Mortgage applications declined once again in the past week with both purchases and refinancing activity falling as the average rate of the most popular US home loan climbs up to 7.41% – its highest since December 2000.
This article was written by Justin Low at www.forexlive.com.
This builds on his remarks from yesterday here where he touted that there is a chance for more „significant“ rate hikes.
This article was written by Justin Low at www.forexlive.com.
Even though Treasury yields are not making new highs today, gold is once again slumping as the dollar remains steady overall. Of note, price is dipping below $1,900 and that is starting to stir up some nerves among buyers surely.
The previous dip earlier this month was held at the $1,900 mark but with it potentially giving way today, it raises fresh concerns about gold’s recent resilience. The August lows around $1,885 will be the next big line in the sand to watch out for as a break there leaves little in the way of a steeper decline in gold.
The breakout in Treasury yields since last week is definitely a key trigger but the good thing for gold at least is that yields are not really racing higher in the past two days. 10-year yields in the US are still hovering around 4.50% to 4.55% and that is keeping broader market sentiment on edge, with gold being no exception to that.
Month-end and quarter-end flows could still muddy things up this week but in the bigger picture, if yields continue to stay higher, this little technical blip lower could end up being a key catalyst for the next correction lower in gold prices. Watch this space.
This article was written by Justin Low at www.forexlive.com.
Markets:
It was a quiet session for the most part, mostly due to a lack of headlines during the session.
There were no major economic releases, so market players were left to their own devices in European trading. The dollar is keeping steadier overall as equities are seen retreating again today, with sentiment continuing to be rocked by higher bond yields.
The latter was more of a factor earlier on, with 10-year Treasury yields briefly hitting 4.56% – its highest since 2007 – before keeping around 4.50% currently.
USD/JPY also nudged up to a high of 149.20 before a quick verbal pushback by Japan finance minister Suzuki saw the pair fall back to flattish levels now at 148.88 on the day.
Elsewhere, EUR/USD is sticky around 1.0600 with large option expiries at the figure level in play while AUD/USD is down near 0.6400 as the risk mood remains iffy at best, falling back after a decent showing by Wall Street yesterday.
This article was written by Justin Low at www.forexlive.com.
US:
Japan:
USDJPY Technical Analysis –
Daily Timeframe
On the daily chart, we can see
that the USDJPY pair is now getting close to the 150.00 handle, which is what
many market participants have been targeting, and it’s also near the upper
bound of the rising channel. We might finally see a decent correction from
those levels, but the market will need a good catalyst to kick off the
pullback. As long as the US data remains strong and the Japanese data doesn’t
show a pick-up in wages, we might see further upside in the bigger picture.
USDJPY Technical Analysis –
4 hour Timeframe
On the 4 hour chart, we can see that the USDJPY has
been diverging with the
MACD for a
long time and this is generally a sign of weakening momentum often followed by
pullbacks or reversals. The price action has also formed what looks like a rising wedge, which
is a reversal pattern. The sellers are likely to step in here around the upper
bound of the wedge and target the break below the lower bound of the pattern
which is eventually likely to cause a selloff into the 145.00 support.
USDJPY Technical
Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that in
case of a pullback, the buyers are likely to lean on the previous resistance turned
support around the 148.45 level where there’s also the confluence with
the 38.2% Fibonacci
retracement level and the 4-hour red 21 moving average. In
case of a break lower, the sellers will pile in even more targeting the lower
bound of the wedge.
Upcoming Events
Today we will see the latest US Consumer Confidence
report which surprised to the downside the last time and weighed on the USD in
the short term as Treasury yields fell. On Thursday, we will have another US
Jobless Claims data which keeps on showing strength in the labour market
maintaining the hawkish pricing in interest rates expectations. Finally, on
Friday, we will get the latest US PCE data and a few Japanese economic releases
such as the Tokyo CPI, the Unemployment Rate and Retail Sales.
This article was written by FL Contributors at www.forexlive.com.
We all know that for the Fed to keep with its higher rates for longer policy, it needs the US economy to keep as solid as it is now in the months or even year ahead. In that lieu, I would argue that the most confounding thing about the US economy in the last year has been the resilience of the US consumer. But is all that about to change?
