Intraday Market Thoughts

Learning from EURCAD Trade

Mar 24, 2017 16:37 | by Ashraf Laidi

The following is the rationale behind our long EURCAD trade issued to our Premium susbcribers last week, currently +100 pips in the green. The focus here is on the rationale behind the decision to go long as highlighted in the 7 reasons below. Considerations of technnicals, fundamentals, intermarket cross-correlations can benefit significantly when applied correctly.

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Learning from EURCAD Trade - Eurcad Premium Snapshot Mar 24 2017 (Chart 1)

Repeal-Replace Delayed

Mar 23, 2017 22:20 | by Adam Button

When in doubt, delay. Republicans delayed the vote on their first major piece of legislation as Tea Party supporters said it didn't do enough to eliminate Obamacare. The pound was the top performer while the Australian dollar lagged. Last night's Premium is now in progress joining 7 other trades. 2 trades in indices, 2 in commodities and 3 in FX.

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Repeal-Replace Delayed - Hyg Monthly Mar 24 2017 (Chart 1)

Newspaper editors and TV talking heads love a political story and with markets focused on populism, they were pulled into the latest drama.

The story was framed as a referendum on Trump's agenda and even bond king Jeff Gundlach was sucked into predicting trouble if the vote failed. Yesterday we wrote that if the vote failed or was postponed, there will be selling but Republicans will quickly regroup and move forward. And we wrote that markets will recognize that.

The S&P 500 fell 10 points as questions arose but the market regrouped and finished off the lows, down just 2.5 points. USD/JPY finished slightly lower and Treasury yields ticked higher.

Expect similar themes to play out over the course of the coming four years. Trump is a different kind of politician but Washington is largely unchanged and grandstanding, threats, compromise and brinksmanship will never go away. At times markets will be rattled but the trade will increasingly be to fade the rhetoric and focus on fundamentals.

Looking ahead, the Asia-Pacific schedule is light. The lone number to watch will be the Nikkei Japan PMI for manufacturing. The prior reading was 53.3. Japanese manufacturing has picked up and the numbers will offer clues on whether factory managers believe it will last.

Aside from that, look for headlines on the healthcare bill. Meetings are expected deep into the Washington night and the vote could be delayed again.   

Act Exp Prev GMT
Flash Manufacturing PMI
54.2 Mar 24 13:45
Flash PMI Manufacturing
53.3 Mar 24 0:30

Why the House Health Care Vote Matters

Mar 22, 2017 22:04 | by Adam Button

The current version of Trump's healthcare plan will be dead-on-arrival in the Senate yet Thursday's vote in the House is a blockbuster. We explain why. The yen was the top performer on Wednesday while the Australian dollar lagged. A new Premium trade has been issued ahead of the House vote, backed by 4 technical reasons and 4 charts. 5 out of the 7 existing Premium trades are currently in the green.

Why the House Health Care Vote Matters - Mysterychart Mar 22 2017 (Chart 1)

The risk aversion in markets stopped on Wednesday but a more-accurate description was that it was on pause. The market is trying to figure out if the House vote on Thursday on the bill to replace Obamacare will pass or fail.

The bill itself isn't so much what's at stake. The market is increasingly viewing it as a test of Republican leadership. It's a barometer on whether Paul Ryan and Donald Trump can whip the House into supporting its agenda.

So what's at stake isn't necessarily this bill. It's the tough fights on tax reform, infrastructure and regulation that are ahead. The mantra of 'repeal and replace' Obamacare was the one thing seemingly every Republican agreed upon but exactly how that would work is proving to be a problem.

A risk we see here is that the market is overstating the problem. This isn't a Republican vote on Trump, his leadership or team unity. It's a vote on a specific piece of legislation and some Congressmen want it changed.

In that sense, buying something like USD/JPY or equities could have limited downside risks. If it passes, it's all upside. If the vote fails or is postponed, there will be selling but Republicans will quickly regroup and move forward. Markets will recognize that sooner than some think.

Changing gears to central banking, the RBNZ held rates at 1.75%, as expected. The anti-NZD jawboning continued and the message was largely unchanged. One small shift was language saying inflation will return to target in the medium-term, rather than 'gradually'. NZD initially dipped but is back to pre-RBNZ levels.

The rest of the Asia-Pacific calendar is light but it will pick up later with UK retail sales and Yellen on the agenda.

Act Exp Prev GMT
Retail Sales (m/m)
-0.3% Mar 23 9:30