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$DXY - Bottom Range Bound BreachedThe Dollar Index TVC:DXY has breached a pretty serious level ; the bottom range bound which has previously acted as strong support for TVC:DXY to bounce. Will this time be the same and this will result in a fake-out? Or will TVC:DXY headed lower, re-visiting pre-pandemic levels? Check out the previous released ideas linked below for more in depth information regarding our journey 'Decisive Move Around the Corner' (line chart) (candlesticks chart) TRADE SAFE NOTE that this is not Financial Advice ! Please do your own research before partaking upon any trading activity based solely on this idea.
TVC:DXY
by Mr_J__fx
Fed’s Powell to Address Rate Cuts at Jackson Hole: What to KnowThe annual Jackson Hole Monetary Policy Symposium takes place this week. Jay Powell, head of the Federal Reserve, will step up to the podium on August 23 and shed light into the central bank’s interest rate-cut timeline. His words will echo around global markets and either propel stocks higher on rate-cut optimism or knock them down if the outlook turns gloomy in the lead-up to the Fed's rate-setting meeting on September 18. No in-between. The most exclusive retreat in central banking — the Jackson Hole Monetary Policy Symposium — is gathering top bankers, economists, financiers and other financial heavyweights for three days of idea swapping, hint dropping and market popping (hopefully.) What’s Jackson Hole? Every August, the top dogs in global finance trade their suits for some Wyoming flannel and gather at Jackson Hole. Hosted by the Kansas City Fed since 1978, this is the forum to brainstorm the future of monetary policy and send it out to traders ready to absorb every word. It’s like summer camp for the financial elite, except the campfire stories can crash markets or send them soaring. When the Fed Chair speaks here, the world listens. Major policy shifts have been telegraphed at Jackson Hole, from hints of rate hikes to the next round of quantitative easing. If you’re trading, you can’t afford to ignore what’s said — or not said — in these mountain-side discussions. Highlights from Past Forums 2010: Ben Bernanke, then Fed Chair, hinted at QE2, a measure to spur growth and keep prices steady through bond purchases, and the markets took off like a rocket. Were you long? Because it was a good time to be long. 2020: Jerome Powell unveiled a major shift in Fed policy towards average inflation targeting. The central bank was more inclined to tolerate inflation above the ideal 2% target before it started pumping interest rates. Expectations for This Week’s Gathering This week’s Fed event will be especially meaningful and consequential. The Fed boss is slated to present his keynote address on August 23. Jay Powell, the man who moves markets with a simple “Good afternoon,” has a lot to break down. Inflation has been going down recently. The latest figures show the consumer price index for July slipped under the 3% mark for the first time since 2021. Consumer spending remains resilient. The retail sales report, again for July, showed that the mighty American shopper upped spending by 1% , topping expectations. The labor market, however, got way off the beaten path. Just 114,000 new jobs were created in July. This is also what caused the global market shake-up that sent ripples through every asset class — from stocks to crypto and beyond. Against this economic backdrop, Jay Powell will be moving markets and making headlines as he delivers his remarks. Front and center is some sort of further confirmation of an expected interest rate cut — already communicated and most likely already priced in. The question now is not if, but by how much interest rates are getting trimmed. Analysts expect borrowing costs to go down either by 25 basis points or a bigger, juicier 50-basis-point cut. And here’s what each one of these means and what’s at stake. If the Fed chooses to cut rates down by 25bps, it risks not doing enough to prevent the economy from tipping into a recession. Higher rates for longer make it more difficult for businesses to borrow and drive growth. But if the Fed chooses to cut rates by too much — a jumbo 50bps cut — it runs the risk of reigniting inflation and, what’s even more, fueling another speculative bull run in the markets. Low rates make money less expensive as loans cost less. The expansive monetary policy measure of cutting interest rates aims to boost economic growth both on the business level and the consumer level. Companies take out loans to expand their operations, build new stuff and hire more workers. And the average consumer finds it easier to get a mortgage or buy a new car (or some Bitcoin ?). Overall, more money is spinning around, creating opportunity and offering liquidity for deals across markets. Brace yourselves as Jay Powell gets ready to drop some hints and prepare the audience for the Fed’s next meeting coming September 17-18. The markets may very well be heading into a rollercoaster few weeks as they try to predict the scale of interest rate cuts. Are you getting ready to pop a trade open this week? Share your thoughts and expectations below!
SP:SPX
by TradingView
8
template for researching equity price wrt monetary policyThe template shows an equity price (e.g. QQQ) comparing to SPY, with indicators of major economic variables 1. Unemployment rate (UNRATE); 2. CPI index (USCCPI); 3. Interest rate (USINTR); 4. FED balance sheet (USCBBS); 5. Dollar strength (DXY); Unemployment rate and CPI are the two major conflicting variables that central bank (FED) tries to balance, via the method of adjusting interest rate and FED balance sheet (e.g. Quantitative easing). And the dollar strength gives some a peek of the world economic via US currency exchange rates. Combining these economic indicators can hopefully give some insights of the growth or decline of the US economics which will partially be correlated with equity prices.
