Reopening Trade Takes Hold

www.investing.com/analysis/reopening-trade-takes-hold-200600042

By Ashraf Laidi | Aug 26, 2021 01:28AM ET

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by Adam Button

It only takes a modest slowdown in COVID cases to spark a big reversal in favor of risk trades. Gold posted its biggest drop in nearly 3 weeks with the rise in real yields as XAU/USD failed at the technically crowded 1805/09 level.

NZD was again the top performer, closely followed by AUD and GBP, while JPY and CAD were the weakest. US July durable goods orders came in stronger than expected.

The chart below shows most major economies have seen negative economic surprises over the past 3 months, reducing the case for a September taper in the US or the UK. The NASDAQ short was stopped.

Citi Economic Surprise Index

We highlighted a potential peak in US cases and shift in Fed tone early on Monday, a theme the market has run with to start the week. Commodity currencies led the way again on Tuesday and US equities hit another record high. Importantly, within the US equity space there was a decided reopening bent with casinos and hotels as the top gainers, while consumer staples and Pfizer (NYSE:PFE) lagged.

For now, the trade is all about positioning for a crest in COVID cases and repositioning for the reopening. It's an opportunity bulls don't want to miss.

Given the strength of some of the reversals, the momentum in this trade could last for some time, especially if Powell stays dovish. Beyond that, the market may focus on the demand picture. There were some warning signs in a soft Richmond Fed Tuesday at +9 vs +25 prior but new home sales were slightly stronger.

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UK credit and money supply data published on Wednesday mostly came out weaker than expected, indicating a continued tightening of financial conditions. The unexpected exception was...

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Bullish: AUD/JPY currently at 88.37 in a channel in range. If we can break resistance here, we are looking for a continuation to the ATR Target/1.618 Fibo at 89.22 with a further...

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Central Banks

Interest Rates

Next Meeting

FED

5.00%

May 03, 2023

ECB

3.50%

May 04, 2023

BOE

4.25%

May 11, 2023

SNB

1.50%

Jun 22, 2023

RBA

3.60%

Apr 04, 2023

BOC

4.50%

Apr 12, 2023

RBNZ

4.75%

May 24, 2023

BOJ

-0.10%

Apr 28, 2023

CBR

7.50%

Apr 28, 2023

RBI

6.50%

Apr 03, 2023

PBOC

3.65%

BCB

13.75%

May 03, 2023

US 30	32,712.1	-5.5	-0.02%
US 500	4,027.2	-0.6	-0.02%
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Copper	4.0762	-0.0068	-0.17%
US Soybeans	1,476.75	+1.25	+0.08%

U.S. 10Y	3.579	+0.013	+0.37%
U.S. 30Y	3.770	-0.008	-0.20%
U.S. 5Y	3.6992	+0.0240	+0.66%
U.S. 3M	4.8505	+0.0780	+1.62%
US 10Y T-Note	114.38	-0.16	-0.14%
Euro Bund	135.53	-0.03	-0.02%
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Reopening Trade Takes Hold

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