Playing the Global Growth Slowdown with FX

Published on
March 14th, 2019
Duration
14 minutes

Playing the Global Growth Slowdown with FX

Trade Ideas ·
Featuring Amelia Bourdeau

Published on: March 14th, 2019 • Duration: 14 minutes

Amelia Bourdeau, founder & CEO of Market Compass, joins Real Vision for the first time to highlight three different currency trades to play the global growth slowdown. She highlights her bearish theses on the Australian dollar, the Canadian dollar and the euro, and reveals key levels to watch out for, in this interview with Justine Underhill. Filmed on March 13, 2019.

Comments

  • RE
    Russell E.
    21 March 2019 @ 10:33
    And.... the Powell speech turns her predictions on their head - just like that.
  • ra
    rehan a.
    18 March 2019 @ 14:35
    Good stuff...please bring out Juliette declercq
  • DF
    Dominic F.
    17 March 2019 @ 11:28
    Trump says that FX is part of the so called 'Trade Deal' between the two countries, so I don't know how China waits until trade deal is done to devalue. If China do that then the 'trade deal' is broken and will begin again, no?
  • MB
    Michael B.
    17 March 2019 @ 07:18
    I have heard these trades described as “crowded”, especially the Euro short. But how important is that really? Is the FX market really like the stock market, which is exclusively for investment and speculation? Doesn’t essentially ALL global commerce, including basically every supply chain, go through the fx market? It seems to me that fx trading and speculation would be a very small percentage of total fx transactions, and thus lack the ability to crowd anything. The numbers on EM and other international debt denominated in USD, originated when the fed funds rate was near zero, and due/coming due is in the trillions, however. Wouldn’t this underpin the dollar regardless of speculative positions? I’m a novice so please correct me and shed some light on this.
    • RP
      Ryan P.
      18 March 2019 @ 02:17
      You are correct. Crowded trades usually are in regards to speculative positioning. You can get CFTC data published weekly to see where the commercials vs specs lie to get a better sense as to degree. Crowded trades can fall risk to violently correcting themselves when the trade becomes too expensive to hold or just not as clear on timing. I wouldn’t worry about a crowded trade as so much of trying to consistently re check your thesis to prove it wrong. If you have conviction then you don’t care what others are doing. By keep in mind this profession is as much as managing your positions as it is coming up with ideas. Best of luck.
  • MS
    M S.
    16 March 2019 @ 03:35
    Great Interview. Enjoyed a lot.
  • GG
    Gary G.
    15 March 2019 @ 14:27
    Here is a trade idea— short usdjpy at market!!!
    • MW
      Marcus W.
      26 March 2019 @ 12:27
      Nice Gary, I have that one on. Shorted a while back from 114, closed at 105. Back on it again at 112. Targeting 107.5. Yen will outplay the USD IMO. As she mentioned. Yen and Usd
  • BP
    Byron P.
    15 March 2019 @ 09:09
    As an fx specialist, she kind of missed what I think is one of the easiest trades and best risk/reward trades out there at the moment and that is short HKD! There is only one reason China opened a gold-yuan contract and has been accumulating gold for the last decade. And that is to float the currency and repeg the HKD to the renminbi.
    • RP
      Ryan P.
      18 March 2019 @ 02:23
      Anything public to read on this?
  • GG
    Gary G.
    15 March 2019 @ 06:52
    Time will tell but most of the guys on RV are just long the dxy from so long now and euro looks like its try to form a bottom.
    • GG
      Gary G.
      20 March 2019 @ 18:26
      👉Dxy!!!
  • KL
    Ken L.
    14 March 2019 @ 21:21
    Maybe someone with FX expertise or Amelia can explain this to me. All of Amelia's trades are based off the USD, so wouldn't the simpler trade be long USD? or DXY?
    • JC
      Joe C.
      14 March 2019 @ 21:27
      Movement in the DXY is a combination of the USD vs an entire basket. She’s playing specific weakness in the named currencies. Which is more likely... that the USD meaningfully strengthens against all/most of the currencies in its DXY basket, or just one of her economic theses in any of these 3 places plays out?
  • SS
    Shanthi S.
    14 March 2019 @ 21:05
