Get 40% Off
💰 Buffett reveals a $6.7B stake in Chubb. Copy the full portfolio for FREE with InvestingPro’s Stock Ideas toolCopy Portfolio

Australian dollar enters the pain trade

Published 20/02/2023, 11:05 am
GBP/USD
-
USD/JPY
-
AUD/USD
-
AUD/JPY
-
CAD/JPY
-
XAU/USD
-
USD/CNY
-
GC
-
LCO
-
ESM24
-
KRW/USD
-
US2YT=X
-
HYG
-
DXY
-
IDR/USD
-
THB/USD
-

DXY tried and failed to break out. The pain trade is definitely higher now:

 
DXY

AUD is grinding through its H&S neckline:

AUDUSD

Oil whacked, gold held on:

BRENT

Metals, miners, EM soft:

COPPER
RIO
EEM

Junk (NYSE:HYG) teetering:

HYG

Yields eased:

YIELDS

Stocks fell with a decent BTFD:

SPX

BofA sums it up for me:

The View: Real economy too strong for inflation target, macro policies not tight enough yet. Stay bullish USD h1 on risk-off, bearish later assuming inflation eventually drops; risk that it will take longer and more pain. FX depends on CB commitment to target. Real rate dynamics more positive for EM as year progresses, especially for BRL, ZAR and IDR.

Leading indicators: Despite strong labor data, leading indicators suggest US recession may be imminent. Historical analogs show growth shock and Fed cuts, upside risks to our bearish end-year USD outlook.

JPY: Rebound limited by structural headwinds: fiscal constraints on monetary policy, shift in Japan’s foreign assets. JPY front-end to remain low, supporting USDJPY carry. Rapid tightening risks JGB downgrade. We expect USDJPY to rise to 138 this year.

GBP: About pricing out bad news, not pricing in good news in 2023. Reluctance to go long acts as ceiling. Barring renewed domestic chaos, lows in GBP in place. 2024 may hold promise of better depending on Brexit. Structural headwinds well known and are playing a part in depressing domestic consumption.

FX vol: AUDJPY vol historically FX hedge for hard landing, followed by other AUDcrosses and CADJPY.

Asia FX: Maintain forecasts despite near-term pull-back on stronger USD. Neutral CNY as equity inflows balance negative carry and CA deterioration. Bullish KRW, TWD, THB on linkages to China, IDR on bond flows and INR on valuation. Bearish PHP on twin deficits.

3rd party Ad. Not an offer or recommendation by Investing.com. See disclosure here or remove ads .

If the DXY pain trade gathers pace, AUD down, down.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.