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Impact: Powell’s White Flag, Inflation Data, and the BoJ

by with No Comment AMT MarketsAssetsFeatured Highlights

Impact: Powell's White Flag, Inflation Data, and the BoJ

Federal Reserve Chairman Jerome Powell’s waving of the ‘white flag’ last Tuesday, when he admitted that inflation was producing stronger than anticipated data had been essentially wagered on since the second week of March by financial institutions. Powell’s speech acknowledging the Fed will find it difficult to cut the Federal Funds Rate in the mid-term (and probably at best not until late this summer) simply verified Forex positions which had already been taken by large players who could afford to make mid-term wagers.

The USD Index has returned to early November 2023 values, and appears able to challenge late September and October prices if inflation data this week causes more volatility, which should put traders of major currencies like the GBP, EUR, JPY and others on full alert. After the USD spiked higher from the 10th to the 12th of April, Forex speculators have seen dynamic action incrementally flirting with stronger USD results the past week and a half.

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USD Cash Index Six Month Chart as of 21st April 2024

Nervous trading continues to be seen in U.S equity indices. The Dow 30 and the Nasdaq 100 are fighting near ratios they touched in the last week of January. And the S&P 500 is traversing ground from the first week of February.

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S&P 500 Three Month Chart as of 21st April 2024

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Gold Six Month Chart as of 21st April 2024

Gold remains speculatively high as its hovers near 2,400.00 USD per ounce. The price of the precious metal has not given back its gains made since the start of March and this is intriguing because of the ‘known’ USD inverse correlation, which had proven to work well with the precious metal over the past couple of years but has been stopped in its tracks for the moment. Technically Gold may look overbought, but geopolitical concerns and the prospect that some central banks may be strong buyers could be fueling the rather incremental gains. Retail traders of Gold need to be careful because price action is likely to produce more surprises.

Forex has been turbulent the past handful of months as shifting behavioral sentiment has created choppy conditions. This coming week contains large fundamental risk events via data releases traders should monitor. USD/JPY speculators will also have to contend with the Bank of Japan.

Monday, 22nd of April, China Loan Prime Rates – borrowing costs are anticipated to remain at the current benchmarks. China produced slightly better Gross Domestic Product results last week, but Industrial Production numbers were weaker. Consumers in China remain burdened by decreasing home values and concerns about the economy.

Tuesday, 23rd of April, European Union and U.K Manufacturing and Services PMI – E.U results via the PMI readings are expected to show slight improvements. However the readings from the United Kingdom are anticipated to come in flat. The EUR/USD and GBP/USD will be affected by the results, but the currency pairs will likely remain focused on U.S data later in the day.

Tuesday, 23rd of April, U.S Purchasing Managers Index – the Manufacturing and Services sectors are expected to produce slightly better readings than the previous month. These results will be interesting taking into consideration the Empire State Manufacturing Index numbers last week were bad. The PMI statistics will provide some impetus to the broad Forex market.

Wednesday, 24th of April, Australia Consumer Price Index – inflation data is anticipated to be higher than the previous month’s results. While stronger inflation is not something that will make consumers happy in Australia, stubborn price results may keep the AUD/USD slightly steadier. The currency pair is traversing values last seen in the second week of November 2023 as of this writing.

Thursday, 25th of April, U.S Advance Gross Domestic Product and Price Index – these numbers are certain to have an impact on all financial assets. A decline in growth is anticipated in the U.S compared to the previous month’s result, but the Price Index is expected to show an increase. Jerome Powell having come out last week and said inflation is causing uncertainty within the Federal Reserve, may have a bit of inside knowledge regarding this GDP inflation number and ‘tipped his hand’. If this inflation gauge is higher than anticipated it could pour fuel onto the already volatile USD. All Forex traders need to pay attention to these results and be prepared with solid risk management.

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USD/JPY One Year Chart as of 21st April 2024

Friday, 26th of April, Bank of Japan – in what has already proven to be a couple of weeks filled with drama for the USD/JPY, the BoJ will step into the limelight. During their last central bank meeting the Bank of Japan increased the Policy Rate to 0.10%. It was the first time the BoJ hiked interest rates in 17 years. The USD/JPY is trading at values last seen in June of 1990. The Nikkei 225 has come off of recent record heights, but the famed Japanese stock index is also trading within territory seen in January of 1990. Business activity via the Core Machine Orders and the Tertiary Industry data last week were stronger than anticipated.

