Trading Desk

USDJPY Based on the latest MOF report, Japan spent $70 billion defending the yen last month. Back in April-May 2024, it spent $60 billion, and in July 2024 it spent $35 billion. With oil still elevated, and Japan importing almost all of its oil, USDJPY has continued to grind higher despite the intervention.

I showed the uptrendline support on the day the first intervention occurred, and that support has held so far. As mentioned before, the MOF needs to buy yen aggressively enough to push USDJPY below 155 and sustain it there for a few days before the market can build downside momentum. Otherwise, the path of least resistance remains higher.

That said, as we approach 160, I would take partial profits and tighten risk. Japan remains one of the largest FX reserve holders in the world, and it still has both the firepower and willingness to intervene again.

Ultimately, unless we see the Strait return to normal and/or a BOJ rate hike, USDJPY should break above 160. But I would not chase into that level given the risk of another intervention.

XAGUSD Silver rebounded precisely from my major trendline support around 72.

That trendline must hold, otherwise we could see it much lower.

On the upside, 81 and 88 are the key resistance levels.

CL1!  We were expecting an explosive move in oil as the triangle came to an end. Price resolved lower, but the move is not being confirmed by the physical market.

Futures are down this week on U.S.-Iran peace-deal headlines, even as crude and product inventories are being drained at a historic pace. Gasoline and other physical products remain elevated.

Three months into the war, I see nothing that changes that setup. The physical market is still not confirming the futures drawdown, so I would be careful calling this a clean fundamental bearish break.

That said, the technical signal has clearly weakened. The majority of oil-related tickers broke down early this week, and subsequent price action has continued lower as expected from the charts. Tactically, the tape stays bearish unless those breakdown levels are reclaimed, but I would not chase the move lower unless physical products start confirming it.

CL (WTI crude futures) closed below lower trendline support on Tuesday and continued to edge lower through the second half of the week. The 80 area is now the last line of defense. A confirmed breach below 80 would suggest real progress toward a peace deal.

BZ1! SpotBrent (Brent crude spot) also broke its uptrendline support on Wednesday. Next support sits around 87, and a sustained breach below that level would point to real progress toward a peace deal.

BZ1! For BZ (Brent futures), a breach below 100 opened the door to a test of 86. The market closed above 90 on Friday, so the downside path is open but not yet fully confirmed.

A breach below 86 would strengthen the peace-deal signal, while bulls need to reclaim 100 before we can talk about more upside.

XAUUSD Gold rebounded swiftly from our 4.4K support and remains range-bound between 4.4K and 4.66K.

The reversal was largely driven by the reversal in yields, as the market gets a new peace-deal headline every 15 minutes.

I expect the inverse correlation between gold/silver and yields to continue.

A breach below 4.4K opens the door to a test of the major trendline around 4.2K.

Until then, gold is still boxed in.

Market Update
#Bitcoin https://www.meridianresearch.app/notes/bd9b6a11-2555-43da-ac05-b8c85edf4e69View note

Chart: Binance BTCUSDT perpetual · Asset Tag: CME Bitcoin futures (BTC1!).

BTC1!

DJIhad been lagging other indices and finally broke above resistance this Friday.

RUT bounced from horizontal support.

AAPL

INTCAgain, semis remain overextended. For bulls, tighten your stops. For bears, wait for a confirmed break.

NVDA If the market decides to put an end to this AI frenzy, NVDA (Nvidia) will likely post a monthly close below 208 and lead the market lower in the coming months. For bulls, the pullback is a low-risk entry. For bears, wait for a confirmed close below 208.

XAGUSD Higher oil prices -> higher yields -> sustained pressure on silver.

Silver remains above the major trendline. If it breaches below that level, further downside is warranted.

SPX NDX ES1! NQ1!

As the indices become increasingly concentrated, the negative macro backdrop is being masked by strength in semis. For the market to come back to its senses, it needs one of three things: oil breaking out, rate hikes, or the AI frenzy coming to an end.

CL1!  Oil was dampened this week as we got a fresh round of fake peace-deal news. The market has changed a lot since Trump's inauguration. Fake news is much more frequent, and algos are reacting to these headlines more aggressively.

On technicals, the triangle formation is coming to an end, likely around mid-June. We will likely see an explosive move from there.

