fomc

Over the past 24 hours, total crypto market capitalisation rose by 2.1% to $2.24 trillion, recovering to the levels at the start of the week. Yesterday, the figure was close to the $2.0 trillion mark, but demand for risk assets recovery supported cryptos, providing around a 12% rise from the bottom to peak in the following four hours. On balance, the cryptocurrency fear and greed index reclaimed another point, rising to 29. The bulls seem to be putting in the necessary minimum effort to keep the positive picture on the charts of the major cryptocurrencies. But there isn’t much more to do now. Bitcoin is up 1.2% in the last 24 hours, trading at $48.7K. The bulls managed to push BTCUSD into the area above the 200-day moving average but are not getting away from it. Etherereum is adding 3.5%, clinging to the $4K. The strong market reaction after the FOMC pushed ETHUSD above this round level, but we saw some selling pressure in the morning. Short-term traders should closely watch whether the former support has turned into resistance. The pair of major cryptocurrencies appear to have been supported by a general increase in risk appetite in the markets following the FOMC announcements. However, investors should keep in mind that this upward move in traditional financial markets was more of a “buy the rumours, sell the facts” style reaction. Fundamentally, news about the faster QE tapering and greater willingness to raise rates has already been priced in during previous weeks. But at the same time, long-term investors should not lose sight of the natural tightening of financial conditions because of these moves, which will slowly but persistently reduce demand for risky assets. The main risk for the crypto market is that we have seen a monetary regime switch in the last couple of months, which promises to take some of the demand for crypto away..

The Fed begins to get up steam and has finally turned its hawkish mode on. Was it something the gold bulls wanted to hear?The Fed’s full capitulation and unconditional surrender of the doves! Yesterday (December 15, 2021), the FOMC issued) the newest statement on monetary policy in which it erased any description of inflation as “transitory.” It took them only half a year to figure it out, but better late than never. Additionally, the Fed practically rejected its new monetary framework called “Flexible Average Inflation Targeting”, which allowed inflation to run hot for some time. In November, we could read:The Committee seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run. With inflation having run persistently below this longer-run goal, the Committee will aim to achieve inflation moderately above 2 percent for some time so that inflation averages 2 percent over time and longer‑term inflation expectations remain well anchored at 2 percent. The Committee expects to maintain an accommodative stance of monetary policy until these outcomes are achieved. The Committee decided to keep the target range for the federal funds rate at 0 to 1/4 percent and expects it will be appropriate to maintain this target range until labor market conditions have reached levels consistent with the Committee's assessments of maximum employment and inflation has risen to 2 percent and is on track to moderately exceed 2 percent for some time.In the last statement, however, this mammoth paragraph was substantially altered.The Committee seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run. In support of these goals, the Committee decided to keep the target range for the federal funds rate at 0 to 1/4 percent. With inflation having exceeded 2 percent for some time, the Committee expects it will be appropriate to maintain this target range until labor market conditions have reached levels consistent with the Committee's assessments of maximum employment.What is missing is the reference to the Fed’s tolerance of inflation above its target. This means that the US central bank has turned the hawkish mode on. Indeed, in line with expectations, the Fed has accelerated the pace of tapering of its quantitative easing. The Committee announced a doubling of the monthly reduction in the purchased assets from $10 billion for Treasuries and $5 billion for MBS to, respectively, $20 and $10 billion. It means that the Fed will end its asset purchase program by March rather than by mid-year.In light of inflation developments and the further improvement in the labor market, the Committee decided to reduce the monthly pace of its net asset purchases by $20 billion for Treasury securities and $10 billion for agency mortgage-backed securities.Dot-Plot and GoldThese are not all December monetary fireworks we got, though. The statement was accompanied by fresh economic projections conducted by FOMC members. How do they look at the economy right now? As the table below shows, central bankers expect faster economic growth and a lower unemployment rate next year compared to the September projections. This is not something the gold bulls would like to hear.More importantly, however, FOMC participants see inflation as more persistent at the moment because they expect 2.6% PCE inflation at the end of 2022 instead of 2.2%. In other words: inflation is currently believed to reach this level only a year from now! Interestingly (at least for economic nerds like me), Committee members expect that core PCE inflation will be higher than the overall index in 2022, and will amount to 2.7%. It is an indication that the Fed considers inflation more broad-based now than just driven by rising energy prices.Last but definitely not least, more interest rate hikes are coming. According to the latest dot plot, FOMC members see three increases in the federal funds rate next year as appropriate. That’s a huge hawkish turn compared to September, when they perceived only one interest rate hike as desired. Central bankers expect another three hikes in 2023 (the same as in September) and additional two in 2024 (one less than in September). Hence, the whole forecasted path of the interest rates becomes steeper and the Fed is now anticipating eight 25-basis point rate hikes from 2022 to 2024, one more than they saw in September.Implications for GoldGiven the hawkish FOMC statement and economic projections, gold is doomed, right? Well, in theory, a more aggressive Fed’s tightening cycle should boost bond yields and strengthen the greenback, pushing gold prices down. However, what does gold say to the God of Bears? Not today!Indeed, the chart below shows that theory and practice are not the same. Initially, the price of gold declined from around $1,765 to around $1,755, but it quickly rebounded and even increased to $1,780.So, what happened and what does it imply for gold’s future? Well, gold didn’t panic, as hawkish statements and dot-plot were widely anticipated. They were probably a little more hawkish than expected, but, on the other hand, Powell’s press conference was deemed as more dovish than predicted. Since Powell’s earlier transparency and dovish heart rescued gold from falling down, gold bulls may breathe a sigh of relief.However, we believe that this wasn’t the Fed’s last word. Inflation is likely to increase further next year; so, the US central bank, which is terribly behind the curve, could be forced to tighten its monetary policy even more. Thus, although my worries about this FOMC meeting turned out to be unnecessary, they could materialize later.If you enjoyed today’s free gold report, we invite you to check out our premium services. We provide much more detailed fundamental analyses of the gold market in our monthly Gold Market Overview reports and we provide daily Gold & Silver Trading Alerts with clear buy and sell signals. In order to enjoy our gold analyses in their full scope, we invite you to subscribe today. If you’re not ready to subscribe yet though and are not on our gold mailing list yet, we urge you to sign up. It’s free and if you don’t like it, you can easily unsubscribe. Sign up today!Arkadiusz Sieron, PhDSunshine Profits: Effective Investment through Diligence & Care

EURUSD tests key supply zone The euro jumped after the ECB announced it will cut its bond-buying program. The pair’s latest retreat seems to have been an accumulation phase for the bulls. Strong buying interest lies in the demand zone around 1.1230. A break above 1.1320 has put buyers back in the control room. 1.1380 from a previously botched reversal attempt is a major hurdle ahead. Its breach may trigger an extended rally towards 1.1460. The RSI’s overextended situation has caused a brief pullback with 1.1270 as a key support. GBPUSD attempts bullish reversal Sterling surged after the Bank of England raised its interest rates to 0.25%. The pound has been treading water above 1.3170. The sellers’ struggle to push lower and the buyers’ attempts above 1.3260 suggest that the mood could be improving. A break above 1.3300 has prompted the bears to cover, attracting momentum traders in the process with 1.3440 as the next target. That said, an overbought RSI may cause a temporary pullback as intraday traders take profit. 1.3260 has become the closest support. NZDUSD breaks resistance The New Zealand dollar rallied as risk sentiment made its return post-FOMC. A bullish RSI divergence indicates a deceleration in the sell-off momentum. The long candle wick from 0.6700 suggests solid buying interest. Then a break above 0.6800 has put the last sellers under pressure. An overbought RSI has limited the initial surge. A pullback may test 0.6755, previously a resistance that has turned into a support. 0.6860 near the 30-day moving average is the next hurdle, and its breach could trigger a bullish reversal.

With the USD Index suffering a ‘sell the news’ event on Dec. 15, the FOMC’s hawkish Summary of Economic Projections wasn’t enough to uplift investors’ optimism. However, while the dollar day traders performed their usual disappearing act, the greenback’s fundamentals were bolstered by the FOMC’s median projection of three rate hikes in 2022. What’s more, while the USD Index initially dipped below 96 and fell below its rising resistance line (which is now support) on Dec. 16, buyers stepped in, and the USD Index bounced. For context, a short-term correction is possible. However, the important point is that the USD Index is likely on a medium-term path to ~98. And with gold, silver and mining stocks often moving inversely to the U.S. dollar, their optimism may disappear over the next few months. Please see below: For context, I warned that a consolidation was likely overdue by highlighting the USD Index’s overbought RSI (Relative Strength Index) readings with the red arrows above. Conversely, the blue vertical dashed lines above demonstrate how the USD Index often bottoms near the end of each month, and rallies often follow. And while the current consolidation may need some more time to run its course, higher highs should materialize over the medium term. To explain, after the USD Index recorded sharp rallies in June and July, consolidation phases unfolded before the uptrends continued. And while the secondary uprisings occurred at more moderate paces, the USD Index still managed to make new highs. As a result, ~98 should materialize during the winter months. Furthermore, if the forecast proves prescient, the USD Index’s strength will likely usher gold back to its previous 2021 lows. Adding to our confidence (don’t get me wrong, there are no certainties in any market; it’s just that the bullish narrative for the USDX is even more bullish in my view), the USD Index often sizzles in the summer sun and major USDX rallies often start during the middle of the year. Summertime spikes have been mainstays on the USD Index’s historical record and in 2004, 2005, 2008, 2011, 2014 and 2018 a retest of the lows (or close to them) occurred before the USD Index began its upward flights (which is exactly what’s happened this time around). Furthermore, profound rallies (marked by the red vertical dashed lines below) followed in 2008, 2011 and 2014. With the current situation mirroring the latter, a small consolidation on the long-term chart is exactly what occurred before the USD Index surged in 2014. Likewise, the USD Index recently bottomed near its 50-week moving average; an identical development occurred in 2014. More importantly, though, with bottoms in the precious metals market often occurring when gold trades in unison with the USD Index (after ceasing to respond to the USD’s rallies with declines), we’re still far away from that milestone in terms of both price and duration. Again, the recent move higher in the USD Index doesn’t necessarily apply in the case of the above rule, as it was not the strength of the USD but the weakness in the euro that has driven it. Likewise, with the USD Index now approaching its long-term rising support line (which is now resistance), a rally above the upward sloping black line above would invalidate the prior breakdown and support a move back above 100. Also, please note that the recent medium-term rally has been calmer than any major upswing witnessed over the last 20 years, where the USD Index’s RSI has hit 70. I marked the recent rally in the RSI with an orange rectangle, and I did the same with the second-least and third-least volatile of the medium-term upswings. The sharp rallies in 2008 and 2014 were of much larger magnitudes. And in those historical analogies, the USD Index continued its surge for some time without suffering any material corrections. As a result, the short-term outlook is more of a coin flip. However, the medium-term outlook remains profoundly bullish, and gold, silver, and mining stocks may resent the USD Index’s forthcoming uprising. Just as the USD Index took a breather before its massive rally in 2014, it seems that we saw the same recently. This means that predicting higher gold prices (or the ones of silver) here is likely not a good idea. Continuing the theme, the eye in the sky doesn’t lie. And with the USDX’s long-term breakout clearly visible, the wind remains at the dollar’s back. Furthermore, dollar bears often miss the forest through the trees: with the USD Index’s long-term breakout gaining steam, the implications of the chart below are profound. And while very few analysts cite the material impact (when was the last time you saw the USDX chart starting in 1985 anywhere else?), the USD Index has been sending bullish signals for years. Please see below: The bottom line? With my initial 2021 target of 94.5 already hit, the ~98 target is likely to be reached over the medium term (and perhaps quite soon), mind, though: we’re not bullish on the greenback because of the U.S.’ absolute outperformance. It’s because the region is fundamentally outperforming the Eurozone, the EUR/USD accounts for nearly 58% of the movement of the USD Index, and the relative performance is what really matters. In conclusion, gold, silver and mining stocks pulled rabbits out of their hats on Dec. 16. However, as 2021 has demonstrated, their daily tricks often lose their allure fairly quickly. Moreover, while it’s uncommon for magicians to reveal their secrets, the precious metals tip their hands time and time again. As a result, the USD Index’s daily weakness was likely a corrective downswing, while the precious metals daily strength was likely a corrective upswing. And with a reversal of fortunes likely to occur over the medium term, gold, silver and mining stocks may lose their magic touch. Thank you for reading our free analysis today. Please note that the above is just a small fraction of today’s all-encompassing Gold & Silver Trading Alert. The latter includes multiple premium details such as the targets for gold and mining stocks that could be reached in the next few weeks. If you’d like to read those premium details, we have good news for you. As soon as you sign up for our free gold newsletter, you’ll get a free 7-day no-obligation trial access to our premium Gold & Silver Trading Alerts. It’s really free – sign up today. Przemyslaw Radomski, CFAFounder, Editor-in-chiefSunshine Profits: Effective Investment through Diligence & Care * * * * * All essays, research and information found above represent analyses and opinions of Przemyslaw Radomski, CFA and Sunshine Profits' associates only. As such, it may prove wrong and be subject to change without notice. Opinions and analyses are based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are deemed to be accurate, Przemyslaw Radomski, CFA and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Radomski is not a Registered Securities Advisor. By reading Przemyslaw Radomski's, CFA reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Przemyslaw Radomski, CFA, Sunshine Profits' employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

Two weeks ago, we posted the following chart in our weekly silver chart book release, after representing a strong case for a bullish silver play: Silver in US-Dollar, Weekly chart from December 3rd, 2021: Silver in US-Dollar, weekly chart as of December 3rd, 2021. We wrote at the time: “The weekly chart above illustrates that as much as we have entered the “shopping zone” for silver. There is a probability that we might see a quick spike down as we have seen at the end of September.” Weekly chart, Silver in US-Dollar, creating silver wealth without fear: Silver in US-Dollar, weekly chart as of December 18th, 2021. We were spot on anticipating how the market would unfold in the future. Furthermore, we followed the principles of consistent analysis of our surroundings, the market, and ourselves. We advanced confidently in the direction of likely probabilities and tried to keep doubt to a minimum. Hourly chart, Silver in US-Dollar, well positioned: Silver in US-Dollar, hourly chart as of December 18th, 2021. This sequence allowed for a low-risk entry on December 15th, 2021 right at the lows. The entry-level of US$21.47 already allowed for a 2.75% partial profit-taking on half of our position size at US$22.06. As always, we use our low-risk quad exit strategy to reduce risk and, as such, fear of losing profits. Now we are well-positioned with the remainder of the position, and a stop raised to break even entry levels. Silver in US-Dollar, monthly chart, worth the effort: Silver in US-Dollar, monthly chart as of December 18th, 2021. The monthly chart above shows our planned following two targets for this trade. With an entry at US$21.47 and an initial tight stop at US$21.22, our risk/reward-ratio towards our first profit-taking target was about 1:2.37. Now for the next target at US$27.35, it is 1:23, and for the final target at US$47.20, it is 1:103. In other words, with extensive planning and stacking of odds, we were able to identify a trade that had about a percent of risk at entry time. In addition, we quickly mitigated risk by early partial profit-taking. And yet, we still have a profit potential of the final 25% of position size, possibly maturing to a 120% profit. Taking only highly likely and highly profitable trades like these is also confidence-building and a fear eliminator. Creating silver wealth without fear: Michael Jordan’s achievement of playing in the present moment only is nothing short of the accomplishment of monks and so-called enlightened beings. It takes a long stretch of a career to achieve such a skill set. It illustrates that trading is more than just pushing a button or extracting a mathematical edge system. Trading is psychology and requires many skill sets combined to produce the necessary consistency to overcome the dilemma that you are only as good as your last action. Luck alone will get you nowhere in this game. It is not our intention to discourage you. Instead, it is quite the opposite. Often trading can be overwhelming and at times one can be down thinking: „Why can’t I do this, why did I betray my own rules again?” Trading is hard, it takes screen time and skill. Do not let fear and doubt dictate your actions. You can do this! Feel free to join us in our free Telegram channel for daily real time data and a great community. If you like to get regular updates on our gold model, precious metals and cryptocurrencies you can also subscribe to our free newsletter. This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision. The views, thoughts and opinions expressed here are the author’s alone. They do not necessarily reflect or represent the views and opinions of Midas Touch Consulting. By Korbinian Koller|December 19th, 2021|Tags: bottoming pattern, Crack-Up-Boom, Gold, Gold/Silver-Ratio, inflation, low risk, Silver, silver bull, Silver Chartbook, silversqueeze, technical analysis, The bottom is in, time frame, trading principles|0 Comments About the Author: Korbinian Koller Outstanding abstract reasoning ability and ability to think creatively and originally has led over the last 25 years to extract new principles and a unique way to view the markets resulting in a multitude of various time frame systems, generating high hit rates and outstanding risk reward ratios. Over 20 years of coaching traders with heart & passion, assessing complex situations, troubleshoot and solve problems principle based has led to experience and a professional history of success. Skilled natural teacher and exceptional developer of talent. Avid learner guided by a plan with ability to suppress ego and empower students to share ideas and best practices and to apply principle-based technical/conceptual knowledge to maximize efficiency. 25+ year execution experience (50.000+ trades executed) Trading multiple personal accounts (long and short-and combinations of the two). Amazing market feel complementing mechanical systems discipline for precise and extreme low risk entries while objectively seeing the whole picture. Ability to notice and separate emotional responses from the decision-making process and to stand outside oneself and one’s concerns about images in order to function in terms of larger objectives. Developed exit strategies that compensate both for maximizing profits and psychological ease to allow for continuous flow throughout the whole trading day. In depth knowledge of money management strategies with the experience of multiple 6 sigma events in various markets (futures, stocks, commodities, currencies, bonds) embedded in extreme low risk statistical probability models with smooth equity curves and extensive risk management as well as extensive disaster risk allow for my natural capacity for risk-taking.

Finally, Powell admitted higher inflation risks and gold jumped above $1,800. Before anyone noticed, however, it plummeted below the key level again. Who are you, Mr. Powell: a reptilian or a human? A dove or a hawk? Since we all know the answer to the first question, let’s focus on the second one. Markets decided that Powell’s last press conference was rather dovish, but a careful reading doesn’t support this view. The main dovish signal was Powell’s emphasis that quantitative easing tapering and interest rate hikes are separate issues, as the tightening cycle criteria are stricter. So, the first rate hike may not come immediately after the end of tapering, which is scheduled for mid-March. Even if they are separate, we shouldn’t expect a long break between the end of quantitative easing and the first rate hike. This gap will definitely be shorter than in 2014-2015. In the last tightening cycle, the Fed ended asset purchases in October 2014, while the first increase in the federal funds rate occurred in December 2015. Powell himself, however, pointed out that the economy is much stronger, while inflation is much higher, so a long separation before interest rate hikes is not likely: I don't foresee that there would be that kind of very extended wait at this time. The economy is so much stronger. I was here at the Fed when we lifted it off last time and the economy is so much stronger now, so much closer to full employment. Inflation is running well above target and growth as well above potential. There wouldn't be the need for that kind of long delay (…) The last cycle that was quite a long separation before interest rates, I don't think that's at all likely in this cycle. We're in a very, very different place with high inflation, strong growth, a really strong economy (…) So this is a strong economy, one in which it's appropriate for interest rate hikes. In fact, this delay may be very short. On Friday, Fed Governor Chris Waller said that the interest rate increase will likely be warranted “shortly after” the end of asset purchases, possibly even at the FOMC meeting in March 2022. Another hawkish message sent by Powell was his acknowledgment of stronger inflation risks, i.e., that inflation may turn out to be more lasting than expected now: There’s a real risk now, we believe, I believe, that inflation may be more persistent and that may be putting inflation expectations under pressure. And that the risk of higher inflation becoming entrenched has increased, it’s certainly increased. I don’t think it’s high at this moment, but I think it’s increased. And I think that’s part of the reason behind our move today, is to put ourselves in a position to be able to deal with that risk. Thus, the Fed has become more concerned about high inflation and has timidly started reacting to it. The acceleration in the pace of tapering was, except for the more hawkish rhetoric, the first step – but not the last one.   Implications for Gold The yellow metal responded surprisingly well to the last FOMC meeting, at which the Fed announced a more aggressive pace of tapering and rate hikes next year. As the chart below shows, gold rose almost $40, or more than 2%, from Wednesday to Friday last week, jumping again above the key level of $1,800. Perhaps investors expected even more forceful actions. After all, despite all the hawkish reaction, the Fed remains behind the curve and shows no hurry to become really proactive. Such a passive attitude is really risky, as history teaches us that high inflation doesn’t just go away on its own, but its stabilization requires a decisive tightening of monetary policy. The longer the Fed waits, the more severe reaction would be needed, which increases the odds of putting the economy into recession. All this seems bullish for gold prices. However, gold was unable to retain its position above $1,800 and declined on Monday (December 20, 2021), so gold bulls can only hope that the yellow metal will the find strength to rally next year. It’s possible if inflation wreaks more havoc in 2022, but a hawkish Fed’s rhetoric remains an important headwind for the gold market. If you enjoyed today’s free gold report, we invite you to check out our premium services. We provide much more detailed fundamental analyses of the gold market in our monthly Gold Market Overview reports and we provide daily Gold & Silver Trading Alerts with clear buy and sell signals. In order to enjoy our gold analyses in their full scope, we invite you to subscribe today. If you’re not ready to subscribe yet though and are not on our gold mailing list yet, we urge you to sign up. It’s free and if you don’t like it, you can easily unsubscribe. Sign up today! Arkadiusz Sieron, PhDSunshine Profits: Effective Investment through Diligence & Care

The start of 2021 wasn’t successful for gold: after a few days of rally, the yellow metal entered a bearish trend. 2022 looks uncomfortably similar. So far, so good – the first three days of 2022 didn’t bring a new catastrophe. It’s probably just the calm before the storm, but the new year started well. Even the price of gold has risen! As the chart below shows, the yellow metal managed to jump above the key level of $1,800 at the very end of 2021, but it still maintains its position (at least as of early January 3, 2022). It reminds me of the beginning of 2021. Gold also started last year with a bang, only to plunge later. Its price increased 3.5% during the first week of the year, reaching $1,957, and then began its big downward move. As the chart below shows, the yellow metal plunged below $1,700 at the very end of March. Hence, although January is historically a good month for gold, it might be too early to celebrate, and investors should exercise caution. However, luckily for gold bulls, there is one significant difference between 2021 and 2022. Last year, there were Georgia runoffs and Democrats took over both the White House and the full Congress (the House and the Senate). That was when the blue wave plunged the yellow metal. This year should be politically calmer for the US (so, we don’t count the odds of Russia invading Ukraine and China attacking Taiwan), but the major threat to the gold market remains the same: a rise in the real interest rates. In January 2021, it was the blue wave that triggered a rebound in rates, but it may be induced by many more factors in the future. It could be the development of a new cure against coronavirus and the end of the pandemic, a more hawkish Fed, or a decline in inflation. The spread of the Omicron variant keeps worries alive. After all, as the chart below shows, the 7-day rolling average of COVID-19 cases in the United States has hit a record high of about 405,000. When we are completely back to normalcy, risk appetite and bond yields may increase. Another risk for gold is the stabilization of inflation and even subsequent disinflation. As the chart below shows, we got a one-off boost in the money supply, so inflation is likely to peak this year. Inflation expectations should ease then, and real interest rates may rebound in such a scenario. What gives me some comfort here is that the pace of money supply growth hasn’t returned to the pre-pandemic level yet, but it stays at an elevated level (although much below the peak). It should support high inflation this year. Moreover, the Fed is likely to remain behind the curve and the peak in inflation may only strengthen the dovish camp within the FOMC (although investors should remember that the composition of the voting members of the Committee has become more hawkish in 2022).   Implications for Gold What does it all imply for the gold market? Will the yellow metal resume its long-term bullish trend in 2022? Well, this is what a majority of investors that took part in Kitco News’ annual outlook survey believe. Of nearly 3,000 retail investors, 54% said they see gold prices above $2,000 by the end of the year. This is also in line with Goldman Sachs’ call for gold in 2022. Other forecasters see gold prices trading in a range between $1,800 and $2,000. It’s certainly a possible scenario. After all, much of the Fed’s tightening cycle has already been priced in; and the last time gold bottomed was in December 2015, just around the first hike in the federal funds rate after the Great Recession. However, I expect more volatile trading with strong downside potential. As a reminder, my educated guess is that gold may plunge at some point amid a rebound in bond yields, but will rise later as worries about the next economic crisis accumulate. Indeed, it’s quite funny, but I haven’t even finished this article, and the price of gold has already started to slide amid rising US dollar index and Treasury yields, in line with my warnings from the beginning of this text. This is how I became a prophet. Now I can see that as soon as you finish reading this article you will continue surfing the internet! If you enjoyed today’s free gold report, we invite you to check out our premium services. We provide much more detailed fundamental analyses of the gold market in our monthly Gold Market Overview reports and we provide daily Gold & Silver Trading Alerts with clear buy and sell signals. In order to enjoy our gold analyses in their full scope, we invite you to subscribe today. If you’re not ready to subscribe yet though and are not on our gold mailing list yet, we urge you to sign up. It’s free and if you don’t like it, you can easily unsubscribe. Sign up today! Arkadiusz Sieron, PhDSunshine Profits: Effective Investment through Diligence & Care

  2022 may be the year of Fed hawks. After tapering, they may hike rates and then start quantitative tightening. Will they tear gold apart? During the Battle of the Black Gate in the War of the Ring, Pippin : “The eagles are coming!”. It was a sign of hope for all those fighting with Sauron. Now, I could exclaim that hawks are coming, but that wouldn’t necessarily give hope to anyone fighting the bearish trends in the gold market. Yesterday (January 5, 2022), the FOMC published the minutes from its last meeting, held in mid-December. Although the publication doesn’t reveal any revolutions in US monetary policy, it strengthens the hawkish rhetoric of the Fed. Why? First, the FOMC participants acknowledged that inflation readings had been higher, more persistent, and widespread than previously anticipated. For instance, they pointed to the fact that the trimmed mean PCE inflation rate, which trims the most extreme readings and is calculated by the Dallas Fed, had reached 2.81% in November 2021, the highest level since mid-1992, as the chart below shows. It indicates that inflation is not limited to a few categories but has a broad-based character. The Committee members also noted several factors that could support strong inflationary pressure this year. They mentioned rising housing costs and rents, more widespread wage growth driven by labor shortages, and more prolonged global supply-side frictions, which could be exacerbated by the emergence of the Omicron variant; as well as easier passing on higher costs of labor and material to customers. In particular, supply chain bottlenecks and labor shortages could likely last longer and be more widespread than previously thought, which could limit businesses’ ability to address strong demand. Second, the FOMC admitted that the US labor market could be tighter than previously thought. They judged that it could reach maximum employment very soon, or that it had largely achieved it, as indicated by near-record rates of quits and job vacancies, labor shortages, and an acceleration in wage growth: Many participants judged that, if the current pace of improvement continued, labor markets would fast approach maximum employment. Several participants remarked that they viewed labor market conditions as already largely consistent with maximum employment. The consequence of higher inflation and a tighter labor market would be, of course, a more hawkish monetary policy. Although the central bankers didn’t discuss the appropriate number of interest rate hikes, they agreed that they should raise the federal funds rate sooner or faster: Participants generally noted that, given their individual outlooks for the economy, the labor market, and inflation, it may become warranted to increase the federal funds rate sooner or at a faster pace than participants had earlier anticipated. Additionally, Fed officials also discussed quantitative tightening. They generally agreed that – given fast economic growth, a strong labor market, high inflation, and bigger Fed assets – the balance sheet runoff should start closer to the policy rate liftoff and be faster than in the previous normalization episode: Almost all participants agreed that it would likely be appropriate to initiate balance sheet runoff at some point after the first increase in the target range for the federal funds rate. However, participants judged that the appropriate timing of balance sheet runoff would likely be closer to that of policy rate liftoff than in the Committee's previous experience. They noted that current conditions included a stronger economic outlook, higher inflation, and a larger balance sheet and thus could warrant a potentially faster pace of policy rate normalization.   Implications for Gold What do the recent FOMC minutes imply for the gold market? Well, referring once more to the Lord of the Rings, they are more like the Nazgûl that wreak despair rather than the Eagles offering hope. They were hawkish – and, thus, negative for gold prices. The minutes revealed that after tapering of quantitative easing, the Fed could also reduce its overall asset holdings to curb high inflation. In December, the US central bank accelerated the pace of tapering and signaled three interest rate increases in 2022. The minutes went even further, signaling a possibility of an earlier and faster rate hike and outright reduction in the Fed’s balance sheet: Some participants also noted that it could be appropriate to begin to reduce the size of the Federal Reserve's balance sheet relatively soon after beginning to raise the federal funds rate. Some participants judged that a less accommodative future stance of policy would likely be warranted and that the Committee should convey a strong commitment to address elevated inflation pressures. Hence, the price of gold responded accordingly to the FOMC minutes and declined from about $1,825 to $1,810, as the chart below shows. Luckily, there is a silver lining: the drop hasn’t been too big, at least so far. It may indicate that a lot of hawkish news has already been priced into gold, and that sentiment is rather bullish. However, the hawks haven’t probably said the last word yet. Please remember that the composition of the Committee will be more hawkish this year, but also that the mindset is changing among the members. For example, Minneapolis Fed President Neel Kashkari, one of the Committee’s most dovish members, said this week that the U.S. central bank would have to need to raise interest rates two times this year. Previously, he believed that the federal funds rate could stay at zero until at least 2024. Thus, although inflationary risk may provide support for gold, the yellow metal may find itself under hawkish fire in the upcoming weeks. We will see whether it will stand its ground, like the soldiers of Gondor. If you enjoyed today’s free gold report, we invite you to check out our premium services. We provide much more detailed fundamental analyses of the gold market in our monthly Gold Market Overview reports and we provide daily Gold & Silver Trading Alerts with clear buy and sell signals. In order to enjoy our gold analyses in their full scope, we invite you to subscribe today. If you’re not ready to subscribe yet though and are not on our gold mailing list yet, we urge you to sign up. It’s free and if you don’t like it, you can easily unsubscribe. Sign up today! Arkadiusz Sieron, PhDSunshine Profits: Effective Investment through Diligence & Care

AUDUSD attempts reboundThe Australian dollar bounces back over strong retail sales in November. The pair saw bids near a previous trough (0.7130).The RSI’s double-dip into the oversold area attracted some traders in taking up the bargain. A bullish RSI divergence suggests a deceleration in the downward momentum. And a jump above 0.7180 could be the first step towards a bounce.The Aussie may surge to the daily resistance at 0.7360 if buyers succeed in lifting offers around 0.7270. Otherwise, the price could test the critical floor at 0.7080.USDJPY tests supportThe Japanese yen rose as risk appetite fades across markets.A bullish MA cross on the daily chart indicates that the dollar’s rally gained traction. However, an overbought RSI means that a pullback could be an opportunity for the bulls to buy dips.The dollar is testing the psychological level of 115.00, the origin of the rally above the November peak (115.50). An oversold RSI has brought in some buying interest. A bearish breakout could trigger a correction to 114.30. Then, the bulls will need to reclaim 115.90 in order to resume the uptrend.US 30 continues to retreatThe Dow Jones tumbled as US Treasury yields hit a two-year high on hike bets.A bearish RSI divergence foreshadowed the current sell-off. A drop below 36300 prompted leveraged positions to close out, driving up volatility as short-term sentiment deteriorated. Rebounds could be opportunities for the bears to sell into strength.35700 is an area of interest, as it lies in a former supply zone and along the 30-day moving average. 35200 would be a second layer of support, while 36400 is the immediate resistance.

  Job creation disappointed in December. However, it could not be enough to counterweight rising real interest rates and save gold. On Thursday (January 6, 2022), I wrote that “the metal may find itself under hawk fire in the upcoming weeks”. Indeed, gold dropped sharply in the aftermath of the publication of the FOMC minutes. As the chart below shows, the hawkish Fed’s signal sent the price of the yellow metal from $1,826 to $1,789. This is because the minutes revealed that the Fed would be ready to cut its mammoth holdings of assets later this year. Previously, the US central bank was talking only about interest rate hikes and the ending of new asset purchases, i.e., quantitative easing. Now, the reverse process, i.e., quantitative tightening, is also on the table. What is surprising here is not the mere idea of shrinking the Fed’s assets – after all, they have risen to $8.7 trillion (see the chart above) – but its timing. Last time, the central bank started the normalization of its balance sheet only in 2018, nine years after the end of the Great Recession and four years after the completion of tapering. This time, QT may start within a few months after the end of tapering and the first interest rate hikes. It looks like 2022 will be a hot year for US monetary policy – and the gold market. Consequently, markets have been increasingly pricing in a more decisive Fed, which boosted bond yields. As the chart below shows, the long-term real interest rates (10-year TIPS) jumped from -1.06% at the end of 2021 to -0.73 at the end of last week. The upward move in the interest rates is fundamentally negative for gold prices.   Implications for Gold Luckily for the yellow metal, nonfarm payrolls disappointed in December. Last month, the US labor market rose, adding just 199,000 jobs (see the chart below), well short of consensus estimates of 400,000. This negative surprise lifted gold prices slightly on Friday (January 7, 2021). The latest employment report suggests that labor shortages and the spread of the Omicron variant of coronavirus are holding back job creation and the overall economy. However, gold bulls shouldn’t count on weak job gains to trigger a sustainable rally in the precious metals. This is because the American economy is still approaching full employment. The unemployment rate declined further to 3.9% from 4.2% in November, as the chart below shows. The drop confirms that the US labor market is very tight, so weak job creation won’t discourage the Fed from hiking the federal funds rate. As a reminder, in December, FOMC members forecasted the unemployment rate to be 4.3% at the end of 2021. What is crucial here is that disappointing job gains reflect labor shortages rather than weak demand. Additionally, wage growth remains pretty fast, despite the decline in the annual rate from 5.1% in November to 4.7% in December. The key takeaway is that, despite disappointing job creation, the US economy is moving quickly towards full employment. The unemployment rate is at 3.9%, very close to the pre-pandemic low of 3.7%. Hence, the latest employment situation report may only reinforce arguments for the Fed’s tightening cycle. This is fundamentally bad news for gold, as strengthened expectations of the interest rate hikes may boost real interest rates further and put the yellow metal under downward pressure. Some analysts believe that hawkish sentiment might be at its peak. I’m not so sure about that. I believe that monetary hawks haven’t said the last word yet, and that the normalization of the interest rates is still ahead of us. Anyway, Powell will appear in the Senate today, so we should get more clues about the prospects for monetary policy and gold this year. If you enjoyed today’s free gold report, we invite you to check out our premium services. We provide much more detailed fundamental analyses of the gold market in our monthly Gold Market Overview reports and we provide daily Gold & Silver Trading Alerts with clear buy and sell signals. In order to enjoy our gold analyses in their full scope, we invite you to subscribe today. If you’re not ready to subscribe yet though and are not on our gold mailing list yet, we urge you to sign up. It’s free and if you don’t like it, you can easily unsubscribe. Sign up today! Arkadiusz Sieron, PhDSunshine Profits: Effective Investment through Diligence & Care

  2021 will be remembered as the year of inflation’s comeback and gold’s dissatisfying reaction to it. Will gold improve its behavior in 2022? You thought that 2020 was a terrible year, but we would be back to normal in 2021? Well, we haven’t quite returned to normal. After all, the epidemic is not over, as new strains of coronavirus emerged and spread last year. Actually, in some aspects, 2021 was even worse than 2020. Two years ago, the pandemic was wreaking havoc. Last year, both the pandemic and inflation were raging. To the great surprise of mainstream economists fixated on aggregate demand, 2021 would be recorded in chronicles as the year of the supply factors revenge and the great return of inflation. For years, the pundits have talked about the death of inflation and mocked anyone who pointed to its risk. Well, he who laughs last, laughs best. However, it’s laughter through inflationary tears. Given the highest inflation rate since the Great Stagflation, gold prices must have grown a lot, right? Well, not exactly. As the chart below shows, 2021 wasn’t the best year for the yellow metal. Gold lost almost 5% over the last twelve months. Although I correctly predicted that “gold’s performance in 2021 could be worse than last year”, I expected less bearish behavior. What exactly happened? From a macroeconomic perspective, the economy recovered last year. As vaccination progressed, sanitary restrictions were lifted, and risk appetite returned to the market, which hit safe-haven assets such as gold. What’s more, a rebound in economic activity and rising inflation prompted the Fed to taper its quantitative easing and introduce more hawkish rhetoric, which pushed gold prices down. As always, there were both ups and downs in the gold market last year. Gold started 2021 with a bang, but began plunging quickly amid Democrats’ success in elections, the Fed more optimistic about the economy, and rising interest rates. The slide lasted until late March, when gold found its bottom of $1,684. This is because inflation started to accelerate at that point, while the Fed was downplaying rising price pressures, gibbering about “transitory inflation”. The rising worries about high inflation and the perspective of the US central bank staying behind the curve helped gold reach $1,900 once again in early June. However, the hawkish FOMC meeting and dot-plot that came later that month created another powerful bearish wave in the gold market that lasted until the end of September. Renewed inflationary worries and rising inflation expectations pushed gold to $1,865 in mid-November. However, the Fed announced a tapering of its asset purchases, calming markets once again and regaining investors’ trust in its ability to control inflation. As consequence, gold declined below $1,800 once again and stayed there by the end of the year. What can we learn from gold’s performance in 2021? First of all, gold is not a perfect inflation hedge, as the chart below shows. I mean here that, yes, gold is sensitive to rising inflation, but a hawkish Fed beats inflation in the gold market. Thus, inflation is positive for gold only if the US central bank stays behind the curve. However, when investors believe that either inflation is temporary or that the Fed will turn more hawkish in response to upward price pressure, gold runs away into the corner. Royal metal, huh? Second, never underestimate the power of the dark… I mean, the hawkish side of the Fed – or simply, don’t fight the Fed. It turned out that the prospects of a very gradual asset tapering and tightening cycle were enough to intimidate gold. Third, real interest rates remain the key driver for gold prices. As one can see in the chart below, gold plunged each time bond yields rallied, in particular in February 2021, but also in June or November. Hence, gold positively reacts to inflation as long as inflation translates into lower real interest rates. However, if other factors – such as expectations of a more hawkish Fed – come into play and outweigh inflation, gold suffers. Great, we already know that 2021 sucked and why. However, will 2022 be better for the gold market? Although I have great sympathy for the gold bulls, I don’t have good news for them. It seems that gold’s struggle will continue this year, at least in the first months of 2022, as the Fed’s hiking cycle and rising bond yields would create downward pressure on gold. However, when the US central bank starts raising the federal funds rate, gold may find its bottom, as it did in December 2015, and begin to rally again. Thank you for reading today’s free analysis. We hope you enjoyed it. If so, we would like to invite you to sign up for our free gold newsletter. Once you sign up, you’ll also get 7-day no-obligation trial of all our premium gold services, including our Gold & Silver Trading Alerts. Sign up today! Arkadiusz Sieron, PhDSunshine Profits: Effective Investment through Diligence & Care.

