El Salvador Bitcoin Plan “Bulletproof”, President Says

By Tom Arnold and Karin Strohecker

El Salvador this month became the first country to adopt bitcoin as legal tender in a move taking effect in September.

Speaking in the interview released on Wednesday, Bukele said the move would boost jobs and economic development to the Central America country.

He said he was confident the project would be a success – despite the World Bank declining to offer technical support and concerns expressed by the International Monetary Fund.

“It looks bulletproof,” he said in an hour-long interview with bitcoin podcaster Peter McCormack. “I’m pretty sure this is going to work, not only for us but for humanity, because it is a leap forward for humanity.

Bukele said the move would lessen El Salvador’s reliance on the U.S. dollar, the existing legal tender.

“(We will be) at least becoming a little less dependent on the output of new dollars, and the new inflation that’s coming with those all those new dollars,” he said.

There was no plan to hold bitcoin in national reserves, though that might happen “probably in the future”, he said.

The World Bank declined to give assistance to El Salvador’s bitcoin implementation given the environmental and transparency drawbacks.

“Having the World Bank, advisers or technical support would have been nice, but we really don’t need it,” Bukele said, adding local talent was more than enough.

He acknowledged there might be some risks to the push.

“But I really do not see them as big risk, only probably getting some people angry at us but they haven’t been so nice to us anyway, so you know, why not try something new?”

Analyst have voiced concerns that the bitcoin push could endanger the country’s request for an $1 billion programme to the IMF. The fund has voiced economic and legal concerns regarding the move, though Bukele said his government had spelled out its plan and would offer more explanation if needed.

“We adopted the U.S. dollar in the year 2001, what’s the difference?” he asked.

“The only difference, probably, is the reasons why we’re doing this. In 2001 it was probably done for the benefit of the banks and this decision is done for the benefit of the people.”

Bukele also said he had received a lot of interest from parties over exploiting renewable energy from the country’s volcanoes to build a bitcoin mining hub.

“We have discovered new (geothermal) wells that will give us 95 megawatts, which is not huge but still quite considerable,” he said.

A bitcoin mining plant would be built at a cost of $480 million, he said, while bitcoin would pay for infrastructure from schools to bridges.

(Editing by Alison Williams)

Southwest Airlines Ceo Gary Kelly to Step Down

Kelly, 66, who became the CEO in 2004, has led Southwest through some of the airline industry’s most turbulent times including the coronavirus crisis that hammered travel demand.

As CEO, he spearheaded several initiatives, including the acquisition of AirTran Airways, the launch of international destinations for the first time in Southwest’s history, and the introduction of the Boeing 737 MAX 8 into the airline’s fleet, the company said.

Jordan, 60, joined the airline in 1988, and has served in roles including director of revenue accounting and corporate controller, among others. He will take charge effective Feb. 1, 2022.

Southwest’s shares fell about 1% in early trading. The stock has more than tripled in value during Kelly’s tenure.

(Reporting by Ankit Ajmera in Bengaluru; Editing by Sriraj Kalluvila)

USD/JPY Price Forecast – US Dollar Testing ¥111 Level

The US dollar has rallied a bit during the course of the trading session on Wednesday as we continue to see the market try to press higher. The ¥111 level is an area that has caused issues more than once. That being said, if we were to break above the ¥111 level, then we could go looking towards the ¥112 level. Nonetheless, it would be very difficult to get above there.

After all, the market would continue to see a lot of noise in this area, so I think that we are definitely looking at an area that could be trouble. Regardless, I use this pair more or less as a signal as to what we do with the Japanese yen against other pairs due to the fact that this pair tends to be very choppy and noisy, but other pairs such as the GBP/JPY pair or even the AUD/JPY pair give us more room to move.

USD/JPY Video 24.06.21

If we do pull back, I anticipate that this could make a bit of a “double top”, which of course would have ramifications in and of itself. For what it is worth, the MACD is showing a bit of divergence, which could be a signal in and of itself that this pair is ready to fall. Whether or not is a major “risk off” type of situation or if it is just simply the US dollar falling is a question that is on the minds of traders, and this could give us a glimpse into what is actually getting ready to happen. Ultimately, this is a pair worth watching but may not be a pair worth trading.

For a look at all of today’s economic events, check out our economic calendar.

Oil Jumps to More Than 2-year High on U.S. Inventories

By Alex Lawler

The American Petroleum Institute reported that crude stocks fell by a bigger than expected 7.2 million barrels, two market sources said. [API/S] Official inventory figures from the Energy Information Administration are due at 1430 GMT. [EIA/S]

Brent crude rose $1.08, or 1.4%, to $75.89 by 1340 GMT, having touched its highest since October 2018 at $75.91. U.S. West Texas Intermediate added $1.14, or 1.6%, to $73.99 and hit $74.07, also the highest since October 2018.

“The uptrend is regaining momentum,” said Stephen Brennock at oil broker PVM. “Overnight, the API set a bullish backdrop.”

