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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
AUDNZD - STAT TRADE: BUY AFTER A 5TH DAY OF SELLING; P=98.7%AUDNZD: 1. Aussie kiwi has been aggressively sold lower for the last 8/9 days, with the bullday being only 4pips higher (pretty much 9 straight days of selling) and most recently the last 4 days have been pure consecutive closes lower. 2. Statistically, after analysing the last 16.5yrs of data it shows the probability of a 5th day or more of selling is 3% which means there is an implied 32/33/ 97% chance that we move higher on the next day, these odds arent too great so I suggust NOT buying on open, instead lets wait and see if we can get another close lower on the daily that takes us into the strong support zone at 1.041/3 - then this will mean buying the probability that a 6th or more day of selling occurs which is 1.3% or an implied chance of 98.7% or 99/100 that the price will go up on the 6th day Trading strategy - AUDNZD wait for monday to close lower at 1.041/3 and buy tuesdays open: 1. I advise buying aussie here after the 5th day lower as the 6th day has a 98.7% chance of moving higher, after a 5th day of selling, the odds are good and I will take part in this.
Long
by QuantumLogicTrading
5
SELL EUR V AUD, USD, NZD: ECB MONETARY POLICY MINUTES HIGHLIGHTSAfter 5days higher EUR$ Statistically is a 80th percentile sell opportunity - the monetary policy minutes were dovish on the margin reiterating and stressing the ECB's willingness to "Boost stimulus again if needed". This should put downside pressure on EUR given september meeting is coming up (when most likely to add to easing). EURAUD and EURUSD shorts here look technically the best and fundamentally with EURNZD also possible and an alternative for EURAUD (depends on your preference - higher differential = NZD; weaker monpol fwd guidance/ future rate stability = AUD). ECB Monetary Policy Minutes Highlights: ECB SAYS "WIDE AGREEMENT" AMONG COUNCIL MEMBERS NOT TO DISCUSS ANY MONETARY POLICY REACTION AT JULY 20-21 MEETING -Brexit Vote Created New Headwinds for Eurozone Economy, Heightened Uncertainty-ECB Minutes -Brexit Vote Could Affect Global Economy in Unpredictable Ways-ECB Minutes -Policymakers Stressed ECB's Readiness to Boost Stimulus Again if Needed-ECB Minutes -Policymakers Thought it Was Too Soon to Discuss Fresh Stimulus-ECB Minutes -ECB Saw Market Impact of Brexit Vote "Contained"-ECB Minutes -Policymakers Stressed Need To Safeguard Transmission of ECB Policies Through Banks-ECB Minutes -Policymakers Noted Apparent Link Between Bank Stock Prices, Bank Lending Volumes-ECB Minutes ECB ACCOUNT OF MONPOL MEETING -Called For Measures To Address Weak Profitability -No Clear Upward Trend In Inflation Path -Premature To Discuss Fresh Stimulus ECB'S PRAET: CALLS WEAK PRICES AN 'ONGOING SOURCE' OF CONCERN
Short
by QuantumLogicTrading
SHORT GBP VS AUD, NZD, USD: FADE RALLIES - RETAIL SALES BEATRetail sales outperformed on all cylinders today and GBP as expected has rallied into nice shortable levels now - with brexit uncertainty likely to continue to way and continued dovish BOE support also equally weighing on sterling in the future. My preferred shorts immediately are vs USD as i expected Fed Dudley and Williams (speaking today) to talk the extremely battered USD higher (as they did earlier in the week). I also like medium-term (end of next week shorts) vs NZD and AUD as GBPAUD and GBPNZD come into nice resistance at 1.81 and 1.713, after closing two days with both aussie and kiwi weaker i think this third day higher will be the last and thus a high probability opportunity to short GBP - I also like these AUD and NZD longs given the above average employment reports from both NZD and AUD this week which seemingly are yet to be priced vs GBP. Further the medium term view vs AUD and NZD of short GBP derives from the trend - where you can see GBP has lost 1000pips post brexit as the implied interest rate differential between GBP and AUD/ NZD has increased and is projected to increase as BOE ease rates and AUD and NZD rates are likely to remain stable (especially AUD given the SOMP and RBA minutes). Whilst NZD rates remain at the pinnacle of 2% so even if the RBNZ does ease as expected the differential between sterling and kiwi will remain the highest for yield seekers for the next 50bps lower, which is likely to be neutral. Trading strategy - Short GBP vs AUD, NZD, GBP in proportionate SMALL lots and add if higher: 1. Short GBPUSD @1.317 - 1.305/8TP1 1.290TP2 2. Short GBPAUD @1.713 - 1.693TP1 1.673TP2 3. Short GBPNZD @1.81 - 1.7910TP1 1.777TP2 I also like this strategy given the 3-way exposure net hedges any individual cross risk e.g. aud nzd or usd.
