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2022-06-23 08:32:20 #WaveAnalysis #T

• AT&T rising inside corrective wave (2)
• Likely to rise to resistance level 20.77

AT&T earlier reversed up from the key support level 18.80 – standing close to the lower daily Bollinger Band and the 61.8% Fibonacci correction of the upward impulse (C) from February.

The upward reversal from the support level 18.80 started the active medium-term corrective wave (2).

AT&T can be expected to rise further toward the next resistance level 20.77 (former wave 3 low from the start of June and the target for the active corrective wave (2).

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2022-06-22 16:28:33 Open / Comment

2022-06-22 16:03:41 The spread between the US and Japanese 2-year yields exceeded 3% this month, reaching 3.5%, the highest since 2007, although it was only 0.25% at the beginning of last year. Approaching a spread of 3% has not stopped the Fed from tightening, nor the Japanese rhetoric, so it makes sense to tune in to a return to pre-World Financial Crisis norms, i.e., above 4.3% versus 3.2% now, leaving the potential for around a third of the movement that already passed.

If these correlations between the USDJPY and US-JP 2-year yield spreads remain in place, we could see the dollar continue to rise to 150 yen, last seen in 1990 and twice as high as the historic lows of 2011.

Suppose the Japanese monetary authorities and the Ministry of Finance manage to steer the yen through such a devaluation, preserving confidence in the financial system. In that case, this could revive the economy by raising export competitiveness, potentially returning the Land of the Rising Sun to export-oriented status. Open / Comment

2022-06-22 16:02:56 USDJPY may find a ceiling as high as 150

The Japanese yen leads in losses against the dollar amongst the G10 currencies. And so far, there are indications that the USDJPY’s rising trend will only be interrupted by technical corrections in the coming weeks or months.

The main fundamental driver for the USDJPY is the substantial divergence in the US and Japanese monetary policy. The former has raised its key rate by 150 points in the last three meetings and started selling assets off the Fed balance sheet. The latter has maintained its crisis rhetoric, promising to continue with QE and increasing bond purchases to keep 10-year yields close to 0.25%.

The currency market is not only wagering on the present but is actively putting expectations into prices. From this perspective, the USDJPY exchange rate results from an overlay of the key rate expectations, which are best reflected in 2-year bond yields. The spread started rising steadily in early 2021, at the same time as USDJPY began to rise. Open / Comment

2022-06-22 12:47:20 It could take another two months of waiting for a turning point in inflation, the CPI will reach a high base effect, and in that time, the CPI could get double-digit y/y growth rates.

In this environment, the Bank of England’s moves to raise the rate by 25 points at each meeting are not capable of curbing inflation.

Perhaps the main positive effect of this policy is the devaluation of the pound’s purchasing power and the reduction of the debt burden in real terms. However, the more obvious consequence of such policies is a drop in confidence in local financial markets and the pound, which we see with the Japanese yen at its lows against the dollar in 24 years.

GBPUSD is now trading at 1.22 - near the psychological low of 1.2000, where it received critical support in 2017 and 2020. But that support may not survive the third test of strength due to an increasingly threatening gap between inflation and interest rates, which would devalue debt. Open / Comment

2022-06-22 12:46:48 UK inflation indicates that the Bank of England is moving too slow

Consumer inflation continues to gain momentum in the UK. Data for May showed that CPI accelerated to 9.1% y/y - a record among the G7 and a 40-year high. The monthly price growth rate was 0.7% compared to 2.5% and 1.1% in the previous two months. However, apart from the reversal to lower base commodity and energy prices in the last couple of weeks, there is little indication that the Bank of England can relax. Moreover, it needs to double the pace of the rate increase from 25 points at once.

Last month producer input prices rose by 2.1% and output prices by 1.6%, reaching an annual rate of 22% and 15.6%, respectively. Under these conditions, producers and retailers will continue to pass increasing costs down to consumers. Unlike in the early years after the financial crisis, retail sales and employment are strong, which allows such a shift of rising outlays to end consumers. Open / Comment

2022-06-22 09:37:40 Ethereum co-founder Vitalik Buterin criticised the popular Stock-to-Flow model for predicting bitcoin exchange rates, saying it is wrong and only gives people unwarranted confidence in the predetermination of exchange rate movements.

Investors are buying bitcoin despite the market’s decline. According to CoinShares, crypto funds saw capital outflows of $39m last week, while there were inflows of $28m into BTC.

Investors have, in our view, false confidence in their strengths. It is commonly believed in the media that retail investors were the first to buy out the 2020 bottom and who managed to beat the funds in 2021 using the r/wallstreetbets forum.

But then the Fed and many other central banks, along with governments, were on the buyers’ side, conducting unprecedented policy easing and handing out monetary stimulus. Now they are doing the opposite: rolling back support programmes and raising rates at the highest rate in decades.

Retail shoppers risk being caught swimming against the financial current, which is hardly a successful strategy. History suggests that enthusiasts risk running out of steam soon, being left with depreciating assets, and losing confidence for years that equity or cryptocurrency markets are a worthwhile place for their money. Open / Comment

2022-06-22 09:37:16 Cryptocurrencies are attracting investors, but it will pass

Bitcoin rallied from $20.5K to $21.6K during the day on Tuesday but later reversed to decline and went back on Wednesday morning. Ether corrected deeply, losing 4.4% over the last 24 hours. The top ten altcoins showed mixed dynamics, ranging from a 6.5% decline (Solana) to a 3.6% gain (Dogecoin).

Total crypto market capitalisation, according to CoinMarketCap, declined 1.9% to $900bn. Bitcoin’s dominance index dropped 0.2 points to 43.5%. The Cryptocurrency Fear and Greed Index is up 2 points to 11 by Wednesday and remains in a state of “extreme fear”.

After a strong move down last week and a retreat from the extremes on Sunday, BTCUSD failed to gain ground with buyers and remained pegged at the round level of $20K.

Bitcoin’s recent drop below $20K triggered a new wave of deleveraging and liquidations that affected miners and long-term investors, Glassnode claims. Open / Comment

2022-06-22 08:45:28 #WaveAnalysis

#USDJPY broke key resistance level 135.50
• Likely to rise to resistance level 137.25

USDJPY currency pair today broke above the key resistance level 135.50 (which stopped the earlier minor impulse wave 1 at the start of June).

The breakout of the resistance level 135.50 should accelerate both of the active impulse waves 3 and (3).

Given the clear daily uptrend and the continued yen outflows, USDJPY currency pair can be expected to rise further toward the next resistance level 137.25 (target for the completion of the active minor impulse wave 3).

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2022-06-21 16:57:55 Open / Comment