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EURGBP - ECB PRESIDENT DRAGHI & BOE SHAFIK SPEECH HIGHLIGHTSECB Draghi: Draghi: Our Measures Are Working, Creating Jobs Draghi: Our Measures Ensure Recovery that Will Ultimately Benefit German Savers, Pensioners Draghi: We Take German Concerns Seriously Draghi: Economic Policies are Essential to Complement our Monetary Policy Draghi: Price Stability Doesn't Mean Inflation of 0% Draghi: We Need to Act When Inflation Is Close to 0% Draghi: Our Measures Have Delivered Draghi: Very Low Rates Affect People's Finances, Welfare Draghi: Low Rates Reflect Weak Long-Term Growth Draghi: Inflation-Adjusted Interest Rates Have Been Low Many Times in Germany Before Euro Draghi: German Exports Benefit from Euro Area Economic Recovery Draghi: German Unemployment Is At Its Lowest Since Reunification Draghi: Low Financing Costs Are Good News for Germany's Finance Ministry Draghi: ECB Policy Isn't Main Factor For Low Profitability of Banks Draghi: German Banks' Cost-to-Income Ratios Are Relatively High Draghi: Low Rates For a Long Period Risk Overvaluation in Asset Markets Draghi: Not Seeing Overheating in Eurozone, German Economy As a Whole Draghi: For Rates to Rise, We Need More Investment, Economic Reforms Draghi: Policymakers Need to Seize Opportunity to Deliver Reforms Draghi: Low Rates Today Are Necessary for Return to Higher Rates in Future Draghi: Need to Allow ECB Policy Measures to Develop Full Impact ECB Draghi: Thankful for Respect of ECB Independence From German Lawmakers ECB Draghi: The ECB Is Sensitive to Risks, People's Concerns About Low Rates ECB Draghi: 'Very Satisfactory Exchange' With German Lawmakers ECB Draghi: I Cherish Occasion for Debate With German Lawmakers ECB Draghi: Germany is Close to Full Employment, Fiscal Stimulus Should Be Carefully Targeted ECB Draghi: Germany is Close to Full Employment, Fiscal Stimulus Should Be Carefully Targeted ECB Draghi: I Never Argued for Irresponsible Fiscal Expansion Draghi: Major Central Banks Have All Embarked on Large-Scale Sovereign Bond Purchase Programs BOE Shafik: BOE Shafik: No Doubt UK Experiencing "Sizeable Economic Shock" BOE Shafik: Likely That Further Monetary Stimulus Will Be Needed BOE Shafik: Reduction In Openness Implies Slower Growth BOE Shafik: Brexit Uncertainty Is Weighing On Business Investment
by QuantumLogicTrading
ECB DRAGHI & BOE FORBES SPEECH HIGHLIGHTS - EURGBP GBPUSD EURUSDECB DRAGHI: -ECB'S DRAGHI SAYS OVERBANKING A FACTOR IN LOW LEVEL OF BANK PROFITABILITY -ECB'S DRAGHI SAYS OVERCAPACITY MEANS SECTOR IS NOT EFFICIENT -ECB'S DRAGHI SAYS LIFE INSURERS FACE WEAK PROFITABILITY UNLESS THEY REFORM BUSINESS MODELS -ECB'S DRAGHI SAYS MARGIN AND HAIRCUT REQUIREMENTS COULD IMPROVE FINANCIAL STABILITY BOE'€™S FORBES: NOT YET CONVINCED THAT ADDITIONAL MONETARY EASING WILL BE NECESSARY -Did not support asset purchases as felt costs were greater than benefits -Now QE announced, will not be voting against it each month, barring substantial economic change -Behaviour of consumers and businesses, and evolution of prices is critically important in determining the appropriate action -Initial effect on the economy of the referendum has been less stormy than many expected -Some evidence that companies are delaying major investments; commercial property and housing market are weaker -Consumer spending is strong and net exports are poised to pick up -Aggregate impact of all of these forces appears to be a modest slowing in the economy to date
by QuantumLogicTrading
3
ECB DRAGHI & BOE FORBES SPEECH HIGHLIGHTS - EURGBP GBPUSD EURUSDECB DRAGHI: -ECB'S DRAGHI SAYS OVERBANKING A FACTOR IN LOW LEVEL OF BANK PROFITABILITY -ECB'S DRAGHI SAYS OVERCAPACITY MEANS SECTOR IS NOT EFFICIENT -ECB'S DRAGHI SAYS LIFE INSURERS FACE WEAK PROFITABILITY UNLESS THEY REFORM BUSINESS MODELS -ECB'S DRAGHI SAYS MARGIN AND HAIRCUT REQUIREMENTS COULD IMPROVE FINANCIAL STABILITY BOE'€™S FORBES: NOT YET CONVINCED THAT ADDITIONAL MONETARY EASING WILL BE NECESSARY -Did not support asset purchases as felt costs were greater than benefits -Now QE announced, will not be voting against it each month, barring substantial economic change -Behaviour of consumers and businesses, and evolution of prices is critically important in determining the appropriate action -Initial effect on the economy of the referendum has been less stormy than many expected -Some evidence that companies are delaying major investments; commercial property and housing market are weaker -Consumer spending is strong and net exports are poised to pick up -Aggregate impact of all of these forces appears to be a modest slowing in the economy to date
