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Interestrates

Discussion of Levels before the FOMC January 31st DXY: (Fed Decision) Stay below 103.80 could trade down to 102.70 support. NZDUSD: Buy 0.6150 SL 15 TP 40 (DXY weakness) AUDUSD: Sell 0.6585 SL 15 TP 60 (DXY strength) USDJPY: Sell 147.10 SL 30 TP 200 (Hesitation at 146.45) GBPUSD: Buy 1.2715 SL 20 TP 60 (DXY weakness) EURUSD: Sell 1.0790 SL 15 TP 45 (2nd setup) Sell 1.0730 SL 20 TP 70 USDCHF: Consolidation, possible straddle Buy 0.8655 SL 20 TP 55 Sell 0.8600 SL 15 TP 40 USDCAD: Sell 1.3400 SL 20 TP 50 Gold: Break above 2040 trade up to 2055 (Conflict escalation & DXY weakness)
TVC:DXY
by JinDao_Tai
Gold forecast: Crazy to expect rate cut tomorrow? Gold forecast: Crazy to expect rate cut tomorrow? Mostly yes. Market consensus leans towards the U.S. central bank maintaining current interest rates following the conclusion of its two-day meeting tomorrow. However, the potential impact on the U.S. dollar and gold is likely to hinge on statements from Fed Chair Jerome Powell regarding expectations for a rate cut. While there is an anticipation of a somewhat dovish shift from Fed officials in the market, the robust January data and the positive JOLTS job report this morning present a case for the possibility of a sustained hawkish stance, The JOLTS report revealed that U.S. job openings in December surged to 9.026 million, surpassing the expected 8.750 million and marking the highest figure in three months. XAU/USD was trading in the green for a second consecutive day before the JOLTS report. Gold is currently above a mildly bearish 20 Simple Moving Average for the first time in over two weeks, with longer moving averages situated significantly below the current level. Still, gold has breached its minor downtrend line originating from the early January high raises the possibility of a bullish target towards $2055, presumably reliant on the possibility of a Fed rate cut (or not).
BLACKBULL:XAUUSD
by BlackBull_Markets
edges up as US inflation print fuels Fed rate cut speculation 26 January 2024, 17:04 •EUR/USD rises in North American trading, buoyed by softer US core PCE inflation data. •Fed's core PCE index fall to 2.9% raises hopes for interest rate cut, aiding EUR/USD's climb. •Mixed European signals: German consumer confidence falls, Spanish unemployment at 16-year low, ahead of Fed decision. The EUR/USD gained some 0.14% in early trading during the North American session as prices in the United States (US) remained above the US Federal Reserve’s goal but eased compared to November’s figures. The major trades at 1.0866 after diving to a low of 1.0812. The Euro got a life-line of a softer US PCE report The Fed’s preferred gauge for inflation, the Personal Consumption Expenditures (PCE), rose 2.6% in the 12 months to December, as expected on an annual basis, while core PCE dipped from 3.2% to 2.9% and below forecasts. After the data, the EUR/USD climbed sharply and clocked a daily high of 1.0885 before retreating toward current exchange rates, as the data reaffirmed investors' speculations that the Fed could begin cutting rates by the summer. The CME FedWatch Tool depicts the odds for a quarter of a percentage rate cut by the Fed at 51.4%, while 50 basis points stand at 37.8%. Nevertheless, US Treasury bond yields reversed its course, climbing higher and putting a lid on the EUR/USD rise. Meanwhile, data across the pond showed that German consumers remain pessimistic amidst economic uncertainty after the GfK Consumer Confidence for February plunged from .25.4 in January to -29.7. In Spain, the Unemployment Rate fell to levels last seen in 2007, from 11.84% to 11.76% in the last quarter of 2023, according to an INE report. Ahead of the next week, the main spotlight would be the Federal Reserve’s monetary policy decision on January 30-31. EUR/USD Price Analysis: Technical outlook Following the US data release, the EUR/USD advanced towards 1.0900 but failed to break yesterday’s high, which could pave the way for a pullback to the 200-day moving average (DMA) at 1.0843. Downside risks are seen at today’s low 1.0812, followed by the 1.0800 figure. Conversely, if buyers lift the spot prices above 1.0900, as they eye the 50-DMA at 1.0920.
