Top Trade Ideas - April 15th
Quickly past inflation and straight onto geopolitical risks. Market narratives change quickly.
Market narratives quickly change. Last week was all about US markets, with a CPI print coming in above estimates, igniting talks of few or no rate cuts this year for the Fed.
As tensions escalated over the weekend, geopolitics is now the theme on everyone’s mind. This will increase volatility in currency and commodity markets (creating plenty of opportunity for big moves) but will unlikely have much effect on US equities.
Volatility for equity markets was already on the rise, with much to focus on. The upcoming earnings season will underpin the S&P 500’s next leg while markets seemingly moved past the rate cut tone change.
In G10 FX, the strong US inflation print sparked a big three-day rally for the US dollar. With the week ending above 106.00, further gains for the week ahead are being eyed up.
As usual, the team has summarised all thoughts and ideas for currency, commodity and equity markets. You can access these by becoming a premium subscriber, or join with a free trial to test out our content first.
FX
Last week we put out a trade idea for being long the DXY. This played out almost perfectly, with the beat in US inflation helping to push the index above 105. We took profit at 105.60, but the market kept going on Friday, closing above key resistance at 105.65.
With key pairs having broken out of ranges, we feel an extension of this move could be seen in coming days. With US data being hot right now, the host of Fed speakers later this week should add fuel to the fire of a ‘hot landing’.
TRADE IDEA - REMAIN LONG DXY
Entry: 106.00
Take Profit: 50% at 107.20, 50% at 108.00
Stop Loss: 104.95
We’ve been banging the drum for GBP/USD to come lower now for the past month or so. In earlier editions of this report we spoke through buying cheap Put options, given the low vol.
For those not already involved, the break below 1.2500 on Friday was key, and now opens up extensive downside for the pair towards the low 1.22’s.
UK inflation out on Wednesday morning is a key risk for this trade, with a hot print potentially giving a kick to the currency. However, our aim is for the position to have moved lower enough for us to set our stops close to flat by the time the data gets released.
If we are stopped out, we’ll look to use any spike to enter fresh shorts once the dust has settled.
On the flipside, a lowball number would only accelerate the pair heading lower.
TRADE IDEA - A FAST FALL FOR GBP/USD
Entry: 1.2445
Stop Loss: 1.2515
Take Profit: 1.2225