Short CADCHF

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Current Views

Short CADCHF @ 0.6515

Stop loss 0.6576

Short CADCHF

While the base case for the Bank of Canada tomorrow is for nothing particularly new, I think the skew / asymmetry is dovish. It’s not the ideal meeting for a change in policy because there is no Monetary Policy Report (that comes at the April 10 meeting), so there are decent arguments for a boring outcome. On the other hand, inflation and wage growth are coming in soft enough that the BoC could easily signal the end of QT at this point given moribund growth and significant slack.

I was trying to sell the rally in CADJPY, but it never got there, so I’m going to bite the bullet here and sell CADCHF instead. Stop loss 0.6576 and hold through the jobs data as my feeling is that the Canadian jobs market is getting closer to equilibrium while the US jobs market remains tight. This chart from Goldman (via Twitter) captures it nicely.

GS: Jobs-Workers Gap Falls Further in Europe and Canada

The gigantic breakouts in gold and bitcoin make me nervous about the USD, that is why I’m doing CADCHF, not USDCAD. While CADJPY still makes sense, I like the entry point better in CADCHF and I think the CHF positions could be at risk if this gold rally continues because gold and CHF tend to be brotherly and the convoluted price action in equities (AI decoupling from Apple and TSLA, for example) makes me think we could get a correction in stocks. There is a double top at 0.6560 in CADCHF.

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Final Thoughts

It looks like the Fed has pivoted too early and is unleashing an inflationary wealth effect for young crypto holders and boomer NASDAQ holders. Bitcoin retested the ATH last night but hasn’t quite cleared the hurdle yet.

Interesting chart! It is odd how only financial assets are ripping, not real assets like corn and oil.

Have one good day.

 

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The Spectra FX Positioning and Momentum Report

Why long NZD and GBP?

Hi. Welcome to this week’s report. The market is getting long GBP again despite no carry and no momentum. Short CHF positions have built up as well, in anticipation of a more aggressive sell CHF campaign by the Swiss National Bank. Momentum scores are low as things are not moving much in FX land and volatility plummets.

Looking back to 2020, NZD positioning on the CFTC has oscillated between plus 20k and minus 20k contracts. Here is positioning overlaid with NZDUSD.

And here’s the same chart, with every time NZD positioning was above or below 10k contracts.

If you eyeball that, you might notice that when the CFTC was short 10k or more contracts, you made money long and when it was long, you made money short. That is correct. Here’s the P&L of going long or short NZDUSD at the Friday close using this simple condition, covering a week later. The CFTC data comes out at 3 p.m. Friday, so this is a strategy that could be executed in real life. The result is interesting because NZDUSD is unchanged in the 4-year period covered (it started at 0.62 and is currently at 0.62).

Note that our “Positioning as a % of OI” score for NZD remains low because we use a lookback to the year 2000 and positioning pre-2020 often got much larger than it is now. The study I’ve done here assumes we are in a similar regime to the one we’ve been in post-2020 and that we are not heading back to a regime where NZD longs could get much, much larger and drive the price significantly higher first. That is possible, but that’s not the call here.

This week’s positioning report suggests risk/reward in NZDUSD and GBPUSD are poor.

G10 FX Positioning and Momentum Scores

That’s this week’s report. Thank you for reading.

https://www.reddit.com/r/dataisbeautiful/comments/1b49w46/the_numbers_mentioned_in_mos_defs_yasiin_bey/

good luck ⇅ be nimble