ridethepig | EUR Market Commentary 28.01.2021📌 ridethepig | EUR Market Commentary 28.01.2021
In this position, we have managed to build a solid floor at the 1.207x area and as widely expected Buyers fought like a lion to defend their jurisdiction. The ECB on the wires attempted to talk down the currency via threatening room for rate cuts, classic jawboning from Knot in attempt to provide shelter. They will not cut again and time to call bs; here actively buying dips in the euro - this charming position is proof of the wonderful beauty of technical analysis.
Looking back to the initial start of this move, it has taken a lot longer for the flow to play out than I would have liked, however, nothing has changed and there is no reason to be alarmed. If we lose the floor and breach 1.200x, then we KNOW we are WRONG and need to reassess the view. Fed artificial dollar devaluation is here to stay and a move back towards the top of the range is the path of least resistance.
Thanks as usual for keeping the feedback coming 👍 or 👎
Ecb
ridethepig | EURGBP Finding a Floor📌 ridethepig | EURGBP Finding a Floor
After the preparatory manoeuvre, passive sellers are keeping a close eye on the 0.882x ABC target and already starting to cover. Sharp Buyers were aware of this and made the transition to attempt a base formation. With ECB / FED now cleared there is the customary inventiveness to continue with the rally. What we are trading here is the expectation of BOE cuts and calling bluff on ECB holding pattern.
On the GBP side, we have been given a data from Johnson for March where kids will return back to school. Taking it with a pinch of salt once more and recommend resisting temptation to park in GBP. BOE has room to cut rates and with Brexit impact starting to enter into play, the flows will become clearer. Technically taking 0.893x will open the floodgates for a momentum gambit towards the highs, while to the downside 0.887x/0.882x area will continue to be the loading zone.
Thanks as usual for keeping the feedback coming 👍 or 👎
ridethepig | EURGBP for ECB📌 ridethepig | EURGBP for ECB
Now that we are trading back at the lows in the range in EURGBP, the game is roughly level going into ECB today and we can begin to look for positions once more. In a situation which is very similar to the previous flow that we played from the pivot in December.
Continuing to build EUR exposure at 0.885x and looking for ECB & BOE to start diverging in expectations from today onwards. BOE are going to play the whole -ve rate endgame with wonderful precision and genuine artistry. Pound devaluation is the way to go in my opinion.
A quick recap of ECB expectations for today:
> Global inflation is starting to show signs of creeping higher ( see the explanation ) so expecting Lagarde to be slightly bullish EUR on inflation , neutral on growth, no changes in rates and the usual 'watching the currency closely'.
Looking to make use of the 0.885x lows for a move back towards our 0.900x pivot and 0.922x highs.
Thanks as usual for keeping the feedback coming 👍 or 👎
ridethepig | EUR Market Commentary 26.01.2021📌 ridethepig | EUR Market Commentary 26.01.2021
An important chart update for euro here, which does not require to create a decision, but shows how price rolls forwards undr the direction of price drivers. It advanced quite far and cramped the highs. Finally there is another opportunity for loading on the 1.212x pivot.
For the risk cocktail we have Conte resignation , covid varients , vaccine execution and delays to Biden stimulus all entering into play. These are unusual markets and volatility expansions (e.g. yesterday) are still showing that the USD remains the safest place to park capital when the storm hits.
I am still of the view that we will clear initial targets , but clearly there are risks entering into the picture and trading pragmatically is important with risk in the air. For those holding longs in this swing, it's time to sit on our hands with a lottery ticket , trail our stops and take of the exposure.
Thanks as usual for keeping the feedback coming on these short-term flows 👍 or 👎
Lagarde needs to place a lid on the Euro If there is a time for a currency to be relatively weak, it's during recessionary periods. A stronger currency entails a rougher time for goods and services to be exported out of the country as those exports are more expensive due to the stronger currency.
This is currently the case for the Euro. From August last year to the latter part of 2020, the EUR/USD fluctuated between 1.16 and 1.19 before shooting past 1.20 at the end of November due to vaccine positivity. It sits comfortably above 1.20, consolidating between 1.205 and 1.233. Christine Lagarde, President of the European Central Bank (ECB), has a dilemma on her hands: how to contain the strength of the Euro due to positive sentiment while fighting deflation concerns?
