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Canadiandollar

CAD JPY - FUNDAMENTAL DRIVERSCAD FUNDAMENTAL OUTLOOK: NEUTRAL BASELINE The CAD has enjoyed far more upside in the past few weeks than we anticipated. We’ve been cautious on the currency given Canada’s dependency on the US (>70% of exports) where the clear signs of a faster than expected slowdown and possible recession should deteriorate the growth outlook for Canada. Apart from that, the risks to the Canadian housing market can negatively impact consumer spending as interest rates rise higher at aggressive speed. Potentially damaging the wealth effect created by the rapid rise in house prices since covid. However, despite the risks to the economy and the outlook, markets still price in a very favourable growth environment for Canada, also supported by a big push higher in terms of trade due to the rise in commodity prices. Furthermore, despite clear warning signals, the BoC has chosen to ignore the negatives and has stayed surprisingly optimistic and hawkish. We’ve missed most of the move higher in the CAD as our bias has kept us cautious, but the risks are still present and with the currency close to 9-year highs (at the index level) we have very little appetite for chasing it higher from here and will be actively looking for opportunities to trade the CAD lower with the right type of bearish catalyst. POSSIBLE BULLISH SURPRISES As an oil exporter, oil prices are important for CAD. Catalyst that sees further upside Oil (deteriorating supply outlook, ease in demand fears) could trigger bullish CAD reactions. The correlation has been hit and miss in recent weeks though. As a risk sensitive currency, and catalyst that causes big bouts of risk on sentiment could trigger bullish reactions in the CAD. With more market participants noticing cracks in the housing markets, a very solid House Price Index print could ease some of those concerns and provide some upside. Even though a lot of tightening has been priced in for the BoC , a big enough surprise in CPI that triggers further hike expectations could provide some short-term support. POSSIBLE BEARISH SURPRISES As an oil exporter, oil prices are important for CAD. Any catalyst that triggers meaningful downside in oil (deteriorating demand outlook, ease in supply shortage, less supply constraints) could be a negative catalyst for the CAD as well. As a risk sensitive currency, and catalyst that causes big bouts of risk off sentiment could trigger bearish reactions in the CAD. Since a lot of policy tightening has been priced into STIR markets, any negative catalysts that triggers less hawkish BoC expectations (faster deceleration in growth or inflation ) could trigger outsized downside for the CAD. In recent communication, Governor Macklem started to mention some hiccups in housing. A big miss in the House Price index could trigger more speculation of a less hawkish bank and could trigger some downside for the CAD. BIGGER PICTURE The bigger picture outlook for the CAD remains neutral for now. Given the clear risks to the growth outlook due to the slowdown in the US, as well as rising risks to the consumer and the housing market, we remain cautious on the currency, even though it’s move much higher than we anticipated. With a lot of upside priced into the CAD and Canadian yields, our preferred way of trading the CAD would be to look for short-term negative catalysts to trade the CAD lower instead of chasing it higher. JPY FUNDAMENTAL OUTLOOK: BEARISH BASELINE The Yen has seen a lot of depreciation this year driven by very negative fundamentals. Yield differentials has by far had the biggest negative impact . With other major central banks starting aggressive hiking cycles, it has lifted yields quite dramatically, which has seen yields like US10Y push considerably higher than 10-year Japanese yields capped at 0.25% by yield curve control. That means dovish monetary policy remains a key negative driver. Despite inflation starting to push higher in Japan, and despite the lessons from other central banks now struggling with inflation last seen since the 70’s, the bank has once again at their June meeting stayed stubbornly dovish keeping yields capped at 0.25%. At this stage the bank is playing a very dangerous game by allowing the JPY to weaken, further adding to inflationary risks. Their dovish persistence remains a negative for the JPY. Even though the JPY is considered a safe haven, the inflows has been more limited compared to other cycles. The main reason for that is that the bank’s current account surplus (a main reason for safe haven appeal) has deteriorated due to the rise in commodity prices. Japan imports over 90% of their energy commodities , so the continued rise in oil prices has added to the downside and eroded some of the classic safe haven appeal. The BoJ and MoF’s reluctance to intervene to stop the rapid depreciation in the JPY in recent weeks has been noticeable. As long as they just voice their dislike but fail to act, the market will keep testing them and shorting the JPY. POSSIBLE BULLISH SURPRISES Monetary policy is stubbornly dovish. Any catalyst that triggers speculation that the BoJ could drop YCC or hike rates or both (big upside surprises in inflation ) could trigger upside in JPY, which means Friday’s CPI print will be in focus. Catalysts that trigger meaningful corrections in US10Y (less hawkish Fed, faster deceleration in US CPI , faster deceleration in US growth) or meaningful bouts of risk off sentiment could trigger bullish reactions from the JPY. Any catalyst that triggers meaningful downside in key commodities like Oil (deteriorating demand outlook, ease in supply shortage) could trigger bullish JPY reactions as well. Any intervention from the BoJ or MoF to stop JPY depreciation (buying the JPY or giving firm and clear lines in the sand for USDJPY ) could offer decent reprieve for the JPY. POSSIBLE BEARISH SURPRISES With yield differentials playing such a huge role for the JPY, any catalysts that push US10Y higher (more aggressive Fed, further acceleration in US CPI , better-than-expected US growth data) could trigger further bearish price action for the JPY. Any catalyst that creates further upside in oil prices (further supply concerns, geopolitical tensions) poses downside risks for Japan’s current account surplus and could trigger further bearish reactions in the JPY. Further reluctance from the BoJ and MoF to address the concerning depreciation in the JPY is a continued negative driver for the JPY to keep on the radar. BIGGER PICTURE The bigger picture remains bleak for the JPY, especially after the BoJ once again stuck to the same overly dovish script this past week. As long as US10Y gains ground and as long as the BoJ stays unnecessarily dovish and no push back is made against the JPY weakness from the BoJ or MoF, the bias remains lower. Take note that positioning has been stretched (tactically and CFTC) for some time, which means we don’t want to chase the JPY lower from here.
