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Shortaussie

Aussie, Aussie, Aussie. Oi, Oi, Oh? As the Aussie MACD turns bearish, one must consider maintaining a short bias from here. The diverging monetary policy direction (with the Fed) put the RBA in a bit of a bind, hike rates and you destabilise the already shaky property bubble, don't hike and the currency should continue to sell off as the relative value, implied by the interest rate differential narrowing; is realised... And finally, if you're forced to cut to prop up housing, sayonara purchasing power.
Short
by PrometheusCHT
SELL AUDUSD - JUNE RBA MINUTES HIGHLIGHTS - DOVISH/ CUT POSSIBLEOn the margin RBA remained in line with previous meetings, adding little but still keeping it on the dovish side imo. Once again, as in previous minutes (and from several other central banks) RBA continued to communicate the necessity of "watching key data" to drive future policy decisions. Interestingly though, they also mentioned the negative impact of a strong AUD which in turn supports RBA doves out there as a cut is the remedy to stop a deflationairy currency in its tracks. Further, RBA notably were under no illusions regarding their inflation situation stating " inflation set to stay low for some time" - another encouraging stimulus for doves given inflation's important position/ weight for setting future policy. As per the attached post, i remain dovish/ bearsh on aussie$, and i continue to expect a cut to 1.50% (25bps) this year given i expect their inflation to remain stagnant. Clear targets are 0.73 when probability of a cut is higher - though i would enter shorts regardless if AUD$ could find its way to its 12m highs at 0.78, though unlikely. I like USD strength in the medium term too hence supporting the short Aussie dollar view RBA Minutes Highlights: RBA MINUTES: BOARD TO WATCH KEY DATA, WILL MAKE ADJUSTMENT TO RATES IF NEEDED; REVIEW OF FORECASTS IN AUG WILL HELP STEER POLICY - Inflation set to stay low for some time, employment mixed, retail sales look set to pick up - Stronger AUD would complicate economic rebalancing - Economic transition is now well advanced
Short
by QuantumLogicTrading
3
DXY/ USD: FOMC MINUTES & FED TARULLO/ DUDLEY SPEECH HIGHLIGHTSJune FOMC Minutes Highlights: - FOMC Minutes: Fed Officials Divided on Rate Path Amid Uncertain Economic Outlook -FOMC Minutes: Members Said Prudent to Wait for More Labor Market Data, Brexit Vote Before Raising Rates -FOMC Minutes: Prior to Brexit Vote, Staff Saw Uncertainty Holding Down Investment in U.K. -FOMC Minutes: Members Judged It Appropriate to Continue to Leave Policy Options Open, Maintain Flexibility -FOMC Minutes: Staff Saw 2H GDP 'a Little Slower' Than in Previous Forecast -FOMC Minutes: Most Officials Said UK Referendum on EU Could Generate Financial Turbulence -FOMC Minutes: Staff Saw Risks to Forecast from Developments Abroad 'Skewed to the Downside' -FOMC Minutes: Officials in June Said Pace of Labor Market Gains Slowed, Economic Growth Picked Up -FOMC Minutes: Most Participants Saw Risks to Economic Projections as 'Broadly Balanced' -FOMC Minutes: Many Participants saw Risk to GDP, Inflation Forecasts 'Weighted to the Downside' -FOMC Minutes: Officials Said Job Gains Diminished in Intermeeting Period Although Unemployment Rate Fell -FOMC Minutes: Some Participants Saw Risks to Unemployment Rate Forecast 'Tilted to the Upside' -FOMC Minutes: Soft Readings on Business Investment Behind Lowered Participant GDP Forecasts -FOMC Minutes: Most Members Indicated Recent Slowdown in Payroll Gains Increased Uncertainty About Labor -Market -FOMC Minutes Showed Officials Divided on Reasons For Weaker May Payrolls Growth -FOMC Minutes: However Many Participants Said Underlying Pace of Job Gains Slowed From Recent Months -FOMC Minutes: Many Participants Said Neutral Rate of Interest Likely to Be Lower Than Estimated Earlier -FOMC Minutes: Most Officials Expected to See 'Continued Progress' Toward 2% Inflation Target -FOMC Minutes: Some Participants Said Sluggish Business Investment Could Portend Slowdown Fed Tarullo & Dudley Speech highlights: NY Fed Dudley: Current Treasury Yield A Concern Tarullo: Global Financial System 'Reasonably Well Prepared' For Brexit Shock Tarullo: Have to Watch to See How Brexit Macroeconomic Developments Play Out Tarullo: Brexit Response in U.S. Gone About As We Expected Tarullo: There Won't Be A Moment Where We Say 'Brexit Is Done' Tarullo: Right Level of Interest Rate Depends on Factors Affecting Economy Tarullo: 'This Is Not An Economy That's Running Hot' Tarullo: Fed Probably Not Providing As Much Accommodation As People Think Tarullo: Were Economy to Pick Up Rapidly, Fed Has Tools to Respond Appropriately Tarullo: Better For Fed to Wait For More Evidence of Rising Inflation Tarullo: Want to Be More Convinced Underlying Inflation Closer to 2% Tarullo: Low Rates Can Create Financial Instability, But That May Not Justify Raising Rates Tarullo: No 'Immediate Concerns' About Financial Instability, Asset Bubbles Tarullo: Still Has Concerns About Liquidity Broadly, Especially Outside Banks Tarullo: Cutting Capital Buffer Could Make Loans More Available 'If There Is Demand' Tarullo: Policy Easing by Other Central Banks Can Have Disinflationary Effect on U.S. Economy Tarullo: Wants More Evidence of Inflation Before Raising Interest Rates