Long
by sniper_2022
1
ECB maintains interest rate at 4.50% but for how long? History of prior EU Rate pauses: 4 months | Oct 00 - Apr 01 12 months | Jun 07 - Jun 08 3 months | Jul - Oct 2011 4 months | Sept 2023 - Present ⏳SO FAR⏳ At least they could say that this is not the shortest one ever now that we are into month 4. Historical Average: 6 months (March 2024) Interestingly this is when the Bank Term Funding Program in the US is ending which was providing liquidity to the banks. It might be a case of one foset gets turned off and another gets turned on. PUKA
ECONOMICS:EUINTR
by PukaCharts
Interest Rates Trading and Hedging Through a New LensIntroduction In the dynamic world of financial markets, Micro 10-Year Yield Futures stand out as a pivotal tool for traders and investors. These futures offer unique opportunities to navigate the complexities of interest rates, particularly in an environment influenced by key economic indicators. This article delves into how traders can leverage both fundamental economic data and a novel technical analysis approach to optimize their strategies in trading and hedging with these futures. Fundamental Analysis Approach Understanding CPI, PPI, and Unemployment Rate: Consumer Price Index (CPI): This indicator measures the average change over time in the prices paid by consumers for a basket of goods and services. It's a critical gauge of inflation, directly impacting interest rates and, consequently, the yields on Treasury securities. Producer Price Index (PPI): PPI tracks the average change over time in the selling prices received by domestic producers for their output. It's a leading indicator of consumer inflation when producers pass on higher costs to consumers. Unemployment Rate: This key metric reflects the number of unemployed workers as a percentage of the labor force. It’s vital for assessing the health of the economy, influencing monetary policy and interest rates. These indicators, notably their changes, provide crucial insights for active trading, particularly in hedging strategies with Micro 10-Year Yield Futures. For instance, a higher-than-expected CPI or PPI might signal rising inflation, prompting traders to anticipate rate hikes and adjust their positions accordingly. How to incorporate Fundamental Analysis into the trade decision process? When making trading decisions for Micro 10-Year Yield Futures, it's crucial to understand the impact of economic reports on interest rates: Buying (Long) Position Rationale: When CPI, PPI, and Employment Rate (opposite of unemployment) are all increasing (indicated by green color on the chart), it typically suggests an expanding economy and potential inflationary pressures. In such scenarios, interest rates are likely to rise to manage inflation. Hence, buying 10-Year Yield Futures could become a strategic move, anticipating a potential uptick in yields. Selling Existing Long Positions: A decrease in any of these indicators (CPI, PPI, Employment Rate) signals a potential slowdown or less aggressive inflationary pressure. Traders holding long positions might consider selling to lock in profits or prevent losses, anticipating a potential drop in yields. Selling (Short) Position Rationale: If these reports show a decreasing trend (indicated by red color on the chart), it suggests economic contraction or reduced inflationary pressure. Lower interest rates are often introduced to stimulate economic growth in such conditions. Shorting 10-Year Yield Futures could be advantageous as it would benefit from a potential fall in yields. Buying Existing Short Positions: An increase in any of these indicators (CPI, PPI, Employment Rate) signals a potential expanding economy and potential inflationary pressures. Traders holding short positions might consider buying to lock in profits or prevent losses, anticipating a potential rise in yields. Rationale Behind the Rules: These rules are based on the traditional economic relationship between inflation, economic activity, and interest rates. Rising inflation or strong economic growth (indicated by higher CPI, PPI, and Employment Rates) often leads to higher interest rates to prevent the economy from overheating. Conversely, decreasing indicators suggest an economy that might need stimulation, often leading to lower interest rates. By aligning trading strategies with these fundamental economic principles, traders can make more informed decisions, leveraging economic trends to speculate or hedge effectively. Technical Analysis Approach Yield Extremes and Curve Analysis: This approach involves charting and combining the 2-Year and 30-Year yield futures contracts in one chart. Analyzing the relationship between these yields provides insights similar to traditional yield curve analysis in a much more accessible format. Key Indicator: A crossover between the 2-Year and 30-Year rates signifies a substantial shift in market sentiment and economic outlook. How to Incorporate Technical Analysis into the Trade Decision Process? As said, the crossover of yield rates between the 2-year and the 30-year yields is a pivotal event, suggesting significant changes in the yield curve. Here's how to interpret and act on these occurrences: Identifying the Crossover Event: A crossover event occurs when the 2-year yield rate overtakes the 30-year rate, or vice versa. This event is indicative of a significant change in the interest rate environment, reflecting shifts in economic expectations and monetary policy. Trading Strategy Based on Micro 10-Year Prior Price Action: When the crossover occurs, the immediate strategy depends on the recent trend in the Micro 10-Year Yield Futures prices. If the Micro 10-Year Yield was trending upwards prior to the crossover, it suggests bullish sentiment in the shorter term. In this scenario, traders could consider taking a short position, anticipating a potential reversal or bearish shift in the market. Conversely, if the Micro 10-Year Yield was trending downwards, indicating bearish sentiment, traders could consider a long position post-crossover, capitalizing on the potential for a bullish reversal or recovery in prices. Rationale Behind the Trade Rules: The crossover event between the 2-Year and 30-Year yields represents a pivotal shift in market dynamics, often reflecting changes in economic policy, inflation expectations, or investor sentiment. Prior price action in the Micro 10-Year Yield Futures provides a context for these shifts, indicating the market's prevailing trend and sentiment. By aligning trading actions with both the yield curve dynamics (crossover event) and the recent trend of the Micro 10-Year Futures, traders can make informed decisions, leveraging the market's anticipated reaction to these significant economic indicators. Market Outlook and Trade Plan Keeping in mind the below tick and (Average True Range) ATR values, based on our analysis, we could express our market views through the following hypothetical set-ups: Trade Plan for the Fundamental Analysis Approach: ENTRY: Wait for the next CPI, PPI and Employment Rate reports and consider executing a trade if all 3 reports are either positive (long) or negative (short). STOP LOSS: Located 1 Monthly ATR away from the entry price Trade Plan for the Technical Analysis Approach: ENTRY: The crossover may confirm itself at the end of the day. Wait for such confirmation and consider executing a short trade once confirmed. STOP LOSS: Located 1 Monthly ATR away from the entry price Tick Value: 0.001 Index points (1/10th basis point per annum) = $1.00 Monthly ATR: The average volatility is measured as 0.509 at the time of this report Trade Example: If the 2-Year yield rises above the 30-Year yield amid rising CPI, consider a short position anticipating rate hikes. Reward-to-Risk Ratio: Calculate this ratio to ensure a balanced approach to potential gains versus losses. Risk Management in Futures Trading Effective risk management is paramount. Utilize stop-loss orders and consider hedging techniques to mitigate potential losses. Understand the significance of economic reports and yield curve shifts in making informed decisions. Conclusion Micro 10-Year Yield Futures offer a versatile platform for interest rate trading and hedging. By combining monthly economic updates with a unique yield curve analysis approach, traders can navigate these markets with greater confidence and strategic foresight. When charting futures, the data provided could be delayed. Traders working with the ticker symbols discussed in this idea may prefer to use CME Group real-time data plan on TradingView: www.tradingview.com This consideration is particularly important for shorter-term traders, whereas it may be less critical for those focused on longer-term trading strategies. Disclaimer: The trade ideas presented herein are solely for illustrative purposes forming a part of a case study intended to demonstrate key principles in risk management within the context of the specific market scenarios discussed. These ideas are not to be interpreted as investment recommendations or financial advice. They do not endorse or promote any specific trading strategies, financial products, or services. The information provided is based on data believed to be reliable; however, its accuracy or completeness cannot be guaranteed. Trading in financial markets involves risks, including the potential loss of principal. Each individual should conduct their own research and consult with professional financial advisors before making any investment decisions. The author or publisher of this content bears no responsibility for any actions taken based on the information provided or for any resultant financial or other losses.
