Get started

Australiandollar

AUD CAD - FUNDAMENTAL DRIVERSAUD FUNDAMENTAL BIAS: BULLISH 1. Monetary Policy At the May policy decision, the RBA made a hawkish turn by raising the cash rate by 0.25% versus STIR expectations of a 15bsp move. Even though there were some hawkish takes looking for a 40bsp move, the 25bsp was still higher than consensus expectations. The bank noted that inflation pressures have risen more than they expected, even without a sharp rise in wages, and means that further increases in the cash rate will be required to bring inflation back in line with their target. They also surprised markets on the balance sheet side by announcing that they are starting passive QT by stopping the reinvestment of maturing bonds. The hawkish surprise was enough to see STIR markets price in >60% chance of a 50bsp hike for the June meeting despite comments from Gov Lowe who said they don’t preclude a bigger or smaller rate move than 25bsp in the future. All-in-all the decision from the RBA was hawkish and has finally kick started the bank’s hiking cycle and should provide support for the AUD in the med-term as long as the bank keeps tightening expectations intact. 2. Idiosyncratic Drivers & Intermarket Analysis Apart from the RBA, there are 3 drivers we’re watching for the med-term outlook: Recovery – unlike other nations where growth & inflation is expected to slow, Australia is expected to see recovery, mostly thanks to stimulus and recovery in China China – With the PBoC & CCP stepping up monetary and fiscal stimulus, any recovery in China bodes well for Australia (40% of exports goes to China). It has also meant that the virus situation in China posed short-term downside risks for AUD as it has pushed back recovery expectations. Thus, virus and stimulus developments in China remains key for the AUD. The AUKUS defence pact could see retaliation against Aussie goods and is worth keeping on the radar as well Commodities – Iron Ore (31%), Coal (14%) and LNG (10%) is more than 50% of Aussie exports, with rising prices giving the AUD huge support from terms of trade. If commodities remain supported it remains a support for AUD, but of course also means any sizeable corrections will weigh on the AUD. That means geopolitical and China demand developments remain key focus points. 3. Global Risk Outlook As a high-beta currency, the AUD usually benefits from overall positive risk sentiment as well as environments that benefit pro-cyclical assets. Thus, both short-term (immediate) and med-term (underlying) risk sentiment will always be a key consideration for the AUD. 4. CFTC Analysis Very bearish CFTC signals with the most recent update as Leveraged Funds moved back into net-short territory, and a very sizable increase in shorts from Large Specs. This has been reflected in the recent AUD price action, as risk sentiment, China growth concerns and commodity downside has been a perfect trio of AUD downside. That also means if risk sentiment can find some reprieve this week it could see some short-term recovery in the AUD. 5. The Week Ahead It’s all about China and Aussie data this week. On the China side, Monday’s Retail Sales and Industrial Production data is expected to show some serious degradation. A worse than expected print could put some pressure on the Antipodeans, but with a lot of bad news in the price (especially after the dismal Chinese PMI prints), a print that’s not as bad as expected could offer some reprieve for general risk sentiment. Apart from Chinese data, focus will also turn to the MLF (Monday) and LPR (Friday) rates, where any cuts from either could also provide some solace and show the PBoC’s resolve to fix the troubling growth situation. If the PBoC decides not to cut either, that would be seen as a negative unless they offer some other form of additional stimulus measures. The covid situation in China is important as well, and the hope is that either the government eases up some of the draconian restrictions or at least offers more material stimulus to support the economy. For the AUD data, the wage data will be the most interesting print with consensus looking for a jump to 2.5%. However, after the RBA’s comments that regional surveys are reporting higher wages, some are expecting a print close towards 3.0%. A print close to 3.0% should solidify hike expectations and could provide the AUD with a boost (especially if we print at or very close to 3.0%). For the jobs data, consensus is looking for the Unemployment Rate to tick down to 3.9%, and if we get that or lower it will be a record low for the series (which ought to be worth a few pips to the upside as long as risk sentiment and China plays their parts). CAD FUNDAMENTAL BIAS: NEUTRAL 1. Monetary Policy The BoC delivered on expectations with a 50bsp hike as well as announcing a start to passive QT from the end of April by ending its reinvestment of maturing bonds. The bank upgraded both inflation and growth estimates as markets were expecting but did play a hawkish card by also increasing their neutral rate estimate to 2.5% from 2.25%. They acknowledged the growing risks from the current geopolitical situation but made it very clear that they are concerned about inflation and their hike of 50bsp showed that they think that policy needs to be normalized quickly (which some took as a hint that another 50bsp is on the way). The bank didn’t offer any additional clarity on QT but did note that they are not considering active QT of selling bonds just yet. Some conditionality also surfaced, where they explained that any sudden negative shocks to growth or inflation could see them pause hikes once they get closer towards neutral ( Gov Macklem also added that they might need to get rates slightly above neutral in the current cycle). Overall, it was a more hawkish than expected BoC decision, but interesting to note that STIR markets did not price in another 50bsp following the meeting (only a 25bsp) hike. We remain of the opinion that we are close to peak hawkishness for the BoC and are looking for the last push higher in the CAD for opportunities to sell. 2. Intermarket Analysis Considerations Oil’s impressive post-covid recovery has been driven by many factors such as supply & demand , global demand recovery, and more recently geopolitical concerns. At current prices the risk to demand destruction and stagflation is high, which means we remain cautious of oil in the med-term . Reason for caution: Synchronised policy tightening targeting demand, slowing growth, consensus longs, steep backwardation curve, heightened implied volatility . We remain cautious oil , but geopolitics are a key driver and focus for Petro-currencies like the CAD (even though the CAD-Oil correlation has been hit and miss). 3. Global Risk Outlook As a high-beta currency, the CAD usually benefits from overall positive risk sentiment as well as environments that benefit pro-cyclical assets. Thus, both short-term (immediate) and med-term (underlying) risk sentiment will always be a key consideration for the CAD. 4. CFTC Analysis First real sign of stress for positioning for CAD as all three participant categories saw very large reductions in net-long positioning. We think markets are setting up a similar path compared to April 2021, Oct 2021 and Jan 2022 where markets were too aggressive to price in CAD upside only to see majority of it unwind later. As always though, timing those shorts will be very important and catalysts are key. 5. The Week Ahead Oil embargo news, risk sentiment and April CPI will be the biggest focus points for the CAD this week. On the embargo front, the recent proposals from the EU were enough to see Oil push higher in the short-term, but with a lot of news arguably priced, and with med-term demand downside risks, the picture for oil is very messy right now. Even though the correlation between CAD and oil has been a bit hit and miss these past few weeks, any sudden moves can still affect the CAD. On the risk front, the classic risk sensitivity that one would usually expect from high beta currencies like the AUD, CAD and NZD have seemingly returned with a vengeance in the past few trading weeks. That means overall risk sentiment will be an important driver to keep in mind for the CAD. On the CPI front, markets are expecting a flat print of the headline YY and a softer print for the headline MM. With a slowing US economy, very aggressive STIR market pricing for the BoC and with the CAD trading at 9-year highs (at the index level), a surprise miss will be the more interesting trade opportunity. A big miss or big beat will arguably not be enough to change the BoC’s mind regarding the rate path just yet, but it could see some of the recent strength dissipate. If risk sentiment can put in a bit of a recovery, and Chinese econ data can hold up better-than-expected, a miss in Canadian CPI could offer an opportunity in the AUDCAD.
