Good morning, nothing much usually happens just ahead of U.S. employment report but last night, Fed’s James Bullard saw it fit to confuse market with another “Fed undecided on right path for rates” statement! Fed undecided on rate path . U.S. equities continued its gradual slide as the early support from higher WTI crude oil on Canada tar sands fire fizzled out Canada fires drive oil higher . Why should higher oil be better for stocks where humans will scratch their heads but machines algos ramp risk higher on such headlines!? We continue in Asia on further derisking as RBA statement of monetary policy release showed lowered inflation forecasts & readiness to cut rates again RBA lowers inflation forecast & ready to cut again . AUD/USD gapped lower to 0.7400 from 0.7460 post 9.30am (HK/SIN time) release. I am still short equities via S&P500 with eminis put fly, Dow & Eurostoxx50 futures. Short AUD/USD & GBP/USD. Long TYM6 call condor expiry today for maximum payoff if between 131.25 to 131.50 (i.e, 10 year UST 10 bp lower to around 1.66% from current 1.76%). Overshadowed by U.S. employment report might be the equally important Canadian’s employment report too where a weaker number will see USD/CAD higher to 1.3000 from 1.2860 now & oil lower to 43 from 46.35 (Dec16 contract) that I’m short. We’re indeed seeing a classic risk off where USD gains across all G7 and EM/Asia currencies now with sliding equities. I expect KRW & TWD to fall most in Asia where their stock markets had rebounded the most since February lows with government support & belated inflows due to EM ETFs ramp up recommended by various private banks & investment banks just 4 weeks ago.
Good morning, Australia Retail Sales came out this morning slightly better at 0.4% vs 0.3% expected & AUD/USD grinded higher to 0.7490 from 0.7450 lows. It feels like a day of consolidation post U.S. ADP last night which came weaker than expected at 156k vs 205k expected and U.S. stock continued their slow grind lower last night with S&P500, Nasdaq100 & Dow all off by -0.6%. Notable moves in FX seen in GBP/USD that continued to be offered (falling from 1.4555 to 1.4461 intraday lows) on back of weaker than expected U.K. Contruction PMI out at 52 vs expected 54.1. CAD continue to weaken as $/CAD marched higher to 1.2850 (intraday highs 1.2887 higher by 4 big figures in 36 hours!) as Canada Trade Balance worsened out at -3.4 billion deficit vs -1.2 billion expected and U.S. Crude Oil inventories out at 2.8 million vs 0.6 milion expected saw oil prices capped & reversing. Have shorted Dec WTI Oil as signs of the rally squeeze from February lows are over and riding the positive carry contango out the curve. Looks like Saxobank came out with report similar to my view Saxobank warns of crude oil rally over . Ahead of Friday’s U.S. employment report, added a TYM6 call condor 131 / 131.25 / 131.5 / 131.75 expiring tomorrow Friday for maximum payoff if 10-years UST yields fall 10bp lower to around 1.66%. Tight trailing stops to protect profits in short AUD/USD, short GBP/USD with short Dow & Eurostoxx50 futures as it will be a crap shoot at best in guessing outcome of U.S. employment report that algos will drive it violently either way in that short span of time when out.
Good morning, the RBA 25bp cut to 1.75% innocuous as it with AUD/USD plunging from 0.7720 to 0.7490 led to AUD/JPY selling from 81.9 to 79.5 that cascaded & brought on $/JPY & NKY lower. Stops fest (with Japan out on holiday) saw lows of 105.55 touch by 4pm (HK/Sin time) when London came in. Unexpectedly poor UK Manufacturing PMI at 49.2 vs expected 51.3 saw GBP/USD lower from 1.4770 to current 1.4545. The lower NKY led to lower S&P500 eminis (that ignored the weaker China Caixin PMI in Asian morning) & led to weaker DAX & Eurostoxx50 when Europoan session started. WTI crude oil reversed lower by 2% to 43.85 accelerated the U.S. & European equities lower with $/CAD jumping from 1.2460 to 1.2710 presently. Sometimes, when a butterfly flapping its wings can cause a tornado somewhere else in chaos theory … it just points to the randomness in markets exarcerbated by bad positioning with the street long AUD, long equities, long oil, long EM, short GBP, short bonds & short vols especially among the fast money crowd and some of the real money too. Sell in May & go away may have well started!