Long Gold/USD (From 19-Nov to 26-Nov)
Real-Time AmpGFX – Sold Gold/USD to close long position (Mon 11/26/2018 9:13 AM MT)
Sold one unit of Gold/USD at 1222.98
Comment
We can see a risk positive tone returning to the market this week on the Fed retaining a softer tone on rates policy outlook and Trump-Xi G20 meeting generating positive comments on willingness to work on better trade relations.
This may help support EM and commodity currencies. And undermine safe haven currencies. We may look at selling USD against a high beta currency after evaluating market conditions further.
We have no positions at this time.
Real-Time AmpGFX – Sold AUD/USD (half position), bought Gold/USD (Mon 11/19/2018 11:15 AM MT)
Sold one unit of AUD/USD at 0.7282 to close half long position
Bought one unit Gold/USD at 1222.75
Comment
The Pence and Xi speeches, and lack of communique from APEC suggest that the atmosphere for a cooling in trade tensions when Trump meets Xi on 1 Dec is diminished. Pence may reflect a more hawkish side of the administration view towards China. And the issues of concern he was talking about were more about strategic relationships in the Asia region that go beyond trade. Nevertheless, they highlight that we are in a new era of tensions between the USA and China, and both sides may remain apart on key issues of economic and trade cooperation that will not be solved by the Trump-Xi meeting.
However, we should not forget that US and China officials were reported to be working on trade issues in preparation for the Xi-Trump meeting, and it would still not surprise to see some positive news to come from this meeting.
The other development in global markets is the deterioration in the IT sector. Chip and software stocks are under pressure. There is concern that demand for IT goods is peaking. This may contribute to weakness in key Asian exporter economies, including China, Taiwan and Korea.
It also is weighing on the USD equity market a factor that is tightening US financial conditions and may lead to further unwinding of US rate hike expectations.
US credit spreads have started widening more significantly. IG and high yield credit risk indices are at new wides for the year. The US economy may not be helped much by the recent fall in oil prices that might weaken investment and credit conditions in its energy sector. The Fed looks at broader financial conditions than implied by the equity market, and the widening in credit spreads may play a bigger part in shifting their views on further rate hikes.
The Fed comments from Powell and Clarida last week already showed a significant shift in tone.
We decided to shift half our short USD position from AUD to gold to reflect a more risk-off tone in tech shares that may contribute to further falls in US yields.
Positions
Long one unit AUD/USD at 0.7310; s/l 0.7243; t/p 0.7522 (Capital at Risk 0.67%)
Long one unit Gold/USD at 1222.75; s/l 1213.43; t/p 1261.43 (Capital at Risk 0.77%)