Raphael Bostic

No price test occurred in EUR/USD this morning due to low volatility and empty macroeconomic calendar. But ahead lies the latest consumer price index in the US, which will likely force many market players to review their positions on risky assets. Demand for euro may drop, which could lead to a decline in the pair.   There will be an increase only when inflation drops more than expected. Markets will also pay attention to the speeches of FOMC members Neel Kashkari and Raphael Bostic. For long positions: Buy when euro hits 1.1036 (green line on the chart) and take profit at the price of 1.1075. Growth will occur amid weak US inflation.   However, when buying, traders should make sure that the MACD line lies above zero or rises from it. Euro can also be bought after two consecutive price tests of 1.1017, but the MACD line should be in the oversold area as only by that will the market reverse to 1.1036 and 1.1075. For short positions: Sell when euro reaches 1.1017 (red line on the chart) and take profit at the price of 1.0981. Pressure will increase in the case of another jump in US inflation. However, when selling, traders should make sure that the MACD line lies below zero or drops down from it. Euro can also be sold after two consecutive price tests of 1.1036, but the MACD line should be in the overbought area as only by that will the market reverse to 1.1017 and 1.0981.       What's on the chart: Thin green line - entry price at which you can buy EUR/USD Thick green line - estimated price where you can set Take-Profit (TP) or manually fix profits, as further growth above this level is unlikely. Thin red line - entry price at which you can sell EUR/USD Thick red line - estimated price where you can set Take-Profit (TP) or manually fix profits, as further decline below this level is unlikely. MACD line- it is important to be guided by overbought and oversold areas when entering the market       Important: Novice traders need to be very careful when making decisions about entering the market. Before the release of important reports, it is best to stay out of the market to avoid being caught in sharp fluctuations in the rate. If you decide to trade during the release of news, then always place stop orders to minimize losses. Without placing stop orders, you can very quickly lose your entire deposit, especially if you do not use money management and trade large volumes. And remember that for successful trading, you need to have a clear trading plan. Spontaneous trading decision based on the current market situation is an inherently losing strategy for an intraday trader.  

The test of 1.2942, coinciding with the decline of the MACD line from zero, prompted a sell signal that led to a price decrease of around 20 pips. The latest CPI data in the US lies ahead, and this will likely cause market players to review their positions on risky assets. Demand for pound may drop, which could lead to a decline in GBP/USD. There will be an increase only when inflation drops more than expected. Markets will also pay attention to the speeches of FOMC members Neel Kashkari and Raphael Bostic.   For long positions: Buy when pound hits 1.2946 (green line on the chart) and take profit at the price of 1.3014 (thicker green line on the chart). Further growth will be seen in the case of weak US inflation data. However, when buying, make sure that the MACD line lies above zero or rises from it. Pound can also be bought after two consecutive price tests of 1.2895, but the MACD line should be in the oversold area as only by that will the market reverse to 1.2946 and 1.3014.     For short positions: Sell when pound reaches 1.2895 (red line on the chart) and take profit at the price of 1.2844. Pressure will increase in the event of further growth in US inflation. However, when selling, make sure that the MACD line lies below zero or drops down from it. Pound can also be sold after two consecutive price tests of 1.2946, but the MACD line should be in the overbought area as only by that will the market reverse to 1.2895 and 1.2844.         What's on the chart: Thin green line - entry price at which you can buy GBP/USD Thick green line - estimated price where you can set Take-Profit (TP) or manually fix profits, as further growth above this level is unlikely. Thin red line - entry price at which you can sell GBP/USD Thick red line - estimated price where you can set Take-Profit (TP) or manually fix profits, as further decline below this level is unlikely. MACD line- it is important to be guided by overbought and oversold areas when entering the market     Important: Novice traders need to be very careful when making decisions about entering the market. Before the release of important reports, it is best to stay out of the market to avoid being caught in sharp fluctuations in the rate. If you decide to trade during the release of news, then always place stop orders to minimize losses. Without placing stop orders, you can very quickly lose your entire deposit, especially if you do not use money management and trade large volumes. And remember that for successful trading, you need to have a clear trading plan. Spontaneous trading decision based on the current market situation is an inherently losing strategy for an intraday trader.  