NASDAQ:QQQ
by shichuzhu
Macro Monday 59~Japan Interest Rate Hikes Often Lead Recessions Macro Monday 59 Japan Interest Rate Hikes Often Lead Recessions Apologies for the late release this week, I was ill yesterday and I am slowly making a recovery. This week I am keeping it brief however the chart really will speak for itself. If you follow me on Trading view, you can revisit this chart at any time and press play to get the up to date data and see if we have hit any recessionary timeline trigger levels. They are very handy to have at a glance. The chart illustrates the Japan central banks Interest rate history and overlays the last 7 recessions. A few key patterns and findings are evident from the chart which I will summarize below. The Chart - ECONOMICS:JPINTR SUBJECT CHART ◻️ 5 of the last 7 recessions were preceded directly by Japan Interest rate hikes. - Arguably it is 6 out of 7 if you include the 1980 recession with the 1981 recession (which happened as rates were still declining from the original increase). ⌛️The average length of time from the initial hike to recession was 11.6 months. - This would be Jan/Feb 2025 based on the initiation of Japan’s rate increases in Feb/Mar 2024. If you read my material you’ll know that the date of Jan 2025 has repeatedly arisen as a concerning date on multiple charts. This does not guarantee anything other than historical time patterns on multiple charts seem to point roughly towards Jan 2025 as a month of concern. ◻️ The minimum time frame from initial hike to recession was 8 months (Oct 2024) and the maximum time frame 18 months (Aug 2025). This can be our window of concern. ◻️ Its important to note that the rates have remained elevated or increasing for longer than the above timelines outset. In this chart we are only looking at the the first rate increase to recession initiation timeline. We are doing this establish a risk time frame. In the event rates remain elevated into month 11.6 (the average timeframe) we will know we are entering dangerous territory (Jan 2025). Likewise we could go a long as 18 months which is the maximum timeframe. This is all dependent on rates remaining elevated or increasing. A reduction in rates could deter or remove the risk timelines discussed. What happens next is dependent on what the Japan Central bank does. History suggests when they start to increase rates its for a minimum of 6 - 8 months (Sept - Oct 2024), lets see if they pass these months and start to move towards Jan 2025 (the average time line from rate increase initiation to recession). This is a move into higher risk territory. I want to add last week summary as a reminder that multiple other charts are lining up to suggest we may have volatility in the coming 6 months: Macro Monday 58 Recession Charts Worth Watching What to watch for in coming weeks and months? ▫️ If both the 10 - 2 year treasury yield spread and the U.S. Unemployment Rate continue in their upwards trajectory in coming weeks and months, this is a significant risk off signal and recession imminent warning. ▫️ Since 1999 the Federal reserve interest pauses have averaged at 11 months. July 2024 is the 11th month. This suggests rate cuts are imminent. ▫️ The 2 year bond yield which provides a lead on interest rate direction is suggesting that rates are set to decline in the immediate future and that the Fed might lagging in their rate cuts. Furthermore, rate cuts are anticipated in Sept 2024 by market participant's. ▫️ Finally, rate cuts should signal significant concern as most are followed immediately by recession or followed by a recession within 2 to 6 months of the initial cut. Yet the market appears to be calling out for this. This is high risk territory. Combine this with a treasury yield curve rising above the 0 level and an increasing U.S. unemployment rate and things look increasingly concerning. (for all of the above charts see last weeks Macro Monday). ____________________________________ As always you can log onto my Trading View press play on the chart to see where we are, and get an visual update immediately on if we are at min, avg or max recessionary levels. PUKA
ECONOMICS:JPINTR
by PukaCharts
4
Time for TLTThe 20-year Treasury Bond ETF 'TLT' is looking good now that the Federal Reserve has stated that an interest rate cut could come as early as September if inflation continues to fall. The fact that Fed chairman Jerome Powell is now using dovish language and naming dates for potential cuts is cause enough to consider shifting some money to bonds. The swift selloff in stocks earlier this week is also good reason to be cautious in equities and bullish bonds, still waiting to see if that was a one-time dip or the start of something more prolonged. We also have rising unemployment, record personal debt and increasing rates of delinquency in auto loans that signal potential recession ahead. At this point it's not a question of 'if' rates cuts and money printing are going to happen, but 'when', especially if we see markets turn back down in a significant way and/or a continued move higher in unemployment. TLT has recently broke above a short-term resistance line as the 20-year treasury bond yield broke below a short-term support line which shows how inversely correlated they are. If we can expect bond yields to come down via Fed rate cuts then we can expect bond prices to go up. TLT is the most popular bond ETF and I've personally been buying ever since price fell below $100 last year with the intention of building a large position ahead of inevitable rate cuts. I'll stop buying when rate cuts begin and then ride TLT until it looks like a bottom in rates is in, and then sell the entire position and flip long stocks.
NASDAQ:TLTLong
by PrepForProfit
3
Zero Spread Milestone: Strategic Trade in Micro Yield FuturesIntroduction The current market scenario presents a unique potential opportunity in the yield spread between Micro 10-Year Yield Futures (10Y1!) and Micro 2-Year Yield Futures (2YY1!). This spread is reaching a critical price point of zero, likely acting as a strong resistance. Such a rare situation opens the door for a strategic trading opportunity where traders can consider shorting the Micro 10-Year Yield Futures and buying the Micro 2-Year Yield Futures. In TradingView, this spread is visualized using the symbol 10Y1!-CBOT_MINI:2YY1!. The combination of technical indicators suggests a mean reversion trade setup, making this a compelling moment for traders to act on such a potential opportunity. The alignment of overbought signals from Bollinger Bands® and the RSI indicator further strengthens the case for a reversal, presenting an intriguing setup for informed traders. All of this is following last Wednesday, July 31, 2024, when the FED reported their decision related to interest rates where they left them unchanged, adding further context to the current market dynamics. Yield Futures Contract Specifications Micro 10-Year Yield Futures (10Y1!): Price Quotation: Quoted in yield with a minimum fluctuation of 0.001 Index points (1/10th basis point per annum). Tick Value: Each tick is worth $1. Margin Requirements: Approximately $320 per contract (subject to change based on market conditions). Micro 2-Year Yield Futures (2YY1!): Price Quotation: Quoted in yield with a minimum fluctuation of 0.001 Index points (1/10th basis point per annum). Tick Value: Each tick is worth $1. Margin Requirements: Approximately $330 per contract (subject to change based on market conditions). Margin Requirements: The margin requirements for these contracts are relatively low, making them accessible for retail traders. However, traders must ensure they maintain sufficient margin in their accounts to cover potential market movements and avoid