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fx:macro Summary Changes 2023_03_11

Created 2 years agoDiff never expires

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"04.03.23

"11.03.23

***** MACRO *****

>>BULL<<

▶︎ Asian PMIs have improved considerably (Hong Kong, Taiwan), other Emerging Markets too (Brazil, Mexico)

▶︎ Chinese PMIs are going strong, the reopening trade is pausing but it should still be a tailwind

▶︎ Sector ETFs are trading well: offensive sectors look bullish, defensive sectors don't

▶︎ Fear & Greed is already at Extreme Fear

▶︎ Bullish AAII sentiment has pretty much evaporated compared to last week, Fear & Greed is back at neutral

▶︎ Credit spreads are still contained, the Corporate Bond Market Distress Index is calm, FX volatility is relatively low

▶︎ Credit spreads are still contained, the Corporate Bond Market Distress Index is calm, bond volatility isn't very high

▶︎ First signs of possible exhaustion to the downside in stocks: the long wick on Friday's VIX candle and a day with >90% down volume on Thursday

▶︎ Equity volatility indexes look decidedly better than last week: declining vol, steeper curve, flatter skew, also: declining currency volatilities; the only negative point is a divergence between VIX and MOVE again

>>BEAR<<

▶︎ ETF flows continue to be very bearish: into short-term treasuries, out of duration, out of equities

▶︎ Fears of contagion from the SVB banking crisis

▶︎ Copper has made a lower high and a lower low, at the least it's not bullish anymore

▶︎ Inflation breakevens, RINF, 5y5y forward inflation and crude oil are all lower... everything is still in their ranges but it could be the start of the market pricing in a hard landing

▶︎ Treasuries trading the way they are supposed to, i.e. flying in case of risk off, isn't a good sign for the market overall

▶︎ Currencies have displayed classic risk-off performance this week for the first time in a while

▶︎ Equity volatility has woken up, MOVE is >140 but both VIX and VVIX are well below their intraday highs from Friday

▶︎ Six out of eight G8 2s10s have so far inverted

▶︎ The Cleveland Fed Yield-Curve-Predicted GDP Growth model gets more and more negative

>>SUMMARY<<

It feels like everything changes every few days. I like the market a lot more than last week: PMIs are improving globally and in key countries, sentiment has normalized, the price action in equity sectors looks bullish (even though the performance numbers are all over the place), volatility is doing well, breadth is okay. ETF flows are very bearish, though, and commodities don't seem to get out of their ranges.

Last week I wrote that it feels like everything changes every few days, and in this regard the past week didn't disappoint. What stands out to me right now is that assets are trading more ""normally"" on risk off: stocks lower, vol and vol of vol making a decent pop, treasuries and JPY both higher. That's different from the last months. There are already a few signs of the market overdoing it, though. In terms of the bigger picture, the SVB collapse is one more crack showing up: we've had LDI funds on the brink of collapse six months ago, a subprime auto lender going under recently and now this.

***** USD *****

>>BULL<<

▶︎ Again this week: the terminal rate has been repriced higher, rate cuts have been pushed further out

▶︎ Powell put 50 bps back on the table even though he tried to walk it back a bit on his second day of testimony

▶︎ GDPNow for Q1 is >2%

▶︎ CESI is rising too

▶︎ PAIN shows flows back into USD from a basically flat position

▶︎ Improving PMI on the heatmap

▶︎ Inflation suprising to the upside and breakevens creeping higher

>>BEAR<<

▶︎ Waller is still hawkish but he's pretty much the only one right now, Bostic and Kashkari see rates at levels currently priced in

▶︎ We're in the trough of the dollar smile with global PMIs improving and the US not outperforming on the one side and the current banking crisis not (yet?) serious enough to trigger panic flows

▶︎ 25-delta risk reversals see the USD weaker

▶︎ We're in the trough of the dollar smile with global PMIs improving and the US not outperforming

>>SUMMARY<<

Same for currencies: it feels like everything changes way too often. We've made a new high in the implied terminal rate this week but the USD was the FX underperformer. It's highly correlated to its 2y and 10y yields and it's tough to imagine them going much higher, also the negative correlation to ES... with how many positives I see for stocks it's hard to see much further upside in the dollar. The options market has been pricing the dollar lower for a few weeks now, and charts like the DXY, USDCNH, USDJPY all look toppy. Changing the bias to short.