by thunderpips
2
GBP CAD - FUNDAMENTAL DRIVERSGBP FUNDAMENTAL OUTLOOK: WEAK BEARISH BASELINE The overall bleak economic outlook for the UK, with exceptionally high Inflation and rapidly falling growth have been the biggest negative driver for Sterling. With rising price pressures and falling demand, the risks of stagflation has risen substantially, so much so that the BoE have forecasted a possible recession for the UK economy heading into 2023. At their June meeting the bank followed through with their more moderate approach by hiking 25bsp instead of growing calls of a potential 50bsp hike. The BoE is stuck between a rock and a hard place, right now they have to hike rates to try and fight inflation but by doing so they risk further damaging economic growth as a result. Even though the June statement was dovish, it wasn’t materially more dovish compared to their previous meeting. the price action was a clear warning sign that a lot of negatives has been priced in for Sterling in recent weeks so chasing lower in risky. POSSIBLE BULLISH SURPRISES Stagflation fears are very high for the UK, with probabilities of recession growing by the week. With so much bad news priced in, incoming news risk is asymmetrical, meaning positive surprises in growth data (like incoming flash PMIs) could trigger bullish reactions for Sterling. Furthermore, as the UK is facing one of its biggest cost of living squeezes in history, lower-than-expected inflation prints (coming up Wednesday) could counterintuitively be a positive driver for the currency (lower CPI means less stagflation risk). The economy needs help right now, which means any help from the fiscal side will be a positive. Any major fiscal support measures to help consumers (subsidies for energy or tax cuts) could trigger bullish reactions for the Pound. We have lots of BoE speak coming up this week, any overly hawkish comments signalling more aggressive policy than what markets are currently pricing in could trigger bullish GBP reactions. POSSIBLE BEARISH SURPRISES Monetary policy is a double-edged sword for the GBP. Odds that the BoE has limited hikes left has been a negative driver, but so too is risks that inflation forces them to hike even more and further damage GDP. Further stagflation risks from higher gas prices or CPI prints could trigger bearish reactions. Politics is also in focus, where any attempts to oust PM Johnson by changing no-confidence laws could trigger bearish reactions. GBP is usually sensitive to political uncertainty and anything that raises odds of a snap election should be negative. With UK threats of triggering Article 16 and EU threats to terminate the Brexit deal if they do Brexit is in focus again. For now, markets have rightly ignored this as posturing, but any actual escalation can see sharp GBP downside. We have lots of BoE speak coming up this week, any overly dovish comments signalling less aggressive policy than what markets are currently pricing in could trigger bearish GBP reactions. BIGGER PICTURE The fundamental outlook for the GBP remains fairly bleak right now with the economic prospects and risk of stagflation keeping the currency pressured. Anything that exacerbates stagflation fears is expected to weigh on the Pound and anything that alleviates some of that pressure should be positive. Tactically the GBP has been stretched to the downside, so any new shorts do need to be weary of the risk of some mean reversion as we saw after this past week’s BoE meeting. CAD FUNDAMENTAL OUTLOOK: NEUTRAL BASELINE The CAD has enjoyed far more upside in the past few weeks than we anticipated. We’ve been cautious on the currency given Canada’s dependency on the US (>70% of exports) where the clear signs of a faster than expected slowdown and possible recession should deteriorate the growth outlook for Canada. Apart from that, the risks to the Canadian housing market can negatively impact consumer spending as interest rates rise higher at aggressive speed. Potentially damaging the wealth effect created by the rapid rise in house prices since covid. However, despite the risks to the economy and the outlook, markets still price in a very favourable growth environment for Canada, also supported by a big push higher in terms of trade due to the rise in commodity prices. Furthermore, despite clear warning signals, the BoC has chosen to ignore the negatives and has stayed surprisingly optimistic and hawkish. We’ve missed most of the move higher in the CAD as our bias has kept us cautious, but the risks are still present and with the currency close to 9-year highs (at the index level) we have very little appetite for chasing it higher from here and will be actively looking for opportunities to trade the CAD lower with the right type of bearish catalyst. POSSIBLE BULLISH SURPRISES As an oil exporter, oil prices are important for CAD. Catalyst that sees further upside Oil (deteriorating supply outlook, ease in demand fears) could trigger bullish CAD reactions. The correlation has been hit and miss in recent weeks though. As a risk sensitive currency, and catalyst that causes big bouts of risk on sentiment could trigger bullish reactions in the CAD. With more market participants noticing cracks in the housing markets, a very solid House Price Index print could ease some of those concerns and provide some upside. Even though a lot of tightening has been priced in for the BoC , a big enough surprise in CPI that triggers further hike expectations could provide some short-term support. POSSIBLE BEARISH SURPRISES As an oil exporter, oil prices are important for CAD. Any catalyst that triggers meaningful downside in oil (deteriorating demand outlook, ease in supply shortage, less supply constraints) could be a negative catalyst for the CAD as well. As a risk sensitive currency, and catalyst that causes big bouts of risk off sentiment could trigger bearish reactions in the CAD. Since a lot of policy tightening has been priced into STIR markets, any negative catalysts that triggers less hawkish BoC expectations (faster deceleration in growth or inflation ) could trigger outsized downside for the CAD. In recent communication, Governor Macklem started to mention some hiccups in housing. A big miss in the House Price index could trigger more speculation of a less hawkish bank and could trigger some downside for the CAD. BIGGER PICTURE The bigger picture outlook for the CAD remains neutral for now. Given the clear risks to the growth outlook due to the slowdown in the US, as well as rising risks to the consumer and the housing market, we remain cautious on the currency, even though it’s move much higher than we anticipated. With a lot of upside priced into the CAD and Canadian yields, our preferred way of trading the CAD would be to look for short-term negative catalysts to trade the CAD lower instead of chasing it higher.