Short
by QuantumLogicTrading
2
AUDUSD LONG: RBA GOV STEVENS SPEECH HIGHLIGHTS"It's a search-for-yield world and this country still looks attractive because other yields look so unattractive," Mr. Stevens said in a joint interview with The Wall Street Journal and the Australian newspaper ahead of his retirement next month. "That's not something that the Reserve Bank can wave a wand and make go away." The below and above support my bullish AUD$ view, the RBA/ Gov Stevens seems to have accepted and become contempt somewhat that AUD appreciation will continue in an era of low global interest rates as ive said before/ earlier. I continue to like AUD$ to 0.78 12m highs, on the back of weak US CPI.. USD currently seeing some bids on the back of Fed Dudleys hawkish comments (attached), but i nonetheless think CPI will be the lasting word on the USD front and will help AUD$ bid up to the 0.78 level. USD strength comes as a function of the fed funds futures which are up at 18% probability of a sept hike vs 9% yesterday, though this should be faded into days end as the CPI weakness takes over RBA Gov Stevens Speech Highlights: RBA Gov. Stevens: World Economy Ready for U.S. Rate Rise RBA Gov. Stevens: Stronger GDP Growth Rates Would Be Welcomed RBA Gov. Stevens: Should Be Possible to Expand Budget, Retain AAA-Rating RBA Gov. Stevens: House Prices Must Still Be Watched Carefully RBA Gov. Stevens: Worrying Knowledge Gap Around China Economy RBA Gov. Stevens: Cash Rate Just One Variable for Australian Dollar Level RBA Gov. Stevens: High Yields in Australia in Infrastructure, Property RBA Gov. Stevens: Hard to Wave Away Demand for Australian Dolla RBA Gov. Stevens: Australian Housing Not in Risky Category RBA Gov. Stevens: Housing Debt Is Significant RBA Gov. Stevens: No Fresh Surge in Housing Leverage RBA Gov. Stevens: Housing Slump Would Not Lead to Systemic Risk RBA Gov. Stevens: Housing Slump Would Not Trigger Bank Failures
Long
by QuantumLogicTrading
5
AUDUSD: RBA MINUTES - NEUTRAL & NO COMMITMENT TO FURTHER ACTIONMinutes were neutral with little hints to further action, much of which inline with the SOMP - if anything it was on the hawkish side given they expect "inflation to be improved by easing" which infers they think policy stable at 1.50% might be sufficient. Though they did go on to say "AUD$ rise could cause complications" though it was kept to a very limited sense (mining industry) and it certainly didnt suggest further easing was on the horizon if it persists. So Aussie from here, with the continued lack of fwd guidance from the RBA i see higher, as posted several days ago - given the 6-9m trend which looks to be yield seeking given the largest economies have slipped into negative rates (ECB, BOJ) and the BOE soon to follow (plus FOMC seem to have adopted a much flatter hike trajectory) thus i expect this bullish sentiment to continue to put topside pressure on aussie (particularly as the RBA have offered little reason for speculators to stay away) as investors continue to seek carry. Trading Strategy: Bullish - Buy Kiwi and Aussie @Market - careful of US Data. 0.773 and 0.779 (0.73 kiwi) look to be the next targets higher - risks to the view are obviously a firming USD through data improvement (given this is the Feds biggest mandate for future hikes), but given the recent data environment this seems unlikely, where i expect CPI today to miss too given retail sales and PPI (CPI Leading indicators) missed heavily last week - this should cause USD STIRs to sell-off again, push rate hopes for sept/ dec back lower and USD weaker + the presidential election i hear is becoming a somewhat constant drag on the USD, even if the rate expectations sell-off subsides. Kiwi has slightly more fwd guidance from the RBNZ with Oct/ November cut on the cards - whilst this may seem encouraging remember kiwi rates trade at 2.0% still vs 1.5% aussie which is a 50bps differential - not to mention that being 200bps+ vs rest of G10.. so kiwi topside is likely expected even though there was some average further monpol suggested as kiwi rates have to come down quite aggressively until they are even at par with aussie, let alone not the no.1 yield currency or closer to the average in G10.. until this point the antipodes will continue to be chased higher imo as investors seek easier yields . RBA Minutes Highlights: -RBA MINUTES: AT AUGUIST MEETING JUDGED PROSPECTS FOR GROWTH, INFLATION WOULD BE IMPROVED BY EASING -RBA MINUTES: BOARD SAW DIMINISHED RISKS FROM HOUSING DEBT, RISING HOME PRICES -RBA MINUTES: ROOM FOR STRONGER ECONOMIC GROWTH GIVEN INFLATION TO REMAIN LOW FOR SOME TIME -RBA MINUTES: HOUSE PRICES, AUCTION RATES, MORTGAGE LENDING POINTED TO COOLING MARKET -RBA MINUTES: RISING A$ COULD COMPLICATE TRANSITION FROM MINING BOOM -RBA MINUTES: FORWARD INDICATORS OF JOBS GROWTH POINTED TO STEADY UNEMPLOYMENT IN COMING MONTHS -RBA MINUTES: CONSIDERABLE UNCERTAINTY ABOUT MOMENTUM IN LABOUR MARKET, INFLATION OUTLOOK -RBA MINUTES: GDP GROWTH LIKELY TO BE MORE MODEST IN Q2, AFTER STRONG Q1 -RBA MINUTES: UNEMPLOYMENT EXPECTED TO DIP ONLY SLOWLY TO 5.5 PCT BY 2018, LEAVE SLACK IN MARKET -RBA MINUTES: SUPPLY OF NEW HOMES TO KEEP RENT INFLATION AT LOW LEVELS -RBA MINUTES: PIPELINE OF HOME BUILDING AT VERY HIGH LEVELS, RISK OF OVERSUPPLY IN SOME MARKETS -RBA MINUTES: REASONABLE CHANCE OF FURTHER STIMULUS GLOBALLY IMPACTING ON CURRENCIES -RBA MINUTES: CHINA STIMULUS SUPPORTING GROWTH THERE, BUT UNCERTAINTY OVER LONGER-TERM OUTLOOK Full Minutes - www.rba.gov.au a
Long
by QuantumLogicTrading
