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LONG USD VS JPY, EUR, GBP: HAWISK FED BULLARD - FED FUNDS RALLYBullard is the lone Fed official forecasting just one additional rate increase, and expects modest growth over the next two and a half years. But he reiterated Tuesday he's not expecting the economy to head south. However, did go out of his way to mention a relatively dovish point "We Have Some Ammunition if We Need it During Next Recession". Nonetheless he remained hawkish net on the margin, reiterating FED Georges hawkish comments regarding the labour market "About as Good as It's Ever Been", whilst using the June NFP print to flatten any questions regarding the low May print saying "Strong June Jobs Gains Showed May Report Was 'An Anomaly'". Similarly Bullard continued with Georges sentiment of the US's post-brexit robustness stating that the "Market Reaction to Brexit Shock Was 'Satisfactory,' 'Orderly'" - and infact surprisingly pushed this hawkish brexit sentiment on to new levels of "Ultimately the Brexit Impact on U.S. Economy Will be 'Close to Zero'". This is perhaps the most hawkish/ upbeat statement i have heard form a key Fed member since the decision which is positive given Bullard's naturally dovish stance. Bullard also stressed the need for a solid US Fiscal package to boost demand, where i have to say fiscal stimulus has almost gone forgotten about in the last 7-years post crash, given the dominance of the central banks, quoting "U.S. Badly Needs Fiscal Agenda for Boosting Economic Growth". Once again todays "FED speaker tracker" continues to add to my long $ view in the medium term. Today already we have seen front end rates continue their aggressive recovery this week, with the fed funds rate implied 25bps hike probability now trading for Sept/ Nov at a whopping 18% vs 11.7%Mon, with Dec trading at 36.3% vs 29.2%Mon . 10y UST (TNX) rates trade up another 4% today after a 5% gain yesterday, whilst 30yrs trade 3% up on the day (TNY) - as global risk rallies. Whilst USD is trading a little weaker in the immediate term as it readjusts lower for risk-on USD selling, long USD/ DXY is my medium term view as we continue to see the US FOMC Rate curve aggressively steepen, which is likely to continue for the next week at least - steeper implied curve means hike is more likely - more likely or realised hikes = increased (in the medium-term) dollar strength. Further, we expect dovish/ easing BOJ BOE ECB over the same period, this monetary policy divergence compounds the long $ view against its 3 biggest crosses (hence the long DXY expression) Medium term trading strategy: 1. The best expression of this medium term USD view is long DXY - as above I hold 8/10 conviction views for a number of the heavily weighted USD basket crosses based largely on likely monetary policy divergence in the medium term (FOMC Hiking whilst BOE, BOJ & ECB ease/ cut) e.g. LONG USDJPY @104 - 106.3TP1 109.5TP2; SHORT EURUSD @1.11 - 109.3TP1 107.5TP2; GBPUSD @1.34 - 131.2TP1 128.5TP2
Long
by QuantumLogicTrading
8
SELL EURUSD/ LONG USD, DXY: HAWKISH FED GEORGE SPEECH HIGHLIGHTSIMO FOMC George was largely bullish/ Hawkish $ on the margin; surprisingly coming out and stating for one of the first times that "Fed rates are too low" and "Not Raising Rates in June Was Due to Timing Issues" - these two statements imo hint that a hike coUuld be on the cards earlier than perhaps was expected (Dec), in-light of his opinion of them being too low and that the missed June hike was merely due "timing issues".. could these timing issue be corrected in July? Unlikely given the Brexit result (likely if the vote was bremain), but nonetheless this was more than encouraging. On the wider economy George remained upbeat, highlighting last weeks NFP report as "welcomed news", and in the medium term reaffirming that "pace of job market growth has been notable" and "economy nearing full employment. The only downers were his comments regarding business investment which he said was "weak" but after went on to assure that "outside of energy, business investment levels were better". Further, he cited that brexit issues were "longer run" uncertainties that the FOMC will watch. Federal Funds Rate Implied Hike/ Cut Probability curve updates: On the back of the strong 100k+ beat NFP print last week, going into this week we have seen an aggressive steepening in the Fed Funds implied prob curve across the tenors; Fridays steepening trend has continued into this week, where now a September/ Nov Hike trades at 12%/11.8% vs 5.9%/5.9% on Friday and 0%/0% on Thursday, with a Dec hike trading at 29.6% vs 22.5% Friday. - This aggressive steepening, especially in the front end (where probabilities have doubled), is likely a function of FOMC member Georges Hawkish comments today, the NFP print and the aggressive recovery in risk across the board in the past few days which have all collectively improved confidence, which in turn has eased sell-side pressure on UST rates - today 10y UST rates have managed to trade 4.4% higher on the day (tnx), with 30y yields also up +0.95% - this is the first real break of downside pressure we have seen in rates for the past month. Trading strategy: 1. The above combined has helped my broad long $ view with my favourite expressions short term being in NZD$ and AUD$ downside (See attached posts). In the medium term, EUR$ and $JPY dollar upside are my favourite trades for the risk-on element that will readjust the USD higher in the backend of this year (see attached posts); And the Monetary policy divergence + brexit uncertainty that should bring EUR$ to a