Get started

Fed

USDJPY: Increase expected but watch end of week JPY FundamentalsAs we see the DXY continue to push up thanks to the fundamentals and potent9ial for a 0.5% rate hike, I'm expecting this pair to continue to push up. Key fundamentals out of Japan this week with inflation data on Thursday, there's also a speech on Friday by incoming Governor Ueda, not expecting policy comment, but if we get some it will likely have an impact on USD and JPY pairs. Depending on the DXY this week, and some weakness I'm expecting to continue for JPY based on JPYWCU, I'd expect we may reach the 137.5 region / where the 50MA and 100MA look about to cross, and then a drop / retracement. We saw a bearish pinbar on the daily on Friday, which does suggest a drop first, however I think this could be misleading due to the USD sell-off on Friday ahead of the long weekend. I'll be getting in with a bullish indicator on a LTF, and then out around 137 or end of day Thursday (ahead of the JPY CPI), whichever comes first. Whatever I expect volatility at the end of the week for this pair, it could drop very quickly with the fundamentals so I'll trade carefully and book profits!
Long
by Finchcliffe
1
EUR/USD Drops To Six-Week Low Sub-1.0600 After FOMC Minutes The EUR/USD pair edged lower and posted a fresh monthly low under 1.0600 on Wednesday amid a stronger U.S. dollar favored by the risk-off environment. However, the corrective decline in U.S. yields across the curve limited the greenback advance and kept the EUR/USD within a narrow range. At the time of writing, the EUR/USD pair is trading at the 1.0605 area, down 0.36% on the day, having struck its lowest level since January 6 at 1.0598. The dollar remained firm after the release of the latest Federal Open Market Committee (FOMC) meeting minutes, which showed some members raised concerns about an economic recession in 2023. Still, members voted unanimously to raise the target range for federal funds by 25 bps despite the fact that some members advocated in favor of a 50 bps increase. Meanwhile, across the pond, European Central Bank (ECB) member François Villeroy de Galhau noted that the bank is not obliged to raise rates in every meeting, stressing that the monetary policy is already in the restrictive territory with a 2.5% rate. The final reading of the German Harmonized Index of Consumer Prices confirmed the annual inflation rate at 9.2%. The Eurozone will publish the figures for the bloc on Thursday, which are expected to show consumer inflation hitting 8.6% in January. The U.S. will release the Q4 Gross Domestic Product (GDP) second estimate. From a technical perspective, the EUR/USD retains a short-term bearish bias according to indicators on the daily chart, while the price is printing the third red candle in a row. Still, the RSI has not reached oversold territory yet, leaving room for a steeper decline. The 1.0580 area stands as the immediate support level, followed by 2023 low at 1.0481 and then the 100-day simple moving average (SMA) at 1.0440. On the flip side, short-term resistances are seen at this week’s high at around 1.0700 and the 20-day SMA at 1.0745 ahead of the February 14 peak of 1.0804.
by Alex_Boltyan_FXAnalyst
USD Index Targets 104.820 After US Federal Reserve Meeting?We have learned that almost all US Federal Reserve officials backed a 25-basis-points rate hike at the last FOMC meeting held on January 31 to February 1. Only a few officials favored a larger 50-basis-points hike at the meeting or said they "could have supported" it. Even so, many more dovish sentences were spoken in the latest meeting than compared to the December meeting. Although, officials did not go as far to consider a pause in rate hikes. The only time this topic was broached was in reference to foreign central banks and their potential strategies. Of course, the meetings also showed the obligatory note that, although the rate hikes have started to ease inflationary pressure, officials agreed that there was much more work to do to get inflation under control and were definitely aware of the risk of not doing enough, so the drip of dovish language will likely continue for some time before a dovish outlook overtakes a hawkish. Especially, because the meeting took place before the release of the hotter-than-expected jobs and retail sales data from January. This might go some way in supporting the USD in the short to medium term. Looking at the DXY after the release of the minutes, it looks to have helped the USD index push into the mid 104s, where it is encountering some resistance. The index only has to break into 104.700 to eclipse its recent one week high and return to its month high. A target above this range could include 104.820, which aligns with the 200-EMA and some peaks reached in January.
