Welcome back traders to the last month of Q3. It was quiet from my side for some time, due to the summer holiday break and major risk events on the horizon.
A lot has changed in a few weeks. The market was pricing in tapering and interest rate hikes by the FED in early June, but the sentiment changed quickly after a disappointing speech for dollar bulls by Powell during Jackson Hole. The NFP came in very disappointing last Friday, and the stagflation drums are beating again.
Jackson Hole
So alot hinged on Powell's speech during Jackson Hole. As always Powell was very vague, however he did mention a couple of interesting things;
1. They will start tapering this year
🔹Not clear how much, could be $1 billion or $10 billion per month
🔹Not clear when (September, November or December FOMC-meeting)
🔹Since the August NFP missed its forecast and came in lower than 500k, it is unlikely they will announce tapering at the September FOMC-meeting
🔹Leaves us with the November and December FOMC-meeting as possible tapering announcement moments
2. No interest hikes for the foreseeable future
🔹Cheap money in abundance for the foreseeable future
Yes, there will be tapering in place this year (most probably December), however the FED will keep drowning the market with cheap money in the meantime. Take note that tapering doesn't mean that they will take money out of the market, however it means they will slow down the money injections into the market. Reading between the lines it means the FED balance sheet will keep growing, however at a slower pace (currently $8.4 trillion).
Eurozone
The shift of attention of traders moves to the next world reserve currency. With the Eurozone economy growing at its fastest pace on record and inflation set to rise further, pressure on the ECB to taper its Pandemic Emergency Purchase Programme (PEPP) is building.
It is widely expected by economists and analysts that there will be an announcement during the ECB-meeting coming Thursday to start taper its PEPP-program in December. This will obviously be bullish for EURUSD and have bearish implications for gold (somewhat) and the dollar.
Technicals
DXY
Although I expected the dollar would break out after the August NFP, it did not so. Currently it seems the dollar bears have been building a bearflag on the daily chart and the third test of 89.5 might do the trick for a breakdown towards 88 and lower.
Gold
Gold made some good bullish moves since the flashcrash of early August and we are back above 1800, however it failed again to close the day and week above the 0.382 fibo retracement level ($1829). This implies bullish weakness and I am expecting a bearish retracement first towards the 1770-1790 zone and bullish continuation towards 1875, 1925 & 1960 afterwards due to dollar weakness to complete an inverse H&S pattern. A solid break of 1835 on the daily chart will make things extremely bullish in goldyland, as this will confirm the triple bottom and this will invite bigger bulls to the arena.
EURUSD
On EURUSD I am very bullish due to the Bullish Wolfe Wave on the weekly chart (send me a DM if you see it too) and the touch of the bearish trendline that broke July 2020 and turned bullish support. I am expecting to see the break of 1.235 before end of year with endtarget 1.28 (Q1 2022).
Indices
I am still bullish on indices as long as the Dow Jones (US30) hasn't touched the 36.6k mark and I am expecting one more blow-off top before we see a market correction of at least 20% (if not more). However I am not buying and I do not advise to buy all time highs to anyone. Rather I would like to stay put and wait for my projected reversal point to sell the equities market to the highest bidder.
Beautiful days ahead with a lot of pips to be collected.
Love and hugs,
Cesaro 😎
A lot has changed in a few weeks. The market was pricing in tapering and interest rate hikes by the FED in early June, but the sentiment changed quickly after a disappointing speech for dollar bulls by Powell during Jackson Hole. The NFP came in very disappointing last Friday, and the stagflation drums are beating again.
Jackson Hole
So alot hinged on Powell's speech during Jackson Hole. As always Powell was very vague, however he did mention a couple of interesting things;
1. They will start tapering this year
🔹Not clear how much, could be $1 billion or $10 billion per month
🔹Not clear when (September, November or December FOMC-meeting)
🔹Since the August NFP missed its forecast and came in lower than 500k, it is unlikely they will announce tapering at the September FOMC-meeting
🔹Leaves us with the November and December FOMC-meeting as possible tapering announcement moments
2. No interest hikes for the foreseeable future
🔹Cheap money in abundance for the foreseeable future
Yes, there will be tapering in place this year (most probably December), however the FED will keep drowning the market with cheap money in the meantime. Take note that tapering doesn't mean that they will take money out of the market, however it means they will slow down the money injections into the market. Reading between the lines it means the FED balance sheet will keep growing, however at a slower pace (currently $8.4 trillion).
Eurozone
The shift of attention of traders moves to the next world reserve currency. With the Eurozone economy growing at its fastest pace on record and inflation set to rise further, pressure on the ECB to taper its Pandemic Emergency Purchase Programme (PEPP) is building.
It is widely expected by economists and analysts that there will be an announcement during the ECB-meeting coming Thursday to start taper its PEPP-program in December. This will obviously be bullish for EURUSD and have bearish implications for gold (somewhat) and the dollar.
Technicals
DXY
Although I expected the dollar would break out after the August NFP, it did not so. Currently it seems the dollar bears have been building a bearflag on the daily chart and the third test of 89.5 might do the trick for a breakdown towards 88 and lower.
Gold
Gold made some good bullish moves since the flashcrash of early August and we are back above 1800, however it failed again to close the day and week above the 0.382 fibo retracement level ($1829). This implies bullish weakness and I am expecting a bearish retracement first towards the 1770-1790 zone and bullish continuation towards 1875, 1925 & 1960 afterwards due to dollar weakness to complete an inverse H&S pattern. A solid break of 1835 on the daily chart will make things extremely bullish in goldyland, as this will confirm the triple bottom and this will invite bigger bulls to the arena.
EURUSD
On EURUSD I am very bullish due to the Bullish Wolfe Wave on the weekly chart (send me a DM if you see it too) and the touch of the bearish trendline that broke July 2020 and turned bullish support. I am expecting to see the break of 1.235 before end of year with endtarget 1.28 (Q1 2022).
Indices
I am still bullish on indices as long as the Dow Jones (US30) hasn't touched the 36.6k mark and I am expecting one more blow-off top before we see a market correction of at least 20% (if not more). However I am not buying and I do not advise to buy all time highs to anyone. Rather I would like to stay put and wait for my projected reversal point to sell the equities market to the highest bidder.
Beautiful days ahead with a lot of pips to be collected.
Love and hugs,
Cesaro 😎