#61 Improving Macros

10 minutes read report, 9 pages

To help speed reading blue is used for new arguments, forecasts are underlined and found at the beginning of each page.

How the forecasts did:

It has been a decent week for the presented forecasts. Shorting US index at 97.05 hit bull’s eye, the long AUDUSD trade is in the green, the long EURJPY and long USDCAD forecasts were not triggered. Worthnoting that the long USDCAD trade was not trigered by only 14 pips.

The bias towards risk-on trades, that I started favoring at the last week’s report, continues and is further supported by recent mactroeconomic releases (especially US Manufacturing PMI and non farm employment change). One should always keep in mind though, that the US government yeild curve continues being inverted and that 10y Bonds yield nothing more that the current FED’s rate.

Major events of last week:

  • USA-China: Trump downplayed the prospect of a summit with Xi until prospects of a deal improve. Remember that a few weeks ago, the end of April has been regarded as a significant time milestone for a deal to be finalized.

    The USA is about to sell fighter jets to Taiwan, angering China. On Thursday, it was revealed that the US was spying on Huawei under the Foreign Intelligence Surveilance

  • EU-China: Multilateralism and the need to reform the WTO was supported in a meeting between Xi, Macron, Merkel and Junker in Paris $40bn deals were signed between France and China including huge purchase orders to Airbus. An EU-China summit is set to happen on April 9.
  • Equities: Samsung profits dropped by 60%
  • Turkey: President Erdogan’s party lost the 5 out of 7 major cities on Sunday’s municipal elections. On the other hand Erdogan’s party won 44% of votes and together with his coalition party they won 52% of votes. No vote is scheduled in Turkey up until 2023. Meanwhile the issue with the S-400 Russian system that is ordered by Turkey despite the articulated objections of other Nato members, is still wide open.
  • Ukraine: The comedian, Zelenskiy, took 30% of the votes and will most likely win at the second round on 21 April.
  • Venezuela: Although, Guido’s freedom of movements narrowed, as he is no longer enjoying the parliament’s immunity, he called for street protests against Maduro. US increased the pressure by anouncing new sanctions on 34 vessels belonging to Venezuela.
  • UK: A flexible extension is on the horizon. More details at the GBP page of the report
  • Cryptos: Total market cap jumped to at $174.9143bn, +22,3% w/w, -78.7% from last year’s $821bn peak

Major events of next week:

  • Tuesday: EU-China Summit, elections in Israel

  • Wednsday: OPEC’s montly report on oil, Monetary meeting of the ECB, UN security counsil (headlines regarding Venezuela are expected.)

  • Friday: IMF meeting


Long EURJPY at 124.01 and 123.59

Strengths of JPY:

  • GDP q/q growth rebounded from the negative territory. Domestically economy is doing fine. The only source of concern are the exports due to the moderate global growth.
  • Monetary policy is unchanged.
  • improving macro readings: GDP (yet, it is expected to decrease in 2019), unemployment, trade balance, M2, current account, manufacturing PMI (but bellow 50), average cash earnings, capital spending, industries activity (but it is stil negative for 3rd month in a row), housing starts

Weaknesses of JPY:

  • risk on mode does not favor JPY
  • deteriorating macro readings: inflation decreased, retail sales,Services PMI, monetary base, industrial production, monetary base, bank lending, household spending

Watch / New Releases:

  • current account, consumer confidence, home loans, bank lending, consumer sentiment, M2, inflation expectations,

  • Next Monetary Meeting on 25 April


Long AUDUSD at current levels adding possition at 0.7050


  • Australian new budget, a few weeks before May’s elections, is the first surplus budget of the decade and includes 75bn AUD for ifrastructure, tax cuts for low and medium income famillies & energy assistance payments
  • China’s latest macro releases reveile that the incentives taken to boost economic activity, like the new interest rates and the new foreign investment law, are working
  • improving macro readings: retail sales, current account, trade balance, inflation, inflation gauge, inflation expectations, unemployment, M1, service PMI (but it is still bellow 50), private capital expenditure, AIG manufacturing index, household consumption, wage price index, building approvals, private sector credit


  • GDP latest reading was unexpectedly lower.

  • Westpac, one of the top four Australian banks, is expecting two rate cuts, in August and November 2019. Moreover it lowered it’s GDP expectations to 2.4%y/y from 2.7%. Recently, the 3 year government bond yield fell bellow RBA’s main rate of 1.50%, an additional sign that a rate cut could happen within the next 3 to 8 months. Yet the communication of RBA remained dovish on Tuesday’s meeting.

  • deteriorating macro readings: GDP, job advertisements, manufacturing PMI, home sales, home loans,company operating profits, decreasing capital expenditure, consumer’s sentiment, business confidence

Watch / New Releases:

  • job advertisments, home loans, consumer sentiment

  • Next monetary meeting on May 7.


Long USDCAD at 1.3281 and 1.3265 (same as previous week)

Strengths of CAD:

  • it was the first time in 6 months that US cut it’s total oil production. Oil price may enjoy a short term rally as US oil production faces logistics/quality issues and South Korean refiners rejected the fist US oil cargos and new sanctions are taken against Venezuelan tankers.
  • improving macro readings: GDP, inflation, current account, trade balance, manufacturing sales, wholesale sales, retail sales

Weakness of CAD:

  • Prime Minister lost political capital due to his involvement in helping the big contractor, SNC-Lavalin, to avoid criminal prosecution related to contracts in Libya. Elections are scheduled to occur in October.
  • For the Brend rally to continue (Friday’s close was 70.20$), an additional 1Million Barrels per day (MBpd) reduced OPEC supply will be needed, and this can only happen if China and India are denied access to Iranian oil. Current reduction exceptions permitted by the USA do not seem to end any time soon.
  • Latest release of US crude oil inventories that have increased w/w and latest rig count increase are favoring oil price dropping and CAD weakening
  • deteriorating macro readings: employment change, labor productivity, capacity utilization, Manufacturing PMI, Ivey PMI, corporate profits,foreign securities purchases, building permits

Watch / New Releases:

  • the OPEC’s monthly report on Wednesday, housing starts and building permits

  • Next monetary meeting on April 24.


