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Interestrates

EURAUD SELLOFF FOLLOWING 09/14/2023 ECB INTEREST RATESI am not a fundamental trader but I do love when a major economic news event plays an impact on the market environment. This entire month the markets have been very slow and choppy so I stood out of swing trades due to the whipsaw behavior. This week has been the slowest following last weeks low movement with fed speeches on the economic calendar almost every day. I had USDCAD shorts that actually just reached my profit target but I closed out earlier this week due to the bad conditions and missed the rest of the trade, I hope you all that followed the analysis benefitted from it more than I did. On the technical side, I do not trade ranges unless big enough of a range so my only option for this pair was to wait for a confirmation of a breakout and trend continuation before getting active. I now have a confirmed breakout that I am waiting on my entry to be triggered. I gave my sell stops a little bit of room before being triggered to avoid potential whipsaws. My entry is at daily lows below 1.6450 and I will be looking to take a +3R sell to July lows around 1.6330 but price could go lower as there are buyers stops stuck around those lows. If my analysis is incorrect and my stop gets hit or my trade entry isn't triggered at all then this could signal further indecision in this pair or a possible bottom forming for a reversal back into the former broken range. Conditions have been poor lately so I am shooting my shot and if this does not go as planned then I will be sitting out the rest of the month and looking for another opportunity in another pair/market.
Short
by bajapips
The Cash BubbleHistory repeats itself, and we should learn from it, however sometimes history is so far away that it spans generations before we're able to grasp the experience first hand. We hear about 1929, but we can't imagine what it was to survive the struggle, we hear about the pandemics during the 20's, same deal, we have heard about recessions, and those who went through the big recession of 2008 triggered by the immobiliary crisis know better, some veterans from the dot com bubble, others from the Black monday in 87, and probably very few from earlier crisis. But I don't think anybody has gone through a halt in the economy due to a pandemic at the level we witnessed in 2020. Let's put it in context, 2020 was an election year, the incumbent government was losing the battle against the pandemic and the halt in the economy. He had the support of the congress and the wallet at his will, the former President Trump flooded the market with freshly printed dollars in an attempt to reignite the economy as soon as possible, and let's say, it worked for the purpose of reactivating the economy and not having to wait for a painful period of a lengthy recovery, however this created an unprecedented scenario, a huge flood of dollars to the market. The biggest cash inflow ever in the history of the world. The M1 metric went to $7.2T, to put it in perspective, since the 60's this has been oscillating in the $480B to $580B in the 70's when Nixon cancelled the convertibility of the Gold and Paul Volcker had to apply unprecedented meassures to fight the stagflation that followed after the dollar became fiat currency. The M1 increased 120% from its 60's level, the increase after the housing bubble burst went from $668B to $1.5T, approximately 225%. After the COVID halt it went from $1.5T to $7.25 T, an increase of 485%, inedit scenario in the history of the United States. The crisis sent the price of oil in the market of futures to a negative value, something that has never been seen, the unemployment reached record levels, the SP500 index fell to a range close to that when Trump became president, wiping off the rally that started shortly after that event, the inflation didn't react immediately, since this is a lagging indicator that reacts to the economy growth, and the access to currency. The amount of printed fiat currency flooding the market created the immediate wanted effect, the economy jumpstart that put everybody to work and reignited the economic machinery, the unemployment started to go down, the inflation ticked up, still within range, the price of gold ticked up, the price of oil started to recover, also within range. However we witnessed shortly after that the inflation was not stabilizing, we witnessed the traffic jam at the ports of entry to the United States, lines and lines of cargo ships waiting to unload at the ports of entry, stuck there just idling. The news blamed the Evergreen ship that blocked the Suez Canal, and affected the distribution lines, but the truth was an excessive demand of products from the Pacific producers that overwhelmed the existing port infrastructure. This was the root reason that affected the production lines in the US and contributed to a galloping inflation. Also, during the recovery cycle, let's remember that one commodity in high demand is oil, since the world moves on it. We saw unprecedented gas prices at the pump. Presidents don't have the power to increase or decrease the prices of gas, that is pure supply/demand, but they can be blamed for increases or take the credit for decreases. In a high demand environment, oil goes along the demand cycle, that is why in a recovery environment the oil prices go higher. Let's remember in the 70's during the stagflation period oil was a highly valued commodity and people were making large lines to load gas. The prices were upticking fast and the media blamed the arab world for it, but it was mere propaganda, what really happened it was just an economy running freely on cash and jacking up the prices. The Trump administration was at the peak of the economic cycle that started in 2009, with low inflation, full employment, low gas prices. After the pandemic the variables changed, the economy went to a sudden halt world wide, and in a desperate attempt to keep the presidency the administration authorized the humongous cash flow in an attempt to prevent the negative effects of the economy to affect the election. At the end Trump lost the