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Hawkish

GBPAUD LONG OPPORTUNITY This week i've been paying close attention to absolute correlated and negative correlated pairs. In my previous analysis on GBPNZD we were looking for a Long Opportunity so it's only logical to look for the same in this pair. Here I see a Triangle formed so what I understand from this data is price is respecting its support and pushing lower highs leading price to its squeeze. The closer price gets to the end of the squeeze the better, I have a long shot bias in this pair because fundamentally we do have a depreciation in currency for both the Aussie Dollar and New Zealand Dollar. Calculating Targets if placing a buy stop a few pips over the probable descending trend line breakout, we collect the pips from the initial impulsive move before price began squeezing and that's how we calculate our potential target, stop loss would be a few pips below support/ daily ascending trend line. This is a great idea for optimal risk to reward. What invalidates this trade? price breaking below support or breaking the ascending trend line (lower lows) we could then find a short opportunity using the Fibonacci tool at the breakout.
Long
by RiosTrades
Fed action further distanced SP500 from 3000This is a follow up to GAMS' first post. The Fed's 25bps cut, coupled with hawkish verbiage, added more weight to the already dwindling American corporate earnings and further confirmed GAMS's bearish view towards the rest of 2019. Strong USD will create strong headwind to heavy-weight components in SP500 like MSFT, AAPL, etc who rely heavily on foreign revenues. As corporate earnings start to take a nose dive as it is about to now, the Fed wouldn't have any ammunition to turn the tide any more. GAMS is extremely bearish with USD and SPX, in the medium to long term. We see GLD, JPY and long UST duration as safe havens in this environment. To express above views, GAMS had entered below strategies. 1. Bull put spread on GLD, 132/152, Dec2019 exp. This creates upfront credit 2. Credit from leg 1 to buy TLT 3. Monthly TLT Covered Call 4. ITM put on SPY, Dec2019 exp.
OANDA:SPX500USDShort
by WhatsTrading
EURGBP - Long on Hawkish DraghiWe have a lot of EUR news due out tomorrow together with a speech from Mario Draghi, the President of the European Central Bank. His comments alone will move the market and we are hoping for an alignment with the PMI data due out later on in the morning. This will give us a great trading opportunity on the EUR throughout the rest of the week. We are planning a long trade on the EURGBP should we see and hear hawkish sentiment from Draghi. The Euro has been the stronger of the two currencies over the past week, and over the past month, and is currently sitting at resistance. We would prefer to see this pair fall into a level of support before the news, giving us a better entry. We would also look to take a long on a breakout condition with a small position, adding to it as the bullish move is confirmed.
Long
by Mase_00_7
8
USD/JPY IDEA- Something to consider after Yellen statement. Couple scenarios to consider here depending on the tone and remarks made by Yellen regarding monetary policy. Currently USD has been moving up but the move will only continue if Fed chair Yellen reinforces her comments made 2 weeks ago when they decided to raise rates again and stated they were still on track and serious about another rate hike in 2017 either in September or most likely December even though the economic data has not supported this. I would expect her to repeat these kinds of hawkish comments that would keep USD on the rise, however if she decides to change course and takes back what she said 2 weeks ago and makes more dovish statements raising rates only when economic data supports it USD could take a big hit as the data hasn't been great.
by nick.trader4
Russell 2000: The bullish caseWe have potential for a new uptrend signal emerging this week, after NFP comes out. If I'm right, we might see a strong rally in equities, lasting well into November. The time target would put a top by November 16th or sooner, which interestingly aligns with the Federal Reserve's FOMC November meeting, which has been hinted that will be a 'live' meeting, regarding an increase of interest rates. I'm mostly net long equities, but today I added back my CLX short position, and I'll be looking to take other strategic shorts going into this Friday's meeting, if viable. I still think it's likely to see more upside, so this signal here seems highly likely to trigger. The bearish case, can be obtained from my weekly 'terminal pattern' chart for the DJIA. That idea is still valid, and we have ample time to validate the decline, breaking the trendline connecting waves 2 and 4, and hitting the price target in time after that. Trade accordingly, buy undervalued, quality companies, short overloved, overowned, overvalued companies, try to play uncorrelated instruments, use different timeframes...hedge accordingly, but don't be biased, and let activity confirm your analysis as you move forward. Follow me and Tim West here for more insights of this kind, check out our publications and the Key Hidden Levels chatroom for more information on Tim's methodology. Cheers, Ivan Labrie.
