From the Floor: 'Is Trump losing his grip?' – #SaxoStrats#SaxoStrats
• Markets now waiting to see if Trump 'is losing his grip' -- Juhl Larsen
• USDJPY could head towards 112.50 as dollar weakens -- Juhl Larsen
• Trump stance hits global indices as tailwind becomes 'draught' -- Garnry
• Minimal expectations on Apple's Q4 could see 'upside surprise' -- Garnry
• Gold back above $1,200/oz as president 'becomes...best friend' -- Hansen
• Hansen to examine Trump effect on commodities in webinar today at 1230 GMT
By Martin O'Rourke
Get a grip
Donald Trump's sacking of acting US attorney general Sally Yates put the skids under global markets overnight as the row over the president's immigration curbs allied to a failure to flesh out his fiscal policy strategies intensified.
That saw a turnaround in the Dow Jones index to return to sub-20,000 levels, a rush of gold buying, a strengthening of yen and long-dated government bonds on the up.
"We saw a big decline in USDJPY Monday for several reasons but mainly because of Trump firing one of his ministers so basically my question here, is Trump losing his grip," asks Dan Juhl-Larsen from Saxo Bank's FX Options desk. "Since Trump was elected, we've seen USDJPY move from 101.0 all the way up to 119.0 and we're now in the middle of this but I'm suspecting if this continues, we could be seeing USDJPY back to 112.50."
USDJPY was at 113.59 at 0755 GMT.
"Investors should keep in mind having something like the 110 Put which at a price of roughly 45 pips looks very cheap," says Larsen. "Risk reversals are also pretty cheap if you want to buy some downside. If this continues from Trump, then risk could increase in the market."
Plenty of room for downside in USDJPY
Larsen warns that the interbank market is not showing clear indications yet that this is what the market is buying into, suggesting a rush into gamma at the 111.50-112 area "in order to have gamma protection if there is a breakout of this range."
Tailwind to drag
It's a similar tale among global equities as ongoing uncertainties over exactly what Trump intends to do lead to a retreat across the major indices.
"We've gone from a tailwind to a drag as the markets shift from optimism to more uncertainty," says Saxo Bank's head of equities strategy Peter Garnry. "The Nikkei is enduring its third retreat in the last six weeks but we are still in an uptrend."
"We have very low historical levels in markets but we're going to see more and it will be interesting to see how markets react to that, says Garnry. "JPY and Nikkei are very sensitive to volatility."
All global indices fell overnight as Trump's rule by diktat and failure to elaborate on his policies undermined the Trumpflation trade that has sustained the equities push since November 8.
Apple could surprise to the upside tonight, precisely because expectations for the technology behemoth are relatively low, says Garnry.
"Apple's focus will stay on China where it has been losing market share pretty heavily and it is also negative top-line growth in Asia-Pacific and north American markets," he says. "There's not a lot of expectations so if it does actually surprise to the upside on the outlook, we could see a rise in the share price."
"The company is actually valued at a 50% discount to the average company in the S&P 500."
Whatever the rest of us may feel about the first days of the Trump presidency, gold bulls have something to cheer as the precious metal once again stretches beyond $1,200/oz.
"Trump has become gold's best friend," says Saxo Bank's head of commodities strategy Ole Hansen. "He was its foe back in November when the story was very much the rising dollar, rising yields and stocks which seems to be reversing as we speak."
"We've been trading quite technical but if we make it above $1,205/oz, that should indicate that we are heading for a new high in the market," says Hansen.
Hansen will elaborate in a webinar today at 1230 GMT. Sign up here.
Pause for thought as Trump gives the bulls something to think about. Photo: Shutterstock
Martin O'Rourke is managing editor at Saxo Bank
Editor’s note: From the Floor takes advantage of TradingFloor.com's unique real-time access to Saxo Bank’s various trading desks around the globe to put our community in touch with the developments that matter to their portfolios.