Brent has gained more than 45% this year, supported by supply cuts led by the Organization of the Petroleum Exporting Countries (OPEC) and as easing coronavirus restrictions boost demand. Some oil industry executives are even talking of crude returning to $100, a level last reached in 2014.

“Underlying demand in the physical market means that any corrections lower will remain shallow and short,” said Jeffrey Halley, analyst at brokerage OANDA.

OPEC and allies, collectively known as OPEC+, meet on July 1. They have been discussing a further unwinding of last year’s record output cuts from August but no decision has been made on exact volumes, two OPEC+ sources said on Tuesday.

Global demand is set to rise further in the second half of the year, though OPEC+ also faces the prospect of rising Iranian supply if talks with world powers lead to a revival of Tehran’s 2015 nuclear deal. [IEA/M] [OPEC/M]

A retreat in the U.S. dollar has also helped to prop up oil, making crude less expensive for buyers holding other currencies. [USD/]

(Additional reporting by Sonali Paul; editing by David Goodman, Jason Neely and David Evans)

Germany Hikes Pandemic-Related Borrowing to 470 Billion Euros

By Michael Nienaber

The revised fiscal plans confirm a Reuters report from last Thursday and mark an increase of additional debt in 2022 of some 18 billion euros compared to earlier estimates.

Chancellor Angela Merkel and Finance Minister Olaf Scholz have implemented an unprecedented array of rescue and stimulus measures since March last year to cushion the impact of the COVID-19 pandemic on Europe’s biggest economy.

The packages have been financed with record new borrowing of 130 billion euros in 2020 and 240 billion euros in 2021 for which an emergency clause was used to suspend debt limits in the constitution. The limits will have to be suspended for a third year running to allow borrowing of 99.7 billion euros in 2022.

“We have protected the health of many citizens, supported companies, secured millions of jobs and prevented Germany from entering a downward spiral,” Scholz told reporters.

Scholz said the additional spending should help Germany to emerge strongly from the crisis and that there was reason for optimism as an economic upswing was now underway.

A survey released on Wednesday showed that a services boom pushed private sector growth to its highest level in more than a decade in June, suggesting that the economy ended the second quarter on a strong footing.

The draft budget envisages public investments of 51.8 billion euros in 2022, down slightly from 59.3 billion euros this year.

Scholz’s medium-term budget plans envisage a return to the constitutional debt brake and, with it, limited deficit spending from 2023. This would only allow net new debt of 5.4 billion euros in 2023 and 12 billion euros in 2024.

The next government, which will take power after a Sept. 26 election, will have a final say on the mid-term budget and borrowing plans.

The increased spending means that Germany’s debt-to-GDP ratio will rise from below 60% in 2019 to 74.5% this year – still the lowest among the G7 countries, which also include the United States, Japan, Britain, France, Italy and Canada.

($1 = 0.8377 euros)

(Reporting by Michael Nienaber; Editing by Caroline Copley and Gareth Jones)

GBP/USD Price Forecast – British Pound Trying to Recover Again

The British pound has initially pulled back a bit during the course of the trading session on Wednesday as we continue to see a lot of volatility but possibly a recovery as well. The 1.40 handle is just above, where the 50 day EMA is currently hanging about. If we can break above the 50 day EMA, then it is likely that we are going to go looking towards the 1.42 handle, an area where we have seen a lot of noise previously. Ultimately, this is a market that I think is somewhat range bound and trying to build up a bit of momentum to finally break out.

GBP/USD Video 24.06.21

Keep in mind that the top of this little range is essentially the same as a major resistance barrier going back quite some time. It is because of this that we need to see massive US dollar selling in order to see this pair go higher, and this could be the range that we are essentially stuck in for the rest of summer. That being said, we are essentially in the middle of the range but the trend at the moment is most certainly to the upside.

Ultimately, the 200 day EMA is racing towards the 1.37 handle, so I do think that we are well supported underneath just as we are seen the market show signs of resistance. Expect a lot of choppy and noisy behavior, especially as the United Kingdom looks as if it is going to continue the lock down, which of course is not good for the economy. All things been equal though, this is probably more about the dollar than anything else.

For a look at all of today’s economic events, check out our economic calendar.

GBP/JPY Price Forecast – British Pound Testing Major Level Again

The British pound has rallied a bit during the course of the trading session on Wednesday to reach towards the psychologically important ¥155 level. This is where we had fallen from, so we have essentially turned around and wiped out the last selloff. Ultimately, the ¥155 level will attract a certain amount of attention, but it certainly looks as if the market still has plenty of bullish pressure. While I have taken profits from the recent trade, this is not to say that I would be a seller. In fact, I expect either a decent breakout, or perhaps some type of pullback that can be bought into. That being said, it is not until we break above the ¥156 level that I feel this resistance barrier is broken out above.

