Some interesting points from ING about 10-year yields, and the risks they see that could take us back to 5%.

• Unlike previous cycles where the 10-year yield typically decreased after the Fed’s rate peak, in the current cycle, the yield has actually increased, hitting a cycle high of 5% in October 2023, three months after the presumed rate peak
• Contrary to expectations following a „Fed peak moment,“ market rates have not decreased significantly. This is attributed to strong labor market data and intermittent increases in inflation.
• Historically, market rates tend to increase temporarily when the Fed makes its first rate cut, as market participants sell on the fact. However, as the Fed continues to cut rates, the 10-year yield eventually decreases and finds a new bottom.

• The current cycle has not seen the typical initial decrease in the 10-year yield following the Fed’s rate peak, partly due to a relative shortage of longer-dated Treasuries from the Federal Reserve’s pandemic-induced holdings.
• The article highlights uncertainty regarding whether the Fed has actually peaked, as there has been no clear data justifying a rate cut, which would confirm the peak.
• The ongoing strength of the economy and anticipated inflation readings are expected to maintain or even increase the pressure on the 10-year yield, possibly pushing it to retest the 5% level or even higher.

Useful info to consider. At the end of the day it’s all still about inflation. There is a lot that can happen before the Fed’s June meeting in terms of the data, and the data will lead the way.

This article was written by Arno V Venter at www.forexlive.com.

UPCOMING EVENTS:

• Monday: Japan
  Wage data, Swiss Unemployment Rate.
• Tuesday: US
  NFIB Small Business Optimism Index.
• Wednesday: Japan
  PPI, RBNZ Policy Decision, US CPI, BoC Policy Decision, FOMC Minutes.
• Thursday: China
  CPI, ECB Policy Decision, US PPI, US Jobless Claims.
• Friday: New
  Zealand Manufacturing PMI, New Zealand Retail Sales, UK GDP, UK Industrial
  Production, US University of Michigan Consumer Sentiment.

Monday

The Japanese Average Cash Earnings Y/Y are
expected to rise to 3.0% vs. 2.0% prior. The JPY might get bid on a strong
figure as the BoJ continues to see the achievement of their inflation target
and mentioned that another rate hikeis dependent
on the data. The timing for such a
move remains uncertain though with July and October being on the table,
although the latter is the most probable one. Overall, even if we see a
beat, the market will likely want to wait for the US CPI on Wednesday as that
is what will likely decide the USD trend for the following days and weeks.

Wednesday

The RBNZ is expected to keep the OCR
unchanged at 5.50%. As a reminder, the central bank dropped
the tightening bias in the last policy
decision stating that interest rates will need to remain at restrictive level
for a sustained period of time. There’s nothing to expect from this week’s
decision as the RBNZ is looking to normalise policy in 2025 while the
market sees the first cut coming in August.

The US CPI Y/Y is expected at 3.4% vs.
3.2% prior, while the M/M measure is seen at 0.3% vs. 0.4% prior. The Core CPI
Y/Y is expected at 3.7% vs. 3.8% prior, while the M/M reading is seen at 0.3%
vs. 0.4% prior. This is probably one of the most important inflation reports
of 2024 as the recent data has already hit the Fed’s confidence and another
hot release will likely trigger a change in the near-term policy outlook,
especially following a good labour
market report on Friday.

Fed’s
Waller recently said that he wanted to see
a couple of good reports to consider a rate cut in June, so we just need
this week’s report to be hot to make the market to price out the June cut.
This will most likely have big repercussions on the markets with Treasury
yields and the US Dollar rallying and the stock market correcting lower. On the
other hand, a cold report should trigger the opposite reaction with the stock
market hitting new highs and the Treasury yields and the US Dollar coming under
pressure as the risk-on sentiment ensues.

