Macro Trading Ideas You Must Know: Focus On Trends, Not War
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Markets have been jolted by Russia’s invasion of Ukraine, but largely in the same direction as current trends.
Will this be the straw that breaks the back of the global economy?
- The USD has surged higher after largely treading water over the past few weeks, pushing it to continue its strengthening trend
- Demand for USDs remains stronger than it was at its low in the middle of last year, which implies that global USD funding conditions are getting tighter – not a good sign for the world economy
- Commodities aren’t broadly weaker, but commodity currencies, AUD and CAD, are not doing well. Especially CAD which can’t rally vs the USD, even as WTI approaches $100 a barrel
- Interest rates have fallen but important markets still aren’t indicating much potential for long term growth-driven inflation:
- The US yield curve keeps flattening, and US breakevens stay off last year’s highs
- WTI is now a whisker away from $100, which could be the last straw that sends the world economy into recession
- Higher energy costs feed into higher production costs all around the world
- This combined with the flattening US yield curve and stronger USD is stagflationary at best, deflationary at worst
Trading Ideas – Performance

Trading Ideas – Commentary
- Long USD positions are doing well as the Russian invasion pushes the Dollar to continue its broad strengthening trend
- Long oil position is doing well (expressed via XLE in ETF Edge), with the war exacerbating already tight supply conditions
- Decision to straddle US 30y rates rather than take an outright long or short position is paying off as the volatility in long yields increases
- Given the current geopolitical situation, it is looking unlikely that long yields will spend the next few months trading in a narrow range
- The trade is poised to profit if the Russian-Ukrainian war keeps driving long yields lower, AND also if the war is resolved quickly and long yields continue their upward trend
- Might be wise to wait for better entry points in short GBPUSD and long gold positions, perhaps on retests of previous levels
Trading Ideas
- Long USD:
- Well established trend, in place for >6 months in most major currency pairs
- If global economic growth does take a turn for the worse in the near future, global USD funding markets will tighten, driving the USD even higher
- The potential for this downturn is currently underestimated, especially in the mainstream media
- The flattening US yield curve (even as the Fed turns hawkish) and poor Chinese economic data provide clear warning signs
- Look for USDCNY to turn higher, i.e change its trend, for an indication of worsening conditions
- Serves as a broad hedge against other “risk” assets in your portfolio, like stocks. BUT:
- Don’t think of the USD trade as “only” a hedge
- It is entirely possible, and normal, for the USD to strengthen as equities rise. The 2nd half of 2021 provides a good example of this, where US equities rallied even as the Dollar broadly strengthened
- USD longs in general should do well, but of the G7 currencies, look to go long the USD vs:
- EUR
- AUD
- CAD
- GBP
- Straddle US 30y rates:
- 30y yields look poised for either a break above 2.17% towards 2.5%, or to fall back and test 1.67%
- This strategy will also profit from a fake out/bull trap, i.e if the 30y breaks above 2.17% but quickly falls back down
- Downside comes from 30y yields trading sideways for a prolonged period of time; and straddles are expensive strategies since they involve purchasing puts and calls
- Trade can be executed:
- With options on US T Bond futures, or options on the TLT ETF
- Or going long in the spot market, either with actual T Bonds or the TLT, and hedging the other direction with puts/calls; which would be a less aggressive strategy
- Long Oil:
- Strong trend and sustained levels of bullishness makes WTI an attractive long
- This view has been expressed with a long position in XLE, as detailed in ETF Edge
- Long Gold:
- Gold has quite decisively broken out of resistance levels and looks strong technically
- The geopolitical backdrop is also supportive of higher gold prices
- Be wary of trading gold based on current high levels of inflation as it didn’t rally over the past few months on record breaking CPI data releases & headlines
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