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FX Update: Trading the central bank normalization theme.Summary: The RBNZ is the latest central bank to remove policy accommodation among G10 currencies, with the Bank of Canada having led the charge in April and likely set to taper purchases again at its meeting later today. Today we look at some hopefully uncorrelated trades for the coming months as the normalization theme potentially deepens, and even in one case if it fails to do so. FX Trading focus: Trading the central bank normalization theme in G10 currencies Yesterday’s extremely hot June US CPI print saw a fairly modest impact across markets relative to the magnitude of the surprise. Sure, the USD did pick up in places and Fed expectations were jolted a few basis points, but there was no broad shift out of recent trading ranges, suggesting that the market continues to buy into the Fed view (or partial Fed view, at least, as dissenters are increasingly vocal) that inflation will prove transitory. Our view is that, while sequential month-on-month inflation measures are likely to moderate in coming months as some one-off factors fade, inflation is by no means transitory. Regardless, the market has respected that the Fed has shifted direction, so for USD bears to get the upper hand, the view will have to be confirmed that the Fed will lag in removing accommodation relative to the underlying fundamentals of real interest rates, current account deficits, etc... Overnight, the RBNZ surprised the market with its hawkish move as discussed in the trade view on AUDNZD below and I decided to dedicate today’s update to considering a few medium- to longer term trades that may play out from here if we continue to see a deepening in the move toward central bank normalization from here. Hopefully, the trades are somewhat uncorrelated, though it is unavoidable that the first three may share directional sympathy if, for example, we lurch into some deep correction in risk sentiment. Bank of Canada expectations today: a further taper and encouraging words – has USDCAD topped out here? Some trade ideas for the next couple of weeks to couple of months: NOK too weak? The Norges Bank is likely to prove the first G10 central bank to hike rates, having specifically forecast that it is set to hike rates in September at its June 17 meeting and forecasting a rate toward 1.50% by the end of 2024. The NOK has been in for a rough ride to the downside despite that hawkish upgrade, however, and that despite the surge in oil prices (normally very NOK supportive) as the market’s surprise at the FOMC meeting just the night before the Norges Bank on June 16 surprised markets and caught many USDNOK shorts off guard – with short covering in USDNOK a possible driver of the considerable downside in NOK. This NOK squeeze may be near completion as the focus could return to central banks normalizing rates and Norway leading the way. Trade: Long NOK vs. a basket of EUR, SEK and USD (stops if NOK is weaker versus all three and EURNOK, for example, trades north of 10.50 and USDNOK trades north of 8.90 while NOKSEK falls below 0.9700). Chief risk for this trade: a further squeeze on NOK longs on a chunky correction in crude oil prices or in risk sentiment if Fed Chair Powell spooks markets in testimony before Congress this week and this sees the USD rising further. EURGBP downside potential? Today’s strong UK inflation print has pulled BoE rate expectations back toward the highs for the cycle, while UK Prime Minister is expected to remove all Covid restrictions next week, which could further supercharge UK activity numbers and have the BoE pull forward its rate expectations more in line with the market’s expectation for a move early next year, it’s recent mimicking of the US Federal Reserve’s stance on inflation likely proving “transitory” notwithstanding. EURGBP is trading heavily today, and earlier this week, we have to remember that the ECB is preannouncing that it is warming up some reassurance that QE won’t quickly come to an end next year with new guidance updates at is meeting next week – a meeting very unlikely to prove hawkish. Further out, the chief focus will be on the August 5 BoE meeting. Trade: Short EURGBP at 0.8515 with a stop above 0.8620 for a test of 0.8300 (trading target: 0.8325) Chief risk for this trade: the ECB review next week comes out less EUR negative than expected or weak risk sentiment generally weakens conviction in the strength of the forward outlook for sterling bulls. Chart: EURGBP weekly EURGBP is pushing on the bottom of the range today after the UK print this morning, which has helped UK rate expectations back higher, a break of the 0.8500 area support could lead to a test of the major post-Brexit referendum support into 0.8300. AUD vs. NZD policy divergence too great – will reconverge? The RBNZ surprised last night by moving suddenly to simply abandon all QE purchases as of next week and removing language pointing to the need to wait considerable time for achieving its inflation and employment objectives. This points strongly toward a rate hike later this year. This is relative to Australia’s RBA, which has been extremely cautious in its moves and continues to express the view that it can wait until 2024 before conditions will be ripe for a hike. Either New Zealand is wrong to be so hawkish or Australia is wrong to be so dovish over a 6-month time horizon from here. Australia is also in the midst of dealing with a Covid variant outbreak after successfully dealing with the virus