I am USD bearish but waiting for a sign before entering. Plus thoughts on MOF intervention impact on USDJPY and TY. And, the quarterly trade idea results.
In a world of inflation fear and high bond market volatility, there are not many good safe havens to hedge a rapid collapse in equities.
Japanese yields are on the move and this short squeeze in EURJPY is a good opportunity to sell near the highs. Intervention is a meaningful kicker.
We’re seeing potentially the second policy error in three years as the Fed can’t help but stay true to its dovish DNA. Another everything rally as central banks cut.
Despite lower US yields overnight, the USD has rallied as global yields fall more. 1.2500 finally broke in cable and a close below opens up the downside.
In an MMT world where the Fed has truncated the policy distribution by promising no more rate hikes, inflation rebounds. There is zero possibility of tax hikes to deal with inflation so the primary cure for this inflationary reacceleration, if it gets worse, needs to be rate hikes.
Traders that have large gains in big up years need to sell stock into April 15 to pay their taxes. This creates a persistent seasonal pattern where stocks trade heavy into April 15 and then rip higher once the unconditional selling flow is done.
March seasonality and falling prices paid indexes point to the potential for weak US CPI tomorrow. This will light a fire under AUDUSD given positioning and the macro outlook for a bottoming of the global manufacturing cycle.
AUD held in well after a strong NFP. An analysis of a limited sample of similar occurrences backs up my theory on bad news / good price: It’s a real thing, but it only lasts a day or two.
The big story right now is the resurgence in commodities in a world where there is basically zero chance of rate hikes to reverse any inflationary impulse.
We have been waiting for the US jobs market to evolve from normalizing to weak. We’ll see.
The dollar is selling off on a rebound in commodities and manufacturing optimism, technical and positioning factors, and a pause in the US Exceptionalism story. With inflation heating up and the Fed still talking about rate cuts, the currency is weakening.
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