Calendar Week 47-2022

 

Stocks, bonds and currencies all had a quiet week, which is kinda nice after the crazy moves post CPI and FTX debacle. Whilst the volatility may have dropped significantly in crypto’s, the fall out from the FTX failure will continue to impact prices, and contagion into tech stocks will also be felt. Commodities on the other hand continue to swing wildly, most notable in oil and copper prices.

 

The week ahead is also relatively quiet too. New Zealand will be looking to raise rates on Wednesday to 4.25% and later that evening a raft of European PMI data is released. None of this will drive prices too much.

 

However, the market still wants to believe in the “Powell Pivot”, that the Fed will stop raising rates and actually start cutting. The market obviously not listening to the Fed heads, which had 16 speeches last week, all with the same theme – rates higher for longer. Yes CPI was lower at last print, but one data point does not make a trend.

 

So, there will be no pivot and the stock market in particular have got this wrong. VIX is back at the lower end of the range. I know the Christmas rally is on, and most likely will continue, but I believe it is a mistake to buy into it now, come January, the market will turn.

 

Currency Guidance

 

USD – Has held at the 200ema and 2022 50% Fib. I expect a bounce of natural price action towards 109.00 and look to fade it there.

 

AUD – Technically it found major resistance at 0.6750 area due to two Fibs 38.2 off April highs and 61.8 off August highs and trend line of both those highs too. With the commodity prices tumbling again, expect the AUD to fall back to 0.6540 zone this week.

 

EUR – PMI data never holds much sway for me as it is a survey and not hard data, what they call soft data. So I see little volatility around those releases, but I do expect the Euro to fall back to 1.01 handle and look to buy a bounce if it shows up.

 

GBP – Is a curious one, it is over extended from its averages but not peaked in momentum yet. I expect the USD will dominate though and will find the Cable back in the low 1.16’s for the next run higher.

 

JPY – This seems to have found support and is looking like it will have another run at Kuroda’s line in the sand at 145.