Trader views - the bulls take charge but for how long?

It’s a good news day in markets – the Fed stole the headlines in its bid to regain credibility, but China is where the vol moves are seen. We should add the news of progress in the Ukraine and Russian negotiations, with the FT reporting a 15-point neutrality plan – here's hoping it evolves and can lead to a lasting ceasefire and troop withdrawal.

Taking a medium-term focus, as long as the signs point to de-escalation, then it feels like the equity markets should squeeze higher. The Fed meeting has passed and strange things happen the day after Fed Day and reversals of the initial move have been all too common. We still have OPEX to deal with on Friday and while we tend to see risk struggle into OPEX, post I would be looking for further upside in risk.

China channelled their inner Mario Draghi and pulled out a “do whatever it takes” moment – the view to support equities brought literally everyone into the mix – the State Council, PBoC, SAFE, CSRC. It was a true show of force and shorts covered as we’ve rarely seen. It shows, if trading Chinese indices you can hold shorts for so long, but when the rate of change really picks up the challenge you face is the national team coming in and supporting - as with any central bank they know the feedback loop between financial conditions and economics.

A cut to the RRR must only be days away.

While I adopt a short-term bullish bias, we’re seeing some sellers today in HK50 and CHINAH, but it feels like these markets have morphed into a buy on dips markets, that holds the potential to positively trend, from a sell on rallies play. I assess if we can use these markets as the long leg in a long and short play and net off the potential outperformance. But if tactical short-sellers are going to stay clear now, perhaps that should keep the outperformance of China in check. Of course, we can look at moves in the single stock names and see meme type moves – DIDI, BAIDU, BABA, NIO – an incredible squeeze higher, and we look ahead to the US trade to see if the flow continues.

AUDJPY has been a clear play here, and this is a momentum dream, as is NZDJPY and NOKJPY – NOKJPY has broken out of its range, and this can be one that may start to trend, so I’d be long in smalls and cutting if it gave a false break back below 13.27 – in any trend system, I’d be holding until the system told me to get out, so no set target.

The Fed meeting, as I say, was as hawkish as it could have been – we saw risks to the USD and that has played out well, but most prominently against the higher beta plays – AUD, NOK, MXN, and ZAR. There's still room for the USD to fall, although the 20-day MA in EURUSD is attracting supply, so a bullish break here could bring in 1.1200/30.

The aim of the Fed is to restore credibility, to come at inflation hard and do what needs to be done and they will use interest rates and the balance sheet to achieve that. Powell is super confident he can do this without causing a recession, although eyeing the flattening of the yield curve I suspect some don’t necessarily agree. The equity market, as I say, looks supported and while positioning is still a factor, we may see calmer heads prevail and a renewed focus on just how hawkish this was – perhaps the weakness in the USD though was a reflection that this was peak hawkishness?