CRYPTO MARKET UPDATE! BITCOIN ENTERS ANOTHER RANGE! Hi Snipers,
Please refer to the recording for the next price levels and scenarios.
Thanks
MS
Inflation
Backfiring BondsTwo financial institutions, Silvergate Capital and Silicon Valley Bank (SVB), collapsed early last week due to a series of ill-fated investment decisions which were exposed by global interest rate tightening. The collapses came after the institutions invested large amounts of capital in long-dated US government bonds, which were considered relatively low risk. However, as interest rates rose rapidly to combat spiralling inflation, bond portfolios started to lose significant value. As a result, when cash demands got high enough, Silvergate and SVB had to sell those backing assets at substantial losses. Silvergate announced a $1 billion loss on the sale of assets in the fourth quarter of last year, while SVB lost $1.8 billion. In both cases, US Treasury bonds comprised large portions of the liquidations. SVB, once the 16th largest bank in the US, then announced a $1.75bn capital raising to plug the hole caused by the sale of its bond portfolio. As one would anticipate, this news resulted in a run on the bank's reserves, and two days later, the bank collapsed, marking the largest bank failure in the US since the global financial crisis. The US government has since guaranteed all deposits of the bank's customers, which has attempted to address concerns of widespread contagion and further runs on other banks' reserves. After the collapse of these institutions, the Federal Reserve announced the Bank Term Funding Program (BTFP), which will provide banks and other depository institutions with emergency loans. However, JPMorgan has since stated this program could inject as much as $2 trillion into the American banking system, which would nullify all hope of inflationary pressures easing.
All of the talk in recent years has been about protecting the banking system from crypto. However, ironically, we had a situation where a digital asset had to be protected from the banking system. The SVB debacle caused USDC to temporarily lose its peg after it was revealed that its issuer, Circle, had $3.3bn wrapped up in a SVB bank account. The stablecoin fell to as low as $0.88 over the weekend before recovering after the US government's deposit guarantee was announced.
These events have highlighted an underappreciated problem with increasing interest rates to reign in inflation. The issuance of new Treasury bonds with higher yields causes the market value of existing bonds with lower yields to decrease. As a result, all banks that hold a significant amount of Treasurys as legally required collateral are vulnerable to the same risk that has affected banks like Silvergate and Silicon Valley Bank. Recently, it looked as if the contagion effects had spread to Swiss banking giant Credit Suisse when their stock began to plummet after questions were raised about the banks' stability. However, since then, the bank has secured a £44.5bn lifeline from the Swiss central bank. The importance of this should not be underestimated. Credit Suisse manages assets in the region of $1.6 trillion. If the bank collapses, it could trigger a domino effect, bringing about a 2008-like crisis.
All in all, it would be ironic if increasing interest rates failed to lower inflation but instead resulted in a number of banks collapsing as a result of their bad bets on treasuries. Despite this market turmoil, yesterday, the European Central Bank stuck to its plan and went with a 50bps rate hike meaning that Credit Suisse may not be out of the woods yet. In recent weeks, the market had been pricing in a 50bps rate hike from the Fed. However, the collapse of SVB and broader risks to the financial system may lead the Fed to raise interest rates by no more than a quarter percentage point next week, with some institutions such as Barclays expecting the Fed to pause all rate increases.
Despite these events, in recent days Bitcoin has significantly outperformed markets. Since the 11th of March, Bitcoin is up over 20% whilst other asset classes are up between 0-2% with 10Y US Yields down around 4%. The key reasons for this most likely come down to the dampening of US CPI data along with the decreased likelihood of future rate hikes as a consequence of the events of the past week. Ironically, while inflation and bank crisis now look more likely, the expectation of more liquidity has provided risk-on assets, such as Bitcoin, bullish momentum.
Australian dollar climbs on strong employment dataThe Australian dollar has taken investors on a roller-coaster ride this week, reflective of the gyrations we're seeing in the financial markets. In the North American session, AUD/USD is trading at 0.6656, up 0.56%.
Australia's employment report for February was stronger than expected. The economy produced 64,600 news jobs, after a decline of 10,900 in January. This beat the estimate of 48,500. What was especially encouraging was that full-time jobs rose by 74,900, with part-time positions declining by 10,300. The unemployment rate fell to 3.5%, its lowest level in almost 50 years, down from 3.7% and below the estimate of 3.6%.