margin calls. Understanding Futures Spreads What is a Futures Spread? A futures spread is a trading strategy that involves simultaneously buying and selling two different futures contracts with the aim of profiting from the difference in their prices. This difference, known as the spread, can fluctuate based on various market factors, including interest rates, economic data, and investor sentiment. Futures spreads are often used to hedge risks, speculate on price movements, or take advantage of relative value differences between related instruments. Advantages of Futures Spreads: Reduced Risk: Spreads generally have lower risk compared to outright futures positions because the two legs of the spread can offset each other. Lower Margin Requirements: Exchanges often set lower margin requirements for spread trades compared to single futures contracts because the risk is typically lower. Leverage Relative Value: Traders can take advantage of price discrepancies between related contracts, potentially profiting from their convergence or divergence. Yield Spread Example: In the context of Micro 10-Year Yield Futures and Micro 2-Year Yield Futures, a yield spread trade involves buying (or shorting) one contract (10Y1! Or 2YY1!) while shorting (or buying) the other. This trade is based on the expectation that the spread between these two yields will move in a specific direction, such as narrowing or widening. The current scenario (detailed below), where the spread is reaching zero, suggests a significant resistance level, providing a unique trading opportunity for mean reversion. Analysis Method Technical Indicators: Bollinger Bands® and RSI 1. Bollinger Bands®: The spread between the Micro 10-Year Yield Futures (10Y1!) and Micro 2-Year Yield Futures (2YY1!) is currently above the upper Bollinger Band on both the daily and weekly timeframes. This indicates potential overbought conditions, suggesting that a price reversal might be imminent. 2. RSI (Relative Strength Index): The RSI is clearly overbought on the daily timeframe, signaling a possible mean reversion trade. When the RSI reaches such elevated levels, it often indicates that the current trend may be losing momentum, opening the door for a reversal. Chart Analysis Daily Spread Chart of 10Y1! - 2YY1! The main article daily chart above displays the spread between 10Y1! and 2YY1!, highlighting the current position above the upper Bollinger Band. The RSI indicator also shows overbought conditions, reinforcing the potential for a mean reversion. Weekly Spread Chart of 10Y1! - 2YY1! The above weekly chart further confirms the spread's position above the upper Bollinger Band. This longer-term view provides additional context and supports the likelihood of a reversal. Conclusion: Combining the insights from both Bollinger Bands® and RSI provides a compelling rationale for the trading opportunity. The spread reaching the upper Bollinger Band on multiple timeframes, along with an overbought RSI, strongly suggests that the current overextended condition is potentially unsustainable. Additionally, all of this is occurring around the key price level of zero, which can act as a significant psychological and technical resistance. This convergence of technical indicators and the critical price level points to a high probability for a potential mean reversion, making it an opportune moment to analyze shorting the Micro 10-Year Yield Futures (10Y1!) and buying the Micro 2-Year Yield Futures (2YY1!) as the spread is expected to revert towards its mean. Trade Setup Entry: The strategic trade involves shorting the Micro 10-Year Yield Futures (10Y1!) and buying the Micro 2-Year Yield Futures (2YY1!) around the price point of 0. This is based on the analysis that the spread reaching zero can act as a strong resistance level. Target: As we expect the 20 SMA to move with each daily update, instead of targeting -0.188, we aim for a mean reversion to approximately -0.15. Stop Loss: Place a stop loss slightly above the recent highs of the spread. The daily ATR (Average True Range) value is 0.046, so adding this to the entry price could be a way to implement a volatility stop. This accounts for potential volatility and limits the downside risk of the trade. Reward-to-Risk Ratio: Calculate the reward-to-risk ratio based on the entry, target, and stop loss levels. For example, if the entry is at 0.04, the target is -0.15, and the stop loss is at 0.09, the reward-to-risk ratio can be calculated as follows: Reward: 0.19 points = $190 Risk: 0.05 = $50 Reward-to-Risk Ratio: 0.19 / 0.05 = 3.8 : 1 Importance of Risk Management Defining Risk Management: Risk management is crucial to limit potential losses and ensure long-term trading success. It involves identifying, analyzing, and taking proactive steps to mitigate risks associated with trading. Using Stop Loss Orders: Always use stop loss orders to prevent significant losses and protect capital. A stop loss order automatically exits a trade when the price reaches a predetermined level, limiting the trader's loss. Avoiding Undefined Risk Exposure: Clearly define your risk exposure to avoid unexpected large losses. This involves defining the right position size based on the trader’s risk management rules by setting maximum loss limits per trade and overall portfolio. Precise Entries and Exits: Accurate entry and exit points are essential for successful trading. Well-timed entries and exits can maximize profits and minimize losses. Other Important Considerations: Diversify your trades to spread risk across different assets. Regularly review and adjust your trading strategy based on market conditions. Stay informed about macroeconomic events and news that could impact the markets. When charting futures, the data provided could be delayed. Traders working with the ticker symbols discussed in this idea may prefer to use CME Group real-time data plan on TradingView: www.tradingview.com This consideration is particularly important for shorter-term traders, whereas it may be less critical for those focused on longer-term trading strategies. General Disclaimer: The trade ideas presented herein are solely for illustrative purposes forming a part of a case study intended to demonstrate key principles in risk management within the context of the specific market scenarios discussed. These ideas are not to be interpreted as investment recommendations or financial advice. They do not endorse or promote any specific trading strategies, financial products, or services. The information provided is based on data believed to be reliable; however, its accuracy or completeness cannot be guaranteed. Trading in financial markets involves risks, including the potential loss of principal. Each individual should conduct their own research and consult with professional financial advisors before making any investment decisions. The author or publisher of this content bears no responsibility for any actions taken based on the information provided or for any resultant financial or other losses.
CBOT_MINI:10Y1!Education
by traddictiv
Money Market says that rate cut will be an urgent one (again)Just take a look on a rate cut expectations. In a short, the main technical graph is a difference (spread) between the nearest futures contract on FOMC interest rate (in this time Sept'24 ZQU2024) and the next one futures contract (in this time Oct'24 ZQV2024). It's clear that spread turned to negative in 2024, and heavily negative over the past several weeks. Historical back test analysis says that in all of such cases, FOMC is to cut interest rates immediately. The next scheduled FOMC meeting is September17-18. Will the market wait 6 more weeks? The right answer: NO. Rate cut will be an urgent one (unscheduled again).
