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EURUSD/ GBPUSD/ USDJPY - SELL USD ON RALLIES: ECB, FOMC, BOELautenschlaeger remained neutral on the margin, stating raising rates wouldnt help anybody but neither would the change to the APP or further cuts. This comes in line with last weeks ECB's to leave policy unchanged. I think this is more pressure for EUR bids but undoubtedly i think USD will dominate the pair until the fed on the 21st and fed funds pricing will sway EUR$'s price range until then. However, on a no vote, combined with the ECBs hawkish-neutral monpol decision my bets will be with EUR$ heading towards the 1.14 upper percentile of the range. Conversely a surprise hike decision will likely shock EUR$ 200-300pips lower than market on the day, though i wouldnt be surprised to see dips brought as we have consistently seen with EUR$ and monpol changes in the past 12m. On the day fed funds trade flat implying 15% probability for september, hence the shock risk is higher, though i do believe the true probability to lie somewhere near here. US 10yr yields also hit 3m highs today interestingly despite there being a risk-off lingering in the air. For USD now though I prefer to buy yen here on rallies in $Yen, yen broadly cheap given risk-sentiment and BOJ no move (in conjunction with FOMC now move). Also i think sterling is cheap here going into BOE, no action is going to happen imo given the strength of data so i prefer to buy dips into 1.310/5. The inflation "Miss" selling is an over-reaction given we are still at the higher levels recorded in CPI, and clearly there is a new normal lower with inflation which the market is under-pricing in GBP. Unemployment data and retail sales will be watched closely, beats will put GBP back on the bid to 1.34 (assuming BOE are neutral) especially given an FOMC no move puts the fed below their own targets and should cause firm supply. ECB Lautenschlaeger highlights: ECB's Lautenschlaeger: Raising Interest Rates Now Would Benefit Nobody, Not Even Savers or Banks ECB's Lautenschlaeger: I Still Consider Negative Rates to be Justified Despite Risks, Side Effects ECB's Lautenschlaeger: We Shouldn't Feel Obliged to Cut Rates Even More ECB's Lautenschlaeger: We Don't Seem to Have Reached Lower Limit For Rates ECB's Lautenschlaeger: See No Reason Now to Change Design of Bond-Purchase Program ECB's Lautenschlaeger: Must Give Bond Purchases Time To Work ECB's Nowotny Says Monetary Policy Should Stimulate Domestic Demand
Short
by QuantumLogicTrading
1
GBPUSD: Long against supportWe can go long GBPUSD here. Sentiment is at a bearish extreme and I don't think we'll see follow through to the downside when oil, the yen and other dollar pairs are stuck in a triangle (due to market awaiting FOMC outcome). Stop should be below 1.3128. I'm risking half on this and the AUDUSD long (see related ideas), while I hold my SPX short from 2187.5 (covered half today at 2133.4, my stop was 2194.6, and I took a NAS100 long that you can see in related ideas, which also is related to these fundamental and sentiment developments) Good luck, Ivan Labrie.
Long
by IvanLabrie
3
STERLING - A HIGHER GBP EQUILIBRIUM: BREXIT, DATA, VOL, RATESGBP moving higher? Data: 1. Leading post brexit data has recovered significantly from 5-10yr lows to firm growth or significant recovery (PMI, Optimism, Confidence) and imo this will be continuing theme given negs arent going to start for another 6-9m, there isnt any impetus to drive us lower again. 2. Also the macro indicators are trading well, e.g. Inflation, employment and GDP are all firm, assuming this continues further BOE action will be impossible & general sterling selling will struggle. Negotiations: 1. EU Exports equal 50% of total exports whilst total exports equal 10% of GDP, so even if we lost all EU exports GDP would only fall by 1% given imports are marginally less than exports thus the cost of losing EU trade is offsetted, its not all one way. UK Domestic demand would pick up the EU import slack so likely only 1% to GDP to be lost. - That is the absolutely worst option. In reality we know negotiations will only realistically lead to at worst international trade inefficiencies e.g. duties/ taxes, which will likely have a less then 0.1% effect on GDP. The EU isnt going to cut all ties. - Also from this point, and GBP 10-20% lower uncertainty is priced so further downside from uncertainty is hard to justify unless we get new political stimulus which is unlikely given how quiet it has been to date. So risks here look to be to the upside e.g. uncertainty/ complacency fading meaning confidence/ optimism rises in the near term (even if wrongly), which sees GBP wash off some of this "gap" and move to a new near term equilibrium. GBP price action: 1. STG crosses have lost 2-4000pips or more in the past 6m, so is relatively very undervalued, thus a 500-1000pip rebalancing higher wouldnt be uncalled for or even relatively aggressive. 2. Topside is also supported by the price action we have seen post brexit, apart from the initial brexit losses, any further downside (weak PMI, BOE easing etc) GBP has failed to hold the lows of the range OR even trade at the lower percentiles for any particular amount of time - we havent seen a new equilibrium lower in sterling weve remained rangebound with a topside skew. We have seen GBP brought quite aggressively on dips, and on reflection, it has actually paid to be a buyer on dips vs a seller on rallies from a risk perspective. Being a bear myself, I know it has been an upward battle to gain any consistent downside, all structural shorts have turned into tactical positions with early profit taking e.g. short GBPUSD for 1.25 was cut early at 1.29 when the bulls faded the move lower. This theme has been consistent despite BOE Easing and strong fwd guidance, with flimsy data. 3. The past week MA i think is much closer to where we will see GBP trade in the future vs the 1m MA at 1.319.. 1.334 on the weekly is where i feel we will find the next months average.