FX Daily: Bond bears give new energy to the dollar A very soft 30-year Treasury auction and hawkish comments by Powell triggered a rebound in US yields and the dollar yesterday. Dynamics in the rates market will remain key while awaiting market-moving US data. In the UK, growth numbers in line with expectations, while in Norway, inflation surprised to the upside. USD: Auction and Powell trigger dollar rebound The dollar chased the spike in US yields yesterday following a big tailing in the 30-year Treasury auction and hawkish comments by Fed Chair Jerome Powell. Speaking at the IMF conference, Powell warned against reading too much into the softer inflation figures and cautioned that the inflation battle remains long, with another hike still possible. If we look at the Fed Funds future curve, it is clear that markets remain highly doubtful another hike will be delivered at all, but Powell’s remarks probably represent the culmination of a pushback against the recent dovish repricing. Remember that in last week’s FOMC announcement, the admission that financial conditions had tightened came with the caveat that the impact on the economy and inflation would have depended on how long rates would have been kept elevated. The hawkish rhetoric pushed by Powell suggests that the Fed still prefers higher Treasury yields doing the tightening rather than hiking again, and that is exactly what markets are interpreting. The soft auction for long-dated Treasuries also signals the post-NFP correction in rates may well have been overdone and could set a new floor for yields unless data point to a worsening US outlook. Today’s highlights in the US calendar are the University of Michigan surveys. Particular focus will be on the 1-year inflation gauge, which is expected to fall from 4.2% to 4.0%. On the Fed side, we’ll hear from Lorie Logan, Raphael Bostic and Mary Daly. Dynamics across the US yield curve will have a big say in whether the dollar can hold on to its new gains. Anyway, we had called for a recovery in DXY to 106.00 as the Fed would have likely pushed back against the dovish repricing. The rebound in yields should put a floor under the dollar, but we suspect some reassurances from the data side will be needed for another big jump in the greenback.

Weak start for Europe ahead of German IFO - By Michael Hewson (Chief Market Analyst at CMC Markets UK)  After an unexpectedly dovish pivot from Fed chairman Jay Powell on Wednesday, European and US markets ended another positive week very much on a mixed note after New York Fed President John Williams pushed back on market expectations of a rate cut as early as March, saying it was premature to be even considering anything of that sort.   Williams was followed in his comments by Atlanta Fed President Raphael Bostic who delivered a similar line of thought, saying he expected rate cuts to begin in Q3 of 2024 if inflation falls as expected. With the Fed dots indicating that US policymakers saw rates back at 4.6% this appears to be more in line with the message the Fed had hoped to deliver on Wednesday, however markets decided to take Powell's press conference comments and run with them, getting out in front of their skis in doing so.   Given where the US economy is now it's surprising that the Fed are said to be to start to be thinking in terms of cutting rates simply because with the economy currently where it is, there is currently no need. With GDP at 5.2% in Q3, unemployment at 3.9%, and weekly jobless claims at just over 200k the risk of inflation reigniting is clearly still a concern for some policymakers.   That certainly doesn't appear to be the case in Europe where economic activity is stagnating at best and even now the ECB comes across as being reluctant to counter a rate cut, even though a reduction in borrowing costs is clearly needed, given that headline inflation is back within touching distance of its 2% target.   The same could be argued for the UK except wage growth is still trending well above 7%, while headline CPI is at 4.6%, though this could come down further in numbers due to be released on Wednesday.   As we look towards the final week before the Christmas break, trading activity is likely to be somewhat thin and choppy, and while we have seen record highs for the Dow, DAX and CAC 40 in the last week or so, we still remain some distance away from the 2021 record peaks of the Nasdaq 100 and S&P500.   As for the FTSE100 we're looking at yet another year of underperformance, after the record highs of mid-February, with the UK benchmark up by just over 1% year to date, with the FTSE250 not faring that much better.   Due to the relatively subdued nature of Friday's US finish, today's European market open looks set to be a slightly weaker one with the only data of note the latest German IFO Business survey for December. Given the weak nature of last week's PMI numbers it would be surprising to see a significant improvement on the November numbers when the current assessment improved slightly to 89.4.   The US dollar was one of the big losers last week driven lower by expectations that US rates have peaked and are on their way back down, with the Japanese yen one of the biggest gainers.   This shift in sentiment will no doubt be welcomed by the Bank of Japan and to some extent helps them out with respect to the weakness of the yen ahead of tomorrow's rate decision. There is now less incentive for them to think about altering their current policy settings, although they might hint at starting to execute some form of shift early next year.      EUR/USD – the rebound to 1.1010 last week didn't last long, unable to push through the November peaks at 1.1015/20. We still have support now back at the 200-day SMA at 1.0830. A break above 1.1030 has the potential to target the July peaks at 1.1275.   GBP/USD – broke briefly above the 1.2730 area, and the 61.8% retracement of the 1.3140/1.2035 down move, pushing up to 1.2795 before reversing. The bias remains for further gains while above the 200-day SMA at 1.2520. We also have support at the 1.2590 area.   EUR/GBP – slipped back from the 100-day SMA at 0.8640 last week, with support at the 0.8570/80 area. A move below 0.8580 targets 0.8520.   USD/JPY – slipped below the 200-day SMA at 142.50 last week, opening the prospect of a move towards 140.00. We now have resistance at 146.00 and while below that we could push towards 139.20.     FTSE100 is expected to open 7 points lower at 7,569   DAX is expected to open 15 points lower at 16,736   CAC40 is expected to open 3 points lower at 7,594