TVC:RUTLong
by IvanLabrie
DXY/ USD: THE WEEK AHEAD - ITS ALL IN THE CHARTDXY: 1. Given the firming of USD STIR/ Fed funds following Yellens JH remarks and the markets hawkish reaction i still think there is another % or so of topside to be priced into USD topside. - Fed funds implying 36% probability of a Sept hike - the highest implied prob in 3 months - hence given cables 50pip appreciation i feel theres another 100pips here to be priced at least in the fron end (tuesday/weds) of next week. 2. The 1yr MA and then the 6m highs are the next targets higher at 96.5 and 97.5 - i feel the market can move to 96.5 based on the steepening of the fed funds curve (now implying 1 hike at close to 100% for 2016 vs 70/75% previoiusly) at the front of next week but then we will need a firm NFP beat to move to the next level higher at 97.5 or 6m highs. 3. Dollar index aside, gbpusd is my favourite expression of long USD aside from DXY - profit target of 1.300/5.
TVC:DXYLong
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 GBPUSD & USDJPY: FED CHAIR YELLEN JACKSON HOLE HIGHLIGHTSYellen as interpreted by the market was bullish, though price action immediately following the JH Speech Highlights was anything but this clear cut and imo said alot more about what was actually said i.e. there is still uncertainty/ no clear commitment, as DXY moved higher immediately after before aggressively selling off for the next 20-30minutes, before then making what looks to be now the decisive move higher, concluding the markets decision to view here statement as hawkish. One of the contradicting elements I found was her view on the near term possibilities, where in this statement, implied at the least that things arent as rosey as the market may think - "Fed Can Provide Accommodation Should Expansion Falter in Near Term" - a truly recovering economy wouldnt need this statement but maybe this is nit picking, but nonetheless could explain the lack of certainty that caused the USD sell-off initially. The USD 30D Fed Funds futures rallied to imply a P=30% chance of a September hike, up from 21% yday and one of the highest post-brexit readings, with equities look to have broken lower, whilst gold remains in bull territory, despite the USD appreciation implying what is expected to be the start of a broader medium term risk-off shift now. Given this fresh lease of life in USD STIR, attention will now closely focus on the USD employment report next friday, where if another 250k+ print comes in im sure we could see another 10pct addition to the september odds, if not more - especially if the unemp rate fell close to the feds terminal expectations of 4.8%. From a trading perspective, and the above information in mind, I remain long on USD vs GBP on rallies - 1.32 or 1.325 prices are the best to engage.. On hind sight some legacy longs should have been added in the post-Yellen vol to 1.328 but given the uncertain comments it is forgivable not to have added/ held here. Next weeks, UK PMIs will remain key for Sterlings hold above 1.30/29 level - a miss and we will likely test lows again, though a hit and sterling bulls will likely continue to be happy to own the pound here in the low 1.30s on the pretence that Carney will not e so forthcoming in future policy despite his aggressive dovish fwd gd. Also I am watching USDJPY - given US equities may pop on the back of this, short gbpjpy or usdjpy to own a risk off asset may prove to be a good call - especially at the 133 level for sterling. This also hedges the long usd exposure in the event data doesnt hold up. Yellen JH Speech highlights: -Fed's Yellen: Case for Increase in Fed Funds Rate Has Strengthened in Recent Months -Yellen: Growth Has Been Sufficient to Generate Further Improvement in Labor Market -Yellen: Economic Outlook Uncertain, Monetary Policy Not on Preset Course -Yellen: Economy Continues to Expand, Led by Solid Growth in Household Spending -Yellen: Range Of Reasonably Likely Outcomes For Fed Funds Rate 'Quite Wide' -Yellen: U.S. Economy Nearing Fed's Goals Of Maximum Employment, Price Stability -Yellen: FOMC Continues to Anticipate Gradual Increases in Fed Funds Rate Will be Appropriate Over Time -Yellen: Even If Average Rates Remain Lower Than In Past, Monetary Policy Will Be Able To Respond Effectively Under Most Conditions -Yellen: Fed Studying Many Issues Related To Policy Implementation
TVC:DXY
by QuantumLogicTrading
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
