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It’s our expectation with a heavy US numbers day to come that Core Retail Sales will be firm and will continue to support the hawks on interest rate policies. We’ve already seen a UK number of 10.1% meaning the United Kingdom is on double-digit inflation on official statistics, which almost certainly understates many other inflation elements that aren’t being captured.We expect Retail and Core Sales to be strong and we would bias to the ongoing Dollar reversal, see the technical chart below. The DXY shows that rather than being a capitulation, we have been in a “channel retracing” which is more akin to squaring up for later upside and resumption of trend rather than a blow off capitulation of weakness and a localized, even long term high.
DXY 12H: channel break
Given this is our view we continue to bias to Dollar reasserting against both the EURO and the Asian counterparts: the Hong Kong Dollar, Chinese Yuan, Japanese Yen and the Korean Won, amongst others. So with those two biases, I would position accordingly and our long term macro view remains that we are in an upside HVF and we had run the second interim of that pattern, hence the pullback.With the passage of time, we should once again see Dollar reassertion to the upside and we anticipate our target on the DXY to be run (on balance of probabilities). This is assuming success of that particular HVF pattern which is our default position, given how well it has performed so far and the time frame within which it has performed. As a result, it’s a dangerous time for risk-on positions.BTCUSD 12H: rising wedge
We have also reported the rising wedge structures on crypto generally, see chart above. As such this points to a potential cooling that could come about in the crypto space, following a bit of a benign period with some rallies. Ethereum did very well given the news, but Bitcoin has underperformed given the Dollar weakness. But despite that, it has rallied and found the 25K level, from which it has been rejected. At the same time Ethereum has been rejected at the 2K level. This is pointing to localized resistance points, and as the US Dollar reaffirms, we would anticipate crypto to ease over the next period.
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Warm wishes, Francis & The Market Sniper Team