by thunderpips
AUD USD - FUNDAMENTAL DRIVERSAUD FUNDAMENTAL BIAS: BULLISH 1. Monetary Policy At the May policy decision, the RBA made a hawkish turn by raising the cash rate by 0.25% versus STIR expectations of a 15bsp move. Even though there were some hawkish takes looking for a 40bsp move, the 25bsp was still higher than consensus expectations. The bank noted that inflation pressures have risen more than they expected, even without a sharp rise in wages, and means that further increases in the cash rate will be required to bring inflation back in line with their target. They also surprised markets on the balance sheet side by announcing that they are starting passive QT by stopping the reinvestment of maturing bonds. The hawkish surprise was enough to see STIR markets price in >60% chance of a 50bsp hike for the June meeting despite comments from Gov Lowe who said they don’t preclude a bigger or smaller rate move than 25bsp in the future. All-in-all the decision from the RBA was hawkish and has finally kick started the bank’s hiking cycle and should provide support for the AUD in the med-term as long as the bank keeps tightening expectations intact. 2. Idiosyncratic Drivers & Intermarket Analysis Apart from the RBA, there are 3 drivers we’re watching for the med-term outlook: Recovery – unlike other nations where growth & inflation is expected to slow, Australia is expected to see recovery, mostly thanks to stimulus and recovery in China China – With the PBoC & CCP stepping up monetary and fiscal stimulus, any recovery in China bodes well for Australia (40% of exports goes to China). It has also meant that the virus situation in China posed short-term downside risks for AUD as it has pushed back recovery expectations. Thus, virus and stimulus developments in China remains key for the AUD. The AUKUS defence pact could see retaliation against Aussie goods and is worth keeping on the radar as well Commodities – Iron Ore (31%), Coal (14%) and LNG (10%) is more than 50% of Aussie exports, with rising prices giving the AUD huge support from terms of trade. If commodities remain supported it remains a support for AUD, but of course also means any sizeable corrections will weigh on the AUD. That means geopolitical and China demand developments remain key focus points. 3. Global Risk Outlook As a high-beta currency, the AUD usually benefits from overall positive risk sentiment as well as environments that benefit pro-cyclical assets. Thus, both short-term (immediate) and med-term (underlying) risk sentiment will always be a key consideration for the AUD. 4. CFTC Analysis Very bearish CFTC signals with the most recent update as Leveraged Funds moved back into net-short territory, and a very sizable increase in shorts from Large Specs. This has been reflected in the recent AUD price action, as risk sentiment, China growth concerns and commodity downside has been a perfect trio of AUD downside. That also means if risk sentiment can find some reprieve this week it could see some short-term recovery in the AUD. 5. The Week Ahead It’s all about China and Aussie data this week. On the China side, Monday’s Retail Sales and Industrial Production data is expected to show some serious degradation. A worse than expected print could put some pressure on the Antipodeans, but with a lot of bad news in the price (especially after the dismal Chinese PMI prints), a print that’s not as bad as expected could offer some reprieve for general risk sentiment. Apart from Chinese data, focus will also turn to the MLF (Monday) and LPR (Friday) rates, where any cuts from either could also provide some solace and show the PBoC’s resolve to fix the troubling growth situation. If the PBoC decides not to cut either, that would be seen as a negative unless they offer some other form of additional stimulus measures. The covid situation in China is important as well, and the hope is that either the government eases up some of the draconian restrictions or at least offers more material stimulus to support the economy. For the AUD data, the wage data will be the most interesting print with consensus looking for a jump to 2.5%. However, after the RBA’s comments that regional surveys are reporting higher wages, some are expecting a print close towards 3.0%. A print close to 3.0% should solidify hike expectations and could provide the AUD with a boost (especially if we print at or very close to 3.0%). For the jobs data, consensus is looking for the Unemployment Rate to tick down to 3.9%, and if we get that or lower it will be a record low for the series (which ought to be worth a few pips to the upside as long as risk sentiment and China plays their parts). USD FUNDAMENTAL BIAS: BULLISH 1. Monetary Policy At the May meeting, the Fed delivered on hawkish expectations regarding rates by hiking the Fed Funds Rate by 50bsp and also confirmed that the committee expects further 50bsp hikes to be appropriate. The fed also stuck to a familiar hawkish tone by downplaying the prospects of an imminent recession by explaining that even though the economy contracted in Q1, that household spending and business investment remained strong. The Chair also stuck to their guns regarding the rate path by suggesting that they think reaching neutral (currently estimated at 2.4%) before year-end would be appropriate and will assess the need for further hikes when they get there. There were however some less hawkish elements which saw a very classic ‘sell-the-fact’ reaction in major asset classes. The first one was on the Quantitative Tightening front where the bank decided on a phased approach for balance sheet reduction by starting the monthly caps at 30bn (treasuries) and 17.5bn ( MBS ) and pushing it up to the expected $60bn (treasuries) and $35bn ( MBS ) over a three-month timeframe. The second less hawkish element was comments from Chair Powell who took 75bsp hikes off the table saying the committee was not actively considering rate moves of that size. Interestingly, it seems STIR markets did not really believe the Fed as the probability of a 75bsp hike stood at >70% directly following the presser. All-in-all, the meeting provided a short-term ‘sell-the-fact’ opportunity, but also cemented the view that despite signs of a slowing economy and despite clear stress in financial markets, the Fed is sticking to their aggressive tightening for now. 2. Global & Domestic Economy As the reserve currency, the USD’s global usage means it’s usually inversely correlated to the global economy and global trade. The USD usually appreciates when growth & inflation slows (disinflation) and depreciates when growth & inflation accelerates (reflation). Thus, current expectations of a cyclical slowdown are a positive driver for the Dollar. Incoming data will be watched in relation to the ‘Fed Put’ as there are many similarities between now and 4Q18, where the Fed were also tightened into a slowdown. If growth data slows and the Fed stays hawkish it’s a positive for the USD, however if the Fed pivots dovish that’ll be a negative driver for the USD. 3. CFTC Analysis Aggregate USD positioning remains close to 1 standard deviation above the mean, and close to prior tops where the USD topped out in previous cycles. That does not change the bullish outlook for the USD in the med-term but means that we would wait for pullbacks before initiating new longs with price at new cycle highs. 4. The Week Ahead In the week ahead, the main focus points for the USD will be Retail Sales & Industrial Production, Fed Speak and overall risk sentiment. For Retail Sales, consensus is looking for a stronger MM headline (0.8%) but a softer MM Core print (0.3%). For Industrial Production, forecasts expect a steady slowdown for both the MM (0.4%) and the YY print (2.0%). On a 6M annualized basis, the March data for Retail Sales and Industrial Production showed a surprise acceleration. Looking at the incoming expectations for the April data, that acceleration looked like a possible blip. If the deceleration trend continues, we would expect that to add fuel to the current growth concerns (which should be a positive for the USD, but at cycle and 20-year highs we won’t want to chase the USD higher on a miss but if we see a surprise beat that could ease up some of the recent market turmoil and could offer some short-term corrective price action in the USD). Fed speak will also be on the radar, where markets will be looking for any signals that Fed speakers are getting more worried about the effects of tightening financial conditions on the economy and broader markets, any less hawkish sounding comments could offer some reprieve for risk and push the USD lower. As always, we’ll also need to keep overall risk sentiment in mind, especially in the current cyclical environment and recent heightened volatility across major asset classes. Further risk off price action should be supportive for the USD, but as the USD is looking tactically stretched, we would prefer to look for some downside on any risk on catalysts.
by thunderpips
AUDUSD: Key Levels to Watch 🇦🇺🇺🇸 Hey traders, AUDUSD is nicely recovering after a strong bearish rally. Here are key levels for you to watch on the pair: Support 1: The price is taking off from a major falling trend line matching the lower lows on a daily. For now, it is the closest key support to watch. Resistance 1: 0.703 - 0.7055 Resistance 2: 0.7255 - 0.727 Resistance 3: 0.734 - 0.7366 Resistance 4: 0.744 - 0.749 Resistance 5: 0.7654 - 0.766 Consider these key levels for potential buying/selling opportunities. Once one of the key structures is reached, wait for a confirmation before you open a trading position. ❤️If you have any questions, please, ask me in the comment section. Please, support my work with like, thank you!❤️
Long
by VasilyTrader
17
AUD USD - FUNDAMENTAL DRIVERSAUD FUNDAMENTAL BIAS: BULLISH 1. Monetary Policy At the May policy decision, the RBA made a hawkish turn by raising the cash rate by 0.25% versus STIR expectations of a 15bsp move. Even though there were some hawkish takes looking for a 40bsp move, the 25bsp was still higher than consensus expectations. The bank noted that inflation pressures have risen more than they expected, even without a sharp rise in wages, and means that further increases in the cash rate will be required to bring inflation back in line with their target. They also surprised markets on the balance sheet side by announcing that they are starting passive QT by stopping the reinvestment of maturing bonds. The hawkish surprise was enough to see STIR markets price in >60% chance of a 50bsp hike for the June meeting despite comments from Gov Lowe who said they don’t preclude a bigger or smaller rate move than 25bsp in the future. All-in-all the decision from the RBA was hawkish and has finally kick started the bank’s hiking cycle and should provide support for the AUD in the med-term as long as the bank keeps tightening expectations intact. 2. Idiosyncratic Drivers & Intermarket Analysis Apart from the RBA, there are 3 drivers we’re watching for the med-term outlook: Recovery – unlike other nations where growth & inflation is expected to slow, Australia is expected to see recovery, mostly thanks to stimulus in China China – With the PBoC & CCP stepping up monetary and fiscal stimulus, any recovery in China bodes well for Australia (China accounts for 40% of Australian exports). It also means the current virus situation in China posesshort-term downside risks for AUD. The AUKUS defence pact could see retaliation against Aussie goods and is worth keeping on the radar as well Commodities – Iron Ore (31%), Coal (14%) and LNG (10%) is more than 50% of Aussie exports, with rising prices giving the AUD huge support from terms of trade. If commodities remain supported it remains a support for AUD, but of course also means any sizeable corrections would weigh on the AUD, which means geopolitical and China demand developments remain focus points. 3. Global Risk Outlook As a high-beta currency, the AUD usually benefits from overall positive risk sentiment as well as environments that benefit pro-cyclical assets. Thus, both short-term (immediate) and med-term (underlying) risk sentiment will always be a key consideration for the AUD. 4. CFTC Analysis Very similar positioning change with Leverage Funds trimming net-shorts by a big amount but Asset Managers increasing net-short contracts by another big amount. With AUD aggregate positioning no longer stretched and mixed signals from CFTC categories, the CFTC data does not provide much in terms of signals for AUD. USD FUNDAMENTAL BIAS: BULLISH 1. Monetary Policy At the May meeting, the Fed delivered on hawkish expectations regarding rates by hiking the Fed Funds Rate by 50bsp and also confirmed that the committee expects further 50bsp hikes to be appropriate. The fed also stuck to a familiar hawkish tone by downplaying the prospects of an imminent recession by explaining that even though the economy contracted in Q1, that household spending and business investment remained strong. The Chair also stuck to their guns regarding the rate path by suggesting that they think reaching neutral (currently estimated at 2.4%) before year-end would be appropriate and will assess the need for further hikes when they get there. There were however some less hawkish elements which saw a very classic ‘sell-the-fact’ reaction in major asset classes. The first one was on the Quantitative Tightening front where the bank decided on a phased approach for balance sheet reduction by starting the monthly caps at 30bn (treasuries) and 17.5bn ( MBS ) and pushing it up to the expected $60bn (treasuries) and $35bn ( MBS ) over a three-month timeframe. The second less hawkish element was comments from Chair Powell who took 75bsp hikes off the table saying the committee was not actively considering rate moves of that size. Interestingly, it seems STIR markets did not really believe the Fed as the probability of a 75bsp hike stood at >70% directly following the presser. All-in-all, the meeting provided a short-term ‘sell-the-fact’ opportunity, but also cemented the view that despite signs of a slowing economy and despite clear stress in financial markets, the Fed is sticking to their aggressive tightening for now. 2. Global & Domestic Economy As the reserve currency, the USD’s global usage means it’s usually inversely correlated to the global economy and global trade. The USD usually appreciates when growth & inflation slows (disinflation) and depreciates when growth & inflation accelerates (reflation). Thus, current expectations of a cyclical slowdown are a positive driver for the Dollar. Incoming data will be watched in relation to the ‘Fed Put’ as there are many similarities between now and 4Q18, where the Fed were also tightened into a slowdown. If growth data slows and the Fed stays hawkish it’s a positive for the USD, however if the Fed pivots dovish that’ll be a negative driver for the USD. 3. CFTC Analysis Aggregate USD positioning remains close to 1 standard deviation above the mean, and close to prior tops where the USD topped out in previous cycles. That does not change the bullish outlook for the USD in the med-term but means that we would wait for pullbacks before initiating new longs with price at new cycle highs.
