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Overview: Global equities are bleeding lower. Several large markets in the Asia Pacific region, including Hong Kong, Taiwan, and India are off more than 2%. Japan and Australian bourses fell by more than 1.5%. Europe's Stoxx 600 is off more than 2% and giving back the gains recorded in the past two sessions plus some. US futures are extending yesterday's loses. The sharp sell-off of equities has given the sovereign bond market a strong bid. The 10-year US Treasury yield that had approached 3.20% on Monday has tumbled to 2.81% today. The 2-year yield had approached 2.75% yesterday after the disappointing CPI report. It is now around 2.57%. European 10-year benchmark yields are 10-14 bp lower. The dollar is flying, except against the Japanese yen. The Antipodeans and Norwegian krone are getting tagged more than 1% today. The euro and sterling have been sold to new lows. Emerging market currencies are a sea of red too. Hungary, which kept its one-week deposit unchanged, has seen the biggest hit, off almost 1.5% today, while the Chinese yuan is off by slightly more than 1%, which is a large move for it. The Hong Kong Monetary Authority intervened to defend its peg… Read More »Dollar and yen surge

The USDX and the precious metals market are like reverse images. Thus, it's possible to guess what gold and silver will do as the dollar gallops up. Miners and silver declined in a truly epic manner, and yes, the same is likely to take place in the following months, as markets wake up to the reality, which is that the USD Index and real interest rates are going up. Speaking of the USD Index, after invalidating the breakout below the multi-year head-and-shoulders pattern, the USDX was poised to soar, just like I’ve been expecting it to do for more than a year, and that’s exactly what it did. The RSI is currently above 70, but since the USDX is in a medium-term rally and is already after a visible correction, it can rally further. Please note that we saw the same thing in 2008 and 2014. I marked the corrections with blue rectangles. Still, the USD Index is now practically right at its next strong resistance – at about 104. I previously wrote the following about this target: It doesn’t mean that the USD Index’s rally is likely to end there. It’s not – but the USDX could take a… Read More »Much to gold’s dissatisfaction, the USD index seems unstoppable

In this technical blog we’re going to take a quick look at the Elliott Wave charts of NZDUSD forex pair. As our members know, the pair shows bearish sequences in the cycle from the February 2021 peak. The pair has made 3 waves bounce recently, that has reached our selling zone and gave us good trading opportunities. In the further text we are going to explain the Elliott Wave Forecast and the trading strategy. NZD/USD H1 Elliott Wave Analysis 05.11.2022 NZDUSD is correcting the cycle from the 0.65682 peak. Recovery has already reached blue box at 0.63552-0.64021 area to complete 2 red recovery. We recommended members to avoid buying the pair while we’re favoring the short side from the blue box. Strategy is selling the pair at the marked zone. Invalidation for the trade would be break above 1.618 fibs extension: 0.64021. As the main trend is bearish we expect sellers to appear at the blue box for 3 waves pull back at least. Once pull back reaches 50 Fibs against the ((b)) black low, we will make short position risk free ( put SL at BE) and take partial profits. As our members know Blue Boxes are no enemy… Read More »NZD/USD selling the rallies at the blue box area

It’s going to be a full-on week for economic indicators with a barrage of data due that should keep the guessing game going on how much central banks will tighten this year. Australia and the UK report jobs numbers, the latter will also release CPI readings along with Canada and Japan. Retail sales will be watched in the UK and US, as well as in China, while the Q1 GDP estimate will be important in Japan.

Overview: Equities are recovering from dramatic losses. Today, the Nikkei, Hang Seng, and Kospi surged by more than 2%. The large markets in the region advanced except India. Europe's Stoxx 600 is up about 1.2% near midday after falling 0.75% yesterday. It is nearly flat on the week after falling for the past four weeks. US futures are 1%+ higher. Benchmark 10-year yields are firmer across the board. The 10-year US Treasury yield is slightly below 2.90%, while European yields are 4-8 bp higher and the peripheral premiums are a little wider. The dollar is mixed with the Scandis, Canadian dollar, and Swiss franc posting modest upticks. The euro, sterling, and yen are struggling. Emerging market currencies are mixed with little obvious rhyme or reason geographically. The freely accessible emerging market currencies are also mixed. Gold extended yesterday's sell-off to test the $1812 area before stabilizing. Now near $1821, gold is off about 3.3% this week. June WTI posted an upside reversal in the middle of the week, after falling to $98.20. It is extending yesterday's gains and testing the $108 area. US natgas is edging higher. It has not fallen since Monday. Europe's benchmark surged 12% yesterday as Russia… Read More »Sentiment remains fragile, and the euro and sterling can barely sustain even modest upticks