election. The economy continued its extremely fast paced recovery path and it overshoot. The Fed chairman was purposely in "Denial" regarding inflation, neglecting it and calling it "transitory", which was more of a Greenspan "laissez faire" economic policy, let the wild animals in their "irrational exuberance" take over and later on we'll pick up the pieces and start the recovery process. This is how we got here now. Where do we go from here?, that is an interesting question, the flood of cash should have been made in a way that there was a recovery but not a rampant inflation, however this would have taken longer and the previous administration was not willing to wait. We have an amount of cash that the economy hasn't been able to absorb. Money is supported basically by the productivity, the working force, the commercial transactions, but there must be a correspondence so the economic variables are kept in check. The GDP vs the M1 is still at an outstanding level. The inflation is heading to the 2-2.5% goal, we're still at full employment, which basically puts us in what the fed have been calling a "soft landing". Will it be?? I suppose initially it will, but we risk facing the same scenario that happened during the stagflation in the 70's, Paul Volcker had a big dilemma, he increased the interest rates, but the inflation was completely out of control, people noticed they could buy an asset and basically turn around and sell it at a higher price, and they still found a buyer. Houses were on the rise, the agriculture also participated of the inflation benefits, farmers could buy a tractor, use it and resell it at a higher price. People in New York City were waiting in line before the jewelries opened so they could buy gold, and sell it later at a higher price. When Volcker decreased the interest rates after the message he sent was of stability and it backfired and inflation was reignited. Taking a look at the CBOE:SPX in the long run, we see there is a negative momentum divergence forming after it reached the All Time High (ATH). The indicators signal a downturn, that could possibly happen after the interest rates reach its pivot, the inflation is at the Fed Goals, unemployment goes beyond the full employment level and the economy shows signs of stalling. Bubbles happen all the time, we enjoy the ride until they burst. We're in a new bubble, the Cash Bubble. The cash should be enough to allow the economy to support it having a healthy inflation level of 2%, as defined by the Fed targets. If there is too much cash and the economy is not able to support it, it will dilute automatically until the economy growth catches up. For decades the ratio of M1 to GDP has been between 9% and 18% as we can see in the chart. After the cash flood it peaked to 85% and currently it is at 68%. I don't think the problem is far from over, even if we reach the 2% inflation target. The challenge for the Fed now is to keep the interest rates low for longer without stalling the economy. It is rumored that the Fed will pause the interest rate hike for their September FOMC meeting. It is expected considering the recent increases have been in the 1/4 of a point followed by a pause. If the pause is prolonged, the inflation reaches its 2-2.5% target and the unemployment is kept within the 4-5% range then the fed can call it a "Soft Landing" up to this point which could be a telegraphed signal to start reducing the interest rates, and the financial market may anticipate this pivot to create a bear market and shake the tree to dislocate and reallocate assets at a discount using all the big cash flood out there. Next year is a presidential election year, and not making it a priority has happened before. During the Volcker's period, he didn't mind pulling the rug on Carter. The Fed does what it has to do. "What has happened before will happen again. What has been done before will be done again. There is nothing new in the whole world." ~ Ecclesiastes 1:9 Patterns repeat because human nature hasn't changed for thousands of years. ~ Jesse Livermore. References Secrets of the Temple: How the Federal Reserve Runs the Country. William Greider. January, 1989 How the economic machinery works. by Ray Dalio. youtu.be Principles for Dealing with the Changing World Order by Ray Dalio. youtu.be
SP:SPX
by Madrid
55
Navigating Forex Success: Mastering the Most Vital Fundamentals Forex trading, the largest and most liquid financial market in the world, offers endless opportunities for profit. Yet, success in this dynamic arena hinges on a solid understanding of fundamental analysis. In this comprehensive article, we will explore the most crucial forex fundamentals that every trader should grasp. We will provide real-world examples to illustrate their impact and share how they can influence your trading decisions. The Cornerstones of Forex Fundamentals 1. Interest Rates: Central banks set interest rates, which have a significant influence on currency values. Higher interest rates in a country can attract foreign capital, boosting the value of its currency. 2. Economic Indicators: Economic data releases, such as GDP, employment figures, and inflation rates, provide insights into a country's economic health. Positive data can lead to a stronger currency, while negative data may weaken it. 3. Political Stability and Economic Performance: Political stability and the overall health of an economy play a crucial role in currency valuation. Countries with stable governments and strong economic performance tend to have stronger currencies. Real-World Examples Example 1: EUR/USD and Interest Rates: Example 2: GBP/USD and Economic Indicators: Mastering the most vital forex fundamentals is essential for navigating the complex world of forex trading successfully. By staying informed about interest rates, economic indicators, political stability, and economic performance, you can make informed trading decisions and better understand the forces driving currency markets. With these fundamentals as your foundation, you'll be better equipped to seize opportunities and manage risks in the ever-evolving world of forex. 🌍📈💰 What do you want to learn in the next post?
