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How to trade the US Dollar Index based on US FED policy actionsYesterday JPowell was very dovish. In summary, it's clear that the FED will use every tool necessary to achieve full employment. This implies that he'll let inflation run hot above 2% for a while. The recent rise in the US 10 YR yield indicates inflation is coming. However, JPowell said that he won't use tools to raise rates to follow the yield curve yet but implied that the FED may extend treasuries maturities should higher yields negatively affect unemployment numbers. Unemployment is still high. How to ride this out JPowell seems to think that the upcoming inflation will be transitional. He also expects the GDP growth to hit 6.5% by the end of this year. In addition, increasing vaccination will boost reopening economies around the world. Therefore, I expect the US Dollar to be strong for a while before heading lower. This play has the least resistance and current economic conditions support this. However, the US Dollar may immediately head lower as more money is introduced into the system. The FED will continue with QE as stimmy cheques hit banks this week.
TVC:DXYLong
by GrizzlyBearBee
SPX - Dot-Plot Eve: Diamond Top or Continuation Pattern to 4K?Diamonds serve as both continuation and, at a higher rate, reversal patterns. Both NAS and SPX have put in Diamonds to consider as we await the Fed consensus on a rate increase in 2023. It is said that the market is forward pricing instrument. The last time we saw rate hike confirmation it took the Christmas Miracle's dovish kick-save to stop the drop. Tough spot for Chairman Powell, I am having a tough time imagining a short-term winning narrative.
FX:SPX500
by Pennywick
Aussie yawns after RBA minutesThe Australian dollar is having a quiet Tuesday session. Currently, the pair is trading at 0.7744, down 0.14% on the day. The RBA minutes were a non-market mover on Tuesday, as there were no surprises from the central bank. The committee remains focused on employment and wage expectations. The minutes noted the sharp appreciation in the Australian dollar since November 2020, adding that the currency was "lower than it would have been otherwise as a result of the Bank's policies." The committee reiterated that they did not anticipate raising interest rates prior to 2024. This dovish stance is consistent with the Federal Reserve, which has said it does not plan to raise rates prior to 2023. Lowe wants to see inflation move up to the bank's target of between 2% and 3%, and only then raise rates. The federal government does not appear to share the RBA's stance on stimulus, and this divergence could become a concern for investors. The central bank recently extended its QE programme, which is a crucial component of its ultra-dovish monetary policy. However, the federal government wants stimulus to be tapered and let the private sector shoulder more of the recovery. Last week, RBA Governor Lowe acknowledged that low interest rates had fueled the housing boom, but insisted that the bank would not change its policy based on housing market considerations. As for the housing market, the House Price Index jumped 3.0% in the fourth quarter of 2020, up sharply from 0.8% beforehand. This easily beat the forecast of 1.9%. The housing market has been red-hot, and both the RBA and the government will have to keep a close eye on this sector. AUD faces resistance at 0.7832, followed by resistance at 0.7906. On the downside, there is support at 0.7652, with the next support level at 0.7546
by OANDA
Australian dollar dips, RBA minutes nextThe Australian dollar is in negative territory in the Monday session. Currently, the pair is trading at 0.7739, down 0.29% on the day. The RBA releases the minutes of its March meeting early on Tuesday (00:30 GMT). At the meeting, policymakers maintained the Cash Rate at 0.10%, where it has been pegged since November. The RBA statement pledged that the record low rates would stay in place as long as inflation remained below the target level of 2 to 3 per cent. The statement noted that the current monetary policy is "continuing to help the economy by keeping financing costs very low" and is "contributing to a lower exchange rate than otherwise". The RBA has watched with concern as the Australian dollar has appreciated sharply against the US dollar, with the Aussie punching above the symbolic 80-line earlier in March. The RBA prefers an exchange rate below the 80-level, in order to maintain price stability and protect the critical export sector. The RBA has been very clear about future monetary policy. At the March meeting, RBA Governor Lowe said that the cash rate is very likely to remain at its current level until at least 2024.” This dovish stance is consistent with the Federal Reserve, which has said it does not plan to raise rates prior to 2023. Lowe wants to see inflation move up to the bank's target of between 2% and 3%, and only then raise rates. Investors are also keeping an eye on the Federal Reserve, which holds its policy later in the week. The message to the market is expected to be dovish, given that the Fed has said it does not anticipate raising rates before 2023. With the US recovery gaining steam, investors will be particularly interested in the Fed's dot-plot, which is a signal of the Fed's expectations of future interest rate changes. AUD faces resistance at 0.7832, followed by resistance at 0.7906. On the downside, there is support at 0.7652, with the next support level at 0.7498