CBOT:ZQ1!
by Pandorra
U.S Recession RiskECONOMICS:EUINTR ECONOMICS:USINTR Potential U.S. Recession Amidst Late Business Cycle and Interest Rate Adjustments Dear Valued Clients, Currently, we are closely monitoring the developments in the U.S. economy and the potential onset of a recession. Current Economic Overview The U.S. is in the late stage of its business cycle, characterized by slowing growth and increased economic uncertainty. Historically, this phase often precedes an economic contraction. The Federal Reserve (FED) has been proactive in managing interest rates to curb inflation and sustain economic growth. However, as the accompanying chart highlights, there are signs that interest rate cuts may be on the horizon. Interest Rate Dynamics Our analysis suggests that if the European Central Bank (ECB) continues to raise interest rates while the FED initiates rate cuts, we could witness a significant shift in economic momentum. The historical data depicted in the chart indicates that such divergences in interest rate policies between the ECB and the FED have often foreshadowed U.S. recessions. The blue line represents the ECB interest rates, while the yellow line denotes the FED rates. Implications for the U.S. Economy The late business cycle phase, coupled with potential rate cuts, heightens the risk of a recession. The red zones on the chart delineate past U.S. recessions, emphasizing the critical juncture we currently face. Should the ECB's interest rates surpass those of the U.S., the resultant economic pressures could tip the U.S. economy into a recessionary period. Our team is here to support you in making informed decisions to safeguard and grow your investments. Thank you for your continued trust and partnership. Leveraged Team www.leveraged.co.za
TVC:DXYLong
by liamsmith
Macro Monday 58 - Recession Warning Charts Worth Watching Macro Monday 58 Recession Charts Worth Watching If you follow me on Trading view, you can revisit these charts at any time and press play to get the up to date data and see if we have hit any recessionary trigger levels. They are very handy to have at a glance. CHART 1 10 - 2 year treasury yield spread vs U.S. Unemployment Rate Subject chart above Summary ▫️ The chart demonstrates how the inversion of the Yield Curve (a fall below 0 for the blue area) coincides with U.S. Unemployment Rate bottoming (green area) prior to recession onset (red areas). ▫️ The yellow box on the chart gives us timelines on how many months passed, historically, before a confirmed economic recession after the yield curves first definitive turn back up towards the 0% level (also see circled numbers showing connecting bottoming unemployment rate). ▫️ Using this approach, you can see that the average time frame prior to recession onset is 13 months (April 2024) and the max timeframe is 22 months (Jan 2025). ▫️ This is only a consideration based on historical data and does not guarantee a recession or a recession timeline however it significantly raises the probability of a recession, and the longer into the timeframe we are the higher that recession probability. ▫️ We typically we have a recession (red zones) either during or immediately after the yield curve moves back above the zero level. At present we are at -0.08 and fast approaching the zero level which is one of the most concerning data points of this week. ▫️ The unemployment rate moved from a low of 3.4 in April 2023 to 4.3 in July 2024. This is a significant increase and is typical prior to recession onset. Conclusion ▫️ If both the 10 - 2 year treasury yield spread and the U.S. Unemployment Rate continue in their upwards trajectory in coming weeks and months, this is a significant risk off signal and recession imminent warning. ▫️ The Sahm Rule triggered this week which has been one of the most accurate indicators of a recession starting. It is triggered when the three-month moving average of the U.S Unemployment Rate above rises by 0.50 percentage points or more, relative to its low over the previous 12 months. The Sahm rule triggering adds to recession concerns, however the designer of the rule has stated that I may not be accurate factoring in recent events like COVID-19 which has thrown unemployment and economic data to extremes. What is the 10-2 year Treasury yield spread? The 10-2 year Treasury yield spread represents the difference between the yield on 10-year U.S. Treasury bonds and 2-year U.S. Treasury bonds. It’s calculated by subtracting the 2-year yield from the 10-year yield. When this spread turns negative (inverts), it’s significant because it often precedes economic downturns. An inversion suggests that investors expect lower future interest rates, which can signal concerns about economic growth and potential recession. In essence, it’s a barometer of market sentiment and interest rate expectations What is the U.S. Unemployment Rate The unemployment rate is calculated by dividing the number of unemployed people by the total labor force in the U.S (which includes both employed and unemployed individuals). CHART 2 Interest Rate Historic Timelines and impact on S&P500 Summary ▫️ This chart aims to illustrate the relationship between the Federal Reserve’s Interest rate hike policy and the S&P500’s price movements. ▫️ This is obviously pertinent factoring in the expectations of a rate cut in Sept 2024. This chart which I shared in Sept 2023 may have accurately predicted this likely Sept 2023 interest rate cut but is this positive for the market? ▫️ Interest Rate increases have resulted in positive S&P500 price action ▫️ Interest rate pauses are the first cautionary signal of potential negative S&P500 price action however 2 out of 3 pauses have resulted in positive price action. The higher the rate the higher the chance of a market decline during the pause period. ▫️ Interest rate pauses have ranged from 6 to 16 months (avg. of 11 months). ▫️ Interest rate reductions have been the major, often advanced warning signal for significant and continued market decline (red circles on chart) ▫️ Interest rates can decrease for 2 to 6 months before the market eventually capitulates. ▫️ In 2020 rates decreased for 6 months as the market continued its ascent and in 2007 rates decreased