COINBASE:BTCUSDEducation
by UnitedSignals
7
How does the interest rate affect the markets?How does the interest rate affect the markets? We often hear in the news that the market is rising or falling after decisions or some statements by the Fed. We also often talk about the dollar index, so let's use simple words and with a cheat sheet at the end of the video, I'll show you how it works SP:SPX BITSTAMP:BTCUSD What is the FED The Federal Reserve is a network of financial institutions that together make up the central bank of the United States of America. Why is the Fed cutting rates? When the economy is not doing well, the FOMC can make interest rates lower, encouraging people to take out loans and stimulate economic activity. What happens when interest rates rise Central banks raise rates when there is a high risk of recession and stagflation (high inflation, very low GDP growth) The higher the rate, the more expensive money is for banks and, as a result, loans become more expensive for the entire economy. A rate cut means a reduction in the cost of loans. Bitcoin, due to its large capitalization, has become highly correlated with traditional markets A change in the rate affects the entire money markets. An increase in discount rates leads to a decrease in the cost of bonds and an increase in yields across the entire class of fixed income instruments. Bank deposit rates go up, and bond yields go up for investors. And vice versa. Use this cheat list like visualisation of potential market upcoming moves
SP:SPXEducation
by Crypto4light
Analyzing Bitcoin's Popularity: The Potential for Corrections 📊🚀 Bitcoin's Soaring Interest: We've witnessed Bitcoin's meteoric rise to fame, drawing attention from investors, institutions, and the general public. Its surging popularity has been nothing short of remarkable. 📈 The Price-Interest Conundrum: Here's the intriguing part – when Bitcoin's popularity skyrockets and the mainstream media begins touting its merits, it often coincides with a phase of rapid price escalation. 📉 The Correction Potential: What history has shown is that these periods of intense interest and price surges can also be followed by corrections – temporary pullbacks in price. This is a natural part of Bitcoin's volatile journey. 💡 Insights for Investors: Understanding this relationship between popularity and corrections can be valuable. It's a reminder that even in the world of crypto, markets don't move in a straight line. Corrections offer opportunities for patient investors. 🔮 Predicting Corrections: While it's challenging to precisely predict when a correction will occur, heightened interest can be a signal to stay vigilant. It's a reminder to approach the market with a balanced strategy, combining optimism with caution. In conclusion, the surging interest in Bitcoin is a testament to its growing significance in the financial world. However, it's essential to recognize that popularity doesn't guarantee a one-way ticket to perpetual gains. Corrections are a healthy part of Bitcoin's price discovery process.
