Relative Strength & Strategy Insights | Updated: Feb 04, 2026 at 12:02:24
Mixed economic data with strong durable goods orders (5.3% vs 1.1% forecast) and factory orders (2.7% vs 1.4%), but weak consumer confidence (84.5 vs 88.0), rising jobless claims (209k vs 205k), and widening trade deficit (-56.8B vs -37.0B). Fed funds rate unchanged at 3.75%.
Positive sentiment from easing geopolitical tensions, European stocks at record highs, German DAX at 3-week high, and improving economic data. German Ifo Business Climate stable at 87.6 (vs 88.4 forecast), German GDP growth (0.3% QoQ vs 0.2% forecast), and Eurozone economic sentiment improved to 99.4 (vs 97.5).
Monetary base slumped 9.5% in January, manufacturing PMI improved to 51.5 (expansion), but retail sales declined (-0.9% YoY vs 0.9% forecast), industrial production weak (-0.1% MoM), and Japanese market significantly lower following Wall Street cues.
Market cautious despite easing geopolitical tensions, FTSE 100 slipped after positive start. Positive car production (17.7% YoY vs 6.7% forecast) but mortgage approvals slightly below expectations (61.01k vs 64.4k).
Mixed signals with market volatility (sharply higher then slightly lower), building approvals sank 14.9% in December, but inflation higher than expected (3.8% YoY vs 3.6%), NAB business confidence improved (3.0 vs 2.0), and export prices surged (3.2% QoQ vs -0.5% forecast).
BoC held rates at 2.25%, wholesale sales strong (2.1% vs 0.4%), but trade deficit widened (-2.2B vs -0.6B), GDP stagnant (0.0% MoM vs 0.2% forecast), and budget deficit larger than expected (-8.02B vs -4.2B).
Trade balance turned positive (0.05B vs -0.18B forecast) with strong exports (7.65B), but credit card spending declined (-0.3% YoY), and ANZ business confidence dipped (64.1 vs 73.9).
Economic sentiment weakened (-4.7 vs 5.5 forecast), but trade balance remained strong at 3.0B (vs 3.8B forecast), and KOF leading indicators slightly below expectations (102.5 vs 103.2).
| Strategy Pair | Action | Target | Strategy Rationale |
|---|---|---|---|
| EUR/USD & GBP/USD | LONG BASKET | Dist: +150 pips | Isolating USD mixed/weak sentiment by longing two European currencies with positive catalysts (EUR strengthening from economic improvements, GBP with some positive data) to hedge against individual European risks. |
| AUD/JPY & NZD/JPY | LONG BASKET | Dist: +180 pips | Exploiting JPY weakness (monetary contraction, weak retail data) against commodity currencies with mixed but potentially resilient fundamentals (AUD inflation upside, NZD trade surplus), diversifying across Pacific economies. |
| EUR/CHF & GBP/CHF | LONG BASKET | Dist: +100 pips | Capitalizing on EUR/GBP strengthening momentum against CHF which shows mixed sentiment and weaker economic data, reducing exposure to any single European economic shock. |
| CAD/JPY & AUD/JPY | SHORT BASKET | Dist: -140 pips | Hedged JPY carry trade: Short JPY against two higher-yielding but weakening/mixed currencies (CAD weakening post-BoC, AUD mixed) to capture yield differential while limiting JPY rebound risk through diversification. |
| EUR/AUD & GBP/AUD | LONG BASKET | Dist: +130 pips | Relative strength play: Long European currencies (strengthening EUR, mixed GBP) against AUD which faces domestic headwinds (plunging building approvals) despite inflation upside, neutralizing single-currency European exposure. |
| USD/CAD & USD/CHF | SHORT BASKET | Dist: -160 pips | Tactical USD short against two currencies with central bank divergence: CAD weakening post-BoC hold but with strong wholesale sales, CHF mixed but with solid trade balance, reducing idiosyncratic Canadian or Swiss risks. |