ECB needs more than interest rates
Theoretically, it could be argued that the ECB has used up all their ammunition when it comes to monetary policy. With Interest Rates at 0% for the past four years, alongside the Coronavirus pulling on both sides, with lockdowns forcing businesses to close and consumers to save, a liquidity trap may be underway. The strength of the Euro also gives the ECB limited room to move rates lower. This harks back to the Bank of Japan's issue during the financial crisis, with analysts predicting disinflation, therefore boosting the Yen, thus boosting fears of inflation - a never-ending cycle.
Only useful tool is asset purchases – however, it may have a side effect of boosting the Euro further
The ECB has purchased over 1.85 Trillion Euros worth of assets during the wake of the Pandemic. However, we may see a situation unfold similar to that of the Fed and US Equities – where the Fed's unwavering support for the US economy has had the side effect of boosting US equities. Further purchases may see an influx of capital in European Equities, increasing the demand for the Euro.
Since the strength of a currency is relative, some analysts predict the only way for the ECB to escape the cycle of a strengthening currency and deflationary concerns is through outperforming the Fed when it comes to asset purchases. Salman Ahmed, global head of Macro at Fidelity International, stated that "In currencies it's the relative game that matters," and that "You can argue that the ECB has been very aggressive in its policy, but has it been more aggressive than others? If the ECB wants to get the Euro down, they will have to outgun the Fed – there is no other way."
ridethepig | Euro for ECB📌 ridethepig | Euro for ECB
In some chart annotations, we have already covered the need for a pullback yesterday and to either use that to build the position centrally or lines aimed at mapping the flow for those covering on the pullback. The main point was to gain momentum for the slingshot after the 1.207x bids held.
> Global inflation is starting to show signs of creeping higher ( see the explanation ) so expecting Lagarde to be slightly bullish EUR on inflation, neutral on growth, no changes in rates and the usual 'watching the currency closely'.
The significance on the technical side is that buyers have situated themselves comfortably since Monday, as a basis for further operations, lies beyond all possible doubt. This is subtle and illustrates the deep relationship between the ECB and the dollar flank. A breach above the 1.216x highs now into sellers camp will trigger the capitulation towards our first target, play the momentum gambit when the opportunity arises.
Thanks as usual for keeping the feedback coming 👍 or 👎
ridethepig | EUR Market Commentary 19.01.2021📌 ridethepig | EUR Market Commentary 01.19.2021
We should strategically protect our position, not a sickly stop or weak-looking exposure, etc.
As you can see, the bids at 1.207x held and buyers as widely expected fought like a lion to defend their jurisdiction. This was not the act of Christian kindness or pity or etc, this is a strategic point that required defending from the outflows. The strength to pull back above our 1.212x pivot shows that buyers are functioning as normal, while sellers are licking their wounds and covering quickly.
How to get rid of our opponent?
A break above the 1.222x via a more dovish than anticipated Yellen today will get rid of any remaining sellers and force 'confidence' back into the spotlight. This will not receive tender treatment as it always comes down to the same situation:
It always comes down to the same situation; a central bank which could be called sound, but which has one sickly component. As we all know by now, the longer the delay in USD devaluation from Fed, the worst the blow is going to be in Equity markets and one way or another eventually this is going to look like Fed has been financing the WhiteHouse and then the game is up. Confidence will send capital fleeing.
Here eyeballing a test of 1.222x first before 1.230x. While invalidation or reassessment will be required should we breach the current floor
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ridethepig | Gold Market Commentary 19.01.2021📌 ridethepig | Gold Market Commentary 19.01.2021
A basing formation with Gold, which does not require to create a 'double bottom' pattern, is undergoing a direction change. It advanced as far as our $1,960 target and has found cramps. Finally, there is the opportunity for a breakthrough.
As an example of this, let us turn to the well know diagram ' Gold finding a bottom ':
The defence was carried out: the sharp speculators do not want to lose $1,800/$1,803 and they are once again fighting for their stand. So, lets follow the flows again here as it seems to be indicated and clear for all to play.
This excellent move higher can also be played in Silver, the lows are clearly holding with more ease and this ideal will turn into the said reality. Yellen hearing today corresponds to the start of these moves, and as @MEGALO1 points out the rally towards fresh highs seems indicated.
