2025.06.16 Weekly

TOP IS IN?

Think we could be seeing a short-term top in risk here.

First, SPX rally has notably slowed and has been pivoting from an area of supply imbalance with the upper vwap capping all of the recent highs. As will be reviewed later below, the upward momentum in economic data exhibited over the last 2 months is beginning to wane, and I suspect these are initial signs of Trump’s policies beginning to impact the data and of which, is likely to temper growth and earnings expectations the more that become evident.

Second, geopol risks do appear to be cooling off slightly with the market already thinking about a potential regime change in Iran. While that appears the likely outcome, I think there could be some lingering challenges, and with Russia and Ukraine still going at it, I expect some geopol premium and some upside risks to inflation to remain, and in turn make the Fed more reluctant to make sooner cuts.

MACRO DATA

May CPI report was soft. 0.08% headline and 0.13% core, missing expectations of about 0.25%. Massive deceleration seen year-to-date with the 3month annualised rate going from 4.5 to 1.0%, but that trend may turn going forward with inflation risks from tariffs and higher oil prices likely to weigh in.

PPI also missing expectations by a similar margin at 0.1% for both headline and core.

UoM preliminary June release rebounded strongly with the main index beating expectations by 7pts, and prior month being revised up from 50.8 to 52.2.

Similarly the NFIB small business survey showed business sentiment improved more than expected. Actual sales and price changes were softer whereas expectations on both turned stronger.

Employment metrics were softer with actual employment and job openings lower, while compensation plans is expected to be higher.

Weekly unemployment claims continues to be in a gradually increasing trend with both initial and continuing claims around their pre-pandemic average. Together with the NFIB survey, last week’s data on the labour market is unlikely to go unignored.

The strong run up in economic data over the last 2months is now beginning to wane.

EQUITIES

Global equities have printed a weekly reversal bar across the board.

And with the odd exception, US stocks are beginning to see some weakness in momentum and SMid-cap sectors, while Energy being the strongest performing sector tends not to bode well for the rest of the market.

Momentum has clearly shifted with the majority of stocks trading below the 20-day, and more than 2/3rds below the 5-day moving average.

SPX printed a weekly reversal bar, off an area of supply imbalance in the ~6050 area.

I’m getting the sense that the balance of risks are moving increasingly to the downside and we’ve seen a local top in equities. Macro data trend is turning softer, and growth and earnings expectations are likely to follow that lower the further it continues. Those downside risks are further compounded by inflation pressures coming back, as the impact of Trump’s tariffs and re-escalating geopolitical risks becomes reflected in the data, and therefore a more delayed response from the Fed.

COMMODITIES

Higher Energy prices is the main story in commodities, making a break above the 4 and 13 week averages, and Precious metals continues to put in continuous weekly gains.

The key question to consider is whether we are amid a peak in ME and Ukraine tensions and whether there is a reversion trade in Crude and Gold rallies. My contention is that it would still be premature given that IDF spokesman said that the campaign of Israeli strikes against Iran is likely to last at least 2-weeks, while fresh reports of both Russian and Ukrainian attacks continue to come in and likely to continue during the warmer months despite both sides coming to the table to discuss a ceasefire.

The July contract has made 2 technical breaks higher — it was unable to sustain the 2nd break into the last week’s close, but has started the current week gapping above with the low printing near the upper trendline today.

Spot Gold broke out last Friday and favouring buys on-dips, with the measured objective eyeing up a move above the 3600 handle.

Given that I think USD will edge out the EUR on the upside if the market tilts increasingly risk-off, I think XAUEUR could be the better pick with 3148 the measured objective. On the flipside, if we do go risk on, on the idea that geopol escalations have peaked, XAUUSD would be the pick for the shortside.

RATES

US yields shifted lower last week after some weaker labour market data to bring forward rate cut expectations, and strong bond auctions relieved pressure on the long end.

US rate differentials narrowed last week leading to the dollar pushing lower. But I think we could see yields chop back higher along with USD this week however as I think Powell will disappoint the doves who are screaming at inflation being back at target.

CURRENCIES

USD AUD and NZD the weakest last week, NOK strongest with a bullish breakout.

Though there is little to suggest the dollar is on the turn, Euro and Cable are both at good levels here that if it was to find a turn, I’d bet that it would be around here.

USDCHF currently has double bottom on last Friday’s low and indecision bar, USDJPY printed a daily sequential 13 on Friday.

As things are, it’s difficult to take a bullish view on USD. But my bet is that USD will find some safe-haven appeal given that it has the most positive carry rate in G10, geopolitical risks to linger, and lack of a signal from Powell and the SEP to appease the doves, along with tones of slowing global growth beginning to hum in the background.

Perhaps a clearer fx trade this week is to go long NOKSEK.

Final thoughts

As I wrote the above, this headline popped up on x:

Families are packing up and fleeing before dawn, leaving behind homes, businesses, and any sense of normal life. Gridlock stretches for miles as people fight to escape a city bracing for more chaos by the hour. Israeli strikes are reportedly shifting toward power grids and infrastructure — designed not just to damage but to divide. The goal isn’t just military — it’s psychological, aimed at turning Iran’s own people against their rulers.

prompting the idea that we are very close to a regime change and Middle East tensions to have peaked.

I still very much like the ideas that I have in mind for this week however which is to be short US equities (softening earnings expectations) and long Dollar (positive carry to offer some safe have appeal). If currencies continue to react favourably to newsflow like the above, I would be comfortable with USDCHF and USDJPY longs, and short XAUUSD; conversely if markets exhibit risk aversion then long XAUEUR and short GBPUSD would be my picks. Trading the bullish consolidation breaks in Crude also appeals in any scenario.

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Good luck trading.