Short NZDCHF and Ready for Corporate Month End

January 25, 2023

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Short NZDCHF and ready for corporate month end

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As I have been saying for a bit, I think we are at peak soft landing narrative for now and we go back to concerns about growth and earnings. MSFT last night did its best to rally on a bad headline release, going from 242 to 253 post 4pm. It’s now trading 234. I have been talking about selling NZD for about a week… On the back of substantially worse data in NZ… But I was nervous about broad strength in risky assets and general dollar weakness.

Now, I think it’s time to go for it. The QSBO, Retail Sales, and credit card spending data in New Zealand all point to a rapidly slowing economy and I think that risky assets have peaked in the short run and so it is finally time to go short kiwi. With stocks, I don’t think the market is going to sit around waiting for the rest of the earnings deluge. MSFT is showing the way until proven otherwise.

Also, you have a nice triple top on the hourly chart and NZ CPI is out of the way (it came out last night) so there is less event risk. Short NZDCHF here (0.5950) with a stop at 0.6055 and take profit at 0.5827. For this trade to work, you probably need equities lower. I think that is fine.

NZDCHF is wrong above 0.6050

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Corporate month end

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Friday is corporate month end so in advance of that, I figured today is a good day to check in on recent performance. The last business day of the month minus two days is the last day for corporations to settle spot in a month (because spot FX is t+2) and corporates are net USD buyers as global consumer goods, tech, and pharma repatriate dollars somewhat steadily each month.

Here is the P&L of various currencies on t-2 (aka corporate month end). I have also included the P&L for the currencies on t-1 (the day before month end) because there is a mean reversion effect along with a general tendency for the dollar to sell off in the final two days of the month due to equity hedging during equity bull markets.

To be clear: “t” is the last day of the month. “t-1” is the day before. “t-2” is 2 days before.

Cumulative P&L of long EURUSD on t-2 every month

Cumulative P&L of long EURUSD on t-1 every month

Cumulative P&L of long USDJPY on t-2 every month

Cumulative P&L of long USDJPY on t-1 every month

Cumulative P&L of long GBPUSD on t-2 every month

Cumulative P&L of long GBPUSD on t-1 every month

The corporate month end effect is most notable from 7am to 11am NY time. Note, of course, that on average the USD goes up in this window, but not always.

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Final Thoughts

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The AUDUSD WMR fix autocorrelation worked yesterday but note that since 2010, we have never seen three WMR fixes of +0.4% or more in a row. If you want to be more conservative, you could wait until after 11am NY to sell the NZDCHF but you might be disappointed!

This is worth a read. Three minutes on a new technology from Alitheon that can analyze standard iPhone images to detect authenticity of art and high-value collectibles. The software is so discerning, it can tell the difference between two “identical” gold bars. Many use cases, no blockchain required! Have a high-speed day.

good luck ⇅ be nimble

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This is from October 2022 but I had not seen it.

Ross Chastain is killing it.

A NASCAR driver used a trick he learned playing a 2005 NASCAR video game for GameCube to pull off an incredible last-lap maneuver to secure himself a spot in the Championship Finals. Driver Ross Chastain, 29, cranked his car into fifth gear, slammed it into the wall, and ended up passing multiple drivers on his way to finishing fourth at Sunday’s 500-lap Xfinity 500 at Martinsville Speedway.

As you can see in the link below, Chastain intentionally drove his car into the wall on the final lap to perform a “wall-ride” that he learned playing GameCube. The tactic was so successful that it helped Chastain finish fourth to earn himself the final playoff spot, edging out Denny Hamlin.

“I played a lot of NASCAR 2005 on the GameCube,” Chastain said in a post-race interview. “I never knew if it would actually work [in real life]. I did that when I was eight years old. I just made the choice. I grabbed fifth gear… and fully committed. Once I got against the wall, I basically let go of the wheel…”

https://twitter.com/NASCARonNBC/status/1586851910878957574

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