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Inflation

Be prepared for a hawkish-than-expected Fed this week?Happy New Year of Rabbit! We will have a busy week. In addition to companies keep reporting result (Four of the FANNG companies will report earnings this week), other major events include a decisive Fed meeting, ECB meeting, BOE meeting, US employment data and OPEC+ meeting. Everyone’s focus will be on Fed meeting. Market fully expects a 25bp rise this week, and Fed might bow to market pressure and adapt a slower hiking pace. Having said that, the risk is Fed might signal there will be more interest rate hikes before the rate reach above 5%, rather than Fed Watch pricing in a pause at 4.75%. There is no doubt inflation is slowing down and the decelerating pace is pretty impressive, but there is still a big gap from the 2% target. Although there was some layoff news, they mainly concentrated on the sectors/companies that expanded rapidly during pandemic and now they are just downsizing to pre-covid level. From the initial jobless claims number, we can see the labour market stayed strong that might keep service inflation elevated. On Friday’s employment report, market expects hourly earnings will grow 4.3% yoy in January and unemployment rate inch up to 3.6%, that might force Fed to hike rate more than expected. The reopen of China economy might also pose risk to higher inflation. Cyclical commodity price such as copper and crude oil moved higher, offsetting the demand destruction concern resulted from a potential global recession. NYMEX WTI Crude Oil Futures broke the downtrend, a further breakthrough above USD82.64 might confirm a formation of uptrend, and could test USD93.64(Q4 double top high) and then USD96.97 (50% retracement). Any further expansionary fiscal policy targeting property or infrastructure sector in China, could also push the commodities price higher and thus the inflation. The supply chain diversification will structurally push up inflation. As the world factory, supply chain in China is very mature and cost effective, any shift of production line to other countries likely associated with higher cost. Idle capacity in China, together with new investment on supply chain in different countries, will permanently push the production cost higher. Globalization helped contain inflation, and the reverse will drive it up. There is risk the inflation will hover around 4% and refuse to go down further, that might put Fed in a difficult situation and diminishing any hope there will be an interest cut this year. ECB and BOE are expected to hike rate by 50bp this week. This might prevent Fed from being too dovish. OPEC+ will have meeting this week and no policy change is expected. However, we need to monitor the risk of escalation of geopolitical tension in Ukraine, and how Russia responds to the price cap on refined products imposed by EU and G7 from Feb 5. Be prepared for some market volatility, and a hawkish-than-expected Fed this week. Happy Trading. Disclaimers Above information are for illustration only and there is no guarantee on the accuracy of the information. They should not be treated as investment recommendations or advices. CME Real-time Market Data help identify trade set-ups and express my market views. If you have futures in your trading portfolio, check out on CME Group data plans in TradingView that suit your trading needs www.tradingview.com
NYMEX:CL1!Long
by FOTrading
How to Reduce Inflation in South Africa in 2023! - 5 WAYS!How to Reduce Inflation in South Africa in 2023! - 5 WAYS! I got this excellent question today from someone Which I thought was an important question to answer considering the state of the Country of South Africa. Hi everyone. In SA I always wonder how an ordinary person "employed or not" can contribute to bring positive change to our inflation? A. Here is my answer... As an economist, I can say in theory it is possible to bring positive change to the inflation rates but in reality – with corruption – I’m not sure it’s that easy. Also, it’s the butterfly effect where we need to come together as a community (country) to work towards lowering inflation. So on the one hand, there needs to be less spending unfortunately. Here are a few measures I can think of… #1. Lower non-essential spending. People need to stop spending unnecessarily on products and services and instead start saving more for their future. This will hamper and reduce the impact of inflation. #2: Support your local places! This world is becoming highly globalised not only where the rich get richer but the TOP stores and shops get richer too. As a community, we need to start supporting the local businesses that have great quality products and services to. We need to be more friendly to each other and help spread awareness to the small but great man. This will help stimulate the local economy and bring on more job creation and economic growth. #3: More investments in education Education is key to help bring personal development and skills training. We need to educate our fellow people on business skills, high income skills, programming, AI, machine learning, savings, risk averse investments and encourage more businesses to help grow. #4: Save more to invest more When inflation is high it means people were spending uncontrollably which pushed up demand and lowered supply. Instead, we should encourage more savings in stocks, property, trading, funds, and personal finances to reduce the effects of inflation. Instead of drinking sorrows away, spending on games to bide time – focus on less spending and more saving for the future – reducing the debt levels. #5: Invest in renewable energy Load Shedding is here to stay. And so we need to try to support more renewable energy initiatives that come about. Solar, wind and gas. This will definitely help reduce the cost of energy and curb inflation. As I said, we can only do our part and hope for the best. We are a nation with hope, optimism and trust. But instead of just trusting the government we should also learn to support and trust our local businesses and methods to living a better life. Hope that helps.