CBOT_MINI:10Y1!Education
by traddictiv
30-Year US Gov't Bond Yields since 1977Here is a long term view of long term US Gov't interest rates. Long term is defined as 30 years and is a common bond owned by pension funds and insurance companies and other long term investors with long term obligations. I highlight the various ranges of interest rates as shown in these 4 boxes and the few moves that temporarily moved interest rates outside those boxes: 1. 1987 Stock Market Crash on collapsing USDollar, hiked capital gains taxes starting in 1988, trade wars with Germany, S&L crisis brewing from 1986 real estate tax law change, and Congressional moves to eliminate interest rate deductions on takeovers. 2. Orange County Bankruptcy 3. Great Financial Crisis "GFC" - massive deleveraging of the banking industry forcing asset prices down in a collapse. 4. Covid reaction by Gov't to shut economy down and stimulate spending and handouts to keep economy afloat 5. Current over-reaction to over-stimulation during lockdowns and supply chain issues.
TVC:TYX
by timwest
8
Controlled Sideways Trends Ahead of EarningsThe Giant Banks and Credit Card companies benefit the most from the Federal Reserve Board's overnight interest rate hikes. As the FRB increases its lending rate, it allows big banks and credit companies to increase their interest rates to consumers, small businesses, etc. That usually means higher revenues. NYSE:V is in a sideways trend that is not as consistent as would be ideal ahead of its earnings report in about 3 weeks. However, HFTs are aware of the tendency for credit card companies to prosper during high interest-rate markets. Study the candlestick patterns: Note the quick reversal back down after a higher price level was reached. Note the rebound the same day when price dropped out of the lows of this sideways trend. There is control in this pattern which is typical of Professional trading activity.
NYSE:V
by MarthaStokesCMT-TechniTrader
$DJI vs $NDX vs RatesSince the "outside" day. The DJ:DJI index has flip flopped above and below the top part of the outside day line. It wants to push higher but when NASDAQ:NDX craters, like it's doing today, it's a lil tough. Since we're doing intraday charts, let's do DJ:DJI as well. What's the biggest thing that sticks out to you on the last chart? Hint: Look at the bottom 2 panes. It could all tie in with a bump in higher rates. IMO not a top. Not enough euphoria. But could be a short term top. We'll see.
DJ:DJI
by ROYAL_OAK_INC
Short term rates still look weak while long term look betterHAPPY NEW YEAR! 🎉 US Treasury markets are more than the combined bond markets of Germany, Japan, China, UK, France, and Italy = HUGE. This is why US #Bond market is important to keep track of. Short term #interestrates has been the weakest in a LONG TIME 1Yr & 2Yr charts look similar. US Debt 2ys & less have been weakening & look like they still want to weaken a bit more. ------------------------------------------------- HOWEVER, long term debt looks to be solidifying a bit. The 10 & 30Yr #Yield look identical & both look like they want to bounce here. How strong? We'll see. Took small position on Thurs. This could also be more of a technical set up as both are at support levels, 30yr is at strong long term support. TVC:TNX #bonds
TVC:US10Y
by ROYAL_OAK_INC
Gold Watch: CPI Impact and Interest Rate DynamicsGreetings Traders, Our spotlight is on XAUUSD, where we are actively eyeing a potential buying opportunity around the 2015 zone. As gold trades in an uptrend, it currently finds itself in a correction phase, steadily approaching the trend at the critical 2015 support area. This numerical level carries historical significance, serving as a vital juncture where the correction may align with substantial market forces, creating an opportune entry point for traders. To comprehend the potential market dynamics, we must delve into the macroeconomic fundamentals. The Consumer Price Index (CPI) data, released on October 25, 2023, revealed an actual inflation rate of 1.2%, surpassing the forecast of 1.1% and the previous 0.8%. This ongoing trend of rising inflation is crucial, as it has the potential to influence the Federal Reserve's monetary policy decisions. The latest FOMC data, dated December 13, 2023, reflects a steady interest rate of 5.50%. Such a stance indicates a commitment to combat inflation, but the continuous dovish rhetoric and the decision to maintain the interest rate may suggest that the Fed is cautious about tightening too quickly. This dovish sentiment in the monetary policy can lead to further weakness in the USD. Considering the interest rate evolution, the Fed has been on a trajectory of cautious adjustments. For instance, in the FOMC meeting on September 20, 2023, the interest rate was held at 5.50%, maintaining the status quo. This steady approach is indicative of the Fed's commitment to managing inflation without overly hindering economic growth. The correlation between interest rates and the strength of the USD is pivotal in understanding gold's potential upsides. The negative correlation between gold and the USD implies that a weakening dollar could propel gold prices higher. As traders navigate the XAUUSD chart, the careful consideration of both CPI and interest rate data is imperative. The dovish monetary policy's potential impact on the USD's strength and the subsequent influence on gold prices should be a focal point in crafting effective trading strategies.