NZDUSD/ AUDUSD: MONETARY POLICY DECISION HIGHLIGHTSRelatively poor delivery from the RBNZ, by the looks of the whipsaw the market wanted/ expected 50bps based on the AUD differential and the RBA rate cut last week 50bps or some alt policy (e.g. QE) seemed like the smart move to make. From here Kiwi and Aussie longs look preferential as the macro environment shifts to a yield seeking stance from monpol trading - 0.782 for AUD and 0.76 for NZD seem the next bull levels. RBNZ unlike RBA offered some promsing forward guidance though e.g. "further policy easing willl be required" and "A decline in the exchange rate is needed" and "high NZD is causing negative inflation in tradables sector" and "Low global rates are placing upward pressure on the kiwi dollar" - all of which comments point to the RBNZ issuing more dovish easing but it does also ponder the question that given they knew this before making the decision why they didnt execute some of the "further policy easing" and "monpol will continue to be accommodative" which will be required in the future now, to have a greater effect vs just a 25bps cut which the market had already digested weeks ago. The RBNZ also interestingly referenced the low global rates environment causing NZD strength through carrry/ hot money flows - which once again begs the question if the RBNZ know that their rate is the leading rate in G10 by 50-150bps, why did they only cut 25bps as a 25bps cut still keeps NZD as the headline ccy for carry and will likely continue to attract hot money flows unless investors are scared by aggressive future policy - which is now in the hands of Gov Wheeler to project the aggressiveness (or not) of the RBNZ to combat the rate differential and consequently bring the NZD down where they feel it is acceptable. Imo given the markets reaction alot is riding on Gov Wheelers speech in 35mins - he needs to be VERY dovish in his forward guidance rhetoric and offer certainties that make kiwi seem less stable than AUD in the future and thus send the hot money flows into AUD and in order to tame kiwi below 0.73, otherwise we will likely see a replication of the AUD case where we moved 100pips+ on the day despite a cut and SOMP and Gov Stevens speech. From here we wait for the speech. If the speech fails to tame kiwi, i suggest buying kiwi as it is likely to outperform given the lack of easing vs expectations/ what is needed to move NZD lower. Further AUD longs are also advised in this carry seeking macro environment - a Dovish RBNZ makes AUD more attractive but even a neutral RBNZ should help AUD also as it puts less pressure on the RBA to ease since the rate differential between their biggest partner is large enough and still in their favour for kiwi buying for aussie. Nonetheless at these technical levels i like AUD to 0.78 and kiwi to 0.76 if we break 0.734 and Wheeler isnt specific/ aggressive with the forward guidance + the USD weakness is likely to last this week with 0 data coming out so longs make even more sense if only short term RBNZ Monetary Policy Decision Highlights: RBNZ: Risk of Further Declines in Inflation Expectations RBNZ Says Further Policy Easing Will Be Required RBNZ: House Price Inflation Adding To Financial Stability Concerns RBNZ: Monetary Policy Will Continue To Be Accommodative New Zealand Dollar Rises After RBNZ Cut To US$0.7315 RBNZ: A Decline In Exchange Rate is Needed RBNZ: House Price Inflation Remains Excessive RBNZ:Lower Dairy Prices Depressing Farm Sector Incomes RBNZ:Domestic Growth Supported By Inward Migration, Construction, Tourism RBNZ: Low Global Rates Placing Upward Pressure On NZ Dollar RBNZ: Trade Weighted Index Signficantly Higher Than Assumed in June MPS RBNZ: High NZ Dollar Causing Negative Inflation in Tradables Sector NZ Central Bank Sees 90-Day Bank Bill at 2.1% in 4Q 2016 vs Prior 2.2% NZ Central Bank Sees 90-Day Bank Bill at 1.8 % in 2Q 2017 vs Prior 2.1%
by QuantumLogicTrading
