Archives of “June 2020” month

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Why US protests are weighing on the $USD

  
  Analysis

Dollar under pressure today

Dollar under pressure today
Markets have generally shrugged off the shocking wave of protests in the United States over the weekend but the one exception is the US dollar, which is under broad pressure.
Why?
It’s simple. Widespread protests have two possible outcomes:
  1. Social reform
  2. Increased authoritarianism
Either one is expensive.
The US is running a $4 trillion deficit this year and another $3 trillion spending bill has already passed the House.
However this ends, it’s going to mean even more spending. I can’t offer any kind of novel take on the social situation but it’s increasingly clear to me that we’ve entered an era of runaway spending.
It’s going to be a global phenomenon but the pressure to generate growth is especially high and as the world’s reserve currency, the rest of the globe is in a position where it needs to finance US spending. Given that we’re on a path to debt monetization, the US dollar more to lose than almost anywhere.
Moreover, massive deficits can last for years. I think Washington could run $5 trillion deficits for a decade before it truly undermined the economy. For now though, all that spending is great for commodity producers because it’s going to mean better demand.
Finally, the US fight with China isn’t going to end no matter what happens in November. The great decoupling is coming.

USD/CAD falls to fresh post-pandemic low

  
Analysis, Forex

Canadian dollar continues to climb

Canadian dollar continues to climb
USD/CAD has fallen to a fresh low on the day as the commodity currencies surge.
This is a market that’s suddenly feeling much better about the virus and not so great about the US dollar. With AUD and NZD you can make the case that the domestic economies are in good shape on the virus, that’s not so much the case for the loonie. Cases are still much lower than in the US but not at the point where people can live relatively fear-free like New Zealand.

Moody’s downgrades India’s ratings to Baa3, maintains negative outlook -Full Text

  
  Analysis

Moody’s Investors Service (“Moody’s”) has today downgraded the Government of India’s foreign-currency and local-currency long-term issuer ratings to Baa3 from Baa2. Moody’s has also downgraded India’s local-currency senior unsecured rating to Baa3 from Baa2, and its short-term local-currency rating to P-3 from P-2. The outlook remains negative.

The decision to downgrade India’s ratings reflects Moody’s view that the country’s policymaking institutions will be challenged in enacting and implementing policies which effectively mitigate the risks of a sustained period of relatively low growth, significant further deterioration in the general government fiscal position and stress in the financial sector.

The negative outlook reflects dominant, mutually-reinforcing, downside risks from deeper stresses in the economy and financial system that could lead to a more severe and prolonged erosion in fiscal strength than Moody’s currently projects.

Moody’s also lowered India’s long-term foreign-currency bond and bank deposit ceilings to Baa2 and Baa3, from Baa1 and Baa2, respectively. The short-term foreign-currency bond ceiling remains unchanged at Prime-2, and the short-term foreign-currency bank deposit ceiling was lowered to Prime-3 from Prime-2. The long-term local currency bond and bank deposit ceilings were lowered to A2 from A1.

A full list of affected ratings is provided towards the end of this press release.

RATINGS RATIONALE

RATIONALE FOR THE RATING DOWNGRADE TO Baa3

POLICYMAKERS WILL BE CHALLENGED TO MITIGATE RISKS OF BROAD EROSION IN INDIA’s CREDIT PROFILE (more…)

Study of Gilead’s remdesivir shows improvement in moderate cases

  
  Analysis
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Results of the latest study

Gilead released its latest study results of patients with moderate COVID-19 and reported that patients on a 5-day tready were “65 percent more likely to have clinical improvement at Day 11 compared with those in the standard of care group.”
The company was upbeat about the results.
“These study results offer additional encouraging data for remdesivir, showing that if we can intervene earlier in the disease process with a 5-day treatment course, we can significantly improve clinical outcomes for these patients.”
Here is the data. It’s not a miracle cure but I’d certainly rather have it if I had the virus.
Results of the latest study
The issue is that it needs to be administered in a hospital and is expensive. That makes it unfeasible in some parts of the world.
Shares of the company are up 10% in the pre-market and the report briefly boosted stock market futures.

