April 11, 2023
We See Some Slowing in Demand for Labor, but Still High
Fed’s Williams: We See Some Slowing in Demand for Labor, but Still High
Inflation remains well above the 2% target as it falls mostly in goods.
Ali Sabbaghi
Eurozone retail sales decrease again in February despite upbeat surveys
Retail sales in February continued to decline, which makes it unlikely for a positive contribution to first quarter GDP. This suggests that there may be weakness in the economy and no strong rebound in growth is expected.
Retail trade volume down by 0.8% in the euro area and by 0.9% in the EU
Retail sales volume has declined since peaking above pre-pandemic levels and has fallen to levels well below. The decline accelerated in 2022 and there is no break from the trend yet. The spike in the value of retail sales last year due to inflation has now plateaued.
Sales figures for February were disappointing in all five major markets, with Germany and France experiencing the biggest drops of -1.3% and -1.5% respectively. This suggests that consumers are still struggling with high inflation and an uncertain economic future, despite a slight improvement in confidence levels. Although there has been a slight uplift in consumer sentiment, it remains at levels typically associated with an economic recession.
Although surveys such as PMI and Ifo showed a positive outlook for the economy in the first quarter, there has been no concrete evidence from actual sales data to support this. Unless there is a significant increase in March, retail sales are likely to decrease in the first quarter. However, it is important to note that retail sales may not accurately reflect the state of the economy as services have been performing well and there is a potential for increased production activity. Despite this, the current retail sales figures do not suggest a strong economic recovery.
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What is VIX and how we can use it in our trades?
First let to learn about Fear, greed, and risk in financial markets.
Fear and greed in financial markets
Fear and greed play a significant role in financial markets. Fear can cause investors to sell their holdings and panic, resulting in a drop in market prices. Greed, on the other hand, can lead investors to take on excessive risks in search of high returns, which can result in significant losses. Both fear and greed can be detrimental to long-term investment success, as they often lead to impulsive decision-making and neglect of sound investment principles. It is essential to manage these emotions and make rational decisions based on careful analysis and understanding of market trends. By being aware of the psychological factors that influence financial markets, investors can make informed decisions that will help them achieve their investment goals.
RISK sentiment in the Forex market
Risk sentiment is a critical factor in the forex market, influencing the behavior of traders and determining the direction of currency movements. At its core, risk sentiment refers to the level of risk appetite or aversion among investors, which in turn drives market sentiment. When risk sentiment is high, traders are more willing to take risks and invest in high-yield currencies or emerging markets, while in times of low-risk sentiment, traders are more likely to seek safe-haven assets, such as the US dollar or the Japanese yen. Therefore, understanding and monitoring risk sentiment is crucial for forex traders to make informed decisions and capitalize on market opportunities.
Read more about risk and sentiments
NOW, What is the VIX index?
The VIX index, also known as the “fear index,” is a measurement of the market’s expectation of volatility in the next 30 days. The VIX is calculated using the prices of put and call options on the S&P 500 index. When the VIX is high, it indicates that investors are expecting a lot of volatility in the market, which can be an indication of fear or uncertainty. Conversely, a low VIX can indicate that investors expect the market to be relatively stable. The VIX is an important tool for traders and investors to gauge market sentiment and make informed decisions about their investments.
How to trade gold or USD by VIX indicator?
When it comes to trading gold or USD using the VIX indicator, it’s important to understand the relationship between the VIX and these assets. Typically, when the VIX is high, investors tend to flock to safe-haven assets like gold and the USD. Therefore, traders can use the VIX as a signal to buy these assets when the index is high and sell when it’s low.
Generally, a VIX value lower than 20 indicates a Risk-On market and traders don’t fear buying risky assets like AUD, NZD, CAD, and GBP.
On the other hand, a VIX value higher than 20 and above is considered a Risk-Off market, indicating that traders are more risk-averse and tend to buy safe-haven assets like USD, JPY, CHF, and gold.
However, it’s important to note that the VIX is not always a reliable indicator and should be used in conjunction with other technical and fundamental analyses. Additionally, traders should always practice proper risk management techniques when trading any asset. You should always use other technical and fundamental analysis tools to make informed trading decisions. Additionally, it is important to keep track of global events and news that can affect market sentiment and volatility.
The Vix value and risk of the market can find on our Ziwox Terminal Market summary page.
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China and Taiwan disrupted the morning market
According to the state media, the Chinese military announced that the maneuvers around Taiwan will continue. Chinese military: We are maintaining the momentum of encircling Taiwan island with maneuvers. We conducted detailed simulated attacks on key targets on the island of Taiwan and surrounding waters.
Taiwan’s Ministry of Defense: In the last 24 hours, 70 Chinese planes and 11 Chinese ships were seen around Taiwan. We saw 59 Chinese military aircraft near Taiwan as of 10 am on Monday. Among them, 39 Chinese aircraft crossed the middle line of the Taiwan Strait and entered Taiwan’s air defense zones. China’s Shandong ship was conducting maneuvers in the western Pacific on Monday morning
Japanese Chief Cabinet Secretary Matsuno, in response to a question about China’s military exercises around Taiwan: We are closely monitoring the situation. I expect that the Bank of Japan will implement a suitable monetary policy with the cooperation of the government.
