Jackson Hole came and went and we were left none the wiser in terms of near term Fed or ECB Policy. The US Dollar ended the week weaker, as Draghi’s silence on the Euro boosted the single currency, although some of the gains were pared in the Q&A session after he noted that “a significant degree of monetary accommodation” is still warranted. The VIX closed Friday at 11.28, down 3 points on the week, US Treasuries were also lower with the move led by the back end of the curve and US equities closed mixed on Friday, but up on the week.
To mark my 1400th issue of Tradernoble Daily Commentary I am offering special 2 year rate of Euro 2750 for my Platinum Service which includes 1 to 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 80 points on Friday and is now ahead by 1176 points for August, having made 1096 points in July, 1023 in June, 1076 in May, 1376 in April, 1335 in March, 1481 in February and 1734 in January. Since I started this New Platinum Service in June 2015 it has averaged a monthly gain of over 1700 points.
Instead of discussing financial stability within the context of the current state of play, and thus providing some clues on how the current ease of financial conditions may affect the Fed’s policy decision process, Fed Chair Yellen took a trip down memory lane looking at the Global Financial Crisis and defended the introduction of new regulations. She argued that such reforms have boosted the resilience of the financial system without “unduly limiting credit availability or economic growth”. Yellen concluded that only modest adjustments to the current regulatory setting are needed.
Her staunch defence of the current regulatory setting effectively distanced herself from President Trump’s antiregulatory rhetoric, it did not really enhance her re-appointment chances and to many it was seen as her valediction speech as Fed Chair. As Yellen was delivering her speech the US Dollar came under pressure with President Draghi later in the day, fuelling further misery to the big dollar.
As expected ECB President Draghi speech did not give fresh information on the outlook for monetary policy and instead it warned that a turn towards protectionism would pose a serious risk for continued productivity growth and potential growth in the global economy. The Euro got a lift thanks to Draghi’s silence on the single currency, reaching an intra-day high of 1.1940 (highest since Jan15).The currency pair then settled 15pips lower following the ECB President’s Q&A session where he reiterated that “a significant degree of monetary accommodation” is still warranted.
So central bank actions on Friday weighted on the USD, in index terms, BBDXY and DXY fell 0.65% and 0.58% on the day with both Indices now very close to key support levels. Unsurprisingly European currencies were the big outperformers, all up over 1% against the USD with CHF the one exception, up 0.89%. AUD and NZD also benefited from the USD weakness, but to a lesser degree, gaining 0.34% and 0.37% respectively. AUD closed the week at 0.7934, essentially unchanged on the week and NZD at 0.7242, 72pips lower on the week.
In the context of other currencies, moves in USD/JPY were modest with the pair only down 0.2%. BoJ Governor Kuroda gave an interview on the side-lines of Jackson Hole and said his yield-curve control programme has been working “quite well” and that he doesn’t see a need to adjust it at present. He noted that since JGBs remaining in the market were declining, each JGB purchase had a greater impact on interest rates, “…so that in coming months there will be less and less need to purchase JGBs in order to maintain the yield curve”.
The lack of any policy commentary from Yellen triggered a rally in longer dated UST yields flattening the curve. 10y UST closed the week at 2.167%, 2.8bps lower on the day and 30y UST yields ended at 2.747%, 2.3bps lower. Meanwhile the 2y rate ended Friday basically unchanged at 1.335%.
In equities the S&P 500 closed Friday + 0.17%, Dow Jones was + 0.14% and NASDAQ was -0.09%. All three Indices managed to record modest gains for the week, partly reversing the losses recorded in the previous two weeks. In contrast main European equity indices ended Friday with small losses ( Euro-Stoxx 50 -0.18%, DAX -0.11%, CAC40 -0.17% and FTSE100 -0.08%) while weekly returns were mixed.
As for commodities, Brent and WT scrapped gains of just under 1%. On Saturday the US Department of the Interior’s Bureau of Safety and Environmental Enforcement (BSEE) said about 25 % of US Gulf of Mexico oil production went offline due to Tropical Storm Harvey. This equates to roughly 428,568 barrels of oil per day out of the roughly 1.75 million bpd pumped from the Gulf. Oil prices may come under upward pressure today as the market assesses the extent of Harvey’s impact on supply. The iron ore composite index shows the bulk commodity went up 1.6% on Friday, but price action in the Dalian Jan-18 contract shows the bulk metal coming under pressure late on Friday with the contract closing at CNY551, almost 2% down on the day. Gold closed up 0.5% at $1292.5 and coal prices were little changed.