by thunderpips
1
GBPCAD: Important Decision Ahead! Your Plan: 🇬🇧🇨🇦 GBPCAD is trading in long-term bearish trend. The market is steadily going down within a falling parallel channel. The pair is approaching its resistance at the moment. Depending on the reaction of the price to that, I see 2 potential scenarios: If the price breaks a resistance of the channel (we need a daily candle close above that to confirm a breakout), then a bullish continuation will be expected to 1.6118 structure. If the price breaks a 1.5855 - 1.59 local daily support and closes below that then a bearish continuation will be expected at least to 1.572 level. Wait for a breakout and only then buy/sell the pair. What are your expectations? ❤️If you have any questions, please, ask me in the comment section. Please, support my work with like, thank you!❤️
Short
by VasilyTrader
7
GBPCAD Rejected on the 1D MA50. Action plan ahead.The GBPCAD pair has been trading within a Falling Wedge pattern, which broke last Thursday to the upside. So far this move has been short-lived as the price got rejected on Friday on the 1D MA50 (blue trend-line) and continues today this trend. While the 1D price action has been on Lower Lows (Falling Wedge's bottom), the RSI has been on Higher Lows, indicating a hidden bullish divergence. The very same divergence was last seen in November/ early December 2021 with the pair trading again within a Falling Wedge. After again a 1D MA50 rejection, the price made an pull-back, then upside fake-out above the 1D MA50, which was still rejected on the Resistance of the previous Lower High, before finally making a Lower Low. That Low led to the true technical break-out that extended as high as the 0.618 Fibonacci retracement level and above the 1D MA200 (orange trend-line). Right now the 0.618 Fib is around 1.66500. Our trading plan is to either buy on the previous Lower Low (around 1.5500) or if the 1.62100 Resistance level breaks first, and target the 0.618 Fib, which by the time will be on or above the 1D MA200, fulfilling the fractal analogy. An alternative to take profit on those buys would be when the RSI hits its Resistance level. -------------------------------------------------------------------------------------------------------- Please like, subscribe and share your ideas and charts with the community! --------------------------------------------------------------------------------------------------------
Long
by TradingShot
1
EUR CAD - FUNDAMENTAL DRIVERSEUR FUNDAMENTAL OUTLOOK: NEUTRAL BASELINE The EUR has had a bumpy ride over the past few months. At the onset of the war in Ukraine the EUR tumbled across the board. However, in recent weeks, the persistently high inflation has seen the ECB take a more hawkish turn with the bank confirming at least a 25bsp hike for July and possibility of a 50bsp hikes in September. Despite the hawkish policy shift, the concerns over fragmentation in bond spreads like the BTP\Bund spread as well as fears of growing stagflation risks has seen the EUR struggled to hold onto any real momentum. The ECB did try to comfort spread concerns this past week with an ad-hoc meeting and decided to use PEPP reinvestments as a way to calm fragmentation. This was not enough to calm concerns though as reinvestment would amount to only 20 billion Euros per month. However, the bank’s decision was enough to push the BTP\Bund down 50bsp, and if that trend continues lower should be supportive for the EUR. The bank did back up their attempts at calming fragmentation fears after their ad-hoc meeting by saying they are looking at introducing an additional ‘tool’ as quick as possible, so markets will be focused on any insights into what that might be. POSSIBLE BULLISH SURPRISES Geopolitics remains a focus for the EUR, where any possible de-escalation or cease fire in the Ukraine war would open up a lot of appreciation for the EUR. Stagflation fears are high right now for the Eurozone, with growth expected to slow while inflation stays persistently high. However, a lot of bad news has already been priced in for the EUR, which means any materially better-than-expected growth data could spark some upside for the single currency. ECB Lagarde testifies before the EU’s Committee on Economic and Monetary Affairs this upcoming week. If Lagarde talks up even more aggressive policy or offers enough conviction that they will handle any spikes in BTP\Bund spreads could trigger some bullish reactions in the EUR. POSSIBLE BEARISH SURPRISES Fragmentation risks in spreads will remain a hot topic next week, and if ECB’s