  Recently, oil prices hit their highest levels in 7 years. Despite this, we are witnessing a surprising increase in US inventories. Why is that? Energy Market Updates Crude oil retreated this morning in the pre-US trading session, after another volatile day on Thursday. It was followed by the weekly release of US inventory figures that surprised the market with an increase in stocks published by the Energy Information Administration (EIA). Meanwhile, market participants were expecting a drop close to 1 million barrels, which implies a slowdown in demand. This imbalance has led to soaring prices for petroleum products and distillates, which will add pressure on households and businesses already struggling with higher levels of inflation. Also, as I mentioned in more detail on Wednesday, there are also geopolitical tensions in various regions carrying some uncertainty, which is an additional turbine to propel oil prices. (Source: Investing.com) RBOB Gasoline (RBH22) Futures (March contract, daily chart) WTI Crude Oil (CLH22) Futures (March contract, daily chart) Do you think that black gold will be worth three figures ($100) anytime soon? In the first quarter of 2022, maybe? Let us know in the comments. That’s all folks for today. Have a nice weekend! Like what you’ve read? Subscribe for our daily newsletter today, and you'll get 7 days of FREE access to our premium daily Oil Trading Alerts as well as our other Alerts. Sign up for the free newsletter today! Thank you. Sebastien BischeriOil & Gas Trading Strategist * * * * * The information above represents analyses and opinions of Sebastien Bischeri, & Sunshine Profits' associates only. As such, it may prove wrong and be subject to change without notice. At the time of writing, we base our opinions and analyses on facts and data sourced from respective essays and their authors. Although formed on top of careful research and reputably accurate sources, Sebastien Bischeri and his associates cannot guarantee the reported data's accuracy and thoroughness. The opinions published above neither recommend nor offer any securities transaction. Mr. Bischeri is not a Registered Securities Advisor. By reading Sebastien Bischeri’s reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Sebastien Bischeri, Sunshine Profits' employees, affiliates as well as their family members may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

  The World Gold Council believes that gold may face similar dynamics in 2022 to those of last year. Well, I’m not so sure about it. Have you ever had the feeling that all of this has already happened and you are in a time loop, repeating Groundhog Day? I have. For instance, I’m pretty sure that I have already written the Fundamental Gold Report with a reference to pop-culture before… Anyway, I’m asking you this, because the World Gold Council warns us against the whole groundhog year for the gold market. In its “Gold Outlook 2022,” the gold industry organization writes that “gold may face similar dynamics in 2022 to those of last year.” The reason is that in 2021, gold was under the influence of two competing forces. These factors were the increasing interest rates and rising inflation, especially strong in operation in the second half of the year, which resulted in the sideways trend in the gold market, as the chart below shows. The WGC sees a similar tug of war in 2022: the hikes in the federal funds rate could create downward pressure for gold, but at the same time, elevated inflation will likely create a tailwind for gold. The WGC acknowledges that the ongoing tightening of monetary policy can be an important headwind for gold. However, it notes two important caveats. First, the Fed has a clear dovish bias and often overpromises when it comes to hawkish actions. For example, in the previous tightening cycle, “the Fed has tended not to tighten monetary policy as aggressively as members of the committee had initially expected.” Second, financial market expectations are more important for gold prices than actual events. As a result, “gold has historically underperformed in the months leading up to a Fed tightening cycle, only to significantly outperform in the months following the first rate hike.” I totally agree. I emphasized many times the Fed’s dovish bias and that the actual interest rate hikes could be actually better for gold than their prospects. After all, gold bottomed out in December 2015, when the Fed raised interest rates for the first time since the Great Recession. I also concur with the WGC that inflation may linger this year. Expectations that inflation will quickly dissipate are clearly too optimistic. As China is trying right now to contain the spread of the Omicron variant of the coronavirus, supply chain disruptions may worsen, contributing to elevated inflation. However, although I expect inflation to remain high, I believe that it will cool down in 2022. If so, the real interest rates are likely to increase, creating a downward pressure on gold prices. I also believe that the WGC is too optimistic when it comes to the real interest rates and their impact on the yellow metal. According to the report, despite the rate hikes, the real interest rates will stay low from a historical perspective, supporting gold prices. Although true, investors should remember that changes in economic variables are usually more important than their levels. Hence, the rebound in interest rates may still be harmful for the precious metals.   Implications for Gold What should be expected for gold in 2022? Will this year be similar to 2021? Well, just like last year, gold will find itself caught between a hawkish Fed and high inflation. Hence, some similarities are possible. However, in reality, we are not in a time loop and don’t have to report on Groundhog Day (phew, what a relief!). The arrow of time continues its inexorable movement into the future. Thus, market conditions evolve and history never repeats itself, but only rhymes. Thus, I bet that 2022 will be different than 2021 for gold, and we will see more volatility this year. In our particular situation, the mere expectations of a more hawkish Fed are evolving into actual actions. This is good news for the gold market, although the likely peak in inflation and normalization of real interest rates could be an important headwind for gold this year. Tomorrow, we will get to know the FOMC’s first decision on monetary policy this year, which could shake the gold market but also provide more clues for the future. Stay tuned! If you enjoyed today’s free gold report, we invite you to check out our premium services. We provide much more detailed fundamental analyses of the gold market in our monthly Gold Market Overview reports and we provide daily Gold & Silver Trading Alerts with clear buy and sell signals. In order to enjoy our gold analyses in their full scope, we invite you to subscribe today. If you’re not ready to subscribe yet though and are not on our gold mailing list yet, we urge you to sign up. It’s free and if you don’t like it, you can easily unsubscribe. Sign up today! Arkadiusz Sieron, PhDSunshine Profits: Effective Investment through Diligence & Care

EURUSD grinds daily support The US dollar inches lower as traders take profit ahead of the Fed meeting. The euro’s struggle to stay above 1.1360 indicates buyers’ weak interest in holding onto previous gains. The latest rebounds have failed to clear the former support that has turned into a resistance. A break below the previous consolidation range and daily support (1.1280) could send the pair to 1.1235. The RSI’s oversold situation attracted some buying interest. But the bulls will need to lift 1.1360 first before a reversal could become a reality. EURCHF attempts reversal The safe-haven Swiss franc retreats as global panic selling takes a breather. A bullish RSI divergence shows a slowdown in the sell-off momentum. Then a rally above 1.0355 has prompted some sellers to cover, taking the heat off the single currency. A bullish MA cross is an encouraging sign for a reversal. 1.0400 is the next hurdle and its breach could be a turning point for traders’ sentiment and a launchpad towards 1.0480. On the downside, 1.0340 is fresh support and then 1.0300 a critical floor to safeguard the rebound. US 30 hits last major support The Dow Jones 30 recoups losses as traders await details on the Fed’s monetary tightening. Breaks below daily supports at 34700 and 34000 have forced buyers to liquidate in bulk. The index saw bids at last June’s low (33200) while the RSI sank into the oversold area on the daily chart. As the quote stabilizes, traders may be looking to buy the dips. A close above 34500 may lead to 35500 which is a key supply zone from a previous breakout. A break below the daily support could trigger a broader correction in the weeks to come.

USDCAD breaks higherThe Canadian dollar slipped after the BOC kept interest rates unchanged. Its US counterpart found support at 1.2560 after a brief pullback.An oversold RSI attracted some bargain hunters. The current rebound is a sign that there is a strong interest in pushing for a bullish reversal. 1.2700 is a key supply zone as it coincides with the 30-day moving average.A breakout would definitely turn sentiment around and trigger a runaway rally. In turn, this sets the daily resistance at 1.2810 as the next target.NZDUSD continues lowerThe New Zealand dollar steadied after the Q4 CPI beat expectations.However, the pair is still in bearish territory after it broke below the lower end (0.6750) of the flag consolidation from the daily time frame. The RSI’s oversold situation brought in a buying-the-dips crowd around 0.6660 but its breach indicates a lack of buying interest.The kiwi is now testing November 2020’s low at 0.6600. The bears could be waiting to fade the next bounce with 0.6700 as a fresh resistance.XAUUSD pulls back for supportGold tumbled after the US Fed signaled it may raise interest rates in March. The rally stalled at 1853 and a break below the resistance-turned-support at 1830 flushed some buyers out.1810 at the base of the previous bullish breakout is a second line of defense. The short-term uptrend may still be intact as long as the metal stays above this key support.A deeper correction would drive the price down to the daily support at 1785. The bulls need a rebound above 1838 to regain control of price action.

The FOMC set the stage for a March interest rate hike, which was an aggressive signal. Gold got it and fell – but hasn't capitulated yet.The Battlecruiser Hawk is moving full steam ahead! The FOMC issued yesterday (January 26, 2022) its newest statement on monetary policy in which it strengthened its hawkish stance. First of all, the Fed admitted that it would start hiking interest rates “soon”:With inflation well above 2 percent and a strong labor market, the Committee expects it will soon be appropriate to raise the target range for the federal funds rate.Previously, the US central bank conditioned its tightening cycle on the situation in the labor market. The relevant part of the statement was as follows in December:With inflation having exceeded 2 percent for some time, the Committee expects it will be appropriate to maintain this target range until labor market conditions have reached levels consistent with the Committee's assessments of maximum employment.The alteration implies that, in the Fed’s view, the US economy has reached maximum employment and is ready to lift the federal funds rate. Indeed, Powell reaffirmed it, saying:There’s quite a bit of room to raise interests without threatening the labor market. This is by so many measures a historically tight labor market — record levels of job openings, quits, wages are moving up at the highest pace they have in decades.Powell also clarified the timing, stating that “the Committee is of the mind to raise the federal funds rate at the March meeting.” This is not completely unexpected, but does mark a significant hawkish change in the Fed’s communication, which is negative for gold.Second, the FOMC reaffirmed its plan, announced in December, to end quantitative easing in early March. It means that in February, the Fed will buy only $20 billion of Treasuries and $10 billion of agency mortgage-backed securities, instead of the $40 and $20 purchased in January:The Committee decided to continue to reduce the monthly pace of its net asset purchases, bringing them to an end in early March. Beginning in February, the Committee will increase its holdings of Treasury securities by at least $20 billion per month and of agency mortgage‑backed securities by at least $10 billion per month.Third, the FOMC is preparing for quantitative tightening. Together with the statement on monetary policy, it published “Principles for Reducing the Size of the Federal Reserve's Balance Sheet”. The Fed hasn’t yet determined the timing and pace of reducing the size of its mammoth balance sheet. However, we know that it will happen after the first hike in interest rates, so probably as soon as May or June. After all, as Powell admitted during his press conference, “the balance sheet is substantially larger than it needs to be (...). There’s a substantial amount of shrinkage in the balance sheet to be done.”Implications for GoldWhat does the recent FOMC statement imply for the gold market? The end of QE, the start of the hiking cycle, and then of QT – all packed within just a few months – is a big hawkish wave that could sink the gold bulls. The Fed hasn’t been so aggressive for years.Of course, maybe it’s just a great bluff, and the Fed will retreat to its traditional dovish stance soon when tightening monetary and financial conditions hit Wall Street and the real economy. However, with CPI inflation above 7%, mounting political pressure, and public outrage at costs of living, the US central bank has no choice but to tighten monetary policy, at least for the time being.It seems that gold got the message. The price of the yellow metal plunged more than $30 yesterday, as the chart below shows. Interestingly, gold started its decline before the statement was published, which may indicate more structural weakness. What is also disturbing is that gold was hit even though the FOMC statement came largely as expected.On the other hand, gold didn’t collapse, but it dropped only by thirty-some dollars, or about 1.6%. Given the importance and hawkishness of the FOMC meeting, it could have been worse. Yes, the hawkish message was expected, and some analysts even forecasted more aggressive actions, but gold clearly didn’t capitulate. Thus, there is hope (and turbulence in the stock market can also help here), although the upcoming weeks may be challenging for gold, which would have to deal with rising bond yields.If you enjoyed today’s free gold report, we invite you to check out our premium services. We provide much more detailed fundamental analyses of the gold market in our monthly Gold Market Overview reports and we provide daily Gold & Silver Trading Alerts with clear buy and sell signals. In order to enjoy our gold analyses in their full scope, we invite you to subscribe today. If you’re not ready to subscribe yet though and are not on our gold mailing list yet, we urge you to sign up. It’s free and if you don’t like it, you can easily unsubscribe. Sign up today!Arkadiusz Sieron, PhDSunshine Profits: Effective Investment through Diligence & Care

  Gold fought valiantly, gold fought nobly, gold fought honorably. Despite all this sacrifice, it lost the battle. How will it handle the next clashes? Have you ever felt trapped in the tyranny of the status quo? Have you ever felt constrained by some invisible yet powerful forces trying to thwart the fullest realization of your potential? I guess this is what gold would feel like right now – if metals could feel anything, of course. Please take a look at the chart below. As you can see, January looked to be quite good for the yellow metal. Its price surpassed the key level of $1,800 at the end of 2021, rallying from $1,793 to $1,847 on January 25, 2022. Then the evil FOMC published its hawkish statement on monetary policy. In its initial response, gold slid. That’s true, but it bravely defended its positions above $1,800 during both Wednesday and Thursday. There was still hope. However, on Friday, the metal capitulated and plunged to $1,788. Here we are again – below the level of $1,800 that gold hasn’t been able to exceed for more than several days since mid-2021, as the chart below shows. Am I disappointed? A bit. Naughty goldie! Am I surprised? Not at all. Although I cheered the recent rally, I was unconvinced about its sustainability in the current macroeconomic context, i.e., economic recovery with tightening of monetary policy (the surprisingly positive report on GDP in the fourth quarter of 2021 didn’t probably help gold), rising interest rates, and possibly a not-distant peak in inflation. In the previous edition of the Fundamental Gold Report, I described the Fed’s actions as “a big hawkish wave that could sink the gold bulls” and pointed out that “gold started its decline before the statement was published, which may indicate more structural weakness.” I added that it was also disturbing that “gold was hit even though the FOMC statement came largely as expected.” Last but not least, I concluded my report with a warning that “the upcoming weeks may be challenging for gold, which would have to deal with rising bond yields.” My warning came true very quickly. Of course, we cannot exclude a relatively swift rebound. After all, gold can be quite volatile in the short-term, and this year could be particularly turbulent for the yellow metal. However, I’m afraid that the balance of risks for gold is the downside. Next month (oh boy, it’s February already!), we will see the end of quantitative easing and the first hike in the federal funds rate, followed soon by the beginning of quantitative tightening and further rate hikes. Using its secret magic, the Fed has convinced the markets that it has become a congregation of hawks, or even a cult of the Great Hawk. According to the CME Fed Tool, future traders have started to price in five 25-basis-point raises this year, while some investors believe that the Fed will lift interest rates by 50 basis points in March. All these clearly hawkish expectations led to the rise in bond yields (see the chart below), creating downward pressure on gold.   Implications for Gold What does the recent plunge in gold prices imply for investors? Well, in a sense, nothing, as short-term price movements shouldn’t affect long-term investments. Trading and investing should be kept separate. However, gold’s return below $1,800 can disappoint even the biggest optimists. The yellow metal failed again. Not the first and not the last time, though. In my view, gold may struggle by March, as all these hawkish expectations will exert downward pressure on the yellow metal. In 2015, the first hike in the tightening cycle coincided with the bottom of the gold market. It may be similar this time, as the actual hike could ease some of the worst expectations and also push markets to think beyond their tightening horizon. If you enjoyed today’s free gold report, we invite you to check out our premium services. We provide much more detailed fundamental analyses of the gold market in our monthly Gold Market Overview reports and we provide daily Gold & Silver Trading Alerts with clear buy and sell signals. In order to enjoy our gold analyses in their full scope, we invite you to subscribe today. If you’re not ready to subscribe yet though and are not on our gold mailing list yet, we urge you to sign up. It’s free and if you don’t like it, you can easily unsubscribe. Sign up today! Arkadiusz Sieron, PhDSunshine Profits: Effective Investment through Diligence & Care

However, these gains attracted some profit-taking at prices around US$1,850. And in the aftermath of last week’s FOMC meeting, gold sold off for three days in a row. This merciless sell-off only ended at US$1,780 wiping out nearly all gains since mid of December. It was some form of the classic “the bull walks up the stairs and the bear jumps out the window” pattern, which is a typical behavior within an uptrend.Hence and exactly for this reason, the deep pullback did not necessarily end the recovery in the gold market. Of course, in the bigger picture, the entire precious metals sector is still stuck in this tenacious correction which has been ongoing since August 2020. In the short-term, however, the pullback has created an oversold setup and once again proved that there is buying interest at prices below US$1,800.US-Dollar index, daily chart as of February 3rd, 2022. False breakout?US-Dollar index, daily chart as of February 3rd, 2022.It also seems that the US-Dollar might have hit an important top last Thursday and is now moving lower, which would be very supportive for gold, of course. Everyone is expecting the US-Dollar to go up as the FED is expected to raise interest rates. But the US-Dollar has been discounting this “hike and taper scenario” for several months already. Actually, the US-Dollar index has been rallying +8.8% since May 2021! During the recent FOMC meeting, however, big money might have used the seeming breakout to sell their dollar longs into a favorable high-volume setup. At the same time, stock market sentiment was extremely bearish. Hence, last week likely triggered a top in the US-Dollar and a violent back and forth bottoming pattern for the stock-market.US-Dollar index, monthly chart as of February 3rd, 2022. A series of lower highs!US-Dollar index, monthly chart as of February 3rd, 2022.In the big picture, a top in the US-Dollar would continue the series of lower highs for the dollar. As well, the US-Dollar is moving within a huge triangle since 2001. After a series of three lower highs since December 2016, a test of the lower boundary of the triangle would give gold prices an extreme tailwind in the coming years. Hence, even if it´s hard to come up with any bearish arguments for the dollar at the moment, technically it looks like the dollar could roll over.Gold in US-Dollar, daily chart from February 3rd, 2020. Gold’s behavior is changing.Gold in US-Dollar, daily chart as of February 3rd, 2022.For gold, a weaker US-Dollar would be very helpful. In fact, since the beginning of this week, we perceive an ongoing change in gold’s behavior. We are getting impressed by its intraday strength! Every small pullback around and below US$1,800 was rather quickly bought again. So far, gold has only recovered 38.2% of last week’s nasty sell-off and currently sits pretty much exactly at its 200-day moving average (US$1,805).But the fresh buy signal from the slow stochastic oscillator on the daily chart promises more upside. Hence, we see gold fuming its way higher in the coming weeks. In the next step, gold will have to overcome the 38.2% resistance around US$1,808.50 and then continue its recovery towards US$1,830. In any case, the seasonal component is at least very favorable until the end of February. Therefore, even higher price targets are conceivable too. But gold needs to breakout above the triangle and clear US$1,850. Only then a more sustainable bullish momentum would emerge which could last further into spring.If, on the other hand, gold takes out US$1,780, the recovery since mid of December might be over already and the medium-term correction might likely pick up again.Conclusion: Seasonality favors another wave upOverall, we assume that seasonality favors another wave up in the gold market. Thus, another rally towards at least US$1,830 is realistic. We are short-term bullish, mid-term neutral to skeptic and long-term very bullish for gold.Feel free to join us in our free Telegram channel for daily real time data and a great community. If you like to get regular updates on our gold model, precious metals and cryptocurrencies you can also subscribe to our free newsletter.Disclosure: Midas Touch Consulting and members of our team are invested in Reyna Gold Corp. These statements are intended to disclose any conflict of interest. They should not be misconstrued as a recommendation to purchase any share. This article and the content are for informational purposes only and do not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision. The views, thoughts and opinions expressed here are the author’s alone. They do not necessarily reflect or represent the views and opinions of Midas Touch Consulting.By Florian Grummes|February 3rd, 2022|Tags: EUR/USD, Gold, Gold Analysis, Gold bullish, gold chartbook, Gold neutral, precious metals, Reyna Gold, US-Dollar|0 CommentsAbout the Author: Florian GrummesFlorian Grummes is an independent financial analyst, advisor, consultant, trader & investor as well as an international speaker with more than 20 years of experience in financial markets. He is specialized in precious metals, cryptocurrencies and technical analysis. He is publishing weekly gold, silver & cryptocurrency analysis for his numerous international readers. He is also running a large telegram Channel and a Crypto Signal Service. Florian is well known for combining technical, fundamental and sentiment analysis into one accurate conclusion about the markets. Since April 2019 he is chief editor of the cashkurs-gold newsletter focusing on gold and silver mining stocks. Besides all that, Florian is a music producer and composer. Since more than 25 years he has been professionally creating, writing & producing more than 300 songs. He is also running his own record label Cryon Music & Art Productions. His artist name is Florzinho.

  Gold didn’t shine in January. The struggle could continue, although the more distant future looks more optimistic for the yellow metal. That was quick! January has already ended. Welcome to February! I hope that this year has started well for you. For gold, the first month of 2022 wasn’t particularly good. As the chart below shows, the yellow metal lost about $11 of its value, or less than 1%, during January. This is the bad side of the story. The ugly side is that gold wasn’t able to maintain its position above $1,800, even though geopolitical risks intensified, while inflation soared to the highest level in 40 years! The yellow metal surpassed the key level in early January and stayed above this level for most of the time, even rallying above $1,840 in the second half of the month. But gold couldn’t hold out and plunged at the end of January, triggered by a hawkish FOMC meeting. However, there is also a good side. Gold is still hovering around $1,800 despite the upcoming Fed’s tightening cycle and all the hawkish expectations about the US monetary policy in 2022. The Fed signaled the end of tapering of quantitative easing by March, the first hike in the federal funds rate in the same month, and the start of quantitative tightening later this year. Meanwhile, in the last few weeks, the markets went from predicting two interest rate hikes to five. Even more intriguing, and perhaps encouraging as well, is that the real interest rates have increased last month, rising from -1% to -0.6%. Gold is usually negatively correlated with the TIPS yields, but this time it stayed afloat amid rising rates.   Implications for Gold What does gold’s behavior in January imply for its 2022 outlook? Well, I must admit that I expected gold’s performance to be worse. Last month showed that gold simply don’t want to either go down (or up), but it still prefers to go sideways, glued to the $1,800 level. The fact that strengthening expectations of the Fed’s tightening cycle and rising real interest rates didn’t plunge gold prices makes me somewhat more optimistic about gold’s future. However, I still see some important threats to gold. First of all, some investors are still underpricing how hawkish the Fed could become to combat inflation. Hence, the day of reckoning could still be ahead of us. You see, just today, the Bank of England hiked its policy rate by 25 basis points, although almost half of the policymakers wanted to raise interest rates by half a percentage point. Second, the market seems to be biased downward, with lower and lower peaks since August 2020. Having said that, investors should remember that what the Fed says it will do and what it ends up doing are often very different. When the Fed says it will be dovish, it will be dovish. But when the Fed says it will be hawkish, it says so. This is because a monetary tightening could be painful for asset valuations and all the debtors, including Uncle Sam. The US stock market already saw significant losses in January. As the chart below shows, the S&P 500 Index lost a few hundred points last month, marking the worst decline since the beginning of the pandemic. Thus, the Fed won’t risk recession in its fight with inflation, especially if it peaks this year, and would try to engineer a soft-landing. Hence, the Fed could reverse its stance relatively soon, especially that it’s terribly late with its tightening. However, as long as the focus is on monetary policy tightening, gold is likely to struggle within its tight range. Some policymakers and economists have argued that the emergence from the COVID-19 pandemic is more like a postwar demobilization and conversion to a civilian industry than a normal business cycle. White House economists have compared the current picture to the rapid increases in 1947, caused by the end of price controls in conjunction with supply chain problems and pent-up demand after the war (“Historical Parallels to Today’s Inflationary Episode”, Council of Economic Advisers, July 6, 2021). The problem with this analogy is that it is only one instance from more than 70 years ago. More recent and more frequent inflation episodes have generally been ended by a recession or a mid-cycle slowdown. Price pressures have an internal momentum of their own and tend to intensify rather than lessen as the business cycle becomes more mature and the margin of spare capacity shrinks in all markets. If you enjoyed today’s free gold report, we invite you to check out our premium services. We provide much more detailed fundamental analyses of the gold market in our monthly Gold Market Overview reports and we provide daily Gold & Silver Trading Alerts with clear buy and sell signals. In order to enjoy our gold analyses in their full scope, we invite you to subscribe today. If you’re not ready to subscribe yet though and are not on our gold mailing list yet, we urge you to sign up. It’s free and if you don’t like it, you can easily unsubscribe. Sign up today! Arkadiusz Sieron, PhDSunshine Profits: Effective Investment through Diligence & Care

  Beware, the Fed’s tightening of monetary policy could lift real interest rates! For gold, this poses a risk of prices wildly rolling down. The first FOMC meeting in 2022 is behind us. What can we expect from the US central bank this year and how will it affect the price of gold? Well, this year’s episode of Fed Street will be sponsored by the letter “T”, which stands for “tightening”. It will consist of three elements. First, quantitative easing tapering. The asset purchases are going to end by early March. To be clear, during tapering, the Fed is still buying securities, so it remains accommodative, but less and less. Tapering has been very gradual and well-telegraphed to the markets, so it’s probably already priced in gold. Thus, the infamous taper tantrum shouldn’t replay. Second, quantitative tightening. Soon after the end of asset purchases, the Fed will begin shrinking its mammoth balance sheet. As the chart below shows, it has more than doubled since the start of the pandemic, reaching about $9 trillion, or about 36% of the country’s GDP. It’s so gigantic that even Powell admitted during his January press conference that “the balance sheet is substantially larger than it needs to be.” Captain Obvious attacked again! In contrast to tapering, which just reduces additions to the Fed’s holdings, quantitative tightening will shrink the balance sheet. How much? It’s hard to say. Last time, during QT from 2017 to 2019, the Fed started unloading $10 billion in assets per month, gradually lifting the cap to $50 billion. Given that inflation is now much higher, and the Fed has greater confidence in the economic recovery, the scale of reduction would probably be higher. The QT will create upward pressure on interest rates, which could be negative for the gold market. However, QT will be a very gradual and orderly process. Instead of selling assets directly, the US central bank will stop reinvestment of proceeds as securities run off. As we can read in “Principles for Reducing the Size of the Federal Reserve's Balance Sheet”, The Committee intends to reduce the Federal Reserve's securities holdings over time in a predictable manner primarily by adjusting the amounts reinvested of principal payments received from securities held in the System Open Market Account. What’s more, the previous case of QT wasn’t detrimental to gold, as the chart below shows. The price of gold started to rally in late 2018 and especially later in mid-2019. Third, the hiking cycle. In March, the Fed is going to start increasing the federal funds rate. According to the financial markets, the US central bank will enact five interest rate hikes this year, raising the federal funds rate to the range of 1.25-1.50%. Now, there are two narratives about American monetary policy in 2022. According to the first, we are witnessing a hawkish revolution within the Fed, as it would shift its monetary stance in a relatively short time. The central bank will “double tighten” (i.e., it will shrink its balance sheet at the same time as hiking rates), and it will do it in a much more aggressive way than after the Great Recession. Such decisive moves will significantly raise the bond yields, which will hit gold prices. However, in this scenario, the Fed’s aggressive actions will eventually lead to the inversion of the yield curve and later to recession, which should support the precious metals market. On the other hand, some analysts point out that central bankers are all talk and – given their dovish bias – act less aggressively than they promise, chickening out in the face of the first stock market turbulence. They also claim that all the Fed’s actions won’t be enough to combat inflation and that monetary conditions will remain relatively loose. For example, Stephen Roach argues that “the Fed is so far behind [the curve] that it can’t even see the curve.” Indeed, the real federal funds rate is deeply negative (around -7%), as the chart below shows; and even if inflation moderates to 3.5% while the Fed conducts four hikes, it will remain well below zero (about -2%), providing some support for gold prices. Which narrative is correct? Well, there are grains of truth in both of them. However, I would like to remind you that what really matters for the markets is the change or direction, not the level of a variable. Hence, the fact that real interest rates are to stay extremely low doesn’t guarantee that gold prices won’t decline in a response to the hiking cycle. Actually, as the chart above shows, the upward reversal in the real interest rates usually plunges gold prices. Given that real rates are at a record low, a normalization is still ahead of us. Hence, unless inflation continues to rise, bond yields are likely to move up, while gold – to move down. Thank you for reading today’s free analysis. We hope you enjoyed it. If so, we would like to invite you to sign up for our free gold newsletter. Once you sign up, you’ll also get 7-day no-obligation trial of all our premium gold services, including our Gold & Silver Trading Alerts. Sign up today! Arkadiusz Sieron, PhDSunshine Profits: Effective Investment through Diligence & Care.

  The latest employment report strongly supports the Fed’s hawkish narrative. Surprisingly, gold has shown remarkable resilience against it so far. What a surprise! The US labor market added 467,000 jobs last month. As the chart below shows, the number is below December’s figure (+510,000) but much above market expectations – MarketWatch’s analysts forecasted only 150,000 added jobs. Thus, the report reinforces the optimistic view of the US economy’s strength, especially given that the surprisingly good nonfarm payrolls came despite the disruption to consumer-facing businesses from the spread of the Omicron variant of the coronavirus. The unemployment rate increased slightly from 3.9% in December to 4% in January, as the chart above shows. However, it was accompanied by a rise in both the labor force participation rate (from 61.9% to 62.2%) and the employment-population ratio (from 59.5% to 59.7%). Last but not least, average hourly earnings have jumped 5.7% over the last 12 months, as you can see in the next chart. It indicates that wage inflation has intensified recently, despite the surge in COVID-19 cases that was expected by some analysts to dent demand for workers. Hence, the January employment report will cement the hawkish case for the Fed. Rising wages will add to the argument for decisive hiking of interest rates, while the surprisingly strong payrolls will strengthen the Fed’s confidence in the US economy.   Implications for Gold What does the latest employment report imply for the gold market? The unexpectedly high payrolls should be negative for the yellow metal. However, while gold prices initially plunged below $1,800, they rebounded quickly, returning above its key level, as the chart below shows. Gold’s resilience in the face of a strong jobs report is noteworthy and quite encouraging. After all, the report strengthened the US dollar and boosted market expectations of a 50-basis point hike in the federal funds rate in March (from 2.6% one month ago to more than 14% now). Such a big move is unlikely, but the point is that financial conditions are tightening without waiting for the Fed’s actual actions. In the past, gold disliked strong economic reports and rising bond yields and showed a negative correlation with nonfarm payrolls, but not this time. More generally, although long-term fundamentals have turned more bearish in recent months, gold has remained stuck at $1,800. However, last week, two factors could have supported gold prices. The first was rising volatility in the equity market. The S&P 500 Index dropped almost 500 points, or 10%, in January, as the chart below shows. Although it has recovered somewhat, it still remains substantially below the top, with the tech sector experiencing weakness. On Thursday, the shares of Meta, Facebook’s parent company, plunged more than 20%. The second potentially bullish driver was last Thursday’s meeting of the ECB’s Governing Council. The central bank of the Eurozone was more hawkish than expected. Christine Lagarde acknowledged inflationary risks and said that she had become more concerned with the recent surge in inflation. According to initial estimates, the annual inflation rate in the euro area amounted to 5.1% in January 2022, the highest since the common currency was created. Lagarde also backed off her previous guidance that the interest rate hike was “very unlikely” in 2022. The ECB’s pivot – the central bank opening the door for the first rate increase since 2011 – boosted the euro against the greenback. The bottom line is that gold has made itself comfortable around $1,800 and simply doesn’t want – or is not ready – to go away in either direction, at least not yet. The battle between bulls and bears is still on. I’m afraid that, given the relatively aggressive monetary and financial tightening, the sellers will win this clash and gold will drop before the bulls can regain control over the market. However, recent gold’s resilience indicates that there is an underlying bid in the markets and bulls are not giving up. If you enjoyed today’s free gold report, we invite you to check out our premium services. We provide much more detailed fundamental analyses of the gold market in our monthly Gold Market Overview reports and we provide daily Gold & Silver Trading Alerts with clear buy and sell signals. In order to enjoy our gold analyses in their full scope, we invite you to subscribe today. If you’re not ready to subscribe yet though and are not on our gold mailing list yet, we urge you to sign up. It’s free and if you don’t like it, you can easily unsubscribe. Sign up today! Arkadiusz Sieron, PhDSunshine Profits: Effective Investment through Diligence & Care

Bitcoin price slows down its ascent after flipping the $42,748 hurdle into a foothold. Ethereum price contemplates a retracement after facing the 50-day SMA at $3,208. Ripple price looks ready for consolidation after a 51% ascent over the past four days. Bitcoin price rally is slowing, allowing bulls to take a breather before the next leg-up. While some might argue the short-term outlook looks bearish – due to the flash crash in January, the bigger picture reveals cryptocurrency (https://www.fxstreet.com/cryptocurrencies) markets still have the potential to go higher. A Wells Fargo report published in February reveals that cryptocurrency adoption is growing exponentially and, in many cases, resembles the growth curve of internet adoption. The American financial corporation even goes on to state the crypto sector could soon exit the initial phases of adoption and enter “an inflection point of hyper-adoption.” Wells Fargo Report: Internet usage history vs crypto users Bitcoin price at a decisive moment Bitcoin price rallied 25% in the last four days and set up a swing high at $45,539.(https://www.fxstreet.com/cryptocurrencies/news/bitcoin-begins-correction-after-45k-rejection-where-can-btc-price-bounce-next-202202081914) The rally rippled out, triggering copycat moves in other altcoins and the cryptocurrency market in general. Yet BTC failed to produce a daily candlestick close above the breaker’s upper limit at $44,387. So, as a result, the bearish outlook is still in play. Investors should be prepared for anything between a minor retracement and a full-blow bear trap. An optimistic scenario will likely see BTC retest the weekly support level at $39,481 before triggering the next leg-up. A more pessimistic scenario, however, would speculate that Bitcoin price could crash to $34,752. A breakdown of this support floor could be the key to triggering a crash to $30,000 or lower. BTC/USD 1-day chart While things look on the fence for Bitcoin price, (https://www.fxstreet.com/cryptocurrencies/bitcoin) a daily candlestick close above $44,387 will invalidate the bearish thesis. A bullish regime, however, will only kick-start if BTC produces a daily candlestick (https://www.fxstreet.com/rates-charts/chart/candlestick-patterns) close above $52,000.   Ethereum price takes a breather Ethereum (https://www.fxstreet.com/cryptocurrencies/ethereum) price seems to be undergoing a pullback (https://www.fxstreet.com/cryptocurrencies/news/ethereum-price-holds-above-3k-but-network-data-suggests-bulls-may-get-trapped-202202090153) as it faces off with the 50-day Simple Moving Average (SMA) at $3,208 while still hovering inside a bearish breaker, extending from $2,789 to $3,167. A rejection here could lead to a retracement to $2,812, where buyers have a chance at restarting the uptrend. Assuming the bullish momentum picks up, there is a good chance ETH could slice through the $3,208 and make a run for the $3,413 hurdle. The local top for Ethereum price could be capped around the convergence of the 50-day and 100-day SMAs at roughly $3,600. ETH/USD 1-day chart On the other hand, if Ethereum price fails to stay above $2,812, it will indicate that buyers are taking a backseat. This development will invalidate the bullish scenario and trigger a crash to the weekly support level at $2,324. Ethereum price could liquidate bulls if ETH falls below $3,000 Ripple price to reestablish directional bias Ripple price broke out of its ten-day consolidation (https://www.fxstreet.com/cryptocurrencies/news/xrp-price-could-easily-return-to-1-under-one-condition-202202081437) and rallied 51% in just four days. This run-up sliced through the $0.740 and $0.817 hurdles, flipping them into support levels. While this climb was impressive, XRP price is likely to retrace as investors begin to book profits. The resulting selling pressure could push Ripple price down to the $0.740 support level where buyers can band together for a comeback. In some cases, the U-turn might not arrive until a retest of the $0.595 to $0.632 demand zone. Regardless, investors can expect XRP price to run up to $1 and collect the liquidity resting above it. XRP/USD 1-day chart On the contrary, if the Ripple price fails to stay above the $0.595 to $0.632 demand zone, it will reveal the lack of bullish momentum and hint that a further descent is likely. In this case, XRP price will sweep below the $0.518 support level to collect the sell-side liquidity resting beneath. XRP price could easily return to $1 under one condition

Podcast 2022-02-11 08:46 20 minutes to read Summary:  Today, we look at the hot US January CPI data hitting the markets yesterday, with an interesting attempt at a whiplash inducing bounce in sentiment just after the data release dealt an initial blow to sentiment as more Fed hikes were priced into the forward curve. Then markets turned south again when St. Louis Fed President and FOMC voter Stephen Bullard later administered a hawkish broadside with thoughts on an emergency Fed rate hike, a rapid path to 100 basis points of hikes and an imminent start to quantitative tightening. We also look at the impact on commodity markets from yesterday's developments and the Bank of Japan doubling down for now on its yield-curve-control policy and more. Today's pod features Peter Garnry on equities, Ole Hansen on commodities, and John J. Hardy hosting and on FX. Listen to today’s podcast and have a look at today’s slide deck. Follow Saxo Market Call on your favorite podcast app: Apple Spotify Podbean Sticher If you are not able to find the podcast on your favourite podcast app when searching for Saxo Market Call, please drop us an email at marketcall@saxobank.com and we'll look into it.   Questions and comments, please! We invite you to send any questions and comments you might have for the podcast team. Whether feedback on the show's content, questions about specific topics, or requests for more focus on a given market area in an upcoming podcast, please get in touch at marketcall@saxobank.com.

