Euro's Problem Flipped: Higher Yields Are Now a Growth Threat
Traders are turning their most bearish on the euro since March. Demand for options to hedge against another euro drop surged today, and EUR/USD hit a 17-month low at 1.1236.
The usual rule is higher yields mean a stronger currency. But the market has flipped that for the euro. It is no longer looking at higher eurozone yields as support, it is worried those yields stun growth. That is the worst-case scenario, and it is likely causing this big drop.
The eurozone is hit harder than the US because it imports its energy while the US exports, so high oil hurts it more. German unemployment stayed elevated at 6.4%. French debt is at 14-year highs on fiscal worries. Traders are also trimming ECB bets, no longer pricing three more hikes.
Growth risk has hung over the euro for a while. Despite the ECB hiking early, growth is the concern. Price is on the 1.1200 to 1.1250 support.
read the full article here.
— Alan
Traders are turning their most bearish on the euro since March. Demand for options to hedge against another euro drop surged today, and EUR/USD hit a 17-month low at 1.1236.
The usual rule is higher yields mean a stronger currency. But the market has flipped that for the euro. It is no longer looking at higher eurozone yields as support, it is worried those yields stun growth. That is the worst-case scenario, and it is likely causing this big drop.
The eurozone is hit harder than the US because it imports its energy while the US exports, so high oil hurts it more. German unemployment stayed elevated at 6.4%. French debt is at 14-year highs on fiscal worries. Traders are also trimming ECB bets, no longer pricing three more hikes.
Growth risk has hung over the euro for a while. Despite the ECB hiking early, growth is the concern. Price is on the 1.1200 to 1.1250 support.
read the full article here.
— Alan
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Gold Daily Chart
Here I am on the sidelines of Gold shorts... though tomorrow lies a big day!
NFP is notorious for crazy whipsaws, so I welcome the volatility as it may give me an entry for Gold shorts.
Although I like the trade, I personally would not short here. I'd much rather wait for a revisit into the $4,240 level of resistance.
I'll notify you guys in the discord if I take the trade along with my levels.
If you want updates / alerts of new trades being taken, join our VIP group here! Today is the last day for 40% off.
— Alan
Here I am on the sidelines of Gold shorts... though tomorrow lies a big day!
NFP is notorious for crazy whipsaws, so I welcome the volatility as it may give me an entry for Gold shorts.
Although I like the trade, I personally would not short here. I'd much rather wait for a revisit into the $4,240 level of resistance.
I'll notify you guys in the discord if I take the trade along with my levels.
If you want updates / alerts of new trades being taken, join our VIP group here! Today is the last day for 40% off.
— Alan
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Gold short trade still running, but I've tightened my stop a bit further into profit.
Trend still seems bearish for the time being.
Will continue to update any new trades in the VIP group.
- Nick
Trend still seems bearish for the time being.
Will continue to update any new trades in the VIP group.
- Nick
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🔔 Closing Bell - Question of the Day
Oil prices spike sharply. Which sector is likely to be hit the least?
Oil prices spike sharply. Which sector is likely to be hit the least?
Anonymous Quiz
10%
Airlines
13%
Transport
19%
Cruise lines
59%
Energy producers
❤8👍3😁2
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❤7
EUR/USD Now Bounces but the Rally Is Capped
Taking another look at the euro, because it could be giving a neat short-term opportunity. NFP today came in way weaker, 29K vs 90K expected, and unemployment ticked up to 4.2%. That is bearish for the dollar, so EUR/USD consequentially is trading higher.
Yields fell right after the release, but they are already fading it and trading back up. And there is a double whammy of euro positives today: weak US jobs plus hot eurozone inflation at 3.8%, which pressures the ECB to stay tight.
Yet the euro is only bouncing modestly. That tells you the stagflation and energy fear is still capping it. Reports suggest the EU may start releasing oil reserves, but that takes time.
Remember I wanted a break of the big 1.1350 support and a retest. We are getting the retest now, into the 0.382 fib. But I need the growth concerns to actually confirm. Euro PMIs Monday will give me the confidence to short or stay on the sidelines.
read the full article here.
— Alan
Taking another look at the euro, because it could be giving a neat short-term opportunity. NFP today came in way weaker, 29K vs 90K expected, and unemployment ticked up to 4.2%. That is bearish for the dollar, so EUR/USD consequentially is trading higher.
Yields fell right after the release, but they are already fading it and trading back up. And there is a double whammy of euro positives today: weak US jobs plus hot eurozone inflation at 3.8%, which pressures the ECB to stay tight.
Yet the euro is only bouncing modestly. That tells you the stagflation and energy fear is still capping it. Reports suggest the EU may start releasing oil reserves, but that takes time.