Here I would like to point out that initial targets of $1,960, $2,015 and $2,075 are in the strategic plan while a breach below the lows will invalidate the setup; you can see why in the previous charts we managed to form a solid base and spot a subtle resource.
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ridethepig | EUR Market Commentary 18.01.2021📌 ridethepig | EUR Market Commentary 18.01.2021
Here to kick the week off with the first moves we have buyers choosing to defend the 1.207x bids, protecting the support level and relieving the channel structure of this duty so that it can become a bit more appealing possibly for a slingshot. The next moves higher in EURUSD can be the start of a swing that cracks the 2018 highs.
Yearly
Eurobonds
Sellers have missed the proper moment to get in contact with the stops below the support. If the position were with Pound, on the other hand, the win for buyers would be much more difficult, whereas now euro follows on its own logically defined map. UK is at the heart of the matter of fundamental impacts around Brexit, the euro will be considered a stepping stone for UK outflows as sharp speculators and large macro hands evacuate through the flanks to avoid getting caught up with BOE -ve rates. To the topside 1.212x remains a 🔑 pivot level with initial targets found above at 1.222x and 1.230x while invalidation comes from a sustained breach below support.
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This Signal in Bond Yields Will Predict the Next Recession.After one of the most unexpected years, I thought I should take a step back and look at macroeconomics a little bit, at one specific chart that I've been watching. That is the German Government 10-Year Bond Yield (DE10Y). I've been anticipating a signal in that chart that will indicate massive shift in global market trends and will bring us closer to the next imminent recession. That signal is the breaking of the decades-long descending wedge.
The momentum is still bearish, and this week the price got rejected at the upper line of the wedge. If this continues downards, then the economy remains in the same state. Central banks are printing currency at an unprecedented rate, and inflation is showing on commodoties and stocks and everything else. Governments are sinking more into debt, and the best place to put your money remains the stock market. That is until this wedge breaks. Because when it does, the bond yields will accelerate upwards. It will become more costly to borrow money. And the economy will slow down again. But this time, it is slowing down while everyone is extremely leveraged and deep in debt. We want to maximize our profit but we do not want to be caught in that state. That is why I pay attention to this chart and the DXY.
There are many charts that can indicate the same outcome, but I choose to focus on one only that does the job.
Now according to some Fibonacci levels, I predict another touch in October 2021. By then, perhaps the majority of zombie companies will have declared bankruptcy. Is it too soon for that? Will government regulation delay that even further? No idea. Too many factors to watch. So let's keep watching this one key chart.
ridethepig | Rate Differentials 📍 A quick update here on the elements of EUR and USD
Ending the 'C' part in the swing down has been a hard struggle and with such a problem a surprising retreat is expected. Buyers are threatening to bottle up their opponent.
A pullback in EURUSD towards 1.15/1.14 will make things a lot easier:
Inflation is demanding a return, after sufficient preparation, watch out on the battlefield (see my explanation in the recession strategy). The other theoretically plan of attack is a flank attack in USD which must be nipped in the bud via FED but they will lag behind now.
Real money understands the point behind this move. Firstly, the test of 1.70 is starting to be considered from the point of view that the current block is settled to the topside.
As usual thanks for keeping the feedback coming 👍 or 👎
10 Year Yield to Spike above 1%? Currency War Heats Up!My long time followers and readers know two things about the bond/credit markets:
1) They are by far the largest markets in the world even dwarfing the Stock/Equity Markets.
2) If you want to know where the Stock Market is going, look at the 10 Year Bond Yield (TNX).
Of course, some argue that things have changed due to central bank money printing propping assets up. 80 Billion per month in fact by the Federal Reserve. This is to ensure that interest rates remain suppressed. Many people do not know how this works. The central bank prints money by buying bonds. It buys the bonds, and then money is credited to banks/dealers etc. New money has now entered the system.
Historically, government debt made the majority of pension funds because they were the safest asset. Bonds are (were) held for yield. For example, say you owned decade plus year government debt before 2007, your 1 million would be netting you between 50-80k per year depending on the interest. Post Great Financial Crisis (GFC), that 1 million would bring in less than 30k per year and even lower today.