I'm seriously clueless about the dollar right now. The fundamentals are pretty good and 50 bps at the next FOMC meeting are in play again. But in a week where we had everything from hawkish Powell to a banking-crisis type risk-off situation on Friday, it's still mostly flat. Then there's CPI upcoming on Tuesday and more jobs data on Thursday; both could push us in either direction, and we've seen the volatility of the future Fed Funds pricing this week. Even a blunt ""long into FOMC because not everyone is positioned for a possible 50 bps hike"" isn't feeling convincing because of the move in the PAIN index. The calendar for next week suggests a weak first half and a strong second half, so that's going to be my base case. Changing to ""no bias"".

***** EUR *****

>>BULL<<

▶︎ The ECB still sounds hawkish but the Minutes showed some disagreement on their communication strategy

▶︎ Holzmann put four further 50 bps hike on the table

▶︎ Core CPI is sticky

▶︎ Stock markets are still outperforming

▶︎ 25-delta risk reversal looks bullish

>>BEAR<<

▶︎ CESI has rolled over

▶︎ German PMI on the heatmap is weaker, Eurozone isn't improving

▶︎ Sentiment in EURCHF is very bullish, price action isn't constructive

▶︎ Positioning is at bearish extremes (probably but COT data is very stale by now)

>>SUMMARY<<

I'm not sure what I'm thinking about the Euro at the moment. German yields are performing but EUR isn't following suit, we will probably see divergences with other pausing central banks soon but even the Fed isn't expected to pause before July, and disagreements among the GC members have already started to show up in the ECB minutes. I'm changing the bias to neutral.

It's still doing pretty well even though the economic situation is weakening. We'll get the ECB rate decision this week, and even though an outlier like Holzmann put four more 50 bps hikes out there the reality will probably more data-dependency and less guidance. Hard to see the market will like that.

***** GBP *****

>>BULL<<

▶︎ Another surprisingly strong GDP print this week

▶︎ The FTSE is outperforming

▶︎ Possible turnaround in the Economic Surprise Index

▶︎ CESI is higher

▶︎ PMIs have been surprising to the upside, especially in contrast to Germany and the Eurozone

>>BEAR<<

▶︎ Baily was more dovish than hawkish this week, and the first MPC member has already started talking about rate cuts (Tenreyro)

▶︎ Bailey was more dovish than hawkish last week, and the first MPC member has already started talking about rate cuts (Tenreyro)

▶︎ CPI surprise to the downside

▶︎ The entire country seems to be in disarray with everyone on strike and people being squeezed; the strikes haven't been front-page lately but they're still going on

▶︎ Bearish seasonality

>>SUMMARY<<

As I wrote last week: it feels like we've already seen every horror scenario for the sterling but it's still going and things will be a lot less bad than feared. It's still a short but I do see that (for me) it is tough to trade with way too many whipsaws.

The GDP surprise is the latest piece in the puzzle that looks brighter than expected. For me, the negative points above carry more weight because CPI and the BoE (both dovish) beat GDP and how the economy is doing (both hawkish), so I'll leave the short bias. GBP pairs are mostly trading sideways, so there will be longs and shorts depending on what's going on with the other currencies anyway.

***** AUD *****

>>BULL<<

▶︎ Commentary in the PMIs sounding pretty upbeat on the economy

▶︎ 25-delta risk reversal is bullish

>>BEAR<<

▶︎ CPI and GDP both surprised to the downside, taking pressure off the RBA

▶︎ Dovish hike by the RBA, market pricing for another hike is just 30%

▶︎ CPI and GDP both surprised to the downside

▶︎ Inherent weakness, it's just not trading well

▶︎ CESI is near lows, the CESI spread between AUD and NZD points to a lower AUD

▶︎ Bullish sentiment and bearish seasonality

>>SUMMARY<<

We'll get the RBA rate decision on Tuesday morning, pricing is 78% for 25 bps, 22% for no change. AUD and NZD are the risk-on currencies again with high correlations to ES (positive) and VIX (negative), so if I expect risk on with stocks higher and the dollar lower, I have to change the bias to bullish here even though I don't like the fundamentals, the sentiment, the seasonality or that it's just weak.