    Very good. Thanks guys.
  • JC
    Joe C.
    14 March 2019 @ 16:30
    I'm as bearish as anyone on the Euro. Completely agree with the parity target being hit eventually. But 6 months is an insane time horizon IMO.
    • SH
      Steve H.
      14 March 2019 @ 17:46
      I agree in principle, and you're probably right. That said, calling anything 'insane' when the world's central banks have gone as far off the reservation as this lot have been driven is perhaps a tad strong. And let's face it, Europe is politically dysfunctional, its economy is too weak to handle positive nominal rates, it will be on the losing end of any real US-China trade deal (should one materialise), and Trump clearly has his eyes fixed on the relatively easy target of European autos; reality will eventually dawn on the markets and, unlikely though it currently seems, that could plausibly happen before the end of the year.
    • JC
      Joe C.
      14 March 2019 @ 18:46
      Fair, let's call it "unlikely". An 11% currency move in 6 months has happened for the Euro before, but feels highly unlikely unless the dollar rallies hard like it did 2014 - 2015. I'd sure love it to be true... short EUR/USD is the gift that keeps on giving.
    • DR
      David R.
      14 March 2019 @ 23:58
      Sorry to burst your bubble, but in fact EURUSD is actually higher over the past week and past month. And in fact, the last 11% move within 6-months was EURUSD *UP* from July 2017 to Jan 2018 from 112 to 125. The previous 11% move was EURUSD *UP* from Dec 2016 - May 2017 from below 104 to 113. That's called an "impulse". The subsequent movement we saw during a chunk of 2018, was very overlapping and choppy in its downward move, and thus is a classic "correction" against the primary trend "impulse". Learn to read at least the basics of a chart. This has been textbook. The dollar has been "corrective" in its higher move, against its primary downward impulsive action. So the next BIG move will be dollar down. You even have a clear double bottom in the EURUSD chart during the corrective phase of the past year, which retraced a classic fibonacci 61.8% of the prior impulse advance. Textbook. Next, analyzing sentiment, the data is clear that retail is crowded long into dollar, while smart commercial money tends on the other side short the dollar. The little people should get a haircut again as usual in these setups. Significantly, we see the ECB began LTRO's a week ago, and yet there was no follow-thru weakness in EURUSD (in fact EURUSD is higher than a week ago). This shows that the dollar price action is weak. What won't go up, instead goes down (ie., USD). Guess what happens to USD when the Fed actually makes a dovish move, instead of tightening like it has been, as seems inevitable given the worsening US economic data of late, which is among the worst in the world at least in terms of negative (bad) surprises in the Citi Economic Surprise Index this year. We also see today that Fed QT was in fact $0 for the week, yet Fed is officially in QT mode, lol... "divergence" already? . Long USD... Picking up nickels in front of a coming streamroller. All that said, the CAD and AUD are turds too. So is JPY. So is EUR but that's old news and maybe priced-in. There are stronger currencies elsewhere in the world that are handily beating the dollar consistently, have been for months, and have significantly higher yields. Dig a little and ye shall find.
    • JC
      Joe C.
      15 March 2019 @ 02:33
      Holy cow. Don’t “learn to read a chart” @ me, please. Especially with something that’s made lower major highs since 08. Short EUR has been a stellar trade, in and out, by far for 12 months. You made money going the other way? Good for you. Notwithstanding the point I was making was we’re so oversold here relative to the last few months, another 11% down seems “insane”, but agreeably not impossible. Which would actually be a point in favor of your bullish view but by all means be reductive anyway. You have your time horizon and your entries and I have mine. If you look at the 1Y chart of EUR/USD and that’s a chart you want to be long, or you look at USD vs 5-10 major currencies and see charts that look like they’re about to break down, by all means place your Fib-based wager. Someone needs to take the other side of my trade.
    • JC
      Joe C.
      15 March 2019 @ 03:21
