Week Ahead: EURUSD to reach cloud 9?

By ForexTime

The world’s most-traded currency pair could reach a fresh 9-month high in the upcoming week, as markets compare the latest policy clues between the US Federal Reserve and the European Central Bank.

To be clear, it’ll be a massive week that extends beyond major central bank decisions (the Bank of England is in action too).

We’ll also see the biggest tech earnings, and even an OPEC+ decision.

In other words, major asset classes are set to be rocked by these major economic data releases and events due in the week ahead:

Monday, January 30

Tuesday, January 31

  • JPY: Japan December unemployment, retail sales, industrial production
  • AUD: Australia December retail sales
  • CNH: China December industrial profits, January PMIs
  • EUR: Eurozone 4Q GDP
  • USD: US January consumer confidence
  • Exxon Mobil earnings

Wednesday, February 1

  • NZD: New Zealand 4Q unemployment
  • CNH: China Caixin manufacturing PMI
  • EUR: Eurozone January CPI and manufacturing PMI, December unemployment
  • GBP: UK January manufacturing PMI
  • Brent: OPEC+ meeting
  • USD: Fed rate decision
  • Meta earnings

Thursday, February 2

  • EUR: European Central Bank rate decision
  • GBP: Bank of England rate decision
  • USD: US weekly initial jobless claims
  • S&P 500: Earnings from Alphabet, Apple, and Amazon

Friday, February 3

  • CNH: China January services/composite PMI
  • USD: US nonfarm payrolls report

 

Here’s what markets currently expect for next week’s Fed meeting:

  • Fed will hike by 25 basis points (bps) on February 1st.
  • Fed will hike again by a further 25 bps sometime after next week’s meeting, but no later than June 2023.
  • Those two hikes would bring US interest rates from the current 4.5% up to around 5%.
  • The Fed will then keep its benchmark rate at around that 5% mark for a while, before cutting interest rates later this year.

 

On the ECB side of the equation:

  • ECB to hike by 50bps next week – double the expected size of the Fed’s upcoming hike.
  • The ECB is forecasted to have another 75bps in hikes more to go through mid-year.

 

In fewer words:

  • Fed = 50 bps hikes total remaining (including next week’s 25bps hike)

  • ECB = 125 bps hikes total remaining (including next week’s 50bps hike)

 

This idea that the ECB has more rate hikes in store relative to the Fed is what’s been propelling EURUSD to its highest levels since April 2022.

 

However, note that EURUSD’s surge is consolidating just below a key Fibonacci level – the 50% line from its January 2021 through September 2022 descent.

The price action suggests that the next move for EURUSD may well depend greatly on what either the ECB or Fed reveals next week.

 

Potential scenarios for EURUSD:

  • EURUSD could be pushed into “cloud 9” if the ECB persists with its hawkish stance, while the Fed starts warming up to the idea of pausing its own rate hikes (or at least markets do not believe any hawkish tones emanating out of the Fed next week).Such an outcome is also likely to invoke further cheer across other asset classes, from stocks to gold, and even crypto.
  • However, if:
    • the Fed triggers a larger-than-expected 50bps hike next week
    • presses home the message that US interest rates will be sent past the market-forecasted 5% target this year.
    • and markets actually believe the Fed’s hawkish intentions

(or a combo of the above factors)

… that may rapidly unwind some of EURUSD’s recent gains.

Key support/resistance levels for EURUSD:

SUPPORT

  • 1.0770 region: previous cycle low, June 2022 resistance zone
  • 1.07365: mid-December cycle high
  • 1.061 region: 38.2% Fib line and around where 50-day simple moving average (SMA) resides

RESISTANCE

  • 1.09426: 50% Fib line
  • 1.112 – 1.114: March 2022 resistance
  • 1.11848: end-March cycle high

 

At the time of writing, markets are forecasting a 70% chance that EURUSD will trade within the 1.07 – 1.105 range over the next one-week, while the implied-volatility is back to its year-to-date high which saw the latest leg up for EURUSD.

Ultimately, this next big move for the world’s most-traded currency is set to be dictated by what either the Fed or the ECB signals to the markets next week.

 

Make sure you also check back on Monday (January 30th) for our next Trade of the Week (published every Monday), as we then focus on GBPUSD and how it may react to the upcoming policy signals out of the Fed vs. the BOE.


Article by ForexTime

ForexTime Ltd (FXTM) is an award winning international online forex broker regulated by CySEC 185/12 www.forextime.com

US GDP is rising, but there are the first signs of a slowing economy. Inflation in Tokyo set a new record

By JustMarkets

At yesterday’s stock market close, the Dow Jones Index (US30) increased by 1.10%, and the S&P 500 Index (US500) added 1.10%. Technology Index NASDAQ (US100) jumped by 1.76% yesterday.

According to the US Commerce Department, gross domestic product (GDP) grew by 2.9% in the latest quarter, less than the 3.2% quarter before but more than the market estimate of 2.6%. But a more detailed report shows signs of slowing growth. While consumer spending maintained a solid growth rate, most of the increase in consumption came at the start of the fourth quarter. Retail sales fell sharply in November and December. Business spending on equipment declined last quarter and is likely to remain low due to lower commodity demand. Futures markets are estimating a 25 basis point hike next Wednesday with a 95.8% probability and suggesting that the Fed’s overnight rate will be 4.45%, lower than the 5.1% rate that Fed officials had previously projected.

