Market Talk – May 11, 2022
ASIA: China’s consumer and producer prices rose more than expected in April, according to data from the National Bureau of Statistics released Wednesday. The consumer price index rose by 2.1% last month from a year ago, boosted by a surge in energy and fresh vegetable costs. The reading topped expectations for a 1.8% rise forecast
The post Market Talk – May 11, 2022 first appeared on Armstrong Economics. source: armstrongeconomics.com/blog
Re-acceleration in core prices to keep USD as the currency to beat for some time – TDS
Consumer prices surpassed expectations in April, rising a firm 0.3%. The core index surged above the consensus median as well, posting a strong 0.6% M
The EUR/USD pair could come back down if it stabilizes under the weekly pivot point. A new lower low could activate a larger drop. The bearish scenario could be invalidated by a valid breakout above 1.0593. The EUR/USD price plunged after the US inflation data was released. It has dropped as low as 1.0501, where … Continued
The post EUR/USD Price Erases Daily Losses Despite Upbeat US CPI appeared first on Forex Crunch.
USDCAD corrects 38.2% of the move up from last week’s low The USDCAD moved lower into the NY open, but the price rebounded higher after the higher CPI data. However, the high price of the USDCAD stalled near earlier swing highs from yesterday and a late day swing high as well near 1.3038. Of note is those highs bookended a move up to 1.30515. That break to the high yesterday failed, and as often happens, the market reestablished resistance at a lower level (i.e. the 1.3038 level). Today’s run higher kept the lower level as the ceiling. The high price today reached 1.30387 and stalled. The price has since moved lower on the USDs rotation back to the downside. The fall lower in the USDCAD has now seen the price move down toward the rising 100 hour MA at 1.29377, and below that the 38.2% of the move up from last week’s low. That retracement level for the USDCAD comes in at 1.29221. The low price off the fall stalled right near that 1.2922 (low reached 1.29202). The price has bounced modestly. What now? The lower highs against 1.3038 formed a ceiling for the pair and gives sellers some hope that a corrective move to the downside has started (i.e, the high is in place at least for now). However, the holding of the 38.2% at 1.2922, and the price action above and below the 100 hour MA has traders thinking that those levels still need to be broken if the sellers are to take more control. Dip buyers currently are likely using the levels as a low risk buying opportunity (at least in the short term) with hopes for a move back above 1.2950 area as a comfort move in the short term. I would expect, however, that those dip buyers would exit with a move below 1.2920-22 area now. On a break lower, the 200 hour MA at 1.2882 (it is also the 50% midpoint of the same move higher) would be another downside target to get to and through if the sellers are to take back more control.
The ECB communication offensive continues, this time with a ‘sources’ report
First we had Lagarde’s call for higher rates.
Then we had Schnabel lay out the case for being more aggressive
Now we have an ‘ECB sources’ report doing the rounds saying officials increasingly see main refi rate rising above zero this year.
The marching orders have been delivered. The ECB is tired of waiting around for inflation to fall on its own and will be hiking at least twice this year.
Normally this would be scope for the euro to rally — and that may yet be the case — but the growth trajectory is so poor in Europe and looming (in 2024, likely) return of fiscal rules makes it a tough place to invest.
Draghi floats the idea of some kind of consumer-cartel to cap oil prices
Former ECB President and current Italian Prime Minister Mario Draghi continues to head down a strange path with regards to oil prices.At home, he’s championed a windfall tax on oil and gas companies that’s going to further exacerbate problems with under-investment. It’s a bizarre turn from a free-market capitalist.Abroad, he’s taking it even step further. He visited the White House this week and spoke with Biden. Energy was evidently near the top of the agenda and he said that both he and Biden agreed that the current structure of the energy market isn’t working.Draghi then floated the idea of a cap on oil prices. He said the idea is to create a cartel of consumers or to persuade OPEC to produce more.I have no idea how that would work but I have strong suspicions it won’t work at all.
The major European indices are closing higher on the day. The German Dax, France’s CAC, Spain’s Ibex and Italy’s FTSE MIB are all up about 2% (or higher) on the day. The provisional closes are showing: German Dax, up 2.1% France’s CAC, up 2.5% UKs FTSE 100, up 1.4% Spain’s Ibex, up 2.1% Italy’s FTSE MIB, up 2.8% Looking at the hourly chart of the German Dax, the low this week stalled near the 61.8% of the move up from the April 7 low. That level comes in at 13388. The run higher today is approaching the indices 100 hour MA at 13857.78. The 200 hour MA is at 14012.73. Those levels will be eyed going forward. A move above each will give buyers additional technical confidence. Conversely stalling against the level would keep the sellers more in control. German Dax looks toward the 100 hour MA
The long bond completes the round trip
Today’s CPI report set off a frenzy of trading in financial markets. The theme was consistent: Worry about more inflation. That hurt stocks, boosted the dollar and raised bond yields.
Yet a few hours later it’s all unwound. That’s a tough trade to square. Maybe more inflation now means less later? Maybe there’s a sense that with the ECB shift today that central bankers are getting more hawkish.
In any case, US 30-year yields are back to where they were before the CPI report.
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