Not if, but by how much

So it's Fed day today, though Macro Man struggles to get excited about a meeting that even Janet Yellen conceded last month isn't really live.  To be sure, the tone of the US data has remained poor; though it is perhaps unsurprising that the hard data has not improved (given that we're not getting April readings yet), Macro Man has nevertheless been somewhat disappointed that confidence data also seem to have pulled back.  As such, it looks to be not a question of "if" but "by how much" the Fed tweaks its characterization of the US growth dynamic and outlook.

Before that, of course, we get the release of Q1 GDP.  The consensus looks for a relatively weak figure of 1.0% annualized, though frankly, given how rubbish most economic reports were last quarter it seems a touch generous if anything.   Indeed, punters will no doubt recall last year and the shock of a negative Q1 GDP print; although the low estimate in the consensus panel appears to be 0.2%, would anyone really  be completely shocked if it came out negative?

Of course, one could easily argue that a bad number and a dovish Fed are already in the price of rates and the dollar, while equities are pricing off of China/ECB QE/Apple Watch/LOLZ.  Although your author is leery of talking his own book, he cannot help but observe that EDZ5 may be tracing out a nice little head and shoulders pattern, with the neckline at 99.375.  The target is only 6 ticks away or so- hardly a "macro" trade- but a break could suggest that the theme of pricing US weakness may have run its course.  That, in turn, could prove useful for other asset prices.


Obviously the dollar has been as firm as a soggy newspaper recently, not only against the usual suspects like the euro and sterling (where Macro Man establish a thankfully small short last week), but also oil, which is actually up on the year (as measured by CLZ5.)  In truth, a moderate rebound in the oil price is probably no bad thing, as it puts paid to the worst of the OMGDeflation nonsense and mitigates the risk of an energy sector implosion.  Whether it's a tell for the Big Dollar is another question entirely; unlike the ECB and BOJ, for example, oil isn't conducting QE!

Still, the euro's approaching some interesting levels.  There's a layer of resistance between 1.10 and 1.1050 that's been rock-solid so far this year.   Similar to the EDZ5 chart above, should it break, it would suggest a deeper challenge to the "US Exceptionalism" theme.

While we might not get a resolution tomorrow, given the proximity of these level we should get one soon- next week's payrolls, perhaps?  Either way, it will hopefully prove more interesting than the last few weeks of back'n'fill.
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Anonymous
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April 29, 2015 at 7:08 AM ×

is the glass half full or half empty?

I guess you can short it now to cover it lower or wait for that level to add longs. the second possibility is also supported by eco weakness.

ciaoooo

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FunnyMoney
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April 29, 2015 at 8:55 AM ×

Let's summarize the situation:
- Recent US economic data is terrible
- Equity markets remain bid
- There is no end to Central Bank easing... any hint that equities might fall is met with more easing.

Conclusion:
The Fed will NOT raise rates. The ponzi scheme continues on unabated.

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amplitudeinthehouse
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April 29, 2015 at 11:22 AM ×

{"US Exceptionalism" theme.}

Have you figured it out yet?
The whole of America is a theme, a theme of bullshit.
No wonder Jobs was looking outside the states...
Apple data , Fed data , whatever data you want, sir...do you want an oversize data?

No shit, MM, yesterday a commentator nailed it...yes mate, sick to the core.

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amplitudeinthehouse
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April 29, 2015 at 11:47 AM ×

Macro Man, having been trading the S&P through the American data releases the last 9 months, I only hope the SEC regulators investigate my trades and pass my name onto Homeland; thereby recommending I be banned from entering the USA for LIFE...then I wouldn't have to keep coming back here each week doing my best to tussle and slip from the "USA exceptional theme" net that has instilled so much goodwill in world markets that I couldn't care less if I didn't earn another dollar for the rest of my life.. really couldn't care less. What a wonderful teacher you have been.

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washedup
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April 29, 2015 at 1:38 PM ×

Thx MM - I am amazed at how quickly sentiment has turned in the UST complex - its suddenly hard to find bears in the 'smart money' segment. Oh i know the wall street economists/pimps were always a lot higher, but they don't really count - velocity works both ways, and if a long end selloff gets going you could easily see 30-40 bps very quickly.
Given where a multitude of assets are priced, I think at this point a silent 'we are carefully observing data' fed is in fact a hawkish fed.

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washedup
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April 29, 2015 at 2:08 PM ×

I think LB may be on to something with that I/S ratio - 3% build - ouch!
Is there anyway to tell what the altalnta fed model (which obviously nailed this) has to say for how things looked in april? When does it first provide a number for Q2?

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Anonymous
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April 29, 2015 at 3:44 PM ×

For the moment, EURUSD is 1.1136, the resistant line is breached, for now. I am pleasantly surprised so far.

Question on equity: Since I am desperate for a 'sell in May' correction to reload SP, I am assuming that many other guys are having the same wish. Does it mean I have to load SP while holding my nose at this level?

Farmer

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Leftback
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April 29, 2015 at 3:45 PM ×

So.... we have been warning in this space for some time (to a fair degree of ridicule) that when the dollar finally turned down, foreign investors would take their ball home, selling not only US biotech crap and other over-priced US equities but also the haven of US fixed income and even USTs, notwithstanding the weak GDP data. This is why we have eschewed ALL US assets other than REITs and a few divis for months now.

Reflexivity works both ways.

On a different note, Hillary Clinton finally made a decent speech about the broken US justice system today in an appearance at Columbia. Baltimore was inevitable and the only surprise is that it didn't happen earlier.

