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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.

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.

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.

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.

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

Prior was +1302K
Gasoline -3607K vs -1574K exp
Distillates -913K vs -1312K exp
Refinery utilization +1.6% vs +0.3% exp

API data released late yesterday:

Crude +1161K
Gasoline +823K
Distillates +662K

WTI crude oil was up $5.31 to $105.09 shortly before the report. It dipped afterwards then bounced back.
The SPR was pulled down by the full 1 million barrels per day anticipated last week.

USDCHF back below the 100 hour MA Markets remain volatile with the US equities moving up and down (the Dow is higher but the Nasdaq is moving above and below unchanged). That volatility has impacted the forex market as it see’s similar up and down price action in the major currency pairs. For the USDCHF, in the NY session, the price moved sharply higher after the higher than expected CPI data. However, the run to the upside found sellers near/ahead of the highs seen on Monday and Tuesday between 0.9965 to 0.99743. Those levels are the highest since December 2019. The subsequent fall in the USDCHF has seen the price tumble back below the 100 hour MA, and return to the earlier European lows near the 38.2% of the last run higher at 0.98728. For the second time today, the buyers leaned against the 38.2% and has seen a bounce. The USDCHF’s move off the low is so far holding below it’s 100 hour MA at 0.99046. That 100 hour MA is a short term barometer for the buyers and sellers as is the 38.2%. Amongst the volatility, a battle is now on between the 100 hour MA at 0.99046 and the 38.2% below at 0.98728. Look for the next shove above or below the aforementioned levels to tilt the bias in the direction of the break. Although, the inability to move above the highs for the week and fall below the 100 hour MAmake it tempting to call for a top, there is work to do on the downside. Not being able to get below the 38.2% of the move up from last week’s low needs to be broken to give sellers some comfort. Absent that, and the fall is nice, but not nice enough to satisfy the “high is in place for now” crowd.

The common
saying is that 90% of traders lose money in the markets. That’s not an
encouraging statistic for someone who wants to start trading, but there are
some key reasons why most traders lose and knowing them can help you to avoid
the same mistakes and increase your chances of success.

 

The first mistake
is to jump into the markets without knowledge. That’s like gambling and if you
don’t know what you’re doing and why, then you won’t survive for long. Just
look at how many retail traders jumped into the markets during the covid
crisis.

There are stories of lucky people changing their lives for the better
yes, but they are very rare compared to those losing all of their life savings
or worse having to pay back huge debts as they gambled with money they didn’t
have. In the chart below you can see how in just two years retail traders went
from heroes to zeros.

 

 

The second
mistake is getting the wrong education from social media influencers whose
goals are just to sell courses and trading signals. You have to be careful when
you invest in education because “an investment in knowledge pays the best
interest”, but an investment in wrong education is deadly in trading. You
better find some free resources and at least get some basic knowledge first and
then if you want to invest in some course or trading community, make sure to do
your due diligence before committing. Friendly tip: avoid anything that focuses
on technical analysis.

 

Once you
have some knowledge, you need capital. The rule of thumb is to invest/trade
only the money you can afford to lose. DO NOT trade money you need to pay bills
or to live off of in general. If you do that, you will already set yourself up
for failure because the psychological pressure will be so high that you will
easily make any kind of emotional mistake, from fearing of missing out to
revenge trading. Statistically, more than 50% of new businesses fail due to
undercapitalisation. Avoid this mistake and you will be another step ahead of
the majority.

 

Even if you
get the knowledge, skills and capital, the last thing you need to get is
experience. Real life experience can’t be taught, it’s something you acquire
through practice and mistakes. It’s the very best teacher for anything in life.

Yes, you can learn something from other people’s experience, but nothing can
substitute your own. In fact, many successful traders study the past
experiences to better forecast the future. A famous saying by Mark Twain goes
like “history doesn’t repeat itself, but it often rhymes” and that happens in
the financial markets as well. The business cycle repeats many times and the
market most of the time follows the same pattern of boom and bust.

 

A recent
example is how bad equities performed when the Fed in 2018 was running QT and
the global growth was slowing down. Now we are in 2022, the Fed is starting QT,
global growth is slowing down a lot and equities are in a bear market…

 

This article
was written by Giuseppe Dellamotta.