lower equilibrium in the future also. Alternatively, this view can be aggregated as pictured into a long DXY play, where imo, it trades 3-4% below equilibrium - index should be near 100. FOMC Member George Speech Highlights : -Fed's George: June Jobs Data Was 'Welcome News' -Fed's George: U.S. Economy Has Proved 'Resilient' -Fed's George: Expects to See 'Fairly Steady Pace of Growth' -Fed's George: Consumers Strong, But Business Investment Weak -Fed's George: Outside of Energy, Business Investment Levels Better -Fed's George: Pace Of Job Market Growth Has Been Noteworthy -Fed's George: Economy Close to Full Employment -Fed's George: Labor Market Recovery Not Evenly Shared by Workers -Fed's George: Labor Pressured by Loss of Middle Skilled Jobs -Fed's George: Fed Policy Limited in Role For Long Term Labor Trends -Fed's George: Fed Rates Are 'Too Low' -Fed's George: Fed Should Raise Rates Gradually -Fed's George: Not Raising Rates in June Was Due to 'Timing Issues' -Fed's George: Brexit Issues Are Longer Run Items to Watch
Short
by QuantumLogicTrading
3
SHORT EURUSD: DOVISH ECB MONETARY POLICY MINUTES - FRESH EASING?IMO the ECB minutes were the most dovish/ clearly directed statements out of the ECB for several months. Before this, and in the past several speakers comments, sentiment has been towards the hawkish/ stale side, citing "ECB has done enough" as the main rhetoric. The June Minutes however show a renewed positioning of the ECB, where they clearly imply they are willing to take further action if needed be with quotes such as "ECB Ready to Act, Using All Its Policy Tools if Needed", and unlike BOJ Kuroda, the ECB clearly seem to have taken ownership of their poor economic ownership finally by saying " Underlying Inflation Has Yet To Show Clear Signs of Upward Trend" and "To Monitor Inflation Outlook Closely" - given that inflation is their headline goal, such comments, when combined with the above readiness to "act", makes the idea of further easing a much higher probability, especially of late where key members almost have refused to mention further action. IMO, this shift in rhetoric to the dovish/ directive side is in an aim to try and put some negative pressure on the EUR since it has managed to par losses vs the USD, whilst bleeding 12% appreciation vs the GBP. The ECB are likely trying to talk down the currency with such rhetoric, especially in light of brexit, where their currency has failed to revalue/ adjust for the negative economic impact that is coming. I see a very bearish outlook for the EUR over the coming weeks/ months given this new dovish ECB stance, much like the GBP, when a central bank wants the currency lower, that is usually the path it follows. Potential dampeners however are the fact that Draghi has before failed to deliver market expectations (Dec 2015 most notable), so unlike the GBP, the acertive nature of these dovish monutes likely have a diminished impact relatively to say the GBP. Nonetheless, i expect the ECB to continue with the rhetoric and given the appreciation/ stability with their biggest trading partners (USD/ GBP) i expect the ECB to take further action in the near term as as it stands, the EUR exchange rate mechanism will/ is failing to transmit the inflationairy pressure they need (infact the opposite) and further easing is the only way to solve this. Thus, I am short EUR from here, especially against the USD where i think it could be up to 500pips overvalued as it is, given its inability to price previous ECB stimulus (March) and Fed Hike in Dec - this short view is especially the case on the back of likely more easing + brexit uncertainties trade seemingly underpriced (vs EJ) and the new EU export inefficiency to the UK one of its biggest markets (given 12% appreciation) - Clear 4-8wk targets are the 1.082 handle in the near term, with 1.052 lows from dec last year the next aim on the back of any fresh easing/ brexit uncertainties still need to be priced. ECB Monetary Policy Minutes -ECB Minutes: ECB Ready to Act, Using All Its Policy Tools if Needed -ECB Minutes: Brexit Vote Seen As 'Important Source of Uncertainty' for Euro Area Outlook -ECB Minutes: To Monitor Inflation Outlook Closely -ECB Minutes: Brexit Could Cause Significant Negative Economic Spillovers to Euro Area -ECB Minutes: Brexit Impact Could Be Transmitted to Euro Area Through Trade, Financial Markets -ECB Minutes: Underlying Inflation Has Yet To Show Clear Signs of Upward Trend -ECB Minutes: Investors Expect Future Challenges for ECB in Sourcing Enough Bonds Under QE Program -ECB Minutes: It Shouldn't Matter Much Which Precise Assets Are Purchased Under QE -ECB Minutes: What Matters is Overall Purchase Volume, Associated Money Creation -ECB Minutes: Composition of Bond Purchases Still Matters to Investors -ECB Minutes: Health of Euro Area Banks is Key for Effective Transmission of ECB Policy
Short
by QuantumLogicTrading
1
An Analysis EURUSD : Channeling with Potential Shark PatternUsually I dont post trade ideas based on shark patterns. The reason is Sharks can complete between 0.886 & 1.13 which makes traders to get confused when to enter. So if you guys have traded sharks successfully & have own set of ratio's : this trade idea is for you only. EURUSD is channeling for sometime and the recent close below our trendline put us on alert. So being conservative traders lets wait for pullback in 4h or Hourly charts to retest our trendlines and we can enter short in EURUSD and book profits around completion of D point. Hit Likes if you agree / Comment your views & Opinions Happy Weekend & Happy Trading !!
Short
by InsiderB