TVC:DXY
by BlackBull_Markets
1
Aussie dips after soft wage dataThe Australian dollar has extended its losses on Wednesday. In North American trade, AUD/USD is trading at 0.6824, down 0.47%. Australian wage growth was short of the forecast, with a gain of 0.8% q/q in Q4 2020. This was down from 1.1% in Q3 and below the forecast of 1.0%. Annual wage growth rose to 3.3%, up from 3.2% but below the estimate of 3.5%. This will be welcome news to the RBA, which is concerned that high inflation could lead to a price-wage spiral that would entrench inflation expectations and complicate efforts to curb inflation. The RBA has hiked interest rates by 325 basis points in the current cycle but the battle against inflation rages on. Inflation rose to 7.8% in Q4 2022, its highest level since March 1990. The central bank's steep tightening is yet to curb inflation, and Lowe faced criticism of his rate policy when he appeared before a parliamentary committee last week. Lowe told the lawmakers that high inflation was "dangerous" and reiterated that future rate moves would be data-driven. The cash rate is currently at 3.35% and the markets have priced a peak rate of 4.1%. The RBA has signalled that more rate hikes are coming and we're likely to see a 25-basis point hike for a fifth straight time at the March meeting, barring some unexpected data. All eyes are on the Federal Reserve, which will release the minutes of its February meeting later on Wednesday. The Fed raised rates by 25 bp, but investors will be interested in the extent of support for a 50-bp hike at the meeting as a clue what to expect from the March 22 meeting. It was only a few weeks ago that the markets were confident that the March meeting would provide a 'one and done' rate increase and the Fed would cut rates late in the year. The blowout employment report, a strong retail sales release and higher-than-expected inflation have changed that narrative. The markets have moved closer to the Fed's hawkish stance, and Goldman Sachs and the Bank of America are projecting three more rate hikes in 2023. AUD/USD has support at 0.6784 and 0.6690 There is resistance at 0.6907 and 0.7001
by OANDA
Upside risks for USD/JPY continue to buildIt may have taken a few weeks, but markets are finally pricing in what we argued all along; a higher terminal rate and no cuts this year. If you cast your mind back to the Fed’s recent 25bp hike, it is fair to say the Fed were not impressed with the market’s original response. Fed fund futures not only lowered the terminal rate to 5% but even began pricing in two cuts this this. And that has all been reversed, and rightly so in our view. Fed members were quick to respond and read from the same hawkish script, with little success early on as markets continued to call ‘bulldust’ on their rhetoric. That is, until a strong Nonfarm payrolls report shook things up, as it paved the way for further hikes. Yet it has taken over two weeks, a plethora more hawkish comments and strong data for markets to slowly wake up to the fact that a higher terminal rate is the more likely path for the Fed, and for us to forget about cuts this year. And that is the scenario we have backed throughout. February data which has underscored the Fed’s hawkish stance include (but not limited to): • Nonfarm payrolls 517k (185 expected, 186k previous) • Unemployment 3.4% (3.6% expected, 3.5% previous, near historic lows) • ISM services 55.2 (50.4 expected, 49.2 previous) • CPI 6.4% y/y (6.2% expected, 6.5% previous) • Retail sales 3% y/y (1.8% expected, -1.1% previous) • Core retail sales 2.3% (0.8% expected, 0.4% previous) • PPI 0.7% m/m (0.4% expected, -0.2% previous) Fed fund futures now imply: • 76% chance of a 25bp hike in March (down from over 90% two weeks ago) • 25.5% chance of a 50bp hike in March (up from 9% two weeks ago, or 0% three weeks ago) • A terminal rate of 5.5% in June (up from 5% terminal rate after the Fed’s last meeting) • Less than a 35% of a 25bp cut in December (two cuts were being priced in after the Fed’s Fed meeting) What are we looking for in the FOMC minutes? For current market pricing to be sustained (or justified, for want of a better word) we’ll need to see a more finely balanced debate over a 50bp hike versus a 25bp in Feb or even March. Markets took it for granted that a 25bp was a given in February, so any uncertainty surrounding this assumption would knock confidence that another 25bp hike in March is a given. And that could send the US dollar and yields higher, and the stock market and gold lower. USD/JPY daily chart USD/JPY reached our upside target around the 200-day EMA / 161.8% Fibonacci projection outlined last Monday, following its false break of 130 and prominent bullish pinbar. Momentum is clearly pointing higher overall, and the recent repricing of Fed fund futures and rise in bond yields ahead of the FOMC minutes provides hope that its trend can continue (if the minutes are deemed to be hawkish, as we suspect). The high around 138 are the next major resistance level, near where another soft US CPI print and the BOJ widening their YCC band originally sent the pair lower.
