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Trade Data Confirms Decoupling Well UnderwayCME: Offshore RMB ( CME:CNH1! ), Micro RMB ( CME_MINI:MNH1! ) On April 5th, the Bureau of Economic Analysis reported the latest U.S. global trade data. For the first two months of 2023, total export and import were $328.9 and $489.7 billion, respectively. U.S. international trade balance was $160.9 billion in deficit. Export growth was very strong, at 9.5% year-over-year, while import was up modestly (+0.5%). As a result, trade deficit was reduced by $25.8B from last year period. My analysis focuses on Exhibits 14 and 14a of the report, which detail global trades by trading bloc and country in 2022 and 2023, respectively. Here are what I found: • NAFTA: Canada and Mexico together have total trade (import plus export) of $245.6B. NAFTA is the largest US trading partner with a 30.0% share. So far in 2023, we see trading growth of 8.5% and 1.3% in share gain y/y. • EU+UK: Total trade is $173.9B, up strongly +20.2% y/y. This is the second largest trading bloc with a market share of 21.2%, up 2.8% y/y. • China+HK: Total trade is $98.6B, down sharply -14.5% y/y. Traditionally the largest US trading partner, China is now the 3rd largest, with a 12.0% share, down 2.6% y/y. • India: Total trade $20.1B (-1.1% y/y) with a 2.46% share (-0.1% y/y) • Vietnam: Total trade $19.1B (-3.0% y/y) with a 2.33% share (-0.2% y/y) • Taiwan: Total trade $19.2B (+72.2% y/y) with a 2.35% share (+0.9% y/y) Shifting of Global Supply Chain The U.S. has determined to reduce its reliance on China for manufactured goods. Decoupling aims to shift global supply chain out of China. Where would they go to? • On-shore: moving manufacturing back to the U.S. (Made-in-America); • Near-shore: moving manufacturing to NAFTA partners Canada and Mexico; • Moving to democratic countries with shared values, including the European Union, Asia (Japan, Korea, India, Vietnam, Taiwan) and South/Central America. Based on BLS nonfarm payroll data in March, total employment in manufacturing sector is 12.98 million. This is 600K more comparing to March 2017 level, before the US-China trade conflict. Manufacturing jobs are coming back to the U.S. What does the strong growth in trading with NAFTA, EU and Taiwan tell us? It shows the shifting of supply chain. This growth comes at the expense of China, which is the only major US trading partner that suffered a decline in both trading volume and market share. Implications of Decoupling Shifting of supply chain has long-term implications. Bringing manufacturing back to the U.S. means job creation as well as consumption and taxes. Companies may receive government incentives to offset the cost of relocation. In the long run, getting out of the expensive cross-ocean shipping and the punitive Trump-era tariff would lower the cost of production. Near-shore production in Canada and Mexico also benefits from a more reliable supply chain and lower transportation cost. Southeastern Asian nations have average labor cost at 1/3 or less comparing to workers of similar skills in coastal China. Vietnam and India prosper in recent years by taking production of clothes, shoes, toys, and low-end electronics away from China. What is the implication of trade decoupling on exchange rate? It will result in devaluation of Chinese Yuan against the US dollar. Firstly, currency exchange rate reflects the interest rate differential in the short-term. • US Fed Funds rate is 4.75%-5.00%, and China Shibor is 1.374%; • The Fed could raise rate again, while China’s central bank is easing to support the lackluster growth in economy. The widening US-China rate differential would cause RMB to devalue, holding all else constant. Secondly, exchange rate represents the relative strength between two economies in the long run. Decoupling has a positive impact on US economy, but a really negative one on China. Since China abandoned Zero-Covid policy last November, its economy has not rebounded as previously hoped. Export-oriented industries are seeing the horror of disappearing orders and clients. The housing sector, the bedrock of China’s economy, is suffering from a bust of real-estate bubble. Dedollarization: Fact or Fiction? Rhetoric about the pending doom of US dollar goes viral in recent weeks. While the Greenback is being challenged, no other