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The USDBRL recently broke above a descending channel, signaling further BRL weakness; an unusual occurrence given the ongoing shift to easing cycles by major global central banks. Figure 1: Major Central Banks Begun Rate Cuts; USDBRL Rises Instead On September 18th, the Federal Reserve (Fed) cut rates by 50 basis points, marking its first reduction since...

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“Emerging markets conclude 2023 on better note than developed markets” – S&P Global Market Intelligence. How much of this has been reflected in the respective market indices? Figure 1: Ibovespa and E-mini S&P500 Index Futures Figure 1 presents a retrospective view of the Ibovespa Index Futures (IND1!) and E-mini S&P500 Index Futures (ES1!) since the onset...

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As the year draws to a close, it's an opportune time to evaluate the potential trajectory of the dollar going forward. From a broader perspective, we anticipate a regime shift for the dollar in 2024, potentially marking significant turning points for the major dollar pairs. Notably, since the 1990s, each instance when real rates crossed the 1% threshold, the...

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The lights, carols and the last FOMC of the year, you know the drill by now, Christmas is here soon! As we head into the year's end, it's the perfect time to revisit an old idea we had last Christmas. In our piece last December titled “ Is the Santa Claus rally real? ” we explored the concept of the Santa Claus rally, discussing why and how a modified version...

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We already know that coffee beans have always been one of the most traded commodities in the world, specifically second, so why the sudden interest again? Figure 1: Summary of World Coffee In recent years, global consumption has increased at a higher rate than production due to pent-up demand. This rather large deficit in balance in the past two years puts...

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Last week , we examined Natural Gas from a seasonality perspective. This week, we aim to extend that discussion and explore other ways to implement a similar view. To quickly recap: From a seasonality standpoint, we identified short-term opportunities for a downward move in Natural Gas. Factors such as higher-than-normal storage levels, unseasonably warm weather,...

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So far we’ve covered Natural Gas twice, once in October 2022 , followed by another in May 2023 . As highlighted in both pieces we are generally longer-term bullish on natural gas but we do see some opportunities for a short-term tactical position now. As winter approaches, the harrowing memories of natural gas price movements during the previous winter seasons...

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Gold is once again in the spotlight, and here’s why! Economic Cycles, PMI & Gold The US Purchasing Managers Index (PMI) is a leading indicator often used to identify turns in the economic cycle. A below 50 PMI print indicates contraction in the US manufacturing cycle, while a print above 50 suggests expansion. Generally speaking, expanding manufacturing...

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This week our eyes fall on the crude oil market. From our previous article, Cracking the Crack Spread , we know that crude oil and gasoline hold a special relationship. Since gasoline is extracted from crude oil, the spread between the two futures should not diverge too much. Yet, in the past few weeks, we have observed a deviation in their prices with the...

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Australia's CPI data, released yesterday, showcased figures hotter than anticipated. While this may not be 'reaction-worthy' news on its own, the scenario in Australia is worth delving into for several reasons. Inflation Trends Initially, let's consider inflation trends. In most western economies, although inflation remains above central bank targets, the...

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In a previous article, "A Beefy Premium" , we delved into the growing divergence between Live Cattle and Lean Hogs. Since then, this disparity has only broadened. Currently, we're seeing a historic peak in both the absolute price difference (Live Cattle – Lean Hog) and the price ratio (Live Cattle/Lean Hog). To comprehend the drivers of this divergence,...

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Say you’re bearish but find yourself confused by the market. You want to partake in the action if things go south, but not 100% certain, what could you do? First, you could build some conviction by identifying potential reasons why you think the market could dip lower… Then, devise a ‘tail hedge’ to profit if things indeed go south. Let’s break down these two...

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As much as we try not to repeat ideas here, occasionally, an opportunity emerges to harp on the same point. As we have previously laid out the bear case for the S&P 500 from a historical volatility behavior perspective, this week we will zoom in on other metrics showing why we think the S&P may struggle from here. The first and most interesting measure,...

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With the action-packed week of global central bank meetings for September now behind us, we believe it's an appropriate time to review where we stand. The current phase, in our view, can be aptly summarized by the words of Huw Pill, the Bank of England’s Chief Economist: a ‘Table Mountain’ scenario rather than a ‘Matterhorn.’ Recent announcements have positioned...

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Certain weeks stand out in importance, and the week ahead is shaping up to be one of them. On the economic calendar we have the Eurozone & Canada CPI as standouts for Tuesday, UK CPI & FOMC on Wednesday. Such action-packed weeks often provide the catalyst for the next move in the markets. Our attention is currently drawn to the EURCAD for multiple reasons....

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Since our last analysis of Soybean Oil, the commodity has completed its head and shoulders pattern, now trading at the resistance formed by the previous neckline. Concurrently, we observe an RSI divergence, where the RSI prints lower highs while the prices chart higher highs. This divergence is generally viewed as a bearish indicator, hinting at possible price...

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Following Powell's statement at the annual Jackson Hole symposium – “We are prepared to raise rates further if appropriate and intend to hold policy at a restrictive level until we are confident that inflation is moving sustainably down toward our objective.” – markets seem more inclined towards expecting another rate hike in the US. This move, in our analysis,...

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The trajectory of the USDCNH is a burning question as it approaches the highs witnessed in November 2022. Recent weeks have seen China's economic robustness wane, and as a result, attempts by its central bank to ease the situation have led to a weakening of the CNH. This dynamic becomes clearer when considering the interest rate differential between China and...