After I posted early yesterday morning we have seen the broader BBDXY Dollar Index join the narrow DXY by pushing (just) through its 2017 lows on a closing basis, to its weakest since the start of 2015. The US Martin Luther King holiday has evidently proved not to be a constraint on ongoing and fairly indiscriminate dollar selling. It is the NZD quite closely followed by the AUD that top the G10 leader board since yesterday London open, up by 0.9% and 0.7% respectively, AUD/USD to a high of 0.7979 (0.7968 now) and NZD to 0.7315 (0.7301 now). Commodity price tailwinds continue to support Aussie and Kiwi even though I see these as part and parcel of ongoing US Dollar weakness. Brent crude closed in London above $70 for the first time 2nd July 2015 and every single precious and industrial metal price is higher (lead, +2% and copper +1.4% leading the way).
To mark my 1500th issue of Tradernoble Daily Commentary I am offering a 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 in this offer can you please email me on bryan@tradernoble.com for details.
For anyone following my Platinum Service it lost 67 points yesterday and is now down 157 points for the month of January, having made 946 points in December, 823 points in November and 657 points in October. Since I started this New Platinum Service in June 2015 it has averaged a monthly gain of over 1600 points.
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Next Thursday’s China December activity readings will provide the next (non-USD related) test for the veracity of the commodity price rally, that I am already concerned about given the further slowing in China credit and money supply growth indicated in the December credit statistics published last Friday as mentioned in yesterday’s Daily Commentary.
Meanwhile the Mexican peso is actually the strongest major currency over the past 24 hours, up almost 1% and feeding off yesterday’s Axios Report that President Trump was softening his line on NAFTA (this after reports last week of Canadian officials becoming increasingly fearful Trump was about to abandon it). NAFTA negotiations are due to restart next week, the same day that the Finance Ministers of the U.S., Mexico and Canada will all be in Davos for the World Economic Forum.
Given where MXN and CAD sit today, I would judge that there is much more upside on USD/CAD and USD/MXN from US abandonment of NAFTA that downside on successful renegotiation of the pact.
In the meantime the Banks of Canada looks set to lift rates for the third time in just over 6 months tomorrow afternoon (to 1.25%). Such a move is 88% priced, so CAD reaction will be governed by the narrative surrounding a move, assuming of course there is one.
EUR/USD added the best part of a cent to its rally after I posted yesterday morning to come within kissing distance of 1.23 (high 1.2297). This high came soon after comments from the ECB’s Hansson who said the ECB could end QE bond purchases in one step after September and that Euro appreciation was no threat to the inflation outlook. Mario Draghi might have something to say about that next Thursday.
The Banque de France has just joined the Bundesbank in saying it is investing part of its FX reserves in the Yuan. No surprise to be reading that this is being used as yet another excuse to be selling US dollars, the argument being that since the USD represents the lion’s share of FX reserves, most of the moves into CNY, as modest as they will be, are likely to be out of USD.
As for Sterling, it has lagged the Euro move but not by much. To the extent that its recent run up was in part driven by reports late last week that Spain and Holland favoured a ‘’soft’’ Brexit, there might be some adverse reaction to the current FT lead story saying that the EU has toughened up its conditions for a post-Brexit transition deal for the UK, demanding that Britain abide by stricter terms on immigration, external trade agreements and fishing rights for nearly two years after it leaves the bloc.
The FT says the revised ‘’directives’’ drawn up by EU member states for Michel Barnier, Brussels chief negotiator, complicate the talks by giving him more precise instructions on several politically sensitive topics for the UK, according to a draft seen by the Financial Times. These include extending free movement rights and a special status to all EU citizens arriving before the final day of the transition at the end of 2020. It also requires that British Ministers seek ‘’authorisation’’ from Brussels in order to continue benefiting from EU trade deals that it would otherwise fall out of on Brexit day.
This morning on the Economic Front we have German CPI at 7.00 am. This is followed by UK CPI, PPI and the House Price Index at 9.30 am. Finally at 1.30 pm we have the New York Empire Manufacturing Index.
March S&P 500
No change as I am still a seller on any further rally higher to 2803/2815 with the same 2823 stop. I feel this could be a key day for the US stock market given its explosive rally from the first trading session of the year especially with the potential of another large ‘’Open Gap’’ to the upside. Meanwhile given how severely overbought that we are trading my only interest in buying the S&P is still on a dip lower to 2750/2758 with a 2743 stop.
EUR/USD
I am certainly having little luck so far this year as the Euro which only missed my revised T/P level on Friday by one point stopped me out of my 1.2160 short position for an 80 point loss at 1.2240 and I am now flat. The Euro is severely overbought and as mentioned in my Economic Commentary above I just cannot see ECB President happy with the strength of the Euro. We have strong resistance from 1.2290/1.2350 and today I will again look to sell the market with a 1.2390 stop. My only interest in buying the Euro is still on a dip lower to 1.2010/1.2060 with a 1.1970 stop.
March Dollar Index
The Dollar traded lower to my 90.20 buy level. I am still long and will only add to this move on any subsequent move lower to 89.60 with an 89.40 stop.
March DAX
Frustratingly the DAX just missed my 13160 buy level with a 13164 low print before having a nice rally and I am still flat. Given the strength of the Euro I will now lower my DAX buy level to 13000/13080 with a 12950 stop. Despite the negative price action I still do not want to be short the DAX at this time.
March FTSE
The strength of Sterling continues to hamper the FTSE rally. I am still flat and will now lower my buy level slightly to 7610/7655 with a lower 7575 stop. Just like the DAX above I have no interest in going short the FTSE despite the negative price action.
Dow Rolling Contract
Yesterday the Dow traded higher to my 25980 sell level. I am still short and will only add to this position on any further move higher to 26090 with a 26165 stop. This incredible move up in the Dow since the November 2016 Presidential Elections reminds me of 1989 when the Nikkei rose from 28,000 to 39,000 in 10 months before falling nearly 50% in the following eight months. This is a dangerous market and is why I have started to sell rallies for the first time in many years. If you are long the equity markets be careful especially with the S&P now trading above its 3rd Standard Deviation. Of course this rally may extend for another few months but we have now surpassed the longest time frame in history without even a 3% correction for the US Stock Markets..
March NASDAQ
No change as I am still short at 6785 with the same tight 6830 stop.
March BUND
Late in yesterday’s trading session the Bund traded lower to my 160.30 buy level and as I did not wish to have a long position overnight I covered this trade at my revised 160.43 T/P level and I am now flat. Today I will again look to buy the market on any dip lower to 159.60/160.05 with a 159.30 stop.
Gold Rolling Contract
No change as I am still a buyer on any dip lower to 1308/1320 with a 1301 stop.
Silver Rolling Contract
I am still flat Silver which continues to match the Gold rally over the past few weeks. Today I will leave my buy level unchanged from 16.90/17.20 with the same 16.60 stop.
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