Long
by QuantumLogicTrading
3
DXY/ USD: WEAK ISM PMI FLUSHES USD BIDS - FED MESTER SPEECHUSD disappointingly failed to maintain its heavily demanded week when ISM PMIs not only fell short of expectations but also showed a slight contraction by slipping across the 50 mark to the downside. This data pattern however has been consistent for USD, where it has failed to show any upbeat prints, though in the past months the Job market has been able to stand out from this trend so it is difficult to read too much into what the report tomorrow will show. As discussed in my post last week, i believe the risks are to the downside and even more so that Fed mester has stated that employment has reached capacity and 75k-100k a month will be enough to maintain the rate - a figure like this tomorrow would surely see DXY move back into the 94s, with september expectations likely to drop into the 12-18% range that it had maintained before yellen last week. Fed Mester on the whole was neutral, offering little to support the dovish or hawkish side. USD Positioning: In terms of positioning, given $Yens rapid 6-day appreciation (today would be the 7th on a close above 103.45) I am looking to get short if we can get a close just 15pips higher than market, as a 7th day on the up has only been seen 3 times in the past 16yrs so shorts here are statistically in play - though of course NFP upside bodes a risk, but given my expectations going in (downside) it is a risk I will be willing to take (not to mention i expect market risk to spike increasing yen demand - but i will discuss this in a separate post if we close higher tonight). My long favoured short GBP$ trade is currently hanging in the balance, with little negative data to illustrate brexit impacts coupled with USD data unable to get a footing it is hard to continue with the "short sterling on rallies" approach, given topside is becoming arguably justifiable, if we see Services Monday and construction friday PMIs above the 50 level, short GBPUSD on rallies will no longer be a conviction trade, as there will be no real macro case outside of the broad "brexit uncertainty" which by all accounts is waning as optimism and confidence measures are fading the downside spike. Ask yourself, going forward assuming data holds up which it should, what further reason does the BOE have to ease or GBP have to fall? Brexit negs arent likely to start until Q2 2017 so we have a firm 6m of "stability".. especially when you think of sterling with respect to the massive 1000-4000pips its lost (cross ccy) into brexit, upside from here is certainly possible even if it is just a recovery rally. Trading NFP on a 220k print is also possible as a tactical trade e.g. long DXY, as DXY is likely to offer lower some more going into the event as the market derisks. Fed Mester Speech Highlights:
TVC:DXY
by QuantumLogicTrading
8
FADE SHORT GBPUSD ON RALLIES: FED KASHKARI SPEECH HIGHLIGHTSSame onld rhetoric from Kashkari - nonetheless i remain short GBP$ on rallies into 1.315/25, given DXY's advances GBP$ has been an outstanding under-performer given 1.315 is the levels we closed on friday/ opened on monday. However, Manufacturing and Construction PMIs are a risk, any topside sterling could certainly trade to the upper levels of the range (1.325) and possibly even test 1,33 - depending on the beat. TP levels should be 50-100pips lower at 1.3100 or 1.3050, longer term trades, or bets on USD Jobs report outperforming, with UK PMIs under-performing could easily aim for 1.2910. Risks for the PMIs are neutral going in, they have ben set higher than last, however UK data has generally outperformed, though GDP was flat and business investment negative (though better than expected). Risks for NFP are neutral-downside, given the 180k "low bar", however the downside risks are the fact weve had 2 massively outperforming prints which could see some mean reversion making this print unusually lower.. The upside is obviously the low figure and the fact ADP Non-farms came in above expectations, though only by a few 1000 and ADP-NFP correlation isnt that high. Nonetheless, I remain short on rallies data dependent.. given the BOEs monpol changes and the FOMCs low but started hike cycle the equilibrium should be well below 1.30 - especially as PM Theresa May confirms no back doors will be used to void brexit and that will definitely go ahead. USD STIR Fed Funds trade higher today also for september implying a 27% probability vs 24% yesterday which gives more upside arguements for USD, though long term govies today trade broadly lower across the 2-30yr curve but only marginally, with 2yrs down 2.4bps (-2.9%) on the day. Though Sterling UK 2yr govies trade 1.4bps (9.09%) lower Fed Kashkari Speech Highlights: Fed's Kashkari: Need More Data Before Decision on Rate Increase Kashkari Wants to See Core Inflation on Rise Before Rate Increase Kashkari: Fed's Governance Structure Should Stay as Is Kashkari Hasn't Seen Inflation Increase Yet Fed's Kashkari: Need More Data Before Decision on Rate Increase
Short
by QuantumLogicTrading
2
SHORT GBPNZD: CARRY TO OUTPERFORM; LOWER BOE EQUILIBRIUM?GBPNZD: 1. Wanted to repost my view on GBPNZD - remain short on rallies here into 1.82 with a 1.80, 200pip target. 2. This whole week weve remained strictly rangebound and sterling kiwi has paid every time (about 10) on shorts at the 1.810 level so i will continue this view at 1.82 given: 1) NZD carry continues to be the highest in G10 so Kiwi demand will likely hold up for the foreseeable future especially on BOE fwd guidance - though UK data outperforming in the near term could continue to put sterling topside pressure though the long game i dont expect this to last. 2) Sterling looks overbrought on the daily at these levels some 400pips higher than BOE monpol lows, here imo is the true home for GBPNZD given I expected the lean for further easing to be on BOE vs RBNZ as kiwi house prices will continue to prevent aggressive easing (as Wheeler pointed out earlier this week - rapid easing isnt going to happen). Risks: 1. Technically, on sterling demand I think risk is to the 1.83 resistance level, I dont think sterlingkiwi has much more given the amount of resistance we have found down at 1.81. 2. AUDNZD Re-balancing - there looks like there may be a AUDNZD rebalancing higher after 2wks of selling, this could shift GBPAUD aussie shorts into kiwi shorts vs GBP, though the AUDNZD movement higher looks to be struggling to gain traction given the differential of 50bps remains the bottom line, and weak fwd guidance from both RBA and RBNZ makes it difficult to differerentite the two (not to mention aussie data has been less firm in recent times vs kiwi). 3. UK PMI - UK PMIs next week, if outperforming will likely give GBP bulls more fuel to own sterling, given it is economic revisions recently higher that has been the fundamental reason for sterling topside - so further leading indications from PMIs could continue this trend, though given the move already higher, 1.82 could be the ceiling here (though watch out for a AUDNZD equilibrium higher which would make gbpnzd move through 1.82). If the PMIs were to show any figure above 50, expect an aggressive 300pip+ movement higher. 4. USD hiking risk - USD strength will cause NZD yield seeking supply as investors shift into USD markets instead.. as we have seen today with the spike higher, continued USD rate performance will drag on NZD longs in the medium term.