ECONOMICS:ZAIRYYEducation
by Timonrosso
Copper is Screaming! Are you listening?Why is Copper so important to track and what can we learn from studying its price action. Copper simply put is the most used base metal in the world and really powers every aspect of world. Doctor Copper is telling us something. Copper has had an impeccable rally of the lows, this has been confirmed with the major rally in copper mining stocks. In this chart we have overlayed the inflation rate in orange with the price action in copper. The inflation rate has a delayed reaction based off of the price action in Copper. What we can observe recently is the price of copper topping 112 days before the inflation rate. Copper had a significant decline which was followed by a decline in peak inflation. Over the last 148 days, Copper has rallied 38%. Could this mean that we are about to see a delayed spike in the inflation reading?
CAPITALCOM:COPPER
by Trading-Capital
Do you Hear Lumber Screaming?Lumber is at a critical inflection point. Its likely telling us that Central bank policy is about to experience more inflation if they start to ease to soon. If Lumber continues to rally, its screaming more housing inflation could be around the corner. Since we have a major Technical Topping formation in play, Lumber is still vulnerable to more downside which could also mean the housing market has much softer prices ahead. If lumber is to show nay chance of negating this bearish pattern it needs to close above the yellow trendline for 2 consecutive weeks.
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by Trading-Capital
AUD/USD rises as inflation jumpsThe Australian dollar has extended its rally with solid gains on Wednesday. In the North American session, AUD/USD is trading at 0.7080, up 0.51%. RBA policy makers are no doubt having a bad day at the office, as Australia's inflation climbed sharply in the fourth quarter. CPI rose to 8.4%, up from 7.3% in Q3 and above the consensus of 7.7%. The hot inflation report will douse hopes that inflation has peaked and there's little doubt that the RBA will have to continue raising rates. The markets had priced in a peak rate of 3.6%, but with the cash rate currently at 3.1% and more rate hikes on the way, it appears that the market is underestimating the terminal rate. The inflation release boosted the Australian dollar around 1% and to a five-month high after the CPI report, but the Aussie has pared much of those gains. The outlook for the Aussie is looking brighter for several reasons. The RBA will almost certainly continue raising rates over the next several months, commodity prices are strong and China's reopening will increase demand for Australian exports. There were no major releases out of the US today, but Thursday has a crowded data calendar, with GDP, durable goods and new home sales. GDP is expected to slow to 2.8%, down from 3.2% in Q3 but still respectable. On Wednesday, US PMIs pointed to a decline in the manufacturing and services sectors, pointing to cracks in the US economy as high rates have dampened economic growth. The US dollar has been under pressure as soft US numbers have increased expectations that the Fed will ease up on rate policy due to the slowing economy. A stronger-than-expected GDP would likely provide the US dollar with a much-needed boost, while a soft GDP reading should send the US dollar lower. AUD/USD is testing resistance at 0.7064. Above, there is resistance at 0.7160 0.6968 and 0.6872 are providing support
by OANDA
Crude oil a leading inflation indicatorTwo observation made the last two years between crude oil and CPI: 1) There were 5 waves up and 2) 3 significant peaks However, between the last 2 peaks of crude, it was a lower low follow-by its downtrend, and CPI followed this downtrend subsequently. Among many commodities, crude oil moves the most in tandem with CPI, but crude seems to lead in this study. Refer to the daily chart on your own, try drawing a downtrend line, you will see crude oil prices has broken above its downtrend line recently. If crude oil is going to transit to an uptrend from here, we will have to track CPI very closely. The inflation fear is still there. Did a video on this observation last week, refer to the link below. Crude Oil Futures Minimum fluctuation 0.01 = $10 0.10 = $100 1.00 = $1,000 10.00 = $10,000 Disclaimer: • What presented here is not a recommendation, please consult your licensed broker. • Our mission is to create lateral thinking skills for every investor and trader, knowing when to take a calculated risk with market uncertainty and a bolder risk when opportunity arises. CME Real-time Market Data help identify trading set-ups in real-time 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
NYMEX:CL1!Long
by konhow
2
It's happening! Blow-off top, Day 1.Traders, You all know that I have been expecting and discussing this day for many moons now, the day we break above our macro downtrend. Today is that day. Day 1 of what I expect to be a blowoff top that will surprise many investors, maybe a majority of investors. Before I get ahead of myself in enthusiasm, we will need another confirmation candle here on the daily. I'd love to see us close and open above the macro uptrend line as well, but that type of price movement is not necessary for confirmation. All we need to do is open and close tomorrow's candle above our macro downtrend and we are good to go. New highs in the U.S. stock markets should arrive sometime this year. I would anticipate by mid-summer to late fall. Enjoy the ride! Stew. [
ULong
by stewdamus
