Futures Lower To Start The Day | Notable Fed Speakers This Week

Phillip Streible, Chief Market Strategist

[Auto Transcribed]

“Let’s shift our attention away from the technicals more towards the fundamentals and what’s going on in currencies and treasuries. Got just the person to help us with that this morning. Phil Strebel joining us chief market strategist at Blue Line Futures. Phil good to have you here. Happy New Year to you. Let’s begin with the greenback. Is this what repricing cut expectations looks like. Yeah it sure looks like it. I’m in the dollar next at five week highs right now. We broke through the 50 day moving average yesterday. I believe we get that extension upwards over like one oh three thirty. It’s going to grab those bullish trends. We were bearish trend for most of November and December and then that consolidation sideways in early January. The breakout higher. I think that it’s making people really question about what the Fed’s intentions are. We’ve seen several Fed speakers come out. We’ve got Fed President Williams coming out later on today. We’ve got Atlanta Fed President Bostick coming out tomorrow. You know we’ve seen that they’ve really been standing pat on any kind of talk about cutting rates. And I think it’s really pushing those expectations out. You go just one week ago today it was an 80 percent chance that they were going to cut rates in March. And then just yesterday 69 percent. Today only a 60 percent chance. I think that those rate cut expectations are fading fast and it’s weighing in on a lot of different commodity markets out there. Bill am I right to look to some of the other foreign currencies. Before I brought you in I pointed to the yen weakness we’ve seen in the euro currency as well fueling the dollar higher. Yeah what a disappointment in the end. It just really can’t gather any steam and it seems like when they’re going to finally start tightening when they’re going to reverse policy stance you know that’s when they pull the rug right back out on it. You go to the euro currency the British pound. They’ve also come out and said that hey hire for longer. We’re kind of pushing out those interest rate cuts even though their particular economic situations are a little bit more dire than the U.S. I think the U.S. though a lot of this economic data is a bit one off where you get you know these beats and things like that. We like we should see retail sales come out. It’s going to be a little bit firmer if you look at seasonally how the weather was coming into late November December. It was great. Try and get those people out there buying things now at the stores. Man it is chilly out there even 23 degrees in Florida right now. So you know I think it’s a lot of seasonalities here. But these Fed officials they don’t want to backtrack on what they’ve done. They’ve worked so hard to get these interest rates up here. They’re seeing a light at the end of the tunnel. Things like crude oil and other inputs into you know inflation data are really starting to come down despite all the geopolitical headwinds that are out there. So they’re doing a really good job. I got to give them that. Well take a look at a few charts here. Phil you mentioned the 50 day moving average. I queued it up so we could have a look. The dollar the green back to 1 0 3 and right back to this 200 as well. So you can see the middle of the range I pointed to. And I always feel like if you get through the middle of a range you’ve been in with energy after rejecting a lower level as we just did back in the end of last month here. Then you open up a door for retest the upper extreme. Just quickly want to point to the weakness. I seen since the end of last year beginning of this year. This is just this small blip on the radar. Look at this compared to the bigger picture move lower. This goes back to the beginning of 2023. Actually let’s take a look because pull up the weekly. I mean it even really speaks more to that point that the yen continues to struggle and fills. I look at the data overnight. I mean can you. Not sure if you had a chance. I hope I’m not backing you in a corner here but speak to what we saw in terms of CPI out of the UK for example coming in at 5.1 percent a little higher than expected. That seems to be kind of giving the pound a little bit of strength today and maybe kind of countering that effect we’re seeing from weakness in the yen and the euro for example. That’s the only currency that’s green on the screen. You know besides the U.S. dollar at the moment. So that really delays those interest rate cut expectations. The higher than expected CPI. Yeah. It’s going to be higher for longer over there. And you know I’m really surprised that you know these data as we’ve seen you know just in the U.S. higher CPI one day lower PPI. You know the next day. Is that any kind of trend reversal change like that. So I think that you know you know you look at the way this inflation data is holding on. I think it’s just going to take time. It is such a lagger before it comes in and we start to hit these lower boundaries. I don’t think we’re going to get close to this 2 percent. We’re going to we’ll get there. But I think that the reality is is you’ve got to look at input costs are going to just remain high. People are going to be stubborn and take down any of those prices. They don’t want to go back to where their trends are. You know the restaurants they’re not cutting prices and things like that. You know so. So it’s just going to be this higher for longer. We just have to deal with it. Yeah it does seem like a sense of reality in terms of input prices a bumpy road. It takes time. Right. All of that kind of point here and somewhat of a mixed picture in some ways right. And there may not be a lot of clarity at this point in terms of the path forward one way or the other. We were just talking about the CPI data out of UK. But as I look at the euro numbers the eurozone core CPI 3.4 percent in line with expectations but a slight decline from prior levels year over year at 3 6 the core coming in at 0 5. OK a little bit higher than expected. I guess these numbers I look at the month over numbers a little bit higher than expected here as well. So again kind of a mixed bag here though a little closer to home here though Phil as I look ahead to some of the numbers head our way in about seven minutes. We’ve got retail sales import export prices. The retail sales is kind of one of the biggest report we’ve been waiting for all week besides some of these Fed speakers. But when you look at the secret to looking at a Fed speaker is look at what their previous comments were from the last time they spoke. And that’ll get you a gauge whether or not they’re more hawkish more dovish on the fence and things like that. You could risk manager day around that. This retail sales number we do think because it’s seasonally it might come in at that upper end of the boundary. You might get a capitulation on some of these other markets like gold silver you know copper has been under pressure oil prices. We’ve been trading some of those farther out contracts and they are dipping below 70 where we do see some value. One thing that I do want to note is that gold has been doing an excellent job holding over the 2000 level. And I think gold really has its hopes on that it gets this first interest rate cut in March. And if you look historically since 1990 that gold futures on average have rallied 6 percent in the first 30 days after that first interest rate cut. I read that on a report yesterday. It was really good stuff. And I think that it gives you some kind of you know preparing to position for when that interest rate cut happens. So if you start to see you know backtracking on these Fed speakers some of this economic data be a mess. And I think you really take a cautious tail when you come to these employment data. We’ve really seen the private sector slipping on adding jobs. And I think the government is trying to do anything they can to continue to retain power in the current of the current administration by kind of inflating those numbers there to show a healthier economy than what it is. You know we’re going to take a little closer look at the commodities in just a minute here. But to your point I’m looking crude oil right now down about two and a half percent. And we’ve been talking about gold a win for the bulls for a while now considering some of the headwinds fundamentals the dollar at these current levels right. Holding above the 50 holding above the 200 after just recently posting new all time highs. I mean yeah follow through is a little bit of a disappointment but the fact that they were able to achieve that level on a retracement has been somewhat limited compared to that longer term trend environment which still remains to the upside here. Bill talk to me a little bit about you mentioned the Fed’s message right. Comparing current comments relative to prior to see if we get any tone shift. Where are you seeing that. Who have you seen a tone shift. Where should our focus be today because we’ve got a handful of names on the schedule as well. Fed President Williams he delivers in a New York event here today. He said that he expects to maintain that restrictive accommodative stance for some time until they fully achieve their goals and that it’s not appropriate to dial back policy until you see inflation come back down to that 2 percent level. So he’s quite hawkish. He probably can continue to reiterate that. And then tomorrow right when you wake up 630 in the morning you’ll be doing your show right then and you’re going to have Fred President Bostic come out. He’s going to speak. So you’re going to have to grab that one as well. You’re all over that one. I’m just focusing on what happens today. You know I like that because as I’m reminded I feel like it was Williams Fed Williams that initially provided that pushback after Powell’s FOMC meeting the comments suggesting that we could see rate cuts to come six versus three though Phil still a major issue here is a little bit discrepancy in terms of what the market’s pricing in and what Fed officials are telling us. Man if we can get 150 basis point rate cut over the course of this year that would be amazing. But it would be such a tailwind for these markets that they would end up bringing inflation back. And I think that that’s what they’re worried about. We’re already seeing this kind of higher for longer. It is weighing in on a small caps Russell 2000 breaking down a bit here. So we’ll see when it comes up oil oil is one of the best gauges of inflation. I think that’s the one that’s kind of most sensitive that people watch and they feel right away in their pockets. The deal with oil right now is that a lot of those shipments that have been going through the Red Sea are being redirected right now. So we’re not really seeing any kind of impact as far as supply coming off more delays at the moment. And that’s why your oil prices are drifting a bit lower. I do believe again on an oil. I think there’s an OPEC put in place because of the fact that you know they’re going to be concerned that they need to get prices upwards to balance their budgets. They are under some pressure. Last year these are OPEC countries. And you look at U.S. production growth. It is slowing. If we do get this shallow recession you could seedemand surprise of the upside and then again the U.S. their production growth on oil is slowing as well. So average range on oil about two bucks and that’s what we’re down here from high to low on the day. So something to keep an eye on. One could argue crude oil coming off the highs we saw into the end of last year up around 95 has helped rates come off as well and the Fed’s decision making process here. Phil appreciate you joining us a solid breakdown here talking currencies treasuries and a couple thoughts there on commodities Phil Streible, chief market strategist Blue Line Futures coming up we’re talking with Bob Iaccino we’ve got the chief strategist Path Trading Partners.”

