Global Central Banks, specifically the FOMC and ECB, are racing to offset an avalanche of slower economic growth ahead via rate cuts and dovish lingo – what currency arbitrage might benefit the best? We ultimately believe that the U.S. Federal Reserve wins out in the end with a weakening USD and perhaps an aggressively weakening USD at that. With the benchmark U.S. 10-yr note yielding a historically paltry 2.05%, it’s still one of the highest yielding government bonds globally. Comparatively speaking, the German 10-yr bund yields -0.32%, France -0.068, Japan -0.133% (I could go on), which means on a rate of change basis, the Fed has the most room to pull down US interest rates aka lower borrowing costs which ultimately leads to a devaluing of the U.S. Dollar. One currency we believe will ultimately win by default due to a dovish U.S. Fed and dovish ECB, is the Swiss franc. Without the peg to the euro, we believe the Swiss will be a top currency for flight to safety measures with declining global bond yields. Our quantitative signal in the CHF/USD went bullish trend at the beginning of June, and is likely to continue thru year end and into 2020.

Swiss Franc Sep ’19 Daily Chart

Swiss Franc Sep '19 Daily Chart

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John Caruso

Senior Market Strategist
Follow John on Twitter @JCarusoRJO. John began his career at Wilshire Quinn Capital, a Wealth Management Firm based out of Los Angeles, California. John made his move to the commodity industry at the end of 2005, and began his path at Lind Waldock, at the time the largest retail brokerage division worldwide. John did his undergraduate work at Robert Morris University in Pennsylvania from 1999-2003, where he was a 4 year varsity basketball letterman.  A self-professed “Macro Trader”, John uses a multi-factor fundamental and “quantamental” trading model in distinguishing market cycles based upon the accelerations or decelerations of growth and inflation metrics. His technical and quantitative approach is heavily reliant upon trend and market range analysis via a custom built standard deviation system in helping him make probability-based market decisions. John is an avid reader of all things pertaining to finance, and behavioral economics. Click here to sign-up for John Caruso's Trading Coach Insights. Daily information and insight on all futures marketsin ranging from metals to equities.
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