Xi what I did there...
アップデート済
Risk receiving another shot of caffeine after a ‘positive’ G20 outcome…. as expected … US and China agreeing to delay tariff increases while negotiations resume. Politically Trump needs to run on the back of a strong economy, the risk is that Xi will view him as already weaken and can continue to exploit this to the advantage of China.
China called Trump’s bluff that he would not follow through on additional tariffs given that these would place a bigger burden on voters. To put simply, Trump needs to resolve the trade dispute with China, but China knows that time is on its side and can play the long game. The cost of reaching an agreement will only decrease as Trump gets closer to the 2020 election.
The upcoming US earnings will show companies are scrapping their plans for Capex and boosting cash flow. Whilst this is a negative factor for risk in the long-term, it will be enough to support liquidity in the short-term. Here we can expect USD to diverge from the “everything is roses” story and I recommend here selling into USD strength. Although the G20 outcome at first glance may lead markets to believe the Fed will only cut by 25bp in July, I hold a different view and stick to a 50bp July rate cut. In terms of timing, if Friday’s NFP undershoots we are going to see a major short-circuit in the current temporary USD rebound on the FX board.
On the technicals ...
Momentum is entering back at the highs here and we are starting to enter in major value areas for those wanting to trade the end of the business cycle. The nature of the move to the upside will be called into question once we break below 2,744, by then it will be too late for them to realise what is happening and that we are marking very long term highs in Global equities. The damage will be done technically below 2,744 which opens the floodgates for macro legs lower than 2500 into 2020/2021.
China called Trump’s bluff that he would not follow through on additional tariffs given that these would place a bigger burden on voters. To put simply, Trump needs to resolve the trade dispute with China, but China knows that time is on its side and can play the long game. The cost of reaching an agreement will only decrease as Trump gets closer to the 2020 election.
The upcoming US earnings will show companies are scrapping their plans for Capex and boosting cash flow. Whilst this is a negative factor for risk in the long-term, it will be enough to support liquidity in the short-term. Here we can expect USD to diverge from the “everything is roses” story and I recommend here selling into USD strength. Although the G20 outcome at first glance may lead markets to believe the Fed will only cut by 25bp in July, I hold a different view and stick to a 50bp July rate cut. In terms of timing, if Friday’s NFP undershoots we are going to see a major short-circuit in the current temporary USD rebound on the FX board.
On the technicals ...
Momentum is entering back at the highs here and we are starting to enter in major value areas for those wanting to trade the end of the business cycle. The nature of the move to the upside will be called into question once we break below 2,744, by then it will be too late for them to realise what is happening and that we are marking very long term highs in Global equities. The damage will be done technically below 2,744 which opens the floodgates for macro legs lower than 2500 into 2020/2021.
ノート
Watch-out .. bears coming in strong
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