Rates
$US10Y $US03MY $SPY $SPX $DIA $QQQ Inversion ContinuesAs investors continue to feel nervous about the health of the global economy, the $US10Y-$US03MY curve continues to invert, with the spread plunging below its Monthly Support Level of -0.457 (blue) to reach -0.502, a level that has not been seen since March 2007.
Investors should continue to remain cautious when it comes to their asset allocation, as dark clouds continue to gather over the global economy and financial markets.
$TLT $IEF $LQD $US10Y US 10-Year Yields Continue to FallYields on the US-10 Year Treasury continue to head lower, as they approach a multi-year support of 1.426% (blue), a level not seen since July 2016.
"Risk Off" continues to be in play.
An important movement on Eur/UsdThe FOCM will begin Wednesday evening to make the market and investors understand the next moves for the short and medium term and the ECB will follow the next day. It is very likely that the euro will come out even more devalued at the end of these two days. As the European Central Bank will almost certainly show a weak economic and political scenario in the eurozone. Talking about new money injections and further postponements of a rate hike; while the FED should ensure another rate cut within the year, but then continue with its restrictive economic policy.
Because an important movement on Eur/Usd we open another long position from here to close by Wednesday evening to then close all the bullish positions and reposition ourselves short. The target is the 1.119 resistance.
US 10 year yield forecast. Heading to 0?This is an update to previous ideas charted at New Years 2019.
The 10 year yield has been following the path of lower yields in a lock step fashion, however the pace of declining yields is concerning. The 3 day looks like Niagara Falls
Where do we go from here?
Currently, the 10 yr yield is in the middle of the 1 (1.32%) and .786 (1.734%) retrenchment lines with a biased towards heading to 1.32.
Two possibilities.
1) Yield punches right through 1.32% and set set new lows.
2) More likely in my view:
"China/Trade" news comes along just in time to see yields reach or even briefly penetrate 1.32%, forming a triple bottom reversal, before reversing and heading back up towards 1.73%
From here, yields could see a rejection from 1.32% and begin heading back towards 1.734%.
RSI is oversold, also suggesting a reversal could come soon.
However, said reversal will be fleeting.
Sometime by or before reaching 1.734% I would expect yields to run out of steam and resume their decline before testing 1.32% and ultimately breaking lower.
There is no such this as a quadruple bottom/top so in this scenario, the yield will crash below 1.32% and 0% becomes a very real possibility in the next 12 months.
How does this tie into mortgage rates? The 10 year is a good general barometer for interest rates but Mortgage Backed Securities (MBS), while improving (rates dropping) the rate of improvement has been slower than what we would expect given the halving of treasury yield in just 9 short months.
The last time the FED starting cutting Rates..... Please have a look at the last time that the FED began lowering rates; they began with 25 basis points, and they ended at ZERO percent.
EURUSD | Wait for Correction then SELLWait for correction to the weekly central Pivot of next week, then Sell between the 21/34 EMA and below the weekly M3 of next week .
Conservative target is M1 of future weekly Pivot and agressive target is at S2 future weekly Pivot .
Shorting Euro is generally a good idea these days because you also get money (Swap) from most brokers for holding the position over night.
EURO LONG NOW OR NEVERLooking at the monthly EUR/USD chart the confluences are more so evident. The Stochastic Oscillator showing divergence of the lows. Price currently sitting just below the 61.8% Fib retracement, You can see the ascending channel beginning to form with our 1.3900 handle target being confluent with channel resistance and the D2 Fibonacci extension -61.8% respectively. I want a monthly close on Wednesday after the rate decision above the 6 month EMA and above the 1.1300 handle to confirm the start of the next leg up. This will also couple with a EURO Long summer rally. X MARKS THE SPOT
Main Eur/Usd Analysis The price touched the support area set at 1.112 with a post-conference Draghi spike. Causing the stop loss closing on our trade. After it return immediately to the closing level of yesterday's session .
