TL;DR: This is going to be the last newsletter for a while. You don't need to do anything, I'll probably be back but I don't know when, and I will neither sell your email address nor send you spam in the meantime.

I've been writing fx:macro for about 20 months now, and it has grown into something I'm proud of. As I've often said: it helped me in a lot of ways to become more structured and more concise, I've met great people along the way, and I've learned so much. But it is time for a change. As is often the case in life, there are bigger and smaller reasons that lead to the same outcome:

I've spent the last month abroad with amazing people and a completely different focus away from markets. I did something similar for two months earlier this year and will do a lot more of it next year. While I enjoy the different mindset and while it's exactly what I need mentally, it doesn't work well with what and how I've been trading. So, I will need to make a change there and focus on finding a style that goes well with that: higher timeframes, less maintenance, not as close to the market as I used to be.

Other things have also come up: I have an offer for a second job that I might accept, and a few different personal projects that all need attention.

Plus, the interaction on Twitter, which was a big driver for the newsletter and a benefit for me, has become considerably worse over the last year: my feed has deteriorated in quality and I barely see interesting conversations happening anymore. It feels just noisy and it doesn't really work for me anymore.

So, what's next? As I wrote above, I'll probably be back sometime but I don't know when or how. If you want to stay on the list, you might be the first to hear. If not, then that's fine too.

Finally, thanks to everyone for your support, I really appreciate it!

See you around…

FXMG

PS. Here's the FOMC prep for next week because the Fed is still a thing:

fxm 2023 W50 09Dec 9a FOMC Prep

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This week's image shows a cesspool with a gold nugget in it. Which has a lot to do with the last bit of homework I do every day. Read more about that below…

Let's get started…

In case you missed the usual deep-dive yesterday, you can still sign up for that here and get access to the premium content:

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💎 Central Bank Speaker Recap for this week

Speaking of homework… here's this week's central bank speaker recap:

fxm 2023 W49 02Dec 4 CB Speaker Recap

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💡 Daily reading habits

Macro is an information game with new puzzle pieces coming in constantly. Two weeks ago, I showed how I use the PMIs to keep up with major trends around different economies. But these are just monthly data points, which means it's a drop in the bucket compared to what's happening day in and day out. So, how do we keep up with all that information?

The answer is always the same: routines and being organized. I'm going through a morning and an evening routine:

It's all built around bookmarks in my browser, which is simple and effective. Let's start with the morning:

1. I check out the ForexLive Session Wrap for the Asia session: I'll read all the headlines and open a handful of the links that seem important. It's hard to get a more concise overview of what happened overnight.

   

2. The second bookmark goes straight to 's website. I have set up a channel that searches for “Wraps”, and that gives me the Newsquawk Europe Market Open in the morning, and the US Market Open around noon (plus a lot of other useful things). I'll skim the Europe report, especially the treasuries, crude oil and geopolitics sections.

   

3. Finally, I read The Morning Hark as the third wrap/recap. (You might be wondering: why three wraps? Easy: they're all different in content and style, emphasize different aspects and complement each other well.)

4. No market routine would be complete without a look at the calendar: my favourite one is the ForexFactory one but I'll cross-check with investing.com because some numbers are reported a bit differently (Aussie labour market data, for example).

5. Next up are a bunch of charts: major indexes and assets, vixcentral.com, CME's FedWatch, FX Options Expirations, Commodity Performance, and a few more. As always, it's key to keep it consistent: same charts every day.

That's it, takes me about 30 minutes or so, and I feel like I know what's happening.

The evening routine looks similar:

1. I check the calendars again to see what data came in throughout the day.

2. I read the ForexLive Session Wraps for the Europe and US sessions.

3. One of my favourite reads: 's Read on the Trading Floor. It's a great way to keep up with the main stories the market is talking (or writing) about. Plus, there's a curated set of links for a deeper dive. If I had all the time in the world, I'd just read everything in there.

4. Now comes the hard part: getting the Newsquawk US Session Wrap. It's available for free on Zerohedge. To get to it, we have to dig through the cesspool of rightwing disinformation, Russian propaganda and “news” about “Hunter Biden's Laptop” or transsexual beer before we find it. But it's definitely worth it because it offers the best and broadest view of all asset classes:

   

All in all, this is maybe another half hour, so it's about one hour per day in total. I'm also taking notes throughout the day/week to retain information a bit more actively than by just reading it, which adds a bit of time but it's worth it in my opinion.

That's it for this week, let me know what you think!

Until next weekend

FXMG

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For an overview of what’s in here, check out this post:

Welcome to issue #83 of fx:macro!

If you're using Gmail, you might need to click “View entire message” at the bottom since it can't display the whole thing.

If you like this newsletter, please consider subscribing and sharing it or forwarding it to others who might be interested. I'm also on Twitter @fxmacroguy if you want to reach out.

Summary

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Currency Drivers

Research folder with all material: Google Drive

Week in Review

Central bank speaker recap for the week: PDF

• Every central bank comment from this week summarized

Central bank events and economic data for this week: PDF

• RBA, FOMC and ECB Minutes

• PMIs from Australia, Germany, Eurozone, UK and US

Market Analysis

• PDF with ~25 pages of charts and tables on where markets currently stand

• Summary table, currency drivers, economic calendar, FX levels

• Charts and data on growth, inflation, interest rates, central banks, equity sectors, sentiment and positioning, market risks and more

Additional Material

Central bank overview with the summaries of each of the latest rate decisions, rate statements and minutes: ​PDF

Central bank meeting preps:

• RBNZ: PDF

Intraday seasonalities for currencies and major assets: PDF

Commitment of Traders for the relevant futures: not included because COT data won't be released before Monday due to Thanksgiving

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Recently, I talked to a couple of traders and at some point, someone mentioned the PMI. Everybody agreed that it's a great indicator to follow but they were surprised when I said I'm actually reading the report, and that I consider that “homework”. So, I thought it might be a good idea to write a short piece on it.

As for the image, I asked MidJourney to paint soft and hard data (because I couldn't come up with a prompt that includes PMI):

Let's get started…

In case you missed the usual deep-dive yesterday, you can still sign up for that here and get access to the premium content:

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💎 Central Bank Recap for this week

PMIs are homework and following central bank speakers is too. Here's a summary of what every one of them said this week:

fxm 2023 W47 18Nov 4 CB Speaker Recap

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💡 ISM Purchasing Managers Index

Staying up-to-date on what's going on macro-wise means following central banks and economic data releases as they come out among other things. PMIs are on my “required reading” list, which means I'll read through every release.

Here's a short chart that shows why: the blue line is the 12-month rate of change of the S&P 500, and the orange line is the ISM Manufacturing PMI. You can easily see the correlation:

First, let's look at the difference between hard and soft data, and why that's important:

• Hard data is more or less objective and not based on people's perceptions or feelings: GDP, unemployment rates, industrial production, and things like that.

• Soft data is often survey-based and asks for a subjective assessment of “current conditions” or expectations of the future: consumer sentiment, inflation expectations, business conditions, etc.

It's important to know what kind of data you're dealing with, and PMIs belong in the second category. Check out this post by for a great overview:

Friday Speedrun

Friday Speedrun: April 28, 2023

Hello. It’s Friday. Thanks for signing up. I’m Brent Donnelly. The About Page for Friday Speedrun is here…

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One thing to keep in mind is that survey-based soft data will often capture the “mood of the time”. People (and businesses) are feeling good, bad, confident, insecure, optimistic, pessimistic or whatever for a variety of different reasons. Just take the European Consumer Confidence as an example: are conditions right now really as bad as they were around when COVID-19 hit? And why was sentiment then way better than during the GFC in 2008/9?

How people feel about (their) reality often doesn't have much to do with what reality is really like. Consumers are probably more extreme than businesses in that regard. Just put consumer sentiment data on a chart like the PMI vs. the S&P 500 above, and you'll most likely end up with something useless.

By the way, the dumbest thing I’ve heard anyone say about this kind of data is that European Consumer Sentiment is negative while the US number is positive because Europeans generally aren't as optimistic as Americans. (This is probably true but ignores the important fact that you can't compare the absolute levels of two different surveys that aren't adjusted for a variety of factors.)