The BoC is expected to keep interest rates
unchanged at 5.00%. Their policy decision comes right after a weak labour
market report on Friday where we saw
job losses and the unemployment rate jumping to 6.1% from the prior 5.8%
figure. StatCan said that the spike in the unemployment rate is tied to an
additional 60,000 people looking for work or on temporary layoff in March as
the agency reported recently that population growth hit its fastest rate since
1957.

The central bank is also focused on wage
growth and unfortunately for them, the rate increased again to 5.1% from the
prior positively revised 5.0% rate. On the positive side, the latest inflation
report missed expectations across the board
with notable easing in the underlying inflation measures. This puts the central
bank in a difficult position although they should have enough reasons to start
leaning more dovish. The market expects the first rate cut in June.

Thursday

The ECB is expected to keep interest rates
unchanged at 4.00%. The central bank will likely set the stage for the June
rate cut as policymakers have been touting such a move for quite some time
and we even got the uber-hawk Holzmann joining the team recently. The latest Eurozone
inflation report missed expectations for
both the Headline and Core measures although the M/M readings were both very
high and Services inflation got stuck at 4% since November 2023. Nevertheless,
the data before the June decision will have the final word as the ECB is also
waiting for the Q1 2024 wage data to give it a bit more confidence.

The US PPI Y/Y is expected at 2.3% vs.
1.6% prior, while the M/M measure is seen at 0.3% vs. 0.6% prior. The Core PPI
Y/Y is expected at 2.3% vs. 2.0% prior, while the M/M reading is seen at 0.2%
vs. 0.3% prior. The data will come after the US CPI report, so it’s unlikely
to see it changing whatever trend will be set by the CPI release.

The US Jobless Claims continue to be one
of the most important releases every week as it’s a timelier indicator on the
state of the labour market. This is because disinflation to the Fed’s target is
more likely with a weakening labour market. A resilient labour market though
could make the achievement of the target more difficult. Initial Claims
keep on hovering around cycle lows, while Continuing Claims remain firm around
the 1800K level. Initial Claims are expected at 215K vs. 221K prior, while
there’s no consensus at the time of writing for Continuing Claims although last
week we saw a decrease to 1791K vs. 1810K prior.

This article was written by Giuseppe Dellamotta at www.forexlive.com.

Dow jones (DJIA) technical analysis: bearish trend watch

Investors and traders, a key technical signal in the Dow Jones Industrial Average (DJIA) points to a potential bearish trend. Let’s dive in:

• Broken trendline: the DJIA has broken below a significant trendline support, indicating a shift toward selling pressure and a possible downward trend.

Looking ahead: Bullish vs bearish price targets for Dow Jones

• Bearish target: if the price fails to cross back above the broken trendline, I’m looking at a potential downside target of 38,600.
• Bullish target: conversely, if the DJIA manages to cross back above the trendline, a bullish move toward 39,300 could be in play.

Stay informed with ForexLive.com

Keep a close eye on the DJIA! Resources like ForexLive https://www.forexlive.com/ offer up-to-date news, analysis, and expert insights to help you navigate the market. Trade the Dow Jones at your risk only.

This article was written by Itai Levitan at www.forexlive.com.

Friday’s jobs report from the US, nonfarm payrolls, was sizzling:

• Forexlive Americas FX news wrap: US dollar jumps on hot NFP and then gives it back

Bond giant Pacific Investment Management Company (PIMCO) has dialed back its forecast for Federal Open Market Committee (FOMC) rate cuts this year. The previous PIMCO projection was for 3, but they’ve dialled that back to 2 now as thier ‚base case‘. A PIMCO rep spoke with Reuters after the NFP numbers on Friday:

• this means a little bit less out of the Fed
• the economy is proving for now that it can handle higher rates

Checking FedWatch you’ll see the pricing for a June rate cut is now bordering on a coin toss. I reckon the likelihood is closer to 10% than 50%. If you’ve been following along with my ’no June rate cut for you!‘ shouting this’ll come as no surprise.

