keenly centers on the NASDAQ, where we are meticulously examining the potential for a strategic buying opportunity around the 16550 zone. The current trajectory of NASDAQ reflects a sustained uptrend, emphasizing a consistent upward movement. Presently, the index is immersed in a correction phase, gradually approaching the trend at the critical 16550 support and resistance historical zone. This numerical level holds significant weight, symbolizing both a historical inflection point and a crucial juncture where market forces may pivot. Adding a layer of depth to our analysis, we take into consideration the broader monetary policy environment in the United States. The prevailing dovish stance in the US monetary policy has exerted downward pressure on the US Dollar Index (DXY), influencing a cascade effect across various indices, including the NASDAQ, due to their correlation. Acknowledging this interconnected landscape enhances our strategic approach as we assess the potential buying opportunity, aligning technical trends with the macroeconomic backdrop. The confluence of a robust uptrend, a critical support and resistance zone, and the influence of dovish monetary policy forms the foundation of our analysis for potential trading opportunities in the NASDAQ tomorrow.
PEPPERSTONE:NAS100Long
by JoeChampion
2
US Financial Markets facing CPI after US Down-Graded to AA+- Emerging Markets are in a paranoid state due to Major US Financial Markets nearing scheduled date of CPI numbers releasing day. Consensus forecasts are anticipating Inflation to steadily go up for the rest of 2023 and entering '24 10'th of August/23 will be a very important day for The Global Financial Markets. Casualties might follow soon due to the turbulence of this frenzy economic environment created. Is US about to enter a recession ? Or do you believe Powell's joke of 'Soft Landing' How about another joke Powell ... Note that US technically had entered recession by two negative consecutive Quarters, however, it got 'saved' by promising growing employment numbers. Seems like Feds are masters at postponing cascading tragedies, great tricksters filled with riddles. With Euro-Zone being officially in Recession for a while now, it's just a matter of time for US fate to be sealed. Why learn economics !? Broader and clearer pictures to strategize your investing/positioning and smaller time frames trading decisions, be it swings, intradays or scalps. Seems like it is enough today for a good poker player and a gambler to trade the markets. How many times can you get lucky in repetitive motion and consider making in to trading for a living ?! Not long . Open your horizons and explore financial literacy to be more in touch with Facade of Financial Markets.
TVC:SPX
by Mr_J__fx
🔥 XAUUSD : The Fall will Continue ?By checking the gold chart in the daily time frame, we can see that the price according to our expectation was accompanied by a further fall and was able to correct up to $1973! Be careful, this fall will continue only if it stabilizes below the level of 1987$! In this case, the next falling targets will be $1966, $1960 and $1939 respectively! Please share your opinion about the possible trend of this chart with me and support us with your likes and comments. Best Regards , Arman Shaban
FOREXCOM:XAUUSDShort
by ArmanShabanTrading
4
🔥 XAUUSD : CPI is Coming ! Bull or Bear ?By checking the price of gold in the daily time frame, we can see that the price started to correct more ,as we expected and was able to fall to $1976! If the price stabilizes below the level of $1990, we can expect more fall from gold! In addition, today we will have the important statistics of the CPI, and if this statistic is announced more than the forecast, it will cause the fall of gold, and if it is announced equal to or less than the forecasted rate, it will increase the price of gold! Today the market will experience high fluctuations! Please share your opinion about the possible trend of this chart with me and support us with your likes and comments. Best Regards , Arman Shaban
FOREXCOM:XAUUSDShort
by ArmanShabanTrading
32
trend line, need your focus actually. #GOLD.. market just trade above his trend line keep close it guys, because its market most important area, there is 2 things actually, in first go market hold his trend line you can see on chart and now again trade in same formation, this time its depends on data actuallay , if market again didnot hold it and data came with position numbgers then downside our first target will be 1973 if not then upside we have 1993 , 1996 and 2008 2010 trade wisely good luck
FX:XAUUSD
by AdilHussain731333
2
