Calendar Week 45-2022

 

A very busy week finished with the Aussie dollar posting its largest daily percentage move in 12 years, closing +3.07%.

 

Mid-week saw the FOMC meeting not pivoting like the market was expecting and remains hawkish. A lot of their chatter through and after the meeting is not about the pace of rises but the focus is more on higher rates and holding them higher for longer than previously discussed. This was not good for stocks and US dollar rallied.

 

Then the Poms got involved too with the BOE also raising rates and warning of recession. But it was Friday’s news from China that really kicked things again. Rumours that China will be easing COVID restrictions sent the Yuan soaring to its largest 1 day move since 2005, dragging the Aussie with it. Commodities also boomed on the news with Copper +8%, Natural Gas +9%, Crude oil +5% and Iron ore +2%.

 

Bonds on the other hand were far more subdued with the 10yrs moving from 4.01% to 4.16%.

 

US jobs data was mixed with the headline number coming in at +261K (vs expected +197K) and a revision of the previous month from +263K up to +315K. This is good news in normal conditions but it is inflationary so in the current environment it is bad news. Detailed numbers on jobs showed full time workers dropping by 490K, which is bad news – so that means good right and the number of unemployed Americans up, thanks to participation rate dropping, also bad news, which means good news. Crazy world hey. End result, buy stocks and sell US dollars.

 

Currency Guidance

 

USD – The picture is still mixed with the Fed clearly wanting higher rates and for longer which should be bad for stocks and good for US dollar. The market though is technically in a down trend, with now two lower highs. The Chinese story, if true, could support the technical but I am not so sure that Xi wants that. Xi is getting more restrictive and controlling of the public, a dictator who is happy to lock people up or down, sending Chinese growth lower not higher. So whilst I prefer to trade when charts match fundamentals, I think the short term is for weaker dollar.

 

AUD – Coming back to the key resistance level of 0.6530 and has now formed an inverse head and shoulder pattern. With the China story the only reason Aussie is back up here, it will be interesting to monitor what the battler does at resistance.

 

EUR – Fell a little further than I expected but we now have a series of higher lows in place and this mini uptrend should take the above 1.01 and potentially into 1.02 territory.

 

GBP – Had a nasty week and lost all that it made the prior week and more. Have no reason to be a buyer of Sterling, however the chart on GBPAUD, GBPCHF and GBPJPY look interesting having retraced to the 50ema and held nicely.

 

JPY – Losing ground to the USD works for BOJ as that is where they defend their currency, but against the other pairs it looks decidedly weaker. CADJPY and EURJPY are highlights here.