The tightness in the labour market has allowed the RBA to aggressively tighten, with ten straight rate hikes since April 2022. Inflation slowed to 7.4% in January, down from 8.4% in December, so the rate hikes are having an effect on curbing inflation. Still, it will be a long road back to the inflation target of around 2%. The central bank is leaning to taking a pause at the April meeting and leaving the cash rate at 3.60%. Major central banks are moving away from continued tightening and the RBA will have to take that into account, as well as the Silicon Valley Bank crisis which has investors on edge about contagion spreading. Central banks have to be cautious with all the market turmoil, for fear that additional tightening would make a global recession more likely.
Market pricing of rate moves has been gyrating like a yo-yo, and currently there is a 10% chance that the RBA will cut rates by 25 basis points at the April meeting. Just a month ago, the markets expected rates to peak at 4.1% in August. The SVB crisis has completely shifted pricing and the markets are currently expecting rates to fall to 3.35% by August.On
There was more good news as Australian consumer inflation expectations for March ticked lower to 5.0%, down from 5.1% and below the forecast of 5.4%.
AUD/USD is testing support at 0.6639. Below, there is support at 0.6508
0.6713 and 0.6844 are the next resistance lines
"Something will break!" and something did break and is breaking!Traders,
In light of the recent Silvergate and Silicon Valley Bank crashes and the Fed following this up with a guarantee to depositors, its spells inflation on. This gives us a big clue to how the market will respond and continues to support my thesis of a blow-off top in the next few months. Let's take a look as to how we should handle this information.
Stew
AUD/USD falls ahead of employment reportThe Australian dollar, which has posted strong gains early in the week, has run into a wall on Wednesday. In the European session, AUD/USD is trading at 0.6638, down 0.66%.
Australia releases the February employment report on Thursday (Australia time). Job growth is expected to rebound, with a consensus of 48,500 after a soft January read of -11,500. The unemployment rate is expected to tick lower to 3.6%, down from 3.7%. The Reserve Bank of Australia will be watching closely, as a robust labour market has enabled the central bank to continue its tightening - the Bank raised rates last week by 25 basis points, a 10th straight hike which brought the cash rate to 3.60%. The good news is that the end of the tightening cycle could be near, with the markets pricing in a pause at the April meeting. Consumers and businesses are weary of rising interest rates and confidence indicators do not paint an optimistic picture.
Along with the job data, Australia releases consumer inflation expectations for March. The markets are braced for the indicator to rise to 5.4%, after a 5.1% gain in February. Inflation expectations is a key inflation gauge as it can set the direction of actual inflation, and the RBA will not be happy if inflation expectations accelerate.
There is an uneasy calm in the air as the dust begins to settle after the Silicon Valley Bank collapse. The sky is not falling, not even above US bank towers, as regional bank stocks have rebounded. The US inflation release on Tuesday delivered as expected, with both the headline and core CPI readings matching the estimates. Headline CPI fell to 6.0%, down from 6.4%, while the core rate ticked lower to 5.5%, down from 5.6%. Inflation is cooling but we're not seeing the disinflation process that the markets were celebrating only a few weeks ago.
AUD/USD is testing support at 0.6639. Below, there is support at 0.6508
0.6713 and 0.6844 are the next resistance lines
SPY: Due for more downside?I've got a supply zone staring at $394 that I think will serve as a temporary top for the remainder of this week. We also have a strong resistance at $393. I may look to enter puts but I am more likely going to try to play UVXY calls with the extra volatility. I'm expecting this to get under $380 fairly quickly and ultimately down o $378 where I see a gap.
DXY Potential Forecast | Pre-CPI | 14th March 2023Hi everyone, back with a pre CPI forecast.
Today's CPI release will be wild and will be the determining factor to solidify the general direction and bias on the USD.
There has been very bearish sentiments on the USD since last Friday after NFP's release.
Fundamental context
1. Employments was good, well above the forecasted or what the market has been pricing in.
2. This shows the strong labor market in the US economy.
3. However, average hourly earnings increased at a decreasing rate to 0.2% from 0.3%.
4. This shows the slowing down of the wage inflation, which is directly correlated with the inflation print and numbers, showing an important signal/sign that inflation could be worse off.
5. In addition, unemployment rate increased by 0.2% compared to previous months.
6. The average earnings and unemployment rate prints showcases the effect of the continuous rate hikes that the Fed has partaken in.
