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A traders' ultimate week ahead playbook


12 July 2021

The question on the floors is whether Friday’s positive move across markets sets the platform for more of the same upbeat flow in risk this week. Equities are marching higher led by cyclicals, and banks finding a better tone with bond yields reversing higher and earnings due out.

The USD will always get a strong look from clients and if US bond yields continue to push higher into 1.40% (in 10s) – a big ‘if’ when June CPI is due, Fed Chair Powell testifies twice and the US Treasury Department issue a significant amount of debt, then the USD should find buyers but specifically vs the JPY and CHF.

Watch USDCNH, as this has been the poster child of reflation bets and if it heads lower then commodities should find a positive tone – Copper goes square on the radar, as solid China data should resonate in upside for $4.46. Gold bulls need a break through 1814 (the 38.2 fibo of the June sell-off) to see the bullish momentum continue and traders then need to ask whether trading Gold in USD is always the best trade given the USD risk this week.

US corporate earnings should get a greater focus from clients too, while the macro will dominate the reporting season should be a largely positive affair and close to 80% of companies should beat on the bottom line.

Implied volatility matrix – here we see the weekly implied volatility (sourced from Bloomberg). This is a key input when pricing options and it offers insight as to whether traders see greater movement ahead. Given the number is an annualised number, we can understand the weekly implied move here – which I have projected on current spot levels to give me a 1 and 2-standard deviation range. It gives a sense of expected movement over the week with levels of confidence.

I find this useful for risk management, position sizing and also for mean reversion purposes.

What’s on the radar this week?

US

China

Australia

UK

Canada

NZ

#source

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