by QuantumLogicTrading
ECB ECONOMIC BULLETIN & BOE FCP MEETING - EURGBP GBPUSD EURUSD*ECB ECONOMIC BULLETIN: -Economic Recovery In The Euro Area Is Continuing -Moderate Global Growth Continued In The First Half Of 2016 -Governing Council Expects The Economic Recovery To Proceed At A Moderate But Steady Pace -Annual Real GDP Expected To Increase By 1.7% In 2016, By 1.6% In 2017 And By 1.6% In 2018 -Annual HICP Inflation Seen At 0.2% In 2016, 1.2% In 2017 And 1.6% In 2018 -Between Early June And Early September Euro Area And Global Financial Markets Remained Relatively Calm, Apart From The Immediate Period Around The UK Referendum BOE FCP MEETING: -BOE: FPC Says UK Faces Period of Uncertainty, Adjustment -BOE: FPC Says UK Faces Period of Uncertainty, Adjustment -BOE: Risks to Stability Include Commercial Real Estate, Current Account -BOE: Financial Policy Committee Says Outlook for Financial Stability "Challenging" -BOE: FPC Also Concerned Some Households May Struggle To Service Debts if Econ Weakens -BOE: FPC Says Risks to Stability from Global Economy Elevated -BOE: FPC Sees Prices of Some Fixed Income Assets Elevated -BOE: FPC Says Term Funding Scheme Has Helped Maintain Bank Interest Margins -BOE: FPC Says No Risk to Stability from Help To Buy Scheme -BOE FPC: UK FACES CHALLENGING PERIOD OF UNCERTAINTY AND ADJUSTMENT AFTER BREXIT -BOE - RISKS TO UK COMMERCIAL REAL ESTATE ARE CRYSTALLISING, TRANSACTIONS LOWEST SINCE 2009 -BOE FPC SAYS PLANNED CLOSURE OF 'HELP TO BUY' MORTGAGE GUARANTEE SCHEME AT END OF 2016 UNLIKELY TO AFFECT LENDING -BOE - UK FINANCIAL REGULATION WILL NEED TO BE AT LEAST AS ROBUST AS CURRENTLY PLANNED, REGARDLESS OF FUTURE RELATIONS WITH EU
by QuantumLogicTrading
ECB ECONOMIC BULLETIN & BOE FCP MEETING - EURGBP GBPUSD EURUSDECB ECONOMIC BULLETIN: -Economic Recovery In The Euro Area Is Continuing -Moderate Global Growth Continued In The First Half Of 2016 -Governing Council Expects The Economic Recovery To Proceed At A Moderate But Steady Pace -Annual Real GDP Expected To Increase By 1.7% In 2016, By 1.6% In 2017 And By 1.6% In 2018 -Annual HICP Inflation Seen At 0.2% In 2016, 1.2% In 2017 And 1.6% In 2018 -Between Early June And Early September Euro Area And Global Financial Markets Remained Relatively Calm, Apart From The Immediate Period Around The UK Referendum BOE FCP MEETING: -BOE: FPC Says UK Faces Period of Uncertainty, Adjustment -BOE: FPC Says UK Faces Period of Uncertainty, Adjustment -BOE: Risks to Stability Include Commercial Real Estate, Current Account -BOE: Financial Policy Committee Says Outlook for Financial Stability "Challenging" -BOE: FPC Also Concerned Some Households May Struggle To Service Debts if Econ Weakens -BOE: FPC Says Risks to Stability from Global Economy Elevated -BOE: FPC Sees Prices of Some Fixed Income Assets Elevated -BOE: FPC Says Term Funding Scheme Has Helped Maintain Bank Interest Margins -BOE: FPC Says No Risk to Stability from Help To Buy Scheme -BOE FPC: UK FACES CHALLENGING PERIOD OF UNCERTAINTY AND ADJUSTMENT AFTER BREXIT -BOE - RISKS TO UK COMMERCIAL REAL ESTATE ARE CRYSTALLISING, TRANSACTIONS LOWEST SINCE 2009 -BOE FPC SAYS PLANNED CLOSURE OF 'HELP TO BUY' MORTGAGE GUARANTEE SCHEME AT END OF 2016 UNLIKELY TO AFFECT LENDING -BOE - UK FINANCIAL REGULATION WILL NEED TO BE AT LEAST AS ROBUST AS CURRENTLY PLANNED, REGARDLESS OF FUTURE RELATIONS WITH EU
by QuantumLogicTrading
1
RBNZ MONETARY POLICY STATEMENT - GBPNZD TACTICAL LONG (NZDUSD)*RBNZ not adding much new in their September statement, and imo, Gov Wheelers speech highlighting the issues with trying to control a ccy with the cash rate makes the persistent worries regarding kiwi/ nzd strength less of a dovish factor than it may appear. Nonetheless, the statement on the margin was neutral, with perhaps the pressure for a lower kiwi and inflation prints putting it on the dovish side. Positioning wise, I am tactically long GBPNZD and EURNZD for another day or two (depending on closes - see attached).. this leaning dovish statement may ease these positions into the money but it isnt the key driver I was looking for but ill take any kiwi weakness we can get here. One onus on short kiwi is the tail off in US STIR which may see some more AUDNZD selling (kiwi buying) as USD rates become less attractive - although we have infact seen December fed funds trade flat on the day (though November did