Lagarde fails to calm market’s fears or if she walks back on some of the hawkish takes for rates following their recent meeting (to help spreads) it could trigger bearish reactions in the EUR. Just like the EUR’s weighting in the DXY is an upside risk for the currency, the weighting is also a potential downside risk. Any potential catalysts that spark short-term upside in the Dollar (upside in yields, risk off sentiment, very hawkish rhetoric from Fed officials) can trigger upside in the USD and weigh on EUR. As growth is a concern in the Eurozone the incoming flash PMIs will be watched closely, and any bigger-than-expected contraction in PMIs could trigger bearish reactions in the EUR. BIGGER PICTURE The fundamental outlook for the EUR remains neutral right now as we have positive and negative forces impacting the currency. On the negative side we have geopolitics, stagflation and spread fragmentation acting as negative drivers. But we also have hawkish ECB policy and better-than-expected recent growth data as supportive drivers. Thus, the best course of action with the EUR right now is taking short-term plays which are driven by clear short-term bearish or bullish catalysts. CAD FUNDAMENTAL OUTLOOK: NEUTRAL BASELINE The CAD has enjoyed far more upside in the past few weeks than we anticipated. We’ve been cautious on the currency given Canada’s dependency on the US (>70% of exports) where the clear signs of a faster than expected slowdown and possible recession should deteriorate the growth outlook for Canada. Apart from that, the risks to the Canadian housing market can negatively impact consumer spending as interest rates rise higher at aggressive speed. Potentially damaging the wealth effect created by the rapid rise in house prices since covid. However, despite the risks to the economy and the outlook, markets still price in a very favourable growth environment for Canada, also supported by a big push higher in terms of trade due to the rise in commodity prices. Furthermore, despite clear warning signals, the BoC has chosen to ignore the negatives and has stayed surprisingly optimistic and hawkish. We’ve missed most of the move higher in the CAD as our bias has kept us cautious, but the risks are still present and with the currency close to 9-year highs (at the index level) we have very little appetite for chasing it higher from here and will be actively looking for opportunities to trade the CAD lower with the right type of bearish catalyst. POSSIBLE BULLISH SURPRISES As an oil exporter, oil prices are important for CAD. Catalyst that sees further upside Oil (deteriorating supply outlook, ease in demand fears) could trigger bullish CAD reactions. The correlation has been hit and miss in recent weeks though. As a risk sensitive currency, and catalyst that causes big bouts of risk on sentiment could trigger bullish reactions in the CAD. With more market participants noticing cracks in the housing markets, a very solid House Price Index print could ease some of those concerns and provide some upside. Even though a lot of tightening has been priced in for the BoC , a big enough surprise in CPI that triggers further hike expectations could provide some short-term support. POSSIBLE BEARISH SURPRISES As an oil exporter, oil prices are important for CAD. Any catalyst that triggers meaningful downside in oil (deteriorating demand outlook, ease in supply shortage, less supply constraints) could be a negative catalyst for the CAD as well. As a risk sensitive currency, and catalyst that causes big bouts of risk off sentiment could trigger bearish reactions in the CAD. Since a lot of policy tightening has been priced into STIR markets, any negative catalysts that triggers less hawkish BoC expectations (faster deceleration in growth or inflation ) could trigger outsized downside for the CAD. In recent communication, Governor Macklem started to mention some hiccups in housing. A big miss in the House Price index could trigger more speculation of a less hawkish bank and could trigger some downside for the CAD. BIGGER PICTURE The bigger picture outlook for the CAD remains neutral for now. Given the clear risks to the growth outlook due to the slowdown in the US, as well as rising risks to the consumer and the housing market, we remain cautious on the currency, even though it’s move much higher than we anticipated. With a lot of upside priced into the CAD and Canadian yields, our preferred way of trading the CAD would be to look for short-term negative catalysts to trade the CAD lower instead of chasing it higher.
