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fx:macro Summary Changes 2023_08_05

Created 9 months agoDiff never expires

50 removals

140 lines

52 additions

138 lines

"29.07.23

"05.08.23

***** MACRO *****

>>BULL<<

▶︎ Positive growth and falling inflation in the US: goldilocks for stocks

▶︎ Equity volatility is still low, FX vol has picked up a bit but so far nothing to worry

▶︎ Equity volatility is still low, FX vol has dropped too

▶︎ Credit spreads are contracting

▶︎ Credit spreads are tight

▶︎ Sector rotation and breadth confirm current action in stocks

▶︎ CL has been going up for a few weeks now

▶︎ The Chinese OECD CLI has turned around and is outperforming

▶︎ The global CESI has picked up a bit

▶︎ TD Ameritrade IMX is moving up and is far from extreme

>>BEAR<<

▶︎ Sentiment is too bullish: AAII Bull-Bear and CNN's Fear & Greed Index both in extreme territories

▶︎ Sentiment is still too bullish: AAII Bull-Bear and CNN's Fear & Greed Index both in/near extreme territories

▶︎ The Bloomberg PMI heatmap isn't looking good, World PMI has worsened and Asian PMIs aren't improving

▶︎ The Bloomberg PMI heatmap isn't looking good, Asian PMIs aren't improving

▶︎ Industrial metals aren't performing, CL has seen a bit of constructive action recently

▶︎ Industrial metals aren't performing

▶︎ Recession probability according to the Cleveland Fed model is still >75%

▶︎ All of the G8 2s10s except for JPY are inverted now

>>SUMMARY<<

Writing this summary feels a bit like Groundhog Day: we're pretty much in the same place we've been in for weeks now. The US economy is doing well, everyone else isn't. Crude and crude-heavy commodity indexes have had a few goods weeks but nothing has broken out of its range so far, and Dr. Copper isn't moving.

Groundhog Day goes on, and nothing about the fundamentals has changed. US stocks are having a bit of a pullback but that's nothing unexpected or extraordinary given how extended everything is to the upside. Chinese stocks attempted an upside breakout from their range, commodities are still rangebound despite the rally in crude oil, and copper isn't joining the party.

Sentiment is still extended to the upside with AAII and CNN F&G way too bullish, and breadth has hit overbought territory, so a pullback in stocks would make sense. Nothing is signalling major problems, though: volatility is low, credit spreads are compressing and the right sectors are performing.

I guess you could frame it positively: given the weak data from China we've seen over months now, it's remarkable that CL and HG are still trading where they are and not lower.

***** USD *****

>>BULL<<

▶︎ GDPNow for Q3 has kicked off at 3.5%, Advance GDP for Q2 was way better than expected

▶︎ GDPNow for Q3 increased to 3.9%, WEI is up too, Q2 GDP beat expectations

▶︎ Data coming in stronger than expected, CESI made a new high this week

▶︎ Data coming in mostly stronger than expected

▶︎ PMI on the heatmap has improved a bit

▶︎ Inflation Nowcast points higher

▶︎ OECD CLI is slowly picking up

▶︎ COT positioning in DX and indirectly via other FX futures is bullish

▶︎ Bullish seasonality

>>BEAR<<

▶︎ Lower real yields and higher breakevens are bearish USD, and 10y yields are near the top of their range again

▶︎ Nothing helpful from Fed speakers

▶︎ CSII is lower, CPI is coming down, 1yr ahead consumer inflation expectations are down

▶︎ 25-delta risk reversal for USDCNY is lower

▶︎ The 5y breakeven rate is below the 10y and the 5y-10y spread is falling fast

▶︎ Bullish sentiment

▶︎ Citi PAIN shows a huge spike in USD longs, and it's hard to imagine that's going to be sustained

▶︎ COT positioning in DX and indirectly via other FX futures is bullish

>>SUMMARY<<

As I wrote above, the US economy continues to surprise: this week's GDP beat, and GDPNow starting Q3 at 3.5%. The FOMC was mostly a non-event with virtually no change to their statement or what we've heard before.

I still haven't made up my mind on the dollar, and I'll be sticking to short-term trades in both directions.