candidate is capable of replacing it as global reserve currency. According to the BIS, 88% of international trade was settled in US dollars in 2021. The Fed estimates that from 1999 to 2019, dollar settlement accounted for 96% of international trade in the Americas, 74% in the Asia-Pacific region, and 79% elsewhere. IMF reports that the percentage of central bank reserve by currency in 149 countries is: US dollars, 59%; Euro, 20%; Japanese yen and pound sterling, 5% each; RMB, 3%; Others, 8%. A global reserve currency could retain its status for well over 100 years before being replaced by another. British pound was the last reserve currency since the start of 1800s. It wasn’t until the establishment of Bretton Woods system in 1944 when the US dollar became its replacement. At that time, the U.S. has been the largest economy for forty years and held over 70% of the world’s gold reserve. In a worst-case scenario, if an upstart currency were to successfully challenge the US dollar, its downfall would be decades away. If your investment horizon is months or years, this is not something stopping you from owning dollar. Trade Idea CME Offshore RMB (CNH) futures is settled at 6.8516 on Monday. The contract has a notional value of $100,000 and is quoted as the number of Chinese Yuan per $1. The next Fed meeting is on May 2-3. According to CME FedWatch, futures traders are pricing in a 71% chance that the Fed would raise 25 basis points. If the Fed raises rate and China’s central bank does nothing, futures price shall go up by mechanical calculation. Holding or selling 1 CNHUSD future requires HKEX:18 ,500 in minimum margin. If the exchange rate moves 1 tick, or $0.0001, the futures account would gain or lose 10 Yuan. Micro RMB futures (MNH) is 1/10 of the standard size CNH contract with a HKEX:10 ,000 notional. Margin requirement is also 1/10 of the original, at HKEX:1 ,850. 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:CNH1!Long
by JimHuangChicago
7
XAUUSD Potential Forecast | 10th April 2023 Technical Confluences 1. GOLD is reached the 2k regions. 2. Important psychological level/ all time highs at 2067. 3. Bullish trend on GOLD with HH and HL forming. 4. Price has rejected the H4 support at 1989 and is currently showing bullish PA. Idea We are looking for price continue heading bullish to tap into the nearest swing high at 2032. NOT FINANCIAL ADVICE DISCLAIMER The trading related ideas posted by OlympusLabs are for educational and informational purposes only and should not be considered as financial advice. Trading in financial markets involves a high degree of risk, and individuals should carefully consider their investment objectives, financial situation, and risk tolerance before making any trading decisions based on our ideas. We are not a licensed financial advisor or professional, and the information we are providing is based on our personal experience and research. We make no guarantees or promises regarding the accuracy, completeness, or reliability of the information provided, and users should do their own research and analysis before making any trades. Users should be aware that trading involves significant risk, and there is no guarantee of profit. Any trading strategy may result in losses, and individuals should be prepared to accept those risks. OlympusLabs and its affiliates are not responsible for any losses or damages that may result from the use of our trading related ideas or the information provided on our platform. Users should seek the advice of a licensed financial advisor or professional if they have any doubts or concerns about their investment strategies.
OANDA:XAUUSDLong
by OlympusLab
DXY AT IMPORTANT RANGEHello friends, today Jerome Powell indicated that they should increase interest rates further more, they said same thing last month but it didn't give much strength enough to DXY enough, so I expect such a move which I have indicated in the chart... and J Powell speech indicates that there's loads of supply of US dollar in the market, and to make US Dollar strong, they should lower down the dollar note printing... and they have to lower the supply of US Dollar.... this indicates that US dollar supply is high, which means collapse of DXY... and I expect US dollar crash anytime soon, and I predict that it may happen after NFP report on 10 March... Hope y'all wellness....
