EM FX weekly

Macro Monday Week 42: "Phase One" - here we go again...

Macro 3 minutes to read
Kay Van-Petersen

Global Macro Strategist

Summary:  This week starts with equities rallying out of the gates on the euphoria of "Phase One" partial deal completion in the works between the US and China. Love it or hate it, believe or disbelieve it - respect the price action, our roles are to make money consistently over time. We could see a squeeze higher in risk-on assets and a pullback in risk-off assets over the near team.

Macro Monday WK 42: “Phase One” partial deal, here we go again… 



A  replay of the call is available HERE


TGIM & Happy Macro Monday everyone, welcome to WK 42

Regardless of whether you believe Trump that a partial deal is in the wraps, one must respect the potential price action & potential squeeze higher on risk-on assets, as well as pullback on risk-off assets.

In particular, areas that have lagged such as energy & biotech etfs on XLE & IBB, Kospi & Hang Seng indexes & of course the agri complex, could grind up much higher for quite a few sessions – alongside a USDCNH 7.08, which could go back to test the 7.00 level.

On the other end gold, silver & the precious metals complex (etfs, single stock names, etc) could see some serious pressure lower over the next few trading sessions. Especially if we continue to have another big move up in US yields (i.e. we’ve gone from c. 1.53% to +1.73% in a wk on USTs), USDJPY 108.31 & USDCHF 0.9961 could continue to climb. The former looks that much interesting as previously these 108.50 / 109.00 area has been key resistance area for DollarYen traders.  

Wishing everyone a healthy, phenomenal, smooth, profitable & bell-curve setting start to the 4Q!





Summary of Prior Week:

  • Geo Politics: After what was a lot of noise of the talks being on, then off, then back on – we got news on Fri prior to the US mkts close from Trump that the talks were going well. This Asia morning, we have tweets from him talking about Phase One being done, ice on tariffs hikes with China due to buy US agri products, give IP protection assurances as well as some kind of currency agreement

    Regardless of whether you are skeptical (KVP) on whether this holds or not, respect the price action & potential squeeze higher on risk assets & pull-back in risk-off assets
  • Econ: Global trends is still lower…
  • FI: Wider from 1.53% to 1.73% in UST
  • FX: 2nd wkly down move in the DXY at -0.51%, still 98.00 is the lvl to break for the bears. On G10 Cable stole the show with a +2.75% lift vs. the greenback, with CAD +0.88% 2nd. On the flip side the Yen & Franc were only losers again the USD last wk at  -1.25% & -0.18%
  • CMD: Bounce back in Oil, Silver, Platinum, Copper & Iron ore… most of the softs continue to move higher, apart from Coffee & Sugar
  • EQ: Majority of last wk’s upside, in some cases over +100% came through on the Fri session
  • Vol: After a pop through 20.00 on Tuesday, we pulled back c. -9% for the wk to close at c. 15.60 lvls.


COT Report: [@Ole_S_Hansen]

  • Trend in USD Net-Longs increasing, goes on…3rd wk running, with a +5% pop to $18.4bn ($17.6bn)
  • Slight shave in Kiwi shorts, yet they keep piling onto the Brazilian real & longs continue to peter away from the yen
  • Second week running in net-long exposure being reduced across the commodity matrix


Week Ahead

Key Focus:

  • Latest US / China Show – “Phase One” | Turkey’s War In Syria | Inflation Themed Week | China 3Q GDP | RBA Mins

Central Banks (SGT):

  • MAS (14) BoK 1.25% e 1.50% p (16) HK 0.97% p (17-21)

FOMC Speakers (SGT):

  • George 2x, Bullard, Evans 2x, Brainard, Bowman, Williams, Clarida

Other (SGT):

  • Bank Holidays (US, CA, JP), BoJ’s Kuroda, BoE’s Carney, RBA’s Lowe, Bundesbank’s Weidman

Econ Data:

