Weekly review.
The week starting Monday 27 May began with 'higher for longer' on the markets mind. Which caused mild concern as the VIX rose above 14 (although still not high by 'panic standards', a rapid move above 20 is the figure in my view when a risk off trade becomes a possibility). But the market was concerned at the thought of higher US rates for longer non the less.
This concern was alleviated towards the end of the week thanks some slightly soft US data, US GDP, jobless claims and core PCE all giving an indication of a soft landing. Although still not enough to warrant an immediate rate cut from the FED. And the battle between 'higher for longer' and 'soft landing' may continue for a little while yet.
The good news is that I believe the JPY is shortable in either environment. It's just a case of getting the timing right.
In other news, the Swiss Franc had periods of notable strength. And I have read that the SNB could have been intervening (just when you thought it was safe to trade the CHF again).
Soft data from Canada puts an imminent rate cut from the BOC firmly on the table. And in Europe, it's been touted a higher inflation reading won't stop the ECB cutting rates, it'll be interesting to see if both central banks cut this week, and if they do, will they be 'hawkish' or 'dovish' cuts?
Higher than expected inflation in Australia should see the AUD remain supported. And it still looks like the RBA and RNBZ will be competing to be the last to cut.
On a personal note, it was a week of three trades, two stopped out and one hit profit. Friday's price action in particular did nothing to appease my complex of taking a trade on a Friday, as the initial USD weakness didn't last. Was the data not powerful enough to warrant a short USD trade? Or was it simply end of month profit taking? Was a JPY short the better option? The movement of the USD on Monday may give us an insight into how the market felt about Friday's core PCE data.
Results for week:
Trade 1: GBP JPY -1
Trade 2: AUD JPY +1.5
Trade 3: NZD USD -1
Total = -0.5%
Total since start of blog= + 24% (Risking 1% per trade).