ECONOMIC CYCLE & INTEREST RATESHello traders and future traders! The state of an economy can be either growing or shrinking. When an economy is growing, it typically leads to improved conditions for individuals and businesses. Conversely, when an economy is shrinking or experiencing a recession, it can have negative consequences. The central bank works to maintain a stable level of inflation and support moderate economic growth through the management of interest rates.
What is an economic cycle?
An economic cycle refers to the fluctuations or ups and downs in economic activity over a period of time. These cycles are typically characterized by periods of economic growth and expansion, followed by periods of contraction or recession. Economic cycles are often measured by changes in gross domestic product (GDP) and other economic indicators, such as employment, consumer spending, and business investment.
Economic cycles can be caused by a variety of factors, including changes in monetary and fiscal policy, shifts in consumer and business confidence, and changes in global economic conditions. Economic cycles can also be influenced by external events, such as natural disasters or political instability.
Understanding economic cycles is important for businesses, governments, and individuals, as it helps them anticipate and prepare for changes in the economy and make informed decisions about investment, hiring, and other economic activities.
How is an economic cycle related to interest rates?
Interest rates can be an important factor in the economic cycle . During a period of economic expansion, demand for credit typically increases, as businesses and consumers borrow money to make investments and purchases. As a result, interest rates may rise to control the demand for credit and prevent the economy from overheating. Higher interest rates can also encourage saving, which can help to balance out the increased spending that often occurs during an economic expansion.
On the other hand, during a period of economic contraction or recession, demand for credit tends to decline, as businesses and consumers become more cautious about borrowing and spending. In response, central banks may lower interest rates to stimulate demand for credit and encourage economic activity. Lower interest rates can also make borrowing cheaper and more attractive, which can help to boost spending and support economic growth.
Overall, the relationship between interest rates and the economic cycle can be complex and dynamic, and the direction and magnitude of changes in interest rates can depend on a variety of factors, including economic conditions, inflation expectations, and the goals and objectives of central banks and other policy makers.
I hope you leant something new today!
Inflation
No secret‼️👀😉🔴inflation🔵rate⚫️marketsNo secret‼️👀😉
🔴inflation up⬆️
🔵rate hikes⬆️
⚫️markets down⬇️
🔴inflation down⬇️
🔵rate cuts⬇️
⚫️markets up⬆️
Bitcoin and Crypto equal markets like DowJones NASDAQ and Co
Chart 1
1972 - 1986
Chart 2
current situation - see update
What do YOU expect in points of inflation?
Let me know your thoughts in the comments🤗
⬇️⬇️⬇️
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Disclaimer:
Not financial advice
Do your own research before investing
The content shared is for educational purposes only and is my personal opinion
SPX Technical sideSPX in my opinion from here will dive into this huge value area, as a lack of orders at these prices is making it hard for it to hold itself up, with the DXY curve sloping upwards we are seeing more and more pumped in the US $ as the Stock market takes losses. The RVI indicator (meh?) has crossed over which 'could' be used to back the idea, and the red cloud 'could' suggest we have ended the large upwards move seen.
EURJPY SHORT Resault: 450 pips✅Considering the weakness in the price rise and the strength of the fall and reaching the ceiling of the descending channel , I enter a sell position when I see favorable conditions.
According to my risk and capital management system, the risk of each trade is one percent per position.
Pre-FOMC XAUUSD Forecast | Wednesday 14th December 2022Hi everyone, today I will be talking about a possible XAUUSD long trade using fundamental analysis.
Context
1. CPI print yesterday came out better than expected
2. CPI m/m at 0.1% vs forecast of 0.3%
3. Core CPI m/m at 0.2% vs forecast of 0.3%
Given the evidence of a cool down in inflation, the Fed's previous aggressive rate hikes has been coming to effect.
This could potentially solidify the stance of a slow down in rate hikes and the Fed could adopt a more dovish stance in the market.
This will result in XAUUSD ticking high, and all eyes would be on FOMC tonight.
Personally, I believe that the Fed would be hiking by 50bps and hint at a lower terminal rate, this will result in validation of our potential long trade in GOLD.
Potential EURUSD SELL. On the Daily chart we have hit the new OB (Order Block). On the lower TF 1min we have found a BOS in this zone and a OB. Potential sell off on EURUSD.
Cant show you a better chart, because i have to do the analysis with my phone. Sorry for that.
What do you guys think about this idea?
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impact of two important following news on DXYTwo important factors that been driving Dollar prices in last several month as we all know is Federal Funds Rate and Inflation data like CPI.
In this week we have both of them coming out on Tuesday and Wednesday, now we want to see how it can affect the market.
Price usually tend to be at important resistive or supportive areas at the time of important news hit the market and as we can see now price is at supporting area and at the Daily low which probably will remain here until the news hit the market so we can expect of low volatility movement on USD and other major crosses, But what will happen when the news releases?
As we know CPI balance is curving to downside and shows that inflation is cooling down and as we see the prediction of tomorrow CPI news we can see that the market expect this trend to continue. Now here is the tricky part, if CPI data put out like prediction or lower than the prediction this means that fed has the inflation under control which makes trader to believe that federal reserve would not need to raise prices very aggressively like before and as a result we may see a risk on environment in the market which can lead Dollar prices to come lower, but on the other hand SPX, TLT, EUR,JPY and also commodity currencies like AUD,NZD to take benefit from the situation.
