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FED vs ECB - Soft Landing As of today Thursday, December 14, 2023- ECB ( European Central Bank ) at 14:00 PM ( Budapest Time GMT+1 ) will disclouse their interest rate decision in the following categories. 11:00 EUR EU Leaders Summit 14:15 EUR Deposit Facility Rate (Dec) 14:15 EUR ECB Marginal Lending Facility 14:15 EUR ECB Monetary Policy Statement 14:15 EUR ECB Interest Rate Decision (Dec) Over the last 2Mto 1M , depending on the data frequency, such as weekly or montly we have observed that, generally speaking, inflation is under control in the Eurozone. Therefore, any further rate hikes from the ECB are absolutely unnecessary and would cause serious issues in the Italian and German economies. Even though a rate hike would cause an immediate surge in EUR/USD, which is certainly in my interest since I hold a long position, in the case of a rate hike, I would close it nearly immediately. I expect that today the ECB will keep interest rates unchanged to allow time for the effects of their previous measures to fully transmit into the economy
Long
by ElGatoTrade
1
US Equities 2024 OutlookCME: E-Mini S&P ( CME_MINI:ES1! ), E-Mini Nasdaq ( CME_MINI:NQ1! ) Stock investors around the world had a banner year in 2023. Of the ten major stock market indexes I monitor, eight delivered solid 1-year returns. • North America: S&P 500, +23.9%; Nasdaq Composite, +53.6%; • South America: Bovespa (Brazil), +22.3%; • Europe: FTSE (UK), +3.0%; Stoxx (Germany), +11.3%; • Asia: Nikkei (Japan), +28.2%; Kospi (Korea), +18.7%; Nifty (India), +19.5%; • China: SSE (Shanghai), -3.2%; Hang Seng (HK), -13.7%. In this second installment of new year outlook for major asset classes, I will discuss what opportunities may lay ahead for US stocks. Subsequent writings will cover Energy, Agricultural commodities, Interest Rates, Forex, and Cryptocurrencies. FYI: The last writing was a year-end review for metal commodities – Gold, Copper, and Aluminum. If you haven’t read it yet, you may follow the link here: Record Gains Built from Lower Baselines While all four major US stock indexes booked double-digit returns in 2023, they each experienced a steep loss in 2022. The combined 2022-2023 returns aren’t so impressive. • Dow Jones: +5.3% • S&P 500: +3.3% • Nasdaq 100: +9.3% • Russell 2000: -5.9% You may think that adding the 2022 return of -18.1 and 2023 return of 23.9% will give the S&P a 2-year return of +5.8%. But the actual return is only +3.3%. Why? Simple Math: If you lose 20% first, you will need to gain 25% to make up for the loss and just get back to square one. Mathematically, 1/0.8 = 1.25, or (1-20%) * (1+25%) = 1. This matters a lot to hedge funds. An active manager may have a 2-20 arrangement with his investors, which is 2% fee on asset-under-management, and 20% on carry interest. If a fund closely tracks the Nasdaq, the manager received no carry for 2022, and the carry for 2023 is based on the 2-year return of +9.3%, not the 2023 return of 53.6%. The fund usually would have a “high water mark” clause that requires the manager to make up for prior loss before getting paid. Therefore, Wall Street bonuses may not be that big this year. 2024 Outlook for US Equities The December 26th CFTC Commitments of Traders report (COT) shows that: • E-Mini Dow: “Asset Manager” has 26,070 long positions and 3,098 short positions. • E-Mini S&P 500: Asset Manager has 1,147,149 longs and 275,037shorts. • E-Mini Nasdaq 100: Asset Manager has 111,046 longs and 20,662 shorts. • E-Mini Russell 2000: Asset Manager 229,229 longs and 142,312 shorts. The overwhelmingly Net Long positions on all major US index futures indicate that futures traders are very bullish on US equities. Investors eye in a soft landing for the US economy and expect aggressive rate cuts by the Federal Reserve. According to CME Group’s FedWatch Tool, the first rate-cut could occur at the March 20th Fed meeting, with a 73.5% probability. For June 12th, the odds of two or more rate cuts increase to 82.2%. By December 18th, investors expect the Fed Funds rate will be 1% to 2% lower than the current 5.25-5.50% range, with 98.5% odds (Data as of January 1st). (Link: www.cmegroup.com) US equity indexes could stay high as long as the Fed remains dovish. The past few months proved that investors are very resilient. The bullish market sentiment is very hard to break, unless really bad things happen. If an investor owns US stocks, there is no good reason to sell them now. We have seen that geopolitical risks had done little damage to US equities. Fed policy still drives the market. Staying with the ride and hedging the stock portfolio with put options may be a good strategy. Trading with CME E-Mini Equity Index Put Options As US equity indexes take turn making all-time high, it’s costly to buy the underlying stocks. Options are an inexpensive alternative to get exposure in stocks. Depending your stock portfolio and views, you could either long or short the options on E-Mini S&P 500 futures • Last Friday, the March E-Mini S&P 500 futures (ESH4) was settled at 4,812.75. Buying 1 long or short position requires initial margins of $11,800; • January end-of-the-month (EOM) Call options with a 4910-strike costed 23.50 points. Premium for 1 call is $1,175 (= 23.5 x $50 multiplier); • January EOM Put options with a 4710-strike priced at 27 points. Premium for 1 put is $1,350 (= 27 x 50). We could construct a similar strategy with E-Mini Nasdaq 100. • Last Friday, the March E-Mini Nasdaq futures (NQH4) was settled at 17,003.75. Buying 1 long or short position requires initial margins of $17,700; • January end-of-the-month (EOM) Call options with a 17,200-strike costed 208.50 points. Premium for 1 call is $4,170 (= 208.50 x $20 multiplier); • January EOM Put options with a 16500-strike priced at 127.70 points. Premium for 1 put is $2,551.40 (= 127.75 x 20). In a rising market, out-of-the-money