Weekly Game Plan 7.1.19

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Here is this week's Game Plan:

Welcome to 2019 and what a start to the new year, with a flash crash and generally higher volatility in FX. The FED has not helped into th end of 2018 and the market is actually pricing in a rate cut for 2019. With an inverted yield curve (in various parts) and lower PMIs, it's hard to envision clear skies ahead.
There wasn’t any market moving news of note on the weekend but wait for Tokyo before gauging things. Markets were closed in Japan through Thursday/Friday so (most?) Japanese retail traders will have to deal with the flash-crash in the USD/JPY and JPY-crosses. Basically, there may be more position adjustments to be done.
Liquidity is the main issue going into 2019 and is the culprit behind the flash crash. Central banks have been on a tightening path (except the PBOC), pulling liquidity from the system. Out of the last 13 FED tightening cycles, 10 ended up with a recession. Together with the recent commentary from BIS Quarterly Review, it seems we're in for a wild ride in 2019 with higher volatility and a bumpy road ahead.

Themes for the Week Ahead:

• Post-NFP positivity:  decent NFP numbers and inflation data might aid risk assets into the new back-to-school week.
• US/China trade talks: Friday's risk recovery was partially justified by hope of a positive outcome on Jan 7-8. If progress is made at the talks it will likely keep markets buoyant – while a step backward will be poorly received by investors.
• Fed Minutes:  traders will scrutinize these closely, attempting to understand Powell's new "flexible" stance.
• The US government partial shutdown is still under way. While the partial government shutdown isn’t a major concern for markets, signs that it may drag on indefinitely would have the potential to rattle already fragile investor sentiment.

Data in the Week Ahead:

• Bank of Canada Decision
• FOMC Minutes
• Carney Speech
• Powell Speech
• AUD Retail Sales
• UK GDP
• US CPI

On the Radar:
Going into the week we have some decent candidates: AUD & Cad strength vs. Eur and Usd. This will depend on risk appetite, which will be a volatile creature based on the commentary I've read thus far. We also have some strength in Silver going into this week.