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Anticipated Federal Reserve Shop Talk to be Delivered Today

by with No Comment AMT MarketsBehavioral SentimentFeatured Highlights

Anticipated Federal Reserve Shop Talk to be Delivered Today

For what it’s worth, here is my prediction regarding what the Federal Reserve will do today. The Federal Funds Rate will remain unchanged in my opinion. The FOMC Statement may show that the vote actually was debated and not unanimous. The statement is likely to warn that inflation remains stubborn and potentially problematic, meaning the Federal Reserve continues to believe it may have to raise the Federal Funds Rate over the mid-term and again before the end of 2023.

The Forex market has seen the USD get weaker against many major currencies since late May. While financial institutions have seemingly positioned for no increase from the Federal Reserve today, this move has also likely been priced into Forex. Day traders need to understand institutional traders will not be betting on what took place the last three weeks, but are trying to anticipate what will happen into early July and beyond regarding their Forex positions.

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GBP/USD One Month Chart as of the 14th June 2023

Many financial institutions may still be betting the Fed will remain more dovish than the U.S central bank wants to admit, but this is a dangerous perception and could prove costly. Financial institutions are concerned about the Fed because they know the central bank has painted itself into a corner it may not be able to maneuver freely within. The battle to conquer inflation while trying to fuel economic growth is not an easy one. Mixed sentiment abounds regarding the U.S economy depending on who is asked.

Talk of a soft landing and a small recession continues to be heard, this while some analysts warn about a hard drop and darker days ahead. Folks, it is all about timelines and their interpretations, experts warning about brighter or darker days ahead have a tendency to be vague regarding exact moments in time. Everyone has an opinion, and people often have more than one.

In my opinion – my one opinion, the Fed is likely to say that it is not going to raise rates today, but may have to do so in the mid-term. If these were normal times and economic conditions were not suffering from huge spending running amok in Washington and the corporate banking sector wasn’t fragile, the Fed may actually have raised the Federal Funds Rate today to continue to battle inflation deliberately. However, a pause for the moment seems like the logical choice, this while ‘hoping’ inflation continues to diminish. And hope is a key word here. Everyone seems to be hoping. The question financial houses and traders need to decide after the FOMC Statement takes place today is how seriously do they consider the Fed’s remarks.

If they believe the Fed will have to continue to remain neutral regarding its mid and long-term interest rate policy, the USD may soften and incremental selling might be demonstrated. Human instinct tends to be optimistic, which means financial institutions and maybe even the Fed wants to believe inflation will ebb lower. If this happens the USD would weaken further. However, the Fed may have to sound more aggressive than people want, but that would damper the mood of financial institutions – so look for optimistic interpretations to abound with rose colored glasses, even if they are wrong in the long-term.

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Gold One Month Chart as of the 14th June 2023

For evidence of outside barometers, traders may want to look at Gold which has essentially traded between 1940.00 and 1975.00 with a few outliers since the last week in May. The price of Gold has seemingly situated within a consolidated framework the past few weeks. The precious metal may produce a strong move if the Fed shows more dovish behavior today, particularly if financial institutions show more optimism via behavioral sentiment in Forex – meaning if a weaker USD trend continues momentarily Gold could traverse higher.

My prediction and $1.00 USD may get you on a bus. As always caution will be needed if you are trading immediately before and after the U.S Federal Reserve’s rate decision. I advise using a seat belt today consisting of entry price, stop loss and take profit orders via solid risk management, but then again these cautious attitudes should always be practiced by day traders.

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Week Ahead: Inflation Followed by the U.S Federal Reserve

by with No Comment AMT MarketsBehavioral SentimentFeatured Highlights

Week Ahead: Inflation Followed by the U.S Federal Reserve

Monday, 12th of June, U.S Federal Budget Balance – hold down the laughter and snickers please as you wonder why you should care, this as the report shows monthly income versus spending from the month before. Yes, the U.S ‘Debt Ceiling’ bill was passed recently. Very few people are going to pay attention to Budget Balance report, except economists and traders who have ‘skin in the game’ via hedge funds as an example – that make long-term bets, and U.S politicians who want to hoot and holler…….while nothing really gets done to limit wasteful spending in Washington D.C.

Tuesday, 13th of June, U.S Consumer Price Index reports – yes, this inflation data will be important per the monthly numbers showing what consumers are spending. A slight uptick is expected with an outcome of plus 0.2% via the broad statistics – last month’s number showed a gain of 0.4%. The outcome of the broad and core CPI statistics will give the Federal Reserve a sounding board for what will take place on Wednesday via the Federal Funds Rate announcement. Stronger than expected inflation numbers could cause a rupture and nervousness. A weaker result would calm Forex and perhaps make the USD slightly weaker.

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EUR/USD One Month Chart as of 11th June 2023

Wednesday, 14th of June, U.S Producer Price Index – these numbers will be released early in the day and will be followed by the Federal Reserve five and half hours later. The inflation outcome via the PPI if stronger than anticipated would cause some caution before the Federal Reserve takes the stage.

Wednesday, 14th of June, U.S Federal Funds Rate, FOMC Statement and FOMC Press Conference – while many analysts seem convinced the Fed will not hike the interest rate this week, there are obviously no guarantees. The FOMC Statement will indicate the U.S central bank’s outlook. Traders who are intent on trading before the official interest rate announcement and statement are playing with fire. Speculators should keep in mind that other central banks have surprised folks with increases recently including Canada and Australia. A hike from the U.S Federal Reserve would surprise a lot of people and financial institutions, but stranger things have happened.

Thursday, 15th of June, New Zealand Gross Domestic Product – the growth numbers which will come out a handful of hours after the U.S Fed leaves the stage will be intriguing and provide NZD/USD traders more impetus into what will likely already be a volatile trading session taking place.

Thursday, 15th of June, China Industrial Production and Retail Sales – these two reports from the economic giant will be watched closely. China’s economy is struggling a bit, and weakness in the housing sector via values are starting to cause a reaction in domestic spending. Industrial Production numbers will give some insights regarding global demand. Economic problems in Europe and North America are certainly not helping matters in China because demand for goods are restrained and hurting the manufacturing sector.

