Some longer term trades that I am looking at. Short GBPNZD- Structure and 10 year spreads - indicate a sell. Macro - Dairy Index forecasting growth over the remainder of the year & UK inflation dropping faster than expected
So fundamentally - where are we at.
This game is always about confluence of levels
UK:
Employment - getting worse
Inflation -6.8- still too high
Inflation seems sticky
PMIs -getting really bad
No geopolitical news
10 year spreads - bid on the hourly.
Talk of halving inflation by the Chancellor- yet oil destined to hit $100++ a barrel
Risk reversals - look pretty bad against Cable in the months ahead.
BoE governor Bailey talking about inflation falling - and that the BOE are approaching the terminal rate.
The UK needs growth - where is it.
But we are at a key level at atm- plus we had high volume - iro the CAD cash rate meeting.
Reading through their statement - made pretty depressing reading.
They did give the US the thumbs up.
However, traders - trade off levels. And we are aa key level.
Annual VWAP, the POC and the 50 pull-back- all 3 are lined up
Also the 10 year spread on the hourly seemed to get a bid- although they turned south today on the 3m
Price also stopped at 1.2500 a clear round number
Looking at the pound - its sell off appears over-exaggerated
US
Inflation - sticky at 3%
Fed- neutral (ish)
Employment - improved slightly
Business surveys - dropping
CPI data next week- lets see what these estimates are.
ISM services - highest increase in 6 months - odd that this makes the headlines in Trading Economics - but you can't even see it on the FF calendar
In addition - US money supply is shrinking Why the US money supply is shrinking for the first time in 74 years (goldmansachs.com)
Below are some key levels of interest.
Attached Image(s) (click to enlarge)
Look ahead, Macro=Direction, Levels & Structure = Entry
In trading should just monitoring the state of each economy- and where it sits in the current cycle, and then notice when it changes
Only then should we be looking at the structure on a chart.
Soley relying on a chart patterns - is what retail traders do - and 95% of them lose.
For instance - I know that the Aus and NZ ones are doing well. I could see that China are trying to address the issues they have.
Does a chart tell me what the GDP is of the UK or the PMI
A chart can tell you if there has been a lot of buying or selling.
People put levels on charts - but time is just as important - the sell off on Gold - only came from the FOMC meeting
Value is often wrong- and can just be viewed through the same lens as structure.
Once price has sold off - it is critical to keep a close eye on the news and structure- as everyone is short.
Here is an example - triple top, value is off on the NZDUSD. Yet we have strong Kiwi data - and a miss yesterday on US GDP and US home sales.
Also there is a cash rate meeting by the RBNZ next week - and in the last meeting they seemed pretty hawkish to me. Since then we have seen some strong data come through.
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Look ahead, Macro=Direction, Levels & Structure = Entry
They say its good to journal - and nothing like doing it in public.
What are traders focused on obviously 3 things next week- the FOMC, UK cash rate meeting and the BOJ potential rate hike
UK:
Consensus is that they are going to cut -but Haldane and Pill have both said they will hold- although they said this before the latest inflation release- June's was 2.0% and has been dropping month by month.
You'd think with interest rates at 5.25% and interest rates dropping each month- it's time to cut. There were other parts that the BOE look at that show resilience in inflation services sector inflation is at 5.7%. Wage inflation is still high and the government seem to be talking up pay deals.
US:
This week's data has been positive- GDP, PCE. but Core CPI and CPI both took a a dive in the latest prints and they have been trending lower
PCE has been dropping - and its only June's figures that bumped up slightly
Also Powell has said that they have to cut before it get's to 2%. Inflation is 3%
Employment data has been moderating. Next week's NFP estimates are 177K- that is the lowest estimate since Oct 23
GDP and retail seem to be doing ok.
Plus the large techs report next week- something to keep an eye on- recent reports have been very strong.
Overall- based on the two metrics that the Fed look at, you'd think they will be talking up a cut next week. FFR is at 5.50%
Powell I think needs to either talk up a cut or actually cut. It's obvious that employment is under pressure and inflation is dropping
Maybe we have got a nice discount in equities going into the FOMC. Prices have definitely pulled back - and we have hit a nice trendline.
Thing is though what are the markets thinking- they are just expecting a normal Fed meeting.
I will be looking to long equities- most likely out of the FOMC - bit concerned about the vix though
Lets see if Bloomberg and Reuters can talk a good game.
Current view though is that they will hold- and cut in September
Also its end of month book balancing...Cable looks as though traders need to short it - need to double check with the banks
I did actually see a bit of that this afternoon- the pound really lagged the other risk currencies
Over the weekend read the Sunday newspapers in respect on any fiscal/monetary interviews
That equity short into the gap fill - what a trade
Current view: Overall you'd expect Cable to under pressure;
Fed are going to hold (inflation is at 3%)
BOE are going to cut (inflation is 2%)
End of month balancing needs to be done
Vix still elevated- so this could keep pressure on risk assets going into the FOMC
Obviously, I don't want to be shorting Cable at Friday's low- so any pullback into last week's POC has got to be a shorting opportunity on Cable.
Need to keep an eye on Gold- as any dovish talk from the Fed - has to be a positive for Gold
Nice sell on Cable -"so any pullback into last week's POC has got to be a shorting opportunity on Cable" perhaps my thinking on a pullback to last week's POC was too optimistic. Something to note. They pulled it back to Thursday's POC and then let rip- and I got into last week's POC. Then took a small long from there.
Will US traders join in - took a small position - but could tell there is a decent buyer there at the POC
Rachel Reeves is going to say how bad are the finances in government. UK national debt is 2.59 trillion.
I think lots of infrastructure projects are going to get cancelled. She speaks today at 3.30 pm.
If she promotes growth and strives to get down national debt -Cable should respond positively to this.
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Look ahead, Macro=Direction, Levels & Structure = Entry
So Cable creeped up...but value is not great. However, the FTSE was pretty flat and though UK gilts seem ok
Rachel Reeves seems a very safe pair of hands.
Looking at tomorrow - US data looks poor and European data is decent.
At least there are some decent buyers there
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Look ahead, Macro=Direction, Levels & Structure = Entry
Cable -been short-
After these trade deals - what's left.
There is a lot of scope for short Cable looking at sovereign spreads
But thinking FOMC minutes if they will short cover here. There was also some buying from this area.
Kinda makes sense.
Bailey speaks tomorrow- and he is kind of dovish so that could pressure the pound for the rest of the week
Will be interesting to see what the estimates will be for next week. If they are decent could be more pressure.
VWAP is a fair bit lower. 1.335
Attached Image (click to enlarge)
Look ahead, Macro=Direction, Levels & Structure = Entry