7. This directly discourages the Fed from taking on a more hawkish stance in the market, upon seeing the fruition of the restrictive policy the Fed has performed.
CPI
1. If CPI were to be worse off than forecasted, this really solidifies the bearishness of the USD as it confirms that the Fed policy has been coming to fruition and there might not be a need to hike interest rates anymore.
2. However, if CPI print continues to be resilient and strong or greater than expectations, there is a marked chance that the Fed will hike interest rates by 50bps in the upcoming FOMC meeting, in which this hawkish stance will continue to drive the market bullish for the USD.
3. All eyes will be on the CPI print tonight.
Regards,
Chern Yu
EUR/USD Takes a Breather After U.S. CPI Data, ECB EyedThe U.S. dollar took a breather on Tuesday following the previous day’s sell-off as markets’ jitters surrounding the Silicon Valley Bank (SVB) collapse quieted, while U.S. consumer inflation data showed a slight deceleration in February.
At the time of writing, the EUR/USD pair is trading at the 1.0730 zone, virtually unchanged on the day, with the upside still capped by the 1.0750 zone. Meanwhile, the DXY index trimmed daily gains and stabilized around 103.60 after hitting a daily high of 104.05.
The U.S. Bureau of Labor Statistics reported that the Consumer Price Index came in line with expectations in February, with annualized inflation hitting 6%, down from its previous reading of 6.4%. On the other hand, the core CPI inflation rate was reported at 5.5% YoY, in line with analysts’ consensus.
Following the data, U.S. bond yields recovered across the curve, helping the dollar. The 10-year bond yield is trading at 3.69%, while the 2-year rate recovered nearly 7% and stands at 4.25%. Amid the banking crisis triggered by the SVB collapse on Friday, investors seem to have taken out of the table a 50 bps rate hike by the Federal Reserve at the March 21, 22 meeting. The bets on a 25 bps increased to 73%, while on Monday, the case of a no-change decision was stronger.
Wall Street indexes welcomed CPI data and the improvement in sentiment. The S&P 500 gained 1.65%, the Dow Jones Industrial Average advanced 1.06%, and the Nasdaq Composite posted a 2.14% daily advance.
On Thursday, the European Central Bank (ECB) will decide on monetary policy, with analysts expecting a 50 basis point rate hike despite the recent developments.
Technically speaking, the EUR/USD pair maintains a slightly bullish short-term outlook, according to indicators on the daily chart. The pair is trading above its key moving averages, and the RSI and MACD have moved into the green.
On the upside, the following resistance levels are seen near this week’s highs at the 1.0750 zone and 1.0800 ahead of the more significant 1.0900 region. On the other hand, supports could be faced at the 20-day SMA at 1.0630 and the 1.0600 psychological level, followed by the 100-day SMA at 1.0545.
⚠️ 🔥 No Time to FOMO!!!! ⚠️ 🔥⚠️ 🔥 NO TIME TO FOMO!!!! ⚠️ 🔥
Goodday for the markets and Crypto as the news came out being ok:
US inflation slows to 6% annual rate amid looming banking crisis
Let me rephrase it: the worst news where avoided, inflation did not rise. Look at CPI chart maybe:
SP-5OO gets rejected despite the predictions for a 'softer more dovish' monetary policy:
In the meantime bank charts look pretty bad to me:
What i called 'good scenario' level did work as support for BKX but it will be retested:
Also, Credit Swiss is nothing but bad news:
www.bloomberg.com
Lastly , i really don't like this rejection on Wells Fargo:
In a few words: let's be careful...
No love these days, just volatility.
The FXPROFESSOR
SVB: Understanding and Managing Interest Rate Risks CBOT: 10-Year Treasury Futures ( CBOT:ZN1! )
Last Wednesday, Silicon Valley Bank (SVB) NASDAQ:SIVB announced that it incurred $1.8 billion loss in the sales of its bond portfolio and sought to issue new shares. Within 48 hours, a bank-run induced by panic customers brought down the legendary bank.
On Friday, US banking regulators seized control of SVB. By Sunday, the Treasury Department, the Federal Reserve, and Federal Depository Insurance Corporation (FDIC) jointly announced a rescue plan that would make whole all depositors. However, SVB shareholders are not protected.
Why has happened to the well-respected and once well-capitalized bank?
