I think we’re seeing a turning point in the economic cycle and markets are moving to reposition for this – one where we’ve been myopically focused on inflation, to the next phase, a pure global growth focus, with inflation subsequently falling back to 4-5% range. We’re all scrambling to price recession risk and how protracted it will be and whether the result will...
We close out a miserable first half for equity investors, and there will be many hoping for better times in the second half. I am not convinced they get them just yet, although those long of Chinese equity markets have been generating some good returns, with the China CN50 index trending like a dream – I guess this comes when the economy is starting to open up and...
Chris and Blake are back for another episode of The Trade Off! The spectre of a recession is hanging over markets and our hosts look over a range of asset classes (Gold, Forex, etc) and look at macro factors that influence them.
In recent weeks we saw the JPY reach lows we have not seen in many years. We saw EURJPY attempt to break 144.20 three times and got rejected on all attempts hence forming a potential triple top.
Triple tops are usually big bearish reversal patterns after a long-sustained move to the upside. We saw the market close as a spinning top on the daily chart which could...
US real rates drive everything in markets right now, and if they are going up then so is the USD, while equity will head lower – for context, the 1-month rolling correlation (assessed by value, not percentage) between US 10-yr real rates and the USDX sits at +0.94 – so there is an incredibly strong relationship.
This is also true of equities, where the US real...
Crude is in the spotlight for many different reasons. The commodity is a key pricing input for other assets. Breakeven inflation rates are being driven significantly by the movements in crude. This obviously has feed through into rates and Fed policy settings.
The rally on Friday has been continued this week as supply and demand jostle for dominance. The G7...
Looking at client positioning it's interesting to see the CHF (Swiss franc) come up on the radar as one of the larger exposures held by clients – certainly more than usual. I suspect this is the case because the CHF is moving but we’re approaching some key levels in a number of the CHF pairs – I’d also add that there is increased discussion on the role of the CHF...
From the monthly chart, we saw cable plummet to the big 1.2000 support level and bounce off. Each time price has come to this level, buyers have stepped in aggressively, as seen back in 2016, 2017, 2019 and 2020, leading to a massive move to the upside.
On the (H4/H1) intraday timeframes, we saw price go up to 1.2400 then started pulling back, consolidating and...
Westy is back from the UK and the Trade Off is back! Markets have moved since the last three weeks, so there is a lot to unpack. Is the bottom in for risk assets or is more pain coming, and when will it reverse?
Fed Chair Jay Powell stole the limelight in his testimony to the Senate and despite all we’ve heard pricing for the July FOMC meeting hasn’t shifted – the markets expect a further 75bp of hikes. What we have seen is solid buying in the US treasury market (2yr USTs were -14bp), while commodity markets evolve to show greater signs of recessionary fears, with copper...
I see EURUSD as screening cheap on several metrics. Certainly, if I look at relative settings in the German and US bond and rates market, one could make an argument that ‘fair value' for EURUSD is above 1.1000. Germany’s biggest trade union pushing for 7-8% wage increases pushing up German bond yields, which has increased the EUR valuation a touch.
Still, it’s...
On the monthly chart, we can go back to 2016 and see that each time price has come into this area buyers have reacted aggressively, which has typically resulted in a strong rally in the following months.
Taking a closer look at the weekly chart, we saw last week's candle closed as a big bullish engulfing candle, confirming that buyers were once again strong in...
USDJPY and the JPY crosses capture the minds of traders – while there is so much going on in central bank land, the BoJ in its meeting today decided to sit on their hands and do absolutely nothing - whilst in some ways this is refreshing, there have been several hedge funds that have been betting that the BoJ will forced to lift its policy of capping the Japanese...
Need to know – Thursday 04:00 AEST / Wednesday 13:00 BST with Jay Powell’s press conference at 04:30 AEST.
Broad Expectations – Of 94 economists polled by Bloomberg 8 have a 75bp (or 0.75%) hike as their call, and 86 are calling for a 50bp hike. The market places a 97% chance of a 75bp hike.
Managing the risk
It’s the meeting everyone has on their radar –...
Blake and Chris are back for Episode 25 and unpack the effects inflation is having on markets, central bank policies and really, almost everything! We hope you enjoy the episode and as always, let us know your thoughts, trades and ideas in the comments.
We can focus on the bullish moves in crypto and crude, but we’ve seen further love for the EUR, with German and Spanish CPI hotter than forecast.
We look ahead to the session ahead for EU CPI estimates (7pm AEST), but the market is now LIKELY positioned for an upside surprise of the 7.8% consensus. We’ve seen EU tradeable interest rate market respond to the...
Tesla has come up on the radar and with the drawdown moving to 45% in the past 34 trading sessions traders are asking if we can see this trade sub $600 soon. Obviously, sentiment is shot to pieces and it's a tough environment for any listed entity, with few wanting to take on risk especially in high beta growth equities, regardless of the news flow from the...
After a bloodbath in US indices on Wednesday, we’ve seen some modest calming of conditions, with the focus on the US500 and whether we could break 3853 – the level which takes the US500 index 20% from its 4 Jan high and into a textbook “bear market”. Consider the average drawdown from its 52-week high in the US500 is 25%, so we can see the index move masks some of...
