Calendar Week 46-2022

 

Well last week was fun! The fallout of FTX initially spread to stocks but then stocks looked past that and with the, slightly, weaker CPI print roared higher. I think we have not seen the last of the FTX impact on prices though, it is still very early on. That said, this is the Christmas rally in full flight now, this was helped further by rumours from China exiting lockdown and peace terms in Ukraine – but they are just rumours.

 

Commodities are also ignoring the looming global recession as energy tracked sideways but metals exploded with copper up over 15% in November and gold, after setting a triple bottom is up over 9%. Gold bugs no doubt enjoying the demise of Crypto.

 

Bond yields retraced but stopped right on the daily 50ema, which it has not tagged since August. Interest rates still have some upside but all the focus is now on overtightening. Even with the dip in inflation on Thursday, it is still a long way from being contained, so higher rates and hold them there for longer. A big risk that the Fed will overshoot.

 

The biggest move on Friday though was in USD, having the worst time since 2009. With both the influences of safe haven and interest rates retracing, the USD will continue to weaken. There is a strong support level not far below, circa 104.18-104.90, with recent turning points in that zone along with key 50% Fibonacci and 200 daily ema. This zone will be the next test of the new downtrend. It will likely bounce off it, but the bounce has a long way to go to make a higher high now.

 

Week ahead sees key data from UK in the form of jobs and inflation. Inflation also from Canada and jobs from Australia also being the data to be aware of.

 

Currency Guidance

 

USD – As above, the sellers clearly dominating but now it is too far too fast so cannot sell it and not a buyer in a bear market. Waiting for the bounce off support zone and will look to fade the rally.

 

AUD – Helped by the “fake” news of China the Aussie broke through resistance and in fact completed the Inverse Head and Shoulder chart pattern. Has stopped at next resistance of 0.6700 and I see limited upside from here as it will be dominated in what the US dollar is doing.

 

EUR – Still no reason to buy fundamentally with energy crisis far from over for the Europeans as they head into what will be a cold winter without gas. It also stopped at key resistance having turned off 1.0350 3 times in last 6 months, expect it to turn again but do not presume so wait for it. Then opposite to USD buy the bounce.

 

GBP – Is closing on a key zone also, 1.19 – 1.1950 which it bounced off in 2016 and 2019 a couple of times each as well as in May this year. If you are long, would be a good target to exit.

 

JPY – With the perception that China is opening up again, the yen gained against most peers but most against the USD. Over done at these levels so expect a bounce as rumour becomes fact that China is not opening.