Opportunity and Risk Go Side-by-Side
Traditional banks seldom extend credit to startups, which are mostly under-collateralized, with little or no profit and big uncertainties about their future survival.
SVB developed a niche competitive edge to provide banking services to companies funded by venture capitals. In the past 40 years, it nurtured many high-profiled tech startups through their entire life cycle, from early-stage to IPO and to Big-Tech giants.
If Sequoia Capital invested in your firm and you apply for a loan from a commercial bank, you can expect the loan officer to ask: “Sequoia Who?” But if you go to SVB, they would say: “$10 million will be in your account tomorrow.”
VCs are exceptionally good at spotting future technological trends, and they follow a rigorous due diligence process to pick investing targets. By working with VCs and startups closely, SVB created an ecosystem that foster technological innovations, and grew to become the 16th largest US bank by deposit.
However, SVB’s concentration in the high-tech sector also make it vulnerable to a boom-and-bust cycle. Last year, bear market hit the industry hard. Publicly traded firms couldn’t raise money with falling share prices. Private companies found the path to IPO got blocked. As startup clients withdrew deposits to keep their companies afloat, SVB is short on capital. It was forced to sell most available-for-sale bonds at a huge loss.
Bad news travelled fast in close-knit tech investing community. VCs urged their portfolio companies to get the hack out of SVB. All told, customers withdrew a staggering $42 billion of deposits on Thursday. By the close of business day, SVB had a negative cash balance of $958 million, according to the filing, and this triggered the government takeover.
A Commercial Bank with a Failing Grade
In fiscal year 2022, SVB earned $4.5 billion in Net Interest Income (NII) and $1.7 billion in non-interest income. When you take away the bells and whistles, SVB is by large a commercial bank. About 73% of its revenue comes from taking in deposits at a low interest rate and making loans at a higher interest rate.
Based on its 2022 10K filing, SVB managed $209.2 billion in total interest-bearing asset and earned $5.7 billion. This represented an effective yield of 2.73%. During the same period, SVB paid out $1.2 billion in funding cost, which equated to 0.57%.
• Therefore, in 2022, its NII = 2.73% - 0.57% = 2.16%
• In comparison, its NII for year 2021 was 2.02% (=2.09% - 0.07%).
• On the surface, SVB was doing well, with NII spread increasing by 14 basis points year-over-year.
What has gone wrong then? Dive deeper into SVB’s balance sheet, we see the long-dated Treasury bonds and illiquid mortgage-backed securities it held got hammered by the rising interest rates. Simply put, SVB got its interest payment back, but the value of its investment principal eroded in a huge way in a rate-hiking environment. All in all, managing interest rate risk is at the core of banking business.
A Naked Bond Portfolio
In its 10K, SVB puts its investment portfolio in Available-For-Sales (AFS), Held-To-Maturity (HTM) and Non-marketable securities categories.
AFS balance was $26.1 billion as of December 31st, including:
• U.S. Treasury securities $ 16,135m (61.9%)
• Agency-issued MBS $6,603m (25.3%)
• Agency-issued CMBS $1,464m (5.6%)
• Foreign government debt securities $1,088m (4.2%)
• Agency-issued CMO—fixed rate $678m (2.6%)
• U.S. agency debentures $101m (0.4%)
• Total AFS securities $26,069m (100%)
Last week, SVB sold $21 billion in the AFS portfolio and incurred a loss of $1.8 billion, or -8.6%. AFS assets are marked to market every quarter. My understanding is that the loss figure was based on selling price vs. year-end fair market value.
Total loss calculated from purchasing price could be much bigger, as these bonds may have been marked down multiple times during previous quarters. Evidence: Since March 2022, CBOT 10-Year Treasury Futures (ZN) price went down from 124 to 109 (-12%) and 30-Year Treasury Bond (ZB) fell from 152 to 118 (-22%).
CBOT Treasury futures market, with its sheer size and liquidity, makes it the marketplace of choice to manage interest risk in times of uncertainties. Each ZN contract has a notional value of $100,000.
• On Monday March 13th, daily trading volume is 3,760,911 lots, which translates into total notional of $376 billion. Open interest (OI) stands at 4,311,338, or $431 billion in notional.
• Volume and OI for ZB are 719,518 and 1,209,881, respectively. Notional value for each is $72 billion and $121 billion, respectively.
What’s Next
On Friday, Signature Bank customers spooked by the SVB collapse withdrew $10 billion. That quickly led to the bank failure. Regulators announced Sunday that Signature was being taken over to protect its depositors and the stability of the U.S. financial system.