Short
by QuantumLogicTrading
SELL GBPJPY: RISK-OFF SHIFT COMING? LOWER BOE MONPOL EQUILIBRIUMGBPJPY: 1. Given Fed Yellen's "hawkish" market response and GBPUSD, GBPNZD and GBPAUD shorts TPd on the rally lower today cleared (FX risk book clear too), im looking to add some safe haven assets to my portfolio. 2. Looking at GBPJPY and GBP structures on the whole, there has been alot of sterling longs in the past 2wks accumulating in spot as economic confidence falsely increases (imo, given intelligent money understands near-term UK risks are to the upside). - GJ rising some 7 of the last 9 days, and now 400pips above the aug 16th lows of 129 at 133.3 I think there is at least that 400pips in downside available from here as the new equilibrium for several reasons: 1) Fed Yellen being hawkish looks like it may be the catalyst for the september US Equity sell-off, in which case, highly negatively correlated assets (e.g. safe havens yen, gold UST) are likely to pick the bids up, thus driving GBPJPY lower i.e. A tightening of financial conditions in the US will put pressure on US equities and also US election risk will transfer into Yen demand - also Brexit/ A50 risk is a medium term yen topside catalyst which makes sense owning through GBPJPY downside. 2) GBP shorts at these levels, given the monpol introduced by BOE, look like the smart move as the market is significantly higher than the monpol lows (which should be the new equilibrium). 3) Further BOJ action is made more unlikely by a hawkish Fed - hawkish fed looks to have provided $yen some topside support in the immediate term if nothing else, this eases pressure on the BOJ to ease - though a counter to this is the recent BOJ Inflation CPI traded some 30bps lower at 0.5% - the biggest drop since its inception (and the lowest level ever) this could be a push to more easing. However, the July Meeting misfire when expectations were perhaps at their highest and the current JGB drying liquidity situation somewhat capping the extent of further easing, I cant see the BOJ doing anything more than jawboning, as they have consistently continued to do (and about the only thing they have). Also for extra confidence, even if the BOJ was to ease - look at the past 2 times (Jan April), both policy measures provided 0 equilibrium relief to yen downside and infact fueled some 500pip+ topside to yen, so yen bulls imo can feel conforted that further easing is likely to have little impact, even more so as their ability to do more is ever reduced. 4) Technically, as mentioned weve been on a 2wk bull run so i feel GBP topside is due a rebalancing lower, and also the downside targets are not uncharted territory having traded at the 129 level on 2 previous occasions so the profit target isnt unreasonable. 5) I hear RM long-term short positioning, is picking up at these levels where sterling looks arguably overbrought. Trading Strategy - SHORT GBPJPY @133.3, add at 134 135 and 136 - TP 130.5 and 129 1. Short GBPJPY - Small at market price 133, and add ever 100pips higher if bulls continue up to 136 - the macro resistance levels on the daily are the 134 and 136 level. - Short small here at 133.3 and ADD as we move higher as short sterling given brexit/ monpol future and long yen given the risk-on bull run which is bound to run out given hiking and election risk intensifying imo is an all but guaranteed trade. Any questions on the trading strategy PLEASE ask!!
Short
by QuantumLogicTrading
4
SELL GBPAUD: STRAT TRADE - 7 DAYS UP P=99.746% 8TH DAY LOWERb]GBPAUD: 1. Sterlingaussie has been aggressively bid higher for the last 7-days on the back of sterling data outperforming last week, broad aussie weakness and a general recovery from lows. 2. Statistically, after analysing the last 16.5yrs of data it shows the probability of a 8th day or more of buying is 0.254% which means there is an implied 98.78% chance that we move higher today - I like these odds so will add a short here. - If we were to see another day of buying, a 8th day, then the probability of a 9th day is even better on the sell-side odds of 99.918% so i will add to shorts if this is the case - the max number of buying days in GBPAUD has been 10d once and 9d 3 times, 8d 7 times. 3. Plus aussie 30 bill rates firmed up on monday implying only a 5% chance of a september cut down from 8% of the past week, and sterling OIS rates came off from Fridays rally after the market decided to fade last weeks data. - Also we have found some technical price resistance at the 1.72 handle so being short here makes sense. Trading strategy - GBPAUD Sell @1.740: 1. Short GBPAUD pretty much at market TP should be 100-200pips lower. 2. Short small and add if we move higher again on thursday - friday imo is the most likely day for a sterling sell-off as shorts are squared up on profit taking. 3. I also like being short gbpnzd and gbpusd from 1.81 and 1.325 - both have 100-200 easy pips - especially on a UK GDP miss on friday.