GBP/JPY Video 24.06.21

Keep in mind that this pair is highly sensitive to risk appetite and therefore you should be cautious about what is going on around the rest of the world. It seems as if we are back into a “risk on” type of attitude, so that does bode well for this market. Remember, the Japanese yen is considered to be a “safety currency”, so therefore if we do get some type of risk off behavior, that could send this market back. Nonetheless, the British pound is very strong in general, so I have no interest in shorting this market unless something drastic happens. In fact, it would need to break well below the €150 level for me to change my attitude about the entire market, and therefore I do not think that we are anywhere near getting short at this point.

For a look at all of today’s economic events, check out our economic calendar.

Bitcoin Bullish Reversal Off 30K In Play

We had sent out trades off of the 34,500 and 39,500 areas respectively, only to get stopped out upon the failure of breaking beyond 40K. We new the risks, and were willing to accept them. While many are now calling for a bear market, not much has changed in the bigger picture to justify such a call. 30K is a key support area that price attempted to clear, but as you can now SEE, it failed to follow through. This type of fake out is a CLEAR sign of strength.

IF the buy signal goes into effect, the 40K resistance area is a good reference point to measure reward from, while the 28K low is where risk can be measured from. 5K potential risk for 7K potential profit is greater than 1:1 and within the scope of our strategy rules. While everyone is over reacting, jumping to conclusions and asserting irrelevant opinions, we simple evaluate price action to see if it aligns with our rules. If yes, we can take a trade, if no, then we stand aside. It is THAT SIMPLE. And since we do not short Bitcoin, that side of the equation is not even a factor. You don’t need to be on both sides of a market to come out ahead.

This simple rules based swing trade philosophy is not perfect, because we do get stopped out, BUT it also filters out countless fake outs and would be stop outs that can empty an account quickly. Most do not realize, this game is more about defense than it is anything else. People chase profits but without a way to protect them, you will only give them back plus more anything so over the long term the effort is pointless.

As far as the bears go, and calling for a bear market, Bitcoin is still way off from such a scenario. The 30K area is a potential higher low of a broader bullish trend. In order for a bear market to even be considered, price would have to take out 20K or even 15K in order to provide evidence.

If you would like to know more about our rules based swing trade strategy, visit.

EUR/USD Price Forecast – Euro Continues to Recover

The Euro has shown itself to be somewhat resilient as we have turned around during the trading session on Wednesday after initially dipping lower. The 1.20 level above is probably the next target, so as it is a large, round, psychologically significant figure, and an area that we have seen action at previously. Because of this, I think we will go back to that area to try to retest it, and perhaps even try to break above there. Pay close attention to the US Dollar Index, as it is highly correlated to the Euro as it is the biggest component.

EUR/USD Video 24.06.21

Looking at this chart, I do believe that it is only a matter of time before we have to try some type of move to the upside as the Euro had been oversold, and quite frankly Jerome Powell and the rest of the Federal Reserve are already starting to walk back some of the hawkish talk of last week, which is essentially what sent this market spiraling. As long as they continue to be relatively dovish, it does make a certain amount of sense that this pair ends up recovering right along with everything else.

At this point, we would have to break down below the 1.1830 level for me to start selling again, at least in the next 24 hours. If we can break above the 1.20 handle, then it is very likely we go looking towards 1.2150 level. I expect volatility and choppy behavior, but I also expect more or less a positive attitude overall for the next several weeks. Ultimately, this is a market that could be offering a nice short-term trade to the upside.

For a look at all of today’s economic events, check out our economic calendar.

Crude Oil Remains Bid With Focus on OPEC+ and Eia Stock Report

Crude oil continues higher with WTI and Brent both reaching levels last seen in 2018. This during a period where rallies across other commodities, especially in metals and key crops have run into corrections. While the energy sector remain supported by an ongoing recovery in global fuel demand and tightening supply, controlled by OPEC+, other sectors have been hurt by a stronger dollar, improved crop weather and Chinese efforts to curb metal prices.

These developments have during the past few weeks triggered a rotation by speculators out of metals and agriculture into energy. The combined net long in oil and fuel products (ex. natural gas) reached 977k lots in the week to June 15, the biggest bet on rising energy prices since October 2018, but still 33% below the January 2018 record. While industrial metals have suffered what looks like a short-term setback on rising market intervention by Chinese authorities and reduced focus on reflation, the energy sector has increasingly become the go to commodities.

This in the belief that OPEC+ in the near-term will manage production increases in a manner that ensures continued price support as global demand continues to recover, and later on due to increased concerns that lack of CAPEX spent on new production could leave the market undersupplied from late 2022 and onwards.

The combined net long Brent and WTI crude oil reached 737k lots, again a level of exposure that was last exceeded in October 2018. A tightening spread to Brent and speculation that storage levels at Cushing, the WTI futures delivery hub, could shrink further amid strong Midwest refinery demand helped drive a 35% reduction in the gross short, thereby supporting a spike in the long/short ratio to a three-year high at 22.8 longs per one short position. While highlighting the risk a market at risk of becoming one-sided it also shows the strong belief in higher prices currently being exhibited by investors.