Back to the PMIs. There are different ones available, the most well-known are the ones released by the Institute of Supply Management, or ISM:

1. Manufacturing PMI, and

2. Services PMI.

Services should in theory be given more weight than Manufacturing because of the two sectors’ different contributions to overall GDP but in practice, both are equally important. And there's actually a third report, the Hospital PMI, but that's not followed by… anyone at all?

The respondents to the survey are usually purchasing managers, which means they tend to be highly qualified and since they're responsible for buying raw materials and stuff to produce things, they're the ones who should know best about how business is going or how it's expected to go.

A headline PMI number above 50 means that the economy is expanding, and a number below 50 means it's contracting but as is usually the case with economic indicators, the direction of travel and rate of change matter more than the actual level.

The PMIs consist of a series of sub-indexes, and the above/below 50 threshold applies here as well. The report provides a nice summary of the headline number and all of the sub-indexes (colour was added by me):

The Prices sub-index has received a bit more prominence over the last few years as a forward-looking inflation gauge. New Orders and New Export Orders are also considered forward-looking. This table alone is worth looking up the report and going through it.

Another section I always read is the one with the comments from survey respondents. It's very anecdotal and definitely not representative but it gives you a good feeling of what's actually going on in the economy:

While the ISM PMIs are definitely the more important ones, they are only available for the US. Another set of PMIs, currently published by S&P Global together with different partners, provides a more granular view: you can get reports for individual countries or a bit more obscure surveys like the one of Global Copper Users.

The reports aren't as detailed as the ones from the ISM but there's a good 4- or 5-paragraph summary at the end. You can read through that in less than five minutes per country:

You can probably see why I like these reports so much: you get a lot of useful info in a few paragraphs, even if it's “only” soft data.

One tool I look at every week is the Bloomberg PMI heatmap:

It's useful because it shows the rate of change (which is what's important) and compares that to the rest of the world. And it's a bit less useful than it could be because it only shows the Manufacturing PMIs, which is an incomplete picture at best.

Oh, and they also have a map view, which is probably the worst way to visualize this data: Russia is the largest country by size but in terms of global manufacturing it's irrelevant. I don't want to offend the Canadians but it's kind of the same with them too:

That's it for this week, let me know what you think!

Until next weekend

FXMG

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This week, we'll look at one of my favourite indicators: the Citi Economic Surprise Index. And when I asked MidJourney for an image of economists all running in a herd (because that's one thing this indicator captures), I got this delightfully weird set of suggestions…

Let's get started…

In case you missed the usual deep-dive yesterday, you can still sign up for that here and get access to the premium content:

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💎 Central Bank Overview

We had the RBA meeting this week, the RBA's projections, the BOC's Summary of Deliberations and the BOJ's Summary of Opinions this week. Here's the central bank overview sheet I'm using that puts everything you need to know about the recent G8 central bank meetings in one place: rates, statements, press conferences, projections, minutes:

fxm 2023 W46 11Nov 3 CB Overview

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💡 The Citi Economic Surprise Index

I first read about the CESI in a book called The Global Macro Edge by John Netto. The book comprises sections from different authors, most of which I had never heard of (and still don't know much about…). In Chapter 4, Jason Roney gives a brief overview of his quantitative macro approach. He's heavily relying on the CESI to gauge how different economies are performing. Here's a quote from the book:

The second factor I use to get a sense of the data trend is the set of surprise indexes. This helps contextualize how a market may react to any given news flow. The market may be at -20 on the surprise index irrespective of whether the unemployment rate is at 10 percent or 5 percent. These surprise indexes do a great job showing the recent trend of market surprises or disappointments.

Specifically, I use the set of Citigroup surprise indexes to track this second component, which one can get for different regions of the world (US, Europe, Asia, South America). One of the reasons I use these particular metrics can be seen if you overlay a very basic three-period moving average and ten-period moving average on any of these charts. When the shorter term three-period moving average is above the ten-period moving average, it’s a pretty safe bet that most money managers will have to be long those markets. However, this is obviously not an end-all-be-all strategy—when economic times are good, it is very hard for managers to not justify being fully invested.

The Citi Surprise Indexes in and of themselves, are not something I can trade as a standalone indicator. However, they do a good job of providing a framework to understand the trend of any given region. They reflect how an economy is performing relative to expectations, where a positive reading means data releases have been stronger than expected, and vice versa.

Unfortunately, the Surprise Indexes aren't available for free but they are on Bloomberg (of course…) and Reuters. The following chart shows what it looks like for the US over 20 years or so:

The basic idea is that a reading above zero means that economic data is coming in stronger than expectations, while prints below zero (unsurprisingly…) mean it comes in worse than expectations. In practice, a rising CESI is bullish and a falling one is bearish.

I've bolded the “stronger/worse than expectations” because that's really the key: most of the time, we're not trading absolute levels of data but whether it comes in better or worse than what's expected (and therefore, presumably, what's priced in). That's also why the CESI isn't saying whether the economy is doing well or badly: it's just doing better or worse than expectations.

How are “expectations” defined in that context? They are the consensus estimate of economists, their mean or median. That brings us to a well-known phenomenon called “herding” or groupthink. Here's what Brave's new AI has to say about it:

“Herding” refers to the phenomenon where many economists make similar predictions or forecasts, often based on the same set of assumptions or factors, rather than independently analyzing the data and coming to their own conclusions. This can lead to a groupthink effect, where the majority view becomes the dominant view, even if it's not necessarily the most accurate one.

Think about it this way: you're an economist with a wife, an ex-wife, three kids in college and a golf club membership to support. You think GDP will print at 5% this quarter but everyone else at lunch tells you they think it's going to be about 2%. What do you do? If you care about your career, you're going to say: 2.3% or something but definitely not the 5% you really believe. Why? Because there's just no upside to placing your bet far away from everyone else: if you're spot on with your 5% you'd get the maximum amount of praise, fame or whatever it is economists get. But: you'd get basically the same hero treatment if you're far off from the actual print but still the most bullish forecaster because “nobody imagined it could be 5%”. But consider the downside: if you're the most bullish forecaster with your bet far away from everyone else and you're wrong then everybody (including your boss) is going to think you're completely nuts. Not a good outcome, and not a good career booster.

Back to the CESI: herding is one part of why it exists and why it behaves the way it does. Look at the COVID spike as an example: expectations were abysmal in April of 2020 but then CESI shot up and reached a high in July. That's the textbook example of everyone (and their forecasting models) being caught on the wrong foot because expectations and reality were just so much out of sync. You know what happened in markets…

The interesting thing is that it's a mean reverting index: forecasters adjust their models and anchors, and then it goes the other way. That's why an extreme reading on either side can well be the peak for optimism or pessimism around an economy.

Since CESI is available for every major economy, it's a great tool for currency traders. You might know that chart from my weekly outlook:

The CESI for the UK (left column, second from the top) has dropped quite sharply from highs to close to lows in a couple of months. That's bearish because the reality of the UK economy has underperformed what was priced in. But: we're close to extreme levels where expectations are so bad that things can only get better. At Hogwarts, the UK economy would be graded P (as in Poor) or D (as in Dreadful) but it might soon become E (for Exceeds Expectations), which is still not an O (for Outstanding).

One last thing I want to mention is that you can build spreads with CESIs from different countries and overlay them on currency pairs. It works quite well with AUD/NZD for example. The purple line is the Aussie CESI minus the Kiwi one. It's often enough telling you where the currency pair should go:

That's it for this week, let me know what you think!

Until next weekend

FXMG

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When I asked MidJourney for a cover image for this issue, I put in the prompt: “What breadth looks like in the stock market”. The results look weird but some things came up again and again: rain, people with umbrellas, and parts of Greek temples or pyramids.

This week, I write about how I approach market breadth and why it's valuable. And in a sense, MidJourney captures quite a few relevant concepts in its images. You can read more about that below.

Let's get started…

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💎 Three central banks and three PMIs

In a sense, reading “old” central bank statements and comparing what they said this time around to what they said before, feels like reading yesterday’s newspaper. But I think it’s just basic homework for everyone who’s seriously trading currencies. This week, homework means: Fed, Bank of England and BOJ.

fxm 2023 W45 04nov 1 review.pdf

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🎄 What about year-end seasonality?