TVC:DXY
by QuantumLogicTrading
3
SHORT AUDUSD TP 800PIPS: BREXIT, RBA, FED & USDJPY HEDGEShort AUDUSD is in my top 3 FX Trades for several reasons: 1. AUD is considered a riskier G10 currency cross, so AUD trades weaker in risk-off markets, or when equities/ SPX trade lower (you can see the high correlation with SPX at the bottom of the graph). - With Brexit concurring last week, global risk has increased, this is especially the case for AUD due to commonwealth connections. Therefore AUD is likely to come under pressure in the future as risk-off sentiment continues to dominate, as the US Election nears, Global growth worries continue (Japan, Europe, China) and Brexit/ uncertainty about further Euro Area exits continues to intensify - we can see Gold and US Treasuries continue to gain supporting the risk-off view and thus supporting selling AUD. Also, risk-off encourages $ buying as a safe haven deposit on the Brexit backdrop. - Further, going into earnings season next week, historically risk currencies (AUD) perform poorly as investors seek safer assets to hedge against earning surprises, thus this helps AUD selling and USD buying. Plus, most investors will want to hold some $ cash in order to fulfil their earnings based equity trading, so this also helps the short AU trade by increasing $ demand relative to AUD. 2. The RBA Meeting on Tuesday the 5th is likely to be dovish, as 1) Brexit risks are weighed in on again, after supportive/ dovish statements from RBA members following the Brexit decision and 2) AUD Macro Environment has performed poorly since the last meeting and the May Rate cut e.g. Retail sales 0.2% vs 0.3%, Unemployment flat at 5.7%. - However, I dont expect an RBA rate cut, as they cut last just 2 months ago in May by 25bps to 1.75% and their GDP print was firm at 3.1% v 2.8% yoy and 1.1% v 0.8% with Unemployment also stable (yet to see inflation), so I expect them to provide reassurance to markets with a strong dovish tone, with possible hints to a August rate cut - citing Brexit and looking forward to their end of July Inflation print as a gauge for further rate cuts. Nonetheless the dovish rhetoric should be strong enough to put pressure on AUD and tip the scales south supporting the AU short. 3. From a USD demand point of view, last week we saw USD lose 160pips against the AUD as Brexit Uncertainty negatively hit the Feds Rate hike cycle expectancy, flattening the curve in the front end which ruled out any hikes until Dec or 2017, fewer hikes = less USD strength. - However, since the beginning of the week where brexit risks ruled out hikes in the near term, the end of the week managed to turn rate hike expectations around as Brexit likelihood decreased/ shifted into 2017. This helped the Fed fund futures curve recover/ steepen somewhat in the front end, with the implied probability of a hike increasing from 0% to 5.9% for both September and November, whilst the probability of a hike in December also steepened significantly from 13.3% to 22.3% with the probability of a 50bps hike being priced for the first time at 1.1%. This trend of Fed Hike recovery is likely to continue as long as Brexit risks remain subdued, so we can expect USD to begin to price stronger in the coming days/ weeks. 4. Technically, AUDUSD trades 100pips away from a key handle at 0.76xx which is a double top and may provide the ideal short area. Further, higher than that at 0.78xx is the 12 month high which is also potentially a great level to get short from as a double top 5. Volatility - 1wk, 2wk and 1m (-1.52, -1.57, -1.60) AUDUSD Risk Reversals all trade with a downside bias indicating put/ downside demand is higher than upside, so the option market net expects AUDUSD to come down over the above tenors. - Out through the 5th, 6th, and 7th (post RBA) we see large notional OTM put options and open interest at 0.7365, 0.7440 & 0.7445 which supports the view that the RBA will be dovish and that AUDUSD is likely to hairpin around the 0.76xx double top level.
Short
by QuantumLogicTrading
4