There are still good arguments for both a stronger and a weaker dollar right now. The dollar smile should be clearly in effect with the US outperforming the rest of the world on growth, positioning is pretty one-sided, yield differentials are screaming higher, seasonality is in the dollar's favour, and the ECB has been perceived as dovish. On the other hand, real yield proxies are lower, and we're approaching the top of the 10y yield range.

As I wrote last week, the dollar smile, yield differentials and positioning are all positive for the dollar. This week saw 10y yields go higher and USD follow suit. 10s have broken through the last peak and are approaching 2022 highs. I don't have a view of whether we are going to break through or not but with CL going up (and an increase in the Inflation Nowcast), breakevens trading higher and higher funding needs from the US Treasury, I think it's a decent possibility.

Next week looks like we could see a bullish first half and a bearish second half data-wise for the dollar.

Now that I think of it, I'm inclined to lean more towards a long than towards a short.

***** EUR *****

>>BULL<<

▶︎ CESI is still down but it has picked up a tiny bit, same for the CESI spread EUR-USD (which is also still near lows)

▶︎ CESI is picking up from its low

>>BEAR<<

▶︎ The EUR hasn't taken this week's ECB statement well, and the few speakers we've had since then have been less than enthusiastic about more action

▶︎ ECB hawks are all on holiday apparently

▶︎ Both German and Eurozone PMIs are weaker

▶︎ Both German and Eurozone PMIs are weaker, and the commentary in the release was depressing

▶︎ COT positioning back at bearish extreme

▶︎ Sentiment is bearish, except for EURCHF where it's the opposite

▶︎ OECD CLI for Germany has turned lower again

▶︎ Seasonality is bearish

>>SUMMARY<<

I believe the market saw Lagarde as too dovish this week but the slight tweak in the ECB statement implying that rates are now at sufficiently restrictive levels can't be discussed away.

Still not much positive to say about the euro, and there's nothing on the calendar that would be a catalyst for a good long trade.

Data is coming in softer and the commentary in both the German and the Eurozone PMIs was (once again) pretty depressing. I think the bearish bias still makes sense.

***** GBP *****

>>BULL<<

▶︎ Bearish sentiment

▶︎ OECD CLI has slowed but is still trending higher

▶︎ It's still surprisingly strong

>>BEAR<<

▶︎ 2s10s are bull steepening on lower 2s

▶︎ Relatively dovish BoE meeting with rates now considered ""restrictive""

▶︎ 2s are weak

▶︎ COT positioning is bearish

▶︎ Data is coming in weaker and GBP is reacting accordingly

▶︎ CESI is past its peak and moving lower

▶︎ CSII has dropped again

▶︎ Bearish seasonality

>>SUMMARY<<

GBP is still holding up relatively well given that incoming data continues to weaken and that CPI two weeks ago has missed expectations. Also, positioning via COT is still extreme on the long side. Overall, GBP lower makes a lot of sense. Price action just isn't confirming it yet.

I still think GBP lower is the reasonable thing to expect but price action has not confirmed it, and a look at the currency index for GBP shows how resilient it is.

We'll see what we get from the BoE this week: the meeting is priced for 25 bps at a 75% chance. I don't expect any major surprises: Tenreyro is out and Greene probably won't start off by rocking the boat. Also, what we've heard from the BoE since the last meeting hasn't been hawkish.

It feels like GBP is going to be down on the BoE decision because they won't out-hawk market expectations.

The BoE decision was reasonably dovish and we saw some downside in sterling but nothing sustained, another sign of inherent strength.

***** AUD *****

>>BULL<<

▶︎ OECD CLI looks like it is bottoming

▶︎ Manufacturing PMI on the heatmap has improved

>>BEAR<<

▶︎ Aussie yields have underperformed, bull steepening into the RBA next week

▶︎ Expectations for another hike from the RBA were disappointed

▶︎ OIS-implied rate expectations have also dropped to around 10% for another hike

▶︎ Dropping CESI and Inflation Surprise Index

▶︎ AUD has traded badly on weak Chinese data, and this week more of that is expected

▶︎ More weak data from China expected, AUD has been trading badly on that recently

▶︎ 2y yields have underperformed

▶︎ Bullish sentiment

▶︎ Bearish seasonality

>>SUMMARY<<

I don't see a hike from the RBA on Tuesday: The market isn't pricing it, CPI last week has come in softer and the only comment we've had since their last decision from Lowe was dovish.

