Earlier this morning China’s Central Bank surprised financial markets by raising short-term rates on the first day back from a long holiday, in a further sign of a tightening policy bias as the economy shows signs of steadying. The PBOC raised the interest rate on Open Market Revenue Purchase Agreements by 10 basis points, effective from today. Higher rates could result in debt-laden firms into deleveraging, though at the risk of stunting growth. Separately, China’s Factory activity expanded for the seventh straight month in January helping the economy to tackle chronic imbalances.
To mark my 1250th issue of Tradernoble Daily Commentary I am offering a special 2 year rate of Euro 2750 for my 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 can you please contact me on bryan@tradernoble.com for details.
For anyone following my Platinum Service it made 48 points yesterday and is now ahead by 173 points for February having made 1734 points in January, 1351 in December, 1971 in November and 1582 in October. The previous four months saw gains of 1142, 1782, 1682 and 2550 points respectively. Since I started this Platinum Service in June 2015 it has averaged a monthly gain of over 1800 points.
The supposedly “lively” conversation that President Trump and PM Turnbull had yesterday over the AustraliaUS refugee deal has gotten quite a deal of not just Australian press but international press coverage in the past 24 hours. It has come on the back of the President’s tweet and distaste for the deal reached with the Obama Administration. What with US criticism of Japan and Japan and Iran being put ON NOTICE (his capitals, not mine) and even a wild story yesterday that the US was considering sending troops south of the border to Mexico! International relations and trade has been totally front of mind.
Will the noise quieten down? We can only wait and see. Speaking to a National Prayer Breakfast in Washington overnight, President Trump said: “When you hear of tough phone calls I have, don’t worry about it. The world is in trouble but we’re going to straighten it out, OK? That’s what I do.”
With the news out of Washington and the new Administration ramping up even further, past Trump reflation enthusiasm has waned further. The US Dollar has continued to leak lower, US stocks closed modestly lower with Treasuries little changed.
At the top of the FX leader board over the past 24 hours is the Aussie in the wake of yesterday’s record trade surplus, thanks to growing export volumes and the super-charged resource commodity prices through the second half of last year. The AUD had been struggling to break through 0.76 in recent times, but it was bid up into the release of the trade number at 11.30 yesterday, that buying accelerating after the report was released, trading toward 0.77 overnight, before settling back in the mid 0.76s, currently at around 0.7660.
While there has been understandable and relentless big dollar focus this week, there was real interest in Sterling yesterday, a day after the Parliamentary approval to trigger Article 50 has been delivered in essence. The UK Government published its White Paper on Brexit while there was close interest in the Bank of England Meeting yesterday afternoon, its growth and inflation forecasts and Governor Carney’s presser.
The BoE left policy unchanged as entirely expected. It raised its growth forecasts for this year from 1.4% to 2.0%, but trimmed their medium term inflation forecasts. The tone of the forecasts changes though and Carney’s press conference evinced less hawkishness or inflation fetish than the market was prepared for, the Bank having to weigh up its formal outlook for higher than target inflation against the post-Brexit economic uncertainties and the two way risks.
The Pound initially bounced on news of no change in policy and an increase in near term growth, but then pulled back from some dialling back of the degree of BoE hawkishness the market was half expecting. Sterling briefly spiked from 1.2650 to 1.27, but then fell back all the way through 1.26 to the lower 1.25s where it sits this morning.
Meanwhile it was a light day for economic data, the market thinking ahead to this afternoon and what Non-Farm Payrolls and the US Non Manufacturing ISM might do to change Fed pricing. US Jobless claims remained low at 246k.
This morning on the economic front we have Euro-Zone and UK Markit Services/Composite PMI at 9.00 am and 9.30 am respectively. This is followed at 10.00 am by Euro-Zone Retail Sales. At 1.30 pm we have the US NFP data including the Unemployment Rate and very important Average Earnings. Markets are expecting another solid result and, as usual, interest not just in the initial payrolls headline but the underbelly of the report, in unemployment and the broader U6 unemployment rate as well as the key average hourly earnings that’s been on a rising trend through last year, annual growth increasing from 2.6% top December 2015 to 2.9% in December 2016. That’s the one to watch. Next we have the US Markit Services/Composite PMI at 2.45 pm. Finally at 3.00 pm we have ISM Non-Manufacturing Composite and Factory Orders.