Remember I wanted a break of the big 1.1350 support and a retest. We are getting the retest now, into the 0.382 fib. But I need the growth concerns to actually confirm. Euro PMIs Monday will give me the confidence to short or stay on the sidelines.
read the full article here.
— Alan
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Gold 1 Hour Chart
What a crazy NFP day... 😳 This morning's Gold signal is off to the races.
Was not expecting this type of follow-through so soon if I'm being honest.
If you want updates / alerts of new trades being taken, join our VIP group here! Today is the last day for 40% off.
— Alan
What a crazy NFP day... 😳 This morning's Gold signal is off to the races.
Was not expecting this type of follow-through so soon if I'm being honest.
If you want updates / alerts of new trades being taken, join our VIP group here! Today is the last day for 40% off.
— Alan
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Shoutout Alan for also catching the move in VIP!
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Why Trading Is So Hard?
NFP came in way cooler than expected. 29K jobs vs 90K forecast, unemployment up to 4.2%. Textbook dovish. And right on cue, the US 10-year yield dropped.
Then something I definitely was expecting happened. Over the next hour, the 10-year swallowed the entire move and climbed back above where it started. The "obvious" move started to reverse.
So why?
Here is my read on it. The bond market looked at that number and said "not so fast." A weak jobs print tells you something about the Fed's rate path, which lives in the 2-year. But the 10-year is not really trading the Fed right now. It is trading the deficit, the flood of Treasury issuance, and sticky inflation. One bad jobs number does not fix any of those. If anything, a softer economy with the same borrowing needs makes the supply problem worse.
So the front end can price fewer hikes while the long end refuses to rally. The hikes probably are not cancelled either. They are just deferred.
— Alan
NFP came in way cooler than expected. 29K jobs vs 90K forecast, unemployment up to 4.2%. Textbook dovish. And right on cue, the US 10-year yield dropped.
Then something I definitely was expecting happened. Over the next hour, the 10-year swallowed the entire move and climbed back above where it started. The "obvious" move started to reverse.
So why?
Here is my read on it. The bond market looked at that number and said "not so fast." A weak jobs print tells you something about the Fed's rate path, which lives in the 2-year. But the 10-year is not really trading the Fed right now. It is trading the deficit, the flood of Treasury issuance, and sticky inflation. One bad jobs number does not fix any of those. If anything, a softer economy with the same borrowing needs makes the supply problem worse.
So the front end can price fewer hikes while the long end refuses to rally. The hikes probably are not cancelled either. They are just deferred.
— Alan
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We're handing out 10 free Top One Futures 50K eval accounts with a purchase of any of our products!
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Get a free 50k eval account with your EdgeFinder, VIP membership, or StockBox purchase!
How to claim yours:
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- Purchase any of our products and earn (up to 3) 50k evaluation accounts!
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🔔 Closing Bell - Question of the Day
Rising inflation expectations tend to push bond yields up and bond prices down.
Rising inflation expectations tend to push bond yields up and bond prices down.
Anonymous Quiz
77%
True, because investors demand higher yields to offset lost purchasing power
23%
False, because inflation makes existing bonds more valuable
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Euro Now Rejects Friday's Retest and Falls to 1.1200 Support
The euro is getting another headwind today. France is in crisis, with riots across roughly 400 schools, hundreds of arrests, and a government fighting over its budget.
That uncertainty in the eurozone's second-biggest economy is weighing on the currency, and the French-German bond spread blew past 150bp, the widest since the last euro debt crisis.
Compare this to Friday. On Friday the euro was bouncing into the retest of broken support. However, France drove it straight through that zone and down to 1.1200.
Price is now sitting on a major demand shelf at 1.1200 that held the April and May lows. This is a big structural floor, and the move into it looks overextended. With Friday's weak US jobs still in play, I am not shorting blindly into this. I'm either waiting for another worthy pullback or break & retest.
read the full article here.
— Alan
The euro is getting another headwind today. France is in crisis, with riots across roughly 400 schools, hundreds of arrests, and a government fighting over its budget.
That uncertainty in the eurozone's second-biggest economy is weighing on the currency, and the French-German bond spread blew past 150bp, the widest since the last euro debt crisis.
Compare this to Friday. On Friday the euro was bouncing into the retest of broken support. However, France drove it straight through that zone and down to 1.1200.
Price is now sitting on a major demand shelf at 1.1200 that held the April and May lows. This is a big structural floor, and the move into it looks overextended. With Friday's weak US jobs still in play, I am not shorting blindly into this. I'm either waiting for another worthy pullback or break & retest.
read the full article here.
— Alan
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USD/CAD Daily Chart
One of my favorite setups for a USD continuation play. USD/CAD's upward trend is a rare example of how charts can move linear sometimes.