Technically, this pair is in a stalemate taking the last six months as a time reference. In fact, the trend has no longer taken a specific direction, continuing to move between the support at 1,112 and the resistance at 1,144. If a time frame of a year and a half is taken into consideration the direction of EURUSD tends to fall. And now we do not see changes of scenery. For the next year and a half we expect the main trend to be maintained and that as final target the area 1.08/1.06 can be reached. This with minor cycles which could also lead to significant bounces.
A new cycle should start with the next FED meeting at the end of July. Despite the spike a few hours ago that caused a false break in the support area, we expect a drop in the US currency for the rest of the summer. The objective is the upward break in the resistance zone at 1,144. The maximum extension of this first mini-cycle could be around 1,158. This level is identified by the EMA200 weekly which acts as a dynamic resistance of extreme importance for the short term.
Fundamental Analysis
At a fundamental level, the scenario that is taking shape is the following. Draghi stated that expectations on future rates are not the best. In fact, it expects that rates could remain unchanged (or even cut) for at least another year. In addition we could see a second edition of quantitative easing. The government bond purchase program, is being studied in Frankfurt.
These statements, once implemented, will negatively weigh for the Euro, which will devalue against the other majors. So for the next year and a half, as we said, we expect a continuation of the main trend on this pair. On the other hand, however, on the Fed side, the devaluation of its currency should, make EURUSD carry out this bullish mini-cycle. The market and investors expect at least two cuts of a quarter of a point by the end of the year.
To summarize
We expect a climb in the very short/short term. Eur/Usd is ready for the bounce and we recommend repositioning long with the final target of the 1,158 (intermediate targets 1,132; 1,144). Stop at 1.103
GOLD: LONG TERM:BULLISH CONE-{SHORT TERM_WAVE 5->ABC CORRECTION}This is just a short update (1 minute read)
Gold has broken out of the ascending triangle due to the FED's recent dovishness . However, after July how likely would it be for the market to have new expectations ex. rates below 2% ? How long it would it take to get there?
Hence, it seems that GOLD is projecting a Bullish CONE in the Long-Term . In the Short term however, it might be reasonable to expect an ABC contraction at the strong resistance levels around 1475-1485 $.
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AUDUSD MACROeco + govt bonds. read to understand the chartAiming to support employment growth and to provide economic support RBA cut its cash rate by 25 bps to a low of 1% at the july meeting.
The Australian economy grew below trend at 1.8% this was followed by low consumption and income growth.
while increased investments in infrastructure is providing a pick up in activity in the resources sector.
a pickup in growth in household disposable income is expected to remove the uncertainty involves outlook for low consumption. employment growth is continuing strong while wages growth remains low. mortgage rates are at record lows and the housing market is stabilising.
big surplus in trade, while higher petro prices the last couple of month could have supported the growth rate for the H1 of the year.
with stabilising housing market, and further rate cuts that will support the economic conditions " credit markets, employment, consumption and so on..", i expect upside moves for the aussie, while slower growth for the US. AU10Y yield have been moving down, which means an increase in buying of government bonds, and therefore increased demand for aussie dollars.
Long at spot, for the rest of the year, and looking for hedging opportunity at 1:1
$IEF Bond Rally FadingDespite the market chatter of rate cuts by the Fed at the end of July, it seems that one area of the market that is not paying much attention are US 10-Year Treasuries ($IEF as a proxy).
After posting an "Evening Star" pattern on July 3rd, US Treasuries have been selling off since. As can be seen in the attached chart, the RSI has been showing negative divergence in relation to recent price rises, indicating that investor sentiment is fading, despite prices marching to record highs. Furthermore, the price is fighting hard to stay within the FR100 at $110.40, indicating that it could fall out of this area any day now.
Going forward, it appears that the rally in US 10-Year Treasuries is fading, and caution investors to take heed in this space
Is Eur/Usd like a bouncing ball ?Is Eur/Usd like a bouncing ball ? Yes it is. The price returned above the EMA 200 daily. This only after a year and a month that continued to travel under it.
At this time, however, the very short/short term scenario seems to have changed. With the break and the closure above the daily EMA200, it is very likely that this uptrend continues up to (at least) 50% of the Fibonacci retracement. Around 1.144, this area has been tested but it will be necessary to wait for the retest to proceed. In fact, an upward breach in this point will also make investors give up their short positions in favor of long ones. Those will be maintained until the next resistance zone set at around 1.16 (where the EMA200 weekly periods passes). A rejection will make investors increase the short positions of their portfolios.