NZDUSD/ AUDUSD: RBNZ GOV WHEELER SPEECH HIGHLIGHTSGovernor of the RBNZ Wheeler offered little bearish pressure on kiwi, refusing to go into any intervention talk and failing to say what the bank will actually use to tame this deflationaire NZD they are experiencing at the moment - with the comments below in mind imo this leaves on direction for Kiwi (short of some FOMC/ USD bullish pressure which seems unlikely as rate expectations continue to be sold-off on the back of a quiet data week) and thats higher - in the speech it became apparent that cutting rates does little to curb kiwi strength given the relative differential remains the highest in G10 in this low interest environment both AUD and NZD rates remain some 50-150bps more attractive for those low risk yield seeking funds. On a break of 0.733 I see NZD$ moving towards 0.76 - though any USD strength could tame the cross, especailly given 60bps of further cuts have been built into the kiwi projections - though given there is 6wks until the next meeting imo there is certainly time for us to move higher before moving lower into the meeting as dovish expectations build as they did before. From here AUD looks more attractive here given their lack of forward guidance, and already breakout levels 0.78 is now the target - USD strength may continue weak given the presidential election.. is it likely the FOMC will hike just before an election e.g. sept or nov? despite their independence this seems unlikely + imo a Dec hike makes the most sense especially as some feds call for some consistency e.g. 12m as it is easier to measure policy transmission this way. One potential downside to this view is USD strength, whilst we seem to be in a wave of relentless selling this could be reversed if it is no election related (though there is little else impetus offered) but nonetheless given AUD's breakout i think the 0.78 target is still fair and given NZDs reaction already - it is unlikely we see sellers from here, this reaction almost mimics the RBA's rate cut reaction e.g. 50pips higher - but that was then followed by 200pips higher 1wk later.. we could certainly be in for the same price action here and this is what my bets are on. RBNZ Gov Wheeler Speech Highlights: -WHEELER: NOT SURPRISED BY NZD MOVE AFTER TODAY'S DECISION -WHEELER: RBNZ HAS BUILT 60BPS OF CUTS INTO PROJECTIONS -WHEELER: NO SERIOUS CONSIDERATIONS OF A 50BPS CUT -RBNZ GOV WHEELER: WOULD LIKE TO SEE MOST OF RATE CUT PASSED ON BY BANKS -WHEELER: THERE IS FLEXIBILITY IN POLICY TARGETS AGREEMENT -WHEELER: WANT NZD TO FALL, WANT TO TAKE PRESSURE OFF NZD WITH LOWER RATES -WHEELER: DEBT TO INCOME TOOL UNLIKELY TO BE IMPLEMENTED THIS YEAR -WHEELER: WAGE MODERATION GREATER THAN RBNZ EXPECTED -WHEELER: RBNZ HAS LIMITED INFLUENCE OVER NZD -WHEELER: WOULD BE CONCERNED IF THERE WAS A FURTHER DROP IN ST INFLATION EXPECTATIONS -WHEELER: WILL LOOK AT NZD REACTION OVER COMING DAYS
Long
by QuantumLogicTrading
1
NZDUSD: RBNZ MONPOL DECISION PREVIEW - BOE OR RBA STYLE?RBNZ Monetary Policy Decision : 1. At 22:00GMT the RBNZ are expected to cut their OCR rate to 2% from 2.25% (25bps), further they will release their monpol statement and rate statement then too - with RBNZ Gov Wheeler speaking 1hr after the release. 2. The are a number of outcomes which are likely to or not to affect the NZD$ market, I will list the combinations below from the very LHS/ Dovish to the more mild and RHS- Combination of outcomes - assuming the 25bps cut is certain as it is priced 100% into kiwi rates markets: 1. LHS NZD$ response fall to 0.690-0.681 - a 50bps rate cut, dovish statements and offering strong easing biased forward guidance e.g. hinting at further cuts likely, possible QE, other alternative measures being taken if kiwi persists strong - and Gov Wheeler Reiterates this dovish and highly committed sentiment in his speech.. - BOE and Gov Carney speech last week is a good illustration of a LHS response, very strong commitment to future easing - despite denying negative rates (housing market sentiment could be the equivalent here) 2. Average NZD$ response fall to 0.710 on the day - a 25bps rate cut, some weak references to future monpol - Wheeler fails to convince the market anything new will be coming 3. RHS NZD$ response = stable at market, then whipsaw higher to 0.73 on the day as investors flock to the highest G10 carry - a 25bps cut, no references to more easing and a theme of conplacency - Wheeler is neutral and perhaps makes mention to the housing environment limiting the RBNZ's hand with future easing. - RBA's rate cut and SOMP last week and Gov Stevens speech yesterday is a good example of a RHS rate cut and neutral statement/ Speech - offering no forward guidance on policy, no hits at future easing conventional or otherwise - where we have seen AUD$ move 200pips higher despite the cut My Opinion on the most likely outcome: 1. Assuming the RBNZ have seen the very bullish AUD reaction to this weeks WEAK rate cut by the RBA/ Stevens (as discussed above) and the RBNZ has also seen the bearish reaction of the market towards BOE/ Carney's reaction to their aggressively dovish statement, speech and policy measures (e.g. cut and 60bn in QE); - And assuming the RBNZ have seen Kiwi's strength (or USD weakness) and the high levels/ bullish sentiment kiwi is going in at into this monpol decision, which is particularly important now since the RBNZ's emergency economic assessment which stated that they didnt appreciate the strong kiwi$ and would like to bring it down. - These two factors in mind, plus the fact kiwi data has remained weak and RBNZ at even 2% after a 25bps cut is still the highest yield currency by a massive 50bps in G10 (AUD at 1.5%), so thinking of these 4 elements which are all very dominant calls for dovish/ 50bps cut policy It makes sense to think that the RBNZ will be skewed to delivering a very dovish/ LHS monpol package and a BOE M. Carney like speech by Gov Wheeler, especially since the House inflation issue has been discussed and macroprudential policies are set to be put in place in september to try and curb this issue where of past this has been a hawkish limitation on the RBNZ's will to be dovish and ease more. - However, guessing central banks this year has been tricky (BOJ in mind) so there is no certainty, and also there are some worrys over the RBNZs ability to cut 50bps at once - despite the need for it as a 25bps cut leaves a 50bps differential between AUD and NZD which will continue to cause deflationairy pressure and bullish NZD as investors flock to kiwi over the close partner Aussie - given this the RBNZ should be even more inclined to cutting the 50bps so that their ccy isnt used as the "carry ccy". There has been several calls by sell-side houses for a 50bps cut, but as above only time will tell.