Short
by QuantumLogicTrading
6
SELL GBPAUD: STRAT TRADE - 5 Days up P=98.78% 6TH DAY LOWERGBPAUD: 1. SterlingKiwi has been aggressively bid higher for the last 5-days on the back of sterling data outperforming last week, broad aussie weakness and a general recovery from lows. 2. Statistically, after analysing the last 16.5yrs of data it shows the probability of a 6th day or more of buying is 1.22% which means there is an implied 98.78% chance that we move higher today - I like these odds so will add a short here. - If we were to see another day of buying, a 6th day, then the probability of a 7th day is even better on the sell-side odds of 99.45% so i will add to shorts if this is the case - the max number of buying days in GBPAUD has been 10 once and 9 3 times. 3. Plus aussie 30 bill rates firmed up on monday implying only a 5% chance of a september cut down from 8% of the past week, and sterling OIS rates came off from fridays rally after the market decided to fade last weeks data. - Also we have found some technical price resistance at the 1.72 handle so being short here makes sense. Trading strategy - GBPAUD Sell @1.721: 1. Short GBPAUD pretty much at market TP should be 100pips lower at the 1.711 level. 2. Also check my previous post of short gbpnzd into rallies at 1.81 and GBPUSD into 1.315-32
Short
by QuantumLogicTrading
4
SPX/ EQUITY BULL RUN: RISK-OFF SHIFT 10% LOWER ANY SECOND NOWSPX Bull run 1. Post Brexit US equities have been in an easing induced rally, with the Fed delaying hikes, BOE easing and RBNZ/ RBA also easing - this encouraged US risk markets to set new highs - with 7 of the last 9 weeks strong closes higher. The Bull run over? 1. The last 2wks have closed flat but hhave remained rangey indicating the market has low conviction to break higher given the 7-bull weeks which saw 10pt+ increases, and we now look to have formed another price ceiling at 2188 0.5% up from the previous ceiling at 2188. 2. There is little reason for the bull run to continue, price action momentum is exhasted, the Fed is doing its best to be hawkish and the US election weighs ever nearer - not to mention US data e.g. GDP comes in lower indicating business conditions may not be the best domestically and easing in international markets looks to be all but fully priced with the FTSE now pulling back from its own hithw- so the move lower from here makes sense, 3. History on the markets side? historically Aug SPX has never closed below July and has been the traditional bull-run month, so my bet is that we will remain range bound for another 2-33wks (possibly one more 0.5% move higher) then the 10-15% pullback will begin in the first week of September as Traders square end of month profits in August end beginning the selling cascade, and the possible NFP beat steepens US rate hike expectations and the tightening puts further added downside pressure on the market. Trading Strategy - Short SPX @2188; Short FTSE100 @>6900: 1. I like to be short SPX and FTSE from here with TP at 2075/2000 and 6440/6000. 2. Hedges include being long individual equities - i currently hold Apple longs from 105 and FB longs from 122.
TVC:SPXShort
by QuantumLogicTrading
2
SHORT GBPUSD & EURUSD: FOMC DUDLEY SPEECH HIGHLIGHTSFed Dudley reiterated his hawkish sentiment from earlier in the week today, concentrating somewhat purely on the labour market and its gains (ignoring every other data point since that would mean being dovish) nonetheless this is supportive of USD bulls regardless of the genuineness. As posted earlier, i like GBPUSD and EURUSD shorts - see attached posts. The option implied fed funds interest rate trades at 18% for september up from 15% yday - more bullish USD sentiment + USD govies trade down across the board though Fed Dudley Highlights: -Fed's Dudley: Fears Of Labor Market Stalling Are Much Reduced -Dudley: Recent Data Confirms Job Market Continues To Improve -Dudley: Evidence Mounting Middle Income Jobs Are Picking Up -Dudley: Puerto Rico Economy Remains Troubled -Dudley: Puerto Rico Has Fundamentals To Mount A Rebound -Fed's Dudley Says Recent Data Confirms U.S. Job Market Still Improving -Fed's Dudley Says U.S. Job Market is Still Improving FED'S DUDLEY: SEEING CONTINUED IMPROVEMENT IN LABOUR MARKET -Positive Signs That 'Hollowing Out' Of Job Mkt Is Abating -Strong Growth For 2 Months Helped Alleviate Earlier Concerns
Short
by QuantumLogicTrading
2
SHORT GBP VS AUD, NZD, USD: FADE RALLIES - RETAIL SALES BEATRetail sales outperformed on all cylinders today and GBP as expected has rallied into nice shortable levels now - with brexit uncertainty likely to continue to way and continued dovish BOE support also equally weighing on sterling in the future. My preferred shorts immediately are vs USD as i expected Fed Dudley and Williams (speaking today) to talk the extremely battered USD higher (as they did earlier in the week). I also like medium-term (end of next week shorts) vs NZD and AUD as GBPAUD and GBPNZD come into nice resistance at 1.81 and 1.713, after closing two days with both aussie and kiwi weaker i think this third day higher will be the last and thus a high probability opportunity to short GBP - I also like these AUD and NZD longs given the above average employment reports from both NZD and AUD this week which seemingly are yet to be priced vs GBP. Further the medium term view vs AUD and NZD of short GBP derives from the trend - where you can see GBP has lost 1000pips post brexit as the implied interest rate differential between GBP and AUD/ NZD has increased and is projected to increase as BOE ease rates and AUD and NZD rates are likely to remain stable (especially AUD given the SOMP and RBA minutes). Whilst NZD rates remain at the pinnacle of 2% so even if the RBNZ does ease as expected the differential between sterling and kiwi will remain the highest for yield seekers for the next 50bps lower, which is likely to be neutral. Trading strategy - Short GBP vs AUD, NZD, GBP in proportionate SMALL lots and add if higher: 1. Short GBPUSD @1.317 - 1.305/8TP1 1.290TP2 2. Short GBPAUD @1.713 - 1.693TP1 1.673TP2 3. Short GBPNZD @1.81 - 1.7910TP1 1.777TP2 I also like this strategy given the 3-way exposure net hedges any individual cross risk e.g. aud nzd or usd.