US CPI Data: Dollar Down As Rate Uncertainty Sustains VolatilityAs the clock ticks towards 13:30 GMT, financial markets are bracing for the release of the Consumer Price Index (CPI) data for November, a pivotal metric that provides a snapshot of the current state of the United States economy. The CPI measures the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services, making it a crucial indicator for gauging inflationary pressures. Against the backdrop of the recent dichotomy in US inflation trends, where rates have reduced from alarming figures in 2021 to a current 3.2%, the forthcoming CPI figures are anticipated to shed light on the continued trajectory. This reduction in inflation, although positive for economic stability, has occurred alongside a somewhat unconventional stance by the Federal Reserve. Traditionally, central banks opt to raise interest rates to curb spending and counteract inflation. However, the US Federal Reserve has maintained a steadfast position in increasing interest rates for over a year, even as inflation trends abate. This seemingly contradictory approach has prompted speculation within financial circles, with analysts debating the motives behind the prolonged interest rate hikes. The anticipated November CPI data is expected to show a 3.1% year-on-year increase, a slight dip from the 3.2% recorded in October. Additionally, annual Core CPI inflation is forecasted to remain steady at 4% for November. These figures will be closely scrutinised to discern any shifts or continuations in the recent trends. Interestingly, the foreign exchange market has already signalled early sentiments ahead of the CPI release. The British pound exhibited strength against the US dollar in the early hours of the London session, reaching a value of 1.2580 at FXOpen. This movement is an intriguing indicator of market sentiment and may reflect expectations or reactions to the anticipated CPI figures. As the financial community awaits the unveiling of the November CPI data, the juxtaposition of decreasing inflation and persistent interest rate hikes by the Federal Reserve adds an element of complexity to the economic narrative. The numbers released will not only impact currency markets but will also influence broader economic outlooks and potentially shape future policy decisions. This article represents the opinion of the Companies operating under the FXOpen brand only. It is not to be construed as an offer, solicitation, or recommendation with respect to products and services provided by the Companies operating under the FXOpen brand, nor is it to be considered financial advice.
by FXOpen
1
EURUSD 12 Dec 2023 Intraday Analysis - US CPI DayThis is my Intraday analysis on EURUSD for 12 Dec 2023 based on Smart Money Concept (SMC) which includes the following Time Frames: 4H 15m 4H Chart Analysis 1. Swing Bullish INT Bearish Reached EQ 2. INT structure turned bearish to liquidate the INT Low (Liquidity above the Daily Demand) and mitigated the daily demand zone. INT Structure is currently bearish, so we are still bearish and there is a high probability that we may break the Swing Low as per the Daily/Weekly Bearish Continuation. On the other side, 4H/Daily Swings are bullish and we are at the extremes. If we are going to continue these bullish structure then at least we need to see Bullish iBOS on the 4H. We also could benefit from LTFs to show us early if that daily mitigation could develop to be a Swing Continuation on the 4H/Daily. Waiting for LTF to show me more developments. 3. Swing low and last demand for potential buys. 15m Chart Analysis 1. Swing Bearish Internal Bearish Reached EQ 2. Swing turned bearish after NFP and tapped into a Daily Demand Zone where we started the 15m Swing/INT Pullback. Currently we are bearish in Structure on 15m and 4H. My expectations is that if we are going to continue down we need to respect the 15m Swing / 4H INT Highs and we can continue bearish. If we invalidated the 15m Swing / 4H INT Highs then we are going to play longs for the Daily Structure. 3. No Supply zones for Shorts that can be potential. 4. No significant Demand zones to hold price
by Amr-Sadek
USDX: Thoughts and Analysis Pre-US CPIToday's focus: USDX Pattern – LH Resistance push Support – 102.45 Resistance – 104.12 - 104.35 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 remain below resistance and possibly break lower if today's CPI data comes in lower than expected. We are mainly focused on the resistance areas and the current LH that has formed around the supply and resistance areas discussed in our video update. We have also noted some bullish price action; if CPI rises to the upside, this could set up a new continuation higher. But for now, as noted in today's video, we will continue to look at the resistance holds and the current trend of CPI declines on the y/y. US CPI data is due on Wednesday at 8:30 am EST or 12:30 pm AEDT. Good trading.
