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Macro

USD/CAD Outlook (14 March 2022)Overall, USD/CAD is ranging across. Recently, USD/CAD broke below the key level of 1.28. The Canadian employment data released last Friday indicated a strong rebound in the jobs market from the previous month’s loss of jobs. - Employment Change (Actual: 336.6K, Forecast: 132.0K, Previous: -200.1K) - Unemployment Rate (Actual: 5.5%, Forecast: 6.2%, Previous: 6.5%) USD/CAD’s next support zone is at 1.26100 and the next resistance zone is at 1.29200. Look for short-term selling opportunities of USD/CAD.
Short
by JinDao_Tai
Yellen says the US won't have a recession - we disagree'US TREASURY SECRETARY YELLEN: I DO NOT EXPECT A RECESSION TO OCCUR IN THE US.' Janet Yellen said this yesterday. The market disagrees. Right now, we're seeing the 2s10s curve flatten. When this happens, the market is expecting long term rates to fall relative to short term rates, or in other words, they're expecting bad times ahead. Traditionally, the 2s10s curve has been a fantastic predictor of recessions, purely because the expectations of the future are exactly what is being displayed. The horizontal red line is where the curve becomes inverted - which means short term rates are HIGHER than long term rates. The indicator in the bottom panel shows recessions, identified by the red dots. You can look back historically to when the curve has inverted to see that it certainly does predict an economic downturn. If we conceptualise this to 'reality', ask yourself what a central bank does in a time of stress... It lowers rates, right? So it would make sense for yields further along the curve to be relatively LOWER than short term rates if the market is expecting a period of stress in the near future.
TVC:US10Y
by FinkPro
6
How the Fed's Rate Hikes Affect the Market (or Not)In this post, I'll be demonstrating how the Fed's rate hikes affect the equity market (or how they don't), through historical examples and analyses of market psychology. This is an issue that has been going on for a while, and one that has caught the attention of all market participants. Yes, tapering and rate hikes aren’t necessarily good news, but I don’t think that 1) they necessarily indicate the beginning of a bear market/recession, and 2) the Fed is as powerful and influential as we think they are. This is not financial advice. This is for educational purposes only. Introduction - There’s a myth, a misconception in the market that the Fed allegedly rescues falling markets with rate cuts and easing measures, and vice versa for when the market is overheated. - This myth began in 1987 during Black Monday, when Alan Greenspan’s Fed cut rates after the crash, creating an impression that the Fed was directly responding to the stock market. - This is when the (mis)belief that the Fed would put a floor under a a falling market stuck. - Nevertheless, if we analyze the data, it actually demonstrates that the Fed stood pat for most corrections, and cutting cycles typically arrive during bear markets, just as coincidence. Historical Cases - There are only two occasions in history where the Fed’s cutting cycles corresponded with market lowpoints. - The first is the aforementioned Black Monday of 1987, and even for this case. - If we take a look at the situation back then, it’s not so much that the Fed made international moves that contributed to history, but rather that the bear market started amid a global liquidity crisis. - With excess liquidity, the rates should have been flat, or down, but that wasn’t the case. - Thus, the Fed’s rate cuts were vital to unfreezing credit and ensuring banks and clearing houses would have access to liquidity they needed, while the market was under severe stress. - The second occasion was the rate cut in 1998, when stocks were reacting to the collapse of Long-Term Capital Management (LTCM). - There was fear in the market that this collapse would lead to a domino effect, ending in a banking meltdown. - Generally, when people fear a banking contagion, liquidity in interbank funding markets dry up. - The Fed’s action to cut rates during this time helped keep money moving, and ensured that banks met their regulatory obligations. Market Psychology - In order to understand the recent discussion revolving around the importance of the Fed’s actions, we need to understand human nature. - People love finding narrative threads and grand explanations because we’re biologically wired to make sense of the world that way. - They confuse correlation and causation, and zero in on evidence that supports their view and shuns whatever suggests otherwise. - But it’s important to remember that in most cases, a fact that everyone knows, tends to be closer to myth than reality, and even if it weren’t a myth, the fact that everyone knows it does not give us an edge in the market. Summary Market shocks are caused by surprises. News about a pandemic or cyber attack that catches investors off guard is much riskier than macro events that are predictable and can be anticipated. Given that the markets are efficient (which I believe they are), it's rational to assume that news about the Fed's rate hikes, and people reaction to it are already priced in. While short term volatility is definitely expected, I believe that the likelihood of this event becoming a trigger for a multi-year recession is extremely unlikely. If you like this educational post, please make sure to like, and follow for more quality content! If you have any questions or comments, feel free to comment below! :)
TVC:IXICEducation
by Michael_Wang_Official
61
EUR/JPY Outlook (11 March 2022)Overall, EUR/JPY is trending downwards. Recently, EUR/JPY bounced off the support zone of 127.500. The European Central Bank (ECB) held its monetary policy unchanged during its meeting yesterday. The central bank sent out a hawkish tone when it announced that it will speed up its QE tapering if the eurozone economic data warrants it to do so, potentially ending bond-buying during the third quarter of 2022. EUR/JPY’s next support zone is at 127.500 and the next resistance zone is at 128.500. Look for short-term buying opportunities of EUR/JPY.
Long
by JinDao_Tai
1
EUR/USD Outlook (11 March 2022)Overall, EUR/USD is trending downwards. Recently, EUR/USD traded into the support zone of 1.10000. The European Central Bank (ECB) held its monetary policy unchanged during its meeting yesterday. The central bank sent out a hawkish tone when it announced that it will speed up its QE tapering if the eurozone economic data warrants it to do so, potentially ending bond-buying during the third quarter of 2022. Currently, EUR/USD is testing the support zone of 1.10000 and the next resistance zone is at 1.12000. Look for short-term buying opportunities of EUR/USD if it bounces off the support zone of 1.10000.
Long
by JinDao_Tai
1