Miss
SILVER IS ABOUT TO EXPLODE AS WELLAs soon as silver breaks 18.5 to the upside its on..
eventually silver might reach 22 by the end of next quarter or so...
The moment we all have been waiting for...Go short from here potential target 105 on long term basis
XAUUSD: GET LONG on open in Oz and you'll wake up richerXAUUSD: Gold - was bearish of gold on Friday. Now the wind's changed - completely - 180 degrees due to the Dollar breaking down. This should save gold from further falls as people flock to it as a shinier, safer safe-haven than the Dollar for a while. Worth getting long asap (NY will be too late for this) as Oz opens as the price is so low at 1228 it means a stop can be placed at 1224 for a 4 to $5 maximum loss if wrong. Upside from here could be considerable over the next few weeks if the Dollar tanks as anticipated looking across all Dollar crosses right now.
USDJPY/ GBPJPY: BUY $YEN IF DATA MISSES; SELL £YEN IF DATA HITSThe Risky BOJ front run trade using CPI inferences
- I find it very interesting that the BOJ is releasing ALL of its key economic data (minus GDP) before making the easing decision, especially as we have already had CPI data this month so we will have an 2 CPI releases in one month which ive never seen happen before (CPI from JPY is usually due next week).
- This to me indicates strongly that 1) All of the data released e.g. CPI, employment, retail sales, industrial production has some weighting on the BOJ decision and 2) that CPI especially has perhaps the strongest weighting on the BOJ decision as they are releasing 2 CPI prints in one month which means they brought forward the measurement by a week - this means they value the CPI print strongly.
- Therefore, knowing this, in an ideal world either 1) ALL of the data will contract, which puts more pressure on a big BOJ easing package or 2) ALL of the data improves which eases the the pressure on the BOJ package - thus from here we are then able to take risk with an "educated" guess of what the policy will tend to be i.e. big or smaller.
Long USDJPY if CPI less than -0.4% and generally weak/ miss other data:
1. The rationale is that a lower than expected and last print shows the JPY economy is decelerating even more aggressively than in previous months and therefore the BOJ will me MORE inclinded to ease heavier, as the data suggests there is a bigger problem.
- Obviously the data/ CPI print imo acts as a function of BOJ easing, if we get massive misses across the slew of data then we should expect a bigger easing package than if there is only a slight miss - therefore we should treat our trades the same way.
2. Long USDJPY by xlots depending on the serverity of the data miss e.g. if CPI was -1.0% and unemployment ticked up to 3.4% i would do 3lots long usdjpy. If it was -0.5% and 3.3% i would do 1lot for example.
Short GBPJPY if CPI is greater than -0.4% and other data generally hits/ is positive
1. The rationale is the opposite of the above - we assume if data improves that the BOJ will be less inclined to do a big easing package so we expect yen to remain strong so we go long yen and short GBP.
- Once again the lot size is a function of the serverity of the data e.g. if CPI turned positive to 0.1% and unemployment dropped to 3% we would short 3lots. vs only 1lot if CPI ticked up only 10bps from last and unemployment ticked down only 10bps.
Risks to the view:
1. The First risk is that data in general is considered to have "underlying trends" so the fact one print is outstandingly bad/ good might NOT impact policy e.g. thin about US NFP that was less than 100k and shocked markets - but it was a one off so didnt make the FOMC cut rates back.
3. Data underlying trends thus can reduce the weighting this data is given e.g. even if CPI improved to 0.1% from -0.4%, the BOJ could argue this is a one off print as the underlying trend for the past 6m+ has been negative inflation thus they will go ahead with a big easing package.
- HOWEVER , the above point "3" in mind i believe data to the downside will be given a greater weighting than data to the upside, so we should have a short yen bias as weak data has been the underlying trend for most data points (especially CPI).
-Further, i also think tail-end/ RHS/ LHS results will be given a proportionately larger weighting in their decision so this should also be reflected in our trading e.g. if CPI was -2% from -0.4% i would be a much much more aggressive buyer of UJ than if a -0.5% print from -0.4% is seen. The same can be said to the topside, if i saw +1.5% inflation from -0.4% last i would be a much greater seller of GBPJPY than if i saw -0.3% CPI from -0.4%.
BOJ EXPECTATIONS: EXCEED/ HIT - LONG USDJPY; MISS - SHORT GBPJPYBOJ Miss - Sell GBPJPY @Market price; 129tp1 - up to 800pips.