Forex 2022-02-11 11:25 5 minutes to read Summary:  The latest US CPI data proved far hotter than expected once again, taking Fed rate hike expectations higher still. The US dollar actually shrugged this development off initially before rallying on a significant further boost to potential Fed tightening after a hawkish broadside from FOMC voter Bullard. Elsewhere, the Bank of Japan just doubled down on its yield-curve-control policy and the Riksbank threw the krona under the bus with a dovish meeting. FX Trading Focus: USD firming underwhelms, given massive further shift in Fed expectations, BoJ doubles down on YCC, Riksbank throws SEK under the bus. US dollar snaps back after whiplash-inducing sell-off post-CPI release. The January US CPI release came in hotter than expected, at 0.6% month-on-month for both the headline and ex-food-and-energy measures vs. +0.4%/+0.5% expected, respectively and at +7.5% / +6.0% year-on-year versus +7.3%/+5.9% expected, respectively. Both of the year-on-year numbers were the highest for the cycle and the highest in forty years and took Fed expectations higher still. Somewhat curiously, the USD kneejerk higher on the data release was quickly erased and the greenback actually sold off to new local lows before later rallying on a hawkish broadside from St. Louis Fed President and FOMC voter James Bullard. And even then, the USD strength looks underwhelming, as discussed in the EURUSD chart below. As noted, Bullard was out speaking yesterday in an interview with Bloomberg yesterday and said that he would like to see 100 basis points of Fed tightening “before July 1” which implicitly means that, if the hikes were to take place at regularly scheduled meetings, one of the three meetings between now and then would need to see a 50-basis point move. He would also like to see QT (balance sheet reduction) beginning in the second quarter and even brought up the idea of an emergency move between meetings. “There was a time when the committee would have reacted to something like this to having a meeting right now and doing 25 basis points right now...I think we should be nimble and considering that kind of thing.” The Fed hasn’t done an emergency hike at a non-scheduled regularly meeting since 1994, as far as I can tell. The combination of the CPI and Bullard’s comments took the March FOMC meeting expectation to +46 basis points, i.e., very strong consensus that the Fed will hike fifty basis points (or an emergency move of 25 bps plus another 25 bps at that meeting) and the anticipated rate through the December FOMC meeting is some 30 bps higher at above 178 bps than where it closed Wednesday. Bank of Japan set to enforce its yield-curve-control policy – before the US CPI release yesterday, the Bank of Japan announced that it would buy “unlimited” amounts of 10-year JGB’s in operations on Monday, obviously to enforce its 25 basis point yield cap on 10-year Japanese sovereign debt after the yield on that debt had reached as high as 23 basis points yesterday. The JPY was sharply weaker on the news, but USDJPY avoided new highs above the previous 116.35 mark as it came back broadly bid – especially in the crosses yesterday - on energy prices and risk sentiment cratering.  This is an interesting move from the BoJ if it maintains this policy, as any further rise in global bond yields from here, particularly longer yields, will theoretically have to absorbed by further weakening of the already very weak Japanese yen. Riksbank dovish, SEK rushes lower – the Riksbank failed to make any shift in line with the recent ECB meeting, as it expressed the view that monetary policy needed to stay loose “for inflation to be close to the target in the medium term.” As well, the Riksbank promised to continue with enough QE to keep the bank’s balance sheet unchanged through this calendar year before allowing holdings to “decrease gradually.” The rate lift-off time frame was only pulled forward to the second half of 2024 from the prior forecast of Q4 of 2024. All in all, a very dovish mix despite Governor Ingves providing the decisive vote in overruling dissenting voices on the QE decision, so the Riksbank did an effective job of throwing the SEK under the bus. Chart: EURUSDYesterday’s developments were perhaps both confusing and revealing. Initially, the hot US January CPI release failed to boost the US dollar, which actually dropped to a new low in places (new high in EURUSD) despite additional Fed tightening being priced into the forward curve in the wake of the release. Later, the USD came roaring back only after Bullard unleashed his hawkish broadside that unsettled the market, which is now forced to price in the risk of even an emergency Fed hike before the regularly scheduled March meeting. All in all, the revealing bit is that we wake up this morning with the Fed priced to hike a full 6-7 times through the December meeting this year, with risk sentiment on the defensive and the EURUSD is only about 30-40 pips below the Wednesday close. This suggests that the path to a stronger US dollar is a very difficult one (a full-on market crash?) and increases the conviction in the downside potential. The ultimate test for that notion would be if the Fed does indeed deliver an emergency hike in coming days and yet EURUSD fails to fall much further or even shows resilience and bounces back to current levels or higher.Source: Saxo Group Table: FX Board of G10 and CNH trend evolution and strength.Yesterday’s action didn’t do much to alter recent trends, though note the Swedish krona biting hard to the downside…Source: Bloomberg and Saxo Group Table: FX Board Trend Scoreboard for individual pairs.Watching how USD pairs shaped up in the wake of the churning back and forth yesterday, and as we watch the nature of the consolidation after the huge EURUSD rally off the lows.Source: Bloomberg and Saxo Group Upcoming Economic Calendar Highlights (all times GMT) 1030 – Russia Central Bank Key Rate Announcement (expected to hike 100 bps to 9.50%) 1500 – US Feb. Preliminary University of Michigan Sentiment  

Investors loved the sound of peace and the risk appetite came back yesterday as Russians started pulling a part of their troops back from the Ukrainian border. Although, news of a cyber-attack on some Ukrainian banks and some government websites including the defense ministry’s website raised a couple of eyebrows again, and turned all eyes to the Russians. But there is no report suggesting that Russia is behind the cyber-attack just yet. Oil fell as much as 4% yesterday on de-escalation news. Gold dropped 35 dollars, as the safe haven money poured into the risk assets. European and US indices rallied. But, released yesterday, the US producer inflation data came in as a bad surprise, yet again. With the looming inflation worries, let’s see if today’s FOMC minutes will kill that joy. Hopeful news is that the latest Fed decision was more hawkish than expected, and the minutes could smooth out a part of the extra hawkishness. Elsewhere, Warren Buffet invested in Brazil’s Nubank, finally building some exposure to cryptocurrencies! Watch the full episode to find out more! 0:00 Intro 0:25 Ukraine update 1:55 Oil dropped 3:49 Gold sunk 4:56 FOMC minutes: what to expect? 6:13 Nasdaq: death cross formation soon? 7:01 Warren Buffet gets exposure to Bitcoin! 7:56 European indices up: are gains sustainable? Ipek Ozkardeskaya has begun her financial career in 2010 in the structured products desk of the Swiss Banque Cantonale Vaudoise. She worked at HSBC Private Bank in Geneva in relation to high and ultra-high net worth clients. In 2012, she started as FX Strategist at Swissquote Bank. She worked as a Senior Market Analyst in London Capital Group in London and in Shanghai. She returned to Swissquote Bank as Senior Analyst in 2020.

EURUSD bounces off support The US dollar retreats as the Fed’s half-point hike in March remains uncertain. The euro’s break above the daily resistance at 1.1480 boosted buyers’ confidence after a sell-off in January. It bounced off 1.1280 at the base of the recent bullish breakout. The support also is right next to the 61.8% Fibonacci retracement level (1.1265) making it an area of congestion. A close above the intermediate resistance (1.1370) would attract more buying interest. Then an extension above 1.1490 may fuel a rally towards 1.1600. GBPUSD awaits breakout The sterling holds well as Britain’s wage growth beats expectations in December. The current rebound came under pressure in the supply zone around 1.3660 which was the origin of a sharp drop in late January. An overbought RSI led to some profit-taking but the pound has found support above 1.3480. The bears’ failed attempts to push lower indicates strong demand. A bullish close above 1.3640 would lift offers towards last month’s high at 1.3750. The daily support at 1.3370 is a key floor in keeping the rally intact. XAUUSD seeks support Gold drifts lower on signs of de-escalation in Ukraine. A break above last November’s high at 1875 may have put the precious metal back on track. However, the rally ran out of steam in the short term with the RSI shooting into the overbought territory. The price is taking a breather and buyers may see a pullback as an opportunity to stake in. A drop below 1852 may wash out weak hands and deepen the correction towards 1830. 1880 is now a fresh resistance and its breach could propel bullion to last June’s high at 1910.

Tesla bounces strongly on Tuesday as risk assets surge. TSLA stock gains just over 5% on Tuesday. Geopolitical tensions falling help risk appetites return. Tesla (TSLA) shares bounced strongly on Tuesday, eventually closing up over 5% in a strong day for equities. The stock market was buoyed by news of some Russian deployments returning to their bases. Russia then appeared to confirm this as hopes grew for a diplomatic solution. This saw an obvious bounce in equities (https://www.fxstreet.com/markets/equities) with the strongest names being those that were previously the weakest. Understandable, but is this gain sustainable? NATO this morning has said it sees no sign of Russian troops pulling back from the Ukraine border. NATO has said it sees Russian troop numbers still growing along the Russian-Ukraine border. This news (https://www.fxstreet.com/news) still has legs. Volatility has been high as a result and will likely continue that way. Tesla Stock News The latest quarterly SEC filings have provided much information to pore over. In particular, Tesla, they do note some hedge fund selling. This is not too surprising given the record highs TSLA stock pushed on to before Elon Musk sold a stake. Benzinga reports that the latest filing shows Ray D'Alio's Bridgewater cutting its stake in Tesla. Cathie Wood of ARK Invest was regularly top-slicing her firm's stake in Tesla recently. CNBC also reported yesterday that hedge fund Greenlight Capital had made a bearish bet on Tesla shares. Greenlight, according to the report, has been a long time Tesla bear. Apart from those snippets though, macroeconomic factors are the main driver of the Tesla stock price currently. Electric vehicle stocks have not been a strong sector so far in 2022 as growth, in general, is out of favor with investors. This has led to steep falls in other names such as Rivian (RIVN) and Lucid (LCID). Both are at a much earlier stage of development than Tesla (TSLA) and on that basis, we would favor Tesla (TSLA) over them. But we must stress we would ideally avoid the sector entirely until perhaps the second quarter. Once markets have adjusted to the prospect of higher rates, some high-growth stocks may benefit. historical in a Fed (https://www.fxstreet.com/macroeconomics/central-banks/fed) hiking cycle the main indices do advance but growth sectors struggle. Rivian so far is down 36% year to date, Lucid is down 24% while Tesla is the outperformer, down 12% for 2022. Tesla Stock Forecast We remain in the chop zone between the two key levels of $945 and $886. Breaking $945 should lead to a move toward $1,063. That would still be consistent with the longer-term bearish trend. Nothing goes down or up in a straight line. TSLA is unlikely to be able to fight the current overpowering macroeconomic backdrop of rising rates (https://www.fxstreet.com/rates-charts/rates) hitting high growth stocks. But breaking $945 is still significant in the short term and should see some fresh momentum. While $886 is significant, the 200-day moving average at $826 should have our real attention on the downside. Tesla has not closed below this level in over 6 months, so that would be significant and again lead to a fresh influx of momentum. Just this time though, it would be selling momentum. Tesla (TSLA) chart, daily Short-term swing traders should note the volume momentum behind moves. Once volume dries up, Tesla tends to fall off intraday. From the 15-minute chart below, we have an opening gap from Tuesday down to $880. This is short-term support, but a break will see the bottom of Monday's range at $840 tested. Tesla (TSLA) 15-minute chart

  Gold prices declined in 2021 and the prospects for 2022 are not impressive as well. However, the yellow metal’s strategic relevance remains high. Last month, the World Gold Council published two interesting reports about gold. The first one is the latest edition of Gold Demand Trends, which summarizes the entire last year. Gold supply decreased 1%, while gold demand rose 10% in 2021. Despite these trends, the price of gold declined by around 4%, which – for me – undermines the validity of the data presented by the WGC. I mean here that the relevance of some categories of gold demand (jewelry demand, technological demand, the central bank’s purchases) for the price formation is somewhat limited. The most important driver for gold prices is investment demand. Unsurprisingly, this category plunged 43% in 2021, driven by large ETF outlfows. According to the report, “gold drew direction chiefly from inflation and interest rate expectations in 2021,” although it seems that rising rates outweighed inflationary concerns. As the chart below shows, the interest rates increased significantly last year. For example, 10-year Treasury yields rose 60 basis points. As a result, the opportunity costs for holding gold moved up, triggering an outflow of gold holdings from the ETF. As the rise in interest rates is likely to continue in 2022 because of the hawkish stance of the Fed, gold investment may struggle this year as well. The end of quantitative easing and the start of quantitative tightening may add to the downward pressure on gold prices. However, there are some bullish caveats here. First, gold has remained resilient in January, despite the hawkish FOMC meeting. Second, the Fed’s tightening cycle could be detrimental to the US stock market and the overall, highly indebted economy, which could be supportive of gold prices. Third, as the report points out, “gold has historically outperformed in the months following the onset of a US Fed tightening cycle”. The second publication released by the WGC last month was “The Relevance of Gold as a Strategic Asset 2022”. The main thesis of the report is that gold is a strategic asset, complementary to equities and bonds, that enhances investment portfolios’ performance. This is because gold is “a store of wealth and a hedge against systemic risk, currency depreciation, and inflation.” It is also “highly liquid, no one’s liability, carries no credit risk, and is scarce, historically preserving its value over time.” Gold is believed to be a great source of return, as its price has increased by an average of nearly 11% per year since 1971, according to the WGC. Gold can also provide liquidity, as the gold market is highly liquid. As the report points out, “physical gold holdings by investors and central banks are worth approximately $4.9 trillion, with an additional $1.2 trillion in open interest through derivatives traded on exchanges or the over-the-counter (OTC) market.” Last but not least, gold is an excellent portfolio diversifier, as it is negatively correlated with risk assets, and – importantly – this negative correlation increases as these assets sell off. Hence, adding gold to a portfolio could diversify it, improving its risk-adjusted return, and also provide liquidity to meet liabilities in times of market stress. The WGC’s analysis suggests that investors should consider adding between 4% and 15% of gold to the portfolio, but personally, I would cap this share at 10%.   Implications for Gold What do the recent WGC reports imply for the gold market? Well, one thing is that adding some gold to the investment portfolio would probably be a smart move. After all, gold serves the role of both a safe-haven asset and an insurance against tail risks. It’s nice to be insured. However, investing in gold is something different, as gold may be either in a bullish or bearish trend. You should never confuse these two motives behind owning gold! Sometimes it’s good to own gold for both insurance and investment reasons, but not always. When it comes to 2022, investment demand for gold may continue to be under downward pressure amid rising interest rates. However, there are also some bullish forces at work, which could intensify later this year. If you enjoyed today’s free gold report, we invite you to check out our premium services. We provide much more detailed fundamental analyses of the gold market in our monthly Gold Market Overview reports and we provide daily Gold & Silver Trading Alerts with clear buy and sell signals. In order to enjoy our gold analyses in their full scope, we invite you to subscribe today. If you’re not ready to subscribe yet though and are not on our gold mailing list yet, we urge you to sign up. It’s free and if you don’t like it, you can easily unsubscribe. Sign up today! Arkadiusz Sieron, PhDSunshine Profits: Effective Investment through Diligence & Care

GBPUSD tests resistance The sterling edged higher after January’s retail sales beat expectations. The recent pause has been an opportunity for the bulls to accumulate. A break above 1.3640 would signal solid buying after previous failed attempts. The daily resistance at 1.3750 would be the next hurdle. Its breach could trigger a broader reversal in the weeks to come. 1.3560 is the immediate support. And 1.3490 at the lower end of the horizontal consolidation is the second line of defense in case the pair needs to attract more support. USDCAD awaits breakout The Canadian dollar tanked after disappointing retail sales in December. The US counterpart is still struggling below the supply zone around 1.2800. A close above this daily resistance could propel the pair to last December’s high at 1.2950, a prerequisite for a bullish continuation in the medium-term. The current sideways action is a sign of indecision. 1.2640 is the lower boundary of the recent consolidation range. A bearish breakout would bring the greenback to a previous low at 1.2560. EURJPY struggles for support The Japanese yen rallies amid growing risk aversion across the board. The euro continues to shed gains from the surge earlier this month. A fall below 131.90 triggered profit-taking, and the latest rally came out to be a dead cat bounce after it was capped by this support-turned-resistance. A break below 130.40 (which sits over the 30-day moving average) shows fragility in market sentiment and would cause another round of sell-off. 129.20 at the base of the bullish impetus would be the next support.

Looking back, gold has been rising nearly US$225 since December 15th, 2021, and US$195 since 28th of January 2022. Especially the strong rally over the last four weeks caught many by surprise. But our price target of US$1,975 was hit exactly last Thursday, when all other markets plunged in anticipation of strong sanctions against Russia. Markets then strongly recovered on Friday on hopes of weak sanctions and a potential postponement of the rate hikes by the FED. Over the weekend, however, NATO and its partners announced SWIFT sanctions against Russia. Monday will therefore likely be another wild and volatile day in the markets. But “peak fear” has probably been reached last Thursday (at least for now). Give peace a chance ðŸ•Šï¸ÂðŸ‡·ðŸ‡ºðŸ•Šï¸ÂðŸ‡ºðŸ‡¦ðŸ•Šï¸Â Fundamentally, banning Russian banks from SWIFT payments will lead to Russia stop selling oil & natural gas. Russian oil represents about 9% of global output and there’s an energy shortage already. The result will be a global depression and more inflation at the same time. And that would be the best-case scenario, cause as quickly as things unfold, WWIII is no longer an unthinkable horror scenario. We can only hope that successful peace negotiations will take place as soon as possible. In these uncertain times, gold should remain supported. As geopolitical events unfold, another sharp spike higher is always possible. A direct transition back into the correction, which began in August 2020, is unlikely. It would rather take much more time (at least a few months), before gold could drift back towards significantly lower grounds. Our maximum downside remains at US$1,625 for the potential 8-year cycle low, due in 2023 or 2024. Gold in US-Dollar, weekly chart as of February 27th, 2022. Gold in US-Dollar, weekly chart as of February 27th, 2022. On its weekly chart, gold continues to be in an uptrend. The breakout above the downtrend line led to a sharp advance over the last two weeks. The stochastic oscillator still has a buy signal in place. And with the sharp reversal/pullback since reaching $1,975, gold did close the week right at its upper Bollinger Band (US$1,889). Since the upper Bollinger Band has been bent upwards, gold will now have more room to continue its rally to the upside over the coming two to four weeks. However, the stochastic oscillator is about to reach its overbought zone. Comparing its behavior to the last 16 months, we have to assume that gold will have a hard time nesting up in the overbought zone for long. Hence, corrective price action is on the horizon. Overall, the weekly chart is still bullish and points to another attack towards US$1,950 to US$1,975. Gold in US-Dollar, daily chart as of February 27th, 2022. Gold in US-Dollar, daily chart as of February 27th, 2022. The daily chart captures the sharp rally as well as the reversal and bloodbath in the gold market over last two days. So far, gold has given back nearly 50% of the rally since January 28th (from US$1,780 up to US$1,975 and then down to US$1,878). The stochastic oscillator has lost its embedded status and momentum is bearish now. Should gold want to correct further towards the 61.8%-retracement ($1,854), it will likely also test the former resistance and breakout level around US$1,840 to US$1,845. Such a pullback towards US$1,840 to US$1,855 has certain probability, but would also offer a very interesting long entry again. Since the short-term timeframes like the 1- and 4-hour charts are getting oversold, gold alternatively might find support between US$1,870 and US$1,880 over the next few days already. To summarize, the daily chart is currently bearish and patience is needed. But Gold I swell supported and should find support either between US$1,840 to US$1,855 or US$1,870 and US$1,880. Afterwards it should start another leg up. Conclusion: Strong reversal should lead to another leg up Last week’s price action was certainly not for the faint of heart. A daily gain of over +4% is extremely rare in the gold market and was immediately undone upon COMEX opening. The sharp reversal does not look too good, but it does not yet mean the end of the rally. Expect some more downside or at least sideways consolidation. Usually, such a sharp rally does not collapse immediately. Hence, once the bulls have sorted themselves, we expect another rise above US$1,900 with a minimum price target of US$1,950. An overshot towards US$2,000 is still possible, but now a bit less likely. Once this next attack will have failed, we assume the start of a corrective wave down somewhere in spring, which could last well into early to midsummer. Feel free to join us in our free Telegram channel for daily real time data and a great community. If you like to get regular updates on our gold model, precious metals and cryptocurrencies you can also subscribe to our free newsletter. Disclosure: Midas Touch Consulting and members of our team are invested in Reyna Gold Corp. These statements are intended to disclose any conflict of interest. They should not be misconstrued as a recommendation to purchase any share. This article and the content are for informational purposes only and do not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision. The views, thoughts and opinions expressed here are the author’s alone. They do not necessarily reflect or represent the views and opinions of Midas Touch Consulting. By Florian Grummes|February 27th, 2022|Tags: Gold, Gold Analysis, Gold bullish, gold chartbook, Gold consolidation, gold fundamentals, Natural Gas, Oil, precious metals, Reyna Gold, US-Dollar|0 Comments About the Author: Florian Grummes Florian Grummes is an independent financial analyst, advisor, consultant, trader & investor as well as an international speaker with more than 20 years of experience in financial markets. He is specialized in precious metals, cryptocurrencies and technical analysis. He is publishing weekly gold, silver & cryptocurrency analysis for his numerous international readers. He is also running a large telegram Channel and a Crypto Signal Service. Florian is well known for combining technical, fundamental and sentiment analysis into one accurate conclusion about the markets. Since April 2019 he is chief editor of the cashkurs-gold newsletter focusing on gold and silver mining stocks. Besides all that, Florian is a music producer and composer. Since more than 25 years he has been professionally creating, writing & producing more than 300 songs. He is also running his own record label Cryon Music & Art Productions. His artist name is Florzinho.

  Russia underestimated Ukraine’s fierce defense. Instead of quick conquest, the war is still going on. The same applies to pulling the rope between gold bulls and bears. It was supposed to be a blitzkrieg. The plan was simple: within 72 hours Russian troops were to take control of Kyiv, stage a coup, overthrow the democratically elected Ukrainian authorities, and install a pro-Russian puppet government. Well, the blitzkrieg clearly failed. The war has been going on for five days already, and Kyiv (and other major cities) remains in Ukrainian hands, while the Russians suffer great losses. Indeed, the Ukrainians are fighting valiantly. The Kremlin apparently did not expect such high morale among the troops and civilians, as well as such excellent organization and preparation. Meanwhile, the morale among Russian soldiers is reported to be pathetically low, as they have no motivation to fight with culturally close Ukrainians (many of whom speak perfect Russian). The invaders are also poorly equipped, and the whole operation was logistically unprepared (as the assumption was a quick capitulation by Ukrainian forces and a speedy collapse of the government in Kyiv). Well, pride comes before a fall. What’s more, the West is united as never before (Germany did a historic U-turn in its foreign and energy policies) and has already imposed relatively heavy economic sanctions on Russia (including cutting off some of the country’s banks from SWIFT), and donated weapons to Ukraine. However – and unfortunately – the war is far from being ended. Military analysts expect a second wave of Russian troops that can break the resistance of the Ukrainians, who have fewer forces and cannot relieve the soldiers just like the other side. Indeed, satellite pictures show a large convoy of Russian forces near Kyiv. Russia is also gathering troops in Belarus and – sadly – started shelling residential quarters in Ukrainian cities. According to US intelligence, Belarusian soldiers could join Russian forces. The coming days will be crucial for the fate of the conflict.   Implications for Gold What does the war between Russia and Ukraine imply for the gold market? Well, initially, the conflict was supportive of gold prices. As the chart below shows, the price of gold (London Fix) soared to $1,936 on Thursday. However, the rally was very short-lived, as the very next day, gold prices fell to $1,885. Thus, gold’s performance looked like “buy the rumor, sell the news.” However, yesterday, the price of the yellow metal returned above $1,900, so some geopolitical risk premium may still be present in the gold market. Anyway, it seems that I was right in urging investors to focus on fundamentals and to not make long-term investments merely based on geopolitical risks, the impact of which is often only temporary. Having said that, gold may continue its bullish trend, at least for a while. After all, the war not only increases risk aversion, but it also improves gold’s fundamental outlook. First of all, the Fed is now less likely to raise the federal funds rate in March. It will probably still tighten its monetary policy, but in a less aggressive way. For example, the market odds of a 50-basis point hike decreased from 41.4% one week ago to 12.4% now. What’s more, we are observing increasing energy prices, which could increase inflation further. The combination of higher inflation and a less hawkish Fed should be fundamentally positive for gold prices, as it implies low real interest rates. On the other hand, gold may find itself under downward pressure from selling reserves to raise liquidity. I'm referring to the fact that the West has cut Russia off from the SWIFT system in part. In such a situation, Russia would have to sell part of its massive gold reserves, which could exert downward pressure on prices. Hence, the upcoming days may be quite volatile for the gold market. At the end of my article, I would like to point out that although the war in Ukraine entails implications for the precious metals market, it is mostly a humanitarian tragedy. My thoughts and prayers are with all the casualties of the conflict and their families. I hope that Ukraine will withstand the invasion and peace will return soon! If you enjoyed today’s free gold report, we invite you to check out our premium services. We provide much more detailed fundamental analyses of the gold market in our monthly Gold Market Overview reports and we provide daily Gold & Silver Trading Alerts with clear buy and sell signals. In order to enjoy our gold analyses in their full scope, we invite you to subscribe today. If you’re not ready to subscribe yet though and are not on our gold mailing list yet, we urge you to sign up. It’s free and if you don’t like it, you can easily unsubscribe. Sign up today! Arkadiusz Sieron, PhDSunshine Profits: Effective Investment through Diligence & Care

The British pound was down to a 16-month low at 1.3080 in the morning, having lost 2% last Thursday. The pressure on the British currency looks to be developing capital outflows from Europe on speculation that reduced energy and materials supplies from Russia will prove to be a shock to the region's economy in the near term. In addition, the British pound was probably influenced by technical factors yesterday and today. The single currency has been sharply oversold in recent days and the EURGBP approach of 0.8200 on Monday morning triggered a strong wave of buying, bringing the pair back above 0.8310. On Monday, the euro got visible support against a wide range of other currencies, from the Swiss franc to the New Zealand dollar. Interest in the euro was also supported on Tuesday by a rally in equities on EU plans to issue joint bonds. But these are also good fundamentals for the British currency, which often directly correlates to the stock market. Short-term, relatively strong oversold conditions in the British currency creates the potential for a technical bounce in the coming days and in the area of 1.30-1.31 to stop its decline, gaining strong buy support until the end of the week and further heading to 1.3350 by the end of the month.

EURUSD bounces back The euro rallies on news that the EU may issue a joint bond to fund energy and defense. The pair found bids near May 2020’s lows (1.0810). An oversold RSI on the daily chart prompted sellers to take profit, easing the downward pressure. A rally above the immediate resistance at 1.0940 and a bullish MA cross may improve sentiment in the short term. However, buyers will need to clear the support-turned-resistance at 1.1160 before they could hope for a meaningful rebound. 1.0910 is the support in case of a pullback. GBPUSD inches higher The sterling claws back losses as risk appetite makes a timid return across the board. Following a three-month-long rebound on the daily chart, a lack of support at 1.3200 and a bearish MA cross shows strong selling pressure. A bounce-back above 1.3200 may only offer temporary relief as sellers potentially look to fade the rebound. 1.3350 is a key hurdle that sits along the 20-day moving average. 1.3080 is fresh support and its breach could trigger a new round of sell-off below the next daily support at 1.2880. USOIL breaks support WTI crude tumbled after the UAE said consider boosting production. The parabolic climb came to a halt at 129.00 and pushed the RSI into an extremely overbought condition on the daily chart. A bearish RSI divergence suggested a loss of momentum and foreshadowed a correction as traders would be wary of chasing the rally. A fall below 115.00 led buyers to bail out, triggering a wave of liquidation. 105.00 is the next support and a breakout could bring the price back to 95.00 near the 30-day moving average.

NZDUSD consolidates gains The New Zealand dollar inched higher supported by roaring commodity prices. A break above the daily resistance at 0.6890 has put the kiwi back on track in the medium term. A bullish MA cross on the daily chart suggests an acceleration to the upside. As sentiment improves, the bulls may see the current consolidation as an opportunity to accumulate. A close above 0.6920 would extend the rally to 0.7050. 0.6800 is the first support and 0.6730 over the 30-day moving average a key demand zone. XAGUSD seeks support Silver consolidates amid ongoing geopolitical instability. A bearish RSI divergence suggests a deceleration in the rally. A tentative break below 25.40 has prompted some buyers to take profit. While sentiment remains optimistic, a correction might be necessary for the bulls to take a breather. The psychological level of 25.00 is a major demand zone. Its breach could send the precious metal to 24.30 which sits on the 30-day moving average. A rally above 26.90 could propel the price to last May’s highs around 28.50. US 30 struggles for buyers The Dow Jones 30 turned south after talks between Russia and Ukraine stalled again. A rebound above 34000 has provided some relief. Nonetheless, enthusiasm could be short-lived after the index gave up all recent gains. The prospect of a bear market looms if this turns out to be a dead cat bounce. A fall below 32300 could trigger another round of liquidation and push the Dow to a 12-month low at 30800. On the upside, 33500 is the first resistance. The bulls will need to lift offers around 34100 before they could attract more followers.

  The S&P 500 index extended its Friday’s decline yesterday, but it remained within a week-long volatile consolidation. Is this a medium-term bottoming pattern? The broad stock market index lost 0.74% on Monday, Mar. 14, after its Friday’s decline of 1.3%. The market bounced from the short-term resistance level of 4,300 and it extended a volatile consolidation following the early March sell-off from the 4,400 level. Last week on Tuesday it reached the local low of 4,157.87 and then we’ve seen a rebound to the 4,300 level. Yesterday the S&P 500 came back below the 4,200 level again. The market is closer to the Feb. 24 local low of 4,114.65. It was 704 points or 14.6% below the January 4 record high of 4,818.62 then. There’s still a lot of uncertainty concerning the ongoing Ukraine conflict. This morning the S&P 500 index is expected to open 0.5% higher following lower than expected Producer Price Index release. The market will be waiting for the important tomorrow’s FOMC Statement release, and we may see some further consolidation. The nearest important resistance level is now at around 4,200. On the other hand, the support level is at 4,100-4,150. The S&P 500 index continues to trade slightly above the recently broken downward trend line, as we can see on the daily chart (chart by courtesy of http://stockcharts.com): Futures Contract Trades Along the Previous Lows Let’s take a look at the hourly chart of the S&P 500 futures contract. Today it is bouncing from the 4,140 level. It’s a support level marked by the previous local low. The support level is also at 4,100. We are still maintaining our long position, as we are expecting an upward correction from the current levels (chart by courtesy of http://tradingview.com): Conclusion The S&P 500 index will likely bounce this morning following better-than-expected producers’ inflation data release. The market may extend its volatile consolidation and we may see more uncertainty, as investors will be waiting for the Wednesday’s FOMC Statement release. Here’s the breakdown: The S&P 500 index will likely bounce this morning, but we may see some more short-term uncertainty. We are maintaining our long position (opened on Feb. 22). We are still expecting an upward correction from the current levels. Like what you’ve read? Subscribe for our daily newsletter today, and you'll get 7 days of FREE access to our premium daily Stock Trading Alerts as well as our other Alerts. Sign up for the free newsletter today! Thank you. Paul Rejczak,Stock Trading StrategistSunshine Profits: Effective Investments through Diligence and Care * * * * * The information above represents analyses and opinions of Paul Rejczak & Sunshine Profits' associates only. As such, it may prove wrong and be subject to change without notice. At the time of writing, we base our opinions and analyses on facts and data sourced from respective essays and their authors. Although formed on top of careful research and reputably accurate sources, Paul Rejczak and his associates cannot guarantee the reported data's accuracy and thoroughness. The opinions published above neither recommend nor offer any securities transaction. Mr. Rejczak is not a Registered Securities Advisor. By reading his reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Paul Rejczak, Sunshine Profits' employees, affiliates as well as their family members may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

  It seems that the stalemate in Ukraine has slowed down gold's bold movements. Will the Fed's decision on interest rates revive them again?  The tragedy continues. As United Nations Secretary-General António Guterres said yesterday, “Ukraine is on fire and being decimated before the eyes of the world.” There have already been 1,663 civilian casualties since the Russian invasion began. What is comforting in this situation is that Russian troops have made almost no advance in recent days (although there has been some progress in southern Ukraine). They are attempting to envelop Ukrainian forces in the east of the country as they advance from the direction of Kharkiv in the north and Mariupol in the south, but the Ukrainian Armed Forces continue to offer staunch resistance across the country. So, it seems that there is a kind of stalemate. The Russians don’t have enough forces to break decisively through the Ukrainian defense, while Ukraine’s army doesn’t have enough troops to launch an effective counteroffensive and get rid of the occupiers. Now, the key question is: in whose favor is time working? On the one hand, Russia is mobilizing fighters from its large country, but also from Syria and Nagorno-Karabakh. The invaders continue indiscriminate shelling and air attacks that cause widespread destruction among civilian population as well. On the other hand, each day Russian army suffers heavy losses, while Ukraine is getting new weapons from the West.   Implications for Gold How is gold performing during the war? As the chart below shows, the recent stabilization of the military situation in Ukraine has been negative for the yellow metal. The price of gold slid from its early March peak of $2,039 to $1,954 one week later (and today, the price is further declining). However, please note that gold makes higher highs and higher lows, so the outlook remains rather positive, although corrections are possible. On the other hand, gold’s slide despite the ongoing war and a surge in inflation could be a little disturbing. However, the reason for the decline is simple. It seems that the uncertainty reached its peak last week and has eased since then. As the chart below shows, the CBOE volatility index, also called a fear index, has retreated from its recent peak. The Russian troops have made almost no progress, the most severe response of the West is probably behind us, and the world hasn’t sunk into nuclear war. Meanwhile, the negotiations between Russia and Ukraine are taking place, offering some hope for a relatively quick end to the war. As I wrote last week, “there might be periods of consolidation and even corrections if the conflict de-escalates or ends.” The anticipation of tomorrow’s FOMC meeting could also contribute to the slide in gold prices. However, the chart above also shows that credit spreads, another measure of risk perception, have continued to widen in recent days. Other fundamental factors also remain supportive of gold prices. Let’s take, for instance, inflation. As the chart below shows, the annual CPI rate has soared from 7.5% in January to 7.9% in February, the largest move since January 1982. Meanwhile, the core CPI, which excludes food and energy prices, surged from 6.0% to 6.4% last month, also the highest reading in forty years. The war in Ukraine can only add to the inflationary pressure. Prices of oil and other commodities have already soared. The supply chains got another blow. The US Congress is expanding its spending again to help Ukraine. Thus, the inflation peak would likely occur later than previously thought. High inflation may become more embedded, which increases the odds of stagflation. All these factors seem to be fundamentally positive for gold prices. There is one “but”. The continuous surge in inflation could prompt monetary hawks to take more decisive actions. Tomorrow, the FOMC will announce its decision on interest rates, and it will probably hike the federal funds rate by 25 basis points. The hawkish Fed could be bearish for gold prices. Having said that, historically, the Fed’s tightening cycle has been beneficial to the yellow metal when accompanied by high inflation. Last time, the price of gold bottomed out around the liftoff. Another issue is that, because of the war in Ukraine, the Fed could adopt a more dovish stance and lift interest rates in a more gradual way, which could be supportive of gold prices. The military situation in Ukraine and tomorrow’s FOMC meeting could be crucial for gold’s path in the near future. The hike in interest rates is already priced in, but the fresh dot-plot and Powell’s press conference could bring us some unexpected changes in US monetary policy. Stay tuned! If you enjoyed today’s free gold report, we invite you to check out our premium services. We provide much more detailed fundamental analyses of the gold market in our monthly Gold Market Overview reports and we provide daily Gold & Silver Trading Alerts with clear buy and sell signals. In order to enjoy our gold analyses in their full scope, we invite you to subscribe today. If you’re not ready to subscribe yet though and are not on our gold mailing list yet, we urge you to sign up. It’s free and if you don’t like it, you can easily unsubscribe. Sign up today! Arkadiusz Sieron, PhDSunshine Profits: Effective Investment through Diligence & Care

USDCHF breaks major resistance The US dollar continues upward as the Fed is set to increase its interest rates by 25bp. The rally sped up after it cleared the daily resistance at 0.9360. The bullish breakout may have ended a 9-month long consolidation from the daily chart perspective. The rising trendline confirms the optimism and acts as an immediate support. Solid momentum could propel the greenback to April 2021’s high at 0.9470. Buyers may see a pullback as an opportunity to jump in. 0.9330 is the closest support should this happen. EURGBP tests key resistance The sterling found support after a drop in Britain’s unemployment rate in January. A break above the daily resistance at 0.8400 has prompted sellers to cover, easing the downward pressure. Sentiment remains downbeat unless buyers push the single currency past 0.8475. In turn, this could pave the way for a reversal in the weeks to come. Otherwise, the bears might double down and drive the euro back into its downtrend. A fall below 0.8360 would force early bulls to liquidate and trigger a sell-off to 0.8280. USOIL drops towards key support WTI crude falls back over a new round of ceasefire talks between Russia and Ukraine. Previously, a bearish RSI divergence indicated a loss of momentum as the price went parabolic. Then a steep fall below 107.00 was a sign of liquidation. Buyers continue to unwind their positions as the price slides back to its pre-war level. The psychological level of 90.00 is an important support on the daily chart. An oversold RSI may attract buying interest in this demand zone. 105.00 is the first resistance before buyers could regain control.

XAUUSD stabilizes Gold struggles as the Fed maps out aggressive tightening. The precious metal has given up all its gains from the previous parabolic rise, which suggests a lack of commitment to support the rally. The price is testing the origin of the bullish breakout at 1907 which coincides with the 30-day moving average. An oversold RSI attracted some buying interest. 1961 is the hurdle ahead before a rebound could materialize. Further down, 1880 is key support on the daily chart and its breach could reverse the course in the weeks to come. NZDUSD attempts rebound The New Zealand dollar found support from a rebound in commodity prices. The pair saw solid bids in the demand zone around 0.6725 and right over the 30-day moving average. A bullish RSI divergence showed a deceleration in the pullback, which would have caught buyers’ attention in this congestion area. A close above 0.6800 has prompted short-term sellers to cover and leave the door open for a rebound. 0.6870 is the last major resistance and a bullish breakout could propel the kiwi past the recent peak at 0.6920. CADJPY breaks key resistance The Canadian dollar shot higher after February’s CPI beat expectations. A break above last October’s high at 93.00 could be an ongoing signal to end a 5-month long consolidation. The RSI’s double top in the overbought area may temporarily hold the bulls back. As sentiment turns overwhelmingly upbeat, buyers may be eager to jump in at a discounted price. The supply-turned-demand zone near 91.60 is an important level to safeguard the breakout. The psychological level of 94.00 could see resistance.