EIGHTCAP:USDXShort
by Eightcap
!!! ↘︎ Multi-day Streak(period): No Santa this Christmas ↘︎ !!!✺ End of Bulls rally after the most successful trading day since April. ✺ The possibility of the Goldilocks scenario - is it on the horizon? ✓ PPI data has been reported today. Key fact: "Firms no longer optimistic" BLACKBULL:SPX500 After the longest period of growth in 2024, the market closed at -0.41 rate, putting the end to the robust bulls rally since the last week. The PPI report came out during the pre-market hours. The result, from the surface was seemingly positive from market perspective. Although, always the detail is the devil. The overall result came out in favor of regular consumer, seeing drastic decrease in manufacturing cost in total: (Processed goods for intermediate demand) Prices for processed goods for intermediate demand moved down 0.9 percent in October, the largest decrease since falling 1.6 percent in May. Leading the October decline, the index for processed energy goods dropped 4.3 percent. Prices for processed foods and feeds decreased 0.4 percent. In contrast, the index for processed materials less foods and energy advanced 0.1 percent. For the 12 months ended in October, prices for processed goods for intermediate demand fell 4.5 percent. The largest contribute to the odds was the transportation and warehousing which increased for about 1.5 percent. The warehousing and transportation contains various subjects from regular staffing needs to delivery of goods, signifying that the era of pandemic is yet remain in the market. The Empire state manufacturing Survey begins with the headline, "Firms No Longer Optimistic," as the future business conditions index plunging from twenty-four points to -0.9, the lowest since 2022. Troublesome in logistics with increased unfulfilled shipment, lacking number of employees, decreased employee work hours, signifying operational challenges residing within the industry. Facing these resilient challenges, business have forecasted in contrast to market's optimistic expectations: General business conditions from twenty-three to -0.9 followed by decreased number of new orders, increased unfilled orders and shipments, lacking performance over all. Back to the graph, here are some key price-lines for the rest of this week on BLACKBULL:SPX500 (red lines): 1. Bull $4506-4521 (Largest volume allocated for the last 5 days) 2. Bear $4393.66-4360 (Largest volume allocated since Oct 28th) With few significant leaps in the previous week and this Monday, the market might have fooled us by acting as if these were the clues as to guarantee the potential end of the year rally. With big CPI report and lots of unexpected positive earnings from larger tech firms and overall, we were able to get through the $4393 resistance level without a hurdle, and it seems that we just ran out of those events to create the unexpectencies to get us through the new high. Plus, the Inverse U-shape pattern is one of my favorite along with Inverse W-pattern (or Double top), and as large the previous leap was, this down trend will also be way much more accelerated with higher velocity than which we anticipated. We all know that demand is the driving factor of the market, but without the proper level of supply to meet the market needs, will only cause higher inflation, simply will lead to another rate hike from the fed. I think today's inverse trend was only the smallest part portraying the fear residing beneath the surface.
BLACKBULL:SPX500Short
by Kim_CLSPX
New Zealand dollar climbs ahead of NZ Manufacturing SalesThe Japanese yen has surged on Thursday. In the North American session, USD/JPY is trading at 144.00, down a massive 2.25%. Earlier, the yen dropped as low as 143.79 per dollar, which marked the yen's highest level since August 10. The yen has posted its biggest one-day jump of the year against the dollar on Thursday after Bank of Japan policy makers provided clear hints that the central bank is planning a major shift in monetary policy. Governor Kazuo Ueda said earlier on Thursday that the BoJ would face an "even more challenging" situation at the end of the year and in early 2024 regarding monetary policy guidance and said the BoJ would have to decide which interest rates to target once it ends negative rates. Ueda's hint that negative rates might soon end followed comments from BoJ Deputy Governor Ryozo Himino on Wednesday. Himino discussed the potential consequences if the BoJ were to raise rates into positive territory. The BoJ is generally tight-lipped about its plans, and these comments from senior BoJ officials were unusual. The markets have interpreted the remarks as signals about a potential shift in policy, which has sent the yen soaring on Thursday. The BoJ meets next on December 18-19, and the comments from Ueda and Himino have turned the meeting "live", as the markets will be watching for a change in policy at the meeting. At previous meetings, tweaks in policy have sent the yen sharply higher and even speculation of a move can send the yen soaring, as evident today. The US releases nonfarm payrolls, one of the most important economic releases, on Friday. The ADP employment report isn't considered an accurate indication of job growth but is still closely watched, as it is released just two days prior to the nonfarm payrolls report. ADP didn't show much change in November, dropping to 103,000 compared to a downwardly revised 106,000 in October. However, this was well below the consensus estimate of 130,000. Nonfarm payrolls are expected to rise to 180,000, after an October gain of 150,000. If the nonfarm payrolls report misses the estimate, the US dollar will likely lose ground in Friday's North American session. . USD/JPY has breached support levels at 145.96 and 144.70. The next support level is at 143.69, followed by 142.73 There is resistance at 148.93 and 150.74