OANDA:XAUUSDLong
by JoeChampion
The Ripple Effect: How Interest Rates Influence the Stock MarketIntroduction Brief Overview In the complex tapestry of the global economy, few factors play a more pivotal role than interest rates. At its core, an interest rate is the cost of borrowing money, a fundamental element that influences economic activity. Governed largely by a nation's central bank, these rates are a powerful tool, used to control economic growth, manage inflation, and stabilize the currency. Whether you are a homeowner paying a mortgage, a student paying off loans, or a conglomerate investing in new ventures, interest rates touch every corner of economic life. They are the heartbeat of the financial world, dictating the rhythm of spending, saving, and investing across the globe. Thesis Statement This article delves into the intricate dance between interest rates and the stock market, a relationship that is both dynamic and profound. Interest rates don't just influence how much it costs to borrow money; they also have a domino effect on stock prices, corporate profits, and investor behavior. Our focus is on unraveling this complex interplay, shedding light on how fluctuations in interest rates can set in motion waves that ripple through the stock market. Importance For investors, particularly those engaged in swing trading, understanding the impact of interest rates is not just academic—it's a crucial aspect of strategic decision-making. Swing traders, who typically hold positions from a few days to several weeks, must be acutely aware of how interest rates can influence market trends and individual stock performances. A change in interest rates can alter the investment landscape overnight, creating risks and opportunities that must be navigated with skill and insight. In this context, a deep understanding of the interest rate-stock market relationship is not just beneficial; it's essential for successful trading. By grasping how interest rates influence market dynamics, swing traders can better anticipate market movements, make more informed decisions, and, ultimately, enhance their trading performance. Section 1: Understanding Interest Rates Definition and Function At its simplest, an interest rate can be understood as the price paid for the use of borrowed money. This rate, usually expressed as a percentage, is what borrowers pay lenders in addition to the principal amount borrowed. But beyond this basic definition, interest rates are a cornerstone of financial policy, serving multiple roles in the economy. They act as a regulatory tool for economic growth, influencing the level of spending and saving in an economy. When rates are low, they encourage borrowing and spending, injecting more money into the economy, thereby stimulating growth. Conversely, high interest rates tend to slow down economic activity by making borrowing more expensive, thus dampening spending and investment. In this way, interest rates are a key lever used by policymakers to maintain economic stability and target inflation levels. Determinants of Interest Rates The setting of interest rates is not arbitrary; it is influenced by a myriad of factors, primarily steered by a country's central bank. The most significant determinants include: 1. Inflation: One of the primary goals of setting interest rates is to control inflation. When inflation is high, central banks may increase interest rates to cool down the economy. This increase makes borrowing more costly and saving more attractive, which can reduce spending and bring down inflation. 2. Economic Growth: Interest rates are adjusted in response to the current state of the economy. In periods of economic downturn or recession, lowering interest rates can stimulate borrowing and investment, providing a boost to economic activity. In contrast, in times of robust economic growth, higher interest rates can help temper expansion and prevent the economy from overheating. 3. Monetary Policy: Central banks, such as the Federal Reserve in the United States, use monetary policy to manage economic stability. This policy includes setting the target interest rate, which influences overall financial conditions in the economy. The central bank's perception of economic conditions (like employment rates, GDP growth, and consumer spending) significantly influences its monetary policy decisions. 4. Global Economic Factors: In today's interconnected world, global economic conditions also play a role. For example, if major economies are experiencing growth or recession, it can influence interest rate decisions in other countries due to the global nature of trade and finance. Understanding these determinants is crucial for investors and traders, as changes in interest rates can have widespread effects on the financial markets, including the stock market. This understanding forms the foundation for appreciating the nuanced ways in which interest rates can influence stock prices and investment strategies, particularly in the realm of swing trading. Section 2: Interest Rates and the Stock Market Direct Impact Interest rates wield a direct and significant influence on stock prices. This impact primarily revolves around the cost of capital and corporate earnings. Lower interest rates make borrowing cheaper for companies, enabling them to invest in growth, expand operations, or refinance existing debt at more favorable terms. This often leads to increased corporate earnings and, by extension, higher stock prices. Conversely, when interest rates rise, borrowing costs increase, potentially leading to reduced profits and lower stock valuations. Furthermore, interest rates also affect the discount rate used in valuation models. When rates are low, future cash flows are discounted at a lower rate, increasing the present value of stocks. Higher interest rates mean a higher discount rate, which can reduce the present value and, consequently, stock prices. Investor Psychology The psychological aspect of investing plays a critical role in how interest rates affect the stock market. Lower interest rates often create an environment of economic optimism, encouraging risk-taking among investors. Stocks, being riskier assets, become more attractive in low-rate scenarios as investors seek higher returns, driving up demand and prices. On the flip side, rising interest rates can signal a tightening of monetary policy and potential economic slowdown. This can lead to increased risk aversion, prompting investors to shift their assets to safer havens like bonds or even cash. Such shifts in investor sentiment can cause stock markets to react negatively, leading to price declines. Sector-Specific Impacts Different sectors of the stock market can react quite differently to changes in interest rates. For instance: • Financial Sector: Banks and financial institutions often benefit from rising interest rates, as they can earn more from the spread between what they pay on deposits and what they earn from loans. • Real Estate Sector: This sector typically has a negative correlation with interest rates. Higher rates increase the cost of mortgages, which can dampen demand for real estate and negatively impact related stocks. • Technology Sector: Tech companies, particularly those with high growth potential but lower immediate profitability, can be sensitive to interest rate changes. Lower rates generally favor these companies by reducing their cost of capital and valuing their future earnings more favorably. • Consumer Discretionary Sector: Consumer spending habits can be influenced by interest rates. Lower rates might encourage more spending on non-essential goods and services, potentially benefiting this sector. Understanding these dynamics is essential for traders, especially those involved in swing trading, as it allows them to anticipate which sectors might be poised for growth or decline in response to interest rate changes. This sector-specific approach enables more informed and strategic investment decisions. Section 3: Historical Case Studies Past Trends To fully grasp the impact of interest rates on the stock market, it is insightful to turn to history. Several instances stand out where shifts in interest rates led to significant market movements: 1. The Early 2000s Dot-Com Bubble Burst: Following the burst of the dot-com bubble, the Federal Reserve lowered interest rates to historic lows to stimulate the economy. This action, coupled with other factors, led to a rapid recovery in the stock market, with the S&P 500 climbing significantly in the years that followed. 