Looking at the upcoming week, I am certainly going to be ‘playing it safe’ as there are a seemingly unending number of problems just waiting to happen. We have three central banks meeting during the week, including the Reserve Bank of Australia, European Central Bank, and the Bank of England. All are going to be announcing rate guidance, with the BoE being the only one expected to raise.
The ECB is expected to sit still with expectations, while the RBA may try to tamper down the idea of raising interest rates. The Aussies have their own problems, as China is starting to show signs of a mixed economy. (The Chinese PPI figures are close to contraction, but the Credit Impulse has picked up.) On, and there is the jobs report on Friday in America that should cause the usual risk induced headaches.
I am still looking to keep risk lower than usual. This means that my position sizes are half of what they normally are. I have dipped my toe into crypto again – but only 0.2 ETH so far. If we recover in that space, we should have plenty of time to add. The currency markets look as if they are overextended with the USD strength, but any pullback at this point should be a buying opportunity.
Take a look at the US Dollar Index, you can see that we are just above the critical 97 handle. When you look at shorter-term charts, it looks like we could pull back a bit, but it should meet plenty of buying – especially as the risk aversion is so strong at the moment.
Expect a lot of noise this week, but I believe that the USD could very well have legs at this point. We will see.