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Leftback
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April 29, 2015 at 3:57 PM ×

DX 95 was briefly pierced today, we expect that level to hold for now, though. There is quite a lot of pain below that level in the market, the yen shorts being the biggest source of concern for me in terms of US asset prices. Euro shorts got what they deserved this morning.....

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washedup
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April 29, 2015 at 4:02 PM ×

Left - you do realize that the 90 DMA of the dollar, after the recent selloff, is still rising? If reflexivity is your concern, then on the scale on which corporate treasury managers and sovereigns act, nothing has changed, and frankly wouldn't even if day went to 92 - the damage, in other words, has been done.

Sorry, I just remembered you are not merely calling for a selloff to shake off the weak longs, and maybe even get a few punters short, but instead a devastation of the dollar, the dawn of a new era of the reign of EM currencies, and the like - personally, I draw the line at ideology based trading, so good luck.

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Anonymous
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April 29, 2015 at 4:04 PM ×

On Hillary...

"Clinton Foundation failed to disclose 1,100 foreign donations"

Is that what you mean by a broken justice system that signals a green light to the people in power that they can ignore the law or is it the broken justice system that failed to indict HSBC bank for aiding the drug cartels in laundering 7 billion dollars of drug proceeds and awards the federal prosecutor in charge of the investigation, Loretta Lynch, with the keys to the kingdom.

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Anonymous
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April 29, 2015 at 4:40 PM ×

cold steel...

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Bruce in Tennessee
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April 29, 2015 at 5:19 PM ×

http://www.marketwatch.com/story/pimco-hires-bernanke-as-senior-adviser-2015-04-29?mod=MW_story_top_stories



....What'd you expect? Rubber biscuit?

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Leftback
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April 29, 2015 at 6:49 PM ×

Washed said: "Sorry, I just remembered you are not merely calling for a selloff to shake off the weak longs, and maybe even get a few punters short, but instead a devastation of the dollar, the dawn of a new era of the reign of EM currencies, and the like - personally, I draw the line at ideology based trading, so good luck"

What? No. Nothing of the sort. Where did you get that from? Just think US is in the same slow growth faux growth QE as everyone else, more or less what Funny Money has argued...

Devastation of the dollar would be 60, if they did Abenomics. 80 isn't unreasonable, and 90 is quite sensible, after all we were there not long ago.

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Anonymous
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April 29, 2015 at 7:16 PM ×

Bernanke said there's no conflict of interest, what more do you want? He said that if he has to say anything more it's a 200k speaking fee.

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Anonymous
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April 29, 2015 at 7:20 PM ×

U.S. 2Q GDP Est. Lowered to 2.5% From 4% at Deutsche Bank

9 trillion deficit spending since 2008

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hipper
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April 29, 2015 at 7:25 PM ×

Good call on GDP MM...

Draghi is getting his prayers answered of shortage of buyable assets. A big bond sell off today, not only TSY's but in Europe too, which is something not seen in a very long time. TSY certainly most probably LB's scenario of foreign sell off along with the dollar, otherwise the reaction looks completely illogical? The only connection I could think of otherwise today is oil, but would be interested to hear if anyone has other explanations for that? It might present an opportunity sooner or later, considering the natural supply driven price cap on oil which should be coming up, sooner or later...

This is something to watch out for, if this development decides to persist it should again start affecting fundamental equity risk premiums, meaning more re-pricing work ahead. Does it mean cash is finally coming back to fashion again?

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washedup
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April 29, 2015 at 8:07 PM ×

sry left probably came off disrespectful instead of tongue in cheek as intended.
hipper i will say that everyone and their grandma now never expects yields to go up on 'deflation' and 'collateral shortage' - even if the lows on yields lie somewhere in our future, it would take a lot of folks by surprise if bunds went to 75-80 and the US 10Y to say 2.40 - why would it happen? oh on nothing, just markets have a way of f@#ng with people like that.

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abee crombie
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April 29, 2015 at 8:28 PM ×

The weakness in EUROSTOXX and bid in EURO continue, but its not the end of the trend, just a much needed bounce. EM FX all have consolidated now, lets see how they play the next few days if they will continue to make gains or slow.

CAD looks like interesting short here as I dont see oil getting above oil sand profitability levels of $75 anytime soon.

Yes Bunds had a a big day today. Good, rip out some of those trend followers. But rates are going to stay low there.

As LB said, sell the rip in Spoos and buy the dip in Stoxx.

I think this will be a nice sell in may kinda of summer.

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Anonymous
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April 30, 2015 at 2:16 AM ×

http://www.nytimes.com/2015/04/28/opinion/the-trader-as-scapegoat.html?_r=1

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amplitudeinthehouse
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April 30, 2015 at 6:11 AM ×

"http://macro-man.blogspot.com.au/2015/04/building-better-moustrap.html"

Good assessment , Macro Man, but if you won't I will...that is, I'll ask one last question..

To the asshole that represents " US Exceptionalism", who's the pimp on wall street that Julian Assange crossed....

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Nico G
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April 30, 2015 at 7:26 AM ×

Anon 404

Clintons are rotten from day one

regarding drug money laundering by the banks, it is actually a (secretly) welcome practice to see dollars gone untraceable back in the monetary system - that way you may envisage the drug trade as an auxiliary tax system since the monies paid for such goods are so far above economical value

that, added to the truism that drugs provides both income to the poorest stratum of the society and evasion to the otherwise potentially restless crowd + that the drug trade finances so many governments and or corrupts other etc and you know why drug fighting is at best symbolic give or take a couple of unlucky reckless guys caught in Bali

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