pebblewriter

Tag: EURUSD

  • Inflation Heads Higher: Apr 10, 2024

    March CPI came in at 0.4% MoM for both headline and core (versus 0.3% expectations for both), hotter than expected for the second month in a row.  YoY headline registered at 3.5% versus expectations of 3.4% and 3.2% in February and core came in at 3.8% (unchanged from February) versus expectations of 3.7%.

    As we expected, inflation continues to be buttressed by strong YoY energy, shelter and services prices. Our gas vs inflation model remains on track.

    Futures came within a few points of our next downside target on the print.

    And, algos are finally recognizing that a string of 0.4% monthly prints can turn into an annual print much closer to 5% than 2%.

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  • Charts I’m Watching: Apr 9, 2024

    Futures are moderately higher on the eve of the CPI print that will likely determine the rate cut picture for the next few months.

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  • Charts I’m Watching: Apr 8, 2024

    Futures are up modestly as traders look ahead to this week’s important data dumps: FOMC minutes and CPI on Wednesday, initial claims and PPI on Thursday, and Friday’s U of Michigan consumer sentiment.

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  • Another Blowout Jobs Report

    NFP came in at 303K vs 200K estimates, a huge beat which, combined with a decline in the unemployment rate, argues against any near term rate cuts.

    ES is all over the map this morning, but has given up much of its overnight ramp and is approaching our next downside target. With CPI coming out next week and a likely military escalation in the Middle East, ES will do well to hold its 50-day moving average.

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  • Charts I’m Watching: Apr 3, 2024

    Futures are off this morning as algos digest the prospect of persistently high inflation and rising interest rates.

    The 20-day moving average continues to matter.

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  • Update on Currencies: Apr 2, 2024

    We’ve seen this movie before. For years, the yen carry trade has been a critical element of the equity price support toolbox. But, all good things must come to an end. When the yen gets too cheap, Japanese inflation becomes problematic as the cost of importing food and energy soars.

    Aside from exposing the ludicrousness of its monetary policy, Japan’s recently unveiled 0.0-0.1% interest rate regime speaks volumes to the pressures of trying to balance economic reality with the desire for ever higher stock prices.

    Slamming the yen’s value works fine – to a point. But, as rising food and energy costs pressure the real economy, something has to give.

    Enter the euro.

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  • The Big Picture: Mar 25, 2024

    Many bears have simply given up betting on a downside that, despite plentiful recession indicators, feels increasingly unlikely. Since the S&P 500 completed its Inverted Head & Shoulders pattern back in December, the index has piled on nearly 14% [see: A Look Ahead at 2024.] The many, many bulls point to a generally strong economy, healthy employment picture, and the transformative potential of AI to justify the market’s historically high valuations. The bears see things differently.

    For an excellent summation of the bears’ case, take the time to read John Hussman’s Universal Capitulation and No Margin of Safety.  He makes some very compelling points regarding valuations…

    We’ve observed greater extremes only twice in U.S. financial history: the week ended December 31, 2021, and the week ended August 26, 1929.

    Other market gurus have also rung alarm bells, from Bill Gross’ warning of “excessive exuberance” to Chris Senyek’s concerns about the “potential formation of another late-90’s-style TMT [technology, media and telecom market] bubble” to Jeff Gundlach’s admonition that “this feels a lot like 1999…there’s a lot of risk in markets that have run this far.”  Even perennially bullish Warren Buffett is sitting on $168 billion in cash, and recently wrote that “markets now exhibit far more casino-like behavior than they did when I was young.”

    We’ll take a look at some of the most compelling economic data and charts that should provide guidance on the remainder of 2024 and beyond.

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  • Breakdown/Breakout

    In a repeat of the most effective algo move of the past 10+ years, VIX broke down following the Fed’s no-news rate decision and press conference yesterday.

    As always, this allowed equities to leapfrog an area of stubborn overhead resistance. continued for members… (more…)

  • FOMC Day: Mar 20, 2024

    Markets are at all-time highs as we await the FOMC’s latest decision on interest rates.

    Note that we’re going on 21 months of a yield curve inversion, the longest since August 1978 to May 1980. Interestingly, the market was flirting with new, all-time highs back then as well.

    Also interesting, that was one of many inversions that was followed by a recession. In fact, every inversion was followed by a recession.

    Is there any reason to expect that this time will be different?

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  • Hey Fed: You Break It, You Fix It

    In his January press conference, Fed Chief Jay Powell accepted some responsibility for the sharp rise in housing prices during the pandemic.

    “We’re also well aware that when we cut rates at the beginning of the pandemic, for example, the … housing industry was helped more than any other industry.”

    This statement implies that, were it not for the pandemic, the current inflation picture wouldn’t be burdened by sticky, elevated housing prices. But, that’s just not true. The problem developed long before anyone heard of COVID-19. During both the 2000-2003 recession and (especially) the 2007-2009 recession, the Fed slashed interest rates in order to save the housing market from steep price slumps. The Fed’s belief that it could eliminate the natural cycles which have always existed in our economy ultimately led to even worse fluctuations. The current housing crisis was brought on by fifteen years of historically low interest rates – not just the pandemic rescue.

    Now, the Fed says they don’t have the tools to fix the problem they created. That much is probably true. Runaway prices usually require a recession to bring them back to trend. But, the least the Fed could do is own up to the problem that they themselves created.

    Futures are off moderately, testing the 10-DMA as we approach the open. But, of course, VIX hasn’t been hammered back below its 200-DMA yet.

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