Weekly Review
The week starting Monday 20 October was a good week for overall market positivity. Political stability in Japan, optimism for US / CHINA trade de-escalation and below expectations inflation data from the UK and US, all contributed to the positive mood as the S&P once again hit all time highs.
It was very pleasing to see the JPY in particular acting in accordance to its (inverse) risk environment correlation. I felt the JPY was a potential short option all week, plus 'hopefully into next week', at least until the FOMC meeting.
On the catalyst front, below expectations UK inflation considerably weakened the GBP, a BOE rate cut may be on the cards sooner than the market previously predicted.
It is pleasing that despite the US government shutdown, there are still opportunities, it's just a little slow going sometimes. I have read that November's US CPI data isn't due to be reported, which doesn't bode well for an end to the shutdown anytime soon. We can only hope that won't be the case.
The fact US CPI was (eventually) reported below expectations, is good news and bodes well for a continuation of 'risk on trades'. But I expect we'll continue to get US / CHINA back and forth, plus Mr Trump is taking aim at Canada again. earnings season kicks into gear this coming week and we have the FOMC, a rate cut is heavily predicted. It'll be the narrative regarding the timing of further cuts that the market will be focused on.
All in all, I continue to hold my 'tentative risk on bias' likely preferring JPY short but not ruling out USD or possibly even CHF if one or the other is considerably the weakest at the time.
Finally, I still consider 'AUD NZD long' to be a viable 'interest rate differential trade.
On a personal note, it was another AUD JPY week. Two 'risk on' trades. One on Monday, attempting to take advantage of JPY weakness following election news combining with dovish commentary from UEDA.
I unfortunately missed the GBP short inflation catalyst opportunity. And had to wait until Thursday for my second AUD JPY long trade. Although, post trade I realised I had neglected to note upcoming JPY inflation data, I therefore closed the trade early, to avoid holding risk during the release.
If US CPI data has been reported on any other day than Friday, I suspect I would have been very tempted to place another 'risk on' trade but I was ultimately put off by the possibility of 'strange Friday price action'.
Let's see what the new week brings.
Results:
Trade 1: AUD JPY +1.5
Trade 2: AUD JPY 0
Total = +1.5%
Total since start of blog = +46.1% (risking 1% per trade).