soften from 20 to 14%) so this yield seeking cross selling may be limited and under some sort of control for now which should enable these tactical kiwi shorts some running room. RBNZ: MONETARY POLICY TO REMAIN ACCOMODATIVE - A Decline In THE NZ$ Is Needed - Further Easing Will Be Required - Weak Global Growth And Low Rates Putting Upward Pressure On NZ$ - High NZ$ Makes It Difficult To Reach Inflation Target - Further Declines In Inflation Expectations Still A Risk - Domestic Growth Supported By Strong Migration, Tourism, Construction - Strong Immigration Is Limiting Wages Pressure - Watching Data Closely - Volatility In Global Markets Has Increased - House Price Inflation Remains Excessive, Macropru Having Moderating Influence - Outlook For Global Growth, Commodity Prices Remains Uncertain - Annual CPI Inflation Expected To Weaken In Sept Quarter Full statement is here - www.rbnz.govt.nz WESTPAC ON THE RBNZ: -This morning the RBNZ left the OCR unchanged at 2.00%, as was widely expected. -Much of the language from the August Monetary Policy Statement was retained in today's release, most likely deliberately so. The last paragraph repeated that "further policy easing will be required to ensure that future inflation settles near the middle of the target range" (our emphasis - "will" is about as strong as the RBNZ's language gets). -The statement acknowledged the economic developments since August, without altering its bottom-line assessment on inflation. Dairy prices have risen strongly, although there is still a great deal of uncertainty around the full season outcome; the NZ dollar has risen more than expected; strong GDP growth was broadly in line with expectations; and there are early signs that the latest round of lending restrictions is having a dampening effect on the housing market. -The RBNZ again noted that annual inflation is expected to rise from the end of this year, as some temporary factors drop out. Nevertheless, the RBNZ still faces an uncomfortably slow return to the inflation target, with the risk that persistently low inflation leads to a further decline in wage and price expectations. -In August the RBNZ was fairly explicit that its interest rate projections split the difference between one and two more OCR cuts in coming months, with the first cut most likely to be at the November MPS. -We suspect that the RBNZ is still committed to at least the first of those rate cuts. Any change in the language of today's statement could have given the false impression that the RBNZ was wavering on further easing.
Long
by QuantumLogicTrading
LONG GBPNZD - STRAT TRADE: 99.01% PROBABILITY OF REVERSALLong GBPNZD: 1. Based on the last 16yrs of daily close data (since 01/01/2000 to date) GBPNZD has a cumulative probability of a =>6th day lower at 0.99%, hence there is a implied 99% chance of reversal on the daily. 2. Also we see the Z-Score for, Monthly, 3m and 2wk all above 1.5SD - with 1m heavily over sold at -2SD. 3. Fundamentally Sterling looks a little over-offered, with the reason for the aggressive move lower uncertain at best imo - whilst today we saw the kiwi/ GDT Price index trade much softer than recent months which is a positive to be short kiwi tactically. Trading Strategy: 1. Buy GBPNZD at market in 1xlot, and add 2x on each daily close lower from here. Start in small lots to reduce risk and ensure you can add on adverse moves lower. TP is the next daily close higher. Any questions please ask!
Long
by QuantumLogicTrading
1
LONG GBPNZD - STRAT TRADE: 99.01% PROBABILITY OF REVERSAL *Long GBPNZD: 1. Based on the last 16yrs of daily close data (since 01/01/2000 to date) GBPNZD has a cumulative probability of a =>6th day lower at 0.99%, hence there is a implied 99% chance of reversal on the daily. 2. Also we see the Z-Score for, Monthly, 3m and 2wk all above 1.5SD - with 1m heavily over sold at -2SD. 3. Fundamentally Sterling looks a little over-offered, with the reason for the aggressive move lower uncertain at best imo - whilst today we saw the kiwi/ GDT Price index trade much softer than recent months which is a positive to be short kiwi tactically. 4. Technically there is also a triple bottom forming at the 1.77 level (previous 2 support lows) which is even more reason to take a long position. Trading Strategy: 1. Buy GBPNZD at market in 1xlot, and add 2x on each daily close lower from here. Start in small lots to reduce risk and ensure you can add on adverse moves lower. TP is the next daily close higher. Any questions please ask!