 

A shock headline yesterday came from the World Health Organization, who told China it’s time to shift away from its dynamic covid-zero policy.
“We don’t think that it is sustainable considering the behaviour of the
virus and what we now anticipate in the future,” WHO Director-General
Tedros Adhanom Ghebreyesus said. “We have discussed this issue with
Chinese experts. And we indicated that the approach will not be
sustainable… I think a shift would be very important.”
Now that’s something that everyone outside of China readily acknowledges, so what’s the controversy?
Namely, it’s that up until now, the WHO has developed a well-earned reputation as extremely deferential to China. The organization was attacked by Trump at the start of the pandemic.
“They’re a puppet for China. Everything China does is OK,” he said.
He even threatened to hold back funding because of the WHO repeatedly siding with China, even in strange circumstances.
“They are a pipe organ for China. So I’m going to make a decision very
soon. I held back all funds. We held back almost USD 500 million from
them. I’ll make a decision, but think of it,” he said.
“We’re
paying USD 450 million and China’s paying USD 38 million, and yet China
tells them what to do. How does that work?” he asked.
Why the sudden criticism
So while the comments about covid-zero yesterday weren’t groundbreaking, the source was. The WHO is highly-respected and publicized in China.
However there was a sharp U-turn as the great firewall quickly went up, censoring Tedros’ comments. Beijing officials also struck back, calling the comments “irresponsible”.
“We hope the relevant individual can view Chinese COVID policy
objectively and rationally and know the facts, instead of making
irresponsible remarks,” spokesman Zhao Lijian said.Initially, I thought the idea might have been floated via China to give them cover for easing but that’s now looking less likely.
A new theoryThe whole world is growing tired of the China lockdowns. The seven-week halt in Shanghai life is snarling supply chains and will lead to another round of global inflation and shortages.
China is isolated in its fight to beat covid. There’s a wide view in virtually every country outside of China that they’re fighting a losing battle; that eventually they have to pivot and that it’s better for everyone if it’s sooner.China has friends at the WHO but the whole world combined has much more influence and the US is still the kingmaker.
The US Democrats are on track to be routed in the midterms and a big reason why is inflation. Getting China up and running is existential for those politicians. So whether it’s over $500m or it’s for the greater good, the WHO has been pressured into lobbying against China’s current policy.
I have to think that the White House played a part in it.
What makes me especially convinced is that at nearly the exact same time as Tedros’ comment, Biden floated the idea of dropping US trade tariffs on China.
“We’re discussing that right now,” Biden told reporters after a speech
about inflation. “I’m telling you, we’re discussing it, and no decision
has been made on it.”That’s quite the coincidence.
My guess is that removing tariffs are the carrot, Tedros and/or broader criticisms are the stick.
I don’t know if there’s a deal to be made where the US drops tariffs in exchange for China dropping covid-zero, but that would certainly be a positive outcome for the global economy.

USDJPY move back above its 200 and 100 hour moving averages The USDJPY has moved higher on the back of the dollar buying after the CPI data showed higher than expected inflation last month. Technically, the price moved back above its 200 hour moving average at 130.17. The price also extended back above its 100 hour moving average at 130.421. That 100 hour moving average is being breached to the downside as I type. Technically, that neutralizes the bias as the price now trades below the 100 but above the 200 hour moving average. The high price today extended to 130.806 which was a swing high going back to last Friday’s trade. That was also the high for the trading week. Sellers leaned against that level on the 1st test. It would take a move above that level to increase the bullish bias going forward. What next? For the buyers to remain content, staying above the 200 hour moving average is key. A break below the 130.171 level would likely lead to buyers turning to sellers on the disappointment. Absent that, traders looking for more upside will be eyeing a move back above the 100 hour moving average (sooner rather than later) followed by the swing highs from yesterday near 130.553 (see red numbered circles). Break above that level would have traders looking back toward the high from last week, and the high from today at 130.801. Move above 130.80, and the high from April 28 at 131.242 along with the high from yesterday’s trade at 131.342 would be back in the traders sites. Those levels were 20 year highs.