Friday’s data releases were largely ignored by the market, Germany’s IFO Business Expectations Index came in stronger than expected, while US Durable Goods orders data were broadly in line, excluding the volatile transportation component.
This morning on the Economic Front we have no Euro-Zone data while the UK is closed for the August Bank Holiday. At 1.30 pm we have US Wholesale Inventories and the Trade Balance. Finally at 3.30 pm we have the Dallas Fed National Activity Index.
September S&P 500
It is very difficult to be short the S&P given the fact the fact how weak the US Dollar is trading. On top of this the McClellan Oscillator which closed negative for most of the past few weeks turned positive on Friday by closing at +29. I am still flat the S&P and as long as the market can hold its 100 Day Moving Average from 2416/2418, I will continue to be a buyer on dips. The S&P has good initial support at 2432 and today I will leave my buy range unchanged from 2427/2432 with the same 2422 stop. Again if I am taken long and subsequently stopped out of this position I will be a more aggressive buyer in front of 2416 with a 2410 stop.
EUR/USD
Thankfully we had no sell levels in the Euro on Friday as the Euro in the absence of any negativity from Dragi rose strongly to close a new highs for the year and I am still flat. The fact that the Euro broke its previous 1.1911 high so easily is a worry as we could well see an attack of 1.20 sooner rather than later. Today I will now raise my buy level to 1.1860/1.1895 with a 1.1830 stop. My only interest in selling the Euro is on a further rally higher to 1.2020/1.2055 with a 1.2085 stop.
September Dollar Index
Shortly after Yellen started speaking the Dollar traded lower to my 92.75 buy level. Subsequently I emailed my Platinum Members to only add to this position on any further move lower to 92.45 and this was also filled after Dragi spoke, thus putting me long at an average rate of 92.60. I am still long and will leave my stop unchanged at 92.20. Despite the low Daily Sentiment Index reading for the Dollar I will now use any rally higher to 92.50 to exit this position for a small loss and go flat. The next key support for the Dollar is at 91.90 and I would prefer to be long near this support than current levels and if I manage to exit my Dollar position at either 92.20 or 92.50, I will be a more aggressive buyer on any further dip lower to 91.55/91.90 with a 91.25 stop.
September DAX
I am still flat the DAX which is selling off as I finish this commentary on the back of the stronger Euro. The DAX has strong support at last week’s 12013 low print and today I will now lower my buy level to 11970/12030 with a 11935 tight stop. Despite the strength of the Euro I still do not want to be short the DAX at this time.
September FTSE
Although the CASH FTSE market is closed for the UK Bank Holiday the Futures market is trading and today I will now lower my buy level slightly to 7320/7350 with a 7295 stop. Given the extreme weakness in Sterling I still do not want to be short the market at this time.
Dow Rolling Contract
I am still flat the Dow as the market missed my initial buy level on Friday before rallying. The Dow has strong support at 21700 and today I will now be a buyer on any further dip lower to 21640/21705 with a 21580 stop which is just below last week’s 21598 low print. Given the weakness in the Dollar I do not want to be short the Dow at this time.
September BUND
It is incredible that the Bund will not sell-off despite the pick- up in German growth as mentioned on Friday and I am still flat. The Bund is overbought but we still do not have a sell signal. Today I will leave my sell level unchanged from 164.90/165.25 with the same 165.50 stop.
Gold Rolling Contract
The idea of going flat into a major event such as the key speeches on Friday at Jackson Hole with low buy levels in the market certainly paid off for both Gold and Silver. Gold traded lower to my 1275 buy level before rallying strongly to 1295 and in the process hit my 1281 T/P level and I am now flat. Given the weakness in the US Dollar I will now raise my buy level to 1279/1285 with a 1274 stop which is just below last Friday’s low print.
Silver Rolling Contract
My Silver plan also worked well with the market trading lower to my 16.75 buy level before rallying to my 16.95 T/P level and I am now flat. Finally we are seeing some upward price action in Silver this morning which is needed as Silver has underperformed Gold for most of the past month. In light of this move higher I will now move my buy level higher to 16.75/17.05 with a tight 16.55 stop.
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