US durable goods orders jumped by 5.6%, but a more detailed report showed that business investment declined for four months. By some measures, US manufacturers are already in recession territory. They have cut production in response to the slowdown in new orders and may make further cuts if the economy continues to decline. Rising interest rates have been a major source of recent weakness. Higher borrowing costs are discouraging consumers from spending and businesses from investing.

Initial US jobless claims were 186,000, lower than the projected 203,000. The US labor market remains resilient, even though several big tech giants have been cutting jobs in recent days.

Renowned investor and Scion Asset Management hedge fund manager Michael Burry suggests that the current growth in the stock market is a mirage and very difficult times lie ahead. The investor draws parallels from September 2000 to early 2003 (the dot-com bubble era and the aftermath of 9/11). Between September 2001 and April 2002, the S&P 500 Index managed to rise twice. But then a four-month decline followed.

Stock markets in Europe were mostly up yesterday. German DAX (DE30) gained 0.34%, French CAC 40 (FR40) added 0.74%, Spanish IBEX 35 (ES35) jumped by 0.87%, and British FTSEv100 (UK100) was up by 0.21%.

A Reuters poll this week showed that markets expect the ECB to pause rate hikes in the second quarter of 2023 once the deposit rate reaches 3.25%. Although some analysts are confident that the ECB will bring the rate up to 4% by the summer, after which it will take a pause.

The bullish trend in gold continues. Yesterday there was another new seven-month high, right at the 1950 level. Gold has an inverse correlation to US government bond yields and the dollar index. As US yields fall as the Fed nears a potential policy change, this positively affects precious metal prices.

Oil prices rose about 2% on positive US economic data and expectations of higher global demand as China, the biggest oil importer, reopened its economy. OPEC+ will meet as early as February 1, where the cartel is likely to confirm the current levels of oil production, which may trigger further price growth. But an excessive growth of oil prices may cause a new round of inflationary pressure, and this is despite the fact that the interest rates are already high. So rising oil prices right now are not good for the global economy.

Asian markets traded yesterday without a single trend. Japan’s Nikkei 225 (JP225) decreased byv0.12%, and China’s FTSE China A50 (CHA50) was not trading. Hong Kong’s Hang Seng (HK50) was up by 2.37%, India’s NIFTY 50 (IND50) lost 1.25%, and Australia’s S&P/ASX 200 (AU200) was not trading yesterday due to Australia Day. On Friday, most Asian markets continued to rise as higher-than-expected economic growth data supported risk appetite.

Tokyo’s core consumer price index increased from 3.9% to 4.3% year-over-year. This is the highest rate of inflation in 41 years. This indicator is considered a leading indicator of inflation nationwide. Rising inflation in the country is expected to eventually end the bank’s ultra-soft stance, but traders are unsure when such a move might occur, leaving the outlook for Japanese stocks clouded with uncertainty.

S&P 500 (F) (US500) 4,060.43 +44.21 (+1.10%)

Dow Jones (US30) 33,949.41 +205.57 (+0.61%)

DAX (DE40) 15,132.85 +51.21 (+0.34%)

FTSE 100 (UK100) 7,761.11 +16.24 (+0.21%)

USD Index 101.82 +0.18 (+0.18%)

Important events for today:
  • – Japan Tokyo core CPI (m/m) at 01:30 (GMT+2);
  • – Eurozone Spanish GDP (q/q) at 10:00 (GMT+2);
  • – Eurozone ECB President Lagarde Speaks at 12:30 (GMT+2);
  • – US PCE price index (m/m) at 15:30 (GMT+2);
  • – US Michigan Consumer Sentiment (m/m) at 17:00 (GMT+2);
  • – US Pending Home Sales (m/m) at 17:00 (GMT+2).

By JustMarkets

 

This article reflects a personal opinion and should not be interpreted as an investment advice, and/or offer, and/or a persistent request for carrying out financial transactions, and/or a guarantee, and/or a forecast of future events.

Investors urged to seize markets’ bullish sentiment

By George Prior

A rallying call for investors has been sounded by the CEO and founder of one of the world’s largest independent financial advisory, asset management and fintech organizations.

It comes from Nigel Green of deVere Group as global markets have got off to a confident start to the year.

The MSCI gauge – the global stock market index – has rallied 9% so far this year after slumping nearly 20% in 2022.

He notes: “The re-opening of China, weaker gas prices, and growing signs of a ‘soft landing’ for the U.S. economy as it appears that the Federal Reserve is reducing inflation without creating significant unemployment, are amongst the factors which have improved the outlook for global markets.

“This is causing a bullish sentiment as investors believe that many of 2022’s headwinds are now in the rear-view mirror.”

He continues: “The worry over corporate earnings in the first half of 2023 is a near-term concern, but one that investors appear reasonably happy to look beyond.

“Investors are looking ahead to the second half of the year, and to a global economic recovery underlined by an end to interest rate hikes from the major central banks by mid-summer, and possibly rate cuts at the end of the year as inflation falls sharply on a year-on-year basis.”

Market volatility in recent times has lowered valuations of some high-quality equities. This, says Nigel Green, will now be being used by savvy investors “to create better long-term investment opportunities and generate higher income for investors. They will be currently viewing this backdrop as a buying opportunity to top-up their portfolios.

“Inflation will still be an issue for a while to come, but less so as we move through the year.

“But it is likely that investors will be seeking to increase exposure to growth stocks, especially the currently undervalued ones, as cost of living eases and global growth picks up momentum.”

