MBCC Trading Highlights - 6th September'22 - FX markets in distress, keep an eye on the Yuan! The Fed is not done yet...

1)S&P 500 – FX markets are signalling distress, and US payroll data did not help!

After the August sell off, the market has found support for the near term around 3940, as shown above. We failed right at the top end of the resistance around 4300, connecting t the downward trending channel from highs of 2022. The bulls need to hold 3940 and then break 3975 to the upside to make a move > 4000. If we lose 3920-3940 area, we will sell down to 3890 and 3805 target, retesting the lows of 3650-3700. The big question in the market right now is do we hold here, marking the bottom, or do we retest the lows?

Moving away from the technical set up, as the technicals only tell us where the market can go if nudged in the right direction, but not where it will go.

As mentioned before the September Quadruple Witching expiration is next Friday, 16th, and into there the derivative set up is such that there is significant open interest around 4000-4200, where the market is in deep negative gamma. The market makers need to sell futures if we stay down here, but will need to buy back aggressively if we break > 4200. This will ALL be technical, not fundamental as it is about being hedged post expiration.

The next catalyst for the market is the 12th September’22 when the US CPI for August will be released. If the data is in any way “lower” the market will use that as an excuse to buy the market and sell the Dollar, as that it is all it is hoping and waiting for. Given the technical set up, the move can be aggressive to the upside given the hedging we explained, but that will be temporary as even though we have seen past peak inflation, the Fed is STILL draining liquidity from the system and tightening.

What is the next shoe to drop here? What is Oil going to do POST OPEC+ announcement yesterday? Where does Copper go? Do we buy Gold yet? All this and more in today’s note for paid subscribers only!