TVC:DXYShort
by rawayoussef0
2
QE or QT?Last week, the Federal Reserve (Fed) went ahead with the 25bps hike that many expected, causing a spike in the U.S. dollar and a temporary halt to the rally that equities and risk-on assets were experiencing. This rate hike has come under scrutiny from market analysts. In the past two weeks since Silicon Valley Bank ( SVB ) and Silvergate Capital collapsed, there has been a multi-billion dollar capital outflow from financial institutions. The primary driver of this depositor flight comes from individuals and asset managers moving capital from low-interest savings accounts to high-interest money markets in the form of treasury bills which pay upwards of 4%. In the week of the collapse of SVB, low-risk investment vehicles that invest money in short-term government and corporate debt saw net inflows of approximately $121 billion. This 25bps hike will increase the yield of newly issued treasury bonds (worsening depositor flight) and cause the value of existing bonds with lower yields to decrease. Ultimately, this initiated the collapse of SVB as the dollar value of the existing treasury bonds that the bank held as collateral fell below legally required levels, resulting in the bank announcing that they needed to raise capital, which culminated in a run on the bank’s reserves. Hence this rate hike further increases systemic risk within the market, displayed by the price of credit default swaps (the cost to insure bondholders against a default) going vertical for many banks within the economy. Consequently, it seems strange to some analysts that the Fed didn’t at least pause rate hikes after the latest FOMC, especially considering Powell stated that he considered pausing in the days leading up to the meeting. After SVB began to unwind, the Fed announced the Bank Term Funding Program (BTFP) in order to try and limit the contagion within the economy. The scheme provides eligible depository institutions with liquidity in return for posting collateral such as under-water treasuries and mortgage-backed securities. Some market participants initially interpreted this as the Fed commencing another round of quantitative easing ( QE ); however, the actual mechanism is very important here. QE is the Fed’s way of injecting the most liquidity into the economy. If the Fed were actively engaging in this, the medium-term outlook would become much more bullish. BTFP collateral posted to the Fed, at least for now, must be swapped back to the bank at the end of the term and comes at a cost. So without going deep into the details, the impact on liquidity is quite different from actual QE. In reality, the recent banking crisis and the Fed’s response display that, in the short term, a pivot to accommodative monetary policy is for now ruled out. The BTFP scheme perfectly displays how monetary authorities will utilise all available measures to preserve stability during further tightening, likely meaning that a hard landing is now firmly on the cards. From a technical perspective, the weekly Bitcoin chart looks good. The bullish momentum from MA9 crossing above MA50 has played out as Bitcoin has rallied towards the key psychological resistance of $30K. Bulls will hope for a weekly close above the $29K resistance level, which should ignite the rally to $30K and beyond. Should this bullish momentum break down, the market will likely test the $24 - $25K support range. A fall through this would likely result in a breakdown towards the $21K - $22K supply zone, where there are presumably a lot of unfilled longs that weren’t filled before the current rally. The fact that the relative Strength Index is hovering around overbought levels indicates that the market could be primed for a reversal and supports the bearish scenario. As we advance, the U.S. CPI data release on the 12th of April will have a bearing on short-term market direction. Soft CPI figures will provide risk-on assets such as crypto with bullish momentum while hurting the U.S. Dollar and yields. Again, volatility will be high around this time, so caution should be exercised, most notably in leveraged positions.
by Coinrule
Dollar Rally to ContinueDXY has been consolidating for a couple months after the large pullback that started in September. This consolidation is expected to continue over the new few months, with price expected to test at least the 107 level. It is reasonable to expect the 110 breakdown level to be tested before another high timeframe round of weakness that will eventually break below the early February lows. This continued DXY consolidation and retrace over the next few months will likely limit upside on the major US indices and commodities. With the recent Fed decision indicating continued focus on fighting inflation, this DXY retrace trend will likely continue until the Fed starts to signal a shift in their policy direction.