BUY USD DIPS VS GBP/ NZD: DOVISH FED W. DUDLEY SPEECH HIGHLIGHTSFed Dudley was speaking At A joint New York Fed, Indonesian Central Bank Seminar On Sunday evening when he left a mixed impression for the markets to digest - saying "it is premature to rule out an interest-rate increase this year" but then on the contrary saying "Raising Rates Prematurely Would Be Riskier Than Moving Slightly Too Late" and following up that sentiment with "Investor Expectations For Flatter Path Of U.S. Interest Rates Seems 'Broadly Appropriate'" and pointing out the medium-term risks are seen skewed to the downside - all of which somewhat contradictory expecting a 2016 rate hike. IMO these comments are more less positive news for the greenback, given the hawkish July Minutes should take precedent (despite the market weirdly selling the september hike being officially put on the table) and after the DXY lost every day last week I think it will struggle to continue this trend into this week as the drop in rate hike expectations/ fed funds rates should flatten out - Likely seeing the bulk of the dovish expectations price last week - september 25bps hike expectations fell from 25% at the beginning of the week to 12% on Friday following the miss GDP report - will likely bottom out around here to 8%min. That said, given the BOJ's miss we could easily see further pressure on US rates this week as imo the failed big stimulus hopes are likely to fade the risk-on environment of late, and move us back into the safe haven trend that has dominated 2016 - so dont be surprised to see some more risk-off rate expectation USD selling/ bond buying - look out for consecutive moves higher in UST or moves lower in tnx. In the medium term this still hasnt changed my view of bullish USD and at present IMO this selling wave has opened up the opp for some good USD buying entry points e.g. kiwi above 0.72, stelring at 1.33, and eur at 1.115 - kiwi and sterling the best trades as we move into RBA, BOE and RBNZ within the next 10 days which should realise considerable downside for kiwi and cable (and for those trading aussie too, tho i prefer the kiwi proxy). Fed Dudley Speech Highlights: -Fed's Dudley Warns It Is Premature To Rule Out an Interest-Rate Increase This Year -Dudley Says Fed-Funds Futures Prices Seem 'Too Complacent' -Dudley Says There Is 'Room For Improvement' in Fed Communications, But They Are Growing More Transparent -Dudley Says His Baseline Outlook For U.S. Growth, Inflation 'Has Not Changed Much In Recent Months' -Dudley Expects 2% Annualized U.S. Growth Over Next 18 Months -Fed's Dudley Says Medium-Term Risks To Economy Are 'Somewhat Skewed To The Down Side' -Dudley Says Brexit Impact Has Been Short Lived, But Longer Term Potential Fallout 'Hard To Gauge' -Dudley Says Fed Takes Dollar Appreciation Into Consideration, But Not Targeting Any Set Exchange Value -Dudley Says Evidence Accumulating The Crisis-Era Headwinds 'Are Likely To Prove More Persistent' -Fed's Dudley Warns it is Premature to Rule out an Interest-Rate Increase This Year -Dudley: Investor Expectations For Flatter Path Of U.S. Interest Rates Seems 'Broadly Appropriate' -Dudley Says Raising Rates Prematurely Would Be Riskier Than Moving Slightly Too Late
TVC:DXYLong
by QuantumLogicTrading
5
LONG DXY / USD: HAWKISH FOMC RATE STATEMENT - SEPTEMBER HIKE?The FOMC rate statement was largely in line with expectations and to the hawkish side - with a september hike hinted at. Much of which followed the rhetoric of FOMC members in the past few weeks (see previous posts) and data (disregarding the poor -4% durable goods mom print). Perhaps the most hawkish/ promising statement made for a Sept rate hike was the fact Fed George Preferred to Raise Rates to Range Between 0.50% and 0.75% - hinting hikes are now being considered. And "Fed Could Raise Rates Later This Year, Possibly As Early As September". Though on balance the Fed did repeat the dovish phrases "low/soft" several times when regarding various measures of inflation and business investment. This FOMC Statement holds in line with my medium run long $ view (hike based) - especially against Yen, GBP, EUR, AUD and NZD who are expected to ease and thus policy diverge. In terms of market pricing, the Fed Funds Future Option implied probabilities of a rate cut have continued their steepening this week - following the 3wk trend with Sept/Nov now pricing a 25.9/ 26.8% probability of a hike (up from 9% 2wks ago) - Dec now has a probability of 41.8% and is showing some stability here, with a 50bps hike implied at 9.9% and rising steadily. From this the implied probability of one rate hike in 2016 is at nearly 70% (Nov+Dec) - which imo is in line, or slightly below my qualitative probability of 90%. With the probability of 2 hikes at 12.5% which is about what i would expect. Nonetheless eyes are now focused on BOJ - which is expected to be a year changing meeting. September FOMC Rate Decision Statement - 0.50% unchanged: --Fed Leaves Policy Rate Unchanged, Says Near Term Economic Risks Have Diminished -Fed