Things are moving

Movement!

The currencies are moving. EURUSD and GBPUSD are on the move as the lethargy finally lifts and the FX market is starting to acknowledge the rebirth of U.S. exceptionalism after a flurry of hot U.S. data and a massive resurgence in the AI Capex trade. I had a bunch of inbound queries yesterday to the effect of: Why is the dollar rallying now?

My answer is simply that things don’t always happen right away and we are playing catch up to the narrative that flipped about a week ago as the market starts to price in U.S. rate hikes, U.K. and Brazilian politics trigger idiosyncratic USD demand, and American equities continue to take out the all-time highs. G10 FX fell asleep for a bit and has now woken up.

I have been writing about how I think equities are set to peak, but wanted to wait for the endish of the week and so I finally went short yesterday (via TNA, see sidebar) as the rabid and price-insensitive gamma flow should come to a conclusion as we hit options expiry today.

My patience on the bullish gold view paid off and I got filled on the idea to buy GCQ6 at 4610. So the sidebar is short EURUSD, long gold, and short U.S. smallcaps, which seems like a reasonable portfolio as the long end of global bond markets receives another kick in the teeth and stocks run out of rocket fuel into expiries.

CUT TO: The long end of the bond market screams in pain:

Fixed income volatility remains low, but watch for a pick up soon and that pick up could accelerate equity downside if the permabid from gamma types disappears next week.

---

Calendar

Some U.K. data and NVDA earnings highlight next week’s event risk.

---

How far can the USD go?

The DXY gapped lower on the April 7^th Iran ceasefire announcement and is now revisiting that gap. So while I remain bullish USD and short EURUSD, there is some risk of consolidation here as we bang up against that resistance zone.

Looking at the EURUSD chart, you can see two clear equilibrium zones and we just dropped into the bottom one. This suggests to me that EURUSD should be 1.1500/1.1700 now on the wide, with sellers coming in closer to 1.1660/70.

And finally, the MOF is in a tricky spot as USDJPY comes back and the courageous 155.50/156.00 buyers look super smart. USDJPY is stuck in something like 156/160 as infinite demand created a floor down there and the threat of MOF above 160 creates a cap. I still cannot understand how Japanese authorities have not ordered quasi-governmental investors like GPIF and Kampo to start rotating into JGBs. It will happen one day and that will be a monster buy unhedged JGBs trade. The reverse of Abenomics.

---

Final Thoughts

Fun fact about two owners of SpaceX stock. The live market on the SpaceX IPO suggests a market cap of 2.4T.

SATS owns 3% of SpaceX which is worth around $72 billion. SATS market cap is $39 billion. Meanwhile, VCX, a closed-end fund that invests in private companies like SpaceX, has a NAV of $18.72 and the stock is trading at $200. That’s interesting. If you were around for the GBTC premium in 2021 or the Palm spinoff back in the heady days of 2000, you know that the law of one price does not always hold in the short term. But remember Thom Yorke’s Law: Gravity always wins.

Violations of the law of one price in financial markets
A solution to the PALM-3COM spin-off puzzles
Can the market add and subtract?

Citron shorts VCX, calls on SEC to investigate whether Fundrise is paying influencers to promote the fund

xkcd making an excellent point as usual

good luck ⇅ be nimble