Intraday Market Thoughts Archives
Displaying results for week of Jul 23, 2017Bitcoin & Ethereum Webinar
On Jul 4th webinar, when Bitcoin traded at $2590, I mentioned the technical and fundamental reasons why it would drop below $2000. 12 days later, Bitcoin fell to $1800. Today's price is at $2540, down $400 over the last 2 days despite the BIP91 lockin. Find out why & what's ahead in Monday's webinar.
The Global Petrie Dish
The rising tide of global growth is lifting all boats but there are lessons in how some are recovering better than others. The Aussie is the strongest, while the JPY is the weakest as equity indices enter an obligatory corrective rally ahead of the Fed. Month-to-date, all currencies are up against the dollar, with the loonie on top and GBP at the bottom. The Premium Insights will issue a trade tomorrow ahead of the Fed decision.
In the pre-crisis era there was an economic orthodoxy that virtually every country followed. That order has broken down in the past decade and led to a series of economic experiments and now we're beginning to see the results.
The big surprise of 2017 has been Canada...as it was the surprising outperformer of 2016. The IMF said on Monday Canada will lead G7 countries in growth and that's with commodity prices halved from two years ago. Economists still don't quite believe in how strongly it's grown.
A pessimist would say that unsustainable asset price rises – housing in this case – have juiced consumer spending. A more favourable judgement would be that stimulative government policies boosted growth.
The UK could have been in the same position as Canada but fiscal tightening and Brexit uncertainty undercut some of the growth potential. It's a similar story in Europe where fiscal discipline and pockets of tight bank lending have held back the recovery.
In the US, Washington is incapable of consensus and the gridlock continues but there is always the belief that politicians there will do the right thing…once all the other options have been exhausted.
The two biggest losers in Monday's IMF update were the US and UK. The commonality there is political uncertainty.
The lesson so far this year is that it's tough to pick the winners and losers because it's such a fine line. In generations past, one country would be growing 4% and another 1%. Now, the difference in forecasts between the top G7 country (Canada 2.5%) and laggard (Japan 1.3%) is small but still has big implications in FX.
We could see just how big those implications are if Japan ever turns the corner. The minutes of the June BOJ meeting showed the board has no plans of exiting policy any time soon as long as CPI does not reach 2% despite tightening labour markets.
| Act | Exp | Prev | GMT |
|---|---|---|---|
| CPI (q/q) | |||
| 0.4% | 0.5% | Jul 26 1:30 | |
Euro Faces Hardened Test
European indices are selling off again, not only due to the prospects of invevitable QE tapering from the ECB, but also due to ongoing declines Europe's auto sector due to allegations of price collusion. Daimler-Benz and BMW are down 15% and 11% year-to-date. On Friday, the Premium Insights locked in 345-pt gain in the Dax short trade opened on Monday. A new note had been issued to indicate the next step (when & where).
The euro surged last week and is now less than 50 pips from the August 2015 high. The Swiss franc narrowly beat the euro last week as the top performer while the pound lagged. CFTC positioning showed increasingly-crowded bets against the yen. The euro has been skidding along the lows for more than two years but is now threatening to break out. Large gains in three of the past four weeks has EUR/USD bumping up against 1.1714 and a break would be a foray into the massive void formed by the drop to 1.05 from 1.40 that started in 2014. Here's Ashraf's January piece (when parity forecasts were FX traders' favourite past-time) asserting not only EURUSD would not reach parity, but will hit $1.10.
The latest leg of gains comes as the US dollar struggles economically and politically. The non-stop drama and gridlock in Washington increasingly threaten another round of risk aversion.
Inertia should keep a bid in the euro early in the week but the calendar picks up midweek with the FOMC, some higher-tier US data and German CPI on Friday.
CFTC Commitments of Traders
Speculative net futures trader positions as of the close on Tuesday. Net short denoted by - long by +.EUR +91K vs +84K prior GBP -16K vs -24K prior JPY -127K vs -112K prior CHF -4K vs 0K prior CAD +8K vs -9K prior AUD +51K vs +37K prior NZD +36K vs +32K prior
The yen trade is beginning to look saturated, especially when you factor in the carry trade. The positioning is the kind of thing you might see before a squeeze on risk trades.
The Canadian dollar finally flipped to a net long position. That means the squeeze on the shorts is done but there is still plenty of ammunition if longs want to get involved. In AUD and NZD, meanwhile, the trade is starting to get crowded.
