Weekly review

I began the week starting Monday 27 January optimistic we might get a 'risk on' environment. But that optimism was immediately blown out of the water as news of an emerging AI company 'deepseek' caused concern for S&P 500 tech companies, NVIDIA in particular was hit hard. The negativity filtered though to the overall environment with the VIX rising above 20. Although I didn't envision the negativity would last too long, it did mean hitting pause on any trade ideas.

The long term effect Deepseek could have on the major US tech companies remains to be seen. But by Tuesday things had calmed down and it was over to thoughts of Wednesday's FED rate decision

The decision (as expected) was an interest rate hold. And the accompanying 'hawkish narrative' shouldn't come as too much of a surprise. Interestingly, the USD didn't particularly strengthen following the hawkish narrative. It's now up to the market to desipher when and how many cuts the FED will implement this year. Currently, it looks like June and two cuts. Which is good for the 'soft landing narrative' but it does make the USD tricky to trade. Should we lean on 'higher for longer' and long the dollar? Or trade it short as part of a 'risk on' trade? I suspect both scenarios will be present over the coming weeks and months.

There were two other interest rate decisions during the week, the ECB and BOC passed by rather uneventfully. Both central banks cut rates and came across fairly dovish. But both currencies didn't weaken as you might expect. Although sentiment remains subdued for the CAD in particular, as the dovish BOC, slowing growth and tariff threats 'should' keep the CAD suppressed moving forward.

The threat of tariffs has been an underlying narrative for the last couple of weeks and it appears it could be coming to a head during he upcoming week. Notice of imminent tariffs has been given this weekend and we could see a volatile start to the new week. Currently it appears the USD will start the week on the front foot. But the back and forth of threats and retaliation will be something to keep a keen eye on.

On a personal note, it was a week of two trades. An AUD CHF long post 'tech sell off'. whereby I felt the market had stabilised enough to 'anticipate' a 'risk on' trade. And although the general mood did improve, it took a while for the currencies to react accordingly and the trade stopped out. On Friday, I felt the 'soft' CAD GDP data warranted a short CAD trade and the overall environment was positive enough for me to get over my concerns of 'strange Friday price action' so I entered an AUD CAD long.

Results:

Trade 1: AUD CHF -1

Trade 2: AUD CAD +1.2

Total = +0.2%

Total since start of blog = +33.1% (risking 1% per trade)