Europe

Waiting for the federal government

Jeffrey Halley

The market is trading flat in Asia as the whole world awaits the outcome of the FOMC rate decision on Wednesday evening, a continuation of the pricing behavior seen in New York.

Sales in Asia this week have been constrained by a long holiday week as mainland China, Japan, Malaysia, Indonesia and Thailand are closed on Wednesdays.

whether Fed hiking Whether 0.50% or not, the core is a statement and forward guidance on the interest rate path. The market is sticking to the hope that the final federal funds rate is currently mostly priced on the market.

As it exists in much of the Anglo-Saxon world, there remains a clear upward risk from that perspective. The only mitigation factor is the start of quantitative tightening by the Fed. If it starts pushing the US yield curve again, it could have more impact than raising the federal funds rate.

In March, US jobs reached 11,549 million, with 4,536,000 workers resigning to change jobs. Last Friday’s employment cost index was higher than expected, with US factory orders surged 2.20% (1.1% exp) in March.

As in many parts of the world, price stress continues, but there are no definitive signs that the US economy will slow significantly.

A staggering 0.25% rate hike by the Reserve Bank of Australia on Tuesday suggests that even the world’s most awkward pigeons in the central bank are beginning to blink. Both the Prime Minister of Singapore and the Governor of the Reserve Bank of New Zealand have stated that the risk of a recession is increasing, and I once found it in line with RBNZ.

In Asia, South Korea’s foreign exchange reserves fell by $ 8.5 billion in April. This is the first hint that major Asian central banks are beginning to use foreign exchange reserves to offset the depreciation of domestic currencies as US yields and the appreciation of the US dollar rise. Inflation of 4.80% year-on-year on Tuesday was the highest in 14 years, and the Bank of Korea can be expected to continue raising rates at several policy meetings.

In China, there are stricter restrictions on the seeding of Covid-19 cases in Beijing. Shanghai and other mainland cities are still under regulation, and China’s Covid-zero policy becomes a larger millstone around the neck day by day.

Fitch downgraded China’s GDP forecast overnight. After a three-day break, China will be back on Thursday, but I wouldn’t expect a post-holiday rally between mainland stocks unless the FOMC brings dovish surprises.

Australian data on Wednesday showed that lucky countries remain lucky. Mortgages recovered to 0.90% in March and retail sales gained 1.60% mothers in March. Investment lending to housing also increased by 2.90%, with S & P Global Services PMI rising to 56.10. None of this eases the rate hike expectations built into Australia’s yield curve.

In addition to the numerous European service PMIs released on Wednesday, there are the German trade balance, the US ADP employment, the trade balance, and the ISM non-manufacturing PMI.

As if it was noisy and busy this week, the United States released data on non-farm payrolls on Friday. Like last month, the street now has 400,000 jobs. As always, large deviations cause tail chase volatility across asset classes.

Finally, pay attention to Bitcoin FOMC hiking Above 0.50%, the statement is hawkish. Bitcoin is trading at $ 38,000.00 and has quietly dropped to the January support line of around $ 37,400.00. The hawkish FOMC may see support fail and will notify you of a fix up to $ 33,000.00. A failure of $ 33,000.00 indicates an ugly sellout with a goal of less than $ 20,000.00.

The non-fungible token (NFT) space has a great idea and I think we can make some serious fiat currencies. Bored Ape people have raised $ 285 million in cryptocurrencies by selling “land” in the virtual world. Or is that coding? I think it’s the equivalent of unplanned purchases and cryptocurrencies.

Anyway, once you’ve cleared the mark, find Tolkien’s family and subdivide Minas Tirith and Rivendel into apartments and lifestyle blocks via the Metaverse NFT. They aren’t cheap to care about you, but the scenery is worth it.

Depending on the route, a portion of the proceeds may be spent on urban renewal Mordor and Moria. Unfortunately, in the true California way, I may need to move all poor current residents to cardboard boxes by the road. Where are Mark and Christopher’s numbers …

Asian oil markets are trading sideways

The news that OPEC’s compliance reached 164%, that is, it couldn’t even raise the agreed quota and couldn’t raise the Asian oil market. Thanks to mainland China and Japanese holidays, oil prices are almost unchanged.

Oil continued to trade in a noisy range all night long, Russia / Ukraine, EU / Russian oil sanctions, or slowdown / or not from China. Brent crude fell 1.60% to $ 105.80 and WTI fell 1.35% to $ 103.50 a barrel. In Asia, Brent crude and WTI have not changed in the dying deal.

Brent crude is well supported with dips up to $ 100.00 per barrel and has a resistance of $ 110.00. WTI trades in the noisy range of $ 100.00 to $ 108.00. In the big picture, Brent crude is still in the wider range of $ 100.00 to $ 120.00 and WTI is in the range of $ 95.00 to $ 115.00. Only weekly closes above or below these levels indicate a new direction of movement.

The gold market is trading sideways

Gold traded between $ 1850.00 and $ 1880.00 per ounce in the range of $ 30 overnight, moving against the daytime movement of the US dollar. It sneaked into a 0.27% profit at $ 1868.00 by the closing price in New York. In Asia, holidays and FOMC meetings are also impacting volatility, with gold edging slightly lower at $ 1866.00 for undirected transactions.

Like everything else, the FOMC statement determines the short-term direction of gold, unless the decision is a 0.25% or 0.75% increase.

From a technical point of view, gold still looks vulnerable and relies on the fall of the US dollar tonight to stabilize the ship. It was not possible to regain the $ 1880.00 region, which is also a 100-day moving average. (DMA) support is $ 1850.00 and the tip of the breakout triangle is $ 1835.00.

 

Jeffrey Halley is a Senior Market Analyst at Asia Pacific. OANDA

Opinions are those of the author and not necessarily those of OANDA Global Corporation or its affiliates, subsidiaries, officers or directors. Leveraged trading is risky and not suitable for everyone. Losses can exceed investments.

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