Meanwhile … USD/CHF…or Gold .. or UST ?

Actually, it’s been IDR for 2014 after Gold and Silver, of course.

WCRS 2014

There’s a flock of black swans coming at us now and luckily, the positioning is at the lightest.

CHF hit a 2 year low against the USD last Friday, only held back by its EUR peg and the EURCHF gapped lower after the weekend’s developments in Ukraine.

EUR/CHF chart


The best performer since last Friday has been Silver, Gold, CHF and JPY but do not ask me why IDR has suddenly become a safe haven currency ? or has it ?

wcrs 28 feb2014

66% of Russian gas exported to the EU transits Ukraine. Apparently, 37% of Germany’s gas and 27% for France and Italy. It is estimated that Franklin Templeton holds 6.4 bio of Ukraine’s international debt which is roughly 1/3 of outstanding. Ukraine needs $35 bio to avoid a default, so there is no happy ending in sight yet especially with Russia threatening to raise gas prices.

No wonder people are flocking to Gold and CHF.

All this in the backdrop of another black swan – China.

The market talk amongst the CNH traders is that 6.00 is really the top for CNY and see the impossibility in the near term for the CNY to strengthen any further. My good friend, the Hongkie babe, is sticking to her long term AUD view that it will test its long term average of 0.80 against the USD with China in mind. She will start loading AUD into her portfolio then.

It does look like Gold for now – because it is still the only instrument outside capital controls and I cannot see the Chinese or Ukrainians or Russians rushing to buy CHF or USTs to hedge against their currency weakness. Why ? Because of capital controls.

Gold is showing a nice break up with its 50 day moving average crossing its 100 day, and if we manage to clear the 1360 hurdle vs the USD, there is a good chance of 1400 and the same in the case of Gold/EUR, trading at a 6 month high. Gold/USD

gold 2014


gold eur

The 10 year US treasury yield has also broken under its 200 day moving average. All eyes are riveted on Ukraine and the US Non Farm Payrolls this Friday, undecided which means it will not be heading any higher soon. Yet, currency weakness will dampen safe haven demand as central banks sell off their reserves which are mainly held in UST.

10Y US Treasury yield


UST US Equity

ust us equity

The battle for Ukraine may be shorter than the post economic battle to follow. And it is most foolhardy to be greedy and think ahead especially when the conflict risks are underpriced by the markets, an opinion echoed by the experts at Citi as well.

My fund manager friend who manages a bond portfolio commented that he hardly understands anything these days and why EUR still at 1.37 but he is mostly prepared for the onslaught in the markets to come. The banks are also preparing. Why should we, retail folks, in the meantime be left behind ?