Here’s what I think from this week’s issue of fx:macro Premium

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💡 Market Breadth

I guess most of you are familiar with the basic idea of market breadth. If not, here's a quick explainer from ChatGPT:

Stock market breadth is a term used to describe the extent and direction of participation of individual stocks within a broader stock market index. It provides insights into the overall health and sentiment of the stock market.

The S&P 500 is capitalization-weighted, so a small number of companies have a disproportionally large influence on the movement of the entire index. , , and alone make up 20% of the entire S&P 500. That's nothing new but it's always a good reminder…

Market breadth removes that bias as it gives each stock the same weight. Here's what that looks like when we compare the with the equal-weighted . Not much of a difference in how they trade overall, and they're taking turns in which one outperforms the other.

It's not the go-to indicator I'm looking at because it essentially tells you how small(er) large caps perform vs. a few mega caps.

📊 The Classic - Advance/Decline Line

Another popular indicator (and one of my favourites) is the advance/decline line. It looks at how many stocks are up vs. how many stocks are down and takes a cumulative sum of the difference:

Things get interesting when there's a divergence going on. Here are two examples:

Right at the beginning of 2022, the SPX made a final push higher but the A/D line put in a lower high at this point. A few months later, the SPX made a new low but the A/D line wasn't following and made a higher low. There are a lot more examples of relevant market tops that were preceded by the A/D line warning you beforehand, here's September/October 2018:

It's almost as if it hands you an umbrella when it's about to start raining (thanks, MidJourney!).

As always, it's not 100% perfect:

• You can find plenty of market tops where breadth did not ring the alarm, so:

  • A market going up together with its A/D line, or

  • A market going down with the A/D line going down as well isn't very interesting from a breadth perspective, and breadth is not “supporting” the market… it just does what it normally does.

• On the other hand:

  • A market going higher with the A/D line declining, or

  • A market falling with the A/D line going up are both times to pay close attention.

Usual disclaimer here: it's not a 100% sure thing. Just look at the most recent example from around June-July this year: the A.I. mania was in full force and a few tech stocks pulled up the S&P while the A/D line initially didn't follow.

So, don't treat it as a religion (H/T the Greek temple from MidJourney). But if you go back, you'll find a lot more examples of it working than not.

😱 The Panic Indicator - Stocks above their 50 DMA

Another indicator I follow closely is the number of stocks above their 50-day moving average. Here's what it looks like for the Nasdaq 100:

That's a nice way to look out for market bottoms: when only around 10% or fewer stocks are trading above their 50 DMA then it's often a good time to start paying attention. I've marked three occasions in the chart above:

1. March 2020: The reading almost reached zero, and it remained low for a month or so.

2. March 2021: A relatively small market correction, the indicator did not reach the 10% mark but the -2 SD band I put around it.

3. October 2022: the most recent market bottom with a reading of almost zero again.

Since it's impossible to know how long the indicator can stay depressed, it's impossible to catch the exact low. I tend to look at it on its way up again: as soon as it reaches the 50% mark or the -1 SD band, a bottom is probably in place.

The number of available indicators is endless… New Highs vs. New Lows, Advancing vs. Declining Volume, McClellan Oscillator and so on. I tend to stick with the two I showed above but that's just personal preference.

Good signals don't come often no matter which indicator you choose. The A/D line can go a year or longer without giving you any useful information, and if you look at the last screenshot above, you can see that meaningful downside spikes in the number of stocks above their 50 DMA aren't that frequent either. That's why it pays to have a routine in place where you look at the same charts over and over again.

Let me know what you think!

Until next weekend

FXMG

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The cover picture is what MidJourney imagines Wall Street bankers look like as they wonder whether the 60/40 portfolio is dead. I don’t have anything useful to add to that debate but I’ll show you a great (and free) tool to analyze different portfolios below.

Let's get started…

In case you missed the usual deep-dive yesterday, you can still sign up for that here and get access to the premium content:

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💎 FOMC Prep for next week

This week, we have three central bank meetings on the calendar: the BOJ, the Fed and the BoE. Below you find the meeting prep for the FOMC on Wednesday. It includes a recap of the previous statement and minutes, economic data that was released since then as well as every comment from Fed speakers.

Pricing and expectations are for an unchanged fed funds rate, and the market has already been looking towards the December meeting for a while. The devil will be in the details, so knowing them makes sense…

fxm 2023 W44 28oct 9a FOMC Prep.pdf

634KB ∙ PDF file

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Meeting preps are included in fx:macro Premium for every G8 central bank before their meetings. Sign up by clicking on the button if you’re interested in that!

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💡 Stocks, bonds and 60/40

We’re once again in a situation where stocks are selling off and bonds are not helping as they “should.” That correlation is the basis for the 60/40 portfolio. And that’s been “in the news” for a while now. Google Trends isn’t all that impressive but there’s clearly more search interest now than there was before 2022 or so:

I’m certainly not going to weigh in on whether the 60/40 portfolio is dead because smarter minds have done that already:

• Goldman Sachs: “60/40 might be dead.”

• Blackrock: “60/40: Not dead, just different.”

• JP Morgan: “60/40 Portfolio Far From Dead”

Imagine that conversation if you switch out “60/40” for “Uncle John”…

Anyway, you can probably guess what this means: nobody in this whole world has a clue about what’s going on. And I mean that in the most non-cynical way possible.

So, if nobody can look into the future, why not have a look at the past? Portfolio Visualizer allows you to do that for free (no affiliation, I just like their site).

The stuff you can do there is endless: you can test portfolios, static and dynamic allocations, core/satellite portfolios, factor allocations, volatility targets and so on. Here’s just one part of their website, and the amount of historical data they have for different asset classes is pretty good:

You can specify things like how and when you rebalance the portfolios, whether you want to use leverage and so on.

Here’s a simple equity chart for the three allocations from the screenshot above:

Portfolio 1 (100% stocks) has clearly outperformed, the 60/40 allocation comes in a distant second, and the gold/commodity addition lowers the returns further. One of the best things about Portfolio Visualizer is that it gives you the relevant stats:

So, while stocks outperform everyone, the Sharpe Ratio of the 60/40 portfolio has beaten them all. And: gold and commodities haven’t provided any additional safety in terms of lower drawdowns or higher Sharpe/Sortino ratios.

That’s not advice or a recommendation. But this tool is probably the easiest way to test questions like:

• Is gold a good hedge in a market crash?

• Can I get protection from TIPS?

• How does the relationship between returns and drawdowns change if I start using leverage?

Check it out and feel free to leave a comment below…

Until next weekend

FXMG

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Below you’ll find a brief overview of how I look at sector rotation as one input in an overall macro picture. This is what MidJourney thinks the business cycle looks like in watercolours. I had to fish out all the images with bicycles but the result is pretty amazing.

In case you missed the usual deep-dive yesterday, you can still sign up for that here and get access to the premium content:

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💎 ECB Prep for next week

We have two central bank meetings coming up this week: the BOC and the ECB. If you're trading a central bank meeting, the preparation for that should always include recapping the last rate statement and minutes, looking at the economic data that was released since then as well as the comments from decision-makers.

Here’s the prep for the ECB meeting, I’ll include the one for the FOMC next weekend:

fxm 2023 W43 21oct 9b ECB Prep.pdf

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Meeting preps are included in fx:macro Premium for every G8 central bank before their meetings. Sign up by clicking on the button above if you’re interested in that!

Let me give a quick shout-out to one of my favourite newsletters, Snippet Finance. They curate the most interesting snippets on finance and investing and deliver them in a short easy-to-digest form. Curated by an investor for investors. Check them out!

💡 Business Cycle and Equity Sector Performance

I was recently asked why I’m looking at equity sectors as part of a macro overview, so I thought it would be a good idea to write a few words on that.

Here’s a nice chart from Fidelity that shows how different sectors perform during the four phases of the market cycle:

• After a recession, you want to be long Financials (because the yield curve steepens and demand for credit increases), Consumer Discretionary and Industrials (because businesses and people start spending more).