The Bank of Japan may want to maintain a weaker USD/JPY equilibrium to continue fostering domestic growth. However, many financial analysts have been calling on the BoJ to become more hawkish regarding monetary policy. The interest rate decision is certain to cause immediate volatility before and after the Policy Rate is made public. USD/JPY traders need to be prepared for fireworks. A slight raise of the interest rate seems to be needed, but after the March hike the BoJ may prove conservative again. The 34 year lows now being seen in the Japanese Yen are astonishing.

Friday, 26th of April, U.S Core PCE Price Index, and Inflation Expectations – the data from the government, and the reading from the University of Michigan will close the curtain on a big week of economic statistics for all traders. The USD will react to these outcomes. It should be noted the previous Inflation Expectations data from the University of Michigan caused a storm in Forex when it came with 3.1% gain.

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AMT Top Ten Miscellaneous Flakes for 19th of January 2024

by with No Comment AMT MarketsBehavioral SentimentFeatured Highlights

AMT Top Ten Miscellaneous Flakes for 19th of January 2024

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10. Music: Come On, Come Over performed by Jaco Pastorius. The bass playing on this song is magnificent.

9. Cybersecurity: Prospect of quantum computing is making Central Banks nervous, quantum development will impact blockchain and make current payment systems vulnerable and perhaps obsolete. Post-quantum cryptography development is vital.

8. Frigid Weather: Tesla owners have dealt with battery power failures as winter temperatures have plummeted in Chicagoland and elsewhere. EV energy solutions need to improve.

7. China: Over the past 11 months FDI (foreign direct investment) has dropped more than 10% in the nation, an estimated short fall of 145.51 billion USD. China’s Foreign Direct Investment release has seemingly been pushed off to next week. Shanghai Composite (SSE) near 2832.28.

6. Energy Sector: WTI Crude Oil still priced politely as ‘interactions’ with Houthis flare. Natural Gas values remain near lows while North America suffers from a deep freeze.

5. Risk Assessment: Iran and Pakistan, although expressing ‘brotherly love’ for each other, have exchanged missiles across their respective border aimed at extremists.

4. U.S Treasuries: Inversion has almost ended completely, 5-Year Notes up to 30-Year Bonds yields have returned to ‘norms’.

3. Gold: Price of the precious metal near 2027.00 USD having bounced higher after challenging the 2000.00 vicinity on Wednesday.

2. Data: Consumer Sentiment reading via University of Michigan on the schedule today, this could provide impetus to markets that appear to be waiting for the next big push.

1. FX Volatility: USD strength has pushed the greenback towards important mid-term resistance in Forex as many day traders are likely still fighting the trend.

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Dynamic Forex Conditions Expected via Inflation Data and Fed

by with No Comment Behavioral SentimentEconomic CalendarFeatured Highlights

Dynamic Forex Conditions Expected via Inflation Data and Fed

Day traders may have experienced difficult results the past few days as Forex produced choppy conditions. The USD proved rather strong on occassion and likely whipsawed technical speculators, particularly if they were looking for sustained trends to emerge with bearish perspectives regarding the USD. The EUR, GBP and JPY have demonstrated rather turbulent values. More challenging days are likely ahead for speculators, this as inflation reports from the U.S and the Federal Reserve are on the horizon.

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EUR/USD Five Day Chart as of 11th December 2023

Curious economic data was published at the end of last week, this as the broad markets turned in a rather convulsive five days of results via financial assets. U.S jobs numbers came in slightly higher than expected for the Non-Farm Employment Change figures and the Average Hourly Earnings. Following the employment data, the Preliminary University of Michigan’s Consumer Sentiment reading came in much stronger than anticipated, and its inflation data found that people are less fearful of inflation looking forward in the States.

On Saturday, China released its CPI and PPI statistics and they continued to show a downwards path. China has taken on a rather sticky deflationary track and this signals that consumers and producers in the nation remain burdened by harsh economic considerations.