I'm looking to enter this position on a pullback into previous resistance turned support. Note: we have not retested the level once since the breakout.
I personally believe that US rates would stay higher for longer as a base case, and potentially see 1-2 more hikes as long as the Middle East war stays unresolved.
The EdgeFinder is also bullish on USD/CAD +5, despite the recent softer-than-expected data releases.
If you want updates / alerts of new trades being taken, join our VIP group here!
— Alan
One of my favorite setups for a USD continuation play. USD/CAD's upward trend is a rare example of how charts can move linear sometimes.
I'm looking to enter this position on a pullback into previous resistance turned support. Note: we have not retested the level once since the breakout.
I personally believe that US rates would stay higher for longer as a base case, and potentially see 1-2 more hikes as long as the Middle East war stays unresolved.
The EdgeFinder is also bullish on USD/CAD +5, despite the recent softer-than-expected data releases.
If you want updates / alerts of new trades being taken, join our VIP group here!
— Alan
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Gold 4H chart:
Will gold take the plunge to 4000?
I am still holding shorts. Price looks to be pushing back down to the weekly low - if we break through 4100, I think there is a strong chance of a plunge down to 4000.
All position updates + new trades will be shared here.
- Nick
Will gold take the plunge to 4000?
I am still holding shorts. Price looks to be pushing back down to the weekly low - if we break through 4100, I think there is a strong chance of a plunge down to 4000.
All position updates + new trades will be shared here.
- Nick
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🔔 Closing Bell - Question of the Day
Expectations of lower interest rates tend to support gold, since the opportunity cost of holding it falls.
Expectations of lower interest rates tend to support gold, since the opportunity cost of holding it falls.
Anonymous Quiz
88%
True, because lower yields make a non-yielding asset more attractive
12%
False, because gold only responds to inflation, never to rates
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US Yields: Why Lower Oil Isn't Enough to Cool Them
Treasury yields are cooling today as oil trades lower, down about 3.5% intra-week. The 10-year is at 5.27%, off yesterday's 5.31%, which was the highest since 2002.
Nick and Merilee's livestream segment this morning shed light on an important question: is lower oil enough to keep yields down? They said, and I agree, that they don't think so, because so much more is baked into the price.
We cannot deny the Middle East contributed to higher yields. But look at everything else driving them. Rising US debt. Lack of confidence in the Fed and Treasury. Diminishing demand for the 10 and 30-year. Japan, one of our biggest bond customers, offloading US debt to prop up the yen, looking out for itself. And the risk in the AI trade.
That is a lot of weight. So unless you see a lot of headwinds for yields, not just one, I think yields continue to trend higher.
read the full article here.
— Alan
Treasury yields are cooling today as oil trades lower, down about 3.5% intra-week. The 10-year is at 5.27%, off yesterday's 5.31%, which was the highest since 2002.
Nick and Merilee's livestream segment this morning shed light on an important question: is lower oil enough to keep yields down? They said, and I agree, that they don't think so, because so much more is baked into the price.
We cannot deny the Middle East contributed to higher yields. But look at everything else driving them. Rising US debt. Lack of confidence in the Fed and Treasury. Diminishing demand for the 10 and 30-year. Japan, one of our biggest bond customers, offloading US debt to prop up the yen, looking out for itself. And the risk in the AI trade.
That is a lot of weight. So unless you see a lot of headwinds for yields, not just one, I think yields continue to trend higher.
read the full article here.
— Alan
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EUR/USD Daily Chart
With Eurozone headwinds still in play, EUR/USD looks like a great short given we see a pullback.
The risk-reward profile doesn't look good at current price, so I'd really need to see a pullback into the 1.13220 zone and sellers defend the level.
Also, EdgeFinder would need to print bearish again. Nonetheless, I'm going to follow the DXY upward trend until it gives out.
If you want updates / alerts of new trades being taken, join our VIP group here!
— Alan
With Eurozone headwinds still in play, EUR/USD looks like a great short given we see a pullback.
The risk-reward profile doesn't look good at current price, so I'd really need to see a pullback into the 1.13220 zone and sellers defend the level.
Also, EdgeFinder would need to print bearish again. Nonetheless, I'm going to follow the DXY upward trend until it gives out.
If you want updates / alerts of new trades being taken, join our VIP group here!
— Alan
👍21❤11
🔔 Closing Bell - Question of the Day
The Fed leans on core inflation because food and energy prices are volatile and can distort the underlying trend
The Fed leans on core inflation because food and energy prices are volatile and can distort the underlying trend
Anonymous Quiz
18%
False, because the Fed ignores core and targets headline only
82%
True, because stripping them out gives a steadier read on inflation momentum
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