Long
by QuantumLogicTrading
GBPUSD - BUYING DIPS CONTINUES: BOE RATE DECISION HIGHLIGHTSBOE view broadly consistent with expectations, a neutral no action. Interestingly and somewhat confusing though was their "If Nov Outlook Broadly Consistent With Aug, Majority Of MPC Expect Further Rate Cut" comment which I am not sure about i.e. Aug data was firm so assuming this continues the BOE will still cut? But either way, looking at their last cut and QE GBP didnt feel the pressure and I expect this to be the same - we will need some USD demand to send GBPUSD below 1.30 for long. Positioning, I maintain long on GBP dips into 1.31xx, aiming for 1.34. Also tactically, I am looking to short GBPAUD if we can get a daily close in the green - which nicely provides a dynamic hedge for the long STG exposure. GBPUSD topside also is supported by forming 2 higher highs and 3 higher lows, indicating that infact this uptrend is structural - price action at the 1.345 is pivotal of a bull run. BOE Minutes: BOE Sep Minutes: MPC Voted 9-0 to Maintain Bank Rate at 0.25% BOE Sep Minutes: 9 Voted to Keep Rate Unchanged BOE Sep Minutes: 0 Voted to Increase Rate BOE Sep Minutes: 0 Voted to Lower Rate BOE Voted 9 - 0 to Continue Bond Purchase Program BOE: Forbes, McCafferty Voted For Bond Purchases After Dissenting Last Month BOE: Forbes, McCafferty Judged That Reversing QE Carried Economic Costs BOE: Aug Package Led to Greater Than Anticipated Boost to U.K. Asset Prices BOE: Evidence On the Initial Impact of Aug Policy Package Is Encouraging BOE: Since Aug Inflation Report, Number Of Near-Term Activity Indicators Somewhat Stronger Than Expected BOE: MPC Now Expects Less of a Slowing in UK GDP Growth in 2H 2016 BOE: Staff Now Expect 3Q Growth Of 0.3% Vs Aug Forecast Of 0.1% BOE: Contours of U.K. Economic Outlook Following Brexit Vote Had Not Changed BOE: Inflation To Return To 2% Target in 1H 2017 BOE: Housing, Consumption Stronger Than Expected BOE: Since Aug Inflation Report, No New Information Relevant for Longer-Term Prospects of U.K. Economy BOE Sees Business Spending Slowing More Sharply Than Consumer Spending BOE: If Nov Outlook Broadly Consistent With Aug, Majority Of MPC Expect Further Rate Cut
Long
by QuantumLogicTrading
GBP/JPY HEAD AND SHOULDER PATTERNGBP/JPY has formed a head and shoulder pattern on the 1H and 4H charts, indicating that a top has been made and price will carry on its retrace from the last 2 weeks of bullish gains. Traders should wait for a breakout of the pennant/flag that contains this pattern. Wednesday - (Jul) Manufacturing Production, BoE Gov Mark Carney Speaks and BoE reports on current inflation. Thursday - JPY GDP (Q2) data and various others, Positive data and strong yen (currently) will play a huge factor in a bearish move to the 61.8% Fib retrace level. Possible that it can break and reach 1D support 129.10 Currently I am short and have been when price kissed the 1D resistance Friday afternoon.
Short
by RenkoBuddy
EURUSD/ GBPUSD/ USDJPY - SELL USD ON RALLIES: ECB, FOMC, BOELautenschlaeger remained neutral on the margin, stating raising rates wouldnt help anybody but neither would the change to the APP or further cuts. This comes in line with last weeks ECB's to leave policy unchanged. I think this is more pressure for EUR bids but undoubtedly i think USD will dominate the pair until the fed on the 21st and fed funds pricing will sway EUR$'s price range until then. However, on a no vote, combined with the ECBs hawkish-neutral monpol decision my bets will be with EUR$ heading towards the 1.14 upper percentile of the range. Conversely a surprise hike decision will likely shock EUR$ 200-300pips lower than market on the day, though i wouldnt be surprised to see dips brought as we have consistently seen with EUR$ and monpol changes in the past 12m. On the day fed funds trade flat implying 15% probability for september, hence the shock risk is higher, though i do believe the true probability to lie somewhere near here. US 10yr yields also hit 3m highs today interestingly despite there being a risk-off lingering in the air. For USD now though I prefer to buy yen here on rallies in $Yen, yen broadly cheap given risk-sentiment and BOJ no move (in conjunction with FOMC now move). Also i think sterling is cheap here going into BOE, no action is going to happen imo given the strength of data so i prefer to buy dips into 1.310/5. The inflation "Miss" selling is an over-reaction given we are still at the higher levels recorded in CPI, and clearly there is a new normal lower with inflation which the market is under-pricing in GBP. Unemployment data and retail sales will be watched closely, beats will put GBP back on the bid to 1.34 (assuming BOE are neutral) especially given an FOMC no move puts the fed below their own targets and should cause firm supply. ECB Lautenschlaeger highlights: ECB's Lautenschlaeger: Raising Interest Rates Now Would Benefit Nobody, Not Even Savers or Banks ECB's Lautenschlaeger: I Still Consider Negative Rates to be Justified Despite Risks, Side Effects ECB's Lautenschlaeger: We Shouldn't Feel Obliged to Cut Rates Even More ECB's Lautenschlaeger: We Don't Seem to Have Reached Lower Limit For Rates ECB's Lautenschlaeger: See No Reason Now to Change Design of Bond-Purchase Program ECB's Lautenschlaeger: Must Give Bond Purchases Time To Work ECB's Nowotny Says Monetary Policy Should Stimulate Domestic Demand
Short
by QuantumLogicTrading
1
GBPUSD: Long against supportWe can go long GBPUSD here. Sentiment is at a bearish extreme and I don't think we'll see follow through to the downside when oil, the yen and other dollar pairs are stuck in a triangle (due to market awaiting FOMC outcome). Stop should be below 1.3128. I'm risking half on this and the AUDUSD long (see related ideas), while I hold my SPX short from 2187.5 (covered half today at 2133.4, my stop was 2194.6, and I took a NAS100 long that you can see in related ideas, which also is related to these fundamental and sentiment developments) Good luck, Ivan Labrie.
