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APAC 18th January 2021

Welcome to Monday. A day when the SPI (Aussie futures for our stock index just as a reminder) took the lead. US holiday tomorrow (I believe markets have a day off) which often has an impact here locally today (anticipation).

Today was an interesting day. We were weaker on the open – compared to the Sat morning (ie US Friday night) close, we were lower, and got pushed down further on the get-go in thin conditions. Rallied back and continued higher strongly (no reason) until the cash open, when we fell back a touch to get in sync (with the cash). YET the Dow futures were quite strong, and Nikkei futures also strong.

They continued higher along with BTC, while we rallied but then paused and ranged near our highs (algo point reached so it was content) – the Nikkei and Dow up over 100pts each at one stage, BTC up 2%, yet we were not getting carried away (as you would expect from the algo comment) – expectations were for selling so a good short entry.

Come about 10:40 am (so 40mins into the day) we came off a bit more, and then the Nikkei followed. US futures stayed strong. Then that capitulated into 11am Nikkei cash open, where we continued down strongly, the Nikkei a touch negative. Again, we led as the Nikkei suddenly fell, down over 100pts early on, but we were already there, and ranging. The US futures backed off a bit. BTC relaxed, and interestingly... (More)

Don't fight the Fed: Dollar depreciation is the Plan.

In this post I’ll walk through the rationale for depreciating the dollar, how that is being accomplished, and whether that means the dollar will lose its reserve currency status.

https://fedguy.com/dollar-depreciation-is-the-plan/

The Exchange Weekend Trend Update: Is the US dollar Index the best way to put on a currency trade?

The DXY or US dollar Index is often brought up as a way to play currency fluctuations, particularly as a "safety trade". In this video, I take a look at how the DXY did in the Corona Panic of Q1, 2020 and how it's done since as compared to some other individual USD pairs available in futures form. As a trend follower, I track all the major USD crosses and don't follow the DXY. I see a benefit in the diversification, and as my video shows. There are extra returns to be had both in risk off, and risk on market regimes looking at individual pairs vs DXY. @Weston Nakamura this seems right up your alley and I'd like to know what you think is the best way to play currencies in risk on/off situations. 

Ramblings on end of first trading week for 2021

As someone who doesn't have a finance day-job or access to Bloomberg, its difficult to find data/search data and do calculations/analysis that I'm interested in and instead, I have to rely on scouring through FinTwit to get access to info.

Having said that, Jan 11 - 25 seems to be a very interesting time window from a few factors:

OpEX on Jan will cause a lot of the Vanna/Charm support for the SP500 to be taken out, which was helping lift markets consistently due to continual unwinding of hedges that market makers were forced to make during the election. Those final hedges come off next week opening the market vulnerable to a technical correction. Want to understand this mechanic better? Shameless self-plug here: https://exchange.realvision.com/post/vanna-and-charm-exposures-5fce493cdbaa191ccaa724df

Along with that, we see some in the FX market that 5y5y forward rates in the FX market for many high-carry FX, such as EM, AUD and NZD have been moving higher. The effects of this have reverberated in the EM FX market, as seen by recent rvol in currencies such as TRY, MXN and ZAR. This seems to suggest the market is expecting higher inflation rates on other currencies . Oh and guess what? You also noticed that the DXY stopped going down, despite GA flipping to the Dems @John Fadool , which intuitively should mean DXY -> 50, Gold -> 10,000, yet here we are, DXY perking a bit and gold puking @Jaymes Rosenthal . One key thing to note about Dems is that... (More)