      And could you clarify where the *clear* double bottom is from last year? We might be looking at different charts.
    • DR
      David R.
      15 March 2019 @ 12:03
      Joe, the potential double bottom in EURUSD is evident on the continuous and hourly charts on 7 March and 12 Nov down below 1.12
    • DR
      David R.
      15 March 2019 @ 12:11
      Joe, why look at a chart limited to 1-year? Yes that one sure looks like a downtrend, albeit in overlapping waves thus possibly corrective in nature, but just 1-year is a myopic perspective. Look back 2 years and it's an altogether different picture with the EURUSD up 800+ pips overall, tho that's also myopic. Presumably like me, you have dozens of charts with different timelines, time candles, trendlines, wave counts, oscillator and momentum indicators etc to help sort it out. Currencies tend to run in long term trends. Looking back many years, it's clear the EURUSD topped in 2008 and likely bottomed in 2016. Look back 50 years and you can see that EURUSD tends to run in roughly 8-year cycles: 1970 low, 1978 high, 1985 low, 1992 high, 2001 low, 2008 high, 2016 low. Thus I retain a bullish bias for EURUSD unless it goes below 104 with follow-through. Likewise, as I wrote below, DXY retains a bearish bias while below its value of 103.9 in December 2016, which DXY has come nowhere close to recovering despite a choppy tentative recovery last year following an impulsive breakdown the year before, that both technically and cyclically looks set to resume sometime. However, as I wrote yesterday, there are better pairs to trade than EURUSD which is NOT among my strong conviction trades. And I've lots more analysis to it than just a "fib wager", thanks.
    • JC
      Joe C.
      15 March 2019 @ 15:04
      You may want to reread the Edwards & Magee "textbook". 11 Nov - 7 Mar doesn't remotely qualify as a double bottom, let alone a "clear" one. I hope you understand it's difficult for me—and perhaps others—to take analysis seriously when it includes "clear", "classic", "textbook", and "the next move WILL be down." The market has a way of humbling absolute & predictive statements. If a slough of technical indicators and a long-term outlook are helping you make money, more power to you. Zero technical indicators and a shorter time horizon work for some of us, too. I find I get more out of RV when I engage & question, rather than lecture why my method is superior. Good luck in your trading/investing.
    • DR
      David R.
      15 March 2019 @ 20:21
      Joe, I already specified conditions for both EURUSD and DXY for which my directional biases will be proven wrong. Which makes it evident that my outlook is no "absolute statement"... and so did my remark, "EURUSD is NOT among my strong conviction trades". So there are no certainties in these uncertain markets, nor did I mean to imply that there are, notwithstanding my occasional choice of words like 'textbook' and 'clearly'. OTOH you're absolutely ok saying that "short EURUSD is the gift that keeps on giving"? (despite EURUSD being up for the day, week and month... and ~1000 pips up now compared to the above-mentioned swing low of Dec 2016). But good luck on your EURUSD trade, as I don't have a dog in that fight. Actually it'd make life easier for me if USD didn't weaken so I do wish that you win in your trade, honestly. But unfortunately you've not really provided much rationale in support (except for your valid "lower highs", which I've already attributed to the current corrective phase that likely will end in C of 2 in the coming months before wave 3 crushes the dollar to new multiyear lows afterwards). Granted, this is a shitty board for discussing/explaining as unfortunately we can't even post/attach a damn single chart. Again, best wishes with it.
    • DR
      David R.
      15 March 2019 @ 20:54
      PS. Apologies for any "lecture" tone... agree it's better to engage than lecture. More productive. My text can be poorly nuanced and also even hyperbolic sometimes :(.
    • JC
      Joe C.
      15 March 2019 @ 21:48
