Weekly review
Similar to most of November, I found it difficult to form a conviction during the week starting Monday the 24th. Which is an an example of how things can change and to never get complacent. Only a few weeks ago, the USD was dominant, the strong economy caused the market to rethink the pace of rate cuts. USD strength was then compounded by the result of the election as the market believed a republican clean sweep would push US yields higher. And US tarrifs would put other currencies under pressure.
But, USD strength didn't 'kick on', which I initially put down to institutions taking profits.
As the new week began. The market was thrown a curve ball when the new US treasury secretary was announced. Mr Bessent is seen as someone who could play devil's advocate to 'Trump policies'. The market liked the appointment, the S&P climbed higher, the VIX fell and US bond yields fell.
My initial thought was falling yields and USD weakness caused by the appointment of Mr Bessent would be short lived. I felt the strong US economy would be the overriding narrative. But the US 10YEAR remained sluggish all week. And the question is whether it was due to month end / quiet Thanks Giving trading. Or if lower yields and USD weakness will be the new theme. (The FED rate monitor shows a December cut is back up to 68%). It'll be a case of letting the market tell us it's thoughts as liquidity picks up when the new week begins. It could well be that we must be 'nimble' with our bias, potentially shorting the dollar one day but longing it the next.
In other news, the NZD had a strong week. Personally, I thought the RBNZ still sounded fairly dovish. But the market unwound NZD rate cut bets.
The JPY also had a strong week, in correlation with falling US yields, plus inflation data from Japan suggests a BOJ rate hike is still on the agenda. I have read a few articles suggesting USD JPY will continue it's downwards trajectory in the short / medium term.
All in all, I'll begin the new week without a clear bias, trying to desipher if last weeks moves were simply a by product of USD liquidity in a quiet trading period.
On a personal note, it was a week of just one trade. If AUD CHF was going to continue up, I felt post bullish Bullock speech was as good a time as any to take the trade.
There is a case to say I could have jumped on USD weakness. But given the ongoing positive US fundamentals, I think it was prudent to wait and see if USD weakness was a flash in the pan.
Results:
Trade 1 AUD CHF -1
Total = -1%
Total since start of blog = +32.9% (risking 1% per trade).