put options could be a strategy for small odds with big payoff. In January, we will have new data releases for December inflation (CPI and PCE) and nonfarm payroll employment, as well as a Fed meeting on January 31st. My reasoning: If we see inflation rebound, stronger employment, or a hawkish Fed, the stock market could turn south, resulting in a gain for the put. Hypothetically, if the March S&P futures price drops 150 points by January month-end options expiration, the put would be 47.25 points in-the-money (= 4710 – 4,662.75) and earn $2,362.5 (= 47.25 x $50). Using the initial margin as cost base calculations, the theoretical return would be 75% (= 2362.5 / 1350 - 1). If the March Nasdaq drops 800 points (17,003.75-800=16,203.75) at January options expiration, the put would be 296.25 points in-the-money (= 16,500 – 16,203.75) and earn $5,925 (= 296.25 x $20). The theoretical return would be 132% (= 5925 / 2551.4 - 1). On the other hand, if stocks continue to rise, put options will lose money, but never go beyond the premium already paid. Options Calculator is a free tool CME Group provided for options traders. It generates fair value prices and Greeks for any of CME Group’s options on futures contracts or price up a generic option with this universal calculator. Traders could customize their input parameters by strike, option type, underlying futures price, volatility, days to expiration (DTE), rate, and choose from 8 different pricing models including Black Scholes. www.cmegroup.com Happy Trading. Disclaimers *Trade ideas cited above are for illustration only, as an integral part of a case study to demonstrate the fundamental concepts in risk management under the market scenarios being discussed. They shall not be construed as investment recommendations or advice. Nor are they used to promote any specific products, or services. CME Group Real-time Market Data help identify trading set-ups and express my market views. If you have futures in your trading portfolio, you can check out on CME Group data plans available that suit your trading needs www.tradingview.com
SP:SPXShort
by JimHuangChicago
Euro jumps to 5-month highThe euro has posted strong gains on Wednesday. In the North American session, EUR/USD is trading at 1.1121, up 0.72%. The US dollar is under pressure this week as we're seeing a risk-on mood in global markets. The week between Christmas and New Year's is normally quiet, with a very light data calendar. However, investors are anticipating the Federal Reserve to cut rates early next year and this sentiment has sent equity markets higher while weighing on the US dollar. The euro is powering higher, with gains of 2.1% in December and 2.9% in November against the retreating US dollar. Federal Chair Powell surprised the markets when he pencilled in three rate cuts for next year. Investors had braced themselves for Powell to push back against rate cut expectations, a script he has followed for months. This time, however, Powell jumped on the bandwagon although Fed members have since urged the markets to tamper their expectations of up to six rate cuts next year. The markets have priced in an initial rate cut in March, with over 150 basis points in cuts for all of 2024 according to the CME's FedWatch tool. There is a similar disconnect between the markets and the European Central Bank. The markets are looking at six rate cuts next year, perhaps as early as March, while the ECB has tried to dampen these expectations. ECB President Lagarde stated last week that members had not discussed a rate cut at the December meeting, at which the central bank held the cash rate at 4.0% for a second straight time. I expect that markets in both the US and Europe will remain much more bullish about rate cuts than the central banks. It's a light data calendar between Christmas and New Year's in the US. The Richmond Manufacturing Index decelerated to -11 today, down from -5 in November and missing the market consensus of -6. On Thursday, unemployment claims are expected to drop to 205,000, down from 210,000 a week earlier. EUR/USD is testing resistance at 1.1072. Above, there is resistance at 1.1130 1.0982 and 1.0924 is providing support
by OANDA
GBP/USD's Bullish Outlook Soars in Anticipation of 2024 Rate CutOn Wednesday, the Federal Reserve, as widely anticipated by investors, held its benchmark interest rate within the 5.25%-5.50% range—the highest level in 22 years. The accompanying Summary of Economic Projections disclosed a notable shift in the central bank's outlook. Now, the Fed foresees 75 basis points of rate cuts in 2024, exceeding the September projection by one additional rate cut. This shift in stance is contributing to the weakening of the US dollar over other currencies such as GBP. Now, let's delve deeper into the technical analysis of GBPUSD The GBPUSD exhibited an assertive recovery as it bounced off the dynamic support line represented by the EMA 200, marked by a robust bullish Marubozu candlestick. Subsequently, the breakout from both the falling wedge pattern and a prominent resistance zone strongly suggests the persistence of the bullish trajectory. Adding to the positive outlook, the momentum indicator recently formed a golden cross, underscoring the potential for an upward surge toward the target region. These collective indicators paint a compelling picture, signaling a noteworthy upside movement to the designated target area—a prospect worth considering for fellow traders navigating current market dynamics. It is essential to note that the analysis will no longer hold validity once the target/support area is reached. Disclaimer: "Please note that this analysis is solely for educational purposes and should not be considered a recommendation to take a long or short position on FX:GBPUSD ." Please support the channel by engaging with the content, using the rocket button, and sharing your opinions in the comments below!
