Central banks

The final furlong of 2023

Here’s a trading review on where central banks stand and where they might be going in the last meetings of 2023

In a post at the beginning of the year, one of my timelines was that we would be well into playing the rate cut game by the end of the year. Well, here we are and with one last round of central bank meetings in 2023, the market is eager to see what they set up for 2024.

Let’s start with the Fed

The market is well into playing the guessing game for when hikes happen and how much rates will be cut. As usual, there’s a fairly large spread but the main consensus is that rates start to get cut from around the middle of 2024.

We have one more CPI report (12th Dec) before the FOMC (13th) and that will likely be a big mover for last minute rate expectations.

I believe that the Fed will use this meeting just to take them into 2024 with as little drama as possible. That would mean keeping the “job’s not done” stance on inflation, and saying that rates are still “restrictive” but not “sufficiently restrictive”. There is no need to start talking cuts, nor allow the market (which is pretty much always dovish) to get extremely dovish.

In fact, as I type this, Powell’s been out to give that exact message but the makret has given him the middle finger with USd selling and yields dropping.

There is a risk that Powell states that rates are “sufficiently restrictive”, and that might be what’s decided by the CPI report. A 2 handle on headline CPI would most certainly rule out a last hike and then that could give them the green light to use “sufficiently restrictive”. However, if that does happen, expect an uber strong message about “higher for longer” and making it clear cuts are not on the table yet (not that that might mean anything given the price action right after Powell).

For USD. There’s no outcome where the Fed are uber hawkish so any such rally is likely to be sold into. If Powell doesn’t deliver a ‘no change to view’ meeting, USD and yields will likely get smoked further than they are today.

The ECB

Given the latest rounds of inflation data, we can also further rule out any more expectations for hikes. The ECB is comfortable where rates are and markets are playing the same “when will they cut?” game. The vast difference in Europe is that the fundamentals are looking far less rosy than currently in the US, and that’s a pressure that’s going to weigh on the ECB. We’ve also just had an inflation print of 2.4%, which puts them closer to their target than any of the other major central banks. Even if the core number remains higher, the headline is the number that guides them in their mandate.

It might be a tougher sell for Lagarde to keep the “higher for longer” message valid in her presser. I also think we may be approaching a situation where the market will start to worry whether they can ‘soft land’ inflation to target, or if it’s going to run straight through and keep going. That might not be something anyone will worry about for this meeting but it might become valid early in 2024, depending on the next inflation data.

We do potentially have the PEPP reinvestment discussion to think about, after recent comments from ECB sources but like the Fed and BOE, QT isn’t seen as a big hawkish monetary policy stick. We may get a move up in EUR if they do a bit more than stopping reinvestment but I doubt that will be a lasting move.

Overall, Lagarde will also not want to let the market get too dovish and therefore prematurely ease financial conditions.

For EUR. Today as I write this the euro is under the cosh for the very rate cut expectations I mentioned above. The Fed had its turn and now it’s the ECB’s turn. If anything, that means Lagarde might have to sell the ‘higher for longer’ message even more strongly at the ECB meeting. Like the dollar, any euro rise on strong non-dovish language might become a selling opportunity for some but we might also just find ourselves developing a new range to work into 2024.  Same as the Fed, any weakness in the message from Lagarde and EUR gets hit hard.

The BOE

In this last week, I’ve slowly come around to the conclusion that the BOE might be becoming the most hawkish bank of the majors. Despite Bailey & Co being very bearish on the UK, they’re still troubled by sticky inflation and particularly wages and services inflation, which happens to be only the biggest sector in the UK economy…

While the Eurozone PMI’s wove a tale of accelerating price drops, the UK PMI told us that while input prices might still be falling, output prices were still rising. That’s the sticky effect right there.

I’ve had a view that the UK might be at risk of its economy tipping over faster than the others due to the height speed of hikes, and while it’s not out of the woods, it seems to be doing a touch better than Europe. It can all change in a heartbeat though but for now, the pound is down the charts for being spanked on cut expectations.