Later this evening the Fed’s Evans and Harker are due to speak on the economy at different venues.
March S&P 500
The S&P traded in a very narrow range ahead of the NFP data release at 1.30 pm. My S&P buy/sell level was not triggered and I am still flat the market. As usual I will go into this economic release flat and if the market subsequently sells off I will be a buyer from 2262/2268 with a 2257 stop. As the S&P is still in a bull trend I am reluctant to go short, especially if we get a large NFP data release in excess of 220K. This is a possibility given the large ADP Employment Change which was reported last Wednesday. The continued bounceability shows how strong the US equity market is that despite what Trump has or has not done since he became President that the S&P keeps bouncing back even though the McClellan Oscillator is still in negative territory. I still expect the market to run into trouble in February but we need to see a sell extreme first that lasts for more than a couple of days.
EUR/USD
Unfortunately the Euro topped out at 1.0830, missing my 1.0855 sell level, before selling off to an overnight low at 1.0747 and I am still flat. The Euro as shown by the Daily Bollinger Band was overbought and due a correction and this sell-off was helped by the ECB defending its easy money policy yesterday despite the increase in inflation. There is no doubt that none of the major economies want a strong currency at this time including America following the comments from both Navarro and Trump on Wednesday. Today I will now reduce my Euro buy level in anticipation of a stronger than expected NFP data to 1.0670/1.0710 with a 1.0635 stop. Today I will again be a seller into the December high at 1.0874, with my sell range from 1.0855/1.0895 with a 1.0925 stop. A break and close over 1.0900 will be extremely bullish for the Euro.
March Dollar Index
As expected the US Dollar rallied given how oversold the market had got after a 5% sell-off over the past four weeks. With the Dollar missing my buy level I emailed my Platinum Members to buy the Dollar at 99.50 with a 99.80 T/P level which was subsequently filled and I am now flat. Today I will again look to buy the Dollar on any dip lower to 99.20/99.50 with a 98.85 stop. Given how oversold the Dollar is trading I still do not want to be short the market at this time.
March DAX
The DAX continues to trade sideways as we await the key NFP data at 1.30 pm. I am still flat and today I will raise my buy level slightly to 11530/11580 with a 11485 tight stop. Just like the S&P above the DAX trend is still bullish and there is no point in trying to go short this market until we get a sell extreme that lasts for more than a few days and takes how the key support level at 11400.
March FTSE
To trade the FTSE at this time you need to keep an eye of the EUR/GBP and Cable (GBP/USD) as these currency moves are really affecting the movement in the FTSE. Yesterday Sterling sold off on the back of the BoE and boom the FTSE rallies. I am still flat the market as the FTSE just missed my 7010 buy level after I posted and today I will now raise my buy level to 7015/7045 with a 6980 stop. I still do not want to be short the FTSE at this time.
Dow Rolling Contract
The Dow continues to lag the other major US Indices and I am still flat. As usual I will stay flat ahead of the Payrolls and if the market sells off following the NFP release I will again look to buy the Dow on any dip lower to 19750/19820 with a 16985 stop. I know my buy level is well below the current price at 19900 but I am not comfortable in having a Dow long position unless it hits my buy range. The trend for the Dow is still up despite the market trading heavy/sideways all week. The Dow needs to break and close below the strong support level at 19675/19725 for me to turn bearish.
March BUND
The Bund traded higher on the back of the comments from ECB Officials defending their easy policy despite the stronger inflation. There is no doubt that we now have a currency war with no chance of any rate hikes on either side of the Atlantic any time soon. Today I will raise my buy level in the Bund to 161.35/161.65 with a 161.02 stop. I still do not want to be short the Bund at this time.
Gold Rolling Contract
Gold is having trouble in breaking its 100 Day Moving Average which comes in at 1223 with the market selling off to a 1210 low print so far. I am still flat as we await the NFP data and as I am back long Silver again I will now reduce my buy level in Gold slightly to 1192/1199 with a 1185 stop.
Silver Rolling Contract
With Silver trading at the top of its Daily Bollinger Band and Williams Index I emailed my Platinum Members to exit my 17.50 long position at 17.68. Subsequently after Silver sold off I re-bought the market again at 17.45. I will add to this position on any dip lower to 17.10 with a tight 16.85 stop on this position.
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