The deVere CEO concludes: “With a better year already underway way and the market currently low, investors should be positioning portfolios to take advantage of a brighter outlook. Many will be moving fast, so as not to miss the opportunities.”

About:

deVere Group is one of the world’s largest independent advisors of specialist global financial solutions to international, local mass affluent, and high-net-worth clients.  It has a network of more than 70 offices across the world, over 80,000 clients and $12bn under advisement.

 

How California’s ambitious new climate plan could help speed energy transformation around the world

By Daniel Sperling, University of California, Davis 

California is embarking on an audacious new climate plan that aims to eliminate the state’s greenhouse gas footprint by 2045, and in the process, slash emissions far beyond its borders. The blueprint calls for massive transformations in industry, energy and transportation, as well as changes in institutions and human behaviors.

These transformations won’t be easy. Two years of developing the plan have exposed myriad challenges and tensions, including environmental justice, affordability and local rule.

For example, the San Francisco Fire Commission had prohibited batteries with more than 20 kilowatt-hours of power storage in homes, severely limiting the ability to store solar electricity from rooftop solar panels for all those times when the sun isn’t shining. More broadly, local opposition to new transmission lines, large-scale solar and wind facilities, substations for truck charging, and oil refinery conversions to produce renewable diesel will slow the transition.

I had a front row seat while the plan was prepared and vetted as a longtime board member of the California Air Resources Board, the state agency that oversees air pollution and climate control. And my chief contributor to this article, Rajinder Sahota, is deputy executive officer of the board, responsible for preparing the plan and navigating political land mines.

We believe California has a chance of succeeding, and in the process, showing the way for the rest of the world. In fact, most of the needed policies are already in place.

What happens in California has global reach

What California does matters far beyond state lines.

California is close to being the world’s fourth-largest economy and has a history of adopting environmental requirements that are imitated across the United States and the world. California has the most ambitious zero-emission requirements in the world for cars, trucks and buses; the most ambitious low-carbon fuel requirements; one of the largest carbon cap-and-trade programs; and the most aggressive requirements for renewable electricity.

In the U.S., through peculiarities in national air pollution law, other states have replicated many of California’s regulations and programs so they can race ahead of national policies. States can either follow federal vehicle emissions standards or California’s stricter rules. There is no third option. An increasing number of states now follow California.

So, even though California contributes less than 1% of global greenhouse gas emissions, if it sets a high bar, its many technical, institutional and behavioral innovations will likely spread and be transformative.

What’s in the California blueprint

The new Scoping Plan lays out in considerable detail how California intends to reduce greenhouse gas emissions 48% below 1990 levels by 2030 and then achieve carbon neutrality by 2045.

It calls for a 94% reduction in petroleum use between 2022 and 2045 and an 86% reduction in total fossil fuel use. Overall, it would cut greenhouse gas emissions by 85% by 2045 relative to 1990 levels. The remaining 15% reduction would come from capturing carbon from the air and fossil fuel plants, and sequestering it below ground or in forests, vegetation and soils.

To achieve these goals, the plan calls for a 37-fold increase in on-road zero-emission vehicles, a sixfold increase in electrical appliances in residences, a fourfold increase in installed wind and solar generation capacity, and doubling total electricity generation to run it all. It also calls for ramping up hydrogen power and altering agriculture and forest management to reduce wildfires, sequester carbon dioxide and reduce fertilizer demand.

This is a massive undertaking, and it implies a massive transformation of many industries and activities.

Transportation: California’s No. 1 emitter

Transportation accounts for about half of the state’s greenhouse gas emissions, including upstream oil refinery emissions. This is where the path forward is perhaps most settled.

The state has already adopted regulations requiring almost all new cars, trucks and buses to have zero emissions – new transit buses by 2029 and most truck sales and light-duty vehicle sales by 2035.

In addition, California’s Low Carbon Fuel Standard requires oil companies to steadily reduce the carbon intensity of transportation fuels. This regulation aims to ensure that the liquid fuels needed for legacy cars and trucks still on the road after 2045 will be low-carbon biofuels.

But regulations can be modified and even rescinded if opposition swells. If battery costs do not resume their downward slide, if electric utilities and others lag in providing charging infrastructure, and if local opposition blocks new charging sites and grid upgrades, the state could be forced to slow its zero-emission vehicle requirements.

The plan also relies on changes in human behavior. For example, it calls for a 25% reduction in vehicle miles traveled in 2030 compared with 2019, which has far dimmer prospects. The only strategies likely to significantly reduce vehicle use are steep charges for road use and parking, a move few politicians or voters in the U.S. would support, and a massive increase in shared-ride automated vehicles, which are not likely to scale up for at least another 10 years. Additional charges for driving and parking raise concerns about affordability for low-income commuters.

Electricity and electrifying buildings

The key to cutting emissions in almost every sector is electricity powered by renewable energy.

Electrifying most everything means not just replacing most of the state’s natural gas power plants, but also expanding total electricity production – in this case doubling total generation and quadrupling renewable generation, in just 22 years.

That amount of expansion and investment is mind-boggling – and it is the single most important change for reaching net zero, since electric vehicles and appliances depend on the availability of renewable electricity to count as zero emissions.

Electrification of buildings is in the early stages in California, with requirements in place for new homes to have rooftop solar, and incentives and regulations adopted to replace natural gas use with heat pumps and electric appliances.

The biggest and most important challenge is accelerating renewable electricity generation – mostly wind and utility-scale solar. The state has laws in place requiring electricity to be 100% zero emissions by 2045 – up from 52% in 2021.