In our daily podcast, which you can find by searching for “Saxo Market Call” on any of your favorite podcast channels, we discussed the reasons why WTI crude oil has led the recent rally. Once again just like during the market panic last April, the focus has returned to Cushing, the massive storage hub where WTI futures contracts are exchanged for physical oil.

On April 20 last year WTI crude oil temporarily hit minus 40 dollars per barrel as a Covid-related collapse in demand almost led to storage tanks topping out. Fast forward to today and we find US oil production still lingering some 2 million barrels per day below the pre-pandemic peak as the sector struggles to find a gear amid a change in the focus.

Strong Midwest refinery demand as fuel demand continues to recover and the mentioned slow recovery in US shale production has left Cushing stocks trailing their five-year average.

Later today at 14:30 GMT the EIA will publish its “Weekly Petroleum Status Report” and following last nights update from the American Petroleum institute, the market is looking for a fifth consecutive draw in crude stocks with 2.6 million being at Cushing. Result can be found on my Twitter @ole_s_hansen.

Increasingly, however, the oil market focus will turn to next week’s OPEC+ meeting, and through the actions or inactions of the group the market will be sent a clear signal whether its price stability through raising production or higher prices that the group will be seeking. Once again we may find Russia and Saudi Arabia on each side of the argument, but as per usual and as we grown accustomed to in recent months, the group will undoubtedly find a compromise that suits both sides.

WTI comment from our technical analyst Kim Cramer

In the short-term WTI crude oil continues to trade within a rising channel, and the uptrend will stay intact as long the price stays $69.75.

On a slightly longer-term chart we can see WTI is nearing strong resistance towards $77, the 2018 peak. If penetrated it may extend its 5 wave all the way to around $85. RSI seems to building up divergence but the jury is still out as to whether the uptrend has reached a level of exhaustion.

Source: Saxo Group
Source: Saxo Group

Ole Hansen, Head of Commodity Strategy at Saxo Bank.

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This article is provided by Saxo Capital Markets (Australia) Pty. Ltd, part of Saxo Bank Group through RSS feeds on FX Empire

AUD/USD Price Forecast – Australian Dollar Continues Recovery

The Australian dollar has rallied a bit during the course of the trading session on Wednesday to show signs of life yet again. Ultimately, the 0.76 level is an area that I think will be crucial due to the fact that it was previous support, so if we can recapture that, this makes this a bit of a “throw over” as the buyers will have saved the market. The 200 day EMA will also have offered a bit of support, so I think at this point in time it is likely that we will continue to see a lot of questions asked.

AUD/USD Video 24.06.21

Quite frankly, I think this has more to do with the US dollar than the Aussie dollar itself, so pay close attention to the US Dollar Index. If it continues to fall, that could help quite a bit in order to push this market higher, driving the Aussie towards the 50 day EMA and then perhaps even higher than that. I have no interest whatsoever in shorting this pair right now, at least not until we break down below the recent lows. If we do, that could send this market much lower, as it would wipe out the rest of support.

At that juncture, I would anticipate that we would probably go down to the 0.71 handle. You should also keep in mind that the Australian dollar is highly correlated to commodities and the global growth picture in and of itself, so it does make quite a bit of sense that we should watch commodity markets as well to give us an idea as to where we go next.

For a look at all of today’s economic events, check out our economic calendar.

Walgreens Could Offer Profitable Short Sales

Walgreens Boots Alliance Inc. (WBA) forced market speculators to take notice in the second half of 2019, rallying on reports the $45-billion drug chain was holding preliminary talks with private equity firms to ‘go private’. Unfortunately, the worst long-term performer in the Dow Jones Industrial Average couldn’t finalize a deal and turned sharply lower, ending 2020 with a negative 38% return. However, things are looking better so far in 2021, with the stock up near 30%.

Losing Market Share to Amazon

The pharmacy chain reports fiscal Q3 2021 results next week, with Wall Street analysts looking for a profit of $1.18 per-share on $33.8 billion in revenue. If met, earnings-per-share (EPS) will mark a 42% profit increase compared to the same quarter last year, which included the pandemic lockdown. The stock topped out a week after raising fiscal 2021 guidance in March and has drifted lower during the second quarter.

Amazon.com Inc. (AMZN) has hurt pharmacy chain income in recent years, with formerly loyal customers loading up on all sorts of front-of-store items online. Unfortunately, the e-commerce juggernaut is now getting into the pharmacy business, with a new division that makes “at-home delivery pharmacy easier and more convenient for customers.” Recent reports also indicate the company is looking at opening brick-and-mortar pharmacies in direct physical competition.

Wall Street and Technical Outlook

Wall Street consensus is locked in glacial ice at a ‘Hold’ rating, based upon 1 ‘Buy’, 1 ‘Overweight’, 17 ‘Hold’, 1 ‘Underweight’, and 1 ‘Sell’ recommendation. Price targets currently range from a low of $37 to a Street-high $72 while the stock is set to open Tuesday’s session about $5 below the median $56 target. Gravity could easily take control in this configuration, especially if Walgreens fails to meet or exceed Q3 expectations.