Long
by financialfreedomgoals101
Dollar Index PivotBetting against the dollar is growing in popularity after the Federal Reserve upended markets by signaling the end of its monetary tightening campaign. Non-commercial traders — a group that includes hedge funds, asset managers and other speculative market players — boosted their bearish bets on the greenback in the week ended Tuesday. More than 39,000 contracts are now tied to expectations the US currency will fall, up more than 10,000 from a week ago when the Fed was preparing to meet, the data show. The currency has suffered a pronounced slump in the wake of that confab, when the Fed released updated economic projections forecasting additional monetary easing next year. Indeed, while there are now more contracts betting on dollar weakness, the dollar value of those contracts has actually slipped to $5.5 billion, slightly lower than last week. The dollar extended its drop on Friday after the Fed’s preferred gauge of underlying inflation showed muted price gains, affirming the central bank’s pivot toward interest-rate cuts next year. What is your opinion on Dollar in 2024? Trade with care Like | Share | Comment
TVC:DXY
by TheAnonymousBanker
8
Buying Opportunity in T-Notes? After putting in a bottom in mid-October, T-notes have rallied sharply higher. Patient bulls have been afforded few opportunities to enter the contracts on a pullback, but that may soon change. Pullbacks are a healthy part of any sustained rally, as they allow market participants to take profits from longer held positions, and reallocate capital in the direction of the prevailing trend. Fundamental Snapshot : T-Note prices are inversely related to yields - meaning that as yields decline, the price of T-Notes will rise. After the last Fed meeting, Chair Powell suggested that the Fed may be cutting rates as much as 3 times in 2024. As displayed on CME’s FedWatch Tool below, the market is pricing in a 77.2% probability that the first rate cut may come as soon as March. If that materializes, T-note prices should continue to press higher. Talkin’ Technicals : The white line on the bottom of the chart labeling short-term bearish divergence on RSI in the bottom indicates that the market is making successive new highs on decreasing momentum, and that the market remains in overbought territory. Meaning that the current rally is effectively running out of steam. Furthermore, volume has steadily decreased since the previous high. If there are no more bulls willing to enter the market, it will likely result in a pullback. A pullback on price will force current bulls to liquidate long positions to capture profit, and afford new bulls to enter the market amidst the correction. Fed policy is a major function in establishing the longer-term trend in T-notes and bonds. By lowering rates in 2024, one should expect both T-notes and bonds to perform well pricewise. Check out CME Group real-time data plans available on TradingView here: www.tradingview.com Disclaimers: CME Real-time Market Data help identify trading set-ups and express my market views. If you have futures in your trading portfolio, you can check out on CME Group data plans available that suit your trading needs www.tradingview.com *Trade ideas cited above are for illustration only, as an integral part of a case study to demonstrate the fundamental concepts in risk management under the market scenarios being discussed. They shall not be construed as investment recommendations or advice. Nor are they used to promote any specific products, or services. Futures trading involves substantial risk of loss and may not be suitable for all investors. Trading advice is based on information taken from trade and statistical services and other sources Blue Line Futures, LLC believes are reliable. We do not guarantee that such information is accurate or complete and it should not be relied upon as such. Trading advice reflects our good faith judgment at a specific time and is subject to change without notice. There is no guarantee that the advice we give will result in profitable trades. All trading decisions will be made by the account holder. Past performance is not necessarily indicative of future results.
CBOT:TN1!Long
by Blue_Line_Futures
EURUSD Pair Projections for Q1, Q2, and Q3 2024Financial Analysis: EURUSD Pair Projections for Q1, Q2, and Q3 2024 Disclaimer : This analysis is based on the information available as of the provided date and is subject to change. It should not be considered as financial advice. Readers are encouraged to conduct their own research before making investment decisions. Ifo Report and Current Business Climate The recent Ifo report reflects a clouded sentiment in the German business landscape, with companies expressing dissatisfaction with their current business situations and heightened skepticism regarding the first half of 2024. Notably: Manufacturing The Business Climate Index in manufacturing witnessed a noticeable decline, with companies perceiving their current business situation as significantly worse. Expectations in the manufacturing sector grew more pessimistic, particularly affecting energy-intensive industries. Service Sector The service sector experienced a slight improvement in the business climate, driven by increased satisfaction with current business situations. Service providers displayed reduced skepticism about the outlook for the next six months, although expectations in restaurants and catering saw a nosedive. Trade The trade sector suffered a setback, as companies assessed their current situations as notably worse. Holiday trade for retailers, in particular, disappointed. Construction The Business Climate Index in construction hit its lowest level since September 2005, with companies reporting a worsened current situation. Approximately half of the companies anticipate further deterioration in the months ahead. Projections for EURUSD in Q1, Q2, and Q3 The Ifo report's insights into the German business sentiment set the stage for assessing the FX:EURUSD pair's projections: Q1: Sluggish Momentum The current scenario suggests a sluggish start for EURUSD in Q1. The clouded business sentiment in Germany may contribute to a sideways market, marked by cautious trading. Q2: Anticipating Improvement As Q2 unfolds, there is an expectation of an improvement in the financial situation in Europe. Despite the challenging Q1, signs of stabilization and potential positive developments could influence a more favorable outlook for the EURUSD pair. Q3: Inverse Head & Shoulders Pattern An analysis of the larger fractal, specifically the Inverse Head & Shoulders pattern forming in the EURUSD pair, points towards robust bullish momentum. This projection aligns with a potential turnaround by the end of Q2 and the beginning of Q3, indicating a shift towards a more positive market sentiment. Conclusion In conclusion, the EURUSD pair is likely to face challenges in the early part of 2024, reflecting the clouded sentiment in the German business landscape. However, signs of improvement are anticipated in Q2, with the formation of an Inverse Head & Shoulders pattern suggesting a strong bullish momentum in the currency pair by the end of Q2 and the beginning of Q3. Traders and investors should closely monitor economic indicators, global events, and the evolving business climate for timely decision-making in the dynamic forex market.