My reasoning for the long bias last week was the idea that we'd see risk on and a weaker dollar. Now we have a dovish hike by the RBA to digest and the economic fundamentals are still weak. We could see a bit of bullish action if markets calm down but there aren't many good reasons why it should go up. Changing the bias to bearish.

***** NZD *****

>>BULL<<

▶︎ The RBNZ is still going with 50 bps and they actively discussed 75 bps, they now have the highest policy rate among the G8, and they say that policy has to tighten further

▶︎ CPI surprise to the upside

▶︎ 25-delta risk reversal is bullish

>>BEAR<<

▶︎ Incoming economic data is getting weaker, the labour market is finally softening

▶︎ Positioning and sentiment are bearish

▶︎ CESI is trending lower

▶︎ Bearish seasonality

>>SUMMARY<<

The fundamentals aren't great here either but it has the RBNZ going for it, and I like that the spread between the CESIs of AUD and NZD are pointing towards NZD strength. Have to change the bias to bullish here too, and I have a bit less of a headache than I do with the Aussie.

I don't have much new information compared to last week except that it outperformed AUD by a decent margin, but they are still trading in tandem against the other currencies. Changing the bias to short here too but I still like it in favour of the Aussie.

***** CAD *****

>>BULL<<

▶︎ Positioning is bullish (probably but COT data is outdated by now)

▶︎ Risk reversal is bullish

>>BEAR<<

▶︎ The BOC has announced the end of their hiking cycle

▶︎ The first central bank to end their hiking cycle and hold rates at current levels, no hawkish tilt in their statement this week

▶︎ Sentiment is bullish

▶︎ Bearish seasonality

>>SUMMARY<<

The BOC will very probably be the first G8 central bank to pause this week. I'm still thinking positioning might be a supporting factor but the high correlation to USD (0.79 over 30 days, 0.94 over 100 days) means that a bullish bias doesn't make sense, so I'm changing it to neutral.

There's just nothing I find positive about it: the market traded it lower after the BOC statement and through the rest of the week. I don't understand what else it is playing: correlation to USD is weakening but still high at >0.60, it's uncorrelated to crude oil, the ES and VIX. Not going against the central bank so I'm changing the bias to bearish.

***** CHF *****

>>BULL<<

▶︎ CESI has picked up a bit

▶︎ CPI beat this week, CHF reacted

▶︎ Sentiment is bearish

▶︎ Hawkish commentary from SNB's Jordan

▶︎ CESI is now bullish

▶︎ It's the currency with by far the worst sentiment, USDCHF and EURCHF are the two FX pairs with the most bulls

▶︎ The most bullish risk reversal

>>BEAR<<

▶︎ Yields are underperforming

▶︎ PMI has weakened

▶︎ CSII is falling

>>SUMMARY<<

Still nothing I particularly like about it at this point.

The economy has picked up, CPI surprised to the upside, sentiment is outlandishly bearish, it's the only currency with a risk reversal I still like, and Jordan was hawkish. Changing the bias to long. The moves in CHF often feel erratic and not sustained for long but the fundamentals are clearly long here.

***** JPY *****

>>BULL<<

▶︎ 10y yield is glued to the upper band

▶︎ CESI is looking bullish

▶︎ Risk reversal sees USDJPY lower

>>BEAR<<

▶︎ Nothing hawkish from the BOJ so far

▶︎ Nothing hawkish again from the BOJ

▶︎ Implied volatility has gone down further, the market doesn't expect a surprise at the rate decision this week

▶︎ First disinflationary CPI print in a while last week

▶︎ First disinflationary CPI print in a while on Friday

▶︎ Still the most dovish central bank out there

▶︎ Seasonality is bearish and sentiment is bullish

>>SUMMARY<<

Nothing we hear from BOJ or government officials hints at any hawkish moves or surprises, the options market isn't concerned either. CPI was disinflationary as predicted by Ueda, and they've repeatedly said they will take their time to assess the market impact of their YCC tweak from December. Still, with US treasury yields topping out at some point and my bias for the dollar, I will be looking for shorts. I'm leaving the bias unchanged because I don't see the risk-off component in the markets that would justify a change to long here."