The stock topped out in 2015 and entered a persistent decline that’s carved an endless series of lower highs and lower lows. The current advance stalled at 50-month moving average resistance at the start of the second quarter while price is now sandwiched between that level and support at the 200-month moving average. A breakdown through that trading floor will set off a major sell signal that could generate profitable short sales, given the stock’s southern trajectory in recent years.

For a look at all of today’s economic events, check out our economic calendar.

Disclosure: the author held Amazon in a family account at the time of publication.

Tesla Opens Solar Charging Station in Tibet, Its First in China

BEIJING (Reuters) -U.S. electric vehicle maker Tesla Inc has opened a solar-powered charging station with on-site power storage in the Tibetan capital Lhasa, the company said in a Weibo post on Wednesday, its first such facility in China.

Tesla does not have a showroom in Tibet, a remote and long-impoverished region. In its post, the company cited the ample sunlight in the mountainous area as behind the move.

China is Tesla’s second-biggest market, but the charging site is its first in the country with dedicated solar power and on-site power storage. China’s power grid is predominantly fueled by coal.

The carmaker moved into the solar business in 2016 with its $2.6 billion purchase of California-based SolarCity, and has said it is keen to develop its energy business.

The company’s solar services include Solar Roof, a power generating system meant to look like normal roof tiles, and Powerwall, which can store power generated by solar panels.

Last year, Tesla, which makes electric vehicles in Shanghai, put out job advertisements for solar and energy storage project managers in China.

(Reporting by Beijing newsroom; Editing by Shounak Dasgupta and Jan Harvey)

Fed’s Bowman: Bottlenecks, High Inflation, May Take Time to Ease

By Howard Schneider

Fed officials since early this year have tried to prime markets and the public to expect high inflation numbers — if only because a price collapse at the start of the pandemic in early 2020 set such a low bar that even a return to normal pricing would involve a large percentage change.

“But there is more to the recent rise in inflation than just these measurement issues,” Bowman said in remarks prepared for delivery to a Cleveland Federal Reserve bank conference.

Supply chains are creaking back to life globally, and have been stretched by the strong demand for goods and services as the economy reopens.

The resulting pressure on prices “may ease as the bottlenecks are worked out, but it could take some time,” Bowman said.

She did not comment on how that view of inflation is influencing her outlook for monetary policy, either in terms of when to start reducing the Fed’s monthly $120 billion in bond purchases, or when to raise interest rates.

“I will continue to monitor the situation closely and will adjust my outlook as needed,” Bowman said.

Much of her talk was focused on community development emerging from the pandemic, and how addressing issues like the lack of broadband in rural areas and parts of some cities could improve economic opportunities.

She said the pandemic had widened disparities along gender, race, and other lines, and said she believed that government lockdowns and other economic restrictions were to blame.

“Government responses to the pandemic — the lockdowns, school closures, and economic restrictions on businesses — significantly widened differences by income, education, race, and gender, and those disparities have persisted during the recovery,” said Bowman.

The issue of whether economic restrictions were needed to protect public health as the coronavirus spread, or imposed an outsized economic cost, has been a divisive point in the country’s response to the pandemic.

(Reporting by Howard Schneider; Editing by Chizu Nomiyama)

BIS Goes for Jugular on Bitcoin, Touts CBDCs

The hits keep coming for bitcoin. Most recently, the Bank for International Settlements (BIS) is piling it on, finding more faults with the biggest cryptocurrency than any redeeming qualities. The BIS stated in its latest Annual Economic Report:

“By now, it is clear that cryptocurrencies are speculative assets rather than money…Bitcoin, in particular, has few redeeming public interest attributes when also considering its wasteful energy footprint.”

Perhaps they have been listening to Elon Musk, who also has taken aim at bitcoin mining’s energy consumption. Bitcoin is no stranger to criticism or threats. The BIS’ assessment also comes on the heels of China’s cryptocurrency crackdown targeting bitcoin mining. The bitcoin price mostly shrugged off the BIS report, with the price up by a double-digit percentage in the last 24-hour stretch.

CBDCs Are A-OK

While the BIS is not a fan of bitcoin, it does not have any problem with central bank digital currencies (CBDCs,) which are catching on globally. CBDCs are digital versions of fiat money, such as the U.S. dollar, that are issued by central banks, potentially using blockchain technology, and can be used as a form of payment by individuals and businesses.

China has been an early-mover on the CBDC front and is already integrating the digital yuan into its economy. Governments that feel threatened by bitcoin, including Nigeria and Ghana, have shown their support for CBDCs. According to the BIS, there are nearly six dozen central banks currently exploring the use of CBDCs.

The BIS has placed a target on the backs of cryptocurrencies, stablecoins, and big techs, saying that they  “all tend to work against the public good element that underpins the payment system.” Meanwhile, on CBDCs, the BIS’ Benoit Coeure is quoted by Reuters as saying, “The train has left the station.”

