NZD/JPY was the top trade this week in risk-appetite reversal

Classic risk-positive trade wins out

NZDJPY weekly chart
The top performing G10 currencies this week were NZD, AUD and CAD, in that order. At the bottom of the list were JPY, USD and CHF.
That’s a classic risk-positive trade setup that has been underlined by the selloff in bonds and the best week for US equities since April. It’s a clear signal that the market feels it overreacted to the Fed, perhaps with a short-squeeze adding to moves.
The mode now is to wait and watch on economic data, particularly jobs and inflation to get a sense of when the Fed will hike next. If NZD/JPY is any indication, we’re not out of the woods yet. The pair recovered from last week’s slump but is now right where it was before the FOMC.
The back-to-back big moves in consecutive weeks cancelled one another out and leaves the market uncertain. There’s a chance the range over the past month could persist through the summer.

CFTC Commitments of Traders report: Euro and GBP longs flushed

Weekly forex futures positioning data for the week ending June 22, 2021:

  • EUR long 89K vs 118K long last week. Longs trimmed by 29K
  • GBP long 18K vs 32K long last week. Longs cut by 18K
  • JPY short 53K vs 47K short last week. Shorts increased by 7K
  • CHF long 14K vs 9K long last week. Longs increased by 4K
  • AUD short 17K vs 18K short last week. Shorts trimmed by 1K
  • NZD long 3K vs 3K long last week. No change
  • CAD long 43K vs 44K long last week. Longs trimmed by 1K

There were substantial shifts into euro and GBP longs in the lead up to the FOMC decision. That left a big chunk of the market vulnerable to the Fed surprise. Afterwards, there was a bit of rush to the exits and that likely exaggerated last week’s rally in the dollar. I’m surprised we didn’t see that in CAD as well but those proved to be stronger hands.

Weekly forex futures positioning data for the week ending June 22, 2021:

US stocks end mixed. S&P back-to-back record close

Nasdaq 3 day string of record closes snapped

The US major stock indices are closing mixed with the Dow leading the way. The S&P closed higher for the 2nd consecutive day. The Nasdaq snapped it’s three day of record closes with a modest loss.
  • S&P index rose 14.33 points or 0.34% at 4280.81
  • NASDAQ index fell -9.32 points or -0.06% at 14360.39
  • Dow gained 238.67 points or 0.7% at 34435.49
  • Russell 2000 index rose 0.84 points or 0.04% at 2334.46

For the week, all the major indices are closing higher with the small-cap Russell 2000 and the Dow 30 leading the way:

  • S&P index rose 2.74%
  • NASDAQ index rose 2.35%
  • Dow industrial average rose 3.44%
  • Russell 2000 of small-cap stocks rose up 4.59%
In the European equity markets today, the major indices closed higher with the exception of the France’s CAC which fell -0.13%. The biggest gain or was the UK FTSE 100 which rose 0.37%:
The US and European indices
Go to top