The Week Ahead
Two green jackets for Scottie; if you picked him as your winner for the tweet I put up, DM me on Twitter, and I will give you your free month.
Two consecutive red weeks for SPX, USD/JPY heading to 155, VVIX >100 and the 10-year at 4.55%. World War Three supposedly happened over the weekend, but ES1 has shrugged it off and is bid (+25pts), and…… oil has been sold -100bps…
I am still working on the risk management post, so I will try to keep this post short and sweet. Last week was a strong week for paid subscribers. Index, FX, and oil trades all worked. I also went overweight AAPL 0.00%↑ (10% weight) mid 168 handle, which has worked well so far…
FYI, there’s still a 20% off available…
FX
No change in stance, hotter than expected inflation prints aren’t something the Fed (or participants) can ignore. They don’t look like a one-off anymore, more a trend if anything. The Fed needs to see a few cooler prints for them to start thinking about a cut, so the June cut isn't happening. If the scenario I have mentioned for quite a while now, where the Fed doesn’t cut this year… you could see DXY >110 by the end of 2024. In the meantime, USD should remain well supported with both the attraction of carry and the ability to hedge both geopolitical risk and inflation upside. What could cause the dollar to sell off? BoJ interventions, June FOMC and positioning.
USD/JPY could crack 155 in the coming week, but as I said to paid subscribers recently, perhaps sell some EUR/JPY if you’re short yen to take advantage of any potential interventions from the BoJ. The question I get a lot about USD/JPY is "how high can it go? I don’t really have an answer but you need more hikes from the BoJ and the Fed to cut for the carry trade to properly unwind. Any dips would be a result of positioning or caused by an intervention. 160 doesn’t seem impossible by the end of Q3.
EUR/GBP position cut for a teeny gain but still holding GBP/USD (short), EUR/BRL (short) and EUR/CAD (short). I like EUR as a funder as I think the ECB will cut more and before the Fed.
Single stock, Index & Vol
Despite a small dip in stocks, a bid in the dollar and bonds being sold off, there’s been little tightening in FCI. FCI still remains loose.