HYCM Market Insights & Trading Tips

Copper set for dip buyers
by Giles Coghlan, Chief Currency Analyst, HYCM

Copper is sometimes referred to as Dr. Copper since it has such a strong connection to global economic health. One appointment with Dr. Copper can give you a quick global health analysis. The verdict since March 2020 is that the globe is setting up for a very strong post viral recovery. As long as vaccines are largely effective then the world should get back to business. As it does in construction and manufacturing copper is set to find high demand. Getting into this copper long trade has proven to be more difficult since it has had few pullbacks on recent strong buying.



Citigroup see pullback ahead

Copper has seen some weakness recently and this could be an opportunity to buy the dip according to Citigroup. They see potential for copper pulling back in the next couple of weeks for the following reasons:

1. There has been weakness in China’s PMI data.
2. There is growing potential for further local lockdowns.
3. There is the possibility of coronavirus mutations.

However, the above should be considered as = opportunities for dip buying according to Citigroup because of the following reasons:

1. There has been good data from the developed world’s construction, consumer goods and automotive sector. Especially so when you consider the lockdowns we have been under.
2. The bank sees copper averaging prices of $7,800 a ton.

On top on Citigroups reasons there is also heavy green tech demand for copper. That should prove to be another upside pressure for copper going into 2Q onwards. Take a look at the chart below for areas where we may find copper buyers on pullbacks.

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Seasonal Insights Twitter 08.02.21
by Giles Coghlan, Chief Currency Analyst, HYCM

Will Twitter shares surge higher this week? Listen on Youtube.



Twitter is an American microblogging and social networking service on which users post and interact with messages known as “tweets”. Registered users can post, like and retweet tweets, but unregistered users can only read them.

Twitter shares are entering a strong time of the year. From February 10 through to February 21 Twitter shares have gained seven times in the last seven years. Twitter announces earnings next week on February 09. Many tech stocks have done very well during lockdowns and Twitter is expected to outperform earnings with Goldman Sachs telling clients to prepare for a potential surge higher.

Trade Risks: The main risk to this trade is if Twitter earnings disappoint.

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China’s consumer sector set for growth
by Giles Coghlan, Chief Currency Analyst, HYCM

The CSI 300 is a capitalization-weighted stock market index designed to replicate the performance of the top 300 stocks traded on the Shanghai Stock Exchange and the Shenzhen Stock Exchange. It has two sub-indexes: the CSI 100 Index and the CSI 200 Index.

The CSI 300 consumer sector could be offering an excellent place to invest for Chinese equity investors. Consumer companies should also gain from a recovering Chinese economy which is set to grow 8% this year from the COVID impacted 2020. The profit growth in the sector is standing out and the CSI 300’s EPS growth has been lower than the GDP expansion over the last 10 years. The future looks good too as, according to Morgan Stanley analysis, China’s private consumption is set to more than double to hit $12.7 trillion.

If you take a look at the chart below you can see the earnings per share (EPS) line in the blue for the consumer sector. Notice how it outpaces the earnings per share of the index as a whole and the GDP of China. It stands to reason that China’s economy becomes stronger in the consumer sector as a step in its advancement. Looks like a good area to invest in for the medium term.



Alibaba set for gains over the medium term?

Alibaba Group Holding Limited, also known as Alibaba Group and as Alibaba.com, is a Chinese multinational technology company specializing in e-commerce, retail, Internet, and technology. This could be a company that gains from strong growth in China’s consumer sector and online gains seen during the COVID pandemic. JD.com is also worth a look.

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Market Mood Platinum 09.02.21
by Giles Coghlan, Chief Currency Analyst, HYCM

Listen to the latest market mood for the Platinum on Youtube.


The outlook for Platinum medium term remains to the upside on global recovery hopes and structural weakness in supply levels as highlighted by the World Platinum Investment Council (WPIC). See here. However, since the WPIC report Platinum prices have already risen considerably. So, the most recent highs may be all for now.

However, the strong seasonal factors for Platinum, combined with the fundamental outlook for the metal, mean that dips lower should find buyers. From February 10 to February 18 Platinum has risen 12 times in the last 15 years for an annualised return of 132.81%. The largest gain was in 2008 with a +8.83% rise.

Platinum dips should find buyers over the next few days.

Trade Risks:

1. The main risk to this trade is from any risk-off tones which pull commodities lower.
2. Any expected outperformance of the US derived from Fed’s Powell comments on Wednesday could strengthen the USD and drag Platinum lower.