For the 14th Dec meeting, once again, hike expectations are low but there might be more of a hawkish tilt on the sticky inflation, which will then be offset by that dour view of the economy from Bailey. Only someone like him could manage a central bank meeting where the outcome might be both hawkish and bearish.

For GBP. Always the wild card currency but if a non-dovish/hawkish monetary policy message balances out a weak economic outlook message, GBP will probably do nothing and be thankful it’s not in the limelight like the others may be. GBPUSD and EURGBP will be the key movers for the trio of banks and the Fed and ECB will likely drive the moves more than the BOE will, so the strength or weakness of USD or EUR will define those pairs, more than the BOE will for GBP.

For the BOC and BOJ

These should pass by without incident. The BOC has been calmed by the pullback in inflation, after panicking over a two month hot streak. 

The BOJ will not be ruffling any feathers into the year-end. Their stall is set out about watching the wage negotiations in spring 2024.

However, one big question might raise its ugly head, and that’s what happens if inflation starts to drop going into the spring? The BOJ will be in a position to potentially start tightening on the higher wages, even while inflation might be down, or below target. Now they’ve made wages a big thing, they’ve done the unusual thing of painting themselves into a corner. If wages aren’t enough to tighten policy on, or if inflation is too low when those wages deals come through, and that keeps them easing, I dread to think where USDJPY goes on the upside. They might be getting into a bit of a hope trade that all the ducks align for them to tighten, and that happening is the only thing that could see JPY strengthen significantly.

ALL CHANGE! The hike cycle is done – here’s what’s coming next 

A preview of life after the September Central banks

All these central banks meetings of the last 2 weeks have been important for setting out their stances for what’s to come. It is the end of the hike cycle, unless we get another bout of inflationary pressure, and pressure that needs to be more than just higher oil prices.

Central banks are right to declare they are not out of the inflationary woods because firms have adjusted their prices up quite quickly, and that’s all still going through an adjustment phase, in all aspects of pricing. The downtrend in inflation is still inflation, so prices are still going up. That’s where the stickiness plays into things, and the big worry of it trending higher again for central banks (see the likes of the BOC). If there are no surprises, then we will be getting our teeth well into the growth, a.k.a the cut trade.

Right now, the US is still top of the majors and despite seeing some gloomy data everywhere else, it’s still all pretty flat overall. The trouble starts if we start seeing big contractions.

So really, we’re likely to see growth patterns more like skimming stones on water, rather than lobbing bricks in. But, if the stones turn into bricks, then we’re in for a big old rate cut cycle that’s likely to carve through thoughts of a neutral level. Central banks can forget calmly cutting to 2.5% odd and then putting their feet up. 

For now, the Central bank plan is to weather the effect of hikes, hope economies don’t falter too much, clear the balance sheets as quickly as possible and get rates down to a neutral level. All before we do see a bigger downturn, or we hit the next meeting between Mr Poo and Mr Fan, and big easing is then needed again.

As mentioned on the Flow Show, we’re in a tidal flux period between the end of hikes, and when rates start coming down. Assets and FX will follow the growth patterns but as I’m not expecting huge variations between economies, we may be limited for any big trends in the interim. I also don’t think we’re out of the woods on inflation so if we do see Central banks hiking again, I’d be wary of the market taking a more negative view, i.e thinking further hikes now would translate to bigger economic weakness, rather than CB’s fixing things, as hikes have been largely viewed thus far.

Despite maybe not thinking we get any big trends, I still think we’ll get plenty of volatility to keep us occupied but we may be seeing more of those quiet periods between data points.

For central bank meetings for the rest of the year, unfortunately, they could be a dull affair but maybe with a couple of outlier hikes and the constant “will they, won’t they?” saga at the BOJ. If this is truly the end of the rate hike cycle, we need to prepare for a change in how markets react, and what they react to. Patterns that were prevalent throughout the hike phase, may wane and become invalid. Markets always change with the cycles. There may not be wholesale changes but something like risk could morph into another different entity. That’s what I’ll be watching for over the next few weeks, to see what may change in terms of sentiment and how markets react to things like data.