• Late in the cycle, it’s Energy that outperforms, and

• During a recession, defensive sectors like Consumer Staples, Healthcare and Utilities are where portfolio managers can hide.

The whole thing also works in reverse: if we know what sectors are currently performing, it gives us an indication of what stage of the cycle we’re currently in. Or at least what stage the stock market is currently in. Other assets might do their own thing.

There are countless websites showing the performance of stock market sectors in various different ways. If you’ve followed me for a while, you know I like to look at the charts from Finviz and stockcharts.com. I also like checking out the thumbnail charts because they are a bit more fun:

Another way is to look at rotation graphs: they look at the performance of every sector relative to a benchmark and plot the strength along the x-axis and the momentum on the y-axis:

• Leading sectors are in the top right quadrant: they show both relative strength and momentum vs. the benchmark.

• Sectors in the bottom right still show relative strength but have lost momentum: they are weakening.

• The bottom left corner is where sectors end up when they have lost momentum and have become weaker than the benchmark: they are lagging.

• Finally, if sectors are picking up momentum from there, they move into the top left quadrant and are considered to be improving.

Movement generally happens in the clockwise direction. Since the rotation chart is calculated on a weekly basis, it offers a higher-level view.

Currently, Energy and Financials are the only sectors in the top right quadrant. The outperformance of Energy fits the idea that stocks are at the top or in the late stages of the cycle. Utilities and Consumer Staples are in the bottom left quadrant and seem to be stuck there, which probably isn’t where theory would put them. What about Tech? and are both in the bottom right, i.e. “Weakening”, along with Consumer Discretionary . That makes sense when we believe in the idea of being in the late stages of the cycle.

One last thing I want to mention: just like the S&P 500, sectors can be dominated by a few stocks that are given outsized weights. Take as an example where just two stocks make up 42% of the entire thing: and . It makes sense to look at the ETF holdings (or index constituents) if you’re working with sectors to put their moves into perspective.

Check out this chart of , and the ratio of the two since the bottom of the Covid low. It’s pretty clear that most of the performance of the ETF is driven by Amazon… in good times as in bad times:

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🧠 Tweet of the week…

To be honest, when I saw this the first time, it didn’t have the context debunking it attached, and I believed it. Sorry Australians 😂

Looks like we’re perfectly on point:

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For an overview of what’s in here, check out this post:

Welcome to issue #77 of fx:macro!

If you're using Gmail, you might need to click “View entire message” at the bottom since it can't display the whole thing.

The cover image is what MidJourney thinks CPI surprising to the upside looks like.

If you like this newsletter, please consider subscribing and sharing it or forwarding it to others who might be interested. I'm also on Twitter @fxmacroguy if you want to reach out.

Summary

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Currency Drivers

Week in Review

Central bank speaker recap for the week: ​PDF​

• Every central bank comment from this week summarized

Central bank events and economic data for this week: ​PDF​

• FOMC and ECB Minutes

• Economic data releases and market reaction throughout the week

Market Analysis

• PDF​ with ~25 pages of charts and tables on where markets currently stand

• Summary table, currency drivers, economic calendar, FX levels

• Charts and data on growth, inflation, interest rates, central banks, equity sectors, sentiment and positioning, market risks and more

Additional Material

Central bank overview with the summaries of each of the latest rate decisions, rate statements and minutes: ​PDF​

Intraday seasonalities for currencies and major assets: ​PDF​

Commitment of Traders for the relevant futures: ​PDF

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The cover image is what Midjourney thinks someone committing a chart crime looks like. If that sounds interesting to you, just go on reading…

In case you missed the usual deep-dive yesterday, you can still sign up for that here and get access to the premium content:

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💎 Central bank speaker recap for the week

Keeping up with central bank chatter (and economic data) is probably one of the most important pieces of homework when you’re trading currencies. Here’s a summary of everything that was said this week:

fxm 2023 W41 07-Oct CB Speaker Recap.pdf

113KB ∙ PDF file

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💡 Chartcrime 101 for traders

This week, I came across the following tweet by @MichaelAArouet:

It's immediately obvious why this chart is funny and bad:

1. The sheer proportions of each figure look strangely alien, and

2. You just can't scale the figures that way when the y-axis doesn't go all the way to zero. A height of 6” (about 1.80 m) is 20% taller than 5” but the tiny Indonesian in the chart is only about a quarter of the size of the Dutch giant on the left.

Charts are among the most essential tools we use in trading, so it makes sense to look at some common pitfalls around them.

⏳ Linear charts over long timespans

This is an easy one. Look at the monthly chart of on a linear y-axis and you'll see that you can't see much except for a humungous rally that started around 2009. And the candles are only getting bigger over time:

Compare that to a logarithmic y-axis: The period up until 2009 was actually a lot more volatile compared to everything since. You would have missed most of the action when looking at a log chart:

Notice the numbers on the y-scale: they are not increasing linearly. A certain price move in percentage terms will always be of the same size no matter if it happens at $0.10 or at $200. The longer the time scale and the larger the difference between lowest low and highest high, the more relevant log charts are:

• It's a good idea to look at stock charts on a log scale,

• It doesn't matter for FX (because currencies typically don't move by orders of magnitude),

• It's a very bad idea to look at most futures charts on a log scale, and we'll see why that's the case below

• Oh, and Bitcoin… log scale, of course

So, the chart nicely brings us to the next topic: did really trade at around $0.08 in the 1980s?

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💸 Dividends matter… and splits, too

Short answer: no, it didn't.

First, we have to account for stock splits: in case of a 2-for-1 split, for example, every price before the split is cut by 50%. That makes sense because if we didn't do that, we'd have huge gaps on the chart when the price is cut in half (or in the case of in 2014, in 1/7th):

IPO’ed at $22.00 but with all the adjustments in place, historical data puts it well below $1. Here's a snip from Yahoo Finance:

The “Close” is where Yahoo Finance factors in stock splits, and the “Adj Close” is where they also take dividends into account. Notice that the open, high, low, close are all identical. In reality, they certainly weren't: it's the side effect of rounding the whole calculation to two decimals. If you strip out the entire movement of a stock over days and weeks, that's a lot of lost information due to rounding…

Second, we need to look at dividends: when a stock pays a dividend, its price immediately drops by the amount paid out per share. Similar to a stock split, we have to adjust everything prior by the same percentage amount as the dividend payout, and we have to do that every time a dividend is paid out.

AT&T is a great example. Here's the chart with splits and dividends included (i.e. prior prices are adjusted accordingly):

And here it is without dividends: it looks quite different, and if you check the y-axis, you'll see that it starts at around $3.30 instead of $0.50 or so.

What's the truth now? Well, if you're a long-term holder then you're probably interested in the first chart that factors in dividends and better shows your total return. If you're in it for very short periods, then it probably doesn't matter too much.

And what about technical analysis because levels and trend lines (if you're into that)? There's no clear answer, and I guess that most traders are looking at adjusted charts with both splits and dividends factored in. But: there is no truth here.

By the way, you can toggle dividend adjustments on TradingView by clicking on the “ADJ” button in the bottom right:

But wait, it gets weirder…

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⚠️ Futures data is always a mess

And I mean it. Stocks don't have an expiration date, so there is just one or stock trading. But there are tens of different expirations trading for many commodity futures, each with a different price. So, how can we look at the historical price of, say, crude oil or wheat?

The short answer: we construct what is called a “continuous chart” by taking the front-month expiration and rolling that over into the new front-month as soon as the old one expires. Sounds simple enough but consider this: there's no standardized way to do this or when to roll. Every platform has a different way of doing it. Every single one. That's why two futures charts from different platforms will often look very different.

The way most continuous charts are created is by adding or subtracting the difference between the old front-month contract and the new one. That sounds kind of similar to how dividends are factored in when looking at stocks. But the crucial difference is: with futures, the price difference is added or subtracted while with stocks, it's adjusted on a percentage basis.

The way the calculation in futures is done means that a move from $5 to $7 in CL is worth $2,000 per contract but it's not a 40% move. That's very different from stocks: going from $5 to $7 is, in fact, a 40% gain.

