Calendar Week 03-2023
Unwarranted easing increased as US inflation comes in at expectations of 6.5%. Despite US earnings downward revisions, despite Bitcoin adding 21% this week, despite gold adding $54 or 3%, despite bonds coming off – everything is awesome!
Stocks and VIX tumbled to a 20 handle, a level not seen just prior to Ukraine being invaded. Every man and his dog, and all those on soap boxes seem to think buying stocks is a good thing.
Who will blink first in this game of bluff? Stocks or Powell? Me thinks it will not be the Fed, but hey, I was wrong last week. We wont know for sure for another two weeks when the FOMC meets Feb 1st.
However, the Fed Blackout starts on Saturday so do not be surprised to see a string of talking Fed heads in the next 5 days as they try to convince the market they are raising rates and holding them high till the battle is won. Because as the market is tracking, they are expecting rates to start dropping as early as March.
Which to this little observer is simply not feasible and the stock market is the odd one out.
Currency Guidance
USD – Least I got the technical picture right last week, and the US dollar index indeed did put in another cycle. It is nearing support of 101 which was the low back in May as it also nears over sold in the momentum indicator. I would expect market to test it properly before swinging back up to the 102.60 area of resistance.
AUD – Inching higher as it has a look at the 70-cent handle. I cannot see it breaching that this week and will look to fade it off that level back to 0.6880 zone.
EUR – Similar theme across all USD pairs is that we are coming to the turning point that happens mid cycle. This one should fade off 1.09 and look to be a buyer at 1.06, perhaps even 1.0725 if a bounce happens there.
GBP – The odd one out here as it has a cycle that is still early days, it did not accelerate as the AUD and EUR did off the ema last week. Momentum indicator too has some decent wriggle room. But with the US dollar close to bouncing, will the Cable have enough inner strength to make a higher high this time around?
JPY – Smashed through strong support level of 131 and is not far from the next level at 127. Although 127 is not as strong initially, this run has been aggressive and the demand zone will most likely be enough to hold for a few days.
