August 12th, 2022 - Market Update
Current position: Carefully floating
Stocks and Mortgage Bonds are both higher so far this morning.
This past week we saw both Consumer and Producer inflation moderate on a year over year basis. And this morning we received a report showing that import prices were down 1.4% last month, which is another sign that inflation is at least starting to subside a bit.
Lower import prices are due to the strength of the dollar vs other currencies. Because of this, we are importing less inflation.
One of the reasons the dollar is so strong comparatively to other currencies is the Fed rate hikes we have been doing here.
When the Fed hikes rates, it attracts foreign currencies to take advantage of higher yields. It's unclear how long this will last, as other central banks are begging to hike and catch up.
Next week brings several important housing reports, including the NAHB Housing Market Index, Housing Starts and Permits, and Existing Home Sales.
Additionally, the Fed Minutes from the July 27 Fed Meeting will be released.
Mortgage Bonds are trading in a narrow range between support at the 25-day Moving Average and overhead resistance at the 100-day Moving Average.
Going back to mid-June, Bonds have created a pennant formation., which is narrowing and squeezing Bonds. Often times, Bonds will break out of these types of patterns in the direction of the previous trend, which was higher.
The 10-year is in a similar position but reversed since we are looking at the yield.
Begin the day carefully floating.
Source: MBS Highway
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