Top Trade Ideas - April 1st
Our best ideas for currency, equity and commodity markets ahead of a new week.
Gold reached a record high, driven by signs that the Federal Reserve is moving closer to cutting interest rates, along with geopolitical tensions and strong demand from China.
At this week’s open, bullion surged to as high as $2,265.73 per ounce, marking a 1.6% increase from Thursday's closing price and continuing a trend of reaching new peaks in recent sessions.
Data released on Friday, when many markets were closed, showed that the Fed's preferred measure of underlying inflation, the core personal consumption expenditures index, had cooled in February. This supports the argument for a decrease in borrowing costs despite the central bank's cautious stance.
In G10 FX, the shortened trading week and quarter end flows were marginally USD positive. Even with EUR/USD managing to break below 1.0800, there’s still a lack of volatility that pervades the market.
Before we move into our currency, equity and commodity ideas… a quick reminder that our month-ahead outlook for April dropped yesterday. Be sure to take a read of that.
FX
The first trade we add for FX relates to our value-carry trade which was the topic of our Friday release.
The full piece can be read here, but in short, we look to target going long AUD and short CHF to pick up carry and also to play on an overvalued CHF and undervalued AUD according to PPP (Big Mac Variation).
It should be helped to push higher thanks to vol remaining low for the foreseeable future. Add into the mix the same path that all major central banks seem to be on this year regarding rate cuts (ex-Japan), and we feel there’s little to rock the boat.
As a side point, we pull weekly candles below as this is a trade for a tenor of several months.
TRADE IDEA - THE VALUE CARRY TRADE
Entry: 0.5875
Take Profit: 0.6650
Stop Loss: 0.5550
Next, we turn to EUR/USD. The pair has been incredibly boring year-to-date, with low vol, meaning that the pip range traded has been slim. We might have broken below 1.0800 for the first time since February, but the move has been caught for the moment thanks to the rising trend line support.
We do feel that a breakout one way is coming as the wedge gets thinner (as shown below) for both bulls and bears. We also feel that given that most traders will be looking at the same basic trend lines as we are, any break will see a continuation with people piling on board.
We have US NFP on Friday and Eurozone inflation on Wednesday, both of which could provide the catalyst for the break.
TRADE IDEA - A BREAK IS COMING ON EUR/USD
One-cancels-other Order, selling at 1.0775 or buying at 1.0925. Targeting downside levels at 1.0700 / 1.0515 and topside at 1.1000 / 1.1135
We continue our ideas below by moving into equity and commodity markets. A 14-day free trial allows you to access these.
Onto the rest of the alpha.