|G10 and EM 3 month implied volatility.|
However there are still some identifiable themes, that maybe if they play out, the summer won't be so bad.
1st one builds off my most recent post from back in April "long look at the CAD" here. I thought the CAD looked like a good buying opportunity. Now I think the complete opposite, but in fairness the CAD has risen just shy of 4% since then, which given today's slow environment, feels more like 10%
A lot of the rationale in April, was that the CAD was the most shorted currency (by most measures) and we have since seen a decent round of short covering, and some speculative buying (especially as inflation has ticked up, something I highlighted back in April).
But now we sit fairly neutral, and seemingly at a bit of a technical cross-road.
|USDCAD daily chart|
Another important factor is that off yield spreads, which can be seen below.
|USDCAD vs 5 year rate spread|
The final chart for the CAD is that of the USDCAD versus implied volatilty. This is because, while a spot trade is easy and simple enough, maybe with volatility so low, this trade might be more favourable via options.
|USDCAD vs 1 month vol|
A 3 month 1.065 call costs about 95 pips, with a KO at 1.04 about 87 pips (probably not worth the KO then)
Either way, I like Long USDCAD here
My next charts are to do with US yields, we still have the 10 year trading give or take at 2.5%, pretty much exactly where it was 365 days ago.
I still do think the US economy will recover well, and is seemingly lagging the UK's monster rebound by 6-9 months (if we forget that little -2.9% print on Q1 GDP) however there has yet to be a "shockingly" strong recovery, hence the US 10 year has gone sideways for nearly 4 months!
This next chart compares the CESI USD to the bp change in the US 10 year over a rolling 70 day period.
It is quite clear (to me at least) that we won't see higher yields without better US data, which is yet to come.
|CESIUSD (white) vs. US 10 year 70 day change (red)|
Next chart is that off USDJPY vs the US 10 year yield... closely tracking as per usual. Does suggest that if we do eventually see higher yields, that the USDJPY will follow suit higher
some other bonus charts just to finish this (sorry its long, been away for a looong time)
|NZDUSD vs G10 3m IV (inverted)|
Sweden... SEK has been my favoured short ever since last December... it took its time, but is finally starting to drop a bit. Mostly because of that lingering deflation (no biggie tho) and we have seen a huge divergence in 1y1y fwd swaps, which as of the other day, the US rate is > than the SEK rate
|USD vs SEK 1y1y and spread|
|USDSEK vs US/SEK 5 year spread|