Mid-Week Positioning: FX
In-line with Macro Pulse
Hi, I had shared the overall view on Macro Pulse here, which lays a pathway on how I see the Macro:
Macro Pulse and Trades in Play
Over the past couple of months and the last quarter, the focus of the market has been on Inflation direction, Growth concerns and the US Fed path on rates more specifically around inflation. I am currently working on an Equity Model which to be honest I have completed and will share that soon. Anyways, back to Macro Pulse check and trades I have in play.
Mid-week, we have had ISM PMI numbers and Jolt Job opening data on the USD front, EUR is quiet so far into the week. Main takeaway from the PMI report is the decline in PMI prices from 60.9 to 57.0, contraction in new orders also. Overall, PMI headline came in lower at 48.7 from 49.2.
From the inflation focus, contracting PMI prices is a relative positive sentiment to the anticipation of rate cuts, US 2s trading lower towards April CPI print level:
Compared to US 2s, the 5s from a market structure perspective is accelerating lower:
The same phenomenon across the 10s. Overall the curve is indicative of pricing in rate cuts with recent data release. The DXY is also reacting in that fashion, trailing yields direction, as DXY trends lower also close to the CPI print level
S&P500 sentiment is mixed, I think its trying to price in growth concerns with weak PMI numbers and also reacting positively to declining PMI prices solidifying further positive anticipation of rate cuts.
In terms of trade opportunity, my focus is on the long EURUSD and NZDUSD. I am a bit skeptical on trading EURUSD due to the MPC meeting later in the week. NZD has less high impact news, reduces the risk of volatility into the week, of course not discounting for US NFP numbers on Friday.
For EURUSD, if you are still holding the long trade I shared last week, with protective stops at break even, you could still hold the position into 1.09813:
For NZDUSD, I am a bit skeptical of a long run, but I have relative confidence in a long position towards 0.62175, if it expands higher I could leave room for a move into 0.68200
But, I am navigating the trade on an intraday basis, with target at 0.6220, leeway for expansion into 0.62300