Calendar Week 32-2022


US Payrolls delivered the US Fed from credibility purgatory as rate hike odds spiked higher, bond yields jumped, and the Greenback roared. Stocks and oil tanked, so did gold as a stronger jobs market is inflationary. However by the close of the session most of those moves had given up already as all eyes look to the US Inflation numbers mid week.


The markets have been choppy and frothy as one would expect as we near the peak of the cycle. Although I believe the inflation cycle has peaked in the USA, globally there is more to come as the US effectively exports it’s inflation with the rising dollar, the US rate rise cycle still has some upside.


Finding a long term trend the past few weeks has been challenging. That said, one thing I have noticed is that a few of the major’s are looking to be forming inverse head and shoulder patterns on the daily timeframes. These are visible on the GBPUSD, AUDUSD, NZDUSD. It could be that this week’s inflation numbers come in weaker then expected, providing US dollar weakness for those head and shoulder formations play out.


Currency Guidance


Holding above the support level the Dollar Index will most likely continue to chop about until the inflation numbers on Wednesday.


AUDUSD has the H&S pattern mentioned with the neckline circa 0.7030. It has some work to do to get up there and test it, through the major handle of 0.70. Fundamentally it would require a weaker Greenback as the Aussie has few attractions right now.


EURUSD has been a messy chop fest since July 19th, something I would prefer to avoid, and wait for a clear break out of the current range of 1.0130 – 1.0270.


GBPUSD the neckline for the Cable’s H&S is circa 1.0250 and like the Aussie, raised rates last week but neither of them could find sustained buying which suggests few attractions for it too and therefore would require significant selling on the US dollar.


USDJPY the plummeted quickly to the support at 131.20, faster than expected but has since bounced almost as quickly too. I suspect the Yen shorts were sweating profusely and may take this opportunity to exit, well the should as I expect this pair to follow the Euro into choppy sideways market.


USDCAD ho hum, what is happening here? Care? With oil weakening finding a buyer would be hard to come by, so it too will be driven by US dollar and which one will be the weakest link.