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Three different scenarios for US debt
by Giles Coghlan, Chief Currency Analyst, HYCM

Back in 2013 the then-Fed Chair, Bernanke, promoted a surge in bond yields. Memories of this event have come back to investors at the start of the year as a couple of Fed speakers spoke about the Fed tapering bond purchases by the end of this year. This sent US bond yields higher. However, Powell was quick to quieten the impact of those voices on the market as he did not want a repeat of the ‘taper tantrum’ back in 2013. Why? It is due to this simple dynamic. Rising yields equals rising interest costs for the US in servicing their debt. See here for the impact on the US 10 year bond yields in 2013.


Rising debt costs

Bloomberg Economics published a chart that projected debt interest rate costs as a share of the United States GDP. They looked at three different scenarios. A 100bps shift in the yield curve (similar to 2013’s shift). A 200bps shift and a base rate case.

You can see the impact of these scenarios on the chart below.


Extra debt means larger repayments.

Why the Fed fears another ‘taper tantrum’?

It is no surprise that an increase in debt levels for world governments will necessarily mean larger repayments. However, a 100bps rise in the yield curve will mean a debt interest payment that is over 4% of the US’s GDP. A 200bps rise will equate to around 6%. So, this is why the Fed does not want to repeat the taper tantrum of 2013 and would like to keep rates as low as possible, for as long as possible.

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Seasonal Insights Deutsche Bank AG 10.02.21
by Giles Coghlan, Chief Currency Analyst, HYCM

Will Deutsche Bank AG shares surge higher this week? Listen on Youtube.


Deutsche Bank AG is a German multinational investment bank and financial services company headquartered in Frankfurt, Germany. Its shares are listed both on the Frankfurt Stock Exchange and the New York Stock Exchange.

The shares are entering a strong time of the year. From February 09 through to February 18 the shares have gained eleven times in the last fifteen years. The average return has been +2.79% over the last 15 years with a huge 202.87% annualised growth. Many cyclical bank stocks are expected to do very well on the reflation trade (return to global growth), so this could be a good time for the shares to rise.

Trade Risks: The main risk to this trade is on a negative risk tone that weighs on stocks.

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Bank of England: Walking back from negative interest rates
by Giles Coghlan, Chief Currency Analyst, HYCM

The last rate meeting was about one thing. Would the bank walk towards or walk away from using negative interest rates?

Since the start of the year, Governor Bailey’s comments has been gently walking back market expectation from the Bank using negative interest rates. One aspect helping that narrative has been that the UK has managed to avoid a ‘no-deal’ Brexit. This fact was referred to in the latest MPC (Monetary Policy Committee) minutes as a point to note. This must have helped the Bank of England breathe a sigh of relief.

The last BoE meeting

Last week the Bank of England further confirmed their unwillingness to use negative interest rates. The reaction in the UK 10 year bond yield chart was telling. The bond yields shot higher as bond traders started to further price out any remaining expectations of the Bank of England using negative rates. Look at the reaction in yields here.


Didn’t the bank prepare to use negative interest rates?

Yes, but in name only. Although the Bank of England announced preparations for PRA regulated firms to implement a negative bank rate the bank made it clear this was ‘not a signal about the future path of monetary policy’. This was about a structural /procedural possibility rather than a policy reality.

The GBP was supported out of the meeting as the MPC, as well as being perceived to be walking back from negative rates, they had a ‘materially stronger than expected’ view on growth. You can read that sentence here in the Bank’s report.

Bond purchases and interest rates

Bond purchases were unchanged and interest rates kept at 0.1%. One point to note is that the bank remains uncertain with regard to the true UK employment picture. The UK Government has cushioned any blow to Uk employment via the furlough scheme. However, the true state of the UK labour market is still a little vague to the Bank of England. A better than expected labour market reality will further support the GBP going forward.

Any hikes in interest rates are only set to come when there is ‘clear evidence that significant progress is being made in eliminating spare capacity and achieving the 2% inflation target sustainably’.

Key takeaway

Negative interest rates are now a tail risk for the Bank of England rather than the base case. This is supportive for the GBP.

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Week Ahead 15.02.21
by Giles Coghlan, Chief Currency Analyst, HYCM

This week saw the main reflation narrative continue to support risk assets in a calendar light week. The reflation narrative is that there is a global synchronised recovery underway supported by vaccine hopes to overcome COVID-19 infections. This helps commodities and equities higher. This narrative helped the S&P500, Nasdaq, and Dow Jones to new highs this week. As long as interest rates remain low, Govern-ment’s provide fiscal support, and the vaccine proves effective against COVID-19 expect risk assets to find buyers on dips lower.