Long
by wikitrades
Canadian dollar drifting ahead of CPI releaseThe Canadian dollar is showing little movement on Tuesday. In the European session, USD/CAD is trading at 1.3382, down 0.13%. We could see stronger movement from the Canadian dollar in the North American session, with the release of the Canadian inflation report. Canada releases the November inflation report later on Tuesday. In October, inflation dropped to 3.1% y/y, down sharply from 3.8%. The market consensus for November stands at 2.9%. Two key core inflation indicators are expected to ease to an average of 3.3%, down from an average of 3.5% in October. A further drop in inflation would be an encouraging sign for the Bank of Canada, which has raised the cash rate to 5.0% but has paused three straight times. The BoC remained hawkish at the December meeting and kept the door open to additional rate hikes but the markets are convinced that the rate-tightening cycle is over and have priced in rate cuts next year, starting in mid-2024. A drop in the November inflation report would bolster expectations for rate cuts next year. If inflation surprises on the upside, it would bolster the Canadian dollar and force the BoC to continue pausing rates at restrictive levels ('higher for lower'). The US dollar has hit a rough patch since the Fed meeting last week when Fed Chair Powell penciled in three rate cuts next year. Traders are far more bullish and have priced in six rate hikes in 2024, starting in March. We're seeing some pushback from the Fed to dampen rate-cut fever in the markets. On Friday, New York Fed President John Williams said a rate cut in March was "premature" and even warned that rates could move higher if inflation were to stall or reverse. Cleveland Fed President Mester said on Monday that the markets are a "bit ahead" of the Fed on rate cuts, as the Fed was focused on how long it would need to maintain rates in restrictive territory, while the markets were focused on rate cuts. USD/CAD is testing support at 1.3363. Below, there is support at 1.3327 There is resistance at 1.3386 and 1.3422
by OANDA
FX Price Action Ahead on Growing Rate DivergenceLast week was busy for major central banks. During a 60-hour window, rates were set for 60% of the global economy, from the US Fed, the ECB, to the BoE. Central banks’ announcements caused a frenzy in markets. The pivot to a dovish stance by the US Fed contrasted sharply with hawkishness from the ECB. This paper summarizes rate announcements and their market impact. It also dives into Yen dynamics as the Bank of Japan (BoJ) meets tomorrow. CAUTION FX TRADERS: GROWING RATE DIVERGENCE AHEAD Renewed divergence in monetary policies was evident from rate announcements by the major central banks. After more than a year of moving in tandem, central banks’ stances are shifting. The Fed is signaling rate cuts sooner. Meanwhile, ECB and BoE insist that rates need to stay higher for longer to fight sticky inflation. As interest rates in the US remain elevated relative to other major economies, the Fed has ample room to slash sooner. Inflation in the EU has contracted at a rapid clip relative to the US. However, economists expect EU inflation to rebound in the near term with fading base-level effects. Inflation in the US is expected to average 2.4% in 2024 compared to 2.7% in the EU and 3.75% in the UK, as per respective central banks. The US economy is strong with robust economic growth, resilient consumer spending, and solid PMI numbers. FED HAS PIVOTED TO DOVISHNESS The FOMC opted to keep rates steady with their statement pointing to the end of the rate hiking cycle. Most notable was the Fed’s updated economic projections & dot plot. It showed faster-declining inflation, slower GDP growth, and faster rate cuts. The Fed’s dot plot of rate expectations guided towards three 25 basis point (bps) cuts next year. Markets were expecting five rate cuts before the Fed announcement. Following the Fed meeting, markets now anticipate six rate cuts. BOE REMAINS HAWKISH The Bank of England opted to keep rates steady with a hawkish pause. The BoE statement indicates further rate hikes if inflationary pressures remain persistent. “The full effect of higher interest rates has yet to come through, posing ongoing challenges to households, businesses and governments," ~ BoE Market Policy Committee ECB JOINED THE BOE WITH A HAWKISH PAUSE ECB decided to keep rates steady with a hawkish pause. ECB President Christine Lagarde asserted that rate cuts were not being discussed yet and rates may even need to go higher to bring inflation under control. ECB noted that tighter financing conditions were leading to demand contraction, which weighed on pushing down inflation. Economic growth is expected to remain subdued. ECB estimates gradual ramp up in growth from 0.6% for 2023 to 0.8% for 2024, and to 1.5% for both 2025 and 2026. BOJ DECISION IS MOST UNCERTAIN WITH A THORNY JOB ON HAND The Bank of Japan (BoJ) is set to announce their rate decision on December 19th. It has maintained ultra-low interest rates all year while others hiked aggressively. Recent statements by BoJ Governor Ueda signal a pivot away from the ultra-low policy. "Managing monetary policy will become even more challenging from the end of the year and heading into next year." ~ Kazuo Ueda, Governor, Bank of Japan on 6/Dec Governor Ueda’s statements have led to market expectation of upcoming monetary tightening in Japan. JPY has strengthened 6% relative to the USD over the last month. Despite Ueda’s statements, BoJ pivot remains uncertain. Inflation in Japan is running hot and above US inflation. Moreover, wage growth and economic growth in Japan have been moderate despite high inflation creating stagflation risks. Consumer spending and wage growth remain muted despite record profits. Feeble Yen is boosting Japanese exporter profits. Nevertheless, the BoJ has been setting up a change in monetary policy. Earlier this year, it raised the cap on JGB yields and eventually changed the cap from a rigid limit to a loose reference. Some economists consider this a prelude to eventual scrapping of the YCC altogether. CENTRAL BANK DECISIONS HAVE CREATED DEEP RIPPLES ACROSS MARKETS Commodity markets reacted positively to the rate announcements. The Fed’s signal of upcoming easing opened the door for commodity demand to rise. Precious metals are likely