Outlook Trend: USD
Last Friday, 6th Jan, US unemployment rate
was retuned to cycle lows, where the US added 223,000 jobs. Many publication were
reported that no signs of a slowing job market in US yet.
But look at the flatted US unemployment rate, this is a sign that a turn
is coming.
We can also observe the inflation had been controlled 2 months consecutive
slowdown as below.
With business surveys pointing to recession, tougher times are coming.
We are speculating that this is indicate the end of monetary tightening, and the capital flow might outflow from USD dollar.
Let’s us compare the US 500 vs GER40 index, both are heading for
divergence.
We are expecting that coming week, US Dollar will be descending to
lower level at 102.
Outlook trend: JPY
Further, observe SP500 vs Nikkei monthly chart. Previously, when US equity market was bounced up to peak in 2021, investors sell JPY and buy USD to trade in US equity market.
When economy outlook is deteriorating, capital will flow out of USD and
head back to JPY as safe-haven currency when market heading to recession in mid
of February to June 2023 (our expectation).
Trading Theme: USD/JPY
After various interest hikes compare to CHF (1.0%), EUR (2.5%), USD (4.5%), obviously JPY become only ONE safety currency.
USD/JPY at Weekly Chart
USD/JPY at Daily Chart
Last week posting Outlook Trend and Watchlist Jan2023: Part2, USDJPY had fulfilled scenario 1: USDJPY will pull back to supply zone 134 to 138 and immediately descending leaving a tall shadow candle stick. I believe it will downswing to demand zone 127 to 131.
With the above findings, my bias more on dovish of USD.
Trading Theme: VXXB
VXX works opposite relationship with SP500. Once the investors tension for coming recession and low confidence on US equity, volatility will rise.
VXX works opposite relationship with SP500. Once the investors tension for coming recession and low confidence on US equity, volatility will rise.
VXX at Weekly chart:
VXX at daily chart:
We need observe the 3 candle sticks to remain above support area 15.4 and
it might pull back to test the support before it continues to move uptrend to
next support area at range 17.5 to 18.5.
To understand further, we can look at Japan bond at weekly chart. It
had been sold all the way down to 146 from March 2020 to December 2022. During
uncertainty, demand for bonds usually increases when investors are concerned
about the safety of their capital.
Japan Government Bond at Weekly Chart
Japan Government Bond at Daily Chart
If money starts to flow into the bond market and candle stick stay
above the demand zone 146.4. Then, we are speculating outbreak ERC to move
upwards to 147.5, move horizontal before swinging up to next supply zone at 148.80.
Trading Theme: AUD/JPY
During pandemic season 2020 to 2021, investors sell JPY and invest in
USD, and flows to Equity market as well as commodity. As a result, we can see
below AUDJPY weekly chart is uptrend since March 2020.
AUD/JPY at Weekly Chart
AUD/JPY at Daily Chart
Currently, AUDJPY already at peak supply zone and moving horizontally. In time of risk off, yen will rally. How about commodity? Risk assets including commodity rise in times of optimism and vice versa.
Let’s pull out commodity chart.
Steel at weekly chart
Copper at Weekly Chart
Iron Ore at weekly chart
The above commodity chart shown no strong move and trending at no trend.
Why would I say so? China has grown to become the world's largest
buyer of several commodities.
China Cai Xin Manufacturing PMI fell to 49.0 in December 2022, the lowest since September 2022. The drop-in factory activity, output, export will also reduce the demand for commodity such as steel, copper, iron ore.
In summary, we might look a bearish trend for AUD/JPY in the
next few weeks.