Other key events from the past week

1. NZD: Inflation rises, Feb 09. Inflation expectations came in higher at 1.89% vs 1.59% prior increasing the more optimistic outlook for New Zealand. This, along-side the reflation trade, should support NZDUSD in the coming week.
2. USD: Inflation is stable, Feb 10. A key element of recent USD strength has been on the hopes of a faster than expected US recovery. With core inflation printing at 1.4% y/y as expected this means the medium-term USD bearish picture stays in place. The weaker dollar also helps support commodities.
3. BTCUSD: All time highs, Feb 03. Bitcoin hit all time highs this week as Tesla announced $1.5 billion worth of Bitcoin purchases. This move by Tesla is the latest in big names that have helped endorse the digital currency. Is $50,000 the next target? Will more fortune 500 companies start investing in Bitcoin?

Key events for the coming week

1. GBP: Inflation expectations, Feb 17. The Bank of England pushed back against negative interest rates at their last rate meeting. Any strong moves higher in inflation will bring forward early bets on interest rate rises and further support the GBP this week.
2. AUD: Employment data, Feb 18. The RBA surprised markets recently and increased bond purchases by AUD $100 billion. Strong employment data may show that move was unnecessary and boost AUDJPY higher.
3. EUR: PMI prints, Feb 19. Eurozone PMI data will be important for gauging euro-zone confidence as vaccination rollouts are slow in Europe. Has this weighed on sentiment? PMI data will be key this week for the EURGBP.

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Seasonal Insights Nikkei 11.02.21
by Giles Coghlan, Chief Currency Analyst, HYCM

The Nikkei is in for a very strong seasonal time post the US election. Listen on Youtube.

Attached Image (click to enlarge)

The Nikkei 25 tends to rise strongly post US elections. If you look at the chart you will see that in the last post-elections years (2017, 2013, 2009, etc) going all the way back to 1969 the Nikkei has tended to have very strong gains.

To be precise the gains have been an average of +7.37% and the largest profit was +25.65% in 2013. The year 2009 was also a strong year post Barack Obama’s election with a +20% plus gain. In the 13 election years, there have only been two years that saw falls.

Trading Risks: The main risk to this trade is on a negative risk tone that weighs on stocks.

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Seven reasons the FTSE 250 is set for growth
by Giles Coghlan, Chief Currency Analyst, HYCM

There are a growing number of reasons that the FTSE 250 may be expected to outperform the FTSE 100 over the next couple of months. Seven of these reasons are listed below.

1. The UK vaccine speed. It is strange to see the UK at the front of anything vaccine-related. However, the UK has nearly vaccinated 20% of their population now and the rollout is fast. It’s been a good response from the UK in comparison to the rest of the world. Israel is the lead country approaching a 75% vaccination rate.

2. Some Goldman Sachs reports are forecasting a 19% GDP rise for Q2 in the UK. Growth is set to return.


3. Within this growth, the UK service sector is poised for a very good recovery. If the UK see the end of lockdowns this will mean the sector can start growing again.
4. There has been a high savings rate in the UK. Because of fiscal support and the UK furlough scheme that has been keeping incomes up during the lockdown. This means that strong demand is expected in the economy once movement is possible again.

5. The make up of the FTSE250 includes a high concentration of financials and consumer services. This means that the 250 should outperform the FTSE100 which is also set for growth between now and June.

6. The UK is now post Brexit: The ‘no-deal’ risk has gone. This is positive for the UK and the investment that was waiting for Brexit risk to disappear can move back into the UK.

7. Finally, there are very good seasonals for the FTSE 250 which is set to gain between now and June. Check out the seasonals chart below.


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February central bank overview
by Giles Coghlan, Chief Currency Analyst, HYCM

Major central bank rundown

The central banks are listed below with their current state of play. The link for each central bank is included in the title of the bank and the next scheduled meeting is in the title too.

Reserve Bank of Australia, Governor Phillip Lowe, 0.10%, Meets 02 March

The Reserve Bank of Australia met on February the 02 and delivered a surprise to the markets. They kept the interest rate and the 3yr bond yield target unchanged at 0.10%. This was as expected. Like December’s meeting the RBA noted that the recent economic recovery had been based on significant fiscal and monetary support. The RBA said they will not increase interest rates until actual inflation is above the 2-3% target range. This means that interest rates are expected to stay as they are until 2024. There was, however, a change. That change to monetary policy was the expansion of the RBA’s bond purchases. Bond purchases were extended by $AUD100 billion. This was slightly unexpected as some desks had been expecting the possibility of QE coming to an end in April on the back of stronger labour data.