FOMC members are piling on the later cut bandwagon:

• Fed’s Logan: It’s much too soon to think about cutting interest rates

• Fed’s Waller says may need to hold current rate for longer than expected, no rush to cut
• Waller’s remarks have pumped up the US dollar
  • (ps still is too)
• More Fed’s Waller: The economy has supported the cautious approach by the Federal Reserve

• Still more from Fed’s Waller: If unemployment goes up no reason to panic
• Fed’s Bostic say he now anticipates only one rate cut this year
• If economy continues to be healthy, why would we cut rates

And, I like this reasoning:

• Global economic recovery, blistering commodities rally … threatening to derail the Fed

FedWatch update:

This article was written by Eamonn Sheridan at www.forexlive.com.

Oil prices have been moving up since late December 2023 and are now (for Brent) forming a ‚Golden Cross‘. This is a sign that technical analysts like, when a shorter-term moving average (MA) crosses above a longer-term MA:

• 50 and 200 day simple moving averages (SMAs) are commonly used, but those parameters are not chiselled in stone somewhere

Brent has thrown out the signal now, WTI is not quite there. I’ve used the free charts on our site, that you can access here. Or of course, use your own charting program as you prefer.

Brent below. Check out the link the chart above and use the ‚BRENT‘ code shown in the chart. Its not really visible on the screenshot below but around $91 there will be a lot of work to be done (ie resistance).

WTI:

This article was written by Eamonn Sheridan at www.forexlive.com.

I am looking for Bitcoin to achieve a new all time high in the near future. See where it might find sellers.

🔍 Technical perspective for the crypto king:

• As I delve into the weekly Bitcoin chart, it’s clear that the bullish momentum continues to surge. I’m setting my sights on a $79k target, driven by key technical formations and recent price dynamics.

🧲 Double resistance magnet:

• We are on the brink of engaging with a double resistance magnet, which historically attracts price due to its technical significance. This includes:
  • A formidable red resistance line that has been tested twice before: marking the weekly highs of April 12th, ’21 and October 18th, ’21.
  • The upper boundary of the prominent yellow channel.

🚀 Current trends for BTCUSD:

• Regaining Historic Heights: Bitcoin has impressively recaptured its significant historical all-time high of $69,000.
• Telling Tail Signs: The pronounced tails on this week’s candlestick and those from two weeks ago reveal underlying buying pressure, suggesting that lower prices are being actively rejected.

📊 Market behavior in crypto: Still bullish:

• The upward trend is evident through the ascending channel colored in yellow, indicating sustained positive momentum.
• The market is consistently carving out higher lows, signaling enduring strength in the uptrend.
• Our eyes are now on the resistance line that’s being challenged for the third time, potentially setting the stage for a pivotal breakout or a strategic retracement.

📈 Strategic considerations when trading bitcoin:

• Await a definitive push above the current all-time high to consider bullish entry points.
• Stay cautious and observant as the market approaches these significant resistance levels.

⚠️ Caution for bitcoin short sellers here (near the previous all time high):

• Short sellers might want to hold their positions, especially with the anticipation of stop orders being triggered above the all-time high, fueling a further surge in price.

🌐 Message to ForexLive.com community:

• Keep abreast of the evolving market landscape and make informed decisions. Have you not registered for free for receiving updates?
• Remember, trading is inherently risky, and it’s crucial to engage with the market based on thorough analysis and personal risk appetite.
• For continued updates and market insights, check out ForexLive.com.

This article was written by Itai Levitan at www.forexlive.com.

