short GU. 1.23 TP high probability.
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2
Cable Update (GBPUSD)
- #725,542
- Feb 2, 2023 4:54am Feb 2, 2023 4:54am
- Joined Apr 2020 | Status: Trader | 8,804 Posts
Trader with an Edge.
Let's do this today. 
We'll have BOE and ECB in two to three hours from now. Before that, it worths looking back at what Powell said yesterday at Fed.
1. Market vs Fed dynamics
This stalemate is set to continue until data emerges later in Q2, possibly Q3 '23. We're talking about job market data: new job, hourly earnings, unemployment, producer prices. Market says Fed has tightened enough, any more than that, guarantees a recession. Fed says, no recession risk, labour market still very strong, can hike as far as they like.
I seem to agree with the Fed. Now, market used to be correct, and that was based primarily on pre-pandemic economics. Today, things are turned upside down, nobody knows what triggers what. US just last year, saw two consecutive quarters negative GDP. Market was saying recession. One year later, still no recession. Now, if market keeps going on with this narrative, they might be correct, "eventually", but that's a prediction worse than a stopped clock.
2. Overly optimistic rally
We saw that euphoria yesterday. Stocks rallied. Dollar dumped. Risk assets sentiments improved. That's just based on two things: Powell's use of the word "disinflation" and market impression that Fed will pause after Mar '23. Market was pricing in on two things: rate pause, and possibly rate cut. That explained the rally we saw yesterday.
3. Wage inflation
This is touchy bit. Fed knows if inflation problem is not resolved, we'll not have an economy, meaning high unemployment, sluggish consumption, dragging down production. Powell said it many times over. Market interpreted it differently: if inflation persists, their portfolio continue underwater, just like the last 12 months. What Fed wants to see, is inflation comes back down to 2%, but Fed knows that's not attainable without wage growth also slowing down to 2%. Now, Fed has an upper here compared to ECB and BOE, given the robust US job market. That is why as long as jobs opening are at record high, this wage inflation bit is very hard to contain, and 2% inflation target is not achievable. Fed doesn't want to see a situation where inflation dips to say, 3%, and then spike up down the road.
What I see is, from these three areas: interest-rate, inflation and liquidity, Fed will to continue to hike past 5%, possibly to 6% by end of 2023.
What I'll do, is to watch and listen, if Powell or other Fed speakers, differ their tones in coming speeches, interviews and talks in coming days. I've a feeling that market was getting too excited, too far ahead, of what Fed was communicating. Market might be assuming rate pause, when the Fed intention might be going on with more hikes in 2023. Market might be assuming Fed will cut rates, when Fed's intention was to hold rate for longer than market expects.
As usual, I'm still bullish on Euro, bearish on Sterling, and bullish on yen.
We'll have BOE and ECB in two to three hours from now. Before that, it worths looking back at what Powell said yesterday at Fed.
1. Market vs Fed dynamics
This stalemate is set to continue until data emerges later in Q2, possibly Q3 '23. We're talking about job market data: new job, hourly earnings, unemployment, producer prices. Market says Fed has tightened enough, any more than that, guarantees a recession. Fed says, no recession risk, labour market still very strong, can hike as far as they like.
I seem to agree with the Fed. Now, market used to be correct, and that was based primarily on pre-pandemic economics. Today, things are turned upside down, nobody knows what triggers what. US just last year, saw two consecutive quarters negative GDP. Market was saying recession. One year later, still no recession. Now, if market keeps going on with this narrative, they might be correct, "eventually", but that's a prediction worse than a stopped clock.
2. Overly optimistic rally
We saw that euphoria yesterday. Stocks rallied. Dollar dumped. Risk assets sentiments improved. That's just based on two things: Powell's use of the word "disinflation" and market impression that Fed will pause after Mar '23. Market was pricing in on two things: rate pause, and possibly rate cut. That explained the rally we saw yesterday.
3. Wage inflation
This is touchy bit. Fed knows if inflation problem is not resolved, we'll not have an economy, meaning high unemployment, sluggish consumption, dragging down production. Powell said it many times over. Market interpreted it differently: if inflation persists, their portfolio continue underwater, just like the last 12 months. What Fed wants to see, is inflation comes back down to 2%, but Fed knows that's not attainable without wage growth also slowing down to 2%. Now, Fed has an upper here compared to ECB and BOE, given the robust US job market. That is why as long as jobs opening are at record high, this wage inflation bit is very hard to contain, and 2% inflation target is not achievable. Fed doesn't want to see a situation where inflation dips to say, 3%, and then spike up down the road.
What I see is, from these three areas: interest-rate, inflation and liquidity, Fed will to continue to hike past 5%, possibly to 6% by end of 2023.
What I'll do, is to watch and listen, if Powell or other Fed speakers, differ their tones in coming speeches, interviews and talks in coming days. I've a feeling that market was getting too excited, too far ahead, of what Fed was communicating. Market might be assuming rate pause, when the Fed intention might be going on with more hikes in 2023. Market might be assuming Fed will cut rates, when Fed's intention was to hold rate for longer than market expects.
As usual, I'm still bullish on Euro, bearish on Sterling, and bullish on yen.
- #725,546
- Feb 2, 2023 5:00am Feb 2, 2023 5:00am
- Joined Apr 2020 | Status: Trader | 8,804 Posts
Trader with an Edge.
- #725,549
- Feb 2, 2023 5:05am Feb 2, 2023 5:05am
- Joined Apr 2020 | Status: Trader | 8,804 Posts
Trader with an Edge.
- #725,550
- Feb 2, 2023 5:06am Feb 2, 2023 5:06am
- | Commercial User | Joined Jul 2021 | 3,279 Posts
My telegram: https://t.me/avidforex
- #725,551
- Feb 2, 2023 5:10am Feb 2, 2023 5:10am
- Joined Oct 2019 | Status: Forexian Fighter = FF | 16,341 Posts
each day 10%,,,, https://www.forexfactory.com/thread/1371538
- #725,552
- Feb 2, 2023 5:12am Feb 2, 2023 5:12am
- Joined Apr 2020 | Status: Trader | 8,804 Posts
Trader with an Edge.
- #725,553
- Feb 2, 2023 5:15am Feb 2, 2023 5:15am
Let's do this today.
- #725,554
- Feb 2, 2023 5:16am Feb 2, 2023 5:16am
- Joined Dec 2011 | Status: Postmaster | 11,928 Posts
{quote} Why buy there? I understand the previous entries but not the succeeding ones.{image}
Tuning
POSTMASTER
- #725,556
- Feb 2, 2023 5:24am Feb 2, 2023 5:24am
- Joined Dec 2011 | Status: Postmaster | 11,928 Posts
POSTMASTER