This is one of those times where traders need to be aware that the tides might be changing, and that we might have to adjust too. Markets will still be markets but we may have to trade them differently. The quicker you can notice and change to that, the better chance you’ll have of making, and more importantly, not losing money.

Chase away the end of summer blues with our NFP competition

Get your trading teeth into the latter part of the year in our fanatastic trading community

Yep, summer trading is nearly over and volatility is going to ramp up as we get stuck in to what’s to come in the final months of the year. It’s going to be big for the fundamentals, for central banks and geopolitics. You can navigate all of that in great company by simply picking a number for this week’s US NFP. Three lucky winners who get closest to the number will each win a free month in our chatroom.

All you have to do is pick what you think the US NFP number will be Friday 1st September 2023, and place it in the comments on the tweet of this post.

The rules:

  • You pick a number as your guess for the Friday NFP number – 1 guess per person
  • First person who picks a number gets it (you can pick another number if your 1st guess is taken)
  • Closest to the number wins. In the case of a draw or split, the person who entered first by time gets it
  • Place your guesses in the replies on the tweet of this post only (@forexanalytix)
  • Entries in by 12.29:59 GMT Friday

Want to know what fantastic services await on our platform??

  • Chatroom with news, research (inc Spanish speaking chatroom), and live trading room, where over 100+ intraday traders chat each trading session.
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  • Breaking market news and insight.
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  • Daily key interbank FX order levels and updates
  • Full daily Forex option expiries and barrier report
  • Commentary and recent charts, formations and setups.
  • PIP (Pattern In Play). Where technical patterns identify potential moves.
  • Live market squawk integration
  • Top financial research
  • Web based platform with desktop notifications
  • App for mobile devices and tablets which offer push notifications when new analysis is posted or when key levels are broken.
  • Live (private) webinars exclusively for Forex Analytix members throughout the trading day.
  • Live charting
  • Money Management tool

Remember, even if you don’t win, you can still benefit from access to the platform via an exclusive ForexFlow 20% discount right here. This discount is for the life of your subscription, not just for a couple of months.

If you miss out on the prize, you can also get free access to the Forex Analytix Platform via our Traders Funding Program. You can check out the details here.

We wish you all the luck.

Get on board our US NFP competition

Go into the summer with free access to the Forex Analytix Platfrom

It’s summer and time for our US Non-farm payrolls competition. Three lucky winners will get a free month’s access to the best trading community around.

What does one have to do to win such a great prize?

All you have to do is pick what you think the US NFP number will be 4th August 2023, and place it in the comments on the tweet of this post.

The rules:

  • You pick a number as your guess for the Friday NFP number – 1 guess per person
  • First person who picks a number gets it (you can pick another number if your 1st guess is taken)
  • Closest to the number wins. In the case of a draw or split, the person who entered first by time gets it
  • Place your guesses in the replies on the tweet of this post only (@forexanalytix)
  • Entries in by 12.29:59 GMT Friday

Want to know what fantastic services await on our platform??

  • Chatroom with news, research (inc Spanish speaking chatroom), and live trading room, where over 100+ intraday traders chat each trading session.
  • Quick analysis on 30 instruments.
  • Breaking market news and insight.
  • Super-fast live data releases
  • Daily key interbank FX order levels and updates
  • Full daily Forex option expiries and barrier report
  • Commentary and recent charts, formations and setups.
  • PIP (Pattern In Play). Where technical patterns identify potential moves.
  • Live market squawk integration
  • Top financial research
  • Web based platform with desktop notifications
  • App for mobile devices and tablets which offer push notifications when new analysis is posted or when key levels are broken.
  • Live (private) webinars exclusively for Forex Analytix members throughout the trading day.
  • Live charting
  • Money Management tool

Remember, even if you don’t win, you can still benefit from access to the platform via an exclusive ForexFlow 20% discount right here. This discount is for the life of your subscription, not just for a couple of months.

If you miss out on the prize, you can also get free access to the Forex Analytix Platform via our Traders Funding Program. You can check out the details here.

