LONG USDTRY & USDRUB: CARRY V $ PAIN LIKELY TO CONTINUE NXT WK
Updated
USD vs Carry:
1. Yield vs USD - G10 - AUD NZD; EM - BRL, ARS, TRY is likely to continue its downside pain into next week as dollar denominated short term interest rates (STIR) spiked (after hawkish Yellen comments - see attached post) to pre-brexit highs (30D Fed Funds steeper and Implying hikes now up at P=33% Sept, P=59.1 Dec, P=92.1% 2016) which as you can see had a highly correlated depreciative effect on yield ccys on Friday which imo will continue to see USD sought and carry supplied into next week.
2. Looking further into september/ until the Fed meeting, a firm beat in the US jobs report remains key for any sustained readjustment higher in USD vs yield.. as will firm data in general after Augusts very lacklustre data performance.
- The broad commodity complex coming under continued pressure after its recent topside (USD appreciation driven or otherwise) will also help the long USD vs carry positioning for the month. Any topside in the commods complex will likely dampen the above effects which will make watching micro commmod market developments key in selecting which ccys are likely to be the best under-performers vs the dollar.
Top Trades - Long USDTRY & Long USDRUB on Oil swings lower:
1. USDTRY - Recent comments from TRY Officials, asking for a "rapid" reduction in interest rates to boost growth and employment AND the 25bps reduction in the overnight lending rate (8.25% vs 8.50%) last week make TRY shorts particularly interesting as speculative fwd differential positioning could see USDTRY rip higher this month, particularly as it is one of the few non-commod export driven carry ccys which shields the long usdtry trade from the above mentioned continued commod environment topside possible which may lag gains.
2. USDRUB - A particularly effective way to play this long USD position would be to short RUB on any southward movements in Oil as this combined with interest rate flows leaving the currency for USD will likely promote a two-pronged movement lower in the Russian currency making it particularly rewarding.
1. Yield vs USD - G10 - AUD NZD; EM - BRL, ARS, TRY is likely to continue its downside pain into next week as dollar denominated short term interest rates (STIR) spiked (after hawkish Yellen comments - see attached post) to pre-brexit highs (30D Fed Funds steeper and Implying hikes now up at P=33% Sept, P=59.1 Dec, P=92.1% 2016) which as you can see had a highly correlated depreciative effect on yield ccys on Friday which imo will continue to see USD sought and carry supplied into next week.
2. Looking further into september/ until the Fed meeting, a firm beat in the US jobs report remains key for any sustained readjustment higher in USD vs yield.. as will firm data in general after Augusts very lacklustre data performance.
- The broad commodity complex coming under continued pressure after its recent topside (USD appreciation driven or otherwise) will also help the long USD vs carry positioning for the month. Any topside in the commods complex will likely dampen the above effects which will make watching micro commmod market developments key in selecting which ccys are likely to be the best under-performers vs the dollar.
Top Trades - Long USDTRY & Long USDRUB on Oil swings lower:
1. USDTRY - Recent comments from TRY Officials, asking for a "rapid" reduction in interest rates to boost growth and employment AND the 25bps reduction in the overnight lending rate (8.25% vs 8.50%) last week make TRY shorts particularly interesting as speculative fwd differential positioning could see USDTRY rip higher this month, particularly as it is one of the few non-commod export driven carry ccys which shields the long usdtry trade from the above mentioned continued commod environment topside possible which may lag gains.
2. USDRUB - A particularly effective way to play this long USD position would be to short RUB on any southward movements in Oil as this combined with interest rate flows leaving the currency for USD will likely promote a two-pronged movement lower in the Russian currency making it particularly rewarding.
Note
Update:1. 2.99 or just before the big fig is the profit target for USDTRY - 4/500pips higher - real USDTRY bulls next levels higher are 3.04 and 3.09 - im all out at 2.99 given the strong resistance here.
2, USDRUB - trade hasnt been activated given stability in oil, need a good -2%+ move lower in oil and some daily downside pressure to warrant this trade.
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