Like last time, the RBA’s statement was generally quite upbeat, despite the dovish twist in their policy action. Remember that QE purchases weaken a currency, so the AUD was weaker out of the meeting. You can read the whole statement here from the RBA. The optimistic tone was affirmed by the Australian Treasury Secretary Kennedy who said that the recovery exceeded expectations and the labour market participation is somewhat surprising.

Remember that the Australian economy is closely tied to China’s economy. Approximately 30% of Australia’s GDP comes from its trade with China. Therefore, expect the AUD to be pushed or pulled along with the US-China trade sentiment. A falling S&P500 tends to weaken the AUD and vice versa, so keep an eye on the latest US stock moves as well in deciding the next path for AUD. The AUD should remain supported medium term on the reflation narrative.

European Central Bank, President Christine Lagarde, -0.50%, Meets March 11

The ECB repeated that Interest rates are expected to remain low until the inflation outlook moves up to a level sufficiently close to, but below 2% within its horizon framework. However, there was a shift in the language about the PEPP programme size. The key takeaway was the emphasis shift about the full use of the PEPP envelope. The ECB reminded markets that the full envelope does not necessarily have to be used. This is a decidedly more upbeat message and is an acknowledgement to ECB policy makers who did not want such a large PEPP envelope in the first place. The total amount of the PEPP envelope remains at €1850 billion with purchases are set to remain until at least the end of March 2022.

In the press conference just after the announcement Christine Lagarde echoed this positive sentiment reflected in the statement noting that risks to growth is still tilted to the downside, but less pronounced. This now sees the ECB joining the ranks of the central banks who are turning more upbeat due to vaccine optimism. One interesting point is that the ECB are asking staff to come up with new gauges to help with stimulus decisions as well as a new gauge of euro area financial conditions. The proposals are wanted from staff for March. Finally, with regard to the EURUSD exchange rate Lagarde said that the ECB was carefully monitoring FX rates.The ECB don’t like a strong EURUSD as it harms euro exporters and if the EURUSD gets too strong, too fast the ECB may act. She repeated that no-tools are off the table.

The reaction of the EURUSD after the decision was very muted and mainly dollar driven. The bog picture remains that are pressures on the eurozone which may face a double dip recession and is slow with the vaccine roll outs. If the US starts to outperform Europe in terms of GDP growth and vaccinating their citizens far more quickly this will weigh on the EURUSD going forward.

Bank of Canada, Governor Stephen Poloz, 0.25%, Meets March 10

Like the ECB the Bank of Canada also had a more optimistic outlook. The general hope is that the current vaccine will boost the world economy and central banks are starting to cautiously enter into that hope. The Bank of Canada signalled that they too can see some possible light at the end of the COVID-19 tunnel. Heading into the latest meeting there had been rumoured to be a slight chance of a very small rate cut mooted by market participants. However, these were unfounded and rates were kept unchanged at 0.25% and bond purchases remained at the CAD $4 billion per week level. The Bank of Canada repeated that interest rates were not expected to rise until 2023, like the Federal Reserve. However, the bullish twist for the CAD was due to see pretty hearty revisions for growth. End of 2021 growth is now seen as +4.6% vs +3.8% previously. Inflation was revised up to +1.5% vs +1.3%. The big push higher for oil has been helping the Canadian oil export economy and the growth revisions show the better outlook.

Macklem in the Press Conference

Macklem’s noteworthy comments in the press was the BoC’s concern about a stronger CAD. The rise in CAD does provide some risks to the outlook for the Canadian economy, so the BoC will not want to thwart their own hand by appearing ‘too rosy’ on Canada’s prospects. Out of the event, the CAD rose sharply (USDCAD falls) sensing a better outlook for Canada. The OiS futures curve suggest that the BoC is likely to keep rates at the current level for the foreseeable future.

Remember that stronger oil supports the CAD as around 17% of all Canadian exports are oil-related. There is negative correlation between USD/CAD and oil has broken down recently. Canada’s top export is Crude Petroleum at over $66 billion and around 15.5% of Canada’s total exports.



Federal Reserve, Chair: Jerome Powell, 0.125%. Meets March 17

The US rates were left unchanged at the January meeting, as expected. The Fed recognised there was a ‘moderation’ in the pace of the US recovery in recent months and managed on balance to strike the right note between vaccine optimism yet sufficient dovishness. If they were too hawkish there would be a risk of a 2013 taper tantrum repeat. In the press conference after the statement, Powell said that he considered real levels of unemployment to be closer to 10% in the US. Two key points of market focus was bind tapering and inflation.