for 2 months as the market continued its ascent. This tells us that rates can go down as prices go up but that it rarely lasts with any gains completely wiped out within months. Conclusion: ▫️ Rate cuts should signal significant concern as most are followed immediately by recession or followed by a recession within 2 to 6 months of the initial cut. This is high risk territory. ▫️ During the week I seen the 2 year treasury bill which matches closely the Federal Reserve interest rate cycle. The spread developing between the two suggests rate cuts are imminent. Remember point one above. The chart below: CHART 3 Relationship between 2 Year Bonds and Interest Rate ▫️ Very briefly, you can see the red areas where gaps formed when the Federal Reserve interest rate was lagging behind the 2 year treasury bonds declines. ▫️ Currently there is a large gap of 1.74% between the two data sets. The last time we had gaps like this were prior to the 2000 and 2007 recessions. Even prior to COVID-19 you can see the Federal reserve was playing catch up. What to watch for in coming weeks and months? ▫️ If both the 10 - 2 year treasury yield spread and the U.S. Unemployment Rate continue in their upwards trajectory in coming weeks and months, this is a significant risk off signal and recession imminent warning. ▫️ Since 1999 the Federal reserve interest pauses have averaged at 11 months. July 2024 is the 11th month. This suggests rate cuts are imminent. ▫️ The 2 year bond yield which provides a lead on interest rate direction is suggesting that rates are set to decline in the immediate future and that the Fed might lagging in their rate cuts. Furthermore, rate cuts are anticipated in Sept 2024 by market participant's. ▫️ Finally, rate cuts should signal significant concern as most are followed immediately by recession or followed by a recession within 2 to 6 months of the initial cut. Yet the market appears to be calling out for this. This is high risk territory. Combine this with a treasury yield curve rising above the 0 level and an increasing U.S. unemployment rate and things look increasingly concerning. We can keep any eye on these charts for a lead on what might happen next. I will be reviewing some other charts over coming days around jobless claims and ISM figures to see how positive and negative we are looking. PUKA
FRED:T10Y2Y
by PukaCharts
4
Potential opportunity from interest rate volatility - $IVOL Quadratic Interest Rate Volatility & Inflation Hedge ETF AMEX:IVOL Quadratic Interest Rate Volatility and Inflation Hedge ETF AMEX:IVOL is starting to look interesting. I wonder can it break above the 10 month smooth moving average this time? Do you think there is a chance of interest rate volatility and want to profit off it? Do you think there is a chance of widening spreads between 2-year Treasury bond yields and 10-year Treasury bond yields? If so this ETF might perform nicely in coming months. What is the IVOL ETF product? Its objective is to protect against inflation whilst providing additional returns from options contracts. IVOL was launched in May 2019 by Quadratic Capital Management under management of @nancy__davis, a prior Goldman Sachs trader who is also quiet the looker. IVOL is an intriguing way to benefit from higher interest rate volatility and widening spreads between 2-year Treasury bond yields and 10-year Treasury bond yields. The ETF should not be confused as an investment to protect against rising interest rates as that is not its objective, it reacts off interest rate volatility and widening 10Y/2Y spreads. IVOL’s inflation protection component is straightforward with 87% of its assets invested in the Schwab U.S. TIPS ETF $SCHP. IVOL earns interest on the inflation-protected bonds held by SCHP. IVOL also benefits from the principal increase in the Treasury Inflation-Protected Security (TIPS) based on the inflation rate. I might do another brief explainer on this product next if you like? The remaining 13% component is mainly options orientated and more complicated. In simple terms if interest rate volatility increases or if investors expect larger fluctuations in interest rates, then the value of the options held by IVOL increases. If interest rate volatility falls, then the options held by IVOL will fall in price. Its a very interesting product given the consistent movement in interest rates over recent months and the spread between the 2Y and 10Y being at an inflection point. I had to put together a chart for for the IVOL and it appears the RSI has a great history of picking tops and bottoms. It is an interesting and gradually growing ETF product that may be of use in the near term. I hope the explanation helps but more so, I hope that the chart will help anyone using the IVOL to avoid unnecessary risk. PUKA
AMEX:IVOLLong
by PukaCharts
$GBINTRS - BoE's Snowball - The Bank of England (BOE) decided to deliver its #inflation medicine in a bigger dose at their recent monetary policy committee meeting. The bank made the shock decision to raise borrowing costs a half percentage point, taking the official rate to 5% ; double the size of the increase anticipated by most economists. BoE hiking interest rates to 5% , it adds further strain to millions of homeowners across the country. The Central Bank Rates was upped by 0.5% from 4.5% previously and remains at it's Highest Level since 2008 Financial Crisis.
ECONOMICS:GBINTR
by Mr_J__fx
$USINTR - A Month of BreathThe Federal Reserve left the target for the Fed Funds Rate ECONOMICS:USINTR unchanged at 5%-5.25%, as expected, but signaled rates may go to 5.6% by Year-End if the Economy and Inflation do not Slow down more. It is the first pause in the tightening campaign following ten consecutive hikes that lifted borrowing costs by 500bps to the highest level since September 2007. Throughout Fed's announcement The Dollar Index TVC:DXY plunged to what can be said Wave C completed from A-B-C Elliot Waves Correction (attached ideas) Have the markets priced in Inflation ECONOMICS:USIRYY and Interest Rates ECONOMICS:USINTR ? TRADE SAFE *** NOTE that this is not Financial Advice ! Please do your own research and consult your Financial Advisor before partaking on any trading activity based solely on this Idea .
