Weekly Review
The week starting Monday 7 April was full of news, fake headlines and wild swings. It's come to something when US CPI data is barley glanced at by the market as 'tariff headlines' once again dominated.
The week began with negativity spilling over from the previous Friday. The market was on edge awaiting the next move in the game of brinkmanship between the US and China. Although sentiment did stabilise somewhat as the week progressed. Two 'positive' social media headlines were quickly rebuked by the administration (I hope unproven social media headlines moving the market doesn't become a regular theme).
On Wednesday, we did get a bona fide positive headline from the president himself. A 90 day pause on tariffs for all countries showing willing. Of course, China was excluded (ultimately hitting back). Nonetheless, the S&P rallied 8% on the news.
Unfortunately, the sheer complexity of the situation ensured the 8% S&P rally was followed by a down day on Thursday. And that's where we find ourselves today, in a twilight zone of a market desperate to go up on positive news, but unable to have faith in positivity due to potential escalation causing growth fears.
In amongst all this, the biggest loser (so far), sentiment wise and price wise, is the USD. All US assets are being sold (stocks, bonds and the currency). And it's playing havoc with the standard correlations We've come to rely on.
It seems to me the market has a lack of faith in the administration. And whether it's all a negotiation tactic, an underlying grand master plan or simply a huge gaffe. However you colour it, pre tariffs, we were explicitly told the aim the administration wanted lower US bond yields. The exact opposite is happening. And I'll begin the new week with a mind for USD short trades. But also 'momentum trades' whereby momentum aligns with a specific cause. I'm prepared to dismiss a lack of correlation as long as the momentum aligns with my underlying thoughts of a particular currency.
For things to get 'back in sync' I suspect it will take an amicable agreement between the US and China.
In other news, all other news was dismissed. Be it the ECB all but confirming an imminent rate cut, the RBNZ actually cutting rates, US CPI (soft landing in tact) or anything else important was rendered moot as the tariff narrative once again dominated.
On a personal note, it was a week of three trades.
It was very strange to place a 'risk off' trade whilst the S&P was going up. But that's what I mean about having faith in your own underlying narrative and placing a trade regardless of correlations.
I then placed two USD short trades. At the time, I billed them as 'risk on' trades. But with hindsight, they were both 'USD short momentum trades'.
It's not an ideal environment but I do still think it's a tradable environment. My preference remains for 1hr swings, but if you prefer a shorter timeframe with the goal of a quicker trade completion time (to avoid the changeable narrative) I would suggest it's a very viable thesis.
Results:
Trade 1: NZD JPY +1.5
Trade 2: NZD USD +1.2
Trade 3: AUD USD -1
Total = +1.7 %
Total since start of blog = +36.5% (risking 1% per trade).