But if CPI data comes out higher than expectation then we can argue that federal reserve do not have inflation under control so it needs to continue hiking prices like before and this situation may lead to higher prices for Dollar and lower prices for all the other assets that we covered above.
Also if the second scenario take place tomorrow we can expect USYIELD to continue going higher which have negative effect on US treasury bond and very bad effect on SPX index.
Put CPI analysis apart the other important news that can shake prices real hard is federal reserve which going to hit the market on Wednesday. On that time we can see that what exactly is in the mind of federal reserve and how they are going to impact the economy. In overall, if they raise rate same or below the expectation its going to be very good for risky assets since it shows that we are getting close to end of rate hiking cycle but if federal reserve going for raising rate higher than expectation then it will have a very good impact on Dollar but bad impact on risky assets.
DXY H4 - Short Signal ProfitDXY H4 - Really started to make a dent downside and break that consolidation now. Fundamentally we are really starting to align with technicals which is great, another big day tomorrow. Keen to see what unfolds, fairly confident in the interest rate decision of 50bps. But Powel's PC no doubt will be interesting.
Inflation still high .. not good enoughCPI data of inflation still high but feeling will be at %7.3 over.
If it’s lower then we will recover but .. the Feds haven’t reached the goals as they wanted.
The inflation still over 40 year high , House markets are still unaffordable and expensive people still trying to get a house and such.
As everything all mixed because of it.. have a feeling the big drop is coming as long the recession is coming in 2023 since lay offs are still going.
CPI DATA is not going to be goodCPI data release today.. big feeling will be at above 7.3%
Because the inflation still high, this brings the feds will crash the Market in the meeting tomorrow.
As recession is coming in 2023.. this is not good news but very bad news for the market and crypto markets to a huge crash.
Trade Plan 12/13/2022
TP1>
if we manage to Trade/Bid above MAIN POC 3980, we can test > 4035 > 4056 > 4081 > 4108.
TP2>
if we Open/Trade below MAIN POC 3980 > we can test > 3960 > 3934 > 3914 (LIS-CPI POC) > 3869.
*All those levels will be INVALID as tomorrow 8:30 AM we will have Inflation Numbers CORE CPI ! GET READY for LOTTO TRADES. $ES can move +100/150 handles
Why the CPI Report Matters and Could be a Bullish Catalyst As long as inflationary expectations remained low after Jerome's last speech where he spoke about softening the increase in interest rates, which may or may not be the case, there is a good chance that inflation ticks down. This would confirm a 50bp hike for December, easing monetary policy and providing room for equities to continue their rally. While I think a lower CPI report is more likely in the near-term than a tick up in inflation, with a possible higher than 50bp increase and a decline in equites, it could go either way.
Later, when the lagging effects of QT are felt, I expect a further decline in the market as discussed in my previous thesis.
It is also possible that inflation stays near its current 7.7%, in which case there may not be too large of a response in equity markets tomorrow. The bigger the move in CPI, the bigger the move in equites. VIX is inching up in anticipation of this binary event.
I am linking this thesis with "long" because I believe the negative CPI trend will continue and result in a near-term rally, but this is only because I feel there is a higher probability of this occurring, not that it is by any means certain.
InTheMoney
Nifty breakout chances?CPI inflation data for the month of November is 5.88% whereas in October it was 6% according to RBI prediction we can fall under 6% inflation boundary in Q3
A good indication data than other countries
Dow Jones going good
Crude oil in double digit.
Nifty might face resistance at 18570-600
The Inflation of the 1980s Tells the Same Story: Pivot=DeclineI have heard both sides: 1) Historically, the Fed pivot will result in a decline in equities because they are pivoting in response to negative economic data which drags on equities, and 2) this time is different, negative economic data is positive for equites because it means inflation is on its way down.
When people reference the former, for whatever reason, they don't take a look at the effective Fed Funds Rate in the high inflationary period of the late 1970's and early 80's and compare the Fed's pivot to equities. In the chart shown, you can see that once Volcker, the Chairman of the Fed, finally took a steadfast position against inflation and rose rates violently, inflation began to cool. Both in part of this raise in rates and the public's belief that Volcker had no intention of letting up, ridding the public of inflationary expectations.
If you look at the charts, you can see that as inflation rose so did the markets. But as Volcker stamped his foot and pushed rates up, inflation began to cool. USIRRY, the third chart down, shows this. Equities began to decline due to this restrictive economic environment and belief the Volcker would not let up.
Notice that, as a result, unemployment (bottom chart) began to rise. This had no positive impact on equities, contrary to what some might think because it would indicate inflation was being taken care of. Instead, the U.S. entered a recession and equities continued to decline. It was only once the Fed stopped lowering rates, unemployment peaked, and inflation neared their target rate did equities bottom.
It is not fair to compare equities and pivots to the Great Recession or the .com Bubble, yet even in historical inflationary periods the same story plays out: the markets bottom well after the Fed pivots
However, this time could be different in that Powell showed no hesitation in attacking inflation and destroying inflationary expectations. He has taken a direct lesson from history. As a result, unemployment could potentially peak faster than expected, inflation could decrease faster than expected, and equities could bottom faster than expected. I believe today's outcome will be similar to that of the early 80's, but that outcome will happen much, much faster. The markets have not bottomed in my opinion, but I expect them to in mid-late 2023.
It's always best to keep equity exposure to avoid missing the bottom.
Because you never know .
InTheMoney