Should we be concerned about hyperinflation?
MACRO SETUP OVERVIEW:
• US earnings continue with tech stocks
• USD / JPY follows US yields higher
• Bitcoin consolidates a new bullish momentum
This week’s focus is on tech earnings, with the top 5 stocks (AAPL, MSFT, GOOGL, AMZN, FB) of the S&P 500 accounting for 22.1% of the index, and all 5 are reporting this week. A tweet from Carter Braxton suggested that in previous times, when all 5 stocks were released in the same week, the SPX ended the week lower. Looking at the current chart you wouldn’t necessarily think it would this time around, but we might see a correction after these stocks report as the index has gained a bit of a lead on itself.
There is also talk of hyperinflation and whether we should be concerned about it. The fact that inflation looks less transient than initially expected is worrying markets as the stagflation warning bells go off. Looking at the USD and US10Y chart, we could continue to see yields rise and what this means for stocks if rates are raised is a matter of debate, as this could be a signal of underlying economic strength and therefore a boost for people sensitive to the economy. equities, but on the other hand, excessive valuations and fears of growth could see equities struggling to recover in this environment.
Bitcoin, on the other hand, continues to attract investors looking for higher yields as stocks remain at all-time highs with uncertain short-term prospects. The recent consolidation has allowed a healthy pick-up in the bullish momentum as traders continue to buy the downside, and with this higher surge appearing to be more sustainable than previous occasions, momentum is likely to build further.
Another important point to come is central bank meetings, a host of which are taking place this week and next. We took a look at what tomorrow’s Bank of Canada meeting might mean for the USD / CAD, as well as the Bank of England and Reserve Bank of Australia meetings next week on the GBP / JPY. and AUD / USD.
* For comments from Dan Nathan, Guy Adami and myself on the Gold, bitcoin, dollar and pound sterling among others, please watch the embedded video at the top of this article.
GRAPHICS OF THE WEEK
USD / JPY vs. US10Y TECHNICAL ANALYSIS: DAILY TABLE (CHART 1)
GBP / JPY ANALYSIS: DAILY GRAPHIC (CHART 2)
AUD / USD TECHNICAL ANALYSIS: DAILY TABLE (TABLE 3)
— Written by Daniela Sabin Hathorn, Market Analyst
Follow Daniela on Twitter @HathornSabin