However, one of the more interesting releases will be the RBA (tomorrow (5th) morning). Rate movement are highly unlikely, and like the BoC the RBA is in a neutral stance where they see equal chance of the next move being a hike as well as a cut.
(N.B.Using OIS markets, there is around a 15% chance of a rate cut)
However, given the uptick in CPI I see no real chance of a rate cut, yet the RBA are still going to be trying to verbally intervening wrt the AUD.
|AUD daily chart|
|AUD vs OIS rate (next meeting)|
|AUD vs US 10s (inverted)|
Much like with the NZD, the AUD is incredibly sensitive to the levels of volatility, and without a meaningful uptick there, its hard to see AUD weakness frankly, as carry traders will look to the AUD and NZD.
|AUD vs 3M implieds (inverted)|
Next onto a chart that was highlight from @gmactrading on twitter, which shows the EURUSD vs generic 2 year swap spread. Simple enough.
|EUR vs 2 year spread|
But it is important to note, that now the rate spread has moved lower (currently 28bps wide) the EURUSDs correlation has picked up significantly. And while correlation =/= causation, given the move from 0 -> 28bps coincides with the ECB cutting, I think it is very significant and will be very key into year end.
However, shorter term, it may have over-run a little bit, especially as the DXY has run into resistance... So with the EURUSD market quite short, and running out of momentum - a short squeeze to 1.35 is on the cards for this week.
Finally, This chart I quickly made in Excel shows on the x-axis the Long/short positioning in the FX markets as a composite indicator of desk prop flows / risk reversals / IMM / real money flow etc etc
The Y-axis shows % deviation (overvalued vs undervalued) of the currencies against my own models (of which some can be found here)
My ideas would be to fade the extreme moves in the upper-right and lower-left quadrants. For example, a week ago, the GBP was trading 1.5% above my model and also had positioning value of 40 (where 50 is most extreme long and -50 is short). Shorting with a set-up like that is how I look to trade based upon this, likewise, short term, the EUR is "undervalued" and also the market is short, so there is potential for a short squeeze higher and hence I would buy. However, I need to do some more work on this idea, just thought I'd share what I've got so far (which admittedly is not much).
Not much else going on, expect 10 days 'til judgement day. fuck.