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Intraday Market Thought: Unprecedented Global Macro Sequence

by Ashraf Laidi | Dec 28, 2023 14:12
Here's some big picture analysis along with unprecedented global macro....2023 is winding down to see a rise in both gold and SPX with a decline in the....Such a combination is relatively frequent as it happened 17 times since....This year would be the 18th occasion for such a set-up...2022 saw the inverse of 2023, namely a decline in both gold and SPX, with a DXY....The 2022 set up is relatively less frequent as it occurred in only 4....But over the past 55 years, markets have never witnessed the 2022-2023 sequence....e...markets never had a year of falling XAUUSD & SPX with rising USD,....It is quite strange for such a sequence to have never happened...I will tackle this in the final paragraph, but let's go through the....Let's add 10-year bond yields to the mix...So far yields are down 0...7% YTD, which means they need to close the week/year above 3...88% to end the year positive and make it 3 consecutive annual gains, something....nbsp;....What about quadrifectas? Have we ever seen a year with an increase (or a....A negative quadrifecta has never happened according to available records....A positive quadrifecta, however (rising XAUUSD, SPX, DXY and 10-yr yields)....I vividly remember the reasons behind the quadrifectas of 2005 and 2016, with....But why did USD rise in 2005 despite the ascent of gold and equities? The reason....The result was an exceptional $312 billion wall of money repatriated into....For more detail on this policy and how USD performed in 2005, see the snapshot....What about the 2016 quadrifecta of rising XAUUSD, SPX, DXY and 10-yr yields?....nbsp;....Looking ahead....One thing that's comforting for the bulls is that the SPX never (since 1962)....If this pattern persists, then 2024 will be in the green...nbsp; The last time SPX fell in one year, rose the next, followed by another....Other such combinations were in the depression-era of the 1930s...nbsp; ....Fractious & Messy Year Ahead....The greatest risk to the stock market in 2024 (bonds & metals) is the....Any credible and consistent signs of renewed inflation (not one-off bounces....But even if you think the probability of such inflation rebound is minimal,....According to seasonality studies strecthing to 1900, April and May tends....A third risk is that of persistently swelling budget deficits and the ever....This could easily ignite another "bond market event" similar to....Tackling the Unprecedented Sequence....So back to that unprecedented sequence mentioned in the 1st paragraph...It's not rare to see a rise in USD and yields with a decline in gold and....But why we never saw the total inverse of that pattern in the following year....A 3rd straight annual increase in the USD would have dealt a lethal blow to....The populartity of risk-parity portfolios hedging equities with bonds....nbsp;....Despite the fundamental promise of technology stocks (chip designers,....The case for Bitcoin remains solid (argued in detail in this post), and we....We started with HUT, MARA, RIOT, then build our way into IRENT and BITF after....This is explains the 6-1 relationship between Bitcoin Miners and Bitcoin,..
Intraday Market Thought: Euro Bounces on Rate Cut Rebuff & Berlusconi’s Pullback

by Adam Button | Jan 8, 2013 0:07
The euro continues to rebound from the failed test of 1...30...The yen was the leader Monday in a day of consolidation while the US dollar....Australian trade balance is the lone indicator in the Asia-Pacific region...Ashraf’s Premium Insights are due later this evening...Two factors sparked the euro rebound in US trading...The first was chatter that the ECB will not cut rates on Thursday and could....This was largely priced into markets already...The second was a report that Berlusconi has agreed not to run in the election...Euro gains mounted after breaking through 1...3050 and the momentum led to a nearly full cent rally to 1...3122...The late December lows in the 1...3060/70 range are now the dominant feature on the short-term chart...EURUSD held up successfully above tje 1...3030 trendline support, which was signalled by Ashraf in Thursday's....The pair is up 80 pips since...The lone data point was the Canadian Ivey PMI with a reading of 52...8 compared to 49...5 expected...The Canadian dollar ticked higher after the release and continued to gain as....The lone item on the upcoming calendar is Australian trade balance at 0030 GMT...The consensus estimate is for a 2...3B deficit for the November period...A miss is unlikely to affect the market.
Intraday Market Thought: Euro's Falling Share of Reserve Allocation