by thunderpips
1
AUD USD - FUNDAMENTAL DRIVERSAUD FUNDAMENTAL BIAS: BULLISH 1. Monetary Policy At the May policy decision, the RBA made a hawkish turn by raising the cash rate by 0.25% versus STIR expectations of a 15bsp move. Even though there were some hawkish takes looking for a 40bsp move, the 25bsp was still higher than consensus expectations. The bank noted that inflation pressures have risen more than they expected, even without a sharp rise in wages, and means that further increases in the cash rate will be required to bring inflation back in line with their target. They also surprised markets on the balance sheet side by announcing that they are starting passive QT by stopping the reinvestment of maturing bonds. The hawkish surprise was enough to see STIR markets price in >60% chance of a 50bsp hike for the June meeting despite comments from Gov Lowe who said they don’t preclude a bigger or smaller rate move than 25bsp in the future. All-in-all the decision from the RBA was hawkish and has finally kick started the bank’s hiking cycle and should provide support for the AUD in the med-term as long as the bank keeps tightening expectations intact. 2. Idiosyncratic Drivers & Intermarket Analysis Apart from the RBA, there are 3 drivers we’re watching for the med-term outlook: Recovery – unlike other nations where growth & inflation is expected to slow, Australia is expected to see recovery, mostly thanks to stimulus in China China – With the PBoC & CCP stepping up monetary and fiscal stimulus, any recovery in China bodes well for Australia (China accounts for 40% of Australian exports). It also means the current virus situation in China posesshort-term downside risks for AUD. The AUKUS defence pact could see retaliation against Aussie goods and is worth keeping on the radar as well Commodities – Iron Ore (31%), Coal (14%) and LNG (10%) is more than 50% of Aussie exports, with rising prices giving the AUD huge support from terms of trade. If commodities remain supported it remains a support for AUD, but of course also means any sizeable corrections would weigh on the AUD, which means geopolitical and China demand developments remain focus points. 3. Global Risk Outlook As a high-beta currency, the AUD usually benefits from overall positive risk sentiment as well as environments that benefit pro-cyclical assets. Thus, both short-term (immediate) and med-term (underlying) risk sentiment will always be a key consideration for the AUD. 4. CFTC Analysis Very similar positioning change with Leverage Funds trimming net-shorts by a big amount but Asset Managers increasing net-short contracts by another big amount. With AUD aggregate positioning no longer stretched and mixed signals from CFTC categories, the CFTC data does not provide much in terms of signals for AUD. USD FUNDAMENTAL BIAS: BULLISH 1. Monetary Policy At the May meeting, the Fed delivered on hawkish expectations regarding rates by hiking the Fed Funds Rate by 50bsp and also confirmed that the committee expects further 50bsp hikes to be appropriate. The fed also stuck to a familiar hawkish tone by downplaying the prospects of an imminent recession by explaining that even though the economy contracted in Q1, that household spending and business investment remained strong. The Chair also stuck to their guns regarding the rate path by suggesting that they think reaching neutral (currently estimated at 2.4%) before year-end would be appropriate and will assess the need for further hikes when they get there. There were however some less hawkish elements which saw a very classic ‘sell-the-fact’ reaction in major asset classes. The first one was on the Quantitative Tightening front where the bank decided on a phased approach for balance sheet reduction by starting the monthly caps at 30bn (treasuries) and 17.5bn ( MBS ) and pushing it up to the expected $60bn (treasuries) and $35bn ( MBS ) over a three-month timeframe. The second less hawkish element was comments from Chair Powell who took 75bsp hikes off the table saying the committee was not actively considering rate moves of that size. Interestingly, it seems STIR markets did not really believe the Fed as the probability of a 75bsp hike stood at >70% directly following the presser. All-in-all, the meeting provided a short-term ‘sell-the-fact’ opportunity, but also cemented the view that despite signs of a slowing economy and despite clear stress in financial markets, the Fed is sticking to their aggressive tightening for now. 2. Global & Domestic Economy As the reserve currency, the USD’s global usage means it’s usually inversely correlated to the global economy and global trade. The USD usually appreciates when growth & inflation slows (disinflation) and depreciates when growth & inflation accelerates (reflation). Thus, current expectations of a cyclical slowdown are a positive driver for the Dollar. Incoming data will be watched in relation to the ‘Fed Put’ as there are many similarities between now and 4Q18, where the Fed were also tightened into a slowdown. If growth data slows and the Fed stays hawkish it’s a positive for the USD, however if the Fed pivots dovish that’ll be a negative driver for the USD. 3. CFTC Analysis Aggregate USD positioning remains close to 1 standard deviation above the mean, and close to prior tops where the USD topped out in previous cycles. That does not change the bullish outlook for the USD in the med-term but means that we would wait for pullbacks before initiating new longs with price at new cycle highs.