  • US: Empire State Mfg. Index, RS, Phily Fed Mfg. Index, Beige Book, TIC Purchases, Housing Data, IP
  • CH: CPI 2.9%e 2.8%p, PPI -1.2% -0.8%, FAI 5.5%e/p, IP 5.0%e 4.4%p, RS 7.8%e 7.5%p, 3Q GDP 6.1%e 6.2%p
  • EZ: GER ZEW, CPI 0.9%e 1.0%p CORE 1.0%e/p
  • JP: Revised IP & Tertiary Industry Activity, National CORE CPI,
  • UK: Jobs data due, CPI 1.8%e 1.7%p, CORE 1.7%e 1.5%p, PPI, RS
  • NZ: Visitor Arrivals, Milk Auction, CPI 1.4%e 1.7%p, Credit Card Spending
  • AU: RBA Mins, MI Leading Index, Jobs Data 15.3k e 34.7k p
  • CA: CPI 1.8%e/p, CORE 2.1%e/p, Mfg. Sales & ADP


Potential Implications of “Phase One” Market Reaction: Near-Term Tactical view

  • Respect near-term potential squeeze & look for jump-on momentum plays…


  • We could decent pop ups in things that have been out of favor including XLE & IBB (energy & biotech etfs), Kospi, Hang Seng Index, Nikkei, Dax, European Banks, China Tech names…


  • On the flip side, precious metals complex & their derivatives could face a lot of pressure as this wk kicks of from gold, silver, platinum to GDX, GDXJ, SIL & of course individual names


  • Don’t mistake this for a structural done deal to the Trump saga on Tariffs…


  • For now, KVP continues to believe, that the most likely 2020 campaign for Trump will be one that runs on Tariffs against China & the RoW, projecting the “strong man” of America & “USA, USA, USA First” theme…

Chartography & Price Action

  • We focus on 6m horizon daily chart, given the potential tactical rally we could see in risk-on assets, as well as pullbacks in risk-off assets
  • We can see the energy & biotech etfs of XLE 57.89 & IBB 100.24 look asymmetrical to the upside, with supportive indicators on the charts. On IBB key near-term resistance lvls to watch are 100D & 200D at 104.044 & 106.21. On XLE similar MAs are 59.90 & 61.54
  • The Hang Seng Index 26,300 looking like its trying to break out higher given Friday’s strong session of c. +2.3% & general suppression given the HK protestors
  • S&P 2978, seems to be in the midst of a bullish MACD trigger, all about taking out 3,000 before challenging the ATH of 3032
  • USDCNH 7.0809, recall highs were 7.1965 on Sep 3, the market will likely look to test the 7.00 lvl if the trade talks stay positive – that’s also the 100DMA
  • EURUSD 1.1029 looks like we have based for now, 1.1050 / 1.1100 are next key lvls – likely it has to be a USD weakening story rather than EUR strength story
  • GBPUSD 1.2606, massive spike last wk with +2.75% (unlevered!) as things get a bit frothy on favourable Brexit expectations – event wise it’s a roll of the dice. From a purely charts & price action perspective, cable looks like its trying to break out higher… 200DMA of 1.2713 is what is needed on a weekly close
  • Gold spot 1485.39, these 1480 lvls has been flagged as key by our commodity strategist Ole Hansen… from a moving average perspective 1446 is the 100DMA, with the real line in the sign being around the 1370/1380 range – which is the 200DMA
  • Silver spot 17.5141, the chart shows that 17.00 to 16.56 should offer some range of support – the line in the sand is just under 16 at 15.92 (200DMA)


The Saxo Bank Group entities each provide execution-only service and access to Analysis permitting a person to view and/or use content available on or via the website. This content is not intended to and does not change or expand on the execution-only service. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws.

Please read our disclaimers:
Notification on Non-Independent Investment Research (https://www.home.saxo/legal/niird/notification)
Full disclaimer (https://www.home.saxo/legal/disclaimer/saxo-disclaimer)
Full disclaimer (https://www.home.saxo/legal/saxoselect-disclaimer/disclaimer)

Saxo Bank A/S (Headquarters)
Philip Heymans Alle 15

Contact Saxo

Select region


Trade responsibly
All trading carries risk. Read more. To help you understand the risks involved we have put together a series of Key Information Documents (KIDs) highlighting the risks and rewards related to each product. Read more

This website can be accessed worldwide however the information on the website is related to Saxo Bank A/S and is not specific to any entity of Saxo Bank Group. All clients will directly engage with Saxo Bank A/S and all client agreements will be entered into with Saxo Bank A/S and thus governed by Danish Law.

Apple and the Apple logo are trademarks of Apple Inc, registered in the US and other countries and regions. App Store is a service mark of Apple Inc. Google Play and the Google Play logo are trademarks of Google LLC.