Still nothing hawkish from the BOJ but their rate statement projects inflation to come down in the short term and then increase again the second half of FY 2023, so in autumn this year. It reads as if they pushed back normalization of their policy in time but it's still very much a thing. I like that it traded well as a risk-off asset this past week."

Diffs guardadas

Texto original

Open file

"04.03.23
***** MACRO *****
     >>BULL<<
▶︎ Asian PMIs have improved considerably (Hong Kong, Taiwan), other Emerging Markets too (Brazil, Mexico)
▶︎ Chinese PMIs are going strong, the reopening trade is pausing but it should still be a tailwind
▶︎ Sector ETFs are trading well: offensive sectors look bullish, defensive sectors don't
▶︎ Bullish AAII sentiment has pretty much evaporated compared to last week, Fear & Greed is back at neutral
▶︎ Credit spreads are still contained, the Corporate Bond Market Distress Index is calm, bond volatility isn't very high
▶︎ Equity volatility indexes look decidedly better than last week: declining vol, steeper curve, flatter skew, also: declining currency volatilities; the only negative point is a divergence between VIX and MOVE again
     >>BEAR<<
▶︎ ETF flows continue to be very bearish: into short-term treasuries, out of duration, out of equities
▶︎ Copper has made a lower high and a lower low, at the least it's not bullish anymore
▶︎ Six out of eight G8 2s10s have so far inverted
▶︎ The Cleveland Fed Yield-Curve-Predicted GDP Growth model gets more and more negative
     >>SUMMARY<<
It feels like everything changes every few days. I like the market a lot more than last week: PMIs are improving globally and in key countries, sentiment has normalized, the price action in equity sectors looks bullish (even though the performance numbers are all over the place), volatility is doing well, breadth is okay. ETF flows are very bearish, though, and commodities don't seem to get out of their ranges.

***** USD *****
     >>BULL<<
▶︎ Again this week: the terminal rate has been repriced higher, rate cuts have been pushed further out
▶︎ GDPNow for Q1 is >2%
▶︎ CESI is rising too
▶︎ Improving PMI on the heatmap
▶︎ Inflation suprising to the upside and breakevens creeping higher
     >>BEAR<<
▶︎ Waller is still hawkish but he's pretty much the only one right now, Bostic and Kashkari see rates at levels currently priced in
▶︎ 25-delta risk reversals see the USD weaker
▶︎ We're in the trough of the dollar smile with global PMIs improving and the US not outperforming
     >>SUMMARY<<
Same for currencies: it feels like everything changes way too often. We've made a new high in the implied terminal rate this week but the USD was the FX underperformer. It's highly correlated to its 2y and 10y yields and it's tough to imagine them going much higher, also the negative correlation to ES... with how many positives I see for stocks it's hard to see much further upside in the dollar. The options market has been pricing the dollar lower for a few weeks now, and charts like the DXY, USDCNH, USDJPY all look toppy. Changing the bias to short.

***** EUR *****
     >>BULL<<
▶︎ The ECB still sounds hawkish but the Minutes showed some disagreement on their communication strategy
▶︎ Core CPI is sticky
▶︎ Stock markets are still outperforming
▶︎ 25-delta risk reversal looks bullish
     >>BEAR<<
▶︎ CESI has rolled over
▶︎ German PMI on the heatmap is weaker, Eurozone isn't improving
▶︎ Sentiment in EURCHF is very bullish, price action isn't constructive
▶︎ Positioning is at bearish extremes (probably but COT data is very stale by now)
     >>SUMMARY<<
I'm not sure what I'm thinking about the Euro at the moment. German yields are performing but EUR isn't following suit, we will probably see divergences with other pausing central banks soon but even the Fed isn't expected to pause before July, and disagreements among the GC members have already started to show up in the ECB minutes. I'm changing the bias to neutral.