Pension funds need an average of 8% per year. You are not making that in bonds. Pensions have thus had to add more risk, ie: buy stocks. In fact, the average person retiring had to do the same. Since you could not buy bonds for long term yield, this money went into the nest safest asset: real estate. Back in the day, a financial advisor would not tell you to put all your money into stocks when you are close to retirement. Today you really have no choice.
Before I discuss the weekly chart for the 10 year yield and what this implies for 2021, a quick lesson on what this chart shows us.
This chart indicated the yield on bonds, NOT the price of the bond. Therefore bond yield and bond prices have an inverse relationship. When the price of Bonds drop, the 10 year yield chart moves higher (rates spike), when the price of bonds pop, the 10 year yield moves lower (rates drop).
Large funds and those studying to be fund managers are well versed in the asset allocation model. Percentage of portfolio's mainly in bonds and stocks. In the GFC crisis, we heard the term risk off and risk on a lot, and is still used today. A risk off environment is when investors are buying stocks and other riskier assets and dumping bonds and other safety assets. A risk on environment is the opposite: investors sell stocks to buy bonds and other safety assets.
The VIX has primarily been used to gauge when there is fear in the market and whether we are in a risk off or risk on environment. Gold and the US Dollar as well. But why not just look at the 10 year yield itself?
Back to the weekly chart of the 10 year YIELD. Currently, they are yielding 0.926, but a reversal pattern is forming. If we get a weekly candle close above 1%, we get a breakout, and we can see yields increase to the 1.33% zone. Remember: this move would mean that bonds are SELLING off. This means that money is LEAVING the bond market, and ENTERING the stock/equity markets (and perhaps other markets such as commodities etc).
Looking at the weekly set up, this move in yields is pointing to HIGHER stock markets. Again, my followers know this is what I have been predicting since markets began making new highs. There is nowhere to go for yield. Stock markets will continue higher until a black swan event occurs.
Now let us look at the flip side. Central Banks.
There is a currency war occurring between central banks, and the US Dollar and the Fed are winning. Why do nations want a weaker currency? Generally, the way to boost inflation and to increase exports to try to revive the economy was by weakening the currency. By the way, the classical economics definition of inflation is a weaker currency, meaning it takes MORE of a weaker currency to now buy something thereby increasing the price.
The European Central Bank (EBC) wants a weaker Euro. The Eurozone is largely an export union, a weaker Euro makes European exports competitive, and the ECB hopes this would boost the economy has more European exports means more profits which means more jobs etc. The difficulty is that the Euro does not weaken even when the ECB attempts to talk it down. They have increased their 'emergency' asset purchasing program to 1.85 Trillion Euro's (remember mainly to buy bonds to keep interest rates suppressed: buy bonds to drop rates)! Euro shot higher.
What option does the ECB have left? To cut interest rates deeper into the negative. Thereby making the interest rate differential between the EU and the USD larger in hopes that people would buy the USD against the Euro.
So now you are probably asking why would investors/traders still be buying European bonds when they are yielding negative meaning you will lose money for holding them for the 10 year or more term?
Bonds have now become a hold for capital appreciation rather than yield.
Remember, if central banks cut rates lower, the bonds that you were holding issued in the previous higher rate environment become more valuable than the bonds issued in the newly lower rate environment. Bond prices move up as rates drop lower!
Many are expecting this to happen next year. The ECB's next option in the currency war is to cut rates deeper into the negative in an attempt to weaken their currency. The Bank of England has made it no secret that they are also looking to go negative in 2021. Will the Federal Reserve follow tit for tat to counter the ECB? If the Canadian Loonie, the Australian Dollar, the Kiwi Dollar keep strengthening against the US Dollar, will the central banks in those nations cut into the negative to attempt to weaken their currencies? This is the currency war, and I believe money is already pricing this in. The move out of fiat: going into Bitcoin and Gold and other commodities.
Going back to our weekly chart of the Ten Year Yield, it is possible that this bottoming pattern reverses and moves lower if negative rates become a reality in the US. This would continue our long term down trend in bond yields. You see this clearly when I zoom out on the monthly chart:
To be quite frank, interest rates will have to be suppressed lower and forever. The world had a lot of debt before, but has even more due to the monetary and fiscal response against Covid. Money printing cannot and will not stop. The US passed a stimulus for $600, and talks are already beginning for a $2000 stimulus check. More will come.
