Weekly Game Plan 1.10.18

You can always find my weekly analysis in the FXRENEW Blog each week, along with articles and thought leadership pieces. Our best pieces can be found in one placehere. If you want to get an idea for how I trade trends, this webinar will help. If you want to know how I Trade the News, this plan will help. 

Here is this week's Game Plan:

Welcome to Q4 2018. Trade wars, Emerging Market distress (due to unsustainable dollar-denominated debt), FED rate hikes, the surging US dollar – they are all real and present dangers. On top of that, Italy’s Fiscal Defiance could get messier, throwing the euro zone’s third largest economy (and largest debtor) into deeper financial uncertainty as the ECB starts to reduce QE.

Over the weekend, China manufacturing PMI for September disappointed, as US/China trade friction is starting to negatively impact the economy. The falling export orders was a direct result of trade tariffs, according to Chinese companies participating in the survey. This may contribute to a bit of Risk-Off tone as markets get under way this week.

Themes for the Week:

• Canada and the United States are trying to save NAFTA but at the time of writing, no deal has been reported by the press. The CAD was the best performing currency last week – suggesting the market is pricing in the likelihood of a trade deal being struck – although the main drivers were rising oil prices and stronger Canadian data.  If a deal between the US and Canada is finalized, expect decent CAD buying.
• Britain’s ruling Conservative Party kicks off its annual conference. Running from Sunday to Wednesday, the widely-watched event could prove a make-or-break moment for Prime Minister Theresa May. Investors will be watching to see whether May can face down hardline Brexiteers in her party and form a united front before the final stages of EU-UK talks.
• The market will keep a close eye on Italian politics, as the populist coalition appears steadfast in opposing the EU calls for budget restraint.
• Emerging Market Distress can be illustrated in a simple chart

Data in the Week Ahead:

• The RBA meets on Tuesday, but it will likely be a non-event for the markets. The RBA remains firmly on hold and the statement following the meeting will likely be similar to the one released after the September meeting.
• US NFP
• AU Retail Sales
• Canada Employment

On the Radar:

US stocks are still appetizing for buyers going into this week. Depending on what happens today in negotiations, CAD might remain strong and I like it vs. Euro, Chf and Jpy. But the Euro should remain weak agaisnt all comm-dolls so long as the risk-on appetite continues, and especially if the Italian situation escalates. GBP trades will have to wait until after the Conservative Party Conference. Chf continues to weaken amongst the risk-on move and is appetizing vs. Cad & USD.

Weekly Game Plan 24.9.18

You can always find my weekly analysis in the FXRENEW Blog each week, along with articles and thought leadership pieces. Our best pieces can be found in one placehere. If you want to get an idea for how I trade trends, this webinar will help. If you want to know how I Trade the News, this plan will help. 

Here is this week's Game Plan:

Over the weekend UK PM May said Britain would not flinch in an impasse with the EU on Brexit. "This is the moment to do what is right for Britain," May said in the Sunday Express. The Sunday Times is reporting that the PM’s aides have begun contingency planning for a November snap election to help save Brexit talks and maintain her leadership. There seems to be more pain in store for GBP in the near-term.
Themes for the Week: 
Risk appetite continues unchalleneged after China refused to retaliate (for now) against Trump's tariffs, and pledged to keep the Yuan stable and support their economy through fiscal and monetary means. Copper and AUD rallied, and the Dow made new all-time highs. Many analysts believe we will need fresh supportive news to keep this ball rolling. 
The FOMC will be the key event in the week ahead and will likely determine the direction of the USD and US Treasury yields. The market expects the FED to tighten policy amidst strong US data, especially wage inflation. This could kick US10YR yields past 3.13% (current year highs) which will put even more pressure on Emerging Market debt, beyond aiding the US dollar. October may very well be a tumultuos month for bonds if US yields break higher. The 10-year Treasury yield matters because it is the rate against which trillions of dollars of borrowing around the world are referenced. It touches every market in the world.

Keep an eye on the Euro and Italian BTPs. On Sep 27 the Italian Government needs to present it's 2019 budget and it has been quite a roller-coaster ride. Right now, markets still are acting as if Tria will be able to remain within EU rules. But DiMaio and Salvini will likely stir things up.
The RBNZ also meets this week and no-change is expected but whereas the last meeting was dovish, recent GDP data out of New Zealand was better than expected, but that might be enough to lift the tone of the RBNZ.
Data in the Week ahead:

• Not much going on beyond FOMC and RBNZ.
• Some central bank speakers (Draghi, Powell, Poloz)
• US Final GDP
• CAD GDP.

On the Radar:
Going into the week my stance is bearish on GBP vs. USD & CAD. I remain bearish on Jpy vs USD and the comm-dolls. I remain bullish on the Dow. And there is a volatility contraction in Gold which has me waiting for the break on either side.

Weekly Game Plan 17.9.18

You can always find my weekly analysis in the FXRENEW Blog each week, along with articles and thought leadership pieces. Our best pieces can be found in one placehere. If you want to get an idea for how I trade trends, this webinar will help. If you want to know how I Trade the News, this plan will help. 

