The rapid reversal in post-August 11 Emerging Market and commodity currency weakness continued with a vengeance in the past 24 hours. The Malaysian Ringgit is 3.6% up on this time yesterday and the Indonesian Rupiah 3% higher. At 0.7211, AUD/USD is now 4.1% above its recent (Sep 24) lows, and NZD at 0.6612 some 6% higher over the same period. Much of this rally is predicated on a view that China will now maintain a relatively stable CNY through the rest of this year at least and following strong verbal commitments by President Xi during his recent U.S. visit.
For anybody following my new Platinum Service it made 60 points yesterday and is now ahead by 120 points for October. The previous three months saw gains of 2833, 2195, 1810 and 3045 points respectively.
Elsewhere in currencies Sterling recouped some of its recent (post services PMI) underperformance following stronger than expected Industrial Production data, in particular versus the Euro where Germany reported an unexpected fall in its industrial output. The Canadian dollar continues to underperform other commodity currencies after another fall in Oil prices, this time generated by US Department of Energy data showing a 3 million barrel addition to inventories last week as well as a 0.8% jump in production.
The US Equity Markets were a sea of Green by the time the Markets closed after another volatile trading session with gains averaging 0.75%. Bond yield are mostly higher, representing a loss of some of their recent safe-haven demand.
However Equity Markets are opening lower this morning following the Japan Economy Watchers Survey which came in well below 50 at 47.5. The Nikkei did not like this and closed down 1%.
This morning on the economic front we already had the release of French GDP which came in weaker than expected at just +0.2%. At 12.00pm we have the results of the Bank of England Meeting, with Minutes and voting records due alongside. No change can be confidently expected. One point of interest will be whether Ian McCafferty again votes for a 25bps hike, or indeed whether anyone else joins him in this call – highly unlikely given recent indications of softening growth. At 12.45 pm we have the ECB Rate announcement and latest Asset Purchase, while there will be no change in policy today, the post-meeting press conference with President Draghi will be of usual keen interest and where we might expect him to suggest that any additions to current QE policy settings will at least have to await the next staff economic forecasting round in early December.
At 1.30 pm we have the latest Weekly Jobless Claims. Finally tonight at 7.00 pm, the main point of interest today will be the September FOMC minutes, which the likes of San Francisco Fed President John Williams have told us produced a ‘very close call’ regarding the decision to hold fire on ‘lift-off’. But it may be the case that the Minutes yet again prove to be ‘something for everyone’. We are also due to hear (again) from Fed Presidents Bullard, Kocherlakota and Williams, but all have spoken since the Payrolls Report and their views are now well known (Bullard and Williams in favour of early rates action, Kocherlakota in favour of further easing.
December S&P 500
Yesterday was one of the most frustrating trading sessions for me in in a very long time as the S&P just missed my 1967 buy level with a 1967.75 low before going on to have a 20 Handle rally and I am still flat. This morning the S&P is opening weaker with the market in the process of leaving a huge ‘Gap’ lower from last night’s official close in Chicago. For this reason I will raise my buy level to 1965/1971 with a 1958 stop. If I am taken long and subsequently stopped out of this position I will be a more aggressive buyer on any further dip lower to 1942/1948 with a 1937 stop. Remember we still have a large ‘Open Gap’ from last Friday’s close at 1941 to Monday’s low at 1960 which I still expect to get filled before the market trades higher. I still do not want to be short this market especially ahead of tonight’s FOMC Minutes.
EUR/USD
The Euro just missed my 1.1200 buy level with a 1.1211 low before going on to have a 90 point rally and I am still flat. I cannot see ECB President Dragi or the ECB been happy with the Euro back trading above 1.13 this morning. I am going to stay flat until we get the Dragi press conference which starts at 1.30 pm. If the Euro sells off following his comments I will then look to buy the Euro on any dip lower to 1.1180/1.1220 with a 1.1150 stop. I still do not want to be short the Euro at this time as to me it is only a matter of time before the Euro trades higher to the 1.18/1.20 key resistance area as in my Opinion there is no chance of the Fed hiking Interest Rates this month.
December Dollar Index
I am still flat the Dollar and today I will lower my sell level 95.70/96.00 with a 96.30 stop.
December DAX
The DAX plan finally worked well yesterday as shortly after the US Markets opened the DAX traded higher to my 10080 sell level before having a nice sell-off which enabled me to cover this position at my 10020 T/P level as outlined earlier to my Platinum Members and I am now flat. Today I will again look to go short on any rally higher to 10080/10130 with a 10160 stop which is just above yesterday’s high print. I will also be a small buyer on any dip lower to 9800/9870 with a 9760 stop.
December FTSE
Frustratingly the FTSE just missed my 6280 buy level by seven points yesterday before going on to have a strong rally and I am still flat. However this morning the market has finally hit my 6280 buy level. I am still long and today I will raise my stop on this position to 6250. I still do not want to be short the FTSE at this time.
Dow Rolling Contract
The Dow also missed my 16980 sell level with a 16965 high shortly after the US Markets opened before falling 200 points and I am still flat. The Dow is opening lower this morning as the Market again leaves a large ‘Gap’ from last night’s official New York close. Given this large move lower overnight I will be a small buyer on any further dip to 16680/16740 with a 16640 stop. My only interest in selling the Dow is still on a rally higher to 16980/17040 with the same 17080 stop.
December BUND
To cap my frustrations yesterday the BUND missed my 155.70 buy level with a 155.74 low which is extremely frustrating when you see the Bund trading 90 points higher this morning and I am still flat. Today I will raise my buy level to 155.70/156.10 with a 155.45 stop. With both the ECB Meeting and key Dragi press conference to follow the Meeting I do not want to be short the BUND today as there has to be a chance that Dragi will again mention QE in this conference and he will not be happy with the Euro back trading above 1.13. Remember following the last ECB Meeting he talked the Euro lower below 1.11 and the Bond Markets higher.
Gold Rolling Contract
Gold has again rejected the key 1150/1160 resistance level and is trading lower this morning. I am still flat Gold and as I am already long Silver which is under pressure this morning I will lower my buy level in Gold slightly to 1125/1135 with a 1118 stop.
Silver Rolling Contract
No change as I am still long Silver from yesterday morning at 15.88 with the same 15.40 stop.
Support your potential at the IG Insights Summit
I am pleased to extend an invitation to you to attend the IG Insights Summit, taking place in the Aviva Stadium on Thursday 15 October from 8am – 5.30pm.
This daylong event will be jam-packed with insights on trading and investing, and give you plenty of opportunity to challenge our expert panel with your own questions. I’ll be presenting a workshop on ‘What’s driving the markets today?’ which I hope you’ll make.
To book your complimentary seat, visit http://www.ig.com/ie/insightssummit and register as places are limited.
Highlights of the day include:
- A key note presentation on momentum investing from renowned financial markets guru Mark Shipman
- A panel discussion on the future of Irish property with the CEO of Hibernia REIT, CFO of Dalata Hotel Group, Chief Economist of Investec, and Market Editor of The Sunday Business Post
- Hear from adventurer and motivational speaker, Mark Pollock, on expecting problems as we explore possibilities
- Many investing and trading workshops from Irish and UK experts
Look forward to seeing you there!
Kind regards,
Bryan
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