Keep An Eye on Risk Correlated Assets

  • 5 open positions into Tuesday
  • Empty calendar makes for quiet trade
  • Volatility expected to return tomorrow
  • Risk assets still highly exposed

FULLY LOADED - My book is nicely stacked into Tuesday and I have a good balance of short-term and longer-term plays. I don't have any risk on the shorter-term trades, with stops at cost on both the GBPUSD long from last week and USDJPY short from Monday. Meanwhile, the AUDNZD long is looking promising, the SPX500 short is showing signs of wanting to stall out, while my GOLD long is trying to find support below $1100. But everything has been quiet this week and the trade is mostly boring on account of an empty economic calendar. It all should pick up again from tomorrow into the end of the week, but for today, we might get more of the same quiet trade.

OBSERVATIONS - Overall, I don't have much to add at the moment, other than the fact that I still think risk correlated markets have yet to show a proportionate and appropriate reaction to the ramped up odds for a December rate hike. All we've seen in the aftermath of the stellar US employment report are yield differential flows into the US Dollar. But the negative risk implications from higher rates should not be ignored as the reality of Fed policy normalization makes it far less attractive to be buying risk assets. Another critical takeaway post US employment is that the pickup in wage growth could put added pressure on the Fed to be more aggressive than it might want to be with it's normalization. This is something that could really shake up risk markets. Let's see.

Fed may get more pressure from wage growth. Via @joelkruger

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