This is pretty great chart (h/t @ Mayhem4Markets) and it speaks to how the pandemic savings is quickly depleting in the US and already has for the lower and middle income households i.e. bottom 80%.
For one, that could translate to weaker spending in the months ahead as consumers run out of excess savings to spend – especially for non-essential goods.
In the face of more subdued consumption and spending, that will in turn impact businesses and spill over to softer labour market conditions perhaps. So, don’t underestimate the chain effect this may have.
Essentially, the US consumer is the ribbon that ties everything together for the Fed right now. If that comes undone and the economy starts to weaken significantly, that will throw the Fed into a bit of a disarray in trying to manage its higher for longer narrative.
And the key question now is, as pandemic savings run out, how soon will this turn into material weakness in the US consumer?
So far, we’re not seeing much signs of that but it is worth keeping an eye out for just in case. It’s all about the data right now but it is important to recognise the potential drivers and forces that may come into play in the months ahead and this is one of that. And a rather critical one at that I might add.
This article was written by Justin Low at www.forexlive.com.
Momentum trading is grounded in the idea that securities
that have recently performed well will continue to do so in the short term,
while those that have underperformed will continue to lag.
A key issue in momentum trading is to identify the trend as
early as possible to maximize the strategy’s returns and avoid entering close
to a trend reversal when the returns would be negative. As such using intraday data indicators as opposed to end-of-day
indicators is essential in generating trade entry and exit alerts.
Price Patterns and Breakouts
Technical traders and analysts use chart patterns,
indicators, and technical analysis tools to identify and confirm these
breakouts.
Resistance or Support Level: A breakout occurs when the
stock price breaches a well-defined resistance level or support level.
Resistance levels are price points where selling pressure has historically been
strong, preventing the stock from moving higher. Support levels, on the other
hand, are price points where buying interest has historically been strong,
preventing the stock from moving lower.
Symmetrical Triangle Breakout: This occurs when the stock’s
price moves out of a symmetrical triangle pattern, which typically signals a
continuation of the prevailing trend.
Head and Shoulders Breakout: A head and shoulders pattern
is a reversal pattern. A breakout below the neckline of this pattern can
indicate a bearish reversal.
Cup and Handle Breakout: This pattern resembles the shape
of a tea cup. A breakout above the handle portion is considered bullish.
Double Bottom or Double Top Breakout: These patterns
indicate potential reversals. A breakout above the double top or below the
double bottom can signal a change in trend direction.
Volume Confirmation: One of the critical
aspect of a breakout is that it should be accompanied by an increase in trading
volume to confirm that there is significant momentum behind the move.
This is typically done on a very granular level using
shorter timeframes than the indicator timeframe. For example, if a derivatives trader was generating signals using
5-minute options data bars then the volume analysis should be
using 1-minute or even tick-level data to ensure there was sustained volume
during the period and not just a single large trade.
Moving Averages
Moving averages help traders in filtering out the noise of
trading patterns and identifying key trend lines. A typical setup is to
generate a fast a slow-moving MA (the slow MA should be approx. 5x the fast MA)
and use the crosses as signals.
For example, the 5-minute moving average and a 30-minute
moving average (calculated using 1-min bar data) with a buy signal generated
when the 5-min average crosses above the 30-min average. It is important to use
the spot the clarifying the trade signals, so the spot should always be above both
moving averages for a buy signal.
Relative Strength Index (RSI)
RSI is a momentum oscillator that measures the speed and
change of price movements. It is the ratio of the total gains versus losses in
a given period (typically 14-time units such a 1-minute or 30-minute
bars).
A ratio
above 70 typically indicates an overbought situation and below 30 an oversold
situation.
RSI is
often combined with moving averages to confirm a signal and avoid trading just
prior to a trend reversal.
Overall,
momentum trading is most effective during periods when there is little news
driving market moves and the trading is driven more by intraday supply and
demand imbalances.
This article was written by FL Contributors at www.forexlive.com.
