Top Trade Ideas - November 25th
Prepping for the week ahead.
NVDA reported positive earnings but was unable to “wow” Wall Street. The pain trade happened. Options priced a +/- 8% move, and the stock opened just over 2% higher. Another tough day for the earnings trade.
In G10 FX, the DXY spiked to two-year highs on Friday, compounded by weak Eurozone and UK data. The spread between SFRZ5 and ERZ5 continues to widen. The Fed decision is becoming less sure of a cut, while the situation in Europe pressures the ECB to take a more dovish path, pushing the odds of a 50bps cut higher. The spread has doubled in under two months, with the divergence in data and investor sentiment. Little wonder that EURUSD is down from 1.12 (the high of year set at the end of September) to 1.033 last week (low of year).
Week Ahead
The economic calendar sees U.S. Q3 GDP released on Wednesday with Eurozone CPI out on Friday.
Beyond that, Federal Reserve minutes and U.S. PCE inflation data will also be in focus as investors continue to gauge whether interest-rate cuts will slow following Donald Trump’s election victory.
Other highlights include interest-rate decisions in New Zealand and South Korea. As yen volatility continues, a string of key economic indicators from Japan are also in focus.
Below the paywall: We start on the FX front this week before moving to commodities, equities and some indices ideas.
FX
The DXY continued to surge last week and briefly traded above the 108 handle, just eclipsing the levels seen back in November 2022. The dollar was quickly sold from this spike, which was primarily driven by a fall in EUR/USD following weak EU PMI data out on Friday.
We took profit on our EUR/USD put, although we stay bearish Euro. We feel the move in the DXY now looks stretched in the near term.
We leave an order to get short at 108, with a tight stop for a material break higher and look to see if USD sellers are happy to step in for the last few trading weeks of the year.
TRADE IDEA - TACTICALLY SHORT DXY
Limit Order: 108.00
Stop Loss: 108.30
Take Profit: 106.50
EUR/AUD traded in the 1.59s to levels not seen since summer 2023. It managed to pull back and close above 1.6000, which was key on Friday, but it provides an interesting setup for this week.