a look at potentially rising us interest rates
DESCRIPTION
It was a turning point for the USD and US markets as the US non-farm payroll numbers came in much higher than expected. This update reinforced the fact that US interest rates could not stay lower forever.TRANSCRIPT
Potentially Rising US Interest
Rates, Gold Basing & Dow
Jones Stalling
with Peter Esho May 4, 2014
The US non-farm payroll numbers came in much higher than expected on
Friday, Asian time. They came in at 288,000 and we think this is really a
turning point for the US dollar and US markets. We think that this is the
first sniff that investors and traders out there will get to reinforce the fact
that US interest rates cannot stay lower forever. We think that the market
will slowly now start to position themselves over the next few years for
rising US interest rates.
The real impact on this is pressure on valuations for all other risk assets.
We think that over the next few months, the Fed will continue to taper,
continue to wind back, but find it very difficult to completely distance
themselves from an eventual increase in US interest rates. This will have a
profound impact regardless of what instrument you are trading.
We initially saw a major rally in the US dollar against the Euro, literally gap
40 to 50 pips and then made up for lost ground. Vito Henjoto has spoken
about that in his technical outlook today. But the key point out there, we
want to make clear, is that the market will now start to reposition for higher
US interest rates. They won�’t happen immediately, but we’ will start to see
more and more commentary around major currency pairs, major interest
rate assumptions and eventually the impact on stock markets.
We maintain our view that the Dow Jones Industrial average on a risk
reward basis is very unattractive at current levels. We maintain our short
position and we’’ve articulated that to you, to clients this week in our Invast
Insights report. We’ve gone through and we’’ve spoken about recent
reports, particularly larger index constituents for the Dow Jones, how
they’ve reported and where we see the Dow Jones going. We’’ve updated
our technical outlook.
We�’ve also updated our portfolio. Our three portfolios are all positive, and
in fact, our best performing portfolio is the most conservative one in Invast
Insights. If you don’’t have Invast Insights, you will receive details of how to
register for a four week free trial.
We also have a very key outlook on gold this week. On our live market
analysis on Wednesday we’ll really be drilling down and updating our view
on gold. We are seeing some very attractive opportunities in the spot gold
market and we’ll be articulating those views in light of the US non-farm
payroll numbers which have come out and what that all means for gold
and other metal prices. We think this is perhaps the most important week
to start to position your portfolio for this data.
There are other bits and pieces coming out on the macro-economic fund,
but we think the key traders, the very smart money, is now starting to
position for an increase in US interest rates over the next few years and
the non-farm payroll number that came out on Friday was really enforcing
that.
Make sure again you register to the live market analysis on Wednesday on
gold and download Invast Insights. Read our report this week if you don’’t
already receive it.
Visit www.invast.com.au/resources/invast-insights.aspx for a free four
week Invast Insights trial.