Negative rates are appealing because it means that governments can service the debt at a lower rate. A weakening currency is also great for debtors because it means they can pay back debt with cheaper currency.
This is why in a very weird way many investors and traders are bullish bonds and see at least one more large move as bond prices increase due to more rate and deeper negative rate cuts. Insane but this is the kind of world we live in.
Once again, highlighting yesterday's post: this is why you want to be in Gold, Silver, Bitcoin and other hard assets. The trade will be out of fiat as traders anticipate the next moves by central banks in this currency war.
One more message I will leave you with. There are some that believe markets have a way to correct themselves. That even with all this central bank manipulation, prices and rates will correct to true value. This would imply double digit interest rates as bonds sell off heavy and interest rates spike. What I like to call the 'cuckening', and will be my sign to short stock markets hard. Now I am not saying this will happen anytime soon, but it is something to keep in mind. If such an event would occur, it would be the largest wealth transfer in history.
ridethepig | EURGBP Breaking Out?📌 @ridethepig G10 FX Market Commentary 17.12.2020 - EURGBP
This line illustrates how we can attempt picking a fight with the winning side. It is a characteristic for confidence to see price getting rejected each time it dips below 0.900x, while when above, buyers have the ability to roam anywhere, they are in full control!
Here the weakness is isolated to the UK and it is worth considering to play against EUR, USD and JPY in particular. The GBP outflows is now such an abused line that we can comfortably play on various crosses at the same time.
Aiming for a test of 0.922x to be resolved initially before anything else. In order to keep maintaining the advantage, buyers should look to pick up pace on the technical break as all resistance will be damaged. UK and EU have had their say...Now it is the markets turn.
I am aiming to keep the short-term flows coming in-between the LT and MT chart updates as I know many here are not interested in macro charts being posted into the tradingview ether.
Thanks for keeping the feedback coming 👍 or 👎
ridethepig | Euro for the Yearly Close📌 EURUSD - Yearly
Buyers how hold a solid position, since the previous two outside candles over the past 30 years were essentially sellers biting into granite (the protected support). The solidity of an outside candle which show in itself the fact that 'eurobonds' are a game changer and troubled sellers cannot open the lows.
Eurobonds Positional Play
The breakdown:
The move would have been premature on account of the MT and LT charts in euro and in dollar:
In order to liberate the euro, we must see Biden get the official ✅which will leave the dollar unprotected from devaluation. Note how the same 1.135x which was the birth of the single currency was also our loading zone for the debt mutualisation. The fact that it is back to square one was not really considered by anybody. But the next targets in the yearly crosshairs come in at 1.400x and 1.600x.
Thanks as usual for keeping the feedback coming 👍 or 👎
correction downside Towards Support 122.90 (AFTER ECB Rate)EUR/JPY has recovered nicely from the corrective low of 125.83 and is currently testing short-term key resistance at 126.49. A break above this resistance will confirm the completion of the correction and the on-set of the next impulsive rally higher to 129.06 but ECB expecting U-TURN STRONG EURO towards Downside correction First. Any positive comment sends EUR skyrocket but very fewer chances.
Today Correction expecting on weekly Base chart 122.90$
R3: 127.75
R2: 127.30
R1: 126.66
S1: 126.27
S2: 125.83
S3: 125.61
EUR/USD: A deep look using FIST analysis 📊Good morning traders,
Our today's Trade of the Day has already reached on of the profit targets and is currently trading 100 pips in plus.
Now, here's a FIST update on EUR/USD. FIST stands for Fundamental, Intermarket, Sentiment, and Technical analysis.
Fundamental
The weak dollar pushed the EUR/USD pair higher and caused a break below the important 1.20 level. This morning, the pair is giving back some gains on risk-off flows and on portfolio rebalancing ahead of the ECB meeting later this week.
The ECB meeting on Thursday is the most important event for the EUR this week. The ECB is expected to provide further stimulus to the slowing economy of the eurozone by increasing its PEPP program by around $400-$600 billion and providing new long-term loans at very favorable rates.
As inflation is slowing down, further stimulus that could increase inflationary pressures will likely be seen as positive for the euro.