by thunderpips
AUD CAD - FUNDAMENTAL DRIVERSAUD FUNDAMENTAL OUTLOOK: WEAK BULLISH BASELINE Despite a decent recovery from the start of the year, the AUD has struggled in the midst underlying negative risk sentiment, but the bigger short-term negative driver has been China’s covid struggles. China’s economy is always a key focus point for the AUD. While all major economies are expected to slow this year, China (which has been slowing for the past 18 months) is expected to recover (monetary and fiscal policy is at a big divergence between China and the rest of the world). This expected recovery in China has been a key positive driver for the AUD. As long as China’s recovery expectations remain alive, that should continue to support the Australian economy as it means further support for key commodity exports like Iron Ore, Coal and LNG. There was some news out this past week that China is looking to set up a centralized iron ore buyer to counter Australia’s dominance. Iron Ore has not taken this news well and will be an important one to watch as Iron Ore is Australia’s top export and 80% of it goes to China. The RBA finally woken up from their slumber and starting their hiking cycle fairly aggressively is also supportive for the AUD. The short-term problem to the current bullish bias for the AUD is the continued covid dilemma facing China right now. As long as the covid situation stays bleak, and China continues to lock down parts of the country due to their draconian covid-zero policy, the AUD might struggle to take advantage of the other positive drivers and makes it more sensitive to underlying risk. POSSIBLE BULLISH SURPRISES Positive Covid developments in China (easing restrictions, more fiscal or monetary stimulus, or letting go of the covidzero policy) could trigger bullish reactions in the AUD. As a risk sensitive currency, and catalyst that causes big bouts of risk on sentiment could trigger bullish reactions in the AUD. With the RBA just getting started with their hiking cycle, there is scope for them to turn more aggressive, and any catalyst that triggers higher hike expectations (RBA speak, inflation and wage data) could trigger a bullish response from the AUD. Any catalyst that triggers further upside in Australia’s key commodity exports (China stimulus, lifting covid restrictions, new infrastructure projects in China, higher inflation fears) should be supportive for the AUD. POSSIBLE BEARISH SURPRISES Negative Covid developments in China (increasing restrictions or adding additional ones) could trigger bearish reactions in the AUD. As a risk sensitive currency, and catalyst that causes big bouts of risk offsentiment could trigger bearish reactions in the AUD. Any catalyst that triggers downside in Australia’s key commodity exports (additional China restrictions, demand destruction fears, and additional news on recent centralized iron ore buyers) could be negative for the AUD. With the RBA just recently shifting policy and hitting the ground running on hikes, there is more room for them to get more aggressive, but of course any RBA speak or info in upcoming meetings that talks down aggressive hikes could still be a short-term negative for the AUD. BIGGER PICTURE The bigger picture outlook for the AUD remains positive for now, but that is largely dependent on what happens to China. The short-term covid issues have pushed back but not removed recovery expectations, but until the covid fog clears and the Chinese economy shows recovery signs, the AUD might struggle to maintain upside short-term momentum. CAD FUNDAMENTAL OUTLOOK: NEUTRAL BASELINE The CAD has enjoyed far more upside in the past few weeks than we anticipated. We’ve been cautious on the currency given Canada’s dependency on the US (>70% of exports) where the clear signs of a faster than expected slowdown and possible recession should deteriorate the growth outlook for Canada. Apart from that, the risks to the Canadian housing market can negatively impact consumer spending as interest rates rise higher at aggressive speed. Potentially damaging the wealth effect created by the rapid rise in house prices since covid. However, despite the risks to the economy and the outlook, markets still price in a very favourable growth environment for Canada, also supported by a big push higher in terms of trade due to the rise in commodity prices. Furthermore, despite clear warning signals, the BoC has chosen to ignore the negatives and has stayed surprisingly optimistic and hawkish. We’ve missed most of the move higher in the CAD as our bias has kept us cautious, but the risks are still present and with the currency close to 9-year highs (at the index level) we have very little appetite for chasing it higher from here and will be actively looking for opportunities to trade the CAD lower with the right type of bearish catalyst. POSSIBLE BULLISH SURPRISES As an oil exporter, oil prices are important for CAD. Catalyst that sees further upside Oil (deteriorating supply outlook, ease in demand fears) could trigger bullish CAD reactions. The correlation has been hit and miss in recent weeks though. As a risk sensitive currency, and catalyst that causes big bouts of risk on sentiment could trigger bullish reactions in the CAD. With more market participants noticing cracks in the housing markets, a very solid House Price Index print could ease some of those concerns and provide some upside. Even though a lot of tightening has been priced in for the BoC, a big enough surprise in CPI that triggers further hike expectations could provide some short-term support. POSSIBLE BEARISH SURPRISES As an oil exporter, oil prices are important for CAD. Any catalyst that triggers meaningful downside in oil (deteriorating demand outlook, ease in supply shortage, less supply constraints) could be a negative catalyst for the CAD as well. As a risk sensitive currency, and catalyst that causes big bouts of risk off sentiment could trigger bearish reactions in the CAD. Since a lot of policy tightening has been priced into STIR markets, any negative catalysts that triggers less hawkish BoC expectations (faster deceleration in growth or inflation) could trigger outsized downside for the CAD. In recent communication, Governor Macklem started to mention some hiccups in housing. A big miss in the House Price index could trigger more speculation of a less hawkish bank and could trigger some downside for the CAD. BIGGER PICTURE The bigger picture outlook for the CAD remains neutral for now. Given the clear risks to the growth outlook due to the slowdown in the US, as well as rising risks to the consumer and the housing market, we remain cautious on the currency, even though it’s move much higher than we anticipated. With a lot of upside priced into the CAD and Canadian yields, our preferred way of trading the CAD would be to look for short-term negative catalysts to trade the CAD lower instead of chasing it higher.