Have a go, and best of luck!!

The Winners Circle

Well, some fine guessing from you folks this month. Lots of guesses in and around the 170-190 mark, so it was a close run thing.

However, there can only be 3 winners, and here they are;

1.chris @skybluchr (nail on the head) 187k

2.Mike @MikeBergMM 188k

3.Alexandre Janeiro @N1njaWarri0r 190k

A special mention to our very own Blake @PipCzar, who far from missing the nail on the head, usually misses the nail altogether. In fact, the hammer often comes out his hand and goes through the nearest window 😂 He called 189k so, he gets bragging rights in FA towers. As for my proprietary model, it shouldn’t have carried the 1 🤭

As always, thank you all for playing and we’ll be back again next month.

We’re taking our US Non farm payrolls competition up a notch

We have an amazing prize for this month’s NFP competition. A free Trader Funding Program assessment!

It’s time again for our US NFP competition and we have a speical prize.

We’re halfway through the year and so we’ve decided that we want to give one lucky trader the opportunity to scale up their trading in the second half of 2023, by trading our money via a $50,000 TFP account.

If you haven’t heard of our Trader Funding Program before, if you pass an assessment, you could trade account sizes from $25,000 to $1,000,000, and you could take 75-90% of all profits. You will also receive the standard two free months of access to the Forex Analytix platform that comes with a $50,000 assessment. Full details of the Trader Funding Program are available here.

You can also check out Forex Analytix CEO, Blake Morrow, who wanted to take the assessment so that he could understand exactly what was involved, so we can help traders through it.

There will still be a total of three winners as we will still give two other lucky winners a free month on the Forex Analytix Platform.

All you have to do is pick what you think the US NFP number will be 7th July 2023, and place it in the comments on the tweet of this post.

The rules:

  • You pick a number as your guess for the Friday NFP number – 1 guess per person
  • First person who picks a number gets it (you can pick another number if your 1st guess is taken)
  • Closest to the number wins. In the case of a draw or split, the person who entered first by time gets it
  • Place your guesses in the replies on the tweet of this post only (@forexanalytix)
  • Entries in by 12.29:59 GMT Friday

Want to know what fantastic services await on our platform??

  • Chatroom with news, research (inc Spanish speaking chatroom), and live trading room, where over 100+ intraday traders chat each trading session.
  • Quick analysis on 30 instruments.
  • Breaking market news and insight.
  • Super-fast live data releases
  • Daily key interbank FX order levels and updates
  • Full daily Forex option expiries and barrier report
  • Commentary and recent charts, formations and setups.
  • PIP (Pattern In Play). Where technical patterns identify potential moves.
  • Live market squawk integration
  • Top financial research
  • Web based platform with desktop notifications
  • App for mobile devices and tablets which offer push notifications when new analysis is posted or when key levels are broken.
  • Live (private) webinars exclusively for Forex Analytix members throughout the trading day.
  • Live charting
  • Money Management tool

Remember, even if you don’t win, you can still benefit from access to the platform via an exclusive ForexFlow 20% discount right here. This discount is for the life of your subscription, not just for a couple of months.

If you miss out on the prize, you can also get free access to the Forex Analytix Platform via our Traders Funding Program. You can check out the details here.

Check out last month’s winners here.

Have a go, and best of luck!!

 

Do you think you know better than the “experts”?

Have a crack at our US non-farm payrolls competition

The so called “market experts” think that Friday’s US non-farm payrolls will come in around 190k vs the 253k in April. If you think you know better, come and have a go at our NFP competition. Pick a number for the NFP and you could be one of three lucky people to win a free month on the Forex Analytix platform.

How do you go about winning? All you have to do is guess closest to the NFP number on Friday.

The rules:

  • You pick a number as your guess for the Friday NFP number – 1 guess per person
  • First person who picks a number gets it (you can pick another number if your 1st guess is taken)
  • Closest to the number wins. In the case of a draw or split, the person who entered first by time gets it
  • Place your guesses in the replies on the tweet of this post (@forexanalytix)
  • Entries in by 12.29:59 GMT Friday

Want to know what fantastic services await on our platform??

