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2023: Time to dive deep into value2023 is off to a cautious start, heralded by the International Monetary Fund (IMF). They have warned that the upcoming recession is likely to leave the global economy fundamentally damaged – with a recession in the US, a deeper slowdown in Europe, and drawn-out recession in the United Kingdom. This is quite possible. However, the current downturn may not look like the downturns of the past - supported by a more resilient labour market. As we transition to 2023, three questions from 2022 still remain unanswered: 1) how sticky will the underlying inflation be 2) how intense will the recession be 3) will we find a solution to Europe’s energy crisis. 2022 has been a tough year for equities, evident from the 20% decline in the global stock market capitalisation to USD $96.6 tn1. Expensive growth stocks that had driven markets higher over the past decade began to correct sharply as the interest rate regime changed. In contrast, value stocks, while down for the year, were relative outperformers. The MSCI value index outperformed its growth counterpart by 21% this year1. The rising rate environment had a strong role to play in the higher relative performance. Central banks turn up the hawkish rhetoric While inflation has begun showing signs of easing globally, central banks in the US, Europe, and UK continue to remain hawkish. The Federal Open Market Committee’s (FOMC) new forecasts for the economy and policy showed few signs that the inflation picture is improving meaningfully. Federal Reserve (Fed) Chair Powell made clear in the December meeting that he wanted to see “substantially” more progress on inflation before the hiking would stop. The latest European Central Bank (ECB) projections show inflation is unlikely to reach the 2% target until late 2025. At its December meeting, the ECB took a hawkish turn, and we think they are likely to hike by 50bps at least twice more, in February and March 2023. Similarly in the UK, the Monetary Policy Committee (MPC) will need to see core consumer price index (CPI) inflation slow materially before the MPC stops its rate hike cycle. The key question in 2023 remains how sticky inflation will be on the upside (how soon it will approach the central bank’s targets), as it will determine the likelihood of central banks maintaining their hawkish stance on monetary policy. Historically the value factor has demonstrated resilience during periods of interest rate volatility. De-risking your equity portfolio with the high dividend and value factor As interest rate volatility is poised to remain high, value-oriented stocks such as financials, energy, utilities, healthcare and industrials may be in better shape to withstand a slowdown. This is because value companies tend to make their money in the near term owing to which earnings for these companies are less discounted than for growth companies whose significant profits and cash flow are expected to occur far in the future. Value stocks also have a better chance of defending and/or growing their operating margins compared to growth stocks. The high dividend factor is synonymous with an investment strategy that gains exposure to companies that appear undervalued and have demonstrated stable and increasing dividends. The strong performance of the dividend factor in 2022 has been a function of their close relationship with stocks with more stable fundamentals alongside the rising rate environment. What worked in 2022? Our approach to blending the high dividend factor alongside the value factor helped the WisdomTree US Equity Income UCITS Index outperform the S&P 500 Index by 24.8% in 2022. As illustrated in the sector attribution (above) the allocation has been positive, contributing to the tracking difference by +21%. The overweight in energy, healthcare and utilities benefitted performance by +12%, 2% and 1% respectively last year.
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by aneekaguptaWTE
EUR/USD -19/01/2023-• Daily EURO/DOLLAR chart, zooming out back to 2021, where the 1.5 year downtrend started • Short term, trend is bullish, higher highs higher lows • Rising wedge forming, a bearish reversal pattern • Resistance levels becoming support levels, a clear sign of an uptrend • However, looking at the big picture changes the outlook a little bit • Drew Fibonacci retracement levels 50% and 61.8% of the long term downtrend • 50% level is around 1.09 and 61.8% is around 1.1225 • Bulls are now fighting to break the 50% level, without success till now • Last area of defense for the bears is the 61.8% critical correction level • If 1.1225 level stays intact, the pair will resume the long term downtrend • Only if bulls manage to break the above level, we can safely say that the long term trend reversed and we are in a bullish market
0
by RamziAbouAbdallah-CMT
6