to benefit from asset rotation out of US treasuries while Crude will benefit from higher economic activity from lower interest rates. Equities surged on Fed pivot. Small-caps and Mid-caps outperformed the Nasdaq-100 and S&P 500. Both SPX and NDX also extended gains. Bond yields fell sharply following the FOMC decision. Yields fell to their lowest level in four months. One-year bond yields performed the best while thirty-year performed the worst. LEVERAGED FUNDS ARE BULLISH EURO, STERLING, AND BEARISH YEN Asset managers and leveraged funds are net long on Euro FX futures. Asset managers and leveraged funds are net short on Yen and Pound futures but have reduced net short positioning over the past few weeks. HYPOTHETICAL TRADE SETUP The Fed’s dovish stance plus the hawkishness of European central banks will result in dollar weakness relative to Euro and Sterling. Upside risks to the dollar persist with stronger economic data and inflation resurgence forcing the Fed to reassess its stance. To gain from the weakening of the dollar against the euro and sterling, investors can buy into CME Micro FX Euro and GBP futures. A long sterling provides higher upside than long euro given higher inflation in the UK. Policy uncertainty in Japan is unlikely to usher in a pivot in the short-term. The JPY is likely to weaken against the dollar despite DXY weakness. To harness gains from weakening Yen, investors can establish a long position in CME Micro JPY Futures. Hypothetical Trade 1 & 2: Long EUR and GBP Entry: 1.0960 Target: 1.1150 Stop Loss: 1.0860 Profit at Target: USD 238 (= 1.1500 - 1.0960 = 190 pips = 190 x 1.25) Loss at Stop: USD 125 (= 1.0860 – 1.0960 = -100 pips = -100 x 1.25) Reward-Risk: 1.9x Entry: 1.2720 Target: 1.3120 Stop Loss: 1.2490 Profit at Target: USD 250 (= 1.3120 - 1.2720 = 400 pips = 400 x 0.625) Loss at Stop: USD 144 (= 1.2490 – 1.2720 = -230 pips = 230 x 0.625) Reward-Risk: 1.75x Hypothetical Trade 2: Short JPY Entry: 139.57 Target: 146.28 Stop Loss: 137.97 Profit at Target: JPY 67,100 (= 146.28 - 139.57 = 671 pips = 671 x 100) Loss at Stop: JPY 16,000 (=137.97 – 139.57 = 160 pips = 160 x 100) Reward-Risk: 4.2x MARKET DATA CME Real-time Market Data helps identify trading set-ups and express market views better. If you have futures in your trading portfolio, you can check out on CME Group data plans available that suit your trading needs www.tradingview.com DISCLAIMER This case study is for educational purposes only and does not constitute investment recommendations or advice. Nor are they used to promote any specific products, or services. Trading or investment ideas cited here are for illustration only, as an integral part of a case study to demonstrate the fundamental concepts in risk management or trading under the market scenarios being discussed. Please read the FULL DISCLAIMER the link to which is provided in our profile description.
CME_MINI:M6E1!
by mintdotfinance
Euro climbs to two-week high as ECB meeting loomsThe euro has extended its gains in Thursday trading. In the European session, EUR/USD is trading at 1.0925, up 0.45%. It has been a good week for the euro, which has climbed 1.5% against the US dollar. The European Central Bank meets later on Wednesday and is widely expected to hold rates at 4.0% for a second straight time. The markets will be focusing on the rate statement and ECB President Lagarde's post-meeting remarks. Lagarde has been hawkish, stressing the need to maintain rates in restrictive territory for a prolonged period - "higher for longer". The markets are more dovish and have priced in six rate cuts for 2024, with a first cut as early as the spring. The economic landscape in the eurozone could support the market's view. Inflation has fallen sharply and is at 2.4%, within striking distance of the Bank's 2% target. The economy has cooled due to high interest rates and a recession remains a possibility. Will Lagarde push back against market expectations of rate cuts? Or will she set a more dovish stance and avoid ruling out rate cuts? The tone of the rate statement and Lagarde's comments could have a strong effect on the movement of the euro today. The Federal Reserve maintained the benchmark rate at a target range of 5.25%- 5.50% for a third straight time. That was not a surprise but Fed Chair Powell provided plenty of drama as he pivoted from his usual hawkish rhetoric. There had been expectations that Powell would push back against growing speculation that the Fed would trim rates in 2024. Powell not only failed to push back, he signalled that the Fed expected to cut rates three times next year. Powell's dovish message sent equities flying higher and the US dollar tumbling. Just two weeks ago, Powell said it would be "premature" to speculate about the timing of rate cuts and that the door was still open to further hikes. There is still a deep disconnect between the markets and the Fed, as the markets have now priced in six rate cuts in 2024. There is resistance at 1.0964 and 1.1033 1.0862 and 1.0793 are providing support
by OANDA
6
Get ready for the FOMC and Jerome PowellWith the SPX trading just about 3.8% from its all-time highs, all eyes will be on the Federal Reserve, which is scheduled to announce a monetary decision later today, followed by a press conference. We do not anticipate any change to the FED Funds Rate as we expect the central bank to take additional time in order to assess the lagging effects of previous rate hikes. During the press conference, we expect Jerome Powell to outline a surprisingly strong labor market and resilient parts of the economy in spite of rising living costs and debt servicing. In some remarks, the chairman will likely admit that a great deal of a job has already been done, but there is still more to do, with inflation being far from the 2% target. Overall, the conference’s tone will likely be carried in the well-known fashion of “higher for longer” and lack of clarity on steps toward easing. We will provide a review of what was said after the conference. Please feel free to express your ideas and thoughts in the comment section. DISCLAIMER: This analysis is not intended to encourage any buying or selling of any particular securities. Furthermore, it should not be a basis for taking any trade action by an individual investor. Therefore, your own due diligence is highly advised before entering a trade.