Bond tapering: One key aspect that was anticipated before the meeting was whether the Fed would mention anything on bond tapering. The consensus view was that this would be unlikely. Powell kept to the expected line and stated that it was, ’too early to talk about tapering’. This reassured markets. Powell went a little further and said that more could be done with bond purchases. This was the right message for the market to hear and hit the right dovish notes.

Inflation: Powell said the Fed will not react to small and transient inflation rises. This is to avoid the scenario where markets start pricing in interest rate rises on the first sign of inflation. Investors will almost certainly do this anyway, but Powell is wanting to warn against that. There were no comments on the exact levels of inflation as you would expect, but Powell said he would ‘welcome’ higher inflation.

The takeaway is that the Fed is on hold and their bias is to strike a balance that sounds a little hopeful but doesn’t get the market thinking that bond tapering is coming. At some point, the US will come out of this crisis and if it comes out strongly watch the US dollar for gains and the US10 year yields should lead that story. You can read January’s full statement here.

Bank of England, Governor Andrew Bailey, 0.10%, Meets March 18

Brexit, Covid-19, and a slowing economy all continuing to weigh on the GBP. The BoE kept interest rates unchanged at 0.10%. The November meeting saw GBP buying on a luke warm sentence on negative rates. The Bank of England said that ‘participants attach some weight to the possibility of a negative bank rate’. Investors had been hoping for a more enthusiastic move towards negative rates. The last Bank of England rate meeting was always going to be about one thing; would the bank walk towards or away from negative interest rates? Since the start of the year Governor Bailey’s comments had been interpreted as walking back market expectation from the Bank using negative interest rates. The fact that the UK managed to avoid a ‘no-deal’ Brexit would have been a big sigh of relief to Governor Bailey. Perhaps it was this that helped him mentally walk back from the use of negative interest rates. It was certainly referred to in the MPC (Monetary Policy Committee) minutes as a point to note.

The last Bank of England meeting cemented the Bank Of England’s aversion to using negative interest rates. The UK 10 year bond yield chart shot higher as bond traders started to price out any remaining expectations of the Bank of England using negative rates. There is now a tail risk of a rate hike coming into the markets. Remember, that although the Bank of England announced preparations for PRA regulated firms to implement a negative bank rate the bank made it clear this was ‘not a signal about the future path of monetary policy’. This was about form rather then intention. Call it the British love of bureaucracy. The GBP was supported out of the meeting as the MPC had a ‘materially stronger than expected’ view on growth. You can read that sentence here in the Bank’s report. This was partially reflected in the UK Q4 preliminary GDP figures out yesterday. This has helped the GBP higher. Any hikes in interest rates are only set to come when there is ‘clear evidence that significant progress is being made in eliminating spare capacity and achieving the 2% inflation target sustainably’.

Swiss National Bank, Chair: Thomas Jordan, -0.75%, Meets March 25

The SNB interest rates are the world’s lowest at-0.75% due to the highly valued Franc. As an export-driven economy they hate a strong CHF and are doing their best to make it as unattractive as possible. The market largely ignores this and keeps buying CHF on risk aversion which has been here in one form or another since around 2008/2009 if the EURCHF chart is anything to go by.

In December the SNB left rates unchanged. The inflation forecast was unchanged from Septembers forecast in terms of the longer-term view. . The forecast for 2020 was -0.7% (vs -0.6% forecast in September) and +0.0% for 2021 and +0.2% for 2022. In short, they see the outlook for 2022 remaining the same. The SNB projected that GDP would shrink by 3% in 2020. Growth for 2021 is seen between 2.5% -3.0%. The statement struck a tone of optimism vs ‘who knows what will really happen’ with upside and downside risks stated.

The SNB continue to intervene in the FX markets. The Swiss are always mindful of the EURCHF exchange rate because a strong CHF hurts the Swiss export economy. The SNB want a weaker CHF. The rest of the world wants CHF as a place of safety in a crisis, so we have this constant tug of war going on. No changes are expected for December’s meeting. However, if the reflation trade really takes off in earnest then expect EURCHF buyers. There is not really much going on with the SNB that is tradable. The CHF remains best used as a risk on/ risk off go to currency. However, in my eyes, it plays second fiddle to the JPY. Read the full statement here.