by OANDA
How things got linked up with one chart(FED, Gold, US10Y,NQ)I covered this part in my video. To be more specific, I made this chart to better understand how things linked up. US 10Y yield is the anchor that rising rates may indicate two things: 1)strong economy, 2) inflation Fed is only able to directly control the short-term rate, say federal funds rate, not the long-end rate. On March 15th of 2020, It reduced the target range for the federal funds rate to nearly zero. That triggered the quick rebound of everything, including gold and NQ. We can see the two assets moved in the same direction . I bet everything moved to the upside! So when things started to change? In early Aug. of 2020 , US 10Y yield completed consolidation and started to go up in a moderate mode. Look at the slope! However, gold reacted to rising yield with a retreat from historic high of USD2075ish and it came all the way down. NQ shrugged off and kept moving higher. The two assets started to move in opposite direction. On Jan. 6th of 2021 , I published an idea titled 'US 10Y jumped by 5+% A dangerous sign for stocks' . Actually, I'm concerned then, because I observed the speed of going up is tooo fast! So when was the pattern of moving opposite terminated? On Feb.8th 2021, US 10Y yield stood at 1.17%. That day was a special day. It created a new high, indicating the readiness of going up. Two days later, the yield started with a series of big bullish candles ! This time, stock market couldn't shrug off like it did 6 months ago. It tumbled with gold. The two assets moved in the same direction again until now! So, when will this pattern be terminated? I don't know. But that day comes with a few signs as below: 1. inflation goes above 3% above. Funds will go back to gold again as it serves the function of hedging inflation. Stocks, especially, growth stocks will suffer a lot. Value stocks will outperform the growth. 2. Corporate earnings are way better than expected. Investors realize that stocks are under valued. The main driver of the market comes back to earnings, not the monetary easing policies. Dollars may get stronger with funds outflow from emerging markets. That's the map in my head of what might happen in the future. Follow the path, I'm confident to dig some opportunities. Give me a like if you love this idea!
FX:NAS100
by JICPT
2
AEM. Looking for Gold miners? Agnico Eagle Mines is your pick!Agnico Eagle Mines ( NYSE:AEM ) is the gold mining company that I picked as a long-term investment over many other miners such as Equinox and Barrick Gold. I picked it based on which countries have USD Swap Lines , an idea explained by Katusa Research in one of his videos on YouTube. I will explain it briefly here. A USD swap line is an open channel between the US Federal Reserve and certain central banks such that the bank can borrow USD at any time almost instantly up to a certain limit (such as $100 billion dollars). This provides the liquidity necessary for those central banks to settle their balance sheets, loans, settle large money transfers and currency conversions, and do other central-bank-y things that you can read online. In practice, what this means is that it is much cheaper and much more reliable for, say, an American gold mining company to realize earnings from its oversees mining operations if those mines were located in Canada or Mexico (USD Swap line countries) rather than if the mines were located in Turkey for example. You can find here the list of worldwide central banks that have USD Swap Lines, or I can save you time and list them here: Before CV-19, the US Federal Reserve had standing USD liquidity swap lines with the central banks of the following countries with a ceiling of $100 billion each: Canada. England. Japan. European Union. Switzerland. And on March 20, 2020, the Federal Reserve extended this arrangement to nine more central banks: $60 billion for each of: Singapore. Australia. Brazil. Denmark. South Korea. Mexico. and $30 billion to each of: New Zealand. Norway. Sweden. As it happens, Agnico Eagle Mines has almost all of its revenue coming from mines located in USD Swap Line countries as opposed to Barrick gold which relies on mines located in Argentina, Chile, Cote d’Ivoire, the Congo, Peru, Saudi Arabia, Tanzania, and other similarly Non-USD-swap-line countries. That alone puts me at more ease of mind as an investor. And I recommend that you weigh in this element in all other kinds of investments. That's it for fundamental analysis. From the technical analysis side, AEM has been struggling with the ascending trend line. I believe this will be long-time support once we settle above it. I see two paths for price which I determined by two things: 1. The long curve which you can see in the following chart: 2. The Linear time cycle of 272 days, which nicely aligned many momentum shifts. We can use as an approximate indicator next to other clues later when we're approaching the next time zone and are looking for signs of reversal or momentum. The rest is in the chart. I drew two paths and I expect the lowest point to be the support at $55.60. I am more confident in the higher price path that takes us to $175 by April 2022. Conclusion : This is a long-term investment for those that chose to invest in gold miners. I believe AEM is a solid pick and is set for growth.