Despite government intervention over the weekend, fear ran contagious through the financial industry this Monday. San Francisco’s First Republic Bank, which had $212 billion in assets at the end of 2022, saw its stock price plunge as much as 70% when the market opened Monday morning.
By market close, US stock market stabilized. Investors wonder if a banking crisis could be the final punch to end the year-long Fed rate hikes.
Lessons Learnt
As investors, we usually allocate our financial assets across various instruments, such as stocks, bonds, and derivatives. The 60 (stock) / 40 (bond) portfolio is the most popular advice from Wall Street.
People generally pay more attention to what stocks to buy and hold, but we may not think twice about managing interest risk in a rising rate environment. The SVB fallout shows that even the safest, risk-free Treasury bonds, if not actively managed, could fall prey to interest rate changes and liquidity risk, resulting in loss of market value.
For me, this is a wake-up call and a good time to review my bond holdings. Some may be hidden in a 401K retirement plan. Hedging interest rate risk with CBOT Treasury futures and Micro Yield futures could go a long way to stay solvent.
A View on Interest Rate Trajectory
Today, the Bureau of Labor Statistics reports that the consumer price index rose 0.4% in February and 6% from a year ago, in line with market expectations. This is the most recent data the Fed will consider before it makes interest decision on March 22nd.
Inflation is cooling, but still too high. A bank run shows how damaging rising interest rate is to the economy. Whether the Fed will continue its rate hikes, pause them, or end them altogether, I think all options are open.
In my view, interest rate is in an uncharted territory once again. With investors in panic mode, they will likely overreact to the Fed decision. This may be a good time to place an order of out-of-the-money options on CBOT 10-Year Treasury Futures (ZN).
On March 14th, the June ZN contract is quoted at 113’220. Quoting convention in Treasury market is 100 and 1/64th. The quote reads as (113 + 22.0/64), or $113.34375 on $100 par value.
If the Fed slows or pause the hike, Treasury price will likely go up. Call options would be appropriate in this case.
• The 115-strike call is quoted 0’20 (=20/64). This is converted into $312.5 premium on the $100,000 contract notional for each contract.
If the Fed stays its course on fighting inflation, Treasury price could fall. And put options would be a way to express your view.
• The 112-strike put is quoted 0’14, or $218.75 premium per contract.
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
DXY Potential Forecast | Pre CPI | 14th March 2023Fundamental Backdrop
1. Employments was good, well above the forecasted or what the market has been pricing in.
3. However, average hourly earnings increased at a decreasing rate to 0.2% from 0.3%.
4. This shows the slowing down of the wage inflation , which is directly correlated with the inflation print and numbers, showing an important signal/sign that inflation could be worse off.
5. In addition, unemployment rate increased by 0.2% compared to previous months.
6. The average earnings and unemployment rate prints showcases the effect of the continuous rate hikes that the Fed has partaken in.
7. This directly discourages the Fed from taking on a more hawkish stance in the market, upon seeing the fruition of the restrictive policy the Fed has performed.
CPI
1. If CPI were to be worse off than forecasted, this really solidifies the bearishness of the USD as it confirms that the Fed policy has been coming to fruition and there might not be a need to hike interest rates anymore.
2. However, if CPI print continues to be resilient and strong or greater than expectations, there is a marked chance that the Fed will hike interest rates by 50bps in the upcoming FOMC meeting, in which this hawkish stance will continue to drive the market bullish for the USD.
3. All eyes will be on the CPI print tonight.
NOT FINANCIAL ADVICE DISCLAIMER
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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.
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DXY and expected CPI figures - inflationThis chart has a lovely little item called US INFLATION indicator.
As you can see, on this daily chart, it is showing the current rate of inflation at the bottom of the chart
Forecast figure was 6 with a previous of 6.4 - it has not been reached and yet, signs are that the FED will likely not raise interest rates again at the end of the month
From now till the 22nd March, we are all playing a guessing gae really. But The real question is what will happen to inflation now ?
It is a catch 22. do nothing to cap it and t will likely run riot, Cap it with raising Rates, and more Banks may collapse, not to mention smaller Firms
Maybe it is time for Banks to start thinking about simply cutting their Profit margins to enable companies to continue with lower bank rates and the governemnt maybe introduces Caps on prices ?
