A recently released report from Goldman is making the rounds and is amping up the buying temperature for a perennial institutional favorite, the carry trade. Even Bloomberg has picked up the story and is running with the theme. They specifically call out two ZH favorites, the BRL and the AUD - however we think this move is really too early/too late, depending on how you look at it.
As seen below, the BRL would have been a great buy right after our last post on it. However, we now expect a major turn around after the current market situation "resolves" itself and investors return to their bunkers. As we have posted extensively on the reasons why we see the market correcting in the near term, we won't rehash the details but suffice to say that you don't want to be caught short on the unwind. If not a direct directional bet, going long vol on the BRL in particular and EM baskets in general seems the smartest play in currency right now. Additionally, look for unrelated casualties (GBP) as the US equity correlation across some of the majors brings down some of the recent gainers.
1. AUDJPY - Will post a bearish key day from the 200-dma with a close below 72.08 today
- This would be the first such pattern since the market based at 55.51 on 2nd February
- This comes as the market hits the 200-dma at 73.26 (today's high 73.47)
- This doesn't mean the market has to collapse or start a sustained downtrend
- But, a correction to the 21-dma at 69.13 as happened on 30th March is very possible
Chart Source: Aspen Graphics Data Source: Reuters
2. AUDJPY 1-month 25-delta Risk Reversals - Short-dated risk reversals appear an attractive way to hedge an underlying long position
- The chart below shows AUDJPY 1-month 25-delta risk reversals back to 2004
- The market has now moved back to pre-crisis levels not seen since July '07
- With this in mind, using short-dated risk-reversals as an overlay on an underlying long-cash position looks attractive (short-dated protection and just a natural T/P if the trend does continue)
- It's also a reminder of how much sentiment has swung since the extremes back in late-'08/early-'09
Chart Source: Bloomberg Data Source: Bloomberg
3. AUDCAD - Also looking tired on the daily charts
- Given USDCAD has only just broken down from it's recent consolidation, CAD looks less susceptible to a positional clearout than AUD
- AUDCAD spot has just hit and held the prior high from 2nd April at 0.8933, it's also hit the trend across the last two notable highs from October and January
- It will post a bearish key day with a close below 0.8822
- The daily momentum setup is very poor, with extremely clear negative momentum divergence developing
- ST double top targets 0.8516
Chart Source: Aspen Graphics Data Source: Reuters
4. AUDCAD 1-month Vol - Towards the base of the range
- 1-month implied AUDCAD vol has also corrected back to near pre-crisis levels
- Downside on AUDCAD should be an attractive way to hedge a long-risk portfolio
- If you do believe there is risk of a pull back in recent trends it also looks an attractive way to position
Chart Source: Bloomberg Data Source: Bloomberg
没有评论:
发表评论