Thursday, 15th of June, U.S Retail Sales – consumers in the U.S have been expected to start producing negative numbers via these statistics, will they begin to do it? A stronger number would be of interest to some, but after Wednesdays’ FOMC Statement and news that will be generated, it is questionable who will give full attention to this report and what affect it could have.

Thursday, 15th of June, E.U ECB Press Conference – this question and answer session could prove to be interesting depending on what the U.S Fed does the day before. Certainly the European Central Bank will give their opinions on monetary policy and economic circumstances in the European Union and abroad. The EUR/USD could be affected.

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USD/JPY One Month Chart as of 11th June 2023

Friday, 16th of June, Japan BoJ Policy Rate and Monetary Policy Statement – no major changes are expected from the Bank of Japan. This is the one central bank unwilling to change its attitude regarding monetary policy because of the whims of others. Perhaps if the U.S Federal Reserve surprised everyone on Wednesday with a hike, this could change the quiet rhetoric from the BoJ – but even that is doubtful. USD/JPY traders should pay attention to the BoJ Press Conference just in case.

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USD/INR: Elevated Range as Questions about Values Persists

by with No Comment AMT MarketsCentral BanksFeatured Highlights

USD/INR: Elevated Range as Questions about Values Persists

The USD/INR has traded the past week approximately between the 82.2200 and 82.7000 ratios. Plenty of discussion regarding what the Reserve Bank of India has been doing as they battle the strong USD has been whispered openly, and is being questioned from financial institutions and speculators. Day traders who have been trying to wager on the value of the Indian Rupee have likely found the waters difficult to swim. As of this writing the USD/INR is near 82.5200.

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USD/INR Three Month Chart as of 8th June 2023

Last Wednesday’s sudden rhetoric, from two U.S Federal Reserve officials caused mayhem briefly within the USD/INR. The currency pair got hit after India’s official trading hours closed, and essentially moved in overseas accounts based on the spoken words from the two Fed members stating the U.S central bank should not raise the Federal Funds Rate on the 14th of June. These sudden Forex moves hurt many USD/INR speculators. After this rhetoric from the two well-regarded FOMC members, like clockwork U.S economic data provided a counter punch last Friday with better than anticipated Non-Farm Employment Change numbers, this while inflation results also remained persistent.

Three Month View of the USD/INR offers Sentiment Insights and perhaps Clues

The past three months of trading in the USD/INR have produced a rather rocky price trend. A low of nearly 81.5200 was seen on the 14th of April, which turned into a high of approximately 82.9000 on the 19th of May. Intriguingly while many USD/INR speculators may be looking at the U.S Federal Reserve and casting blame, questioning the potential interventions by the Reserve Bank of India remains relevant. The Reserve Bank of India has actually been rather tranquil regarding its use of interest rate hikes; it has not raised the key lending rate aggressively in India like many of its major global counterparts. Why is this?

Is there a potential the Reserve Bank of India and the government has wanted the Indian Rupee to get weaker? Deflating the Indian Rupee’s value in order to potentially create an unseen tax is considered an old trick by economists. This because some believe inflation is a way to tax people without actually raising interest rates, the deflated value of a currency makes it easier for governments to sometimes repay debt, based on the notion the money they are now using is cheaper compared to when the Indian Rupee’s value was better.

Where is the USD/INR Going to Go Next?

I am no economist; my specialty tends to be risk analysis. There is an old joke, ‘why did god create economists? To make weathermen look good.’ The point is that economists often get their outlooks wrong, but we cannot blame only economists for getting their outlooks wrong, many of us do. The USD/INR has a tough few days ahead, it must deal with nervous market sentiment generated from a lack of clarity via the U.S Federal Reserve. Looking for correlations in the Forex market is proving difficult for the moment for all short-term speculators. Choppy trading in the USD/INR has been noticeable the past few days, this Monday’s upwards trend has turned into near-term consolidated day trading. Other major currency pairs are turning in rather turbulent results also without a firm technical stance.

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Gold Three Month Chart as of 8th of June 2023

After speaking with many associates in the financial sector the past week, it appears many people believe the Fed should stop raising interest rates for the time being. Some financial institutions seem to be leaning in this direction, but there are caution signs all over that warn about potential surprises from the U.S Federal Reserve.

Yesterday the Bank of Canada raised its Overnight Rate by another 0.25%, when most analysts believed they would pause. Another interesting sign is the current price of Gold near 1950.00. The recent lower price could indicate some financial houses believe the Federal Reserve may actually remain active regarding further interest rate hikes, this because the price of Gold has tended to rise when the perception existed the Federal Reserve is going to be dovish. Gold’s downward price action should raise suspicious eyebrows.

But then again, I am not an economist; I am merely a risk analyst. So my words to you are, be careful if you are wagering on the USD/INR before the U.S Federal Reserve’s pronouncements next Wednesday on the 14th of June.

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India’s Speculative Real Estate Bubble and Values: Part One

by with No Comment AMT MarketsAssetsFeatured Highlights

India’s Speculative Real Estate Bubble and Values: Part One

India’s Real Estate Sector is a Well Known Affair to its own Citizens and to Global Asset Management Companies

India’s major cities like Mumbai, the financial capital of India, Gurgaon, Delhi, Bengaluru and Hyderabad, the tech hub of the nation, serve as major attractions for local players and international corporate giants who want to participate in the real estate sector. While transparency still remains a challenge that needs to be addressed in Tier 2 and Tier 3 cities of India, underlying demand continues to expand throughout the nation. The Real Estate Regulatory Authority, passed a bill known as the RERA Act, by the serving government in March of 2016, to create transparency and fairness between buyers and sellers in the residential real estate market, however these measures do not always help circumstances as hoped.

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Well known companies like Blackstone which is based in New York, and Brookfield Asset Management of Toronto have vast operations in the commercial real estate sector of India. Their estimated investments are significant. Amounts spent are believed respectively to be nearly 50 billion USD by Blackstone, and the Brookfield figure is likely around 22 billion USD. The companies concentrate money for real estate, and infrastructure like telecommunications, roads and other spheres crucial to create value.

