More of the Same or Something Different?
|OVERVIEW - It's all been so quiet out there. I know we've been seeing some potential for movement, with the US Dollar trying to make its way back and stocks coming off a bit. But it hasn't been much at all. This week's dull economic calendar and the fact that it's August isn't helping the cause. And so, we head into Thursday with markets feeling like they could get active at any moment, but at the same time, not doing anything just yet. On the FX side, we continue to hold the long USDCAD exposure from 1.2605, while on the equities side, there hasn't been any change worth talking about. Stocks are super extended across the major time frames and at a minimum should relent to some form of a decent correction. But they have yet to do so and there's no point in getting excited right now.
LOONIE - I am going to keep a close eye on USDCAD now and will be looking to tighten up the risk. It all looks like we could see more upside follow through, but I can't neglect the fact that the US Dollar hasn't been a favorite play in 2017 and could easily come back under pressure again. I'll be monitoring the price action in the New Zealand Dollar on Thursday as it digests the latest RBNZ decision and if I feel there is an opportunity there, I will be happy to get involved.
STRATEGY - The plays I like are all selling Kiwi, which means I will be looking to sell NZDUSD, buy GBPNZD or buy AUDNZD....but only if the trade sets up. I'm also super interested in EURGBP up here above 0.9000 and believe selling up here, perhaps between 0.9100-0.9300 offers compelling risk to reward longer term. I still see the market needing to unwind the worst case Brexit scenarios and while it may take time, ultimately, this should translate to a bigger drop in this cross rate in the months ahead. I suppose the other super sweet thing about this trade is that it offers a positive carry. So to be short EURGBP actually pays money to hold each day. Anyway, let's see how things play out today.
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