The plan to get there includes offshore wind power, which will require new technology – floating wind turbines. The federal government in December 2022 leased the first Pacific sites for offshore wind farms, with plans to power over 1.5 million homes. However, years of technical and regulatory work are still ahead.

For solar power, the plan focuses on large solar farms, which can scale up faster and at less cost than rooftop solar. The same week the new scoping plan was announced, California’s Public Utility Commission voted to significantly scale back how much homeowners are reimbursed for solar power they send to the grid, a policy known as net metering. The Public Utility Commission argues that because of how electricity rates are set, generous rooftop solar reimbursements have primarily benefited wealthier households while imposing higher electricity bills on others. It believes this new policy will be more equitable and create a more sustainable model.

Industry and the carbon capture challenge

Industry plays a smaller role, and the policies and strategies here are less refined.

The state’s carbon cap-and-trade program, designed to ratchet down total emissions while allowing individual companies some flexibility, will tighten its emissions limits.

But while cap-and-trade has been effective to date, in part by generating billions of dollars for programs and incentives to reduce emissions, its role may change as energy efficiency improves and additional rules and regulations are put in place to replace fossil fuels.

One of the greatest controversies throughout the Scoping Plan process is its reliance on carbon capture and sequestration, or CCS. The controversy is rooted in concern that CCS allows fossil fuel facilities to continue releasing pollution while only capturing the carbon dioxide emissions. These facilities are often in or near disadvantaged communities.

California’s chances of success

Will California make it? The state has a track record of exceeding its goals, but getting to net zero by 2045 requires a sharper downward trajectory than even California has seen before, and there are still many hurdles.

Environmental justice concerns about carbon capture and new industrial facilities, coupled with NIMBYism, could block many needed investments. And the possibility of sluggish economic growth could led to spending cuts and might exacerbate concerns about economic disruption and affordability.

There are also questions about prices and geopolitics. Will the upturn in battery costs in 2022 – due to geopolitical flare-ups, a lag in expanding the supply of critical materials, and the war in Ukraine – turn out to be a hiccup or a trend? Will electric utilities move fast enough in building the infrastructure and grid capacity needed to accommodate the projected growth in zero-emission cars and trucks?

It is encouraging that the state has already created just about all the needed policy infrastructure. Additional tightening of emissions limits and targets will be needed, but the framework and policy mechanisms are largely in place.

Rajinder Sahota, deputy executive officer of the California Air Resources Board, contributed to this article.The Conversation

About the Author:

Daniel Sperling, Distinguished Blue Planet Prize Professor of Civil and Environmental Engineering and Founding Director, Institute of Transportation Studies, University of California, Davis

This article is republished from The Conversation under a Creative Commons license. Read the original article.

 

Murrey Math Lines 26.01.2023 (USDCHF, XAUUSD)

By RoboForex.com

USDCHF, “US Dollar vs Swiss Franc”

On H4, the quotes are under the 200-day Moving Average, which indicates prevalence of a downtrend. The RSI has bounced off the support level. As a result, a downward breakaway of 2/8 (0.9155) is expected, followed by falling to the support level of 1/8 (0.9094). The scenario can be cancelled by rising over 3/8 (0.9216). In this case, the pair may rise to the resistance level of 4/8 (0.9277).

USDCHFH4
Risk Warning: the result of previous trading operations do not guarantee the same results in the future

On M15, the lower line of VoltyChannel is broken away. This increases the probability of further falling.

USDCHF_M15
Risk Warning: the result of previous trading operations do not guarantee the same results in the future

XAUUSD, “Gold vs US Dollar”

On H4, the quotes are above the 200-day Moving Average, which indicates prevalence of an uptrend. The RSI has bounced off the support level. Further growth to the resistance level of 8/8 (2000.00) should be expected. The scenario can be cancelled by a downward breakaway of the support level of 6/8 (1937.50). This might entail falling to 5/8 (1906.25).

XAUUSD_H4
Risk Warning: the result of previous trading operations do not guarantee the same results in the future

On M15, the upper line of VoltyChannel is broken away, which confirms the uptrend and a high probability of growth.

XAUUSD_M15

Article By RoboForex.com

Attention!
Forecasts presented in this section only reflect the author’s private opinion and should not be considered as guidance for trading. RoboForex LP bears no responsibility for trading results based on trading recommendations described in these analytical reviews.

In Germany, an economic recovery is expected. Allied countries have agreed to transfer tanks to Ukraine

By JustMarkets

At the close of the stock market yesterday, the Dow Jones Index (US30) increased by 0.03%, and the S&P 500 Index (US500) was down by 0.02%. Technology Index NASDAQ (US100) lost 0.18% yesterday.

The US reporting season continues to gain momentum. Tesla (TSLA) had a great fourth quarter thanks to a 37% increase in revenue. Tesla stated that under any scenario, they are prepared for short-term uncertainty but are focused on the long-term potential of autonomy, electrification, and energy solutions. IBM Corporation (IBM) on Wednesday reported its highest annual revenue growth in a decade and beat Wall Street expectations for the fourth quarter. The company also projected year-over-year revenue growth. But despite the good report, the company’s stock fell on the release of the report. Economists attribute this to the fact that they are not confident that the company can deliver such results, given the weak macroeconomic backdrop. Shares of Alphabet (GOOGL) increased losses from the previous day, falling more than -2% after the tech giant cut another 1,800 jobs on Wednesday.