Long
by CityIndex
My Thoughts on the EUR/USDHere are some of the notes I had put down since 2020. I am wondering how long the EUR/USD can hold above the 1.05 lvl . The Federal Reserve is on a path to keep hiking, in hopes of combating inflation and winning on that front. The ECB is stuck between a rock and a hard place as inflation is still extremely high and the economy is barely above water. I think price is going to at least hit 1.05. I am a little skeptical about price hitting the parity level again, at least in the first two quarters, but in the future I think the EUR/USD will like break below the parity level again. Jan 10, 2020 -Focus EUR, GBP, NZD, CHF, ECAD, ZAR, maybe CAD -EUR Likely to push higher during first month or two because price will likely move with GBP, USD experiencing with Manufacturing, US/China Phase One Deal take a few months to show signs of improvement -I will focus on when the EUR drops -thinking price will push to 1.13, then turn around, especially if there is a war with Iran/Iran conducting terrorist activities -if price pushes to the 1.14, my focus with this pair will dissipate and I won't be trading this pair -If price pushes above 1.15, holds for a few days, and doesn't push back below 1.1450 and stay there, then the trend is broken on the down side, price will likely push higher, to around 1.18/1.20 by end of year, if this happened before or during June May 21, 2020 -thinking EUR will push lower -monthly chart pattern showing price may push higher pretty significantly, but fundamentals/market sentiment posting says otherwise -doubt that the ECB will want EUR to appreciate -to push higher, virus would need to subside greatly or a great deal of confidence in a cure/vaccine -EU countries would need to recover Jan 10, 2021 -PT EUR 1.40, CAD 1.20/1.15, GBP 1.50, JPY (want to stay in for as long as I can, price likely to drop to 102), AUD 0.80/then to 0.70, NZD 0.75 then to 0.60, CHF 0.80, ECAD 1.45, ZAR 9.20 -Some prices likely to take more then a year to him my targets. Prices that might hit this year are CAD, AUD, NZD. CHF may hit 0.80 this year, JPY 102 may be broken -No current strong plan Mar 14. 2021 -target 1.40 -monthly chart showing double bottom almost complete, within a monthly inverse H/S -Will price pull below 1.16, I don't see it as stimulus might be the new norm this year -If inflation starts raising considerably/US economy recovers quick, then price will likely push lower, past 1.16 to 1.15 -I think though price will push higher this year, maybe hitting 1.30 Jun 06, 2021 -US economy is open up slowly -ECB is still holding onto the PEPP and has not distributed yet -ECB still looking to be dovish -Price likely to range and whipsaw -FED and ECB not diverging like in 2014 Jun 28, 2021 -price is trading near 1.19 and may break lower because of divergence between FED/ECB -price target 1.15 Oct 13, 2021 -I think price is going to push lower because of the FED and ECB divergence -price having trouble pushing above the 1.20 lvl -the 1.05 or at least the 1.08 might be hit faster than I think -shorts are becoming stronger and stronger -price might drop to 1.08 by Feb 2022 -I doubt 1.20 will be hit because if price breaks below the 1.15 and hits 1.13, the 1.15 will be hard to break -if price is able to stay below 1.15 before Nov, price will likely hit 1.10 Dec 31, 2021 -Said I would only focus on: CAD, JPY (PT 120), ECAD (below 1.40), ZAR, GCHF -No current strong plan Feb 12, 2022 -I am going to stay out of no matter how price is moving -Reason, ECB hinting at being hawkish -only use as a hedge May 07, 2022 -price having trouble pushing lower -I think price may hit parity as sentiment surrounding USD extremely strong, ECB having hard time balancing Russia/Ukraine conflict with its economy and inflation -hints of ECB raising rates in 3rd/4th QTR this is what is going to start price recovering -price may be able to hit 1.10/1.15 if the ECB becomes very hawkish -staying out of the pair for the year Jun 10, 2022 -EUR is a risk currency and could push lower if recession worries increase -majority of central banks raising rates quickly, slow down inevitable -not concerned with this pair and going to stay out for now Aug 07, 2022 -stuck between raising rates and fighting off a recession -in short term I think price will push higher, but won't last for long -if interest rates increase, borrowing costs will increase, ECB has tool to fight this, but will still cause inflation Oct 16, 2022 -I think EUR is going to push