Yesterday was pretty much all about the Bank of England ahead of this afternoon’s Non-Farm Payrolls from the US. The Bank of England cut the Bank Rate by 25 basis points to 0.25% which is its lowest rate in its 322 year history. This cut was expected by all analysts in a MPC 9-0 vote, while at the same time extending its QE from £375bn by £60bn to £435bn and this increased bond buying to include £10bn of Corporate Bond buying. Also announced was a Term Funding Scheme to reinforce the pass-through of the cut in the Bank Rate.
To mark my 1100th issue of Tradernoble Daily Commentary I am offering a special 2 year rate of Euro 2500 for Platinum Service which includes 1/4 updated emails throughout the trading day. This offer is open to both new and existing members and if anyone is interested please email me on bryan@tradernoble.com for details.
For anyone following my Platinum Service it made 40 points yesterday and is now ahead by 210 points for August having made 1682 points in July. The previous three months saw gains of 2550, 1532 and 2175 points respectively. Since I started this Platinum Service in June 2015 it has averaged a monthly gain of over 2100 points.
While the moves were not totally unexpected, the concerted dual move from the Bank of England – as close as I could have expected to an ‘’all guns blazing’’ or in the words of the BoE Chief Economist Andy Haldane a ‘’muscular approach’’ – saw GBP/USD immediately jag lower from 1.3350 before the announcement to 1.3150 and below, testing 1.31 and not far from that level as I go to print, currently trading just above the figure.
The UK Interest Rate Market moved in tandem, two year UK Gilt Yields falling by 8 basis points to 0.117%, with the market pricing in more easing. The BoE’s Quarterly Inflation Report noted that ‘’if incoming data proves to be broadly consistent with QIR, a majority of members expect to support a further cut in the Bank Rate to its effective lower bound at one of the Monetary Policy Committee’s (MPC’s) meeting during the course of the year. The MPC judges this bound to be close to, but a little above zero.
The easing and the BoE Governor’s scheduled press conference was strengthened by a media blitz to sell the message of support for the economy from the BoE. Carney also did several TV interviews while his two Deputy Governors have been doing interviews on the economy and BoE strategy. Deputy Governor Michael Broadbent noted that recent PMI’s suggest the economy is shrinking, with risks manifesting in a variety of indicators. The QIR took the axe to its 2.3% growth forecast for the year, cutting it to just 0.8%, including a flat second half.
The UK Equity market liked all this news with the FTSE 100 closing up 1.6% at 6740.
This morning on the economic front we have German Factory Orders at 7.00 am. This is followed by UK Halifax House Prices at 8.30 am. Next we have the US NFP data where the expectation is for an increase of 180K and an Unemployment Rate of 4.8%. Again the most important component for me will be Average Earnings where the expectation is for a 0.2% increase. Finally at 8.00 pm we have US Consumer Credit.
September S&P 500
Unfortunately the S&P just missed my 2151 buy level with a 2154 low print and I am still flat. As usual I will stay flat until we get the NFP release and if the market sells 0ff on this data I will look to buy the market on any dip lower to 2140/2147 with a 2133 stop. My only interest in selling the S&P is on a rally higher to 2174/2179 with a 2184 stop.
EUR/USD
No change as I am still long the EURO at 1.1150 from Wednesday with the same 1.1095 stop. Just like the S&P above I will use any rally in the Euro to get flat ahead of the NFP release. Following the NFP I will again look to buy the Euro on any dip lower to 1.1010/1.1050 with a 1.0970 stop. Remember for me to turn bearish the Euro I need to see the market break and close below the June low at 1.0910. I still do not want to be short the Euro at this time.
September Dollar Index
No change as I am still a seller on any rally higher to 96.30/96.70 with a 97.10 stop. The 96.70/97.00 should be initial strong resistance for the Dollar and I would expect the Dollar to sell-off on any test of this area first, before trying to re-group and trade higher.
September DAX
No change as I am still a small buyer on any dip lower to 10090/10140 with a 10045 stop. My only interest in selling the DAX is on a rally higher to 10350/10410 with a 10455 tight stop.
September FTSE
The aggressive action by the Bank of England yesterday saw the FTSE close 1.6% higher. It is now clear that a combination of a weak currency and an aggressive easing policy from the Bank of England means that this market is a buy on dips only despite the market been very over-bought after the huge post Brexit rally. I am still flat the market and today I will now raise my buy level to 6640/6670 with a 6595 stop. Naturally I do not want to be short the FTSE at this time.
Dow Rolling Contract
No change as I am still a buyer on any dip lower to 18220/18275 with an 18150 stop. Despite the Dow struggling to trade higher I do not want to be short the Dow at this time as all surprises for equity markets as we saw from the BoE yesterday are on the topside despite the awful economic growth that currently persists in all major economies.
September BUND
Long after the Bund opened yesterday the market traded lower to my 166.60 buy level before spiking higher on the BoE news which saw me T/P way too early at 166.95 and I am now flat. Today I will again look to buy the Bund on any dip lower to 166.50/166.90 with a 166.15 stop. It is now clear that the Central Banks will try and defend this 166.50 now key support and pivot point.
Gold Rolling Contract
No change as I am still a buyer on any dip lower to 1330/1338 with the same 1323 stop.
Silver Rolling Contract
Given the extent of the Daily Sentiment Index reading at 91% bulls for Silver I have decided to cover my recent long 20.40 position at 20.45 and go flat especially ahead of the NFP release at 1.30 pm. Given this extreme reading my only interest in buying Silver is on a dip lower to 19.40/119.80 with an 18.95 stop.
For any of my UK members who may be interested I am doing a special all-day trading seminar over the Non-Farm Payrolls in London on September 2nd 2016. I will be assisted by Paul Wallace who is a trader that I have done a lot of joint presentations in both Dublin and London over the past 12 months. Paul is a very engaging and interesting speaker and together we will try and take you through how to trade markets live over an important economic indicator. If anyone is interested in this not to be missed event in my opinion you can check the details out on the following link:
https://summer2016londonlivetradingday.eventbrite.com
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