  • Chatroom with news, research (inc Spanish speaking chatroom), and live trading room, where over 100+ intraday traders chat each trading session.
  • Quick analysis on 30 instruments.
  • Breaking market news and insight.
  • Super-fast live data releases
  • Daily key interbank FX order levels and updates
  • Full daily Forex option expiries and barrier report
  • Commentary and recent charts, formations and setups.
  • PIP (Pattern In Play). Where technical patterns identify potential moves.
  • Live market squawk integration
  • Top financial research
  • Web based platform with desktop notifications
  • App for mobile devices and tablets which offer push notifications when new analysis is posted or when key levels are broken.
  • Live (private) webinars exclusively for Forex Analytix members throughout the trading day.
  • Live charting
  • Money Management tool

Remember, even if you don’t win, you can still benefit from access to the platform via an exclusive ForexFlow 20% discount right here. This discount is for the life of your subscription, not just for a couple of months.

If you miss out on the prize, you can also get free access to the Forex Analytix Platform via our Traders Funding Program. You can check out the details here.

Have a go, and best of luck!!

 

US debt ceiling fight

What’s the best trade for the US debt debacle?

The US debt ceiling talks are in full flow so we take a look at how best to trade it

I’ve been thinking about which asset might be easiest to trade the US debt situation and I’m coming around to the conclusion that perhaps gold is the cleanest counter trade.

It’s good for trading both sides, the arguments and the resolution, because we’re close to a key level.

Gold technical analysis

We’ve got a potential massive triple top, and the driver of this latest rally is part of the market’s worry about whether the US will be defaulting in June. The fact we haven’t broken the 2075 level suggests the market is happy with its current pricing. Then we have the fact the players are beginning to get around a table is a positive note, even if that means days and days of posturing until the 11th hour. The record of 78 ‘can kicks’ of the debt drama in the last 70 years would favour yet another one but it’s the small risk of default that causing the market to worry.

The reason why gold might be the best option is partly down to the techs. If 2075 is the ceiling for risk pricing, a resolution will mark it as another significant top. If we do head into a default situation, the level will likely break. Therefore we have simple trades. 1 level, two ways of trading it.

I’m going to be looking at shorts into the level but with a buy reverse on a break. If we do get a break, it’s likely because of big negative news and will likely have some legs. After that I can look to the clock to gauge when to perhaps turn that to a short on a debt agreement. Conversely, if it doesn’t break but I’m short ino the level anyway, an agreement will likely give me a decent move down.

In all aspects, there’s no need to put much risk into the trade. Today’s US CPI might kick it up and through, and so maybe only a $15/20 stop is needed if that move is just a data move that reverses after.

At the end of the day, I love trades that have one clearly defined level to balance trades off of. It’s looks clean and that makes it easier to trade. Well, until the market decides to mess it all up that is..

All that remains now is timing. Do I go small now so I’ve got skin in the game, or do I wait for better levels and help from the data?

 

 

Non-farm payrolls competition – Can you become a legendary NFP champion?

Our Non-farm payrolls competion is ready to rock

Here we go again folks! Nearly time for that all important US jobs number, which means nearly time for you to win a wonderful prize.

With no signs of the US jobs market wobbling, will this be the month it does (been saying that for a year-plus now), or will we see continued robustness? If you fancy making a guess about that, you can do so in our NFP competition. Pick a number for the NFP and you could be one of three lucky people to win a free month on the Forex Analytix platform.

How do you go about winning? All you have to do is guess closest to the NFP number on Friday.

The rules:

  • You pick a number as your guess for the Friday NFP number – 1 guess per person
  • First person who picks a number gets it (you can pick another number if your 1st guess is taken)
  • Closest to the number wins. In the case of a draw or split, the person who entered first by time gets it
  • Place your guesses in the replies on the tweet of this post (@forexanalytix)
  • Entries in by 12.29:59 GMT Friday

Want to know what fantastic services await on our platform??