As expected, the Bank of Canada raised its overnight rate by 25 basis points to 4.5%. An accompanying statement said that if economic developments are broadly in line with MPR’s forecast, the Board of Governors expects to keep the discount rate at its current level. The Bank of Canada may be the first bank among major economies to end its tightening cycle.

Equity markets in Europe were mostly down yesterday. German DAX (DE30) decreased by 0.08% yesterday, French CAC 40 (FR40) gained 0.09%, Spanish IBEX 35 (ES35) lost 0.16%, and British FTSE 100 (UK100) was 0.16% lower.

The German government said on Wednesday that it expects economic growth this year, not a recession, as Europe’s largest economy has successfully weathered the energy crisis and supported consumers and businesses hurt by higher energy prices. The outlook for 2023 improved to 0.2% growth from a 0.4% contraction expected in October, when Germany feared it would run out of natural gas used to power factories, generate electricity, and heat homes this winter.

Recession risks in the UK are rising because of record shortages and falling production. Factories are cutting production at a record pace, business activity is falling, and the labor market is also starting to signal trouble. Traders are betting that the Bank of England will reverse course and cut its key interest rate later this year to support the weakening economy. But before the rate cut, the central bank is expected to make two more rate hikes of 0.25-0.5%.

Yesterday, Germany approved the supply of Leopard tanks to Ukraine. At the same time, the US also indicated that it would transfer 31 Abrams tanks. Following this news, the Russian embassy issued a tweet indicating that Germany’s decision to approve the delivery of Leopard tanks to Ukraine is extremely dangerous and takes the conflict to a new level. The conflict is expected to escalate in the coming weeks.

Volatility in the oil market has declined because of the holiday week in China. But optimism about the surge in demand from China remains, so with the current level of production by OPEC countries, analysts see further growth in oil quotes. The only constraint to growth is the increase in strategic crude stocks for the 4th week in a row.

Asian markets also traded flat yesterday. Japan’s Nikkei 225 (JP225) gained 0.35%, and China’s FTSE China A50 (CHA50) did not trade and will not trade until the end of the week due to holidays. Hong Kong’s Hang Seng (HK50) also did not trade, India’s NIFTY 50 (IND50) decreased by 1.25%, and Australia’s S&P/ASX 200 (AU200) ended the day down by 0.30%.

S&P 500 (F) (US500) 4,016.22 −0.73 (−0.018%)

Dow Jones (US30) 33,743.84 +9.88 (+0.029%)

DAX (DE40) 15,081.64 −11.47 (−0.076%)

FTSE 100 (UK100) 7,744.87 −12.49  (−0.16%)

USD Index 101.64 −0.28 (−0.27%)

Important events for today:
  • – US Core Durable Goods Orders (m/m) at 15:30 (GMT+2);
  • – US GDP (q/q) at 15:30 (GMT+2);
  • – US Initial Jobless Claims (w/w) at 15:30 (GMT+2);
  • – US New Home Sales (m/m) at 17:00 (GMT+2);
  • – US Natural Gas Storage (w/w) at 17:30 (GMT+2).

By JustMarkets

 

This article reflects a personal opinion and should not be interpreted as an investment advice, and/or offer, and/or a persistent request for carrying out financial transactions, and/or a guarantee, and/or a forecast of future events.

SP500m close to forming “golden cross”. What’s next?

By ForexTime

A golden cross is when the asset’s 50-day simple moving average (SMA) crosses above its 200-day SMA.

Such an event indicates that this asset’s prices have been climbing of late, enough to be higher than its longer-term average.

At the time of writing, the gap between those two widely-followed technical indicators now stand at less than 4 points on the SP500m.

When it happens, the “golden cross” tends to send a “bullish” signal to traders, suggesting there could be more gains in store.

NOTE: The S&P 500 index is a benchmark which measures the overall performance of US stock markets.

 

How has SP500m performed after forming a “golden cross”?

Here’s how the SP500m has fared following its past three “golden crosses”:

  • July 2020: S&P 500 climbed by a further 50%, culminating in its current record high registered over a year ago, in early January 2022.
  • End-March 2019: S&P 500 climbed by another 20% as it came tantalisingly close to the 3400 mark, before the steep dropoff in February 2020 as the Covid-19 pandemic gripped global markets.
  • April 2016: S&P 500 advanced by another 40% until its then-peak in September 2018

 

Upcoming events that could rock the SP500m:

1) Federal Reserve decision: Feb 1

The world’s most important central bank is back in action again next week.

On February 1st, the Fed is due to announce how much higher it will send US interest rates.

At the time of writing, market forecasts are based on the following:

  • Fed will hike by 25 basis points (bps) on Feb 2nd.
  • Fed will hike again by a further 25 bps sometime after next week’s meeting, but no later than June 2023.
  • That would bring US interest rates from the current 4.5% up to around 5%.
  • The Fed will then keep its benchmark rate at around that 5% mark for a while, before cutting interest rates later this year.

Note that, generally, many asset classes such as stocks, gold, and even cryptos do not enjoy US interest rates moving higher.

Hence, if the Fed signals its intentions to move US interest rates even higher past the market-forecasted 5%, that could drag the SP500m lower.

However, if the Fed signals that it’s indeed ready to pause its rate hikes, that could translate into more gains for the SP500m.

 

 

2) Big Tech Earnings: Feb 2nd

Apple, Alphabet (Google’s parent company), and Amazon are all due to report their respective earnings from Q4 2022.

What are “earnings” and why does it matter?