by thunderpips
AUDNZD: Potential Trend-Following Trade Explained 🇦🇺🇳🇿 This morning on a Live Stream we discussed AUDNZD pair: the price dropped to key daily structure support. To catch a trend-following move from that, watch a bullish flag pattern on 1H time frame. You need an hourly candle close above that to confirm a breakout. Goals will be 1.1049 / 1.1074 If a price breaks a yellow zone to the downside, the setup will be invalid. ❤️If you have any questions, please, ask me in the comment section. Please, support my work with like, thank you!❤️
Long
by VasilyTrader
3
GBPAUD: Your Trading Plan For Today 🇬🇧 🇦🇺 Hey traders, Have you seen that cute dodji candle that GBPAUD formed on a daily time frame. That candlestick pattern formed on a strong horizontal key level. To short with a confirmation, watch a double top formation on 4H. 1.7664 - 1.769 is its horizontal neckline. Wait for 4H candle close below that, then short aggressively or on a retest. Goals will be 1.75 / 1.74 If the price sets a new higher high on 4h, the setup will be invalid. ❤️If you have any questions, please, ask me in the comment section. Please, support my work with like, thank you!❤️
Short
by VasilyTrader
1
AUD USD - FUNDAMENTAL DRIVERSAUD FUNDAMENTAL BIAS: BULLISH 1. Monetary Policy At the May policy decision, the RBA made a hawkish turn by raising the cash rate by 0.25% versus STIR expectations of a 15bsp move. Even though there were some hawkish takes looking for a 40bsp move, the 25bsp was still higher than consensus expectations. The bank noted that inflation pressures have risen more than they expected, even without a sharp rise in wages, and means that further increases in the cash rate will be required to bring inflation back in line with their target. They also surprised markets on the balance sheet side by announcing that they are starting passive QT by stopping the reinvestment of maturing bonds. The hawkish surprise was enough to see STIR markets price in >60% chance of a 50bsp hike for the June meeting despite comments from Gov Lowe who said they don’t preclude a bigger or smaller rate move than 25bsp in the future. All-in-all the decision from the RBA was hawkish and has finally kick started the bank’s hiking cycle and should provide support for the AUD in the med-term as long as the bank keeps tightening expectations intact. 2. Idiosyncratic Drivers & Intermarket Analysis Apart from the RBA, there are 3 drivers we’re watching for the med-term outlook: Recovery – unlike other nations where growth & inflation is expected to slow, Australia is expected to see recovery, mostly thanks to stimulus in China China – With the PBoC & CCP stepping up monetary and fiscal stimulus, any recovery in China bodes well for Australia (China accounts for 40% of Australian exports). It also means the current virus situation in China posesshort-term downside risks for AUD. The AUKUS defence pact could see retaliation against Aussie goods and is worth keeping on the radar as well Commodities – Iron Ore (31%), Coal (14%) and LNG (10%) is more than 50% of Aussie exports, with rising prices giving the AUD huge support from terms of trade. If commodities remain supported it remains a support for AUD, but of course also means any sizeable corrections would weigh on the AUD, which means geopolitical and China demand developments remain focus points. 3. Global Risk Outlook As a high-beta currency, the AUD usually benefits from overall positive risk sentiment as well as environments that benefit pro-cyclical assets. Thus, both short-term (immediate) and med-term (underlying) risk sentiment will always be a key consideration for the AUD. 4. CFTC Analysis Very similar positioning change with Leverage Funds trimming net-shorts by a big amount but Asset Managers increasing net-short contracts by another big amount. With AUD aggregate positioning no longer stretched and mixed signals from CFTC categories, the CFTC data does not provide much in terms of signals for AUD. 5. The Week Ahead With a quiet week ahead the main focus for the AUD will be on China developments, commodities and risk sentiment. On the China side, the market’s attention will turn to Covid developments. Even though we don’t think the Covid challenges changes the med-term outlook for China’s recovery, it has certainly pushed it back, and last week’s PMI data was much worse than expected. Any major negative Covid developments can place further pressure on the AUD, while further stimulus measures out of China would be seen as a positive. For commodities , Iron Ore is a key focus for the week ahead. Even though Iron Ore has held up very well in recent weeks despite China’s Covid predicament, this week saw Iron Ore break through key support and ending the week close to 5% down. If this downside pressure in Iron Ore continues it will be a negative driver for the AUD. Furthermore, the classic risk sentiment correlation has come back with a vengeance these past three weeks, which means overall risk sentiment and equity price action will also be in might be in the limelight for the AUD. USD FUNDAMENTAL BIAS: BULLISH 1. Monetary Policy At the May meeting, the Fed delivered on hawkish expectations regarding rates by hiking the Fed Funds Rate by 50bsp and also confirmed that the committee expects further 50bsp hikes to be appropriate. The fed also stuck to a familiar hawkish tone by downplaying the prospects of an imminent recession by explaining that even though the economy contracted in Q1, that household spending and business investment remained strong. The Chair also stuck to their guns regarding the rate path by suggesting that they think reaching neutral (currently estimated at 2.4%) before year-end would be appropriate and will assess the need for further hikes when they get there. There were however some less hawkish elements which saw a very classic ‘sell-the-fact’ reaction in major asset classes. The first one was on the Quantitative Tightening front where the bank decided on a phased approach for balance sheet reduction by starting the monthly caps at 30bn (treasuries) and 17.5bn ( MBS ) and pushing it up to the expected $60bn (treasuries) and $35bn ( MBS ) over a three-month timeframe. The second less hawkish element was comments from Chair Powell who took 75bsp hikes off the table saying the committee was not actively considering rate moves of that size. Interestingly, it seems STIR markets did not really believe the Fed as the probability of a 75bsp hike stood at >70% directly following the presser. All-in-all, the meeting provided a short-term ‘sell-the-fact’ opportunity, but also cemented the view that despite signs of a slowing economy and despite clear stress in financial markets, the Fed is sticking to their aggressive tightening for now. 2. Global & Domestic Economy As the reserve currency, the USD’s global usage means it’s usually inversely correlated to the global economy and global trade. The USD usually appreciates when growth & inflation slows (disinflation) and depreciates when growth & inflation accelerates (reflation). Thus, current expectations of a cyclical slowdown are a positive driver for the Dollar. Incoming data will be watched in relation to the ‘Fed Put’ as there are many similarities between now and 4Q18, where the Fed were also tightened into a slowdown. If growth data slows and the Fed stays hawkish it’s a positive for the USD, however if the Fed pivots dovish that’ll be a negative driver for the USD. 3. CFTC Analysis Aggregate USD positioning remains close to 1 standard deviation above the mean, and close to prior tops where the USD topped out in previous cycles. That does not change the bullish outlook for the USD in the med-term but means that we would wait for pullbacks before initiating new longs with price at new cycle highs. 4. The Week Ahead In the week ahead, the market’s biggest attention for the USD will turn to April CPI data, Fed Speak and Consumer Sentiment data. Even though there have been some clear signs that growth is slowing in the US economy, the Fed has kept up with promises of aggressive tightening this year as inflation is more than 4 times above target. Consensus expects headline inflation to drop to 8.1% from the prior of 8.5% and for Core YY to drop to 6.0% from 6.5%. This is mainly driven by base effects as April 2021 marks the month when price pressures started to really ramp up in the US. After the previous surprise miss in Core CPI and PCE , a bigger-than-expected miss in CPI could spark further speculation about ‘peak inflation’. Thus, any print close to or below the market’s minimum expectations could see some downside pressure in the USD and US10Y , as both are trading very close to cycle highs. We will also unfortunately be inundated by Fed speak next week as various officials will be running for the microphone to voice their own opinion of the May policy decision. As usual their comments will be watched closely for any new information that was not shared in the statement or during the presser with the Chair. We’ll also have updated Consumer Sentiment data, which will be important to see whether the bounce we saw from the prior reading is followed up with another, or whether sentiment deteriorates further from already recession territory lows. As always, risk sentiment will also be a focus for the safe haven Dollar.
by thunderpips
AUD USD - FUNDAMENTAL DRIVERSAUD FUNDAMENTAL BIAS: BULLISH 1. Monetary Policy At the May policy decision, the RBA made a hawkish turn by raising the cash rate by 0.25% versus STIR expectations of a 15bsp move. Even though there were some hawkish takes looking for a 40bsp move, the 25bsp was still higher than consensus expectations. The bank noted that inflation pressures have risen more than they expected, even without a sharp rise in wages, and means that further increases in the cash rate will be required to bring inflation back in line with their target. They also surprised markets on the balance sheet side by announcing that they are starting passive QT by stopping the reinvestment of maturing bonds. The hawkish surprise was enough to see STIR markets price in >60% chance of a 50bsp hike for the June meeting despite comments from Gov Lowe who said they don’t preclude a bigger or smaller rate move than 25bsp in the future. All-in-all the decision from the RBA was hawkish and has finally kick started the bank’s hiking cycle and should provide support for the AUD in the med-term as long as the bank keeps tightening expectations intact. 2. Idiosyncratic Drivers & Intermarket Analysis Apart from the RBA, there are 3 drivers we’re watching for the med-term outlook: Recovery – unlike other nations where growth & inflation is expected to slow, Australia is expected to see recovery, mostly thanks to stimulus in China China – With the PBoC & CCP stepping up monetary and fiscal stimulus, any recovery in China bodes well for Australia (China accounts for 40% of Australian exports). It also means the current virus situation in China posesshort-term downside risks for AUD. The AUKUS defence pact could see retaliation against Aussie goods and is worth keeping on the radar as well Commodities – Iron Ore (31%), Coal (14%) and LNG (10%) is more than 50% of Aussie exports, with rising prices giving the AUD huge support from terms of trade. If commodities remain supported it remains a support for AUD, but of course also means any sizeable corrections would weigh on the AUD, which means geopolitical and China demand developments remain focus points. 