Point 2: Jobs data is strong. People are employed, consumer still spending, earnings still healthy for companies. This could lead to a persistent period of demand induced inflation!
Читать полностью…It is unlikely, but don't rule out the possibility of Powell mentioning rate hikes potentially being appropriate tomorrow.
This could lead to continued USD strength, and a continued selloff in the stock market.
- Nick
EURUSD Daily Chart:
Big picture, the dollar continues to look strong relative to European peers.
Like this message if you want me to expand more details... for those of you fundamental nerds like me!
- Nick
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Unemployment claims came in lower than expected but matched last month's number of 212K claims. Lesser claims than expected is a good sign that unemployment is slowing down and the job market is still in line with Fed policy.
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Retail is betting heavily on crypto right now. The majority of the crowd is bearish dollar despite the continued rise in yields. The US indices are now mixed after being in retail's short positions. This could be a sign that traders are getting more bullish on stocks.
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Small cap stocks are taking the biggest beating right now due to their highly sensitive nature to interest yields and borrowing costs. Geopolitical tensions are also not going to help this index perform well if sentiment turns to risk off.
Despite strong economic data, it is actually hurting optimism in the short term due to the fears of higher interest rates for longer. The market is trying to pare some of the losses from the last few days, although the S&P and NASDAQ have broken under significant levels on the 1D timeframe.
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GBPUSD is one of the strongest bearish pairs on the EdgeFinder right now. The score is now -10 due to the downtrend slowing a bit. Retail is still long this pair while COT continues to buy USD and sell GBP. Because this pair is somewhat correlated to the US stock market, it will likely suffer more loss if the market does.
With threats of retaliation from Israel on Iran, investors look to put their money elsewhere outside of risk-favoring assets. So, they may flock to things like gold or the dollar, which is likely why the pound is seeing more funds pulled out of the currency from smart money.
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Oil 4H Chart:
Staying strong at 84.50. Demand side looks strong with the recent strong US economic data.
- Nick
Check this table out. Here's a quick rundown!
- COT data: shows bullish preference for USD over EURO
- Retail positioning: Retail is long this pair, which is a contrarian signal
- Seasonality: April historically bearish
- Trend: bearish!
- GDP: favors Euro
- PMI data favors USD
- Retail sales: strong in the US, weakening in Europe
- Inflation: sticky in the US, which could mean monetary policy remains restrictive in the US when compared to the ECB
- Jobs data: strong USD
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Gold
Metals grow weaker as a result of the shift in risk sentiment. Yields are an important factor in gold’s health so the higher it goes, the weaker gold may get. Price could test a broken trend line on the 1D timeframe should price move lower. If the Fed wants to remain restrictive, this could hurt gold as well.
-Frank
GBPUSD shifted from appearing more bullish to mixed as COT has flatlined the number of positions added to the long side on this pair. Meanwhile, retail is getting increasingly long indicating that the pair could dip further.
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Gold is still very strong on the 1D timeframe. Price clearly does not want to break under the support zone around $2300 despite rising yields. This is a concerning indication to investors that we could be in a heavy risk-off environment suddenly.
Rate cut forecasts keep getting pushed back further into the year, and at this rate, may get pushed into next year. The shift we saw in October through March was an optimistic one, but now it seems like we are back to the strict monetary policy we thought was over. -Frank
Russell 2000, 4H chart: I am short! Let's see how it goes. I've written up my reasoning below.
- Interest rates look like they may remain higher for longer. This bodes poorly for the russell 2000, which is an index comprised of smaller cap stocks that are more interest rate sensitive. This is due to their larger need for borrowing, as well as having less cash on hand when compared to large cap companies (S&P500)
- Retesting resistance, downtrenc, 20 period moving average retest. Stops above structure
- EdgeFinder bearish reading on the indices data scanner page
- Nick
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NZD/USD
Kiwi dollar is now getting an extremely bearish reading of -16 which is now the strongest score on the EdgeFinder. Money is flocking to the dollar now that geopolitical tensions have risen further in the Middle East and that the Fed has decided to wait until there is further confidence that inflation rates are coming down to the 2% target. Now there is little confidence of a rate cut in June. Retail sentiment is majority long this pair, while COT has sold NZD and bought USD.
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USD/JPY
UJ is still climbing today as yields rise and tensions worsen in the geopolitical scope. Unlike the US indices, a hawkish tone could help propel price further to the upside as the pair nears levels last touched since the ‘90s. We will have to keep a close eye on yields and earnings today to see where the pair might turn. -Frank
SPX500
The S&P has fallen 4.5% off the highs and is now shuffling around a hard level of support on the 1D timeframe. Tensions in the Middle East have escalated and seem to be thwarting the optimism from stronger earnings this week. Powell is also set to speak this afternoon and discuss monetary policy going forward. If he delivers a hawkish tone by considering rate hikes again or leaving rates where they are for the remainder of the year, the indices could tumble. If he remains cautiously dovish and wants to keep the rate cuts on the table this year, we might see a bounce from this level. -Frank