Another bad week for AUD (and NZD) on risk off, nothing from the RBA and nothing noteworthy on the data front. I'm not expecting anything to change here, so I'm leaving the bias at bearish.

Also, we expect more weak data from China this week, and AUD has traded awfully on that over the last weeks. Maintaining the bearish bias.

***** NZD *****

>>BULL<<

▶︎ 2s10s have bear flattened recently

▶︎ CESI has picked up further

>>BEAR<<

▶︎ It's inherently weak

▶︎ Sentiment is bullish

▶︎ Bearish seasonality

>>SUMMARY<<

Unchanged from last week: We've had a hawkish CPI surprise (higher than expected albeit lower than previously) but absolutely no follow-through from NZD. Also no support from the RBNZ who removed guidance for possible further hikes last week.

Things are similar to AUD for NZD: no help from the central bank, data is mediocre at best and nobody is going to get excited about it.

***** CAD *****

>>BULL<<

▶︎ The Manufacturing PMI has improved on the Bloomberg heatmap

>>BEAR<<

▶︎ The BOC have ended their hiking cycle, no hint of further action in the statement

▶︎ Data over the last few weeks has mostly disappointed and weakened

▶︎ CL has staged a bit of a stealth rally but correlation to CL is currently negative

▶︎ Has the worst CLI among the G7

▶︎ CSII is dropping

▶︎ Has the worst OECD CLI among the G7

▶︎ Bullish sentiment and bearish seasonality

>>SUMMARY<<

There's nothing I particularly like about CAD right now. It has a high correlation to USD and a negative one to CL.

Unchanged from last week: There's nothing I particularly like about CAD right now. It has a high correlation to USD and a negative one to CL.

But: compared to other currencies, ""nothing to like"" isn't the worst thing out there. I don't see why it shouldn't perform better than AUD or NZD, for example.

I'm changing the bias to neutral.

***** CHF *****

>>BULL<<

▶︎ The SNB is still trying to sound hawkish, I just wonder why

▶︎ Bearish sentiment via EURCHF and USDCHF

▶︎ CESI is going up

▶︎ Inherent strength

>>BEAR<<

▶︎ Huge divergence between COT Large Trader net positions and price

▶︎ IV is slowly creeping higher

▶︎ Inflation Surprise Index has gone down further

▶︎ PMI on the heatmap is weaker

>>SUMMARY<<

Unchanged from last week: There's no fundamental reason why CHF has outperformed recently, so my guess is on the SNB buying it. I also don't understand why they're still as hawkish as they are given that CPI m/m is at 0.1% and has missed expectations. And what really stands out is that COT positioning is showing Large Traders positioning diverge from spot price.

We don't get a lot of data from Switzerland but the data we got this week was bad: weaker consumer sentiment, a Manufacturing PMI in the 30s and a deflationary m/m CPI print. It was a risk-offish week, so CHF performed reasonably well. I wonder how long the SNB will continue to buy it higher. The bearish bias is a fundamental one.

***** JPY *****

>>BULL<<

▶︎ Potentially higher 10y yields should be good for JPY

▶︎ 10y yields pushing higher despite BOJ interventions

▶︎ The BOJ have upgraded their near-term inflation forecasts (but only those; the FY 2024 projection has been lowered)

>>BEAR<<

▶︎ COT still says a JPY short is still not a very crowded trade

▶︎ Sentiment is bullish

▶︎ CSII has dropped

▶︎ Still the most dovish central bank out there

▶︎ Inherent weakness

>>SUMMARY<<

What a rollercoaster for JPY last week. Everybody seems to be confused as to what the new YCC tweak means in the grand scheme of things, and the fact that 10y yields only traded a tad above the (old) 0.5% cap is puzzling.