NYSE:AEMLong
by TechNerdOmar
2
What Analysts Got Wrong about the Recent Volatility.Since I'm not a professional analyst, I've sunk many hours of research in the past week to understand the recent move in the market on a deeper level. Here are my findings. I hope you find this informative. I've been hearing different analysts' opinions about the recent move in the stock market. I heard the money is moving from tech stocks to banks, or from growth stocks to value stocks. I'm here to say that neither is true. NASDAQ:GOOG is a tech stock and it's been rising. NASDAQ:COST is a value stock and it's been falling. Observe different stocks and you'll find numerous examples. The recent move is rather about companies in debt vs companies with free cash flow . It turns out that when interest rates are raised, it can be predicted with certainty that more money is going to flow into servicing existing debt rather than into productivity. Watch this talk with Brent Johnson to understand this concept, minute 50 to 60. Banks, who recently had their debts quantitatively eased, have more room to buy corporate bonds from companies like GM and Ford. This debt is used to service older debt. The big money, which understands this debt-based economy well, knows precisely where value is going when interest rates rise. Big money used their tried-and-tested calculations and decided to move their investments from free-cash-flow companies, to debt-generating companies. That's what's been happening, and that's the reasoning behind it. However, there is a point the smart money is missing and they keep missing it and never learn. There is much more value to reap from technology and innovation than there is in loan interests. This value of tech is not priced into their tried-and-tested calculations. It's probably too uncertain for them. But realize that when companies like Amazon, Apple, Google, Facebook, and Tesla create value through technology, they are carrying the rest of the useless debt-generating economy on their backs and creating prosperity for the entire nation and for the world. Real value is in productivity. The United States has moved slowly after WW2 from an industrial exporter to a liquidity and debt exporter of sorts, which also reflected on the US's internal economy. And that weakened the industrial sector over the decades and bubbled the financial sector to an overwhelming extent that it's sucking more and more money from productive businesses and pouring it into existing debts with the purpose of buying more time. The retail investor should learn and understand this in order to position themselves with high conviction on the side of technology and simply hold stocks like Tesla for a decade. You are already benefiting the economy by saving money aside and putting it in the right place and of course the reward is high. Let me know your thoughts. I probably made mistakes and left some statements in need of more elaboration.
SP:SPX
by TechNerdOmar
4
The Link Between Inflation, Rising Bond Yield, & Market Sell-offAggravated by Jerome Powell's speech at the Wall Street Journal Jobs Summit, the tech-led sell-off continues, causing the Dow Jones Industrial Average to fall by 1.11%, S&P 500 by 1.34%, and Nasdaq Composite by 2.11%. On that note, the 10-year Treasury yield also popped to 1.541% during Jerome Powell's speech, later closing at that level for the day. But how, specifically, did Jerome Powell cause the market to sell-off yesterday? Let's find out. Prior to Jerome Powell's speech, there were already a substantial amount of tension surrounding the bond market and concerns regarding inflation. A key event occurring recently that brought a great deal of attention to the acceleration of rising bond yields were the sudden spike in 10-year Treasury yield back in 2/25/21 from 1.38% to 1.54% - temporarily jumping as high as 1.6%, when an auction of US$62 billion 7-year notes was met with weak demand. This rattled the stock market because investors were not ready for the velocity of the 10-year Treasury yield surge. Instead, they were expecting for yields to gradually inch higher throughout the year. In an effort to pinpoint the exact reason for the surge, many conclusions were drawn. One of which relates to inflation concerns. Over the course of the pandemic, trillions in fiscal relief has been delivered, of which an addition $1.9 trillion in fiscal package is expected to come from the Biden Administration. With so much money printed and nowhere to flow yet due to economic lockdown as a result of the pandemic, investors fear that once the economy reopens again, pent-up demand will drive people to go on vacation and spend in masses, injecting all the printed money over the course of the pandemic into the economy all at once, driving inflation up at a rate that has not been seen since the 2008 Financial Crisis. Due to this belief of a looming inflation, it makes bond that are purchased currently