lower, but in the short term higher -price on monthly chart is bouncing/testing support of monthly descending wedge, coupled with ECB likely to raise rates, might push the EUR higher -other hand, price could break lower as EZ heads into winter, Russia cutting Oil taps, causing supply crunches Nov 20, 2022 -I think the EUR and GCAD are going to push lower Dec 07, 2022 -working on getting into building my portfolio -looking at building in the EUR, GCHF, GCAD -EUR might push near the 1.10 -EUR going to experience some pain similar to UK, -manufacturing/industrials showing some growth -build into GCAD first then EUR, then Silver Dec 11, 2022 -descending wedge holding -if continues to push higher, might be able to hit 1.10, possibly around 1.12/1.14 (testing resistance of descending wedge) -price also forming an inverse H/S, if correct, price may B/O and push to the 1.22 before breaking lower -EZ close to being in a recession or in a recession already -double digit inflation, could cause ECB to raise rates quickly -ECB looking to possibly stop or reduce asset purchases which could push price higher -wages also increasing along with housing prices -Manufacturing/Industrial growth low -I think EUR will push up initially because ECB will have to raise rates quickly, and FED and ECB might eventually diverge
Short
by DollarSaenz
1
No Landing in the Twilight ZoneCBOT: Micro Treasury Yields ( CBOT_MINI:2YY1! , CBOT_MINI:5YY1! , CBOT_MINI:10Y1! , CBOT_MINI:30Y1! ) Is the US economy heading towards a “no landing”, as opposed to a “hard landing” or a “soft landing"? There is a heated debate among economists and market strategists. What is a "no landing"? It is a new term drawn up by Wall Street, which describes the economy continuing to grow while the Fed raises interest rates to fight inflation. Stock investors have a hard time making sense of the latest data from inflation, employment, and corporate earnings. The Fed’s future policy actions are unclear. As a result, the US stock market moved sideways in recent weeks. Treasury Market in Disarray With a widening negative yield curve, bond investors are convinced that a US economic recession is on the horizon. Let’s refresh our knowledge on this subject. Yield curve shows interest rates on Treasury bonds with short-term, intermediate, and long-term maturities, notably 3-month T-Bill, 2-year and 10-year T-Notes, 15-year and 30-year T-Bonds. Bond investors expect to be paid more for locking up their money for a long stretch, so interest rates on long-term debt are usually higher than those on short-term. Plotted out on a chart, the various yields for bonds create an upward sloping line. Sometimes short-term rates rise above long-term ones. That downward sloping line is called yield curve inversion or negative yield curve. An inversion has preceded every U.S. recession for the past 50 years. It’s considered a leading indicator of economic downturn. On July 21st 2022, the 2-year yield stood at 3.00%, above the 2.91% 10-year yield. Since then, we have been in negative yield curve environment for seven months. The 10Y-2Y yield spread has widened to -76.9 bps, but a recession has not yet occurred. Below are current yields indicated by CBOT Treasury futures as of February 17th: • 30-day Fed Funds: 4.665% • 2-year Treasury: 4.618% • 5-year Treasury: 4.014% • 10-year Treasury: 3.848% • 30-year Treasury: 3.883% We observe that the longer the duration, the lower the yield. The 5Y, 10Y and 30Y yields all price below current Fed Funds rate target of 4.50-4.75%. The US economy seems surprisingly strong, despite the Fed trying to cool it with eight consecutive rate hikes. However, negative yield curve contradicts the notion of “No Landing”. Trading Opportunities in Micro Yield Futures Investors currently expect the Fed to raise interest rates in March and June meetings, with the terminal rate consensus at 5.3% at the end of this tightening cycle. Clearly, Treasury futures market has not priced in the pending rate hikes. The most underpriced interest rate is the 10-year yield. At 3.85%, it is 90 bps below current Fed Funds target and 1.45% below expected terminal rate. On February 17th, the February and March 2023 contracts of CBOT 10-Year Micro Yield Futures (10Y) were quoted almost the same rate, at 3.850% and 3.853%, respectively. Investors apparently brushed off the upcoming rate increase in March. My trading rationale: US businesses continue to expand, which provides solid support for the long-term debt market. With