Fink FX: Fading the JPY Unwind

What a week that was! 

Massive unwinds all over the shop, especially in JPY which is where our main focus is for the week ahead.

All explained in the video, and summarised below 👇

TLDR; AUDJPY Long bias

The simplest version - sold off a boatload all at once, and now at levels where it doesn’t make sense to KEEP selling.

On the flipside of that, if you’ve been waiting for an unwind to join on the long side, this is pretty much as good as it gets 👇

Targeting the middle of last weeks range, 100DMA, and the June low around 102.60.

The Aussie data midweek and BoJ on Thursday are both decent catalysts, but may not be necessary given the depth of the unwind.

CADJPY looks similar and could benefit from an inverse positioning unwind (market is heavily short CAD), although it’s tricky to isolate an obvious catalyst to trigger the unwind of CAD shorts…

GBP - Fundamentally, short it to the ground, set it on fire, then kick it in the nuts

Just to teach it a lesson. Will speak more about this in Macro Factor later today.

Focusing on the flows though, as long as the June High holds, the bull case is still just about intact.

(UPDATE it’s not holding 😬)

BoE is priced at marginally better than a coin flip for a 25bps cut on Thursday, (now up to 58%) so there’s still scope for disappointment in either direction.

My view is that even if they don’t cut, any GBP rally will be short-lived.

As always though, I’ll defer to the market when it comes to executing trades.

Keep an eye out for UK’s new chancellor Rachel Reeves budget announcement & speech later.

Apparently, there’s going to be an Office of Value for Money (OVM) to "put an end to wasteful spending" (Orwell > Nostradamus). 😭

Back on topic!

Gold - not technically FX I know, but we’re doing it anyway

Still looks like there’s more to go.

Stair stepping lower towards the 2340 zone, and would be no surprise to see the range lows tagged at a later date.

A few things I didn’t mention in the video….

Massive week of earnings, including megacaps, plus an AI nerdfest between Nvidia’s Jensen Huang & The Zuck this afternoon 👇

We’ve also got bond maths to contend with, the US treasury refinancing estimates are out today, and then the composition of that financing is released on Wednesday. 👇

The general theory is that if financing is pushed further into longer dated bonds (rather than shorter dated bills), financial conditions can tighten.

But it’s reflexive.

If financial conditions tighten, that pushes funds into bonds, yields fall, and lending becomes cheaper.

There’ll probably be lots of noise around this release in macro circles, and it might create some volatility when the announcement drops.

Overall though, it’s just another data release to put into context.

Similar view for the Fed meeting.

Widely expected to tee up the September cut. A surprise July cut would probably un-nerve markets.

We’ll dig into the NFP prep on Thursday.

Until then, ping us questions in the discord