Where is the EURUSD headed amid the EU and US inflation lag?We hope everyone had a great start to the year! As we think about the year ahead and some of the major themes that might play out, the EU vs US inflation story is among those catching our eyes now in particular. “Inflation” & “Rate Hikes” were the main talking points for the US Economy in 2022 as the US Federal Reserve (Fed) reacted and adjusted to stubborn inflation. On the other side of the Atlantic, a similar situation is playing out, albeit with a 4 to 7 months lag behind the US. Measuring the difference between the turning points, we can roughly determine the lag between the economic indicators. Headline Inflation (top chart) in the US moved up close to 7 months before the EU’s. Core Inflation (middle chart) in the EU lags the US by 5 months. Policy reaction (bottom chart) of the European Central Bank (ECB) lags the Fed by 4 months. This dynamic is important when trying to understand the path forward for the EURUSD currency pair as central banks watch inflation figures and adjust policy rates accordingly. EU & US policy rate differentials help us sniff out major turning points for the EURUSD pair. As seen in the chart above, the yield differential measured using CME Eurodollar and Euribor futures, started to widen in September 2021, which marked the EURUSD tumble from 1.160 all the way to 0.987. But now it appears the reverse is happening. Yield differentials are starting to close as markets adjust to slower pace of rate hike environment in the US while ECB still battles stubbornly high inflation. Using CME’s Fed watch tool as well as Bloomberg’s OIS Implied Euro interest rate probability tool, we can estimate the market implied forward path for the 2 major central bank’s policy rates. With the market expecting the Fed to pause rate hikes in March, while the ECB is expected to only pause in July. Interestingly, the difference in expected rate pivot is in line with the 4 to 7 months lag in economic conditions we established from the analysis above. As the ECB continues to hike while the Fed pauses, yield differential is likely to close, helping to boost Euro’s attractiveness against the USD. Coupled with the dollar’s downward momentum, This could favor further strength in the EURUSD pair. On the technical front, we see a golden cross with 50-day moving average crossing above the 200-day moving average for the pair. Coupled with an uptrend and spike in the RSI, it has marked the recent up trends remarkably well. If this historical behavior holds, the EURUSD pair could still have further room to run. For those who use Parabolic SAR, the current chart has just flipped back to a buy signal after the recent price consolidation. Given the ECB’s policy lag, dollar weakness, and a bullish technical setup, we lean on the buy side for the EURUSD pair. We set our stop at the 1.0520 level, and take profit level at 1.12800, with each 0.00005 increments per EUR in the EURUSD futures contract equal to 6.25$. Do also check out our previous EURUSD idea which played out nicely: The charts above were generated using CME’s Real-Time data available on TradingView. Inspirante Trading Solutions is subscribed to both TradingView Premium and CME Real-time Market Data which allows us to identify trading set-ups in real-time and express our market opinions. 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 Disclaimer: The contents in this Idea are intended for information purpose only and do not constitute investment recommendation or advice. Nor are they used to promote any specific products or services. They serve as an integral part of a case study to demonstrate fundamental concepts in risk management under given market scenarios. A full version of the disclaimer is available in our profile description. Sources: www.cmegroup.com www.cmegroup.com Bloomberg
CME:6E1!Long
by inspirante
EUR/USD Daily Chart Analysis For Week of January 13, 2023Technical Analysis and Outlook: The euro-dollar has bounced strongly from Mean Sup 1.052 as specified EUR/USD Daily Chart Analysis for January 6. The prevailing up path to the newly created Mean Res $1.070 and Key Res $1.078 is completed with the eye towards Outer Currency Rally 1.1100. However, be aware that this puppy is in the process of breaking downwards to newly formed Mean Sup $1.070 to reignite upward action as specified above.
by TradeSelecter
1
EUR/USD Daily Chart Analysis For Week of January 6, 2023Technical Analysis and Outlook: The euro-dollar has bounced strongly from Mean Sup 1.058 as specified EUR/USD Daily Chart Analysis For the Week of December 30. The prevailing up path to the newly created Mean Res $1.070 and Key Res $1.078 is ongoing with the current market sentiment. However, be aware there is the possibility that this puppy may break downwards from Mean Res $1.070 to reignite upward action as specified above.
by TradeSelecter
EUR/USD dips lower, German PMI improvesWelcome 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. 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. 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 is testing support at 1.0674. Below, there is support at 1.0566 There is resistance at 1.0782 and 1.0852
by OANDA
Euro shrugs as Spain's inflation dropsIt'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%. 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%. 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." 1.0660 is a weak support line. Below, there is support at 1.0616 There is resistance at 1.0702 and 1.0778
by OANDA
1
Euro higher as US jobless claims riseWe'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. 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. 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 is testing resistance at 1.0660. Above, there is resistance at 1.0746 1.0574 and 1.0488 are providing support
by OANDA
EUR/USD Daily Chart Analysis For Week of December 23, 2022Technical Analysis and Outlook: The euro-dollar stays put under our Mean Res 1.0680. The prevailing down path points to the Mean Sup 1.0470, and extended probabilities to Mean Sup 1.0330 is a high degree of certainty. However, the upside move to retest Mean Res 1.0680 and Key Res $1.0780 is possible within the current market sentiment. Of course, the question is always, 'Which way will this puppy break from the current position?'.