2. The 2008 Financial Crisis: In response to the 2008 financial crisis, central banks around the world slashed interest rates to near-zero levels. This move was aimed at encouraging investment and spending. Stock markets eventually responded positively after an initial period of high volatility, with indices like the Dow Jones Industrial Average rebounding strongly in the subsequent years. 3. The COVID-19 Pandemic Response in 2020: As a reaction to the economic fallout from the COVID-19 pandemic, central banks again cut interest rates. This action, combined with fiscal stimulus, led to a swift recovery in stock markets, with tech stocks, in particular, showing strong performance. Analysis of Outcomes Analyzing these historical cases reveals several key patterns and lessons: • Quick Response Leads to Quick Recovery: One consistent observation is that swift and decisive interest rate cuts by central banks have often led to rapid recoveries in the stock market. This suggests that proactive monetary policy is a crucial tool in mitigating economic downturns. • Sector-Specific Responses: Different sectors respond uniquely to interest rate changes. For example, tech stocks have historically performed well in low-interest environments due to their growth potential and reliance on cheap capital. • Long-Term Impacts: While lower interest rates typically lead to immediate stock market gains, the long-term impacts can be complex. Prolonged low-interest-rate environments can lead to asset bubbles and increased debt levels, posing risks to economic stability. • Investor Behavior: These historical instances underline the importance of investor psychology. Market sentiment can shift dramatically in response to interest rate changes, often resulting in short-term volatility before settling into a trend. These historical examples provide valuable insights for investors, particularly those engaged in swing trading. Understanding how the market has responded to interest rate changes in the past can help in formulating strategies that anticipate similar movements in the future, though it's important to remember that past performance is not always indicative of future results. Section 4: Interest Rates and Swing Trading Opportunities and Risks Swing traders, with their focus on short to medium-term market movements, can find both opportunities and risks in the fluctuations of interest rates. These changes can create significant price movements and trends in the stock market, which swing traders can capitalize on. Opportunities: • Sector Rotation: Interest rate changes often lead to shifts in sector performance. Swing traders can take advantage of this by rotating into sectors that are likely to benefit from the current interest rate environment. • Trend Identification: Interest rate trends can set the stage for medium-term trends in the stock market. Identifying and riding these trends can be a profitable strategy. • Volatility: Interest rate announcements and expectations can increase market volatility, creating price swings that traders can exploit. Risks: • Market Unpredictability: While interest rate changes can create trends, they can also lead to market uncertainty and unpredictable movements, especially around the time of major announcements. • Overreaction: Markets can sometimes overreact to interest rate news, leading to exaggerated moves that can reverse quickly. • Lag in Market Reaction: The full impact of interest rate changes on the economy and corporate earnings may take time to materialize, posing a risk for traders who act too quickly on interest rate news alone. Strategies Swing trading strategies in the context of changing interest rates might include: • Trading on Interest Rate Announcements: Swing traders can take positions just before interest rate announcements, betting on the market's reaction to the news. • Riding the Wave: After an interest rate change, traders can identify which sectors are likely to benefit and take positions accordingly. • Contrarian Strategies: In cases of overreaction, swing traders might adopt a contrarian approach, taking positions opposite to the market's initial movement. Mark Minervini’s Perspective Mark Minervini, a renowned stock trader, emphasizes the importance of understanding market context, which includes the impact of interest rates. Minervini's trading philosophy, based on specific patterns and technical analysis, also considers the broader economic environment. He suggests: • Focus on Quality Stocks: Even in fluctuating interest rate environments, Minervini advocates for focusing on high-quality stocks with strong fundamentals and growth potential. • Risk Management: In times of interest rate volatility, Minervini stresses the importance of stringent risk management strategies to protect against unforeseen market movements. • Adaptability: Minervini's approach is about adaptability - being able to switch strategies based on changing market conditions, including shifts in interest rates. By incorporating these insights and strategies, swing traders can better navigate the complexities of trading in varying interest rate environments, balancing the pursuit of opportunities with the management of risks. Conclusion Summary This article has explored the multifaceted relationship between interest rates and the stock market, highlighting its significance in the realm of investing and swing trading. We began by defining interest rates and their function in the economy, followed by an examination of the factors influencing their determination, such as inflation, economic growth, and monetary policy. We then delved into the direct impact of interest rates on stock prices, investor psychology, and the varying responses of different market sectors. Historical case studies provided a practical perspective, showcasing how shifts in interest rates have historically affected the stock market. In the realm of swing trading, we discussed the opportunities and risks presented by fluctuating interest rates and outlined strategies to navigate these changes, incorporating insights from Mark Minervini's trading philosophy. Finally, we analyzed the current interest rate environment and offered educated guesses on future trends and potential market reactions. Final Thoughts Understanding the dynamics between interest rates and stock market behavior is not just about recognizing patterns; it's about comprehending a fundamental aspect of financial markets. For investors and swing traders, this knowledge is crucial. It enables them to adapt their strategies, mitigate risks, and seize opportunities in a landscape that is constantly shaped by monetary policy decisions. Call to Action As we navigate through evolving economic conditions, the importance of staying informed cannot be overstated. I encourage readers to continuously educate themselves about current economic trends, particularly interest rate movements. Integrating this understanding into your investment strategy can provide a significant edge in making informed, strategic decisions in the stock market. Remember, in the world of trading, knowledge is not just power—it's profit.