3. Global Risk Outlook As a high-beta currency, the AUD usually benefits from overall positive risk sentiment as well as environments that benefit pro-cyclical assets. Thus, both short-term (immediate) and med-term (underlying) risk sentiment will always be a key consideration for the AUD. 4. CFTC Analysis Very similar positioning change with Leverage Funds trimming net-shorts by a big amount but Asset Managers increasing net-short contracts by another big amount. With AUD aggregate positioning no longer stretched and mixed signals from CFTC categories, the CFTC data does not provide much in terms of signals for AUD. 5. The Week Ahead With a quiet week ahead the main focus for the AUD will be on China developments, commodities and risk sentiment. On the China side, the market’s attention will turn to Covid developments. Even though we don’t think the Covid challenges changes the med-term outlook for China’s recovery, it has certainly pushed it back, and last week’s PMI data was much worse than expected. Any major negative Covid developments can place further pressure on the AUD, while further stimulus measures out of China would be seen as a positive. For commodities , Iron Ore is a key focus for the week ahead. Even though Iron Ore has held up very well in recent weeks despite China’s Covid predicament, this week saw Iron Ore break through key support and ending the week close to 5% down. If this downside pressure in Iron Ore continues it will be a negative driver for the AUD. Furthermore, the classic risk sentiment correlation has come back with a vengeance these past three weeks, which means overall risk sentiment and equity price action will also be in might be in the limelight for the AUD. USD FUNDAMENTAL BIAS: BULLISH 1. Monetary Policy At the May meeting, the Fed delivered on hawkish expectations regarding rates by hiking the Fed Funds Rate by 50bsp and also confirmed that the committee expects further 50bsp hikes to be appropriate. The fed also stuck to a familiar hawkish tone by downplaying the prospects of an imminent recession by explaining that even though the economy contracted in Q1, that household spending and business investment remained strong. The Chair also stuck to their guns regarding the rate path by suggesting that they think reaching neutral (currently estimated at 2.4%) before year-end would be appropriate and will assess the need for further hikes when they get there. There were however some less hawkish elements which saw a very classic ‘sell-the-fact’ reaction in major asset classes. The first one was on the Quantitative Tightening front where the bank decided on a phased approach for balance sheet reduction by starting the monthly caps at 30bn (treasuries) and 17.5bn ( MBS ) and pushing it up to the expected $60bn (treasuries) and $35bn ( MBS ) over a three-month timeframe. The second less hawkish element was comments from Chair Powell who took 75bsp hikes off the table saying the committee was not actively considering rate moves of that size. Interestingly, it seems STIR markets did not really believe the Fed as the probability of a 75bsp hike stood at >70% directly following the presser. All-in-all, the meeting provided a short-term ‘sell-the-fact’ opportunity, but also cemented the view that despite signs of a slowing economy and despite clear stress in financial markets, the Fed is sticking to their aggressive tightening for now. 2. Global & Domestic Economy As the reserve currency, the USD’s global usage means it’s usually inversely correlated to the global economy and global trade. The USD usually appreciates when growth & inflation slows (disinflation) and depreciates when growth & inflation accelerates (reflation). Thus, current expectations of a cyclical slowdown are a positive driver for the Dollar. Incoming data will be watched in relation to the ‘Fed Put’ as there are many similarities between now and 4Q18, where the Fed were also tightened into a slowdown. If growth data slows and the Fed stays hawkish it’s a positive for the USD, however if the Fed pivots dovish that’ll be a negative driver for the USD. 3. CFTC Analysis Aggregate USD positioning remains close to 1 standard deviation above the mean, and close to prior tops where the USD topped out in previous cycles. That does not change the bullish outlook for the USD in the med-term but means that we would wait for pullbacks before initiating new longs with price at new cycle highs. 4. The Week Ahead In the week ahead, the market’s biggest attention for the USD will turn to April CPI data, Fed Speak and Consumer Sentiment data. Even though there have been some clear signs that growth is slowing in the US economy, the Fed has kept up with promises of aggressive tightening this year as inflation is more than 4 times above target. Consensus expects headline inflation to drop to 8.1% from the prior of 8.5% and for Core YY to drop to 6.0% from 6.5%. This is mainly driven by base effects as April 2021 marks the month when price pressures started to really ramp up in the US. After the previous surprise miss in Core CPI and PCE , a bigger-than-expected miss in CPI could spark further speculation about ‘peak inflation’. Thus, any print close to or below the market’s minimum expectations could see some downside pressure in the USD and US10Y , as both are trading very close to cycle highs. We will also unfortunately be inundated by Fed speak next week as various officials will be running for the microphone to voice their own opinion of the May policy decision. As usual their comments will be watched closely for any new information that was not shared in the statement or during the presser with the Chair. We’ll also have updated Consumer Sentiment data, which will be important to see whether the bounce we saw from the prior reading is followed up with another, or whether sentiment deteriorates further from already recession territory lows. As always, risk sentiment will also be a focus for the safe haven Dollar.
by thunderpips
AUD USD - FUNDAMENTAL DRIVERSAUD FUNDAMENTAL BIAS: BULLISH 1. Monetary Policy At the May policy decision, the RBA made a hawkish turn by raising the cash rate by 0.25% versus STIR expectations of a 15bsp move. Even though there were some hawkish takes looking for a 40bsp move, the 25bsp was still higher than consensus expectations. The bank noted that inflation pressures have risen more than they expected, even without a sharp rise in wages, and means that further increases in the cash rate will be required to bring inflation back in line with their target. They also surprised markets on the balance sheet side by announcing that they are starting passive QT by stopping the reinvestment of maturing bonds. The hawkish surprise was enough to see STIR markets price in >60% chance of a 50bsp hike for the June meeting despite comments from Gov Lowe who said they don’t preclude a bigger or smaller rate move than 25bsp in the future. All-in-all the decision from the RBA was hawkish and has finally kick started the bank’s hiking cycle and should provide support for the AUD in the med-term as long as the bank keeps tightening expectations intact. 2. Idiosyncratic Drivers & Intermarket Analysis Apart from the RBA, there are 3 drivers we’re watching for the med-term outlook: Recovery – unlike other nations where growth & inflation is expected to slow, Australia is expected to see recovery, mostly thanks to stimulus in China China – With the PBoC & CCP stepping up monetary and fiscal stimulus, any recovery in China bodes well for Australia (China accounts for 40% of Australian exports). It also means the current virus situation in China posesshort-term downside risks for AUD. The AUKUS defence pact could see retaliation against Aussie goods and is worth keeping on the radar as well Commodities – Iron Ore (31%), Coal (14%) and LNG (10%) is more than 50% of Aussie exports, with rising prices giving the AUD huge support from terms of trade. If commodities remain supported it remains a support for AUD, but of course also means any sizeable corrections would weigh on the AUD, which means geopolitical and China demand developments remain focus points. 3. Global Risk Outlook As a high-beta currency, the AUD usually benefits from overall positive risk sentiment as well as environments that benefit pro-cyclical assets. Thus, both short-term (immediate) and med-term (underlying) risk sentiment will always be a key consideration for the AUD. 4. CFTC Analysis Very similar positioning change with Leverage Funds trimming net-shorts by a big amount but Asset Managers increasing net-short contracts by another big amount. With AUD aggregate positioning no longer stretched and mixed signals from CFTC categories, the CFTC data does not provide much in terms of signals for AUD. 5. The Week Ahead With a quiet week ahead the main focus for the AUD will be on China developments, commodities and risk sentiment. On the China side, the market’s attention will turn to Covid developments. Even though we don’t think the Covid challenges changes the med-term outlook for China’s recovery, it has certainly pushed it back, and last week’s PMI data was much worse than expected. Any major negative Covid developments can place further pressure on the AUD, while further stimulus measures out of China would be seen as a positive. For commodities, Iron Ore is a key focus for the week ahead. Even though Iron Ore has held up very well in recent weeks despite China’s Covid predicament, this week saw Iron Ore break through key support and ending the week close to 5% down. If this downside pressure in Iron Ore continues it will be a negative driver for the AUD. Furthermore, the classic risk sentiment correlation has come back with a vengeance these past three weeks, which means overall risk sentiment and equity price action will also be in might be in the limelight for the AUD. USD FUNDAMENTAL BIAS: BULLISH 1. Monetary Policy At the May meeting, the Fed delivered on hawkish expectations regarding rates by hiking the Fed Funds Rate by 50bsp and also confirmed that the committee expects further 50bsp hikes to be appropriate. The fed also stuck to a familiar hawkish tone by downplaying the prospects of an imminent recession by explaining that even though the economy contracted in Q1, that household spending and business investment remained strong. The Chair also stuck to their guns regarding the rate path by suggesting that they think reaching neutral (currently estimated at 2.4%) before year-end would be appropriate and will assess the need for further hikes when they get there. There were however some less hawkish elements which saw a very classic ‘sell-the-fact’ reaction in major asset classes. The first one was on the Quantitative Tightening front where the bank decided on a phased approach for balance sheet reduction by starting the monthly caps at 30bn (treasuries) and 17.5bn (MBS) and pushing it up to the expected $60bn (treasuries) and $35bn (MBS) over a three-month timeframe. The second less hawkish element was comments from Chair Powell who took 75bsp hikes off the table saying the committee was not actively considering rate moves of that size. Interestingly, it seems STIR markets did not really believe the Fed as the probability of a 75bsp hike stood at >70% directly following the presser. All-in-all, the meeting provided a short-term ‘sell-the-fact’ opportunity, but also cemented the view that despite signs of a slowing economy and despite clear stress in financial markets, the Fed is sticking to their aggressive tightening for now. 2. Global & Domestic Economy As the reserve currency, the USD’s global usage means it’s usually inversely correlated to the global economy and global trade. The USD usually appreciates when growth & inflation slows (disinflation) and depreciates when growth & inflation accelerates (reflation). Thus, current expectations of a cyclical slowdown are a positive driver for the Dollar. Incoming data will be watched in relation to the ‘Fed Put’ as there are many similarities between now and 4Q18, where the Fed were also tightened into a slowdown. If growth data slows and the Fed stays hawkish it’s a positive for the USD, however if the Fed pivots dovish that’ll be a negative driver for the USD. 3. CFTC Analysis Aggregate USD positioning remains close to 1 standard deviation above the mean, and close to prior tops where the USD topped out in previous cycles. That does not change the bullish outlook for the USD in the med-term but means that we would wait for pullbacks before initiating new longs with price at new cycle highs. 4. The Week Ahead In the week ahead, the market’s biggest attention for the USD will turn to April CPI data, Fed Speak and Consumer Sentiment data. Even though there have been some clear signs that growth is slowing in the US economy, the Fed has kept up with promises of aggressive tightening this year as inflation is more than 4 times above target. Consensus expects headline inflation to drop to 8.1% from the prior of 8.5% and for Core YY to drop to 6.0% from 6.5%. This is mainly driven by base effects as April 2021 marks the month when price pressures started to really ramp up in the US. After the previous surprise miss in Core CPI and PCE, a bigger-than-expected miss in CPI could spark further speculation about ‘peak inflation’. Thus, any print close to or below the market’s minimum expectations could see some downside pressure in the USD and US10Y, as both are trading very close to cycle highs. We will also unfortunately be inundated by Fed speak next week as various officials will be running for the microphone to voice their own opinion of the May policy decision. As usual their comments will be watched closely for any new information that was not shared in the statement or during the presser with the Chair. We’ll also have updated Consumer Sentiment data, which will be important to see whether the bounce we saw from the prior reading is followed up with another, or whether sentiment deteriorates further from already recession territory lows. As always, risk sentiment will also be a focus for the safe haven Dollar.