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Gold One Month Chart as of 11th December 2023

U.S equity indices were rather jerky, but finished last week’s trading higher than they started. U.S Treasury yields finished the week higher, except for the 30 Year Bond which came in with a result slightly below its starting point for the five day period. Gold has seen its price come down from highs and this may be interpreted as a reaction to the stronger USD. The precious metal may be in for volatile days ahead.

The risk appetite flame has apparently been turned lower, but is still simmering and this is due to financial instiutions waiting to see if the U.S Federal Reserve delivers a neutral monetary policy rhetoric this coming Wednesday. The USD which had been getting weaker across the board for a handful of weeks, suddenly seemed to hit ‘support’ and reversed higher as questions regarding ‘fair market value’ may have been considered. Larger players in Forex are likely waiting for their outlooks to be confirmed via the Federal Reserve or dampened considerably. The higher Average Hourly Earnings data on last Friday was a reminder inflation data continues to be stubborn, even if many analysts believe the Fed’s higher interest rates will begin to have an impact in 2024 and slow the U.S economy.

Monday, 11th of December, U.S Ten Year Bond Auction – the results of the auction will be studied by financial institutions, particularly as investors debate the necessity for interest rates to be kept high, against those who are arguing for the need to cut the Federal Funds rate by late spring 2024.

Tuesday, 12th of December, U.S Core Consumer Price Index – the inflation numbers will be critical for behavioral sentiment and certainly affect the attitude of financial houses and their trading positions before the Fed steps into the limelight on Wednesday. The Core CPI numbers are expected to be slightly higher compared to last month’s outcome. Perhaps last Friday’s higher U.S earnings data will pave the way for a calm reaction if the CPI is strong. Forex markets will respond to this report and day traders should be braced for price ranges and spreads to get wider.

Wednesday, 13th of December, U.S Producer Price Index – the PPI numbers will be released early in the States, five and a half hours before the Fed’s Federal Funds Rate publication. Traders need to be ready for volatility before the Producer Price Index figures are reported. The inflation numbers are expected to be higher than the previous month’s outcome.

Wednesday, 13th of December, U.S Federal Reserve – the last interaction of the year for the U.S central bank and financial institutions will be an important affair. The Fed’s Federal Fund Rate, FOMC Statement and Press Conference will get full attention. The Fed is expected to hold interest rates in place, the question is what ‘vocabulary’ the central bank will use as it lays the groundwork for its 2024 outlook. While talk of a more neutral Fed, one that isn’t as aggressive has been envisioned, financial institutions want to see a ‘softer’ tone become the reality.

Depending on how the U.S Federal Reserve talks about inflation and its monetary policy insights for the next few months to come via this FOMC Statement, the USD will take center-stage and Forex conditions may become rather violent as Wednesday concludes. Day traders are advised to be very careful if they plan on trying to surf the waves caused by the Fed’s storms which will certainly be stirred.

Thursday, 14th of December, E.U European Central Bank – the ECB will release its Main Refinancing Rate, Monetary Policy Statement and conduct its Press Conference. The last ECB event proved to be rather mundane. While some talking heads may try to make this coming event into must see television, many financial institutions likely expect the European Central Bank to say, “the E.U economies remain lackluster, there are glimmers of growth in some spheres, but recessionary problems are still evident”, this while also mentioning inflation is observed to still be too strong, but showing signs of erosion. In other words, the EUR/USD is likely to remain USD centric according to existing behavioral sentiment that has been triggered earlier.

Friday, 15th of December, China, Industrial Production – the report is anticipated to show a better outcome than last month’s figure. China skeptics will examine these reports carfully, as well investors with ‘skin in the game’ in the nation.

Friday, 15th of December, E.U, U.K and U.S Manufacturing and Services PMI – these reports will be watched from the European Union nations, the United Kingdom and U.S, but the results will be filtered into existing sentiment which has been generated on Wednesday and Thursday from the Fed and ECB. Behavioral sentiment in Forex will likely look at the PMI results with vague interest levels. Traders should note that as the weekend approaches, there will be only one full week of trading left before the holiday season gets underway and financial markets begin to experience thin volumes.