by OANDA
US Dollar Steadies as Market Awaits Economic Data, Yen SoftensIn early European trading, the US dollar steadied near a one-week high against a basket of currencies, holding at 103.559 on the Dollar Index. This stability follows a period of weakness in November, marked by traders anticipating significant rate cuts by the Federal Reserve in the coming year. However, recent actions have seen a shift in sentiment as investors scaled back on dovish expectations, waiting for crucial economic indicators this week, including job openings, ISM services activity data, and the highly anticipated nonfarm payrolls report on Friday. Amid this anticipation, the Japanese yen experienced a slight dip against the dollar, trading at 147.08, influenced by concerns over inflation. Tokyo's Core CPI for November showed a decrease to 2.3%, down from October's 2.7% and below the expected 2.4%. The Bank of Japan remains cautious about tightening its monetary policy despite persistent inflation above the 2% target, citing the need for sustained wage growth for long-term inflation sustainability. The BoJ's upcoming meeting in mid-December will be closely watched for any potential policy shifts. As for the US, focus is on the imminent release of the ISM Services PMI, being for November hovering around 52.7 after October's decline to 51.8. Meanwhile, technical analysis for USD/JPY indicates resistance levels at 148.77 and 147.72, with support at 146.48 and 145.96 Risk Disclosure: Trading Foreign Exchange (Forex) and Contracts of Difference (CFD's) carries a high level of risk. By registering and signing up, any client affirms their understanding of their own personal accountability for all transactions performed within their account and recognizes the risks associated with trading on such markets and on such sites. Furthermore, one understands that the company carries zero influence over transactions, markets, and trading signals, therefore, cannot be held liable nor guarantee any profits or losses.
Short
by legacyFXofficial
Euro Ascendancy: Unveiling EURJPY's Resilience Post-TokyoEURJPY underwent a correction at the onset of the Tokyo trading session following the release of Japan's National Core CPI data on November 24, 2023. Despite the data indicating a slight increase from the projected 2.8% to 2.9%, it's crucial to note that this led to only a minor correction in this currency pair. This correction aligns with market movements typically associated with economic data announcements. Technical Analysis: The currency pair currently positions itself near a robust demand zone identified at the 163.720 level. This zone has demonstrated significant resilience in previous periods, creating opportunities for potential further strengthening. In the realm of technical analysis, the target for strengthening is set at the 167.660 level, reflecting the pivot point since August 2008. Supporting Factors: Euro Strength: Despite a minor correction, the Euro maintains its resilience. Fundamental factors, such as the conservative monetary policy of the ECB, provide robust support for the Euro, particularly after touching a strong demand zone. Japanese Inflation: Despite a modest increase in Japan's CPI by 0.1% since October 2023, this can be viewed as a relatively insignificant impact that merely resulted in a temporary correction, presenting opportunities for short-term strengthening. Historical Price Movement: Historical price movement analysis indicates that EURJPY has the potential to reach its highest level since August 2008. This is attributed to the high-interest-rate policy implemented by the ECB in recent times, acting as a catalyst for this strengthening. Notably, the Euro has shown a robust increase against the JPY since October 30, 2023, with a notable surge of 3.44% as of the time of writing. Risks and Considerations: It's imperative to remember that trading always involves risks, and market conditions can change rapidly. Risks associated with changes in ECB policies, Japanese economic data, or geopolitical factors should be vigilantly monitored. Disclaimer: This analysis is for informational purposes only and does not constitute investment advice. Trading decisions should be based on in-depth analysis and an understanding of associated risks. Trading always carries risks, and past performance does not guarantee future results.
Long
by fardycurry
2
USD/JPY Waiting for USD news!The USD/JPY pair recorded an increase near the 150.20 area, recovering some of the previous losses caused by weaker-than-expected US inflation data. However, the US dollar is near its lowest level since September, reflecting expectations that the Federal Reserve has concluded its tightening policy. The BoJ may delay a shift from accommodative monetary policies following the contraction of the Japanese economy. The daily trend is bearish, but the pair shows resilience above the psychological level of 150.00 and an ascending trendline. A downside break could lead to further declines towards 149.20-149.15, while an upside move may encounter resistance at 151.00, 151.20, and 151.90. The situation calls for caution before positioning for further gains or losses.