Long
by IvanLabrie
3
STERLING - A HIGHER GBP EQUILIBRIUM: BREXIT, DATA, VOL, RATESGBP moving higher? Data: 1. Leading post brexit data has recovered significantly from 5-10yr lows to firm growth or significant recovery (PMI, Optimism, Confidence) and imo this will be continuing theme given negs arent going to start for another 6-9m, there isnt any impetus to drive us lower again. 2. Also the macro indicators are trading well, e.g. Inflation, employment and GDP are all firm, assuming this continues further BOE action will be impossible & general sterling selling will struggle. Negotiations: 1. EU Exports equal 50% of total exports whilst total exports equal 10% of GDP, so even if we lost all EU exports GDP would only fall by 1% given imports are marginally less than exports thus the cost of losing EU trade is offsetted, its not all one way. UK Domestic demand would pick up the EU import slack so likely only 1% to GDP to be lost. - That is the absolutely worst option. In reality we know negotiations will only realistically lead to at worst international trade inefficiencies e.g. duties/ taxes, which will likely have a less then 0.1% effect on GDP. The EU isnt going to cut all ties. - Also from this point, and GBP 10-20% lower uncertainty is priced so further downside from uncertainty is hard to justify unless we get new political stimulus which is unlikely given how quiet it has been to date. So risks here look to be to the upside e.g. uncertainty/ complacency fading meaning confidence/ optimism rises in the near term (even if wrongly), which sees GBP wash off some of this "gap" and move to a new near term equilibrium. GBP price action: 1. STG crosses have lost 2-4000pips or more in the past 6m, so is relatively very undervalued, thus a 500-1000pip rebalancing higher wouldnt be uncalled for or even relatively aggressive. 2. Topside is also supported by the price action we have seen post brexit, apart from the initial brexit losses, any further downside (weak PMI, BOE easing etc) GBP has failed to hold the lows of the range OR even trade at the lower percentiles for any particular amount of time - we havent seen a new equilibrium lower in sterling weve remained rangebound with a topside skew. We have seen GBP brought quite aggressively on dips, and on reflection, it has actually paid to be a buyer on dips vs a seller on rallies from a risk perspective. Being a bear myself, I know it has been an upward battle to gain any consistent downside, all structural shorts have turned into tactical positions with early profit taking e.g. short GBPUSD for 1.25 was cut early at 1.29 when the bulls faded the move lower. This theme has been consistent despite BOE Easing and strong fwd guidance, with flimsy data. 3. The past week MA i think is much closer to where we will see GBP trade in the future vs the 1m MA at 1.319.. 1.334 on the weekly is where i feel we will find the next months average.