by TradeSelecter
EUR/USD Corrective ShortAfter last weeks FED and ECB markets were left adjusting to Powell and Lagarde's comments. FED will have to continue on with rate hikes well into Q2 '23 when they can start a pivot of no hikes, but certainly not making any cuts either. Rates will be held until they feel they have things 'under control'. While Lagarde sounded 'hawkish' it doesn't change high inflation is here to stay and global growth concerns are starting to take headlines, weighing on sentiment. I scalped the range last week but focused on shorts after fibonacci extension target was reached at 1.07350. I took short from 1.07250 closing at the end of the week at 1.06050. This week I took entry short back at that same level, 1.06050 **If SL gets hit, it’s only 10 pips and I’ll hop in on a long scalp into 1.06500 - 1.06800 Market can range with end of year low volume so its best to cut it quick when you know a key level is failing and get in at a better entry. At the end of the day, trade you own levels..but I hope you found to be decent
Short
by Krecioch
2
EUR/USD Daily Chart Analysis For Week of December 16, 2022The euro-dollar rip through our Mean Res 1.0585 but could not punch to vital Key Res $1.0780. The newly created interim Mean Res 1.0680 is the catalyst to draw the currency to retest the Mean Res 1.0680 and hit the Key Res $1.0780 in the process. The prevailing down path points to the Mean Sup 1.0450 and mildly extended probabilities to Mean Sup 1.0330. However, once the current down sentiment occurs, a furious decline to the additional Mean Support levels may likely happen. Of course, the question is, “From which support level will this puppy break playing down movement position?
by TradeSelecter
EUR/USD moving around 1.0600, far from the weekly high The EUR/USD is trading sideways on Friday, managing to stay above 1.0600, despite the strength of the dollar and the decline in equity markets, still favored by the European Central Bank meeting on Thursday. It peaked at 1.0735, the highest since June and then pulled back to as low as 1.0590. It is up for the week, but off highs. The ECB raised interest rates by 50 basis points on Thursday, and President Christine Lagarde gave an outlook at the press conference suggesting at least three more 50 basis point hikes to come at the next meetings. Her comments pushed German government bond yields higher while US Treasury yields held steady, giving strong support to the euro. The common European currency was among the best performers on Thursday, in a day in which there was a sharp global decline in equity markets, amid fears of a recession. The dollar was strengthened by the risk aversion environment. This prevented the EUR/USD from going above 1.0700 again. The ECB's tone helped it remain above 1.0600, at a time when other currencies fell to multi-day lows versus the dollar. Technically, the EUR/USD maintains a bullish trend. The upside was capped at 1.0730 and showed signs of weakness after failing to hold above 1.0700. A consolidation above 1.0700 is needed for the euro to open the doors to more gains over the short term. Technical indicators are neutral, and mostly flat, with no clear bias. There are some signs of bullish exhaustion (particularly the retreat from the weekly high) that could lead to a bearish correction, especially if the pair clearly breaks below 1.0600. The next strong support is seen at 1.0500. More to the downside emerges 1.0440 that if broken could change the outlook to neutral.
by Alex_Boltyan_FXAnalyst
1
EURJPY long End of Day trend follower (EOD)Here is what the fundamentals are following the ECB rate decision today, words from ©Lloyds Bank European Central Bank (Dec): We're not pivoting The European Central Bank (ECB) raised interest rates today by 50bps, in line with expectations. It follows 75bp hikes in the last two meetings in September and October, and a 50bp rise in July. There was broad agreement (not unanimity) on the decision and it brings the deposit rate up to 2%. There were similar increases in the main refinancing rate and the marginal lending rate to 2.5% and 2.75%, respectively. Policy rates have been raised by a total of 250bp since July (Chart 1). Although the hiking pace was reduced today, the ECB warned that interest rates will “still have to rise significantly” and that they will be kept at “restrictive levels” to dampen demand and guard against second-round effects on inflation. President Christine Lagarde indicated that more 50bp rises could occur early next year (the next update is on 2 February). She said, “we’re not pivoting” and that the ECB is “in for a long game” and there is more ground to cover. Current inflation was described as “far too high” (Chart 4) and forecast to stay above target for what is seen as “too long”. The ECB’s new quarterly economic projections upgraded inflation for 2023 to 6.3% (from 5.5%) and for 2024 to 3.4% (from 2.3%). The first forecast for 2025 is 2.3%, still above the 2% target (Chart 2). The ECB envisages a “short and shallow” recession – while next year’s GDP growth was revised down to 0.5%, it remains above the consensus forecast (Chart 3). Detail on the start of quantitative tightening (QT) – the reversal of QE – was also provided today. The ECB said that from March it will no longer reinvest fully the proceeds from maturing assets held in its Asset Purchase Programme (APP) portfolio. From March until the end of Q2 next year, the average decline will be €15bn a month, meaning that about half of estimated redemptions wil be reinvested (Chart 7). This degree of detail could also be interpreted as hawkish, because it reinforces the impetus to reduce the ECB’s balance sheet (Chart 6). Overall, while today’s interest rate decision was expected, the messaging was nevertheless surprisingly hawkish. There seems to be increasing disquiet about persistent upside surprises to inflation and the extended period in which it is expected to remain above target, while the economic downturn is now perceived as potentially less severe than previously feared. The market reaction saw the euro rise above $1.07 for the first time since June, while the pound fell below €1.15. Markets now expect the ECB ro raise interest rates above 3% next year. Hann-Ju Ho Senior Economist That may be the fundamental reason and may be I am a little early in my trade idea as today's candle hasn't closed.I am assuming that we don't make a new higher high before the end of the NYC session.
