THIS WEEK'S MAJOR NEWS EVENTS!
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Wednesday
🗓 8:30 AM EST: USD CPI
🗓 2:00 PM EST: FOMC

Thursday
🗓 8:30 AM EST: PPI & Unemployment

Friday
🗓 10:00 AM EST: Prelim UoM Consumer Sentiment

⭐️ FREE RELATED COURSES:
How to Trade CPI Data
How to Trade PPI Data
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The 10 year treasury bond is bullish at +7, our most bullish asset on the EdgeFinder. The reason bond prices are in demand is due to the expectations of lower bond yields in the future. Lower yields means higher prices.

Investors are not expecting rates to go higher now that the Fed talks more about cutting than hiking. The next likely move from the Fed will be to lower interest rates, thus propelling bond prices. If we want to see a more expensive 10 year bond, we probably want to see lower inflation.
-Frank

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The demand for gold remained mostly unchanged from last week's COT. Price crumbled on Friday on better than expected NFP. However, with an uptick in unemployment to 4%, the US has not seen this level for a few years. Once we hit this threshold, finding a job becomes increasingly harder for women and minorities.

Price hit support and may be trying to bounce from the lows after a 3% drop Friday. For this week, we are going to need to see worse economic projections from FOMC and lower CPI. The reason lower inflation is bullish is because it can prompt the Fed to cut. Higher or sticky inflation will only delay the rate cut and continue to put pressure on the metal's demand. -Frank

EURUSD is no longer a strong bullish score on the EdgeFinder and is now hovering around neutral. The US economy is performing better than the EU, and ECB cut their interest rate out of concern for the economy.

Depending on the CPI data, FOMC may take a more hawkish stance if inflation remains sticky. If CPI moves lower, investors may become very excited for a rate cut in September. So, a lower CPI could be bullish EURUSD and a higher CPI may be bearish. -Frank

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Adding to the overall market indecisiveness, retail is strongly short biased against the S&P at over 70% short. NAS is also majority short, and Dow Jones is mixed.

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The reason for this confusion couples with the fact that COT is also short this week on the indices. US30 and SPX are the largest changes to the short side. This may suggest that no one knows where the market is heading for now. This week will definitely provide a clearer picture on smart money sentiment, but there is so much uncertainty that it is hard for me to guess where I think indices, gold and dollar are headed in the short term.
-Frank

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S&P500
Although the market has hit a consolidation zone and technicals point to being overbought, we can’t pull a continuation of the rally off the table quite yet. Unlike most assets, the stock market tends to trend upward until a fundamental crack in the economy’s infrastructure. With CPI tomorrow and the Fed’s forecasted projection of the economy and interest rates, we have to consider another melt up if inflation numbers come in cooler. There is also long term support on the rising trend line on the 1D timeframe should price retrace. -Frank

Gold
Gold rises at the market open as stocks fall. Investors are still trying to figure out which asset would work best against the dollar as we expect lower inflation data tomorrow. Regardless of why the Fed may cut rates this year, it will still be a bullish sign for gold as it means a weaker dollar. However, if CPI runs hotter than expected, rates will have to stay higher for longer which could hurt gold’s price over time.
-Frank

EUR/USD
After the ECB’s rate cut, the euro might be much weaker than the dollar now. This is because the US still fears that we might not get a cut this year while Europe’s monetary policy becomes looser. The pair is now on support on a falling trend line and may have to test the lows again. If CPI is higher, we might be looking at a bearish EU pair.
-Frank

Cooler CPI numbers across the board... probably going to be weaker dollar with strong indices and gold

Yields seem to be capped now that we are looking for that September rate cut to happen. Lower CPI is a good indication that today's FOMC will lean dovish as higher rate fears are subsiding. Despite a slowing job market, a cooler inflation number is what investors are looking for. In other words, as long as CPI is coming down with labor, it's a good sign. Stagflation is not a concern right now. -Frank

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The Fed's latest dot plot suggests lower interest rates by next year. However, we are expecting to be at 5.1% this first year. The problem still lies with the Fed's lack of confidence towards their inflation goal to justify three rate cuts. When comparing the Fed's initial projections in March, we have seen a shift to higher interest rates for longer based on this image. We are still expecting one cut this year, but that's far different from the three we thought was going to happen. So, the question remains as to whether the Fed will actually cut this year, or will it get re-forecasted to no cuts this year. https://www.federalreserve.gov/monetarypolicy/files/fomcprojtabl20240612.pdf
https://finance.yahoo.com/news/fed-dot-plot-suggests-central-bank-will-cut-interest-rates-one-time-in-2024-down-from-three-cuts-in-march-180721564.html

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