If we do not get a deal by then, the path is likely to the upside, and 115-120 remains the iron wall. If we do get a real deal, oil will first test the low 80s before breaching that level by year-end.

BZ1! For BZ (Brent futures), a breach below 100 opens the door to a test of 86, and a breach below 86 would suggest real progress on a peace deal. Above 118-120, the ATH around 140 comes into play.

BZ1! Oil was dampened this week as we got a fresh round of fake peace-deal news. The market has changed a lot since Trump's inauguration. Fake news is much more frequent, and algos are reacting to these headlines more aggressively.

On technicals, the triangle formation is coming to an end, likely around mid-June. We will likely see an explosive move from there.

If we do not get a deal by then, the path is likely to the upside, and 115-120 remains the iron wall. If we do get a real deal, oil will first test the low 80s before breaching that level by year-end.

HG1! Copper backtested my 6.11 support.

Fundamentals remain strong. A confirmed breach above the upper channel could lead to a more vertical move.

US02Y Despite Trump tweeting every 15 minutes this week to calm yields, it appears 4% is here to stay for US02Y (U.S. 2-Year Treasury Yield). The next natural target sits around 4.4%.

BTC1!

What happens if it breaks below the lower channel?

Tick tock...

Chart: Binance BTCUSDT perpetual · Asset Tag: CME Bitcoin futures (BTC1!).

US10Y

US10Y Last week, I mentioned that the US10Y (U.S. 10-Year Treasury Yield) multi-year downtrend resistance line is the only resistance global long-end yields have left. The market tried very hard to defend it this week, and we saw a fakeout. A sustained breach above opens the door to a test of the 2023 high, after which we could see a repeat of the 1970s-1980s stagflation era.

Time is ticking. The triangle formation is coming to an end, and I expect the resolution to be violent. If it resolves to the upside, we will likely see a break above 120. If it resolves to the downside, it is likely targeting the low 80s.
Trump manipulated the market again this week as he TACOed on a publicly undisclosed, self-imposed deadline. Oil dumped and equities rallied ahead of the inventory data release, which showed the sharpest drop in inventories.

And now we have yet another Pakistan peace-deal headline. Our team has monitored and recorded over 70 Pakistan peace deals since the beginning of the war. If oil is set to explode to the downside, maybe it will be the 80th or 90th peace deal that finally turns out to be real. For now, we stand by our view that a peace deal is extremely hard to reach, and the path of least resistance remains to the upside for oil.

USDJPY has been grinding steadily higher, as we expected. I showed the uptrend-line support on the day the first intervention occurred, and this support has held so far. As mentioned before, the MOF must buy yen aggressively enough to push USDJPY below 155 and sustain it below that level for a few days for the market to pick up downside momentum. Otherwise, the path of least resistance remains to the upside. That said, as we approach 160, I advise caution. Japan remains one of the largest FX reserve holders in the world, and it still has enough firepower and willingness to intervene again. I would be taking partial profits as we approach 160. Ultimately, unless we see the Strait return to normal and/or a BOJ rate hike, USDJPY will, without doubt, surge above 160.

Equities have been resilient to higher oil and flashing inflation numbers, as the indices are now more concentrated than ever in one sector. While indices rallied to new ATHs, the majority of stocks were down, and more stocks were making new lows than new highs. Such extremes tend to happen right before historical crashes. 

NVDA reported earnings after the close yesterday. Market reaction has been muted despite yet another earnings report with stunning headline numbers. Even if you are new to semis, you would know that NVDA is the most profitable company in this sector and has held this position for a few years. Risks are lurking in the dark as we dig deeper into NVDA's earnings. Despite posting $50 billion in cash flow from operating activities, NVDA's cash balance only grew by a measly $0.66 billion, while cash outflow from investing activities sat at $26 billion and cash outflow from financing activities sat at $21 billion. The majority of the outflows from investing and financing activities were money sent to customer companies that have agreed to use the money received to buy NVDA's chips. This is the circular financing we warned about 9 months ago. And it appears to be coming closer to an end, as there appears to be no more organic growth in demand for NVDA's products. NVDA's technicals remain largely unchanged from months ago. If the market decides to put an end to this AI frenzy, NVDA will likely post a monthly close below 208 and lead the market lower in the coming months. For bulls, the pullback is a low-risk entry. For bears, wait for a confirmed close below 208.

Tick Tock...