TVC:DXYLong
by CycleTargets
TLT: Trade Idea Before More Fed QEThe signal I was waiting for to start buying bonds was whenever the Federal Reserve stopped or slowed raising interest rates. The Fed held another rate policy meeting this week and only raised the Federal Funds Rate by +.25% instead of the +.75% that had been the trend. We've gone from seeing a +.50% hike in Dec, to +.25% in Jan to +.25% this week after 4 prior straight +.75% hikes in mid to late 2022. Now that banks are failing and layoffs are starting to tick up, this weeks rate hike was likely the last for a bit unless inflation doesn't stay flat or go down before the next Fed rate meeting. You can search "2023 FOMC meetings" for the full schedule. My thought here is that within the next 12-18 months the Federal Reserve will lower rates and begin buying treasuries again(aka money printing), and I think the time to start front-running that trade in to bonds is now for those who like to accumulate a larger position over time. The best way for the average trader or phone app investor to get into bonds is via "TLT", the iShares 20+ year Treasury Bond ETF, which tracks the 20-year treasury bond price rather than the interest rate on the 20-year bond. As rates go up, bond prices go down and vice versa. Right now I'm betting on rates having topped out(or close to it) and that bond prices are going to go back up over the next year or so as recession fears kick in and stock prices go lower. We've had a deep and long yield curve inversion to boot and those almost always precede a US recession. I have a recent post showing the yield curve inversion vs stocks vs US recessions for reference. TLT price is trading at decade lows and holding above $100 after a dip down to $90. Seeing the price of any asset hold above nice round numbers is always a good sign, psychologically traders like round numbers. The lower PPO momentum indicator is showing signs of a potential reversal in momentum from negative to short-term positive, and this is a monthly chart so it would be a significant event. A bullish crossover is what we want to see which is when the green signal line crosses above the purple base line in the lower PPO indicator. That would indicate a short-term return to bullish momentum on a monthly basis.
NASDAQ:TLTLong
by PrepForProfit
4
Federal Reserve Balance Sheet Projected to Exceed $19 TrillionWave structures on these Economic Indexes tend to play out fairly often, such as in the case for Various CPI and Interest Rate Charts which can bee seen in the Related Ideas tab below. With that in mind, I now turn to The Federal Reserve Balance Sheet; and when I look at the Balance Sheet what I see is that since the Inception of this chart, it has traded within an Equidistant Channel that can be easily viewed and plotted in Log scale. When I look deeper into this I can also see that since around the end of the 2008 GFC when mass bailouts occurred, the RSI on the Balance Sheet has typically stayed Elevated and Above the Bullish Control Zone: meaning any time spent below the level of 70 has typically been followed by insane expansionary rallies, thus huge continuations in the rapid increases of the Balance Sheet. Additionally, it can also be seen that as of recent times (notably since the mid 2010s) the MACD has become a great indicator in the form of Hidden Bullish Divergences appearing just before huge continuations to the upside; these mid 2010 events align with the blunder that were the taper tantrums in which the fed ultimately capitulated on their monetary tightening stance and decided to expand the Balance Sheet Exponentially Higher and now looking at the chart we can see yet another Hidden Bullish Divergence forming that will be confirmed at the close of the month after the next trading week signaling that another big wave up is about to begin. Lastly, when zooming all the way out and taking in all the data at once, it can be seen that we are in what looks to be an AB=CD wave structure in which the first expansion was a 400% Expansion and the Current Expansion is on the way to being yet another 400%. We are currently about halfway there and the AB=CD Wave Structure would suggest that the Federal Reserve will more than double it's Balance Sheet by 2026 as the Federal Reserve capitulates yet again in an attempt to save the current fragile economic system.
FRED:WALCLLong
by RizeSenpai
3
XAUUSD Technical Analysis 23.03.2023 1h chart– Previous Daily candle closed Bullish at 1970.100 forming new Daily Support at 1940.600. – Buys on close above 1974.500 targeting 4h Resistance at 1981.500, Leaving Runners to the Daily Resistance formed at 1988.500. – Sells on close below 1961.000 targeting 1h previous Resistance formed at 1953.500, Leaving Runners to the 1h Support at 1946.200. – We have High Impact News data ahead on the New York session with Unemployment Claims and New Home Sales
OANDA:XAUUSD
by SalimFX20
GBP & Gold Reaction to UK Inflation and US Rate HikeTwo significant events have occurred within the past 12 hours, causing both GBPUSD and gold prices to surge. The first event was the unexpected rise in UK inflation, which jumped from 10.1% in January to 10.4% in February 2023, marking the first increase in four months. The primary factor behind this increase was the soaring food and drink prices, which surged at the fastest pace in 45 years. This inflation reading may fuel arguments that the Bank of England needs to boost interest rates again. However, the data might have arrived too late to impact the Bank's interest rate decision, which is due tomorrow. Nevertheless, the GBP rallied against the USD, before subsiding, and then rallying again on the news of the second event. The second event occurred an hour ago, with the US Federal Reserve announcing its latest interest rate decision, which included a 25-basis-point hike. While most of the market had anticipated this move, some participants believed that the Fed might pause its rate hikes. In the post-decision address, Fed Chair Jerome Powell acknowledged that recent economic indicators, particularly job data, have come in stronger than expected. However, Powell noted that the recent turmoil in the banking sector should result in tighter lending conditions, which will help combat the robust economic data. Nonetheless, Powell added that it was too early to determine how monetary policy should respond to the recent banking crisis, but it will play a role in future rate hike decisions. Gold is following a similar path to the GBP/USD and appears to be encountering some resistance at $1,970.