USD/CAD eyes retail salesThe Canadian dollar is unchanged on Friday, trading at 1.3466 in the European session. We could see some volatility in the North American session, as Canada releases retail sales. The markets are bracing for a downturn in retail sales for November, with a forecast of -0.5% m/m for the headline figure and -0.4% for the core rate. This follows a strong report in October, as the headline reading was 1.4% and core retail sales at 1.7%. If the releases are as expected or lower, it could be a rough day for the Canadian dollar. Today's retail sales release is the final major event prior to the Bank of Canada's meeting on January 25th. The markets have priced in a 25-bp increase, but a hold is also a possibility, especially with December inflation falling to 6.3%, down from 6.8%. The BoC has raised rates by some 400 basis points in the current rate-tightening cycle, which began in March 2022. Similar to the market outlook on the Fed's rate policy, there is significant speculation that the BoC could wind up its tightening at the first meeting of 2023 and then keep rates on hold. The BoC has said that future hikes will be determined by economic data, and there are signs of strength in the economy despite the Bank's aggressive rate policy. GDP expanded by 2.9% in Q3 which was stronger than expected and job growth sparkled in December, with over 100,000 new jobs. The markets will be looking for clues about future rate policy from the rate statement and BoC Governor Macklem post-meeting comments. 1.3455 is a weak support line, followed by 1.3328 1.3582 and 1.3707 are the next resistance lines
by OANDA
The Revival In the past two weeks, the market has seen a significant increase in bullish momentum leading many to believe that the proposed ‘echo bubble’ that many predicted for 2023 may indeed play out. It was initially unclear what was driving this momentum but the market gaining confidence that CPI will continue to decrease, as well as a temporary liquidity increase thanks to the ongoing US Debt Ceiling increase crisis, seem to be important factors. The U.S. CPI data published on the 12th of February was in line with expectations with a 0.1% reduction. There is evidence to suggest that if CPI inflation continues to fall in 0.1% increments M/M, and if recessionary predictions play out as expected, then the FED could potentially hit its 2% Y/Y target as soon as May. An important thing to note is that this was the last CPI print that will be calculated based on the current methodology that considers two years of data. February’s data will be calculated on a single year of data meaning that future 2023 CPI prints will be based on consumption in 2021 alone. Considering 2021 data instead of 2020 and 2021 will likely bring the upcoming CPI numbers down leading analysts to believe that the FED is indeed engineering a pivot. One event that could temporarily put a halt to the rally is that Genesis, the parent company of Grayscale, is said to be planning to apply for chapter 11 bankruptcy as soon as this week. It’s worth noting that the discount on $GBTC has widened to -43% over recent days after it had climbed back up to -36.5% following the December lows. Many analysts feel that the market already has this event priced in, however, it is certainly something to keep an eye on. From a technical perspective, Bitcoin broke out from the falling wedge pattern and ripped above $20,000. Bulls will be hoping for a weekly close above the $21,000 resistance which would light the way towards $28,700 which is the prior head and shoulders neckline and 61.8% Fibonacci retracement level of the $3,782 2020 low to $69,000 2021 high. Bears will support the prediction of Elliot Wave theory that the observed rally is part of a Wave 4 correction. This means the market could potentially still have a Wave 5 selloff to come which would test the lows. The above Bitcoin weekly chart shows that the bullish momentum the market is experiencing in 2023 lies within the boundaries of Wave 4 meaning that the market may not be not out of the woods yet. An important event to watch in the coming weeks is the FOMC meeting on the 1st of February. Following this meeting, the FED will release projections for the Federal Funds Rate in the coming quarters which will have a significant bearing on the short-run market direction. Volatility will be high around this time and caution should be exercised when entering positions.
by Coinrule
1
AUD/USD slides after soft Aussie job reportThe Australian dollar has extended its slide on Thursday. AUD/USD is trading at 0.6884 in Europe, down 0.82%. Australia's December employment report was weaker than expected, sending the Australian dollar sharply lower. The headline reading showed a loss of 14,600 in total employment, which may have soured investors. The release wasn't all that bad, as full-time jobs showed gains of 17,600, with part-time positions falling by 32,200. The unemployment rate remained at 3.5%, but this was a notch higher than the forecast of 3.4%. On the inflation front, recent releases point to inflation moving higher. November CPI rose to 7.3%, up from 6.9%, and the Melbourne Institute Inflation Expectations climbed to 5.6%, up from 5.2%. We'll get a look at the all-important quarterly inflation reading next week. Inflation came in at 1.8% q/q in Q3, and an acceleration in Q4 would force the Reserve Bank of Australia to consider raising rates higher and for longer than it had anticipated. The cash rate is currently at 3.10%, and I expect the RBA will raise it to 3.50% or a bit higher, which means we are looking at further rate hikes early in the year. The US dollar seems to take a hit every time there is a soft US release, and this week has had its share of weak data. The Empire State Manufacturing Index sank to -32.9, while headline and core retail sales both fell by -1.1%. PPI came in at -0.5%. All three releases were weaker than the November readings and missed the forecasts, indicating that cracks are appearing across the US economy, as the bite of higher rates is being felt. The markets are clinging to the belief that softer numbers will force the Fed to ease up on its pace of rate hikes and possibly end the current rate-cycle after a 25-bp increase in February. The Fed has done its best to dispel speculation that it will pivot, but I expect the US dollar to lose ground if key releases are weaker than expected. AUD/USD is testing support at 0.6893. Below, there is support at 0.6810 0.6944 and 0.7027 are the next resistance lines
by OANDA