Olivia

Outlook: Markets are skipping back and forth between fear of inflation and fear of recession. This results in some peculiar price actions. For what it’s worth, the Bloomberg Economics’ “probability of a recession in the next 12 months at 38%, up from zero just months ago. Morgan Stanley predicts the euro-area will slide into a recession at the end of 2022, and Citigroup analysts reckon the odds of a worldwide pullback in the next two years are about even.” We can’t resolve the issue and even if we had a perfect crystal ball, it might not tell us how to trade because the process of getting there bends and kinks some other things. Twilight Zone music. We saw it is spades yesterday–commodity prices mostly lower while the 2/10 ran to -0.04. These two things are not necessarily at odds, but certainly not “normal.”  The 2/10 spread ran up, it ran down, it ran up again. It’s slippery as a greased pole. Meanwhile, the European bond market (aka the Bund) is far steadier and on a rising trajectory, with a bump or two. This implies two things—the market in US Treasuries is wobbly and somewhat indecisive between the idea the Fed will back… Read More »Markets are skipping back and forth between fear of inflation and fear of recession

Euro nearing parity with dollar It continues to be a miserable July for EUR/USD, which has declined 3.12%. The euro continues to deliver fresh 20-year lows, dropping to 1.0071 late in the Asian session. The euro has since recovered most of today’s losses, but the psychologically-important parity line is getting closer by the day, as the euro continues to stumble. On the economic front, US nonfarm payrolls outperformed, with a reading of 381 thousand, well above the consensus of 240 thousand. The ECB released the minutes of its June meeting on Thursday, with investors hunting for clues about the lift-off hike at the July meeting. The minutes didn’t provide any new insights, which could be a disappointment but shouldn’t really be all that surprising. The July 21st meeting will be live, with a modest 25bp increase being the most likely scenario, with another rate hike to follow in September. Still, the ECB has not shut the door on a larger hike at the upcoming meeting, and we have recently seen higher-than-expected moves by the Federal Reserve and other central banks. Lagarde & Co. will be keeping a close eye on next week’s inflation reports out of Germany and France, the two… Read More »Euro breaks below 1.01 – Is parity next?

Euro nearing parity with dollar It continues to be a miserable July for EUR/USD, which has declined 3.12%. The euro continues to deliver fresh 20-year lows, dropping to 1.0071 late in the Asian session. The euro has since recovered most of today’s losses, but the psychologically-important parity line is getting closer by the day, as the euro continues to stumble. On the economic front, US nonfarm payrolls outperformed, with a reading of 381 thousand, well above the consensus of 240 thousand. The ECB released the minutes of its June meeting on Thursday, with investors hunting for clues about the lift-off hike at the July meeting. The minutes didn’t provide any new insights, which could be a disappointment but shouldn’t really be all that surprising. The July 21st meeting will be live, with a modest 25bp increase being the most likely scenario, with another rate hike to follow in September. Still, the ECB has not shut the door on a larger hike at the upcoming meeting, and we have recently seen higher-than-expected moves by the Federal Reserve and other central banks. Lagarde & Co. will be keeping a close eye on next week’s inflation reports out of Germany and France, the two… Read More »Euro breaks below 1.01 – Is parity next?

The bears awoke from their winter sleep and took control of Wall Street. However, they haven’t conquered the gold market yet! The Bear Market It’s official: there is a bear market in equities! As the chart below shows, last month, the S&P 500 Index plunged more than 20% from its historic peak of 4797 points in early January 2022. A decline of greater than 20% is considered to mark a bear market as opposed to a normal correction within the bull market. The Dow Jones hasn’t yet crossed that threshold, but the S&P better reflects the condition of the US stock market, so we can firmly state that bears took control of Wall Street for the first time since the pandemic crash. How long will the bear market last? According to Reuters, after World War II, on average, stocks declined slightly over a year from the peak to the bottom. So, the current bear market could continue for a few months. Similarly, on average, the S&P 500 index fell by 32.7% during modern bear markets. Hence, there is room for further declines in the stock market. What does the bear market in equities mean for the US economy? Well, the… Read More »The bears took control of the market, but refrained from gold

In this article we’re going to take a quick look at the Elliott Wave charts of USDNOK, published in members area of the website. We have favoring the long side due to impulsive bullish sequences the pair is showing in the cycle from the 9.33 low. Consequently, we recommended members to avoid selling the pair, while keep favoring the long side.  Recently the pair made a short term pull back that has given us buying opportunities.  In the further text we are going to explain the Elliott Wave Forecast and trading strategy. USD/NOK Elliott Wave 1hour chart 07.07.2022 Currently the pair is giving us intraday (ii) blue pull back that is unfolding as Elliott Wave Zig Zag Pattern.  Wave (ii) Pull back looks incomplete at the moment. We expect to see more downside toward 10.041-9.976 ( Blue Box – buying zone) . We don’t recommend selling the pair against the main bullish trend. Strategy is waiting for the price to reach blue box zone, before entering the long trades. We expect buyers to appear at the blue box for the further rally toward new high ideally or for a 3 waves bounce at least . Once bounce reaches 50 Fibs against the  b… Read More »USD/NOK buying the dips at the blue box

