Trade Ideas We Like
As we await the ECB on Thursday and the Fed next week, we are trying to decide if we are entering a new risk on mode in the market or are we headed for a risk off/ defensive market. There is always the option that we are in a consolidating market, which analysts and salespeople don’t like to admit, as it isn’t much fun to write about or easy to get clients interested in trading.
We are leaning towards the later. The market seems to us to be in a holding pattern while we get more information on global growth and a feel for how aggressive the global central banks are going to be. (how worried they are/ how politicized they have become)
Minter high level views:
ECB delivers, but won’t impress: -10 bps on rates, QE bond buying resumption, tiering will wait. We think the ECB will save some fun for the new ECB head, Lagarde.
Fed delivers a .25% cut and hints that more cuts will follow, if economic developments warrant it.
Norges Bank, after todays 2.1% print on inflation and a stronger than expected regional network report, the market is very split on whether we see a hike.
Our opinion is that, if we see a hike or not, we most likely will not see much of a reaction. A hike will most likely be the last for some time.
Brexit, we think Boris actually wins an election, but time is running out on having to ask for an extension. Tough one to handicap…
(Don’t count Boris out!)
Trade: we think this is a slow burning theme. Nothing happens until October, and we would be surprised if there was an agreement this year.
The market will most likely continue to trade up and down in the short term based on tweets and statements. We think the market wants to be positive to risk and wants to lean on trade as the driver in an environment where global growth is slowing.
While we wait for some kind of direction from the Central banks the next couple of weeks (if for no other reason than to get confirmation of market expectations):
Gold, one of favorite long term trades, has dropped more than we expected the past few trading sessions. We see support at the 1,480 to 1,500 level. A close below will have us doing some soul searching. With easy global monetary policy, the possibility of a long drawn out trade war, hard Brexit and political trouble areas such as LATAM, IRAN, North Korea and Hong Kong, we see a good chance for a test of 1,600. We suggest adding select gold miners to clients portfolios. Call to discuss!
AUDJPY is often an FX cross that the market follows to get a guide into risk appetite. The cross is at a key level for us in terms of the technical picture. A break of 73.80 would open for a test of 75.00.
Stay tuned for Tweets, Chinese comments in media on trade, possible Iran issues driving oil prices, but we don’t expect surprises from the Central banks.