Macro Dragon: Big Hat, Lots of Cattle... USDCNH Up, AUDUSD to potential tank big time...

Macro 4 minutes to read

Kay Van-Petersen

Global Macro Strategist

Summary:  Macro Dragon = Cross-Asset Daily Views that could cover anything from tactical positioning, to long-term thematic investments, key events & inflection points in the markets, all with the objective of consistent wealth creation overtime.


(These are solely the views & opinions of KVP, & do not constitute any trade or investment recommendations. By the time you synthesize this, things may have changed.)

Macro Dragon: Big Hat, Lots of Cattle... USDCNH Up, AUDUSD to potential tank big time...

 

Top of Mind…

  • Some of you would have gotten the urgent & important mail that KVP sent out yesterday when we started to break out higher on USDCNH above the key 7.1500, we soon took out the 7.1660ish high set in Mar this year, then touch the ATH of 7.1965 that was market in Sep 2019. This morning Asia we are +0.10% at 7.1837… 7.20 continues to be the lvl.
  • We still continue to feel, it’s the best barometer for US / CH relations… & yes, implications to the downside are worse for Asia (especially Aussie & other key trading partners of China) than for the US (remember, this time around Trump has the Fed & treasury to backstop any fall in the stock market – so if he pulls the plug on the trade deal he gets:
  • 1. To look like the strongman of the US, being tough on China.
  • 2. As my man Tesla-J pointed out, he gets to say he’s bringing American manufacturing home as he had promised.
  • 3. He gets very little/to no push back from the dems (i.e. No support for China from either party, especially in a post C19 world).
  • 4. He gets +200% increased support on the monetary policy side from the Fed & treasury… remember Trump > Treasury > Fed… [& yes, amazing that they have not pushed for a structural USD devaluation, but always trickier to do in a polarized & anti-globalization stance that his administration has had]
  • 5. He gets +100% increased pressure & probability of further fiscal support from Congress.
  • 6. He gets to justify more spending & budget increased for military expenditure, given increased tensions with China. Again, KVP will pull out the fog horn… defence is lagging & it makes no sense… KVP would just lift the blob (Yes, classic macro guy when it comes to equities, “just give me the sector blob”), with an etf like ITA… again another roller coaster session +5% o/n… as of close of last wk, it was -31% YTD, now we are -25%... there is more room to run here, than a snail embarking on a marathon.
  • Bottom line, the risk to a sustained fall in US equities from a US / CH trade deal break, is significantly lower today than it was in January. The US – from the perspective of Trump wanting the stock market to be supported & going up – is anti-fragile in regards to worsening relations between the US & China. In fact to KVP, if Trump really wants higher US equity markets (more Fed liquidity & support [MP], more fiscal packages [FP]), then the “optimal move” is to break the trade deal & worsen relations with China. There will be obvious side effects of a higher USD (which he can say does not matter, given point #2 above) & the US agricultural sector potentially losing multi-year to perpetual structural demand from China (que in BZ, Aussie, Kiwi & other non-US farmers doing backflips on this).
  • Lastly think we likely see new highs on USDCNH & KVP is surprised that AUDUSD continues to be bid, he can envision a big break lower sub of 0.6500 from these 0.6625-80 lvls…
  • Big Hat… Lots of Cattle… BHLC… now lets move on to Process, Next Best Trade… PNBT…
  • Have a great day & stronger close to the wk & month everyone…

-

On The Radar Today

  • NZ: ANZ Business Confidence
  • AU: RBA’s Lowe Speaking 08:00 SGT, Private Capital Expenditure
  • EZ: Regional flash CPIs out of Spain & Germany
  • US: 2nd reading on 1Q GDP, Durable Goods, Pending Home Sales, Natural Gas Storage, Crude Oil Inventories, FOMC Williams @ 23:00

-

Start-End = Gratitude+Integrity+Vision. Create Luck. Process > Outcome. Sizing > Idea.


Namaste,

KVP

Disclaimer

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 is not intended to and does not change or expand on this. 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/en-hk/legal/disclaimer/saxo-disclaimer)

Saxo Capital Markets HK is a company authorised and regulated by the Securities and Futures Commission of Hong Kong. Saxo Capital Markets HK Limited holds a Type 1 Regulated Activity (Dealing in securities); Type 2 Regulated Activity (Dealing in Futures Contract) and Type 3 Regulated Activity (Leveraged foreign exchange trading) licenses (CE No. AVD061). Registered address: Rooms 2001-02, 20/F York House, The Landmark, 15 Queen's Road Central, Hong Kong

By clicking on certain links on this site, you are aware and agree to leave the website of Saxo Capital Markets, proceed on to the linked site managed by Saxo Group and where you will be subject to the terms of that linked site.

Apple, iPad and iPhone are trademarks of Apple Inc., registered in the US and other countries. AppStore is a service mark of Apple Inc.

Please note that the information on this site and any product and services we offer are not targeted at investors residing in the United States and Japan, and are not intended for distribution to, or use by any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation. Please click here to view our full disclaimer.