Calendar Week 36-2022
US stocks ended the week on a downer. It looked like late in the week it had stopped right on the 61.8% Fib level and found support, maybe even a bounce. That seemed to be confirmed on Friday when US Non Farm Payrolls came in with mixed results. The number of employed rose more than expected, wages dropped more than expected and the % rate ticked higher more than expected. The US got excited about this and started buying. Then Putin announced that Europe will be getting ZERO gas from him and the market puked.
Bigger picture, is keep an eye on Powell and Fed Heads chatter over next two weeks until we get inflation numbers on the 13th and the Fed members go into media lockdown in the run up to the FOMC on 22nd. What we are looking for is whether the US will be raising by 50 or 75 basis points. A raise is a given, even after these jobs numbers. If Inflation on the 13th drops, we will still get a raise but unlikely to be 75 basis points.
Forget the market noise, particularly the stock market. The US dollar will still be bid as the “go-to” for safety and because US rates will be raised more. So look to fade (sell) and stock rally and buy and US dollar bids.
Currency Guidance
USD – US dollar was getting sold post jobs number on Friday, until Putin threw a spanner in the works. It looks a little tricky at the moment, this far away from the conservative 50ema and momentum indicators showing buyer exhaustion. I would be waiting for a pull back/retracement/dip before jumping into a long trade on it this week.
AUD – The commodity picture is deteriorating and hurting the Aussie. Whilst I think the US dollar may not have too much more upside in it. I am not bullish the Aussie by any stretch of the imagination, just happy to buy it against weaker currencies such as the Pound. But even now, I think buying the Aussie anywhere is fraught with risk so would prefer to sell it. Issue is, other than US dollar there is nothing to sell it against and even the US dollar is a shaky buy right now.
EUR – Euro is repeating its pattern of pushing away from the ema, hitting momentum exhaustion then consolidating sideways. It has done this 5 times in the last 7 cycles over the last 9 months. As patterns repeat I then naturally going to assume there is little more downside of this current cycle and it will consolidate between 0.99 and 1.01 for a while. We might see buying in it (selling US) in the lead up to US inflation numbers (on expectations that the US inflation number will be weaker). That will be the time to look for new shorts in the next down cycle. Too many headwinds for the EUR to be a buyer anytime in my foreseeable future.
GBP – Losing ground to everyone and rightly so. However, it is overdone and needs a relief rally. Like the Euro, there is no reason to be a buyer anytime soon, but look to fade the rally when it comes.
JPY – My view that it would find buyers was proven to be completely wrong. The only currency more crappy then the Yen is the Pound. Very messy on the charts against all pairs other than US$ but it is a tough countertrend trade to take right now. So sitting this one out for this week.