by thunderpips
3
NZDCAD Buy upon a pull-back, target the 1D MA200The NZDCAD pair has been trading on a Channel Down within a Bearish Megaphone pattern. Right now the price is testing the 1D MA50 (blue trend-line) as a Resistance and is struggling, trading below it since April 13. Both the 1D RSI and the candle action resembles the sequence at the start of the Megaphone, which after one last pull-back upon rejection on the 1D MA50, it rebounded to the Lower Highs. As a result, we will be waiting for one last opportunity to buy near the bottom of the Channel and target its top or the 1D MA200 (orange trend-line) should it come first. -------------------------------------------------------------------------------------------------------- ** Please support this idea with your likes and comments, it is the best way to keep it relevant and support me. ** --------------------------------------------------------------------------------------------------------
by TradingShot
6
CAD JPY - FUNDAMENTAL DRIVERSCAD FUNDAMENTAL OUTLOOK: NEUTRAL The CAD has enjoyed far more upside in the past few weeks than we anticipated. We’ve been cautious on the currency given Canada’s dependency on the US (>70% of exports) where the clear signs of a faster than expected slowdown in the US should have deteriorated the growth outlook for Canada. Apart from that, the risks to the Canadian housing market risks to negatively impact consumer spending as interest rates rise higher at aggressive speed, potentially damaging the wealth effect created by the rapid rise in house prices since covid. However, despite the risks to economy and the risks to the outlook, markets still price in a very favourable growth environment for Canada, also supported by a big push higher in terms of trade due to the rise in commodity prices. Furthermore, despite clear warning signals, the BoC has chosen to ignore the negatives and has stayed surprisingly positive and hawkish. We’ve miss most of the move higher in the currency as we’ve been cautious in our bias, but the risks are still present and with the currency at 9-year highs (at the index level) we have very little appetite for chasing it higher from here. POSSIBLE HAWKISH SURPRISES As an oil exporter, oil prices are important for CAD. Catalyst that sees further upside Oil (deteriorating supply outlook, ease in demand fears) could trigger bullish CAD reactions. The correlation has been hit and miss in recent weeks though. As a risk sensitive currency, and catalyst that causes big bouts of risk on sentiment could trigger bullish reactions in the CAD. POSSIBLE DOVISH SURPRISES As an oil exporter, oil prices are important for CAD. Catalyst that sees further upside Oil (deteriorating supply outlook, ease in demand fears) could trigger bullish CAD reactions. The correlation has been hit and miss in recent weeks though. As a risk sensitive currency, and catalyst that causes big bouts of risk off sentiment could trigger bearish reactions in the CAD. Since a lot of policy tightening has been priced into STIR markets, any negative catalysts that triggers less hawkish BoC expectations (faster deceleration in growth or inflation ) could trigger outsized downside for the CAD. BIGGER PICTURE The bigger picture outlook for the CAD remains neutral for now. Given the clear risks to the growth outlook due to the slowdown in the US, as well as rising risks to the consumer and the housing market, we remain cautious on the currency, even though it’s move much higher than we anticipated. With a lot of upside priced into the CAD and Canadian yields, our preferred way of trading the CAD would be to look for short-term negative catalysts to trade the CAD lower instead of chasing it higher. JPY FUNDAMENTAL OUTLOOK: BEARISH The Yen has fallen off the proverbial cliff over the past few months, driven by very negative fundamentals. Yield differentials has by far had the biggest negative impact . With other major central banks starting aggressive hiking cycles, it has lifted yields quite dramatically, compared to the BoJ which has stubbornly kept their yields capped through continued Yield Curve Control. The inverse correlation to US10Y is usually important but has taken centre stage in recent months as the biggest driver of the JPY. Even though the JPY is considered a safe haven, the inflows has been more limited compared to other cycles. The main reason for that is that the bank’s current account surplus (a main reason for safe haven appeal) has deteriorated and expected to continue to deteriorate due to the rise in commodity prices. Japan imports over 90% of their energy commodities , so the continued rise in oil prices has added to the downside and also eroded some of the classic safe haven appeal. Monetary policy is the other negative driver. Despite inflation starting to push higher in Japan, and despite the lessons from other central banks now struggling with inflation last seen since the 70’s, and despite the market’s relentless attempts at testing the JGB 10-year yield cap at 0.25%, the bank has stayed stubbornly dovish. At this stage the bank is playing a very dangerous game by allowing the JPY to weaken, further adding to inflationary risks. Their dovish persistence remains a negative for the JPY. The BoJ and MoF’s reluctance to intervene to stop the rapid and violent depreciation in the JPY has been noticeable. As long as they just voice their dislike but fail to act and actually do something, the market will keep testing them and shorting the JPY. POSSIBLE HAWKISH SURPRISES Any catalysts that trigger meaningful downside in US10Y (less hawkish Fed, faster deceleration in US CPI , faster deceleration in US growth) or triggers meaningful bouts of risk off sentiment could trigger bullish reactions from the JPY. Any catalyst that triggers meaningful downside in key commodities like Oil (deteriorating demand outlook, ease in supply shortage) could trigger bullish JPY reactions. Monetary policy is stubbornly dovish. Any catalyst that triggers speculation that the BoJ would drop YCC or hike rates or both (big upside surprises in inflation ) could trigger a big recovery in the JPY, especially with stretched short positioning. Any intervention from the BoJ or MoF to stop JPY depreciation (buying the JPY or giving firm and clear lines in the sand for USDJPY ) could offer decent reprieve for the JPY. POSSIBLE DOVISH SURPRISES With yield differentials playing such a huge role for the JPY, any catalysts that push US10Y higher (more aggressive Fed, further acceleration in US CPI , better-than-expected US growth data) could trigger further bearish price action for the JPY. Any catalyst that creates further upside in oil prices (further supply concerns, geopolitical tensions) poses downside risks for Japan’s current account surplus and could trigger further bearish reactions in the JPY. Further reluctance from the BoJ and MoF to address the concerning depreciation in the JPY is a continued negative driver for the JPY to keep on the radar. BIGGER PICTURE The bigger picture looks bleak for the JPY right now, and as long as US10Y gain ground and as long as the BoJ stays unnecessarily dovish and as long as the BoJ and MoF does nothing to address JPY weakness, the bias remains lower. However, given stretched tactical and CFTC positioning, and given growth concerns in the US, we don’t want to chase the JPY lower from here.