SP:SPX
by Tradersweekly
1
How long will gold hold above $2000? The Federal Reserve kept its interest rate as 5.25%-5.5% for its December 2023 decision (staying unchanged for a third consecutive meeting). This was in line with expectations, but the big news is that they indicated 75bps cuts in 2024. This revelation has weakened the USD across the board with the Aussie dollar the best performer at +1.3%. GBP/USD and EUR/USD also caught fresh bids and jumped above 1.2598 and 1.0850, respectively (BoE and ECB interest rates decision hit the market in less than a day). Gold has also been boosted and rebounded to test the $2,000 mark just now. But how long will this last? Jerome Powells public address will likely be the reason gold does or does not stick to this price level in the short term. He's talking right now!
BLACKBULL:XAUUSD
by BlackBull_Markets
A Holly Jolly Inflation OutlookLast Friday's University of Michigan Survey of Consumers revealed some surprising bullish trends as we head into the heart of the holiday season. November’s 69.4 sentiment score, the highest since August, was a massive jump from 61.3 in October, making a positive change in how consumers feel about the state of the economy. Within the report, though, is what really raised eyebrows on trading desks to wrap up last week. My chart of the week is UMich 1-year inflation expectations. At 3.1%, it was the softest outlook for inflation since March 2021 and the biggest monthly drop since 2001. The stunning reversal comes amid rapidly falling gasoline prices. Bigger picture, the 5-year inflation outlook also came in tame at just 2.8%, tying for the lowest figure since July 2021. It’s all music to the Fed’s ears ahead of this week’s key December FOMC meeting. Bond traders widely expect no change in the policy rate, but households’ collective outlook for lower inflation means they could be less aggressive in asking for significant wage increases in the new year, thus squashing the chance of a wage-price inflation spiral to take place in the coming quarters. What does it mean for investors? It is yet another sign that inflation should continue its downward trajectory. Headline CPI is seen printing 0.0% for November, following October’s goose egg, while core prices are forecast to have risen by 0.3% last month. I assert this good news should help get the usually bullish back half of the December period off to a strong start, and the Santa Claus Rally period (the last five trading days of the year followed by the first two sessions of the new year) appear on track for gains.
ECONOMICS:USMIE1YLong
by mikezaccardi
GBP/USD - Pound edges higher ahead of UK job dataThe British pound is showing little movement at the start of the week. In Monday's European session, GBP/USD is trading at 1.2576, up 0.22%. It's a busy week for UK releases which could translate into volatility from the British pound. The UK releases employment data on Tuesday, GDP on Wednesday, followed by the Bank of England rate decision on Thursday. The UK employment report will be closely watched by the BoE, which is expected to hold the cash rate at 5.25% for a third straight time. The UK labour market has remained strong despite the BoE's aggressive tightening and high wage growth continues to drive inflation. The unemployment rate is expected to tick higher from 4.2% to 4.3% while wages including bonuses are expected to ease to 7.7%, down from 7.9%. BoE Governor Bailey had a hawkish message for the markets last week, saying that interest rates could remain at current levels for "an extended period" in order to bring inflation back down to the 2% target. Inflation has been falling sharply, but the current clip of 4.9% remains much higher than the target and the BoE doesn't want to encourage talk of a rate hike, which could ease financial conditions and push inflation higher. The markets, however, have priced in rate cuts in mid-2024. Friday's US nonfarm payrolls came in at 199 thousand in November, above the market consensus of 180,000 and higher than the October gain of 150,000. Unemployment dropped from 3.9% to 3.7% and average hourly earnings rose to 0.4% m/m, up from 0.2% in October and above the market consensus of 0.3%. The strong data points to a resilient labour market despite signs that the economy is cooling down, and has reduced fears of recession. The markets are still expecting four or five rate cuts in 2024, pointing to a deep disconnect with the Fed, which is insisting that hikes remain on the table. The strong nonfarm payroll report is a reminder to the markets that the US labour market remains strong, even if there are clear signs that the economy is cooling down. Tuesday's inflation report will be closely watched, as a stronger-than-expected reading would likely force the markets to temper expectations about rate hikes in 2024. GBP/USD is putting pressure on resistance at 1.2592, followed by 1.2682 1.2484 and 1.2369 are the next support levels
by OANDA
Trading this week's fundamental events The market's attention will be fixed on the Federal Reserve's final policy meeting of 2023 scheduled for this Wednesday, with the expectation that the US will maintain interest rates at a 22-year high. Investors will have an opportunity to scrutinize the Fed's statement and Chair Jerome Powell's press conference for any indications of potential rate cuts in 2024 (or lack thereof). One day prior to the Feds decision, the US is also poised to unveil essential inflation data. Forecasts suggest a marginal uptick of 0.1% in November consumer prices. Turning attention to Europe, traders will focus on rate decisions from the European Central Bank (ECB) and the Bank of England (BoE), both occurring on Thursday. The BoE is predicted to maintain borrowing costs at a 15-year high while reiterating the necessity for elevated rates. Any commentary from the bank deviating from this outlook could potentially cause ripples in the market. Eurozone inflation dropped to 2.4% last month, down from over 10% a year earlier, following ten consecutive rate hikes. This decline brings the ECB's 2% inflation target into view and makes a further rate increase unlikely. Goldman Sachs has forecasted that the European Central Bank's meeting in April will mark the initiation of its first rate cut, followed by a 25 basis points cut at each subsequent meeting throughout the year.