by Ashraf Laidi | Jun 30, 2015 19:34
The IMF's latest quarterly FX reserves figures show central banks'....1% of total official reserve allocation in Q1, the lowest level since 2002...The US dollar's share of disclosed currency holdings rose to 64...1%, the highest since March 2009, which is the peak of the USD's rise during....The IMF notes these figures are a reflection of “allocated”....There is no disclosure from the People's Bank of China –-the world'....The Role of Valuation....Notably, central bank allocation of foreign exchange reserves is largely....Similarly, the euro's fall accelerated in mid Q1, which occurred....nbsp;....This also explains the rise in allocation to the Aussie and Canadian&....Allocation to both GBP and JPY remain similar at about 4% of reported....Interestingly, the rise in JPY allocation occurred despite the Bank of....This phenomenon goes in line with the yen's appreciation of recent days....nbsp;..
Intraday Market Thought: Sunny Days in Australia?

by Adam Button | Jan 17, 2017 0:05
Sometimes the people who are most successful are the quiet ones who do the....The market can be the same way...The Premium Insights are considering opening a GBP trade ahead of Tuesday'....The stories in 2017 so far have been Trump, bonds, oil, jobs and US dollar....One spot where there has been almost no news or attention is the Australian....Why?....Australia has certainly been quiet...It's Summer holiday season there and that's made for a quiet calendar,....Another reason is the level of risk aversion in the market...AUD tends to do best when risk appetite is high but there is also a sweetspot of....If it were to rise any further the risk aversion would kick in and AUD would....The final reason is that the Australian dollar selling in the latter-half of....It was caught up in year-end flows and that's slowly been unwinding...The result is gains in 8 of the 10 trading days so far this year...The domestic calendar will remain quiet in the week ahead so for a sense of....With the pair closing at 0...7500 on Friday it's right up against an inflection point...Last week's high was 0...7519 and the December high was 0...7525...If those levels can break then the pair could add another 250 pips...If it holds, the it's likely a sign of higher risk aversion or a renewed....But do watch out from the deteriorating technicals in the Shanghai Composite and....Commitments of Traders....Speculative net futures trader positions as of the close on Tuesday...Net short denoted by - long by....EUR -66K vs -70K prior...JPY -80K vs -87K prior...GBP -66K vs -65K prior...CHF -14K vs -13K prior...AUD -4K vs -2K prior...CAD -8K vs -4K prior...NZD -14K vs -11K prior....The moves this week in the CFTC report were modest in what might be a sign of....Notably, the euro net short is now at the lowest since June...That signals a bit of extra ammunition for a retest of the 2016 lows.
Intraday Market Thought: Spring in the Market

by Adam Button | Mar 21, 2017 22:01
The change of the seasons on Tuesday brought a sea change in markets as....The pound was the top performer while the New Zealand dollar lagged...Central bank speakers highlight Asia-Pacific trading...nbsp;Last night's GBP Premium trade is in the red...Currently, 5 out of 7 existing Premium trades are showing a gain, with the....The S&P 500 posted its worst day since Oct 1 on Tuesday in a 29-point....In FX, that meant selling on the yen crosses...USD/JPY briefly broke the bottom of the Feb/March range and whether it truly....There wasn't a single catalyst for the change in mood but one worry is the....The first test is the repeal and replacement of Obamacare, which is the....Yet the first bill to replace it is facing a close vote in the House this....That's something the market has known for days but the inability of....Another worry is oil...For the past two days OPEC and Russia have floated some oil-positive stories...Both led to short-lived pops in crude that were erased in the following half-....Now, crude is re-testing the March low and API inventories showed another big....Another technical level to watch is the January high of 1...0829 in the euro...We've emphasized repeatedly how the US dollar struggled with good news like....Now the tide has turned and small doses of USD-negative news are having a big....That's a signal about an overcrowded trade that's thinning out...Ultimately, central banks will write the next chapter but it's beginning to....The BOJ's Funo and RBA's Debelle speak at 0130 GMT and 0140 GMT,....Just after Debelle speaks, the Fed's Rosengren is in Bali to deliver remarks...We'll be curious to see if hawkish talk can stem the USD selling.
Intraday Market Thought: Countdown to Sunday's Volatility