ECONOMICS:USINTR
by Mr_J__fx
Why Interest Rates Matter for Forex TradersWhy Interest Rates Matter for Forex Traders Delve into the intricate world of forex, where interest rates stand as towering beacons guiding currency movements and trader strategies. From the fundamentals of central bank operations to the subtle nuances of the carry trade, uncover how they shape the global financial tapestry, dictating economic outcomes and trader fortunes. Understanding Interest Rates An interest rate is the cost of borrowing money or the return earned from lending, expressed as a percentage. Two primary types dominate the discourse: Central Bank Interest Rates Set by monetary authorities like the Federal Reserve, these rates often serve as the benchmark for short-term lending between banks. For instance, the federal funds rate in the US dictates interbank loans overnight, influencing liquidity and, by extension, currency value. Market Interest Rates Think LIBOR (London Interbank Offered Rate) – the rate at which banks lend to each other in the international interbank market. It, influenced by supply and demand dynamics, often fluctuates daily, making it a vital metric for traders who delve into currency swaps or forward rate agreements. In trading currency pairs, interest rates aren't mere numbers – they're indicators dictating strength, investment flows, and overall economic health. Interest Rates as Market Drivers In forex, interest rates emerge as crucial influencers. Acting as catalysts, they shape currency values, guide investment flows, and mould strategies traders employ. For those looking to take advantage of these forces, using a platform like FXOpen's TickTrader offers a competitive edge, ensuring traders have access to real-time data and advanced trading tools. Decoding Interest Rates in Forex Market Trends Interest rates wield enormous power in the global financial theatre, particularly in the dynamics of forex trading. One of the clearest relationships observed is between high interest rates and currencies. Elevated rates act as a magnet for foreign capital since investors constantly scout for better returns. This inflow requires the purchase of the country's currency, leading to its appreciation. Carry Trade and Interest Dynamics One such tactic to capitalise on rate disparities is the carry trade. Traders borrow funds in a currency with low rates and invest it in a currency yielding higher returns. The difference or the "carry" becomes their profit. The symbiotic relationship between interest rates and forex is deeply evident here. A sound grasp of the nuances of this strategy can lead to lucrative opportunities for seasoned traders. Interest Differentials: The Subtle Nuances Even minor variations in rates across nations can offer significant opportunities. These differentials between currency pairs influence their relative strengths. For instance, if Country A starts offering higher interest rates than Country B, it could lead to an appreciation of Country A's currency, interest rates playing the central role. Savvy traders continually analyse these differentials, strategising their trades to capitalise on the anticipated market movements. Central Banks and Monetary Policy Central banks hold a significant position in steering a nation's economic direction. One of their critical levers is the setting of interest rates. They directly impact the money supply and, subsequently, inflation levels. When inflation surges beyond targeted levels, central banks may raise rates to rein it in, as this will typically reduce consumer borrowing and spending. Conversely, when economies face downturns, they might reduce them, promoting borrowing and investment and aiming to boost economic activity. Thus, the delicate balance between inflation rates and interest rates is a testament to the central authorities’ pivotal role in economic stability. Monetary Policy Tools: Shaping the Financial Landscape Central banks use a variety of tools to implement their monetary policies: Open Market Operations By buying or selling government securities, these banks control the money circulating in the economy. Selling securities pulls money out of the market, leading to higher interest rates. Conversely, purchasing them injects money, pushing rates down. Reserve Requirements By altering the amount of money banks need to hold in reserve, central banks can influence the amount available for loans. A higher reserve means fewer loans, resulting in higher rates and vice versa. Forward Guidance and Quantitative Easing These are more nuanced tools. Forward guidance involves bank governors communicating their future plans, providing the market with a sense of direction. Quantitative easing, on the other hand, involves large-scale asset purchases to increase money supply and lower interest rates. Economic Indicators and Their Correlation with Interest Rates Economic indicators provide valuable insights into a country's financial health, and their fluctuations often influence monetary policy decisions. For instance, when inflation surpasses target levels, central banks might consider hiking them to temper the rising prices, leading to an interplay between foreign exchange and interest rates. A strong GDP growth signals a thriving economy, which might attract foreign investments. These inflows usually put upward pressure on the domestic currency. However, if the bank responds by raising rates, this may further amplify its strength. Thus, the effect of increasing interest rates on currency is often profound, making it a focal point for forex traders. Similarly, employment metrics, consumer sentiment, and manufacturing output are all vital indicators that economists monitor. Changes in these metrics might hint at upcoming monetary policy adjustments. Lastly, there are foreign currency loans and interest rates. When global rates are low, corporations might engage in foreign currency loans, seeking cheaper financing options. However, shifts in these rates can impact the cost of servicing these loans, leading to potential forex market volatility. The Bottom Line The dance between forex and interest rates is both complex and fascinating. As we've seen, interest rate trading offers profound insights and opportunities for those in the foreign exchange arena. For those eager to navigate these waters and capitalise on the intricate interplay of rates and currencies, opening an FXOpen account can be the gateway to informed, strategic trading in this dynamic market. This article represents the opinion of the Companies operating under the FXOpen brand only. It is not to be construed as an offer, solicitation, or recommendation with respect to products and services provided by the Companies operating under the FXOpen brand, nor is it to be considered financial advice.
Education
by FXOpen
6
Pressure Builds Ahead of Major Central Bank Marathon It's a huge week for central banks with the Bank of Japan (BOJ), Federal Reserve (Fed), and Bank of England (BOE) set to deliver their decisions within a 32-hour window. Market activity remains largely subdued in anticipation. The BOJ’s decision is the most unpredictable. Current market sentiment suggests a ~60% likelihood of a 10-basis point hike and a ~40% chance of no change. A lack of action could undermine the yen's recent gains with a potential resistance at 155.30 (100 MA). The Fed's announcement is scheduled for Wednesday. Market expectations for a rate cut are just 5%. Investors are keenly awaiting any signals regarding a potential move in September. Finally, the Bank of England has the market guessing with an almost 50 –50 chance for a cut. GBP traders are also digesting a key speech from the new finance minister Rachel Reeves in which she unveiled plans for some spending cuts/ or tax increases to fill a £22bn spending shortfall that was 'covered up' by the Conservative government. Traders now also have 30th October to look forward to as the date of the autumn budget.