Long
by QuantumLogicTrading
3
DXY/ USD: WEAK ISM PMI FLUSHES USD BIDS - FED MESTER SPEECHUSD disappointingly failed to maintain its heavily demanded week when ISM PMIs not only fell short of expectations but also showed a slight contraction by slipping across the 50 mark to the downside. This data pattern however has been consistent for USD, where it has failed to show any upbeat prints, though in the past months the Job market has been able to stand out from this trend so it is difficult to read too much into what the report tomorrow will show. As discussed in my post last week, i believe the risks are to the downside and even more so that Fed mester has stated that employment has reached capacity and 75k-100k a month will be enough to maintain the rate - a figure like this tomorrow would surely see DXY move back into the 94s, with september expectations likely to drop into the 12-18% range that it had maintained before yellen last week. Fed Mester on the whole was neutral, offering little to support the dovish or hawkish side. USD Positioning: In terms of positioning, given $Yens rapid 6-day appreciation (today would be the 7th on a close above 103.45) I am looking to get short if we can get a close just 15pips higher than market, as a 7th day on the up has only been seen 3 times in the past 16yrs so shorts here are statistically in play - though of course NFP upside bodes a risk, but given my expectations going in (downside) it is a risk I will be willing to take (not to mention i expect market risk to spike increasing yen demand - but i will discuss this in a separate post if we close higher tonight). My long favoured short GBP$ trade is currently hanging in the balance, with little negative data to illustrate brexit impacts coupled with USD data unable to get a footing it is hard to continue with the "short sterling on rallies" approach, given topside is becoming arguably justifiable, if we see Services Monday and construction friday PMIs above the 50 level, short GBPUSD on rallies will no longer be a conviction trade, as there will be no real macro case outside of the broad "brexit uncertainty" which by all accounts is waning as optimism and confidence measures are fading the downside spike. Ask yourself, going forward assuming data holds up which it should, what further reason does the BOE have to ease or GBP have to fall? Brexit negs arent likely to start until Q2 2017 so we have a firm 6m of "stability".. especially when you think of sterling with respect to the massive 1000-4000pips its lost (cross ccy) into brexit, upside from here is certainly possible even if it is just a recovery rally. Trading NFP on a 220k print is also possible as a tactical trade e.g. long DXY, as DXY is likely to offer lower some more going into the event as the market derisks. Fed Mester Speech Highlights:
TVC:DXY
by QuantumLogicTrading
8
FADE SHORT GBPUSD ON RALLIES: FED KASHKARI SPEECH HIGHLIGHTSSame onld rhetoric from Kashkari - nonetheless i remain short GBP$ on rallies into 1.315/25, given DXY's advances GBP$ has been an outstanding under-performer given 1.315 is the levels we closed on friday/ opened on monday. However, Manufacturing and Construction PMIs are a risk, any topside sterling could certainly trade to the upper levels of the range (1.325) and possibly even test 1,33 - depending on the beat. TP levels should be 50-100pips lower at 1.3100 or 1.3050, longer term trades, or bets on USD Jobs report outperforming, with UK PMIs under-performing could easily aim for 1.2910. Risks for the PMIs are neutral going in, they have ben set higher than last, however UK data has generally outperformed, though GDP was flat and business investment negative (though better than expected). Risks for NFP are neutral-downside, given the 180k "low bar", however the downside risks are the fact weve had 2 massively outperforming prints which could see some mean reversion making this print unusually lower.. The upside is obviously the low figure and the fact ADP Non-farms came in above expectations, though only by a few 1000 and ADP-NFP correlation isnt that high. Nonetheless, I remain short on rallies data dependent.. given the BOEs monpol changes and the FOMCs low but started hike cycle the equilibrium should be well below 1.30 - especially as PM Theresa May confirms no back doors will be used to void brexit and that will definitely go ahead. USD STIR Fed Funds trade higher today also for september implying a 27% probability vs 24% yesterday which gives more upside arguements for USD, though long term govies today trade broadly lower across the 2-30yr curve but only marginally, with 2yrs down 2.4bps (-2.9%) on the day. Though Sterling UK 2yr govies trade 1.4bps (9.09%) lower Fed Kashkari Speech Highlights: Fed's Kashkari: Need More Data Before Decision on Rate Increase Kashkari Wants to See Core Inflation on Rise Before Rate Increase Kashkari: Fed's Governance Structure Should Stay as Is Kashkari Hasn't Seen Inflation Increase Yet Fed's Kashkari: Need More Data Before Decision on Rate Increase
Short
by QuantumLogicTrading
2
SHORT GBPNZD: CARRY TO OUTPERFORM; LOWER BOE EQUILIBRIUM?GBPNZD: 1. Wanted to repost my view on GBPNZD - remain short on rallies here into 1.82 with a 1.80, 200pip target. 2. This whole week weve remained strictly rangebound and sterling kiwi has paid every time (about 10) on shorts at the 1.810 level so i will continue this view at 1.82 given: 1) NZD carry continues to be the highest in G10 so Kiwi demand will likely hold up for the foreseeable future especially on BOE fwd guidance - though UK data outperforming in the near term could continue to put sterling topside pressure though the long game i dont expect this to last. 2) Sterling looks overbrought on the daily at these levels some 400pips higher than BOE monpol lows, here imo is the true home for GBPNZD given I expected the lean for further easing to be on BOE vs RBNZ as kiwi house prices will continue to prevent aggressive easing (as Wheeler pointed out earlier this week - rapid easing isnt going to happen). Risks: 1. Technically, on sterling demand I think risk is to the 1.83 resistance level, I dont think sterlingkiwi has much more given the amount of resistance we have found down at 1.81. 2. AUDNZD Re-balancing - there looks like there may be a AUDNZD rebalancing higher after 2wks of selling, this could shift GBPAUD aussie shorts into kiwi shorts vs GBP, though the AUDNZD movement higher looks to be struggling to gain traction given the differential of 50bps remains the bottom line, and weak fwd guidance from both RBA and RBNZ makes it difficult to differerentite the two (not to mention aussie data has been less firm in recent times vs kiwi). 3. UK PMI - UK PMIs next week, if outperforming will likely give GBP bulls more fuel to own sterling, given it is economic revisions recently higher that has been the fundamental reason for sterling topside - so further leading indications from PMIs could continue this trend, though given the move already higher, 1.82 could be the ceiling here (though watch out for a AUDNZD equilibrium higher which would make gbpnzd move through 1.82). If the PMIs were to show any figure above 50, expect an aggressive 300pip+ movement higher. 4. USD hiking risk - USD strength will cause NZD yield seeking supply as investors shift into USD markets instead.. as we have seen today with the spike higher, continued USD rate performance will drag on NZD longs in the medium term.