potentially worthless because of possible subpar yield. As a result, people flock away from bonds at the moment because they are expecting that yields will rise going forward in order to compensate for inflation risk. Thus, yields are continuously being driven up. However, with the sudden spike in yield, it creates uncertainty around whether we will be seeing an acceleration of rising bond yields and possibly indicate that inflation could be around the corner. The possibility of this scenario is further amplified by vaccination efforts contributing to a recovering U.S. economy, and the incoming $1.9 trillion fiscal package that could further inflate the economy going forward while pushing the economy further into the recovery. Taking all of this into account, let's go back to Jerome Powell's speech. Having understood all of these, investors were looking at Jerome Powell to see whether he would give any indication on how he plan to control the acceleration of the rising bond yield, perhaps through an adjustment of the Fed's asset purchase program, where they will step up on the purchasing of long-term bonds to drive down long-term interest rates, or even extending the Supplementary Leverage Ratio that will be expiring on 3/31/21, so that banks can further help with the purchase of long-term bonds. However, in his speech, Jerome Powell said nothing of the sort, in which the market took as a signal that yields could rise further, triggering the sell-off even further, and driving the 10-year Treasury yield further up to a level that matches the initial 10-year Treasury yield spike back in 2/25/21. In fact, Jerome Powell made supposedly positive remarks stating that he expects the rise in inflation as the economy recovers to only be temporary, that he does not expect the move up in price to be long-lasting nor does he expect it to be enough to change the Fed's accommodative monetary policy, among others. With the market sell-off and surge in yield during his speech, it is clear that the market neither believes his words nor views it positively. To conclude, we are now in a very volatile situation where stocks no longer just goes up. We cannot control the direction of the market, but what we can control is how we deal with this situation emotionally and monetarily. Don't get too hung up on the short-term bearishness of the current market condition because if you zoom out your chart, in the grand scheme of things, this is just a tiny bleep. As such, if you believe that we will eventually recover from this market sell-off, use this as an opportunity to buy into your favorite companies at a huge discount. Invest safe. This is not investment advice so please do your own due diligence! Support this idea with likes and share your thoughts below.
TVC:US10YEducation
by AntrePoint
The Devil is in the DetailsWhat Happens Next? Economists describe inflation as “too many dollars chasing too few goods.” When you have too many dollars chasing the same thing, the chase will drive the price up. Things will become more expensive. If you look at the following chart of the U.S. Stock Market 1945 to 2021: www.macrotrends.net you will notice the stock market chart from the end of World War 2 1945 to 2021. You can see quite clearly the Tech Bubble of the early 2000 and the subsequent bust, and you can also see the Housing Bubble followed by the Great Financial Crisis of 2007 and 2009. To the right of the chart, you can see the tremendous inflationary money-printing experiment of 2009-2021, literally bursting off the chart, with the stock markets S&P 500 going vertical to today’s all-time highs of 3,932. At the same time, we have an economy that has stalled, unemployment rising, people paid to stay at home, businesses and individuals struggling, or on government life support. How is it possible that the markets are screaming for a record after record high when the real economy, people, business, goods, and services have all suffered tremendously? A Faustian Bargain A Faustian Bargain is a pact with the Devil, whereby an individual or a people trade something moral or spiritual, such as their souls, for some worldly or material benefit, such as knowledge, power, or riches. However, the benefits are temporary, perhaps decades-long, but eventually, you must repay the Devil with your soul. In the wake of the destruction of World War 2, the U.S. emerged as the strongest country in the World. It had amassed most of the World’s Gold, was the most industrially advanced nation, and was the least damaged during the War. More importantly, the U.S. inherited the privilege of becoming the World Reserve Currency, a benefit previously held by the badly damaged and shrinking Empire of Great Britain. The U.S. dollar became the undisputed Heavy Weight Currency of the World, and from now on, it would make the rules. The majority of global trade would now be conducted in the mighty U.S. Dollar… backed by Gold. The privilege