by BlackBull_Markets
A Recession Is Coming - Brace for Impact First things first What is a Recession? A recession is a period when the economy isn't doing well. It means businesses are selling less, people are losing jobs or not getting raises, and overall, there's less money being spent. It's like a slowdown in the economy where things are not growing, and sometimes they shrink. This period of economic decline usually lasts for a few months or longer. Usually, when we have two consecutive quarters of negative Gross Domestic Product (GDP) we say that we are in a recession. Now, let's look at previous recessions to see if we can find some patterns that help us predict the coming one. 😊 This is how you can navigate through the chart: - past recessions are highlighted with orange colored boxes based on the data from "FRED economic data". - The purple line chart shows the US inflation rate. - The US GDP is shown in a green step-line chart. - The US interest rate is shown with an orange line. - The Yellow line chart shows the unemployment rate in the US. - The most important line chart here is the blue one that shows the spread between the 10-year bond yield and the 3-month bond yield (Yes we could also use 2-year instead of 3-month). This blue line, the yield curve, is important to us because it's a reliable indicator that almost every time gave us a heads up for a recession (if you were looking at it of course 😁). When it falls below zero, we call it the inverted yield curve and we hit a recession almost every time it gets back up after spending some time below zero. An inverted yield curve tells us that the market participants are concerned about future economic growth It can lead to tighter financial conditions, reduced lending, and lower consumer and business spending, which can contribute to a downturn in the economy. With that said, take a look at the chart and you can easily spot the repetitive pattern of interest rate hikes/cuts, unemployment rate, and the inverted yield curve just before each recession. With the strong possibility of having the first rate cut in September, and the patterns you see on the chart, can you say that we are going to have a hard landing and a recession? I would say yes. If you say we are not going into a recession and your counter argument is backed by a low unemployment rate and a positive GDP and a declining inflation rate, this chart does not support the idea. I know there are other factors that might support the soft landing scenario, and I would like to have your point of view on this. So, please share your thoughts in comments section if you are reading this post through Tradingview. 😊 For further research, you can pull up the charts of indices like S&P500 or commodities of your choice to see how they moved during each recession. This will help you find some patterns that might assist you in your future investments.
TVC:US10Y
by SamanFx0
Using Interest Rate Parity to Trade ForexUsing Interest Rate Parity to Trade Forex Interest rate parity stands as a cornerstone concept in forex trading, offering a lens to assess currency value shifts based on interest differentials. This article explains how traders can leverage this principle to make strategic decisions, delving into its mechanics, implications, and practical applications in the forex market. Understanding Interest Rate Parity Interest rate parity (IRP) is a foundational theory in foreign exchange markets that provides a link between exchange rate parity and the cost of borrowing. At its core, IRP posits that the difference in interest rates between two countries is equal to the differential between the forward and spot exchange rates when adjusted across compounding periods. To understand IRP, one must first grasp the concepts of spot and forward rates. The spot rate is the current price at which one currency can be exchanged for another. For instance, if the EUR/USD spot price is 1.10, one euro can buy 1.10 US dollars today. Conversely, a forward rate is agreed upon today but represents the price at which one currency will be exchanged for another at a future date. Forward values are based on the spot rate but adjusted by the interest differential between the two currencies. If the US borrowing cost is higher than that in the Eurozone, the forward price for EUR/USD will typically be higher than the spot price. Exchange rate parity refers to a situation where the value of two currencies is at an equilibrium, such that there are no arbitrage opportunities from interest differentials. IRP theorises that the forex is efficient and self-correcting in the long run, with interest and exchange rates moving in tandem to eliminate arbitrage opportunities. The Mechanics of IRP The interest rate parity formula is instrumental in determining the fair value of a forward price. The formula is based on the premise that the difference in borrowing costs between two countries is an anchor of market movements over time. In essence, it equates the return on a domestic deposit to the return on a foreign deposit, factoring in price movements. To calculate this, one would use an interest rate parity calculator, which requires inputs such as the domestic and foreign interest rates, the spot price, and the duration of the contract. The formula is expressed as: F = S * (1 + id) / (1 + if) ^ t Where: F is the forward exchange rate, S is the spot exchange rate, id is the domestic interest rate, if is the foreign interest rate, t is the time duration of the contract (in years). The forward rate (F) tells traders what the forex quote should be in the future to prevent arbitrage due to the interest differentials. For instance, if the domestic country A offers a lower lending rate compared to the foreign country B, it is expected that the domestic currency will depreciate in value relative to the foreign currency over time. The expected depreciation is reflected in a forward value that is lower than the spot value. Understanding the IRP calculation can help traders analyse where currencies are headed, providing the foundation of strategies such as hedging or speculative trades based on anticipated lending rate movements. While these calculations provide theoretical values, actual market prices may diverge due to market sentiment, liquidity conditions, and unforeseen economic events. Interest Rate Parity Example Assume an investor is choosing between depositing $100,000 in the United States at an annual interest of 2% (id = 0.02) or in the United Kingdom at an annual interest of 5% (if = 0.05). The current spot price (S) is 1.3000 USD/GBP. The future value of the US investment after one year would be: 100,000 * (1 + 0.02) = 102,000 USD To calculate the equivalent investment in the UK, convert the dollars to pounds at the spot value and apply the UK lending rate: (100,000 / 1.3000) * (1 + 0.05) ≈ 80,769.23 GBP Now, to avoid arbitrage, the forward rate (F) should equate the future value of the UK investment when converted back to USD to the future value of the US investment. The formula to find the forward rate is: F = S * (1 + id) / (1 + if) Plug the values into the formula: F = 1.3000 * (1 + 0.02) / (1 + 0.05) Simplify the equation: F = 1.3000 * 1.02 / 1.05 F ≈ 1.2714 USD/GBP This means the forward price should be approximately 1.2714, indicating that in one year, one British pound is expected to be exchanged for 1.2714 US dollars, based on the interest differential. Using IRP to Trade Forex Using IRP in forex trading involves analysing currency parity to determine future prices. Traders can gauge the potential movement of forex pairs by examining the interest differentials between two economies. If a country's borrowing costs rise relative to another's, its currency is often expected to strengthen due to the appeal of higher returns on investment. This relationship is a key consideration in strategies such as the carry trade, where traders borrow in a currency with a low borrowing cost and invest in one with a higher yield, taking advantage of the differential. Using platforms like FXOpen's TickTrader may enhance the process, providing over 1,200 trading tools to help demystify the markets. Factors Influencing IRP IRP is significantly influenced by central bank policies, as these institutions set the base interest rates in their respective currencies. Decisions to change these rates often reflect economic conditions like inflation, employment levels, and economic growth. Additionally, geopolitical events, market sentiment, and financial stability contribute to borrowing cost fluctuations. While central bank announcements can cause immediate market reactions, long-term trends in IRP are shaped by the underlying economic health of nations. Traders monitor these indicators to analyse shifts in currency parity and adjust their strategies accordingly. The Bottom Line In exploring the intricacies of IRP, traders gain valuable insights into the dynamics of forex trading. It's a crucial part of a strategic toolkit, helping to anticipate and react to market movements. For those ready to apply this knowledge, opening an FXOpen account offers a gateway to harnessing the power of interest differentials in the dynamic forex market. This article represents the opinion of the Companies operating under the FXOpen brand only. It is not to be construed as an offer, solicitation, or recommendation with respect to products and services provided by the Companies operating under the FXOpen brand, nor is it to be considered financial advice.
