Short AUD/USD (from 1-May to 10-May) & FOMC Comment (2-May)
S/l orders triggered in short AUD/USD (before US CPI) and short EUR/USD (after the US CPI) … both trades closed in profit (10-May)
Real-Time AmpGFX – Order Update, thoughts on AUD (Tue 5/8/2018 1:53 PM MT)
Positions
Short half unit EUR/USD at 1.2206; s/l 1.1943; t/p 1.1788
Short half unit AUD/USD at 0.7517; s/l 0.7488
Short half unit EUR/JPY at 130.77; s/l 130.23; t/p 128.28
Comment
Stop loss orders lowered to lock in gains.
It is interesting to see AUD weaker after recent strong data (trade, business confidence, building approvals) and strong budget. Chinese data has also been solid – trade report. And Chinese commodity futures prices are also firmer over the last month. AUD fell on weaker than expected retail sales. This makes me a little more cautious pursuing a weaker AUD outlook. As such, my stop loss in AUD is closer than others.
Weaker AUD is reflective of higher US yields, a stronger USD, and weaker global EM markets.
Risks to AUD are also coming from the political cycle and housing market. However, overall economic performance remains strong with a record high in business conditions. The Australian external position is also stronger.
Real-Time AmpGFX – Sold AUD/USD to re-establish short (Fri 5/4/2018 5:35 AM MT)
Sold half unit of AUD/USD at 0.7517
Comment
We were stopped out near the high overnight after RBA statement.
It seems the trade talks with China have yielded little and highlight the deep divisions.
This should add to the bearish outlook for global EM and AUD.
The RBA raised their inflation forecast, but it remains below the mid-point of the target zone through the 2+ year horizon, so rate hikes are still well away and subject to high uncertainty, much of it to the downside.
US payrolls later today. But there is every reason to expect an upside surprise
Positions
Short half unit EUR/USD at 1.2206; s/l 1.2078 (lowered from 1.2178); t/p 1.1788
Short half unit AUD/USD at 0.7517; s/l 0.7563
Short half unit EUR/JPY at 130.77; s/l 131.33; t/p 128.28
Real-Time AmpGFX – Sold AUD/USD (to re-establish) & FOMC Comment (Wed 5/2/2018 12:42 PM MT)
Sold half unit of AUD/USD at 0.7519
Comment
We were stopped out of short position yesterday.
Post the FOMC, the USD has softened, and we have decided to re-establish the short AUD/USD position.
The FOMC raised the language on inflation, saying now that, “both overall inflation and inflation for items other than food and energy have moved close to 2 percent”, and it also dropped its risk assessment, removing from its statement, “the Committee is monitoring inflation developments closely.”
This seems to suggest that the Fed thinks it is close to all its targets, and thus it should be thinking about getting rates to neutral more quickly. The statement should tend to underpin the rise in US rates seen recently. Odds of four hikes this year and further hikes through next year should increase somewhat. The long-run neutral rate is seen at 2.9%, vs the current rate of 1.63%.
The Fed has described its inflation target as “symmetrical” for some time, and had this word in its statement in the final paragraph already. (“The Committee will carefully monitor actual and expected inflation developments relative to its symmetric inflation goal.”)
But it also added it in the second paragraph as well. (“Inflation on a 12-month basis is expected to run near the Committee’s symmetric 2 percent objective over the medium term.”)
Previously it had said, “Inflation on a 12-month basis is expected to move up in coming months and to stabilize around the Committee’s 2 percent objective over the medium term.”
By adding the word “symmetrical” in a second time, the market may conclude some additional willingness to let inflation run above target for a time and less urgency to hike.
The initial reaction to the FOMC statement appears to be giving more weight to the addition of “symmetrical” for a second time, and it may have already factored in an upgrade to the inflation outlook.
However, for mine, I think the key overall message is that inflation is near target and the Fed is normalising, while other nations still have inflation too low. This should tend to support the current trend towards a higher USD.
Positions
Short half unit EUR/USD at 1.2206; s/l 1.2078 (lowered from 1.2178); t/p 1.1788
Short half unit AUD/USD at 0.7518; s/l 0.7558
Real-Time AmpGFX – Sold AUD/USD (Tue 5/1/2018 9:30 AM MT)
Sold half unit of AUD/USD at 0.7473
Comment
This is a dangerous level to begin selling AUD/USD, so I do so tentatively.
If we are in the same choppy pattern of the last year then the AUD/USD is at risk of a significant bounce. I am cognisant of being caught out several times selling AUD near lows in the past year.
Furthermore, with the fall today coming in a holiday-affected market, the risk is that it reflects thin markets and will reverse. There is limited new info to explain the USD rise today.
However, I see a significant probability that the USD is breaking out of its choppy pattern of recent months.
Just as the equity market turned suddenly volatile in February after a long period of low volatility, the same type of regime change may occur in other markets. I see a risk that the break out in the USD from its recent ranges across most pairs may trigger a sustained and surprisingly rapid move with little retracement. As such, I have decided not to wait for a retracement to sell the AUD.
Of consideration is that the USD had become very disconnected from its interest rate differentials, and it may now be reconnecting. The shaky equity market is turning attention back towards rate spreads. Emerging market assets may be in retreat on ebbing growth, China/trade risks. Australia is at risk from the royal commission and slowing housing market. Higher global yields may further pressure Australian bank funding costs and mortgage rates. Political cycle is coming into play.
Positions
Short half unit EUR/USD at 1.2206; s/l 1.2078 (lowered from 1.2178); t/p 1.1788
Short half unit AUD/USD at 0.7473; s/l 0.7523; t/p 0.7188
Profit was taken at the limit order left on the other half unit of EUR/USD short.