• US March non-farm payrolls +303K vs +200K expected
• Canada March employment -2.2K versus +25K expected
• US February consumer credit outstanding +14.12B vs +15.0B expected
• Fed’s Bowman: It is not yet time for us to consider cutting rates
• Bowman Q&A: Progress on lowering inflation has stalled
• Baker Hughes US oil rig count +2
• Fed’s Logan: It’s much too soon to think about cutting interest rates
• Hezbollah leader talks tough after Israeli strike on Iran’s consulate. Gold spikes
• White House’s Brainard: I think this is a very encouraging jobs report
• Fed’s Barkin: That’s quite a strong jobs report
• Tesla gives up on plans to build a low-cost car – report
• Italian central bank slashes 2024 inflation forecast in another sign of coming rate cuts

Markets:

• Gold up $33 to $2323
• WTI crude oil up 14-cents to $86.73
• US 10-year yields up 8.1 bps to 4.39%
• S&P 500 up 57 points to 5204
• USD leads, CAD lags

As we wind down the day, the FX changes are small but that doesn’t tell the whole story.

The US dollar jumped 40-50 pips on the non-farm payrolls report as the data and details were roundly hot. The only thing that kept the unemployment rate in check was a rise in the participation rate. Wages would also have been hotter if not for some rounding and a revision to the prior.

Despite that, equity future held in positive territory and that was a sign of things to come. The quirk was that yesterday there was a rout in risk trades late in the day on Middle East war fears and that began to unwind. With that, the dollar eventually gave back all it’s NFP gains and equities roared.

There was no lack of Fedspeak and certainly tilted more hawkishly but the market is still in a data-dependent mood. June Fed probabilities have dwindled to close to 50% and there are 65 bps in cuts priced this year compared to 70 pre-data. Bonds were also beaten up late in something to watch for the week ahead, especially with CPI on deck.

Perhaps though, the market is looking abroad where government spending is lower and inflation is falling back to target (or lower). The Bank of Italy slashed its inflation forecasts today and Canadian employment was surprisingly weak. The US appears to be more of an outlier and that means that once fiscal stimulus dries up, so will the outperformance. In the short-term that should be a USD tailwind but eventually that will reverse as the bill is paid.

As for the loonie, it fell to the worst levels of the year before bouncing in the broad USD slump later and with the help of new highs for oil.

This article was written by Adam Button at www.forexlive.com.

Canada’s jobs report showed a decline of 2.2K jobs in February, worse than the +25K reading expected. The headline is even worse than it looks when you consider runaway growth in Canadian immigration that led to a rise in the unemployment rate to 6.1% from 5.8%. That’s the highest since 2017.

„The cracks that had been slowly emerging within the Canadian labour market suddenly got much wider in March,“ writes CIBC. „By sector, weakness in headline employment reflected declines in accommodation & food services and retail &
wholesale, suggesting that the sluggishness in consumer spending is impacting hiring plans.“

They note that population grew by 91K in the month with the labour force up by 58K.

„With GDP expected to weaken in Q2 following the surprisingly strong start to the year, we
would expect to see further softening in the labour market with the unemployment rate peaking close to 6.5%. However,
interest rate cuts starting in June should bring a reacceleration in growth, which will help to stabilise the labour market in
the second half of the year and into 2025,“ CIBC writes.

The market is pricing in a 74% chance of a June 5 rate cut and 73 bps of easing this year.

This article was written by Adam Button at www.forexlive.com.

• Credit up $14.12 billion
• Prior 19.49B (revised to 17.68B)

Lending was a tad cooler in February so maybe there are signs that high rates are working? Those 14% rates on used car loans aren’t exactly enticing.

This article was written by Adam Button at www.forexlive.com.

Oil cooled somewhat into the close after hitting the best levels in five months an hour earlier.

I think those buying oil on a potential Iran-Israel war are taking an unnecessary risk in betting on an unknowable outcome. In general, the best trade is to fade war fears and that’s what the broader market did today. If there’s a war premium, it could come out on Monday.

In any case, this is the fourth straight week of gains for brent and the first close above $90. The $90 level is an important one because it’s an area where OPEC might start to bring some barrels back on. Now that’s not going to happen right away and there’s plenty of room for an overshoot but I would be wary of chasing $100.

This article was written by Adam Button at www.forexlive.com.