If that sounds weird to you, welcome to the club. But have a look at this chart:

Two things stand out here:

1. TradingView tells us that the 1-day price change was 1,522%, or in other words: the price of ZM has increased 15-fold or so on one day with a candle that doesn't look much out of the ordinary…

2. Prices to the left of the crosshair are all negative. ZM didn't really trade with negative prices but that's an artefact of the adjustments that have been made on this continuous contract.

That brings us to the golden rules of futures charts:

• Don't use percentages when dealing with adjusted continuous charts, and

• Always use the linear scale because log magnify numbers close to zero like this:

Alright, so we're already beyond the 5-minute mark but I wanted to spare you another cliffhanger. There are more nuances to this, of course, but that's it for this week.

Let me know what you think and leave a like if you… like this post.

See you next week!

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Today's cover image is a psychedelic oil well because of what I wrote in the section on Macro below and because CL is going to be a good example for our practical section on the term structure.

Let's get started…

In case you missed the usual deep-dive yesterday, you can still sign up for that here and get access to the premium content:

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💎 Macro and view on the US dollar

A few things that stand out to me:

1. Growth will be lower from here on while inflation is still elevated. 5y5y forward inflation expectations and breakevens are even rising, and CL has been going up by almost 50% in three months. Slower growth plus high(er) inflation isn't bullish for risk assets.

2. Speaking of energy… and crude oil outperformance suggest we're (once again) at the top of the business cycle when nothing performs but energy. The sector rotation chart shows it pretty well. The last time it looked like this was in the first half of 2022 when everything else sold off.

3. Seasonality is bullish into year-end, and I'm reading three posts per day on that on Twitter or Substack. I'm not sure what the catalyst for risk-on into the end of the year could be. Last year, it was the AI bubble but that horse is dead now. “October” by itself isn't a good catalyst, in my opinion. But I do know that betting against Q4 is often a bad idea.

The following table sums up bullish and bearish points for the overall macro environment and the US dollar. The premium edition of fx:macro contains these summaries for every G8 currency. You can check it out in the Archive for previous editions:

If you want access to that, you can sign up here:

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💡 The final part of our primer on the term structure

In the previous two issues of this newsletter, we looked at the futures term structure, what it is, how we can quantify it and how it can be useful in trading. This week, we’ll look at the practical aspects: how to trade with it.

If you haven’t read the first two parts, check them out here:

🔨 A few practical examples

I’ve already mentioned CL and how we can use the two closest expirations as one way to visualize the term structure in TradingView: CL1!-CL2!, i.e. the difference between the front month contract and the one that comes after that - a.k.a. “front-month contango”. (At least that’s what I call it because it sounds nicer than its technical name: reverse calendar spread.)

The following chart shows what it looks like. We’re interested in finding a divergence between what price is doing and what the term structure is telling us. And there are plenty of divergences… I’ve marked four but you can find more:

• May 2022: CL is rallying to a new high but front-month contango is telling a different story. Price making a new high while CL1-CL2 is falling isn’t a bullish sign: time to find a short.

• August 2022: Same thing: CL makes a new high but the term structure barely moves, again time to look for a short.

• November 2022: CL hits resistance from below while CL1-CL2 is making a lower high: expecting the resistance to hold.

• January 2023: Higher high for CL but falling front-month contango: looking to sell that high.

As with everything in trading, it’s not perfect, see next chart. Over a two to three-week period at the start of the month, we’ve had CL breaking through a resistance level while our term structure indicator signalled underlying weakness. The divergence resolved quickly over two days as the term structure went deeper into backwardation again and CL1-CL2 shot up:

📝 Pay attention when dealing with futures data

One thing TradingView isn’t very good at is handling futures data. Note the little circled arrows at the bottom of the chart. They tell you when a continuous futures contract rolls over from one contract to the next. If you click on one, it will tell you what the old and the current front-month contracts are. In this case, we switched vom V23 to X23:

Whenever things look strange (e.g. an unexplained gap or a sharp move), it makes sense to exclude a data artefact because of a futures roll. That’s why I included the spread between X23 and Z23 contracts on the chart above as well. They show pretty much the same divergence albeit a bit flatter. In any case, we would have been on the wrong track to expect a false breakout based on the action in the term structure. Shit happens.

The basic idea is the same across most futures if they have a normal term structure. If they have seasonal one like NG, we have to take a slightly different approach:

The highest point in each of the seasonal cycles is marked by the January contract. So, we could use the next two January contracts, 24F and 25F, and look at their spread:

That does a pretty nice job, there’s a nice divergence in April/May and one that’s currently ongoing. An alternative would be to look at the current V23 contract and its V24 counterpart.

Be careful when you’re using TradingView and you’re dealing with anything that’s not traded on the CME because TradingView only has non-adjusted continuous contracts for most of these futures, and they have nasty roll gaps in them.

🎬 A few more notes

If you’re using Interactive Brokers, they have a nice tool in their Trader Workstation that allows you to explore the term structure in a bit of an interactive way and compare what it looked like on different days in the past. Of course, they have hidden it well but you can find it under “More Advanced Tools > Futures Term Structure”:

One last thing: the term structure in financial futures is closely tied to interest rates. You can see this in the next chart where the blue line is our front-month contango of 6A (Australian dollar) and the orange line is the difference in 2-year yields between Australia and the US:

They aren’t 100% identical because the time to expiration constantly changes for the futures and the 2y yield is just a very crude proxy for interest rates here in general but you get the idea.

So, this brings our little series on the term structure to a close. I hope you found something useful in it. Feel free to leave a comment and let me know what you think…

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🧠 Here's something interesting

This is from an older tweet but it’s still worth keeping in mind, especially when markets are going through a phase like right now:

PART of the reason '08 analogs look so compelling is the default setting on charts. All you see is the downside in the frame. Keep in mind this was the case for 2011 and 2015-2016 as well. Our minds naturally gravitate to what is available on the screen.

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If you want to know what’s up with the oranges in the cover image, we’ll get to that in the second part of our primer on the term structure below.

In case you missed the usual deep-dive yesterday, you can still sign up for that here and get access to the premium content:

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💎 Week in Review

We had four central bank meetings this week, two central banks released their meeting minutes, and we got a dump of PMIs on Friday. Here's a review of all these events. If you're trading forex, reading the central bank material is pretty much basic homework, and if you're an investor, reading through the PMIs is a great way to gauge what's going on in the economy.

Here's a sample of what it looks like, and the link to the full PDF is below.

fxm-2023-W39-23Sep-1-Review.pdf

7.37MB ∙ PDF file

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📌 Here's something useful

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💡 Term Structure Part 2: How to use it

If you missed the first part, you can give it a quick 5-minute read here:

Before we get to the juicy part, here's the answer to the question from last week: how are the far-out futures contracts priced when they had zero trades (and thus, zero volume)?

🐇 A Small Rabbit Hole on Settlement Rules

Unsurprisingly, there's an impressive set of rules that goes into determining the settlement price. Here's an example for ZC, the corn future. If there were no trades in a contract, they will look at trades in adjacent expirations and use that to figure out a reasonable price:

If that doesn't work, they will just change the price by as much as the neighbouring nearer-term contract:

While I don't think knowing this is an absolute must, it's still a good reminder that exchange (and product) rules exist, and it's better to know them than not to. Just think of CL trading into negative prices in 2020 or the XIV blowup during the Volmageddon episode of 2018.

📐 Measuring the Futures Curve

Okay, so let's get to the (hopefully) more interesting parts. Before we look at trading with it, we must first figure out how to measure the term structure. I'll show you two ways and their pros and cons:

1. Using a linear regression line through the term structure, and

2. Comparing two (or more) single points on the curve.

🧮 Linear Regression

I'm happy to say that there's no maths in this paragraph! Look at the following chart with the term structure of NG, natural gas:

Linear regression is a mathematical way of figuring out the slope of the yellow line when the number of points on either side of the line and their distances from it are equal. That gives us one handy number to work with for every trading day: the slope of the linear regression line. Positive = contango, more positive = steeper contango, negative = backwardation, more negative = steeper backwardation.