Short
by QuantumLogicTrading
3
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$0.7315 RBNZ: A Decline In Exchange Rate is Needed RBNZ: House Price Inflation Remains Excessive RBNZ:Lower Dairy Prices Depressing Farm Sector Incomes RBNZ:Domestic Growth Supported By Inward Migration, Construction, Tourism RBNZ: Low Global Rates Placing Upward Pressure On NZ Dollar RBNZ: Trade Weighted Index Signficantly Higher Than Assumed in June MPS RBNZ: High NZ Dollar Causing Negative Inflation in Tradables Sector NZ Central Bank Sees 90-Day Bank Bill at 2.1% in 4Q 2016 vs Prior 2.2% NZ Central Bank Sees 90-Day Bank Bill at 1.8 % in 2Q 2017 vs Prior 2.1%
by QuantumLogicTrading
NZDUSD: TECHNICAL ANALYSIS - TARGET 0.701 BUT USD WEAKNESS?NZD$ Technical Analysis: Moving Average/ fair price gauge: 1. Kiwi looks rich here at the lower 0.72 level which, significantly above the 3m and 12m which sit at 0.703 and 0.690 respestively, whilst the 1 trades at 0.711. - However, going into RBNZ where they are expected to be dovish (discussed in detail in attached post), these MA levels fall nicely in line with areas of price action suppport and thus will be used as profit targets - thus 0.711, 0.701 and 0.691 are my TP1 TP2 and TP3 levels however, given the bearish bias >50% of my lots will be squared at between the 0.701 and the 0.61 level. The 0.711 level is an intermediate TP, which is better suited for 0.718 shorts vs the 0.722 shorts that i currently hold. 0.691 is possible but is skewed towards the bottom of the range, with 0.681 at the very LHS - a 50bps cut and strong dovish forward guidance e.g. like BOE will likely offer us here - cable managed to fall some 350-400pips which ceteris paribus takes kiwi into the 0.681 level also. Volatility 1. Realised vol has contracted aggressively in the last few days as the daily ranges have tightened unsurprisingly going into RBNZ - IV on the other hand also unsurprisingly has traded bid as option positioning increases as investors place bets on RBNZ. - Net bets to date look to be bearish, with current 25d risk reversals skewed to the downside at -2.6vols, and across the view we observe a -0.5 to -1 downside bias reflecting the expected RBNZ dovish pressure expected. - 50d ATM vols trade currently at 30%, 14.8% 1wks, 12.3% 2wks and 11.3% 1m - clearly the RBNZ and following speakers are steepening the vols here. Though interestingly past current and 1wks, 2wk and 1m IVs are flatter than RV, indicating the market expects kiwi price action to settle after the next week which could mean we see NZD$ move post RBNZ then stabalise at this level vs obseriving continued seesaw action of the past 6wks e.g. 0.70-3 ranging. - Interestingly RV has developed a 60-80% correlated pattern of aggressive/ volatile price action emerging AFTER RV reaching the 5.0-5.5 level (current levels) so assuming my/ markets RBNZ forecasts are correct one would expect this move to be lower (ive highlighted these moves). Standard Deviation: 1. On the daily weve seen SD normalise from the previous levels where kiwi tested the +2 levels after realising these upper 0.72 levels for a sustained amount of time now - hence NZD$ trades at pretty normal levels for the linear regression though an uptrend as now formed vs sideways/ flat being the previous trend. However, I am betting on the RBNZ offering kiwi lower and realising some days below the 0.70 which should see the kiwi trade at 0.70 as an average price at years end - assuming the RBNZ has seen RBA and BOE (and the difference in response and will use this to make their policy effective).
Short
by QuantumLogicTrading
AUDUSD: FUTURE DIRECTION? BUY THE BREAKOUT; SELL THE TRIPLE TOPPost RBA has left Aussie in a somewhat uncertain direction; whilst the 25bps cut last week should have seen us offered to at least the 0.74 low support level, instead weve seen persistent aussie bids, even despite the strong USD employment report and consequential increased rate hike odds. Much of this Aussie topside is a function of investors shifting macro strategies from a monetary policy stance to a yield seeking/ rate differential positionings; further aussie downside was unhelped by the RBA's rate statement & SOMP which failed to offer any forward guidance regarding further policy, or hint at any FX levels which they thought were too high. Despite this I have seen several sell-side houses offer particularly dovish outlooks for the RBA - with 2 or more rate cuts and potentially new unconventional methods being used by end of 2017. My personal view is a mixed one. Whilst Aussie lower at these levels makes sense e.g. rate cut last week seemingly yet to be priced, we are at a double top resistance level that has held when the rate was 1.75 so should hold now the rate is lower. However, whilst this is the case in the immediate term aussie is still trading better bid, which is interesting given kiwi is trading with a slightly biased offered tone even though kiwi still has the better carry at 2.25% vs 1.5% - this could be a signal the market expects the RBNZ to be more aggressive in their policy decision on the 10th and/ or they will be more dovish and assertive with their forward guidance, which i agree is likely given the RBNZ has said several times it is not happy with kiwi at these levels and is likely to use policy tools to combat this. So on this note, if AUD$ holds the 0.768 level and fails to close on the daily above this (and shows 1/2 red dailies lower) this wiLl show the bias has confirmed to the downside and I will sell aussie to 0.750tp1 and 0.743tp2. Alternatively, given aussies topside bias, and the factors mentioned above, it is highly possible that the bulls win and AUD$ breaks higher - if we see a daily close above the 0.768 highs this imo will likely confirm the breakout and my bias until 0.778 is bullish thus I will buy the break with a 0.775tp1 and 0.778tp2. Today USD strength is firming as the fed funds rate implies a sept p=18% that the fed hikes up from 12% yesterday - though on the data side we are pretty quiet, with retail sales the only notable print which is on Friday. On the AUD side Gov Stevens from the RBA will be speaking later this week... hopefully he sets a bearish aussie tone and helps us move lower, but either way i think AUD$ is a solid trade. The breakout will see alot of momentum imo as a high % of bears will have stops ust above the 0.768 level (given the double top resistance) so we would likely short squeeze those stops 30pips higher immediately once their level has broken. Further, a confirmed rejection at the 0.767 level should see the bears take over (as they have done in the past 2 times), hence my high conviction on this trade.