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Dog Days of Summer and a Return of Calm as Storms Threaten

by with No Comment AMT MarketsBehavioral SentimentFeatured Highlights

Dog Days of Summer and a Return of Calm as Storms Threaten

With essentially two full weeks of trading until the end of August and the unofficial end of summer in sight, perhaps this week may be a good time for retail traders to be observers if they do not have the stomach for potentially noisy speeches and markets.

However, speculators who can block out media hyperbole and microphone soundbites from folks standing on podiums may find conditions rather attractive. As always outlook depends on perspective, time frames and managing risk. Behavioral sentiment has been rather chaotic the past month and some traders may suspect we are approaching the end of the loud spectacles of nervous drama in the markets.

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USD/ZAR One Year Chart as of 20th August 2023

The economic data this coming week should prove to be a rather mild schedule, but outside influences will certainly get publicity and get fanfare from talking heads who want 15 minutes of your attention. The BRICS Summit will get underway in Johannesburg, South Africa officially on the 22nd. Another big conference later this week will be the U.S Federal Reserve’s Jackson Hole Symposium. Both events will produce plenty of conversations about inflation, economic stability and a more cohesive global cooperation monetarily. This will also create many raised eyebrows among traders who are skeptical about these type of events.

While leaders of China, Russia, India, Brasil and South Africa get together in Johannesburg, it is likely we will hear talk about potential BRICS expansion and the pursuit of a new unified currency which doesn’t rely upon the USD. However, in the background there is likely to be plenty of distraction because of China’s faltering economic data and Russia’s Ruble which has been impacted severely in the past month. Plenty of large rugs will be needed to hide the dust which threatens to make this BRICS event rather memorable.

Add the ongoing saga of Niger and the absence of a political solution for the world’s fourth largest producer of uranium as a potential flash point standing on the side of the stage waiting to make an appearance regarding Africa news. Perhaps it is too cynical to wonder if coordinated military action within Niger will await the end of the BRICS Summit. This so China and Russia are not given an opportunity on the ‘world stage’ as a united voice to offer their opinions regarding an intervention.

The Jackson Hole get together of global central bankers from the Fed, BoE, ECB, BoJ and others will certainly grab headlines late this week, but the script is mostly known regarding the rhetoric to come from the Federal Reserve’s annual event. Forex may move based on comments from the central bank chiefs as they speak towards the end of this week, but it is unlikely anything surprising is going to be heard. U.S Treasuries will remain a topic because of the ability to lock in a solid return over the mid-term compared to betting on the outcomes of the stock market, but this scenario has been playing out the past month. Investors should prepare for a long line of speeches regarding economic outlooks from central bank officials all week. Day traders should also remember that the chatter starts to be ‘tuned out’ as the speeches grow longer.

Traders looking for other outside influences may want to look at the cryptocurrency market where major assets have shown signs of struggling. Bitcoin and Binance coin could remain in the headlines for all the wrong reasons, if their prices continue to challenge important support levels and become more vulnerable.

Monday, 21st August, China Prime Rates – economic data from the nation has caused concerns that real estate problems are spilling over into the domestic consumer market. The interest rates China lends money to consumers is expected to be lowered to try and spark spending. Recent economic reports from China have been bad, and readers who believe this is merely ‘Western’ bias being reported should be careful to look for other sources to confirm data. Investment within the second biggest economy of the world has become tentative, because there is a fear the ‘official’ China numbers may be worse than those being reported.

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USD/JPY Six Months Chart as of 20th August 2023

Tuesday, 22nd August, Japan Consumer Price Index – the Bank of Japan report is expected to show a slight decline to the inflation numbers. Last month’s outcome of 3.0% is expected to lower and produce a 2.9% result. The USD/JPY could react momentarily to the outcome, the currency pair is near highs it hasn’t touched since November 2022.

Tuesday, 22nd August, U.S Existing Home Sales – the data is expected to show a slight decline of purchases. Mortgage prices continue to climb in the U.S and homeowners are less likely to desire taking on a new higher mortgage, this if they already have a lower mortgage locked in from a few years ago within a dwelling they already live.

Wednesday, 23rd August, Flash European Manufacturing and Services PMI – the reports will come from the E.U and U.K. The German and British outcomes will stir the Forex markets. The manufacturing data from Germany and Britain are forecast to be slightly negative.