US:
Australia:
AUDUSD Technical Analysis –
Daily Timeframe
On the daily chart, we can see that the AUDUSD pair
eventually rallied back into the 0.65 resistance and then
sold off following the more hawkish than expected FOMC dot plot. The price
bounced on the support, but it’s now rolling over again as the sellers continue
to be in charge. A break below the support should open the door for a fall into
the 0.62 handle.
AUDUSD Technical Analysis –
4 hour Timeframe
On the 4 hour chart, we can see that the recent
bounce got rejected from a broken trendline which
acted as resistance and started to fall again. The moving averages are
crossed to the downside, so the momentum remains bearish, and the natural
target should be the support of the range at 0.6370. That’s where we can expect
the buyers to pile in again with a defined risk below the support to target a
rally into the 0.65 resistance. The sellers, on the other hand, will want to
see the price breaking below the support to pile in even more aggressively and
target the 0.62 handle.
AUDUSD Technical Analysis –
1 hour Timeframe
On the 1 hour chart, we can see that the
price got rejected from the downward trendline and the 61.8% Fibonacci
retracement level recently. The trend on this
timeframe is clearly bearish as the price has been printing lower lows and
lower highs. The break below the most recent lower low at 0.6404 suggests that the
sellers are likely to take the pair into the 0.6370 support. On the other hand,
if the price breaks above the trendline, we should see the buyers piling in to
target the 0.65 resistance.
Upcoming Events
Today we will see the latest US Consumer Confidence
report which surprised to the downside the last time and weighed on the USD in
the short term as Treasury yields fell. On Thursday, we will have another US
Jobless Claims data which keeps on showing strength in the labour market
maintaining the hawkish pricing in interest rates expectations. Finally, on
Friday, we will get the latest US PCE data.
This article was written by FL Contributors at www.forexlive.com.
„And so if we’re lacking data that the Fed can officially sink its teeth into, then that’s going to lead to an inability to make a decision about the path for rates. The lens of the Fed becomes foggy.“
The comments are from MS‘ Ellen Zentner in a Bloomberg TV interview.
Congress will shut down next weekend a deal is not struck. Hardline Republicans are calling for tighter spending controls, a significant hurdle in reaching an agreement to get the legislation passed.
This article was written by Eamonn Sheridan at www.forexlive.com.
Last week the Fed kept interest rates unchanged as
expected while striking a hawkish tone via the Dot Plot. In fact, the Fed not
only sees another rate hike by the end of the year, but also much less rate
cuts by the end of 2024. Fed Chair Powell has also
admitted that the soft-landing scenario is not his base case at the moment and
stronger than expected economic data may require additional tightening. For
now, the economic data remains strong with Jobless Claims crushing
expectations last week, which is not what the Fed wants to see.
Nasdaq Composite
Technical Analysis – Daily Timeframe
On the daily chart, we can see that we had a big
selloff following the FOMC meeting and the Nasdaq Composite has now reached a
key support zone
around the 13174 level where we have the confluence with the
major trendline and the
38.2% Fibonacci retracement level.
This is where we can expect the buyers to step in with a defined risk below the
trendline to position for a rally into the highs.
Nasdaq Composite Technical
Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that the Nasdaq
Composite broke out of the bearish flag defined
by the minor counter-trendline, and fell all the way down to the support level.
The target for the pattern is generally the equal extension of the first leg
which stands roughly around the major trendline. At this point, the sellers
will want to see the price breaking below the trendline to pile in with even
more conviction and extend the fall into the 12274 support.
Nasdaq Composite Technical
Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that in
case we get a bounce around the support or the trendline, the sellers will have
an opportunity to sell the pullback around the black trendline where they will
have the confluence with a previous swing level, the Fibonacci retracement levels
and the red 21 moving average. The
buyers, on the other hand, will want to see the price breaking above the trendline
to invalidate the bearish setup and position for a rally.
Upcoming
Events
This week is pretty bare on the data front with just a
couple of notable economic releases. Tomorrow, we will get the latest US
Consumer Confidence report while on Thursday we will see again the US Jobless
Claims data. On Friday, we conclude the week with the US PCE data.
This article was written by FL Contributors at www.forexlive.com.