  • These quarterly earnings announcements are when public-listed companies reveal just how good a job they did at earning profits over the prior quarter.
  • Markets tend to “reward” the companies whose earnings either came in better than expected, or are confident about their ability to keep earning higher profits in the near future.

    The reward = traders and investors buy up these stocks and send their prices higher.

  • However, if the company’s financial performance disappointed markets, or if the company’s management are concerned about tougher times ahead for the business, that could prompt markets to sell the stock and send its share price lower.

 

Why are earnings out of Apple, Alphabet, Amazon so important for the S&P 500?

Note that these stocks are some of the biggest in the world.

Combined, all three stocks have a market cap of almost 4.5 Trillion (with a “T”) US dollars. That accounts for almost 13% of the S&P 500’s total market cap of about US$35 trillion (as of market close on January 25th).

Hence, given their enormous size, how markets react to the earnings out of these 3 tech titans should have a major impact on how the S&P 500 performs as a whole.

Note that all 3 will report their respective earnings after US markets close a week from today – Thursday, February 2nd.

Hence, expect to see a major reaction in the S&P 500 when the US stock market reopens on February 3rd – the day following the earnings release by Apple, Alphabet, and Amazon.

 

What’s next after golden cross?

If such a bullish technical event does happen for the SP500m, equity bulls (those hoping stocks will move higher) will be looking to next conquer the following resistance levels:

  • 4060: downward upper trendline that began since January 2022 record high.
  • 4105.6: early December cycle high
  • 4144.2: December 13th intraday peak

A closing price above the 4144.2 intraday peak would signal a bullish breakout of the year-long downtrend.

Such price action may well entice even more stock bulls back to the fore.

 

However, if market sentiment turns sour that could drag the S&P 500 back below the psychologically-important 4,000 mark.

From a fundamental perspective, this could be due to any of the following:

  • disappointing US earnings
  • a still-hawkish Fed
  • growing fears of a US recession
  • other risk-off events

If so, then the following support levels will start to likely tempting to equity bears (those who believe that stock prices will fall):

  • 3947: 200-day SMA
  • Low-3900s: cycle high from late-Oct/early-Nov
  • 3885.5: previous cycle low

Forex-Time-LogoArticle by ForexTime

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Mid-Week Technical Outlook: Breakouts In Focus

By ForexTime 

European shares struggled for direction on Wednesday as investors awaited corporate earnings for fresh directional cues ahead of a busy week for financial markets.

The overall mood has been dampened by mass layoffs in the tech space and signs of slowing global growth. With recession fears sapping risk appetite, stock markets remain vulnerable to further losses. In the currency space, the dollar seems to be drawing strength from risk aversion – dragging other G10 currencies lower. Regarding commodities, oil prices remain shaky while gold has slipped from a nine-month high.

Some trading opportunities may be forming during this period of uneasy calm and growing tension. Our tool of choice this afternoon will be technical analysis with our focus falling on currencies, commodities, and indices.

GBPUSD trapped within range

It has been a choppy affair for the GBPUSD over the past few days. Prices remain trapped within a range with support at 1.2150 and resistance at 1.2450. A breakout could be on the horizon but this may need the assistance of a fresh directional catalyst. Although prices are trading above the 50, 100, and 200-day SMA, bears seem to be back in the vicinity. Prices may test the 1.2150 level in the short to medium term. A breakdown below this point could open a path back toward 1.2000.

USDJPY to resume downside

USDJPY remains under pressure on the weekly timeframe as there have been consistently lower lows and lower highs. Prices are trading below 130.00 and could challenge 126.50 in the short to medium term. A strong breakdown below 126.50 may open the doors toward 122.00. If prices are able to push back above 130.00, the next key point can be found at 133.20.

AUDUSD approaches resistance

Aussie bulls continue to draw strength from dollar weakness. After breaking above the 0.7000 level, prices have pushed higher, with 0.7135 acting as a key point of interest. A breakout above this level could suggest an incline towards 0.7250. Should prices slip back below 0.7000, the AUDUSD may decline toward 0.6900.

USDCAD gearing for breakdown?

USDCAD could be on the brink of a breakdown as prices wobble above the 1.3350 support level. A solid move below this point could open the doors towards 1.3240 and potentially lower. Should 1.3350 prove to be reliable support, a rebound back toward 1.3500 could be on the cards.

Gold bull’s still in control

Zooming out on the weekly charts, gold remains firmly bullish on the weekly timeframe. There have been consistently higher highs and higher lows while the MACD trades above zero. A solid breakout and weekly close above $1940 may trigger an incline toward the psychological $2000 level. Should $1940 prove to be a tough nut to crack, the precious metal may dip back toward $1900.

S&P 500 remains rangebound

The S&P500 has been trapped within a wide range since May 2022. May support can be found around 3600 and resistance at 4300 on the monthly timeframe. Given the various fundamental forces influencing global sentiment, a breakout could be on the horizon. A strong breakout above 4300 could open a path towards 4819.5. Alternatively, a selloff below 3600 could signal a further decline towards 3250.

 

Forex-Time-LogoArticle by ForexTime

ForexTime Ltd (FXTM) is an award winning international online forex broker regulated by CySEC 185/12 www.forextime.com

As US-EU trade tensions rise, conflicting carbon tariffs could undermine climate efforts

By Noah Kaufman, Columbia University; Chris Bataille, Columbia University; Gautam Jain, Columbia University, and Sagatom Saha, Columbia University 

Rising trade tensions between the U.S. and the European Union, two of the most important global leaders when it comes to climate policy, could undermine key climate initiatives of both governments and make it harder for the world to put the brakes on climate change.

