Weekly review.
The week starting Monday 14 October was another week where it was difficult to have confidence in anything other than USD long trades. Due to US data remaining robust (namely retail sales and jobless claims) combined with the on-going 'unwinding' of FED rate cut expectations.
It was also another week with a disconnected between the overall risk environment and the currencies. The S&P remains buoyed by 'generally positive' earnings and forward guidance, the VIX hovered below 20 for most of the week, there wasn't any 'fresh' middle east concerns. But throughout, the AUD and NZD didn't have the strength a risk on environment suggests they should. I still put this down to the negative china narrative... which 'hopefully' came to a conclusion on Thursday with an announcement the market took positively.
Regarding the fundamentals of the currencies, not an awful lot has changed...
AUD: still the currency I think 'should' be strongest thanks to the 'hawkish' RBA, especially given the excellent employment data this week.
USD: As noted, the dollar has been strong recently due to positive data plus the unwinding of rate cut expectations. Although, for the USD strength to continue, it may require a further re-pricing of rate cuts (from 0.5 by year end to 0.25). But for now, the dollar remains on my 'to long list'.
CAD: Soft CPI data this week will keep the pressure on the BOC to remain dovish. And we could see the CAD weaken into Wednesday's interest rate meeting. As ever, the difficulty trading the CAD will be navigating the price of oil and if the CAD gains strength alongside the USD.
NZD: All thing being equal, the recent 0.5bp rate cut with the market expecting more to come, 'should' see the AUD NZD chart rise.... But the NZD remains a potential long in a strong 'risk on' environment.
EUR: This week's rate cut, with warnings about eurozone growth, 'should' keep the EUR suppressed.
GBP: The pound remains resilient through mixed data. Soft CPI aligns with the BOE 'dovish twist'. But excellent retail sales data should keep the BOE cautious about cutting too quickly. It will be interesting to see what governor Bailey has to say next week. For now, the GBP tentatively remains on my 'to long list'. Particularly as a relative fundamental trade Vs EUR or CHF.
CHF and JPY: My 'hope' at the start of the new week is the china negativity has abated, the risk currencies move back in alignment with the soft landing sentiment. And barring any BOJ 'jawboning', the JPY and CHF will present themselves as good shorts as part of a 'risk on' trade.
Although 'earnings season' remains something to keep an eye on. And the upcoming US election could start to affect the market... that could be a complex spiders web to pick through. And we'll cross that bridge when it happens.
On a personal note, it was another week where I struggled to find conviction in a trade. Just the one USD CHF long, which was another attempt to take advantage of the USD strength Vs the dovish SNB.
At the moment, I am finding, whatever trade I'm 'eyeing up', I prefer to see a 'cluster' of 1hr support to place a stop loss behind.
Results for week.
Trade 1: USD CHF +1.5
Total = +1.5%
Total since start of blog = +33.2% (risking 1% per trade)