Major Talking Points
- CPI data comes in lower than expected
- Fed holds rates
- BoJ holds rates, and JPY continues to slide
- Gold finds a bid at $1940
This week has provided some volatility without really creating lots of opportunities. The appetite for risk continues to surge, and retail investors continue to chase extreme returns.
With the US CPI data coming in below forecast, investors continue to plough funds into equities, believing the Fed will keep on pausing, based on recent data.
However, the Fed has certain data points suggesting that equity valuations need to ease. With a higher core PCE (inflation) and a higher peak in interest rates, we would see a move higher in USD and US10Y, while equities falter.
This hasn't transpired, we are currently seeing equities continue to surger as per the charts below.
Markets React
Looking across the indexes, NAS100 is currently sitting at YTD highs up 42% from January lows.
With S&P500 being up 17% from January lows with 4550 as the next area of resistance, buying at these elevated level doesn't sound too appealing.
Looking at FX, the weakest currency across the board is JPY - as it stands with the BoJ holding policy, We can expect further declines in JPY... This is a case of buy the corrections, good trade management is required.
If a sudden change in equity valuations were to hapen, we could see a sharp move lower in JPY crosses.
Once again, Gold has come into our area of interest yesterday at $1940, and saw it catch a quick bid, proving a nice false break...
Traders watching this area would have caught a nice move higher.
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