Short
by QuantumLogicTrading
2
NZDUSD: RBNZ MONPOL DECISION PREVIEW - BOE OR RBA STYLE?RBNZ Monetary Policy Decision : 1. At 22:00GMT the RBNZ are expected to cut their OCR rate to 2% from 2.25% (25bps), further they will release their monpol statement and rate statement then too - with RBNZ Gov Wheeler speaking 1hr after the release. 2. The are a number of outcomes which are likely to or not to affect the NZD$ market, I will list the combinations below from the very LHS/ Dovish to the more mild and RHS- Combination of outcomes - assuming the 25bps cut is certain as it is priced 100% into kiwi rates markets: 1. LHS NZD$ response fall to 0.690-0.681 - a 50bps rate cut, dovish statements and offering strong easing biased forward guidance e.g. hinting at further cuts likely, possible QE, other alternative measures being taken if kiwi persists strong - and Gov Wheeler Reiterates this dovish and highly committed sentiment in his speech.. - BOE and Gov Carney speech last week is a good illustration of a LHS response, very strong commitment to future easing - despite denying negative rates (housing market sentiment could be the equivalent here) 2. Average NZD$ response fall to 0.710 on the day - a 25bps rate cut, some weak references to future monpol - Wheeler fails to convince the market anything new will be coming 3. RHS NZD$ response = stable at market, then whipsaw higher to 0.73 on the day as investors flock to the highest G10 carry - a 25bps cut, no references to more easing and a theme of conplacency - Wheeler is neutral and perhaps makes mention to the housing environment limiting the RBNZ's hand with future easing. - RBA's rate cut and SOMP last week and Gov Stevens speech yesterday is a good example of a RHS rate cut and neutral statement/ Speech - offering no forward guidance on policy, no hits at future easing conventional or otherwise - where we have seen AUD$ move 200pips higher despite the cut My Opinion on the most likely outcome: 1. Assuming the RBNZ have seen the very bullish AUD reaction to this weeks WEAK rate cut by the RBA/ Stevens (as discussed above) and the RBNZ has also seen the bearish reaction of the market towards BOE/ Carney's reaction to their aggressively dovish statement, speech and policy measures (e.g. cut and 60bn in QE); - And assuming the RBNZ have seen Kiwi's strength (or USD weakness) and the high levels/ bullish sentiment kiwi is going in at into this monpol decision, which is particularly important now since the RBNZ's emergency economic assessment which stated that they didnt appreciate the strong kiwi$ and would like to bring it down. - These two factors in mind, plus the fact kiwi data has remained weak and RBNZ at even 2% after a 25bps cut is still the highest yield currency by a massive 50bps in G10 (AUD at 1.5%), so thinking of these 4 elements which are all very dominant calls for dovish/ 50bps cut policy It makes sense to think that the RBNZ will be skewed to delivering a very dovish/ LHS monpol package and a BOE M. Carney like speech by Gov Wheeler, especially since the House inflation issue has been discussed and macroprudential policies are set to be put in place in september to try and curb this issue where of past this has been a hawkish limitation on the RBNZ's will to be dovish and ease more. - However, guessing central banks this year has been tricky (BOJ in mind) so there is no certainty, and also there are some worrys over the RBNZs ability to cut 50bps at once - despite the need for it as a 25bps cut leaves a 50bps differential between AUD and NZD which will continue to cause deflationairy pressure and bullish NZD as investors flock to kiwi over the close partner Aussie - given this the RBNZ should be even more inclined to cutting the 50bps so that their ccy isnt used as the "carry ccy". There has been several calls by sell-side houses for a 50bps cut, but as above only time will tell.
Short
by QuantumLogicTrading
3
NZDUSD: TECHNICAL ANALYSIS - TARGET 0.701 BUT USD WEAKNESS?NZD$ Technical Analysis: Moving Average/ fair price gauge: 1. Kiwi looks rich here at the lower 0.72 level which, significantly above the 3m and 12m which sit at 0.703 and 0.690 respestively, whilst the 1 trades at 0.711. - However, going into RBNZ where they are expected to be dovish (discussed in detail in attached post), these MA levels fall nicely in line with areas of price action suppport and thus will be used as profit targets - thus 0.711, 0.701 and 0.691 are my TP1 TP2 and TP3 levels however, given the bearish bias >50% of my lots will be squared at between the 0.701 and the 0.61 level. The 0.711 level is an intermediate TP, which is better suited for 0.718 shorts vs the 0.722 shorts that i currently hold. 0.691 is possible but is skewed towards the bottom of the range, with 0.681 at the very LHS - a 50bps cut and strong dovish forward guidance e.g. like BOE will likely offer us here - cable managed to fall some 350-400pips which ceteris paribus takes kiwi into the 0.681 level also. Volatility 1. Realised vol has contracted aggressively in the last few days as the daily ranges have tightened unsurprisingly going into RBNZ - IV on the other hand also unsurprisingly has traded bid as option positioning increases as investors place bets on RBNZ. - Net bets to date look to be bearish, with current 25d risk reversals skewed to the downside at -2.6vols, and across the view we observe a -0.5 to -1 downside bias reflecting the expected RBNZ dovish pressure expected. - 50d ATM vols trade currently at 30%, 14.8% 1wks, 12.3% 2wks and 11.3% 1m - clearly the RBNZ and following speakers are steepening the vols here. Though interestingly past current and 1wks, 2wk and 1m IVs are flatter than RV, indicating the market expects kiwi price action to settle after the next week which could mean we see NZD$ move post RBNZ then stabalise at this level vs obseriving continued seesaw action of the past 6wks e.g. 0.70-3 ranging. - Interestingly RV has developed a 60-80% correlated pattern of aggressive/ volatile price action emerging AFTER RV reaching the 5.0-5.5 level (current levels) so assuming my/ markets RBNZ forecasts are correct one would expect this move to be lower (ive highlighted these moves). Standard Deviation: 1. On the daily weve seen SD normalise from the previous levels where kiwi tested the +2 levels after realising these upper 0.72 levels for a sustained amount of time now - hence NZD$ trades at pretty normal levels for the linear regression though an uptrend as now formed vs sideways/ flat being the previous trend. However, I am betting on the RBNZ offering kiwi lower and realising some days below the 0.70 which should see the kiwi trade at 0.70 as an average price at years end - assuming the RBNZ has seen RBA and BOE (and the difference in response and will use this to make their policy effective).
Short
by QuantumLogicTrading
GBPNZD: Uptrend continuationWe're long GBPNZD from 1.8431, with stops at 1.82598. In related ideas you can see my long term NZDUSD analysis, which makes me think this pair is due to embark in a lengthy daily/weekly uptrend soon. After the first push, a pullback came and has given great opportunity to enter longs. We now have to break the blue box resistance up, and trade comfortably higher and/or expand the daily range from this zone, upwards. If not in, you can risk a long with stops at 1.8423, and target the level on chart. Check out my updated track record here: pastebin.com If interested in my real time whatsapp alerts and swing trading newsletter, or in personal tuition, contact me privately. I'm offering a considerable discount on a packaged course which includes access to my private trading signals list for a year. Cheers! Ivan Labrie Link to Tim West's chatroom: www.tradingview.com We discuss setups like this often there. Feel free to stop by and subscribe to his indicator pack. If you have any questions ask. Risk disclaimer: My analysis is provided as general market commentary and does not constitute investment advice. I will not accept liability for any loss or damage including, without limitation, to any loss of profit which may arise directly or indirectly from use of or reliance on such information.