The reason why private equity giants allocate massive investments into India commercial real estate is due to the remarkable advantages of the locations available for property, and the capability to turn a profit. The land purchased and developed is usually situated close to burgeoning information technology companies. It is easily understood these IT companies have expansive needs to function properly which include plenty of area for employees to work. This is relevant in the north of India where Brookfield has invested in places like Mumbai and Gurgaon. Apart from the commercial demand for property, the employees who work in these type of companies also drive residential apartment sales in these cities.

The real estate market in Gurgaon has seen remarkable growth in the recent years where prices have experienced double digit appreciation. Readers need to understand that Gurgaon, is a city near India’s capital of New Delhi in northern

India. It’s known as a financial and technology hub. The rise of e-commerce players like Amazon and the Walmart owned Flipkart are important. Walmart spent around 16 USD billion to buy about 77% of Flipkart in 2018 and their vast operations also have sparked demand for huge amounts of property, including warehouses. This activity has certainly attracted the attention and desire of global players to invest in commercial real estate operations.

The residential real estate market has grown fast, and continues to achieve huge growth even after the coronavirus pandemic. An extremely rapid pace is fueled because low interest rates have appealed to new home buyers to initiate purchases of apartments and condominiums in metropolitan cities like Chennai, Mumbai, Hyderabad, and Bengaluru. Many affluent families in India from these major cities continue to own and rent residential homes in the areas, taking advantage of demand. According to a survey conducted by the global property consultancy firm Savills, now 70% of families in the metropolitan cities mentioned previously from the north and south of India have answered positively when asked if they would like to buy a second home in the next couple of years.

Residential real estate sales have been rising after the pandemic, especially for double bedroom apartments averaging 1200 square feet of housing, usually within a category that is priced in a range above 5,000,000 Rupees (around 60,000 USD). India’s benchmark mortgage rate is in the 8.7% to 9.7% range as of this writing, this is higher than it was one year ago. But Indian home buyers haven’t yet stepped back from buying, this because interest rates in India have not increased too much in percentage terms. The average time to pay a loan for residential mortgages ranges from 10 to 20 years in India. This allowable time frame makes it affordable for employees to pay via Monthly EMI, Equated Monthly Installments. The mortgages come with a floating rate meaning the buyers can reset their rates when the local interest rate falls. Yes, floating rates certainly do contain dangers if interest rates climb too high.

A Speculative Roulette Game: The Least Known and Unequal Affair

But there is another reality and a very different story in certain areas of India where data misses critical elements of the real estate business. Speculative participation in property is done by the most affluent who are the dominant buyers and sellers; speculative buying and selling is too expensive for most citizens. Real estate has frequently been used as a tool to hide wealth and avoid taxes by many within certain segments of India. The real estate speculative bubble creates vast distortions in the costs of rents, and affects employment opportunities for the masses. Government offices may sometimes turn a blind eye to these circumstances, because as long as cities and regions can collect money from the speculative frenzy there is little reason to turn off the revenue streams.

Frequently there is someone who is capable of bidding higher for lands in most of the Tier 2 and Tier 3 cities discussed, compared to those who actually need the property to live there and function properly. It is important to mention Tier 2 and Tier 3 cities and what is taking place in these areas, because these locations frequently lack substantial income generation opportunities for people and don’t have massive infrastructure or enough office space to employ people where wages have stagnated for many years. Take for example the Tamil Nadu, a state in southern India where I live, the average price of a double bedroom 1200 sq’ft residential apartment in the capital city of Chennai is around 6,000,000 Rupees (around $73,000 USD).

Readers need to note that the Indian ‘middle class’ prefers to have 2 bedroom 1200 sq’ft residential houses and apartments on average, thus builders construct houses and units based on land availability. Market prices for the property equals the costs of building materials and labor along with the speculative factors worked into the total value.

A look at the town of Madurai where the same apartment is available at a comparable price tag like Chennai is important to critique. Because wages in Madurai are a quarter, and sometimes less than half of what one could earn in Chennai, the disparities in the income distribution and the property prices in India become evident and need to be recognized.

In some rural towns where wages have not grown more than 5% per year,

India has seen real estate prices doubling every 4 years. For example, the rural town called Ponnamaravathy near to Madurai, which is my hometown, speculation in the real estate sector has seen frenzied pricing in an unprecedented manner for land and newly built houses. There is a great divergence between real per capita income versus the escalating real estate prices and rents in the interiors of India in towns such as Ponnamaravathy.

According to real estate analysts, most land parcels and their inventory of projects within metropolitan cities that are under construction has been bought by speculators. When units in new projects are sold to speculators, these generally change hands multiple times during the construction period, which generally lasts three to four years. Such heavy ‘churning’ means fast price increases. Also, the builders who market their own projects as investments raise list prices frequently to keep existing investors happy with notional gains, so they can point to the ‘attractiveness’ of potential speculation.

While it may not matter to some citizens in the larger cities, the problem of speculative influences do matter in the small towns where community wages have not grown properly. Inflation and speculative investments in these towns do not create sufficient job growth either. Surplus cash profits earned by many businesses, and foreign remittances, which were close to 108 billion USD in 2022, goes back into real estate speculation causing higher rents and forcing lower income households to struggle.

Rural Wages Haven’t Grown but Prices are Increasing for Homes

According to economists data, Average Nominal Wages in rural India is approximately 15,000 Rupees per month for men and 8,000 Rupees per month for women.There is an ample real estate supply in the rural market, but speculative demand has created steep pricing, typically initiated by large ‘investors’ willing to pay top money for any asset irrespective of its location, affordability or current market price based on the assumption values will continue to increase.

The difference between rural wages and costs for homes creates heavy disparities and inequalities for households living within the lower thresholds of society. For example, a double bedroom 1200 sq’ft residential apartment in Ponnamaravathy can be selling at a whopping 7,000,000 Rupees (approximately 85,365 USD). This is 20% more than what we have seen before on average in Chennai, and Madurai, a Tier 2 city, in Tamil Nadu state. The wages in the rural town of Ponnamaravathy are just 10% compared to what one could earn in Chennai annually, making the purchase of a residence priced at these higher values difficult for most residents and making many people renters for life.