1. A BOJ miss can be considered as delivering the median expectations e.g. 10bps cut to the depo (-0.2%), 10bps cut to the LSP (-0.1%), Yen10trn increase in monthly JGB purchases & 50% Increase in Annual ETF purchases e.g. 3.3trn-5trn. Fiscal Stimulus Yen10-15trn.
- The package above or less should be sold as the market expects this to maintain UJ at 105-6 level.
- The short GBPJPY is a great trade anyway as you benefit from the BOE easing carry which should in turn move us to 125 (BOJ miss and BOE hit) - which the BOE 1m forward OIS rates market currently prices 25bps at 100% and the average expectations are 25bps and £50bn of QE (even more certain now as the BOE M. Weale - the most hawkish MPC Member moved to the easing side as Business optimism and PMI dropped to their 10yr lows) - thus GBPJPY can expect further downside even past the BOJ as the BOE is all but guaranteed to ease "most members expect to ease at the august meeting" - July BOE Minutes Quote.
- Currently a BOJ miss is the most likely outcome - as many of you have seen in FX Yen has been brought aggressively as expectations have fallen, much a mirroring from the change in rates market where - For the 25th the 3m JPY Libor prices only a 6.65bps cut at to the key rate at 100% and on the same date the 3m euroyen August future prices only a 5.5bps cut at 100%. Though the further dated September 3m euroyen future prices a 9bps cut a 100% - likely a function of the market betting on more action being done in the september meeting (which makes sense).
BOJ HIt: Buy USDJPY @Market price; 107-111tp - up to 700pips
1. A BOJ Hit can be considered as double or more the median expectations (in my opinion) - 20bps+ to the depo, 20bps+ to the LSP, Yen20trn+ to the JGB Purchases and 100-200% extra annual ETF purcases from Yen3.3trn to 6.6/9.9trn. Yen20-30trn Fiscal stimulus.
- The package above or more IMO will allow $yen to trade to 111, and for a sustained amount of time.
- The long USDJPY is the best proxy to play the "over-delivery" imo as USD is the most stable base, and has the most pips to gain on yen weakness - given FOMC hawkishness/ Hiking expectations give USDJPY topside even more impetus.
- As above, the markets currently DON'T expect this result, as $Yen trades at the 104 level and rates markets price only 5-6bps of lowering. HOWEVER, if BOJ/ JPY Govt are to deliver a big easing package - one that smashes expectations (such as the one above) it will be now. The reason I think this is the case is below:
APPLE: EARNINGS PREVIEW - LOW BAR; 1.38EPS & REVENUE $42.34BNApple earnings to be released after market today
Expectations:
1. 1.39EPS and $42.31bn Revenue
- I personally have been an Apple bull for some time - I believe the bar for apple has been set low, with EPS 25% lower than last year and Revenue target also 15% lower than last year - I think this is achievable as Iphone SE sales will be included in the income statement for the first time this quarter which should help beat the low 42.34bn target.
Risks:
1. Obviously, if Apple misses these expectations i see downside to $89-90 immediately happening - nonetheless I think this opens up a valuable buying opp and I will be buying any 89-90 (or lower) lows, once the earnings hit/ miss flows are over as i believe apple is very cheap on a multiple basis some 10x.
Trading Strategy:
1. On an earnings beat I think because AAPL price has been depressed for so long (30% for 6m+), APPL will see significant topside e.g. to $111 so you should BUY AAPL at market and hold past the 101 breakout for 110tp.
2. Equally, if AAPL misses, we should clear existing risk at $95 and reenter APPL at the MISS bottom which should be $89, or perhaps less.
- I like owning Apple as it is one of the least leveraged companies, with over 250bn in cash & marketable securities (highly liquid) and generates 40-60bn dollars in bottom line profit, with 200bn revenue - thus it is one of the most profitable companies. With this cash, Apple in the future (under new leadership) can regain its prowess and make new highs e.g. 140-160 within the next 12-18m - before if they actually invest in M/A or some heavy R/D - poor leadership by Tim Cook is to blame for APPL's stagnant performance imo - they should have purchased Yahoo to compete with Google ad rev, Twitter to compete with FB and Netflix to grow their Apple TV business - all of which would have worked due to Apples massive worldwide brand and i believe such acquisitions can be made in the future thus I value owning Apple.
Any questions let me know.