Outlook: The calendar today has import and export prices and revisions to various other data, but the only potential market-mover is the preliminary May University of Michigan's consumer confidence index. As we complain quite often, it’s based on a tiny sample and doesn’t deserve the headline. Weirdly, the market didn’t focus on PPI, which rose 0.5% m/m in April, pretty much in line with forecasts and better than 1.6% the month before–but only on the m/m basis. Trading Economics reports “Year on year, wholesale prices rose 11%, above market expectations of a 10.7% gain and compared to 11.5% in March. Still, producer inflation is running at the highest rate in 40 years and the report didn’t show much sign that price pressures will ease considerably in the near future.” The important news also went by with little notice–Fed chief Powell said we should expect 50 bp hikes at each of the next two meetings, meaning July as a well as June. He also said whether the US gets a recession is due to factors outside the Fed’s ability to control. We are glad to hear this–maybe it will shut up some of the more stupid commentators. Perhaps Powell is a… Read More »All the cryptos are tanking

Summary United States: Don't Look Down Yet Consumer price inflation may have peaked, but the climb down from here will not be free of obstacles. The CPI and PPI rose 0.3% and 0.5%, respectively, in April. Small business optimism stalled during the month, as owners are concerned about their ability to continue to pass on higher costs to consumers. Next week: Retail Sales (Tues), Industrial Production (Tues), Housing Starts (Wed) International: Inflation Plague Continues in Emerging Markets Price growth is a global problem; however, inflation seems to be more of a problem across the emerging markets. With commodity prices still high and weak local currencies, most emerging market countries are experiencing above-target inflation. Next week: UK CPI (Wed), Japan CPI (Thurs), South Africa Reserve Bank (Fri) Interest Rate Watch: Will Tighter Financial Conditions Lead to a More Dovish Fed? In the post-FOMC meeting press conference last week, Chair Powell indicated that financial conditions would need to tighten to help the Fed restore price stability. The Bloomberg Financial Conditions Index began to tighten early this year when FOMC members signaled that the committee would become more aggressive in battling inflation. This week, conditions tightened further to the least-supportive posture in two… Read More »Weekly economic and financial commentary

There are currently increasing indications that global economic growth will slow down in the coming quarters. The leading indicator of the OECD for the world economy weakened in April to an index value of around 100.2. In the downturns since 2000, it took an average of around 12 months to reach the cyclical low from this index level in times of growth slowdown. Based on this data, the cyclical cooling of the global economy could therefore last until spring 2023. Currently, the significant increase in inflation in some economies such as the Eurozone is already putting a considerable strain on private consumption. The outbreak of war in Ukraine has exacerbated the rise in inflation at a global level through energy and food prices. Unfortunately, there are no signs of any significant relaxation here in the short term. The current cooling of commodity prices that are sensitive to the economy, such as copper, could dampen global inflationary pressures in the longer term. On the other hand, falling raw material prices are another indicator of a slowdown in the global economy. In addition, unexpectedly strict Covid-related containment measures in China are further clouding the global economic outlook. This could again exacerbate the… Read More »Global economy cooling

A combination of negative factors dragged EUR/USD to a fresh multi-year low on Thursday. Aggressive Fed rate hike bets, the risk-off mood continued underpinning the safe-haven USD. Looming recession risk led by the Ukraine crisis exerted heavy downward pressure on the euro. The EUR/USD pair witnessed aggressive selling on Thursday and finally broke down through a near one-week-old trading range. The steep intraday decline dragged spot prices to the lowest level since January 2017 and was sponsored by a combination of factors. The US dollar rallied to a fresh 20-year high amid the global flight to safety. The markets now seem worried that a more aggressive policy tightening by major central banks to constrain inflation could hit global economic growth. This, along with the resurgence of geopolitical tensions, took its toll on the risk sentiment and forced investors to take refuge in the traditional safe-haven assets. In the latest developments surrounding the Russia-Ukraine saga, the latter announced that it would suspend Gazprom gas transit on its territory. Separately, Finland confirmed that it would apply to join NATO “without delay” and Sweden is expected to follow suit, citing security concerns following Russia's invasion of Ukraine. Meanwhile, Russia vowed an unspecified response.… Read More »EUR/USD Analysis: Bearish trend pauses just ahead of 2017 low, not out of the woods yet

A combination of negative factors dragged EUR/USD to a fresh multi-year low on Thursday. Aggressive Fed rate hike bets, the risk-off mood continued underpinning the safe-haven USD. Looming recession risk led by the Ukraine crisis exerted heavy downward pressure on the euro. The EUR/USD pair witnessed aggressive selling on Thursday and finally broke down through a near one-week-old trading range. The steep intraday decline dragged spot prices to the lowest level since January 2017 and was sponsored by a combination of factors. The US dollar rallied to a fresh 20-year high amid the global flight to safety. The markets now seem worried that a more aggressive policy tightening by major central banks to constrain inflation could hit global economic growth. This, along with the resurgence of geopolitical tensions, took its toll on the risk sentiment and forced investors to take refuge in the traditional safe-haven assets. In the latest developments surrounding the Russia-Ukraine saga, the latter announced that it would suspend Gazprom gas transit on its territory. Separately, Finland confirmed that it would apply to join NATO “without delay” and Sweden is expected to follow suit, citing security concerns following Russia's invasion of Ukraine. Meanwhile, Russia vowed an unspecified response.… Read More »EUR/USD Analysis: Bearish trend pauses just ahead of 2017 low, not out of the woods yet