Calendar Week 41-2022
Bad news is “good” for the market and good news is “bad”, as a healthy unemployment report and 50 year low number for the USA, sends investors panicking to offload risk assets. The cat was very much dead on the bounce this week.
I was starting to question my sanity mid-week as stocks were aggressively bid, along with the putrid Pound and esoteric Euro. Made no sense to be long term holders of any of these assets. Even commodity currencies are not worth owning right now. But, thankfully, it (market) began to behave and the Non-Farm Payrolls helped cement the concept that interest rates have to rise to slow the economy down.
I note that oil has bucked the trend this week. With global demand becoming softer as we head into recession, one would think that price for the black gold would also weaken. As it is for most other commodities. Seems OPEC’s jawboning this week has convinced that supply might be an issue.
Will be a pretty quiet start to the week with Japan and USA on holidays. But Thursday is shaping up to be another volatile one with FOMC minutes and CPI. US Inflation is currently at 8.3% and after that jobs number, if the CPI print is over 8.5%, the market will get super crazy. Trade and manage accordingly.
Currency Guidance
USD – Came and tagged the 110 like I wanted but has bounced rather aggressively. Almost too aggressively. I expect, barring any unforeseen headlines, that it will wander aimlessly until the inflation numbers on Thursday as punters take a wait and see approach. Still lean to the buy side though as there could still be follow through from the Non-Farm numbers.
AUD – With a weak Central Bank, facing reduce demand for our materials, reduced prices on them too as demand dries up, there is not many bright lights for the Aussie. Should be 58cents and I expect it will be before Christmas.
EUR – How the Germans have managed to convince the outliers to continue to be a part of this union is admirable if not understandable. Nice cycle back to the ema as it looks to test the 95c level, which we predict it to push well below if USA CPI hits 8.5% on Thursday.
GBP – This little stinker. The new government has no idea, backflipping on their tax cuts, makes them look like a comedy sketch. What more can you say but don’t buy anything British right now, the bottom is not set yet. We may have seen the bottom, but it is not confirmed. Cause it hit 1.0352 so quickly, I expect the market will want to have another look/test of that level.
JPY – The BoJ are STILL being tested with their 145 line in the sand. My advice is don’t trade the Yen against the US but look at it against weaker currencies such as commodity currencies.