by thunderpips
1
EURAUD: Trend-Following Trading Setup 🇪🇺🇦🇺 EURAUD is trading in a long-term bearish trend. After the price set a new low at the beginning of April, the pair started a correctional movement. It looks like bears are finally started to push: yesterday the price broke a strong horizontal demand cluster and a major rising trend line. Now I expect a bearish continuation to 1.44 level. ❤️If you have any questions, please, ask me in the comment section. Please, support my work with like, thank you!❤️
Short
by VasilyTrader
11
AUD CAD - FUNDAMENTAL DRIVERSAUD FUNDAMENTAL BIAS: BULLISH 1. Monetary Policy At their April meeting, the RBA took a slightly more hawkish stance by removing their reference to ‘patience’ in terms of policy tightening. With the bank taking a sanguine view of rising price pressures, the statement did reveal a growing concern for inflation with 10 references to ‘inflation’ in the statement. The bank explained that higher energy and commodity price could see a sizeable increase to inflation forecasts in the May report. In their Financial Stability report the bank urged borrowers to prepare for an increase in rates, which was a further signal from the bank. Even though the meeting showed a bank that is turning the page, the statement also revealed very similar conditionality such as incoming wage and inflation data. Following the meeting, markets have a bit of an overreaction by pricing in a >80% chance of a rate hike at the May meeting but was later pushed back to <30%. Given the importance of wage data, and since that is only release on the 18th of May, the most likely meeting for a first hike is the June meeting. Westpac investment bank agrees with our take with the bank expecting a 15bsp lift off in June, followed by 25bsp hikes in July, August, Oct and Nov. Even though this confirms our fundamental bullish bias, the >14 hikes priced by end 2023 means risks of lower repricing is building. 2. Idiosyncratic Drivers & Intermarket Analysis Apart from the RBA, there are 3 drivers we’re watching for the med-term outlook: Recovery – unlike other nations where growth & inflation is expected to slow, Australia is expected to see recovery, mostly thanks to stimulus in China China – With the PBoC & CCP stepping up monetary and fiscal stimulus, any recovery in China bodes well for Australia (China accounts for 40% of Australian exports). It also means the current virus situation in China posesshort-term downside risks for AUD. The AUKUS defence pact could see retaliation against Aussie goods and is worth keeping on the radar as well Commodities – Iron Ore (31%), Coal (14%) and LNG (10%) is more than 50% of Aussie exports, with rising prices giving the AUD huge support from terms of trade. If commodities remain supported it remains a support for AUD, but of course also means any sizeable corrections would weigh on the AUD, which means geopolitical and China demand developments remain focus points. 3. Global Risk Outlook As a high-beta currency, the AUD usually benefits from overall positive risk sentiment as well as environments that benefit pro-cyclical assets. Thus, both short-term (immediate) and med-term (underlying) risk sentiment will always be a key consideration for the AUD. 4. CFTC Analysis Quite strange positioning change for the AUD with Leverage Funds trimming net-shorts by a chunky amount but Asset Managers showing a whopping build up in net-short contracts. The shift in Asset Manager positioning could explain the reluctance of the AUD to make any real progress despite very positive China developments. CAD FUNDAMENTAL BIAS: NEUTRAL 1. Monetary Policy The BoC delivered on expectations with a 50bsp hike as well as announcing a start to passive QT from the end of April by ending its reinvestment of maturing bonds. The bank upgraded both inflation and growth estimates as markets were expecting but did play a hawkish card by also increasing their neutral rate estimate to 2.5% from 2.25%. They acknowledged the growing risks from the current geopolitical situation but made it very clear that they are concerned about inflation and their hike of 50bsp showed that they think that policy needs to be normalized quickly (which some took as a hint that another 50bsp is on the way). The bank didn’t offer any additional clarity on QT but did note that they are not considering active QT of selling bonds just yet. Some conditionality also surfaced, where they explained that any sudden negative shocks to growth or inflation could see them pause hikes once they get closer towards neutral ( Gov Macklem also added that they might need to get rates slightly above neutral in the current cycle). Overall, it was a more hawkish than expected BoC decision, but interesting to note that STIR markets did not price in another 50bsp following the meeting (only a 25bsp) hike. We remain of the opinion that we are close to peak hawkishness for the BoC and are looking for the last push higher in the CAD for opportunities to sell. 2. Intermarket Analysis Considerations Oil’s impressive post-covid recovery has been driven by many factors such as supply & demand , global demand recovery, and more recently geopolitical concerns. At current prices the risk to demand destruction and stagflation is high, which means we remain cautious of oil in the med-term . Reason for caution: Synchronised policy tightening targeting demand, slowing growth, consensus longs, steep backwardation curve, heightened implied volatility . We remain cautious oil , but geopolitics are a key driver and focus for Petro-currencies like the CAD (even though the CAD-Oil correlation has been hit and miss). The upcoming week has a new round of OPEC meetings where the cartel is once again expected to stick to their plans to up output by 430K BPD per month. It will be interesting though to see whether recent lockdowns in China, and possible oil embargo news from the EU impacts the OPEC discussions, if at all. 3. Global Risk Outlook As a high-beta currency, the CAD usually benefits from overall positive risk sentiment as well as environments that benefit pro-cyclical assets. Thus, both short-term (immediate) and med-term (underlying) risk sentiment will always be a key consideration for the CAD. 4. CFTC Analysis Very little change in CFTC data for the CAD. We think markets are setting up a similar path compared to April 2021, Oct 2021 and Jan 2022 where markets were too aggressive to price in CAD upside only to see majority of it unwind later. As always though, timing those shorts will be very important. 5. The Week Ahead The highlight for the week ahead will be the jobs data scheduled for Friday, as well as oil market developments and risk sentiment. On the jobs data, this will be an interesting test for the Canadian labour market which have held up really well after bouncing back from the Omicron hick up. Even though we think the growth outlook for Canada is too optimistic, it might be too early to start seeing those growth concerns trickle into the jobs market as it is usually a late cycle indicator. However, in the event of a miss or a beat it might not change much in terms for the BoC just yet but given the frothy CAD price action a surprise miss could kickstart some overdue downside. Even though the correlation to oil has been rather hit and miss over the past few weeks, it’s always important to keep oil developments in mind, which means next week’s OPEC+ meetings could be an important event for Petro-currencies, especially with the possibility of oil embargo news from the EU as well. Then we also have risk sentiment to watch as the classic risk sensitivity that one would usually expect from high beta currencies like the AUD, CAD and NZD have seemingly returned with a vengeance in the past two trading weeks. That means overall risk sentiment will be an important driver to keep in mind for the CAD as well.