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Have a look at the following chart where you can see the price of OJ, orange juice, in blue (right-hand scale), and the slope of the linear regression line in grey (left-hand scale, inverted). When the term structure gets more into contango, this line will fall (because of the inverted scale), and when we go more into backwardation, it will rise.

There are a few things to note:

1. Price and the slope of the term structure go together,

2. We're deep in backwardation right now (the slope is at around -3 or so), and

3. There's a divergence: the price of OJ has gone up while the term structure has flattened.

A divergence like this is bearish for OJ, which must make happy considering he bought puts on OJ a while ago:

Blind Squirrel Macro

Sell, Mortimer, Sell!

Summary Last week the 🐿️ fulfilled the lifelong ambition of any macro tourist and went short frozen concentrated orange juice futures (FCOJ). The market is pricing a repeat of 2022 when hurricane damage decimated South Florida citrus production. We are taking the other side with an asymmetric setup in FCOJ put options…

Read more

3 years ago · 22 likes · 9 comments · The Blind Squirrel

That divergence is something you can't see by just eyeballing the individual expirations. The following two charts illustrate this: the first one is from the day when the backwardation was at its extreme, and the second one is more recent. I can't see which one is more and which one is less steep here.

The linear regression metric is objective and tells the story. The bad thing is: it's not widely available, let alone on TradingView. I'm sure there are better ways to look at it but it's always good to remember there's probably no “correct” way of doing things like this but rather a hundred different ways that all lead to Rome.

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⚖️ Comparing two points on the curve

So, what we need now isn't something “more perfect” or “better” but something applicable that's available and easy to use.

Have a look at the following chart from TradingView: you can see CL1!, the CL front month future. The blue line is CL1!-CL2!, which just takes the difference between the front month and the next expiration. That's nothing else than the steepness of the curve between those two points, i.e. “front-month contango.” And it works quite well:

💸 Banking with the Term Structure

The bad news first: we're already past the 5-minute reading time mark - but the good news is that next week is another week to bring this little series to a close.

There are a few more things to go over: what are the pitfalls of the simplified TradingView approach, what are practical examples and how does it work for weird term structures like NG.

Feel free to leave a comment and let me know what you think!

Cheers,
FXMG

PS. Sorry for the cliffhanger again… but it is what it is.

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💎 FOMC Meeting Prep for next week

We have four central bank meetings next week: the Fed, Bank of England, the SNB and the BOJ. Here's a meeting prep for the Fed on Wednesday. It includes a summary of their last statements, economic data and a summary of Fedspeak since the last meeting. It's a great resource if you want to have an informed view beforehand or if you want to trade the event. Here's what it looks like, and the link to the PDF below.

FOMC Meeting Prep.pdf

543KB ∙ PDF file

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fx:macro Premium includes preps for the other three central bank events as well, among other things. You can find out more about it here:

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📌 Here's something useful

Just a quick reminder that you can actually export data from TradingView:

1. Click on the icon in the top right of the window (yellow arrow)

2. Search for “Export chart data” in the search box that shows up

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💡 A Primer on the Term Structure

The term structure is one of the most useful things to look at if you're trading commodities, so it pays to have a good understanding of what's going on there. This will be the first of a few short bites on the term structure with actionable advice on how to find trades or filter signals.

You might be asking: what do FX and macro have to do with commodities? The price of crude oil is basically inflation, copper is called Dr. Copper because it's a proxy for global growth, there are correlations between commodities and currencies, and so on.

If you have no idea what the term structure is and you ask Midjourney to draw you one, you get this eerily beautiful thing:

🤔 What is the Term Structure?

Futures are trading with an expiration date. You can buy and pay for oil, wheat, coffee or other commodities today but have them delivered months or years from now. That means that on any given day, a number of futures for the same commodity are trading. Here's an example for crude oil. The x-axis represents the different expirations, and the blue line shows the price at which they were trading on August 8th, 2022 (left-hand scale). You can see that, on that day, further-dated expirations were cheaper than nearer-dated ones.

On November 12th, 2020, the whole situation looked completely different for crude oil: expirations further out traded at a premium:

There are different reasons why that is the case. Futures are forward contracts, i.e. you pay now and receive your purchase later. We could call it PNRL instead of the more common BNPL when you go shopping and buy stuff you don't need.

Since commodities have to be stored, transported, fed and taken care of, this will be factored into the price: if you buy oil now but don't want to get it delivered for another year, the person you're buying it from will most likely charge a higher price than if you want to get it next month.

It's similar for financial futures where the price of “storing” whatever the future's underlying is, is negligible… except for the price of money, i.e. interest rates. A good primer on forward pricing in general can be found in Sheldon Natenberg's book Option Volatility & Pricing.

Sidenote 1: Since most futures don't go into delivery, commodities could also be considered stuff you don't need. At least if you're a trader.

Sidenote 2: People often claim that the price of a future with a certain expiration date reflects the market's expectation of where that commodity will trade at that date. That's complete nonsense.

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👅 Basic Term Structure Lingo

You need to be familiar with two terms:

1. Contango, and

2. Backwardation

Contango refers to a term structure that is sloping upwards like the one in the second chart above: prices further out are getting more expensive. Backwardation is the opposite: the curve is sloping downward, i.e. you pay more now than in the future.

Generally, contango is considered “normal”, while backwardation is the exception. Also, backwardation is generally bullish for a commodity. We're not going to concern ourselves with why that's the case but there are good reasons.

The important thing is that it's not just contango and backwardation that matter but also changes in the slope of the curve: as it gets flatter and more into backwardation, price tends to go up, and as it gets steeper and more into contango, price tends to go down.

That's some pretty valuable information when we apply it to a filter for entering trades, for example.

🌊 Weird Term Structure Shapes

Okay, so we know contango and backwardation, and that changes in the curve relate to price. But what about something like this:

The chart shows NG, natural gas. That's a highly seasonal commodity with a seasonal term structure, so different expiration months cost more or less than others depending not only on how far out they are in time but also what month they expire.

There's no name for the shape, thankfully.

⏭️ Now What?

I promised you something actionable but that will have to wait for next week. Blame the fact that the average human reading speed is slow enough that it took you five minutes to get to this point. And the fact that I wanted a cliffhanger. But: next week I'll show you how we can put this knowledge into an indicator in TradingView and use it to find trades!

Oh, and I'll answer the question that has to be burning on your mind: quite a lot of futures in the charts above show zero volume traded. How have they been priced then?

Feel free to leave a comment and let me know what you think!

Cheers,
FXMG

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It's been one of these weeks where my initial assumptions of what to trade have been completely wrong but I've been saved by paying attention to the market's sentiment and reaction to headlines. The idea was to look for a dollar short because of a weak calendar, how the economic surprise index was developing and September seasonality. Tuesday morning saw quite some dollar strength, and when the dollar just put in a brief dip when Waller made some dovish comments about the risks of doing too much and too little being balanced, it was pretty clear I my idea was wrong. A few months ago, I've written a day-by-day summary for a similar week, I hope you find it helpful.

There's a lot of material in this newsletter, so I included a Summary table with the most important info in one place. Everything you find there is derived from data and news in the accompanying PDFs. It's not necessary to go through them all but they provide a lot of depth and background. Skip them if you're short on time or just read the ones that are relevant for you.

If you like this newsletter please consider sharing or forwarding it to others who might be interested in it. I'm also on Twitter @fxmacroguy if you want to reach out.

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Summary

Research folder with all material: Google Drive

Playbook

This is the shortest possible summary of everything you will find in the rest of this newsletter. Please check out this article about what this summary aims to provide and what its limitations are.

Currency Drivers

For an explanation check out this link.

Week in Review

Central bank speaker recap for the week: Download PDF

Review of central bank events and economic data for this week: Download PDF

• RBA Rate Decision and statement

• BOC Rate Decision and statement

• ISM Services PMI

Market Analysis

• Download PDF

• Summary table, currency drivers, economic calendar, FX levels

• Charts and data on growth, inflation, interest rates, central banks, equity sectors, sentiment and positioning, market risks and more

Additional Material

Central bank overview with the summaries of each of the latest rate decisions, rate statements and minutes: Download PDF

Central bank meeting preps for next week’s events with latest rate decision, statement, press conference and minutes, economic data since the last rate decision and summarized comments from every speaker:

• ECB: Download PDF

Intraday seasonalities for currencies and major assets: Download PDF

Commitment of Traders for the relevant futures: Download PDF

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It's been 18 months since I started publishing fx:macro in March 2022. Since then, this humble project has grown to almost 6,000 readers. Thanks to everyone who has been a part of it thus far.

