DAILY TECHNICAL ANALYSIS
With quantitative tightening just ramping up, the other shoe about to drop on the market .Less support for the bond market and contraction in the liquidity in the financial system create another set of headwinds for the global economy and financial markets.
Fed speakers this week Powell & voters Brainard & Bowman. Data includes PCE price index, consumer confidence -which holds more importance than normal- durable goods, Q2 GDP, UoM sentiment & raft of housing data.- this market cares little for these niceties as capitulation is getting more ugly and painful .
Italy went to polls & right-wing alliance led by Meloni`s Brothers of Italy party set for clear majority in both houses. Meloni plays down her party`s post-fascist roots & portrays it as a mainstream group like Britain`s Conservatives. Friction with EU likely to hit headlines .
USD index : Positive trending setup - next stop 115.34 May 2002 high
EUR/USD traded to 0.9528 in a flash.
Only a break above 10 dma at 0.9901 to ease downward pressure.Minor support is at a 2002 monthly low at 0.9608.
China will release industrial profits this week, but the focus will be on official mfg & services PMIs - Caixin mfg PMI on Friday.
PBOC fix at 7.0298 marks highest since Jul 2020.China re-introduces 20% reserve ratio for FX fwds- move that would make betting against yuan more expensive .
USDCNY 7.1650 key - break sets up 7.50.
Sunday night fear rocks - Combination of free spending, unfunded tax cuts & huge govt borrowing- epitome of "casino macroeconomics".Almost an admission that UK economy has nothing more than a City.all the hallmarks of a panic GBP exit. Sterling crisis for the history books in making .Speculation of an emergency 1% BoE hike to stem the tide.This could be a death knell for economy . 1.0327-1.0845 range so far- should stay there for sometime .
Tokyo`s response to sterling led offshore risk rout key for today.Suzuki says both Govt and BOJ concerned over weak yen.BoJ Rinban operations will provide some interest today.Yield on 10-y JGBs pulled back from 0.25% cap when BoJ reaffirmed dovish credentials lat Thursday.
Markets cautious after last week`s BoJ intervention - you may not get to see BOJ now at 145.00 ?
While entire world is fretting USD strength and trying all the tools in their arsenal , here it`s case of usual chest thumping. GBP rout is an eye opener of how the twin deficits can play havoc with currency in this new paradigm -Realisation to set in early - Intervention salve is unlikely to last - Life above 81.65 is more painful for sure .