Offers More Upbeat Assessment of Labor, Economic Conditions -Fed Could Raise Rates Later This Year, Possibly As Early As September -Federal Reserve Keeps Fed Funds Range Unchanged at 0.25% to 0.50% -FOMC: Voted 9-1 For Fed Funds Rate Action -Fed Leaves Discount Rate Unchanged at 1.00% -Fed: Economic Activity Expanding At A 'Moderate' Rate -Fed: Labor Market Strengthened, Job Gains 'Strong' in June -Fed: Payrolls, Other Indicators Point to 'Some Increase' in Labor Utilization in Recent Months -Fed: Market-Based Inflation Compensation Measures 'Remain Low' -Fed: Survey-Based Inflation Expectations Measures 'Little Changed' -Fed: Inflation Expected to Remain Low in Near Term -Fed: Inflation Expected to Rise to 2% Over Medium Term As Transitory Effects Fade -Fed: Household Spending Has Been 'Growing Strongly' -Fed: Business Fixed Investment Has Been 'Soft' -Fed Continues to Expect 'Only Gradual Increases' In Fed Funds Rate -Kansas City Fed's George Dissents On Fed Policy Action -George Preferred to Raise Rates to Range Between 0.50% and 0.75%
TVC:DXYLong
by QuantumLogicTrading
4
NZDUSD SHORT UPDATE: EYE RBNZ GOV G. WHEELER SPEECH CLOSELY!The Govenor of the RBNZ is speaking in 16 hours time - there could be significant up/ downside volatility in Kiwi - as we have seen after the past 3wks where the RBNZ have gone through the full hawk-dove cycle in their inferences/ rhetoric. We had RBNZ Spencer's comments on house inflation back on the 7th of July which wrote off an RBNZ OCR cut - sending kiwi$ to 12m highs, then we had the RBNZ announce an Emergency economic assessment which was a dovish move - then the assessment itself was extremely dovish and reassured markets that the RBNZ would cut the OCR citing Kiwi strength/ persisting low inflation as the drivers, bringing us round circle and push kiwi to 0.69lows . RBNZ G Wheeler likely comments 1. IMO he is likely to discuss the marcoprudential policies the RBNZ can use to tame the house price inflation in NZD, in an attempt to assure markets that it isnt over looking the houseflation issues in NZD post their economic assesment which ssaid they would cut the OCR (which would potentially make the HPI situation worse) - discussing or implementing new restrictive Macropru would be hawkish but likely over seen by the OCR cut. 2. IMO Wheeler will reiterate findings from the economic assesment e.g. high NZD price, low inflation and the need to cut the OCR - this will be heavily dovish and should send kiwi$ to the 0.6900 level if not towards 0.6800 if he really emphasised the inevitability of the OCR cut in August. Risks to the view: 1. Obvious risk to this view is 1) Wheeler back tracks on the economic assessment, follows Spencers tune from July 7th and undermines the need to cut the OCR - either in itself or as a function of the HPI situation. - Any inferences that the RBNZ/ Gov Wheeler IS NOT backing the cut/ economic assesment findings and kiwi will likely bounce to 0.72 immediately, and back to the 0.73 highs within the week. - there is still 2wks until their rate decision/ meeting on the 10th of August so there is still room for Wheeler to talk hawkish/ throw another spanner in the work before actually making the decision. Trading Strategy: 1. As above - any hawkish sentiment that moves us higher/ rallies kiwi I will sell into as i believe fundamentally the RBNZ has called its hand and anything between now and the 10th is noise - its best to wait for the information to full price e.g. to 0.72 but if momentum slowed near 0.71 I will sell there. - I dont have any interest buying any hawkishness or selling any dovishness at these levels - I will only sell 0.71+ pull backs as i think the rate cut is imminent and any hawkishness is just the RBNZ trying to keep the markets on its toes - Technically we are seeing some downside deviation + MA support - with kiwi$ trading on its 3m -2SD channel line and 3m Moving Average line, this looks supportive, with kiwi$ posting a green day once it hit hit these two techncials (as you can see highlighted in red) - this could continue to support a hawkish bounce, which is good for re-shorts. Eyes on the comments closely! *Any questions please let me know - I will be providing RBNZ Gov Wheeler Highlights ASAP*
Short
by QuantumLogicTrading
2