For now the fundamental scenario is quite uncertain: on one hand there is the ECB which will continue to devalue the euro as the Eurozone is not yet ready increase the interest rate, but it needs further money injection to stabilize. On the other hand, the Fed also seems to have revised its monetary policy. By now the rate cut by a quarter of a percentage point is practically certain in July. In fact the market is already discounting it with this "collapse" of the euro. According to some analysts this have raised the probability that in 2019 there may be another 2 rates change, one in September and one at the end of the year. This has strongly destabilized the American currency, which in the last few weeks has lost ground against all the other majors.
Trading ideas
To conclude Eur/Usd like a bouncing ball and for this reason we recommend opening a long position with a target of 1.144. A trade that partially compensates the other open days ago in the opposite direction. For now, we keep the short trade in the portfolio and add a very short period trade to the target of 1,144.
Rates Down For a Few More Months...Then Up, Up and AwayThis leading diagonal ended as called earlier appears to be making an ABC correction that should end when C = A at 1.75
Then, the longer term upward correction should continue in a third wave, which I think will be a C wave ending this sub-minuet level correction of the larger minute correction of the larger trend.
C should be equal to A as measured from the end of the ongoing sub-minuet ABC correction.
Long 10 year for a couple months, then short 10 year (as rates rise and price falls) for the next year or so...
Good luck!
Short August Fed Fund FuturesAugust Fed Fund Futures are currently pricing a 27% chance that the Fed will cut by 50 basis points or 0.5% at the end of July. ( The July 31st meeting to be exact). Historically the Fed has only cut interest rates by 0.5% twice before in its entire history. Once in 1999 (we know what was happening then) and once in 2007 (we know what was happening then). Today, we don't see the same froth and insanity we did in those two bubbles in credit or otherwise. If the Fed did cut by 0.5% in July then I would also sell equities like crazy because it would mean the Fed sees something really bad compared to what markets see. There is NOT a Fed meeting in August.
The strategy is to sell the August Fed fund futures down to 97.78 which is where the market is simply pricing in ONE cut of 0.25% for July, with a stop at 98 for the aggressive traders, but lower for the less aggressive. Fed futures provide huge margin, so you can make almost 3x your required overnight margin maintenance even if the fed just cuts once. IF THE FED DOESN'T CUT, then you can make even more.
US 10 YR - Lower yields to come in 2019 and beyondLooks like loan officers will be selling 2 and 3 percent fixed mortgages before long. ;)
This is an update to my previous idea:
If you're a fan of Fibonacci, then you're already well aware of the significance of the 1.618 and .618 lines.
If you're not. Here's a super simple version.
.618 retrace is the most likely level to see a "bounce" if the overall trend is higher.
However, If .618 fails to hold, it's bearish and the next level of support is .786 followed by 1.0 representing a full retrace with new lower lows possible.
So, if the 10 year yield is to "bounce" and start heading higher, it basically has to do it here and now...
But that's probably not going to happen this time.
Globally, central banks of the world are already loosening. China and Europe leading the way.
The US economy is clearly showing signs of slowing. Tariffs, combined with record rain have devastated the Midwest farming region. (Expect higher food prices in 2020).
A rising dollar at a time where exports are desired more than ever, etc.
Ultimately, i expect the 10 yr yield to test the previous low of 1.32 we saw following the passage of Brexit.
And we could get there quick. Next 4-6 months or "before 2020" if that's easier.
ZN1!, A good show of charts over narratives.Ten year consolidates are looks higher. Bought the gap fill. Up all year so far, been a solid winner.
Copper / Gold ratio update - Treasury yields are roughly correctCopper / gold ratio is in line with 10 year Treasury yields at the moment.
Last year's big gap has corrected. So no actionable signal right now
Business Cycle update - Still more downside for Steel and RatesBusiness cycle still points to more downside in steel prices and treasury rates. Recent declines are too fast and such fast declines are usually followed by some bounce/consolidation before more downside.