🏆🖨️💰 When the Champions of Inflation hate Bitcoin 🌴 ₿🌴👨🏽🦳💪 Dan Peña has made a name for himself as a successful entrepreneur, investor, and business coach. However, he has also been a controversial figure, with some of his opinions and actions drawing criticism.
🌴 ₿🌴 One example is his stance on Bitcoin, which he has publicly stated will go to zero.
While many experts and investors believe that Bitcoin has the potential to revolutionize the financial industry, Peña has been highly critical of the cryptocurrency. He may not fully understand or appreciate the unique features of Bitcoin, such as its deflationary nature nor does he seem able (or willing) to navigate a rapidly changing economic landscape.
🏆Now let's dive into how this 'CHAMPION OF INFLATION' has created his legacy:
🥁Dan Peña has created jobs and achieved great success through his bold and unconventional approach to business. However, his success has not come without consequences, and I tend to think that Peña's activities have contributed to both inflation and environmental degradation.
🏗️🏢🌇🏢🏭
One of the ways the many Peñas has contributed to inflation is through investments in the real estate market.
By investing in properties and then selling them at higher prices, Peña has been able to generate significant profits. However, this has also led to higher property values, which can make it more difficult for middle-class families to afford homes. In turn, this can lead to inflation as the cost of housing and other goods and services rise. I think you should agree....
🏦🏧🖨️💸💰💰💰💰💰💸
Dan Peña is the GURU of loans. A true LEGEND in borrowing.
A Legendary contributor to Printing and Inflation. Could had been nominated for the 'Federal reserve Client of the year' award.
☞Hear it from the man himself: www.youtube.com
🤦 Simple: Loans means printing = Inflation (on steroids....)
⛽🛢️🏭🚢☢️☠️
Peña's activities in the oil and gas industry have also been a source of concern. While his company, Great Western Resources, was successful in producing oil and gas, it also contributed to pollution and environmental degradation. Oil and gas production is a known source of greenhouse gas emissions and air pollution, and it can also have negative impacts on local ecosystems and wildlife. He doesn't seem like the 'Go green guy' to me (probably still drives Diesel).
🆗👍
While Peña's success in business cannot be denied, it is important to recognize that his activities have had real-world impacts on Inflation and the environment .
As such, it is crucial that we consider the long-term consequences of business activities and work to minimize any negative impacts. By doing so, we can create a more sustainable and equitable economy that benefits everyone.
In conclusion, Dan Peña's success in business has come at a cost, and he can be seen as a case of ''Inflation impersonated'' and environmental impact.
While we should celebrate the achievements of successful entrepreneurs, we must also hold them accountable for their actions and ensure that their activities do not harm society or the planet.
🏆👨🏽🦳💪
Dan Peña, I hereby honor you with the Title of '🏆CHAMPION OF INFLATION🏆.
May you have only great days forth and may your children and grandchildren understand and fix any damage that you have caused to the Economy and the world. For sure you been buying Bitcoin lately despite what you say.
One Love,
The FXPROFESSOR
ps. It is important to note that Peña's activities in the oil and gas industry may have also had positive economic impacts, such as creating jobs and generating revenue. However, it is crucial to balance these benefits against the potential negative impacts, such as pollution and inflation, and to implement policies and regulations to mitigate any negative consequences. As we navigate a rapidly changing economic landscape, it is important to remain informed, open-minded, and committed to building a more sustainable and equitable future for all.
The current context is serious | Forex-Indices-Stocks-Crypto |It seems that inflation is considered the devil for the markets, so the focus will be on the next Fed meeting scheduled for March 22nd. Last week we saw a strong increase in NFP and this could be the first sign of a hawkish FED, but this week we will see the second and final sign for the markets: CPI release. These two drivers will complete the big economic figure ahead of the interest rate announcement.
In recent weeks Governor J.P has been under a lot of pressure from the financial community (including Janet Yellen, Treasury Secretary and former Fed Governor) due to the large risk of contraction and the impact of such aggressive monetary policy. But perhaps the news about failure of some banks could prove to be a strong ally of Powell. Why am I saying that? If the Fed's target is to drag the US economy into a mild recession to try and get inflation back to around 2 percent, concern that these two failures could be contagious within the banking sector could help Powell achieve the first target: "bring down inflation...".
Even the geopolitical context should not be underestimated: The war in Ukraine and China-United States tensions over Taiwan.