Short
by Forex48_TradingAcademy
9
US CPI UpdateUS CPI US Headline and Core CPI for October both came in lower than expected (decrease). US Headline CPI: YoY – Actual 3.24% / Exp. 3.3% / Prev. 3.7% (Green on cha rt) US Core CPI: YoY – Actual 4.02% / Exp. 4.2% / Prev. 4.13% (Blue on chart) The chart below illustrates the direction of the current YoY down trend for both Headline and Core CPI however we are still not at the historical moderate levels of inflation desired. You can see these moderate levels of inflation between 1 – 3% from 2002 – 2020 below. Nice to see the Core CPI come down, almost down, into the moderate historical averages PUKA
ECONOMICS:USIRYY
by PukaCharts
Japan Inflation Overview JAPAN CPI Japan Headline and Core CPI for Sept both came in lower than expected. Japan Headline CPI: YoY – Actual 3.0% / Exp. 3.2% / Prev. 3.2% (green on chart) Japan Core CPI: YoY – Actual 4.2% / Exp. 4.3% / Prev. 4.3% (blue on chart) The chart below illustrates that Core CPI appears to be plateauing with Headline CPI decreasing from 4.3% to 3% since Jan 2023. Similar to the Eurozone chart you can we are long way from the moderate levels of inflation between -1.5 – 1.5% from 2015 – 2020 below. Japan’s economy contracted by 2.1 per cent during the third quarter of 2023, following an expansion in the previous two quarters. Analysts fear the country might slip into a recession. The contraction was sparked by a combination of sticky core inflation holding close to its 4.2 – 4.3% ceiling since May 2023, the slowing of exports, and low pay rises that appear to have led to weak domestic consumption. “Given the absence of a growth engine it wouldn’t surprise me if the Japanese economy contracted again in the current quarter. The risk of Japan falling into recession cannot be ruled out.” - Takeshi Minami – Chief Economist Norinchuckin Research Institute
ECONOMICS:JPCCPI
by PukaCharts
Wholesale Inflation Posts Its Biggest Decline in Over Three YearA powerful one-two combination of data pointing to softening inflation is continuing to support investor sentiment and a strong equity rally with Producer Price data this morning showing weaker-than-expected price increases among wholesalers. The data follows yesterday’s release of the Consumer Price Index, which showed no m/m change. Stocks are also gaining additional support from data this morning depicting declining retail sales, which equity players are perceiving as disinflationary rather than contractionary. Markets are bifurcated today, however, with yields and the dollar higher, as bond and currency traders pare back some of yesterday’s bonanza. Consumers Rein in Spending The U.S. Commerce Department reported this morning that retail sales declined sharply in October, as consumer spending slowed from the third quarter’s blistering pace. The resumption of student loan repayments definitely had an adverse impact, as a portion of wages were allocated to debt service rather than consumption. Retail sales declined 0.1% month-over-month (m/m) in October, the first decline since March. October’s figure arrived better than the -0.3% projection, however, while slipping from September’s 0.9% growth rate. Retail sales excluding automobiles and excluding automobiles and gasoline rose 0.1% on both fronts, worse than the 0.8% figures from September. Sales Contraction is Broad Based Seven out of thirteen categories contracted during the period, with the following categories experiencing the noted m/m declines: Furniture showrooms, 2% Miscellaneous stores, 1.7% Automobile dealerships, 1% Sporting goods retailers, 0.8% Building materials shops, gasoline stations and general merchandise also had declines but of lesser degrees. Gains were led by health and personal retailers, with sales increasing 1.1%. Other categories produced the following increases: Grocery stores, 0.6% Electronics and appliances retailers, 0.6% Dining establishments, 0.3% Ecommerce, 0.2% The apparel category was flat. Wholesalers Hit with Price Declines Wholesale inflation cratered at its fastest rate since the depths of the pandemic in April 2020. October’s Producer Price Index (PPI) declined 0.5% m/m, less than projections of a 0.1% increase and September’s 0.4% growth rate. Core PPI, which excludes food and energy, was unchanged and weaker than the 0.3% estimated and the previous month’s 0.2%. On a year-over-year (y/y) basis, headline and core producer prices rose 1.3% and 2.4%, compared to the previous period’s 2.2% and 2.7%. Leading the wholesale price decline were a 6.5% drop in energy products, a 0.7% decline in trade services and a 0.2% contraction in food. Transportation and warehousing wholesale prices rose at a sharp 1.5% rate, meanwhile. Services overall came in unchanged m/m while goods excluding food and energy rose 0.1% during the period. Equities Gain, but Positive Sentiment Eases Optimism sparked by yesterday’s CPI and this morning’s PPI appears to be easing, with stocks off their highs of the