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Risks Ahead: Tranquil Data Mixed with Loud Nervous Chatter

by with No Comment AMT MarketsBehavioral SentimentFeatured Highlights

Risks Ahead: Tranquil Data Mixed with Loud Nervous Chatter

Last Friday finished with stronger than expected Non-Farm Employment Change numbers, which essentially collided with dovish rhetoric via two U.S Federal Reserve FOMC members from the middle of the week; this while inflation clearly remains stubborn in the U.S.

All of which sets up this coming week for nervous trading results and until the 14th of June, when the Federal Reserve’s Federal Funds Rate pronouncements will be brought forth. Plenty of talk about interest rates will be heard in the days ahead and traders should expect to hear debates as the chatter grows louder.

Commodity traders may be interested in the outcome of the OPEC+ meetings taking place this weekend. The cartel’s decisions regarding oil production will affect not only prices of Crude Oil futures, but is a direct reflection regarding global demand, which also tells us about the organization’s viewpoints regarding global economic conditions.

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WTI Crude Oil Three Month Chart as of 4th of June 2023

Monday, the 5th of June, European Services PMI – Germany, France and Italy and will release their Purchasing Managers Index readings. The German outcome could prove interesting because the nation is suffering from recessionary pressures. The PMI results could affect the EUR/USD a bit. The U.K will also release their data too.

Monday, the 5th of June, U.S ISM Services PMI – this report will be of interest because some are expecting a better outcome compared to May’s results. A potentially strong reading could prove problematic and put more pressure on the Federal Reserve to raise interest rates next week.

Tuesday, the 6th of June, Australia RBA Rate Statement – the Reserve Bank of Australia surprised people with an increase of their Cash Rate last month. No increase is expected now, but the RBA’s rhetoric should be listened to as they comment about domestic and global economic conditions.

Wednesday, the 7th of June, Canada BoC Overnight Rate – Bank of Canada is expected to hold its borrowing costs in place, but inflation is still creeping into prices and the BoC’s Rate Statement may prove intriguing.

Thursday, the 8th of June, U.S Weekly Unemployment Claims – following in the footsteps of the stronger than expected jobs numbers last week, this report could get some media fanfare. However, it also may prove to be a lot of noise and have little real affect on market direction.

Friday, the 9th of June, China CPI and PPI – the inflation reports from China could prove interesting in wake of recent lackluster economic data from the nation. Last Thursday’s Caixin Manufacturing PMI results came in slightly better than expected, but data from China the week before was negative. The data from China gives investors and traders insights because of its importance as a global supplier of consumer products.

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Federal Reserve Noise as Short and Long-Term Clarity Fades

by with No Comment AMT MarketsBehavioral SentimentFeatured Highlights

Federal Reserve Noise as Short and Long-Term Clarity Fades

There is a storm in the Forex markets currently and it will persist tomorrow. Today is a good day to talk about the difference between short-term trading and long-term investing. Short-term outlooks typically are top heavy with technical interpretation, and behavioral sentiment mixed with fundamentals when speculators are pursuing the marketplace looking for quick profits. Loud short term thunderbolts coming from various components that affect trading are significant. Yesterday’s noise had an impact.

Long-term investment is done with a focus on patience, conservative outlooks regarding fundamentals and potential behavioral sentiment that could develop and encapsulate attitudes within a chosen asset. Day traders are often ready to bet on what is going to happen in a matter of minutes, hours and perhaps a day. If a so called day trader has to be in a position longer than a couple of days, they often find that they are not emotionally prepared to wait for outcomes.

There is also the problem regarding a lack of enough cash in many trading accounts. Short term traders often do not have enough money to carry positions for a significant duration, sometimes overnight transaction fees charged by their brokerage platforms are too expensive. The availability of limited money is a liability and creates unprofitable propositions, unless an extreme amount of leverage is being used. Most short term traders lose their money when trying to apply excessive leverage. Dangers abound for day traders.

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GBP/USD One Month Chart as of 1st of June 2023

Important U.S Data is on the Schedule Tomorrow which may not be mere Noise

Tomorrow the Non-Farm Employment Change number will be published, but the Average Hourly Earnings report will be a crucial part of the data brought forth too. Short-term traders like wagering on the jobs outcome and trying to ride its impetus, hoping a prosperous wave delivers them to the shore with profits. If the Average Hourly Earnings report comes in stronger than anticipated tomorrow, this could send Forex markets into a volatile and dangerous session as it mixes with yesterday’s Federal Reserve ‘dust’ which is still in the air causing problems.

Federal Reserve Dust Storm Caused by Jefferson and Harker Yesterday

Two members of the Federal Reserve’s FOMC committee, Philip Jefferson a Federal Reserve Board of Governors member and Patrick Harker the President of the Federal Reserve Bank of Philadelphia, suggested on Wednesday that keeping the Federal Funds Rate in place on the 14th of June would be a good idea.

Philip Jefferson has been nominated by President Biden to take the powerful seat of Vice-Chair of the Federal Reserve, but he has not been appointed to the position yet officially. The position of Vice-Chair is a key job within the Fed which creates a rather strong voice regarding policy historically. Jefferson’s voice could make a difference in the next two weeks. However, even with Patrick Harker joining Jefferson’s rhetoric yesterday, among them are a handful of other FOMC voting members who have expressed loud concerns about inflation and made it clear in their opinions, that staying aggressive regarding interest rate policy is important.

Clarity remains difficult to visualize regarding what the U.S Federal Reserve will do near and mid-term. However, the Federal Reserve has been exceptionally good at creating choppy Forex conditions much to the detriment of short-term traders, which is supposedly not part of the Fed’s mandates.

Forex Markets have been Stirred and Tomorrow’s Data could Shake Conditions More

Wednesday’s comments from the two Federal Reserve members briefly stirred global Forex and the broad marketplace. Short term traders likely got caught in the momentary flashes of hysteria caused by the comments of the two gentlemen.