allowed the U.S. to become very rich for a while. However, by the late 1960’s, the U.S. had squandered its treasure, having spent most of its Gold. So, in 1971 the U.S. declared an act of bankruptcy and closed the Gold window. The U.S. Dollar became fiat or fake…backed by nothing, except the full faith and credit of the U.S. government. The world went into shock, and chaos erupted. War and violence dominated the more impoverished regions of the World, while stagflation and recessions dominated the Western World. By the late 1970s, inflation in the U.S. was out of control. The Federal Reserve and the Bond Vigilantes drove up interest rates to tame the rampant inflation. The economy was dying, and the U.S. needed a solution; the U.S. would need to give the World a good reason to hold the U.S. Dollar, a reason other than Gold. The U.S. was on its knees and ready to make a bargain to regain its dominance. A deal with the Devil, a Faustian Bargain would do. The deal would allow: The U.S. to defend its title as World Reserve Currency through a combination, oil Market control, financial shenanigans, war, intimidation, sanctions, embargoes, bullying, and most importantly, the ability to expand debt. The Devil would just wait until the debt could expand no more. The Debt Feast The inflation of the 1970’s was crushed by raising interest rates, raising the prime rate in the U.S. to the dizzying height of 21.5% in 1981, but the economy was on its knees Through a combination of Central Bank policy, government approval, deregulation of the financial system, accomplices at the Treasury, shoddy oversight, credit and debt once again began to flow. The monetary base began to explode, and debt began to grow faster than the real economy. The bond market hit its bottom in 1981, and the stock market hit its bottom in 1982. The Devil didn’t lie, good times were here again, and we wouldn’t have to worry about the debt or the payback for decades. Well, decades have passed, and we didn’t have to look back until now. The powers that be, the Federal Reserve, and the Treasury have bailed out the system by issuing more and more debt. As you can see from the chart above, we’ve had two major shocks in the stock market since 1982: the Tech Bubble and the Great Financial Crisis. However, when you look at the details, they’ve had to continuously bail out the system since 1980, and the debt has erupted. We are rapidly approaching $30T, with the forecast for Trillions more. tradingeconomics.com The Powers That Be Have Had To Intervene In Every Crisis We’ve Had Since The 1980s. And Since The Great Financial Crisis Of 2007, We Now Realize That We Can Never Ever Stop Printing Money. It Is Inflate Or Die… Bailouts Since 1980 Black Friday 1987 The S&L Crisis 1990 The Tequila Crisis 1994 The Asian Crisis 1997 The LTCM Crisis 1998 Tech Bubble 2000 Great Financial Crisis 2007 Covid -19 Crisis 2020 Give the Devil his Due Funnily enough, the bottom of the last major stock market crash was on Mar 9, 2009, at 666, the Devil number. It’s been inflate or die ever since. In the aftermath of the Great Financial Crisis, the economy had collapsed. The first domino to fall in the Great Financial Crisis was the housing market; the panic that ensued exposed the game for what it really is. A debt-fueled Ponzi scheme, supported by the powers that be. They have been bailing out Wall Street since the 1980s, and now because of Covid-19 Crisis, another Crisis, they currently have to bail out you and me on Main Street, as well as their interests on Wall Street. They’ve provided a tsunami of debt to flow into the economy, and it has rushed into the financial markets. The bond markets, the stock markets, the housing markets, the corporate debt markets, the crypto-currency markets, and so on, they’ve all exploded to the upside. Investors and traders have surfed this wave of free money backed by debt and driven the markets to all-time highs. The above charts show the tsunami of asset price inflation rises from an Ocean of Debt. We are in awe of the money printing and have been humbled by the retail investor. Their lack of experience and formal education about the stock markets has served them well; they have made themselves small fortunes, fair play. We hope that they have learned enough and that they know when to book profits. Debt/liquidity fueled stock markets and free money backed by debt given to individuals. You combine that with Covid-19 boredom, blissful ignorance, momentum, social media, and you have a speculative frenzy. The tremendous appetite for risk leads us to conclude that investor taste buds have been removed or they are completely unaware that a threat exists. Give the Devil his due; he has drawn us all into the frenzy and set us up to take away our souls and the soul of the U.S… the mighty Dollar. PS: The Original piece with the bells and whistles on the charts can be found here: theimpartiallens.com
TVC:SPX
by rzinho
1