Here is this week's Game Plan:

This week should pick up where we left off last week: the return of trade war fears, after reports indicated the US will go ahead with imposing tariffs on another 200 BLN USD worth of China imports despite resuming talks with China on contentious trade issues. Stocks may come under more pressure, USD may remain buoyant and EM currencies (alongside the comm-dolls) may come under pressure. However, tariffs are apparently being reduced to 10% instead of the 25% feared. So the markets may not react as violently.
Themes for the Week:

• The US/China trade debate will most likely be the main focus after Trump confirmed 200 Bln worth of Tariffs, but apparently is reducing the impact to 10% from 25%. There is much uncertainty still, so stay nimble.
• A Reuters report said that legal experts believe the Mueller investigation may get energized by news that former Trump campaign chairman Paul Manafort has agreed to fully cooperate with US prosecutors. The saga has the potential to impact markets, as the early November US midterm elections comes into focus.
• The Bank of Japan will decide on monetary policy, but no change and no impact are expected.

Data in the week ahead

• Bank of Japan policy decision
• UK CPI & Retail Sales (the mood is quite negative on Retail Sales after sector bellwether John Lewis told investors that its first-half profit was all but wiped out)
• CAD CPI & Retail Sales
• Draghi speaks
• NZD GDP

What's on the Radar:
Depending on what happens between the US and China, things may change intraweek, but for now here's what is on my list: US equities remain biased to the long side, as do UsdJpy and GbpJpy; Silver remains biased to the short side; AUD & NZD remain weak vs. USD and GBP.
Good Luck!

Weekly Game Plan 10.9.18

You can always find my weekly analysis in the FXRENEW Blog each week, along with articles and thought leadership pieces. Our best pieces can be found in one placehere. If you want to get an idea for how I trade trends, this webinar will help. If you want to know how I Trade the News, this plan will help. 

Here is this week's Game Plan:

The divergence between the US and the rest of the world keeps intensifying. Friday saw an escalation of US/China trade war fears due to Trump comments and a rise in the USD due to a strong NFP report. This is a toxic combination for emerging market countries which typically have large current account deficits and high levels of USD-denominated debt.
The USD flipped back into a positive posture on the back of NFP as you can see here. Despite this fact, we did have some relaxation in the USDTRY as you can see here. However, the markets are also focused on Brasil, Argentina and Russia but also India and Indonesia. Contagion is the main concern so keep your ears on the wires.
Themes for the Week:
The major themes from last week will continue to be influential this week:

• the US/China showdown on trade;
• moves in Emerging markets (is contagion spreading?)
• political drama in Washington with a plethora of attempts to overthrow Trump (although the markets haven't reacted to this yet, but will indeed react if there's any hint of impeachment or serious accusations)

but also

• ECB and BOE meet. No rate changes are expected but the ECB is expected to signal they are ready to commence tapering their bond purchase. There will also be interest in what BOE's Carney says regarding the state of Brexit.

Data in the Week ahead:

• US CPI & Retail Sales
• UK GDP, Employment and BOE meeting;
• ECB meeting
• AU Employment data

On the Radar:
I continue to see AUD and NZD weakness amidst EM stress, US/China tension and technical USD strength. There has been much strength recently in the CHF as a safe haven but the USD is becoming equally favoured. Gbp and Eur might pop onto the list depending on their respective central bank meetings near the end of the week. In equity space, FTSE and DAX remain weak, as is Silver.

Weekly Game Plan 3.9.18

You can always find my weekly analysis in the FXRENEW Blog each week, along with articles and thought leadership pieces. Our best pieces can be found in one placehere. If you want to get an idea for how I trade trends, this webinar will help. If you want to know how I Trade the News, this plan will help. 

Here is this week's Game Plan:

It should be a relatively benign start to the week, and mild pressure might be seen in CAD. Also, during the Asian session we will also have AU Retail Sales. However, the US and Canada are away on holiday tomorrow and as such, there shouldn’t be all that much movement. The rest of the week will be busy.

Themes for the Week:

Has the Trade War impacted US Employment? NFP shall tell. The market expects 187k  in August. NAFTA may have a future yet, after the US sealed a deal with Mexico. However, tensions are still high with Canada as Ottawa “won’t just sign any deal”. Saturday Trump maintained his harsh stance with Canada, which may put some pressure on the Loonie this week.

More Tariffs on China. Chinese stocks may come under more pressure this week as Trump prepares to impose tariffs on another $200 billion of Chinese imports, on top of the $50 bln already taxed in the trade row.

Emerging Markets will still be an attention grabber. The Turkish lira has lost more than 30 percent in August. But Argentina’s peso plunged around 20% last week – more than 10%  in one day – dragging other currencies like the Brazilian real down with it. With the Fed on a hiking path, there may be more pressure to come for EM. We have already seen the market’s reaction: USD bid, CHF bid, Jpy bid in a typical risk-off move. Beware of this.

GBP is an interesting candidate as  parliament returns from summer recess and raises the prospect of more divisive noise over Brexit. EU’s Barnier has become more accomodative recently, helping the Pound gain traction. But the game is far from over. Also coming up on the horizon is the Conservative Party conference at the end of September, where PM May could potentially face a leadership challenge.

RBA and BOC meet this week. While neither central bank is expected to surprise, participants feel the RBA might be a bit more dovish in their statement after West Pac raised their mortgage lending rate and there are “concerns over household debt”. Instead, the market is expecting more of a hawkish stance from BOC but in light of NAFTA issues and worse GDP data recently, will the Bank stick to script?

Data in the week ahead:

• AUD Retail Sales
• RBA decision
• AU GDP
• Bank of Canada Decision
• Cad Unemployment
• US NFP
• UK PMIs.

On the Radar:

Going into the week, I have a bearish bias on Aud & Cad vs. GBP, USD and (with less convinction) Jpy. I’ve got a short bias on FTSE and I remain with a long bias on US equities.