short-term yield rising fast, borrowers would flock to lower rate debt, pushing up demand for the longer-term credit. In my opinion, a 10-year yield below 4% is not sustainable. For confirmation, let’s take a look at various market interest rates for 10-year duration: • US Corporate AAA Effective Yield: 4.61% • US Corporate BBB Effective Yield: 5.64% • US Mortgage Rate, 10-year fixed: 6.24% • Bank Certificate of Deposit, 10-year: 4.10% (Discover Bank) Monthly contracts for the 10Y are listed for 2 consecutive months. Contract notional value is 1,000 index points. A minimum tick of 0.001 (1/10 of 1 bps) is worth $1. This means that a 25-bps increase will translate into $250 per contract. It would be a 77% gain in contract value if we use the $325 initial margin as a cost base. April contract starts trading on March 1st. If it is quoted similar to the March contract, there is potential to gain. Whether we compare with market rates of debt instruments of the same 10-year duration, or with risk-free Treasury rates of different durations, a 10-year yield pricing below 4% is a bargain. Besides, the FOMC meeting on March 21st-22nd would likely give the contract a big boost, as long as the Fed raises rates. In summary, I would consider a long position for April 10Y contract at or below 4% yield. What about the idea of yield curve reversal and the narrowing of 10Y-2Y spread? It may still happen, but its timing is unclear at this point. Micro Yield futures are designed for shorter-term trading with contracts listing for only two calendar months. This is different from CBOT 2-year (ZT) and 10-year (ZN) futures which are listed for 3 consecutive quarters, currently through September. The traditional Treasury futures contracts would be better instruments for a yield spread strategy. 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 trade set-ups and express my market views. If you have futures in your trading portfolio, check out on CME Group data plans in TradingView that suit your trading needs www.tradingview.com
CBOT_MINI:10Y1!Long
by JimHuangChicago
6
Euro drifting, markets eye PMIsThe euro showed some volatility at the start of last week but since then it has been in calm waters and has stayed close to the 1.0.7 line. We'll get a look at eurozone and German PMIs on Tuesday. The ECB has been criticized for sending mixed messages to the markets, but Christine Lagarde was crystal clear last week when she told EU lawmakers that “in view of the underlying inflation pressures we intend to raise interest rates by another 50 basis points at our next meeting in March”. Lagarde said the ECB would then evaluate future moves, but with inflation still high, the risks for further rate hikes are skewed to the upside. The ECB's primary focus is to tame inflation. Headline inflation fell to 8.5% in January, down from 9.2% in December, but is still unacceptably high. Core CPI has been stickier than expected and wage increases are stemming the drop in inflation. ECB member Isabel Shnabel said last that investors risk underestimating inflation, a warning that the Fed has also made to the markets that have consistently been more dovish about rate policy than the Fed. Schnabel noted that the disinflation process has not started in the eurozone, another signal that the central bank will remain in a hawkish mode for the near future. Fed members continue to pound out the message that inflation remains too high and more rate hikes are needed. Investors are clearly concerned that the Fed will make good on these statements, which has sent risk sentiment lower and the US dollar higher. The markets had high hopes that the March rate increase would be a 'one and done', but it looks like the Fed will continue raising rates into the second quarter. According to CME's FedWatch, the markets have priced in an 83% of a 25-bp hike and a 17% of a 50-bp increase. EUR/USD is testing resistance at 1.0704. Above, there is resistance at 1.0795 1.0604 and 1.0513 are the next support lines
by OANDA
GOLD vs DXY - Negative Correlation, meet in the middle?I've mapped XAUUSD (top) against DXY (bottom) to clearly show the almost perfect negative correlation. DXY is more extreme in it's movements, as highlighted in the recent candles. I'm expecting further strength for DXY this week, especially as FOMC speakers are all hawkish and the market is expecting a 0.5% rate hike. If this is correct then Gold will have no choice but to fall, and I'm expecting it to hit the 1775 level, due to DXY strength.
