USD to test high end of range

Quick note today:

USD showing strength on the back of higher rates, in the 10 year U.S. bonds (over 3% ).  The FED confirmed its positive view on the U.S. economy which also helped the USD.  The strong USD hurt the commodities and EM markets.  President Trump and his rhetoric regarding the trade war with China caused  Asian stocks to open up weaker this morning.  While the VIX index is rallying on the market uncertainty.  The market is also focusing on Turkey as the situation is getting more serious by the day and there the U.S. administration leveled sanctions against Turkish officials because of the detention of a U.S. pastor.

Dollar index ticking up and looks to test higher in the short term

As we have stated before a couple of the key indicators we follow to get a sense of the risk in the market are USDJPY and the VIX index.  Both as shown below are showing signs of increased stress.  For this reason we are reducing our open positions.  Details can be found on our position tracker.

VIX index  up 75 bps since yesterday, would not be surprised to see it test the 15% level.

It feels to us that the trade issues are resurfacing and the possible good news regarding NAFTA partners which was supportive to the market, is being overshadowed by the U.S.- China escalation, with both sides digging in.

New Trade:

Those looking to rotate out of higher risk equity positions, we recommend buying Novo Nordisk CFD before the company reports on August 8th.  We see it a s a good defensive play in this market.

Buy between 310 and 315 today and tomorrow if get a chance.  Target 350, stop 295

  • Novo Nordisk has underperformed it peers in the last 3 months.
  • Novo Nordisk will benefit from USD strength as 50% of revenues comes from the U.S.
  • We look for Novo Nordisk to adjust full year guidance upwards.  Current guidance is topline growth of 3-5% in DKK and a growth rate 2-5% in ordinary result
  • Latest subscription data shows Novo Nordisk taking market share from both Sanofi and Eli Lilly

TickerDate OpenedEntry PriceStopTarget PriceCurrent Price
EURUSD Put Option / Strike 1.1300 / Exp. 26 of Sept.2/70.0056premiumbelow 1.13000.0010

Visit our Position Tracker to look at all of our realized trades: http://www.mintermarkets.com/position-tracker/

– Mark W

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