According to the Ziwox Terminal, the Market is Risk-Off and all currencies are weak against the US dollar
According to Chinese media reports, the Chinese military continues its maneuvers across Taiwan on Monday. The Chinese military has deployed several aircraft around the Taiwan Strait and the northern and southern ends of Taiwan Island. The Chinese military has conducted sea and air inspections and blockade maneuvers around the island. The aircraft carrier Shandong participated in a combat readiness exercise around Taiwan.
Weekly gold Analysis
Fundamental View
Gold is still under buying pressure but it is at an important level
In the past week, gold was fixed above 2000 dollars. This consolidation was done right above the $2000 and $2002 area. Important and psychological area.
The momentum is still bullish and can rise again to its historical high. We mean the area of 2060. But this price jump definitely needs a catalyst as a driver.
The instability of the economy, the uncertainty in the decisions of the Federal Reserve to interest rate increasing cycles, the purchase of gold by central banks, the crisis of banks under the pressure of recession and inflation, as well as the decrease in bond yields make gold more attractive for buying than ever before.
If in the coming week, the employment data is higher than expected or if the inflation increases a lot, they can make gold fall sharply and return it to the previous level.
But any disappointing data or even close to expectations will stabilize gold in the current areas and even towards higher levels.
Technical View
Technically, gold is slightly overbought at current levels. But what is seen in the candlesticks (downward shadows) shows the pressure on buyers in this area.
If there is no better than expected data for the US economy (employers and CPI), any drop in the price of gold to a lower level can be considered as a correction and another opportunity for buying gold again.
any price drop considered as a correction and a BUY opportunity by Alisabbaghi on TradingView.com
Calendar events
Important events for gold:
USD CPI and Core CPI, FOMC meeting on Wed
Week ahead
What has the Fed planned for the dollar?
The US non-farm payrolls printed 236,000 jobs in March, above the 230k consensus and the unemployment rate dropped to 3.5%.
This week’s core inflation number is likely to come in at 0.4%.
So we have More jobs, less unemployment, and high inflation.
This could be Powell’s only reason for further rate hikes, although these are the last rate hikes and must favor a final 25bp Fed rate hike in May.
However the printed data was lower than expected, there were 17k of downward revisions to the past two months but on the positive side, the bulk of the jobs added were in full-time positions. For this reason, the market considered the strength of the dollar.
Fed will be in a policy pivot
All traders are waiting for the outlook for the US jobs numbers, but the statement from Fed officials indicates that they strongly insist on curbing inflation. The Market priced a 25bp hike rate for 3 May.
We consider only a 25bp hike for this week’s meeting. the Fed will indeed hike 25bp, but see the Fed rapidly reversing course later this year.
US CPI data for March will be released on Wednesday. After it, the Federal Reserve will release minutes, where officials raised interest rates by 0.25% but changed their policy rhetoric. They pointed out that the interest rate may increase. So all traders are waiting for this week’s CPI data because it could be a driver for the USD and a sign of Fed decisions.
Will the central bank of Canada reduce interest rates?
Wednesday is the Bank of Canada, BOC interest rate decision. An important day for CAD traders.
BOC, At their last meeting, decided to keep interest rates unchanged, It making Canada the first central bank to not raise interest rates in their hawkish policy cycle. The central bank of Canada announced that the latest economic data is in line with the central bank’s expectations, so we can expect no increase in interest rates for Canada this week.
BOC PRESS CONFERENCE, On Wed Apr 12, Any word that suggests interest rate cuts are coming soon could put pressure on the Canadian dollar.
Australian jobs data is the most important clue for traders
The Reserve Bank of Australia has hinted in past statements that further contraction may be needed in the future, so AUD traders should pay close attention to Thursday’s Australian employment report. We are also keeping an eye on China’s CPI and PPI data to be released on Tuesday, as China, the world’s second-largest economy, is Australia’s main trading partner and could influence traders’ decisions for the currency.
If the employment report will be weak, it could reinforce the Reserve Bank of Australia to stop interest rate hikes and could pressure on AUD.
Economic calendar
Important events:
Investors have poured $508 billion into cash in the first quarter, the most since the pandemic.
BofA Investment Bank: Investors have poured $508 billion into cash in the first quarter, the most since the pandemic, the largest quarterly increase in cash holdings since 2001.
Our analysis shows that the increase in cash holdings is likely due to investors’ concerns about market volatility and uncertainty about the recovery of the global economy and that this shift towards cash has occurred across all types of investors, including institutional and retail investors. However, investors may still be hesitant to accept risk and may choose safer investments instead.
Of course, it should be noted that this increase in cash assets may not be a cause for concern; Because it may provide flexibility for investors to take advantage of potential investment opportunities in the future. Additionally, while a shift toward cash may be a sign of investor caution, it may not necessarily indicate a lack of confidence in the market or the economy.
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