by BlackBull_Markets
EUR/USD Moves Towards 1.0800 Ahead of Fed's DecisionThe EUR/USD pair has advanced modestly on Wednesday as investors remain sidelined ahead of the Federal Reserve Open Market Committee (FOMC) decision. At the time of writing, the EUR/USD pair is trading at the 1.0790 zone, 0.23% above its opening price. All eyes are on the Federal Reserve decision to be released at 18:00 GMT, which will be accompanied by the statement and the dot plot with updated members’ projections. Half an hour later, Chairman Jerome Powell will speak at a press conference. Hours ahead of the verdict, the CME FedWatch Tool points to a 25 bps rate hike as the most likely outcome (89.3%) versus no change (10.7%). While the banking turmoil seems contained, at least at the time being, the Fed is far away from taming inflation. A 50 bps rate increase seems out of the table, so if the Fed surprises with such an increase, the dollar could rally across the board. Investors will also scrutinize the statement, the dot plot and Powell’s wording. While the technical picture becomes less relevant ahead of the highly anticipated decision, the EUR/USD maintains a bullish short-term bias according to indicators on the daily chart while the price continues to rise above its main moving averages. The EUR/USD pair needs to reclaim the 1.0800 zone to pave the way higher, with 1.0900 –psychological level and 50% retracement of the 1.2266-0.9535 decline – as the next target and critical barrier on the upside. On the flip side, immediate supports are seen at 1.0700 and the 20-day SMA at 1.0640. The broader perspective will remain positive if the pair manages to hold above 1.0500 after the Fed event.
by Alex_Boltyan_FXAnalyst
FED Interest Rates and it's mechanism BINANCE:BTCUSDT In the United States, the federal funds rate is the interest rate at which depository institutions (banks and credit unions) lend reserve balances to other depository institutions overnight on an uncollateralized basis. Reserve balances are amounts held at the Federal Reserve to maintain depository institutions' reserve requirements. Institutions with surplus balances in their accounts lend those balances to institutions in need of larger balances. The federal funds rate is an important benchmark in financial markets. The effective federal funds rate (EFFR) is calculated as the effective median interest rate of overnight federal funds transactions during the previous business day. It is published daily by the Federal Reserve Bank of New York. The federal funds target range is determined by a meeting of the members of the Federal Open Market Committee (FOMC) which normally occurs eight times a year about seven weeks apart. The committee may also hold additional meetings and implement target rate changes outside of its normal schedule. The Federal Reserve uses open market operations to bring the effective rate into the target range. The target range is chosen in part to influence the money supply in the U.S. economy Financial institutions are obligated by law to hold liquid assets that can be used to cover sustained net cash outflows. Among these assets are the deposits that the institutions maintain, directly or indirectly, with a Federal Reserve Bank. An institution that is below its required liquidity can address this temporarily by borrowing from institutions that have Federal Reserve deposits in excess of the requirement. The interest rate that a borrowing bank pays to a lending bank to borrow the funds is negotiated between the two banks, and the weighted average of this rate across all such transactions is the effective federal funds rate. The Federal Open Market Committee regularly sets a target range for the federal funds rate according to its policy goals and the economic conditions of the United States. It directs the Federal Reserve Banks to influence the rate toward that range with open market operations or adjustments to their own deposit interest rates. Although this is commonly referred to as "setting interest rates," the effect is not immediate and depends on the banks' response to money market conditions. Separately, the Federal Reserve lends directly to institutions through its discount window, at a rate that is usually higher than the federal funds rate. Future contracts in the federal funds rate trade on the Chicago Board of Trade (CBOT), and the financial press refer to these contracts when estimating the probabilities of upcoming FOMC actions. When the FOMC wishes to reduce interest rates they will increase the supply of money by buying government securities. When additional supply is added and everything else remains constant, the price of borrowed funds – the federal funds rate – falls. Conversely, when the Committee wishes to increase the federal funds rate, they will instruct the Desk Manager to sell government securities, thereby taking the money they earn on the proceeds of those sales out of circulation and reducing the money supply. When supply is taken away and everything else remains constant, the interest rate will normally rise. The Federal Reserve has responded to a potential slow-down by lowering the target federal funds rate during recessions and other periods of lower growth. In fact, the Committee's lowering has recently predated recessions, in order to stimulate the economy and cushion the fall. Reducing the federal funds rate makes money cheaper, allowing an influx of credit into the economy through all types of loans.