We will see the impact on the main markets (dollar, SP500, gold...) in the second part of this analysis.
Side-step a potential storm!Just when we thought the hawkish narrative was pretty much priced in, SVB’s fallout basically threw a spanner into the hiking cycle.
You’ve probably read quite a lot about the whole SVB debacle since Thursday’s trading session so we won’t harp on that. We instead want to turn your attention to two other markets that moved significantly since the SVB episode. Interest Rates & Gold.
A sharp repricing has occurred in the expected rate path as markets digest the onslaught of SVB-related events. As a result, we saw the probability of a 50bps point hike jump from 30% to 80% and then back down to 20% as of today.
Additionally, further rate hikes have also been priced out indicating market’s expectations of a more cautious Fed. Most importantly, the implied aggressive rate cuts starting from the end of 2023 caught our eyes here.
As a reminder, the last time the fed paused and then cut rates, Gold responded with a 60% rally. As the potentially lower terminal rate and faster pace of rate cuts narrative begin to pick up momentum, we think Gold deserves more attention now than ever. The next FOMC meeting is only 10 days away. From there, we will get a sense of what the Fed thinks of the current situation. If they start to show signs of retreat from their hawkish stance, we believe it will be a catalyst for this trade.
Another point of worry is economic data still coming in hot, at least for now. For those not keeping count, Non-Farm Payrolls numbers have beaten estimates to the upside for the past 11 months as the economy remains unusually strong. With the next set of CPI numbers coming out this Tuesday, a hot print could drive inflation worries further. If the Fed shows signs of easing on the hawkish narrative while Inflation numbers continue to be hotter than expected, higher Inflation expectations could once again drive investors into inflation-protecting assets like Gold.
Key volatility gauges have pointed higher over the past few days and major indexes have edged closer to key price and technical levels. Given these, volatility is likely to compound from here as Commodity Trading Advisors (CTAs) potentially flip sides and funds rotate out of the banking sector.
In such uncertain times Gold’s status as a safe haven asset could attract flows as investors sidestep the market turbulence.
Looking at the price action, Gold still trades well clear of the 500 Day EMA mark which has marked the support for the price action and well clear of the 1800 physiological level. RSI is still middle of the road indicating that there is still room for Gold to run higher.
Gold’s relationship with interest rates and position as an inflation-hedge/safe haven asset could very well position it for further upside from here. For now, we think it provides enough upside to sidestep the potentially volatile times ahead. We set our stops near the previous level of support and the 0.618 Fib level, 1755, and our take profit levels at 2065. Each 0.1-point increment in COMEX Gold future is equal to 10 USD.
The charts above were generated using CME’s Real-Time data available on TradingView. Inspirante Trading Solutions is subscribed to both TradingView Premium and CME Real-time Market Data which allows us to identify trading set-ups in real-time and express our market opinions. If you have futures in your trading portfolio, you can check out on CME Group data plans available that suit your trading needs www.tradingview.com
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The contents in this Idea are intended for information purpose only and do not constitute investment recommendation or advice. Nor are they used to promote any specific products or services. They serve as an integral part of a case study to demonstrate fundamental concepts in risk management under given market scenarios. A full version of the disclaimer is available in our profile description.
Reference:
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EUR/USD Daily Chart Analysis For Week of March 10, 2023Technical Analysis and Outlook:
The currency continued trading within Mean Sup 1.054 and Mean Res 1.070 envelope this week as specified on Daily Chart Analysis For the Week of March 3 - Resumption 2nd phase pullback to Inner Currency Dip of 1.046 is in progress.
US30 Short SignalNice time to go short after resistance test... looking for 1:2.5 risk reward .... put break even after initial risk or a little bit more....
DOLLAR BULLfinally JAY admits its not all in hand, another strong number on friday will get investord back in the 3Q 2022 mindset that Fed is behind, DIXY BULL, expect nasdaq to out perform DJI for 2H of 2023 after the initial jerk movement.
Inflation (CPI) - A Battle Already LostInflation ( CPI ) - A Battle Already Lost
I've recently shared my outlook on CPI and where I think its headed in the months ahead but after further review, it seems that I've previously overlooked certain signals which should have altered my perspective in a way that it did not. Based on discovery of those signals, I have now updated my anticipatory CPI chart to highlight certain levels of interest.