As much as I loved offering fx:macro for free, the significant amount of time and effort required would make keeping it free forever a pretty expensive endeavour for myself. Therefore, full access to fx:macro will require a paid subscription from September 16th.

⏰ TL;DR

I know, a lot of you are short on time, so here are the basic facts. Below, you'll find more background information.

Going forward, there will be two newsletters:

• The paid premium edition of fx:macro will contain the entire research package you're familiar with by now. It will cost 39 € per month. If you’re a student, reach out to me via email for a discount.

• The lite version will be free and always provide something valuable from the premium newsletter, something useful and/or some educational content that hasn’t been part of the newsletter so far. It will be quite a bit shorter than what you're used to from me, and easy to digest. A lot of you will see a bit of brevity as a positive anyway. And it will be worth your while, I promise.

The newsletter you're currently reading will continue as fx:macro lite, the free edition, while the premium content will be hosted over at ConvertKit. You can sign up by clicking this button:

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A bit of backstory and how we got here

fx:macro is the result of my preparation for the trading week ahead. When I started out, my main goal was to improve the quality of my analysis and the processes behind it. I decided to publish to hold myself more accountable, and I was hoping for some feedback. Surprisingly, people liked it.

Over time, I added different things to the newsletter either because I got the idea from somewhere or someone, or because I realized that I needed a particular thing. One great example is the Central Bank Overview: I used to go back and forth between the calendar, notes I took in Evernote, and previous editions of fx:macro to find the information I needed about the last central bank meetings. Now, it's all neat and tidy in one place, and it's always up to date.

This brings me to the main point: I'm still the first reader of fx:macro every weekend, and each time I'm happy that it exists! That means I'm actually reading through it before I'm looking for potential trades. Not every bit every time, of course, but I'm using it like any reader would as a basis for my macro view, trade ideas and to know what's going on overall - to be in the market.

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FX Macro's weekly is Harkster HQ's first port of call on a Sunday morning. It delivers an in-depth analysis of macro developments, CB comments, sentiment and cross-asset analysis. The summary section (chart of the week below) is an incredibly succinct snapshot of all the relevant macro drivers for each G10 currency. (Harkster, )

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Here's what you will be getting with the premium edition of fx:macro

The premium version of fx:macro will be published on the weekend, usually on Saturday. It will include access to all of the research pieces (see below for more details):

• Market Analysis and Outlook, and Weekly Review

• Central Bank Speaker Recap, Central Bank Overview, and Meeting Preps before events

• Intraday Seasonalities and Commitment of Traders Reports

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The pieces of the whole

By now, fx:macro is a package of several different pieces, each of which can be used more or less on its own. If you've been a reader for a while, you probably know most or all of them already. For the sake of completeness, I'll introduce all of fx:macro's parts in the following sections.

Market Analysis and Outlook

This is the centrepiece of the whole thing: a comprehensive look at markets from different angles. Here's is what's in it:

• A summary of the overall macro situation and each G8 currency with bullish and bearish arguments listed,

• Correlation tables for the major asset classes to quickly gauge which asset class is driving what,

• The economic calendar for the week ahead, colour-coded for each currency and whether the expectations for each release are better or worse than the previous release, and

• A 360º view on markets: indicators of growth and inflation, long- and short-term interest rates, market expectations of central bank decisions, equity sector performance, sentiment and positioning, a summary of the Commitment of Traders report, credit spreads, volatility and vol indexes, market breadth and more.

The whole report is usually about 20-30 pages long, and even after just reading through the summary table you have a pretty good understanding of where markets are currently standing. Here's what the PDF looks like:

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Weekly Review

This report contains summaries of the week's relevant events. Here's what I cover every time:

• G8 central bank statements and projection materials that are released with them

• Central bank meeting minutes, and

• PMI reports

This allows you to read through the important parts of the major macro releases.

The report also contains the relevant economic data that was released each day of the week for the G8 economies and how the different currencies reacted:

Central Bank Speaker Recap

This report contains summarized comments from every G8 central bank speaker that hit the microphone during the week. Depending on how much is going on, this can be from a single page to four pages long. It's a great resource to stay up-to-date on central bank chatter. Here's what it looks like:

Central Bank Overview

This PDF is designed to be a quick reference guide to the last relevant central bank decisions, statements, meeting minutes, projection materials, post-meeting press conferences, and market reactions. It contains this information for every G8 central bank and it's updated as soon as new material is released.

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Central Bank Crib Sheets and Meeting Preps

These reports are published before central bank events. They contain:

1. A summary of what happened at the last meeting(s): key points from the rate decision, the statement, projection materials like the dot plot, press conference, and meeting minutes

2. An economic calendar with the important data that was released since the last central bank statement.

3. A summary of every central bank speaker's comments since the last meeting.

It's designed to have the most important things in one place before going into a central bank event: what did they do last time and what happened since then that might influence their decision.

You can see what the report looks like in the following screenshots:

Intraday Seasonalities

This is a chart pack with about 100 charts that show how different currencies and assets performed, on average, throughout the day over the last 30 and 100 days, respectively:

Commitment of Traders

I cover the COT report in the Market Outlook but for a deeper dive, I use this PDF. It contains the legacy COT data as well as the newer disaggregated datasets that were introduced in the early 2000s. The charts I include contain the raw data as well as a version of the COT-Index introduced by Larry Williams that looks at net positions for the different market participants on a basis relative to the total open interest over the last year:

The research pieces are created on different days of the week before they are sent out as one package on Saturday, and they all take a different amount of time and effort to produce. The bottleneck is the Market Analysis: I write it on Saturday and it takes about six hours or so. To cut it short, this means that not every weekend will feature every piece. I plan on exceeding the following numbers of published pieces on a rolling 52-week basis, but this is the minimum of what you can expect:

• Market Analysis and Outlook: 35

• Weekly Review: 45

• Central Bank Speaker Recap: 48

• Central Bank Overview: 48

• Central Bank Meeting Preps: every G8 central bank meeting

• Intraday Seasonalities Report: 48

• Commitment of Traders Report: 48

So far in 2023, I've published every single week for a total of 35 issues.

The price is 39 € per month. That's very reasonable and affordable for most: about 1 € per day and probably a fraction of what you're risking on a single trade. Not to mention converting the price into hours and comparing that to how much time it will save you. If you’re a student, send me an email for a discount link.

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The future direction of fx:macro lite, the free newsletter you're reading right now

As I mentioned above, my main goal is to provide something valuable and useful every week for free. This is what you can expect:

• Something from the premium edition, e.g. one week it might be the Central Bank Overview or the Meeting Prep for an upcoming central bank meeting, another week it might be the Market Analysis.

• Occasionally, I'll publish the full weekly premium content on here, too.

• Something useful, e.g. a website, tool, or article that helps you become better at trading.

• Some educational content, my thoughts on trading-related concepts, what I’m working on, etc.

I want to keep it short and neat because nobody needs another long newsletter that's not jam-packed with information. fx:macro lite will be published on Sunday.

I plan on using Substack's referral program in the future so you can earn access to the paid version of fx:macro by referring others to fx:macro lite.

Why I'm not hosting the paid newsletter on Substack

First of all, I'm very grateful to Substack because their platform allowed me to start out this project for free and with minimal knowledge or hassle. Also, from a technical point of view, their product is great. Take the editor, for example. You as the readers don't see that but for me as a writer it's essential. I've tried other platforms, and their editors would not allow pasting images from the clipboard directly into the editor or glitch out on long posts - both of which are bad for the long and chart-heavy material I put out.

That being said, Substack lacks in other areas that become important when you build a business around a newsletter. For example, you can't sell any products on Substack besides a newsletter subscription, and the metrics they show you are woefully incomplete. You can't even see how many subscribers unsubscribed, let alone get more information about them.