Short
by QuantumLogicTrading
SELL GBPJPY: RISK-OFF SHIFT COMING? LOWER BOE MONPOL EQUILIBRIUMGBPJPY: 1. Given Fed Yellen's "hawkish" market response and GBPUSD, GBPNZD and GBPAUD shorts TPd on the rally lower today cleared (FX risk book clear too), im looking to add some safe haven assets to my portfolio. 2. Looking at GBPJPY and GBP structures on the whole, there has been alot of sterling longs in the past 2wks accumulating in spot as economic confidence falsely increases (imo, given intelligent money understands near-term UK risks are to the upside). - GJ rising some 7 of the last 9 days, and now 400pips above the aug 16th lows of 129 at 133.3 I think there is at least that 400pips in downside available from here as the new equilibrium for several reasons: 1) Fed Yellen being hawkish looks like it may be the catalyst for the september US Equity sell-off, in which case, highly negatively correlated assets (e.g. safe havens yen, gold UST) are likely to pick the bids up, thus driving GBPJPY lower i.e. A tightening of financial conditions in the US will put pressure on US equities and also US election risk will transfer into Yen demand - also Brexit/ A50 risk is a medium term yen topside catalyst which makes sense owning through GBPJPY downside. 2) GBP shorts at these levels, given the monpol introduced by BOE, look like the smart move as the market is significantly higher than the monpol lows (which should be the new equilibrium). 3) Further BOJ action is made more unlikely by a hawkish Fed - hawkish fed looks to have provided $yen some topside support in the immediate term if nothing else, this eases pressure on the BOJ to ease - though a counter to this is the recent BOJ Inflation CPI traded some 30bps lower at 0.5% - the biggest drop since its inception (and the lowest level ever) this could be a push to more easing. However, the July Meeting misfire when expectations were perhaps at their highest and the current JGB drying liquidity situation somewhat capping the extent of further easing, I cant see the BOJ doing anything more than jawboning, as they have consistently continued to do (and about the only thing they have). Also for extra confidence, even if the BOJ was to ease - look at the past 2 times (Jan April), both policy measures provided 0 equilibrium relief to yen downside and infact fueled some 500pip+ topside to yen, so yen bulls imo can feel conforted that further easing is likely to have little impact, even more so as their ability to do more is ever reduced. 4) Technically, as mentioned weve been on a 2wk bull run so i feel GBP topside is due a rebalancing lower, and also the downside targets are not uncharted territory having traded at the 129 level on 2 previous occasions so the profit target isnt unreasonable. 5) I hear RM long-term short positioning, is picking up at these levels where sterling looks arguably overbrought. Trading Strategy - SHORT GBPJPY @133.3, add at 134 135 and 136 - TP 130.5 and 129 1. Short GBPJPY - Small at market price 133, and add ever 100pips higher if bulls continue up to 136 - the macro resistance levels on the daily are the 134 and 136 level. - Short small here at 133.3 and ADD as we move higher as short sterling given brexit/ monpol future and long yen given the risk-on bull run which is bound to run out given hiking and election risk intensifying imo is an all but guaranteed trade. Any questions on the trading strategy PLEASE ask!!
Short
by QuantumLogicTrading
4
SELL GBPAUD: STRAT TRADE - 7 DAYS UP P=99.746% 8TH DAY LOWERb]GBPAUD: 1. Sterlingaussie has been aggressively bid higher for the last 7-days on the back of sterling data outperforming last week, broad aussie weakness and a general recovery from lows. 2. Statistically, after analysing the last 16.5yrs of data it shows the probability of a 8th day or more of buying is 0.254% which means there is an implied 98.78% chance that we move higher today - I like these odds so will add a short here. - If we were to see another day of buying, a 8th day, then the probability of a 9th day is even better on the sell-side odds of 99.918% so i will add to shorts if this is the case - the max number of buying days in GBPAUD has been 10d once and 9d 3 times, 8d 7 times. 3. Plus aussie 30 bill rates firmed up on monday implying only a 5% chance of a september cut down from 8% of the past week, and sterling OIS rates came off from Fridays rally after the market decided to fade last weeks data. - Also we have found some technical price resistance at the 1.72 handle so being short here makes sense. Trading strategy - GBPAUD Sell @1.740: 1. Short GBPAUD pretty much at market TP should be 100-200pips lower. 2. Short small and add if we move higher again on thursday - friday imo is the most likely day for a sterling sell-off as shorts are squared up on profit taking. 3. I also like being short gbpnzd and gbpusd from 1.81 and 1.325 - both have 100-200 easy pips - especially on a UK GDP miss on friday.
