selling

On Tuesday, the demand for the pound was significantly higher than that for the euro. As soon as this happened, many analysts began to pay attention to the report on prices in UK stores, as shop price inflation accelerated to 9% this month. This indicates that UK inflation is decreasing slowly or not decreasing at all, despite the benchmark interest rate being raised to 4.5%.   The consensus forecast for the Bank of England's rate currently suggests two more quarter point rate hikes in June and August.   This would bring the rate to 5%. Any further tightening without alternatives would push the British economy into a recession, and even the current rate could potentially cause it, despite the BoE's optimistic forecasts. But how can inflation be combated if it hardly responds to the actions of the central bank?     I believe there can only be one disheartening answer: it cannot. If further rate hikes lead to a recession, the Brits, clearly dissatisfied with recent events within the country, may start a new wave of mass strikes. Take note that in the past year, many Brits have openly criticized the British government for the sharp decline in real incomes and high inflation.   If the rate increases further, the economy will contract, leading to an increase in unemployment. If the rate is kept as it is, it might take years for inflation to return to the target level. The BoE is in a deadlock. BoE Governor Andrew Bailey expects inflation to start decreasing rapidly from April. He noted the decline in energy prices, which will somewhat dampen inflationary pressure on all categories of goods and services. However, the April inflation report was unusually contradictory. While headline inflation showed a significant slowdown, core inflation continues to rise.   Therefore, it is not possible to conclude that inflation is slowing down in the general sense. We can only wait and observe. If Bailey turns out to be right, then the BoE will not need to raise the rate to 5.5% or 6%, which currently seems like a fantasy.   However, if inflation continues to hover around 10%, the BoE will need to devise new measures to address it without exerting serious pressure on the economy. It might require patience for several years. It is entirely unclear which option the central bank will choose.   The demand for the British pound may increase as market expectations of a hawkish stance grow. But will these expectations be justified? The pound may rise based on this, but fall even harder when it becomes clear that the BoE is not ready to raise the rate above 5%. I believe that wave analysis should be the primary tool for forecasting at the moment.     Based on the analysis conducted, I conclude that the uptrend phase has ended. Therefore, I would recommend selling at this point, as the instrument has enough room to fall. I believe that targets around 1.0500-1.0600 are quite realistic.   A corrective wave may start from the 1.0678 level, so you can consider short positions if the pair surpasses this level. The wave pattern of the GBP/USD pair has long indicated the formation of a new downtrend wave. Wave b could be very deep, as all waves have recently been equal.   A successful attempt to break through 1.2445, which equates to 100.0% Fibonacci, indicates that the market is ready to sell. I recommend selling the pound with targets around 23 and 22 figures. But most likely, the decline will be stronger.    

Both instruments continue to decline steadily even with the news background, which is not always "strong". Over the weekend, however, there was quite expected news from the U.S. Congress about the national debt limit.   US Treasury Secretary Janet Yellen reaffirmed June 1 as the "hard deadline" for the US to raise the debt ceiling or risk defaulting on its obligations. Since no one in the market doubted that the Democrats and Republicans would eventually find common ground, the decision and its announcement were just already expected.   US President Joe Biden's press office reported that the White House and House Republicans have striked an agreement, meaning an official bill will be passed by June 1 that would raise the debt ceiling by another $2 trillion. Problem solved, and the week could start volatile for the markets.       There is nothing scheduled for Monday. Nevertheless, many instruments can show good activity as they haven't had the opportunity to react to the news of raising the debt limit over the weekend. Since this decision is positive for the US economy, it is reasonable to expect an increase in demand for the US currency. However, some analysts believe that the recent appreciation of the US dollar was driven by rising risk aversion sentiment.   Despite the default risk that threatened the US and the dollar, many investors may have used it as a "safe haven." Personally, I don't believe in such an assumption, but I can't speak for every individual. I expect active movements on Monday, but it doesn't make sense to guess the direction. In any case, regardless of the direction of both instruments, we can assume that this movement will not disrupt the overall wave pattern. If the euro and the pound rise on Monday-Tuesday, it can be considered as a corrective wave within a downtrend.   In the opposite case, the main wave will continue to form. We have much more important news and reports, such as the US labor market or inflation in the European Union. The wave pattern is highly important for the market right now, as instruments can move in a certain direction based solely on it. The topic regarding central bank rates is currently losing some of its appeal.   Last week, there were many speeches by European Central Bank and Federal Reserve members, but we did not receive any clarity on the topic. I believe that there is a consensus on this issue, and the new speeches did not change it.     Based on the analysis conducted, I conclude that the uptrend phase has ended. Therefore, I would recommend selling at this point, as the instrument has enough room to fall. I believe that targets around 1.0500-1.0600 are quite realistic. These are the targets I suggest for selling the instrument.   The wave pattern of the GBP/USD pair has long indicated the formation of a new downtrend wave. Wave b could be very deep, as all waves have recently been equal. A successful attempt to break through 1.2445, which equates to 100.0% Fibonacci, indicates that the market is ready to sell. I recommend selling the pound with targets around 23 and 22 figures. But most likely, the decline will be stronger.    