For more details on the sight deposits check out SNBCHF.com. This site called the removal of the floor back in 2015, so well worth checking out.

Bank of Japan, Governor Haruhiko Kuroda, -0.10%, Meets March 19

The Bank of Japan met on January 20 and 21 The Bank of Japan is another very bearish bank and the latest meeting saw no major shift. The Bank, like others, warned of downside and upside risks as they too struggle to see into the future. They kept monetary policy as expected and rates unchanged at -0.10%. The Yield Curve Control is maintaining its flexible target with 10yr JGB yields at around 0%. Projections were revised higher. Fiscal median forecast was 3.9% for next year from 3.6%. Core CPI was -0.4%. In the big picture Inflation in Japan continues to miss the 2% target and the BoJ have stated that they will ‘keep very low interest rate levels for an extended period of time’. All in all the BoJ remained on the fence at this last meeting. There had been chatter about whether the BoJ would exit their large scale purchases of ETF’s and loosen their grip on yield curve control. This was always going to be the wrong time for this and Kuroda said, ‘It’s too early to exit from our massive monetary easing programme at this point’. He added, ‘Western economies have been deploying monetary easing steps for a decade, and none of them are mulling an exit now’. Fair enough, point taken. You can read the summary of opinions here.

Reserve Bank of New Zealand, Governor Adrian Orr, 0.25%, Meets February 24

The RBNZ kept the asset purchase programme maintained at $NZD100 billion and introduced the new Funding for Lending Programme as planned. Furthermore, the RBNZ maintained projections that the Official Cash Rate would remain at 0.25% until March 2021. At first glance, all appears to be as expected. However, the detail shows revisions for inflation and employment. Inflation is now expected to rise to 0.9% in Dec 2021 vs the previous forecast of 0.3%. Employment was projected to still weaken further in the near term, but then pick up into this year. However, it was not just the more optimistic outlook that caused the market to buy NZD out of the last rate meeting. It was also the fact that the last RBNZ meeting was really designed to launch the Funding for Lending Programme. The whole principal of this programmes is that if rates did go negative banks could easily pass that savings onto customers. Here is an extract from the RBNZ’s statement:

“Members noted that the effectiveness of an FLP would depend on financial institutions passing on declines in their funding costs to borrowers, and agreed to monitor pass-through to lending rates closely. Members agreed with the staff assessment that an FLP would be an effective way to provide additional monetary stimulus, and that it was the best tool to deploy at this time given the Committee’s principles for alternative monetary policy instruments.”

So, the RBNZ had needed to keep up some sense of why this is an important move at their last meeting. In theory they can still cut rates to negative and have deliberately kept that option open. However, the message given by Governor Orr speaks clearly as he resisted the calls to move rates negatively. Inflation pressure has been rising recently with 2-year inflation expectations coming at 1.89% vs 1.59% recently and the outlook for New Zealand looks pretty robust given their excellent handling of the COVID-19 crisis. The latest chatter is moving towards bond purchase tapering and rates rises next. Been a turnaround story helping the NZD higher against weaker currencies. You can read the last monetary policy statement here.

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Market Mood S&P500 15.02.21
by Giles Coghlan, Chief Currency Analyst, HYCM

Listen to the latest market mood for the S&P500 on Youtube.


Next week should be another quiet week as the Chinese Lunar New Year holidays means the Asia-Pacific session will be quieter. There is a distinct slow feel in the markets right now with US stocks reaching record highs, but stock volumes at high levels, and a lack of top tier data to add into the mix.

However, the base case for the US is that both the Federal Reserve and Washington are ready to step in and give monetary and fiscal support when needed. The Fed is keeping rates low, QE levels high, and it shrinks from even any hawkish thoughts, let alone rhetoric. At the same time, the US is vaccinating its population at a good rate and the expectations are that the easy monetary policy will support US stocks for the foreseeable future.
In this environment the majority view will be to ‘buy the dip’.

Therefore, expect S&P500 buyers from pullbacks lower to 3800.

Trade Risks:

1. The main risk to this trade is from any risk-off tones.
2. Any bad news about the vaccine roll out will weigh on stocks.

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Is the EURCHF set for growth?
by Giles Coghlan, Chief Currency Analyst, HYCM

The EURCHF has been weak over the last few weeks. This is has been a little surprising especially as the reflation trade has been expected. The EURCHF should be a pair that would find gains on a global synchronised recovery.