***** GBP *****
     >>BULL<<
▶︎ The FTSE is outperforming
▶︎ Possible turnaround in the Economic Surprise Index
▶︎ PMIs have been surprising to the upside, especially in contrast to Germany and the Eurozone
     >>BEAR<<
▶︎ Baily was more dovish than hawkish this week, and the first MPC member has already started talking about rate cuts (Tenreyro)
▶︎ CPI surprise to the downside
▶︎ The entire country seems to be in disarray with everyone on strike and people being squeezed; the strikes haven't been front-page lately but they're still going on
▶︎ Bearish seasonality
     >>SUMMARY<<
As I wrote last week: it feels like we've already seen every horror scenario for the sterling but it's still going and things will be a lot less bad than feared. It's still a short but I do see that (for me) it is tough to trade with way too many whipsaws.

***** AUD *****
     >>BULL<<
▶︎ Commentary in the PMIs sounding pretty upbeat on the economy
▶︎ 25-delta risk reversal is bullish
     >>BEAR<<
▶︎ CPI and GDP both surprised to the downside, taking pressure off the RBA
▶︎ Inherent weakness, it's just not trading well
▶︎ CESI is near lows, the CESI spread between AUD and NZD points to a lower AUD
▶︎ Bullish sentiment and bearish seasonality
     >>SUMMARY<<
We'll get the RBA rate decision on Tuesday morning, pricing is 78% for 25 bps, 22% for no change. AUD and NZD are the risk-on currencies again with high correlations to ES (positive) and VIX (negative), so if I expect risk on with stocks higher and the dollar lower, I have to change the bias to bullish here even though I don't like the fundamentals, the sentiment, the seasonality or that it's just weak.

***** NZD *****
     >>BULL<<
▶︎ The RBNZ is still going with 50 bps and they actively discussed 75 bps, they now have the highest policy rate among the G8, and they say that policy has to tighten further
▶︎ CPI surprise to the upside
▶︎ 25-delta risk reversal is bullish
     >>BEAR<<
▶︎ Incoming economic data is getting weaker, the labour market is finally softening
▶︎ Positioning and sentiment are bearish
▶︎ CESI is trending lower
▶︎ Bearish seasonality
     >>SUMMARY<<
The fundamentals aren't great here either but it has the RBNZ going for it, and I like that the spread between the CESIs of AUD and NZD are pointing towards NZD strength. Have to change the bias to bullish here too, and I have a bit less of a headache than I do with the Aussie.

***** CAD *****
     >>BULL<<
▶︎ Positioning is bullish (probably but COT data is outdated by now)
▶︎ Risk reversal is bullish
     >>BEAR<<
▶︎ The BOC has announced the end of their hiking cycle
▶︎ Sentiment is bullish
▶︎ Bearish seasonality
     >>SUMMARY<<
The BOC will very probably be the first G8 central bank to pause this week. I'm still thinking positioning might be a supporting factor but the high correlation to USD (0.79 over 30 days, 0.94 over 100 days) means that a bullish bias doesn't make sense, so I'm changing it to neutral.

***** CHF *****
     >>BULL<<
▶︎ CESI has picked up a bit
▶︎ Sentiment is bearish
     >>BEAR<<
▶︎ Yields are underperforming
▶︎ PMI has weakened
▶︎ CSII is falling
     >>SUMMARY<<
Still nothing I particularly like about it at this point.

***** JPY *****
     >>BULL<<
▶︎ 10y yield is glued to the upper band
▶︎ CESI is looking bullish
▶︎ Risk reversal sees USDJPY lower
     >>BEAR<<
▶︎ Nothing hawkish from the BOJ so far
▶︎ Implied volatility has gone down further, the market doesn't expect a surprise at the rate decision this week
▶︎ First disinflationary CPI print in a while on Friday
▶︎ Still the most dovish central bank out there
▶︎ Seasonality is bearish and sentiment is bullish
     >>SUMMARY<<
Nothing we hear from BOJ or government officials hints at any hawkish moves or surprises, the options market isn't concerned either. CPI was disinflationary as predicted by Ueda, and they've repeatedly said they will take their time to assess the market impact of their YCC tweak from December. Still, with US treasury yields topping out at some point and my bias for the dollar, I will be looking for shorts. I'm leaving the bias unchanged because I don't see the risk-off component in the markets that would justify a change to long here."