Arriving closely behind the comments by the Fed officials yesterday was the U.S JOLTS Job Openings report, which is viewed suspiciously by many professionals in the investment world because its numbers are sometimes suspected of being inflated by ‘headhunters’. However yesterday’s JOLTS results showed a huge increase in available employment options and caused another temporary reaction in Forex – in many ways counteracting the Fed voices.

Meaning tomorrow’s Non-Farm Employment Change numbers, and the inflation report via the Average Hourly Earnings will cause a loud buzz before and after their publication. This as the rhetoric from Fed members Jefferson and Harker mixes into the statistical outcomes.

The USD has been strong in the broad markets the past few weeks against many major currencies. This as evidence has grown the Federal Reserve may feel pressured into increasing the Federal Funds Rate in June in order to fight inflation. Tomorrow’s job reports will be essentially a week and half before the interest rate decision on the 14th of this month.

Short-term traders will likely bet on what will happen tomorrow and will continue to speculate in the coming two weeks regarding what the Federal Reserve will do. This while long-term players position their portfolios based on outlooks that can deal with the ‘dust’ in the air momentarily, knowing they should remain patient. Long-term investors do not always make money, but yesterday’s brief fireworks caused by the Federal Reserve officials weren’t quite as troubling for investors with a broader horizon who don’t flinch with fear from short-term murmurs.

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USD/INR: Stubborn Higher Range and Risky Speculative Wagers

by with No Comment AMT MarketsFeatured HighlightsFinancial Institutions

USD/INR: Stubborn Higher Range and Risky Speculative Wagers

The USD/INR has remained within the higher level of its one month price range as behavioral sentiment remains difficult to gauge. As of this writing the USD/INR is near the 82.7200 ratio, but readers are urged to check this price against live market action as they read to compare conditions.

The Broad Forex Market is Nervous and so is the USD/INR

While many traders of the USD/INR who have been tempted to be sellers of the currency pair might be taking it personally that their perceived price targets have not been accomplished, they should note the broad Forex market has been difficult for most global speculators. The price action the USD/INR is experiencing currently comes from impetus due to nervous behavioral tendencies being generated from conflicting sentiment. The price range between 82.5000 and 82.8500 since the 18th of May has been rather persistent with momentary outliers.

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USD/INR Five Day Chart as of 30th May 2023

Fear of the U.S Federal Reserve remains rather strong in Forex, this has affected the USD/INR because of concerns the U.S central bank might increase the Federal Funds Rate on the 14th of June. Inflation remains durable and is showing few signs of vanishing. The higher consumer prices in the U.S are a thorn in the side of the Federal Reserve which is intent on trying to put a dent into rising prices. If U.S data continues to show inflation is pushing ahead a rate increase could happen, and the higher prices in the USD/INR likely reflect this has been priced into the currency pair.

Federal Reserve policy can certainly be debated and fingers pointed at their wrong conclusions and decisions made the past two years. The current circumstances for the Fed has put it in a very difficult position. The lack of a clear outlook for financial institutions is leading to a lot of risk adverse trading since the 9th of May. Also concerns about the U.S debt ceiling did not calm many nerves the past few weeks, although the crisis seemingly has found a compromise which is likely to be approved tomorrow in Washington.

High U.S Interest Rates and More Corporate Banking Woes as a Potential

Higher interest rates are hurting U.S corporate banking particularly in the mid and small sized sectors of the industry. If these banks continue to suffer, their problems will create a credit crunch for many in the U.S middle class, which could have a big effect on consumer spending.

Higher interest rates via the increasing Federal Funds Rate are hurting the corporate banking sector because it makes it harder to lend money, and some clients are taking their money out of deposits to seek better returns elsewhere – like Treasury Bonds. The increased interest rates in the U.S also hurt many global currencies like the USD/INR because global financial institutions sometimes seek the better paying U.S bonds, which are also seen as more trustworthy long-term investment vehicles.

Thus, while the Fed is projecting tough talk about the potential of raising interest rates in June, and warning the mid and long-term outlook is cause for concern as inflation shows its ugly head, financial institutions are demonstrating nervous behavioral sentiment. The strong rhetoric from the U.S Fed and its lack of clarity regarding real direction has left the USD/INR and many other major currency pairs in awkward choppy positions with highs being tested. Until U.S economic data shows inflation is under control and growth is slowing down substantially, the Fed may have to continue to be rather hawkish sounding, which will not help the USD/INR selloff strongly in the near-term. In other words traders considering selling should be conservative with the USD/INR and not be overly ambitious with their targets.

Today the CB Consumer Sentiment reading is coming from the U.S, a lackluster report with negative data would actually help the USD/INR. Also this coming Friday jobs statistics will be published. While many folks will watch the employment outcome from the Non-Farm Employment Change, the Average Hourly Earnings could be more important and provide insights regarding inflation which could prove crucial. A rise in wages is not the outcome the Federal Reserve wants to see.

Warning: Use Entry Price Orders when Trading the USD/INR when Possible

Traders should also note that short-term wagers on the USD/INR should be done with entry price orders to make sure they are not caught and hurt by the large spreads which might be offered by their brokers – the spread is the differential between the ‘bid and ask’ price. Frequently a trader will be given a price fill that leaves them feeling like they have been cheated. Speculators frequently try to target short-term price goals with quick hitting bets, but bad price fills make these types of wagers difficult to get a positive result – when only a handful of pips in either direction can hurt a trader because too much leverage is being used.

USD/INR traders who are buyers should understand they will most likely be given the sell price of the ‘bid and ask’ when seeking upwards direction, and sellers of the currency pair are likely to get the ‘buying’ price of the spread – thus making a chosen wager on direction further away and difficult to achieve profits. Using an entry order which pinpoints a chosen price to enter a trade is vital. A trader should not expect to get a price fill which is ‘geared’ towards their chosen direction. Also, spreads in the USD/INR are wider than many major currency pairs because the amount of volume in the Indian Rupee cash market tends to be thinner, leaving more room for the technological capabilities of Forex brokers to provide less than attractive pricing.