  • Chatroom with news, research (inc Spanish speaking chatroom), and live trading room, where over 100+ intraday traders chat each trading session.
  • Quick analysis on 30 instruments.
  • Breaking market news and insight.
  • Super-fast live data releases
  • Daily key interbank FX order levels and updates
  • Full daily Forex option expiries and barrier report
  • Commentary and recent charts, formations and setups.
  • PIP (Pattern In Play). Where technical patterns identify potential moves.
  • Live market squawk integration
  • Top financial research
  • Web based platform with desktop notifications
  • App for mobile devices and tablets which offer push notifications when new analysis is posted or when key levels are broken.
  • Live (private) webinars exclusively for Forex Analytix members throughout the trading day.
  • Live charting
  • Money Management tool

Remember, even if you don’t win, you can still benefit from access to the platform via an exclusive ForexFlow 20% discount right here. This discount is for the life of your subscription, not just for a couple of months.

If you miss out on the prize, you can also get free access to the Forex Analytix Platform via our Traders Funding Program. You can check out the details here.

Good luck!!

THE WINNERS

A closely fought contest this month with some very close guesses. We have a tie for first and second places.

Joint first is  @rudy56637433 (254k) and @JaidenDhaliwal (252k).

Joint second is @James_Groom (256k) and @PercyTerraceBnB (250k).

So, there’s 4 winners this month who will each recieve a free month on the Forex Analytix platform.

Well done you folks, and unlucky to the rest of us.  Thanks for playing and we’ll be back next month.

 

Bank of Japan

Trading the BOJ

A new era begins for Japan’s BOJ

A new governor and a new direction for the BOJ? We’re about to find out so here’s some thoughts about trading it.

Just getting my (Ryan) ducks in a row ahead of the BOJ and I’m going to be watching a very wide area in USDJPY, which (give or take a few yens), we’re in the middle of (127-138). With events like this you have to know the sentiment on both sides of a pair so that you know how to react if something happens that moves the price the opposite way of that sentiment.

Right now, we know the market is less certain about the dollar, the Fed and the data, and the political stuff, hence why yields keep dropping and USD keeps a slightly bearish tone. So, if USDJPY rallies on the BOJ, and US yields remain under the cosh, as does USD vs other pairs, a rally here would look out of place, and then we ask how far does that go before a counter trade becomes too good to resist?

I’m positioned short already and happy to add up to that 138 if seen, and if only mainly driven from the JPY side. A sustained move over 138 and I’ll be reassessing that trade. On the otherside, a steep drop on the BOJ would mean they’ve signalled a change is coming and that’s going to lead to perhaps the start of a decent leg lower (120’s?).

The 127/128 will be where I’ll watch for an initial move becoming stretched. That will give me somewhere to look to take profit and also to add back (or add more) if it breaks. So, even if you aren’t already in a trade, these areas are where you may get an opportunity just based on the techs rather than the fundamentals.

USDJPY technical analysis chart

I also like my colleagues’ Kman’s view of AUDJPY as a BOJ trade. Again, matching off the fundamentals between the two, we’ve seen Aus inflation coming down more than expected, which pushes the RBA further towards less hikes, and Aus related commods haven’t been doing great either. So, again, any move that pushes AUD out of sync with its own issues potentially leads to a decent counter trade. I’m watching another zone in the pair.

AUDJPY technical analysis chart

Now, you may think that I’m taking it for granted that the BOJ are going to move away from easing, and thus JPY will definitely rally but that’s not the case. I’m just going on the signals I’m deciphering from the BOJ and the data, that they are as close to being able to end easing as they’ve ever been, plus I think inflation is going to stay toppy for them, as it is for everyone else. The evidence (IMO) is stacking up for them to be able to turn and I’m happy to trade that until something comes along that makes those thoughts invalid.

 

 

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The Prop Firm Challenge – Practice What You Preach

Taking the test in our Trader Funding Program

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As CEO of Forex Analytix and Co founder of the Trader Funding Program, I take our products and services very seriously. These are services I use every day for my trading and analysis, but I also have to make sure they are right for our customers. Read more