by QuantumLogicTrading
3
AUDUSD: RBA SOMP HIGHLIGHTS - NFP GUIDANCE FROM HEREThe RBA was relatively neutral on the margin, keeping their inflation targets the same at 1.5-2.5. However, unfortunately for aussie shorts the RBA didnt offer any forward guidence on sentiment towards further easing, or specific reference to the aussie FX level - despite there being a strong bid bias brewing in the aud$ cross post-25bps cut. Also their forecasts for underlying inflation imo were quite positive at 1.5% vs 1.0% currently - this infers the RBA perhaps even thinks that the 1.5% rate will be sufficient to reach their inflation target, and that another cut this year isnt being thought about given they predict on target inflation with current policy. Although this does then run the downside risk of inflation staying low (as i expect) which may force the RBAs hand to cut again at years end if inflation is below 1.% or another print that misses the 1.5% expected mark. At these levels aussie looks attractive on the offer with a 0.74xx target - however USD supply has been strife since last week when rate expectations sold off amid poor GDP print to just p12% in september - down from 25% earlier in the week.. this week failed to improve, with little impetus for this to be the case, though the greenback now looks to NFP today for guidance. A beat/ firm print should help aussie offer well at these levels given we are right at the double top 0.766 level, so any USD strength arising from the NFP print has a bias to see AUD$ move lower, though as the macro landscape questionably is changing, it is uncertain if it will be enough to surpress yield seekers demand for aussie deposits for long/ a sustained period (if at all), which is expecially odd since we saw the rate brought down this week whihc should have set a bearish tone for the week, as we have seen with the BOE and GBP. After NFP we will have a clearer view. From here i think aussie positioning should be sidelined until the NFP print is clear - a miss and i actually think Aussie is better to trade bid, with 0.78 a firm target. A NFP hit and that should offer aussie lower, though for some reason I see the risk asymmetrically skewed to aussie topside, given the very week reaction to what is/ should be the biggest fundamental driver possible - a rate cut. So much of this trade is being vigilant - an NFP miss, buy a 0.766 confirmed breakout, a NFP hit - ensure AUD$ is trading with a clear bid bias.. any 10-30pips movement lower will not suffice at these levels, aussie is still likely bidding. RBA Minutes Highlights: - Underlying Inflation To Remain Under 2% For Much Of Forecast Period, Reach 2 % By End 2018 - Prospects For Economy Positive, But Low Inflation Allows For "Even Stronger Growth" - Judged Risks Associated With Rising House Prices And Debt Had Diminished - A$ Remains Significant Source Of Uncertainty For Inflation, Growth Forecasts - Economic Growth And Inflation Forecasts Little Changed Overall - Forecasts Underlying Inflation 1.5% By End 2016, 1.5-2.5% End 2017, 1.5-2.5% End 2018 - Forecasts GDP Growth 2.5-3.5% End 2016, 2.5-3.5% End 2017, 3-4% End 2018 - Says Unemployment To Fall Only A Little Out To 2018, Employment Growth To Be Modest This Year - Drag On GDP From Falling Mining Investment Looks To Have Peaked, Non-Mining Still Subdued - Dwelling Investment To Stay Strong For Next Year Or So, But Raises Risk Of Oversupply - GDP Growth Looks To Have Moderated In Q2 As Net Exports Added Less - Wage Growth Expected To Remain Low, Rise Modestly Out To 2018 - Increasing Supply, China Steel Cutbacks To Put Downward Pressure On Iron Ore Prices - Growth In China Expected To Slow Gradually Over Next Few Years, Housing A Risk - Brexit To Have Limited Effect On Australia's Major Trading Partners
by QuantumLogicTrading
11
LONG USD VS AUD, GBP, NZD: FED EVANS SPEECH HIGHLIGHTSFed Evans was the third fed member this week to hint that at least one rate increase is on the cards, though more dovish in saying "one hike could be appropriate" vs saying "expect the fed to hike at least once this year" which we heard from Dudley/ Kaplan earlier in the week. Though in reality his speech was dovish on the margin and offered little help for the wiltering green back which has fallen 6 of the last 7 days. The most USD shunning comment was " Could See One More Rate Increase This Year 'Even Though I Prefer None'" which obviously offers no help for the USD. Nonetheless from here and at these levels i continue to see alpha in long USD vs AUD above 0.76 and GBP above 1.33 as the RBA cut the interest rate on tuesday which imo will likely be priced into a imminent 0.74xx sell-off once this USD weakness fades, and as the BOE likely also eases tomorrow which should see cable trade into the low 1.30s if now 1.28s or beyond. NZD is also a good proxy short as the RBNZ is expected to ease by 25-50bps on the 10th which should see kiwi trade into 0.69xx or 0.67xx respectively. Whilst USD weakness is likely exacerbated by Fed Evans dovish remarks - today the federal funds futures ticked higher, as the BOJ-miss induced safe haven demand eased today after several days of selling off and the implied prob of a sept hike steepened to 18% vs 12% yesterday.. if the Rates market can hold these gains into fridays NFP we will likely see USD trade with a bid bias vs the above. The risk going forward though in the next 1-2wks is a poor NFP print.. if we miss expectations considerably this could send USD into a selling spiral, though a firm or beat print i confidently believe will see DXY regain prowess as many of its crosses trade at attractive USD long levels e.g. EUR, GBP, AUD, NZD etc. Fed Evans Speech Highlights: Fed's Evans: One Rate Increase for 2016 Could Be Appropriate Evans: Need More Confidence Inflation Headed to 2% Evans: Could See One More Rate Increase This Year 'Even Though I Prefer None' Evans: One More Increase Close Enough in Line With Views Evans: Wouldn't Mind Waiting to Raise Rates Until Economy Stronger Evans: Recent GDP Data Was Disappointing Evans: Ability to Continue Growing Jobs A 'Pretty Good Sign' Evans: Fed Isn't 'Behind The Curve' on Rates Evans: Core Inflation Won't Reach 2% Until 2018 Evans: Brexit Risk Has 'Come Down' Evans: Global Economy Growing More Slowly Than Would Have Hoped Evans: U.S. Fundamentals Are 'Good' Evans: Expects 2016 GDP of 2% to 2.5% Evans: Labor Market Has Displayed Resilience Fed's Evans: One Rate Increase for 2016 Could Be Appropriate
TVC:DXYLong
by QuantumLogicTrading