Last week, everyone was confused as to what the BOJ meant but this week has shown that JPY is still good as a haven currency. It finished the weak behind USD, EUR and CHF performance-wise. Factoring out the rise in US yields and the risk-off sentiment, my take would be that the latest YCC tweak by the BOJ hasn't changed much for the yen, which means it's mostly a trade from the short side."

JPY is still the cheapest funding currency, and the market's reaction so far doesn't feel like it's seeing the BOJ's decision as a gamechanger for now."

Saved diffs

Original text

Open file

"29.07.23
***** MACRO *****
     >>BULL<<
▶︎ Positive growth and falling inflation in the US: goldilocks for stocks
▶︎ Equity volatility is still low, FX vol has picked up a bit but so far nothing to worry
▶︎ Credit spreads are contracting
▶︎ Sector rotation and breadth confirm current action in stocks
▶︎ The Chinese OECD CLI has turned around and is outperforming
▶︎ TD Ameritrade IMX is moving up and is far from extreme
     >>BEAR<<
▶︎ Sentiment is too bullish: AAII Bull-Bear and CNN's Fear & Greed Index both in extreme territories
▶︎ The Bloomberg PMI heatmap isn't looking good, World PMI has worsened and Asian PMIs aren't improving
▶︎ Industrial metals aren't performing, CL has seen a bit of constructive action recently
▶︎ Recession probability according to the Cleveland Fed model is still >75%
▶︎ All of the G8 2s10s except for JPY are inverted now
     >>SUMMARY<<
Writing this summary feels a bit like Groundhog Day: we're pretty much in the same place we've been in for weeks now. The US economy is doing well, everyone else isn't. Crude and crude-heavy commodity indexes have had a few goods weeks but nothing has broken out of its range so far, and Dr. Copper isn't moving.

Sentiment is still extended to the upside with AAII and CNN F&G way too bullish, and breadth has hit overbought territory, so a pullback in stocks would make sense. Nothing is signalling major problems, though: volatility is low, credit spreads are compressing and the right sectors are performing.

***** USD *****
     >>BULL<<
▶︎ GDPNow for Q3 has kicked off at 3.5%, Advance GDP for Q2 was way better than expected
▶︎ Data coming in stronger than expected, CESI made a new high this week
▶︎ PMI on the heatmap has improved a bit
▶︎ OECD CLI is slowly picking up
▶︎ Bullish seasonality
     >>BEAR<<
▶︎ Lower real yields and higher breakevens are bearish USD, and 10y yields are near the top of their range again
▶︎ CSII is lower, CPI is coming down, 1yr ahead consumer inflation expectations are down
▶︎ 25-delta risk reversal for USDCNY is lower
▶︎ The 5y breakeven rate is below the 10y and the 5y-10y spread is falling fast
▶︎ Bullish sentiment
▶︎ COT positioning in DX and indirectly via other FX futures is bullish
     >>SUMMARY<<
As I wrote above, the US economy continues to surprise: this week's GDP beat, and GDPNow starting Q3 at 3.5%. The FOMC was mostly a non-event with virtually no change to their statement or what we've heard before.

There are still good arguments for both a stronger and a weaker dollar right now. The dollar smile should be clearly in effect with the US outperforming the rest of the world on growth, positioning is pretty one-sided, yield differentials are screaming higher, seasonality is in the dollar's favour, and the ECB has been perceived as dovish. On the other hand, real yield proxies are lower, and we're approaching the top of the 10y yield range.

Next week looks like we could see a bullish first half and a bearish second half data-wise for the dollar.

***** EUR *****
     >>BULL<<
▶︎ CESI is still down but it has picked up a tiny bit, same for the CESI spread EUR-USD (which is also still near lows)
     >>BEAR<<
▶︎ The EUR hasn't taken this week's ECB statement well, and the few speakers we've had since then have been less than enthusiastic about more action
▶︎ Both German and Eurozone PMIs are weaker
▶︎ COT positioning back at bearish extreme
▶︎ Sentiment is bearish, except for EURCHF where it's the opposite
▶︎ OECD CLI for Germany has turned lower again
▶︎ Seasonality is bearish
     >>SUMMARY<<
I believe the market saw Lagarde as too dovish this week but the slight tweak in the ECB statement implying that rates are now at sufficiently restrictive levels can't be discussed away.

