Euro erases losses as the resilience continues

Euro back above 1.19

Euro back above 1.19
No one seems to like the euro as it struggles with another covid wave and an inability to conclude a collective fiscal passage.
Yet someone is buying. EUR/USD has climbed to 1.19 from 1.17 at the start of the month. Today it dipped back to 1.1867 but has rebounded to unchanged. Barring a surprise in the next few hours, it will close near the highs of the week.
We’re a universe away from the old days of 1.60 and Gisele Bundchen wanting to be paid in euros but the negative sentiment and reality that eventually Europe will get the vaccine is a recipe for a contrarian trade.
There are also signs that the eurozone is coping with covid better than expected. The surprise index from Citi for the eurozone is currently the highest in the world at +150.

CFTC Commitments of Traders: EUR longs continue to get covered. JPY shorts remain steady

Weekly forex futures positioning data for the CFTC for the week ending March 30, 2021

  • EUR long 68K vs 74K long last week. Longs trimmed by 6K
  • GBP long 20K vs 25K long last week. Longs trimmed by 5K
  • JPY short 58K vs 59K short last week. Shorts trimmed by 1K
  • CHF long 3K vs 4K long last week. Longs trimmed by 1K
  • AUD long 4K vs 12K long last week. Longs trimmed by 8K
  • NZD long 3K vs 4K long last week. Longs trimmed by 1K
  • CAD long 3K vs 7K long last week. Longs increased by 4K

Highlights:

  • All net positions trimmed
  • The new positions show long currencies, and short the USD with the exception of the JPY which shows short JPY and long the USD
  • The AUD long was trimmed the most (8k).
  • JPY, CHF and NZD only saw positions trimmed by 1K

S&P and Dow close at record levels again

Nasdaq 1.9% from the all time high

The major indices are all closing higher and near highs for the day/week. The S&P and Dow industrial average both closed at record highs. The NASDAQ index is just under 2% away from the all time high.

The major indices also closed higher for the week with the NASDAQ index leading the charge at up 3.12%.
The final numbers are showing:
  • S&P index +31.58 points or 0.77% at 4128.75. The high reached 4129.48 which is the all time high for the pair.
  • Nasdaq +70.878 points or 0.51% at 13900.18. The all-time high price is at 14175.12. The index is 275 points from the all time high putting the index about 1.9% from the all time high
  • Dow rose 298.68 points or 0.89% at 33801.25. That was just off the high for the week at 33810.87 (which is also the all time high).
For the week, the Nasdaq led. The Dow lagged but was still higher. The Russell 2000 index of small cap stocks fell -0.56%.  The Nasdaq was up 3.12%.
Helping in the US was lower /steady rates despite the rise in rates today. Below are the changes for the week.  The largest decline was in the 5 year sector with a decline of 11.59 basis points. The 10 year is down -6.49 basis points (rates are up about 4 bps today).  Next week the US treasury will be auctioning of reopened 3, 10 and 30 year issues.

Oil nears the moment of truth

Oil flat today

Oil flat today
I did a video recently where I talk about the importance of watching markets that aren’t moving and aren’t grabbing headlines.
At the moment, that’s oil. WTI is flat today and looks like it will stack up another doji star on the chart. It’s normally one of the most-volatile assets but it’s been stuck in a sub-$5 range since March 18.
I’m a big time oil bull and I have been for many months but this is the kind of chart that makes people on both sides of the trade worried. A break is inevitable and the longer it stays here, the more likely it is to be a violent one.
Platts’ survey today showed OPEC+ is wavering in its compliance and that Iranian and Libyan barrels continue to increase (they’re not subject to quotas). Russia has been particularly lax in compliance.
We’ve got 2 mbpd coming back online through July and the WHO is warning about rising covid cases and deaths globally.
On the flipside, the US reopening is looking impressive in almost every way. Gasoline and travel demand is way ahead of where almost anyone thought it would be and will keep getting better. At these levels of production, global inventories are being drawn down.
So there are two trades (from my perspective):
  1. Hang onto longs and hope the trend continues
  2. Cut longs and hope to buy back cheaper
If it’s #2, the question is where to buy? The area around $52-54 looks attractive but a flush to $48 would be the real pain trade and a magnificent level to buy oil or oil companies.

Iran has released a South Korean-flagged tanker (& its captain) it seized in January

Iran released South Korean-flagged tanker Hankuk Chemi and its captain.

  • Iran released the crew in February but many stayed with the ship.
Some good news.

A trader (or traders) with a $40m punt on a US stock market collapse

Reuters report on a big trade on US options market Thursday

  • One or more traders laid out a roughly $40 million bet that the Cboe Volatility Index will break above the 25 level and rise towards 40 by mid-July
  • The VIX closed at 16.95 on Thursday, its lowest close since February 20, 2020,
More at the link here with an explanation as to why the bet is probably on a drop not a surge. By mid-July.