  The FOMC finally raised interest rates and signaled six more hikes this year. Despite the very hawkish dot plot, gold went up in initial reaction. There has been no breakthrough in Ukraine. Russian invasion has largely stalled on almost all fronts, so the troops are focusing on attacking civilian infrastructure. However, according to some reports, there is a slow but gradual advance in the south. Hence, although Russia is not likely to conquer Kyiv, not saying anything about Western Ukraine, it may take some southern territory under control, connecting Crimea with Donbas. The negotiations are ongoing, but it will be a long time before any agreement is reached. Let’s move to yesterday’s FOMC meeting. As widely expected, the Fed raised the federal funds rate. Finally! Although one Committee member (James Bullard) opted for a bolder move, the US central bank lifted the target range for its key policy rate only by 25 basis points, from 0-0.25% to 0.25-0.50%. It was the first hike since the end of 2018. The move also marks the start of the Fed’s tightening cycle after two years of ultra-easy monetary policy implemented in a response to the pandemic-related recession. In support of these goals, the Committee decided to raise the target range for the federal funds rate from 1/4 to 1/2 percent and anticipates that ongoing increases in the target range will be appropriate. It was, of course, the most important part of the FOMC statement. However, the central bankers also announced the beginning of quantitative tightening, i.e., the reduction of the enormous Fed’s balance sheet, at the next monetary policy meeting in May. In addition, the Committee expects to begin reducing its holdings of Treasury securities and agency debt and agency mortgage-backed securities at a coming meeting. It’s also worth mentioning that the Fed deleted all references to the pandemic from the statement. Instead, it added a paragraph related to the war in Ukraine, pointing out that its exact implications for the U.S. economy are not yet known, except for the general upward pressure on inflation and downward pressure on GDP growth: The invasion of Ukraine by Russia is causing tremendous human and economic hardship. The implications for the U.S. economy are highly uncertain, but in the near term the invasion and related events are likely to create additional upward pressure on inflation and weigh on economic activity. These changes in the statement were widely expected, so their impact on the gold market should be limited.   Dot Plot and Gold The statement was accompanied by the latest economic projections conducted by the FOMC members. So, how do they look at the economy right now? As the table below shows, the central bankers expect the same unemployment rate and much slower economic growth this year compared to last December. This is a bit strange, as slower GDP growth should be accompanied by higher unemployment, but it’s a positive change for the gold market. What’s more, the FOMC participants see inflation now as even more persistent because they expect 4.3% PCE inflation at the end of 2022 instead of 2.6%. Inflation is forecasted to decline in the following years, but only to 2.7% in 2023 and 2.3% in 2024, instead of the 2.3% and 2.1% seen in December. Slower economic growth accompanied by more stubborn inflation makes the economy look more like stagflation, which should be positive for gold prices. Last but not least, a more aggressive tightening cycle is coming. Brace yourselves! According to the fresh dot plot, the FOMC members see seven hikes in interest rates this year as appropriate. That’s a huge hawkish turn compared to December, when they perceived only three interest rate hikes as desired. The central bankers expect another four hikes in 2024 instead of just the three painted in the previous dot plot. Hence, the whole forecasted path of the federal fund rate has become steeper as it’s expected to reach 1.9% this year and 2.8% next year, compared to the 0.9% and 1.6% seen earlier. Wow, that’s a huge change that is very bearish for gold prices! The Fed signaled the fastest tightening since 2004-2006, which indicates that it has become really worried about inflation. It’s also possible that the war in Ukraine helped the US central bank adopt a more hawkish stance, as if monetary tightening leads to recession, there is an easy scapegoat to blame.   Implications for Gold What does the recent FOMC meeting mean for the gold market? Well, the Fed hiked interest rates and announced quantitative tightening. These hawkish actions are theoretically negative for the yellow metal, but they were probably already priced in. The new dot plot is certainly more surprising. It shows higher inflation and slower economic growth this year, which should be bullish for gold. However, the newest economic projections also forecast a much steeper path of interest rates, which should, theoretically, prove to be negative for the price of gold. How did gold perform? Well, it has been sliding recently in anticipation of the FOMC meeting. As the chart below shows, the price of the yellow metal plunged from $2,039 last week to $1,913 yesterday. However, the immediate reaction of gold to the FOMC meeting was positive. As the chart below shows, the price of the yellow metal rebounded, jumping above $1,940. Of course, we shouldn’t draw too many conclusions from the short-term moves, but gold’s resilience in the face of the ultra-hawkish FOMC statement is a bullish sign. Although it remains to be seen whether the upward move will prove to be sustainable, I wouldn’t be surprised if it will. This is what history actually suggests: when the Fed started its previous tightening cycle in December 2015, the price of gold bottomed out. Of course, history never repeats itself to the letter, but there is another important factor. The newest FOMC statement was very hawkish – probably too hawkish. I don’t believe that the Fed will hike interest rates to 1.9% this year. And you? It means that we have probably reached the peak of the Fed’s hawkishness and that it will rather soften its stance from then on. If I’m right, a lot of the downward pressure that constrained gold should be gone now. If you enjoyed today’s free gold report, we invite you to check out our premium services. We provide much more detailed fundamental analyses of the gold market in our monthly Gold Market Overview reports and we provide daily Gold & Silver Trading Alerts with clear buy and sell signals. In order to enjoy our gold analyses in their full scope, we invite you to subscribe today. If you’re not ready to subscribe yet though and are not on our gold mailing list yet, we urge you to sign up. It’s free and if you don’t like it, you can easily unsubscribe. Sign up today! Arkadiusz Sieron, PhDSunshine Profits: Effective Investment through Diligence & Care

  The Fed's hawkish alerts seem like a voice in the wilderness to gold investors. However, a carefree attitude can backfire on them – in just a few months. An epic battle is unfolding across the financial markets as the Fed warns investors about its looming rate hike cycle and the latter ignores the ramifications. However, with perpetually higher asset prices only exacerbating the Fed's inflationary conundrum, a profound shift in sentiment will likely occur over the next few months. To explain, I highlighted in recent days how the Fed has turned the hawkish dial up to 100. Moreover, I wrote on Mar. 22 that it's remarkable how much the PMs' domestic fundamental outlooks have deteriorated in recent weeks. Yet, prices remain elevated, investors remain sanguine, and the bullish bands continue to play.  However, with inflation still rising and the Fed done playing games, the next few months should elicit plenty of fireworks. For example, with another deputy sounding the hawkish alarm, San Francisco Fed President Mary Daly said on Mar. 22: "Inflation has persisted for long enough that people are starting to wonder how long it will persist. I'm already focused on letting make sure this doesn't get embedded and we see those longer-term inflation expectations drift up." As a result, Daly wants to ensure that the "main risk" to the U.S. economy doesn't end up causing a recession. Please see below: Source: Reuters Likewise, St. Louis Fed President James Bullard reiterated his position on Mar. 22, telling Bloomberg that “faster is better,” and that “the 1994 tightening cycle or removal of accommodation cycle is probably the best analogy here.” Please see below: Source: Bloomberg   Falling on Deaf Ears To that point, while investors seem to think that the Fed can vastly restrict monetary policy without disrupting a healthy U.S. economy, a major surprise could be on the horizon. For example, the futures market has now priced in nearly 10 rate hikes by the Fed in 2022. As a result, should we expect the hawkish developments to unfold without a hitch? Please see below: To explain, the light blue, dark blue, and pink lines above track the number of rate hikes expected by the Fed, BoE, and ECB. If you analyze the right side of the chart, you can see that the light blue line has risen sharply over the last several days and months. For your reference, if you focus your attention on the material underperformance of the pink line, you can see why I’ve been so bearish on the EUR/USD for so long. Also noteworthy, please have a look at the U.S. 2-Year Treasury yield minus the German 2-Year Bond yield spread. If you analyze the rapid rise on the right side of the chart below, you can see how much short-term U.S. yields have outperformed their European counterparts in 2021/2022. Source: Bloomberg/ Lisa Abramowicz More importantly, though, with Fed officials’ recent rhetoric encouraging more hawkish re-pricing instead of talking down expectations (like the ECB), they want investors to slow their roll. However, investors are now fighting the Fed, and the epic battle will likely lead to profound disappointment over the medium term. Case in point: when Fed officials dial up the hawkish rhetoric, their “messaging” is supposed to shift investors’ expectations. As such, the threat of raising interest rates is often as impactful as actually doing it. However, when investors don’t listen, the Fed has to turn the hawkish dial up even more. If history is any indication, a calamity will eventually unfold.  Please see below: To explain, the blue line above tracks the U.S. federal funds rate, while the various circles and notations above track the global crises that erupted during the Fed’s rate hike cycles. As a result, standard tightening periods often result in immense volatility.  However, with investors refusing to let asset prices fall, they’re forcing the Fed to accelerate its rate hikes to achieve its desired outcome (calm inflation). As such, the next several months could be a rate hike cycle on steroids.  To that point, with Fed Chairman Jerome Powell dropping the hawkish hammer on Mar. 21, I noted his response to a question about inflation calming in the second half of 2022. I wrote on Mar. 22: "That story has already fallen apart. To the extent it continues to fall apart, my colleagues and I may well reach the conclusion we'll need to move more quickly and, if so, we'll do so." To that point, Powell said that “there’s excess demand" and that "the economy is very strong and is well-positioned to handle tighter monetary policy." As a result, while investors seem to think that Powell’s bluffing, enlightenment will likely materialize over the next few months. Please see below: Source: Reuters Furthermore, with Goldman Sachs economists noting the shift in tone from “steadily” in January to “expeditiously” on Mar. 21, they also upped their hawkish expectations. They wrote: “We are now forecasting 50bp hikes at both the May and June meetings (vs. 25bp at each meeting previously). The level of the funds rate would still be low at 0.75-1% after a 50bp hike in May, and if the FOMC is open to moving in larger steps, then we think it would see a second 50bp hike in June as appropriate under our forecasted inflation path.” “After the two 50bp moves, we expect the FOMC to move back to 25bp rate hikes at the four remaining meetings in the back half of 2022, and to then further slow the pace next year by delivering three quarterly hikes in 2023Q1-Q3. We have left our forecast of the terminal rate unchanged at 3-3.25%, as shown in Exhibit 1.” Please see below: In addition, this doesn’t account for the Fed’s willingness to sell assets on its balance sheet. For context, Powell said on Mar. 16 that quantitative tightening (QT) should occur sometime in the summer and that shrinking the balance sheet “might be the equivalent of another rate increase.” As a result, investors’ lack of preparedness for what should unfold over the next few months has been something to behold. However, the reality check will likely elicit a major shift in sentiment.  In contrast, the bond market heard Powell’s message loud and clear, and with the U.S. 10-Year Treasury yield hitting another 2022 high of ~2.38% on Mar. 22, the entire U.S. yield curve is paying attention. Please see below: Source: Investing.com Finally, the Richmond Fed released its Fifth District Survey of Manufacturing Activity on Mar. 22. With the headline index increasing from 1 in February to 13 in March, the report cited “increases in all three of the component indexes – shipments, volume of new orders, and number of employees.” Moreover, the prices received index increased month-over-month (MoM) in March (the red box below), while future six-month expectations for prices paid and received also increased (the blue box below). As a result, inflation trends are not moving in the Fed’s desired direction. Please see below: Source: Richmond Fed Likewise, the Richmond Fed also released its Fifth District Survey of Service Sector Activity on Mar. 22, nd while the headline index decreased from 13 in February to -3 in March, current and future six-month inflationary pressures/expectations rose MoM. Source: Richmond Fed The bottom line? While the Fed is screaming at the financial markets to tone it down to help calm inflation, investors aren't listening. With higher prices resulting in more hawkish rhetoric and policy, the Fed should keep amplifying its message until investors finally take note. If not, inflation will continue its ascent until demand destruction unfolds and the U.S. slips into a recession. As such, if investors assume that several rate hikes will commence over the next several months with little or no volatility in between, they're likely in for a major surprise. In conclusion, the PMs declined on Mar. 22, as the sentiment seesaw continued. However, as I noted, it's remarkable how much the PMs' domestic fundamental outlooks have deteriorated in recent weeks. Thus, while the Russia-Ukraine conflict keeps them uplifted, for now, the Fed's inflation problem is nowhere near an acceptable level. As a result, when investors finally realize that a much tougher macroeconomic environment confronts them over the next few months, the shift in sentiment will likely culminate in sharp drawdowns. Thank you for reading our free analysis today. Please note that the above is just a small fraction of today’s all-encompassing Gold & Silver Trading Alert. The latter includes multiple premium details such as the targets for gold and mining stocks that could be reached in the next few weeks. If you’d like to read those premium details, we have good news for you. As soon as you sign up for our free gold newsletter, you’ll get a free 7-day no-obligation trial access to our premium Gold & Silver Trading Alerts. It’s really free – sign up today. Przemyslaw Radomski, CFAFounder, Editor-in-chiefSunshine Profits: Effective Investment through Diligence & Care * * * * * All essays, research and information found above represent analyses and opinions of Przemyslaw Radomski, CFA and Sunshine Profits' associates only. As such, it may prove wrong and be subject to change without notice. Opinions and analyses are based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are deemed to be accurate, Przemyslaw Radomski, CFA and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Radomski is not a Registered Securities Advisor. By reading Przemyslaw Radomski's, CFA reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Przemyslaw Radomski, CFA, Sunshine Profits' employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

Every asset class has been on a rollercoaster ride as investors are watching central bankers all around globe tighten monetary policy to fight inflation.  Financial conditions are starting to tighten and the risks of slower growth are accelerating.   The focus for the upcoming week will naturally be a wrath of Fed speak and the latest US CPI data which is expected to show inflation decelerated sharply last month. A sharper decline with prices could vindicate Fed Chair Powell’s decision to remove a 75 basis-point rate increase at the next couple policy meetings. A close eye will also stay on energy markets which has shown traders remain convinced that the market will remain tight given OPEC+ will stick to their gradual output increase strategy and as US production struggles to ramp up despite rising rig counts.  Energy traders will continue to watch for developments with the EU nearing a Russian energy ban.   US Market volatility following the FOMC decision won’t ease up anytime soon as traders will look to the next inflation report to see if policymakers made a mistake in removing even more aggressive rate hikes off the table over the next couple of meetings.  The April CPI report is expected to show further signs that peak inflation is in place.  The month-over-month reading is expected to decline from 1.2% to 0.2%, while the year-over-year data is forecasted to decrease from 8.5% to 8.1%. The producer prices report comes out the next day and is also expected to show pricing pressure are moderating.  On Friday, the University of Michigan Consumer Sentiment report for the month of May should show continued weakness. The upcoming week is filled with Fed speak that could show a divide from where Fed Chair Powell stands with tightening at the June and July meetings.  On Tuesday, Fed’s Williams, Barkin, Waller, Kashkari, Mester, and Bostic speak.  Wednesday will have another appearance by Bostic. Thursday contains a speech from the Fed’s Daly.  On Friday, Fed’s Kashkari and Mester speak.   EU The Russia/Ukraine war and the sanctions against Russia have dampened economic activity in the eurozone. Germany, the largest economy in the bloc has been posting weak numbers as the war goes on. With the EU announcing it will end Russian energy imports by the end of the year, there are concerns that the German economy could tip into a recession. On Tuesday Germany releases ZEW Survey Expectations, which surveys financial professionals. Economic Sentiment is expected to decline to -42.5 in May, down from -41.0 in April. On Friday, the Eurozone releases Industrial Production for March. The Ukraine conflict has exacerbated supply line disruptions, which is weighing on industrial production. The sharp drop in German Industrial Production (-3.9%), suggests that the Eurozone release will also show a contraction. The March estimate is -1.8%, following a gain of 0.7% in February. 

Summary:  Gold, in a downtrend since mid-April, has found a tentative bid amid continued turbulence across global stock markets. So far, however, the fresh bid has not been strong enough to rattle some of the recent established tactical short positions. For that to happen the metal needs a runaway upside day or a period of consolidation back above the 200-day moving average, currently at $1839/oz. From an absolute return perspective gold’s year-to-date performance in dollars can be viewed as a disappointing Gold, in a downtrend since mid-April, has found a tentative bid amid continued turbulence across global stock markets. So far, however, the fresh bid has not been strong enough to rattle some of the recent established tactical short positions. For that to happen the metal needs a runaway upside day or a period of consolidation back above the 200-day moving average, currently at $1839/oz. Read next: Altcoins: What Is PancakeSwap (CAKE)? A Deeper Look Into The PancakeSwap Platform| FXMAG.COM From an absolute return perspective gold’s year-to-date performance in dollars can be viewed as a disappointing, but when considering the impact of the stronger dollar and the steep losses in stocks and bonds, any diversified investor with gold is likely to be satisfied. The yield on US ten-year inflation adjusted bonds trades lower with the break below the 21-day moving average at +0.09% During the past month, gold has been suffering from the double blow of a stronger dollar and the FOMC (Federal Open Market Committee) signaling an aggressive pace of future rate hikes in order to combat inflation at the highest level in decades. Fine, if the economy does not suffer too much of a setback, thereby raising the risk of recession. What has changed during the past 48 hours has been dismal earnings news from large US retailers raising the risk of a deeper than expected economic slump. Most recently Target Corp which yesterday plunged the most since 1987’s Black Monday crash. In his comments the CEO sited persistent cost pressures and bloating inventories amid a change in consumer spending as reasons. These developments helped deepen the global stock market rout, and today the weakness has continued, thereby supporting short covering and fresh haven buying of US bonds while the dollar has softened. All developments that has supported the mentioned bid in gold. The yield on US ten-year inflation adjusted bonds trades lower with the break below the 21-day moving average at +0.09% signaling a loss of short-term bullish momentum.  Read next: Altcoins: What Is Litecoin (LTC)? A Deeper Look Into The Litecoin Platform| FXMAG.COM The loss of momentum in recent weeks have seen ETF (Exchange Traded Fund) investors reduce gold holdings in all but one of the last 18 days while money managers in the latest reporting week to May 10 cut their net long in COMEX gold futures to a three-month low. Interestingly the latest reduction was primarily driven by long liquidation with no signs of appetite for naked short selling.  We maintain a bullish outlook for gold given the need to diversify amid a troubled stock market and the increased risk of a policy FOMC policy mistakes driving yields and the dollar lower. From the chart below it is clear that gold has its work cut out, and a great deal of work is needed to mend the chart damage done during the past month. The first sign of improvement would be a break above the 200-day moving average at $1839 followed by $1868, the latter being the first level to signal loss of bearish momentum. Source: Saxo Group Source: Saxo Bank

By InvestMacro | COT | Data Tables | COT Leaders | Downloads | COT Newsletter Here are the latest charts and statistics for the Commitment of Traders (COT) data published by the Commodities Futures Trading Commission (CFTC). The latest COT data is updated through Tuesday June 14th and shows a quick view of how large traders (for-profit speculators and commercial entities) were positioned in the futures markets. All currency positions are in direct relation to the US dollar where, for example, a bet for the euro is a bet that the euro will rise versus the dollar while a bet against the euro will be a bet that the euro will decline versus the dollar. There were many really large moves this week in the COT positioning as the data was recorded on Tuesday – just one day ahead of the Federal Reserve’s announcement of a 75 basis point increase in the US benchmark Fed Funds rate. Currency market speculator bets were mostly higher this week as eight out of the eleven currency markets (Russian ruble futures positions have not been updated by the CFTC since March) we cover had higher positioning this week while two markets had lower contracts. Leading the gains for currency market positions was the Canadian dollar (24,264 contracts) and the Japanese yen (21,891 contracts) with the New Zealand dollar (12,933 contracts), Swiss franc (9,324 contracts), US Dollar Index (6,538 contracts), British pound sterling (5,214 contracts), Australian dollar (4,642 contracts), Bitcoin (571 contracts) and Brazil real (508 contracts) also showing positive weeks. Meanwhile, leading the declines in speculator bets were the Mexican peso (-59,107 contracts) and the Euro (-56,561 contracts) this week. Currency Speculators Notes: US Dollar Index speculators raised their bullish bets for a second straight week this week and for the seventh time in the past ten weeks. These increases pushed the large speculator standing (+44,476 contracts) to the highest level in the past two hundred and seventy-three weeks, dating back more than five years to March 21st of 2017. The most bullish level ever was +81,270 contracts on March 10th of 2015. The US dollar strength keeps rolling along and the overall standing has now remained bullish for the past fifty consecutive weeks, dating back to July of 2021. The US Dollar Index price has continued its strength as well and reached a high this week of over 105.75 which is the best level for the DXY since back in December of 2002. Euro speculators sharply dropped their positions this week by the most on record with a huge decline of -56,561 contracts. This record decline beat out the previous high of -52,107 contracts that took place on June 19th of 2018. Euro bets had been gaining over the past month and were at a total of +50,543 contracts before this week’s sharp turnaround which has now tipped the overall spec positioning into bearish territory for the first time since January. Japanese yen speculator bets surged this week (+21,891 contracts) and gained for the fifth straight week. Yen speculator positions have been in bearish territory for over a year and have been extremely week since many central banks around the world started raising their interest rates. The Bank of Japan has not raised rates and has signaled that it will not do so, creating large interest rate differentials compared to the other major currencies. Despite the spec bets increase this week, the yen exchange rate came under further pressure this week with the USDJPY price closing over the 135.00 exchange rate (and remaining near 20-year highs). Mexican Peso speculator bets fell sharply by -59,381 contracts this week and flipped the MXN speculator positioning from bullish to bearish. The weekly speculator decline is the largest fall in the past thirteen weeks and the decrease into a bearish standing is the first time since March 29th. Canadian dollar bets jumped this week by the most in the past seventy-seven weeks and brought the speculator position back into bullish territory for the first time in six weeks. CAD speculator bets have now gained for four straight weeks and the overall spec standing is residing at the highest level since July 2021. New Zealand dollar speculators also boosted their bets this week after the NZD positions had dropped in six out of the previous seven weeks. This week’s rise in weekly bets was the most in the past thirteen weeks but the overall speculator standing remains in bearish territory for the seventh straight week. Strength scores (3-Year range of Speculator positions, from 0 to 100 where above 80 is extreme bullish and below 20 is extreme bearish) show that the US Dollar Index (100 percent), Bitcoin (100 percent) and the Brazilian Real (96.8 percent) are leading the strength scores and are all in extreme bullish positions. On the downside, the Mexican peso (16.1 percent) has fallen into extreme bearish positioning followed by the Japanese yen (25.9 percent) and British pound (26.7 percent) which are just above the 20 percent extreme bearish threshold. Strength score trends (or move index, that calculate 6-week changes in strength scores) shows that the US Dollar Index (19.5 percent), Japanese yen (19.1 percent) and Swiss franc (18 percent) have the highest six-week trend scores currently. The Mexican peso also leads the trends on the downside with a -17.5 percent trend change. Data Snapshot of Forex Market Traders | Columns Legend Jun-14-2022 OI OI-Index Spec-Net Spec-Index Com-Net COM-Index Smalls-Net Smalls-Index USD Index 61,144 91 44,476 100 -47,736 0 3,260 52 EUR 668,164 69 -6,018 33 -28,495 68 34,513 32 GBP 238,322 63 -65,596 27 81,063 78 -15,467 24 JPY 232,513 77 -69,755 26 86,443 78 -16,688 20 CHF 39,362 20 -6,808 39 18,147 72 -11,339 19 CAD 175,219 47 23,202 65 -30,284 43 7,082 44 AUD 142,857 39 -43,254 45 44,710 52 -1,456 49 NZD 45,410 35 -6,838 60 9,773 45 -2,935 18 MXN 197,375 48 -26,381 16 23,148 82 3,233 57 RUB 20,930 4 7,543 31 -7,150 69 -393 24 BRL 69,931 67 47,213 97 -48,458 4 1,245 79 Bitcoin 12,242 68 1,061 100 -947 0 -114 10   US Dollar Index Futures: The US Dollar Index large speculator standing this week resulted in a net position of 44,476 contracts in the data reported through Tuesday. This was a weekly boost of 6,538 contracts from the previous week which had a total of 37,938 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish-Extreme with a score of 100.0 percent. The commercials are Bearish-Extreme with a score of 0.0 percent and the small traders (not shown in chart) are Bullish with a score of 52.2 percent. US DOLLAR INDEX Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 86.9 2.9 9.1 – Percent of Open Interest Shorts: 14.2 80.9 3.8 – Net Position: 44,476 -47,736 3,260 – Gross Longs: 53,133 1,752 5,553 – Gross Shorts: 8,657 49,488 2,293 – Long to Short Ratio: 6.1 to 1 0.0 to 1 2.4 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 100.0 0.0 52.2 – Strength Index Reading (3 Year Range): Bullish-Extreme Bearish-Extreme Bullish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: 19.2 -19.1 7.1   Euro Currency Futures: The Euro Currency large speculator standing this week resulted in a net position of -6,018 contracts in the data reported through Tuesday. This was a weekly fall of -56,561 contracts from the previous week which had a total of 50,543 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 33.2 percent. The commercials are Bullish with a score of 67.9 percent and the small traders (not shown in chart) are Bearish with a score of 31.6 percent. EURO Currency Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 31.0 54.1 12.7 – Percent of Open Interest Shorts: 31.9 58.3 7.5 – Net Position: -6,018 -28,495 34,513 – Gross Longs: 206,986 361,159 84,823 – Gross Shorts: 213,004 389,654 50,310 – Long to Short Ratio: 1.0 to 1 0.9 to 1 1.7 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 33.2 67.9 31.6 – Strength Index Reading (3 Year Range): Bearish Bullish Bearish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: 0.1 -1.1 5.9   British Pound Sterling Futures: The British Pound Sterling large speculator standing this week resulted in a net position of -65,596 contracts in the data reported through Tuesday. This was a weekly lift of 5,214 contracts from the previous week which had a total of -70,810 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 26.7 percent. The commercials are Bullish with a score of 77.6 percent and the small traders (not shown in chart) are Bearish with a score of 23.6 percent. BRITISH POUND Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 12.3 77.2 8.7 – Percent of Open Interest Shorts: 39.8 43.2 15.1 – Net Position: -65,596 81,063 -15,467 – Gross Longs: 29,343 184,011 20,625 – Gross Shorts: 94,939 102,948 36,092 – Long to Short Ratio: 0.3 to 1 1.8 to 1 0.6 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 26.7 77.6 23.6 – Strength Index Reading (3 Year Range): Bearish Bullish Bearish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: 5.9 -4.7 -0.5   Japanese Yen Futures: The Japanese Yen large speculator standing this week resulted in a net position of -69,755 contracts in the data reported through Tuesday. This was a weekly boost of 21,891 contracts from the previous week which had a total of -91,646 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 25.9 percent. The commercials are Bullish with a score of 77.8 percent and the small traders (not shown in chart) are Bearish-Extreme with a score of 19.5 percent. JAPANESE YEN Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 14.0 75.6 9.6 – Percent of Open Interest Shorts: 44.0 38.4 16.8 – Net Position: -69,755 86,443 -16,688 – Gross Longs: 32,441 175,789 22,340 – Gross Shorts: 102,196 89,346 39,028 – Long to Short Ratio: 0.3 to 1 2.0 to 1 0.6 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 25.9 77.8 19.5 – Strength Index Reading (3 Year Range): Bearish Bullish Bearish-Extreme NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: 19.1 -16.5 5.7   Swiss Franc Futures: The Swiss Franc large speculator standing this week resulted in a net position of -6,808 contracts in the data reported through Tuesday. This was a weekly lift of 9,324 contracts from the previous week which had a total of -16,132 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 39.2 percent. The commercials are Bullish with a score of 72.4 percent and the small traders (not shown in chart) are Bearish-Extreme with a score of 19.1 percent. SWISS FRANC Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 10.9 66.2 22.9 – Percent of Open Interest Shorts: 28.2 20.1 51.7 – Net Position: -6,808 18,147 -11,339 – Gross Longs: 4,291 26,045 9,026 – Gross Shorts: 11,099 7,898 20,365 – Long to Short Ratio: 0.4 to 1 3.3 to 1 0.4 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 39.2 72.4 19.1 – Strength Index Reading (3 Year Range): Bearish Bullish Bearish-Extreme NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: 18.0 -19.8 17.9   Canadian Dollar Futures: The Canadian Dollar large speculator standing this week resulted in a net position of 23,202 contracts in the data reported through Tuesday. This was a weekly boost of 24,264 contracts from the previous week which had a total of -1,062 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish with a score of 65.4 percent. The commercials are Bearish with a score of 43.5 percent and the small traders (not shown in chart) are Bearish with a score of 44.3 percent. CANADIAN DOLLAR Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 32.3 45.1 16.8 – Percent of Open Interest Shorts: 19.0 62.4 12.7 – Net Position: 23,202 -30,284 7,082 – Gross Longs: 56,550 79,064 29,357 – Gross Shorts: 33,348 109,348 22,275 – Long to Short Ratio: 1.7 to 1 0.7 to 1 1.3 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 65.4 43.5 44.3 – Strength Index Reading (3 Year Range): Bullish Bearish Bearish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: 15.9 -14.4 6.3   Australian Dollar Futures: The Australian Dollar large speculator standing this week resulted in a net position of -43,254 contracts in the data reported through Tuesday. This was a weekly lift of 4,642 contracts from the previous week which had a total of -47,896 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 44.7 percent. The commercials are Bullish with a score of 52.2 percent and the small traders (not shown in chart) are Bearish with a score of 48.9 percent. AUSTRALIAN DOLLAR Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 22.2 59.9 14.9 – Percent of Open Interest Shorts: 52.4 28.6 16.0 – Net Position: -43,254 44,710 -1,456 – Gross Longs: 31,660 85,591 21,342 – Gross Shorts: 74,914 40,881 22,798 – Long to Short Ratio: 0.4 to 1 2.1 to 1 0.9 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 44.7 52.2 48.9 – Strength Index Reading (3 Year Range): Bearish Bullish Bearish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: -13.7 7.8 10.4   New Zealand Dollar Futures: The New Zealand Dollar large speculator standing this week resulted in a net position of -6,838 contracts in the data reported through Tuesday. This was a weekly increase of 12,933 contracts from the previous week which had a total of -19,771 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish with a score of 59.8 percent. The commercials are Bearish with a score of 45.5 percent and the small traders (not shown in chart) are Bearish-Extreme with a score of 18.2 percent. NEW ZEALAND DOLLAR Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 32.8 61.8 4.9 – Percent of Open Interest Shorts: 47.9 40.3 11.4 – Net Position: -6,838 9,773 -2,935 – Gross Longs: 14,894 28,062 2,236 – Gross Shorts: 21,732 18,289 5,171 – Long to Short Ratio: 0.7 to 1 1.5 to 1 0.4 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 59.8 45.5 18.2 – Strength Index Reading (3 Year Range): Bullish Bearish Bearish-Extreme NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: -0.4 -0.2 3.8   Mexican Peso Futures: The Mexican Peso large speculator standing this week resulted in a net position of -26,381 contracts in the data reported through Tuesday. This was a weekly reduction of -59,107 contracts from the previous week which had a total of 32,726 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish-Extreme with a score of 16.1 percent. The commercials are Bullish-Extreme with a score of 82.5 percent and the small traders (not shown in chart) are Bullish with a score of 56.7 percent. MEXICAN PESO Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 57.8 38.3 3.1 – Percent of Open Interest Shorts: 71.2 26.5 1.5 – Net Position: -26,381 23,148 3,233 – Gross Longs: 114,093 75,532 6,170 – Gross Shorts: 140,474 52,384 2,937 – Long to Short Ratio: 0.8 to 1 1.4 to 1 2.1 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 16.1 82.5 56.7 – Strength Index Reading (3 Year Range): Bearish-Extreme Bullish-Extreme Bullish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: -17.5 17.4 -2.9   Brazilian Real Futures: The Brazilian Real large speculator standing this week resulted in a net position of 47,213 contracts in the data reported through Tuesday. This was a weekly rise of 508 contracts from the previous week which had a total of 46,705 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish-Extreme with a score of 96.8 percent. The commercials are Bearish-Extreme with a score of 4.0 percent and the small traders (not shown in chart) are Bullish with a score of 79.4 percent. BRAZIL REAL Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 83.0 12.5 4.6 – Percent of Open Interest Shorts: 15.5 81.8 2.8 – Net Position: 47,213 -48,458 1,245 – Gross Longs: 58,023 8,711 3,197 – Gross Shorts: 10,810 57,169 1,952 – Long to Short Ratio: 5.4 to 1 0.2 to 1 1.6 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 96.8 4.0 79.4 – Strength Index Reading (3 Year Range): Bullish-Extreme Bearish-Extreme Bullish NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: 5.3 -5.0 -4.0   Bitcoin Futures: The Bitcoin large speculator standing this week resulted in a net position of 1,061 contracts in the data reported through Tuesday. This was a weekly increase of 571 contracts from the previous week which had a total of 490 net contracts. This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish-Extreme with a score of 100.0 percent. The commercials are Bearish-Extreme with a score of 0.0 percent and the small traders (not shown in chart) are Bearish-Extreme with a score of 10.3 percent. BITCOIN Statistics SPECULATORS COMMERCIALS SMALL TRADERS – Percent of Open Interest Longs: 81.7 0.5 8.2 – Percent of Open Interest Shorts: 73.0 8.2 9.2 – Net Position: 1,061 -947 -114 – Gross Longs: 9,996 62 1,008 – Gross Shorts: 8,935 1,009 1,122 – Long to Short Ratio: 1.1 to 1 0.1 to 1 0.9 to 1 NET POSITION TREND: – Strength Index Score (3 Year Range Pct): 100.0 0.0 10.3 – Strength Index Reading (3 Year Range): Bullish-Extreme Bearish-Extreme Bearish-Extreme NET POSITION MOVEMENT INDEX: – 6-Week Change in Strength Index: 12.3 -30.9 -3.5   Article By InvestMacro – Receive our weekly COT Reports by Email *COT Report: The COT data, released weekly to the public each Friday, is updated through the most recent Tuesday (data is 3 days old) and shows a quick view of how large speculators or non-commercials (for-profit traders) were positioned in the futures markets. The CFTC categorizes trader positions according to commercial hedgers (traders who use futures contracts for hedging as part of the business), non-commercials (large traders who speculate to realize trading profits) and nonreportable traders (usually small traders/speculators) as well as their open interest (contracts open in the market at time of reporting).See CFTC criteria here.

Summary: G20 summit and Fed meeting minutes. Both the Euro and the GBP have remained under pressure from the incredibly strong US Dollar. Cost-of-living-squeeze in Japan. Read next: US Dollar Hitting 19-year Highs (EUR/USD, GBP/USD), Russia Cuts Off Gas Taps (EUR/GBP), GBP/AUD Currency Pair & RBA Policy Decision  USD Could strengthen further in the coming days The market is reflecting mixed signals for this currency pair. The market outlook for the US Dollar seems bullish going forward into the coming days as the Federal reserve minutes are released and the G20 summit. If the Fed minutes reveal a hawkish attitude that surpasses market expectations, the US Dollar could be pushed even higher and could increase the greenback’s rising yield advantage against G10 and emerging market counterparts. EUR/USD Price Chart GBP & Euro Under pressure The market is reflecting bullish signals for this currency pair. Both the Euro and the GBP have remained under pressure from the incredibly strong US Dollar, the negatives for the Euro are well-known across the markets and could likely be exacerbated by two events in July. For the pound sterling, politics is at the forefront of talking in the media, however, from a traders perspective, the pound has been optimistic in terms of being affected by the current difficult situation. It seems that this is the beginning of the end for Prime Minister Boris Johnson, although the current backdrop that plagues the Pound remains unaltered. This has been evidenced by this morning’s soft construction PMI data, while comments made by BoE Chief Economist Pill were not exactly in favour of a larger hike in the Bank rate. EUR/GBP Price Chart USD dominating JPY The market is reflecting bullish signals for this currency pair. Inflation is currently showing signs of becoming more politically based in Japan in the wake of the continuing cost-of-living squeeze. Whilst the market awaits FOMC meeting minutes which could give the US Dollar more support, the rising cost of living in Japan continues to squeeze domestic households' income ahead of Japan's upper house election on Sunday. USD/JPY Price Chart EUR/JPY currency pair The market is reflecting mixed signals for this currency pair. The EUR/JPY currency pair remains at lofty level, however, the trend is being questioned. EUR/JPY Price Chart Sources: finance.yahoo.com, dailyfx.com, poundsterlinglive.com

Summary: Dow Jones suffered in the wake of the Fed FOMC. RBNZ interest rates are now at 3%. DJI Closed in the red on Wednesday After the Fed minutes were released, the Dow Jones Industrial Average recovered from its lows. After Elon Musk, CEO of Tesla (TSLA), made a statement, Manchester United (MANU) regained a crucial level. As Bitcoin declined, so did Coinbase (COIN) and Riot Blockchain (RIOT). There weren't many breakouts among the conflict. Denbury (DEN), an energy play, was able to rise above a buy mark as its relative strength line accelerated. Also monitoring its own entrance is Wesco International (WCC). DJI Price Chart RBNZ pushed interest rates to 3% The market's reaction to the Reserve Bank of New Zealand's (RBNZ) August policy update and guidance led to a sell-off of the New Zealand Dollar. The Reserve Bank of New Zealand (RBNZ) signaled it will raise interest rates to levels higher than they had previously been expecting. On paper, the RBNZ did everything it could to back NZD bulls: it said that the economy was in good shape, that inflationary pressures were widespread, and that it would continue to raise interest rates. As the RBNZ suggested they will need to raise rates higher than they had previously thought, short-term New Zealand bond yields increased. Two additional rises of 50 basis points are now likely to occur throughout the course of 2022, and a smaller hike may occur in early 2023. The Pound to New Zealand Dollar fell by two thirds of a percent in the 15 minutes following the decision. The drop in the value of the Kiwi dollar may indicate that the market foresaw everything the RBNZ did, allowing investors to quickly shift their focus from domestic factors to international events. We observe that sentiment is low in midweek trading, with equities markets down and commodity prices falling. Even more so than the New Zealand Dollar, the Australian Dollar is also falling; in fact, it is the greatest loser of the day. Sources: poundsterlinglive.com, finance.yahoo.com, investors.com

The US dollar slowly added for the third trading session, returning to levels of three weeks ago. While the published FOMC meeting minutes did not cause a sharp reaction, the FX dynamics of the past week are more indicative of the end of a corrective pullback. And we would not be surprised if the Dollar's growth will shift to the next gear in the coming days. The market's primary focus has been whether there will be a 75-point rate hike next. These expectations have changed little since the futures market, as has been the case for the last week or so, is laying down a roughly 40% chance of a third consecutive such move. However, the central bank officials are concerned that the inflation threat could quickly return if policy tightening does not suppress expectations. So, the FOMC is in the mood to press the monetary brake pedal more firmly than the market expects. This is now roughly the same signal Powell sent in autumn 2018, resulting in a violent sell-off in the equity market. It seems that markets are setting expectations for a lower final rate hike than the Fed. The FOMC has been using more and more channels lately to explain its view, from comments from committee members and minutes to explanatory articles in the WSJ. It is well visible that the currency market has been taking note of these signals for at least a week now, although investors continued to push stocks up until yesterday. The currency market often goes half a step ahead of stocks, so we see the reversal of the Dollar Index to growth over the last ten days as the end of a corrective decline and the start of a new wave of dollar strength. Apart from the Fed, there are also several fundamental factors on the Dollar's side right now, from slowing retail sales and a collapse in the housing market to strong demand for LNG, which the US exports to Europe. These factors are reducing pressure on the Dollar through the trade balance. At the same time, money markets are paying increasing attention to rising bond yields in the US. While the two-year US bonds most sensitive to Fed policy are trading at with 3.2% yield, compared to similar Chinese bonds at just 2.07% and German as low as 0.75%. This disposition attracts buyers to dollar securities, which further support its exchange rate. The Dollar Index has managed to quickly return above its 50-day moving average, maintaining it as support for over a year. If we are right, the Dollar could soon reach a retest of the July highs, when the DXY was above 109, and the EURUSD was down to 1.0. And with a new retest, we should expect dollar buyers to be able to push it to renew multi-year highs unless the macroeconomic situation changes drastically.