by BlackBull_Markets
Gold struggles to gather momentum following rebound to $2,040Gold advanced to the $2,040 area in the second half of the day on Thursday but lost its momentum. Despite the renewed USD weakness, rising US yields limit XAU/USD's upside as market focus shifts to Friday's November jobs report. Gold price (XAU/USD) attracts some buying for the second straight day on Thursday, albeit lacks follow-through and remains confined in a familiar range held over the past three days through the first half of the European session. The fundamental backdrop, meanwhile, seems tilted firmly in favour of bullish traders amid growing acceptance that the Federal Reserve (Fed) is done with its policy tightening campaign and will start cutting rates as early as March 2024. Furthermore, the recent dovish rhetoric from European Central Bank (ECB) officials, along with the Reserve Bank of Australia’s (RBA) and the Bank of Canada's (BoC) decision to hold rates steady, lifted hopes that interest rates have peaked globally. This, in turn, is seen as a key factor acting as a tailwind for the non-yielding yellow metal. Meanwhile, a strong pickup in demand for the Japanese Yen (JPY) demand, bolstered by expectations for a hawkish pivot by the Bank of Japan (BoJ), prompts some profit-taking around the US Dollar (USD). In fact, the USD Index, which tracks the Greenback against a basket of currencies, corrects sharply from a two-week high touched on Wednesday and turns out to be another factor lending support to the US Dollar-denominated commodity. Apart from this, the prevalent cautious market modo turns out to be another factor contributing to the modest intraday uptick. Bulls, however, seem reluctant and prefer to wait for the release of the US monthly jobs data on Friday.
OANDA:XAUUSDLong
by dc_analytics
GC: Gold Reaches Record High on Hope of Fed Rate CutsCOMEX: Gold Options ( COMEX:GC1! ) Gold prices rallied to an all-time high on Friday. Spot gold climbed 1.6% to $2,069 per ounce, up 3.4% for the week. Gold price rose to $2,075 mid-session to beat the previous record of $2,072 reached in 2020. U.S. gold futures also broke new ground. The February 2024 contract of COMEX gold futures settled at a record high of $2,089.7, up 1.6% for the week. On Friday, gold futures trade volume was 259,889 lots, with open interest standing at 498,685 contracts. Options on the COMEX gold futures also attracted investor attention. On Friday, total options volume was 92,906, up 112% from the prior day. Open interest was 806,297 lots. For the lead February 2024 contracts, investors bought 19,565 call options and 6,894 put options. A call-to-put ratio of 2.83:1 indicates that investors are very bullish on gold. Gold prices have been pumped up on investor hype that the Federal Reserve may have completed its monetary tightening policy and could start cutting rates as early as March. How high could gold price go? Since last year, I have written extensively about gold on TradingView. Let’s revisit the fundamental drivers of the global gold market. Gold as an Inflation Hedge Gold has historically been an excellent hedge against inflation because its price tends to rise when the cost-of-living increases. The US CPI Index has a base value of 100 set at 1982-1984. Its latest reading in October is 307.7. Over the last 40 years, the cost of US goods and services has tripled on average. The year-end gold price between 1982 and 1984 averaged $378. As of Friday, the bullion gained 447% for the same period. Over the long run, investing in gold does beat inflation. Gold as a Precious Metal As a commodity, gold is negatively correlated to the US dollar. Since gold is priced in dollar, a strong dollar raises the cost for foreign investors who must pay more with weakened foreign currency. This reduces the demand for gold. “Strong Dollar, Weak Commodities” is the general theme in global commodities market, gold included. A closely related theme is “Higher Rates, Lower Prices”. Higher interest rates and Treasury bond yields raise the opportunity cost of holding non-yielding gold. Unlike other commodities, gold is not consumed or used up every year. Therefore, gold mining output is not a major factor in the pricing of gold. Gold as a Safe Haven Investment Gold retains its value in times of both financial chaos and geopolitical crises. People flee to its relative safety when world tensions rise. During such times, gold often outperforms other investments. In the past two decades, gold price peaked during the 2008 financial crisis, the 2010 European debt crisis, the 2018-19 US-China trade conflict, the outbreak of COVID pandemic, the Russia-Ukraine conflict, and the March 2023 U.S. bank run. Gold as an Investment Class As an investment class, gold competes for investor money along with stocks, bonds, cryptos and money-market funds. Even at record high, gold gained only 13.2% year-to-date, underperforming S&P 500 (+19.6%), Nasdaq 100 (+46.4%) and Bitcoin (+136.0%). A False Narrative on Monetary Easing The recent rise in the stocks and gold is largely shaped by the changes in market sentiment. Investors believe that the Fed is shifting gears from restricted to easing policy. Looking back in the past two years, market sentiment might not be the most reliable gauge of the Fed’s next step of action. The market has called for the Fed Pivot prematurely and incorrectly multiple times. We will need to wait and see what’s happening next. In his speech at Spelman College in Atlanta on Friday, the Fed Chair said that “the risks of under- and over-tightening are becoming more balanced,” but the Fed is not thinking about lowering rates right now. Investors focus on the current rate well into restrictive territory, but pointedly ignore the warning that it was premature to speculate on easing rates. The confirmation bias is at work here. They hear what they want to hear and create a new narrative that rate cuts will come sooner. Pricing in 5-6 rate cuts in a year is very aggressive. The Fed Chair has been accused of being too late to act, seeing inflation transitory earlier on. When it comes to cutting rates, the Fed would be very cautious, and at a very slow and measured pace. Trading Opportunities with Gold Options Market fundamentals haven’t changed. Market sentiment, however, has shifted. The aggressive