BUY USD VS AUD, NZD & GBP: FOMC MEMBER KAPLAN SPEECH HIGHLIGHTSMore of the same here - my USD view remains bullish against AUD, NZD, GBP from here and at these levels. Especially on the back of the RBA i still think we should see 0.745 in AUD$ today, 0.69 in kiwi on the 10th (RBNZ), and 1.28 for GBP on the 4th (BOE) Fed Kaplan Speech Comments: Kaplan: Expects Continued Oil Price Volatility Until Year-End Kaplan: 1Q, 2Q GDP Figures Were Disappointing Kaplan Expects to See More Bankruptcies, M&A and Restructuring In Energy Sector This Year DJ News Kaplan: Dallas Fed Still Expects Full Year GDP of 2% Due to Solid Consumer Demand Kaplan: 1Q, 2Q GDP Figures Were Disappointing Kaplan: Dallas Fed Still Expects Full Year GDP of 2% Due to Solid Consumer Demand Kaplan: Dallas Fed Expects Workforce Participation Rate To Go Down to 61% by 2024 Kaplan: Has Confidence Headline Inflation Will Reach 2% In The Medium Term Kaplan: China Future GDP Growth Rates Likely to Decline Kaplan: Brexit Impacts Will Take Time to Unfold Kaplan: Removal of Accomodation Should Be Done in 'Gradual and Patient Manner' Kaplan: There Has Been Significant Decline in Neutral Rate Of Interest Last Few Years Kaplan: Expects to see one hike this year Kaplan: Decline in Neutral Rates Makes Using Monetary Policy More Challenging Kaplan: Structural Reforms, Fiscal Policy Should Be Used to Help Economies
TVC:DXYLong
by QuantumLogicTrading
SHORT AUDUSD: RBA INTEREST RATE DECISION - CUT 25BPS TO 1.50%RBA Cut the Cash rate to 1.50% by 25bps, the market has had a very subdued reaction though, barely falling 30pips from market. I still think there should be more downside here and into the mid/low 74xx before the full fade comes in - so luckily room for retails to get in, looks like the algos were having a day off today. This is positive for any kiwi$ short holders - this now puts almost certain pressure on RBNZ to do the same (if not 50bps) next week. Previously Aussie$ fell 180pips back in May 3rd on a 25bps cut like this, and the next day lost 40pips so a total of 210pips in 2days, 0.766 to 0.745 - assuming this model holds true this time we should then expect AUD$ to trade to 0.737 in 2-days given we started at 0.758. Thus the 0.744/5 target I have should be modest but inline with the subdued market reaction (TPs further to the LHS run the risk of being faded out unreached). We could/ should see some more selling through LDN/ NY as real money gets on board - unlikely to stay in the 0.75's for today (or close here imo). RBA Interest Rate Decision Highlights: -AUSTRALIA AUG RBA CASH RATE* DECREASE TO 1.50 % (FCAST 1.50 %) VS PREV 1.75 % -RBA SAYS RISING A$ COULD COMPLICATE ECONOMIC TRANSITION -RBA SAYS JUDGED ECONOMIC GROWTH WOULD BE IMPROVED BY EASING -RBA SAYS GLOBAL ECONOMY GROWING AT A PACE BELOW AVERAGE -RBA SAYS RECENT AUSTRALIAN DATA SUGGESTS OVERALL GROWTH CONTINUING AT A MODERATE PACE -RBA SAYS UNDERLYING PACE OF GROWTH IN CHINA ECONOMY APPEARS TO BE MODERATING -RBA SAYS RECENT DATA CONFIRMS INFLATION REMAINS QUITE LOW, EXPECTED TO REMAIN CASE FOR SOME TIME -RBA SAYS LESS RISK OF LOW RATES OVERHEATING HOUSING MARKET -RBA SAYS LABOUR MARKET DATA CONTINUE TO BE SOMEWHAT MIXED
Short
by QuantumLogicTrading
12
AUDUSD: RBA BANK HIGHLIGHTS - CUT & SELL OR STAND PAT & LONG?Inline with the mixed information below, i too am undecided with what the RBA will do. There are several arguments for a cut e.g. CPI falling at an alarming rate/ strong trend; strong aussie; 1.75% high yield and likely to maintain AUD strength. But several against e.g. some of the trimmed prints show stability at 1.7%; need for more data - aussie employment report etc, given the AUD only holds data reports quarterly. That said, whilst im not certain on a RBA rate cut, i am certain on an RBNZ cut (more of a 25 or 50bps cut question), so going into RBA the lower conviction and risk trade is to play it through kiwi transmission e.g. short kiwi$ - an RBA cut will put downside pressure on kiwi$ too as it increases the chance of an RBNZ cut even more as the RBNZ will seek to drive their relative yield down and NZD currency appreciation down. The release is expected at AM5:30GMT - I expect aussiedollar will lose 100-200pips from market on a 25bps cut and if they stand unchanged i expect a topside rally into the 767 resistance graveyard but terminally, with a no rate cut i think we will likely see an end of week close at the 0.782 12m high resistance level assuming the USD employment report is average. Central bank confidence trades relatively low these days in the "disappointment era! however we have seen some strong conviction with bullish bets on RBA cut positioning so far with AUD$ down 100pips+ from yesterday - the lower we move pre-RBA the nastier a disappointment rally with be but also the short downside returns diminish - we could end up only seeing 100pip dropp if we move to 745 pre-decision. BAML ON THE RBA: - We expect the RBA to cut rates this week in response to a weak inflation pulse and spare capacity in the labour markeT. - A cut should lend support to the rates curve above 40bp. We await better levels to reset AU US spread compression trades. - The AUD is benefiting from the global search for positive yield and a rate cut is unlikely to deter this supportive inflow. RBA to hold due to spot on CPI? - TDS - Analysts at TD Securities explained that the recent AUD Q2 underlying CPI was spot-on the RBA’s expectations so they don’t think this will be a trigger for the Bank to cut. RBA to cut tomorrow - MUFG -Derek Halpenny, European Head of GMR at MUFG, suggests that the Australian dollar is one of those currencies that is currently much stronger than what is implied by the 2-year swap yield spread with the US. RBA to cut 25bps at its August meeting – RBC CM -Research Team at RBC Capital Markets, expects the RBA to cut 25bps at its August meeting. RBA: Not enough grounds to cut rates in August - Commerzbank - Antje Praefcke, analyst at Commerzbank notes that even though the market widely expects the RBA to cut the interest rate by 25 basis points from 1.75% to 1.50% next Asian session, they do not see enough grounds to lower the key interest rate in August. RBS - RBA to be on hold
by QuantumLogicTrading
3
AUD/USD : Is 0.76104 the key to the deadlock?AUD/USD has been trading within range (0.742-0.764) all July. Some fierce resistance was at 0755, 0.761 and 0.764 levels. Meanwhile, 0.742 was July's major support with 0.749 acting as a front line support that kept bears from taking over. Friday trading saw the pair failing its last attempt to break the 0.749 levels before it spiked towards 0.76104 (23rd June resistance level) after a disappointing US GDP reading. The pair closed below the 76c mark ahead of a week that carries a tough interest rate decision from RBA on Tuesday afternoon. Interestingly, it appears that the classic two heads and a shoulder pattern was in formation on Friday, with the shoulders at exactly 0.76104 (23rd June - 29th July) and the head at 15th of July high at 0.76765 ! Obviously, that pattern will be invalidated if the 23rd of June high of 0.76474 is broken. However, the RSI descending trendline suggests that we are due for a bearish corrective action with 0.755 is the first support to be tested, followed by 0.752 level. A break below 0.752 would facilitate the bearish takeover of the 0.749 (which I believe won't be fighting any longer) and take us towards lower 74c levels. My positioning: I'm bearish on AUD/USD SL 0.765 TP1 0.742 TP2 0.733