OANDA:XAUUSDShort
by Finchcliffe
USDCAD: Expecting a breakout and push up to 1.38With public holiday's in both USA and Canada tomorrow, I expect a quiet start to the week for this pair. On Tuesday it's Canada CPI which has been falling. Bank of Canada have just paused its rate rises as it expects inflation to come down to around 3% by mid-year and 2% in 2024, so if inflation continues to fall this should be negative for the CAD. On the other-hand, the DXY strength I've posted about in recent ideas seems to be materialising and I'm expecting a push up to test 105.2 - 105.6, particularly with the FED stating 'the battle with inflation certainly isn't won', and recent other economic data supporting the chances of the US avoiding recession. The FED still has room for manoeuvre and may be looking at another 0.5pt hike in the pending FMOC minutes, which will be good for the dollar. From a technical perspective, price is bouncing off the 200MA (8hr) and above the 50MA and 100MA, which are about to cross, and so I am bullish bias. If the fundamentals play out as I expect, I'll be looking to get in long on this pair before the breakout of a quick for a quick scalp, and then monitoring for a rise up to 1.38 following the break and retest.
Long
by Finchcliffe
4
EUR/USD at 3-week low after strong US dataThe euro is down for a third straight day and fell earlier to 1.0629, its lowest level since Jan. 23. In the European session, EUR/USD is trading at 1.0639, down 0.30%. The US dollar is showing some strength this week against the majors, as US data continues to shine. Retail sales impressed with a 3% gain earlier this week, and PPI and unemployment claims were both better than expected. Is the disinflation process stalled? The markets didn't expect such good numbers, but the economy has proved to be surprisingly resilient to rising interest rates. The Fed has been preaching 'higher for longer' for some time, but the markets stuck to their dovish stance, expecting that the Fed would have to pivot and even cut rates later in the year. The host of strong US numbers has forced investors to recalibrate, and the markets have revised upwards their peak rate forecast to above 5%. The US dollar has been the big winner of the shift in market thinking, and US Treasury yields are at their highest level this year. Fed member Mester said she saw a strong case for raising rates by 50 basis points at the last Fed meeting, a sign that the Fed could move away from the moderate 25-bp hikes if inflation isn't falling quickly enough. Mester said that she didn't see inflation falling to 2% until 2025, which points to a long disinflation process. The ECB raised rates by 50 basis points in February and has signalled that it will do the same at the Mar. 16 meeting. The main financing rate is currently at 3%, well below the Fed (4.5%) and other major central banks. It's not clear what the Bank has planned after the first quarter, but with inflation running at 8.5%, the risk for further rate hikes is skewed to the upside. The ECB has made it clear that rates will remain high until there is evidence that inflation is falling toward the target, which means that the current rate-tightening cycle isn't anywhere near its end. EUR/USD is testing support at 1.0629. Below, there is support at 1.0581 1.0762 and 1.0847 are the next resistance lines
by OANDA
1