by thunderpips
AUD USD - FUNDAMENTAL DRIVERSAUD FUNDAMENTAL BIAS: BULLISH 1. Monetary Policy At their April meeting, the RBA took a slightly more hawkish stance by removing their reference to ‘patience’ in terms of policy tightening. With the bank taking a sanguine view of rising price pressures, the statement did reveal a growing concern for inflation with 10 references to ‘inflation’ in the statement. The bank explained that higher energy and commodity price could see a sizeable increase to inflation forecasts in the May report. In their Financial Stability report the bank urged borrowers to prepare for an increase in rates, which was a further signal from the bank. Even though the meeting showed a bank that is turning the page, the statement also revealed very similar conditionality such as incoming wage and inflation data. Following the meeting, markets have a bit of an overreaction by pricing in a >80% chance of a rate hike at the May meeting but was later pushed back to <30%. Given the importance of wage data, and since that is only release on the 18th of May, the most likely meeting for a first hike is the June meeting. Westpac investment bank agrees with our take with the bank expecting a 15bsp lift off in June, followed by 25bsp hikes in July, August, Oct and Nov. Even though this confirms our fundamental bullish bias, the >14 hikes priced by end 2023 means risks of lower repricing is building. 2. Idiosyncratic Drivers & Intermarket Analysis Apart from the RBA, there are 3 drivers we’re watching for the med-term outlook: Recovery – unlike other nations where growth & inflation is expected to slow, Australia is expected to see recovery, mostly thanks to stimulus in China China – With the PBoC & CCP stepping up monetary and fiscal stimulus, any recovery in China bodes well for Australia (China accounts for 40% of Australian exports). It also means the current virus situation in China posesshort-term downside risks for AUD. The AUKUS defence pact could see retaliation against Aussie goods and is worth keeping on the radar as well Commodities – Iron Ore (31%), Coal (14%) and LNG (10%) is more than 50% of Aussie exports, with rising prices giving the AUD huge support from terms of trade. If commodities remain supported it remains a support for AUD, but of course also means any sizeable corrections would weigh on the AUD, which means geopolitical and China demand developments remain focus points. 3. Global Risk Outlook As a high-beta currency, the AUD usually benefits from overall positive risk sentiment as well as environments that benefit pro-cyclical assets. Thus, both short-term (immediate) and med-term (underlying) risk sentiment will always be a key consideration for the AUD. 4. CFTC Analysis Quite strange positioning change for the AUD with Leverage Funds trimming net-shorts by a chunky amount but Asset Managers showing a whopping build up in net-short contracts. The shift in Asset Manager positioning could explain the reluctance of the AUD to make any real progress despite very positive China developments. USD FUNDAMENTAL BIAS: BULLISH 1. Monetary Policy In March the Fed delivered on a 25bsp hike as expected with Fed’s Bullard the only dissenter voting for a 50bsp hike. The Dot Plot saw a big upgrade from 3 hikes (Dec) to 7 hikes for 2022, with the FFR seen reaching 2.75%- 3.0% in 2023 before falling in 2024. They did however lower their neutral rate from 2.5% to 2.4% which were a negative. Inflation forecasts for 2022 were raised to 4.1% (previous 2.7%) but med-term inflation saw less aggressive upgrades. Even though the overall message and projections were hawkish, the fact that GDP estimates were lowered to 2.8% from 4.0% shows the Fed expects their actions to impact demand and also reflect some of the recent geopolitical uncertainties. The Fed didn’t share new details on QT but noted that the decision to start selling assets will be made at a coming meeting (markets consensus sees a July start as likely) and added that good progress in QT discussions means a May announcement is likely. During the presser the Chair expressed his view that the economy is doing really well and, should be more than able to withstand the incoming rate hikes (a very similar situation like we had in 4Q18). When asked whether 50bsp hikes could be on the table, the chair explained that the FOMC has not made decision to front-load hikes and will keep an eye on incoming inflation data to determine their policy actions going forward, but of course added that every incoming meeting was live. Overall, the Fed was hawkish, but due to very strong pre-positioning and close to peak hawkishness priced for STIR markets the meeting saw a ‘sell-the-fact’ reaction across major asset classes. 2. Global & Domestic Economy As the reserve currency, the USD’s global usage means it’s usually inversely correlated to the global economy and global trade. The USD usually appreciates when growth & inflation slows (disinflation) and depreciates when growth & inflation accelerates (reflation). Thus, current expectations of a cyclical slowdown are a positive driver for the Dollar. Incoming data will be watched in relation to the ‘Fed Put’ as there are many similarities between now and 4Q18, where the Fed were also tightened into a slowdown. If growth data slows and the Fed stays hawkish it’s a positive for the USD, however if the Fed pivots dovish that’ll be a negative driver for the USD. 3. CFTC Analysis Aggregate USD positioning remains close to 1 standard deviation above the mean, and close to prior tops where the USD topped out in previous cycles. That does not change the bullish outlook for the USD in the med-term but means that we would wait for pullbacks before initiating new longs with price at new cycle highs.
by thunderpips
AUD CAD - FUNDAMENTAL DRIVERSAUD FUNDAMENTAL BIAS: BULLISH 1. Monetary Policy At their April meeting, the RBA took a slightly more hawkish stance by removing their reference to ‘patience’ in terms of policy tightening. With the bank taking a sanguine view of rising price pressures, the statement did reveal a growing concern for inflation with 10 references to ‘inflation’ in the statement. The bank explained that higher energy and commodity price could see a sizeable increase to inflation forecasts in the May report. In their Financial Stability report the bank urged borrowers to prepare for an increase in rates, which was a further signal from the bank. Even though the meeting showed a bank that is turning the page, the statement also revealed very similar conditionality such as incoming wage and inflation data. Following the meeting, markets have a bit of an overreaction by pricing in a >80% chance of a rate hike at the May meeting but was later pushed back to <30%. Given the importance of wage data, and since that is only release on the 18th of May, the most likely meeting for a first hike is the June meeting. Westpac investment bank agrees with our take with the bank expecting a 15bsp lift off in June, followed by 25bsp hikes in July, August, Oct and Nov. Even though this confirms our fundamental bullish bias, the >14 hikes priced by end 2023 means risks of lower repricing is building. 2. Idiosyncratic Drivers & Intermarket Analysis Apart from the RBA, there are 3 drivers we’re watching for the med-term outlook: Recovery – unlike other nations where growth & inflation is expected to slow, Australia is expected to see recovery, mostly thanks to stimulus in China China – With the PBoC & CCP stepping up monetary and fiscal stimulus, any recovery in China bodes well for Australia (China accounts for 40% of Australian exports). It also means the current virus situation in China posesshort-term downside risks for AUD. The AUKUS defence pact could see retaliation against Aussie goods and is worth keeping on the radar as well Commodities – Iron Ore (31%), Coal (14%) and LNG (10%) is more than 50% of Aussie exports, with rising prices giving the AUD huge support from terms of trade. If commodities remain supported it remains a support for AUD, but of course also means any sizeable corrections would weigh on the AUD, which means geopolitical and China demand developments remain focus points. 3. Global Risk Outlook As a high-beta currency, the AUD usually benefits from overall positive risk sentiment as well as environments that benefit pro-cyclical assets. Thus, both short-term (immediate) and med-term (underlying) risk sentiment will always be a key consideration for the AUD. 4. CFTC Analysis Quite strange positioning change for the AUD with Leverage Funds trimming net-shorts by a chunky amount but Asset Managers showing a whopping build up in net-short contracts. The shift in Asset Manager positioning could explain the reluctance of the AUD to make any real progress despite very positive China developments. CAD FUNDAMENTAL BIAS: NEUTRAL 1. Monetary Policy The BoC delivered on expectations with a 50bsp hike as well as announcing a start to passive QT from the end of April by ending its reinvestment of maturing bonds. The bank upgraded both inflation and growth estimates as markets were expecting but did play a hawkish card by also increasing their neutral rate estimate to 2.5% from 2.25%. They acknowledged the growing risks from the current geopolitical situation but made it very clear that they are concerned about inflation and their hike of 50bsp showed that they think that policy needs to be normalized quickly (which some took as a hint that another 50bsp is on the way). The bank didn’t offer any additional clarity on QT but did note that they are not considering active QT of selling bonds just yet. Some conditionality also surfaced, where they explained that any sudden negative shocks to growth or inflation could see them pause hikes once they get closer towards neutral ( Gov Macklem also added that they might need to get rates slightly above neutral in the current cycle). Overall, it was a more hawkish than expected BoC decision, but interesting to note that STIR markets did not price in another 50bsp following the meeting (only a 25bsp) hike. We remain of the opinion that we are close to peak hawkishness for the BoC and are looking for the last push higher in the CAD for opportunities to sell. 2. Intermarket Analysis Considerations Oil’s impressive post-covid recovery has been driven by many factors such as supply & demand , global demand recovery, and more recently geopolitical concerns. At current prices the risk to demand destruction and stagflation is high, which means we remain cautious of oil in the med-term . Reason for caution: Synchronised policy tightening targeting demand, slowing growth, consensus longs, steep backwardation curve, heightened implied volatility . We remain cautious oil , but geopolitics are a key driver and focus for Petro-currencies like the CAD (even though the CAD-Oil correlation has been hit and miss). The upcoming week has a new round of OPEC meetings where the cartel is once again expected to stick to their plans to up output by 430K BPD per month. It will be interesting though to see whether recent lockdowns in China, and possible oil embargo news from the EU impacts the OPEC discussions, if at all. 3. Global Risk Outlook As a high-beta currency, the CAD usually benefits from overall positive risk sentiment as well as environments that benefit pro-cyclical assets. Thus, both short-term (immediate) and med-term (underlying) risk sentiment will always be a key consideration for the CAD. 4. CFTC Analysis Very little change in CFTC data for the CAD. We think markets are setting up a similar path compared to April 2021, Oct 2021 and Jan 2022 where markets were too aggressive to price in CAD upside only to see majority of it unwind later. As always though, timing those shorts will be very important. 5. The Week Ahead The highlight for the week ahead will be the jobs data scheduled for Friday, as well as oil market developments and risk sentiment. On the jobs data, this will be an interesting test for the Canadian labour market which have held up really well after bouncing back from the Omicron hick up. Even though we think the growth outlook for Canada is too optimistic, it might be too early to start seeing those growth concerns trickle into the jobs market as it is usually a late cycle indicator. However, in the event of a miss or a beat it might not change much in terms for the BoC just yet but given the frothy CAD price action a surprise miss could kickstart some overdue downside. Even though the correlation to oil has been rather hit and miss over the past few weeks, it’s always important to keep oil developments in mind, which means next week’s OPEC+ meetings could be an important event for Petro-currencies, especially with the possibility of oil embargo news from the EU as well. Then we also have risk sentiment to watch as the classic risk sensitivity that one would usually expect from high beta currencies like the AUD, CAD and NZD have seemingly returned with a vengeance in the past two trading weeks. That means overall risk sentiment will be an important driver to keep in mind for the CAD as well.