[End of Transcript]

Sign up below for a FREE trial of our daily commentary!

https://bluelinefutures.com/2023-signup/?utm_source=Barchart

📉Futures trading involves substantial risk of loss and may not be suitable for all investors. Therefore, carefully consider whether such trading is suitable for you in light of your financial condition. Trading advice is based on information taken from trade and statistical services and other sources Blue Line Futures, LLC believes are reliable. We do not guarantee that such information is accurate or complete and it should not be relied upon as such. Trading advice reflects our good faith judgment at a specific time and is subject to change without notice. There is no guarantee that the advice we give will result in profitable trades. All trading decisions will be made by the account holder. Past performance is not necessarily indicative of future results.

📈Blue Line Futures is a member of NFA and is subject to NFA’s regulatory oversight and examinations. However, you should be aware that the NFA does not have regulatory oversight authority over underlying or spot virtual currency products or transactions or virtual currency exchanges, custodians or markets. Therefore, carefully consider whether such trading is suitable for you considering your financial condition.

With Cyber-attacks on the rise, attacking firms in the healthcare, financial, energy and other state and global sectors, Blue Line Futures wants you to be safe! Blue Line Futures will never contact you via a third party application. Blue Line Futures employees use only firm authorized email addresses and phone numbers. If you are contacted by any person and want to confirm identity please reach out to us at info@bluelinefutures.com or call us at 312- 278-0500