previously – a factor that could suddenly fade quickly once it rounds the corner as has been achieved elsewhere. The AU-NZ divergences are so strong between the two economies that we actually have a hard time seeing how they can stretch much wider from here with 2-year rate spreads at six-year lows, as the market has priced in considerable tightening from the RBNZ, while we expect if the normalization process continues to play out, the RBA caution will have proved excessive, leading the market to play catchup down the road. Trade: Buy half a position at 1.0600 and another half position in the vicinity of 1.0500 with stops below 1.0400 for an eventual recovery toward 1.0900+ as Australia’s commodity mix will prove more compelling for the requirements of green transformation (copper, even uranium, etc..). Will revisit if the price action reverts higher and keeps well away from 1.0500. Chief risk for this trade: simply that we are too early - the policy divergence between NZ and Australia could continue to widen, driving the AUDNZD pair below 1.0400. USD – Fed will continue to lag? While the US CPI print for June was a massive headline grabber and the USD has managed to rally off major support in the wake of the June 16 FOMC meeting, that move may have played itself out if the market shifts to the view that while the Fed is moving cautiously toward tightening, it will never be able to do so in earnest and will lag other central banks. A key test of this will be the FOMC meeting of the week after next. Trade: EURUSD 6-month call option, strike 1.2000, partially offset by 1.1500 put (total cost about 60 pips with spot ref: EURUSD trading at 1.1800 on July 14). An AUDUSD 3-month call option, strike 0.7700 (cost: 46 pips with spot ref: AUDUSD at 0.7457 on July 14). Stop on the EURUSD short put if spot drops below 1.1600 for more than two days. Chief risk for this trade: the FOMC meeting the week after next shows a more robust discussion of the need for the Fed to taper asset purchases, which sends the USD higher and risk sentiment lower. 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by Saxo
NOKIA is making one more push. NOKFifth wave of local impulse, making this one a relatively confident prediction. Plenty of momentum to move more and then reassess. No train can travel indefinitely after all. Remember, this is not financial advice. You must do your own research and carefully make decisions for yourself by yourself. We love TA and do not provide individually tailored financial advice, or financial advice period. Now that aside, Fibonacci in crystal clear green and invalidation noted, as always, in red. Good luck out there.
NYSE:NOKLong
by Rykin_Capital
USDNOK looking up 🦐USDNOK after the double bottom over the support has moved to the upside over an ascending trandline. The price has now reached a daily resistance and according to Plancton's strategy if the market will break above we will set a nice long order. ––––– Follow the Shrimp 🦐 Keep in mind. 🟣 Purple structure -> Monthly structure. 🔴 Red structure -> Weekly structure. 🔵 Blue structure -> Daily structure. 🟡 Yellow structure -> 4h structure. ⚫️ Black structure -> <4h structure. Here is the Plancton0618 technical analysis , please comment below if you have any question. The ENTRY in the market will be taken only if the condition of the Plancton0618 strategy will trigger.
Long
by InkyGrip
$PLTR Meme Stock with Real Fundamental ValueQuick update on PLTR, moving how I predicted towards its first target of $27. Red day today because of the meme stock price movement, but this company does in fact have true fundamentals and continues to sign deals with the US government as well as show YOY growth, data analytics will without a doubt be one of the biggest sectors in the near future, and one of the only positions I will accumulate steadily throughout my lifetime as an Amazon or Facebook of my generation. The price movement can also be reflected by the meme stock rampage currently going on, due to redditors absolutely loving the company as well as our faithful Cathy Wood that continues to BTFD. Palantir not only is an incredible growth company that I believe will have a significant value in the years to come, but Reddit also can and has been giving this some steam to break out even further. Options are interesting on this one, so I would say share accumulation is the way to go. GLTA, PLTR to the moon (Long term for good reasons).
PLong
by chartxzy
$BB Analysis & Predictions Based on Parabolic Squeeze MomentumWith BB now reaching a new high since the previous January squeeze, the level reached was approximately near the $20 Level, or the 61% Retracement level. It is now currently using the 50% retracement level of $17 as support for a potential next leg up. If parabolic movement continues in the "meme stocks" , you can look for your next targets of resistance levels near $20 (61% retracement) and then $24 (78% retracement). The zones are as shown on the chart, shows how these fibonacci retracement levels play a significant role in determing support and resistance on 1D chart. My position on this was strictly options, I purchased so called YOLO calls on Tuesday of this week 6/4 $16 Calls - 0.86 /c as well as yesterday at the close purchased 6/11 $20 Calls - 3.30 / c Sold the June 4's for 4.85 at the open today, cant complain about that gain and they expire soon, and I will hold these $20 calls for next week if the current support zone holds. GLTA, follow for more
NYSE:BBLong
by chartxzy
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