00:00I mean, to flesh out that view for us, Chris, and why, how the trading environment has really changed for everyone.
00:06Well, I think you'd seen such a low volatility environment.
00:09You know, ranges were so suppressed and everything was very much in a holding pattern.
00:14Income strategies were the way forward.
00:15People were looking at carry and effects in select currencies, certainly in LATAM.
00:19And that was because, you know, we saw this positive grinding, very low range kind of situation.
00:23You wanted to be paid to be in the position.
00:25Now, I'm not necessarily giving up on buy the dip completely.
00:29I mean, I think there's clearly a bid coming back into the market.
00:32We saw that yesterday, obviously, on the back of the Wall Street Journal article on Friday when oil prices spiked up.
00:38Yeah, we did see the buying coming back in, did tail off at the end.
00:41But there's certainly still a bid in the market.
00:43So I don't think we can necessarily give up on buy the dip yet.
00:46I mean, it's been a very successful strategy.
00:48And, yeah, I think this situation in the Middle East is obviously something we're watching very, very closely over the next 12 to 24 hours to see how this develops.
00:56And we're obviously looking at the tail risks around that situation and looking at the probabilities and the distribution.
01:02But, you know, I think the way that I want to play this right now is more on let the market come to you, use the market feeling a little bit more compelled about what they're seeing and buy strength rather than actually buy a pullback and buy the dip.
01:18So I think 60-50 is the level on the S&P futures.
01:21There's been a ceiling above that.
01:23I think we want to wait for a close above that level.
01:25And then, you know, that will be, for me, the market saying that they're feeling comfortable about where we are at the moment.
01:30Obviously, that would probably coincide with a pullback in crude volatility, which is still pretty elevated.
01:36And, you know, I think then the market can move on to, you know, to other factors, thinking that the supply issues in the Middle East are well contained.
01:44But it's obviously still a very fluid situation over the next 12 to 24 hours.
01:49Chris, you mentioned – David here, by the way – you mentioned buy into strength.
01:53And, you know, somewhat that – you know, an asset that's somewhat caught somewhat of a bid recently, given, I guess, what's going on in the Middle East, is the U.S. dollar,
02:02which, as we all know, has been on the back foot going into what's called the last few days or so.
02:06So what do you think is behind that sort of bid underneath the U.S. dollar?
02:11Is that positioning or is the market rethinking now the role of the dollar as a haven?
02:18Well, we're seeing a little bit of buying in the dollar today, certainly against the yen.
02:21It's coming nicely above where it's really been a ceiling, about 145.05 really since through or throughout most of May into June.
02:28And it looks like it's sort of poking its head above the precipice there, and that may continue to get a bit of a run on into the Bank of Japan.
02:36So you've got the Fed meeting, and then we've got the Ministry of Finance call on the duration side of things on Friday, which will be quite interesting,
02:43probably the bigger event for the yen in some capacities.
02:47But, yeah, I think that positioning is absolutely at the heart of that.
02:50If you look at the flow data from the flow desks, we know that the real money accounts are really very, very short of U.S. dollars at the moment.
02:59And they are the big drivers of the move.
03:02The hedge funds love to get set in positions and start at early doors, and I think they did in January.
03:07And obviously, we've seen an 8% move down in the real effective exchange rate in the U.S. dollar.
03:13But it's the real money accounts, your pension funds, your insurance companies, that when they get going, they can cause a really, really strong move.
03:20Now, positioning in real money is very short.
03:23Positioning in the hedge fund community, in the leveraged account side, has cut back quite substantially.
03:29And I feel like that's probably the short-term trade for me, is given that the real money are still very short.
03:34Retail have been buying U.S. dollars.
03:36There's probably got a little bit of upside in the U.S. dollar going through this week.
03:39I think we'd probably trade up to – I would probably be looked to flip the position and initiate shorts probably into sort of 99.50, maybe 100 in the dollar index.
03:47And that would just give us a little bit of a positioning flush out to get set for another leg lower.
03:52So, there is a very strong consensus trade that the U.S. dollar is going lower over time.
03:57But I think short-term, there's probably some upside risk from that positioning.
04:00But I don't think people are giving up on the U.S. dollar.
04:03I don't think people are giving up on U.S. assets.
04:06That's not the case.
04:06I mean, it's just – it's more about that massive investment pool that is being somewhat neutralized in some capacities.
04:15And that's got more to go.
04:17But, yeah, obviously, the U.S. dollar is still the reserve play.
04:21And that's, in my mind, not going to change for a long, long time.
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