The US labour market created 372K new jobs in June, close to the rate of growth in the previous three months when growth was 398K, 368K and 384K. The data came out better than expectations, which suggested a slowdown to 260K–290K. The rate of wage growth in the same month a year earlier slowed to 5.1% in June after peaking at 5.6% in March. Fed officials in the last couple of days have hinted to markets that the rate could be raised again by 75 points at the end of July, as monetary officials prefer to bring the gap between projected inflation and the Fed Funds rate closer to zero before the end of the year. A strong labour market is likely to strengthen the Fed in its intentions. At least that is what the market thinks, having priced in a rate hike of 75 points later this month. Interestingly, the stronger-than-expected report did not cause the Dollar to strengthen. It is more likely that the markets are “selling the fact” as the Dollar has already broken several records this week.  At the same time, investors and traders should be prepared that market participants may soon return to active Dollar… Read More »A strong US labour market clears the way for dollar growth

The US Bureau of Labor (sic) Statistics usually releases its Non-Farm Payroll (NFP) report on the first Friday of each month. But occasionally, like now, it’s the second Friday. So, we have to wait until the 8th July to get the latest update. Historically, the NFP is considered the most important data release of each month. It is the most extensive employment measure of the world’s biggest economy, so is considered a strong indicator of global economic health, even though it is backward-looking. It’s important to traders as it can often lead to dramatic market movements, particularly if the release is significantly outside market expectations. Payrolls versus inflation But we have seen a marked shift in attitude towards the Non-Farm Payroll data. This has been particularly noticeable over the last year and a half, as we move further away from the chaotic month-on-month payroll changes we saw as the pandemic took hold. The NFP release has lost its ranking as the top monthly data release. Instead, it is inflation numbers, particularly the Consumer Price Index (CPI) and Core Personal Consumption Expenditures (PCE) that now engage traders and commentators alike. Dual mandate The US Federal Reserve has a dual mandate. One… Read More »Data and the Federal Reserve’s dual mandate

The US Bureau of Labor (sic) Statistics usually releases its Non-Farm Payroll (NFP) report on the first Friday of each month. But occasionally, like now, it’s the second Friday. So, we have to wait until the 8th July to get the latest update. Historically, the NFP is considered the most important data release of each month. It is the most extensive employment measure of the world’s biggest economy, so is considered a strong indicator of global economic health, even though it is backward-looking. It’s important to traders as it can often lead to dramatic market movements, particularly if the release is significantly outside market expectations. Payrolls versus inflation But we have seen a marked shift in attitude towards the Non-Farm Payroll data. This has been particularly noticeable over the last year and a half, as we move further away from the chaotic month-on-month payroll changes we saw as the pandemic took hold. The NFP release has lost its ranking as the top monthly data release. Instead, it is inflation numbers, particularly the Consumer Price Index (CPI) and Core Personal Consumption Expenditures (PCE) that now engage traders and commentators alike. Dual mandate The US Federal Reserve has a dual mandate. One… Read More »Data and the Federal Reserve’s dual mandate

Better-than-expected jobs data raised the likeliness of a bumper rate hike this month, but with markets having finally stabilised it seems the focus will instead shift to corporate earnings. US employment data proves resilient for now “The latest US jobs report helped alleviate fears that the widely anticipated recession could begin to hit business investment and hiring decisions. Nevertheless, we have seen some weakness for US markets as better-than-expected payrolls, and stable unemployment/wages strengthen the case for a 75 basis-point hike in three-weeks’ time. Inflation remains the key concern for the Fed, and the absence of major red flags in the economy serves to raise the likeliness of Fed action to stifle price pressures. As ever, it is the tech-focused Nasdaq that suffers to the greatest degree, with bloated valuations coming into question in the face of surging rates and a potential recession.” Focus to shift to earnings, as rising commodities impact demand and margins “Economic concerns are expected to take a back seat in the coming weeks, with US banks kicking off earnings season on Thursday. Inflation remains the key concern for businesses and customers alike, as we keep a keen eye out for whether rising costs are passed… Read More »Jobs data outperforms, although rate hike implications dampen market sentiment

Cable lost traction after upbeat US jobs data and returned below 1.20 handle, erasing the good part of Thursday’s recovery. Fresh weakness generates initial signal that bounce was short-lived, as technical studies on daily chart are bearish and the latest US data added to negative fundamentals for pound, as better than expected June figures confirm the strength of the labor market, supporting Fed’s idea of another aggressive hike this month that would further inflate the greenback. Bears look for eventual close below pivotal supports at 1.2080/00 (Fibo 76.4% of psychological 1.20 support after two attempts failed that would confirm bearish stance and risk deeper drop. Res: 1.2055; 1.2084; 1.2104; 1.2152 Sup: 1.1919; 1.1875; 1.1822; 1.1751