by AlexWhale
What's next for the rate debate?The U.S. interest rate debate changed dramatically in August 2023. The economic debate shifted gears with diminishing concerns about a recession, leading U.S. long-term Treasury yields to rise sharply. And the debate over future Federal Reserve policy transitioned from trying to call the peak in short-term rates to discussing the length of time rates might remain elevated. The net result was a less inverted U.S. yield curve, not because short-term interest rates fell, but because long-term yields rose. With the no recession view becoming the more popular base case, there has also been a shift in the longer-term inflation debate. Without a recession, many economists are coming to the view that core inflation, which the Fed targets, will remain well above the Fed’s 2% target throughout 2024 and possibly longer. We studied extended periods where short-term rates held above the prevailing inflation rate. There appears to be a loose relationship between the growth of nominal GDP and long-term Treasury yields. This makes sense if one thinks about nominal GDP growth as part inflation and part real economic activity, and it helps explain why bond yields have moved higher. Put another way, the period of 1% fed funds rates under the Greenspan Fed in the early 2000s and then the near-zero fed funds rates introduced by the Bernanke Fed after the 2008 Great Recession are historical outliers. These super low rates encouraged a search for yield and popularized the view that the Fed has the market’s back, artificially supporting both equities and bond prices (that is, lower bond yields). The Powell-led Fed is guiding us that those days are in the rearview mirror, and market participants are starting to agree. In his closely watched Jackson Hole speech, Powell highlighted the economic uncertainty ahead and how risk management remains key moving forward. If you have futures in your trading portfolio, you can check out on CME Group data plans available on TradingView that suit your trading needs www.tradingview.com By Bluford Putnam, Managing Director & Chief Economist, CME Group *Various CME Group affiliates are regulated entities with corresponding obligations and rights pursuant to financial services regulations in a number of jurisdictions. Further details of CME Group's regulatory status and full disclaimer of liability in accordance with applicable law are available below. **All examples in this report are hypothetical interpretations of situations and are used for explanation purposes only. The views in this report reflect solely those of the author and not necessarily those of CME Group or its affiliated institutions. This report and the information herein should not be considered investment advice or the results of actual market experience.
CBOT:ZB1!
by CME_Group
11
3x Inverse TLT ETF: Breaking Out of Descending Broadening WedgeThe Inverse ETF for the 20-Year US Government Bond is currently breaking out of a Descending Broadening Wedge and is looking to go much higher perhaps between the 61.8% and 78.6% retraces which would be about a 500-1,400% percentage gain which also means that longer end bond yields are going much higher. I previously said I would repost this chart after the split so that the numbers would be accurate, and now that split has happened. I have my eyes on the $36 to hold and am currently looking to get some calls for that strike price expiring next year. It's worth noting the Partial-Decline we got before breaking out of the Broadening wedge, which makes it more likely to play out.
AMEX:TMVLong
by RizeSenpai
2
Why the EURUSD might trade higherFollowing Powell's statement at the annual Jackson Hole symposium – “We are prepared to raise rates further if appropriate and intend to hold policy at a restrictive level until we are confident that inflation is moving sustainably down toward our objective.” – markets seem more inclined towards expecting another rate hike in the US. This move, in our analysis, provides the Federal Reserve (the Fed) with added flexibility for future decisions. Meanwhile, the European Central Bank (ECB) echoes a similar sentiment, insisting on remaining stringent as the battle against inflation is ongoing. A dive into headline & core inflation shows a decline in the former for both the EU and US. However, Europe's core inflation remains stubbornly high, without evident signs of decreasing. Further, Europe's robust PMI, in contrast to the sub-50 US print, paired with this sticky core inflation, indicates that the ECB might maintain its tight monetary stance to combat inflation. The Futures and OIS market can give us some insights on market participants’ expectation of the forward rate path. Here we see similar expectations of an increase in rates before cuts are priced in. Generally speaking, interest rate differential is inversely related to the EURUSD, hence in the chart above we see this relationship in play with the US-EU Interest Rate, roughly marking out the inverted EURUSD path. From 2019 to 2022, where we saw the rate differential held constant after a period of decrease, the EURUSD traded higher during that period. Hence whether the ECB tightens further or keep in line with market expectations, we see potential for the EURUSD to trade higher given historical precedence. The US dollar is currently hovering near the upper threshold of a descending channel. The previous 3-times when RSI reached such levels marked the turnaround point for the dollar. On a longer-term chart, we see the EURUSD trading right above the 1.08 level which has been a key support & resistance level going back to 1970s. Zooming in, the EURUSD pair now trades on the lower band of an ascending channel with RSI pointing oversold. Again, the past 3 times when RSI were at this level marked the reversal point for the EURUSD. Hence, whether the ECB reacts with more hikes as expected by market participants, or it stays the expected course, the EURUSD is likely to trade higher as we look back in history. Supported by technical, and the potential for a weaker dollar as it trades near resistance, we favour a long position in the EURUSD Futures at the current levels of 1.0827 with a stop loss at 1.05 and take profit at 1.130. Each 0.00005 increment per EUR in the EURUSD futures contract equals to 6.25$. 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 Disclaimer: 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: www.cmegroup.com www.cmegroup.com
CME:6E1!Long
by inspirante
USD/TRY is to jump in 2023?For the last months, the Turkish lira has been traded near the all-time lows against USD. I think that demand for the lira would shift soon, and it would trigger a breakout of resistance of 18.7 with the first psychological price target of TRY 20 for 1 USD with consolidation near 25 in the second half of the year. In terms of technical analysis, I do not see any compelling things on the USD/TRY chart. Therefore, I decided to look at an exotic currency pair with TRY on one side. I have taken Hungarian forint or HUF. Comparing HUF with USD or EUR , we can say, it is a weak currency that has constantly lost its value for the last 20 years. However, against the weakest TRY, HUF is a king. On the TRY/HUF chart, I see an opportunity to breakout of support of HUF 18.4 for TRY until the end of the year. The first target could be 14 with the chance to drop to 10. Keeping in mind that HUF is a weak currency that is now in a temporary good shape against the world currencies, such a possible forint strengthening against the lira could happen only if the latter drop to the majors. If TRY/HUF is to be 14, and USDHUF is near its essential middle-term resistance of 380. It means USDTRY would be around 27,14. If TRY/HUF reaches 10, USDTRY would be 38. With a magical macroeconomic policy in Turkey, including jumping inflation , artificially low-interest rates in Turkey , and raising interest rates in USD, EUR, and Erdogan's elections in June (and budget spending increase), it doesn't seem impossible to me.
