📌USD - devaluation continuation is the name of the game...the breakdown is cooking; Biden has turned dollar into an awful shelter. Look for cover elsewhere, a 'digital dollar' could also be a beautiful political manoeuvre in which we may see the transfer of whole equipment from West to East. Needless to say, the centrepiece to the FX board is looking a lot less convincing as we end the year compared with how we started.
📌 EUR - bridges are building...eurobonds entering into the picture has been decisive, debt mutualisation is a necessary component for the currency to survive and Coronavirus was for Merkel what Britain was for Alexander Hamilton. Political bridge building will provide a nice shelter for the coming year(s) and the bias is to remain long EUR/USD .
📌GBP - is also playable of course... and should be one of the better isolated macro trades here. While Johnson has managed to provoke Biden , he has lovingly moved away from no-deal via Trump back to secured the 'deal' with Europe. The subordinate Johnson deal will not really be considered better by anybody in the ST and is unlocking a leg lower in GBP assets. The only prevention for the annihilation manoeuvre, as has already been pointed out, comes from the dollar devaluation which can enter into play sharply into 2022. This is an instructive example of balancing a portfolio.
📌 JPY - "if it aint' broke, don't fix it"...the West have a lot to learn from Japan when it comes to understanding how to deal with the issues surrounding private debt from 1991. Of course, you are right to say well @ridethepig the West didn't let asset prices considerable weaken, sure, but this is why growth fizzles out. Japan knows the problem is terribly restrictive and must sacrifice fiscal policy. Paying down on private debt with wonderful imaginative gifts while using Government spending to continue the money supply flows. A risk-off inversion is/was the only way to avoid deflation and the 30 year gap is now plugged with experience.
📌 CHF - "SNB have played skilfully"...in order to protect the currency as best it can, the CB has been granted a chance for some more direct action at 0.870x. And in the meantime, with a WhiteHouse dependent on Fed resources and conducting desperate struggles for its own existence, dollar devaluation is opening the waterfall towards 0.780x if the would fail.
📌 AUD - "Commodity shortages and supply restraint"...the prognosis for the Aussie seems quite good (and for other commodity currencies NZD and CAD more broadly). The barricades from global government have managed to disrupt supply chains and in this game, because of the relationship the Australian currency has with , a test of 0.80c is needed.
📌 NZD - "keep an eye on RBNZ" ...the dollar shorts across G10 are mobile but here I must say NZD is my least favourite of the commodity currencies. The blind spots to this come from RBNZ bringing debt:income measures generally back into play, which is not helpful for credit and will potentially unlock threats of negative rates once more.
📌 CAD - "the taxing neighbour"...is leading to direct inflows into Canada. A Biden sweep in GA is grounding the manoeuvre for the outflows, the soundness of which will give us the chance to park capital for a few quarters at most. Losing 1.280x for the yearly close is sufficient that we are able to work out the waterfall towards 1.20xx. Stay short USD versus CAD into 2021.
📌 SEK - "Classical manoeuvring"...a very good year for SEK after the initially softer start, it rallied aggressively alongside NOK . The main line in SEK at 8.2x is within touching distance.
📌 NOK - "more to come" ...with a strong indication from models to buy both NOK and SEK . Commodity shortages (including Oil ) can no longer be staved off. The successful penetration of 8.7x support will unlock a -12% waterfall for 2021.
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