Calendar Week 17 – 2022

“There was movement at the station, for the word had got around” that the Central bankers from USA and Eurozone were hawkish on interest rates last week. Rates surged in Germany and the USA to multi year highs. The 2 year bonds are at 0.27 and 2.67% respectively. Considering the average dividend yield on the S&P500 is 1.4% it seems the market has woken up to the fact that bonds are a more attractive investment right now.


Central Bankers


With the hawkish Central bankers looking to raise rates, playing catch up to inflation, stock market was spanked lower. There is an old saying in stock market circles, “sell in May, go away”. The saying is tied to the Northern Hemisphere summer doldrums. However, it seems to have started a little earlier this year.


Commodities fared a little better with mixed results across the board, mostly sideways in key markets.


Whilst the US dollar dominated Friday session followed by Eurodollars, tracking the move in bonds thanks to those Central bankers. All the other majors and minors got a towelling much like the stock market did. The move in rates has been well telegraphed and we have kept you abreast of it, but judging by the jump in volatility on Friday, it seems the rest of the market is just waking up to it.


Currency Guidance


Friday’s move has put the AUDUSD uptrend under threat. Mid week it was looking to setup for another buying opportunity as it turned north off the 50ema. However, it is now well under the 50ema and a move under 7160 and March lows will produce a lower low. We will be keeping an eye on that one.

The GBPUSD sunk to and closed on a support zone and 50% fib retracement level, as measured from 2020 lows to 2021 highs. Ideally we would want this to bounce from here so we can get short in the next cycle.

The EURUSD battled it out but I suspect the USD will win and look for the Eurodollar to fall further to 1.06 and potentially even 1.05.

The USDJPY. Well, I have given up trying to pick the top of this. Cant sell it, cant buy it.

The USDCAD was looking good and we had a short trade on this that got stopped out as the Loonie now looks to be trading back across the range it has been in since June last year – circa 1.24-1.29.

The little Kiwi, smashed like the Aussie and has produced lower lows and lower highs now. Too far gone right now to sell it, so like the Cable, we must wait for the retracement rally so we can fade this one short in the next cycle.