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Inflation is a key economic indicator that provides valuable insights into the broader economic landscape. By understanding and interpreting inflation data, traders can make more informed decisions and navigate the markets with greater confidence and success.
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EUR/USD
EU comes up to test a long term resistance level on the 1D timeframe. This level is a falling trend line started at the beginning of the year. Short sellers may look to use this opportunity to move price lower. However, if the US stock market continues to move higher, it may propel the pair higher above the trend line. We need to watch for the break on the EU pair to see if it closes above that line. -Frank
Last week's NFP report in the US came out much weaker than expected after seeing a steady climb in forecasts. A cooling jobs market could indicate pessimism in the US economy even if it means no rate hikes. This is especially true if CPI comes in higher or does not move next week.
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- Nick
Retail is majority long oil, crypto, metals, USDCAD, USDCHF, and USDJPY. They are also short the SPX500, GU, EU, AU and NU. The sentiment this week seems to be bearish dollar and bullish risk-on.
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Gold begins the week in the green after nearly a month of downside. Price is now above the support on the 1D timeframe and is testing Friday's high. Smart money is still buying the metal despite falling yields and risk-on sentiment returning.
Geopolitical tensions are still causing issues on the supply side, but China seems pretty bullish on gold who has been buying for some time. The 12% rise from the start of the year suggests the lack of optimism in equities and possibly the dollar too.
- Frank
Despite lower than expected jobs data today - the DXY still rallied back from the lows, and seems to be holding support on the daily chart...
Have a great weekend everyone!
- Nick
With the help of AAPL, tech stocks move higher on the day, further past the potential falling trend line. If price can close above this resistance level, it may suggest that we have seen a reversal back up to the highs. The jobs report and PMI was not good news for the economy, but it might have given investors some relief from the rate hike fears that the Fed might have to do. The market opened up higher and since then, there has been little volatility intraday. Next week does not have any big news in the US, so there's a chance that the sentiment might continue off the NFP report. Next news event is in two weeks for CPI
-Frank
This setup with high retail optimism and lower COT bullishness suggests the potential bearishness we may start to see in currencies trading against the dollar. This chart shows that smart money is increasingly short NZDUSD while retail is heavily long after yesterday's FOMC conference.
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Right now the US indices are neutral for the most part. The market doesn't know where to go with the data we have now. Mixed sentiment is usually a bad place for traders unless they are taking quick intraday moves like what we have seen the past couple weeks.
The Russell is very interest rate sensitive as it consists of smaller companies that need yields lower for a smoother business operation. If you take a look at the US indices, you might have noticed that despite the 2-3% moves that happened during the day ended up closing back to where they opened.
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NZDUSD is flashing bearish signals on the EdgeFinder. The score is now -12 and has remained lower than -10 for the most part for the last month. This is likely due to the monetary shift in Fed sentiment who had originally forecasted three rate cuts by the end of this year.
However, we are not seeing any of these plans come to fruition as we approach the middle of the year. Now the question remains when, if any, the cuts will come. As forecasts keep getting pushed back deeper into the year, it raises fears that they won't come until next year.
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NAS100
The NASDAQ continues to push higher this week as earnings roll out. Price is near all-time highs again sitting just 2% below. Similar to gold, the index trades against the yields. Seeing lower yields will likely be bullish for the stock market. The US02Y just needs to break a strong support level to do so. If NAS100 touches the highs, it could also indicate buyer exhaustion should yields stay where they are. -Frank
Gold
Still need to talk about gold even though it is not really moving today. The recent fall in yields has not really helped the price of gold. The US 2 year yield now sits at support around 4.8% on the 1D timeframe and may look to move higher. If policy remains strict from the Fed, it might be tough for gold to move up. But if we start to get an indication that the Fed may want to still cut this year, gold might be more optimistic. -Frank
Smart Money is selling oil, indices, and ten year notes. This is a sign that the institutions are getting more risk off going into the week.
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We love trading oil due to its high liquidity, global demand, geopolitical significance, and the wide array of factors influencing its price movements!
Читать полностью…Small caps are the only bearish reading on the indices, however. Retail seems to be a heavy influence in the latest stock market rally as COT is selling the indices. The interpretation of Fed sentiment seems skewed in the sense that investors are looking for any excuse to drive prices higher.
The issue I have with stocks right now is that we went from several rate cuts this year, with the expectations of them starting as early as December 2023. Now cut forecasts keep getting pushed back further and further into the latter half of the year, and there might not even be one in 2024.
- Frank
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As we come off a few weeks of heavy news in the US, earnings continue to roll out in the stock market. EURUSD is now flashing bullish signs after investors digested the Fed as somewhat eased the fears of a rate hike in the US.
The risk-on trades look to be more optimistic as COT showed a slowdown in USD interest while upping the ante on currencies such as EUR in last week's report. Europe also has no major news events this week so it may just play off the stock market sentiment.
- Frank
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Gold is a different story from the indices. Although catching support on the 1D timeframe, price has not really moved despite falling yields and worse economic data in the US. The dollar is also stubborn. It caught support and pared most of its losses on the day. There is some divergence between the overall sentiment around the dollar. Higher rates for longer seems to be the new narrative, so it would be good for yields/dollar. However, with a rate hike off the table for now, the metal should be experiencing bullishness. There is a lot to consider right now, but we can likely expect a lot of back and forth for the dollar related assets. Going into next week, it might be another battle between the bulls and bears like we've seen the past couple weeks
-Frank
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The yield curve has been a very accurate predictor of a stock market correction. You can see when the chart crosses below the inversion level, a correction has happened in the years following. 2000, 2008, 2020 have all been major market crashes. But right now, we are sitting at over 600 days on being inverted with no signs of a market crash.
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Retail is now decisively short the dollar as GU and AU sit in the top sell positions while metals, oil, crypto, and indices mostly remain in their top buys.
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The NAS100 seems relatively unbothered by the fact there might not be any rate cuts this year. Price is only 5% off the highs it made earlier in the year as the lack of volatility this week is keeping stocks within a range of support and resistance.
What we can likely expect is choppiness from positive growth in earnings yet stubborn inflation. Tomorrow's NFP is going to be another big news day, and we'll see if that is enough to give the markets a decisive move. It seems that a lower jobs number will be bearish for the indices given the fact we would have a slower jobs market and higher than expected inflation.
-Frank
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USDCAD remains strong as yields stay elevated above 5% and oil prices fall. As we get ready for FOMC today, stocks dip at the bell and wait for Powell’s speech on monetary policy and interest rate decision. The most probable outcome is for rates to stay where they are at 5.5% with a mention from Powell that they may remain elevated until they see further confidence in inflation returning to their 2% target.
- Frank
Update on my IWM / Russell position:
I've moved my stop slightly in profit. While I believe the Powell may sound more hawkish today due to sticky inflation, these events can be volatile and if a surprise dovish note causes markets to pop, I will take profits. - Nick