However, one of the reasons for the euro weakness is the expectations of a double-dip recession. The Eurozone has been slow in vaccinating its population in comparison to the US. If the US economy shows a faster than expected return to normality then any dollar strength will weigh on the euro. Furthermore, the CHF has been gaining as a safe haven currency on risk-off trading surrounding COVID-19 concerns. So, there have been reasons the EURCHF has been pressured.


EURCHF set for growth over the long term

However, with that being said, there is a decent case to be made for the EURCHF to make a recovery from here. The CHF has long been bought since the Global Financial Crisis and had its shock highs against the EUR as the EURCHF peg was removed. That area serves as the ‘catastrophic floor’. At present, there is not a reason for the EURCHF to fall back below that level. Especially as the SNB is intervening in the EURCH pair to stop it from going too low. Remember the SNB hate a strong franc.

If economies are set to rebound on a synchronised global growth narrative then the EURCHF could be a good pair to consider.

The risk, of course, is that the strength in the CHF is sounding a warning note against the deflation narrative and that markets have got ahead of themselves in the vaccine euphoria. However, will the EURCH FSNB floor hold whatever? There could be a strong case made that they would. The only factor to remember is that the last time the EURCHF had a floor at 1.2000, it went horribly long. So, make sure leverage levels are low/at zero.


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Rising oil prices may fast forward US rate hikes
by Giles Coghlan, Chief Currency Analyst, HYCM

Bloomberg had an interesting piece out on why oil prices threaten the Fed’s mandate to keep rates flat until 2023. The Federal Reserve’s current position is that they have told markets that they are not thinking of hiking interest rates until at least 2023. However, oil pushing higher threatens that approach for the following reasons:

1. Rallying oil increases inflation expectations. The higher energy costs get passed on to the consumer increasing prices. Look at the chart below showing how WTI prices lift inflation.


2. The argument against the Fed reacting is that the Fed see energy costs as ‘transient’(passing), so look through them. However, there is a strong case for rising oil prices remaining:

1. OPEC is determined to cut supply to boost the prices
2. The jump to green energy has caused key oil infrastructure, like Keystone, to be cancelled.
3. As Economies re-open that will cause oil demand to rise, further supporting prices.
4. The new normal now is that higher energy costs are part of the landscape and the Fed is not factoring them in properly.

The takeaway

Remember the Fed’s target is to allow/look for +2.5% inflation and rising oil prices could be the factor that gets it there. That may come far sooner than 2023. Watch out for oil adding inflationary pressures and possibly triggering a taper tantrum. See here to read more on that.

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Week Ahead 17.02.21
by Giles Coghlan, Chief Currency Analyst, HYCM

Once again the main reflation narrative continued to support risk assets in another calendar light week. Low interest rates, high levels of quantitative easing, governments ready to support economies with fiscal stimulus and more and more people receiving vaccines all feed into a ‘the world is growing again’ narrative. The key event this week to watch going forward is the rising US10 year yields. If US yields rise too far, too fast, this is liable to prompt a sell-off in US equities. US President Biden aims to vaccinate every American by the end of July. So a fast, vaccine driven, US recovery could result in further dollar gains, so expect dollar moves (alongside US10 year yields) to gain attention in the coming week.

Other key events from the past week

1. AUD: RBA Minutes, Feb 16. The RBA surprised markets recently and increased bond purchases by AUD $100 billion. The minutes last week showed that the board is really trying to tackle AUD strength to protect its export market. It may be an impossible task as there are strong market reasons for a higher AUDJPY.
2. EUR: German ZEW sentiment. Feb 16 A surprise this week was the German sentiment reading that came in at 71.2 vs 59.6 expected. This shows the Ger-mans are focusing more on vaccine optimism and less on present lockdowns.
3. BTCUSD: Crypto fever rules! Feb 16. BTCUSD hit $50,00 for the first time this week as institutional demand increased the market capitalisation to $1.5 trillion. HYCM blog readers would have been alerted to the strong fundamentals in Bitcoin way back in October last year. See here. More buyers on dips ahead?

Key events for the coming week

1. NZD: Interest rate, Feb 24. The RBNZ meets next week and no change in interest rate is expected. However, it will be all about the statement. Any indication that the RBNZ is bringing interest rate hikes forward in time will boost the NZD. You can catch up on all the latest central bank positions here.
2. Gold: Dragged lower, Feb 18. Gold has been dragged lower recently by the rising US 10 year yields. Any further gains in US 10 year yields and expect Gold to break out lower of its recent range beneath $1780.
3. Vaccines: Roll out speed, Feb 26. The faster the vaccine roll out across the world the more enthusiasm we will see for the reflation trade. This supports risk commodities like copper to find buyers on any dips.