Data is coming in softer and the commentary in both the German and the Eurozone PMIs was (once again) pretty depressing. I think the bearish bias still makes sense.

***** GBP *****
     >>BULL<<
▶︎ Bearish sentiment
▶︎ OECD CLI has slowed but is still trending higher
     >>BEAR<<
▶︎ 2s10s are bull steepening on lower 2s
▶︎ COT positioning is bearish
▶︎ Data is coming in weaker and GBP is reacting accordingly
▶︎ CESI is past its peak and moving lower
▶︎ Bearish seasonality
     >>SUMMARY<<
GBP is still holding up relatively well given that incoming data continues to weaken and that CPI two weeks ago has missed expectations. Also, positioning via COT is still extreme on the long side. Overall, GBP lower makes a lot of sense. Price action just isn't confirming it yet.

We'll see what we get from the BoE this week: the meeting is priced for 25 bps at a 75% chance. I don't expect any major surprises: Tenreyro is out and Greene probably won't start off by rocking the boat. Also, what we've heard from the BoE since the last meeting hasn't been hawkish.

It feels like GBP is going to be down on the BoE decision because they won't out-hawk market expectations.

***** AUD *****
     >>BULL<<
▶︎ OECD CLI looks like it is bottoming
▶︎ Manufacturing PMI on the heatmap has improved
     >>BEAR<<
▶︎ Aussie yields have underperformed, bull steepening into the RBA next week
▶︎ OIS-implied rate expectations have also dropped to around 10% for another hike
▶︎ AUD has traded badly on weak Chinese data, and this week more of that is expected
▶︎ Bullish sentiment
▶︎ Bearish seasonality
     >>SUMMARY<<
I don't see a hike from the RBA on Tuesday: The market isn't pricing it, CPI last week has come in softer and the only comment we've had since their last decision from Lowe was dovish.

Also, we expect more weak data from China this week, and AUD has traded awfully on that over the last weeks. Maintaining the bearish bias.

***** NZD *****
     >>BULL<<
▶︎ 2s10s have bear flattened recently
▶︎ CESI has picked up further
     >>BEAR<<
▶︎ It's inherently weak
▶︎ Sentiment is bullish
▶︎ Bearish seasonality
     >>SUMMARY<<
Unchanged from last week: We've had a hawkish CPI surprise (higher than expected albeit lower than previously) but absolutely no follow-through from NZD. Also no support from the RBNZ who removed guidance for possible further hikes last week.

***** CAD *****
     >>BULL<<

     >>BEAR<<
▶︎ The BOC have ended their hiking cycle, no hint of further action in the statement
▶︎ Data over the last few weeks has mostly disappointed and weakened
▶︎ CL has staged a bit of a stealth rally but correlation to CL is currently negative
▶︎ Has the worst CLI among the G7
▶︎ Bullish sentiment and bearish seasonality
     >>SUMMARY<<
There's nothing I particularly like about CAD right now. It has a high correlation to USD and a negative one to CL.

But: compared to other currencies, ""nothing to like"" isn't the worst thing out there. I don't see why it shouldn't perform better than AUD or NZD, for example.

I'm changing the bias to neutral.

***** CHF *****
     >>BULL<<
▶︎ The SNB is still trying to sound hawkish, I just wonder why
▶︎ Bearish sentiment via EURCHF and USDCHF
▶︎ CESI is going up
▶︎ Inherent strength
     >>BEAR<<
▶︎ Huge divergence between COT Large Trader net positions and price
▶︎ IV is slowly creeping higher
     >>SUMMARY<<
Unchanged from last week: There's no fundamental reason why CHF has outperformed recently, so my guess is on the SNB buying it. I also don't understand why they're still as hawkish as they are given that CPI m/m is at 0.1% and has missed expectations. And what really stands out is that COT positioning is showing Large Traders positioning diverge from spot price.