SELL AUDUSD - JUNE RBA MINUTES HIGHLIGHTS - DOVISH/ CUT POSSIBLEOn the margin RBA remained in line with previous meetings, adding little but still keeping it on the dovish side imo. Once again, as in previous minutes (and from several other central banks) RBA continued to communicate the necessity of "watching key data" to drive future policy decisions. Interestingly though, they also mentioned the negative impact of a strong AUD which in turn supports RBA doves out there as a cut is the remedy to stop a deflationairy currency in its tracks. Further, RBA notably were under no illusions regarding their inflation situation stating " inflation set to stay low for some time" - another encouraging stimulus for doves given inflation's important position/ weight for setting future policy. As per the attached post, i remain dovish/ bearsh on aussie$, and i continue to expect a cut to 1.50% (25bps) this year given i expect their inflation to remain stagnant. Clear targets are 0.73 when probability of a cut is higher - though i would enter shorts regardless if AUD$ could find its way to its 12m highs at 0.78, though unlikely. I like USD strength in the medium term too hence supporting the short Aussie dollar view RBA Minutes Highlights: RBA MINUTES: BOARD TO WATCH KEY DATA, WILL MAKE ADJUSTMENT TO RATES IF NEEDED; REVIEW OF FORECASTS IN AUG WILL HELP STEER POLICY - Inflation set to stay low for some time, employment mixed, retail sales look set to pick up - Stronger AUD would complicate economic rebalancing - Economic transition is now well advanced
Short
by QuantumLogicTrading
3
SHORT EURUSD: MISPRICING ECB & FED POLICY/ FUTURE POLICY/ BREXITThe Gross underpricing of ECB and FOMC Monetary Policy Changes - A fully-priced medium-term equilibrium Lower coming? EURUSD: *Short EURUSD 3m-12m Duration: 1/2lots @1.11 - 1.07TP1; 1.04-5TP2 1.01TP3 1. On Decemeber 2nd the ECB cut their rate by 10bps to 0.05%, paradoxically this actually caused EURUSD to rally higher. Thus this is a mispricing as Reductions in CB interest rates send currencies lower as 1) it reduces the demand for the currency as hot money flows, seeking higher rates, falls and; 2) Increases the Supply of the currency as at lower interest rates, banks borrow more and lend more, which in turn (through the bank/ credit multiplier) increases the EUR money supply. - So reduced demand + increased supply = EUR should have a lower value, so EURUSD should have fallen. Instead EURUSD actually rallied 350pips higher to 1.095 on the day - so this policy action has been underpriced - Though it should be noted that the reason EURUSD didnt fall was because going into the Dec ECB meeting expectations of Draghi were priced at 15-20bps of cuts so since he "failed" the market reacted hawkishly/ buy EUR. 2. On Dec 16th the FOMC increased their rate by 25bps to 0.50%. For the same, but opposite, reasons above this leads to increased USD demand and reduced supply. - so the net impact should be aggressively increased USD strength, however, EURUSD only fell by some 100pips before days after erasing these gains to 1.08 back to 1.10 - so this policy action has been underpriced . 3. On March 10th ECB cut their rate to 0.00% or 5bps and extended their QE programme by several EUR100bn. This once again reduces EUR demand and increases EUR supply (even more so as QE is combined). - So the net impact once again should be for EUR weakness to be priced in and EURUSD to trade much lower. However, once again paradoxically on the day EURUSD actually traded HIGHER? from 1.10 to 1.12 - so this ECB policy action is the third CB action to go UNPRICED in EURUSD 4. On the 24th of June the UK voted to leave the European Union in a shock Brexit vote - now given that it was a shock vote, EUR should have traded aggressively lower as one of its strongest countries voting to leave its economic union 1) weakens the E.Unions GDP/ Employment/ Inflation status as the UK leaves; 2) Causes uncertainty regarding the new trade agreements between the UK and itself, especially given that the UK is one of the regions biggest export markets; 3) causes uncertainty regarding other nations leaving - a run on the EU could develop.. currently several more nations have called for a vote. - So all in all the Brexit result is negative for the economic stability of the Euro area and as a result this should reduce demand for EUR as investors fear the worst/ choose safer currencies. Reduced EUR demand should cause EURUSD to trade lower - it took a 200pip loss to 1.118 - 200pips of downside is not enough to price perhaps the most uncertain event possible for the EUR (800pips more suitable given UK is 16% of the eurozone).
Short
by QuantumLogicTrading
2