by Adam Button | Apr 20, 2017 22:57
First there was Brexit, then Trump and now it's the French election; or at....We take a closer look...nbsp;The Premium Insights closed the EURCAD long at 1...4495 for a 235-pip gain in order to make a way for a tactical dual EUR trade on....Polls showed fractional momentum for Macron, helping to boost the CAC-40 in....That uptick may be telling because a large number of voters said they were....A poll from Harris showed Macron at 24...5%, Le Pen at 21%, Fillon at 20% and Melenchon at 19%....Given the margin of error and other factors like turnout and undecideds, it&....Polls show Melenchon would win that contest but German Fin Min Schaeuble....What's important to remember is that's a highly unlikely scenario and....If Macron finishes in the top-two and moves to the runoff, he's heavily....Fillon would also be a big favorite against Le Pen or Melenchon...So while the market sees this as a potential redux of Brexit or Trump, it....Brexit polls were close in the days ahead of the vote and Trump lost the....In France, it's a national popular vote so polling is simplified...That said, there is always the risk that voters are playing coy with pollsters....The risks may be even higher after what looked like a terrorist attack on the....That alone could add to jitters Friday...After talking with many traders and analysts, there is a distinct fear of....Sunday Afternoon Volatility....Watch for exit polls hitting at 8 pm Paris time on Sunday (7 pm London, 2 pm....Before that, we'll watch for continue comments from leaders at IMF....The prior was 52...4.
Intraday Market Thought: Sometimes It only Takes a Nudge

by Adam Button | Jun 27, 2017 23:15
When markets are on the razor's edge it only takes a nudge to send them....The euro was the top performer while the yen lagged...The Asia-Pacific calendar is light but a major central banking event takes place....The EURUSD premium long was closed at 1...1348 for 168-pip gain, while cable remains open...Below is the Premium video posted right after Draghi's inflation remarks...In central banking, it's not always the words, it's who says them...Yellen has been saying for months that the slowdown in US inflation is only....By the end of the day, 50 pips had turned into 160 as technical levels gave....At the same time, the IMF cut its US growth estimate for this year to 2...1% from 2...3% and for 2018 to 2...1% from 2...5%....They blamed, in part, the inability of Congress to deliver on promises...That point was underscored late in the day as Republican leaders said no vote....Stocks didn't like that headline and the S&P 500 fell 0...8% and the Nasdaq 1...6%....The bigger story was in the bond market as European 10-year yields surged 12-16....6 bps...That helped to sink the yen across the board including a 230 pip rise in....The Canadian dollar got a helping hand from a 2% rise oil and that led to....However late in the day, private inventory data from API showed yet-....Cable was also a winner as it rose above 1...28 and then busted through stops in an instantaneous move to 1...2862 as the mid-June highs broke...Part of the equation of Sturgeon announcing a halt on plans to host a....Buried under it all was an upbeat US consumer confidence number and hawkish....It's clear that soft data and hints at continuing to raise rates aren't....The breakout in the euro is real but it's not going to be a non-stop climb....Looking ahead, the calendar is quiet for a few hours ahead but we're looking....Draghi, Carney, Kuroda and Poloz will all appear together at 1330 GMT to talk..
Intraday Market Thought: Korean Fuse Burns Risk Trades

