Calendar Week 06-2023

 

Compared to last week, the week ahead will be tame. Powell is having an official talk mid-week and we will see Australian rates higher tomorrow. Otherwise, the markets will be left to their own designs.

 

It was a roller coaster of a week after super Thursday saw the central banks of USA, UK and EU all raise rates but indicate that they are close to the end of the cycle. Markets reacted with enthusiasm as US dollar got sold off, rates came off and stocks rallied. To only then hit US jobs data which had a massive increase. Investors, rightly, saw this as inflationary and bonds spiked after the release. US dollar ran with it and despite mixed earnings, stocks ended the day little changed but up for the week. Just cannot kill it.

 

Fundamentally, the stock market is disassociated to reality that rates will continue higher and will remain high for longer. The bond and currency markets are more attuned to what is happening to the common man and are rightly pricing in those expectations.

 

Currency Guidance

 

USD – Technically the Greenback us still in a downtrend, but I suspect that it will break that and come in line with the fundamental outlook. There is resistance at 103.35 which will coincide with the 50ema. Expect it to pause there, even dip a little which will be the time to get long.

 

AUD – After getting smashed from 0.7150 and extension, the Aussie is finding some buyers at 0.6900. Chinese growth yet to kick, it was rumour remember, the commodity markets also got spanked last week, so I would be cautious in buying AUD, particularly against the resurging USD.

 

EUR – Fading off 1.10 I have a target for the Euro at 1.03. Some minor support at 1.046 with the 50% retracement of Sep lows coming in at 1.0285 and no reason to buy Euro’s, I suspect 1.03 to be reached in coming weeks.

 

GBP – Double top formation confirmed and an almost perfect M in place puts the Cable in line for a target of 1.14 from the current 1.20 levels.

 

JPY – Downtrend has had the first signal of the break with a higher low in place. A move above 134.85 will be the 2nd signal and confirmation. Won’t happen this week but that is what we are looking and waiting for. Gapping 120 pips higher on the open this morning only highlights the market intention.