USD/JPY: time to sellUSD/JPY: time to sell. Infact the price has broken down the last key short-term static support. It is identified by 61.8% of the Fibonacci retracement and placed at 109.35. After violating both key dynamic supports on weekly time frame (EMA 20 and 200 periods).
Technically the price is set to a further downtrend. It is continuing this short/very short-term downtrend. This should lead it as the last step to retesting the first really important support. It could be found on the 78.6% of the Fibonacci retracement (set at 104.9).
Before this, there are only static supports of secondary importance, which should not be able to bounce the price and reverse the trend. Obviously if the macroeconomic scenario does not change.
This fundamental scenario is always uncertain in the eyes of investors, who are turning to the Japanese currency, using it as a "safe haven". This trade tensions between the US and China are tracing back all the major world lists.
So on USD/JPY: time to sell and we will wait for a confirmation on the weekly closing before set any trades. If it closes below 109.3 we will position ourselves short; vice versa we will enter long with a very short term position as for us the main trend remains bearish.
Is silver a safe commodity ?Is silver a safe commodity ? This is the main question. In the short, maybe yes.
The price of silver has once again returned to lateralize in this channel. Between static support at 14.07 and static resistance at $ 14.75 an ounce. Until one of the two is violated, the trend remains flat. So speculators will tend to trade this commodity on very short time frames.
In any case, from a technical point of view, the silver seems to be directed towards the support just mentioned. In any case, from a technical point of view, the silver seems to be directed towards the support just mentioned. A test of the area around $ 14 will trigger a series of long entries by investors, who will keep the positions in the medium period, keeping them in their portfolios up to the maximum target between 16.50 and 17 dollars. Coinciding with the dynamic resistance zone identified by the EMA200 periods.
Basically, this raw material tends to start rising again immediately. The tensions caused by a trade war between the USA and China, the political and economic instability that plagues Europe and a possible return to an even more restrictive monetary policy by the United States, will lead investors to take refuge and differentiate their portfolio with assets such as silver and gold, or other precious materials.
Operative ideas
So, as we said before: Is silver a safe commodity ? Maybe with this strategy.
Having said that, it is advisable to start to position ourself long on the SILVER and increase if the price falls to the support indicated, from a purely technical point of view.
As a first target we can hypothesize the resistance of the channel in which the price is lateralized ($ 14.75). If it is broken to the upside, you will see an acceleration of the price up to the second target in area 15.23. The short-term final target is located close to $ 15.74 an ounce.
The price of eur/usd is moving now!The price of eur/usd is moving now! It stopped below the dynamic resistance identified by the EMA20 daily. So it did not complete the movement that we expected this week. The analysts had expected a slight decline in the US dollar against the other majors because of the FED conference, the announcement of the pay slips of the non-agricultural sector and the level of unemployment.
The price is going to look for the static resistance set around 1.13 on this pair. For after the announcement of Trump on the new duties that will be imposed on China, the USD has strengthened again. We close at Break Even the bullish position that we had opened on EURUSD.
Technical point of view
The main trend remained unchanged. The final target is reachable within a few months among the static supports set at 1.10-1.08. There wasn't the rebound we expected, is now very likely that it will continue in this downtrend.From here (1.12) the price should start to go down and re-test the non-key static support at 1.112 within a few sessions. Once tested and broken to the downside there will be confirmation of a channeling on the part of this change projected to the downside. Here the price will bounce between the upper and lower side until it reaches the minimum of the period which will presumably be the area around 1.08.
Fundamental point of view
Even the fundamental scenario supports this view. The European Central Bank will continue to adopt an expansive policy, devaluing the Euro. The FED does not intend to take steps back by cutting rates and reviewing its monetary policy.
Trading ideas
The price of eur/usd is moving now and the possible TPs that we will set for this pair are: -the first one on the support of the 1.112.-the second on that of the 1,104.-the third on the final target at 1.08 and coinciding with 78.6% of the Fibonacci retracement. The analysis will be invalidated at the break of the resistance zone in the 1.146 area.