TVC:US10YEducation
by JS_TechTrading
LONG a Falling Interest Rate! - TLTNASDAQ:TLT is an ETF that tracks value of United States Treasury Bonds in the time range of the 20-30-year bonds. With this ETF tracking the bond value it will rise with the decrease in these bond yields as the previous bonds offering higher % rates increase in value. I am bullish on TLT for a few reasons that are summarized in the bullets below - Interest Rates are at their highest levels in around 20 years and history would show that following these peaks in the 5.5%-7% range tends to be a sharp fall of interest rates usually due to a general moderate or severe economic downturn needing economic stimulus with low rates - Along with the peak thesis, in the current economic state of America, it has been generally discussed by Fed Presidents that rate slowdown / rate hike pauses are starting. The FedWatch tool from CMEGroup shows that traders predict the highest rates will not go any higher, and actually start being cut in Early Spring 2024. Due to this data, it is definitely important to realize the risk/reward of this trade on how the downside is minimal with the current economic conditions proving interest rates will likely not move higher, and definitely not more than a last 25bps hike for this rate cycle considering no unprecedented events occur. - Another staple to this bullish thesis is against the Federal Reserve. I strongly believe the Federal Reserve bluffs intentionally during their public conferences and talks. Recalling the inflationary period following COVID, the Fed repeatedly spoke out on this inflation being transitory while CPI rocketed to record highs in decades. I believe they like to not inform the public to the 100% truth and locked room talks. The Fed has came out and said they are quite against publicizing a rate pause officially / begin cutting rates and I believe this is a bluff. As the Fed claims to wait for data, I believe that data is showing, and will continue to show stronger economic struggle from the effects on high-interest rates. As unemployment just ticked up and probably will continue, rates will start to drop fast as soon as the Fed starts. Treasury Yields would likely dump prior to all of this as the anticipation begins to flow into the markets. Lastly, I think the Fed tends to deceive the public to try and not heavily move the markets in a short time. - Overall the data should start to pour in on economic slow down as student loan repayments resume, credit delinquencies continue to rise, housing market cools, unemployment ticking up, and more can feed to a sharp drop in CPI as aggregate US demand settles. The Fed will act on this slowdown and will need to sharply cut interest rates, especially if they wait too long. - Technicals on NASDAQ:TLT also look strong with a major demand zone, a dailydouble bottom and a diagonal trendline supports the price level. TTM_Squeeze also backs up a possible end to the downside. Below 89 area could be a solid Exit area for risk-management. Any Cut in Rates, or anticipation in rate cuts can send TLT flying with bond yields tumbling. Bonus: NASDAQ:TLT also provides a safe hedge to a market collapse or recession. Because market recessions would spark a cut in rates to help fuel a recovery, while stocks may tumble, this ETF would rally on a decline of interest rates to help stimulate a falling economy. Thesis : long Commons or 2025 dated Credit Spreads
NASDAQ:TLTLong
by ZachSap
6
FX Price Action Ahead on Growing Rate DivergenceLast week was busy for major central banks. During a 60-hour window, rates were set for 60% of the global economy, from the US Fed, the ECB, to the BoE. Central banks’ announcements caused a frenzy in markets. The pivot to a dovish stance by the US Fed contrasted sharply with hawkishness from the ECB. This paper summarizes rate announcements and their market impact. It also dives into Yen dynamics as the Bank of Japan (BoJ) meets tomorrow. CAUTION FX TRADERS: GROWING RATE DIVERGENCE AHEAD Renewed divergence in monetary policies was evident from rate announcements by the major central banks. After more than a year of moving in tandem, central banks’ stances are shifting. The Fed is signaling rate cuts sooner. Meanwhile, ECB and BoE insist that rates need to stay higher for longer to fight sticky inflation. As interest rates in the US remain elevated relative to other major economies, the Fed has ample room to slash sooner. Inflation in the EU has contracted at a rapid clip relative to the US. However, economists expect EU inflation to rebound in the near term with fading base-level effects. Inflation in the US is expected to average 2.4% in 2024 compared to 2.7% in the EU and 3.75% in the UK, as per respective central banks. The US economy is strong with robust economic growth, resilient consumer spending, and solid PMI numbers. FED HAS PIVOTED TO DOVISHNESS The FOMC opted to keep rates steady with their statement pointing to the end of the rate hiking cycle. Most notable was the Fed’s updated economic projections & dot plot. It showed faster-declining inflation, slower GDP growth, and faster rate cuts. The Fed’s dot plot of rate expectations guided towards three 25 basis point (bps) cuts next year. Markets were expecting five rate cuts before the Fed announcement. Following the Fed meeting, markets now anticipate six rate cuts. BOE REMAINS HAWKISH The Bank of England opted to keep rates steady with a hawkish pause. The BoE statement indicates further rate hikes if inflationary pressures remain persistent. “The full effect of higher interest rates has yet to come through, posing ongoing challenges to households, businesses and governments," ~ BoE Market Policy Committee ECB JOINED THE BOE WITH A HAWKISH PAUSE ECB decided to keep rates steady with a hawkish pause. ECB President Christine Lagarde asserted that rate cuts were not being discussed yet and rates may even need to go higher to bring inflation under control. ECB noted that tighter financing conditions were leading to demand contraction, which weighed on pushing down inflation. Economic growth is expected to remain subdued. ECB estimates gradual ramp up in growth from 0.6% for 2023 to 0.8% for 2024, and to 