by thunderpips
1
AUD CAD - FUNDAMENTAL DRIVERSAUD FUNDAMENTAL OUTLOOK: WEAK BULLISH After a tumultuous ride in 2021, the AUD has seen a decent recovery so far this year. The geopolitical tensions in Europe gave the commodity dependent currency a boost as commodity prices surged and seeing record highs for Australian terms of trade. Apart from that, China’s economy has been a key focus point for the AUD. With China having a very different cyclical outlook compared to other major economies, that has been a key positive driver for the AUD. While all major economies are expected to slow this year, China (which has been slowing for the past 18 months) is expected to recover (monetary and fiscal policy is at a big divergence between China and the rest of the world). Thus, as long as China’s recovery expectations remain alive, that should continue to support the Australian economy as it means further support for key commodity exports like Iron Ore, Coal and LNG. The fact that the RBA has finally woken up from their slumber and started their hiking cycle fairly aggressively is also supportive for the AUD. However, the short-term problem to the current bullish bias and something that has been weighing on the currency is the continued covid dilemma facing China right now. As long as the covid situation stays bleak, and China continues to lock down parts of the country due to their draconian covidzero policy, the AUD might struggle to take advantage of the other positive drivers and also makes it more sensitive to the overall underlying negative risk sentiment in risk assets. POSSIBLE HAWKISH SURPRISES Positive Covid developments in China (easing restrictions, more fiscal or monetary stimulus, or letting go of the covidzero policy) could trigger bullish reactions in the AUD. As a risk sensitive currency, and catalyst that causes big bouts of risk on sentiment could trigger bullish reactions in the AUD. With the RBA just getting started with their hiking cycle, there is scope for them to turn more aggressive, and any catalyst that triggers higher hike expectations (inflation and wage data) could trigger a bullish response from the AUD. Any catalyst that triggers further upside in Australia’s key commodity exports (China stimulus, lifting covid restrictions, new infrastructure projects in China, higher inflation fears) should be supportive for the AUD. POSSIBLE DOVISH SURPRISES Negative Covid developments in China (easing restrictions, more fiscal or monetary stimulus, or letting go of the covidzero policy) could trigger bullish reactions in the AUD. As a risk sensitive currency, and catalyst that causes big bouts of risk offsentiment could trigger bearish reactions in the AUD. Any catalyst that triggers downside in Australia’s key commodity exports (additional China restrictions, demand destruction fears) should be negative for the AUD. BIGGER PICTURE The bigger picture outlook for the AUD remains positive for now, but that is largely dependent on what happens to China. The short-term covid issues have pushed back but not removed recovery expectations, but until the covid fog clears and the Chinese economy struggles, the AUD will struggle to maintain upside momentum in the short-term, despite positive catalysts. CAD FUNDAMENTAL OUTLOOK: NEUTRAL The CAD has enjoyed far more upside in the past few weeks than we anticipated. We’ve been cautious on the currency given Canada’s dependency on the US (>70% of exports) where the clear signs of a faster than expected slowdown in the US should have deteriorated the growth outlook for Canada. Apart from that, the risks to the Canadian housing market risks to negatively impact consumer spending as interest rates rise higher at aggressive speed, potentially damaging the wealth effect created by the rapid rise in house prices since covid. However, despite the risks to economy and the risks to the outlook, markets still price in a very favourable growth environment for Canada, also supported by a big push higher in terms of trade due to the rise in commodity prices. Furthermore, despite clear warning signals, the BoC has chosen to ignore the negatives and has stayed surprisingly positive and hawkish. We’ve miss most of the move higher in the currency as we’ve been cautious in our bias, but the risks are still present and with the currency at 9-year highs (at the index level) we have very little appetite for chasing it higher from here. POSSIBLE HAWKISH SURPRISES As an oil exporter, oil prices are important for CAD. Catalyst that sees further upside Oil (deteriorating supply outlook, ease in demand fears) could trigger bullish CAD reactions. The correlation has been hit and miss in recent weeks though. As a risk sensitive currency, and catalyst that causes big bouts of risk on sentiment could trigger bullish reactions in the CAD. POSSIBLE DOVISH SURPRISES As an oil exporter, oil prices are important for CAD. Catalyst that sees further upside Oil (deteriorating supply outlook, ease in demand fears) could trigger bullish CAD reactions. The correlation has been hit and miss in recent weeks though. As a risk sensitive currency, and catalyst that causes big bouts of risk off sentiment could trigger bearish reactions in the CAD. Since a lot of policy tightening has been priced into STIR markets, any negative catalysts that triggers less hawkish BoC expectations (faster deceleration in growth or inflation ) could trigger outsized downside for the CAD. BIGGER PICTURE The bigger picture outlook for the CAD remains neutral for now. Given the clear risks to the growth outlook due to the slowdown in the US, as well as rising risks to the consumer and the housing market, we remain cautious on the currency, even though it’s move much higher than we anticipated. With a lot of upside priced into the CAD and Canadian yields, our preferred way of trading the CAD would be to look for short-term negative catalysts to trade the CAD lower instead of chasing it higher.