The equity rally in the US didn’t pick up momentum after the Federal Reserve (Fed) released its latest meeting minutes, which sounded more hawkish-than-expected, or more hawkish-than-what-was-needed-to-give-another-boost to the US stock markets. The biggest take was that the Fed will continue tightening its policy until it sees that inflation is ‘firmly on path back to 2%’. The S&P500 fell 0.72% as Nasdaq gave back 1.20%, although the jump in the US 2-year yield was relatively soft, and the Fed funds futures scaled back the expectation of a 75 bp hike in the next meeting. Crude price completed an ABCD pattern, and it is more likely than not we see the price rebound to the $100 level in the medium run. In China, Tencent announced its first ever revenue drop as government crackdown continued taking a toll on its sales, and the pound couldn’t gain even after the above 10% inflation data boosted the Bank of England (BoE) hawks and the call fall steeper rate hikes to tame inflation in the UK. Watch the full episode to find out more! 0:00 Intro 0:28 As expected, Fed minutes were more hawkish-than-expected 3:39 Crude oil has more chance to rebound than to fall 6:02 Tencent posts first-ever revenue drop 7:14 Apple extends gains, but technicals warn of correction 8:38 Pound unable to extend gains despite rising Fed hawks’ voices Ipek Ozkardeskaya has begun her financial career in 2010 in the structured products desk of the Swiss Banque Cantonale Vaudoise. She worked at HSBC Private Bank in Geneva in relation to high and ultra-high net worth clients. In 2012, she started as FX Strategist at Swissquote Bank. She worked as a Senior Market Analyst in London Capital Group in London and in Shanghai. She returned to Swissquote Bank as Senior Analyst in 2020. #Fed #FOMC #minutes #USD #GBP #inflation #Tencent #Alibaba #earnings #crude #oil #natural #gas #coal #futures #SPX #Dow #Nasdaq #investing #trading #equities #stocks #cryptocurrencies #FX #bonds #markets #news #Swissquote #MarketTalk #marketanalysis #marketcommentary ___ Learn the fundamentals of trading at your own pace with Swissquote's Education Center. Discover our online courses, webinars and eBooks: https://swq.ch/wr ___ Discover our brand and philosophy: https://swq.ch/wq Learn more about our employees: https://swq.ch/d5 ___ Let's stay connected: LinkedIn: https://swq.ch/cH

Summary:  Today we discuss the August US CPI shocker yesterday, as the core inflation reading on the month rose at twice the expected pace, taking even headline inflation into positive territory month-on-month despite the huge drop in energy prices. The market tanked and the USD soared as investors are forced to consider whether the FOMC meeting next week will bring a 100 basis point hike. Crude oil, metals, stocks to watch and a preview of Adobe and more also on today's pod, which features Peter Garnry on equities and John J. Hardy hosting and on FX. Listen to today’s podcast - slides are found via the link. Follow Saxo Market Call on your favorite podcast app: Apple  Spotify PodBean Sticher If you are not able to find the podcast on your favourite podcast app when searching for Saxo Market Call, please drop us an email at marketcall@saxobank.com and we'll look into it.   Questions and comments, please! We invite you to send any questions and comments you might have for the podcast team. Whether feedback on the show's content, questions about specific topics, or requests for more focus on a given market area in an upcoming podcast, please get in touch at marketcall@saxobank.com.     Source: https://www.home.saxo/content/articles/podcast/podcast-sep-14-2022-14092022

Summary:  Markets trade nervously ahead of the FOMC meeting this week, as a minority consider it likely that last week’s hotter-than-expected US August CPI data could see the Fed hiking 100 basis points at Wednesday’s FOMC meeting, driving further painful USD strength. Other notable central bank meetings this week include the Bank of Japan, Swiss National Bank, Norges Bank and Bank of England meetings, all on Thursday.   What is our trading focus? Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) US equities were lower on Friday but managed to stage a pullback in the later part of the trading session with S&P 500 closing at 3,890. Sentiment remains weak this morning with US equity futures trading lower and Friday’s low in S&P 500 futures at the 3,853 level is the key critical downside level to watch. Financial conditions are still tightening, VIX curve is flattening, and the US 10-year yield is trending higher pointing to weaker equities ahead., The next big level in S&P 500 futures is the 3,800 level. This week the key event risk for US equities is naturally the FOMC meeting which will provide another tightening of policy rates and potentially a hawkish tilt on the guidance due to the latest inflation figures in the US. Hong Kong’s Hang Seng (HSIU2) and China’s CSI300 (03188:xhkg) Hang Seng Index dropped nearly 1%, dragged by technology stocks, with Hang Seng Tech Index (HSTECH.I) declining 2%, Alibaba (09988:xhkg) falling 3.3%, Tencent (00700:xhkg) down 1%. EV makers underperformed, with NIO (0986), Li Auto (02015:xhkg), and Xpeng (09868:xhkg) declining 4% to 6%. Following the news that the Hong Kong Government is reviewing and considering plans to end the hotel quarantine requirements for inbound travellers, tourism and retail stocks rallied, Cathay Pacific Airways (00293:xhkg) up nearly 2%, travel agent EGL surging 11.5%, Chow Tai Fook Jewellery (01929:xhkg) rising 6.6%. CSI 300 was little charged, with coal, and beverage names outperforming. USD traders mull FOMC meeting this Wednesday The US dollar has remained rangebound in most pairs ahead of this Wednesday’s FOMC meeting, but did break higher recently versus GBP, CAD, and NZD. Whether the Fed hikes 100 basis points (a minority looking for this after the hot CPI print for August last week) may prove less important than the Fed’s guidance on its forecasted “terminal rate” in the quarterly refresh of its accompanying “dot plot” forecasts for the Fed rate and as the market reads the tone of the statement and draws conclusions from the latest economic projections. The June PCE inflation forecasts, for example, still see 2023 inflation falling back to 2.7% and 2024 inflation to 2.3%. That latter forecast has only been raised 0.2% from the year-earlier level, suggesting that the Fed still sees the inflationary threat as something that its current path of tightening will make a transitory phenomenon. Gold (XAUUSD) Gold remains below $1680 and may struggle ahead of Wednesday’s FOMC rate decision given its potential impact on the dollar and Treasury yield as well as its impact on the terminal rate, currently priced around 4.5% by next March.  Speculators flipped their gold position to a net short in the week to September 13 and it highlights the upside risk should the price manage to break above the twice rejected support-turned-resistance level at $1680. Strong short covering from speculators in silver, supported by copper market tightness, has seen its relative value as seen through the XAUXAG ratio rise to a three-month high. Below $1854, last week's low in gold, the market may target the 50% retracement of the 2018 to 2020 rally at $1618.    Crude oil (CLV2 & LCOX2) Crude oil remains rangebound with Brent continuing to find support ahead of $90 and WTI around $84.50. Prices are being supported by the reopening of Chengdu in Sichuan, boosting the outlook for demand. Overall, however, the potential negative impact on demand from a global economic slowdown will not go away, and the market will be watching central bank decisions from the US to Europe and Asia and their overall impact on the dollar. Production from the OPEC+ alliance fell 3.6 million barrels/day short of its target level in August according to delegates and with Russia’s production at risk of falling by 1.9 million barrels per day once the EU embargo starts in December, the risk to supply remains equally high and price supportive. US Treasuries (TLT, IEF) US treasury yields trade near the cycle highs ahead of the FOMC meeting on Wednesday, with focus on the 10-year benchmark at 2.50%, the cycle high from June and on guidance from the Fed, as a minority are looking for a 100 basis point hike this week, while the terminal rate for next spring has risen almost to 4.50% recently, up more than 100 basis points from early August. What is going on? Dreadful UK retail sales in August There is no other word to qualify the latest retail sales report in the UK. Retail sales (important to note: UK Retail Sales are reported in volume, not price) contracted by minus 5.4 % year-over-year versus expected minus 4.2 %. Excluding fuel bills, it was out at minus 5 %. Just for the sake of comparison, UK retail sales fell 3.8 % year-over-year at the worst point of the Global Financial Crisis. High inflationary pressures coupled with the upcoming recession will certainly pose a serious challenge to the Bank of England (BoE). The market participants expect the central bank will hike rates by at least 50 basis points later this week (a stronger hike of 75 basis points is possible on cards). But we wonder how long the tightening cycle can last in the UK given the rapid deterioration of the situation on the growth front. On a flip note, the EZ CPI for August was confirmed at 9.1 % year-over-year. This is painfully high. Expect the ECB to hike interest rates by at least 50 basis points at its October meeting. In her last appearance last Friday, ECB president Christine Lagarde did not give much clue about the pace of the tightening cycle in the eurozone. She only mentioned that “hikes should send a signal that we’ll meet price goals”. US University of Michigan survey remains optimistic The preliminary September University of Michigan sentiment survey saw the headline rise to 59.5 from 58.5, just short of the expected 60, but nonetheless marking a fourth consecutive rise. Notably, the rise in forward expectations was starker than in current conditions, with the former also coming in above consensus expectations. Also, key were the inflation expectations, which echoed what was seen in the Fed surveys last week. The 1yr slowed to 4.6% from 4.8% and the 5yr expectations slowed to 2.8% from 2.9%.  EU recommends withholding EUR 7.5B from Hungary on rule of law violations The specific accusation is one of corruption in Hungary’s awarding of public contracts. The amount of budget funds to be withheld represents some one-third of the budget for Hungary during the current 7-year budget period. A majority of EU member states will have to approve the recommendation for the funds to be withheld. Hungary has scrambled recently to address the EU’s concerns, with new laws to be debated next week as the country has until November 19 to make changes and inform the commission. What are we watching next? Japan’s CPI and central bank decision to signal concerns on yen weakness Japan has key data on August inflation due Tuesday followed by the Bank of Japan decision a day after the FOMC on Thursday. Consensus estimates for August CPI are touching close to 3% levels, with core higher as well at 1.5% YoY from 1.2% previously. Upside pressures continue to persist from high food and energy prices, while the soft year-ago base also means mobile phone charges are likely to pick up. While it is still hard to expect a pivot from the Bank of Japan this week, given that Governor Kuroda remains focused on achieving wage inflation, the meeting will still likely have key market implications. Raft of central bank meetings this week It isn’t just FOMC week, we also have a bevy of other central banks up with rate decisions this week, including Sweden’s Riksbank tomorrow, which is expected to hike 75 basis points to take the policy rate to 1.50%. The FOMC meets Wednesday, followed by a historic Thursday in which the Bank of Japan, Norges Bank of Norway, Swiss National Bank and Bank of England meet among G-10 currencies, with the Central Bank of Turkey and South Africa’s Reserve Bank also meeting that day. Of those, only Turkey and Japan are expected to keep rates unchanged, with all others looking to continue tightening policy. Porsche IPO set for €70-75bn valuation The Porsche brand is set to be spun out from the Volkswagen group on September 29, with 12.5% of the shares to be floated. VW shareholders will be awarded a special dividend on half of the proceeds from the IPO, with the remaining half targeted for investing in the transition to EVs. The IPO comes with a greenshoe option of 10-15% dilution. Earnings calendar this week This week our earnings focus is on Lennar on Wednesday as US homebuilders are facing multiple headwinds from still elevated materials prices and rapidly rising interest rates impacting forward demand. Later during this week, we will watch Carnival earnings as forward outlook on cruise demand is a good indicator of the impact on consumption from tighter financial conditions. Today: AutoZone Tuesday: Haleon Wednesday: Lennar, Trip.com, General Mills Thursday: Costco Wholesale, Accenture, FactSet Research Systems, Darden Restaurants Friday: Carnival Economic calendar highlights for today (times GMT) 0800 – Switzerland Swiss National Bank Sight Deposits 0900 – ECB’s Guindos to speak 1200 – ECB's De Cos to speak 1245 – ECB's Villeroy to speak 1400 – US Sep. NAHB Housing Market Index 2330 – Japan Aug. National CPI 0115 – China Rate Announcement 0130 – Australia RBA Minutes of Sep. Policy Meeting  Follow SaxoStrats on the daily Saxo Markets Call on your favorite podcast app: Apple  Spotify PodBean Sticher   Source: https://www.home.saxo/content/articles/macro/market-quick-take-sep-19-2022-19092022

Summary:  Equity markets consolidated some of the recent losses yesterday as traders mull a cavalcade of central bank meetings this week, topped by the FOMC meeting tomorrow. The market has been burned in its attempts at pricing “peak Fed” in recent months and now Fed rate expectations are running steadily higher into tomorrow’s meeting. Can the Fed deliver on the hawkish side of a market that has finally begun to respect what this Fed is all about?   What is our trading focus? Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) Yesterday US equities touched new lows intraday for the cycle lower that started on 17 August, but despite weak sentiment and downward momentum the market turned around rallying into gains. S&P 500 futures rallied 1.9% from its lows to the close and the positive momentum is continuing this morning with the index futures trading around the 3,929 level. The US 10-year yield is still sitting just below 3.5% and any meaningful push above the 3.5% level will likely renew the headwinds for equities. The rally in US equities was driven by no news so the setup feels almost like the rally ahead of the Jackson Hole event and the recent US CPI report. The market wants good news and a positive surprise, but the question is whether the FOMC will deliver that tomorrow. We doubt it believing the Fed will rather fail being too hawkish than being too dovish. Hong Kong’s Hang Seng (HSIU2) and China’s CSI300 (03188:xhkg) Hong Kong equities rallied, with Hang Seng Index rising 1.3% and Hang Seng Tech Index (HSTECH.I) climbing 2.3%. Alibaba (09988:xhkg), Meituan (03690:xhkg), JD.COM (09618:xhkg), and Netease (09999:xhkg) surged 3% to 4%. EV stocks rebounded, with XPeng (09868:xhkg) soaring nearly 9%, NIO (09866:xhkg), and Li Auto (02015:xhkg) rising nearly 6%. Macao casino stocks were among the outperformers, rising from 3% to 6% across the board. CSI300 Index was little changed, with solar power, energy storage, and auto outperforming. Major Chinese banks fixed their 1-year and 5-year Loan Prime Rates unchanged this morning. USD traders mull FOMC meeting this Wednesday The US dollar slightly on its backfoot yesterday and overnight as EURUSD criss-crosses parity and USDJPY is locked in a tight range ahead of tomorrow’s FOMC meeting. The degree to which the Fed is able to surprise the market on the hawkish side and trigger another rise in US treasury yields (possibly it as important to see longer US yields rising, not just an adjustment at the front-end of the US yield curve to absorb,  for example, a higher than expected Fed “dot plot” forecast for next year) will determine whether the US dollar is set for another significant surge to cycle highs in the wake of the meeting. AUDNZD breaks higher through major level Despite a nominally dovish set of RBA minutes overnight, AUDNZD leaped to a new six-year high overnight, clearing the 1.1300 level. The diverging current account developments in recent quarters are likely a key driver as Australia features a formidable commodity portfolio and has become a current account surplus nation at a time when New Zealand’s reliance on energy imports has taken a toll on its trade balance, which has gone into a steep deficit. The next focus is perhaps 1.1430, the high from 2015 and highest since AUDNZD traded in a range north of 1.2500 for much of the 2008-2012 time frame. Gold (XAUUSD) Gold putting in a higher low compared with Friday was the takeaway from Monday’s price action. The yellow metal has settled into a 20-dollar range near a two-year low ahead of Wednesday’s FOMC meeting and while the risk of a 1% hike cannot be ruled out, the market seems the be settling for another 75 bp hike, a development that may ease some of the recent selling pressure which has seen speculators flip their positions back to a net short, a relatively rare occurrence. Today’s price action is likely to be just noise ahead of Wednesday with algo-driven strategies likely to be in the driving seat, given the dollar and yield movements the overall say on the direction. Below $1854, last week's low in gold, the market may target the 50% retracement of the 2018 to 2020 rally at $1618. Crude oil (CLV2 & LCOX2) The best that can be said about Monday’s price action in energy is that traders don’t currently know which leg to stand on, a situation made worse by thin liquidity. With another interest rate hike looming and with global growth slowing there are good reasons to call for lower prices. Lower prices were also sought in response to news China may grant export permissions for excess fuel supplies, and the US announcing it will offer an additional 10 million barrels from its strategic reserves. Against these a softer dollar and recovering equity markets and continued worries about Russian supply once the EU embargo begins in early December helped sent Brent and WTI back in black following a near seven-dollar round trip. More of the same can be expected until a clearer picture emerges. US Treasuries (TLT, IEF) US treasury yields continue to trade near the peak of the cycle as the market wonders whether the 10-year can explore new territory for the cycle above 3.50% the cycle high from back in June, as well as whether any adjustment higher in Fed rate hike expectations will be entirely felt at the front end of the yield curve, as the inversion has fallen close to the cycle extreme near –0.50% for the 2-10 yield spread as the 2-year rate pushed close to 4.00%. What is going on? The euro area looks set to enter a recession According to Bloomberg, economists see an 80 % chance of a recession in the euro area in the next twelve months. This now looks inevitable. Last week, Barclays downgraded its 2023 growth forecast for France to minus 0.7 %. The Bank of France also published its three main scenarios for the French economy for next year. A recession is one of them (expected drop in GDP of minus 0.5 %). This is not its baseline, though. The length and amplitude of the recession in the eurozone will highly depend on the evolution of the energy crisis and on the risk of energy rationing. This is a bit too early to know exactly how much GDP will drop next year. Economists also expect that the European Central Bank (ECB) will continue to tighten monetary conditions (financial conditions are still loose in the euro area based on the latest credit growth data). More than half consider a second 75 basis-point rate hike is likely in October. This is only the beginning. It is likely the ECB will continue until early next year (when the recession might be officially announced). Covid vaccine related stocks tumble on Biden declaring pandemic over Shares in Moderna and BioNTech fell 7% and 9% respectively as the Biden administration declared the pandemic for over. The designation follows other countries and will lower the alertness among health care regulators and likely lower the demand for Covid vaccines as only the very high-risk people in the population will get a vaccine and booster shoots. This is worse than expected news for Covid vaccine manufacturers such as Moderna and BioNTech that are now forced to expand their product portfolio to offset this weakness. US NAHB declines for ninth month in a row NAHB Housing Market Index reported its ninth consecutive decline to 46.0, beneath the prior 49.0 and expected 47.0. Save for two panicky months during the early 2020 pandemic break-out, this is the lowest levels cine 2014, but for perspective, the indicator was sub-20 for most of 2008 through 2011. The weaker-than-expected data highlighted the pessimism hitting the US housing market due to the rising mortgage rates, and housing starts may be set to cool further in the coming months. Japan CPI hits a 31-year high Japan’s August CPI touched the dreaded 3% YoY mark from 2.6% previously, coming in at the strongest levels in over three decades and significantly above the Bank of Japan’s 2% target level. The core measure, which excludes fresh food and energy, also come in higher-than-expected at 1.6% YoY. With wage growth remaining restrained, this may mean nothing for Bank of Japan, which remains committed to maintaining its yield curve control policy. However, the markets may start to test the BoJ’s resolve once again, especially with US 10-year yields also touching 3.5% overnight while JGB yields remain capped by BoJ YCC policy at 0.25%. Grains trade mixed but remains in an uptrend The Bloomberg Grains Index continues its steady ascent after hitting a low point two months ago with global weather concerns, dwindling stockpiles and uncertainty about the Ukraine grain deal being the focus. Chicago wheat nevertheless fell on Monday on an expected increase in Russia’s crop that will compete with US exports already challenged by a strong dollar. Soybeans was supported by Chinese export demand while corn traded sideways but finding support at its 21-day moving average. Lithium prices and stocks back at records Lithium equities are back in focus as the lithium price hits a fresh record after tripling in the past year fuelled by electric vehicle demand. Recently the IEA forecast lithium demand to accelerate more than 40 times over the next two decades. The lithium carbonate price has also had an extraordinary run, up 1,000% from its covid low as supply remains a concern. Shares in Albemarle Corp (ALB:xnys), the world’s biggest lithium company and its neighbour Livent (LTHM:xnys), as well as SQM (SQM:xnys), the world’s second biggest lithium producer are on watch with their shares trading near their peaks. US President Biden wows support for Taiwan When being asked in a CBS 60 Minutes interview whether the U.S. would send forces to defend Taiwan in case of military actions from mainland China, President Biden replied: “Yes, if in fact, there was an unprecedented attack.” In answering a follow-up question about if the U.S, unlike in Ukraine, would send forces men and women to defend Taiwan, Biden said: “Yes”. China’s Emerging Industries PMI slightly improved Emerging Industries PMI (EPMI) in China climbed slightly to 48.8 in September from 48.5 in August. The modest improvement was below market expectations and the 48.8 print was the lowest September figure (EMPI is not seasonally adjusted) since 2014 when the survey first started, suggesting weak growth momentum. What are we watching next? Sweden’s Riksbank set for largest hike in decades today The market is divided on whether the Riksbank hikes 75 basis points or a full 100 basis points, either of which would be the largest hike in nearly 30 years. One factor possibly tilting the odds in favour of a larger move is the exchange rate, as EURSEK trades near the range high of 10.90 since 2020, and USDSEK is less than three percent from its all-time high, which was just above 11.00 back in 2001. SEK is traditionally very sensitive to risk sentiment, so a larger hike may only impress beyond a knee-jerk reaction if broader sentiment and the outlook for Europe improves. FOMC meeting tomorrow Many headlines discuss whether the Fed is set to hike 75 or 100 basis points tomorrow. The Fed generally doesn’t like to surprise markets too much, so arguably it is safe in “only” hiking another 75 basis points as the 100-basis point odds are priced rather low. The more likely hawkish surprise scenario is one in which the Fed sets the “dot plot” of Fed policy forecasts for 2023 higher than the market currently expects – possibly as high as 5.00% for the median expectation. Another item to watch is the Fed’s forecast of PCE inflation for 2023 and 2024, together with where it places the first forecasts for inflation in its first set of forecasts for 2025. Earnings calendar this week This week our earnings focus is on Lennar on Wednesday as US homebuilders are facing multiple headwinds from still elevated materials prices and rapidly rising interest rates impacting forward demand. Later during this week, we will watch Carnival earnings as forward outlook on cruise demand is a good indicator of the impact on consumption from tighter financial conditions. Today: Haleon Wednesday: Lennar, Trip.com, General Mills Thursday: Costco Wholesale, Accenture, FactSet Research Systems, Darden Restaurants Friday: Carnival Economic calendar highlights for today (times GMT) 0730 – Sweden Riksbank Interest Rate Announcement 0800 – ECB's Muller to speak 1230 – Canada Aug. Teranet/National Bank Home Price Index 1230 – US Aug. Housing Starts & Building Permits 1230 – Canada Aug. CPI 1700 – ECB President Lagarde to speak 2030 – API's Weekly Crude and Fuel Stock Report Follow SaxoStrats on the daily Saxo Markets Call on your favorite podcast app: Apple  Spotify PodBean Sticher   Source: https://www.home.saxo/content/articles/macro/market-quick-take-sep-20-2022-20092022

Summary:  The FOMC delivered a hawkish message to the market sending equities and bonds lower. Russia also announced a partial mobilization of its reservists increasing the stake in its war in Ukraine impacting commodities. We go through the details of yesterday's FOMC decision and details, and what knock-on effects they have caused throughout the various markets. We also discuss BOJ's decision to stay firm on its rate policy putting more pressure on JPY. Today's pod features Peter Garnry on equities and Ole Hansen on commodities. Listen to today’s podcast - slides are found via the link. Follow Saxo Market Call on your favorite podcast app: Apple  Spotify PodBean Sticher If you are not able to find the podcast on your favourite podcast app when searching for Saxo Market Call, please drop us an email at marketcall@saxobank.com and we'll look into it.   Questions and comments, please! We invite you to send any questions and comments you might have for the podcast team. Whether feedback on the show's content, questions about specific topics, or requests for more focus on a given market area in an upcoming podcast, please get in touch at marketcall@saxobank.com. Share   Source: https://www.home.saxo/content/articles/podcast/podcast-sep-22-2022-22092022

There will be few reports today, but they are important. We are also awaiting the speeches of many bank representatives. Reports form United Kingdom UK reports showed positive results and were higher than expected. The results for August with Average Earnings ex Bonus reached 5.4% and were 0.1% higher than expected, and increased compared to the previous reading. The unemployment rate also turned out to be positive and was lower than expected. The current reading of the unemployment rate was at 3.5% and it was expected to keep the previous level of 3.6%. Despite positive results, the change in the number of unemployed people in the U.K. during the reported month turned out to be much higher than expected. The current Claimant Count Change reading is 25.5K. The last reading was at the level of 1.1K, which means a significant increase in jobseekers. Read more: UK Results Higher Than Expected And The Day Is Full Of Speeches| FXMAG.COM The Brazilian Consumer Price Index (CPI) Today Brazil publishes inflation data for September. YoY's CPI is expected to hit 7.10%, a decline from the previous reading of 8.73%. If the forecast is correct, it means that the index has been falling since July. As for the MoM CPI, it is also expected to decline from -0.36% to -0.34%. And just like CPI YoY will decline from July. Speeches of the day In addition to UK earnings data and Brazilian inflation data, we expect a lot of speeches. We are waiting for two speeches from a German bank. The first at 14:00 CET, which also starts with all the speeches today. The speaker will be Burkhard Balz Member of the Executive Board of the Deutsche Bundesbank. The next speech will be German Buba Wuermeling Speaks which is set at 17:00 CET, traders may see the immediate global market impact. There will also be speeches by representatives of the European Central Bank (ECB) today. The first is scheduled for 14:45 CET. The speaker will be Philip R. Lane, member of the Executive Board of the European Central Bank. The next one will take place a quarter of an hour later, with a speech by Andrea Enria, Chair of Supervisory Board of the European Central Bank. The last speakers from the old continent will be representatives of a British bank. Bank of England (BOE) Monetary Policy Committee (MPC) Member Sir Jon Cunliffe will speak at 17:00 CET. Andrew Bailey, head of the BOE's Monetary Policy Committee will speak at 20:35 CET. This speech will be the most important of the day because it will have the greatest impact on the currency of the country (British Pound, GBP) and thus on the entire currency market. Today also FOMC members will take the floor. Federal Reserve Bank of Philadelphia President Patrick Harker is set to speak at 17:30 CET. His public engagements are often used to drop subtle clues regarding future monetary policy. Another speech will be made half an hour after this with Loretta J. Mester. Summary 8:00 CET UK Average Earnings Index +Bonus (Aug) 8:00 CET UK Claimant Count Change (Sep) 8:00 CET UK Unemployment Rate (Aug) 14:00 CET German Buba Balz Speaks 14: 00 CET Brazilian CPI (YoY) (Sep) 14:45 CET ECB's Lane Speaks 15:00 CET ECB's Enria Speaks 17:00 CET BoE MPC Member Cunliffe Speaks 17:00 CET German Buba Wuermeling Speaks 17:30 CET FOMC Member Harker Speaks 18:00 CET FOMC Member Mester Speaks 20:00 CET ECB's Lane Speaks 20:35 CET BoE Gov Bailey Speaks Source: https://www.investing.com/economic-calendar/

Summary:  Today we look at the market bouncing back strongly yesterday as we await a data dump from the US today ahead of the long Thanksgiving weekend there. While the focus from the Fed is on how the FOMC delivers its "deceleration of tightening" message, it is worth noting that financial conditions are close to their easiest since the Fed began hiking in 75 basis point increments back in June. Will this receive any comments in the FOMC minutes release tonight? We also look at leading indicators pointing to an incoming recession, talk crude oil, copper and wheat, the RBNZ hiking 75 basis points overnight, stocks to watch and much more. Today's pod features Peter Garnry on equities, Ole Hansen on commodities and John J. Hardy hosting and on FX. Listen to today’s podcast - slides are available via the link. Follow Saxo Market Call on your favorite podcast app: Apple  Spotify PodBean Sticher If you are not able to find the podcast on your favourite podcast app when searching for Saxo Market Call, please drop us an email at marketcall@saxobank.com and we'll look into it.   Questions and comments, please! We invite you to send any questions and comments you might have for the podcast team. Whether feedback on the show's content, questions about specific topics, or requests for more focus on a given market area in an upcoming podcast, please get in touch at marketcall@saxobank.com.   Source: https://www.home.saxo/content/articles/podcast/podcast-nov-23-2022-23112022

OANDA Senior Market Analyst Craig Erlam reviews the latest market news with Jonny Hart. They discussed the Fed minutes, BoK rate hike, Chinese lockdowns, and oil as the G7 finalise the Russian price cap. http://www.subscribeonandroid.com/audioboom.com/channels/4947364.rss This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds. Market Insights Podcast (Episode 402) - MarketPulseMarketPulse

Alex Kuptsikevich, Senior Financial Analyst at FxPro, a few questions regarding US inflation, UK 100, cryptocurrency market and more. Here's what he replied. Global stocks and commodities rise, even cryptocurrencies note an increase. Are you of the opinion as Chinese economy finally opened and US labour market deliver markets with promising numbers there's only ongoing Russian-Ukrainian war preventing markets from real growth? So far, the rise in asset prices has been more of a sigh of relief when things do not develop according to the worst-case scenario. Nevertheless, it is worth paying attention to the disastrous drop from 3% to 1.7% in global GDP growth forecasts for 2023 from the World Bank. This low growth promises a subdued global demand comparable to the worldwide recession times of 2020 and 2009. In contrast to the years, major world central banks are increasing interest rates instead of decreasing them. The full effect of the policy tightening has yet to become evident but will manifest itself by the middle of the year. Even if stopped immediately, the war between Ukraine and Russia will not fix the logistical problems as it is unlikely to change attitudes towards Russian energy. It seems that inflation in Eurozone is cooling down, do you expect the same from the US economy this week? The US economy is one step ahead, staying within Europe in the business cycle. Inflation data from the USA could therefore be a benchmark for the eurozone, but hardly the other way around. Commodity prices are falling, which is keeping inflationary pressures in check. However, it is now worthwhile to start shifting the focus to services inflation as rising wages can creep into this area and become a real problem for central bankers around the world. Service price developments will determine how long the Fed will raise interest rates and keep them high. So far, the forecasts of the FOMC members are alarming. At the same time, market participants have shrugged off such comments, continuing to believe in an imminent policy reversal to easing due to weaker commodity prices. Read next: 2023 Predictions: Central banks were buying gold at the end of the year at the highest rate since 1955 | FXMAG.COM Bullish sentiment spreads among cryptocurrency market - even altcoins gain significantly - what's the most probable driver of these increases?  Currently, the main driver of growth is the depletion of sellers. There isn't anyone to sell cryptocurrencies yet, after having been down for more than a year. However, such a reason is rarely a basis for sustained growth. That would require a new investment idea, which is hard to find with tight financial conditions and increased demands on project returns. The good news right now is when a project stays afloat. UK 100 doesn't seem to share optimism of US equities, could decent GDP print this Friday help the index and UK economy as a whole? The weaker pound has contributed to the UK100 trading at its highest since 2018 this week. It is also noteworthy that the leading UK equity index and the pound have been moving upwards in sync since October. The UK equity market is helped by the previous weakening of the pound, which has somewhat boosted the competitiveness of local goods, as well as a rebound in raw material and energy prices, which allows producer and seller costs to fall. Separately, continental European and British equities have enjoyed a clear influx since the start of the year. Investors appear to have been pleased with the resilience of the region's economies in light of the energy crisis and are also hoping for a recovery in Chinese activity, rushing to turn the page on a tough 2022.

February 22, 2023  $USD, Canada, Currency Movement, FOMC, Italy, Japan, RBNZ, US Overview: The surge in US interest rates and sharp losses in US stocks sent the dollar broadly higher in North America yesterday. The $42 bln of two-year notes auctioned by the US Treasury saw the highest yield in more than a quarter-of-a-century (4.67%) and it still produced a small tail. Sterling, helped by its own surprisingly strong data, was the only G10 currency to have gained against the surging dollar. Still, no important technical levels were breached, though the greenback rose to nearly seven-week highs against the Canadian dollar. The US dollar also rose to new highs for the year against the Japanese yen before settling at about JPY135.00. Rising US rates and falling stocks are the main driver and the FOMC minutes later today are the focus. While the US economic calendar is light today, Fed speakers return tomorrow, and the data highlight is the PCE deflator on Friday. The major US equity indices lost at least 2% yesterday and are little changed today. However, global equities were dragged lower, with sharp losses in Japan, Korea, and India. Europe's Stoxx 600 is off about 0.85%, the third largest swoon this year. European bond yields are mostly 1-2 bp higher. The G10 currencies are mostly heavier, but the yen and Swiss franc are slightly firmer, while the New Zealand dollar is virtually flat despite the 50 bp hike. Among emerging market currencies, the Mexican peso continues to shine, but nearly the rest are softer. Gold is holding above yesterday's $1830 low but is not making much of a recovery. April WTI is extending its pullback for the sixth consecutive session to trade below $76. Asia Pacific The Reserve Bank of New Zealand slowed the pace of its tightening by hiking the overnight cash target rate by 50 bp to 4.75%. It continues to see a peak at 5.5%, but now it is seen in Q4 23 rather than Q3. While headline inflation is easing, the central bank argued the core rate is too high and employment is "beyond the maximum sustainable level." The RBNZ said it was too early to assess the impact from the cyclone and the fiscal response. It continues to see an economic contraction beginning in Q2 but expects it to be short and shallower. The next meeting is on April 5 and the swaps market sees about a 50% chance of another 50 bp move. The New Zealand dollar initially traded higher in response, reaching about $0.6250 from about $0.6215 but has given it back to trade little changed on the day. Japan's January services producer prices edged up to 1.6% year-over-year. They peaked last June at 2.1%, and had slowed to 1.5% pace, the lowest since Q1 22. They averaged about 2.1% in the few months before Covid struck. The inflation focus in Japan is not about service prices but goods prices, not about producer prices, but consumer prices. The national consumer prices will be released early Friday. The Tokyo CPI warns of another jump in the national figures and the median forecast (Bloomberg survey) is for a 4.3% year-over-year pace. This would be a new cyclical high and could very well prove to be the highwater mark. Next week Tokyo's February CPI will be released. It does a good job of anticipating the national figure. We look for government subsidies, the appreciation of the yen on a trade-weighted basis, and the decline in energy and wheat prices to ease price pressures. Read next: The AUD/USD Pair Remains Under Selling Pressure, The GBP/USD Pair Is Below 1.21 Again| FXMAG.COM The dollar reached nearly JPY135.25 yesterday, a new high since last December's BOJ surprise. While it has held today, the greenback found support around JPY134.55. With US rates little changed, the exchange rate is seen consolidating. For the second consecutive session, the 10-year JGB pushed above its 0.50% cap. The BOJ bought bonds and offered five-year low-cost loans to banks to buy government bonds. The Australian dollar edged closer to $0.6800, slipping fractionally through last week's low. The 200-day moving average is about $0.6805. The $0.6780 area marks the (38.2%) retracement of the rally from the middle of last October's low (~$0.6170) and is the next important chart area. The greenback rose to almost CNY6.90 today, its best level since January 4 and slightly through the 200-day moving average (~CNY6.8885). The reference rate was set at CNY6.8759, tightly against expectations (CNY6.8760). Europe In a process that is difficult to disentangle cause and effect, or perhaps as an example of reciprocal causality, the weakening euro, rising yields, and widening peripheral premiums within the eurozone go hand-in-hand. The euro has moved back toward $1.06, which it has not traded below since January 6. The 10-year German Bund yields more than 2.50% and is challenging the high from the end of last year (~2.57%), which has not been seen in a dozen years. It is a similar story with France's 10-year yield, but almost 50 bp higher. Italy's 10-year yield is approaching 4.50%. Last year's peak was near 5.00%. Spain's 10-year yield peaked at the end of last year slightly above 3.65%, an eight-year high. It moved above 3.50% yesterday. Italy's 10-year premium over Germany pushed above 190 bp yesterday for the first time in over a month. Its two-year premium widened to above 50 bp, which it had not seen since January 2. Spain and Portugal's premium over Germany has also widened, but not as much as Italy. Italy's debt burden makes it particularly vulnerable, yet there is another consideration too. Italy's 2021 and 2022 budget deficit is likely to be revised up next week when the stats office assesses the impact of the tax credits initially aimed to encourage green building renovations. The cost has been estimated to in excess of 110 bln euros. There were various elements and the one that was terminated was called "the super-bonus." It was not well-targeted and the use of tradeable (between financial institutions and businesses) helped create the environment for misuse. That said, the initiative did appear to bolster the construction sector in 2021 and helped set the stage for a broader economic recovery. It had been enacted by the coalition government led by Prime Minister Conte from the Five-Star Movement. Former Prime Minister Draghi intervened to curb some of the program's excesses, and last week the Meloni government stopped the program altogether. A key judgment call that the Eurostat may decide, is whether the tax credits are "payable" or "non-payable" which will determine how the cost will accounted; whether is front-loaded or amortized over several years. The euro peaked on Monday a little above $1.07 and has been sold to about $1.0625 today. Last week's low was slightly below $1.0615. A break of the $1.0600 opens the door to a potential move toward $1.0460-$1.0500. There are options for 1.3 bln euros at $1.0550 that expire today. The intraday momentum indicators are oversold but with the FOMC minutes later today, the North American market may show limited enthusiasm for the euro. Resistance may be seen in the $1.0640-50 area. Sterling posted an outside up day yesterday by trading on both sides of Monday's range and settling above its high. It reached almost $1.2150 and has been sold to about $1.2065 today. Initial support is seen near $1.2050. On the top side, the $1.2100-20 area may offer a nearby cap. America The string of constructive US economic data continued yesterday and drove interest rates higher. It seems US rates are being driven higher more by the data than Fed's rhetoric. The flash composite PMI rose above the 50 boom/bust level for the first time since last June. It stands at 50.2 and is due to the recovery in the service PMI to 50.5 from 46.8.  Separately, the Philadelphia Fed's non-manufacturing survey also improved in February to 3.2 from 6.5.  The manufacturing sector is doing less well, which was a clear pattern in the eurozone and UK flash reports. The US flash manufacturing PMI rose to 47.8 from 46.9.  It is the second consecutive month that the weakness moderated. The Empire State manufacturing survey and the Philadelphia Fed survey picked up similar contractionary impulses from the manufacturing sector. Elsewhere existing home sales disappointed. The median forecast in Bloomberg's survey called for a 2% increase in January, but instead they fell by 0.7% and the December decline was revised to -2.2% from -1.5%. Existing home sales have not increased since last January and 4.00 mln unit (SAAR) is the slowest since 2010. Today, there may be keen interest in the FOMC minutes from the meeting earlier this month that delivered a 25 bp hike. As seems rather common recently, the market had one reaction to the Fed's statement and decision and then reversed during Powell's press conference. The message from the Fed is that price pressures remain, and it will take more than moves to reach a level of restriction that it will be comfortable pausing. After a clear campaign to bring the target rate above is seen as the long-run appropriate level, officials believe the pace of tightening can return to a more normal pace of 25 bp. Some of the discussion, like easing of financial conditions may be less relevant. Also, the market has dramatically scaled back ideas of a Fed cut late this year. The last meeting of the year is on December 13. The January 2024 meeting concludes on the last day of the month. The market's bias toward a cut saw the implied yield of the January contract fall to more than 40 bp less than the September contract most recently on February 2. It stood at 18.5 at yesterday's settlement, the smallest discount since early last October. Weaker than expected Canadian retail sales, excluding autos in December, coupled with the more modest increase in price pressures may have lent support to the Bank of Canada's pause that was being questioned after the recent unexpectedly strong employment report. Headline inflation rose by 0.5% (0.7% was expected), allowing the year-over-year rate to fall below 6% for the first time since last February. The base effect suggests the rate is likely to fall sharply over the next couple of months. The US two-year yield shot up 11 bp to 4.73% as it approaches last year's high reached in early November near 4.80%. The two-year Canadian yield was dragged up by eight basis points. However, the more significant weight on the Canadian dollar was from the broad risk-off move. The correlation between changes in the S&P 500 and the Canadian dollar on a 60-day rolling basis is little changed since the start of the year around 0.75.   The US dollar is extending its gains against the Canadian dollar. It has reached CAD1.3560, its best level since January 6. Options for about $475 mln at CAD1.3550 expire today. The CAD1.3600 area offers the next chart area, but the year's high was set near CAD1.3685. The gains in Europe have stretched the intraday momentum indicators and initial support is seen at CAD1.3520-30. The Mexican peso is one of the few currencies gaining on the greenback today. The US dollar recovered yesterday to around MXN18.4830 after testing the five-year low near MXN18.3350 seen last Friday and Monday.  It held MXN18.48 today and slipped back to MXN18.4135. A consolidative session seems likely.    Disclaimer

Price action today will likely be largely dictated by the outcome of the FOMC meeting. It is still unclear whether the Fed will hold rates or hike. Recent developments in the banking sector make it a tough call Energy: Market awaits FOMC Oil prices rebounded yesterday with ICE Brent rallying by a little more than 2% as markets took comfort in comments from the US Treasury Secretary, Janet Yellen, that the government would be prepared to take further action to protect depositors in small US banks, although prices have weakened somewhat in early morning trading today.  Overnight, the API reported that US crude oil inventories increased by 3.26MMbbls, whilst on the products side, gasoline and distillates saw draws of 1.09MMbbls and 1.83MMbbls respectively. However, key for markets today will be the FOMC meeting amid continued uncertainty over whether the Fed will hold rates or hike by 25bp. Russia has said that the previously announced oil supply cuts of 500Mbbls/d for March will be extended until the end of June given current market conditions. Although, there is doubt over whether Russia has reduced output in March, given that seaborne crude exports have held relatively steady so far this month. Meanwhile, it appears unlikely that the G7 will revise the Russian oil price cap, with reports that some officials are reluctant to take such action. The cap was set to be reviewed in March and some EU countries (Poland) have been pushing for the price cap to be lowered from the current US$60/bbl. There are signs that the European gasoil market is tightening. The prompt ICE gasoil timespread is trading in backwardation of around US$30/t, up from around US$15/t at the start of March. This will be largely on the back of lower runs from French refiners. Continued strike action in France is affecting fuel deliveries and causing some refiners to halt or reduce operations. Total has halted its 247Mbbls/d Normandy refinery, whilst the remainder of Total and Exxon refineries are all operating below capacity. Metals: China imports of Russian aluminium climb China has nearly doubled its imports of Russian aluminium in the year since the invasion of Ukraine. Imports of refined aluminium from Russia, the largest aluminium producer after China, climbed 94% to 538,600 tonnes between March 2022 and February 2023 from the previous 12 months, according to Chinese customs data. This has happened as some Western buyers have rejected Russian supplies in their contracts. Read next: Softer Federal Reserve could play in favour of S&P 500 index| FXMAG.COM LME total on-warrant stocks for copper reported outflows of 5,500 tonnes (the biggest daily decline since 8 December) to 43,500 tonnes as of yesterday. Most of the outflows were reported from warehouses in Europe and Asia. Meanwhile, cancelled warrants for copper rose by 4,975 tonnes for a second consecutive session to 32,900 tonnes as of yesterday, signalling potential further outflows. Agriculture: Ukraine 2023 grain harvest to fall Ukraine’s Agriculture Ministry expects the 2023 grain harvest to fall by 17% year-on-year to 44.3mt as farmers reduce area, while average yields are also expected to be lower. The ministry estimates that domestic wheat output will fall by 19% YoY to 16.6mt, whilst the corn harvest is expected to fall 15% YoY to 21.7mt. The latest export data from Ukraine’s Agriculture Ministry shows that 2022/23 grain exports stood at 35.8mt as of 21 March, a decline of 20% YoY. Total corn shipments stood at 21mt (+2% YoY), whilst wheat exports fell 34% YoY to 12.3mt. Read this article on THINK TagsRussian oil price cap Refined product Oil Grains Diesel Copper Aluminium Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more