by thunderpips
1
AUD USD - FUNDAMENTAL DRIVERSAUD FUNDAMENTAL BIAS: BULLISH 1. Monetary Policy At their April meeting, the RBA took a slightly more hawkish stance by removing their reference to ‘patience’ in terms of policy tightening. With the bank taking a sanguine view of rising price pressures, the statement did reveal a growing concern for inflation with 10 references to ‘inflation’ in the statement. The bank explained that higher energy and commodity price could see a sizeable increase to inflation forecasts in the May report. In their Financial Stability report the bank urged borrowers to prepare for an increase in rates, which was a further signal from the bank. Even though the meeting showed a bank that is turning the page, the statement also revealed very similar conditionality such as incoming wage and inflation data. Following the meeting, markets have a bit of an overreaction by pricing in a >80% chance of a rate hike at the May meeting but was later pushed back to <30%. Given the importance of wage data, and since that is only release on the 18th of May, the most likely meeting for a first hike is the June meeting. Westpac investment bank agrees with our take with the bank expecting a 15bsp lift off in June, followed by 25bsp hikes in July, August, Oct and Nov. Even though this confirms our fundamental bullish bias, the >14 hikes priced by end 2023 means risks of lower repricing is building. 2. Idiosyncratic Drivers & Intermarket Analysis Apart from the RBA, there are 3 drivers we’re watching for the med-term outlook: Recovery – unlike other nations where growth & inflation is expected to slow, Australia is expected to see recovery, mostly thanks to stimulus in China China – With the PBoC & CCP stepping up monetary and fiscal stimulus, any recovery in China bodes well for Australia (China accounts for 40% of Australian exports). It also means the current virus situation in China posesshort-term downside risks for AUD. The AUKUS defence pact could see retaliation against Aussie goods and is worth keeping on the radar as well Commodities – Iron Ore (31%), Coal (14%) and LNG (10%) is more than 50% of Aussie exports, with rising prices giving the AUD huge support from terms of trade. If commodities remain supported it remains a support for AUD, but of course also means any sizeable corrections would weigh on the AUD, which means geopolitical and China demand developments remain focus points. 3. Global Risk Outlook As a high-beta currency, the AUD usually benefits from overall positive risk sentiment as well as environments that benefit pro-cyclical assets. Thus, both short-term (immediate) and med-term (underlying) risk sentiment will always be a key consideration for the AUD. 4. CFTC Analysis Quite strange positioning change for the AUD with Leverage Funds trimming net-shorts by a chunky amount but Asset Managers showing a whopping build up in net-short contracts. The shift in Asset Manager positioning could explain the reluctance of the AUD to make any real progress despite very positive China developments. USD FUNDAMENTAL BIAS: BULLISH 1. Monetary Policy In March the Fed delivered on a 25bsp hike as expected with Fed’s Bullard the only dissenter voting for a 50bsp hike. The Dot Plot saw a big upgrade from 3 hikes (Dec) to 7 hikes for 2022, with the FFR seen reaching 2.75%- 3.0% in 2023 before falling in 2024. They did however lower their neutral rate from 2.5% to 2.4% which were a negative. Inflation forecasts for 2022 were raised to 4.1% (previous 2.7%) but med-term inflation saw less aggressive upgrades. Even though the overall message and projections were hawkish, the fact that GDP estimates were lowered to 2.8% from 4.0% shows the Fed expects their actions to impact demand and also reflect some of the recent geopolitical uncertainties. The Fed didn’t share new details on QT but noted that the decision to start selling assets will be made at a coming meeting (markets consensus sees a July start as likely) and added that good progress in QT discussions means a May announcement is likely. During the presser the Chair expressed his view that the economy is doing really well and, should be more than able to withstand the incoming rate hikes (a very similar situation like we had in 4Q18). When asked whether 50bsp hikes could be on the table, the chair explained that the FOMC has not made decision to front-load hikes and will keep an eye on incoming inflation data to determine their policy actions going forward, but of course added that every incoming meeting was live. Overall, the Fed was hawkish, but due to very strong pre-positioning and close to peak hawkishness priced for STIR markets the meeting saw a ‘sell-the-fact’ reaction across major asset classes. 2. Global & Domestic Economy As the reserve currency, the USD’s global usage means it’s usually inversely correlated to the global economy and global trade. The USD usually appreciates when growth & inflation slows (disinflation) and depreciates when growth & inflation accelerates (reflation). Thus, current expectations of a cyclical slowdown are a positive driver for the Dollar. Incoming data will be watched in relation to the ‘Fed Put’ as there are many similarities between now and 4Q18, where the Fed were also tightened into a slowdown. If growth data slows and the Fed stays hawkish it’s a positive for the USD, however if the Fed pivots dovish that’ll be a negative driver for the USD. 3. CFTC Analysis Aggregate USD positioning remains close to 1 standard deviation above the mean, and close to prior tops where the USD topped out in previous cycles. That does not change the bullish outlook for the USD in the med-term but means that we would wait for pullbacks before initiating new longs with price at new cycle highs. 4. The Week Ahead The main event for the week ahead will no doubt be the FOMC meeting, but we’ll also get ISM PMIs as well as the April jobs print coming our way. For the FOMC, we think the Fed has set themselves a very high hawkish bar going into the meeting. STIR markets are pricing in 3 back-to-back 50bsp hikes, as well as an earlier start to QT ($95bn p/m). On the language side, recent Fed speak has seen even the doves find their inner hawks by talking up very aggressive policy tightening. So, with all of that as the baseline going into the meeting, it means the Fed would need to hike 75bsp and up the expected QT pace to really surprise markets. With the USD and Yields at cycle highs and equities at cycle lows, that increases the chances of some sell-the-fact reactions. This would be our preferred strategy for the USD going into the week. Then we also have the data where the ISM PMI data will be closely watched for further clues of whether growth is slowing faster than expected. On the jobs side, the impact of the NFP will most likely be dictated by the outcome of the FOMC decision. If the Fed manages to surprise on the hawkish side (seems unlikely) a beat in jobs won’t do much to change that, but a miss can certainly do a lot to stir the pot (even more so if the Fed decision is interpreted as ‘less hawkish’.
by thunderpips
Today’s Notable Sentiment ShiftsAUD – The Australian dollar rallied on Tuesday after the RBA raised rates by more than expected and signalled further moves ahead, leading investors to wager on a faster tightening in the coming months. The central bank announced a 25 basis point rate hike, taking the Cash Rate to 0.35%, versus consensus for a 15 basis point rate hike, which would have taken the Cash Rate to 0.25%. Commenting on the announcement, NAB queried “does it mean that they will do 40 basis points in June, so we are up to 75 basis points? It is certainly possible. It looks like their narrative and the inflation forecasts that they’re hinting at comes across as fairly hawkish.”
by thunderpips
AUDCHF Neutral medium-term, 0.7465 long-term.The AUDCHF pair is currently holding the 1D MA50 (blue trend-line) as Support and in a similar sequence as the June - September 2020 pattern, it may turn sideways on the medium-term and consolidate. However, since the 0.618 Fibonacci retracement level has been broken, most likely it will maintain the bullish trend on the long-term. The next 1D MA200 (orange trend-line) contact, will most likely be the long-term buy signal. Our target is the 1.236 Fibonacci extension around 0.7465. -------------------------------------------------------------------------------------------------------- ** Please support this idea with your likes and comments, it is the best way to keep it relevant and support me. ** --------------------------------------------------------------------------------------------------------
by TradingShot
4