Weekly Review.
War headlines took a back seat during the week starting Monday 27 July, there was a lot of other information driving the narrative and the implications on interest rate expectations remained at the fore.
The FED and BOJ meetings were the highlights. At first glance, the FOMC meeting was taken as hawkish, a resolute defiance in bringing inflation down to 2%, coupled with a hawkish vote shift, initially strenghtened the USD and sent stocks lower. The move intensified when capax concerns once again reared its head following earnings.
But once the dust settled, the market began to take a different view. Pre FOMC, the probability skewed towards two rate hikes before year end. The market now thinks one rate hike is more likely. This narrative was supported by 'softer' GDP and PCE data, coupled with the recent 'softer' CPI data. Moving forward, it could be one a battle between 'goldilocks' data and geoploitical tension.
Hot on the tail of the FED, the BOJ delivered a 'hawkish hold. Which initially disappointed JPY bulls. But it wasn't long before the M.O.F. intervened, reports that the FED also actively attempted to strengthen the JPY complicates the matter further. History shows that strength bourne from intervention doesn't last too long. But the uncertainty does support my recent preference of the CHF being the 'cleanest short' at the moment.
In other news, it transpired that a de-leverageing of chip stocks by the hedge fund SITUATIONAL AWARENESS could go a long way to explaining recent chip weakness. Once the news was made public, the NASDAQ stabilised and 'hopefully' that's the end of the matter.
In a mirror image from last week, 'soft' Australian data took the shine off the AUD. And last week's AUD NZD rally unwound. But in the grand scheme of things, the AUD remains on my 'to long list'.
A cautiously hawkish BOE keeps the GBP relatively supported.
As the new week begins, fresh 'very scary' geoploitical news aside, I continue to view CHF strength as an opportunity to 'short' the franc. And it's all eyes on the USD'S next move. Given the recent softer data and the USD's weakness that accompanied it, I am prepared to short the dollar if the weakness continues. But at the same time, I wouldn't be surprised to see it strengthen again, if negative war news or hot data reverts the narrative to 'long USD'.
On a personal note, after months of averaging two trades per week, it was pleasing to place 4 trades for the second week in a row.
Primarily focusing on 'short CHF', with Mondays NZD CHF hitting profit. Tuesday's AUD CHF stopped out. I felt the USD weakness was too strong to ignore on Thursday, placing a EUR USD long, which hit profit.
By Friday, I felt CHF strenght was overdone, placing a EUR CHF long, which hit profit.
All eyes on war headlines and US data as the new week begins.
Results:
Trade 1: NZD CHF +1.3
Trade 2: AUD CHF -1
Trade 3: EUR USD +1.5
Trade 4: EUR CHF +1.5
Total = +3.3%
Total since start of blog = +63.1% (risking 1% per trade).