End of a Crazyish Week with Nikkeileaks and a YCC Tweak

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It’s hard being long the dollar, but I’m sticking with my current trades through the month-end weirdness.

by Brent Donnelly

July 28, 2023

https://blog.nateliason.com/p/proof-you-can-do-hard-things

Current Views

08AUG EURUSD

1.0970 put for ~32 pips

Target 1.0830 (spot ref 1.1045)

Short GBPUSD at 1.3080

Stop loss 1.3026 (was 1.3226)

Take profit 1.2757

Long USDCAD @ 1.3230

Stop loss 1.3088

July 28, 2023

USD, EUR, GBP, and Japan

As I said yesterday, it’s hard work being long USD. GBPUSD got to within 5 pips of the TP zone and is now 120 pips higher again. German state CPI was weak and EURUSD went down to 1.0945 for a second and is now 70 pips higher.

EURUSD 5-minute chart over the past few days

It’s odd. Perhaps real money month end hedging is getting going or the central banks are back selling USD. I’m not completely sure.

And of course, the BOJ did the thing that was leaked in the Nikkei about 7 hours before the meeting. This led to wild but directionless price action in USDJPY:

USDJPY 5-minute chart

Japanese yields have broken through the old 50bps ceiling but have not gone crazy or anything (yet). Here is the chart:

Japan 10-year yield 2020 to now

This week was the big one and now we roll into August and ISM and jobs are the main features. The last business day of the month is Monday, so expect some real money FX hedging today and Monday and then we will see if the August bullish USD seasonality kicks in or not. This looks like a bad news / good price setup in EURUSD short-term but I’m sticking with the bearish view as there is often weirdness around month end so I’m trying to look through this crazy price action.

Hodge Podge

All the big stuff is in the rearview mirror for now and I know everyone is tired so I’m keeping am/FX short today, as I often do on Fridays. Here are a couple of interesting nuggets before you go:

Good chart from a good post by Joseph Wang. “A New Index to Measure US Financial Conditions.”

And I’m not sure what this chart means, but it’s interesting too.

Link

And finally, this note from the Bank of Canada (“What the stock market says about future growth” is a good idea, though I feel the piece could have had stronger forward-looking takeaways. Specifically, does sector performance offer more accurate predictions of GDP than private and public sector GDP forecasts? This would be a good study to conduct. If you have 7 hours laying around, go for it and send me the results! :]

Have an algebraic weekend.