Short
by Abdallah
SPX: BOJ MISS = BULL RUN END +2% + 2016 SAFE HAVEN TREND RESUMESEnd of the bull run Global Equity Indexes: 1. SPX/ Global Equity indexes in the past 2/3wks saw a post-brexit central bank easing induced rally, as many CB released dovish statements following the vote which spurred investor confidence in fresh easing. - IMO much of the bull run was based on BOJ easing hopes, given the size of the economy (4th largest) stimulus from the BOJ had risk sentiment increasing affects - though now in light of no new easing from the BOJ and many CBs shrugging off/ UK internalising the brexit impacts I believe this bull run is over. 2. Technically speaking we may see another week or two of sideways or +1% as the market awaits easing policy information from the BOE (6th largest economy), but past this and regardless of what the BOE does i think the upside bias will cease. BOE is only likely to inject 50bn over probably 6m+ which is a drop in the ocean relatively as the BOJ does 100bn+ in one month, so by mid august latest I expect risk-markets to turn sour and a 10% correction is likely. Confirmation the risk-rally is over: - During this bull run we have seen risk markets/ SPX make gains rather frigidly, one day up one day down has been the trend - rather than the usual breakout green green green rallies of the past - this to me indicated that the topside was cautious and reinforced my view that it was central bank driven (not equity market performance driven). Thus, Confirmation of the trend turning to risk-off will be consecutive days of risk markets falling (SPX/ global indexes) OR consecutive safe haven markets rising (Gold, UST, Yen) and the emergence of a strong negative correlation between the two assets will be a solid second indicator that the 2016 risk-off trend is back. Trading Strategy - a number of ways to play this one: 1. Short FTSE100 @6700 or 7000 (wait for BOE) - this is my favourite trade but has a few conditions. We have built some resistance at the 6700-800 level so here isn't a bad place to sell however i think we will get a better selling vantage point next week, assuming the BOE cut the bank rate 25bps. - The BOE easing should move FTSE100 up 3-4% in a few days into the 7000 ATH key level as easing boosts business conditions and a lower GBP increases FTSE company international competitiveness. The 7000 level is where I am aiming for FTSE shorts with sell-limit orders as 1) its all time high levels; 2) I like to fade central bank action since it is artifical; 3) the broader risk-run is over so FTSE will suffer with the rest of the market 2. Short US Indexes @Market - SPX is perhaps the best short ATM given it trades right at its newly set all time high levels and on the backdrop of the BOJ miss we should see some downside soon. 3. Long Yen @mrkt - in the immediate term my favourite trade I like long Yen (for 200-400pips) against USD and GBP, given the BOJ backdrop is most related to JPY markets. We have already we seen the risk-off transmission taking place in here as Nikkei sold off 2% after the result and JPY grew 3% but i still think in the immediate term e.g. 1wk we can see more JPY topside and Nikkei weakness - me prefering to trade the FX strength over the equity as the equity often follows as a function of FX strength. 4. Long Bonds or Gold @mrkt - for the medium/ longer term I like buying govt debt, particularly UK gilts (BOE QE increases demand) or Gold - Gold we saw move higher on Friday in reaction to the BOJ so it will be interesting to see if we can get risk-off confirmation run from this next week (look for 3/4 green days). Risks to the view: 1. US Earnings have outperformed imo on average this Q, so the risk-run may be sustained for longer than the 2wk window that I expect. Nonetheless, i think even this is capped at 4wks e.g. we should be in full bear mode by the start of September - look out for the confirmation, a run of 3/4+ days of consecutive safe haven gains is often all the markets have to signal to show
TVC:SPXShort
by QuantumLogicTrading
6
SHORT AUDUSD: EYEING CPI PRINT - SELL 1.0%YOY, 0.3%Q; RBA EASINGAM 2:30GMT Ausssie Inflation prints are released these are key for determining their August Policy Decision 1. IMO a 1.0%yoy CPI print shows a further 0.3% contraction in their yearly CPI, this should be sufficient to push the RBA to cutting their OCR by 25bps, similarly a 0.3%qoq CPI will be needed in conjunction to show that inflation is growing at a slow pace. 2. RBA Minutes that support this view of low CPI leading to a cut from July said - - On 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
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
AUDNZD: Ready to go back upAUDNZD has reached an extremely low level as you can see in the quarterly chart, and as is typical in cross pairs, they tend to revert back to the long term mean when this happens. The best way to know when it'll turn is when fundamentals favor outperformance of one of the currencies over the other, specially when technicals align. In the weekly chart you can observe my 'pair trader' indicator, which shows the spread between AUDUSD and NZDUSD. Interestingly enough, it's at record low levels, similar to the one before the steep rally that started in April 2015. Since both economies are fairly similar, this pair tends to range in a very wide and volatile range in the long term as you can see. I favor longs in this pair. If price were to drop below the 'Brexit key level' on chart, I'd doubt the advance. Check out my updated track record here: pastebin.com If interested in my real time whatsapp alerts and swing trading newsletter, or in personal tuition, contact me privately. I'm offering a considerable discount on a packaged course which includes access to my private trading signals list for a year. Cheers! Ivan Labrie Link to Tim West's chatroom: www.tradingview.com We discuss setups like this often there. Feel free to stop by and subscribe to his indicator pack. If you have any questions ask. Risk disclaimer: My analysis is provided as general market commentary and does not constitute investment advice. I will not accept liability for any loss or damage including, without limitation, to any loss of profit which may arise directly or indirectly from use of or reliance on such information.