by Adam Button | Sep 4, 2017 0:40
North Korea detonated its largest test yet as it sprints toward nuclear-power....The yen and Swiss franc are strongly higher in early trading as a result...Gold gapped up to 1337 from Friday's 1325...CFTC positioning data showed further bets against the pound...US and Canadian markets are closed on Monday...nbsp; 3 Premium trades are in progress but 2 trades will be added ahead of what....nbsp;....North Korea tested a nuclear weapon underground on Saturday that appeared to....It was Pyongyang's 6th nuclear test, which triggered a 6...3-magnitude quake and was felt throughout northeastern China...A statement from Kim Jong-Un's government said it was a hydrogen bomb....Risk trades are under pressure with the yen and Swiss franc around 50 pips....Expect more risk aversion as Europe begins trading and note that markets....The speed of North Korea's progress and testing is alarming...They are evidently years ahead of where experts had believed...In a tweet, Donald Trump said the United States is considering, in addition to....That's almost-certainly a hollow threat because China is by far its....Most of the UN Security Council is angling to cut off North Korea's oil....As recently as last week China said it didn't want further sanctions...The immediate risk probably isn't nuclear war but some kind of trade spat....According to reports, Trump has already asked aides for tariffs on China for....Ultimately, the fears and rhetoric will subside but at this point it looks like....CFTC Commitments of Traders....Speculative net futures trader positions as of the close on Tuesday...Net short denoted by - long by....EUR +87K vs +88K prior...GBP -52K vs -46K prior...JPY -69K vs -74K prior...CHF -2K vs -2K prior...CAD +53K vs +51K prior...AUD +67K vs +60K prior...NZD +19K vs +22K prior....The moves were modest this week but the trend has been a slow build in pound....One spot that's vulnerable in the week ahead is NZD, which has caught..
Intraday Market Thought: Does Euro Care About Catalonia?

by Adam Button | Oct 2, 2017 13:32
Nearly 1000 people were injured in a voting crackdown Sunday in Catalonia as....After having been the top performer in September, the pound is the day's....US manufacturing ISM is up next...nbsp; The Premium shorts in DAX and USDCAD were both stopped out...Here is a look at today's DAX chart...Could it be a case of "market is irrational longer than you can be....Spain's central government attempted to shut down voting as Catalonia aims....The challenge for Catalan leaders is to form a legitimate government and gain....The government will aim to enter into negotiations but given the violence and....Will the euro suffer? Early indications are that it won't and so long as it....Catalonia's contribution to Spain's economy has been....A more-likely driver early in the week will be solid numbers from China...The official manufacturing PMI was at 52...4 compared to 51...6 expected while the services PMI soared to 55...4 versus 53...4 previously...In a sign that officials are loosening policy, China also loosed the RRR for....CFTC Commitments of Traders....Speculative net futures trader positions as of the close on Tuesday...Net short denoted by - long by....EUR +88K vs +62K prior...GBP +5K vs -10K prior (1st positive in nearly 2 years)....JPY -71K vs -51K prior...CHF –1...8K vs -1...5K prior...CAD +75K vs +59K prior...AUD +77K vs 72K prior...NZD +8K vs +12K prior....The power of central bankers has been on display in the cable data...GBP was deeply net short a few weeks ago and now the market is betting Carney....Euro longs also rebounded after a dip last week as the market finds support....17...The bounce shows how eager specs are to buy the dips...nbsp;..
Intraday Market Thought: From Washington to Rome

by Adam Button | Sep 27, 2018 14:54
Markets were busy digesting the aftermath of the Fed's rate hike....CAD fell further as Trump played hard ball with Canada over NAFTA...The RBNZ held rates at 1...75% as expected, with US rates finally rising above those of New Zealand...درج اليورو بعد الفدرالي (فيديو للمشتركين فقط)....The Fed hiked rates to a range of 2...00%-2...25% on Wednesday but sent mixed messages about the path of rates ahead...In the bond market, US 10s are also yielding 40 basis points more than kiwi....It's rare to have the US as the high yielder in developed markets and those....As for the Fed, the statement removed a reference to 'accommodative' in....That move reversed in the press conference when Powell indicated the....In comments on the path of rates, Powell sounded like he'd just spent two....Instead he said the Fed will stay on its path and judge what to do next based on....As for the path, it's not entirely clear but he said the lowest estimations....Salvini Flirts with Budget....The euro fell anew alongside Italian bonds after Matteo Salvini, Italy's....The comments were at odds with Economy minister Tria who had been supporting....Brussels requires EU nations to keep the budget deficit below 3% of GDP...The matter will resurface again next week when Italy's leadwers back from....Separately, the Canadian dollar swooned Wednesday as NAFTA negotiations sour...First, the White House leaked that it's planning to publish the text of a....Trump has long threatened to exclude Canada but that was mostly through to be....Trump doubled down later saying he rejected a one-on-one meeting with....Still, Trump conceded there was a “good chance” of a deal with....That was reflected in a rally in USD/CAD to 1...3040 from 1...2950.