Article / 17 April 2017 at 3:34 GMT

Macro Monday: Vive la France! Fifth Republic in Focus — #SaxoStrats

Global Macro Strategist / Saxo Bank Group - Singapore Hub

  • Donald Trump has changed his opinion of Janet Yellen
  • He has decided to not brand Beijing a forex manipulator: another about face
  • The main indicators for equities are still elevated, but with bearish signs about
  • Several agricultural commodities have hit one-year lows
By Kay Van-Petersen

A replay of the global macro weekly call for week 16 is available here.

Summary of last week
  • Continued focus on North Korea, as well as noise out of the China and US camps
  • CMD: Risk-off favoring oil and precious metals. Big week for gold and silver at +2.5% & +2.0%
  • Equities: Some pullback in equities, still feels like it's lagging the risk-off we are seeing in other assets classes / securities.
  • Vol: VIX about +30%!!! To about 16.
  • Trump shows many faces (see Wednesday, in WSJ Interview.): “I respect her.” (that is, Federal Open Market Committee chair Janet Yellen). And Trump will not brand China a currency manipulator after all. We are once again seeing 180 degree turns. Only delta is, these were some core and visceral promises by Trump on the election trail, especially on China and of course he’d smashed Yellen’s name.
  • FI: Continued to be bought as yields drop
  Jean-Luc Mélenchon, above, has been gaining momentum if the French electoral campaign, especially after Benoit Hamon gave him his backing. Photo: Shutterstock

COT report (April 11)
  • USD positioning up 16% to 416.3 bn.
  • Market longing yen, first time since November.
  • Pullback in AUD longs positioning, down 18%.
  • MXN longs at 1 year high as Trump capitulating on “everything” promised on the campaign trail
  • CAD at 1 year low in terms of positioning
  • Sterling: Not much change but Eurozone fallout would rock Sterling higher.
  • Silver positioning at all-time high. It's up another 6%.
  • Grains commodities continue to slump with soybeans, soybeans meal, soybean oil and sugar all making one year low.
The week ahead
  • Key Focus: North Korea, Flash PMIs, Turkey, All about French Elections (Sunday April 23).
  • Central Banks: ID 4.75% e/p (April 20).
  • Fed Speakers: Stanley Fischer (April 17), Esther George (April 18), Eric Rosengren (April 20), Neel Kashkari (April 11), jerome Powell (April 20) and Kashkari (April 21).
  • Other: Quite a few markets still out (Hong Kong, Australia, New Zealand, Switzerland, UK, Germany and France), Bank of Japan governor Haruhiko Kuroda (April 17), Beige Book (April 19) Reserve Bank of Australia minutes (18), Bank of England governor Mark Carney (April 20), IMF (April 21-22).
  • Economic side: China GDP +6.8% e/p IP +6.2%e +6.3%p FaI +8.8%e +8.9%p RS +9.7%e +9.5%p US: Housing data, IP, Beige Book, Flash PMIs JP: TB, Flash PMIs, Tertiary EZ: Final CPI +1.5% e/p Core +0.7% e/p, TB, Eurozone Flash PMIs UK: RS AU: RBA Mins NZ: Milk auction, CPI QoQ +0.8%e +0.4%p.
Positioning and thinking
  • North Korea : Continued noise in North Korea given recent grand celebrations and also a failed missle test over the weekend. Question of when, not if, on the contingency scenarios.
  • Turkey: Erdogan seeks to solidify his base but polls indicate that votes are too close. Erdogan win will be short-term bullish.
  • French Elections: Polls results did not work on Scottish Referendum, Brexit, US elections but did work on the Italian Elections. Round one 23 April, Round two 7 May.
  • Backdrop on French election : Fillon was leading until the wage scandal. Then came Macron whom market had a view that he will eventually win the round two against Le Pen.
  • Now: Emmanuel Macron has been losing steam and Jean-Luc Mélenchon gaining momentum especially after French Socialist candidate Benoit Hamon's backing on Melanchon. A potential Marine Le Pen and Mélenchon outcome could spook EURUSD towards parity and safe assets buying. More on the table below.
*Assuming we had French elections yesterday and price anchor on last Friday’s close. This is what we could possibly see in terms of price action after the first round of the French Elections.*


