Weekly review

The week started with relative calm but uncertainty. With the market seemly absorbing the fitch downgrade and Apple negativity, Talk of a soft landing was prevalent but the market was waiting for US CPI for clarity. In the lead up to CPI, the only trade I was comfortable in was JPY shorts, based on interest rate differential. This was backed up back wage costs in Japan softening, which will keep the pressure off the BOJ having to change policy. I took advantage of this with two JPY short trades, a CAD JPY, I went with the CAD on Monday due to Canada's correlation with strong oil at the time. On Tuesday, I placed an AUD JPY long. It was a 4hr support and resistance trade, the Aussie had weakened a little thanks to dissapointing data from China. But I felt the 4hr support was too strong for the chart to go any lower. Moving forward, the AUD and NZD do seem to be surpressed by China negativity at the moment and it's something worth keeping an eye on. I then had two days off from trading, but I did keep an eye on the CPI data, which came if soft. This initially weakened the dollar and a soft landing or possibly even no landing continues to be a very strong possibility. After the initial weakness, the dollar gained strength along with rising yields in the US. This is a little puzzle because in a soft landing, disinflation environment, you would expect yields to come down and the dollar to weaken. There is a bit of a risk environment disconnect at the moment. Bonds, stocks and currencies are moving independently of each other and I must do some research to find out why. By Friday morning I was back at the charts and trading again. I feel the soft landing 'risk on' narative warranted another JPY short trade. I chose the Aussie as I liked the support on the 1hr chart. In hindsight If I'd have gone with the GBP (which reported better than expected GDP) or the USD, they would have been better options. As mentioned earlier, The AUD and NZD closeness to chinas economy is something worth noting. Moving forward, I still think JPY shorts are the preferred option at the moment, especially at 4hr support. The only caveat being as USD JPY approaches the 145 figure, BOJ intervention talk will once again blur the picture.

Results for the week:

Trade 1:  CAD JPY  +1.5

Trade 2:   AUD JPY +1.5

Trade 3:   AUD JPY - 1

Total =     + 2 %

Total since start of blog = +4.5%