1.5% for both 2025 and 2026. BOJ DECISION IS MOST UNCERTAIN WITH A THORNY JOB ON HAND The Bank of Japan (BoJ) is set to announce their rate decision on December 19th. It has maintained ultra-low interest rates all year while others hiked aggressively. Recent statements by BoJ Governor Ueda signal a pivot away from the ultra-low policy. "Managing monetary policy will become even more challenging from the end of the year and heading into next year." ~ Kazuo Ueda, Governor, Bank of Japan on 6/Dec Governor Ueda’s statements have led to market expectation of upcoming monetary tightening in Japan. JPY has strengthened 6% relative to the USD over the last month. Despite Ueda’s statements, BoJ pivot remains uncertain. Inflation in Japan is running hot and above US inflation. Moreover, wage growth and economic growth in Japan have been moderate despite high inflation creating stagflation risks. Consumer spending and wage growth remain muted despite record profits. Feeble Yen is boosting Japanese exporter profits. Nevertheless, the BoJ has been setting up a change in monetary policy. Earlier this year, it raised the cap on JGB yields and eventually changed the cap from a rigid limit to a loose reference. Some economists consider this a prelude to eventual scrapping of the YCC altogether. CENTRAL BANK DECISIONS HAVE CREATED DEEP RIPPLES ACROSS MARKETS Commodity markets reacted positively to the rate announcements. The Fed’s signal of upcoming easing opened the door for commodity demand to rise. Precious metals are likely to benefit from asset rotation out of US treasuries while Crude will benefit from higher economic activity from lower interest rates. Equities surged on Fed pivot. Small-caps and Mid-caps outperformed the Nasdaq-100 and S&P 500. Both SPX and NDX also extended gains. Bond yields fell sharply following the FOMC decision. Yields fell to their lowest level in four months. One-year bond yields performed the best while thirty-year performed the worst. LEVERAGED FUNDS ARE BULLISH EURO, STERLING, AND BEARISH YEN Asset managers and leveraged funds are net long on Euro FX futures. Asset managers and leveraged funds are net short on Yen and Pound futures but have reduced net short positioning over the past few weeks. HYPOTHETICAL TRADE SETUP The Fed’s dovish stance plus the hawkishness of European central banks will result in dollar weakness relative to Euro and Sterling. Upside risks to the dollar persist with stronger economic data and inflation resurgence forcing the Fed to reassess its stance. To gain from the weakening of the dollar against the euro and sterling, investors can buy into CME Micro FX Euro and GBP futures. A long sterling provides higher upside than long euro given higher inflation in the UK. Policy uncertainty in Japan is unlikely to usher in a pivot in the short-term. The JPY is likely to weaken against the dollar despite DXY weakness. To harness gains from weakening Yen, investors can establish a long position in CME Micro JPY Futures. Hypothetical Trade 1 & 2: Long EUR and GBP Entry: 1.0960 Target: 1.1150 Stop Loss: 1.0860 Profit at Target: USD 238 (= 1.1500 - 1.0960 = 190 pips = 190 x 1.25) Loss at Stop: USD 125 (= 1.0860 – 1.0960 = -100 pips = -100 x 1.25) Reward-Risk: 1.9x Entry: 1.2720 Target: 1.3120 Stop Loss: 1.2490 Profit at Target: USD 250 (= 1.3120 - 1.2720 = 400 pips = 400 x 0.625) Loss at Stop: USD 144 (= 1.2490 – 1.2720 = -230 pips = 230 x 0.625) Reward-Risk: 1.75x Hypothetical Trade 2: Short JPY Entry: 139.57 Target: 146.28 Stop Loss: 137.97 Profit at Target: JPY 67,100 (= 146.28 - 139.57 = 671 pips = 671 x 100) Loss at Stop: JPY 16,000 (=137.97 – 139.57 = 160 pips = 160 x 100) Reward-Risk: 4.2x MARKET DATA CME Real-time Market Data helps identify trading set-ups and express market views better. 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 This case study is for educational purposes only and does not constitute investment recommendations or advice. Nor are they used to promote any specific products, or services. Trading or investment ideas cited here are for illustration only, as an integral part of a case study to demonstrate the fundamental concepts in risk management or trading under the market scenarios being discussed. Please read the FULL DISCLAIMER the link to which is provided in our profile description.
CME_MINI:M6E1!
by mintdotfinance
Comparative Analysis of US and UK EconomiesDear Traders, I would like to offer my perspective on the major economic drivers for USD and GBP. Like the famous investor John Bogle says, "The market may be crazy, but it's not entirely insane. Fundamentals matter." This analysis compares key economic indicators of both countries in order to explore potential impacts on the GBP/USD currency pair in the long term. Examining GDP, growth rates, interest rates, inflation, jobless rates, government finances, external balances, and population dynamics displayed above, I intend to provide insights into the relative strengths and challenges of each economy. ECONOMIC PERSPECTIVE USD exhibits a larger GDP and higher growth rate , implying a more robust economy. They both have similar interest rates, but USD's higher growth puts it in a position of advantage. INFLATION, JOBLESS RATE, AND GOV. FINANCES GBP faces higher inflation, which affects it purchasing power against USD. Both nations show low jobless rates; the UK maintains a lower debt-to-GDP ratio (good for GBP). EXTERNAL BALANCES AND POPULATION DYNAMICS Both countries have current account deficits, but the UK's larger deficit may affect its currency negatively. USD represents a significantly larger population, influencing economic scale. MY TAKE Understanding the economic dynamics of USD and GBP is crucial for interpreting potential influences on the GBP/USD pair in the long term. From the economic data and analysis presented above, it is evident that USD shows economic strength , while GBP shows stability . In the light of this, I expect a stronger USD (DXY) in the coming weeks or months. The currency pair may see fluctuations as institutions assess these strengths and challenges, but my bias on the GBPUSD pair is BEARISH. A break below 1.2451 will likely send the pair to 1.2207 price region or even lower.