The uncertainty surrounding the Federal Reserve's (Fed) stance on rate cuts has created a complex narrative that demands close attention. As the Fed hinted at a potential halt to its monetary tightening efforts, European policymakers resisted aligning with this sentiment. Notably, Fed members like John Williams and Raphael Bostic have contradicted expectations of a rate cut. Despite this, Fed funds futures activity indicates a high probability of the first rate cut by March next year, with a more than 75% chance, and a near 100% chance of the first cut in May. The market anticipates around a 150 basis points cut throughout the next year, doubling the 75 basis points cut predicted by Fed officials. This ambitious projection clashes with the current resilience of the US economic growth.   Long Japanese yen By Ipek Ozkardeskaya, Senior Analyst | Swissquote Bank   The Federal Reserve's (Fed) rate cut talk becomes chaotic and frankly, hard to follow. After the Fed signaled a possible end to its monetary policy tightening campaign and the European policymakers refused to adhere, some Fed members including John Williams and Raphael Bostic pushed back the Fed cut expectations.   Alas, activity on Fed funds futures price in the first Fed cut by March next year with more than 75% chance, and the first cut in May with almost a 100% chance. The market pricing matches the expectation of around 150bp cut throughout next year, versus only 75bp cut foreseen by Fed officials – which is already ambitious given the resilience of the US economic growth. Therefore, either the US economy will do fine, and the Fed won't start cutting rates in March. Or we will see a sharp slowdown in the US growth and a potentially deteriorating growth outlook will force the Fed to start cutting the rates in Q1 and cut thoroughly. But a scenario where the Fed starts cutting rates in March while economy remains resilient and inflation low makes little sense as the fiscal spending will remain robust into next year's presidential election and maintain the risk of a U-turn in inflation alive.   But anyway, investors could give the Fed doves the benefit of the doubt until Friday's PCE data. The PCE, the Fed's favourite gauge of inflation, is expected to show a further decline in both headline and core inflation. More importantly, if the data matches expectations, it would mean that 6-month annualized inflation will be a touch above the Fed's 2% target. The latter could keep the Fed doves in charge. Nonetheless, the successful alleviation of inflation can be attributed to the decline in oil prices. Even though the base case scenario is a limited upside potential in oil prices, any reversal in oil price dynamics could tame the Fed cut expectations. In the short run, the barrel of American oil is around the $72pb on Monday on the back of lower Russian exports and suspended transit in the Red Sea due to attacks by the Houthis on ships in the region. Solid offers are seen into $74/75pb range. 

FX Daily: One last big central bank meeting The dollar is recovering some ground after the pushback from Fed officials against rate cut bets. However, the dovish Dot Plot may work as an anchor for rates and keep the dollar soft into the end of December. In Japan, the BoJ announces its policy in the early hours of tomorrow, and that will direct market expectations about a January hike.   USD: Softer into year-end? The last few days of market action, before volumes dry up for Christmas, should continue to revolve around the “tug of war” between Fed officials trying to temper rate cut speculation and investors who have instead seen a validation of dovish bets from last week’s Dot Plot projections. Data can tip the scale in these situations, so consumer confidence, personal spending, and PCE figures should move the market this week. We don’t expect the last bits of US data in 2023 to paint a very different picture, though. Ultimately, the Dot Plot surprise should keep providing an anchor for rates into the new year and prevent a major dollar rebound in a period that is also seasonally unfavourable for the greenback. It will, however, be important to see how much louder the post-meeting pushback against rate cut bets by Fed officials will be. We’ll hear from Chicago Fed President Austan Goolsbee today and Raphael Bostic tomorrow, but with Christmas getting closer, there will obviously be fewer chances to collect FOMC members’ remarks. Today, the US calendar is otherwise quiet, and the FX market will primarily focus on the Bank of Japan announcement overnight (more in the JPY section). We expect DXY to stabilise around 102/103 into year-end, but risks are skewed to the downside.