Doubling Down, Buying the Dip

Despite the regulatory spotlight, bitcoin bulls have been flexing their muscles of late, doubling down and buying the dip. Among them, Cathie Wood, who is at the helm of Ark Invest, has reportedly scooped up 1 million shares of the Grayscale Bitcoin Trust and more than 214,000 shares of cryptocurrency exchange Coinbase. Using the ARK Next Generation Internet ETF, Wood seemingly allocated USD 12 million to the Grayscale Bitcoin Trust.

Wood is not the only one buying. Chun Wang, co-founder of F2Pool, a bitcoin mining pool, is also using the market downdraft to buy more bitcoin. While the bitcoin price may be off its peak, the cryptocurrency community is used to its volatility.

Inflation and the Bank of England: What Its Rate – Setters Have Said

By David Milliken

Following are highlights of Bank of England policymakers’ recent comments about inflation and the outlook for rates and the wider economy.

ANDREW BAILEY, GOVERNOR

May 23: “We are going to have to be looking at the entrails of the inflation evidence very carefully from now onwards.”

“If we were to see signs that pricing pressure was becoming more generalised, then for me that would be a signal which would cause us to then have to evaluate where we were in terms of guidance, and at what point the guidance falls away.”

May 13: “The really big question is: ‘Is (higher inflation) going to persist or not?’ Our view is that on the basis of what we’re seeing so far, we don’t think it is.”

DAVE RAMSDEN, DEPUTY GOVERNOR (MARKETS & BANKING)

June 1: “If (inflation is) not temporary we know what to do about that. We can push bank rate up from its historically low level and we know what that will do to demand.”

BEN BROADBENT, DEPUTY GOVERNOR (MONETARY POLICY)

April 24: “The price rises for those hitting capacity limits are going to be bigger than the falls in prices for those seeing falls in demand…. When you get the shift in demand, you’re going to run into bottlenecks in some areas, particularly in those areas where supply, too, has been hit for a particular reason.”

JON CUNLIFFE, DEPUTY GOVERNOR (FINANCIAL STABILITY)

June 4: “What we’re seeing is a strong bounce-back of activity…. People have accumulated a lot of savings, they’re going out and they’re spending, particularly in those areas where we couldn’t go out in the last year or so.”

ANDY HALDANE, CHIEF ECONOMIST

June 9: “If wages and prices begin a game of leapfrog, we will get the sort of wage-price spiral familiar from the 1970s and 1980s…. In my view this is the most ­dangerous moment for monetary policy since inflation-targeting was first introduced into the UK in 1992 after the European Exchange Rate Mechanism debacle.”

GERTJAN VLIEGHE, EXTERNAL MEMBER

May 27: “The first rise in Bank Rate is likely to become appropriate only well into next year, with some modest further tightening thereafter…. It would probably take until the first quarter of next year to have a clear view of the post-furlough unemployment and wage dynamics.”

MICHAEL SAUNDERS, EXTERNAL MEMBER

May 24: “The yield curve is in a reasonable place. If events come out more or less in line with the May Monetary Policy Report forecast, then we might need down the road some modest monetary policy tightening, but not yet, and the word is ‘modest’.”

JONATHAN HASKEL, EXTERNAL MEMBER

May 12: “I am not that worried about inflation.”

“There will be lots of record figures of ‘record this’ and ‘record that’. If you jumped down on the trampoline, you know, the trampoline bounces back up again.”

“What I think we’ve got to be much more aware of, and this is important for inflation, is what the medium-term consequences are going to be, and in particular if the economy has a lot of scarring.”

SILVANA TENREYRO, EXTERNAL MEMBER

April 12: “One lesson that we learned from the financial crisis is that withdrawing policy support too early can be very costly.”

“Withdrawing it too early… can lead to scarring effects on the labour market that would be very costly and slow down growth going forward.”

(Reporting by David Milliken; Editing by William Schomberg)

Sterling Trades Below 2-1/2 Month High Against Euro, Eyes on BoE Meeting

By Ritvik Carvalho

Recent movements in the pound have been dollar-driven, as investors price in earlier than expected tapering of asset purchases by the Federal Reserve after the U.S. central bank last week signalled higher rates in 2023. But Wednesday’s PMIs put the focus squarely back on data.

Inflation pressures faced by British firms hit record levels this month, and growth in the private sector cooled only slightly from an all-time high in May when coronavirus restrictions were lifted, a survey showed on Wednesday.

The preliminary reading of the IHS Markit/CIPS UK Composite Purchasing Managers’ Index (PMI) pointed to one of the strongest monthly improvements in business activity since 1998, with a reading of 61.7 – not far off May’s unprecedented 62.9.

The PMI for the services sector dipped to 61.7 in June from 62.9 in May. The index for the smaller manufacturing sector fell to 64.2 from 65.6.

Meanwhile, euro zone business growth accelerated at its fastest pace in 15 years this month as the easing of more lockdown measures and the unleashing of pent-up demand drove a boom in the bloc’s dominant services industry, a survey showed.

