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: Oil Inventories, US GDP & Fed meeting...
Top of Mind…
- The stealth rally in the yen continues – regular readers will not be surprised that on Macro Dragon we’ve been saying 105 / 103 / 100 on DollarYen have always been a lot more feasible than +110 on DollarYen (one touches & . From KVP’s perspective its simple…
- Remember this on Jan 2020:
- The Fed was at sub 25% of its balance sheet to GDP… whilst
- The BoJ was at +100% BS / GDP… who has more fire power?
- That’s right… “The QE for Life” central bank… the Fed… US economy in Jan 2020 was c. $21trn v.s JP’s $5trn… its not even a competition… by the end of 2Q... the Fed will have done +$5trn, more than what the BoJ has done for c. the last 8yrs
- Its not even about DollarYen being at 100, its about it being well south of 100 in 12-18m time…
- USDJPY closed down -0.35% to 106.63, not a lot of people are watching this – also note FX vol is low again in G10. Personally CADJPY looks that much more interesting, given the issues in the energy & the high likelihood that we see oil prices significantly lower in the Jun & Jul contracts (talking -$100 to -$200 are going to be possible prints, i.e. KVP can envisage prints well south of $0.0) – as the world wakes up to no V-shaped recovery & the fact that the demand for oil futures is purely a financial construct demand driven by long oil etfs. I.e. the price you see there, in KVP’s view, is not the "real price of economic supply / demand dynamics…
- Charts on both USDJPY & CADJPY look bearish to KVP, plus the fundamentals are not constructive for a stronger loonie…. Nor USD vs JPY in the near-term nor long-term
- Gold continues to consolidate around these $1700 lvls. We’ve now made two double tops around the 1740 lvl…. Medium-to-long term KVP’s long conviction knows no bounds… near-term hard to know if we test 1690 - 1660 lvl
- With that said, owning gold over the Fed & ECB resonates with the Dragon… you know all those folks who say we could never see negative rates in the US? Sure man… whatever you say… they are literally making things up as they go along… negative rates are potentially the least of the worries to have
On The Radar Today…
- US: First reading 1QGDP -4.0%e +2.1%p, Crude Oil Inventories 11.2m e 15.0m p (note two wks back was record inventory lvls at 19.2m), Pending Homes Sales & of course FOMC
- EZ: GER Import Prices & Flash CPI, GER bund auction, M3 Money Supply, Private Loans 3.8%e/p
- AU: CPI 1.9%e 1.8%p, CORE 1.5%e 1.3%p
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