FX Daily: Cautious BoJ hits the yen The Bank of Japan did not give in to market pressure and kept its dovish guidance intact. However, the wording on the economic and inflation outlook paves the way for a hike in the second quarter in our view. The yen should revert to being driven mostly by US rates after taking a hit today. Elsewhere, Fedspeak will remain in focus along with some US data.   USD: Mixed Fedspeak The dollar has started the week modestly offered, with Scandinavian currencies performing well and the yen dropping after this morning’s Bank of Japan announcement (more in the JPY section below). The US calendar was empty yesterday, so the spotlight was on Fedspeak. Loretta Mester said that the markets are “a little bit ahead” on rate cuts, and Mary Daly said that her outlook for rate cuts is very close to the median Dot Plot (75bp of easing next year). Interestingly, Daly said that policy would still be restrictive if three cuts were delivered next year, which would probably imply greater room for easing if the economic outlook deteriorates. Chicago Fed President Austan Goolsbee said he is confused by the market reaction to the Dot Plot, but remarks from Daly and Mester instead seemed to endorse investors’ bullish response. We’ll keep monitoring Fed speakers today, with Thomas Barkin and Raphael Bostic (the latter swings more to the dovish side) set to deliver remarks. However, the focus will also be on US data, with housing starts set to have declined along with building permits in November. October TIC data is also due today. Tomorrow’s consumer confidence and Friday’s PCE and personal income numbers will be the last bits of data that can move the market before Christmas. Today, FX markets may stay quiet, and the general mood on the dollar could be modestly bearish unless we hear some more convincing pushback on rate cuts by Fed offici

Asia Morning Bites China 1Y MLF rates and Indonesia trade data are due today. Markets are digesting the Taiwan election results..   Global macro and markets Global markets:  US Treasury yields lurched lower again on Friday, and with little on the data calendar, this was probably a reaction to Middle East developments as well as perhaps some precautionary positioning ahead of Taiwan’s election. 2Y yields fell 10.1bp, and fell to 4.144%. There was less movement at the back end. 10Y yields fell just 2.7bp to 3.939%. Raphael Bostic suggested that further progress on reducing inflation was likely to be slow and cautioned against cutting rates too early. EURUSD hasn’t responded yet to the lower yield environment and edged a bit lower to 1.0947, which is consistent with a market that has become more risk-averse. G-10 currencies were not much changed. The AUD lost a little ground. But Cable is fractionally higher, and the JPY is also a little stronger at 145.03. The APAC region has also not shown much movement outside some weakness of the VND. USDCNY is currently at 7.1675. US equities had another flat day on Friday. Both the S&P 500 and NASDAQ were more or less unchanged.  Chinese stocks were slightly lower. The Hang Seng and CSI 300 both fell 0.35%.   G-7 macro:  Friday was pretty quiet on the macro front within the G-7. UK activity data was quite mixed, but there was a slightly better set of trade figures which may have helped sterling a little. US PPI for December was a little lower than expected which may have helped to encourage bond yields lower. Today there is nothing of note from the G-7.   Taiwan: As noted earlier, Taiwan re-elected a DPP President, and William Lai Ching-te was elected to the top job marking a third consecutive term for a DPP Presidency. Turnout was good, at 72% and President Lai received just over 40% of the vote. The more China-friendly KMT party got 33.49% of the vote, and the TPP got 26.45% of the vote.  It wasn’t all good news for the DPP though. The Legislative Yuan (parliament), which the DPP held in a narrow majority of its 113 members before the election, dropped to 51 seats, one less than the KMT, with the TPP picking up three seats taking their total to 8. This will make it harder for the DPP to pass new policies. Besides some slightly provocative language from both sides of the Strait of Taiwan, there don’t appear to be any reports of anything more tangible as yet.   China: Ahead of the activity data deluge later this week, China decides on its 1Y MLF rates today. Even though the CNY is still looking quite soft at 7.16-7.17, the consensus has pencilled in a 10bp cut of the rate from 2.5% to 2.4%. This follows some soft money supply figures at the end of last week.    Indonesia: Indonesia reports trade figures today. Exports will likely remain subdued because of soft global demand but imports are tipped to show a modest gain due to capital goods imports. This should keep the trade balance in surplus, though the market consensus has the surplus slipping to roughly $1.9bn. A smaller trade surplus would mean less support for the currency which could prompt BI to hold rates at 6% for longer.   What to look out for: China lending rate and Indonesia trade China new loans CNY (9-15 January) Japan M3 and tool orders (15 January) China medium-term lending rate (15 January) Indonesia trade data (15 January) India trade data (15 January) Philippines remittance data (15 January) Australia Westpac consumer confidence (16 January) Japan PPI inflation (16 January) US empire manufacturing (16 January) Singapore NODX (17 January) China GDP, industrial production, retail sales (17 January) Indonesia BI policy (17 January) US retail sales, industrial production and the Fed’s beige book (17 January) Fed’s Waller speaks (17 January) Japan core machinery orders (18 January) Australia labor data (18 January) Japan industrial production (18 January) US initial jobless claims, housing starts and building permits (18 January) Fed’s Williams and Bostic speak (18 January)