GBP/USD has fallen for 5 weeks in a row, dropping a total of 3.85 cents (-2.2%). The sequence of weekly falls last extended to 6 weeks on 29th August 2008, 311 weeks ago (when the run of weekly falls lasted for 7 weeks (and the fall over the 7 weeks was 11.5%).
Last week was the 4th week in a row that GBP/USD had ended the week beneath the previous week’s low. This sequence last extended to 5 weeks on 15th September 2000, 726 weeks ago.
Nikkei on Sunday reported that “it has learned” the GPIF decided last week that the domestic equity allocation can deviate beyond the existing “upper limit” of 18% (vs. 16.5% actual as of end March) as a temporary measure until the new model allocation is decided in September. BofAML Strategist Yamada thinks that the domestic equity allocation has been approaching the 18% upper limit due to market movements and increasing the domestic equity allocation to 20% (or more) is already consensus. Flow wise, we’ve seen net buyers of USDJPY during Wellington session mainly from HFs but hearing retail names were sellers of XJPY so the pair traded from 102.22 high to 102.10. Onshore Tokyo traders think geopolitics sentiment seems to have eased a bit from last week, and expects USDJPY to follow Nikkei intraday. 101.90/00 support level. Resistance 102.30
BofAML’s MacNeil Curry looks for a temporary turn higher in risky assets this week, largely on the back of Friday’s bullish reversals in US equity futures and the recent unsustainable bearish extremes in short term sentiment. He looks for UST yields to bounce and the $ to suffer a corrective setback, especially against emerging market and commodity currencies, but note that price action suggests that the larger trend is still lower for US equities and US Treasury yields. Indeed, we would look to buy Treasuries on a pullback, as well as the US $; particularly against emerging market and commodity currencies like INR and NZD. Finally, regardless of the larger environment for risk, gold is setting up to be sold, with 1345/1385 where we look for a top and end to the 14mth range trade.