Join the millions of people who stay on top of global financial markets with Investing.com.
Download Now
As Treasury yields back up anew:
Landing on stocks:
Pretty self-explanatory. US and European PMIs were stronger than expected and good news is bad news now as sticky inflation gets stickier.
This yield backup will see no relief before macro data starts pointing at recession again. The primary mechanism to take that tightening global will be DXY. BofA:
View: Bullish USD snapback ideas. The last two weeks of US data confirmed our 2023 year ahead view that the DXY turns up from the 102/100 target area. We also favored fading euro in the 1.09s as a probable medium-term turning point (Chart 4). This trend change started with the market’s reaction to US non-farm payroll data on Feb 3, 2023 and remains underway in Q1.
A string of stronger than expected US economic data has continued in February. It is supporting the USD with terminal rate expectations rising, consensus bearish views being challenged and a cup and handle base forming on the Bloomberg USD index (Exhibit 1). This pattern is seeking confirmation with a daily close above 1245 to target1275-1280. If confirmed, it would further support our bias for a snap back in the USD for the rest of Q1, a common seasonal dip in April and another bounce back in May.
In our 2023 year ahead technical views we argued it tends to take time for the DXY to top after large / sharp periods of appreciation. Besides the one-off plaza accord spike and DXY collapse back in 1985, history suggests 2-5 swings sideways can occur in a range or topping process. Swing 2 up is underway and USD has upside in Q1 (Chart 2).
AUD is headed for the knackery until DM recession data arrives.
Written By:
David Llewellyn-Smith
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed. Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website. Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
Get The App