As we can see on the wavemap, the Consumer Price Index (a measure of inflation) has broken above its 40+ year bearish trend line. The breakout was very strong and should be considered as very significant. The format of the wave during this breakout has developed as what seems to likely be a zig-zag formation. Noticeably, the upside zig-zag wave has retraced 90% of the 40 year long bearish drawdown. Therefore, leaving little probability of it being a truly corrective wave. Aside from the macro bear trend-line, I have also highlighted the newly respected bullish trend-line.
Finding resistance near 6.77, Fibonacci measurements suggest that the pending action will fall to retest the former price containing trend line and maybe even drop below it. Specifically, Elliott Wave Theory suggests that 0.99-1.01 should be the downside target range. Over the past 20 years, this level has also supplied nearly unbeatable support. If support is once again discovered near 1.00, the currently active wave could then be sent to retest the red bullish trend, at a level near 9-10.
Ultimately, completion of the blue diagonal will signify that the CPI (and inflation) area headed for upside levels that the American economy has never witnessed. Personally, I believe that inflation is a byproduct of capitalism and there is no true containment possible. The next decade will prove to show if this is on point or simply farce.
Inflation ratelooking back at historical inflationary support levels...inflation remains sticky and you can see why.
SILVER Bounce from Support?!Here we are looking at SILVER on the Weekly TF…
As you can see, SILVER has been trading within a macro symmetrical triangle structure, which has clear and established support and resistance lines.
Silver has been trading within this structure since March of 2020 (COVID—19 Crash). Since then, it has tested descending resistance 5 times on the weekly, and ascending support 3 times (so far).
Currently, SILVER is on its way to that support, and I expect it to reach that line soon (relative to the weekly TF candles).
While it’s still too early to definitively say, I do believe that SILVER will bounce from support, and make another run to resistance in another attempt to breakout to the upside.
What do you think SILVER will do next? Let me know in the comments!
Cheers!
USOIL chart & US inflation Ticker belowHere is the cause of inflation - OIL
As its price rises, initially, nothing changes ( Arrows)
But once the increase in cost is begun to be felt
Retails prices rise to cover increase costs of manufacture, transport, staff
Staff demand more wages so they can buy goods
Repeat
Then The FED comes in , raises the cost of Borrowing, putting pressure on retail to LOWER prices so that the Pubic can buy goods
Note how the price of oil drops PRIOR to the effects of raises in interest rates
HERE is your Problem
Also, take note of the contract that the Petro$ had and that has now been Stopped by OPEC countries. The OIL charts over the next few years are going to show some interesting patterns I thinnk
Swissie rally fizzles, SNB's Jordan up nextUSD/CHF has rebounded on Tuesday, ending a rally that saw the Swiss franc climb over 1%. In the European session, USD/CHF is trading at 0.9344, up 0.40%.
Switzerland released the February inflation report on Monday and the reading was higher than expected. CPI rose 0.7% m/m, up from 0.6% in February and above the 0.4% forecast. On an annualized basis, CPI climbed 3.4%, edging up from 3.3% and higher than the forecast of 3.1%.
These inflation numbers would be a dream come true for most major central banks, which are struggling with inflation levels two or three times higher. Still, the Swiss National Bank is concerned about high inflation, as its target is 0-2%. The SNB was widely expected to raise rate by 50 basis points at the rate meeting on March 23 and the uptick in February inflation cements the likelihood of such a move. Swiss National Bank Chair Jordan will make an appearance later today and is likely to address the rise in inflation.
The SNB does not provide forward guidance for its rate policy, but the central bank has projected an inflation rate of 2.4% for 2023. With the cash rate currently at 1%, it's a safe bet that we'll see another hike in June of either 25 or 50 basis points. The continuing tightening should provide a boost to the Swiss franc, but traders should keep in mind that the SNB has not hesitated to intervene in the foreign exchange market when the Swiss franc became too strong for its liking.
In the US, Federal Reserve Chair Powell will be in the spotlight as he testifies before a Senate committee later today. The Fed has remained hawkish and after a host of strong January releases, the markets have shifted their expectations closer to the Fed's stance. It was only a few weeks ago that the markets were projecting a pause followed by rate cuts, but this has changed to pricing in three more rate hikes this year. There is a lot of uncertainty in the air about inflation and interest rates and the markets are hoping that Powell's comments will provide some clarity.
There is resistance at 0.9381 and 0.9420
0.9304 and 0.9224 are providing support
