Momentum Models Flip Bullish EUR/USD and Bearish USD/JPY

When evaluating the performance of our momentum models we are considering the average performance across the one-, three-, and 12-month momentum models.

Summary

• Momentum models were up +0.2% over the past week, with equity models up +1.1% WoW, and FX models and rates models both flat WoW.
• Momentum models are up +0.6% in aggregate over a three-month time frame, with equity models the best performing (+2.9%).

Market Implications

• Momentum models have flipped bullish EUR/USD and bearish USD/JPY. We remain bearish USD, and are short DXY.

Latest Signals

Equity momentum model signals were unchanged. The S&P 500 remain modestly bearish, very bearish the Nikkei, and very bullish the DAX and FTSE (Chart 1).

Rates momentum model signals are also mostly unchanged. Signals in the US 5Y, 10Y and long bond remain modestly bearish, JGBs remained very bearish, while Bunds flipped to very bearish from modestly bullish and gilts shifted to very bearish from modestly bearish (Chart 1).

FX momentum models saw important small shifts. Most notably, EUR/USD shifted to modestly bullish from modestly bearish, and USD/JPY shifted to modestly bearish from modestly bullish. GBP/USD also flipped to very bullish from modestly bearish, USD/CAD shifted to very bullish from modestly bullish, while AUD/USD and NZD/USD remain modestly bearish. In the EUR crosses, the EUR/CHF signal shifted to very bullish from modestly bullish, EUR/SEK shifted to very bearish from modestly bearish, and EUR/NOK shifted to very bullish from modestly bullish (Chart 2).

Model Performance

• Momentum models were up +0.2% over the past week, with equity models up +1.1% WoW, and FX models and rates models both flat WoW.

*The basic strategy is to use returns (lookback windows) to give buy/sell signals. So, if the US stocks are up over the past three months, you buy, otherwise, you sell (note I use excess returns).

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