Longing Corn futures, predominantly via the CORN ETF, emerged as a prominent strategy after the daily close surpassed the 475 mark. This upward trajectory set the scene on Monday, with prices continuing to appreciate by 1.64% by the week’s end. Despite this upward movement, the Wheat segment faced a setback, observing a weekly decline of 7.28%, translating to an average decrease of 2.43% per asset.
The past week was marked by pivotal economic data releases, which, while generating some market directional movement, remained relatively subdued. Key economic indicators included:
US Producer Price Index (PPI): This inflation measure only increased by 0.2% month-on-month, falling short of the anticipated 0.4%, presenting a dovish surprise that fostered an environment in which stock prices were able to ascend.
US Retail Sales: Demonstrating a slower pace than projected, the month-on-month increase registered at merely 0.4%, contrary to the expected 0.6%. This disappointing figure echoed concerns about an impending slowdown within the US economy.
UK Consumer Price Index (CPI): The inflation rate arrived modestly under expectations, clocking in at an annualized rate of 2.5% versus a forecast of 2.6%.
UK Gross Domestic Product (GDP): With a weaker-than-anticipated performance, showing only a 0.1% month-on-month growth, this data again indicated a decelerating economy.
US Unemployment Claims: This metric aligned with expectations, presenting no surprises.
UK Retail Sales: The situations were considerably grimmer, as reported sales demonstrated a month-on-month decrease of 0.3%, oppose to the predicted increase of 0.4%, reflecting significant challenges within the British retail environment.
- Australian Unemployment Rate: Staying steady at 4.0%, this finding met expectations.
A notable trend from last week was the enhancement of risk sentiment, coupled with a minor depreciation in the US Dollar, attributed to disappointing inflation and PPI data. This scenario raised the probability of a Federal Reserve rate hike anticipated in March. Meanwhile, in the Forex market, the British Pound appeared particularly weak, bolstered by substandard inflation and retail figures, while the Japanese Yen exhibited strength, as market expectations grew regarding potential interest rate hikes from the Bank of Japan at its imminent meeting.
The Week Ahead: January 20th – 24th, 2025
This coming week features a lighter calendar of key economic releases, indicating a probable dip in both market activity and volatility in the Forex space. The major data points to monitor, arranged in order of projected significance, include:
Bank of Japan Policy Rate & Monetary Policy Statement: This will be closely scrutinized for indications regarding future interest rate adjustments.
New Zealand CPI (Inflation): Important for gauging inflation trends in the region.
Flash Services & Manufacturing PMI: Releases from the USA, Germany, UK, and France will provide insight into the health of the service and manufacturing sectors in these countries.
UK Claimant Count Change (Unemployment Claims): An important measure of unemployment changes.
- Canada Unemployment Claims: Further indicators of the labor market health in Canada.
A public holiday in the USA on Monday may contribute to decreased trading volume, which could exacerbate market stability concerns.
Monthly Forecast: January 2025
For the month of January, a projection was made that the USD/JPY pair would appreciate, while the EUR/USD pair would depreciate. Evaluating the forecast thus far reveals mixed performances, indicating areas for potential reassessment of market positions.
Weekly Forecast: January 19, 2025
Last week I refrained from releasing a weekly forecast as the absence of significant price shifts in currency pairs negated the foundation for my trading strategy. However, the Japanese Yen exhibited strength, emerging as the most robust major currency, while the British Pound languished as the weakest. Overall volatility softened, observable in the 7% of prominent Forex pairs and crosses that experienced fluctuations exceeding 1%. It is reasonable to anticipate that market conditions will either stabilize or persist at a comparable level in the week to come.
Technical Analysis
Examining the US Dollar Index, a near-doji candlestick formation was printed last week, preserving the long-term bullish trend and securing the highest closing price in over two years. However, a marginal week-end decline hinted at a potential bearish retracement. Comparisons to the past three and six months reflect an enduring bullish health for the Greenback, suggestive of further exploitable opportunities. However, recent weaker-than-expected inflation metrics hinted at a stronger case for possible Federal Reserve rate cuts during 2025, which could temper bullish aspirations for the Dollar. Should the bullish momentum renew, further upward movement could see resistance targeting at the 110.00 mark.
GBP/USD Analysis
The GBP/USD pair is entrenched in a long-term bearish trend. A downturn was observed again last week, despite the latest candlestick suggesting a potential slowing of bearish momentum. Continuous underperforming UK economic indicators have portrayed a clear sign of a decelerating economy. Further complications stem from skepticism surrounding the UK government’s economic forecasts, leading to a significant credibility issue, which has resulted in a pronounced short interest in the Pound.