      No worries, happy to provide my rationale for lower EUR/USD: 1. Slowing YoY rate of change in growth & inflation in the eurozone has historically been bearish for the Euro. Rates continue to be buried in near-zero or negative territory, especially relative to the US 2. I subscribe to Brent Johnson’s “Dollar Milkshake” theory despite disagreeing with him that rates are headed higher globally. To me, the theory holds as long as the Fed is tightening relative to ROW, even if that means easing less aggressively than ROW 3. Sentiment in EUR is far from historical extremes A move above 1.144 would stop me out tactically, but I’d still look to short from higher levels until the data above change. These factors have been in place since early last year when I first went short, hence “the gift that keeps on giving”, but the trade is now getting long in the tooth. One of my favorite market lessons is that you and someone else can have opposing views on an asset and still both make money, as long as your time horizons and executions are correct. I hope that’s the case for us.
    • MW
      Marcus W.
      26 March 2019 @ 12:30
      I've been looking at the The Yen vs Euro to hit parity in 2019. I'd back that in over the USD. See 95 to the Euro again perhaps.
  • DR
    David R.
    14 March 2019 @ 16:18
    The other big risk not mentioned is that the US falls flat like has already begun, having already been priced for strong growth, rising rates and liquidity withdrawal, none of which should happen. In the contrary, second derivatives for the US economy are the worst in the world this year, the Fed will cut rates not increase, and turn from QT to QE. Sounds like a potential dollar collapse in the making - like the technical charts are saying which is most telling of all but unfortunately missing here. Long gold, precious metals, commodities. Short dollar. Dollar index remains long-term bearish unless 103.9 is broken. The next 1000 pips for USD are most likely down; ie, DXY will hit 86.75 (and lower) instead of 106.75
    • MB
      Michael B.
      17 March 2019 @ 07:33
      David, It looks as if the Euro has hit a series of lower highs all bumping up against a downward sloping line/area of resistance in 2008, 2009, 2011, 2014, and then 2018. I’m using Ilya Spivak’s graph here. What do you make of this? I’m new to fx and technical analysis, so I’m interested in your honest take on this. https://a.c-dn.net/b/1zUuEw/EURUSD-Technical-Analysis-Euro-Bounce-May-Bring-Test-Above-1.15_body_Picture_2.png.full.png
  • AP
    A P.
    14 March 2019 @ 14:22
    Short EURRUB
    • AP
      A P.
      14 March 2019 @ 19:11
      I mean, I really like the setup, fundamentals + technicals: * Still at one of its weakest points in close to 10 years, yet holding up * Barely moved during the oil crash of October-December last year * Low government debt/GDP (13.5%), lower external debt since 2015 issues and all the sanctions * Inflation steadily rising (from 2.5% in July to 5.2% currently) so potential for further hikes, in the meantime great carry (7.75% vs EUR) * Ease of doing business dropped from #124 in 2010 to #31, and is improving every year * More gas growth to come (3x oil growth), and more diversification of customers (see Diego Parilla’s 2015 RV video and him mentioning the “Beijing option”) * Yield curve ok * Equity markets in line with other EM YTD * With gold reserves holdings increasing the most (after dumping their US Treasuries last year). In the meantime FX reserves have also improved * Technicals are coming together - above both 50MA and 200MA with golden cross forming + double ascending triangles & clear long term breakout starting (After a double bottom) * RSI neither overbought, nor oversold * Little discussed / borderline hated (Never seen a rouble trade on RV) * Composite PMI above 50 (though softening, so need to keep an eye on it), but depending on where commos go - obv. it is a commo play as well * Bearish Eurozone + loose EUR with TLTRO, political issues as exposed above More on the fundamentals with Michael from Cross Border Capital, short podcast —> http://bit.ly/2ERjIJW Happy to hear bearish arguments (and sorry for hijacking the obvious long USD trades exposé), but the setup looks really enticing for me now.
    • DR
      David R.
      14 March 2019 @ 23:40
      AP, no worries, I think yours is way better than the long USD trade here which is a very crowded retail position. Bad juju there.
  • Nv
    Nick v.
    14 March 2019 @ 11:46
    Well done Amelia. (Unbreakable challenge)
    • AB
      Amelia B. | Contributor
      20 March 2019 @ 19:04
      Thanks! Good to hear from you. I hope you are well.