Short
by QuantumLogicTrading
6
SELL GBPAUD: STRAT TRADE - 5 Days up P=98.78% 6TH DAY LOWERGBPAUD: 1. SterlingKiwi has been aggressively bid higher for the last 5-days on the back of sterling data outperforming last week, broad aussie weakness and a general recovery from lows. 2. Statistically, after analysing the last 16.5yrs of data it shows the probability of a 6th day or more of buying is 1.22% which means there is an implied 98.78% chance that we move higher today - I like these odds so will add a short here. - If we were to see another day of buying, a 6th day, then the probability of a 7th day is even better on the sell-side odds of 99.45% so i will add to shorts if this is the case - the max number of buying days in GBPAUD has been 10 once and 9 3 times. 3. Plus aussie 30 bill rates firmed up on monday implying only a 5% chance of a september cut down from 8% of the past week, and sterling OIS rates came off from fridays rally after the market decided to fade last weeks data. - Also we have found some technical price resistance at the 1.72 handle so being short here makes sense. Trading strategy - GBPAUD Sell @1.721: 1. Short GBPAUD pretty much at market TP should be 100pips lower at the 1.711 level. 2. Also check my previous post of short gbpnzd into rallies at 1.81 and GBPUSD into 1.315-32
Short
by QuantumLogicTrading
4
SPX/ EQUITY BULL RUN: RISK-OFF SHIFT 10% LOWER ANY SECOND NOWSPX Bull run 1. Post Brexit US equities have been in an easing induced rally, with the Fed delaying hikes, BOE easing and RBNZ/ RBA also easing - this encouraged US risk markets to set new highs - with 7 of the last 9 weeks strong closes higher. The Bull run over? 1. The last 2wks have closed flat but hhave remained rangey indicating the market has low conviction to break higher given the 7-bull weeks which saw 10pt+ increases, and we now look to have formed another price ceiling at 2188 0.5% up from the previous ceiling at 2188. 2. There is little reason for the bull run to continue, price action momentum is exhasted, the Fed is doing its best to be hawkish and the US election weighs ever nearer - not to mention US data e.g. GDP comes in lower indicating business conditions may not be the best domestically and easing in international markets looks to be all but fully priced with the FTSE now pulling back from its own hithw- so the move lower from here makes sense, 3. History on the markets side? historically Aug SPX has never closed below July and has been the traditional bull-run month, so my bet is that we will remain range bound for another 2-33wks (possibly one more 0.5% move higher) then the 10-15% pullback will begin in the first week of September as Traders square end of month profits in August end beginning the selling cascade, and the possible NFP beat steepens US rate hike expectations and the tightening puts further added downside pressure on the market. Trading Strategy - Short SPX @2188; Short FTSE100 @>6900: 1. I like to be short SPX and FTSE from here with TP at 2075/2000 and 6440/6000. 2. Hedges include being long individual equities - i currently hold Apple longs from 105 and FB longs from 122.
TVC:SPXShort
by QuantumLogicTrading
2
SHORT GBPUSD & EURUSD: FOMC DUDLEY SPEECH HIGHLIGHTSFed Dudley reiterated his hawkish sentiment from earlier in the week today, concentrating somewhat purely on the labour market and its gains (ignoring every other data point since that would mean being dovish) nonetheless this is supportive of USD bulls regardless of the genuineness. As posted earlier, i like GBPUSD and EURUSD shorts - see attached posts. The option implied fed funds interest rate trades at 18% for september up from 15% yday - more bullish USD sentiment + USD govies trade down across the board though Fed Dudley Highlights: -Fed's Dudley: Fears Of Labor Market Stalling Are Much Reduced -Dudley: Recent Data Confirms Job Market Continues To Improve -Dudley: Evidence Mounting Middle Income Jobs Are Picking Up -Dudley: Puerto Rico Economy Remains Troubled -Dudley: Puerto Rico Has Fundamentals To Mount A Rebound -Fed's Dudley Says Recent Data Confirms U.S. Job Market Still Improving -Fed's Dudley Says U.S. Job Market is Still Improving FED'S DUDLEY: SEEING CONTINUED IMPROVEMENT IN LABOUR MARKET -Positive Signs That 'Hollowing Out' Of Job Mkt Is Abating -Strong Growth For 2 Months Helped Alleviate Earlier Concerns
Short
by QuantumLogicTrading
2