Long
by IvanLabrie
GBPUSD/ GBPJPY: BOE POLICY DECISION & CARNEY SPEECH HIGHLIGHTSBOE's policy decision and QIR was largely inline with expectations, perhaps even 10bn better than expected on the QE side - and was very forgiving with hints towards further interest easing, though the stubborn unwillingness to realise negative rates undermined this to some extent. GBPJPY and GBPUSD shorts traded into intermediate TP levels - with GBPJPY unsurprisingly outperforming (implied vol adjusted) given USD weakness, and trading through the 133 handle (132.3 now targeted) whilst cable traded abit more firmly bid struggling to even test the 1.308 pivot, let alone break it - i think we will see a 1.308 key support break tomorrow if NFP comes in hit or beat and I am now waiting for this (gbpjpy shorts closed). BOE Monetary Policy Decision Highlights: BOE Aug Minutes: 0 Members Voted to Increase Rate DJ News BOE: Six Members Voted To Expand QE Program, Three Against BOE: Forbes, Weale And McCafferty Voted Against Expansion Of QE BOE: QE Dissenters Saw Risk That Recent Surveys Overstate Economic Weakness DJ News BOE: Eight Members Voted To Launch Corporate Bond Buys, Forbes Dissented DJ News BOE: Forbes Concerned By Excessive Stimulus, Risks Of Corporate Debt BOE: All Members Voted In Favor Of Term Funding Program BOE: Majority Of MPC Members Expect To Vote For Further Rate Cut 0 BOE: MPC Members See Lower Bound For Bank Rate "Close To, A Little Above" Zero BOE Aug Minutes: MPC Voted 9-0 To Lower Bank Rate To 0.25% BOE Aug Minutes: 0 Voted to Keep Rate Unchanged BOE Aug Minutes: 9 Members Voted to Lower Rate BOE Signals MPC Not Contemplating A Move To Negative Interest Rate BOE: Economic Outlook "Has Weakened Markedly" Following Brexit Vote BOE Makes Largest Cut In Economic Growth Forecast Since 1993 BOE Cuts 2017 Economic Growth Forecast To 0.8% From 2.3% In May BOE Cuts 2018 Economic Growth Forecast To 1.8% From 2.3% In May BOE Sees Declines In Business Investment During 2017 And 2018 BOE Sees Business Investment Down 3.75% In 2016 Versus 2.5% Growth In May BOE Sees Business Investment Down 2% In 2017 Versus 7.25% Growth In May BOE Sees Housing Investment Up 1.25% In 2016 Versus 4% In May BOE Sees Housing Investment Down 4.75% In 2017 Versus 5.25% Growth In May BOE Sees Pickup In Inflation On Weaker Pound BOE Sees Inflation At 2.1% In 2017, 2.4% In 2018 BOE: Measures Ensure Inflation Won't Fall Below Target In Medium Term UK Hammond: Prepared To Take Needed Steps To Support Economy BOE Expands Program Of Government Bond Purchases By GBP60 Bln BOE Purchases Of Government Bonds Will Take Six Months To Complete BOE Government Bond Buys Will Take Total To GBP435 Bln From BGP375 Billion BOE Last Expanded Stock Of Government Bond Buys In November 2012 BOE Launches New Program of GBP10 Billion In Corporate Bond Buys BOE Purchases Of Corporate Bonds Will Take 18 Months to Complete BOE Will Buy Non-Financial, Investment Grade Bonds BOE: Issuers Of Corporate Bonds Must Make "Material Contribution" To UK Economy BOE Approves Term Funding Scheme To Provide Loans To Lenders BOE Loans To Banks, Building Societies At "Close To" Bank Rate BOE TFS Intended To Ensure Cut In key Rate Passed On To Businesses, Households BOE MPC Sees Room To Expand all Four Stimulus Measures BOE Govenor Mark Carney et al. Speech Highlights: BOE Carney: UK Has One Of Most Flexible Economies BOE Carney: Can't Fully Offset Economic Impact Of Brexit BOE Carney: Package Of Stimulus Measures Is "Exceptional" BOE Carney: By Acting Early Can Reduce Uncertainty, Bolster Confidence BOE Carney: GBP Fall Will Boost Exports, Reduce Imports BOE Carney: MPC Has Been "Conservative" In New Growth Forecasts BOE Carney: Package Ensures Stimulus Will Have Maxium Impact
Short
by QuantumLogicTrading
4
Bank Of England is coming :) Watch out With Bank of England ready to Cut its Interest rates to record low of 0.50 by cutting 25 basis points this will be first policy action in 7 years and also continue its Quantitative Easing at £375 billion. Therefore Pound is looking ready for a selloff also Reuters reported that speculators were holding record short positions on pound, which sets the scene for a big bounce if they decide to hold. In any Case We need to be Prepared therefore i have marked a Short Term Consolidation Pattern (Triangle) suggesting a break on either side. With the the Fundamental back drop i am a Seller of Pound going into the event i also marked a Long term Demand Zone in case there is a Surprise and they(BOE) decide to hold for a while. Disclosure: i already have a position long in the pair and will add on above mentioned zones. If you like my analysis please hit the like button to support FX:EURGBP
Long
by robin_bajaj_7
4
LONG USD VS AUD, GBP, NZD: FED EVANS SPEECH HIGHLIGHTSFed Evans was the third fed member this week to hint that at least one rate increase is on the cards, though more dovish in saying "one hike could be appropriate" vs saying "expect the fed to hike at least once this year" which we heard from Dudley/ Kaplan earlier in the week. Though in reality his speech was dovish on the margin and offered little help for the wiltering green back which has fallen 6 of the last 7 days. The most USD shunning comment was " Could See One More Rate Increase This Year 'Even Though I Prefer None'" which obviously offers no help for the USD. Nonetheless from here and at these levels i continue to see alpha in long USD vs AUD above 0.76 and GBP above 1.33 as the RBA cut the interest rate on tuesday which imo will likely be priced into a imminent 0.74xx sell-off once this USD weakness fades, and as the BOE likely also eases tomorrow which should see cable trade into the low 1.30s if