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Calendar this Week includes Debt Ceiling, Earnings and Jobs

by with No Comment AMT MarketsBehavioral SentimentFeatured Highlights

Calendar this Week includes Debt Ceiling, Earnings and Jobs

Monday the 29th of May, Many banking holidays including in the U.S and U.K – traders choosing to participate in the markets should be aware that low transaction volumes can cause volatility due to imbalances. Be careful if you choose to trade on Monday.

Tuesday the 30th of May, U.S Debt Ceiling – talks and vote will be in focus. It appears an agreement may be in place, but financial institutions will certainly monitor the shenanigans from Washington, D.C. this week to see if a compromise can avert a crisis. Equity and Forex markets will respond to all developing news.

Tuesday the 30th of May, U.S CB Consumer Confidence – this survey of households in the States should be monitored. Spending remains strong in the U.S while manufacturing outlook appears nervous. The results may imply forward looking sentiment for U.S economy regarding consumption and could stir the markets slightly.

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EUR/USD Three Month Chart as of 28 May 2023

Wednesday the 31st of May, Germany Preliminary CPI – inflation remains troubling in Europe and the German economy is seen as the linchpin. The result from the Consumer Price Index could rattle the EUR/USD a bit.

Thursday the 1st of June, China Caixin Manufacturing PMI – this Purchasing Managers Index from China will give some insight regarding the nation’s economic sentiment and its results will offer some clues regarding global demand for goods. Last month’s number was viewed as slightly negative.

Thursday the 1st of June, U.S ISM Manufacturing PMI – last week’s manufacturing and Core Durable Goods Orders numbers from the U.S were negative. While growth via the Prelim GDP came in slightly better this past Thursday, economic outlook remains skittish. Last month’s ISM data result was negative and this month’s forecast is not optimistic either.

Friday the 2nd of June, U.S Average Hourly Earnings and Non-Farm Employment Change – the results will shake the broad marketplace. Inflation via wages in the U.S remains a concern for the U.S Federal Reserve and the job market has appeared on the surface to remain rather strong statistically. A strong number from the Average Hourly Earnings could keep the Fed nervous and another hike on the 14th of June within their mindset.

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Risk Friday: To Freeze or Reduce is not the Correct Question

by with No Comment AMT MarketsBusinessFeatured Highlights

Risk Friday: To Freeze or Reduce is not the Correct Question

The U.S debt ceiling debate in actuality, is a vote to legally increase the amount of debt the U.S government can spend. Approval of the debt ceiling vote will give a green light to the government to be a larger debtor without consequence. Other than eventually not being able to pay its bills in the future, what’s the problem some might ask. And let’s not consider potential downgrades from S&P, Fitch Ratings and others for the moment.

Here are the Problems Ahead for the U.S

U.S debt dominoes have grown heavy and are getting harder to stand back up, but those with the ability to spend simply do not care because they will never be held responsible. The U.S government seems to have forsaken capitalism and have entered the plundering stage, where the government believes it can ‘find’ enough revenues from higher taxes and the selling of long-term Treasury bonds while remaining the big man on campus.

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Gold Five Years Chart as of 26 May 2023

Higher taxes frequently stymie businesses and make it harder to hire employees because the expenses become too big. As an example for what the future could look like in the States turn your eyes to Chicago, where elected city leadership is considering implementing a ‘head tax’ in which businesses would need to pay a fee on each person it employs. The tax situation is getting so ridiculous in Chicago, that long time economic juggernauts like the Chicago Mercantile Exchange are grumbling and threatening to leave because of “ill-conceived” policies.

Likewise, the U.S government seemingly doesn’t understand that spending cannot be replenished by tax collection alone. Actual cuts to spending need to take place. It is called reducing the deficit. The naive will eventually be made to see the light painfully.

The Ramifications for the U.S could be Economically Untenable

U.S interest rates which have been raised the past year and a half, have affected mid and small sized banks and the amount of money the U.S government has to pay on maturing bonds because of higher borrowing costs. Fitch Ratings has recently whispered publicly they may be forced to downgrade U.S debt offerings, this if the U.S government doesn’t increase the amount of money it is legally allowed to owe. Pause for a second here, do you see the absurdity in this clown show? In other words a rating service company is OK with the debtor being allowed to ‘borrow’ more money from itself that it does not have – in order for that same debtor to be allowed to ‘promise’ it can repay its debt at a later time.

The U.S government keeps allowing debts to grow and creating entitlements as if this has no effect on inflation. Quantitative easing and stimulus packages initiated by the U.S government artificially kept the Gross Domestic Product figures looking positive and the equity markets happy for more than a handful of years. However, the proverbial ‘can’ has been kicked down the road so many times it is ready to disintegrate. The debt problem is simply being passed down to the children and grandchildren of the U.S, or so the current leadership seems to hope. But what if the debt problem explodes now? This generational problem is systematic globally, other governments practice equally bad or worse fiscal policy. Politicians do not like to walk around with empty hands.

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USD Index Five Years Chart as of 26 May 2023

The Clock is Ticking Loudly and Some Investors are Paying Attention

The clock is ticking in the U.S and unless they can prove expenses can be managed better, they are on a perilous road to becoming a regular nation among others, that is looked upon with scorn and derision because they cannot pay their debts. The dominance of the USD will be punished and shattered if they do not stop the nonsense. The dollar’s status as the reserve currency of the world has been slipping incrementally for a couple of decades and this will continue if the U.S government does not seize the problem and find solutions. A failure to show budgetary sanity and decrease expenditures will eventually cause something many U.S citizens do not want, relegation to the status of a ‘regular’ nation. The attitude of, “I remember when” could become a refrain heard in the U.S sooner rather than later.

The U.S is in a precarious place and sunshine in many respects is not on the horizon. Financial institutions supposedly believe the U.S debt ceiling will be taken care of in the coming days or weeks. However, a debt ceiling agreement is not the correct bandage for a broken leg, the problem is much larger. Debt should not be allowed to continuously grow. If the situation gets worse, some nations sitting on the geopolitical fence may shift their alliances depending on the ability of mutual relationships to help deliver economic stability.