Technical Picture: Kay Van-Petersen

  • Main Equity Indices still elevated, yet bearish technical indicators are ticking, plus lagging moves in other asset classes. S&P500, CAC, Dax all look like they are stalling…

Dax appears to be stalling

The CAC 40 looks to be stalling too

  • USDJPY looking very bearish, key weekly close below 200 day moving average , market getting long. DXY questionable.

Japanese yen chart

  • AUDUSD and NZDUSD looking constructive – despite cmd pullback – especially AUD, though risk is to the upside on Kiwi positioning (i.e. 1yr record lows, NZ CPI on Thu will be key).

AUD chartnnn


  • GBPUSD has to break above 200D or back below 100D of 1.2629 / 1.2421 levels. Risk to the upside.
  • EURUSD has avoided the bullet. We closed just south of 100D of 1.0625, then 1.0850 key (200 day)
  • Gold has broken out and it's off to the races, $1300/oz almost a given from the $1286/oz Friday close. The 200 day moving average of $1257/oz is support, was quite a stiff resistance to break through (about five rejections since E-Feb)

XAU chart

  • Ditto on silver. Weekly charts on both look very strong, need another weekly close above 200 day for sustainability
  • Oil has shown very strong price action, with Friday close above 100D of $53/barrel. Weekly still higher lows and higher highs
  • Bunds, bounced from 200 day 0.17% lvl to close at 0.19%. Think this could reverse quickly, this is key support levels where yields bounced back early Dec, early Jan & early Mar. (note we had this US10s)
  • US 10s, chart still looks bearish – amazing thing, we are close to breaking 2.20% and Equities have not really pulled back. Weekly close below 2.20% is a potential jet fuel for bears as that is key level. Also closed below 200W 2.2580%

KVP global macro books
  • New position. Been waiting for a pullback in Emerging Market FX (rand actually strengthened this wk by 2.6% versus the USD) and we just have not gotten it, finally decided some exposure needed. Risk obviously could be timing, yet was thinking that over the last two to four wks!
  • Short USDMXN at 18.5210 for 1.5%, with a 0.5% sell order at 19.00, 1.0% at 19.50 & 1.0% at 20.00 (for potential total risk of 4.0%). Wide stop at 20.32, wide targets with 50% at 17.08 & 50% at 16.08
Please see our Q2 Outlook here.

  – Edited by Robert Ryan

Here is the recording of this week's Macro Monday call.

Kay Van Petersen is Global Macro Strategist at Saxo Bank. You can follow him on Twitter: @SaxoStrats or @KVP_Macro. Please join us live for next Monday's Macro Call at 0830 [Singapore/Hong Kong], 0930 [Tokyo], 1030 [Sydney]. 

goldfinger goldfinger
Is Mike, Mark Carney's brother? Good read though, thanks.
Kay Van-Petersen Kay Van-Petersen
Goldfinger, thats how I test if anyone is picking up what we are putting down. Glad it was a good read, hope its adds value to your positioning & current thoughts on the markets.
goldfinger goldfinger
I liked your analysis of permutations of French candidates, especially. Looks like only you and I are working today.
Madjid Madjid
I kind of agree with you on the USDMXN, but I just took the last of my profits dating back to November because of the incoming news “Awarding contracts for building the great and beautiful wall”. I could be completely wrong
Thanks again to you and your team for the great work you deliver every Monday
Kay Van-Petersen Kay Van-Petersen
Thanks Madjid, a lot of spice & tender loving care goes into that Global Macro oven every wkd. Yes, goldfinger, whats that expression, no rest for the profitable?
alicia33 alicia33
This comment has been redacted


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