Short US index at 97.06 and 97.21, targeting 96.10

Strengths of USD – Risk off points:

  • Geopolitical risk in Israel and Yemen is rising.
  • deteriorating macro readings: GDP, core PCE, retail sales, current account, wholesale inventories moving higher, Manufacturing PMI, Non-manufacturing PMI, consumer credit, optimism, construction spending, consumer confidence, consumer credit, personal spending, capacity utilization rate

Weaknesses of USD -Risk on points:

  • Latest release of the US initial jobless claims as well as the non-farm employment change give enough reasons to postpone any upcoming recession scenarios, for at least 7 more months.
  • FED dots confirmed that there will be no rate hike in 2019
  • Geopolitical risk in Turkey, Taiwan, Pakistan India seem to be falling.
  • Improving macro readings: trade balance, unemployment unchanged at historic low, unit labor cost, trade balance, services PMI, durable goods orders, manufacturing Index,industrial production moving lower, housing market, new home sales, vehicles sales, consumer sentiment

Watch / New Releases:

  • factory orders, inflation, consumer sentiment, inflation expectations

  • Next Monetary Meeting of the FED on May 1st.


Long EURUSD at 1.1202 and 1.1168


Strengths of EURUSD:

  • as we are approaching to the upcoming EU elections it seems that the shift of power in the EU parliament would not be significant
  • the possible merge of Deutsche Bank and Commerzbank
  • the yields of the government bonds of the periphery are decreasing
  • improving macro readings: trade balance, current account, unemployment, M3, German GDP, German Trade balance, service PMI, wage growth, industrial production, economic sentiment, private loans,German economic sentiment, business climate

Weaknesses of EURUSD:

  • the upcoming Spanish & Finish general elections on April.

  • EU-USA trade relations will be the next point of focus. The Trump administration wants to include agriculture in the negotiations and threatens to impose tariffs on EU car industry unless Europeans built plans in the USA. The EU is willing to limit negotiations to industrial goods, as it was agreed in the July’s Junker-Trump summit. Additionally, the EU wants the steel and aluminum tariffs to be removed.

  • downward revisions of expected GDP growth from European commission (1.3% EU growth from 1.9% expected in November) and from the ECB (1.1% revised from 1.7%)

  • deteriorating macro readings: inflation, retail sales,Manufacturing PMI (bellow 50), German Maufacturing PMI (bellow 50), PPI, investor confidence,consumer confidence, German factory orders, German industrial production, German retail sales

Watch / New Releases:

  • German Trade balance, investor confidence, industrial production

  • Wendesday’s monetary meeting of the ECB. Nothing new is expected.


No forecasts for GBP, as the Brexit soap opera is getting tiresome to be watched.

Cross party talks betweesn the Tories and Labor continue. Last Thursday, UK parliament voted to let Prime Minister May to ask for an extention of the Friday’s (12th of April) deadline , when the UK needs to decide if they will participate in EU elections. EU’s Donald Tusk suggested a flexible 12 months delay until the UK parliament approves a Brexit agreement.

Here you may see a petition to revoke Article 50 and remain in the EU.

If the UK decides not to participate in the EU elections on May, then the Brexit drama must come to an end by the 22nd of May.


  • BOE is the only central bank that continues to communicate that inflationary pressures exist and that an ongoing tightening of monetary policy at gradual and limited extend is appropriate. Indeed, latest inflation reading increased
  • improving macro releases: GDP, unemployment, M4, manufacturing production, industrial production, construction PMI (below 50), Manufacturing PMI, average earnings and wages, trade balance


  • deteriorating macro releases: retail sales, consumer’s confidence, retail sales, current account, Business Investments, Service PMI (below 50), construction output, industrial order expectations, high street lending,lending to individuals, home prices

Watch / New Releases:

  • retail sales, inflation expectations, GDP, manufacturing production

  • Next Monetary Meeting of the Bank of England on 2 May


Issued by Labis Michalopoulos, CFA




Redistribution is allowed as long as the author and his contact details are referenced.

My net returns are published in real time at www.forexfactory.com/dxmix I was experiencing an Annual Sharpe Ratio of 1.73 for over 45 months (montly Sharpe ratio above 0.5) . On 24 August, I mistakenly ordered to open a position 10 times bigger that I am used to. My equity level is currently back on track, but my statistics are no longer impressive. My 48 months monthly Sharpe Ratio, that includes the leveraged AUDUSD trade, now stands at 0.30, equal to 1.03 Annual Sharpe Ratio.

This material is for Qualified Investors and Professional Clients only and should not be relied upon by any other person.

Past performance or past accurate forecasts is not a guide to future performance and the accuracy of future forecasts and should not be the sole factor of consideration. All financial investments involve an element of risk.

This report is for information purposes only and does not constitute an offer or invitation to anyone to invest or trade and has not been prepared in connection with any such offer.

Any research in this document has been independently produced by Labis Michalopoulos, CFA for his own purpose. The views expressed do not constitute investment or any other advice and are subject to change. The author has an interest in the currency pairs, indexes and any other security disclosed in this report as he is an active trader.

Reliance upon information in this material is at the sole discretion of the reader.


One comment

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