BOE POLICY MEETING

The pound lost some of its morning gains to the euro after the data. By 1233 GMT, sterling was 0.2% higher against the euro at 85.41, having hit 85.30 pence – its highest since April 6 – earlier in the session.

Against the dollar, sterling was higher by 0.3% at $1.3989, up for a third straight session.

“Stronger eurozone PMI responses and a weaker UK survey may have contributed to sterling weakening against the euro as the data were released over the morning,” said Oliver Blackbourn portfolio manager at Janus Henderson.

“However, it is unlikely that the data changes the picture for the Bank of England tomorrow,” he said, referring to a meeting of the bank’s Monetary Policy Committee on Thursday.

Britain’s top central bank officials still appear divided over whether to pull the plug on their 875 billion-pound ($1.2 trillion) government bond purchase programme, after inflation hit its highest in nearly two years.

Elsewhere, on the fifth anniversary of the Brexit referendum, European Union member states informally agreed to grant Britain a three-month extension to one of the contentious aspects of the post-Brexit Northern Ireland protocol, Irish national broadcaster RTE reported.

London asked Brussels last week for the extension to allow time to resolve a dispute over whether chilled meat products such as sausages, produced in mainland Britain, can continue to be sold in British-ruled Northern Ireland.

The protocol essentially keeps Northern Ireland in the EU’s customs union and adhering to many of its single market rules to avoid creating trade barriers with EU member Ireland and thereby putting at risk the 1998 Good Friday peace agreement.

Meanwhile, Britain has delayed the final phase of its economy’s reopening by a month to July 19, aiming to use the extra time to speed up the country’s vaccination programme.

Sterling has been among the top performing ‘G10’ currencies this year on bets that Britain’s economy will reopen quicker than its peers due to its rapid progress with the COVID-19 vaccination programme. About 80% of Britain’s adult population has now received a first dose.

CFTC data shows speculators maintaining a net long position on the currency. [CFTC/] [IMM/FX]

(Reporting by Ritvik Carvalho; Editing by Ana Nicolaci da Costa and Gareth Jones)

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Are The US Major Indexes Rolling Over In An Excess Phase Peak Setup?

Recently, I published a research article on Bitcoin suggesting there may be a bigger downside price move setting up – breaking support near $30k and extending the Excess Phase Peak pattern that we warned about back in November 2020.  Today, my team and I wanted to alert you that the recent price rotation in the Dow Jones Industrial Average and the Transportation Index COULD setup in an early stage (Phase #2) peaking formation similar to what started the recent down trend in Bitcoin.

The setup of the Excess Phase peak pattern consists of an exuberant rally to a peak (Phase #1), followed by a moderate price correction that sets up into a sideways flagging pattern (Phase #2).  If the INDU and TRAN continue to move in a sideways flagging formation after recently move moderately lower, we may start to see a new Excess Phase Peak setup in these two major indexes. This could be a warning of a much bigger breakdown in trend in the near future.

Please take a minute to review our earlier research posts related to the Excess Phase Peak setup (below) and how it related to the current market trend:

INDU MUST RALLY ABOVE $35,300 TO BREAK AWAY FROM EXCESS PHASE PEAK

The Weekly INDU chart, below, highlights the five phases of the Excess Phase Peak formation and also highlights a GREEN “break-away” rally trend that could setup to end any potential Excess Phase Peak formation.  If the markets resume the rally trend and the INDU rallies above $35,300 soon, we would consider this a new “break-away” rally trend – potentially ending the Excess Phase Peak pattern setup.  If the INDU fails to rally above $35,300 and trades within the Phase #2 sideways flag range, then breaks downward, this type of price action would confirm the Phase #3 breakdown price trend that sets up intermediate support and the eventual Phase #4 sideways consolidation.

Remember, the phases of the Excess Phase Peak pattern are fairly easy to identify.

  • Phase #1:  The rally to the ultimate peak level.
  • Phase #2:  The breakdown of that peak level, setting up the initial support level and prompting a sideways price Flag/Pennant price channel.
  • Phase #3:  The breakdown of the #2 sideways price channel leading to a steep decline to intermediate support – which acts as a temporary sideways bottom.
  • Phase #4: The breakdown of the intermediate support level which ultimately leads to the strongest price decline targeting the ultimate bottom in price.
  • Phase #5: Identifying the ultimate bottom/momentum base in price.  This trending phase can last many months (possibly more than 12 months at time), or could be in the form of a deep “V” bottom.

Once the breakdown of the Phase #2 flagging formation is confirmed, we start to look for confirmation of the Phase #3 intermediate support level and the eventual Phase #4 breakdown of that support level.

If the INDU rallies above the recent all-time highs and breaks-away from the sideways flag ranges, then we would consider that new high as a new bullish price trend – negating the Excess Phase Peak Phase #2 setup completely.  Obviously, any new all-time high/rally could eventually setup another Phase #1 peak and Phase #2 sideways flagging channel at any time in the future.

