10.09.2021

The thesis that we may see a mini-reflation rally has put the carry trade back on the table. Simply put, if we see rates continue to rally this way, it will be too enticing to sell funding currencies and buy currencies that benefit from rising prices, those linked to commodities.

For that thesis to have any merit, at least for us, the CHARTS have to agree. So let’s look at one (not CORSS JPY) and see if the super cycle has a path higher, in this case we focus on AUDCHF.

Weekly Chart: The Super Cycle has a path higher. It suggests that AUD could have a HUGE move vs CHF.

What does the FORWARD CURVE look like ?

1 year FORWARD earns 60 pts. That is not bad CARRY these days.

Let’s focus on the SHADED area of the chart. The RISK is that we are BUYING AUDCHF in what could potentially be a SUCKER’S WAVE (WAVE 2).

DAILY CHART: This is a CLOSE UP on the WEEKLY A-B-C pattern we identified

Shows the thesis is VALID as long as 0.6500 is not BREACHED. We want to keep looking at different time frames to find ACTIONABLE ENGAGEMENT ZONES.

HOURLY CHART: We like this position, it is CONSTRUCTIVE on many TIME FRAMES, it earns attractive CARRY and it has a FUNDAMENTAL story that matches the CHARTS. We are always looking at levels where we are WRONG. For now, we stay LONG and watch 0.6665, that will force us to reassess the position and find better levels to participate int he LONG TERM BULLISH structure.