Long
by IvanLabrie
8
LONG DXY/ USD VS GBP: HAWKISH FOMC LOCKHART SPEECH HIGHLIGHTSFOMC Lockhart was the 4th Fed this week to imo be relatively Hawkish with his words, most notably reinforcing with the others brexits near-term stability saying "Doesn't Expect 'Brexit' to Have Near Term Impact on Economy" and " So Far 'Brexit' Reaction Largely Orderly". Most interestingly though was Lockharts view on the FOMC's positioning for future rate increases, saying "Won't Rule Out Two Rate Rises This Year" - which is extremely hawkish given most expect 1 at the most.. Back up this sentiment by insisting that the Fed is "Fed Not Behind Curve, Has Time to Decide on Next Rate Move". Nonethless Lockhart did somewhat contradict his "rate expectations" by saying "Time for 'Cautious and Patient Approach' to Rate Policy" which surely shouldn't be the case if 2 hikes are coming - that would be on the aggressive side. All in all, Lockharts comments go hand in hand with my Bullish medium term USD/ DXY view (see previous articles) - I like the USD vs EUR, JPY, GBP, AUD, NZD in the medium term so long DXY/ USD is favoured, even more so if 2 rate hikes were to be realised this year. At current levels short GBPUSD is my favourite expression FOMC RATE HIKE IMPLIED PROBABILITIES - On the likelihood of rate increases, in the past 24 hours, from the Federal Funds Rate implied probability curve we have seen rates/ probabilities firm after yesterdays "risk-break" recovery, with a 25bps September/ Nov hike steepening to 17.2% from 11.7%(Wed), and Dec setting new highs at 35.9% from 29.5% (Wed) - Dec also went on to double the probability of a 50bps hike to 5.1% vs 2.8%(Wed), giving Lockharts comments some weight. FOMC Lockhart Speech Highlights: -Fed's Lockhart: Fed Not Behind Curve, Has Time to Decide on Next Rate Move -Lockhart: Time for 'Cautious and Patient Approach' to Rate Policy -Lockhart: So Far 'Brexit' Reaction Largely Orderly -Lockhart: 'Brexit' Will Increase Long Term Uncertainty -Lockhart: Doesn't Expect 'Brexit' to Have Near Term Impact on Economy -Lockhart: Bond Market Yields Largely Reflect Flight-To-Quality Buying -Lockhart: Too Soon to Say 'All Clear' for Financial Markets -Lockhart: 'Brexit' Not a 'Leman Moment' -Lockhart: Still Expects U.S. to Grow by 2%, Expects More Job Gains -Lockhart: Economy is 'Performing Adequately' -Lockhart Says Fed Has Time to Decide on Next Rate Move -Fed's Lockhart: Presidential Election May Be Boosting Economic Uncertainty -Fed's Lockhart: Won't Rule Out Two Rate Rises This Year
TVC:DXYLong
by QuantumLogicTrading
SELL NZDUSD - RECONFIRMED BY 12M HIGHS? CPI PRINT EYED CLOSELYAlso as additional technicals to support the short NZD$ view: 1. On the daily and NU currently Trades close/ at to its +2 standard deviation lines, these are highly resistive. - Assuming NU trades mean reverting +2SD means there is a 95% chance of a price reversal/ 95% of all prices should be below the +2SD channel lines (e.g. NU highly likely lower from here). -- And as you can see by the Yellow circle highlights NU has held this +/- 2SD discipline in the past so is highly likely to maintain these levels in the future. 2. Also NU trades significantly above its 60, 120, and 250 Moving Averages on 1h, 4h, 1D, 1wk - this also signals strong overbought prices, where selling has a higher probability of success. 3. NZD$ looks to have confirmed the 0.73 12 month high level as resistance - strong pivot point. 4. The strong 100k+ print beat from NFP last week imo didnt price much into NZD$ downside at the time, however given the reaction in the Fed Funds rates market, it may be pricing now as the market now implies a 25bps hike at 5.9% Sept/ Nov vs 0% prev, 22.5% Dec vs 18.5% prev - 50bps hike 1.1% vs 0% - also the probabilities of cuts all fell significantly across the curve. 5. Risks to the view continue to be a hawkish RBNZ - as we saw last week the short played well but was undermined at 0.70 when RBNZ speaker highlighted the HPI issue and inferred the cut may not happen in Aug as a result (Hence the recovery back to 0.73). - The rate cut went from 80% to 50% on the back of these comments imo - now NZD CPI inflation and employment readings in the coming 30 days serve as the determinant of their Aug decision, a flat or miss CPI print will likely mean the RBNZ will cut 25bps (CPI is the no.1 target), so beyond the 0.73 level resistance we look for certain confirmation in the CPI reading, though it will be difficult to know what the market is thinking/ to get ahead of the market in the lead up, where the short was a giveaway before the RBNZ's new comments were on the table. - Also on this point it is worth noting that given many of the worlds CBs have shifted to a dovish tone in light of the brexit vote (e.g. RBA BOE BOJ FOMC) this indirectly puts pressure on RBNZ to cut as Kiwi/ NZD will continue to appreciate causing disinflationairy pressures/ brakes to continue on the nzd economy, thus we also carry positive upside given the worlds policy positioning at the moment. Trading Strategy 1. Sell @0.726 TP 0.702 SL 0.732 - More aggressive shorts may be added if confidence in a cut is higher - a cut will send NU down to 0.67 at least for example. *Be sure to check the attached post "SELL NZDUSD @0.73 - TP 700PIPS: BREXIT, RBNZ, FED & USDJPY HEDGE" for NZDUSD short fundamentals*
Short
by QuantumLogicTrading
1