Near the lower area of this chart we’ve highlighted the On Balance Volume trend and how it has recently started to trend lower.  We would expect any continued upside price trending to support an increasing OBV level as accumulation takes place in the markets.  Failure to see the OBV level rising as price rises may suggest a “false break-away” in trend.

TRAN MIRRORING EXCESS PHASE PEAK FLAGGING SETUP – WHAT NEXT?

This Weekly Transportation Index chart should appear very similar to the INDU chart (above).  The unique similarities of these two charts, one addressing the Blue Chip US economy and the other addressing future US transportation expectations related to economic activity, suggests traders may be shifting away from a reflation recovery after the FOMC statements last week.  We are starting to see traders/investors reevaluate the capability of the US economy to continue the rally trends as they have since November 2020.  Could this shift in investor sentiment prompt a broader market price setup?  Is it warning of an Excess Phase Peak setup in the making?

Right now, we only have confirmation of a recent all-time high peak and the start of what appears to be a sideways Flagging price channel.  We won’t know if the Excess Phase Peak pattern is truly confirmed until we see how the current sideways Flagging price channel concludes.

If it breaks downward, then we’ll have confirmation of a Phase #3 Excess Phase Peak stage that will alert us that a bigger downside price trend is pending.  If it breaks higher, and takes out $16,175, then we’ll consider this new rally high an end of the current Phase #2 setup and expect prices to continue rallying to new highs.

As we move into the end of June, the end of Q2:2021, it is important to understand that market price volatility should begin to increase as earnings and forward expectations continue to flood the news wires.  We are only 8+ days away from the end of June and we believe the markets are likely to trend sideways through to the end of the month – leading up to the Q2:2021 earnings calendar.

It makes sense to us that the broader markets, and investors, are searching for more clarity and reason to be bullish after such an extended price rally.  Time will tell how this plays out, but one thing is certain: Q2:2021 earnings and forward expectations will likely drive trader/investor sentiment over the next 3+ weeks.  Expect an increase in volatility and some potential surprises.

Consider this message an early warning if the Excess Phase Peak setup continues and confirms the Phase #3 breakdown of the current sideways Flagging setup.

Want to know how our BAN strategy is identifying and ranking various sectors and ETFs for the best possible opportunities for future profits? Please take a minute to learn about my BAN Trader Pro newsletter service and how it can help you identify and trade better sector setups.  My team and I have built this strategy to help us identify the strongest and best trade setups in any market sector.  Every day, we deliver these setups to our subscribers along with the BAN Trader Pro system trades.  You owe it to yourself to see how simple it is to trade 30% to 40% of the time to generate incredible results.

Enjoy your day!

Chris Vermeulen
Chief Market Strategist
www.TheTechnicalTraders.com

 

Stocks Mixed As Traders Wait For PMI Reports

Euro Area PMI Reports Exceeded Analyst Expectations

S&P 500 futures are swinging between gains and losses in premarket trading as traders wait for U.S. PMI reports which will be released shortly after the market open.

Analysts expect that Manufacturing PMI declined from 62.1 in May to 61.5 in June. Services PMI is projected to decline from 70.4 in May to 70 in June.

In Euro Area, flash readings of PMI reports for June exceeded analyst expectations. Manufacturing PMI remained unchanged at 63.1 while analysts expected that it would decline to 62.1. Services PMI increased from 55.2 in May to 58 in June compared to analyst consensus of 57.8.

Better-than-expected PMI reports may push U.S. stocks closer to all-time high levels, although Fed remains the main catalyst for markets. Yesterday, Jerome Powell reiterated his dovish message, which provided additional support to stocks.

Hong Kong’s Pro-Democracy Apple Daily Newspaper Will Shut Down

Apple Daily has recently stated that its last print edition would be published on Thursday as the newspaper has to shut down after authorities have frozen its assets under the national security law. Newspaper’s owner, Jimmy Lai, is in jail.

Chinese stocks and China-related ETFs have been losing ground in June as Chinese authorities showed their desire to put pressure on various companies from big Chinese tech firms to Bitcoin miners.

The recent crackdown on crypto mining has even pushed Bitcoin below the $30,000 level, although the world’s leading cryptocurrency has recently managed to rebound.

Most likely, the closure of Apple Daily will further hurt sentiment towards Chinese stocks. It remains to be seen whether current crackdown will push investors to take some funds out of Hong Kong, but it’s surely a viable scenario. In this case, developed stock markets in U.S. and EU will likely enjoy an influx of new funds from Asian investors.

WTI Oil Moves Towards The $74 Level As Crude Inventories Decline

API Crude Oil Stock Change report indicated that crude inventories decreased by 7.2 million barrels compared to analyst consensus which called for a decline of 3.6 million barrels. The report served as an additional bullish catalyst for oil and pushed it closer to multi-month highs.

Today, traders will focus on EIA Weekly Petroleum Status Report. If EIA data confirms that inventories are declining at a fast pace, WTI oil will have a good chance to move closer to the $75 level which will be bullish for oil-related stocks.

For a look at all of today’s economic events, check out our economic calendar.