Exercise-Discipline

Exercise-Discipline Updated 

NFP reaction has given us a chance to add to USD longs for the medium-term. Fundamentals haven't changed and are still in play. Weaker wage growth doesn't change the fact that a structural dollar shortage and monetary policy divergence remains.

Exercise-Discipline

Today's month-end rebalancing flows were understandably USD negative, given the recent USD positioning in the market. They have given us excellent levels to add to USD longs. The USD uptrend should resume, given the strong fundamentals in play. Donald Trump's jawboning simply cannot weaken the USD materially, since he cannot reduce the structural dollar...

Exercise-Discipline Updated 

Bond yields are moving upwards - NOT because of rate hike or inflation expectations - but because of changes in term premia of longer dated bonds. Investors are demanding a higher premium to hold longer dated Treasuries. This naturally pushes bond yields up. DXY is normally extremely correlated with Treasury yields. Right now, DXY is trading at a discount...

Exercise-Discipline

Commercial hedging short interest is at multi-year highs - back to where it was in summer 2014 when oil topped at around $100. Hedgers are locking in current prices as they believe they are extremely attractive in the medium term. Speculative positions are also at multi-year highs - making oil prices prone to a downside squeeze. WTI may have set in a near-term...

Exercise-Discipline Updated 

4H chart - bearish divergence. Suggests reversal of S/T uptrend and continuation of long term downtrend.

Exercise-Discipline

Brexit = uncertainty until 2020. USD = rate hikes, fiscal stimulus, normal mean reversion of 10Y term premium, $10 trillion global dollar debt. This divergence should continue to push GBPUSD lower, even if the BoE decides to hike rates in the face of rising CPI.

Exercise-Discipline Updated 

30M chart shows divergence. Long term trend is up. Dip buyers should come back into play because dollar has fallen faster than yields.

Exercise-Discipline Updated 

Bullish divergence on 4H chart. Also yield differential between US and CA to increase in medium term. US 10 year should revert to incorporate 'normal' term premium - i.e. 25-50 bps.

Exercise-Discipline Updated 

Bond yields are moving in accordance with changes in term premia. A normal mean-reversion of term premium on the 10 year Treasury should maintain bearish bias. After the sharp sell-off in bonds with little-to-no retracement, a correction was to be expected. Thus, bond prices are moving as expected.

Exercise-Discipline Updated 

Bearish divergence Target 0.696

Exercise-Discipline Updated 

Sterling is significantly undervalued. While the uncertainty of Brexit remains, one thing does not: The path of interest rates and further QE. In my opinion: 1) The BoE is neutral, and NOT dovish. 2) Massive GBP depreciation has already led to a rise in PPI and CPI. 3) This rise in inflation, if Sterling continues to trade below 1.30, will continue. 4)...

Exercise-Discipline

Bearish divergence on 4H chart. GBPUSD up 120 pips from 1.22 lows. Target: missed weekly pivots at 7040, 6970

Exercise-Discipline

Fundamentally: the Eurozone is politically unstable. Debt is rising. The Euro may bottom soon if Draghi tapers QE. Rising US interest rates will put downward pressure on global equity markets. Technically: there are multiple divergences on the 4H chart towards 11600. Target: 11000, 10500, 10000

Exercise-Discipline Updated 

The bullishness in copper is misguided, in my opinion. Sustained dollar strength always hurts commodities in the longer term. The chart shows inverted dollar versus copper. A big fat juicy divergence, along with likely continued dollar strength due to a structural off-shore dollar shortage, should put pressure on commodities.

Exercise-Discipline Updated 

The chart shows INVERTED dollar index (blue) vs CAD index (candles). There is a clear correlation between inverted dollar and CAD - that is, a stronger dollar negatively impacts CAD - likely since a stronger dollar weighs on commodity prices in general. At present, there is a strong divergence between CAD index and inverted dollar. This needs to be...

Exercise-Discipline Updated 

Fundamentally: rising interest rates, higher inflation expectations and a rise in US yields relative to other major G10 currencies should continue to drive the dollar higher. Further into 2017, $10 trillion of off-shore dollar denominated debt is massively bullish for the greenback. Technically: The dollar index has broken 100.50 - a major multi-year...

Exercise-Discipline Updated 

Fundamentally: growing monetary policy divergence between the Fed and RBA. Technically: AUDUSD has broken the 2016 uptrend line. A 38.2% correction from recent lows was to be expected, given the sheer pace of dollar strength. The next leg is down to 0.70. Perhaps the best trade going into 2017.

Exercise-Discipline Updated 

Uptrend from late 2016 should support the greenback against the Loonie. Fair value around 1.40.