Weekly Game Plan 23 Mar 20

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 news flow concerning the coronavirus pandemic is fluid, along with policy actions, and as such markets will likely remain prone to large swings in either direction, although a risk-off bias remains. Central banks are trying to ease tensions in the credit markets, while politicians are attempting to aid their economies (which they have closed down in order to contain the virus spread).
What will eventually turn the tide? A vaccine, or some cure for the covid for sure! But until then, and until there is more certainty and confidence on when the crisis will fade and how the global economy will look once it does, the pattern of deep sell offs of risk and vicious technical corrections will continue.

Keep positions small and manage your trades actively during this time.

Themes for the week:

• Credit market stress and USD demand: desperate companies and banks around the world have been stumping up big premia in recent days in their rush to buy greenbacks -- for trade, debt repayments, or just to hold. Central banks are trying to ease the tension, but keep an eye on credit.
• Covid Spread: markets were spooked once again on Friday as lockdowns started to be implemented in the US. The spread and the death toll of the Covid will continue to attract attention.
• PMIs: these timely indicators will reveal current sentiment in Europe and the UK. This is forward-looking data and the markets will pay close attention. We will now see how much bad news the market has discounted vs. data.
• EM stress: the strong dollar, a dire global economic outlook, tumbling oil prices thanks to waning demand and a Russia/Saudi Arabia production spat as well as rising borrowing costs are taking a huge toll on Emerging Markets.

Data in the week ahead:

• EU PMIs (quite important, should be dismal)
• UK PMIs (should also be dismal)
• US PMI (Idem)
• GER IFO (Idem)
• UK CPI (prices could jump as PMIs were showing increases)
• BOE Decision and statement
• US unemployment claims (could skyrocket..)
• US PCE

On the Radar:

While 2-way trading is key in these conditions, I maintain a broad bearish bias on indices for now, and also on Crude. I stil like USD strength vs. Eur and Gbp especially, but there are curious counter-trend moves in Cad vs. Chf and Jpy. Once again, another week full of opportunities. Just remember to keep your position sizes small, and cast a wide net.

Weekly Game Plan 9 Mar 20

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

Remember that US & Canada are shifting to Daylight Savings, so depending on where you live it will appear as if North America wakes up 1 hour earlier than usual and data is issued 1 hour earlier.

Over the weekend China issued a gloomy trade report which is likely to reinforce fears that economic growth halved in the first quarter to the weakest since 1990. Beyond that, the Covid-19 continues to advance across the globe, with South Korea, Italy, Germany, Greece, Iran and even the US showing more cases. The market will be keeping a close eye on the credit markets, as stress in high-yield credit is the most unwanted side effect of slowing global growth, weak demand and rapidly rising investor fear.
Heightened volatility is the name of the game.

Themes for the Week:

Covid-19: the virus is the main protagonist and will continue to drive markets in the week ahead, as it spreads across the globe.
Credit Market Stress: after the REPO issues, now Credit Default Swaps are soaring (Especially in Europe) as the Covid-19 has added stress to an already stretched market. One instrument to keep on your watchlist is PHIYX (Pimco High Yield Fund) which is linked to the credit market and will potentially anticipate the moves in SP500.

ECB: the ECB meeting this week should generate some nice volatility as markets are not sure what to expect. A 0.10% cut is priced in by markets, but not by analysts who are not convinced the ECB will cut rates. Whenever there's uncertainty, there's room for volatility.
Fiscal Support: just as we noted last week, more governments will be going on spending sprees to support the economy. These measures are inflationary in the longer term, and at best can give some confidence in the short-term.

Data in the week ahead:

• UK GDP m/m
• UK Annual Budget
• US CPI
• ECB Decision

On the Radar:

I remain bearish on Dax/Eurostoxx and Crude. I am cautiously bullish Gold. I'm bearish USD and CAD vs. Jpy and Chf.
Please take care of yourselves and your family. Prevention is the best medicine against the Covid-19 so be vigilant but do not panic. The mortality rate remains around 3% at best. As Dalio said recently "The most important assets that you need to take good care of are you and your family. As with investing, I hope that you will imagine the worst-case scenario and protect yourself against it. "

Weekly Game Plan 1 Mar 20

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

China manufacturing PMI plunged to 35.7 from 50 in January, the fastest pace monthly contraction on record. While non-manufacturing PMI plunged to 29.6 – the lowest reading on record.  The extremely weak PMIs will shock markets on Monday morning and the fact that China reported the terrible numbers will also be surprising to many.

Be aware of emergency central bank intervention, which could keep volatility elevated. On Friday, stocks rallied to cut more than half the extreme losses in the last hour of trading following hints from Fed Chair Powell that the Fed was "ready to act as appropriate".

Themes for the Week Ahead:

• Inter-Meeting FED Reaction:  FED's Powell issued this brief statement on Friday. This seems like an anticipation of some kind of imminent action on their behalf. The markets do expect the FED to step in and ease policy with emergency rate cuts.
• COV-19 and PMIs: markets are awaiting Chinese and US PMI data this week, in order to gauge the initial impact of the COV-19 on the economy. Over the weekend, China issued the official numbers which were dismal: official manufacturing PMI at 35.7 vs 50.0 in Jan, market was expecting 46; Non-mfg PMI at 29.6 vs 54.1 in Jan, lowest on record.
• Fiscal Spending: China and South Korea area already 2 nations that have started fiscal stimulus (government support to the economy) to counter the COV-19 effects. Pressure is mounting in Germany of all places, to do the same. Fiscal stimulus will definitely be a theme going forward, and should be beneficial to risk-assets including stocks and commodities, as well as inflationary.
• OPEC: more cuts will likely be discussed this week, with Crude tumbling over 30% since the start of the Year.
• Super-Tuesday:  14 US states go to the polls on Super Tuesday - the largest single-day delegate haul in the nomination fight. Investors will be looking to see whether progressive Senator Bernie Sanders consolidates his lead (which would be negativefor risk assets and the USD) or if moderates such as former Vice President Joe Biden or former New York Mayor Michael Bloomberg can make inroads. While investors have been more consumed by the coronavirus developments, election-related headlines have jostled some parts of the market.
• Central Banks: beyond the expected FED emergency cut, this week we will see whether Bank of Canada and RBA are willing to ease policy. BOC is expected to ease, but the RBA would surprize the markets if they were to do so.

Data in the week ahead:

• CNY Caixin PMI (will be influential)
• US ISM PMI (could be better, given rise in Empire State & Philly Fed)
• RBA Decision (markets are expecting no change & dovish commentary...but there is a chance of a surprize rate cut given the Cov-19 impact on markets)
• AU GDP Q/Q (no real bias, will depend on RBA slant)
• BOC Decision (rate cut expected as Crude Oil is down 30% from earlier in the month, lower GDP, COV-19 issue)
• US ISM NMI (will depend on ISM Manuf.)
• OPEC Meeting
• AU Retail Sales
• Cad Employment
• US NFP

On the Radar:

Volatility is expected, so my forecast is based on the continuation of risk-off, along with last week's performance. I remain short on Dax moreso than US equities, I remain biased short on Crude, I remain short on Aud/Nzd/Cad vs. JPY and EUR