now 1.28s or beyond. NZD is also a good proxy short as the RBNZ is expected to ease by 25-50bps on the 10th which should see kiwi trade into 0.69xx or 0.67xx respectively. Whilst USD weakness is likely exacerbated by Fed Evans dovish remarks - today the federal funds futures ticked higher, as the BOJ-miss induced safe haven demand eased today after several days of selling off and the implied prob of a sept hike steepened to 18% vs 12% yesterday.. if the Rates market can hold these gains into fridays NFP we will likely see USD trade with a bid bias vs the above. The risk going forward though in the next 1-2wks is a poor NFP print.. if we miss expectations considerably this could send USD into a selling spiral, though a firm or beat print i confidently believe will see DXY regain prowess as many of its crosses trade at attractive USD long levels e.g. EUR, GBP, AUD, NZD etc. Fed Evans Speech Highlights: Fed's Evans: One Rate Increase for 2016 Could Be Appropriate Evans: Need More Confidence Inflation Headed to 2% Evans: Could See One More Rate Increase This Year 'Even Though I Prefer None' Evans: One More Increase Close Enough in Line With Views Evans: Wouldn't Mind Waiting to Raise Rates Until Economy Stronger Evans: Recent GDP Data Was Disappointing Evans: Ability to Continue Growing Jobs A 'Pretty Good Sign' Evans: Fed Isn't 'Behind The Curve' on Rates Evans: Core Inflation Won't Reach 2% Until 2018 Evans: Brexit Risk Has 'Come Down' Evans: Global Economy Growing More Slowly Than Would Have Hoped Evans: U.S. Fundamentals Are 'Good' Evans: Expects 2016 GDP of 2% to 2.5% Evans: Labor Market Has Displayed Resilience Fed's Evans: One Rate Increase for 2016 Could Be Appropriate
TVC:DXYLong
by QuantumLogicTrading
SHORT GBPUSD/ GBPJPY: BOE EXPECTATIONS & FORECAST - FADE RALLIESimo sterling strength/ USD weakness has opened up a great opp to get short vs the USD. Also, technically £YEN looks like it has some 400pips of downside in it available if the BOE do ease and weaken the currency (130.5). Shorting GBP$ at 1.33 opens up 250pips of easy downside profit assume the BOE deliver 25bps and 50bn of QE (the consensus) - £Yen at 1.35 opens up 400pips+ to 130.5 if there is a cut - I like selling gbpyen as it also gives exposure to long yen which post BOJ/ MOF failing to deliver is a given (nothing to stop safe haven demand dominating). In terms of sterling forecast I think a 25bps cut and 50bn QE should spike us to lows at 1.28, with the tail-end likelihood stretched to 1.25xx if they were to cut 50bps and more QE. Personally I am owning alot of GBP downside but will TP at an earlier level e.g 1.305 and 130.5 as central bank action has had a limited impact recently/ the propensity to fade action has been high (think of RBA Yesterday). Nonetheless, I may leave some 25% on the table in order to own more of the downside possibility. BOE Positioning I hear is building up nicely at the 1.33/4 level (though we are yet to see this transfer into realised downside for cable), and the rates markets are now full pricing well over the 25bps of cuts expected - Nominal OIS spot and forward rates are pricing - 27bps and 29bps respectively as of 12noon 2nd Aug (Spot same as 1st Aug, Fwd pricing 1bps less - 30bps on the 1st) vs the July meeting on the 12th of July there was only 25bps priced into the spot OIS curve BUT there was 31bps into the forward curve - thus we are seeing a lack of consensus e.g. whilst the spot is pricing 2bps more aggressively for the Aug meeting the Forward curve is pricing 2bps less - the spot curve is usually more conservative though so this implies that the rates market IS positioning more aggressively for the BOE this time round (since the spot is 2bps more aggressive now vs july meeting and the too rates are converging signalling the market expects a lower longer term equilibrium that a rate cut would bring). Also the 1wk and 1m GBP Libor is pricing cuts much more aggressively than for the July meeting - where July 12th had 25bps priced at 22% for 1wk and 18% for 1m, and now the 2nd of Aug has 25bps priced at 36.67% 1wk and 36.8 1m, which is the best part of 2x more aggressive. Further the options market looks to have a mildly short bias for 4th Aug expiries - with 25delta risk reversals skewed 1vol to the downside for gbpusd and 1.5vols to the downside for gbpjpy as investors look to own BOE delivery through lower risk option markets. USD should also firm up in the next few days as fed funds implied hike probabilities have stabilised and steepened up again, with a 18% probability of a hike in sept now priced vs 12% yesterday - this should help GBPUSD trade well offered tomorrow on a BOE delivery as gives USD a stronger base. REUTERS POLL- -STERLING SEEN AT $1.30 IN ONE MONTH, $1.26 IN THREE MONTHS AND $1.27 IN 12 ($1.31, $1.28 AND $1.29 IN JULY POLL) GS GBP forecast: - In its latest forecast on the GBP, analysts at Goldman Sachs see sterling at $1.20 and 90 pence per euro in 3 months, $1.25 and 80 pence per euro in 12 months. RBC on BOE: -Research Team at RBC, expects that the UK MPC will vote to cut Bank Rate by 25bps to 0.25% and increase the QE target by £50bn by renewing its programme of Gilt purchases over a four-month period. Danske Bank on BOE: -Research Team at Danske Bank, estimates that just over 25bp worth of rate cuts at this week’s Monetary Policy Committee meeting has already been priced in by the UK money market, while the overnight interest rate is priced to fall to 0.15% by the end of 2016 RBS on BOE: -Ross Walker, Research Analyst at RBS, suggests that the UK monetary policy easing is coming in August in the form of a rate cut – probably 25bp, possibly 50bp – is the most likely part of the package.