The two have clashed over the 2022 Inflation Reduction Act’s requirements that products be made in America to receive certain U.S. subsidies. The EU recently announced plans for its own domestic-only clean technology subsidies in response.

The U.S. and EU also now have competing carbon tariff proposals, and these could end up undermining each other.

In December 2022, the EU reached a provisional agreement on a carbon border adjustment mechanism. It will put carbon-based tariffs on steel, aluminum and other industrial imports that aren’t regulated by comparable climate policies in their home countries. The Biden administration, meanwhile, proposed a “green steel club” of nations that would cooperate on reducing emissions by levying tariffs on relatively high-emission imports.

At first glance, the two approaches might seem similar. But the EU and U.S. proposals reflect starkly different and arguably incompatible visions for the intersection of climate and trade policies.

A failure to align approaches risks further stoking trade tensions and would likely have international repercussions. Without multinational coalitions, dirtier, lower-cost competition will undercut emerging low-carbon technologies.

A strong transatlantic partnership is a prerequisite to greening the global economy. Without creative compromises and skillful diplomacy, the EU may find that its tariffs lead to reprisals rather than reciprocal action, and the U.S. quest to create climate clubs will not get off the ground.

EU’s textbook approach to tariffs

The carbon border adjustment mechanism, or CBAM, is tied to the EU’s flagship climate policy, its emission trading system. The system requires large European factories and other greenhouse gas emitters to purchase allowances for each ton of carbon dioxide they release. It’s a form of a carbon price.

However, if only European industries have to pay this carbon price, the EU risks domestic production’s losing out to imports from countries with weaker regulations on emissions. This phenomenon, referred to as “carbon leakage,” can result in even dirtier industrial production.

To date, the EU has avoided carbon leakage by compensating domestic producers of certain industrial products with free emissions allowances. But that approach is becoming increasingly expensive as the carbon price rises, with a recent trading range of 70 to 100 euros per metric ton. The CBAM makes it possible to phase out these free allowances by phasing in tariffs on imports from countries without comparable carbon pricing policies. Once finalized, the tariffs could be applied starting in 2026.

How the EU’s carbon border adjustment would work.

The CBAM has been met with some international outrage, with the “BRICS” countries – Brazil, Russia, India, China and South Africa – calling it “discriminatory” and a U.S. senator accusing the EU of going “rogue.”

In reality, the CBAM treats domestic products and imports equally by applying the same carbon price, just as any economics textbook recommends. It also aims to further global climate action by giving other countries the incentive to implement their own carbon pricing policies.

Biden’s climate club approach

Unlike the EU, the U.S. has failed to adopt a national carbon price despite several attempts. The Inflation Reduction Act instead fills the federal climate policy void largely by offering subsidies for producing clean energy.

However, subsidies to American producers won’t reduce emissions from other countries’ production of internationally traded products.

For example, steel accounts for 11% of global carbon dioxide emissions, with the vast majority from East Asia, including 53% of global production from China. Transforming Chinese production is therefore critical to lowering emissions.

Encouraging a global shift to cleaner production methods will require international cooperation, including trade measures that enable expensive low-carbon investments and penalize high-emissions steel production.

President Joe Biden needed an approach to climate tariffs that would benefit U.S. producers without requiring a politically untenable carbon price. His proposed green steel club is an agreement among countries that would commit their steel and aluminum industries to meeting certain emissions standards. Tariffs would be imposed on imports that exceed the standard or come from countries that are not signatories to the agreement.

Most U.S. manufacturers would benefit. U.S. steel typically produces fewer emissions than its competitors. The desire to exploit this “carbon advantage” has taken hold with politicians on both sides of the aisle.

Biden’s plan could be the first “climate club” of nations, consistent with the recommendations of an increasing number of policy experts. In a recent book, Charles Sabel and David Victor suggest building on the international success in phasing out ozone-depleting chemicals: The Montreal Protocol used a combination of cooperative learning, penalties and pools of resources for countries in need of technical and financial support.

Creative ways to cooperate

The two visions for climate policy tariffs involve different paths toward somewhat different goals, so they cannot easily be reconciled. The premise of the EU strategy is that tariffs are necessary to ensure that climate policies impose the same costs on domestic and foreign emitters. In contrast, the U.S. is proposing tariffs that penalize producers with high emissions.

The U.S. cannot pursue the EU approach without some form of a national carbon price. At the same time, the EU is unlikely to abandon its long-planned and laboriously negotiated CBAM, particularly to partner with a White House that may have a different occupant in two years.

There are, however, pathways forward that blend elements of both visions.

For example, parts of the CBAM, including the linkage to the EU carbon price, could be included as elements of climate clubs, including Biden’s green steel club. That may enable the EU to retain hard-fought progress on its emissions trading system.

Alternatively, some U.S. senators are pushing legislation to create a U.S. carbon border adjustment, including a domestic carbon price and a tariff on imports of some energy-intensive products like steel and aluminum. Bipartisan support for such legislation would create a basis for a durable compromise with the EU. However, even a narrow carbon price on industrial products may not be politically viable in the Republican-controlled House of Representatives.

Looking ahead

Any unilateral use of tariffs will strain sensitive geopolitical relationships.

By pursuing compromise rather than conflict, the U.S. and EU can leverage their joint economic strength to create a powerful coalition that encourages low-carbon industrial production around the globe, including in China and India, without ceding domestic advantages.

