FX Charts Reaching Turmoil Zone

China vs USA Proxy

CADAUD. Breakouts in 2008 and 2020.

The Case for Deflation

The market is in a curious state with some sectors such as oil and oil serivces hinting at bullish breakouts and bonds hinting at bearish breakdowns. How about the contrary? The charts say the market isn't far from deflation either. If crude reverses, the outlook for inflation dims fairly quickly. I'm not going into monetary data in this post, only looking at some assets that should be doing well if inflation, specifically commodities prices, move higher.

Crude oil is about $10 away from a clear bullish breakout, but it is battling at a resistance area. It is $20+ away from a major bearish breakdown.

Rio Tinto has a potential measued move to $100 or its done and topping.

Freeport-McMoRan has what looks like a diamond pattern to me. Moves out of diamonds are often huge, powerful moves.

Emerging markets, of which China is the main component, are less than 10 percent from major support.

Copper is already well into a rollover and it leads oil.

Not enough to call it a serious break yet, but EURUSD went through support on Friday. The euro is keeping the U.S. Dollar Index in a bearish pattern.

East Asian currencies are rolling over. It won't take much of a push open a retest of the dollar's 2022 highs. An extension of the current dollar rally into Monday might be enough, as it would be enough to carry EURUSD below support...

Of Australia, Brazil and South Africa's stock markets and currencies, only Brazil's currency looks strong. You'd think it would be more than 1 out of 6 if a commodities bull run is coming.

Gold has a bullish look to it, but it often falls in the first part of deflationary waves. A pullback towards ther $1550 to $1600 area might be the buy of a generation if secular disinflation and the 40-year bond bull market have ended.

I've been focused on rising home prices and affordability, but I didn't pay close enough attention to the 2006 top. The Case-Schiller Index spent about 13 months topping (the low between the two tops broke in April 2007, after the initial March 2006 peak) with a double-top pattern. A precisely similar top in time would see home prices implode this month because Black Knight has said, and the trend in Case-Schiller, points to a new high in July. Case-Schiller will report August data in October. Analogs need not be precise though. As long as prices sink in the autumn, it'll be a very similar top. The prior top was followed by a 50 percent decline.

A Look at East Asia Via AUD

I'm not predicting AUD strength, but I look at charts of AUD crosses and wonder. With the RBA relatively hawkish, what if AUD loses less than expected in a USD rally? Many charts would break bullishly for both AUD and by implication, USD should USDAUD be also climbing. RBA Surprise Rate Hike

Good Payroll Report

Between the Atlanta Fed and the payroll report, I'm admit to having some doubt about the weakness of the economy. I thought there would be clear signs of recession by now. Perhaps this is the last gasp. It would be very good news if it wasn't. A strong economy also doesn't really dent my bearish thesis because remember the 1970s. The Boomers + 1965 immigration act + feminism unleashed massive labor supply into the economy, wages soared with inflation and the stock market fell until an inflation-adjusted low in 1982. High inflation and high interest rates will kill financial assets and shift capital from Wall Street to Main Street. This is undoubtedly a good thing.

As for today, my main decision is whether to close weekly puts at the open because the market could rally back towards 3750 on the ES or hold because a move down could accelerate. I would reshort at 3750, that would be the plan barring a bigger rally. I don't expect a larger rally. While a move back up towards 3800 wouldn't kill my bearish outlook, it would surprise me a great deal.

For today's chart, here's the AUDJPY cross and then again with crude oil overlaid.

Keep an eye on HYG, LQD, mortgage REITs such as BXMT, Canadian banks and so on. The word for the day is follow through. Bears want to see new 52-week lows in these types of sectors because it will speak to rising financial and credit risk. If these sectors don't make new lows, it would raise the risk that the drop today, currently driven by Nasdaq and technology stocks, could be reversed.

Australian Dollar the Next Domino for Yen Weakness

AUDJPY is coming up on major resistance, about 2 percent away. A break out here would strengthen the case for endgame in Japan.

Inflation Cheat Sheet

People have their economic hobbyhorses and they can't separate their grocery bill from financial markets. I'm done debating with people. Inflation has peaked in the short-term, both July and August CPIs will be rather low, on pace for maybe 3-percent annualized. If crude falls like that topping pattern says it could, the target is $50 area, inflation is done for good. If I'm wrong then I'll go long! I don't care which way it goes, but I care to look and see what the tells me and what my understanding of economics says. Betting on deflationary collapse is still very cheap because very few traders and investors, outside of the bond market, are looking for it.

The AUDUSD correlation says $30 could be the target for crude oil. That gap is going to close one way or another and right now I'd bet oil comes down bigtime.

Release the Dingoheaded Kraken

Open Borders Killing the American Family, Driving Homelessness Higher

Housing takes years to plan for. When a government opens the borders to massive migration, it is placing extreme stress on the existing housing stock. Soaring rents, soaring home prices and soaring homelessness are a direct result of this policy. Inflation is exacerbating a problem that at its heart is being caused by the Baizuo admin's immigration policies.

From Australia. MacroBusiness: Immigration ramp-up will turn rental crisis into catastrophe

“Rental competition is tough at the moment”…

“The number of properties available for rent has fallen to historically low levels and demand to rent is up, particularly in the capital cities, with Covid-normal underway and the borders having reopened”…

“A return of migration and an imminent rebound in the international student market will continue to add to rental pressures, further shrinking the supply of available properties.”

Leith van Onselen comments,

All indicators coming from the Albanese Government suggests it will ramp-up immigration aggressively. It plans to use September’s jobs summit, which will be dominated by immigration lobbyists, as a Trojan Horse to gain ‘consensus’ for the biggest ever migrant intake.

Anybody lobbying to increase immigration needs to answer the following question: where will the hundreds of thousands of new migrants live when there is already an extreme shortage of homes for the existing resident population?

As usual, the many costs of extreme immigration are never considered by the ‘Big Australia’ lobby nor policy makers.

Australia is a microcosm of the USA. The U.S. is in worse shape because it is also allowing in terrorists, murderers, rapists, drug traffickers, sex traffickers and assorted ne'er-do-wells.

Long Rising Sun, Short Oz

Short RY also looks good (EURJPY).

Another Trade Setup That Will Emerge

Short Australian and Canadian housing, via various proxies.

More Yen Charts

Ozbucks, won and yuan.

Australia PMI Plunges

If June is half as bad as May, the PMI will signal contraction:

Full report: Manufacturing recovery slows in May

Suddenly the New Leading Cause of Death

Dead Man Talking: Australia begins to reap what it has sown. It's grim.

VD: When The Reaper Calls, commenting on the above:

So, the good news is that you’re not necessarily doomed if you were dumb enough to get the Death Jab one or more times. The bad news is that you not only proved that you’re literally gullible enough to kill yourself on the basis of a government agency’s recommendation, but you’re also much more likely to die of “suddenly” or some other cause due to your genetically-altered, vaccine-compromised immune system.

It’s possible for science and the media to hide or otherwise explain away a lot of statistical anomalies, but all-cause mortality isn’t one of them.