Long
by Macrobriefing
ECB vs BoE: What's next for EUR/GBP?The European Central Bank (ECB) and the Bank of England (BoE) both raised interest rates by 50 basis points at their final meetings of the year. The Eurozone's policy rate was hiked to 2.5%, the highest in fourteen years, and the UK's to 3.5%, the highest since late 2008. In contrast to the relatively dovish BoE meeting, the ECB meeting was substantially more hawkish than the market had anticipated, prompting the EUR/GBP cross to surge. In a divided vote, the BoE decided to raise rates by 50bps, with one member (Mann) pressing for 75bps and two members (Tenreyro and Dhingra) preferring to maintain current rates. According to the BoE statement, more increases in the Bank Rate may be necessary due to ongoing inflationary pressures fueled by a tight labour market. In the first quarter of 2023, UK CPI inflation is expected to fall as household spending and property market indicators weaken. Even if the ECB lowered its speed of rate rises from 75bps to 50bps, it made it clear that interest rates will still have to climb consistently and by a steady pace to reach restrictive levels to get inflation back to 2% quickly. The ECB also indicated that quantitative tightening will begin in March 2023. The ECB will not reinvest all expiring securities' principal payments in the Asset Purchase Programme (APP), meaning its asset portfolio of eurozone bonds will fall at an average pace of €15 billion per month until Q2 2023, with the subsequent rate established over time. During the press conference, ECB President Lagarde reiterated that the ECB will rise with tenacity and that 50bps may be the right rate hike for the next meeting and the two after that. She also hinted that once the peak is achieved, "it won't be enough to hit and withdraw," and that high interest rates will be in place for a longer period of time. Historically, the interest-rate gap between the Euro Area and the UK has been one of the key driver behind the EUR/GBP exchange rate. Market reactions to the BoE and ECB meetings: Yields differential matter Before today's meeting, the market was highly dovish on the ECB, pricing in a peak of 2.8% next year, while it had already built in hawkish expectations on the BoE, pricing in a peak of 4.6% in the Bank Rate in August 2023. German bond yields soared by 15 basis points after the ECB rate announcement and during Lagarde's press conference, but UK gilt yields stayed nearly unchanged from pre-BoE meeting levels. The negative yield spread between German and UK sovereign bonds shrank throughout the curve today as investors repriced ECB rise expectations. The 2-year German-UK yield gap narrowed to -1% and the 10-year one to -1.2%.  In the coming weeks/days, market expectations for the ECB rate may continue to rise as ECB hawks are likely to reiterate their aggressive stance. The Bank of England's market pricing may stay broadly stable, given it has already incorporated heightened expectations ahead to the meeting. This may indicate that the negative yield disparity between German and British bonds will continue to narrow, exerting upward pressure on the euro-pound exchange rate. A further 30 basis point reduction in the negative yield spread between 2-year German bonds and UK gilts, lowering it from -1% to -0.70%, might drive EUR/GBP to 0.89 or near to the psychologically important level of 0.90.
by Capitalcom
Hawkish ECB but Euro still fallsThe ECB presented a strong hawkish front; - hiking rates by 50bps and commenting during the press conference that - MORE hikes were coming, - 50bps for a period of time, not pivoting, - committed for the long term to bring inflation down to 2% This saw the EURUSD climb strongly from 1.0620 up to 1.0735 HOWEVER , right after the press conference ended, the dollar bulls took control, driving the EURUSD back down. Back down toward the key support level of 1.06. Where could the EURUSD head from here? Stay tuned! This would be a HAWK and BULL battle worth watching.
by JinDao_Tai
4