In our view, both sides have ample reasons to find common ground.The Conversation

About the Author:

Noah Kaufman, Research Scholar in Climate Economics, Columbia University; Chris Bataille, Research Fellow in Energy and Climate Policy, Columbia University; Gautam Jain, Senior Research Scholar in Financial Markets, Columbia University, and Sagatom Saha, Research Scholar in Energy Policy, Columbia University

This article is republished from The Conversation under a Creative Commons license. Read the original article.

 

Valuation Software Valutico secures Investment & Partnership

  • Investment from VC investors PUSH Ventures and aws Gründerfonds
  • Investment & planned strategic partnership with Erste Group

25 JANUARY 2023:
Valutico, the web-based valuation platform, announces that it has closed its first financing round with outside investors. Existing investors also participated in the round, totalling equity funding in the mid 7-figures.

Investments from Venture Capital firms PUSH Ventures and aws Gründerfonds will make a substantial impact on the business, not only from a product and service perspective but also by gaining their invaluable expertise.

Vienna-based Erste Group is also participating in the financing round and intends to enter into a strategic partnership with Valutico to help further digitalize the bank’s processes around valuation and corporate lending.

Valutico will apply the funding raised in this round of financing to further accelerate its growth, deliver on its product roadmap, and grow its product and engineering teams.

Valutico provides software for data-driven valuation analysis

Valutico serves the Financial Services and Investment Management industries with data-driven tools to conduct valuation analysis more efficiently. In an area dominated by slow and error-prone spreadsheets, Valutico empowers businesses and experts to perform accurate valuations in a fraction of the time it used to take while solving the issue of complex tools, lack of data sources and time-consuming reporting. Valutico’s globally distributed and fast-growing team of 60 employees currently proudly serves around 600 clients in over 85 countries.

Recent innovative product extensions of the existing valuation models, which currently focus on the financial value of a company, include the integration of the Capitalised Earnings Method and Venture Capital (VC) Method. But Valutico is also working on a robust qualitative and quantitative module for the holistic assessment of an organisation’s impact on the environment, society and governance (‘ESG’).

Paul Resch, Co-Founder & CEO comments:

“The new funding rounds off an outstanding year for the company and will allow us to double down on our growth path and continue to innovate around the question of what “value” means in a business context. The benefits of Valutico’s platform are already being felt across the financial landscape and this recent funding helps us strengthen our offering and broaden our positive impact. We are using this opportunity to reinforce our commitment to our clients and we look forward to the road ahead!”

Laurenz Simbruner, Founding Partner at PUSH Ventures comments:

“Paul and the team have shown an impressive track record building a fantastic product for a global audience of business customers. We are super excited to support Valutico on its way to becoming a world leader in the financial services software industry.”

Christoph Haimberger, Managing Director, aws Gründerfonds comments:

“Our investment allows Valutico to grow beyond legacy valuation tools, in ESG and digital usability. A value-driven combination of our investment thesis into “Green Winners” and “Digital Winners”. We are thrilled to be part of the journey with the outstanding and globally ambitious Valutico team.“

Ingo Bleier, Board Member for Corporates Banking & Markets at Erste Group comments:

“At Erste, we are committed to improving our ability to analyse and apply data in order to gain a better understanding of our customers’ needs and to develop our offering accordingly. That’s why we are exploring how Valutico‘s innovative valuation platform can help us to further digitalize part of our process in the corporate banking and underwriting business.”

About Valutico

Valutico is the world’s leading valuation platform. Valutico’s all-in-one software allows finance professionals to value a company in minutes, by providing data-driven tools to conduct analyses faster and more accurately.

Used by more than 600 financial firms in 85 countries, Valutico is an emerging force in the world of business valuations. The powerful platform is popular amongst professionals in advisory roles such as in Corporate Finance, M&A, and Tax and Audit, as well as Investment Managers in Private Equity, Venture Capitalists, and Family Offices. Large corporations also use Valutico for Strategy, Financial Reporting, and Investor Relations.

Founded in 2017, and headquartered in Vienna with subsidiaries in the US and UK, Valutico operates worldwide with an ever-expanding network of valuation practitioners who use Valutico’s platform, consultancy services, and valuation trainings. Valutico’s mission is to make the complex process of company valuations simple, and to support accurate valuations for a well-functioning economy.

About aws Gründerfonds

The aws Gründerfonds is an Austrian venture capital company and has at its disposal investment capital of around 70 million euros. The investment focus is on Austrian startups with high growth potential for seed and follow-on financing in the start-up and early growth phase (Later Seed and Series-A). Co-investors from the international network are actively involved.  The aws Gründerfonds sees itself as a long-term, stable partner and offers entrepreneurial venture capital with active support. So far, together with co-investors, more than EUR 566 million have been invested in 45 companies, and numerous exits have been successfully completed.

About PUSH Ventures

PUSH Ventures is an early-stage venture capital firm investing in outstanding teams with convincing products and high growth potential. PUSH Ventures has been active as investor and has a strong belief in the megatrend of digitalisation and technological advances for the creation of value. Focus areas include health and the future of the planet in Europe, especially Austria and Germany.

About Erste Group

Founded in 1819 as the first Austrian savings bank, Erste Group went public in 1997 with a strategy to expand its retail business into the CEE region. Since then, Erste Group has grown to become one of the largest financial services providers in Central and Southeastern Europe, where it services around 16 million customers.