pebblewriter

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  • Update on Currencies: Jul 6, 2022

    EURUSD and DXY have officially tagged the targets we set for them several months ago.  Recall that in the Mar 7 Update on Currencies, we noted that the Ukraine invasion could accelerate DXY’s next leg up.

    The yellow .707 at 106.276 and white 1.272 at 106.741 both intersect the white channel top in late 2022 – but it seems unlikely that DXY would wait that long to make its move given the fluidity of the Ukraine invasion.

    We noted in April that DXY had broken out of its rising red channel and, based on our analog, was likely to reach the target in July – which is exactly what it did.

    The move was made possible, of course, by EURUSD crashing as we expected. From that same post:

    There are many potential targets between here and the H&S target of .785. The first is the 1.06 lows from 2020, followed by the 1.03 lows from 2016. Once those break down, of course, the euro will face the 1.000 support, also the yellow .618, possibly as early as mid-March.

    The ECB fought the breakdown as long as it could. With inflation and fragmentation both surging, the current plunge has caught many off guard.Then there’s the hapless BoJ, sitting quietly in the corner hoping that no one notices just how fundamentally broken it is. We’ll update all the big picture charts today, focusing on their connection to the plunge in equities over the next two weeks.

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  • The Last Stretch

    As our analog forecast, markets are getting clobbered today. As ugly as things look now, they’ll get much worse over the next two weeks.

    Note that DXY has reached our next upside target, and according to our EURUSD charts, probably isn’t done.

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  • Charts I’m Watching: Jul 1, 2022

    Futures are down slightly after being off nearly 50 overnight.  The relative calm is in contrast to significant moves in currencies and commodities.

    If our analog has anything to say about it, this is the proverbial calm before the storm.

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  • That Sinking Feeling

    As anyone on a budget could tell you, the headline of this post is hardly news. Income isn’t keeping up with expenses, and isn’t likely to any time soon.

    The Fed might prefer PCE over CPI because it ignores food and gas prices. But, it’s those very categories which are making it difficult for the average family to make ends meet.

    Futures were already off by 1.25% before the data hit the wires. Our analog, still on track, suggests the decline is going to accelerate in the coming weeks.

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  • Q1 GDP Slumps Further

    Stocks are essentially flat following a slight downward revision in Q1 GDP from -1.5% to -1.6% and export numbers which are truly circling the drain.

    The disappointing data came on the heels of the worst consumer confidence reading since Feb 2021 and three (so far) Fed presidents advocating a 75 bps rate hike in July.

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  • Charts I’m Watching: Jun 28, 2022

    Futures are up modestly, backtesting the 20-day moving average for a second day. Time to buckle up.

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  • Horse Trading

    The ECB’s annual forum is officially underway in Sintra, Portugal, with the market pondering the likely winners and losers. Christine Lagarde and Jay Powell are no doubt doing a little horse trading as both urgently need to address spiraling inflation and neither in a position to afford higher rates.

    The US can help mitigate inflation by ramping the USD higher. Europe, which faces a more complicated energy dilemma thanks to the war in Ukraine, is stuck between a rock and a hard place.  As the euro slides, the sharp spike in energy prices accelerates.

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  • But It Looks Like a Rally…

    Following a series of intraday ramps, futures shot up above the 10-day moving average as soon as the market closed. Bogus? Of course. But, the record will reflect (and the algos have responded to) a seemingly bullish move. Chase it at your own peril.

    Today’s tricks will include trying to get past the 10am New Home Sales and Michigan Consumer Sentiment data.

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  • Charts I’m Watching: Jun 23, 2022

    Futures just backtested the 10-day moving average and our analog trendline, leaving the door open for a pullback – as long as VIX doesn’t get clobbered again.

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  • Oil: Back in the Groove

    WTI spent May 2020 through Feb 2022 in a fairly well-defined channel (below, in white) as it recovered from its pandemic lows. It broke out on Mar 1, however, topping 100 and taking only 5 sessions to reach our 130 target which wasn’t schedule to happen until December.Since then, it’s seen a series of fits and starts, holding an internal trend line and flirting with reentering the white channel. It’s flirting no more. Against the backdrop of a gas tax holiday and significant demand destruction, it has dropped through the channel top and the 100-day moving average.

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