LESS HAWKISH MINUTES - Certainly not the most hawkish of Fed Minutes on Wednesday. The market reacted accordingly, selling US Dollars across the board after the leaked release resulted in a scaling back of September liftoff odds. Perhaps also a concern for hawks was the fact that the Fed Minutes were more dovish than expected without even having the benefit of taking into consideration the developments of the past few weeks. OIL has dropped back to fresh multi-year lows, while China has since been out devaluing its currency. But even with all of this, I am still of the opinion the Fed raises rates in September.
DOLLAR WEAKNESS - Interestingly enough, I don't say this with any expectation for Dollar strength. In fact, I am looking for some Dollar weakness ahead. I even would go as far as to say a Fed rate rise in September could produce a more bearish US Dollar reaction than if the Fed did nothing. Why? Well because any rate rise is sure to be accompanied by some very strong language reminding the market that just because the Fed has raised rates doesn't by any stretch mean the Fed is going to be tied to an aggressive tightening path. The Fed will make it very clear that it is going to take things very slow.
MY BOOK - As far as my book goes, Wednesday was a busy day. I exited my short USDTRY position for a loss. While I do believe this market will reverse sharply in the sessions ahead, the trade simply wasn't there when I took it and I will stand aside. I also exited my long OIL at break-even after the market showed very little follow through to the upside. We have since dropped to yet another multi-year low and I may think about stepping in again. I have taken two shots over the past several days, both producing break-even results. Looking at the more developed FX markets, I sold USDJPY and USDCAD. As of this update, I am short USDJPY at 124.07, but was taken out of my USDCAD short from 1.3123 at cost in the post-Fed Minutes whipsaw move. I still like the USDCAD short and may jump back in. Stay tuned. Finally, I'm still holding my SPX500 short from 2122.