A1 Trading Company

September 14, 2023

Major Problem in the US

Frank Cabibi

PPI came out today, and it was not what investors expected. This is a major signal for the USD and any asset trading against it. Here are some more setups to end the week and looking ahead to next:

EdgeFinder Analysis

USOil is the strongest bullish reading on the EdgeFinder as of now that inflation is continuing to move higher and supply shortages are kicking in. Saudi Arabia and Russia have both said that they will be slowing production by over one million barrels a day.

PPI numbers came out higher this morning which is another indicator that the Fed may need to step in again. Core, however, remained unchanged but still suggests sticky prices overall. COT showed us a very clear bias to the long side last week.

Gold is continuing to move down on the 1D timeframe after the recent PPI news. It still looks like price is going to come down and test the $1880s before finding any clear level of support. In the meantime, we can expect choppier market price action going forward.

The 2 year yield is still pushing higher and maintaining itself around 5% which is concerningly high in regards to the historical levels of yields. If price does bounce for whatever reason, we could potentially find another resistance level around $1915.

UJ is also very bullish according to the EF's readings. COT is still majority long USD over the JPY, but we also saw that they started buying up the yen in last week's report. This pair moves very directly with the 2 year yield which we talk about a lot in this type of analysis.

Unemployment claims came in less than expected as well, further increasing the rate hike speculation. We'll have to see how price action performs today, but it is hard to tell with constant sentiment switching amongst traders.

Retail Spotlight

Retail sentiment is showing some strange numbers in the sense that several of these pairs are identical on the long and short side. NZDUSD, AUDUSD, USDCHF are all 76% long, while GBPUSD and EURUSD are 65% long.

Smart Money Spotlight

COT is showing a large increase in the net long changes on ZAR, JP225, JPY and USOil. To the short side is NZD, AUD, EUR and CAD. USOil got a large increase in longs added on a week-to-week basis. The bottom chart shows how positional bias has changed.

Fundamental Analysis

The latest data on USD's CPI and PPI in the picture above could raise alarm for the risk-on traders. Both indices have increased suggesting more resilience in the economy than anticipated.

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