Today I spoke with Dale Pinkert from Forex Analytix and noted that an opportunity to buy the US dollar has emerged, particularly against the euro. For the second half of the year, Chinese growth and Japan's inflation are the stories to watch. Check out the video or the concise recap below.
Euro Performance: I observed a consecutive eight-day rise in the euro until yesterday. If you're thinking about selling, now might be an opportune moment. I pointed out that the UK's inflation seems to be tempering slightly, suggesting that the earlier anticipated 6.5% increase might have been a stretch.
US Housing Market: I've held a bullish view on the U.S. housing market for a long time, which I believe still has room for about 30% growth. I feel the market is supply-constrained right now, but anticipate a spread to larger markets eventually. However, I think the Federal Reserve may face some challenges in managing this growth.
Equity Speculation: I discussed the recent surge in equity speculation. I believe the Federal Reserve isn't too worried about the current market movements, unless the speculation broadens considerably. I particularly highlighted the influential role of AI in attracting investment due to its remarkable technological advancements.
Inflation and Growth: I took a close look at inflation numbers and concluded they appear to be more about easy comparisons with last year's figures than genuine growth. But I warned that the comparisons are going to get tougher towards the end of the year.
Outlook for Rest of the Year: I feel the divergent trade will be the key focus for the rest of the year. I predict a strong dollar trade for the second half of the year, which I see as a challenge for the US economy, especially if it remains the only place showing strength.
Yields and Equity Prices: I noted my concerns about equity prices, which is why I'm currently buying into the bond market, expecting lower yields. I tied this decision to a potential risk-off event that could lead to a favorable move in bonds.
Market Optimism: Despite my worries, I've maintained a bullish outlook on the economy and stocks throughout the year. However, I found it interesting that many economists are now leaning towards the 'soft landing' theory, despite the fact that just a short while ago, these same people were predicting a recession. This sudden shift is something I'm keeping an eye on.
Gold: I have a bullish sentiment on gold and anticipate that the seasonal trade might intensify towards late Q3. I suggest that even with a potential upcoming dollar rally, an opportunity to buy gold could present itself, preferably if the price drops below $2000.
Oil: I'm an oil bull and acknowledge the recent positive turn in WTI. However, I'm awaiting the upcoming EIA number and material draws before increasing my conviction. I caution that being overly bullish beyond $90 could be risky if OPEC's capacity isn't maxed out. I see potential for prices to rise to around $80-$85.
Other Commodities: While acknowledging the importance of grains, steel, and lumber in the commodities market, I note that they don't get much attention in forex. I believe these are commodities worth paying close attention to.
Market Observations: I recommend keeping an eye on China and Japan and staying alert to the US dollar price action. I also stress the importance of appreciating what we have in life, not just in the markets, reminding traders of the human aspect of our participation.