Conversely, the US Dollar has clinched a two-year peak. While it retraced slightly amid a heightened probability of potential Fed rate cuts due to weaker inflation data, the residual strength remains palpable. Cautiously, I remain bearish on GBP/USD; however, acts of vigilance should be exercised, as the price nears a pivotal inflection point identifiable just above $1.2100.
EUR/USD Perspective
In looking at the EUR/USD pair, its long-term bearish trend reasserted itself last week as the price struck a new two-year low before rebounding, which marked an uptick for the first time in five weeks. As reliable trends often characterize this pair, short positions remain appealing to me. The recent retracement suggests that we may have witnessed the conclusion of the bearish pressure, enhanced further as Friday showed late-week selling momentum.
Although the Euro is not particularly weak, the prevailing bearish sentiment predominantly arises from a robust US Dollar vying for supremacy across the board.
USD/JPY Dynamics
Though the USD/JPY pair is still aligned with a long-term bearish trend, the volatility has surged, permitting extensive retracements while remaining within a reasonable range of its peak price point. Despite the Dollar’s long-standing bullish trend, the Japanese Yen’s recent strengthening emerges amid heightened market speculation surrounding imminent interest rate adjustments from the Bank of Japan’s officials, dependent on forthcoming economic data corroborating Japanese wage growth.
The intricacies of this pair yield intrigue, particularly for day traders who can dissect daily price movements effectively—albeit skepticism should persist with the broader bullish narrative for a sustained long-term horizon.
Bitcoin Market Movement
Bitcoin has recently navigated a trajectory succeeding its two-month low below $91k, propelled by a daily pin bar signaling bullish intent, effectively rejecting lower prices. The upward momentum indicates proximity towards the record high achieved last month. A definitive closing above $106,187 could inaugurate a new record in New York and serve as an encouraging entry point for bullish trade.
The enthusiasm surrounding Bitcoin surged considerably following President-Elect Trump’s victory, perceived favorably concerning cryptocurrency. Yet, this positivity may be tempered by the recent inability to capitalize on crossing the $100,000 threshold.
However, as pre-inauguration expectations envelop the market, we could observe another ethically driven surge potentially coinciding with improving conditions in the stock markets, as Bitcoin tends to behave more like a risk asset rather than a traditional hedge. Given its historic propensity for lucrative run-ups, I remain poised to engage in long positions should an unprecedented daily close occur within the week.
Corn Futures Outlook
In particular focus last week, Corn futures produced a robust bullish candlestick pattern, closing at a one-year high while effectively surpassing the pivotal 475 mark. This price action occurred near last week’s peak, reinforcing bullish sentiment in the market. The foundational principle underlying my approach is the historical success of taking long positions when major commodities break through six-month highs.
Alas, participation in the futures market poses difficulties, particularly for retail traders due to the high cost structure; yet, the CORN ETF provides an accessible avenue for benefiting from bullish movements in corn pricing. This ETF has exhibited superior performance compared to its futures counterpart, although caution should be exercised regarding potential discrepancies in momentum.
Conclusion: The Trading Landscape Ahead
As we eye the week ahead, the most promising trading opportunities appear concentrated in Corn futures alongside the CORN ETF, alongside potential short positions on GBP/USD and EUR/USD as the market digests economic narratives and upcoming data releases.
FAQs
Q: What indicators are most reliable for assessing market sentiment?
A: Key indicators include the Consumer Price Index (CPI), Producer Price Index (PPI), and Unemployment Claims among others. Each of these provides insights into inflationary pressures and employment conditions which directly affect market sentiment.
Q: How can I utilize ETFs for trading commodities?
A: ETFs like CORN represent an easy access point for participating in commodity price movements without incurring the high costs that futures might involve.
Q: What is the significance of the Bank of Japan’s Policy Rate announcement?
A: This announcement is critical as it can influence both the Yen’s strength and broader market sentiment regarding interest rates, which in turn can affect trading strategies involving JPY pairs.
Q: Why are GBP/USD and EUR/USD identified as potential short positions?
A: Both currency pairs are currently entrenched in bearish trends, confirmed by deteriorating economic data and overarching strength in the US Dollar, indicating potential continuation of their downward trajectories.
Q: How does Bitcoin’s relationship to the stock market affect its price?
A: Bitcoin often mirrors trends in the broader stock market, behaving as a risk asset rather than a traditional safe haven, particularly during periods of positive market sentiment or bullish runs in equities.
References
- U.S. Bureau of Labor Statistics. Economic Indicators.
- Bank of Japan. Monetary Policy Reports.
- Trading Economics. Inflation Rates.
- Financial Times. Currency Market Updates.
- CoinDesk. Cryptocurrency Market Insights.