Texto modificado

Open file

"11.03.23
***** MACRO *****
     >>BULL<<
▶︎ Asian PMIs have improved considerably (Hong Kong, Taiwan), other Emerging Markets too (Brazil, Mexico)
▶︎ Chinese PMIs are going strong, the reopening trade is pausing but it should still be a tailwind
▶︎ Fear & Greed is already at Extreme Fear
▶︎ Credit spreads are still contained, the Corporate Bond Market Distress Index is calm, FX volatility is relatively low
▶︎ First signs of possible exhaustion to the downside in stocks: the long wick on Friday's VIX candle and a day with >90% down volume on Thursday
     >>BEAR<<
▶︎ Fears of contagion from the SVB banking crisis
▶︎ Inflation breakevens, RINF, 5y5y forward inflation and crude oil are all lower... everything is still in their ranges but it could be the start of the market pricing in a hard landing
▶︎ Treasuries trading the way they are supposed to, i.e. flying in case of risk off, isn't a good sign for the market overall
▶︎ Currencies have displayed classic risk-off performance this week for the first time in a while
▶︎ Equity volatility has woken up, MOVE is >140 but both VIX and VVIX are well below their intraday highs from Friday
▶︎ Six out of eight G8 2s10s have so far inverted
▶︎ The Cleveland Fed Yield-Curve-Predicted GDP Growth model gets more and more negative
     >>SUMMARY<<
Last week I wrote that it feels like everything changes every few days, and in this regard the past week didn't disappoint. What stands out to me right now is that assets are trading more ""normally"" on risk off: stocks lower, vol and vol of vol making a decent pop, treasuries and JPY both higher. That's different from the last months. There are already a few signs of the market overdoing it, though. In terms of the bigger picture, the SVB collapse is one more crack showing up: we've had LDI funds on the brink of collapse six months ago, a subprime auto lender going under recently and now this.

***** USD *****
     >>BULL<<
▶︎ Powell put 50 bps back on the table even though he tried to walk it back a bit on his second day of testimony
▶︎ GDPNow for Q1 is >2%
▶︎ CESI is rising too
▶︎ PAIN shows flows back into USD from a basically flat position
▶︎ Improving PMI on the heatmap
     >>BEAR<<
▶︎ We're in the trough of the dollar smile with global PMIs improving and the US not outperforming on the one side and the current banking crisis not (yet?) serious enough to trigger panic flows
     >>SUMMARY<<
I'm seriously clueless about the dollar right now. The fundamentals are pretty good and 50 bps at the next FOMC meeting are in play again. But in a week where we had everything from hawkish Powell to a banking-crisis type risk-off situation on Friday, it's still mostly flat. Then there's CPI upcoming on Tuesday and more jobs data on Thursday; both could push us in either direction, and we've seen the volatility of the future Fed Funds pricing this week. Even a blunt ""long into FOMC because not everyone is positioned for a possible 50 bps hike"" isn't feeling convincing because of the move in the PAIN index. The calendar for next week suggests a weak first half and a strong second half, so that's going to be my base case. Changing to ""no bias"".

***** EUR *****
     >>BULL<<
▶︎ The ECB still sounds hawkish but the Minutes showed some disagreement on their communication strategy
▶︎ Holzmann put four further 50 bps hike on the table
▶︎ Core CPI is sticky
▶︎ Stock markets are still outperforming
     >>BEAR<<
▶︎ CESI has rolled over
▶︎ German PMI on the heatmap is weaker, Eurozone isn't improving
▶︎ Sentiment in EURCHF is very bullish, price action isn't constructive
     >>SUMMARY<<
It's still doing pretty well even though the economic situation is weakening. We'll get the ECB rate decision this week, and even though an outlier like Holzmann put four more 50 bps hikes out there the reality will probably more data-dependency and less guidance. Hard to see the market will like that.

