RECAP LAST WEEK
Apologies again for the no show last week. I’m not going to blame it on quadratic sequences – I just needed a break from the markets. Sometimes it’s good to take a step back and look at the big picture. Not just the markets but at yourself.
The big event everyone bought into was a dovish hike from Yellen. USD was getting hit prior to the release but was wrong footed because the DOTS were considerably up. It was like Yellen hadn’t been looking at the bond market the previous week. Neither at break-evens for that matter. To me The Fed’s implied newish position, which is currently looking through CPI and to a healthy GDP, has worried the markets. You could argue a loss of FED faith may be arriving shortly.
EURUSD could not break 1.13 big fig AGAIN. That’s 5 times on the DAILY. The only place I like buying is 1.1100 because based on price action alone this could capitulate. There’s nothing in my fundamental reasoning. It is pure price action with lower highs and multiple failures to break upside.
CABLE is currently still in a bar room brawl but 1.28 is the scalp to get for bulls. The surprise vote last week had algos lift it but reality set in. Here are the facts. No sensible Tory wants another election, despite the lack of majority for TM. A soft Brexit is now more likely, despite David Davies sabre rattling. The negotiations start this week, CABLE will move on a dime so watch out. The last vote didn’t mean we are heading for a hike. Forbes is redundant.
So what now? Buy 1.2640 and look at 1.28 to break but I would only sell into 1.30 big fig
USDJPY very bullish as it broke 200DMA and trend channel on DAILY but 111.50 and 111.80 will provide strong resistance. If they go there’s clear water until 112.50
- AUD minutes, and a host of CB talking. SNB, BOE Carney and FED’s Fisher
- Canadian CPI. Normally a dud but after the new hawkish tilt we are watching this now.
- EU PMI Friday !
- UK BREXIT NEGS start Monday. CABLE will be a jumpy cat so watch out.
- US soft and hard data divergence continues but FED looks through CPI. Maybe GDP is the last hurrah for USD. If that weakens expect a BIG equity correction and continued short-end weakness in yields to follow. Good bye USD and the trust in FED DOTS
- USDJPY seeing large buyers at 110.80 in Asia. I’m told it’s a big quant fund so a level to watch this week for buying dips.
That’s it for this week. Catch Patrick Reid on Linked in for more updates. Charts below as usual.
Patrick and Adam