With the weakness in the USD - where the DXY holds the potential to crack the consolidation lows and EURUSD looks to break the 1.0875 and 1.0750 range - married with the grind lower in US real rates (lower pane) - we’re seeing new cycle highs in gold.
A range break in the DXY would certainly be helpful in the quest to push price to $2000, which is the big...
Welcome to the first Trade Off episode of 2023! A lot to catch up in all the moving markets but luckily, Westy and Blake have you covered! Expect a wide-ranging discussion from big macro themes, to spicy setups and actionable trade ideas. See you there!
As detailed in the BoJ meeting preview yesterday, the market is on edge for significant movement – case in point, USDJPY 1-day implied volatility (vol) currently sits at 49% - for context, this equates to a 279-pip move (higher or lower) on the day (with a 68% level of confidence), where the market feels fairly confident the upside should be contained into...
It’s been many years since Bank of Japan (BoJ) meetings posed significant risks for traders, but this Wednesday’s BoJ meeting holds the potential for significant volatility in USDJPY, as well as the JPY crosses, and JPN225.
The risk manager
The job of the trader is to manage risk, as well as achieving correct position sizing for every trade.
So, when I look at...
Having returned from three weeks of annual leave with a renewed focus, it feels like the transitioning market expectations and positioning from a hard-landing economic scenario to one that is less bad one still has legs, and the positive risk sentiment should hold for now, although we must be prepared to react to changes in sentiment and price. The drivers; EU Nat...
US500 -2.8%, NAS100 -3.3%
GER40 -3.3%, EUStoxx -3.5%
VIX +2.3 vols at 23.45%
DXY +0.8%
AUDUSD -2.4% (the weakest link in G10 FX), GBPUSD -1.9%
XAUUSD -1.6%, XAGUSD -3.5%
The markets saw yesterday’s Fed meeting as hawkish, but there was enough in Powell’s press conference to keep us believing they will move to an even slower pace of hikes and risk was subsequently...
Having seen US core CPI come in at 6% the strong reaction in rates, US Treasuries, gold, and the USD makes sense – somewhat more puzzling, after an initial spike of 3% in the US500, we’ve seen a sizeable reversal in US equity markets and perhaps this shows trepidation to hold exposures over the upcoming FOMC meeting.
Certainly, USD pairs are getting a strong...
Having reached the double top target, we see that Crude is now 15% below from its 50 day MA - in the past 2 years we've been as stretched as 17% below this average before we saw solid mean reversion kick in - we are in oversold territory and that offers an elevated risk of short covering
By way of flow, we now see 67% of open positions in crude are now held long...
Having turned neutral on risk last week, on the idea that traders would look to square exposures ahead of this week's data deluge, the call was early but largely on the money – where we saw the US500 close lower 4/5 days, losing 3.4% on the week. Elsewhere, the USD gained a modest 0.4%, US 2-year Treasury yields gained 7bp and crude hit downside targets with an...
With next week’s US CPI print and FOMC meeting offering the potential for further market volatility, it feels like these landmines are a fitting end to an incredibly eventful 2022.
We look back at the big themes that have driven cross-asset volatility and the conditions through which we’ve all had to adapt our trading – these include persistently high inflation,...
Asia found some form yesterday with further reopening measures announced and the H-Share cash index closing +5.3% - USDCNH traded aggressively down to 6.9300, and for the most part found buyers hard to come by but the reversal higher from the start of US cash trade has been impressive. A rush to broadly de-risk portfolios has hit the tape hard, with S&P500 futures...
We move past US payrolls with only a momentary shake for risky markets - the immediate reaction was to buy USDs, sell Treasuries and equity, however, the market was quick to reverse that flow. When we drill down into wages, revisions and the balance between the Household and Establishment survey, the wash-up is it supports the ‘soft landing’ argument and won’t...
A key set-up for the radar - we currently see a solid test of the H&S neckline, where a break targets 6.6500 - a move here would be conditional on a moderation in US core CPI (due 13 Dec) and a fed funds terminals rate headed to 4.75% - however, any decline in this cross would lift AUD, NZD and be thematic of outperformance in Chinese equities
Price is breaking...
After a hiatus, Westy and Blake are back on TradingView with The Trade Off!
As usual, they dissect the macro trends du jour, look at setups that rock their world and plays of the day: risk on, NFP, China, SPX, USDJPY, USDCHF, Silver, Vix, NAS100, Crude
EURUSD was on fire through EU trade stopping just shy of 1.0500 – talk of month-end flows predictably doing the rounds, but then it’s been all USD buyers taking us into session lows. The wash-up is an ominous set-up on the EURUSD daily, with a big rejection candle coming off a major supply zone and resistance above 1.0400 – we’ve even seen EUR sellers in US trade...
Core themes central to the narrative:
• Month-end flows – it’s always a fool’s errand attempting to trade month-end pension fund rebalancing flow and one really has little edge doing so – consider, however, the USD is -5% MTD and having its worst month since Sept 2010, with NZDUSD +7.5% to be the best performing G10 pair - the US500 is +4% MTD, while US Treasury...
USDJPY looks heavy on the daily, where we’ve broken below rising trend support (drawn from the May swing) and out of the I-cloud, which price was hugging from mid-Nov. We can see a marked increase in the 3-day ROC and a close through the 11 Nov lows of 138.46 could see the pair start to bear trend with the 200-day MA at 133.84 potentially coming into...
The technicals in crude continue to break down as the buyers stand aside – the 26 Sept swing low looks close to being taken out at $76.61 and a break here sees $65 come into play – it does feel like these lows will be tested, so a short bias is preferred. The fact we see crude down 4% when copper is up 1% speaks to the EU price caps as the driver, over just a...
