Long EUR/AUD (5-July to 18-July)
Position closed on stop
Long half unit of EUR/AUD at 1.5824; s/l 1.5673; t/p 1.7234 ( stop executed at 1.56688, loss was 1.175% of capital)
Real-Time AmpGFX – strong Australian employment report (Wed 7/18/2018 8:06 PM)
The Australian employment report delivered jobs growth of +50.9K in June, well above 16.5K expected, and most of the gains were full-time; up 41.2K.
The data will probably not change the outlook for rates much given it comes after slower jobs growth Feb-May, and the unemployment rate was reported unchanged at 5.4%, in a stable range since Sep last year, but at the bottom of the range for a second month, and consistent with ongoing gradual improvement in the labour market. (it was a bit lower at 5.37%, vs 5.40% in May, a low since 2012).
The participate rate rose from 65.5 to 65.7, reversing falls in the previous three-months, below the peak in January of 65.8, but overall around record highs, seen last in 2010.
Overall a solid outcome, that balances the recent less strong outcomes since January, and will support the RBA view that the next move in rates is more likely to be a hike, albeit still some time away.
3yr bond yields have risen 4bp on the data and the AUD has risen 0.4% so far on the day, against a relatively stable NZD and other major currencies.
We were stopped out of our long EUR/AUD position.
(Chart 1: The unemployment rate at a low since 2012 in June, the quarterly under-utilization measures were not updated in June)
(Chart 2: Participation rate recovered some of its recent fall, still broadly around record highs last see in 2010)
(Chart 3: A rebound from recent softness in labour market growth)
Positions
Short half unit NZD/CAD at 0.8914; s/l 0.9013; t/p 0.8513
Short half unit NZD/CAD at 0.8914; s/l 0.9013; t/p 0.8513
Position closed on stop
Long half unit of EUR/AUD at 1.5824; s/l 1.5673; t/p 1.7234 ( stop executed at 1.56688, loss was 1.175% of capital)
Real-Time AmpGFX – Bought EUR/AUD (Thu 7/5/2018 1:41 PM MT)
Bought half unit of EUR/AUD at 1.5824
Comment
The US may be looking to tune-down its trade protectionist rhetoric with the EU while maintaining the pressure against China. Reports include discussions with European automakers to reduce tariffs. Former White House Communications Director Anthony Scaramucci is in the media saying the President should turn down the pressure on the EU and try and join with them in pressuring China. (A strategy that may make sense, and the Mooch may be influential or even being used as a trial balloon to pave the way for policy shifts)
The CNY is tending to weaken again after the intervention to stabilise it earlier in the week. Chinese equities remain under pressure. The level of tension with China is increasing with tit for tat bans onChina Mobile and Micron Technology.
The EUR may have been dampened by reports that the Italian government intends to move forward with its plans to both cut taxes and introduce a universal income, threatening to blow its budget out, and causing Italian bond yields to rise again. Risk of Italian market weakness spilling over the EUR poses a risk to this trade.
There were some more hawkish comments from ECB members that the market should be predicting a hike in September 2019, earlier than its current market pricing nearer the end of 2019.
The AUD may be undermined by speculation that its banks may raise mortgage rates soon, some softening in iron ore prices in recent days. Copper prices have fallen more sharply and may be reflecting concerns about industrial metals more broadly.
Position
Long half unit of EUR/AUD at 1.5824; s/l 1.5673; t/p 1.7234
Our Capital at Risk: 101bp
By setting an initial stop loss of 1.5673, our (AmpGFX) percentage loss would be 0.95%. Based on our trade size this represents 101bp or 1.01% of our trading capital.
In the past, I have provided some guidance on the relative size of our trades using “units”. I am working on providing a clearer understanding of the actual amount of capital we have at risk, as reflected in the results we report on our website.
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