rate-cut assumption has the effect of lowering the expected interest rates. This helps raise the present value of future cash flows. Hence, stock value goes up. Lower bond yield reduces the disadvantage of holding the non-yielding gold, and the US dollar weakening makes gold more attractive to foreign buyers. This bull market is vulnerable. If investors adjust their rate-cut assumptions from 5-6 to 2-3 times, the market could turn nosediving. However, investors set their sight on rate cuts and will not abandon it until the fact rejects the false narrative. Gold has a so-called “Santa Claus rally” and could continue for a while. The Fed Chair’s statement could become more convincing if: • Nonfarm payroll stays strong (December 8th) • CPI stops falling (December 12th) • The Fed keeps rate unchanged and emphasizes on fighting inflation (December 13th) Options on COMEX Gold Futures (GC) could be a cost-efficient and risk-mitigated way to express one’s opinion on how quickly the Fed would cut rates. Each options contract is based on 1 futures contract and has a notional value of 100 troy ounces of gold. At $2,089.7, each contract is worth $208,970. For illustration purpose: For the February 2024 contract, an out-of-the-money (OTM) call at 2190 ($100 above futures price) is quoted at 18.80. To acquire 1 call options requires an upfront premium of $1,880 (= 18.80 x 100 ounces). An OTM put at 1990 ($100 below futures price) is quoted at 9.00. To acquire 1 put requires an upfront premium of $900 (= 9.00 x 100 ounces). Options premium is significantly lower than futures margin, which stands at $7,800 per contract. It’s a fraction of the cost if you were to buy 100 ounces of gold in the spot market. If the trader buys a call and gold futures goes up, his account will increase in value. Unlike investing in spot gold or gold futures, the payoff in options is nonlinear, determining by the Black-Scholes option model. Similarly, when the trader buys a put and gold futures declines, he would also make a profit. On the flip side, the trader could lose money if the market moves against him. But the maximum loss is capped at the upfront premium. Happy Trading. Disclaimers *Trade ideas cited above are for illustration only, as an integral part of a case study to demonstrate the fundamental concepts in risk management under the market scenarios being discussed. They shall not be construed as investment recommendations or advice. Nor are they used to promote any specific products, or services. CME Real-time Market Data help identify trading set-ups and express my market views. If you have futures in your trading portfolio, you can check out on CME Group data plans available that suit your trading needs www.tradingview.com
COMEX:GC1!
by JimHuangChicago
7
GBPUSD Short Trend at 1.27 before Bailey speech!The GBP/USD pair continued to experience gains during the American session, reaching a new monthly high at 1.2715 before a modest retracement. The British Pound maintains its strength against the US Dollar, with the GBP/USD comfortably trading above the 1.2600 level after touching Monday's peak at 1.2644, the highest since last August. The Governor of the Bank of England (BoE), Andrew Bailey, stated on Monday that achieving the 2% inflation target would be a challenging task. Despite the central bank raising rates to 5.25% between 2022 and 2023, Bailey acknowledged the negative impact higher rates can have on households but added that it is still too early to consider rate cuts. Inflation in the UK, measured by the Consumer Price Index (CPI), was 4.6% year-on-year in October, more than double the central bank's comfort level. From a data perspective, the UK's macroeconomic agenda is relatively light this week. The country released the October Retail Price Index (BRC), which showed a 4.3% year-on-year increase, an improvement from the previous month's 5.2%. From a technical standpoint, the market exhibits a strong upward trend after breaking out of the bullish channel, and personally, I anticipate a pullback towards 1.2530 before further upward movement with the goal of surpassing the supply zone at 1.2970 and subsequently retesting the upper part of the daily supply zone. Wishing everyone successful trading, greetings from Gaia.
Short
by UnknownUnicorn67331274
5
EUR/USD drops ahead of eurozone CPIThe euro is in negative territory in Thursday trade. In the European session, EUR/USD is trading at 1.0940, down 0.27%. Germany's inflation rate declined sharply in November and the eurozone is up next, with the November inflation report later today. German inflation dropped to 3.2% y/y in November, down from 3.8% in October and below expectations. This was the lowest inflation rate since June 2021 and was driven by lower food and energy inflation. Will eurozone inflation follow suit? The markets are expecting a modest decline for November. Headline inflation is expected to fall to 2.7%, down from 2.9% in October, and the core is expected to ease to 3.9%, down from 4.2% in October. If inflation falls modestly as expected, it is unlikely to cause the ECB to reconsider its rate policy. The markets have priced in a rate cut in May 2024 and a softer-than-expected print would likely result in the odds of a rate cut being brought forward. The ECB has signalled a 'higher for longer policy', as have the Federal Reserve and other major central banks. Even though inflation has been dropping, it remains considerably higher than the ECB's 2% target and the central bank hasn't given any indications of a rate cut. Investors will be looking for hints about rate policy from ECB President Christine Lagarde, who will speak today at an ECB forum in Frankfurt after the eurozone inflation release. In the US, second-estimate GDP for the third quarter was revised to 5.2%, up from the initial estimate of 4.9%. The strong reading should ease fears of a recession but also provides the Fed with little reason to trim rates while inflation remains well above the 2% target. The Fed has signalled a 'higher for longer' stance on rates but the markets are more dovish and have priced in a rate hike in March 2024 at 45%, according to the CME's FedWatch tool. EUR/USD is putting pressure on support at 1.0920. Below, there is support at 1.0873 1.0986 and 1.1033 are the next resistance lines
by OANDA