Short
by Samuel124
3
US CPI Data: Dollar Down As Rate Uncertainty Sustains VolatilityAs the clock ticks towards 13:30 GMT, financial markets are bracing for the release of the Consumer Price Index (CPI) data for November, a pivotal metric that provides a snapshot of the current state of the United States economy. The CPI measures the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services, making it a crucial indicator for gauging inflationary pressures. Against the backdrop of the recent dichotomy in US inflation trends, where rates have reduced from alarming figures in 2021 to a current 3.2%, the forthcoming CPI figures are anticipated to shed light on the continued trajectory. This reduction in inflation, although positive for economic stability, has occurred alongside a somewhat unconventional stance by the Federal Reserve. Traditionally, central banks opt to raise interest rates to curb spending and counteract inflation. However, the US Federal Reserve has maintained a steadfast position in increasing interest rates for over a year, even as inflation trends abate. This seemingly contradictory approach has prompted speculation within financial circles, with analysts debating the motives behind the prolonged interest rate hikes. The anticipated November CPI data is expected to show a 3.1% year-on-year increase, a slight dip from the 3.2% recorded in October. Additionally, annual Core CPI inflation is forecasted to remain steady at 4% for November. These figures will be closely scrutinised to discern any shifts or continuations in the recent trends. Interestingly, the foreign exchange market has already signalled early sentiments ahead of the CPI release. The British pound exhibited strength against the US dollar in the early hours of the London session, reaching a value of 1.2580 at FXOpen. This movement is an intriguing indicator of market sentiment and may reflect expectations or reactions to the anticipated CPI figures. As the financial community awaits the unveiling of the November CPI data, the juxtaposition of decreasing inflation and persistent interest rate hikes by the Federal Reserve adds an element of complexity to the economic narrative. The numbers released will not only impact currency markets but will also influence broader economic outlooks and potentially shape future policy decisions. This article represents the opinion of the Companies operating under the FXOpen brand only. It is not to be construed as an offer, solicitation, or recommendation with respect to products and services provided by the Companies operating under the FXOpen brand, nor is it to be considered financial advice.
by FXOpen
1
Trading this week's fundamental events The market's attention will be fixed on the Federal Reserve's final policy meeting of 2023 scheduled for this Wednesday, with the expectation that the US will maintain interest rates at a 22-year high. Investors will have an opportunity to scrutinize the Fed's statement and Chair Jerome Powell's press conference for any indications of potential rate cuts in 2024 (or lack thereof). One day prior to the Feds decision, the US is also poised to unveil essential inflation data. Forecasts suggest a marginal uptick of 0.1% in November consumer prices. Turning attention to Europe, traders will focus on rate decisions from the European Central Bank (ECB) and the Bank of England (BoE), both occurring on Thursday. The BoE is predicted to maintain borrowing costs at a 15-year high while reiterating the necessity for elevated rates. Any commentary from the bank deviating from this outlook could potentially cause ripples in the market. Eurozone inflation dropped to 2.4% last month, down from over 10% a year earlier, following ten consecutive rate hikes. This decline brings the ECB's 2% inflation target into view and makes a further rate increase unlikely. Goldman Sachs has forecasted that the European Central Bank's meeting in April will mark the initiation of its first rate cut, followed by a 25 basis points cut at each subsequent meeting throughout the year.
by BlackBull_Markets
$CNINTR - Interest Rates Cut- The People’s Bank of China on Tuesday trimmed its one-year loan prime rate (LPR) by 10 basis points from 3.65% to 3.55%, and reduced the five-year rate by the same margin to 4.2%. The cuts follow reductions in other interest rates last week. The LPR sets the interest that commercial banks charge their best clients, and serves as the benchmark for household and corporate lending. The one-year rate affects most new and outstanding loans, while the five-year rate influences the pricing of longer term loans, such as mortgages. This is the first time the PBOC has cut both LPR rates since August 2022, when renewed Covid lockdowns and a deepening property downturn were pummeling the economy.
ECONOMICS:CNINTR
by Mr_J__fx
BOND YIELDS - Expect to See Minimum 20% Interest Rates...Have you ever encountered the notion that less can be more? Well, that's precisely why it has taken me considerable time to present this update concept regarding Bond Yields. This analysis carries profound implications for every global market. What we're witnessing here holds the potential to trigger the most significant economic downturn in our lifetime—the impending prospect of the Greatest Depression. The issue at hand is human complacency. In today's world, there's a pervasive disregard for the past, dismissing it as old news. However, nothing could be further from the truth. Our society seems destined to repeat the same errors due to our complacency, particularly in an era dominated by instant gratification. We persist in borrowing from the future at an unprecedented rate, marking the pinnacle of leverage and record debt compared to household income, which is at historically low levels. I take my time delivering this information to ensure the utmost quality in my analysis, even if it means minimizing my output. Stay tuned for more insights to come.
TVC:TNX
by AriasWave
2
IWN Russel Index ETF ShortIWN on the reliable daily chart has been trending down for two in a descending channel as shown on the chart with upper and lower trendlines drawn with the tool. The Stochastic RSI oscillates in the interval between oversold and over bought and presently is well overbought at nearly 100. While the RSI may double top like it did in July, it is at least right now at the first top. The zero lag MACD is confirmatory with a K/D line cross well above the histogram. I will play this by buying a put option at a strike of $ 150 for October 24 If Biden tries to prompt up the market to gain a re- election and is successful, this will get stopped out. If interest rates are not pulled back by the fed soon, small caps will continue to get crushed. On the other hand when rates are pulled back, they will be nimble and recover quicker than the large caps and it will get stopped out. I think the fed will pullback rates to help Biden out, although the fed is not partisan ? Oil prices in their downward trend lend support to a slow fall off in the inflation rate. What goes for IWN also goes for DIA.
AMEX:IWNShort
by AwesomeAvani