Education
by INVESTRONE
3
BTCUSDIn the daily time frame, with increasing expectations of a 0.25% increase in interest rates or even keeping it constant due to the financial crisis of banks in America, Bitcoin will cross the heavy resistance of 25,000 and at the level of 28,500 in lower times, we can see the weakness of the trend, which can indicate The market rest for the next move according to today's economic data and Powell's speech. If the level of 25000 is rejected, it can be the key support for the correction to continue the upward trend, but with the positive impact of the result of tonight's session, the levels of 32000 and 38000 are the next targets of this accelerated movement, which seems to be different from the very bullish expectations. In the market, it is necessary to continue the upward movement of a correction, which Mr. Pavel can have a surprise for the market. (You have to see if he has the phone in his hand or not 😉)
BITSTAMP:BTCUSD
by MrHunterTradeInsight
NQ Power Range Report with FIB Ext - 3/22/2023 SessionCME_MINI:NQM2023 - PR High: 12874.75 - PR Low: 12862.25 - NZ Spread: 28.0 Evening Stats (As of 12:15 AM) - Weekend Gap: N/A - 8/19 Session Gap: -0.04% (open > 13237) - Session Open ATR: 260.79 - Volume: 14K - Open Int: 214K - Trend Grade: Bear - From ATH: -23.2% (Rounded) Key Levels (Rounded - Think of these as ranges) - Long: 12959 - Mid: 12392 - Short: 11820 Keep in mind this is not speculation or a prediction. Only a report of the Power Range with Fib extensions for target hunting. Do your DD! You determine your risk tolerance. You are fully capable of making your own decisions.
CME_MINI:NQM2023Long
by mv3trader5
XauUsd Fed's Rate Decision | Will it retest or drop below 1915Last week 1915 was a decisive resistance for price to reach 1990. Upcoming Fed Decision, Will it retest 1915 support or will it trade below 1915? Upcoming Fed Rate Decision, I am confident Fed will rise Interest rate despite having a dilemma like SVB. However, it pausible Fed will stop interest rate at 5% IF inflation rate in bearish This is based on my personal opinion. momentum. Recent date show Inflation rate is at 6.04%. It was peak at 9.06% in June 2022. Drop 3.02% in 8 month. We will expect another 8 months or less until inflation lowered to 2% or 3%.
TVC:GOLDShort
by Khairi_RL
2
XauUsd Fed's Rate Decision | Will it retest or drop below 1915Last week 1915 was a decisive resistance for price to reach 1990. Upcoming Fed Decision, Will it retest 1915 support or will it trade below 1915? Upcoming Fed Rate Decision, I am confident Fed will rise Interest rate despite having a dilemma like SVB. However, it pausible Fed will stop interest rate at 5% IF inflation rate in bearish momentum. This is based on my personal opinion. Recent date show Inflation rate is at 6.04%. It was peak at 9.06% in June 2022. Drop 3.02% in 8 month. We will expect another 8 months or less until inflation lowered to 2% or 3%.
TVC:GOLDLong
by Khairi_RL