day while yields and the dollar have given back a good chunk of Monday’s gains. Still, all major U.S. equity indices are higher, with the small-cap Russell 2000 leading, having gained 0.8% while the Nasdaq Composite, S&P 500 and Dow Jones Industrial indices are higher by 0.3%, 0.3% and 0.2%. Sectoral breadth remains impressive, with all sectors higher while the defensive health care and utilities sectors are 0.1% and 0.4% lower. Leading the sectors are materials and consumer staples, with each gaining 0.6% as technology looks tired from its recent monster run. Indeed, to secure more gains going forward, the market will need to broaden out and begin to exhibit momentum in cyclical and value stocks. The dollar and yields are higher, with the 2- and 10-year Treasury maturities up 8 and 10 basis points (bps) to 4.92% and 4.55% while the greenback’s index is up 22 bps to 104.30. The dollar is gaining relative to the euro, yen and pound sterling while it loses ground versus the franc, yuan and Aussie and Canadian dollars. Crude oil is down 1.3% or $1.02 to $77.14 per barrel in response to the Energy Information Administration reporting a 17-million-barrel inventory increase in the U.S. over two weeks. Buoyant supply, continued concerns about weakening demand and waning worries over a potential escalation of the Middle East crisis are weighing on the commodity’s price. Consumers Cut Spending and Seek Bargains Target’s third-quarter results illustrate how consumers are cutting back on discretionary purchases while results for TJX highlight how consumers are increasingly turning to off-price retailers for low-cost items. At Target, comparable sales, which is derived from stores operating for 12 months or more and online channels, fell 4.9% during the third quarter. It was the second-consecutive quarter of declining same-store sales. On a y/y basis, the company’s revenues dropped from $26.5 billion to $25.4 billion, a 4.3% contraction. The result, however, exceeded the $24.24 billion anticipated by the analyst consensus. On another positive note, the company’s earnings per share (EPS) of $2.10 exceeded the consensus expectation of $1.48 and increased from $1.54 in the year ago quarter. The quarter was impacted by Target aggressively discounting merchandise as it sought to reduce an inventory glut, a strong trend among retailers. Target also attributed its third-quarter earnings growth to improved sales of “high-frequency items” such as groceries and beauty items, the addition of a new line of trendy kitchenware, and other new items. Target also said it has continued to reduce its inventory which as of the end of the third quarter was down 14% y/y. TJX, which operates discount retailers T.J. Maxx, HomeGoods and Marshall’s, raised its full-year guidance and said its third-quarter results benefited from capturing market share as its off-price stores attracted cost-conscious consumers. The company expects to generate a full-year EPS of $3.71 to $3.74, up from its earlier guidance of $3.66 to $3.72. TJX expects same store sales to increase 4% to 5%, an increase from its earlier guidance of 3% to 4%. During the third quarter, its sales revenue of $13.27 billion jumped approximately 9% from the $12.17 billion generated by the company in the year-ago period. Analysts expected $13.09 billion. Its overall same-store sales, furthermore, climbed 6%. TJX also posted an EPS of $1.03, which climbed significantly from $0.91 in the year-ago period. The recent quarter EPS exceeded the analyst consensus expectation of $0.99. In addition to benefiting from shoppers seeking bargains, TJX is also benefiting from its suppliers having excess inventory. The company provides discount prices by acquiring surplus items that retailers are removing from their inventories. Washington Makes Progress of Avoiding Government Shutdown In Washington, the House of Representatives appears to have avoided a government shutdown by passing a plan that will extend government funding until early next year. The measure is expected to be approved by the Senate and was passed by the lower chamber even though, it delays political battles over spending for border security and the Ukraine-Russia War while failing to make budget cuts in other areas of government spending. The House Freedom Caucus opposed the continuing spending resolution because it doesn’t include budget cuts and address border issues. The Balancing Act Today’s weak economic data highlights an important consideration going forward. Is data decelerating slow enough to be supportive of a soft landing, or is activity falling sharply and more consistent with recessionary conditions? The question is of the essence for capital markets as we operate within late-cycle monetary policy tightening, the riskiest juncture. While the former case would be supportive of current earnings estimates, the latter case would certainly point to projections falling from the $240 expected in 2024 for the S&P 500.