  Fed minutes – 12/04 – despite the turmoil rippling through the US banking system in March the Federal Reserve went ahead and raised rates by 25bps, however, the tone in the statement came across as much more dovish with the removal of the reference to "ongoing increases will be appropriate", with "some additional policy firming may be appropriate". Powell did go on to say that the prospect of rate cuts this year was not being considered, which some had touted might have been an option This change helps to give the Fed wriggle room to pause at the next meeting, if the data permits, as well as indicating that the end of rate rises could be close. This week's minutes are also likely to be instructive as to how seriously the option of a pause on rates was discussed, and whether in going down that route may have sent a signal that the Fed was more concerned with the current situation than markets would have liked. Powell did admit that a rate pause was considered due to the banking crisis, however, the challenge for the Fed would always have been how to present this change without spooking the markets even more. Powell did go on to say that the prospect of rate cuts this year was not being considered, which some had touted might have been an option. A cursory analysis of the latest dot plot chart confirmed that Fed officials were not considering cutting rates, even as markets continued to price that very possibility. Expect the minutes to focus on the uncertainty around recent events while also outlining the data dependence component of any further moves on interest rates. Read next: The Commodities Feed: Specs boost positioning in oil| FXMAG.COM

European markets have got off to a solid start to the week despite a warning from the IMF about the wider banking sector, and risks to growth more broadly. Painting a bleak outlook for the global economy, the IMF laid out the possibility that interest rates could eventually fall back to the levels they were a few months ago, although declined to lay out a timeline for that. US markets underwent a mixed finish with the Nasdaq 100 slipping back on the back of rising yields, while the Dow finished higher. With markets currently in a bit of a "twilight zone" between Friday's US payrolls report and today's March CPI numbers, the picture with respect to the Fed's next move on rates could well become a little bit clearer, even as last week's economic data largely pointed to some softening in the US economy.  Friday's jobs report reset the bad data narrative of last week that had driven bond yields sharply lower, with the March payroll numbers seeing 236k jobs added, while the unemployment rate fell to 3.5% even as the participation rate rose to 62.6%. Last week's data appear to suggest that people are finally returning to the workforce as the cost of living continues to squeeze consumer finances. It also suggests that the JOLTs numbers will continue to come down, as more people return, having seen these numbers fall below 10m for the first time since May 2021 in February. Wages data fell from 4.6% to 4.2%. Market reaction over the past couple of days has been for US 2-year yields to push back above 4%, after falling as low as 3.65% at one point last week.   Friday's jobs report also saw an upward revision to February to 326k, while seeing a downward revision to January to 477k from 504k. All in all, despite some of the weakness seen in last week's ISM numbers the US labour market continues to look resilient, with little sign of weakness at the moment, thus casting further doubt on the narrative that we'll see rate cuts by the second half of this year. Judging by the bond market reaction, Friday's data also keeps the prospect of another 25bps rate hike on the table ahead of today's US CPI numbers for March, which are expected to see core prices edge higher to 5.6% from 5.5%. This is what the Fed is most concerned about, particularly in services which has continued to rise, and will likely drive policy decisions going forward. This is where the main focus of the central bank is likely to be from here on in even as today's headline number is expected to improve with a fall from 6% to 5.1%. Tomorrow's March PPI numbers might add extra weight to the dovish narrative if they continue to fall sharply given that they tend to be much more forward-looking and act as a forward indicator for CPI. While today's CPI numbers are set to keep the pot boiling on the likelihood of a pause or a further 25bps rate hike at the start of May, tonight's Fed minutes could also offer a useful insight into the discussions at the previous Fed meeting, when the US banking system was undergoing significant turbulence due to the collapse of Silicon Valley and Signature Bank. There had been some speculation in some quarters that the Federal Reserve might have looked at the possibility of a rate cut. In a lot of respects, any notion of a rate cut would have been absurd and could well have made matters even worse and spooked the market even further. Nonetheless, the turmoil did mean the Fed had to be much more careful about its messaging and despite going ahead with a 25bps rare rise, there was a notable shift in tone in the statement. The removal of the reference to "ongoing increases will be appropriate", with "some additional policy firming may be appropriate", was a sensible change, helping to give the Fed wriggle room to pause at the next meeting, if the data permits, as well as indicating that the end of rate rises could be close. Today's minutes are also likely to be instructive as to how seriously the option of a pause on rates was discussed, and whether in going down that route may have sent a signal that the Fed was more concerned with the current situation than markets would have liked. Powell did admit that a rate pause was considered due to the banking crisis, however, the challenge for the Fed would always have been how to present this change without spooking the markets even more. Powell did go on to say that the prospect of rate cuts this year was not being considered, which had been touted in some quarters as an option. A cursory analysis of the latest dot plot chart confirmed that Fed officials were not considering cutting rates in the near future, although markets continued to stubbornly price that very possibility. We also have the latest monetary policy decision from the Bank of Canada, who are expected to keep rates unchanged at 4.5%, for the second month in a row, as they continue to assess the ongoing effects of previous rate rises on the Canadian economy. Thus far we've seen the latest jobs data hold up well, while headline CPI has continued to come down, even as the economy has managed to hold its own. Today's decision is likely to be an "as you were" decision with little distinction from the language seen last month. Forex EUR/USD – still a rangebound market with resistance at the highs last week at 1.0980, with the 1.1030 area as the next key resistance. Found support at the 1.0830 area at the start of the week, with key support just below that at 1.0780. GBP/USD – rebounded from the 1.2340 area after 4 days of declines, with the main resistance back at the highs of last week at 1.2530. Strong support is currently at 1.2270, with further gains towards 1.2660 still preferred while above 1.2250.   EUR/GBP – trend line support from the August 2022 lows continues to hold, currently at 0.8740. Below 0.8720 could see a move toward 0.8680. Currently need a close above the 50-day SMA at 0.8790. On the upside, we also have trend line resistance at the 0.8870/80 area. USD/JPY – has broken above the highs of last week at 133.80 and is now looking to test cloud resistance at 134.50. Currently has cloud support at 132.20. FTSE100 is expected to open 5 points lower at 7,780 DAX is expected to open 5 points higher at 15,660 CAC40 is expected to open 5 points higher at 7,395

Headlines surrounding the abundant risks to the outlook dictate near term direction, but we see a trend towards lower rates. The Senior Loan Officers Survey highlighted the squeeze on growth prospects. ECB hawks will face headwinds as US developments largely dictate financial sentiment Source: Shutterstock Look for lower rates as risks to the outlook abound The Fed has delivered its latest hike last week - in line with what markets currently price and we largely agree. From here on the market rates trend should be down as risks to the economic outlook abound and should eventually outweigh. In the US the failure to raise the debt ceiling poses a large risk to financial stability and the economy and will likely come to dictate headlines in coming weeks. But think also of the simmering banking tensions and their knock-on effects, with the Senior Loan Officers Survey yesterday providing evidence of further credit tightening and thus compounding the recessionary risks coming from rapidly higher borrowing costs, as our economist notes. But keep in mind that when the Fed made its decision last week it already had the survey at hand and Fed Chair Powell noted it was broadly consistent with the FOMC’s thinking. The Senior Loan Officers Survey yesterday provided evidence of further credit tightening The Fed also released its latest financial stability report yesterday. The top of the list of most cited risks was still occupied by persistent inflation and monetary tightening. Even if Wednesday’s CPI report could show the annual rate falling to below 5%, this still means inflation is running well above the Fed’s 2% target. And, even if market-priced inflation forwards eventually point to the Fed coming close to its target a year from now, the NY Fed’s survey of consumer expectations saw inflation expectations at the medium and longer horizon increase slightly - three year ahead is now at 2.9% and five year ahead at 2.6%. Rates actually inched further up yesterday, with 10Y UST reclaiming 3.5%. On this particular day this was probably more due to a heavy slate of corporate debt issuance. But near-term our view of lower market rates by year end does not exclude temporary moves higher. At this stage direction is dictated by macro data and headlines surrounding banking tensions and the debt ceiling.     Even upbeat inflation break-evens suggest returning to 2% will be a struggle Source: Refinitiv, ING The ECB hawks will struggle to decouple from the US In the Eurozone money markets think the ECB can still deliver one, or at most two, hikes. But despite officials’ signalling that more ground needs to be covered, the market is not fully discounting 25bp at the June meeting.  Arguably, the ECB returning to a 50bp increment looks very unlikely after last Thursday's decision to hike at a slower pace. And markets probably don’t think that the ECB will be able to isolate itself entirely from the risks looming over the US outlook. The market is not fully discounting 25bp at the June ECB meeting Chief economist Lane still highlighted that there “was a lot of momentum in inflation”, though forecasting “a lot of disinflation coming later this year.” Given the track record of forecasts the focus will remain on the observable, with the ECB itself having flagged "significant upside risks" to the inflation outlook. But we doubt that the ECB’s hawks will be able to push market rates materially higher on their own, given that financial sentiment is largely dictated by developments in the US. ECB hawks are set to attempt to lift euro yields this week Source: Refinitiv, ING Today's events and market view Main focus in the European session is on central bank speakers, where both ends of the ECB dove-hawk spectrum are represented today. Among others, Chief Economist Lane is representing the dovish end while on the hawkish side we will hear from Slovenia’s Vasle, Croatia’s Vujcic and most prominently from Isabel Schnabel, although only in the evening. In the US, headlines surrounding the debt ceiling could dictate direction, with President Biden meeting with Speaker of the House McCarthy today. The data calendars have little of note aside from the US NFIB small business optimism index.   Read next: Banks intensify the squeeze on US growth prospects| FXMAG.COM In primary markets Austria will issue €1.7bn across 10Y and 20Y lines while Germany reopens a 5Y bond. The European Union has mandated a dual tranche deal for a new 3Y bond and a 30Y tap which should also be today’s business. The US Treasury will sell US$40bn in 3Y notes. Read this article on THINK TagsRates Daily Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more

FX Daily: Trading the 50-50 risk Despite the very strong headline US May payroll figure, rising unemployment and declining wage inflation are keeping markets from fully pricing in a June Fed hike (we expect a hold). Barring a big ISM services surprise today, the lack of other key inputs before next week’s CPI could keep the dollar capped. The RBA decision tomorrow is also a 50-50 decision     USD: Not enough to price in a June hike The blowout May headline payroll number added fuel to the narrative of an extra tight US labour market, but the coincidental rebound in unemployment to 3.7% and slowdown in wage growth kept markets from going all-in on a June rate hike by the Federal Reserve. As discussed in this note by our US economist, payrolls and the unemployment rate are calculated through different surveys: the former by employers, and the latter by households. In practice, firms and households conveyed very different messages about the direction of the US labour market in May.   We think that, when adding the cooling off in wage inflation, and considering the diverging views within the FOMC, the case for a pause at the 14 June meeting should prevail. The last big risk event before the rate announcement is the 13 June CPI reading, while today’s ISM services figures (the consensus expects a mild improvement) might have a somewhat contained impact on rate expectations, barring major diversions from expectations. The FOMC has already entered the black-out period.   Markets are currently pricing in a 25-30% implied probability of a hike in June, while 21bp are factored in by the end-July meeting. We suspect that the pricing may not vary considerably, or that the narrative of a “50-50” chance of a hike in June may prevail until the CPI numbers next Tuesday – and barring a surprise there – into the FOMC announcement itself.   With markets not having received enough compelling evidence from the May jobs report to price in more than a 50% probability of a June hike, we feel that two-year USD swap rates, which rebounded to 4.73% after having declined to 4.51% on Friday, may struggle to find much more support this week.   Add in a period of potential market sentiment stabilisation now that the debt-ceiling saga has ended and we think the dollar's bullish momentum may dwindle into the FOMC meeting.   We see a higher chance of DXY stabilising around 104.00 or pulling back to 103.00. Some pro-cyclical currencies could emerge as outperformers in this period: the Canadian dollar, for example, may stay supported now that Saudi Arabia announced another one million barrels a day of oil production cuts and even if the Bank of Canada stays on hold on Wednesday, as long as it keeps the door open for a potential hike down the road.    

Rates Spark: Worries that more might be needed The Bank of Canada has resumed hiking after a pause, highlighting concerns that elsewhere more might be needed to bring inflation down even as the Fed is mulling a pause of its own. Market rates have adjusted higher again and look vulnerable to more upside in the near term, especially in the US, with supply looming early next week.   The Bank of Canada lends skip narratives globally more credibility If they need any evidence that the current tightening cycle is not of the usual type, rates markets only have to look at the Bank of Canada’s 25bp hike yesterday. It was a move that surprised the majority of economists and came after the bank stood pat since last hiking 25bp in January. The Bank of Canada has led Fed policy in many ways, when it came to starting quantitative tightening or reverting to larger hikes. Now it may well have jumped ahead with the “skip” narrative, just when FOMC members are mulling a pause of their own. While it was previously tempting for markets to read any pause already as the end of the tightening cycle, it shows that an adverse turn of the data can require central banks to tighten the policy screws further.   With regards to the markets’ pricing of the Fed, the implied probability of a hike next week increased moderately to 30%. The probability of a July hike briefly spiked above 90% before falling back to 80%, not far from where it sat before. Yet further out the SOFR OIS forwards for year-end are now back at their highest levels since March at just above 5%.   Inflation concerns and supply add near-term upside to yields   Supply remains a near term factor for rates However, it was longer rates in the 5- to 10-year area that underperformed, with 10Y USTs rising more than 12bp to close in on 3.8%. While the BoC’s decision delivered the decisive push, the rise in yields already started earlier. That may also be owed to the prospect of faster paced Treasury issuance after the lift of the debt ceiling weighing on markets.   True, the rebuild of the Treasury’s cash balance as indicated yesterday to US$425bn by the end of June will mostly come from additional bills issuance, but early next week markets also will face 3Y and 10Y Treasury auctions on Monday and a 30Y auction on Tuesday. It means the bond sales will come around the crucial US CPI release and just ahead of the FOMC decision, volatility events that may warrant additional price concessions.   The US Treasury is about to rebuild its cash account   Upside inflation risks outweigh softer data, also at the ECB In EUR rates markets as well, just ahead of the upcoming ECB meeting, worries about inflation continue to outweigh the impact of softer data. Market have been close to fully pricing a June hike for a while now and see at least one more hike until September. They see a 20% chance that we will have a third hike, reflecting the recent return of speculation that the ECB’s deposit rate could reach the 4% handle.   The ECB’s Schnabel and the Dutch central bank’s Knot were the latest to say more tightening was needed. Schnabel cautioned “given the high uncertainty about the persistence of inflation, the costs of doing too little continue to be greater than the costs of doing too much”. Our own economists also think a hike next week looks like a done deal. More interesting is what the ECB will signal around the further path ahead. Given the current tightening bias evident in minutes of the last meeting and recent commentary as well as the still painfully slow decline in inflation the door should be left open to deliver more. A second hike in July looks likely. A third in September is possible, but not yet the base case.   Today's data and market view The Bank of Canada’s resumption of rate hikes also lends credibility to the skip narrative that Fed officials have increasingly been pushing last week. Despite all positive signs on the inflation front and weaker data, the concern clearly is that central banks may still need to do more. Technical factors like the Treasury supply packed into early next week just ahead of the Fed decision can add a bearish tilt to the market until then, and at least to some added volatility. Main highlight on the data front are the weekly US initial jobless claims. Consensus here is for little change which would indicate a still relatively tight job market. In the eurozone we will get the final first quarter GDP figures. Supply certainly has been a theme in eurozone rates markets, too, especially with Spain printing a €13bn 10Y bond which added to the widening of periphery bond spreads. After recent busy primary markets, only Ireland is scheduled to be active - with two bond taps in the sovereign space today.  

To hike or to hold for the Fed this week     When the Federal Reserve last met at the beginning of May raising rates by 25bps as expected, the market reaction was relatively benign. There was little in the way of surprises with a change in the statement seeing the removal of the line that signalled more rate hikes were coming, in a welcome sign that the US central bank was close to calling a halt on rate hikes.     Despite this signalling of a possible pause, US 2-year yields are higher now than they were at the time of the last meeting.     This is primarily due to markets repricing the likelihood of rate cuts well into next year due to resilience in the labour market as well as core inflation. Some of the recent briefings from various Fed officials do suggest that a divergence of views is forming on how to move next, with a slight bias towards signalling a pause tomorrow and looking to July for the next rate hike.      At the time this didn't appear to be too problematic for the central bank given how far ahead the Federal Reserve is when it comes to its rate hiking cycle. The jobs market still looks strong, and wages are now trending above headline CPI meaning that there may be some on the FOMC who are more concerned at the message a holding of rates might send, especially given that the RBA and Bank of Canada both unexpectedly hiked rates this past few days.     With both Fed chair Jay Powell leaning towards a pause, and potential deputy Chair Philip Jefferson entertaining similar thoughts in comments made just before the blackout period, the Fed has made itself a hostage to expectations, with the ECB set to raise rates later this week, and the Bank of England set to hike next week, after today's big jump in wage growth.       This presents the Fed with a problem given that it will be very much the outlier if it holds tomorrow. Nonetheless there does appear to be increasing evidence that a pause is exactly what we will get, with the problem being in what sort of message that sends to markets, especially if markets take away the message that the Fed is done.     If the message you want to send is that another hike will come in July, why wait when the only extra data of note between now and then is another CPI and payrolls report. You then must consider the possibility that these reports might well come in weaker, undermining the commitment to July and undermining the narrative for a further hike that you say is coming, thus loosening financial conditions in the process.     While headline inflation may well be close to falling below 4% the outlook for core prices remains sticky, and at 5% on a quarterly basis, and this will be an additional challenge for the US central bank, when it updates its economic projections, and dot plots.   The Fed currently expects unemployment to rise to a median target of 4.5% by the end of this year. Is that even remotely credible now given we are currently at 3.7%, while its core PCE inflation target is 3.6%, and median GDP is at 0.4%.     As markets look to parse this week's new projections the key question will be this, is the US economy likely to be in a significantly different place between now and then, and if it isn't then surely, it's better to hike now rather than procrastinate for another 5 weeks, especially if you are, as often claimed "data dependant".       By Michael Hewson (Chief Market Analyst at CMC Markets UK)  

EUR: Another day driven by the US As discussed in our June ECB Cheat Sheet, we see developments in USD rates as more impactful in the long run for EUR/USD compared to what might emerge from tomorrow’s ECB meeting. In terms of short-term impact, we expect the combination of a hawkish hold by the Fed and a hawkish 25bp hike by the ECB to leave EUR/USD trading closer to 1.0700 than 1.0800 as we expect the FOMC to offer reasons to stay attached to dollar longs. The ECB may struggle more to convey a hawkish message after inflation and growth data came in on the softer side.

Asia Morning Bites China activity data are due shortly - expectations are low. After the Fed yesterday, today we have the ECB, and more tightening is expected. Australian employment data and US retail sales complete the data excitement for the day.     Global Macro and Markets Global markets: Stocks had little trouble digesting the FOMC “skip", which did almost exactly what was expected of it – perhaps the dot plot 2 additional hikes was one more hike than had been expected. Anyway, the result was a virtually flat S&P 500 and a modest 0.39% gain from the NASDAQ. It certainly could have been worse. US Treasury yields were mixed. 2Y yields rose 2bp to 4.688%, while those on the 10Y UST actually dropped 2.7bp to 3.786%. EURUSD rose to 1.0842, and other G-10 currencies also made gains against the USD – with the notable exception of the JPY which remains at about 140. Have we reached a turning point for the USD and bond yields….? Other Asian FX was quite mixed. The KRW gave back some of its gains from the previous day. The THB and IDR were also softer, while the INR pushed stronger to 82.106. Other than that, not too much change.   G-7 macro: An almost playbook FOMC last night. A hawkish “skip” but a slightly higher-than-expected dot plot. James Knightley provides all the detail in this linked note. The ECB also meets today. That could be a somewhat different meeting with a hike fully expected, and few reasons for the ECB to be able to sound a more dovish note. Here is a link to a cheat sheet from our FX colleagues. We also get US retail sales, which are not expected to look very good (consensus looks for a -0.2%MoM headline result). China: A busy morning with the 1Y MLF likely also showing a 10bp cut, and then a little later (10:00 SGT) the data dump, which we feel could come in softer than the initial consensus numbers posted on newswires. There is a lot of speculation about further stimulus measures being announced, which might follow today’s data release, though far from certain.   Australia: The monthly data report today is as hard to call as usual. A small increase in overall employment is the consensus view. But the devil will be in the detail with the split between full-time and part-time jobs being very important, as well as the unemployment rate.   Japan: This morning’s data release is upbeat and supports our view that the economy is still recovering. Exports rose 0.6% year-on-year in May (2.6% in April, market consensus -1.2%). Exports to the U.S. and the EU rose 9.4% and 16.6% respectively, but this is partly due to the low base comparison last year. Exports to Asia and China continued to weaken, falling -8.1% and -3.4%, respectively. By export items, strong auto exports led the growth but declines in exports of chip-making machinery and semiconductor parts dragged down exports. Export growth has slowed down recently, but Japan’s performance is relatively good compared to other Asian countries, where exports have recorded a series of deep contractions. Also, core machinery orders, a forward-looking indicator for investment, rebounded 5.5% MoM (sa) in April, more than offsetting the decline in March (-3.9%), thus 3-month sequential comparison increased for three months in a row. Consequently, we think that the growth momentum is still alive in Japan. Regarding the recent speculation on the early election in Japan, we think it would have a limited impact on the BoJ’s policymaking because the election won’t have any immediate influence on inflation.   Indonesia: Indonesia reports trade figures today. We expect both exports and imports to stay in negative territory with the trade surplus set to narrow further to roughly $3bn. The progressive narrowing of the trade surplus over the past few months points to fading support for the IDR, which has faced some pressure of late. With exports not likely to replicate last year’s strong performance, we expect the trade surplus to normalize at these levels over the coming months. Meanwhile, Indonesia’s constitutional courts are set to rule on a petition to amend the country’s voting system today. The said petition would bring back closed ballot list system voting and inevitably delay next year’s election. Expect a revival of anxiety if the courts rule in favour of the change given its implications for the February 2024 election.     What to look out for: China activity data New Zealand GDP (15 June) Japan core machine orders (15 June) Australia unemployment (15 June) China industrial production and retail sales (15 June) Indonesia trade (15 June) India trade (15 June) Taiwan policy meeting (15 June) ECB policy meeting (15 June) US retail sales and initial jobless claims (15 June) Singapore NODX (16 June) BoJ policy meeting (16 June) US University of Michigan sentiment (16 June)

In the wake of the recent Federal Reserve (Fed) decision and its implications for the financial markets, we reached out to experts, analysts, and economists from HF markets to gain their insights on the current situation. Our focus revolves around two key areas: the Fed's decision and its impact on the gold market. With these topics in mind, we explore the potential outlook for gold prices in the coming weeks and discuss the market's response to the FOMC (Federal Open Market Committee) decision.   Gold Market Analysis When considering the trajectory of gold prices in the near future, experts express skepticism regarding the likelihood of reaching a new all-time high for XAU. While certain central banks, including Turkey, China, and India (which added 2 tonnes to its reserves in May), have increased their gold purchases to diversify their reserves away from the US dollar, investors, speculators, and hedge funds focus on other factors. Notably, gold is currently trading at a premium compared to its valuation against the US 10-year real interest rate. Recent price movements indicate a potential further decline, with a possible target range of $1860 or even lower to $1785. FXMAG.COM: Could you give as your point of view about how the gold prices would behave in next weeks? Is there a chance that there will be new ATH? Marco Turatti – HFM Market Analyst: It seems unlikely that we will see a new all-time high for XAU soon. Its price has so far been supported by increased purchases by certain central banks, such as Turkey, China and others (India added 2 tonnes to its reserves in May). The aim is to differentiate its reserves from the USD.  But investors, speculators and hedge funds look at other fundamentals and gold is very expensive compared to where it should trade against, for example, the US 10-year real interest rate. Just today it broke $1940, and could continue to the $1860 zone, if not lower to $1785.    Fed's Decision and Market Reaction Regarding the FOMC decision, experts highlight the surprise factor. Many anticipated that the Fed would approach the peak and initiate rate cuts in the coming months. However, the Fed's stance indicates that the official rate could reach 5.75% in 2023, with Chairman Jerome Powell stating that no cuts are expected for approximately two years. This stands in contrast to the Dot Plot projections. The Fed also expressed optimism regarding the new growth and job outlook.     FXMAG.COM: Could you please comment on the FOMC decision? Marco Turatti – HFM Market Analyst: The Fed really surprised: a lot of people thought we were close to the peak and ready to cut rates this year, but this is not the case. The official rate will probably reach 5.75% in 2023 and Jerome Powell says there will be no cuts for about 2 years (which is different from what the Dot Plot says).  They were also quite optimistic about the new growth/jobs outlook. The market didn't really go anywhere: yes, there was a lot of up and down movement in both indices and the USD, but at the end the day it ended with the US500 flat and the USDIndex having recovered 103.  Now there will be time in the coming hours to better process the central bank's message. Today (15/06) we are seeing declines in the stock market futures and this makes sense for equities (also given the emphasis on labour market monitoring, the Fed wants it weaker).  One direct and clear reaction we are noticing, however, has obviously been the rise in rates along the whole curve, which is weighing on gold.

The European Central Bank (ECB) has recently made a surprising shift in its approach towards financial stability, signaling a departure from its historically dovish stance. This decision, prompted by the challenges posed by inflation, has significant implications for both the performance of individual economies and the overall prosperity of the European Union.   In this article, we had the opportunity to discuss the ECB's decision with Petr Ševčík, an analyst from BITMarkets, who shared valuable insights into the repercussions of this move. BITMarkets, a platform that has been closely monitoring the rise of cryptocurrency trading in Europe, has observed increased trading activity in this sector since the beginning of the year. Cryptocurrencies, known for their volatility, have gained attention as a potential refuge in times of economic uncertainty and hardship. As inflationary pressures continue to burden traditional industries such as housing and banking, some investors are turning to alternative assets like cryptocurrencies.   The impact of the ECB's decision is already being felt across various sectors, with construction and materials stocks experiencing a 0.8% drop and bank stocks dwindling by 0.7%. These developments are a natural consequence of higher borrowing costs, leading to a slowdown in loan growth. However, amidst these challenges, there are signs of resilience in certain areas. Media stocks, for instance, enjoyed a 0.7% upside following the news, indicating that the markets may begin to respond more favorably to individual performance rather than being solely influenced by widespread conditions.    FXMAG.COM: Could you please comment on the ECB decision?   It's crystal clear that the reluctant ECB is that of the past. Historically known for adopting a very dovish approach towards financial stability of the bloc by avoiding sharp interest hikes, its decision to bump rates again highlights the struggles caused by inflation which are burdening the performance of individual economies and corporations and the livelihood of individuals; on a macro scale, this has been hindering the prosperity of the European Union for a daunting lengthy period. BITmarkets has witnessed the rise of crypto trading since the start of the year, and a notable portion of increased trading activity has stemmed from Europe. Cryptocurrency assets are volatile and always have been, but they have been regarded as refuge by some in times of economic uncertainty and hardship. What's apparent is that the housing industry and the banking sector are among the industries which are being damaged the most, with construction and materials stocks dropping 0.8% and bank stocks dwindling 0.7% following the news. From a wider perspective, this is only natural as borrowing costs increased which attributes the slowdown of growth in loans.  While the news was not taken very lightly as the continent's most popular indices shed their prices, I don't project much more dismay for Europe with regards to economic stability. Media stocks enjoyed a 0.7% upside and that speaks a thousand words. Inflation is cooling down and markets may begin to behave based on performance rather than being continuously-succumbed to widespread conditions. The European financial market has been a victim of calamitous market conditions for years, but the latest ECB move is one that can ultimately bring the EU out of its shell.

In the wake of 10 consecutive interest rate hikes, it is high time for the markets to embrace a more positive outlook. The Powell-led committee's aggressive pursuit of raising benchmark rates, although necessary, has cast a shadow of pessimism over financial markets, potentially overshadowing the remarkable achievements of industry pioneers. Throughout history, monetary policy has proven to be a valuable tool for achieving financial stabilization in economies. The United States has faced its fair share of hardships in recent times, including a prevailing sense of distrust toward local banks and the adverse ripple effects of the debt ceiling conundrum. These challenges have been further exacerbated by soaring nationwide inflation, which has also left its mark on the cryptocurrency market.   It has been 15 months since the Federal Reserve decided to pause the rate hikes, indicating a momentary respite for the nation's monetary defenses. During this time, cryptocurrencies have displayed a bullish trend when examined from a long-term perspective. While current market conditions may appear to be in the red, they could potentially serve as necessary corrections following the rapid price surges witnessed in the crypto asset space. The Federal Reserve's monetary policy is operating as intended, with continuous and comprehensive assessments of economic conditions. Crucially, these assessments should consider the implications not only for industry leaders but also for everyday households. Adopting a bottom-up approach may yield insightful findings regarding the broader impact of monetary policy decisions.   FXMAG.COM: Could you please comment on the FOMC decision? It’s about time for markets to see the brighter side of day after 10 straight interest rate hikes. The Powell-led committee has been on a frenzy of aggressive benchmark rate increases – while necessary – has infected financial markets with pessimism, and that can overshadow the successes and feats of industry pioneers. Monetary policy has historically served as a very useful tool for achieving economy financial stabilization, and the United States economy has been susceptible to quite the hardship in recent times. The distrustful sentiment towards local banks and the adverse ripple effect of the debt ceiling conundrum had been exacerbated with scorching nation-wide inflation. That has also had its impact on the crypto market. It has been 15 months since the Fed decided to pause the rate hikes, which perhaps is an indication that the nation’s monetary defenses are taking a breather. Since the start of the year, cryptocurrencies have been very bullish when putting on the long-term lenses. While contemporary market conditions are more in the red, they potentially serve as corrections to the recent sharp price bumps in crypto assets. The Federal Reserve’s monetary policy is doing as it should, given continuous extensive assessment of economic conditions. What’s pivotal here is the conditions to be assessed, which in my perspective should take into consideration the implications on industry leaders but also those on everyday households; a bottom-up approach may present quite the insightful findings.  

In the ever-evolving landscape of financial markets, decisions made by major central banks have a significant impact on shaping trends. We recently had the opportunity to speak with Matthew Weller, an analyst at StoneX, to gain insights into the current state of affairs.   Read more   The European Central Bank (ECB) recently made headlines with its "Hawkish Hike," raising its key interest rate by 25 basis points to 3.5%. This move aims to combat the escalating inflation in the eurozone, marking the eighth consecutive rate hike since July 2022. The ECB's determination to bring inflation down from its current 6.1% to its target of 2% is evident. ECB President Christine Lagarde has hinted at the possibility of further rate hikes at the next meeting in July, emphasizing the need to tackle inflation head-on. Lagarde made it clear that the ECB has no plans to pause its rate hikes. While the ECB focuses on inflation control, other central banks, such as the US Federal Reserve, have taken a pause in their rate hikes to assess their impact on economic growth and employment. However, the Fed's projections indicate the potential for two more rate hikes this year. Similarly, central banks in Australia and Canada have resumed rate increases after a temporary pause, underscoring the global challenge of high inflation. The ECB's decision to raise rates comes at a time of economic uncertainty, influenced by factors such as the ongoing conflict between Russia and Ukraine and potential wage agreements that may further fuel inflationary pressures. The ECB acknowledges that short-term economic growth may remain subdued, but it expects improvements as inflation subsides and supply disruptions ease. While concerns persist regarding the potential negative impact of higher rates on the economy and the risk of a recession, the ECB remains committed to addressing inflation as a top priority   FXMAG.COM: Could you give as your point of view about how the gold prices would behave in next weeks? Is there a chance that there will be new ATH? Gold Consolidates Amid Hawkish Central Bank Actions   With major central banks continuing to tighten monetary policy and inflation still receding (if more gradually than before) gold prices are likely to remain on the back foot in the near term. As of writing, the yellow metal is trading in the mid-$1900s, where it has spent the last three weeks consolidating. Bulls will be looking for a break above the June high near $1990 to signal a potential retest of the record highs near $2075 as we move into July, whereas a confirmed break below $1930 could open the door for a retest of the 200-day EMA near $1900 next.

Crude prices are lower on disappointment with the size of cuts with China’s key lending rates. ​ Oil seems locked in on anything and everything that has to do with China. ​ Last week, oil was supported by improving Chinese refiner quotas. ​ This week, energy traders are seeing oil weakness emerge on disappointing stimulus efforts. ​   WTI crude looks like it is starting to find some decent support at the $68 region and that should hold as long the Fed does spook markets that they might be ready to deliver more than two additional rate hikes. ​     Gold The gold bears are in control and momentum selling doesn’t seem to care that stocks are softer and as Treasury yields come down. ​ Wall Street is still thinking that the Fed will only deliver one more quarter-point rate rise but no one wants to be long gold before what will likely be a shortened week of hawkish Fed speak. ​ Fed Chair Powell will defend his FOMC performance. Fed’s Waller will stick to his stance of supporting further hikes. ​ Fed’s Goolsbee might be closer to supporting a pause. ​ A temporary rebound in housing data might push Fed’s Bowman might wait to see if that impacts the trend of lower rents. ​ ​ Fed’s Mester has been a true hawk and probably won’t say she sees a reason to pause rate hikes. ​ Fed’s Bullard will likely confirm he still supports two more rate hikes. ​ If gold selling accelerates, it could get ugly as major support won’t appear until the $1900 region. ​  

Yesterday’s price action of Nasdaq 100 has reintegrated back below the upper limit of the “Ascending Wedge” with a bearish breakdown below its daily RSI momentum indicator. Short-term momentum is still bearish as the Index has broken below the 20-day moving average which has also turned flat. 14,980 is the key short-term resistance to watch. This is a follow-up on our prior analysis “Nasdaq 100 Technical: Squeezed up ahead of CPI and FOMC” published on 13 June 2023. It rallied and hit the key 15,100/270 resistance zone as expected (click here for a recap). Interestingly, after the Nasdaq 100, the top performer among the benchmark US stock indices (recorded a year-to-date return of +36.12% as of 23 June 2023) hit the 15,270 key medium-term pivotal resistance (printed on intraday high of 15,285 on 16 June 2023), it shed a weekly loss of -1.28% for the week of 20 June 2023 which was its worst weekly loss in around three months.   At the risk of forming a medium-term blow-off top   Fig 1: US Nas 100 medium-term trend as of 27 Jun 2023 (Source: TradingView, click to enlarge chart) The recent price actions of the US Nas 100 (a proxy for the Nasdaq 100 futures) has reintegrated back below the upper limit of the bearish “Ascending Wedge” configuration yesterday, 26 June, and had a daily below it which indicates that the prior break above this upper limit on 12 June is considered as a failure bullish breakout (see daily chart). In addition, the daily RSI oscillator has broken below its key corresponding ascending trendline support at the 58 level which suggests that medium-term momentum may have turned bearish that in turn reinforces the potential medium-term blow-off view. The key medium-term support to watch will be at 13,660 (lower limit of the “Ascending Wedge”, 50-day moving average, former swing high area of 15 August 2022 & close to the 38.2% Fibonacci retracement of the up move from 28 December 2022 low to 16 June 2023).     Short-term momentum remains bearish   Fig 2: US Nas 100 short-term minor trend as of 27 Jun 2023 (Source: TradingView, click to enlarge chart) Price actions of the Index have broken below the 20-day moving average that has started to turn flat (see 1-hour chart). The hourly RSI oscillator has continued to inch downwards towards the oversold level of below 30 but no bullish divergence signal yet. Watch the 14,980 key short-term pivotal resistance and a break below 14,580 support exposes the next support at 14,255/220. On the flip side, a clearance above 14,980 negates the bullish tone to see a retest on the 15,260/270 key medium-term resistance.      

FX Daily: Hawkish Sintra kicks off The ECB Symposium in Sintra starts today, with an introductory speech by Lagarde plus remarks from other ECB members. A generally hawkish tone should come from all sides: the eurozone (despite a worsening growth outlook), the UK (despite the mortgage crisis) and the US. We’ll also monitor the speech by Norges Bank Governor today and Canada’s CPI numbers.   USD: Slightly weaker into Sintra The week has started on a rather quiet tone across most asset classes. The dollar is trading softer against the pro-cyclical currencies, a sign that the FX market has also fully overlooked the weekend crisis in Russia. As highlighted in yesterday’s FX Daily, investors are fully focused on the central bank story, and with the FOMC and post-FOMC hawkish messages having now been absorbed, we are transitioning to a period where data will tell investors whether there is any need to push tightening expectations beyond the one rate hike priced in for July. The notion of first and second-tier data releases is a bit more muffled in an environment where markets are spasmodically looking for evidence of disinflation and/or economic slowdown. We will see a gradual intensification in the US data release calendar in the coming days, which will culminate with ISM services and payroll data on 6 and 7 July; and then June CPI figures on 12 July. Zooming back into this week, the Conference Board consumer confidence data today will be the highlight of the day, although some focus will also be on May’s Durable goods orders and new home sales, and on June’s Richmond Fed Manufacturing index. Consensus expectations point to a relatively firm set of numbers, and we see no reasons to strongly disagree. Considering the low likelihood of a dovish turn by Fed Chair Jerome Powell at his Sintra speech tomorrow, an acceleration in the dollar decline does not seem very likely.