In the US, CPI numbers and unemployment claims are the main reports of the week. CPI and core CPI are expected to rise to 0.1% (prev. 0.0%). Unemployment claims are expected higher as well at 723K (prev. 712K).
INTERMARKET
The current difference between the 2y US and German yields signal the possibility of further weakness in EURUSD. However, it's important to note that the downtrend in yield differentials has mostly been the result of lower US yields.
SENTIMENT
Fast money has increased its bullish positioning the euro for the third consecutive week ahead of the ECB. Bullish bias has now reached the highest level since October 27, without extreme positioning, signaling further upside potential in the pair.
TECHNICALS
The technical picture looks bearish in the short-term, but I expect liquidity to enter the market again near the 1.2000 level, which is an important level for the pair. If volume confirms an entry, this is the first level to enter with a long position.
The second level to watch is the 1.1860-1.1880 area, where the pair could also face buying pressure.
Please hit the "LIKE" button if you find this post useful! Let me know your views on the pair in the comment section below.
ridethepig | NFP PlayNFP is threatening the breakdown in EURUSD and across G10 pairs.
The flows, with centralisation focused on the dollar follow profit taking and an early advance. This can be exploited and is easy to understand what is in play (as with NZDUSD). We have our shelter at 1.215x which is our ceiling, the next step is to look for areas of value to the downside.
In a classical price action style, support regions are suitable targets at 1.211x and 1.200x. This will be met with demand; macro position building. More an anyone else, you will all know how bullish we were on euro ahead of the crowd.
We are back above those highs after the breakthrough and with claims ticking down we are in time for payrolls, it is harder to play the buy side this time as we are already extended and at rich levels. The idea is of course an attempt to ride a retracement on the NFP headline.
Lets see how it goes.
ridethepig | DAX sufferingAn interesting development on DAX after the planned highs last week. We will go through what does it mean, how is this an advantage to sellers and when is it appropriate to add to the position. The same focus can be applied across the global equity board.
Resistance can also be conceived with the presence of stimulus; but total restraint, which reigns from lockdowns stretching into another 3 weeks for Germany will give buyers breathing difficulties...To what extent, should we ask, is this an advantage that we can capitalise on and how unpleasant will that be for buyers?
Our very short-term range is +/- 15% ... so although from a timing perspective we are compact, the yield connected with such a wide range is apparent. The main mid-term and long-term range is even clearer:
📍 Rule: when loading on the short-term understand the position our opponent poses in the mid and long term, to further understanding of scope and whether taking the position is worthwhile..
With this in mind, in the long-term macro chart in euro I posted back in 2018... yes 2018... it was about buyers attempting to trap their opponent into a selloff before continuing the legs higher.
With a completion of the moves in euro, the formation of the hammer in Germany equities can finally advance with 1.20xx and 1.21xx cleared. But there is no-stopping the digital euro into 2021 and thus the attempt to cancel the currency remains under pressure:
As well as active pressure from the currency, there is also the concept of lockdowns and further static economic growth from Germany. We must distinguish from whether this is a short lived -15% selloff or a sustained economic cycle down. Send the troops, time will tell.
Thanks as usual for keeping the feedback coming 👍 or 👎
ridethepig | EURGBP grinding higherBarnier comments on 'no deal is still possible' well illustrating the strategic skill of negotiation. UK has sadly been completely outplayed, not by any fault other than some simple Etonians sticking about fisheries which is 0.02% of GDP...Hard to understand how we ended up here, most £500m private companies would never dream of hiring Johnson as CEO or Sunak as CFO...Brexit was always political fairy-dust, a last despairing effort to continue the 'empire' which was immediately countered via the powerful Klaus Schwab at WEF and etc.
📍 The lows are now protected and in good shape.
Of course, you are right to think the threat is for them to sweep the lows, just like how buyers played the interesting line of sweeping the highs in GBPUSD before crashing:
I love it when a story comes together.
The next leg here is higher for EURGBP, London is vacating its seat at the table (in the short-term at least) and sharp speculators are well aware. Much better to look for a test of the highs here, as we shall see, an important few weeks. I completely understand why some voted for Brexit, unfortunately in such a scenario there is always the question: which carries more weight globally, the UK or the EU?
Thanks as usual for keeping the feedback coming 👍 or 👎