Russell Shor

The US30 dropped 165 points yesterday. This followed the ADP surprise to the upside, showing 235K jobs were created (153K - forecast). This prompted renewed rate hike fears, given the Fed concern over wage inflation.

Oil has been clobbered over the last two trading days. UKOil, FXCM’s Brent CFD, and USOil, its WTI CFD, have both fallen into their bearish channels between the lower blue and red bands. If the red Bollinger bands expand, volatility will be increasing

Gold continues to climb, notching up prices last seen in June of last year. The precious metal is positioned between its upper blue and red bands on its daily chart. This is its bullish channel. Its daily stochastic has crossed above 80 (green rectangle). Maintaining these levels will imply that a bullish underlying momentum is present and the greater the prospect for higher prices. Gold’s strength corresponds with dollar weakness…

The GER30 daily chart is trading in its bullish area between the upper blue and red bands. The Bollinger bands are expanding (black ellipses). This suggests increasing volatility. The hourly chart on the right has underlying support at the central pivot, P. If the trend-following EMAs and momentum based stochastic cross up (green ellipses), this will be viewed as a bullish development. If stochastic makes its way above the 80…

The daily gold chart has charted a series of higher troughs followed by higher peaks (green zig-zags). We regard this as an uptrend. The precious metal may look to chart its next daily impulse up (daily +ve impulse scenario). We consider the hourly chart. Following the BoJ’s announcement that it will defend the 50bps level, up from the 25bps level, the precious metal’s trend-following EMAs and the momentum based stochastic…

The BoJ surprised markets by shifting their JGB defense from 0.25% to the 0.5% level. In response, the USDJPY declined by 2.6% to 133.27 as the JGB yield rose to a high of 0.432%. The central bank has used yield curve control since 2016 to manage interest rates at relatively low levels. The JPN225 also dropped as markets pondered the higher rates that companies would now pay on their debt,…

Fed raised by 50bps. Less aggressive, but higher TR upped to 5.1 (4.6). Fed chair was hawkish. ECB even more hawkish than Fed. 50bps ongoing and QT announced. Hawkish ECB is a more convincing case — more ground to cover, but more difficult to deliver because of the fractious nature of the bank. BoE delivered 50 bps and was the least hawkish of the three. There was a three-way split:…

Inflation is moderating, yet the Fed remains aggressive in policy. We attribute a reason for this to the tight labour market.

Last week’s dot plots suggest rates will move higher, with the terminal rate adjusted upwards from 4.6% to 5.10%. The Fed chair’s tone during the media conference was hawkish. Risk markets were less than impressed. They sold off heavily for the rest of the week. The market thinks that Fed policy is too aggressive.

Today’s poor economic data will reinforce the market’s expectation of a Fed pivot. This despite yesterday’s hawkish Fed tone. Core retail sales printed at -0.2% MoM against and expectation of 0.2% and last month’s 1.2%.

The ECB has followed the Fed and the BoE with its own 50bps hike. It also announced quantitative tightening from March 2023. Tone was hawkish, with the statement saying, “interest rates will still have to rise significantly at a steady pace to reach levels that are sufficiently restrictive to ensure a timely return of inflation to the 2% medium-term target.”