Wednesday, 23rd of August, U.S Flash Manufacturing and Services PMI – the U.S reports are expected to show a decline in the manufacturing sector. If a negative result materializes, this could actually spark a selloff of the USD – if the financial markets have returned to calm waters by the middle of this week. Weaker numbers might be interpreted as another reason for the U.S Federal Reserve to remain neutral and why they should consider becoming dovish over the mid-term.

Thursday, 24th of August, U.S Durable Goods Orders – the core and broad numbers are anticipated to show declines. If the Durable Goods Orders numbers are worse than expected this could spark more USD selling, particularly if financial institutions are already calm and feel the data is another step to ‘lowering’ the Fed’s hawkish interest rate rhetoric. However, for the USD to weaken the markets will likely have needed to be tranquil beforehand, without major surprises having happened earlier in the week that may have escalated nervous behavioral sentiment in the broad markets.

Friday, 25th of August, Germany Business Climate and GDP – the ifo Business Climate report comes from a composite of manufacturers, wholesalers, and other enterprises and is expected to be lower than last month’s outcome. The Gross Domestic Product results are anticipated to show no changes, which would mean Germany’s economy remains in the doldrums and is flirting with recessionary pressures.

Friday, 25th of August, U.S University of Michigan Consumer Sentiment – this revised reading is expected to show U.S consumers remain steady without significant changes compared to the previous outcome.

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China and U.S Data Early and Important as Central Banks Fret

by with No Comment Behavioral SentimentCentral BanksFeatured Highlights

China and U.S Data Early and Important as Central Banks Fret

Monday, 17th July 2023, China GDP and Industrial Production – the economic numbers coming from China have shown steady signs of a downturn. Gross Domestic Product figures however are expected to increase this month, but some analysts may question transparency issues regarding the reported statistics. Industrial Production numbers are expected to fall, which on the surface may cause people to question any positive results from the GDP. Retail Sales will also be published on Monday. The housing market in China remains critically important in the nation and some borrowers appear to be suffering financial stress. While many global retail traders might not be invested in China, the nation serves as a good barometer for the world’s economy, particularly regarding consumer demand.

Monday, 17th July 2023, U.S Empire State Manufacturing Index – the New York based report is expected to have a negative reading. It should be noted June’s data came in stronger than expected. Another positive surprise outcome would continue to show economists are finding it difficult to gauge the U.S economy. Last Friday’s solid Consumer Sentiment reading from the University of Michigan highlighted the rather complex results from the U.S, weaker than expected inflation numbers are also factoring into a muddled sentiment. However, the Federal Reserve is still believed to be leaning towards another interest rate hike on the 26th of July. Day traders should remain alert.

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USD/CAD 3 Month Chart as of 17th July 2023

Tuesday, 18th July 2023, Canada Consumer Price Index – the inflation numbers from Canada are expected to show a slight decrease in the velocity of rising prices. The numbers are likely to affect the USD/CAD which is trading near lows last challenged in September of 2022.

Tuesday, 18th July 2023, U.S Retail Sales – considering last week’s improved Consumer Sentiment numbers recently from the States, demonstrating better retail results compared to last month will not be a surprise. Earnings season on Wall Street gets underway this coming week and solid Retail Sales numbers may help mid-term outlook regarding equities. However, behavioral sentiment is fragile.

Wednesday, 19th July 2023, U.K CPI – the inflation numbers from Britain are expected to show a slight decrease in the rate of price expansion, but any result above 8% via the broad data will not make many folks feel better. GBP/USD speculators should monitor the reports.

Thursday, 20th July 2023, U.S Existing Home Sales – the rising costs of mortgages in the States is having an effect on the marketplace. Signs of stress in housing is an intriguing barometer regarding the outlook for the American economy. Better Consumer Sentiment and Retail Sales mixed with less than glowing numbers from the housing sector could make for a troubling diet for traders to consider and act upon.

Friday, 21st July 2023, U.K Retail Sales – recessionary results are shadowing Britain. Poor results from the retail sector would not help behavioral sentiment, particularly if inflation numbers have continued to show they are unrelenting two days before. The Bank of England is in an uncomfortable spot, this as the GBP/USD trades near highs it last saw in April of 2022.