Top Trade Ideas - May 13th

A new week brings new opportunities.

Good morning. A new week brings lots of new opportunities.

Last week, Hong Kong’s equity benchmark climbed to the highest level since August, and mainland China equities also rose. US markets also continued higher, building on the previous week’s gains.

Potential major catalysts for markets this week include a policy rate decision from China on Wednesday and a US April inflation print on the same day.

Elsewhere this week, the euro area is set to report inflation and growth figures while a swath of Federal Reserve officials are due to speak including Chair Jerome Powell.

In G10 FX, the US Dollar tread water for the week following the Fed meeting. Our focus was mainly on GBP and JPY, with Yen continuing to underperform and the BoE offering a dovish tilt for the Pound.

Let’s get straight to the ideas:

FX

We’ve been expressing our bearish GBP view over the past month via being long EUR/GBP, which is slowly grinding higher. We’ve also had tactical short GBP/USD trades on, although the USD leg of these trades has been quite noisy.

That was the case towards the end of last week, when a dovish BoE meeting actually saw GBP losses reverse against USD following worse-than-expected US initial jobless claims and a general risk-on mood.

We continue to hold to our view, and so turn to selling any rallies in GBP/USD. Thanks to the pop on Friday, we look at add a new position here above 1.2500. On the downside, we watch for a break of 1.2450 to open up a move back to 1.2300.

TRADE IDEA - SELL RALLIES ON GBP/USD

Entry: 1.2520

Take Profit: 1.2320

Stop Loss: 1.2605

Earlier in the year we flagged up why we like AUD/CHF as a great carry trade for the mid-term. The pair is moving constructively higher, aided by the move in copper as well better investor sentiment around a China rebound.

Apart from the blip towards the end of April, the trend line higher is being respected, and with a short-term move back towards that level, we like to step in and buy for a continued move higher. We feel the above themes will continue to play out in the coming few weeks and beyond.

TRADE IDEA - THE CARRY TRADE OF AUD/CHF

Entry: 0.5985

Stop Loss: 0.6150

Take Profit: 0.5910

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As usual, the rest of our week’s rundown for FX, commodity and equity markets is below. You can try a free trial here.

Onto the rest…

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