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...
Top-level view - Long and strong for 4200, cutting on a 3- & 8-day EMA crossover
On the day we see the US500 cash closing +1.4% and above 4000, taking the bear market rally to 14.6% from the 13 Oct low.
All sectors rallied with energy the best performer gaining 3.2% - breadth was broad at a stock level and we see 89% of stocks in the index closing higher – hard...
When we think of the USD, and what drives capital, the USD ‘smile’ theory is an interesting and logical model to conceptualise the fundamental drivers of price action.
The basic principle is we can think more strategically about the regime that drives the USD, and this has consequences for price, and by extension commodities and other second-order derivatives of...
The world’s market participants continue to debate whether long-end bonds are a good buy as we roll into 2023, given the consensus view of a recession in Europe, the UK, and the US – while China should see a tough 1H23 but a more prosperous 2H23. We debate whether the USD has indeed peaked and whether the seasonal rally in risky assets into the end of the year is...
Scanning through the charts, it's not hard to find a whole array of markets pushing key levels – USDCAD jumps out as it holds the July highs and looks to be turning higher – a potential long idea on a swing timeframe, adding on a bullish 3 & 8 EMA crossover. The US500 also gets close attention as it eyes the 200-day MA at 4057, although sellers are impacting on...
Gold (XAUUSD) remains one of, if not the most, traded instrument at Pepperstone and with momentum firm many are asking if the yellow metal can take out $1800, but go on to have a far more prosperous 2023.
Technically, after finding solid bids into $1620 and a solid platform to progress, we’ve seen price breaking the bear channel drawn from the March high – bulls...
The crypto markets work through their MF Global moment, with investors running the ruler over the exchanges and many questioning if we see another run on an exchange early this week. It feels ominously like we will see some further big changes in the crypto exchanges, but whether this proves to hold systemic challenges through broad financial ecosystem seems...
While we wait for news on the US midterms and tomorrow's US CPI print, many have been closely following and trading the incredible saga unfolding in the crypto exchanges, and coins, with Binance making its non-binding bid for FTX – clearly there are views that CZ (CEO of Binance) walks away from this and some are rightly or wrongly running the ruler over the other...
Core macro themes traders need to roll with:
• China reopening plans – after Friday’s incredible moves will the market buy the expected early weakness? Consider copper had a 4 standard deviation move on Friday (+7.6%) and the HShares closed its best week since 2015.
• Central bank divergence is even more pronounced – several central banks have underwhelmed on...