***** JPY *****
     >>BULL<<
▶︎ Potentially higher 10y yields should be good for JPY
▶︎ The BOJ have upgraded their near-term inflation forecasts (but only those; the FY 2024 projection has been lowered)
     >>BEAR<<
▶︎ COT still says a JPY short is still not a very crowded trade
▶︎ Sentiment is bullish
▶︎ CSII has dropped
▶︎ Still the most dovish central bank out there
▶︎ Inherent weakness
     >>SUMMARY<<
What a rollercoaster for JPY last week. Everybody seems to be confused as to what the new YCC tweak means in the grand scheme of things, and the fact that 10y yields only traded a tad above the (old) 0.5% cap is puzzling.

JPY is still the cheapest funding currency, and the market's reaction so far doesn't feel like it's seeing the BOJ's decision as a gamechanger for now."

Changed text

Open file

"05.08.23
***** MACRO *****
     >>BULL<<
▶︎ Positive growth and falling inflation in the US: goldilocks for stocks
▶︎ Equity volatility is still low, FX vol has dropped too
▶︎ Credit spreads are tight
▶︎ Sector rotation and breadth confirm current action in stocks
▶︎ CL has been going up for a few weeks now
▶︎ The Chinese OECD CLI has turned around and is outperforming
▶︎ The global CESI has picked up a bit
▶︎ TD Ameritrade IMX is moving up and is far from extreme
     >>BEAR<<
▶︎ Sentiment is still too bullish: AAII Bull-Bear and CNN's Fear & Greed Index both in/near extreme territories
▶︎ The Bloomberg PMI heatmap isn't looking good, Asian PMIs aren't improving
▶︎ Industrial metals aren't performing
▶︎ Recession probability according to the Cleveland Fed model is still >75%
▶︎ All of the G8 2s10s except for JPY are inverted now
     >>SUMMARY<<
Groundhog Day goes on, and nothing about the fundamentals has changed. US stocks are having a bit of a pullback but that's nothing unexpected or extraordinary given how extended everything is to the upside. Chinese stocks attempted an upside breakout from their range, commodities are still rangebound despite the rally in crude oil, and copper isn't joining the party.

I guess you could frame it positively: given the weak data from China we've seen over months now, it's remarkable that CL and HG are still trading where they are and not lower.

***** USD *****
     >>BULL<<
▶︎ GDPNow for Q3 increased to 3.9%, WEI is up too, Q2 GDP beat expectations
▶︎ Data coming in mostly stronger than expected
▶︎ PMI on the heatmap has improved a bit
▶︎ Inflation Nowcast points higher
▶︎ OECD CLI is slowly picking up
▶︎ COT positioning in DX and indirectly via other FX futures is bullish
▶︎ Bullish seasonality
     >>BEAR<<
▶︎ Nothing helpful from Fed speakers
▶︎ CSII is lower, CPI is coming down, 1yr ahead consumer inflation expectations are down
▶︎ 25-delta risk reversal for USDCNY is lower
▶︎ The 5y breakeven rate is below the 10y and the 5y-10y spread is falling fast
▶︎ Citi PAIN shows a huge spike in USD longs, and it's hard to imagine that's going to be sustained
     >>SUMMARY<<
I still haven't made up my mind on the dollar, and I'll be sticking to short-term trades in both directions.

As I wrote last week, the dollar smile, yield differentials and positioning are all positive for the dollar. This week saw 10y yields go higher and USD follow suit. 10s have broken through the last peak and are approaching 2022 highs. I don't have a view of whether we are going to break through or not but with CL going up (and an increase in the Inflation Nowcast), breakevens trading higher and higher funding needs from the US Treasury, I think it's a decent possibility.

Now that I think of it, I'm inclined to lean more towards a long than towards a short.

***** EUR *****
     >>BULL<<
▶︎ CESI is picking up from its low
     >>BEAR<<
▶︎ ECB hawks are all on holiday apparently
▶︎ Both German and Eurozone PMIs are weaker, and the commentary in the release was depressing
▶︎ COT positioning back at bearish extreme
▶︎ OECD CLI for Germany has turned lower again
▶︎ Seasonality is bearish
     >>SUMMARY<<
Still not much positive to say about the euro, and there's nothing on the calendar that would be a catalyst for a good long trade.