Education
by FXOpen
1
Short Position on EUR/USD: Potential Major DowntrendI'm entering a short position of 4 lots on FX:EURUSD at 1.0865. This trade setup is based on my analysis of recent price action and key support levels. If we break below 1.0827, I believe this will confirm that the top for FX:EURUSD is finally in, signaling a strong bearish trend. Trade Details: Entry: 1.0865 (Short position) Confirmation Level: 1.0827 (Break below this to confirm downtrend) Target: 1.0538 (-1.618 Fibonacci extension) Technical Analysis: Entry Point (1.0865): This level represents a key resistance where recent price action has shown signs of selling pressure. Entering at this point allows us to position ourselves ahead of a potential breakdown. Confirmation Level (1.0827): This is a critical support level that is the .50 fib level of the recent breakout. A decisive break below this level will indicate that bearish momentum is gaining strength, confirming the downtrend. Target (1.0538): The -1.618 Fibonacci extension from the most recent breakout of structure suggests this as a logical target for the downward move. This level has historical significance and could act as a strong support where the price may stabilize or reverse. Recent Rally Peak: It appears we are currently at the peak of a sizable rally from 1.06. This rally has driven the FX:EURUSD up to our second entry point, and the momentum appears to be weakening, suggesting a potential reversal is imminent. Supporting Factors: Bearish Momentum: The recent price action shows lower highs, indicating a bearish trend. Economic Indicators: Recent economic data from the Eurozone and the U.S. suggest a potential divergence in monetary policy, favoring a stronger USD $DXY. Market Sentiment: Current market sentiment appears to be risk-off, which typically benefits the USD as a safe-haven currency. Eurozone Rate Cuts: The Eurozone is projected to cut interest rates in June. This potential rate cut will likely weaken the euro further and be beneficial to the USD TVC:DXY , adding to the bearish case for FX:EURUSD . U.S. Interest Rate Hike: Additionally, I believe the U.S. will raise interest rates by the end of the year. This expected rate hike would further strengthen the USD TVC:DXY , adding downward pressure on FX:EURUSD .
Short
by mackmackeyy
Why Are Bonds Still Crashing?Why are US, UK, and EU bonds still crashing since March 2020? In this video, we are going to study the relationship between bonds, yields, and interest rates, which many of us find confusing. How can we understand them, and why are bond prices leading the yield, followed by interest rates this season? 10 Year Yield Futures Ticker: 10Y Minimum fluctuation: 0.001 Index points (1/10th basis point per annum) = $1.00 Disclaimer: • What presented here is not a recommendation, please consult your licensed broker. • Our mission is to create lateral thinking skills for every investor and trader, knowing when to take a calculated risk with market uncertainty and a bolder risk when opportunity arises. CME Real-time Market Data help identify trading set-ups in real-time 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
TVC:US30YEducation
by konhow
9
$DXY -Decisive Move Around the Corner !!! Dollar Index TVC:DXY on the cusp of making a major move TA speaking ; (100.8 or 110) - To the upside starting currently by jumping at 200EMA and breaking recent highs within pattern while facing strong resistance just above on Range Ceiling(105) and last Highs of 107(ChoCh). - Either falling off a cliff headed in to re-visiting Range Bottom of 100.82 (Swing/Positioning) Fundamentally speaking ; Would be a great move to the Upside for TVC:DXY Fundamentally speaking, resulting so on SHORTING anti-correlated assets, such as EUR/USD and other FX pairs. Must be time for TVC:DXY to strengthen even more, makes sense ,, otherwise Recession is just ahead ! On headlines , CPI ECONOMICS:USIRYY is coming lower, with economists awaiting Fed Cuts ECONOMICS:USINTR cuts by end year. However, worth mentioning is that wealth hedges such as TVC:GOLD continues to be stocked up in piles of tonnes from China ECONOMICS:CNGRES and not only; China's Wealthy Class is also in the process of purchasing pure physical Gold *** NOTE This is not Financial Advice ! Please do your own research with your own diligence and consult your own Financial Advisor before partaking on any trading activity with your hard earned money based solely on this Idea. Ideas being released are published for my own trading speculation and journaling needed to be clear on different asset classes price action.
TVC:DXY
by Mr_J__fx
$EUIRYY -EU YoY (CPI) source: EUROSTAT The inflation rate in the Euro Area declined to 2.9% year-on-year in October 2023, reaching its lowest level since July 2021 and falling slightly below the market consensus of 3.1% . Meanwhile, The Core Rate, which filters out volatile food and energy prices, also cooled to 4.2% in October; marking its lowest point since July 2022. However, both rates remained above the European Central Bank's target of 2%. The energy cost tumbled by 11.1% (compared to -4.6% in September), and the rates of inflation eased for both food, alcohol, and tobacco (7.5% compared to 8.8%) and non-energy industrial goods (3.5% compared to 4.1%). Services inflation remained relatively stable at 4.6%, compared to 4.7% in the previous month. On a monthly basis, consumer prices edged up 0.1% in October, after a 0.3% gain in September.
ECONOMICS:EUIRYY
by Mr_J__fx