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USD/INR: Narrow Price Range as Nervous Sentiment Exhibited

by with No Comment AMT MarketsBehavioral SentimentFeatured Highlights

USD/INR: Narrow Price Range as Nervous Sentiment Exhibited

The USD/INR has delivered a rather narrow price range the past four days of trading as the currency pair awaits impetus from crucial U.S risk events.

The USD/INR is trading near the 82.7000 ratio as of this writing. While the currency pair over the past month has seen a rather incremental climb higher, the past handful of days has seen rather sideways price range emerge. Talk about Reserve Bank of India intervention has been discussed widely and this has caused speculative caution too. However, risk events from the U.S which will be delivered soon are also a catalyst for conservative trading in the USD/INR and broad Forex markets globally.

Trading Tip Regarding Bias that Forex Speculators should try to Avoid

A very important aspect for USD/INR traders to consider is that they should remove any bias they may feel personally regarding the Indian Rupee. Traders closely connected to the currency they are trading, particularly if they are citizens of the nation; tend to believe their national currency should always be stronger no matter the circumstances. This notion of bias does not always work out well for traders with a nationalist leaning.

The Indian Rupee is no different regarding its ability to maneuver against the USD like many other major currencies. While the Indian Rupee certainly has its own financial capabilities, the USD remains the dominant currency on the block and affects most outcomes. If a trader can remove their bias and love of their nation from their trading sentiment, this often makes it easier to have a more realistic viewpoint about potential price direction in the short-term and long-term. The Indian Rupee is an important global currency, one that will grow in stature, but traders should remember current circumstances too.

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USD/INR Five Day Chart as of 24th May 2023

U.S Debt Ceiling Concerns and the Upwards Drift of the USD/INR Causing Problems

Concerns are being voiced regarding the failure of U.S debt ceiling talks, the inability to not find an agreement in the U.S Congress is problematic. June 1st is supposedly the date the U.S government must reach a conclusion. The past week has seen signs from Democrats and Republicans acknowledging the importance of finding a settlement, but political rancor still is making a mess of the situation. Trading institutions are certainly not happy about the loud debate and could ‘punish’ financial assets more over the short-term until a debt ceiling compromise is reached.

The move higher in the USD/INR has likely caught many speculators by surprise the past month. However, the drift upwards has correlated to the broad Forex markets the past couple of weeks, this as the USD has turned stronger against many major currencies. The USD/INR essentially went from 82.1200 to its current price since the 15th of May. The Forex pair was trading near 81.6000 on the 4th of May. The temptation to sell the USD/INR the past couple of weeks has likely been strong as traders flirted with the notion technically that the currency would have to reignite its downwards path, but that clearly has not happened.

Today and the remainder of the week, the U.S has important risk events on the calendar. U.S Treasury Secretary Janet Yellen will be speaking and will certainly be asked to state her opinion on the debt ceiling talks. She will likely try to offer a neutral tone and not scare the financial markets. However, she can certainly be counted upon to say it is important to reach an agreement so the U.S can continue paying its financial obligations.

Perhaps more important than Treasury Yellen’s talk this afternoon, will be the U.S Federal Reserve’s FOMC Meeting Minutes publication later in the day. Financial institutions globally are nervous about the Fed’s interest rate outlook regarding its June Federal Funds Rate decision. Many analysts have predicted the U.S central bank will halt interest rate hikes and not increase on the 14th of June. Yet inflation data from the U.S remains problematic. Today’s FOMC Meeting Minutes text will provide insights regarding the Federal Reserve’s last meeting and give an inside look towards its leanings for a potential hike or pause.

USD/INR traders should also be aware that important Gross Domestic Product data will come tomorrow which will offer details regarding U.S growth. On Friday the U.S will release Core Personal Consumption Expenditure statistics and this will provide inflation results, and the outcome will certainly influence the U.S Federal Reserve’s June interest rate decision.

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FOMC Meeting Minutes and Key Growth Data Coming this Week

by with No Comment AMT MarketsBehavioral SentimentFeatured Highlights

FOMC Meeting Minutes and Key Growth Data Coming this Week

Monday the 22nd of May, Japan Core Machinery Orders – which will likely have very little impact on the markets – not even the USD/JPY should react too much. Although it should be noted last month’s figure was negative and this month’s result is expecting a better outcome.

Monday the 22nd of May, E.U Consumer Confidence – forecast to produce a negative number, but this statistic doesn’t usually get much of a response in the financial markets unless there is a shocking result.

Tuesday the 23rd of May, E.U French and German Manufacturing and Services PMI, along with the broad E.U results – the manufacturing statistics from France and Germany are expected to come in slightly better than last month’s results but remain in negative territory.

Tuesday the 23rd of May, U.K Manufacturing and Services PMI – traders will watch these results after the bad GDP numbers from Britain almost two weeks ago.

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GBP/USD Three Month Chart as of 21st of May 2023

Tuesday the 23rd of May, U.S Flash Manufacturing and Services PMI – the reports could prove of interest and cause a bit of a tremor in the market, but unless there is a big surprise investors will remain cautious as they anticipate the next day’s potentially big risk events.

Wednesday the 24th of May, U.K Bank of England Governor Bailey – will be speaking at two events and could stir the GBP/USD with his comments on the British economy and inflation.

Wednesday the 24th of May, U.S Treasury Secretary Janet Yellen – will be speaking at a Wall Street Journal event, where she will be listened to for any comments on the ‘U.S debt ceiling” crisis. Yellen is a ‘trained’ speaker and she will try not to scare financial institutions who will have some leaders in attendance.

Wednesday the 24th of May, U.S FOMC Meeting Minutes – the report which will outline the U.S Federal Reserve’s thinking regarding its recent interest rate hike and what it might be considering regarding June could impact the marketplace. The report is published late in the day, but financial institutions will certainly wait for the publication and react. While the FOMC paper is sometimes considered ‘noise’, this report will be important because of the nervous sentiment which exists in markets like Forex and equity indices as they deal with a lack of clarity.

Thursday the 25th of May, U.S Preliminary Gross Domestic Product – the growth (or lack of growth) numbers from the States will be watched intently. A muted projected gain of 1.1% is anticipated by some analysts.

