Macro Dragon: New Dawn = New Quarter = Copper + Gold + Dollar
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.
Macro Dragon: New Dawn = New Quarter = Copper + Gold + Dollar
Top of Mind…
- New day, new month, new quarter, new 2nd half! Again, its always about making the next iteration of whatever time-line, the best one yet. Nothing else matters at the end of the day, yet the intent to make it “the best one yet” is key.
- It also deserves it weight in retrospection, reflection & calibration of the last month, quarter & 1st half of the year. What did I get right, why? What did I get wrong, why? How to we incredible the probability & volume of the first, whilst at best maintain or decrease the probability of the latter?
- Again, just remember its systems over outcomes… if you find yourself getting too stuck on the results… you are likely focusing on the wrong thing/s.
- Quarterly|Month Close, Gold 1783 +0.46%: Technically super bullish close to the 1st half, quarter, month & week as we are breaking out higher. As flagged in yest piece – this was one of two things that the Dragon has keen been watching.
- Again the global macro landscape & confluence of irrevocable monetary & fiscal spending (until we get to infra. capex), creates a masterpiece picture for the precious metals complex.
- You know the Dragon’s view on gold/precious metals space – this is one of our Prime Conviction trades for 2020, that could have a shelf life for years to come. In many ways it is complementary to the Meta Trade & Trend of them all. Reach out to your friendly RM &/or GST partner, if you’d like to see our works on this theme & for our VIPs, speak to our strategists.
- Quarterly|Month Close, DXY 97.33 -0.15%: Technically, bearish trend & breakdown lower continues on a daily chart basis. Need the daily bearish price to action to cascade into the weekly, then monthly charts. From the Dragon’s perspective we continue to be dollar bears so long as we don’t get two consecutive weekly closes above the pivotal 98.00 / 98.50 range… as that’s where the 200 DMA is. As to us getting every higher conviction on our bearish skew, it’s to take out the 200WMA of c. 96.50 – which is the last key rallying cry of the dollar bulls.
- Interestingly enough, the USD weakness story from a G10 weighting perspective continues to be primarily from the Euro side. The yen will join the part (& not necessarily from a risk-off way) at some point in the 2nd half of the year, which will firmly break the back of the +12yrs strength of the USD.
- With a range of 103.82 to 72.70, as well as an average of 89.427 – the dollar is still well in the upper echelons of its strength. What do we need for the next big leg lower? Likely a lot more fiscal spending & even more monetary measures – a la YCC & negative rates. All these are likely (similar to what we were saying about “gold lift-off” for the last few months & “one cannot own enough US duration” in Jan 7 Feb), a question of when, not if.
- Lastly, hard to say if this is the start of a trend or not. Yet this was the 2nd consecutive quarterly close lower in the DXY since 1H17, that period eventually led to 3 more quarters of a lower dollar (5 quarters in total), which cumulated with a -15% peak to trough move (103.82 to 88.25).
- Quarterly|Month Close, Copper 273.20 +1.27%: Whilst this was something that KVP was not watching – it’s definitely got his attention.
- Copper is breaking out higher & it’s doing so, way before we see the “all fiscal policy roads leads to infrastructure” theme that we mentioned two wks back. So whilst its leaves KVP feeling like, this is a medium to long-term long exposure at some point… its also on the contingency tactical playbook as a massive short on any risk-off catalysts – say, Trump announcing phase one deal with China is over & Tariffs are getting smacked back on.
- So whilst obviously last quarter was generally a record best quarter for most assets, given that 1Q was generally a record word for most assets – its worth noting that copper, which should be tied to global growth prospects was up +21.79% in 2Q, after a -20.34% 1Q drop.
- So whilst note yet back to the c. $280 close of last year, at a current 273… that just $7 away – it makes you wonder where copper is heading, wants we get some actual real, multi-trillion dollar infrastructure bills announced. Obviously CLP & Chilean assets in general (Plus AUD & Australia) are worth keeping on ze radar on this. Key caveat here, KVP has done negative recent works on copper supply/demand dynamics & potentially that could be having an adverse impact in prices going up, if C19 infected areas globally are limiting supply both from a mining & logistics perspective.
- FOMC Mins: These are out tonight, likely very little surprise to be seen, given how much of Powell, Mnuchin & other members of the FOMC that we have had on tape over last 2-3wks... yet if there is any focus its likely to be on YCC plus potential discussions around negative rates. Also worth noting its start of new month, quarter, 2nd half... so flows could continue to be noisy.
To Keep In Mind Today
- AU: AIG Mfg. Index 51.5a 41.6e, Building Approvals -16.4%a -7.0%e -2.1%p
- NZ: Building Consents m/m 35.6%a -9.9%p
- JP: Tankan Mfg. -34a -31e -8p, Tankan Non-Mfg. -17a -20e 8p, Final Mfg. PMI 40.1a 37.8e/p
- CH: Caixin Mfg. PMI 51.2a 50.7e/p
- EZ: Mfg. PMI 46.9e/p, GER Retail Sales
- UK: Mfg. PMI 50.2e 50.1p, Nationwide House Prices
- US: Mfg. PMI 49.6e/p, Non-Mfg. 49.5e 43.1p, Crude Oil Inventories, Total Vehicle Sales, FOMC Mins. (likely focus on YCC usage & negative rates references – if any)
Start-End = Gratitude + Integrity + Vision + Tenacity. Process > Outcome. Sizing > Idea.
This is the way
Latest Market Insights
Outrageous Predictions 2023: The War Economy
- The constantly growing global need for energy drives the world's richest to huddle up and launch a R&D project in a size the world hasn't seen since the Manhattan Project gave the US the first atomic bomb.
French President Macron resignsThe political stalemate in France and the rise of Marie Le Pen following the 2022 elections corners President Macron, forcing him to give up on politics and resign from his position. At least for now.
Gold rockets to USD 3,000 as central banks fail on inflation mandateAs markets and central banks realise that the idea that inflation is transitory is wrong, and that prices will remain higher for longer, gold is sent through the roof, hitting a price tag of USD 3,000
EU Army forces EU down path to full unionWith continued challenges in the region and a US military that isn't aggressively enacting its former role as global policeman, the European Union agrees to create its own armed forces, bringing the whole region closer.
A country agrees to ban all meat production by 2030In an effort to become one of the global leaders on the path to net-zero emissions, one country decides to not only put a heavy tax on meat, but to ban domestic production entirely.
UK holds UnBrexit referendumFollowing a recession and domestic pressure, the United Kingdom is thrown into political turmoil that will end with a vote to wind back Brexit.
Widespread price controls are introduced to cap official inflationHistory tells us that with the war economy comes rationing and price controls. And this time is no different, as policymakers introduce strict price controls that lead to a range of unintended consequences.
OPEC+ & Chindia walk out of the IMF, agree to trade with new reserve assetSanctions against Russia have caused widespread turmoil due to US Dollar moves in countries across the globe that don't consider the US an ally. To relieve themselves from this, they leave the IMF and create a new reserve asset.
USDJPY fixed to the USD at 200 as Japan overhauls financial systemFollowing the challenges that faced the Japanese Yen in 2022, the Bank of Japan attempts to keep the currency from sliding. Unsuccessful on the long-term, Japan will launch a reset of its entire financial system.
Tax haven ban kills private equityWith the war economy comes an increased focus on national interests and sovereign nations' ability to assert themselves. In that regard, the OECD countries turn their attention on tax havens and pull the big guns out, banning them altogether.