***** GBP *****
     >>BULL<<
▶︎ Bearish sentiment
▶︎ OECD CLI has slowed but is still trending higher
▶︎ It's still surprisingly strong
     >>BEAR<<
▶︎ Relatively dovish BoE meeting with rates now considered ""restrictive""
▶︎ 2s are weak
▶︎ COT positioning is bearish
▶︎ Data is coming in weaker and GBP is reacting accordingly
▶︎ CESI is past its peak and moving lower
▶︎ CSII has dropped again
▶︎ Bearish seasonality
     >>SUMMARY<<
I still think GBP lower is the reasonable thing to expect but price action has not confirmed it, and a look at the currency index for GBP shows how resilient it is.

The BoE decision was reasonably dovish and we saw some downside in sterling but nothing sustained, another sign of inherent strength.

***** AUD *****
     >>BULL<<
▶︎ OECD CLI looks like it is bottoming
▶︎ Manufacturing PMI on the heatmap has improved
     >>BEAR<<
▶︎ Expectations for another hike from the RBA were disappointed
▶︎ Dropping CESI and Inflation Surprise Index
▶︎ More weak data from China expected, AUD has been trading badly on that recently
▶︎ 2y yields have underperformed
▶︎ Bullish sentiment
▶︎ Bearish seasonality
     >>SUMMARY<<
Another bad week for AUD (and NZD) on risk off, nothing from the RBA and nothing noteworthy on the data front. I'm not expecting anything to change here, so I'm leaving the bias at bearish.

***** NZD *****
     >>BULL<<
▶︎ CESI has picked up further
     >>BEAR<<
▶︎ It's inherently weak
▶︎ Sentiment is bullish
▶︎ Bearish seasonality
     >>SUMMARY<<
Things are similar to AUD for NZD: no help from the central bank, data is mediocre at best and nobody is going to get excited about it.

***** CAD *****
     >>BULL<<
▶︎ The Manufacturing PMI has improved on the Bloomberg heatmap
     >>BEAR<<
▶︎ The BOC have ended their hiking cycle, no hint of further action in the statement
▶︎ Data over the last few weeks has mostly disappointed and weakened
▶︎ CL has staged a bit of a stealth rally but correlation to CL is currently negative
▶︎ CSII is dropping
▶︎ Has the worst OECD CLI among the G7
▶︎ Bullish sentiment and bearish seasonality
     >>SUMMARY<<
Unchanged from last week: There's nothing I particularly like about CAD right now. It has a high correlation to USD and a negative one to CL.

But: compared to other currencies, ""nothing to like"" isn't the worst thing out there. I don't see why it shouldn't perform better than AUD or NZD, for example.

***** CHF *****
     >>BULL<<
▶︎ The SNB is still trying to sound hawkish, I just wonder why
▶︎ Bearish sentiment via EURCHF and USDCHF
▶︎ CESI is going up
▶︎ Inherent strength
     >>BEAR<<
▶︎ Huge divergence between COT Large Trader net positions and price
▶︎ Inflation Surprise Index has gone down further
▶︎ PMI on the heatmap is weaker
     >>SUMMARY<<
We don't get a lot of data from Switzerland but the data we got this week was bad: weaker consumer sentiment, a Manufacturing PMI in the 30s and a deflationary m/m CPI print. It was a risk-offish week, so CHF performed reasonably well. I wonder how long the SNB will continue to buy it higher. The bearish bias is a fundamental one.

***** JPY *****
     >>BULL<<
▶︎ Potentially higher 10y yields should be good for JPY
▶︎ 10y yields pushing higher despite BOJ interventions
▶︎ The BOJ have upgraded their near-term inflation forecasts (but only those; the FY 2024 projection has been lowered)
     >>BEAR<<
▶︎ COT still says a JPY short is still not a very crowded trade
▶︎ Sentiment is bullish
▶︎ CSII has dropped
▶︎ Still the most dovish central bank out there
     >>SUMMARY<<
Last week, everyone was confused as to what the BOJ meant but this week has shown that JPY is still good as a haven currency. It finished the weak behind USD, EUR and CHF performance-wise. Factoring out the rise in US yields and the risk-off sentiment, my take would be that the latest YCC tweak by the BOJ hasn't changed much for the yen, which means it's mostly a trade from the short side."