Services PMIs (Jun) – 05/07 - despite the dire start of manufacturing activity, services have held up well but even here we are seeing pockets of weakness with France seeing a sharp drop in the flash numbers a few days ago, sliding from 52.5 to 48, while activity in the rest of the euro area remains broadly positive. This is an area that could help boost economic activity in Italy and Spain now we're in the holiday season and which may help avert a 3rd quarter of weakness. We're also expected to see positive readings from the UK and the US.   Fed minutes – 05/07 – recent briefings from various Fed officials do suggest that a divergence of views is forming on how to move next, as well as in the coming months, and while the commitment to a pause in June was well flagged the commitment and guidance did pose a bit of a problem to the Fed given the strong economic data only days before the meeting in question. Powell managed to overcome that with a strongly hawkish message at his press conference along with an upgrade to the central banks key economic forecasts. A number of members changed their dots to reflect the prospect that they were prepared to raise rates twice more by the end of the year, with a hike in July looking increasingly likely.  This was somewhat surprising given markets were pricing one more rate hike, however key in amongst this is the Fed's determination that markets stop pricing rate cuts by the end of this year. This insistence of pricing in rate cuts by year end has been one of the key characteristics that has helped drive recent gains in stock markets. This slowly appears to be being priced out, as is the possibility that the Federal Reserve, along with other central banks, looks to prioritise pushing inflation down at the risk of raising the level of unemployment. This week's minutes ought to give us an indication of the thought processes of the more dovish members of the FOMC, and how comfortable they are with the prospect of further rate rises.    AO World FY 23 – 05/07 – has had its share of problems after getting a huge lift during the pandemic as business for electrical goods shifted online. These growing pains presented problems of their own in terms of scaling its operations so when the inevitable slowdown happened the business struggled to cope as costs surged. Back in 2021 the shares rose to a record high of 443p, as a pandemic buying frenzy pushed the shares up from lows of 48.5p in the space of 9 months. It's taken a little bit longer to round-trip that journey with the shares hitting a record low back in August of 39p. We've seen a decent recovery since then, helped by a number of guidance upgrades this year, one on January, with the focus on reducing costs with revenues set to see a 17.2% decline from last year. In March EBITDA guidance was raised again, to between £37.5m and £45m, with management citing further margin improvements. In April this was followed by a Q4 trading update which predicted UK revenues of £1.13bn while updating its profit guidance to the top end of its recent range upgrade of EBITDA of between £37.5m to £45m. In a sign of confidence regarding AO's turnaround plan, in June Mike Ashley's Fraser Group acquired a 19% stake in the business at 68p per share in a welcome boost for the online retailer.  

Services PMIs and Fed minutes in focus By Michael Hewson (Chief Market Analyst at CMC Markets UK) In the absence of US markets yesterday, European markets underwent a modestly negative session on a fairly quiet day, and look set to open modestly lower this morning, with Asia markets drifting lower. For the past few days, markets have been trading in a broadly sideways range with little in the way of momentum, as investors weigh up the direction of the next move over the next quarter.   The last few weeks have been spent obsessing about the timing of a possible recession, particularly in the US, with the timing getting slowly pushed back into 2024, even as bond markets flash warnings signs that one is on the horizon.     As we look ahead to Friday's US payrolls report, speculation abounds as to how many more central bank rate hikes are inbound in the coming weeks, against a backdrop of economic data that by and large continues to remain reasonably resilient, manufacturing notwithstanding.     Despite the dire start of manufacturing activity as seen earlier this week, services have held up well, although we are now starting to see some pockets of weakness. A few days ago, in the flash numbers France saw a sharp fall in economic activity, sliding from 52.5 to 48 for June, although activity in the rest of the euro area remains broadly positive.     This is an area of the economy that could help boost economic activity, particularly in Italy and Spain now we're in the holiday season and has seen these two countries perform much better in recent months. The outperformance here could even help avert a 3rd quarter of economic contraction for the euro area.       Expectations for Spain and Italy are 55.7, and 53.1, modest slowdowns from the numbers in May, while France and Germany are expected to slow to 48 and 54.1.     We're also expected to see a positive reading from the UK, albeit weaker from the May numbers at 53.7. US PMI numbers are due tomorrow given the July 4th holiday yesterday.     Later today with the return of US markets, we get a look at the most recent Fed minutes, when the FOMC took the collective decision to keep rates on hold, with the likelihood we will see a resumption of rate hikes later this month.     In the lead-up to the decision there had been plenty of discussion as to the wisdom of pausing given how little extra data would be available between the June and July decisions. The crux of the argument was if you think you need to hike again, why wait until July when the only data of note between the June and July decisions is one payrolls report, and one set of inflation numbers.     All of that is now moot however and while inflation has continued to soften, the labour market data hasn't. Here it remains strong with tomorrow's June ADP report, the May JOLTs report, weekly jobless claims, as well as Friday's June payrolls numbers.     Tonight's minutes may offer up further clues as to the Fed's thinking when it comes to why they think that two more rate hikes at the very least will be needed by the end of this year.     A few members changed their dots to reflect the prospect that they were prepared to raise rates twice more by the end of the year, with a hike in July now almost certain. This stance caught markets off guard given that pricing had been very much set at the prospect of one more rate hike, before a halt.     A key part of the thinking may have been the Fed's determination that markets stop pricing rate cuts by the end of this year. This insistence of pricing in rate cuts by year end has been one of the key characteristics that has helped drive recent gains in stock markets.     This has now been largely priced out, so in this regard the Fed has succeeded,   The key now is to make sure that the Federal Reserve, along with other central banks, while prioritising pushing inflation down, don't break something else, and start pushing the rate of unemployment sharply higher.   This is the balancing act central banks will now have to perform, and here it might be worth them exercising some patience. Given the lags being seen in the pass through of monetary policy it may be that a lengthy pause after July, keeping rates at current levels for months, is a wiser course of action than continuing to raise rates until the tightrope snaps, and the whole edifice comes tumbling down.       Today's minutes ought to give us an indication of the thought processes of the more dovish members of the FOMC, and how comfortable they are with the prospect of this balance of risks.             EUR/USD – remains range bound with support around the 1.0830/40 area and 50-day SMA, with resistance remaining at the 1.1000 area. A break below the lows last week opens the way for a potential move towards 1.0780.     GBP/USD – still looking well supported above the 50-day SMA at 1.2540, as well as trend line support from the March lows, bias remains higher for a move back to the 1.3000 area. Currently it has resistance at 1.2770.       EUR/GBP – rolling over again yesterday, sliding below the 0.8570/80 area, and looks set to retarget the 0.8520 area. Resistance remains at the 50-day SMA which is now at 0.8655. Behind that we have 0.8720.     USD/JPY – currently capped at the 145.00 area, with support at the 144.00 area this week.  The key reversal day remains intact while below 145.20.  A break below 143.80 targets a move back to the 142.50 area. Above 145.20 opens up 147.50.      FTSE100 is expected to open 5 points lower at 7,514     DAX is expected to open 28 points lower at 16,011     CAC40 is expected to open 23 points lower at 7,347

US dollar set to post its worst weekly decline since November By Michael Hewson (Chief Market Analyst at CMC Markets UK)   If we could sum up the catalyst behind this week's market price action, it can probably be summed up in a single word, disinflation.   Starting with Chinese inflation numbers on Monday, to US CPI on Wednesday, and US PPI on Thursday, all this week's inflation numbers have pointed to one overarching theme, that of rapidly slowing prices, which has had markets pricing in the prospect that this month's Federal Reserve rate hike is likely to be the last one for a while.     Unsurprisingly this has prompted a sharp decline in global yields, a big selloff in the US dollar, as well as giving equity markets a real boost in a complete reversal from the gloom of last week, with the Nasdaq 100 and S&P500 rising to their highest levels since January 2022.     European markets have also undergone a decent rebound on the basis that the multiple rate hikes that investors had been pricing in from the ECB and the Bank of England may now not happen. That doesn't mean we won't see these central banks hike again, it's still very likely that the ECB will hike by 25bps this month and the Bank of England at the start of August. It is what comes after that which has started to become a lot less clear.     UK GDP numbers for May, were encouraging, despite showing a contraction due to the extra Bank Holiday, coming in better than forecast with the pound managing to post another daily gain, putting in its best run of gains this year, and reinforcing its position as the best performing G10 currency this year.     Yesterday's UK data also showed that the services sector performed better than expected, coming in at 0%, showing that despite the challenges currently facing the economy it has continued to hold up reasonably well. This would suggest that the Bank of England still has room to push rates up further with 25bps already priced in for August and potentially 50bps if next week's CPI doesn't show a material slowing. Judging by the current trends around global inflation the feeling is that UK inflation could start to fall rapidly by the end of Q3.     The slide in the US dollar this week has been astonishing, and with the Federal Reserve set to go into a blackout period tomorrow, ahead of its next meeting, there has been little sign that this week's data has swayed the FOMC's stance when it comes to their view that further multiple rate hikes are likely to be needed between now and the end of the year. The problem now is the market isn't buying it, with 2-year yields retreating sharply, as markets price in a goldilocks scenario of slowing prices and a resilient labour market.         Today's only economic numbers of note are US import and export prices for June, which are expected to reinforce the deflationary narrative of this week's data, with both month on month and annual numbers all expected to come in negative for the second month in succession.   We'll also be getting the latest University of Michigan sentiment numbers for July, which have up until recently been market movers when it comes to forward inflation expectations. After this week's CPI and PPI numbers they probably won't get the same level of attention.   On the earnings front the focus will be on the release of the Q2 numbers for JPMorgan Chase, Citigroup and Wells Fargo, and their respective views of the health of the US consumer, and how much they set plan to aside in additional provisions. Their guidance on how they see the US economy in Q3 is also likely to be crucial.     EUR/USD – surged through this year's previous peaks, and rising to its highest level since February 2022, the euro looks on course to test the 1.1500 area and the 2022 highs. The 1.1100 area should now act as support.     GBP/USD – having broken above the 1.3020 area, the pound should now head towards the 1.3300 area and March 2022 highs. Support remains a long way back at the 1.3020 area, and below that at 1.2850.        EUR/GBP – failed at the 0.8570/80 area yesterday as it continues to ping between this area of resistance and the lows this week at 0.8500/10.     USD/JPY – looks set to push lower as we move into the cloud support area with next support at the 200-day SMA at 137.20, and below that at 135.70. Resistance now comes in at the 140.20 area and 50-day SMA.     FTSE100 is expected to open 12 points lower at 7,428     DAX is expected to open 15 points lower at 16,126     CAC40 is expected to open 7 points lower at 7,362  

The demand for the US currency is falling almost every day, based on which many analysts and economists make various guesses and assumptions about the possible reasons. I must say that personally, it makes me cautious. If the problem lies in inflation or monetary policy, then why did we see such a sharp decline in demand for the US currency just last week? If the market factors in certain future events into current prices, then why did the dollar experience such a significant decline this week?     The US inflation report only partially answers this question. As I mentioned before, the demand for the dollar began to decline on Monday, two days before the report was released, and continued to fall on Thursday. On Friday, we didn't even see a bearish correction. Thus, inflation could only have had a slight impact on the overall weakening of the US currency.   A more likely reason is market expectations. If inflation in the US falls to 3%, it not only implies a possible end to tightening measures as early as this month but also a faster transition to a more accommodative policy. At the same time, the European Central Bank and the Bank of England may raise rates several more times and maintain them at peak levels much longer than the Federal Reserve, as inflation is significantly higher in the eurozone and the UK. Perhaps this factor is what is causing the dollar's decline. But then another question remains open. How much does the market intend to play out this factor? It is unlikely that the demand for the US currency will decline until inflation in the EU and the UK drops to 3%. I would like to remind you that the US currency has been declining for almost a year.   If inflation had been rising in the EU and Britain throughout this year while falling in the US, it would have made sense. However, the Federal Reserve raised rates just like the ECB and the Bank of England, while inflation has been slowing down worldwide over the past six months. I mean to say that the dollar may be in a less favorable position compared to the euro or the pound, but not to the extent that it is declining. It seems to me that the market, as it loves to do, is preemptively playing out its assumptions.   This means that we can expect new difficulties in interpreting the news background in the future. When the FOMC starts lowering rates, thedollar may unexpectedly begin to rise, as by that time, the ECB and the BoE may have finished tightening. The dollar cannot keep falling in response to any actions by central banks!         Based on the analysis conducted, I conclude that the uptrend build-up is still in progress, but it can end at any moment. I believe that targets around 1.0500-1.0600 are quite realistic, and I advise selling the instrument with these targets. However, now we need to wait for the completion of the a-b-c structure, and afterwards we can expect the pair to fall into this area. Buying is quite risky. It is risky to buy. The euro takes any opportunity to rise, but the news background for the dollar is not as weak as it may seem.   The wave pattern of the GBP/USD pair suggests the formation of an upward set of waves. However, the wave structure has already taken on a five-wave appearance, which means it may be completed. If the attempt to break the level of 1.3084 (from top to bottom) proves unsuccessful, the instrument may continue to rise with targets located around 1.3478 (261.8% Fibonacci extension). A successful breakthrough attempt will initiate a more expected and logical process of building a descending Wave 4 or a new downward segment of the trend with initial targets around the 1.2840 level.    

GBP: Good news on inflation, bad news for the pound Lately, we have been pointing at the pound’s vulnerable position. Markets' aggressive tightening expectations required data to offer no hints of abating price pressures and an overstretched positioning (on the long-end). It appeared that some long positions had been scaled back already ahead of this morning’s key CPI release, with the pound underperforming in the G10 space yesterday. Looking at the June figures released this morning, there is finally some encouraging news for the Bank of England. Headline inflation slid back below 7.9% (below consensus), illustrating a 0.4% MoM increase which has been the slowest seen since early 2022. We know that the BoE is mostly focused on service inflation, and there was good news here too – a decline from 7.4% to 7.2%, contrary to the BoE’s expectations. The question now is whether this is enough to tilt the balance to a 25bp hike in August. We are inclined to think so, even though it remains a close call. The post-CPI Sonia curve looks significantly changed, with 36bp priced in for August and 90bp to the peak, which marks a huge 55bp shift since last week. In FX, the pound is under pressure, down around 0.70% against the dollar. We suspect there is more room to fall in GBP/USD, especially if our expectations for some dollar support into the FOMC prove to be correct. A move to the 1.2800 area in Cable looks possible even before the BoE meeting. EUR/GBP has spiked, but we suspect markets may like some bullish narrative on the euro side beyond the 0.8700 level, and that may not come just yet if the ECB turns fully data-dependent and the eurozone outlook remains lacklustre at best.

Rates Spark: The stretch before two key central bank meetings There was some selling of bonds yesterday, and it feels a bit vulnerable here considering the decent total returns recorded year-to-date against all odds given monetary tightening and the future recession risk. There is also a pre-FOMC and pre-ECB theme in the air. Many will wait to get the central bank(s) assessment of things before pulling the trigger.   Long duration buying in the past month morphs to a selling tendency Most of the past month has been dominated by bond buying, typically long duration in nature. The same has been seen in corporates, and there has also been a decent bid into high-yield bonds. A glance at total return year-to-date show some impressive bond market performances, led by higher beta products. There are always profit-taking risks attached to this. A lot of the buying in the past month or so had helped to keep core yields from getting too carried away to the upside. But yesterday more selling than usual was seen for a change, in particular out of Asia. This was a factor in unleashing Treasury yields higher. The low jobless claims number pushed in the same direction, but would not have been enough as a stand-alone to push the 10yr yield from 3.75% to 3.85%. And other data today has in fact been quite muted or negative for the economy. The terminal discount for the funds rate also remains elevated, with the Jan 2025 future still above 3.75%. That keeps the pressure focused on the upside for market rates. The 4% level for the 10yr Treasury yield is firmly in focus here, likely post next week's FOMC outcome; at least we'll likely need to get through that first.   Closing in on cycle peaks With inflation dynamics looking more encouraging, the general notion is that central banks are close to their cycle peaks in terms of tightening. If we look at current pricing, the market is seeing a good chance that the Fed will deliver its final hike of the cycle next week. Historical patterns suggest that a re-steepening of the yield curve led by the front end then followed as recession eventually ensued. And indeed, if it were to go by the Conference Board's Leading indicator, which posted another drop yesterday, we would have been in recession for a long time already.  However, the context looks somewhat different this time, as some parts of the economy still look unusually resilient. And markets are seeing a growing likelihood of a soft landing, which itself limits the drop in front-end rates as less aggressive rate cuts are then needed. On the flip side, that resilience continues to harbour potential upside risks to inflation. And central banks will therefore tread more cautiously and not take any chances. They are sensitive to their poor track records of forecasting inflation in the past and are basing their policies on current inflation dynamics rather than their models.   Curves have reflattened over past weeks, a clear steepening signal remains elusive      

Asia Morning Bites The data calendar in Asia today is focused on inflation in Singapore while Taiwan reports industrial production figures. FOMC, ECB and BoJ meetings later this week will add some excitement.   Global Macro and Markets Global markets:  US equity markets moved sideways for much of Friday, finishing almost unchanged from the previous day. Equity futures are pointing to a similarly inconclusive start today, which is perhaps not surprising during the FOMC week. Chinese stocks were also somewhat directionless, with the CSI 300 also failing to make any ground, though the Hang Seng index did gain 0.78%. There wasn’t much going on in US Treasury markets either. The yield on the 2Y US Treasury was virtually unchanged at 4.837%, while the 10Y yield dropped by only 1.5bp to 3.835%. There was a bit more action in FX space, where EURUSD dropped sharply to 1.1130, erasing some of the gains of the previous week. Other G-10 currencies also lost ground, though Cable was pretty steady maybe helped by better inflation data at the end of last week. Asian FX struggled against the USD on Friday. The worst-performing currencies were the THB and KRW.  The INR has been extremely stable at just under USDINR 82.0, which given the weakness across other FX pairs, suggests that it is being actively managed at around this level.   G-7 macro:  Friday was a quiet day for G-7 Macro data, but today, we will be inundated with plenty of PMI numbers from across the G-7 for both the service and manufacturing sectors.   Taiwan:  June industrial production probably turned more negative again after a slight bounce in May. The year-on-year growth rate is forecast to drop back to -16.49% by the consensus, though we think the drop may be even more pronounced, and expect a fall of about 18% YoY. This is mainly a statistical correction, as it does appear that production is bottoming out at around current levels.   Singapore: June inflation is set for release today.  Both headline and core inflation are expected to dip with favourable base effects helping force both numbers lower.  Headline inflation is expected to slip to 4.4%YoY (from 5.1%) while core inflation could dip to 2.4% (from 2.8%).  Moderating inflation could give the MAS some breathing room and we expect slowing inflation and slightly better-than-expected 2Q GDP to be factored into the MAS decision later in 4Q.    What to look out for: Key moves from major central banks New Zealand trade balance (24 July) Japan Jibun PMI and department store sales (24 July) Singapore CPI inflation (24 July) Malaysia CPI inflation (24 July) Taiwan industrial production (24 July) Thailand trade balance (24 July) South Korea 2Q GDP (25 July) Bank Indonesia policy meeting (25 July) Hong Kong trade (25 July) US Conference board consumer confidence (25 July)Australia CPI (26 July) Singapore industrial production (26 July) US new home sales (26 July) US FOMC decision (27 July) China industrial profits (27 July) ECB policy decision (27 July) US personal consumption, durable goods orders initial jobless claims (27 July) South Korea industrial production (28 July) Japan Tokyo CPI and BoJ policy (28 July) Australia PPI (28 July) US personal spending, core PCE, University of Michigan sentiment (28 July)

Asia Morning Bites Australian inflation this morning is an appetizer ahead of tonight's FOMC main course.   Global Macro and Markets Global markets:  US stocks crept higher on Monday, though without much conviction. The S&P rose 0.28%, while the NASDAQ rose a further 0.61%. That leaves the NASDAQ up 35.14% ytd… Chinese stocks responded well to the supportive comments coming out of the Politburo yesterday. The Hang Seng index rose 4.1% and the CSI 300 rose 2.89%. However, we remain cautious about the economic outlook as the recent comments continue to lack detail despite the various “pledges” and “vows” to boost spending.  Ahead of today’s FOMC, which we in Asia will wake up to tomorrow morning, Treasuries were relatively quiet. 2Y yields rose 1.5bp to 4.874%, while 10Y UST yields rose just 1.2bp to 3.884%. EURUSD has drifted back down to 1.1051 on expectations of a hawkish Fed tonight. But the AUD gained ground yesterday, rising to 0.6788.  The GBP and JPY also strengthened against the USD ahead of Friday’s Bank of Japan meeting (see our latest note on this). The positive sentiment in China has enabled the CNY to strengthen to 7.1363 and the yuan was Asia’s best performing currency yesterday. Most other Asian currencies also gained against the USD. G-7 macro:  House prices in the US gained further ground in May, with both the FHFA and S&P CoreLogic measures of house prices rising more than expected.  There were also gains in the Conference Board’s consumer confidence indices. None of which plays into the “one and done” view that the market currently holds for the FOMC. Elsewhere, Germany’s Ifo survey presented more bad news, falling more than expected, though the UK’s CBI business survey was a little brighter. Today is quiet ahead of the Fed (02:00 SGT/HKT) with just US home sales and mortgage applications.   Australia:  CPI inflation for June should show further declines in inflation, with the headline rate declining to around 5.4% YoY from 5.6% currently. That would be a 3 percentage point decline from the December 2022 peak. Inflation should decline again next month. Thereafter, we will need to see month-on-month changes in inflation slow considerably to stop inflation from stabilizing at high levels or even backing higher again, as all the helpful base effects will have been used up until we get nearer to the end of the year. Singapore: Singapore reports industrial production figures for June.  We expect another month of contraction, extending the slump to 9 months of decline, tracking the downturn in non-oil domestic exports.  Industrial production should slip by 6%YoY and we can expect the slide to continue for as long as global demand stays subdued. 

Rates Spark: Can Christine sound as calm as Jerome? The more Chair Powell spoke yesterday, the more he meandered into less hawkish territory. But he did not stray too far. Next up is the ECB's Lagarde, who is more prone to deviate. The 25bp hike is not the point. The tone is. We show that the US 10yr yield looks low relative to the strip, while in fact the 10yr Euribor rate looks if anything high versus its strip.   The Fed cements a mild rate cutting discount ahead, keep upward pressure on Treasury yields From a market rates perspective one of the key things to watch from the Federal Open Market Committee (FOMC) outcome was how the Fed decision and subsequent commentary might affect the Fed funds strip. In particular, beyond the hiking and into the discounting completion of the rate cutting phase. This is important, as where the fed funds strip sits in 2025 has a material effect on longer-dated Treasury yields, as, say the 10yr yield, really should not trade much through the longer dates on the strip. In fact they should trade at a 30bp premium to it (above it). We went into the FOMC with the Jan 2025 implied rate at just under 4%. It’s still there post the meeting, but closer to 3.9% now (as it jumps around, typically on low volumes). Remember this was down in the 3% area when Silicon Valley Bank went down. The fact that its some 100bp higher now limits the extent to which the 10yr Treasury yield can fall. In fact it should rise, and we continue to target it to get to the 4% area in the coming weeks, versus a current level of around 3.9%. That is broadly flat to the implied funds rate in Jan 2025. That’s too low for the 10yr yield, as it implies no curve just as the Fed has completed it rate cutting cycle.     We are not agreeing with the market discount per se, but where it sits is important in terms of framing the here and now for the 10yr Treasury yield, and in that way helps to add context to the immediate few weeks ahead. Meanwhile, the Fed continues to gradually tighten through its bond roll-off programme. Most of the impact of this has been in lower volumes going back to the Fed on the reverse repo facility. Bank reserves have in fact held steady. This allows the Fed to keep the tightening pressure on. It also keeps bills rates under elevation pressure, and prevent the bills curve from moving to a state of material inversion. At least not just yet. And, all other key rates are up by 25bp too, including the reverse repo rate now at 5.3%. The ECB to match the Fed, but the 10yr Euribor rate trade with more of a cushion It's the European Central Bank's turn on Thursday, with a 25bp hike anticipated. Delivery will see the Refi rate get to 4.5% and the Deposit rate to 3.75%, with the latter still heavily influential with respect to where front end Euribor rates are actually pitched. The current 3mth Euribor rate is pitched at just over 3.7%, at or about the level of the deposit rate. And the Euribor strip has it extending up to 3.9%, and so just about discounting one more 25bp hike.   The biggest attention will be centered on the words coming from President Lagarde. Chair Powell post the FOMC outcome started off sticking to script, but slowly morphs to an acknowledgement that inflation has indeed fallen, the real rate had risen and was indeed in a restrictive state. As the conference went on he was almost on the verge of a nod towards an eventual rate cutting track down the line. Lagarde will need to be a bit more careful. Chair Powell tends not to stray too far from script, while Lagarde can deviate far more. If we look out along the Euribor strip, the 3mth rate is discounted to be below 3% by the middle of 2025, and it stays below, getting down to 2.7%. There is a gap between that and where the 10yr Euribor rate currently sits at around 3.6%. Here there is a difference relative to the US, there the 10yr Treasury yield is already flat to or below where the fed funds strip is pitched. Part of this is reflective of the tendency of the deposit rate to have an outsized influence, but it's not all that. Optically there is more value in 10yr Euribor on this simple measure.   Today's events and market views Ahead of the ECB meeting, we'll have some regional consumer confidence, produce price inflation and retail sales. But nothing that is likely to move the market in any material fashion. More influential will be the US data. US GDP data for the second quarter is expected to confirm that the US economy continued to growth at a pace of almost 2%, while the GDP price index is set to fall to about 3%. The latter is a good look, and a reminder of the recent CPI number at the same rate. The core PCE index should be more influential though. It too should fall, but to a still elevated 4%. We'll also get durable orders, which should see a calming in the ex-transportation reading. But still far from a recesionary-type number. The headline should remain elevated, in the area of 1.3% helped by airline orders. We'lll also get another helping of weekly jobless claims, expected to be still in the 230k area, and still well below average. And then there are inventories data which should not be very market moving. Home sales data is expected to be weak, but has had a tendency to surprise to the upside of late. And the the Kansas City Fed Index should be weak too, especially given its aimed at the manufacturing sector where weakness has been in the waters for quite some time now.

Asia Morning Bites After the Fed, attention now shifts to the BoJ tomorrow and ECB later today.   Global Macro and Markets Global markets:  US equities didn’t hate Jerome Powell’s message last night at the FOMC following the latest 25bp rate hike. But they didn’t love it either. That probably suggests Powell got it about right in terms of the overall tone. (see our detailed note here). The door is left wide open for more hikes, the question is, will they actually deliver?   The S&P 500 was down just 0.02%, while the NASDAQ fell only 0.12%. Practically flat on the day. Chinese stocks were a bit more subdued also, maybe figuring that the earlier Politburo comments were more hot air than cold cash, and the CSI 300 drifted 0.21% lower, while the Hang Seng index fell 0.36%. US Treasury markets clearly felt that they were appropriately priced for the FOMC message, and 2Y yields came off just 2.3bp, while the 10Y dropped just 1.8bp to 3.867%. These slight yield reductions enabled the EUR to claw a little ground back against the USD, and EURUSD rose to 1.1083. Other G-10 currencies – GBP and  JPY made gains against the USD, though the AUD lost some ground after their June inflation figures, which on the whole, could have been better even though they did show inflation still dropping (see our note here for more detail). Asian FX had a mixed day. The CNY has begun to drift weaker again after its Politburo-induced strengthening earlier. But there were some positive outcomes from the THB and MYR. G-7 macro:  After the FOMC excitement, which turned out not to be so exciting after all, it’s the turn of the ECB today. Here’s a cheat sheet from our European economists, rates and FX strategists, who think that they may veer towards a more data-dependent strategy after this meeting, which could be viewed as a slightly dovish tilt and lead to a weaker EUR. On top of that, we also get Advance 2Q GDP from the US, with a consensus view of 1.8%QoQ annualized growth – only slightly down from 2.0% in 1Q23. Any upside surprise is likely to see bond yields pushing higher again. China: Industrial profits data for June will not likely buck the trend of other weak data. Industrial production growth remained weak in June, while producer price inflation turned more negative. So a  further dip from May’s -12.6%YoY outcome seems possible. What to look out for: ECB and BoJ China industrial profits (27 July) ECB policy decision (27 July) US personal consumption, durable goods orders initial jobless claims (27 July) South Korea industrial production (28 July) Japan Tokyo CPI and BoJ policy (28 July) Australia PPI (28 July) US personal spending, core PCE, University of Michigan sentiment (28 July)

AUD underperformed among the major currencies against the USD from 27 to 28 July 2023 ex-post FOMC, ECB, and BoJ. Split view among economists and interest rates traders on RBA monetary policy decision today. Short-term bearish downside momentum at this juncture as the AUD/USD failed to trade above the 200-day moving average. Key short-term resistance on AUD/USD is at 0.6740. This is a follow-up analysis of our prior report, “AUD/USD Technical: Rebounded right at 200-day moving average” published on 25 July 2023. Click here for a recap. The AUD/USD staged a rebound thereafter and reached an intraday high of 0.6821 on 27 July, just shy of the 0.6835 intermediate before it staged a bearish reversal and shed -198 pips ex-post FOMC, ECB, and BoJ to print an intraday low of 0.6623 on last Friday, 28 July. The Aussie has underperformed among the major currencies against the US dollar in the last two trading days of last week where the AUD/USD recorded an accumulated loss of -1.68% from 27 July to 28 July versus EUR/USD (-0.63%), GBP/USD (-0.71%), and JPY/USD (-0.65%) over the same period. The weak performance of the AUD/USD is likely to be attributed to the wishy-washy monetary policy guidance of the Australian central bank, RBA that led to a split forecast among economists and traders for today’s RBA monetary policy decision. Split view among economists and traders on RBA decision According to polls, the consensus among economists is calling for a hike of 25 basis points hike to bring the policy cash rate to 4.35% after a pause in the previous meeting in July. In contrast, data from the ASX 30-day interbank cash rate futures as of 31 July 2023 has indicated a patty pricing of only a 14% chance of a 25-bps hike, down significantly from a 41% chance priced a week ago.     Fig 1: AUD/USD medium-term trend as of 1 Aug 2023 (Source: TradingView, click to enlarge chart) From a technical analysis standpoint, the price actions of the AUD/USD are still trapped within a major sideway range configuration with its range resistance and support at 0.6930 and 0.6580 respectively.       Fig 2: AUD/USD minor short-term trend as of 1 Aug 2023 (Source: TradingView, click to enlarge chart) The AUD/USD has managed to stage a minor rebound of 117 pips from its last Friday, 28 July intraday low of 0.6622 in conjunction with an oversold reading seen in the hourly RSI oscillator on the same day. Interestingly, the minor rebound has challenged and retreated at the key 200-day moving average yesterday, 31 July during the US session (printed an intraday high of 0.6739). Right now, the hourly RSI oscillator has broken below its ascending support after it hit an overbought condition yesterday which indicates that short-term momentum has turned bearish. Watch the 0.6740 key short-term pivotal resistance to maintain the bearish tone, and a break below 0.6625 intermediate support exposes the major range support of 0.6600/6580. However, a clearance above 0.6740 negates the bearish tone to see the next resistance at 0.6835 in the first step.  

Asia Morning Bites Asian Markets have yet to fully respond to Friday's mixed payrolls report. Indonesian 2Q23 GDP today.   Global Macro and Markets Global markets:  US equities dipped slightly on Friday after a mixed labour report that contained some hints that the US economy was slowing. The S&P 500 declined 0.53% and the NASDAQ fell 0.36%. Chinese stocks had a better end to the week. The Hang Seng rose 0.61% and the CSI 300 rose 0.39%. US Treasury yields retreated sharply on Friday. The 2Y yield dropped 11.7bp, and 10Y Treasury yields fell 14.1bp to 4.034%. The USD also softened against the EUR. EURUSD rose sharply to 1.104 intraday, before settling back to just over 1.10.  The AUD took a look above 0.66 but has also settled back to 0.6572. Cable rose to 1.2747, and the JPY dropped to 141.91. Asian FX was mostly weak against the USD on Friday but will likely recover lost ground in early trading today. The KRW and THB were the two weakest currencies on Friday. The KRW is now 1309.70. G-7 Macro: Friday’s labour report was very mixed, with the headline payroll numbers coming in a bit lower than expectations, but wages growth rising and the unemployment rate falling. James Knightley thinks this should keep the FOMC on hold at their September meeting.  Fed speakers last week gave conflicting messages. Bostic suggested that as the labour market was now slowing, the Fed did not need to hike any more  - a view that is in line with our house forecast. Bowman said that more hikes were likely. There is nothing of any note from the G-7 today. Later this week, we get July CPI inflation from the US, which could move slightly higher again from June’s 3.0% reading.  Core inflation is forecast to stay at 4.8%YoY. Indonesia:  2Q23 GDP is set for release today.  The market consensus points to a 5.0%YoY expansion for 2Q with consumption getting a lift from fading inflation.  Meanwhile, softer export growth, partly due to moderating global commodity prices likely capped growth momentum amidst slower global trade.  This would match the expansion reported in 1Q with growth on track to meet government expectations.  Bank Indonesia recently retained its growth outlook for 2023 at 4.5-5.3%YoY.   What to look out for: Fed speakers Thailand CPI inflation (7 August) Indonesia 2Q GDP (7 August) Fed’s Bowman and Bostic speak (7 August) South Korea BoP current account balance (8 August) Japan trade balance (8 August) Australia Westpac consumer confidence (8 August) China trade (8 August) Philippines trade (8 August) Taiwan trade (8 August) US trade balance (8 August) South Korea unemployment (9 August) China CPI inflation (9 August) Taiwan CPI inflation (9 August) US MBA mortgage application (9 August) Japan PPI inflation (10 August) Philippines GDP (10 August) RBI policy meeting (10 August) US initial jobless claims and CPI inflation (10 August) Singapore CPI inflation (11 August) Hong Kong GDP (11 August) US PPI inflation, University of Michigan sentiment (11 August)

Late Friday US sell-off set to weigh on European open    By Michael Hewson (Chief Market Analyst at CMC Markets UK)   European markets managed to eke out some modest gains on Friday, at the end of what was a negative week overall as concerns over earnings guidance downgrades and rising long term yields weighed on broader market sentiment. A mixed US jobs report looked to have stabilised sentiment, pulling the DAX and FTSE100 off their lows of the week after another slowdown in jobs growth in July and downward revisions to previous months, spoke to the idea that central bank rate hikes have done their job, and that no more are coming. This uplift only lasted until just after European markets had closed with all the signs that US markets would be able to end a 3-day losing streak, however the early gains that we saw in the early part of the day soon evaporated with the Nasdaq 100 and S&P500 both posting their worst weekly performances since March.     In essence there was something for everyone in Friday's jobs report, weaker jobs growth, the unemployment rate inching lower, and robust wage growth. Ultimately it spoke to a resilient US economy, as well as a possible Fed pause in September, ahead of this week's CPI report, although there are some on the FOMC who are still on the "more rate hikes to come" line. One of these members is Governor Michelle Bowman who at the weekend expressed her view that more rate hikes were likely to be needed to return inflation to target. While this may now be starting to become a minority view on the FOMC, it merely serves to highlight the growing uncertainty that is not only starting to permeate central bank thinking but also investor sentiment more broadly, as well as raising broader questions. Has the Fed managed to engineer a soft landing, and should they cause a pause to allow more time to assess any lag effects on consumers as well as the broader economy. Or do they carry on hiking on the basis that we could have seen a short-term base when it comes to prices slowing down? While markets are still pricing in a 40% chance of one more rate hike before the end of the year, this figure could swing either way in the event of a hot CPI print later this week. If next month's jobs report is of a similar "goldilocks" variety then a pause seems the most likely outcome from the next Fed rate decision. Whichever way we go with the data in the coming weeks, a pause still seems the most plausible outcome. For the most part bond markets drove most of the price action in financial markets last week with sharp increases in longer term yields, despite the sharp falls on Friday, as the yield curve steepened sharply. Yields could be the main driver this week with the US set to issue $103bn across a range of maturities this week, in the wake of last week's credit rating downgrade by Fitch.   It's also worth keeping an eye on this week's China trade data for July, due tomorrow, and inflation date on Wednesday, against a backdrop of an economy that appears to be struggling with weak domestic demand, and where economic activity has been struggling. We also have preliminary Q2 GDP economic numbers for the UK at the end of the week as well as industrial and manufacturing production numbers for June.       EUR/USD – rallying off last week's lows just above the 1.0900 area, closing above the 50-day SMA in the process we need to see a move back above 1.1050 to have any chance of revisiting the July peaks at 1.1150.   GBP/USD – drifted down the 1.2620 area last week before rebounding strongly, but we need to see a back above the 1.2800 area to ensure this rally has legs. Below 1.2600 targets 1.2400. Resistance at the 1.2830 area as well as 1.3000.     EUR/GBP – feels like it wants to retest the 100-day SMA at 0.8680, having drifted back from the 0.8655 area last week. Support now comes in at the 0.8580 area, with the bias for a retest of the July highs at 0.8700/10. Below 0.8580 retargets the 0.8530 area.   USD/JPY – failed just below the 144.00 area last week, and has now slid back below the 142.00 area, which brings a move towards the 140.70 area into focus. Main resistance remains at the previous peaks at 145.00.   FTSE100 is expected to open 31 points lower at 7,533   DAX is expected to open 54 points lower at 15,898   CAC40 is expected to open 29 points lower at 7,296

Fed’s Bowman reiterates that more hikes might be need to bring down inflation German Industrial Production fell to a 6-month low US inflation data expected to support a September pause, but possible coin flip for the November meeting   The US dollar is stronger across the board as the bond market selloff returns, sending the 10-year Treasury yield 6.9 basis points higher to 4.103%. After a mixed jobs report (slower job growth pace but higher wages) this week is all about an inflation report that will probably show moderate price growth.  The focus for many traders is all about the end of tightening and this weekend’s Fed speak supported the higher for longer stance.  Fed’s Bowman noted that it will likely need to raise interest rates further to bring down inflation.  A New York Times article this morning reported that Fed’s Williams stated that the central bank’s work to cool the economy is almost done and that he expects rate cuts could happen next year.    Heading into Thursday’s US inflation report, expectations are for headline CPI to rise from 3.0% to 3.3%, mainly due to base effects, but snapping a long streak of declines that has been in place since last August. Fixed income markets are growing confident that the September FOMC will support a rate pause.  The core readings are also expected to hold steady, but any hot surprises could keep the pressure on for a November hike.    At the end of last week, the euro saw some volatility after the Bundesbank said domestic government deposits would not receive any interest, sparking a move into bills and other high-yielding markets.  This decision surprised many traders and could lead to significant outflows for German debt.  Today’s disappointing German industrial production data also sent the euro lower as recession risks continue to rise.  Output continues to drop, falling to a 6-month low.   The weekly EURUSD chart shows price is approaching key trendline support at 1.0930. If downward momentum accelerates, downside targets include the 1.0850 region followed by 1.07667 level.  To the upside the 1.1050 provides initial resistance followed by the 1.1135 level.    