5 Trading Frustrations

  
Analysis, Education

Top Trader Frustrations

  1. I cannot trade my plan!
    • You need to develop the skill to execute your trading plan under duress.
    • Use visualization exercise to see yourself successfully executing your trading plan during the day. The greater level of detail a trader uses in their visualization exercise the greater its effectiveness.
  2. I cut my winning trades too early!
    • Have profit targets
    • Take partial profits
    • Measure each day the missed profits that you could have obtained if you didn’t miss a setup, or if you didn’t cut your winning trades too early.
  3. I am not consistent with my trading
    • Establish a playbook with setups that work for you, and setups that don’t work for you.
    • Define the risk that you should take in setups based on whether they are A+, B, C setups (based on risk/reward and % win rate).
    • Track the amount of risk that you are taking on similar trades, so that the results can be properly analyzed. Risk 30% of your intraday stop loss on a A+ setup, 20% on a B setup, 10% on a C setup, 5% on a Feeler trade.
    • Do a trade review
      • Did I trade the best stocks today?
      • Did I recognize the market structure?
      • Did I push myself outside the comfort zone?
      • Things I did well
      • Things I could improve
  4. I cannot find a profitable trading system
    • Trading is a probability game, setups don’t work all the time, so don’t keep trying and throwing away trading setups without thoroughly testing them.
    • Get exposed to lots of different setups and trade the setups that make the most sense to you and works best for you.
  5. I lack the confidence to take trades
    • Have a detailed trading plan, place orders in advance in possible.
    • Put on feeler trades with 5-10% of the risk that you normally put on. Once you start to become more comfortable you can then put on your regular trades again.

China says that it opposes US interference in HK affairs

  
Analysis, Politics

Comments by the Chinese foreign ministry

  • US action interferes with internal affairs, undermines bilateral relations
  • US purposely oppressing Chinese firms for no good reason
  • Firmly opposes the actions by the US
  • Reaffirms that no foreign country has any right to interfere in HK
It is not like they have not mentioned any of these remarks before and while there is the treat of countermeasures, it seems both sides aren’t willing to escalate this too quickly yet.

Eurozone May final manufacturing PMI 39.4 vs 39.5 prelim

  
Analysis, Economy

Latest data released by Markit – 1 June 2020

  • Prior 33.4
The preliminary release can be found here. Little change relative to the initial estimate and this just reaffirms that while factory conditions have improved since April, they are still relatively subdued considering the economic fallout from the virus outbreak.
Looking ahead, the devil will be in the details when it comes to PMI readings. Headline figures should continue to see an improvement based on the survey question of “how is your business activity doing relative to the month before?”.
But for the manufacturing index, sub-indices such as new orders, output, and employment will be the key things to focus on moving forward.
Markit notes that:

“The manufacturing downturn looks to have bottomed-out in April, with production falling at a markedly slower rate in May. The improvement in part merely reflects the comparison against a shockingly steep fall in April, but more encouragingly was also linked to companies restarting work as virus lockdowns were eased. The further lifting of COVID-19 restrictions in coming months should provide a further boost to manufacturers.

“While we are still set to see unprecedented falls in industrial production and GDP in the second quarter, the survey brings hope that the goodsproducing sector may at least see some stabilisation – and even potentially a return to growth – in the third quarter.

“Whether growth can achieve any serious momentum remains highly uncertain, however, as demand – both domestically and in export markets – looks set to remain subdued by social distancing measures, high unemployment and falling corporate profits for some time to come.

“Headcounts continue to be cut at a rate not seen since the height of the global financial crisis in 2009 as firms scale-back capacity in line with weak demand. Prices charged for goods are meanwhile also still falling at a pace not exceeded over the past decade as manufacturers offer discounts to help clear warehouses of unsold stock. The labour market and profits could therefore deteriorate further in coming months, holding any recovery in check.“

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