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Seasonal Insights Jingdong 17.02.21
by Giles Coghlan, Chief Currency Analyst, HYCM

Is JD.com set for gains? Listen on Youtube.

Attached Image (click to enlarge)

JD.com also known as Jingdong and formerly called 360buy, is a Chinese e-commerce company headquartered in Beijing. It is one of the two massive B2C online retailers in China by transaction volume and revenue, a member of the Fortune Global 500, as well as a major competitor to Alibaba-run Tmall. Many analysts consider that the China consumer market is set to grow considerably in the near to medium term once economies open again. Does this make JD.com a great share to buy as it approaches its strong seasonal time of the year?

The average return between February 22 and April 16 over the last 6 years has been +9.59%. Could this be a great company to buy once the Lunar New year holidays are over next week?

Trade Risks:

1. The main risk to this trade is on a negative risk tone or a vaccine-resistant COVID-19 variant that weighs on stocks.
2. If US 10 year yields rise too fast that could result in some equity selling.

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Myth or Fact: ‘Sell in May, and go away’?
by Giles Coghlan, Chief Currency Analyst, HYCM

The saying ‘sell in May, and go away’ is a well known Wall Street saying. The basic premise is that you want to own equities from the end of October through to the end of April. You then, ‘sell in May….’. If you are new to the markets, or even if you are more seasoned it can be easy to overlook the wisdom of that short phrase. So, here is a quick snapshot of the S&P500 over the last 71 years.

Buying from October – April

Attached Image (click to enlarge)

You can see on the chart above that holding the S&P500 from October 31 through to April 30 gives an average return of +6.27%. If you had taken this each year for the last 71 years it would have given you an annualised return of +13.04%. The win ratio would have been 77.14% and the maximum profit would have been 24.48%.

Buying from May – October

Now compare this to if you bought the S&P500 in May and held until October 31.


You would have had an average return of only +1.17%. So you can see that the S&P500 clearly sticks to the rule that it is better, over the long term, to sell in May and go away. Statistically, buying stocks at the back end of October is a great time to buy. This is also matched by large fund flows around this time, so this is the reason for the gains in the S&P500 over this time of the year.

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Seasonal Insights Nike 18.02.21
by Giles Coghlan, Chief Currency Analyst, HYCM

Will Nike shares sprint higher next week? Listen on Youtube.



Nike, Inc. is an American multinational corporation that is engaged in the design, development, manufacturing, and worldwide marketing and sales of footwear, clothing, equipment, accessories, and services.

The shares are entering a strong time of the year. From February 18 through to February 26 the shares have gained twelve times in the last fourteen years if you discount the odd year in 2020 on COVID-19 disruption. The average return has been +1.94% over the last 14 years with a 164.20% annualised growth rate. Sportswear was in high demand during lockdowns, so this could make Nike a good stock to buy.

Trade Risks: The main risk to this trade is on a negative risk tone that weighs on US stocks.

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Seasonal Insights Hang Seng Bank 19.02.21
by Giles Coghlan, Chief Currency Analyst, HYCM

Will Hang Seng shares drop next week? Listen on Youtube.

Attached Image (click to enlarge)

Hang Seng Bank Limited is a Hong Kong-based banking and financial services company with headquarters in Central, Hong Kong. It is one of Hong Kong’s leading public companies in terms of market capitalisation and is part of the HSBC Group, which holds a majority equity interest in the bank.

The shares are entering a weak time of the year. From February 19 through to March 18 the shares have fallen sixteen times in the last twenty-one years. The average return has been -3.04% over the last 21 years. Is this a good time to sell Hang Seng shares before their seasonal strong run higher from March through to May?

Trade Risks: The main risk to this outlook is if the reflation trade keeps supporting bank stocks higher.

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Seasonal Insights Apple 19.02.21
by Giles Coghlan, Chief Currency Analyst, HYCM

Is Apple stock set to rise? Listen on Youtube.

Attached Image (click to enlarge)

Apple is an American multinational technology company headquartered in Cupertino, California, that designs, develops, and sells consumer electronics, computer software, as well as online services. During the COVID-19 lockdowns, Apple has gained as a so called ‘stay at home’ stock. Consumer demand for Apple has been strong during the last year and the stock is in a strong time of the year right now.

The average return between February 22 and May 08 over the last 25 years has been +11.78%. The stock has risen 20 times over the last 25 years during this period.

Trade Risks: The main risk to this trade is on a negative risk tone that weighs on stocks.

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