Weekly Notes 2021/06/14

As I’ve made some new connections on Twitter this past week, thought I’d give a small introduction:

It has often been from experience in a professional capacity we could see how things are applied and practiced, but from the many seasoned professionals, ‘smart guys in the room’ and an abundance of people willing to share their experiences, insights and analysis, Twitter is the ultimate resource! Not only has Twitter aided my understanding of markets and provided the basis for further investigation and learning, it’s also connected me with some bright minds of whom I’ve been very fortunate to chat with on a regular basis. As a result, some of my best trading returns have been from getting the best of both fundamental and technical domains that (as a former systems trader trading a few strategies) I’ve added a macro discretionary side to my trading.

As many of us like to do about our passions, I love talking and sharing about the things I love — teaching kids Chess, breaking down a Golf swing, Cooking for friends and family, and more recently — sharing the thoughts that guides my trade selections and preferences, which is essentially a culmination of all the great insights and analysis shared on Twitter. I don’t profess to be right, or a great trader, but I always endeavour to formulate a view and learn from it.

With that, let’s hit the charts…

Last week’s moves seem mostly positioning driven with some unwinding in the long reflation trade.

US sector rotations on the defensive side with cyclicals’ underperforming. Also interesting to see XLB down -2.04% with commodities still on the rip…

EEM and ACWX finished lower but sentiment still positive overall with most of the major indices up last week.

Global yields fell last week which looks to have contributed to the risk-off like moves we’ve seen in FX. I am under the general impression that increased hawkishness from the Fed will give US rates a lift. US10yr yield below 1.5% seems to low for an average inflation policy that is targeting 2% as well as fiscal tailwinds to support inflation. Could be that excess liquidity is having an effect on longer duration yields but this an area far too nuanced for me to comprehend so I’ll be monitoring the experts commentary on this with particular interest, such as:

Speculative USD positioning is seeing more mixed flows instead of the usual one-way USD selling…

equal weighted indexes showing risk-off tones for the second week…

and it’s a busy week for Central Bankers.

USD ~ think USD will be supported til FOMC and stay supported if Fed dials up hawkish tones, otherwise I’d be looking to go long high betas.

EUR ~ ECB was dovish with some upbeat comments on outlook but I think EUR could continue to be on the backfoot with the contrasting states of both economies and policies. If FOMC turns out to be a dud however, EUR is probably likely to take a bounce with some decent support in EURUSD mid-1.20s

JPY ~ found bid last week as global yields fell and risk currencies sold off. There are some risk-off signs in FX but with equity sentiment still positive, I see this rally as an opportunity to get short than to buy into the reversal so long as global yields start to pick up this week.

CHF ~ upside momentum has been slowing recently and planning a small short bet through SNB who will probably stick to their usually extreme dovish policy this week. Paying attention to USDCHF which is coming off double lows, GBPCHF potential right shouldering pattern, and NZDCHF which has been consolidating nicely in a descending channel pattern.

GBP ~ stopped out of GBPCHF last week but my GBP view still unchanged and like long ideas especially versus CHF and EUR and possibly USD depending on FOMC. Looking at the GBP index chart, found support at the bottom of the shaded area which I’ve marked out as the lower-end of Brexit peaks, and I see this to be encouraging for GBP to build further gains.

CAD ~ still technically oversold and with the highest unrealized to implied vol of the commodity dollars. Market have been piling on longs in recent weeks anticipating a CAD breakout but looks to have gotten squeezed out last week. Charts look good for further continuation and I still retain some USDCAD longs, but cautious of rallying Oil prices and positive sentiment.

AUD ~ an uninteresting currency atm being stuck in some very tight ranges, but one pair that may warrant some attention is AUDNZD short which has rallied into a major supply zone above the 1.08 handle. Also still seeing more reasons to be bearish given relative CB stance and sensitivity to Chinese relations and commodity demand.

NZD ~ eyeing NZD dips this week especially if FOMC produces nothing new.

Have a good week trading!



Macro Trading Journal

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