Long
by Nikita_Kalinin
US2000 BEARISH SCENARIOAll focused on the forthcoming remarks by Jerome Powell, set to disrupt the situation tomorrow, which could potentially shift investor sentiment from buying to selling. The US2000, also known as the Russell 2000, represents a small-cap index that follows behind the larger indices such as DJIA, S&P, and Nasdaq. In recent months, the Russell has demonstrated weaker performance in contrast to its counterparts. The impending increase in interest rates might introduce new challenges to the market. Indicated by a symmetrical parabolic pattern, there's a suggestion that a bearish trend could extend around 130-150 points, mirroring the height of the curve. Nevertheless, the equation "Powell = Power" still holds true. Risk Disclosure: Trading Foreign Exchange (Forex) and Contracts of Difference (CFD's) carries a high level of risk. By registering and signing up, any client affirms their understanding of their own personal accountability for all transactions performed within their account and recognizes the risks associated with trading on such markets and on such sites. Furthermore, one understands that the company carries zero influence over transactions, markets, and trading signals, therefore, cannot be held liable nor guarantee any profits or losses.
CME_MINI:RTY1!Short
by legacyFXofficial
A Closer Look at the Dow JonesLast week was volatile on the markets. Many indices have been corrected (a fall in value after a previous period of rise). The fear of interest increases following the speeches of the members of the FED and the Chinese economy which worries despite the support plans of the Chinese government. I am therefore focusing today on the Dow Jones. Founded in 1896 by Charles Dow and Edward Jones, the Dow Jones is an index made up of 30 major American companies. It reflects the overall health of the stock market in the United States. Bullish Scenario: Testing the Waters In the wake of last week's turbulence, the Dow Jones is now poised to challenge its previous resistance level, which had effectively capped its price for the past year. The close of trading on Friday witnessed a late-day surge in stock prices, indicating a resurgence of buying interest. The candlestick chart suggests a potential rebound, bolstered by a concurrent bounce on the oblique support line. Bearish Scenario: Keeping a Watchful Eye However, it is prudent to consider the bearish scenario as well. If the current support line fails to hold, there exists a possibility that prices could find support at the 200-day moving average, an essential metric used to assess longer-term market trends. Failing this, the next support level looms around the 32,500 point threshold. In conclusion, the Dow Jones remains in the spotlight as investors navigate through this period of market volatility. Its performance in the coming weeks will undoubtedly serve as a litmus test for the broader U.S. stock market, shedding light on the intricate interplay of economic factors and investor sentiment.
TVC:DJI
by ssavi
T-Bonds (US 30 yr); Wait for it!If it walks like a duck and it quacks like a duck ... But wait for it! In reality the Inflation-Deflation pendulum is already past mid-swing, towards the later (by most meaningful measures). Incidentally, most institutions and central banks are piled in at the short end of the curve and one could sell them anything going out past 3 years, for anything. That, in itself, ought to serve as a warning. (Yeah, they are known to be dead wrong, especially when it really matters.) Add in (or don't!) the A.I.+ automation related speculative bonanza about long term deflationary pressures and the case would get even stronger for rates to peak at these levels. Wait for signs of a reversal, though. p.s. The only thing that goes up in a market crash is correlation! (I.e., T-Bonds alone will not save anyone.)
CBOT:ZB1!
by Nemo_Confidat