Short
by QuantumLogicTrading
3
BUY USD VS AUD, NZD & GBP: FOMC MEMBER KAPLAN SPEECH HIGHLIGHTSMore of the same here - my USD view remains bullish against AUD, NZD, GBP from here and at these levels. Especially on the back of the RBA i still think we should see 0.745 in AUD$ today, 0.69 in kiwi on the 10th (RBNZ), and 1.28 for GBP on the 4th (BOE) Fed Kaplan Speech Comments: Kaplan: Expects Continued Oil Price Volatility Until Year-End Kaplan: 1Q, 2Q GDP Figures Were Disappointing Kaplan Expects to See More Bankruptcies, M&A and Restructuring In Energy Sector This Year DJ News Kaplan: Dallas Fed Still Expects Full Year GDP of 2% Due to Solid Consumer Demand Kaplan: 1Q, 2Q GDP Figures Were Disappointing Kaplan: Dallas Fed Still Expects Full Year GDP of 2% Due to Solid Consumer Demand Kaplan: Dallas Fed Expects Workforce Participation Rate To Go Down to 61% by 2024 Kaplan: Has Confidence Headline Inflation Will Reach 2% In The Medium Term Kaplan: China Future GDP Growth Rates Likely to Decline Kaplan: Brexit Impacts Will Take Time to Unfold Kaplan: Removal of Accomodation Should Be Done in 'Gradual and Patient Manner' Kaplan: There Has Been Significant Decline in Neutral Rate Of Interest Last Few Years Kaplan: Expects to see one hike this year Kaplan: Decline in Neutral Rates Makes Using Monetary Policy More Challenging Kaplan: Structural Reforms, Fiscal Policy Should Be Used to Help Economies
TVC:DXYLong
by QuantumLogicTrading
BUY USD DIPS VS GBP/ NZD: DOVISH FED W. DUDLEY SPEECH HIGHLIGHTSFed Dudley was speaking At A joint New York Fed, Indonesian Central Bank Seminar On Sunday evening when he left a mixed impression for the markets to digest - saying "it is premature to rule out an interest-rate increase this year" but then on the contrary saying "Raising Rates Prematurely Would Be Riskier Than Moving Slightly Too Late" and following up that sentiment with "Investor Expectations For Flatter Path Of U.S. Interest Rates Seems 'Broadly Appropriate'" and pointing out the medium-term risks are seen skewed to the downside - all of which somewhat contradictory expecting a 2016 rate hike. IMO these comments are more less positive news for the greenback, given the hawkish July Minutes should take precedent (despite the market weirdly selling the september hike being officially put on the table) and after the DXY lost every day last week I think it will struggle to continue this trend into this week as the drop in rate hike expectations/ fed funds rates should flatten out - Likely seeing the bulk of the dovish expectations price last week - september 25bps hike expectations fell from 25% at the beginning of the week to 12% on Friday following the miss GDP report - will likely bottom out around here to 8%min. That said, given the BOJ's miss we could easily see further pressure on US rates this week as imo the failed big stimulus hopes are likely to fade the risk-on environment of late, and move us back into the safe haven trend that has dominated 2016 - so dont be surprised to see some more risk-off rate expectation USD selling/ bond buying - look out for consecutive moves higher in UST or moves lower in tnx. In the medium term this still hasnt changed my view of bullish USD and at present IMO this selling wave has opened up the opp for some good USD buying entry points e.g. kiwi above 0.72, stelring at 1.33, and eur at 1.115 - kiwi and sterling the best trades as we move into RBA, BOE and RBNZ within the next 10 days which should realise considerable downside for kiwi and cable (and for those trading aussie too, tho i prefer the kiwi proxy). Fed Dudley Speech Highlights: -Fed's Dudley Warns It Is Premature To Rule Out an Interest-Rate Increase This Year -Dudley Says Fed-Funds Futures Prices Seem 'Too Complacent' -Dudley Says There Is 'Room For Improvement' in Fed Communications, But They Are Growing More Transparent -Dudley Says His Baseline Outlook For U.S. Growth, Inflation 'Has Not Changed Much In Recent Months' -Dudley Expects 2% Annualized U.S. Growth Over Next 18 Months -Fed's Dudley Says Medium-Term Risks To Economy Are 'Somewhat Skewed To The Down Side' -Dudley Says Brexit Impact Has Been Short Lived, But Longer Term Potential Fallout 'Hard To Gauge' -Dudley Says Fed Takes Dollar Appreciation Into Consideration, But Not Targeting Any Set Exchange Value -Dudley Says Evidence Accumulating The Crisis-Era Headwinds 'Are Likely To Prove More Persistent' -Fed's Dudley Warns it is Premature to Rule out an Interest-Rate Increase This Year -Dudley: Investor Expectations For Flatter Path Of U.S. Interest Rates Seems 'Broadly Appropriate' -Dudley Says Raising Rates Prematurely Would Be Riskier Than Moving Slightly Too Late
TVC:DXYLong
by QuantumLogicTrading
5
GJ Short awaiting reversal to the upsideI've set various s/r at daily/weekly levels which also respects .00 and 0.5 levels coincidentally maybe. I still see this pair go down a bit more before retracing to the upside heading for the upper trend line of the channel. Why? Well we are about to hit the 0.618 at 134.229 (I would say we could reach the 134 before an actual bounce to the upside) which is a strong psychological level based on a huge number of traders who use that level as a reversal level and also because we are expecting data this week. It is said that there are high probabilities of the Bank of England (BoE) to cut rates by 25 basis points however, the effect of Brexit was not as tremendous as expected and it seems like they've been doing pretty well even after this whole situation so it could be highly expected that they simply hold rates for the time being. If that were to be the case, we would be seeing a major bounce back in the GBP. Also, after BoJ's decision on Friday which was a total disappointment, we could be expecting Japan to devalue their currency by most probably adding more money to their stimulus (as reported by JPMorgan Stanley that they could cut rates to -0.3% raise Japanese Government Bonds (JGB) purchases to YEN 100 Tln instead of the previous YEN 27 Tln. This would also fuel the bounce back on that lower TL.
Short
by howlongyouball