Calendar Week 15 – 2022

 

Stocks continue to defy the market normality and remain at pre Ukraine invasion prices, despite the surge in bond yields and commodity prices. Whilst oil has calmed down somewhat, settling under $100/barrel, the tail risks are still there. Russia has not given up, and whilst it appears they have found it tough going, they will continue to push for an agreement that NATO moves off their border, so that war is not over. Energy and Industrial metal prices are holding on to these elevated levels, as is most soft commodities too. This, along with supply chain disruptions, will continue to force inflation higher and interest rates to follow them. US Bonds have un-inverted themselves, so back out of contango, which is the signal of an imminent recession. The only explanation I have for stocks hanging so high is that investors are looking through the rate rises that will occur in 2022, to the rate falls and potential QE5 of 2023 as recession hits and the easy money tap gets opened wide again.

 

Currency Guidance

 

Over in FX land the majors have played out as we predicted last week, only the Yen has defied us.

The Aussie – AUDUSD is retracing back to the mean and we will be looking for the market to pause between 0.7350 and 0.74 this week, setting up for a new buy trade if price action and sentiment allows.

The Euro – EURUSD ideally would make a new lower low under 1.08 from early March lows, before having a relief rally. Right now its in no mans land and is neither a buy or a sell, more of a wait and see.

The Cable – GBPUSD has made a new cycle low. Being oversold on RSI it is certainly not a sellers market and would be a tricky counter trend buy if you are looking to trade the bounce. Another one of wait and see.

The Yen – USDJPY has massive resistance here at 125 area. Its not been up here since 2015 and when it was, it was quickly sold off. If it tests 125 and fails again, it will create a double top worth looking to short off.

The Loonie – USDCAD has returned to the 50ema. It has been in a range of circa 1.24 -1.29 for 9 months now, however, if there is bearish price action here in the next few bars/days we could have a short trade setup.

The Kiwi – NZDUSD similar to the Aussie is retracing to the mean but has completed the pullback unlike the Aussie. Bullish price action in next few days would make a strong argument for a long trade here.