Another factor is that I don't want to be dependent on any platform too much. The editor is a good example again. If I can't write my newsletter anywhere else just because everyone else's editor sucks then I'm not really independent. That's one of the reasons why I moved to PDFs instead of long-form emails. Being platform-independent is crucial to me, so being on a second platform makes a lot of sense.

But the most important thing is the price. Substack takes 10% of the revenue while other platforms take a flat fee upfront. So, depending on revenue, Substack could be ten times more expensive than an alternative like ConvertKit. Ten times. I know the arguments for the different pricing models but it remains a hard sell to me.

As I wrote above, I'm very grateful to Substack, and I like their product. The free newsletter will continue to be published here, and depending on how things go, the paid version might be in the future.

You're still here…

That's great, I hope you'll stick around and enjoy my content!

Cheers,
FXMG

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Summer is over and autumn has begun. I’ve taken a few weeks off, and stayed away from trading. One thing this newsletter has taught me is the value of keeping up with what’s going on overall even when I’m not trading. It used to take me two or three weeks until I got back into the market after a short break, especially during busier times of the year than August. Now, I just read my own newsletter, and it’s a pretty smooth transition back into the game.

Anyway, it looks like the dollar is still king:

There's a lot of material in this newsletter, so I included a Summary table with the most important info in one place. Everything you find there is derived from data and news in the accompanying PDFs. It's not necessary to go through them all but they provide a lot of depth and background. Skip them if you're short on time or just read the ones that are relevant for you.

If you like this newsletter please consider sharing or forwarding it to others who might be interested in it. I'm also on Twitter @fxmacroguy if you want to reach out.

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Summary

Research folder with all material: Google Drive

Playbook

This is the shortest possible summary of everything you will find in the rest of this newsletter. Please check out this article about what this summary aims to provide and what its limitations are.

Currency Drivers

For an explanation check out this link.

Week in Review

Central bank speaker recap for the week: Download PDF

Review of central bank events and economic data for this week: Download PDF

• ECB Minutes

• US ISM Manufacturing PMI

• Canadian Manufacturing PMI

Market Analysis

• Download PDF

• Summary table, currency drivers, economic calendar, FX levels

• Charts and data on growth, inflation, interest rates, central banks, equity sectors, sentiment and positioning, market risks and more

Additional Material

Cental bank overview with the summaries of each of the latest rate decisions, rate statements and minutes: Download PDF

Central bank meeting preps for next week’s events with latest rate decision, statement, press conference and minutes, economic data since the last rate decision and summarized comments from every speaker:

• RBA: Download PDF

• BOC: Download PDF

Intraday seasonalities for currencies and major assets: Download PDF

Commitment of Traders for the relevant futures: Download PDF

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I’m still on semi-holiday and won’t be taking any trades. Since the whole Outlook part of the newsletter is basically the groundwork for trade ideas, this isn’t included in today’s issue. But since I’m trying to keep up with what’s going on news-wise and on the data-front even if I’m not trading, the lookback part is there as usual.

I will be back with a regular issue next Saturday.

If you like this newsletter please consider sharing or forwarding it to others who might be interested in it. I'm also on Twitter @fxmacroguy if you want to reach out.

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Share fx:macro

Research folder with all material: Google Drive

Currency Drivers

For an explanation check out this link.

Week in Review

Central bank speaker recap for the week: Download PDF

Review of central bank events and economic data for this week: Download PDF

• PMIs from Europe, the UK, the US, and Australia

• Currency reactions to relevant economic data releases throughout the week

Market Analysis

• Not included this week

Additional Material

Central bank overview with the summaries of each of the latest rate decisions, rate statements and minutes: Download PDF

Intraday seasonalities for currencies and major assets: Download PDF

Commitment of Traders for the relevant futures: Download PDF

Leave a comment

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It's August and everyone's on holiday. I don't like to trade during this time. And since my newsletter is mostly about preparing for the upcoming trading week, this issue and the next one won't have the Market Analysis & Outlook.

Enjoy the summer!

If you like this newsletter please consider sharing or forwarding it to others who might be interested in it. I'm also on Twitter @fxmacroguy if you want to reach out.

Subscribe now

Share fx:macro

Research folder with all material: Google Drive

Currency Drivers

For an explanation check out this link.

Week in Review

Central bank speaker recap for the week: Download PDF

Review of central bank events and economic data for this week: Download PDF

• RBA Minutes

• RBNZ Rate Statement and MPS

• FOMC Minutes

Market Analysis

• Not included this week

Additional Material

Central bank overview with the summaries of each of the latest rate decisions, rate statements and minutes: Download PDF

Intraday seasonalities for currencies and major assets: Download PDF

Commitment of Traders for the relevant futures: Download PDF

Leave a comment

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I will be taking a small semi-vacation for the next two weeks, so expect a newsletter without the Summary Table and the Market Outlook.

There's a lot of material in this newsletter, so I included a Summary table with the most important info in one place. Everything you find there is derived from data and news in the accompanying PDFs. It's not necessary to go through them all but they provide a lot of depth and background. Skip them if you're short on time or just read the ones that are relevant for you.

If you like this newsletter please consider sharing or forwarding it to others who might be interested in it. I'm also on Twitter @fxmacroguy if you want to reach out.

Subscribe now

Share fx:macro

Summary

Research folder with all material: Google Drive

Playbook

This is the shortest possible summary of everything you will find in the rest of this newsletter. Please check out this article about what this summary aims to provide and what its limitations are. Click here for the difftext from last week.

Currency Drivers

For an explanation check out this link.

Week in Review

Central bank speaker recap for the week: Download PDF

Review of central bank events and economic data for this week: Download PDF

• BOJ Summary of Opinions

• Currency reactions to economic releases

Market Analysis

• Download PDF

• Summary table, currency drivers, economic calendar, FX levels

• Charts and data on growth, inflation, interest rates, central banks, equity sectors, sentiment and positioning, market risks and more

Additional Material

Cental bank overview with the summaries of each of the latest rate decisions, rate statements and minutes: Download PDF

Central bank meeting preps for next week’s events with latest rate decision, statement, press conference and minutes, economic data since the last rate decision and summarized comments from every speaker:

• RBNZ: Download PDF

Intraday seasonalities for currencies and major assets: Download PDF

Commitment of Traders for the relevant futures: Download PDF

Leave a comment

Subscribe now

There's a lot of material in this newsletter, so I included a Summary table with the most important info in one place. Everything you find there is derived from data and news in the accompanying PDFs. It's not necessary to go through them all but they provide a lot of depth and background. Skip them if you're short on time or just read the ones that are relevant for you.

If you like this newsletter please consider sharing or forwarding it to others who might be interested in it. I'm also on Twitter @fxmacroguy if you want to reach out.

I've been reading Lykeion for a while and highly recommend you check it out! It's a new type of financial media – a free bi-weekly newsletter, monthly research, and podcasts navigating the intersection of business, finance, and geopolitics. 

Lykeion was founded by a team of former analysts, researchers, and portfolio strategists, and they’re delivering investment-grade insights, communicated simply and without hyperbole. 

Check it out for free here!

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Share fx:macro

Summary

Research folder with all material: Google Drive

Playbook

This is the shortest possible summary of everything you will find in the rest of this newsletter. Please check out this article about what this summary aims to provide and what its limitations are. Click here for the difftext from last week.

Currency Drivers

For an explanation check out this link.

Week in Review

Central bank speaker recap with summarized comments from every G8 central bank speaker during the week: download PDF

Review of central bank events and economic data for this week: download PDF

• RBA rate decision and MPS

• BoE rate decision

• US ISM Manufacturing and ISM Services PMIs

Market Analysis

• Download PDF

• Summary table, currency drivers, economic calendar, FX levels

• Charts and data on growth, inflation, interest rates, central banks, equity sectors, sentiment and positioning, market risks and more

Additional Material

Central bank overview with the summaries of each of the latest rate decisions, rate statements and minutes: download PDF

Intraday seasonalities for currencies and major assets: download PDF

Commitment of Traders for relevant futures: download PDF

Leave a comment

Subscribe now