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/USD Pound declined slightly on Monday, which kept the Marlin oscillator in a downward direction. However, it seems to be preparing to overcome the balance indicator line (in red) this morning, most likely aiming to advance towards the first target at 1.2720.     If the price manages to consolidate below this level, it will break through the MACD line (in blue) and move towards the June 29 low at 1.2590.   On the four-hour chart, the pair trades below the lower boundary of the range (1.2839) and the balance indicator line, shifting the short-term trend towards selling. The Marlin oscillator also moved into negative territory, indicating a bearish trend. In the event of an unexpected breakout above the upper boundary of the range (1.2903), the price increase could be stopped by the MACD line (1.2937)  

While we've understood Federal Reserve Chair Jerome Powell's potential rhetoric, what about European Central Bank President Christine Lagarde's statement? That's much more complicated. The ECB's rate is below the Fed's, yet inflation in the European Union is higher. This single factor suggests that the ECB should agree to additional tightening. However, in recent months, we've repeatedly heard that a pause is needed. A pause doesn't mean the end of the tightening process, but, in a manner of speaking, its final stretch. If Lagarde hints at such a scenario in her speech, the euro will dip even further in the market.     The second crucial factor is the state of the European economy. GDP has been stagnant for almost four quarters, and PMIs keep falling. As a result, every new rate hike will push the European economy into an even deeper hole. It's important for the ECB to maintain a balance between the rate and the economy. Every subsequent ECB meeting is now a mystery. Some members of the Governing Council believe in another rate hike, while others insist on a pause. Lagarde is set to guide the market on Friday. In my opinion, the chances of a dovish stance from Lagarde is much higher. Even if she announces that the current course will be maintained, it doesn't mean all members of the Governing Council will support her stance. From this perspective, the Fed appears to be a more cohesive entity, so the preliminary verdict is as follows: Powell's hawkish stance is more likely, while Lagarde's is "conditionally-hawkish".   This means a further decline for the EUR/USD. As for the GBP/USD, a lot hinges on the 1.2618 mark. A successful attempt to break through it will signal the market's readiness to continue selling, regardless of Powell's remarks in Jackson Hole. Based on all the above, I don't expect the market mood to change on Friday. Both instruments might start forming corrective upward waves, but so far, there are no signs for either. Hence, it's too early to talk about a strong increase in demand for the euro and the pound.     Based on the conducted analysis, I came to the conclusion that the upward wave pattern is complete. I still believe that targets in the 1.0500-1.0600 range are quite realistic, and with these targets in mind, I advise selling the instrument. The a-b-c structure appears complete and convincing. Therefore, I advise selling the instrument with targets set around the 1.0788 and 1.0637 marks. I believe that the bearish segment will persist, and a successful attempt at 1.0880 indicates the market's readiness for new short positions. The wave pattern of the GBP/USD pair suggests a decline within the downtrend segment. There is a risk of ending the current downward wave if it is wave "d" and not "1". In that case, wave 5 could start from current levels. However, in my opinion, we are currently seeing the construction of a corrective wave within a new downtrend segment. If this is the case, the instrument will not rise much above the 1.2840 mark, and then a new downward wave will commence. We should brace for new short positions.  

Bullish outlook - buying stock using ITM put options Dipping into the insights shared in our series, selling an in-the-money (ITM) put option emerges as a strategy to potentially acquire Adobe stocks at a discount.     Strategy: selling an in-the-money put option Trade setup: Action: SellToOpen Quantity: 1 Expiry: 15-Sep-2024 Strike: 550 Premium: $18.90 (per share) Premium and risk: Premium received: $18.90 x 100 (per contract) = $1,890 Max risk: Significant (potential obligation to buy the stock if it falls below the strike price) Max reward: $1,890 (retained premium if Adobe stays above 550 at expiry) Breakeven point: $550 (strike) - $18.90 (premium) = $531.10 Comparison with buying stock: This strategy can potentially allow you to acquire Adobe stocks at a discounted rate compared to the current market price, with the added benefit of premium retention  

We remain in the midst of a rather quiet period of macroeconomic news out of New Zealand, with no tier-1 reports out yet in 2024. The New Zealand dollar instead continues to trade on global risk sentiment and news out of China. The PBoC’s surprise decision to hold its 1-year MLF rate unchanged today has triggered a bout of selling in both AUD and NZD this morning, with the New Zealand dollar slipping to its lowest level since mid-December amid fears over the health of Asia’s largest economy. Domestic activity should begin to pick up pace in the next few weeks, with a handful of economic data releases likely to ramp up volatility in the New Zealand currency. Q4 business confidence (Monday) and the December PMIs (Thursday) will be closely watched by investors. Market participants will also likely have one eye on next Tuesday’s Q4 inflation report, which will be key in determining the direction and timing of RBNZ interest rate changes in the coming few months.