This is from Marc Chandler's weekend musings, October 9.
From Marc to Market:
We suggested that the US jobs data and the CPI would be a 1-2 punch that would strengthen the greenback after it pulled back from extremes seen in late September. The US employment data were sufficiently strong, and the unemployment rate fell back to cyclical lows (3.5%), which prodded the market to again toy with the idea that the Fed funds terminal rate may be 4.75% rather than 4.50% and in Q2 next year rather than Q1.
The dollar rose against most G10 currencies last week, helped by the gains after the employment data. The Norwegian krone was the strongest (1.7%), helped by rising oil prices and a rally in equities (risk-on). The Canadian dollar was the second strongest (~0.9%). Rising stocks and hawkish comments by the central bank governor supported the Loonie. The New Zealand dollar was the third G10 currency to appreciate against the greenback (~0.30%). The RBNZ hiked by 50 bp after Australia only delivered a quarter-point move. The Australian dollar fell by about 0.35% last week.
Dollar Index: The Dollar Index posted a key downside reversal on September 28, perhaps encouraged by the Bank of England's actions. After making new multi-year highs above 114.75, it turned tail and closed below the previous session's low. The retreat carried into the start of last week before DXY found support near 110.00. It held above the trendline drawn off the mid-August and mid-September lows. The momentum indicators pulled back from overbought territory but have not turned up, despite the 2.5% bounce in the second half of last week. That bounce saw the Dollar Index approaches the (61.8%) retracement objective of the pullback, which is found slightly below 113.00. The high after the employment data was almost 112.85. Tactically, the dollar may be vulnerable to "buy the rumor, sell the fact" type of activity after the October 13 CPI.
Euro: The euro recovered from 20-year lows near $0.9535 on September 28, with a critical upside reversal, and rallied into almost $1.0000 in the first part of last week. The upside stalled, and the short-term momentum players had to move to the sidelines. We note that the euro's recovery was insufficient to lift the five-day moving average above the 20-day moving average. The euro's push lower in the second half of last week brought to almost the (61.8%) retracement of the bounce. That is found near $0.9715. The MACD looks poised to turn lower from the middle of its range. The Slow Stochastic is still rising. While the price action reinforces the significance of par, the $0.9800-30 may offer a nearby cap ahead of it....
....MUCH MORE
It seems as though the whole world would like to see hopes of higher U.S. rates dashed.
That would mean a weaker dollar which would mean some relief for Europe, Asia and most importantly emerging markets.
I on the other hand would like to see the US Dollar Index at 115 or above in furtherance of the master plan for world domination. 113.35, up 0.22 on the futures.
Our best guess for the headline CPI numbers:
0.2% for the month of September; 7.9% year-over-year.
This time we are optimists vs the consensus 8.1% YoY.
September 2022 CPI data are scheduled to be released on October 13, 2022
For comparison, early on September 13 we posted:
CPI? Best guess: Unlike last month, no 0.00% for the month, maybe 0.2% and 8.1% for the trailing twelve months.*
Later that day it came in at 0.1% for the month and 8.3% year over year and the markets went all to hell. And we were pessimists, outliers among the pivot crowd. many peeps were calling for a lock sub-8% print and maybe down to 7.6%. And the result on the DJIA:
From 32,381.34 at the close the day before, September 12 to today's close at 29,239.19.
You don't want to lose 9,7% per month for too many months in a row, it can really mess up your bonus game.