SP:SPX
by IBKR
12
GBP/USD Pullback before of 1.27!On Tuesday, the GBP/USD experienced a significant surge following the release of a US inflation report, which increased the likelihood that the Federal Reserve has concluded its interest rate hikes. The US Bureau of Labor Statistics reported a more pronounced decrease in October's inflation than expected, with the Consumer Price Index (CPI) dropping to 3.2% annually from 3.7%, and the core CPI falling from 4.1% to 4%, missing estimates. These data triggered a dollar collapse, with the US Dollar Index falling over 1.40% to 104.13, and the yield on the US 10-year benchmark note dropping to 4.45%, a level last seen in September 2023. In the US, the Producer Price Index, Retail Sales, New York Fed Empire State Manufacturing Index, and Federal Reserve speakers are anticipated. Additionally, I note a price in supply zones in H4 and the break of some swing highs, suggesting a potential pullback before a continued bullish run towards 1.27. Comment and leave a like, greetings from Nicola, the CEO of Forex48 Trading Academy.
Short
by Forex48_TradingAcademy
7
SR3: Trading Opportunities in a Disrupted Treasury MarketCBOT: Three-MO SOFR Futures ( CME:SR31! ) Breaking News: The US Treasury bonds are risk-free No Longer ! Last Friday, top credit ratings agency Moody's lowered its credit outlook on the U.S. to "negative" from "stable", citing large fiscal deficits and a decline in debt affordability. It has so far maintained the AAA credit rating for U.S. sovereign bonds. This move follows a rating downgrade by Fitch, another major ratings agency. On August 1st this year, Fitch cut U.S. credit rating from AAA to AA+, a decision made following months of political brinkmanship around the U.S. debt ceiling. Going back, the S&P was the first credit agency to give Uncle Sam a bad grade. It cut the U.S. credit rating from AAA to AA+ in August 2011 and has maintained it ever since. U.S. credit rating is now lower than that of Australia, Canada, Denmark, Germany, Luxemburg, Netherlands, Norway, Singapore, Sweden, Switzerland, and the European Union. These countries all enjoy AAA ratings from the top-3 major ratings agencies. The risk-free assumption on US Treasury bonds has long been the foundation of the global credit market. It typically measures the riskiness of a debt issue by adding risk premium(s) on top of a risk-free interest rate, which by default is the Fed Funds rate. If the U.S. bonds are no longer deemed risk-free, should we change “the mother of all reference rates” with a new risk-free rate? It would be like cracking the foundation of the Empire State Building and will bring chaos to the $133-trillion global bond market. In my opinion, this Doomsday scenario is very unlikely to occur. ‘A revisit of the following high-profile credit market events helps us understand why. August 2011: the S&P downgraded U.S. credit rating On August 5, 2011, the S&P announced its decision to give its first-ever downgrade to U.S. sovereign debt, lowering the rating by one notch to "AA+", with a negative outlook. S&P was direct in its criticism of the governance and policy-making process, which took the U.S. to the brink of default as part of the 2011 U.S. debt-ceiling crisis. This unprecedented downgrade drew sharp criticism from the Obama administration and the U.S. Congress, but the S&P refused to budge. What did the investors think? • The 10-Year Note with a par value of 100 traded at around 130 before the downgrade. A month later, its price hardly moved. By year end 2011, the 10Y note rose to 132. • The 30-Year Bond was quoted at 136. It reached 145 by year end, up 6.6%. • Following the downgrade, the S&P 500 lost 7.6% in August. But it quickly rebounded. The S&P ended the year at 1,258, up 3.3% from before the downgrade. I rephrase a famous quote to explain what happened: “When the U.S. sneezes, the World catches a cold.” The U.S. downgrade created a bigger chao in global markets. Investors pulled money out of emerging markets, which were considered even riskier. They put money back in the U.S. stocks and bonds, which, ironically, are deemed safer. There has not been any long-term impact from the S&P downgrade, or from its decision to keep U.S. rating at the less-than-perfect rating: • The S&P settled at 4,415 last Friday, up 260% since the downgrade in 2011; • US GDP has grown from $15.6 trillion in 2011 to $25.5 trillion in 2022, up 63%; • In 2011, US national debt totaled $14.8 trillion, a level the S&P considered as “unsustainable”. It has now mushroomed to $33.7 trillion, up 128%. The U.S. government has not defaulted on any debt or missed any interest payment. August 2023: Fitch downgraded