***** GBP *****
     >>BULL<<
▶︎ Another surprisingly strong GDP print this week
▶︎ The FTSE is outperforming
▶︎ CESI is higher
▶︎ PMIs have been surprising to the upside, especially in contrast to Germany and the Eurozone
     >>BEAR<<
▶︎ Bailey was more dovish than hawkish last week, and the first MPC member has already started talking about rate cuts (Tenreyro)
▶︎ CPI surprise to the downside
▶︎ Bearish seasonality
     >>SUMMARY<<
The GDP surprise is the latest piece in the puzzle that looks brighter than expected. For me, the negative points above carry more weight because CPI and the BoE (both dovish) beat GDP and how the economy is doing (both hawkish), so I'll leave the short bias. GBP pairs are mostly trading sideways, so there will be longs and shorts depending on what's going on with the other currencies anyway.

***** AUD *****
     >>BULL<<
▶︎ Commentary in the PMIs sounding pretty upbeat on the economy
     >>BEAR<<
▶︎ Dovish hike by the RBA, market pricing for another hike is just 30%
▶︎ CPI and GDP both surprised to the downside
▶︎ Inherent weakness, it's just not trading well
▶︎ CESI is near lows, the CESI spread between AUD and NZD points to a lower AUD
▶︎ Bullish sentiment and bearish seasonality
     >>SUMMARY<<
My reasoning for the long bias last week was the idea that we'd see risk on and a weaker dollar. Now we have a dovish hike by the RBA to digest and the economic fundamentals are still weak. We could see a bit of bullish action if markets calm down but there aren't many good reasons why it should go up. Changing the bias to bearish.

***** NZD *****
     >>BULL<<
▶︎ The RBNZ is still going with 50 bps and they actively discussed 75 bps, they now have the highest policy rate among the G8, and they say that policy has to tighten further
▶︎ CPI surprise to the upside
     >>BEAR<<
▶︎ Incoming economic data is getting weaker, the labour market is finally softening
▶︎ Positioning and sentiment are bearish
▶︎ CESI is trending lower
▶︎ Bearish seasonality
     >>SUMMARY<<
I don't have much new information compared to last week except that it outperformed AUD by a decent margin, but they are still trading in tandem against the other currencies. Changing the bias to short here too but I still like it in favour of the Aussie.

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

>>BEAR<<
▶︎ The first central bank to end their hiking cycle and hold rates at current levels, no hawkish tilt in their statement this week
▶︎ Sentiment is bullish
▶︎ Bearish seasonality
     >>SUMMARY<<
There's just nothing I find positive about it: the market traded it lower after the BOC statement and through the rest of the week. I don't understand what else it is playing: correlation to USD is weakening but still high at >0.60, it's uncorrelated to crude oil, the ES and VIX. Not going against the central bank so I'm changing the bias to bearish.

***** CHF *****
     >>BULL<<
▶︎ CPI beat this week, CHF reacted
▶︎ Hawkish commentary from SNB's Jordan
▶︎ CESI is now bullish
▶︎ It's the currency with by far the worst sentiment, USDCHF and EURCHF are the two FX pairs with the most bulls
▶︎ The most bullish risk reversal
     >>BEAR<<
▶︎ PMI has weakened
     >>SUMMARY<<
The economy has picked up, CPI surprised to the upside, sentiment is outlandishly bearish, it's the only currency with a risk reversal I still like, and Jordan was hawkish. Changing the bias to long. The moves in CHF often feel erratic and not sustained for long but the fundamentals are clearly long here.

***** JPY *****
     >>BULL<<
▶︎ Risk reversal sees USDJPY lower
     >>BEAR<<
▶︎ Nothing hawkish again from the BOJ
▶︎ First disinflationary CPI print in a while last week
▶︎ Still the most dovish central bank out there
▶︎ Seasonality is bearish and sentiment is bullish
     >>SUMMARY<<
Still nothing hawkish from the BOJ but their rate statement projects inflation to come down in the short term and then increase again the second half of FY 2023, so in autumn this year. It reads as if they pushed back normalization of their policy in time but it's still very much a thing. I like that it traded well as a risk-off asset this past week."