by thunderpips
2
EUR CAD - FUNDAMENTAL DRIVERSEUR FUNDAMENTAL OUTLOOK: NEUTRAL The EUR has had a bumpy ride over the past few months. At the onset of the war in Ukraine the EUR tumbled across the board. However, in recent weeks, the persistently high inflation has seen the Governing Council take a more hawkish turn. At their June meeting the bank confirmed that a 25bsp hike for July, but also kept the door open for 50bsp hikes from September onward. Despite this hawkish tilt from the bank, and despite bund yields pushing up into fresh cycle highs, the EUR struggled to gain any real momentum after the meeting. For some this was a sign that the market had already priced in too much hawkishness for the ECB. This seems a bit unlikely though as the bank faces more energy price risk compared to the US and is at a greater risk of needing to tilt even more aggressive in months ahead. One reason for the downside is due to the market’s worries about fragmentation with spreads like the BTP/Bund spread jolting higher as higher interest rates increases the default risk of highly indebted countries like Italy. Even though hawkish policy opens up room for upside, the spread fragmentation and USD strength means there is two-way drivers for the EUR. POSSIBLE HAWKISH SURPRISES The customary post-ECB sources revealed some GC hawkish were still not satisfied despite a hawkish tilt. Any ECB comments that signal even more aggressive policy could trigger bullish reactions for the EUR. Geopolitics remains a focus for the EUR, where any possible de-escalation or cease fire in the Ukraine war would open up a lot of appreciation for the EUR. Stagflation fears are high right now for the Eurozone, with growth expected to slow while inflation stays persistently high. However, a lot of bad news has already been priced in for the EUR, which means any materially better-than-expected growth data could spark some upside for the single currency. The EUR has a 57% weighting in the DXY, which means any big fluctuations in the USD can impact the EUR quite a bit. Thus, this week’s upcoming FOMC could offer some reprieve for the EUR if the Fed is not able to surprise on the hawkish side. POSSIBLE DOVISH SURPRISES One caveat with incoming ECB comments is that hawkish comments can also counterintuitively pose downside risk. With markets quite concerned about spread fragmentation, hawkish comments that trigger further upside in BTP/Bund spreads could trigger bearish reactions in the EUR. Just like the EUR’s weighting in the DXY is an upside risk for the currency, the weighting is also a potential downside risk. With US headline CPI reaching 8.6% there is a risk that the Fed surprises markets with a 75bsp hike at the upcoming meeting. Any outsized upside in the USD as a result of that is expected to weigh on the EUR, potentially more than other majors. BIGGER PICTURE The fundamental outlook for the EUR remains neutral right now as we have positive and negative forces impacting the currency, we have geopolitics, stagflation and spread fragmentation being negative inputs and we have more hawkish ECB policy and less bad than expected recent growth data as supportive drivers. Thus, the best course of action with the EUR right now is taking short-term plays which are driven by clear short-term bearish of bullish catalysts. CAD FUNDAMENTAL OUTLOOK: NEUTRAL The CAD has enjoyed far more upside in the past few weeks than we anticipated. We’ve been cautious on the currency given Canada’s dependency on the US (>70% of exports) where the clear signs of a faster than expected slowdown in the US should have deteriorated the growth outlook for Canada. Apart from that, the risks to the Canadian housing market risks to negatively impact consumer spending as interest rates rise higher at aggressive speed, potentially damaging the wealth effect created by the rapid rise in house prices since covid. However, despite the risks to economy and the risks to the outlook, markets still price in a very favourable growth environment for Canada, also supported by a big push higher in terms of trade due to the rise in commodity prices. Furthermore, despite clear warning signals, the BoC has chosen to ignore the negatives and has stayed surprisingly positive and hawkish. We’ve miss most of the move higher in the currency as we’ve been cautious in our bias, but the risks are still present and with the currency at 9-year highs (at the index level) we have very little appetite for chasing it higher from here. POSSIBLE HAWKISH SURPRISES As an oil exporter, oil prices are important for CAD. Catalyst that sees further upside Oil (deteriorating supply outlook, ease in demand fears) could trigger bullish CAD reactions. The correlation has been hit and miss in recent weeks though. As a risk sensitive currency, and catalyst that causes big bouts of risk on sentiment could trigger bullish reactions in the CAD. POSSIBLE DOVISH SURPRISES As an oil exporter, oil prices are important for CAD. Catalyst that sees further upside Oil (deteriorating supply outlook, ease in demand fears) could trigger bullish CAD reactions. The correlation has been hit and miss in recent weeks though. As a risk sensitive currency, and catalyst that causes big bouts of risk off sentiment could trigger bearish reactions in the CAD. Since a lot of policy tightening has been priced into STIR markets, any negative catalysts that triggers less hawkish BoC expectations (faster deceleration in growth or inflation) could trigger outsized downside for the CAD. BIGGER PICTURE The bigger picture outlook for the CAD remains neutral for now. Given the clear risks to the growth outlook due to the slowdown in the US, as well as rising risks to the consumer and the housing market, we remain cautious on the currency, even though it’s move much higher than we anticipated. With a lot of upside priced into the CAD and Canadian yields, our preferred way of trading the CAD would be to look for short-term negative catalysts to trade the CAD lower instead of chasing it higher.
by thunderpips