U.S. credit rating In a surprise move on August 1st, Fitch downgraded U.S. Treasuries to AA+ from AAA. The U.S. markets were already in decline following the July 25th Fed decision to raise interest rates by 25 bps to 5.25-5.50%. Markets were clearly driven by the Fed, and the Fitch downgrade was merely a footnote. • The 10-Year Note traded at around 112 at the time of the downgrade. It fell as much as 6% to 105. The 10Y note has recovered somewhat to 107 by Monday. • The 30-Year Bond was quoted at 136. It dipped to 108 (-20%) by October, and it’s now quoted at 113, a rebound of nearly 5%. • Following the July rate hike, the S&P 500 has dropped from 4,588 to 4,117, a sharp 10% drawdown. However, it has since staged ten winning streaks, pushing the index back to 4,415, an impressive 300-point rebound (+7.2%). November 2023: Moody’s lowered U.S. credit outlook Last Friday November 10th, Moody's kept U.S. credit rating at AAA, but lowered its outlook to "negative" from "stable", citing large fiscal deficits and a decline in debt affordability. • The 10-Year Note ended the day at 4.646%, a modest gain of 0.016%. • The 30-Year Bond was settled 4.756%, down 0.011%. • The S&P 500 closed at 4,415, up 68 points or +1.6%. The U.S. hardly moved on Monday, as investors waited for the new inflation data. Today, the BLS reports that October CPI was unchanged from previous month, with the annual headline CPI dropping to 3.0%, below market expectations. The S&P pushed up 2% to reach 4,500 in morning trading. There you see how little the impact from a downgrade. Trading with CBOT SOFR Futures In “SOFR: Farewell to LIBOR”, published on July 3rd, I explained that the Securitized Overnight Funding Rate (SOFR) has already replaced the London Interbank Offering Rate (LIBOR) as the leading global credit market benchmark. If you are curious about what this means to you, check out your credit card agreement. You would find that the bank interest rate calculation usually consists of a “prime rate” and a markup, where the prime rate is defined as the sum of SOFR and a fixed rate. CBOT 3-Month SOFR Futures ( FWB:SR3 ) lists 40 quarterly contracts. It shows what the SOFR would be, quarter by quarter, ten years down to road. Based on Friday settlement prices and volume, here is the market consensus on SOFR through the end of 2024: • Current Fed Funds rate: 5.25-5.50% • December 2023 SOFR: 5.415%, volume: 265,153 • March 2024 SOFR: 5.350%, volume: 283,053 • June 2024 SOFR: 5.140%, volume: 324,902 • September 2024 SOFR: 4.880%, volume: 469,238 • December 2024: SOFR: 4.605%, volume: 402,005 SOFR futures are the most liquid futures contracts in the world. On Friday, 2,787,432 lots changed hands. Open interest was 10,655,832 contracts. The contracts showed here each traded over a quarter million lots in a single day. We could assume that market prices reflect best investor consensus on interest rate level at any given time in the future. Here are my observations: • The lead December contract is quoted at 5.415%, in line with the current Fed Funds range of 5.25-5.50%. It dropped to 5.3675% Tuesday after the CPI data. • The September 2024 quote of 4.635% on Tuesday, is 62-87 bps below range, indicating 2-3 rate cuts of 25 bps within the next ten months. • The December 2024 quote of 4.330% is 92-107 bps below range, indicating three to four rate cuts by the end of next year. In my opinion, the Fed decision, the Fed Chair statement and the latest data on payrolls and inflation, sent conflicting signals to the market, creating confusion among investors. Market prices are temporarily dislocated, which may present trading opportunities. The September 2024 quote indicates two or three rate cuts. I think that this assumption is too aggressive. The Fed, in both its statements and the Fed Chair public comments, repeatedly stressed that it never raised the issue of if or when to cut rates. If a trader holds the view that the September SOFR rate shall rise, he could express it with a short position in SOFR futures. The quoting convention of SOFR future is 100-R, where R is the effective interest rate. If the rate goes up, futures price will go down. SOFR contracts have a notional value of $2,500 x contract-grade IMM Index. Each 1 basis-point move would result in a gain or loss of $25 per contract. The minimum margins are $850 for the September contract. Hypothetically, if the trader is correct and the rates turn out to be 25 bps high, he would have a theoretical return of $625 per contract (= 25 X 25). The trader would lose money if the Fed cut rates faster than anticipated. 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
CME:SR3Z2023Short
by JimHuangChicago