All ears on Powell and Lagarde at Jackson Hole today   By Michael Hewson (Chief Market Analyst at CMC Markets UK)     After an initially positive start to the day yesterday, only the FTSE100 managed to eke out any sort of gains, after a rebound in yields and the fading of the Nvidia sugar rush saw European markets slip into negative territory.   US markets, having started very much in a positive vein with the Nasdaq 100 leading the way higher, also turned tail as bond yields pushed higher, along with the US dollar, finishing the day sharply lower. As we look towards today's European open, the rise in yields and weak finish in the US, as well as weakness in Asia this morning, is set to see European markets open lower this morning. Much of the narrative for this month was supposed to be centred around what Fed chair Jay Powell would likely say at Jackson Hole today with respect to the prospect of another pause in the rate hiking cycle when the FOMC meets next month.   This week's poor economic data out of Germany and France has shifted the spotlight a touch when it comes to central bank policy towards the European Central Bank and Christine Lagarde's speech, at 8pm tonight, after Powell who is due to speak at 3:05pm.   While this year's Symposium is titled "Structural Shifts in the Global Economy" it won't be just Jay Powell whose words will be closely scrutinised for clues about rate pauses next month it will also be the Bank of England and the Bank of Japan where markets will be looking for important insights into the risks facing central banks in terms of the risks in over tightening monetary policy at a time when the challenges facing the global economy are numerous.   This week's PMIs have highlighted the challenges quite clearly to the point that it appears the ECB may well also look at a rate pause next month, alongside the Federal Reserve, although the reasons for an ECB pause are less about inflation falling back to target, than they are about a tanking economy.   The latest German PMIs suggest the prospect of another quarter of contraction in Q3, while the Bank of England has a similar problem, although the bar for a pause next month is slightly higher given how much higher UK CPI is relative to its peers.   Before we hear from ECB President Christine Lagarde, Powell will set the scene just after US markets open, and his tone is likely to be slightly less hawkish than he was a year ago.  When Powell spoke last year, he made it plain that there was more pain ahead for US households and that this wouldn't deter the central bank in acting to bring down inflation, even if it meant pushing unemployment up. While Powell is unlikely to be anywhere near as hawkish, as he was last year, he won't want to declare victory either. As we already know from recent comments from various Fed officials it is clear the Fed believes the fight against inflation is far from over, and in that context it's unlikely he will deliver any dovish surprises.   This belief of a slightly hawkish Powell is likely to have been behind yesterday's sharp declines in US markets, which were driven by rising yields as investors continued to price in higher rates for longer. Not even a set of blow-out earnings from Nvidia was enough to keep markets in the black, with the shares opening at a new record high above $500, before sliding back to finish on the lows of the day, closing unchanged. The inability to hold onto any of the early gains suggests that the recent enthusiasm for this $1trn chipmaker may be due a pause. While investors will be focussing on Powell, the focus today returns to the German economy and in the wake of this week's poor PMIs we'll be getting the latest snapshot of the business sentiment in Europe's largest, but also sickest economy, as well as the final reading of Q2 GDP.   The most recent German IFO business climate survey showed sentiment falling to its lowest level since October last year in July at 87.3 and is expected to slow further to 86.8. Expectations also slipped back to 83.5 suggesting the economy could remain in recession in Q3.   Any thoughts that we might see an improvement in August are likely to have been dealt a blow by the sharp rise in oil prices seen in the last few weeks, as well as this week's PMIs. With recent economic data out of China also suggesting a struggling economy, German exporters are likely to continue to find life difficult.        EUR/USD – sinking below the 200-day SMA at 1.0800 with support just below that at trend line support from the March lows at 1.0750. Still feelsrange bound with resistance at the 1.1030 area.   GBP/USD – slipped below the 1.2600 area which could well open up a move towards 1.2400 and the 200-day SMA.  We still have resistance at the 1.2800 area and 50-day SMA.       EUR/GBP – the rebound off this week's 11-month low at 0.8490 looks set to retest the 0.8600 area. We also have resistance at the 0.8620/30 area.   USD/JPY – rebounded off the 144.50 area with resistance at the highs this week at the 146.50 area, with resistance also at 147.50.   FTSE100 is expected to open 5 points lower at 7,328   DAX is expected to open 39 points lower at 15,582   CAC40 is expected to open 16 points lower at 7,198    

US service sector’s strong summer boosted by concerts and movies The US service sector ISM surprised to the upside in August and while not at very high levels is consistent with US growth accelerating in the third quarter. There are doubts as to how sustainable this will be, but the rise in the inflation component will keep hawks wary even if they do indeed go with the majority and vote for a pause on rate hikes in two weeks.   Entertainment drives a strong summer for services The US ISM services index was surprisingly strong in August, rising to 54.5 from 52.7. This is well ahead of the 52.5 consensus expectation and in fact above every single forecast submitted by economists, leaving the index at a six-month high. Activity improved to 57.3 from 57.1, new orders jumped to 57.5 from 55.0 while employment rose to 54.7 from 50.7, indicating broad-based strength throughout the report. It may well be that the summer entertainment boon has been a big factor with concerts and cinemas pulling in record revenues and ancilliary businesses feeling the benefits too. Nonetheless, as the chart shows, the headline reading is still at levels that would historically point to lower YoY GDP growth than the 2.5% recorded in the second quarter.   US ISM indices and US GDP growth (YoY%)   Inflation concerns to keep the hawks wary amid data uncertainty The prices paid component rising to 58.9 from 56.8 is a concern though and is likely to keep the hawks wary even if there does seem to be a consensus amongst Federal Reserve officials that it can afford to pause in September and assess the situation again in November. Interestingly S&P's PMI measure for services, also released this morning, told a very different story. The headline index dropped sharply to 50.5 from 52.3, indicating barely any growth with its employment measure weakening and its prices measure recording their lowest reading since February. Just shows you how tricky it is to get a clear reading of what is going on in the economy right now and reinforces the view that a pause at the September FOMC makes sense.

FX Daily: Hawkish vibes from Asia Governor of the BoJ Kazuo Ueda suggested the Bank may have enough evidence on wages for a policy shift by year-end. To us, it sounds like a successful attempt to support the yen. Meanwhile, the PBoC is pushing back against CNY weakness. All of this is softening the dollar momentum, but US data will be back in focus soon and USD upside risks are non-negligible.   USD: BoJ and PBOC drive dollar lower The seemingly unstoppable dollar run is being dented this morning by two currencies that had all but contributed to consolidating USD strength until now: the yen and the yuan. The Bank of Japan’s Governor Kazuo Ueda released an interview where he said policymakers may have enough information by year-end – if wage inflation continues – to make a decision on unwinding some monetary stimulus. The market reaction to this has been significant. The overbought USD/JPY is falling and testing 146.00, and the benchmark JGB yields are at 0.70% despite the BoJ deploying the loans-for-bonds programme to curb yields. The timing of Ueda’s interview may suggest an intent to support JPY without deploying intervention – which wouldn’t be warranted by an excessively concerning rate of JPY depreciation anyway. In China, authorities are back with strong defence measures for the renminbi. This follows a growing consensus later last week that the People's Bank of China was starting to tolerate further CNY depreciation as USD/CNY had rallied past 7.30. Alongside a significantly stronger CNY fixing, the PBoC issued a statement saying market participants should “voluntarily maintain a stable market” and avoid speculative trades. The general softening in USD momentum this morning has helped take USD/CNY back below 7.30. This morning’s change of direction in dollar dynamics has clearly been fuelled by moves from the BoJ and PBoC, but whether USD/JPY and USD/CNY can stay under pressure relies on the dollar’s reaction to its own domestic drivers. This will be a busy week in US data, and the latest releases have tended to be quite supportive for the greenback. The main highlight of the week in the US calendar is the CPI report on Wednesday, which is widely expected to show an August inflation rebound, and our economics team flags upside risks to consensus expectations. The core CPI print is expected at 0.3% month-on-month, an acceleration from the 0.2% MoM seen in recent months. There are no data releases to watch today, but we'll see the NFIB survey, retail sales and industrial production figures in the US later this week. The FOMC has already entered the pre-meeting blackout period, but the latest indications clearly pointed to a pause in September. Can inflation change policymakers’ minds? It would probably need to be a materially stronger than expected print, but from an FX perspective, expect the bullish pass-through to the dollar to be felt anyway. Markets can still add to the 11bp of tightening by year-end and push rate cut expectations further down the road. The two-year USD swap rate (OIS) may retest the 4.94% August highs and offset the efforts by the PBoC (likely to be a continuous one) and the BoJ (more likely a one-off move by Ueda) to lift their domestic currencies.

Goods and shelter progress enough for a pause, cuts will require improvement in ex-housing services: A third straight 0.2% m/m core CPI print would meet many Fed officials’ criterion to consider a pause, at least based on progress on the inflation mandate. Indeed, at a Q&A during a 13 July speech, Governor Waller (one of the more hawkish-leaning FOMC participants) said that two more “good” CPI prints could suggest stopping hikes. July comprised one, and we think August will comprise two. While this outcome is likely to help justify a pause, we think the Fed will need to see more progress on the non-housing services inflation front in order to entertain rate cuts. To wit, Powell said “some further progress here [in non-housing services inflation] will be essential to restoring price stability.”  

JPY: BoJ officials push back on the market's hawkish interpretation A media report this morning suggests that Bank of Japan officials saw a discrepancy between what Governor Kazuo Ueda stated in a recent interview about the timing of adjusting monetary policy and what markets interpreted. For some background, we discussed Ueda’s comments in Monday’s FX Daily: he had hinted at earlier-than-anticipated timing (year-end) for the BoJ to have enough evidence on wages to decide on a potential monetary policy shift. The actual tone of the interview was quite cautious, but a market that has been on its toes for any hawkish sign understandably overreacted to the remarks. USD/JPY is also in the FX intervention area. While the rate of change has probably not been alarming enough to justify Japanese officials to step in, Ueda’s comments did look to us as a “soft” intervention. Clearly, BoJ members are ready to trade some more yen depreciation for clarity on their stance – and avoid bond market volatility – so the chances of actual FX intervention are rising again, especially given the unlikeliness of an immediate turn lower in the dollar ahead of next week’s FOMC.    

Fed set to hold, but signal the potential for a final hike Mixed US data and Federal Reserve comments solidly back the market pricing of another pause at the 20 September FOMC policy meeting. However, inflation concerns linger and economic resilience suggest the Fed will continue to signal the potential for a final hike even if we don’t think it carry through with it.     Fed set to pause again on 20 September At the last Federal Reserve monetary policy meeting in July, the Federal Open Market Committee raised the Fed funds policy rate range 25bp to 5.25-5.5%. The minutes to the decision also showed officials continue to have a bias to hike further since “most participants continued to see significant upside risks to inflation, which could require further tightening of monetary policy". At the Fed’s Jackson Hole Conference in late August Chair Powell said that policymakers “are attentive to signs that the economy may not be cooling as expected”, indicating a sense that it may indeed need to do more to ensure inflation sustainably returns to target. Nonetheless, the FOMC minutes also suggested differences of opinion are forming. While all voting FOMC members backed the hike, there were two non-voting members who “indicated that they favoured leaving the target range for the federal funds rate unchanged”. Moreover, “a number of participants judged that… it was important that the Committee's decisions balance the risk of an inadvertent overtightening of policy against the cost of an insufficient tightening”. In recent months we have had some encouraging news on core inflation with two consecutive 0.2% month-on-month prints with a third coming in at 0.278%, much better than the 0.4-0.5% MoM consecutive prints we got over the prior six months. There has also been evidence of moderating labour costs (the Employment Cost index and cooling average hourly earning growth) together with more modest job creation. Yet we have to acknowledge that the activity data has remained strong with the US economy on track to grow at an annualised 3% rate in the current quarter. The commentary from officials, including the hawks, such as Neel Kashkari, suggest a willingness to pause again in September (just as it did in June), but to leave the door ajar for a further hike at either the November or December FOMC meetings.  Given this situation economists are universally expecting the Fed funds target rate range to be left at 5.25-5.5% with markets not pricing even 1bp of potential tightening. While the European Central Bank hiked rates but indicated it may be done, the Fed is set to pause, but keep its options open.   The potential for further hikes remains As with the June hold decision, the Fed is set to suggest that the decision should be interpreted as part of its process of a slowing in the pace of rate hikes rather than an actual pause. While inflation is moderating, it is still too high and with the jobs market remaining very tight and activity holding firm, the Fed can’t take any chances. The scenario graphic above outlines the range of possibilities outside of our core view of no change, but the door left open for future hikes. However, the other options have very low probabilities attached to them. We simply cannot see the point of the Fed softening its stance on the outlook for policy and give the markets the green light to sell the dollar and drive Treasury yields lower given this will undermine their fight against inflation. At the same time, a 25bp hike would be such a shock it could be seen as inconsistent with the Fed’s attempt to engineer a soft landing and would hurt risk appetite.   Dot plot to retain a final hike – but we don't see it being implemented This brings us onto the updated Fed’s forecasts. The key change in June was the inclusion of an extra rate hike in their forecast for this year, which would leave the Fed funds range at 5.5-5.75% by year-end. It seems highly doubtful this will be changed given the data flow, while the unemployment and inflation numbers seem broadly on track. GDP for 2023 is likely to be revised up substantially though given the remarkable resilience of activity and the consumer spending splurge over the summer, much of which appears to have gone on leisure activities.   ING expectations for the Federal Reserve's new forecasts

As mentioned in previous updates, the reason why gold in our opinion has been holding up well despite the mentioned headwinds, is likely to be a market in search for a hedge against the current negative market sentiment and most importantly, the FOMC failing to deliver a soft, as opposed to a hard landing. A hard landing or stagflation may occur if the Fed keeps the Fed funds rate too high for too long or in the unlikely event the economy becomes too hot to handle. Other drivers can be rising energy prices keeping inflation elevated while hurting economic activity or a financial of geopolitical crisis erupts. Demand for gold as a hedge against a soft-landing failure is unlikely to go away as the outlook for the US economic outlook in the months ahead looks increasingly challenged. With that in mind, we maintain a patiently bullish view on gold while wondering whether the yellow metal in the short-term will continue to be able to withstand additional yield and dollar strength. The timing for a fresh push to the upside will remain very US economic data dependent as we wait for the FOMC to turn its focus from rate hikes to cuts, and during this time, as seen during the past quarter, we are likely to see continued choppy trade action. Spot gold, in a downward trending channel since May, is currently stuck in a $1900 to $1950 range with additional dollars and yield strength raising the risk of a short-term break below which may see $1885 being challenged. A close back above the 200-day moving average, last at $1927, is likely to coincide with a break of the mention downtrend, opening for a fresh attempt to challenge resistance in the $1950 area.  

Asia Morning Bites Australia's August CPI inflation report should show inflation rising again. The fall in Chinese industrial profits may be moderating.   Global Macro and Markets Global markets:  For a change, US Treasury yields didn’t rise yesterday. Nor did they fall particularly. The yield on the 2Y UST was down just 0.4bp to 5.121%, while that on the 10Y bond rose just 0.2bp to leave it at 4.536%. This was despite Neel Kashkari, a voter on the FOMC this year, saying that he thought even a soft-landing scenario would probably require one more rate hike this year. Michelle Bowman talked about the need to cool the economy to bring rents down in line with wage growth, though she did not explicitly outline a path for rates. But she implied more was needed. With this, it feels as if markets are listening and choosing to believe that in the end, the Fed will not carry through on their threats to raise rates again, either because the threat lacks credibility, or because they believe that the growth and inflation evidence will turn sufficiently to make it unnecessary. It’s a tough call to make and leaves upside as well as downside risk. Kashkari and Bowman are both due to speak again today. US Stocks cooled on Tuesday. The S&P 500 dropped 1.47% while the NASDAQ fell 1.57%. Equity futures are looking mildly positive. It was also another off-day for Chinese stocks. The Hang Seng fell 1.48%, while the CSI 300 fell 0.58%.   The risk-off sentiment may be helping the USD, which has pushed even lower overnight, dropping to 1.0570. The AUD has declined below the 64 cent level, though may get a boost from CPI inflation data later on today. Cable has dropped to 1.2148, and the JPY has risen to 149.07, a level at which you have to think there could be some more verbal intervention (Finance Minister Suzuki has already waded in) and close to a level where physical intervention may occur. The CNY has held roughly level at 7.3112, though the rest of the Asia pack was weaker against the USD. The KRW and THB, together with the IDR were the weakest currencies in the region yesterday. G-7 macro:  US new home sales fell a little more than expected in August, dropping 8.7% MoM to a 675K annual pace. The Conference Board consumer confidence index was down slightly, breaking down into a slightly stronger present situation response, but a sharply weaker expectations survey. Germany also releases consumer confidence figures from GfK today. The only US data of note is the August durable goods orders and shipments figures.   Australia: A combination of base effects wearing off, and higher gasoline and food prices will take Australia’s monthly inflation rate for August back up again after the surprising decline in July. The inflation rate should push back from the July 4.9% YoY rate to a little over 5%. The consensus estimate sits at 5.2%, which is not far from our estimate of 5.1%. While this does not immediately threaten the market’s view that the RBA has peaked in its rate cycle, a few more results like this, plus some economic resilience may spur thoughts that there is still one more hike to come. We certainly are not ruling another hike out.   China: Industrial profits figures for August are released this morning. The year-on-year decline in this series has been moderating, and we expect this to continue, though probably still leaving profits down from a year ago.   What to look out for: Australia inflation Australia CPI inflation (27 September) China industrial profits (27 September) Japan machine tool orders (27 September) US durable goods orders and MBA mortgage applications (27 September) Australia retail sales (28 September) US initial jobless claims, personal consumption, pending home sales (28 September) Fed's Powell, Goolsbee and Barkin speak (29 September) Japan Tokyo CPI inflation and labor report (29 September) Thailand trade (29 September) US University of Michigan sentiment, personal spending (29 September)

Gold continues to defy the gravitational pull from rising US Treasury yields and a stronger dollar which gathered further momentum after the US Federal Reserve last week delivered a hawkish pause in their aggressive rate hike campaign. But while the normally strong inverse correlation with dollar and yields have faded, thereby reducing selling pressure from algorithmic focused trading strategies, gold's resilience continues to point to demand from investors seeking a hedge against nervous markets and the rising risk of stagflation hitting the US economy in the coming months.   Key points in this gold note Gold continues to show resilience despite multiple headwinds from dollar strength to rising yields and lower future rate cut expectations Support is likely to be driven by a market in search for a hedge against the FOMC failing to deliver a soft, as opposed to a hard landing. We maintain a patiently bullish view on investment metals as the timing of a fresh push to the upside remains very US ecnomic data dependent.  Gold continues to defy the gravitational pull from rising US Treasury yields and a stronger dollar which gathered further momentum after the US Federal Reserve last week delivered a hawkish pause in their aggressive rate hike campaign, while at the same forecasting considerably higher rates over 2024 and 2025 because of a resilient US economy, a strong labor market and sticky inflation, recently made worse by an OPEC-supported rise in energy prices. Following the FOMC announcement we have seen the dollar reach a fresh 11-month high against a broad basket of major currencies, while the yield on US 10-year Treasuries has reached a 16-year high above 4.5%. The short-term interest rate futures market has reduced bets on the number of 25 basis-point rate cuts by the end of 2024 to less than three from the current level, with risk of another hike before yearend kept open.     Looking at our gold monitor below, it is difficult to build a bullish case for gold if current developments were the only driver for the yellow metal. With the dollar and bond yields on the rise, the inverse correlation with a relatively stable gold has deteriorated, a development that has reduced selling pressures from algorithmic trading strategies, normally a major contributor to daily trading volumes. In addition, as mentioned the tailwind from future rate cuts has also faded as the market price in a higher for longer scenario. A development which for now continues to see some asset managers vote with their feet when it comes to investing in gold through Exchange-traded funds, the reason being the high opportunity cost of holding a non-interest paying position relative to short-term government bonds. The current cost of holding a gold position for 12 month is close to 6%, the bulk of that being the cost of borrowing dollars for one year, and until we see a clear trend towards lower rates and/or a upside break forcing a response, real money allocators will be looking for opportunities elsewhere. ETF investors which include the above mentioned group of real money allocators have been cutting holdings for the past four months, leaving the total down by 172.4 tons during this time to 2757.8 tons, a 3-1/2-year low. The leverage fund net long position meanwhile continue to hover around 60k contracts (6 million ounces), some 35k below the one-year average.            

US PCE inflation set to slow further, ahead of the Fed next week By Michael Hewson (Chief Market Analyst at CMC Markets UK) This week a raft of disappointing earnings numbers, and caution over guidance from the likes of Alphabet and Meta Platforms has helped overshadow concerns about an escalation of the conflict in the Middle East between Israel and Hamas. The combination of these two factors has also helped to undermine the previously resilient Nasdaq 100, sending it to its lowest levels since May, although it did find support at its 200-day SMA.     With US markets starting to look slightly more vulnerable to a broader correction and an increasingly uncertain geopolitical backdrop there has been little reason for investors to get overly enthusiastic about looking to get back into the market, instead moving into safer haven type plays like gold, the Swiss franc, and US treasuries. While the Nasdaq 100 fell through its previous lows from September, the S&P500 has looked even more vulnerable, sliding below its 200-day SMA, as well also sliding to 5-month lows.   It's also been another disappointing week for European markets with the DAX on course for its 6th successive weekly decline falling back to levels last seen in March, while the FTSE100 has also struggled for gains these past few days. Against such a backdrop it's therefore somewhat surprising that the US economy continues to look so strong, with last night's impressive Q3 results from Amazon serving to underscore that fact, with the shares rising in after-hours trade.   Q3 revenues comfortably beat expectations at $143.1bn, as did profits which came in at $0.94c a share, or $9.88bn. This included a gain of $1.2bn from its stake in Rivian. There was a strong performance from online stores with net sales of $57.27bn, while AWS saw revenues of $23.06bn which was slightly below expectations of $23.2bn. Operating margin was also better than expected at 7.8%.   For Q4 Amazon expects net sales of $160-167bn, while the company said it is going to hire 250k full and part-time employees to cover the holiday periods of Thanksgiving and Christmas. Amazon also said it expects to see operating income rise to between $7bn and $11bn.   Yesterday's US Q3 GDP numbers were an impressive set of numbers, the best quarterly performance for the US economy since Q4 of 2021, with growth of 4.9%, with a good proportion of that driven by personal consumption of 4%. The strength of these numbers showed the resilience of the US economy, while on the other side of the ledger with respect to core PCE inflation this slowed to 2.4% from 3.7% over the quarter.     Against such a strong economic backdrop the Federal Reserve will be very reluctant to signal that they are done as far as further rate hikes are concerned when they meet next week. Against such a strong set of numbers it was somewhat surprising to see US treasury yields fall back as sharply as they did, however part of the reason for yesterday's slide is perhaps the sense that if the Fed were to hike again, they will wait until December just to ensure another hike is needed, once more data becomes available. Today's core PCE inflation numbers could help inform that thought process further on whether to hike rates again by another 25bps.     With the latest economic projections citing a Fed funds rate of 5.6% by year end and another spike in oil prices exerting further upward pressure on prices, as well as wages, the Fed will want to keep markets thinking that another rate rise is on the table between now and the end of the year.     With a resilient US jobs market and wage growth looking sticky we do appear to be starting to see a split opening up on the FOMC, despite recent data showing that on the Fed's core measure, inflation is easing. The core PCE deflator inflation numbers showed a further easing of inflationary pressure in August, slipping to 3.9% from 4.3%. This is welcome news for those who worry that inflation in the US is proving sticky, with personal spending also slowing to 0.4% from 0.9%.     Today's September numbers are expected to show a further slowdown to 3.7% for PCE core deflator while personal spending is forecast to remain steady at 0.4%.       EUR/USD – slipping back towards the 1.0520 area with the next support at the recent lows at 1.0450. Resistance at the 1.0700 area and 50-day SMA.    GBP/USD – slipped below the 1.2100 area, before rebounding modestly from the 1.2070 area. Major support remains at the October lows just above 1.2030. Below 1.2000 targets the 1.1800 area. Resistance at 1.2300.   EUR/GBP – failed at the 0.8740 area again yesterday. A move below 0.8680 and the 200-day SMA targets the 0.8620 area.   USD/JPY – has pushed above the previous highs at 150.16, making a new high for the year, potentially opening up a move towards 152.20. Support at the lows last week at 148.75.   FTSE100 is expected to open 12 points higher at 7,366   DAX is expected to open 15 points higher at 14,746   CAC40 is expected to open 16 points higher at 6,905

EUR: Unsustainable gains Yesterday was a volatile session for EUR/USD. Eurozone headline inflation dropped more than expected to 2.9%, but markets might have focused on core staying relatively high at 4.2% by looking at the positive EUR/USD reaction. Anyway, the rally was very short-lived. Above-consensus US employment costs and consumer confidence, Canada entering a technical recession, and sustained USD/JPY demand all prompted a dollar comeback and EUR/USD is now trading closer to its 1.0550 anchor. Today, the direction of travel for EUR/USD will be set by US data releases first and the FOMC then. As discussed in the USD section above, we might see a dollar correction, but our base case is that it would follow the pattern of the one we saw yesterday, with gains above 1.0650 in EUR/USD proving hardly sustainable. Most of Europe is on holiday today, so European calendars are quite empty.

Asia Morning Bites 2 November 2023 Asian markets digest US Treasury yield swing ahead of payrolls release tomorrow.   Global macro and markets Global markets: If last night’s FOMC meeting was supposed to be a “hawkish pause”, then markets weren’t listening. Yields on the 2Y US Treasury note dropped 14.4bp, taking them below 5% (4.944%), and there was an even bigger drop at the longer end. 10Y yields fell 19.7bp to 4.734%, and implied rates now show a 25bp cut priced in at the June meeting in 2024. FX markets are still a bit mixed and may spend today catching up with the implications of the drop in yields. EURUSD is fractionally higher at 1.0582, having drifted lower for most of yesterday. The AUD is looking stronger, probably as markets (and ourselves) are firmly of the view that the RBA actually hikes rates again next week, closing the policy rate gap with the US a bit. AUDUSD is now up to 0.6418. Cable is also a little higher after a choppy session, and is currently trading at 1.2177, while the JPY has edged slightly down from yesterday’s highs to 150.65. Losses from the THB, KRW and IDR yesterday will likely reverse today and follow the AUD and JPY. US stock markets were lifted by the drop in bond yields. The S&P 500 rose 1.05%, while the NASDAQ was up 1.64%. Chinese stocks were broadly flat yesterday. G-7 macro: Here is a link to our US economist, and FX and rates strategists’ note on the FOMC meeting. The twin features of the Fed suggesting that higher yields are doing some of their work for them, plus lower supply issuance pressures at the longer end are probably the main causes of the big drop in yields overnight. Nevertheless, the Fed is still leaning towards higher, not lower rates, so last night’s bond swing may not be the end of the story just yet. Ahead of the non-farm payrolls release tomorrow, yesterday’s ADP print was 113K. That is close to its 89K reading last month, which was hopelessly inaccurate, so it is anyone’s guess if this is a useful, or contrarian steer ahead of payrolls. Perhaps more ominously, the manufacturing ISM slowed sharply. The headline ISM index was already in negative territory in September (49.0), but dropped to a much weaker 46.7 reading in October, with a sub-50 employment index too (46.8). New orders also dropped sharply to 45.5. Today’s US macro data is the final durable goods/factory orders data for September, which won’t have much additional bearing on the market in all likelihood. The Eurozone releases its own manufacturing PMI data today. Korea: Consumer price inflation unexpectedly rose to 3.8% YoY in October (vs 3.7% in September, 3.6% market consensus, 3.9% INGf). Korea’s inflation has been reheating for three months in a row after the recent low of 2.3% in July.  Food and energy was the main reason for the rise; fresh food (12.1%), gasoline (6.9%), public transportation fees (11.3%), taxi (20%), and dairy products (milk 14.3%). Core inflation excluding food and energy edged down to 3.2% YoY, but has stubbornly stayed around that level for four months. Looking ahead, we expect headline inflation to climb even more to touch the 4% level in November but we look for core inflation to ease down into the 2% range, mostly due to base effects. This will make it more likely that the BoK will hold its hawkish stance longer than expected, but another rate hike possibility is still low. Japan: Prime Minister Fumio Kishida is planning to announce an economic stimulus package. The planned size, JPY21.8 trillion, is smaller than in the pandemic era, but still higher than the market expected. But markets seem a little sceptical of the positive impact this stimulus package will have on the economy. A highlight of the stimulus is income and residential tax rebates to aid households (especially low-income households), hit by higher inflation. But the impact of tax rebates is usually smaller than cash transfers or shopping vouchers. Also, the rebates will only be temporary, thus the impact could be limited. Australia: Australia's trade surplus narrowed sharply in September. Exports fell 1.4% MoM, (partly reversing last month's 4.5% gain). But the main damage was done by a solid 7.5% MoM increase in imports, with imports of capital goods rising especially strongly, taking the surplus down from AUD10.2bn to AUD6.8bn.  Malaysia: Bank Negara Malaysia will meet today to discuss policy rates, and is unanimously expected to leave rates unchanged at 3.0%. inflation is currently only 1.9%YoY, so there is no need for them to tighten at this stage. 

Asia Morning Bites China's Caixin services PMI report will be the focus for today ahead of tonight's US non-farm payroll data.   Global markets and macro Global markets:  Front-end US Treasury yields bounced slightly yesterday after their big post-FOMC drop. 2Y UST yields rose 4.6bp, but remain below 5% (4.989%). But yields on the 10Y Treasury kept falling, dropping a further 7.5bp to 4.659%.  US equity markets are benefitting from the drop in bond yields. The S&P 500 rose a very decent 1.89%, and the NASDAQ was also up (1.75%). Chinese stocks were more mixed. The CSI 300 fell 0.47% on Thursday, but the Hang Seng rose 0.75%. The USD lost further ground on Thursday. EURUSD rose to 1.0617. The AUD rose to 0.6428. Cable pushed back above 1.22, though has dropped back to 1.2194 now, and the JPY has eased down to about 150.5.  Asian FX was broadly stronger against the USD on Thursday and looks likely to keep making gains today.  The KRW led the rest of the Asia FX pack, dropping to 1343. The THB followed, dropping to 35.99. The CNY also made small gains, and USDCNY has moved down to 7.3143.   G-7 macro: It was the turn of the Bank of England to sit on its hands yesterday, following the FOMC’s “pause” the previous day. The MPC committee decided to leave Bank Rate at  5.25%. But pushed back against the market’s expectation for rate cuts next year. Today, non-farm payrolls provide us all the entertainment we need to take us into the weekend. For what it is worth, the consensus forecast for the payrolls headline is +180K, with no change in the unemployment rate (3.8%) and average hourly earnings growth dropping from 4.2% YoY to 4.0%. We also get the non-manufacturing ISM. However, whatever it produces will be eclipsed by the payroll numbers.   China:  After the disappointments of the official PMIs, and then the Caixin manufacturing PMI indices earlier this week, the consensus view of a slight rise of the Caixin service-sector PMI to 51.0 from 50.2, looks in strong danger of being undershot.   Singapore: September retail sales are due for release later today.  We can expect another month of modest expansion with retail sales possibly up roughly 1.5%YoY supported by robust department store sales driven by the return of visitor arrivals. Retail sales have been a bright spot for economic growth this year but elevated inflation should cap its upside in the near term.    What to look out for: China Caixin PMI services and US NFP China Caixin PMI services (3 November) Singapore retail sales (3 November) US NFP and ISM services (3 November)

FX Daily: Hard to buck the euro downtrend The dollar has shown resilience after disappointing JOLTS job openings data yesterday, leaving EUR/USD under pressure as the euro’s idiosyncratic negatives fuel bearish momentum. Today, the Bank of Canada may deliver a hawkish hold despite worsening growth, giving some help to the Canadian dollar.   USD: Showing resilience The larger-than-expected drop in October’s JOLTS job openings has offered new reasons to speculate on more rate cuts from the Federal Reserve next year, but the stronger ISM services figures in November have worked as an offsetting factor in terms of FX impact. AUD and NZD are rallying this morning, helped by stronger fixing for the yuan from the People's Bank of China (PBoC) after yesterday’s downgrade of China’s outlook by Moody’s. However, the dollar has remained rather supported across the board even after the disappointing JOLTS figures, a signal that markets are taking a less aggressive stance in FX following non-conclusive evidence of deterioration in the US outlook.   Speaking of non-conclusive evidence, it’s worth noting that the ADP payrolls being released today have no predictive power for actual payrolls. Still, markets have often moved on out-of-consensus ADP numbers. Today, expectations are 130k. MBA mortgage applications, final third-quarter labour cost data, and October trade balance figures are also on the calendar today but should not move the market. We suspect markets are holding a more cautious stance as we head into the key US payroll figures on Friday and the Fed meeting next week, where there is a good probability the FOMC will deliver a protest against rate cut bets – especially if data fails to turn lower. When adding the soft idiosyncratic momentum faced by the euro, we remain modestly bullish on the dollar into the FOMC.

Surprise dovish twist By Ipek Ozkardeskaya, Senior Analyst | Swissquote Bank   The Federal Reserve (Fed) wraps up the year with a resounding finale. The Fed is not bothered to see the US yields fall in preparation for a rate cut. On the contrary, they endorsed the idea of a policy pivot thanks to an encouraging fall in inflation and sounded way more dovish than everybody expected at their announcement yesterday – which clearly exposed that the policy pivot is coming. This is the major take of the final FOMC meeting of the year, and it was totally unexpected. Jerome Powell still said – just for the sake of saying – that 'it is far too early to declare victory' over inflation, but the committee lowered their inflation forecasts for this year and the next, and the so-called dot plot – which plots where the Fed officials see the interest rates going – plotted a 75bp cut in Fed funds rate next year. The median expectation now suggests that the Fed rate will be lowered to 4.6% by the end of next year. And that's quite a big change compared to last time the Fed President spoke to say that the rates would stay high for long. It now appears that the rates won't stay high for so long. The first Fed rate cut is now expected to happen in March, with more than 85% probability.  As a result, the US 2-year yield – which captures the Fed rate bets – sank to 4.33% yesterday, and with the dovish message that the Fed sent to the market, the 4.50% level that I saw as a support at the start of this week should now act like a resistance. The US 10-year yield sank below 4%, reflecting the idea that the policy pivot suggests some meaningful slowdown in the US economy. The falling yields sent the S&P500 above the 4700 mark, to the highest levels in almost two years and the Dow Jones Industrial Index hit a record high. There is no reason to stop believing that the S&P500 will soon renew record as well, unless there is a meaningful decline in earnings expectations.   The dovish Fed echoed loudly across the FX markets as well. The US dollar was sharply sold, the EURUSD rebounded back above the 1.09 level, Cable extended gains to 1.2650 and the USDJPY fell almost 1.80% yesterday and slipped below the 141 level this morning. Trend and momentum indicators are comfortably negative, the fundamentals – meaning the narrowing divergence between the more dovish Fed and the more hawkish Bank of Japan (BoJ) – are comfortably positive for the yen, hence price rallies in the USDJPY are now seen as opportunities to strengthen the short USDJPY positions.  Now today, it's the European Central Bank (ECB) and the Bank of England's (BoE) turn to give their final policy verdict for this year. And both Mme Lagarde and Mr. Bailey are certainly annoyed to see the Fed go so soft yesterday, as Christine Lagarde had said herself that no reduction in rates should be expected in the next few quarters. It will be interesting to see if ECB and BoE officials feel comfortable about giving up their tough stance. I still believe that Lagarde will repeat that it's too early to talk about rate cuts, in which case we could see the EURUSD jump above the 1.10 level and finish the year above this level.   Across the Channel, the situation is less obvious. The UK economic outlook is not bright, and wages show signs of slowing. One big argument is that inflation has more than halved in the UK since the start of this year. Yes. But inflation in the UK – though halved – stands at 4.6% which is more than twice the BoE's 2% target. The latter makes the BoE less inclined to initiate rate cuts compared to the other two major central banks.   

Rates Spark: Does the Fed know something we dont? The surprise from the FOMC was partly the extra 25bp implied cut added to 2024, but it was more the lack of pushback from Chair Powell on the 2024 rate cut narrative. He almost endorsed it, which leads us to question whether he knows something of significance that we don't. Today's focus is on the ECB and BoE policy meetings.   Chair Powell validates the move from 5% to 4% on the 10yr yield Such was Federal Reserve Chair Jerome Powell's phraseology at the press conference that one must suspect that he knows more than we know. And its not about the macro data. We can see that. It's more about what the Fed might be seeing under the hood. Perhaps in commercial real estate, or single family residential rentals or private credit, or another other area of the system that might find itself overexposed to rate hikes delivered, under water and vulnerable to breaking. We don't know of course, but a Fed chair that stands up asserts that he understands the dangers they run by keeping rates too high for too long is one that looks like he's ringing alarm bells. Along with the Fed, the market too has added an additional 25bp rate cut for 2024, now at 150bp cumulative. The entire curve has shifter lower, led by real rates. The 2/10yr curve has gapped steeper too. This is a meaningful outcome. The question now is whether the 2yr can really break free and head lower as a driver of the yield curve, steepening it out from the front end. That traditionally happens on a three month run in ahead of an actual rate cut. We’re on the cusp if this, but not quite there just yet. It’s been a remarkable ongoing market move, especially as it has been interlaced with some tailed auctions, indicative of resistance to the falling market rates narrative (in the long end). But there’s been little from Chair Powell and the FOMC to stand in the way of this. Recent data has not really validated the dramatic fall in yields. But today the Fed has helped to do so. A far more hawkish Fed had been anticipated. The question ahead is where is fair value for the 10yr. We think it’s 4%. It’s premised off the view that the funds rate gets to 3% and we are adding a 100bp curve to that. We are about to sail below 4% though as a theme for 2024, with 3.5% the target. But the move below 4% towards 3.5% will be an overshoot process. If something breaks, we fast track all of that and jump to a new environment. That has not happened as of yet, but we think the stakes have risen.   ECB to push back against early cut expectations With a first rate cut more than fully discounted by April and on overall anticipated easing of 135bp over 2024, the market’s expectations of European Central Bank policy stand in stark contrast to the official line of rates having to remain high for longer. But since the last meeting in particular the inflation data has surprised to the downside, which even influential ECB officials like Isabel Schnabel had to acknowledge. The prospect of further hikes is clearly off the table, but she warned that central banks will have to be more cautious. That also meant that the ECB should be more careful with regards to making statements about what will happen in the next six months. The ECB’s new growth and inflation forecasts will have to be lowered, the crucial question is just by how much. Also taking it from Schnabel, the ECB is unlikely to give any longer rate guidance, which would only mean a truer meeting-by-meeting and data dependent approach. Still, the ECB is unlikely to endorse the aggressive market pricing, especially that of cuts already early in the year. So far the communication has been that one is particularly concerned about the development of upcoming wage negotiations which makes pricing for March rate cuts look premature. But how can the ECB still convey a hawkish tilt? One possibility is using communication about plans to shrink the balance sheet. We do not think there will be concrete decisions yet, but the ECB could state that it has begun discussing to potentially end PEPP reinvestments earlier than planned.   BoE likely reiterate rates will stay restrictive for an extended period Expectations of policy easing have further deepened ahead of today’s Bank of England monetary policy committee meeting. A first rate cut is now fully discounted by June with an overall expected easing of close to 100bp over 2024. One reason for growing expectations was a downside surprise in wage growth which saw private sector regular pay growth fall to 7.3% year-on-year from 7.8% YoY. Another trigger was yesterday’s disappointing GDP growth for October which means we are potentially on track for a fractionally negative overall fourth quarter figure. The BoE is likely to reiterate the guidance from November, where it said it expected rates to stay restrictive for “an extended period.  A hold is also widely anticipated by the market, but the recent data could convince some of the three MPC’s hawks who had still voted for a hike in November to back down from that position toward a ‘no change’.    Today's events and market view The central bank meetings are clearly the focus today given how far market expectations of policy easing have come. There may well be some disappointment in store for pricing of rate cuts as early as March. But further out we must acknowledge that the shift lower in rates is also driven by a drop in inflation expectations. The 10Y EUR inflation swap for instance has come down all the way from levels closer to 2.6% in October to currently 2.15%. Even central banks themselves have become more positive about the disinflationary tendencies taking hold. On the heels of the FOMC meeting rates markets in the US will look out for the initial jobless claims as well as retail sales data today. we will also get import and export prices.

Gold attempts to rebound following Friday's sharp drop The price of gold shows a renewed upward momentum at the start of the week as it attempts to rebound from the drop seen on friday which brought the price down nearly 1.50% after the Federal Reserve's recent signaling of the conclusion of its monetary policy tightening cycle and the suggestion of a cumulative 75 basis points rate reduction in 2024 led to a sharp upward move last Wednesday. Additionally, heightened geopolitical risks and concerns surrounding a more pronounced economic downturn, particularly in China and the Eurozone along with general economic uncertainty, provide added support to gold as a safe-haven asset. From a technical point of view, any subsequent upward movement is likely to encounter resistance in the vicinity of the $2,040 range and a breach beyond this level could prompt a test of last week's peak, around the $2,049-2,050 region. On the other hand, a downside correction may find support in the $2,015-2,010 area before approaching the psychological threshold of $2,000 and which may be followed by the $1,980 area from which last wednesday's post-FOMC upward move started.