Thursday the 25th of May, U.S Preliminary GDP Price Index – this report will deliver insights regarding inflation in the U.S and should be given some attention by traders.

Friday the 26th of May, Core PCE Price Index – the inflation numbers should be watched. Any surprise above the anticipated 0.3% forecast could cause an affect in the financial markets.

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Nervous Contradictory Trading Winds for Behavioral Sentiment

by with No Comment AMT MarketsAssetsFeatured Highlights

Nervous Contradictory Trading Winds for Behavioral Sentiment

Behavioral sentiment in the broad financial markets is nervous, and mixed results in the major asset classes are likely causing retail traders to feel uneasy. Most day traders try to perceive which direction they should lean based on price momentum while looking for fast profits. The current state of the broad markets are making decisions difficult for retail traders.

A healthy dose of nervousness at this moment might be a good thing for speculators and keep them conservative. Swirling results in Forex and commodities are causing plenty of problems for traders who instinctively like to pursue buying positions because of the human tendency to be optimistic.

Federal Reserve Causing Headaches for Smaller Banks and Forex

Forex markets have been choppy since the beginning of February 2023, when the U.S Federal Reserve surprised many people with continued aggressive rhetoric. The U.S central bank has backed up its ‘tough’ talk as it ‘fights’ inflation with more interest rate hikes. Clarity regarding a potential June hike from the Fed remains problematic with no certain answer yet. For the moment there seems to be a belief there will be a genuine pause, which may be fueling better returns for U.S equity indices, but there are no guarantees. Behavioral sentiment remains fragile.

The detrimental effect from higher interest rates on mid and small size banks in the U.S remains harmful. Mid and smaller corporate banks continue to struggle with the increased Federal Funds Rate. Bad business decisions within these banks have made it difficult to make profits in an environment when money is no longer ‘free’, this as many of their depositors look for better returns.

A six month chart of the EUR/USD below shows how the EUR started to climb in the fall of 2022, but then began to run into headwinds when financial institutions started to reconsider the seriousness of U.S Federal Reserve policy earlier this year. Analysis regarding the timing of the Federal Funds Rate forecast to actually start becoming dovish has proven problematic.

While the EUR/USD still maintains plenty of its gains, the current price of the the currency pair is below early February highs. The EUR/USD was trading near 0.95700 in late September of 2022, and the price as of today near 1.07800 is a vast improvement for the EUR. However, the choppiness of the Forex market the past few months has not been easy for day traders who have suffered from sudden reversals frequently in many of the major currency pairs.

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EUR/USD Six Month Chart as of 19th May 2023

The KRE regional bank index below shows the dramatic drop in value of the mid and small size banks in the U.S the past year, and the sector certainly still has financial concerns and shadows which are causing pressure on their corporate share values. Stubborn inflation remains and the desire of the U.S Federal Reserve to attack rising costs with higher interest rates remains a serious concern.

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KRE Regional Banking Index One Year Chart as of 19th May 2023

Stock Markets Suddenly at One Year Highs as Investors Seem to Return

Is the S&P 500 a harbinger of things to come or are investors in the index being too optimistic? Day traders likely stay away from the S&P 500 many times because they are mostly trading the index via CFD’s and this can prove expensive regarding transactions, they are not long-term investors – meaning they do not like to make bets that take awhile to materialize. The results from the past year and a half in the stock markets have made speculators nervous regarding bets on equities.

However, institutions and long-term investors buy and hold the S&P with a vision towards the future; they also reap the rewards of its dividends. The ability of the S&P to be trading at nearly one year highs is curious. The improvement in equity values in the indices may be a sign that ‘smart money’ continues to invest in the stock market for the long-term, even during what is perceived as a fragile period of behavioral sentiment. Financial institutions may also be betting on the U.S Federal Reserve having to become more dovish regarding interest rate policy in June and looking forward.

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S&P 500 Index One Year Chart as of 19th May 2023

Results on the NASDAQ 100 may be surprising to many and the index is trading at one year highs, and though like the S&P it is still under all-time highs from late 2021 and early 2022, investors have shown a taste for investing in the ‘hi-tech’ index again. While this may contradict the behavioral sentiment of Forex and the results in the mid and small size banking sector, the NASDAQ 100 does point out money is still being invested and might be an indication that day traders need to be more patient, more optimistic about the coming months and year.

While a recession might be looming, large companies have started to lay off workers and scale back on bonuses in an effort to fight against reduced profits. The narrative from the media may be negative in many cases, but many long-term investors tend to look at more conservative fiscal policy in companies as a good practice and a sign they should invest.

Perhaps the market is going through a needed case of the jitters and the U.S indices are showing that brighter days are ahead, even if there are storm clouds that still must be dealt with regarding inflation and possible recession.The long-term horizon tends to always be more optimistic. Day traders may not be able to take advantage of quick hitting trades, but what about changing perspective and looking for more patient results by being more conservative as a speculator? Or maybe investors in the stock market are wrong and another violent selling surge will return into equities, but what if it doesn’t.

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NASDAQ 100 Index Five Year Chart as of 19th May 2023

There is a fear among mid-size brokers that trading volumes in many sectors are dropping. Showing cautious investor sentiment on the retail front – which may be a healthy reaction in many respects because it is hard to read momentum right now. Day traders tend to get killed by the daily gyrations of Forex and equities in choppy markets because they are using too much leverage. However, historically when retail traders have turned cautious, this is when institutional trading houses have tended to do remarkably well. Investment houses can take on more risks in markets that are perceived as nervous and fragile, because they have a longer time horizon and more cash to absorb momentary losses.

Commodity prices are also intriguing because after hitting highs nearly one year ago in May and June of 2022, the ratios of many broad commodity indices have come down and values are traversing near late 2021 levels. Which brings us to the consideration that global demand for physical resources are limited because corporations are not making large purchases of commodities, this as they wait on better manufacturing demand for their products. This may appear contradictory and create nervous behavioral sentiment for traders, but cautious business practices are a way to make sure there is enough money for the future when conditions turn optimistic again.