An all-round strong US Payrolls Report backed up by a better than expected manufacturing ISM drove Friday’s market moves, with some of the payrolls impact coming an hour before the release, courtesy of a 7:21am Trump tweet that he was ‘’Looking forward to seeing the employment numbers at 8:30 this morning’’. US stocks, Treasury yields and the US Dollar were all higher, USD/JPY leading the way in FX with a gain of the 0.66%. Sterling bucked the stronger USD trend, aided by a better than expected manufacturing PMI (54.4 from 53.9). AUD/USD finished Friday almost exactly where it started around 0.7570. US May Payrolls rose by a better than expected 233k with 15k worth of upwards revisions; Unemployment unexpectedly fell to 3.8% (3.755% unrounded so very close to recording a two-tenths drop); and Average Hourly Earnings lifted by 0.3% even though the seasonal risk was for 0.1% versus the 0.2% consensus. This pulled annual growth up to 2.7% from 2.6%. The Manufacturing ISM released 90 minutes later printed 58.7 up from 57.3 with strong orders, output and employment sub-readings (price paid were also higher).
To mark my 1600th 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. To demonstrate this value, a monthly subscription over the same period would cost 4440 euro in total This offer represents a 38% discount and is open to both new and existing members. 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 made 10 yesterday on the first trading session for June, having made 1927 points in May, 1657 points in April, 1760 points in March, 2256 points in February, 879 points in January and 946 points in December. Since I started this New Platinum Service in June 2015 it has averaged a monthly gain of over 1600 points
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Speaking to Reuters on Friday, San Francisco Fed President John Williams said that the Fed should continue with gradual rate increases over the next two years. He says the Fed is about three rate hikes away from reaching a “neutral” level and that he sees less need for forward guidance from the Fed as rates near neutral. The Fed does not necessarily need to pause on rate hikes once rates reach neutral, but could drive rates still higher if the economy remains strong and inflation is at or above the Fed’s 2% target, Williams reportedly said. This echoes similar comments from Fed Governor Lael Brainard last week (traditionally regarded as a dove) who also spoke of the potential need for Fed policy to become restrictive. This is the real debate markets will be having in coming months, not whether the Fed will deliver three or four hikes this year. At the moment, there is nothing standing in the way of it being four, but the year still has a long way to run and ‘’events’’ could yet intervene.
Geopolitics has been put to one side again yesterday with markets re-adopting a risk-on posture, commodity currencies out in front in the FX space, base metals higher, stocks higher (and VIX lower) and bond yields backing up. (Italian yields have eased back further.)
While risk-on prevailed, oil prices pulled back and for once WTI out-performed Brent. Bloomberg estimated that OPEC pumped 31.9mbpd in May, the same as in April and production the lowest for a year. The market seems to have taken to heart that OPEC/Russia might supply more to the market, OPEC recently suggesting that ‘’stable oil supplies (will) be made available to the market in a timely manner to meet growing demand and offset declines in some parts of the world’’.
Higher risk appetite generally has done JPY no favours this week, with AUD/JPY up 1.3% for the day to almost 84. Sterling was also soft yesterday, with a focus back on EU-UK Brexit negotiations. The EU Withdrawal Bill will return to the House of Commons on 12 June, ahead of the next EU summit on 28 June, and the May Government is still to decide on the way forward for the thorny Irish border issue. AUD/GBP is also up 1.3%, but against the Euro, the rise in the Aussie has been 0.7%. The Bank of England’s MPC member Silvana Tenreyro has been on the wires saying that she expects the softness in the economy as likely temporary, seeing little cost in waiting before hiking and only gradual rises expected ahead.
The ECB Governing Council’s Ewald Nowotny (Governor of the Austrian Central Bank) spoke on trade, warning that “we know from history that even big wars begin with small skirmishes”, but as usual Trump was having none of it Tweeting (mainly on China) “The U.S. has made such bad trade deals over so many years that we can only WIN!” and “China already charges a tax of 16% on soybeans. Canada has all sorts of trade barriers on our Agricultural products. Not acceptable!” If the market needed one, it is another reminder that geopolitical tensions could easily re-appear at any time, not only from US-China and with media focus on the G7 leaders meeting this weekend. For now however, it is put to one side.
This morning on the Economic Front we have German, Euro-Zone UK and US Manufacturing Services/Composite PMI at 8.55 am, 9.00 am, 9.30 am and 2.45 pm respectively. At 10.00 am we have Euro-Zone Retail Sales while Nowotny again speaks this morning. Finally we have US JOLTS Jobs Openings and ISM Non-Manufacturing at 3.00 pm.
June S&P 500
Thankfully we had no sell levels in the S&P on Friday as yet again the market rallied after building value above the 50 Day Moving Average following last Tuesday’s re-test to close in the middle of my 2742/2747 resistance level. I am still flat and today I will now raise my buy level to 2726/2734 with a 2719 stop. I still do not want to be short the market at this time.
EUR/USD
My Euro plan worked well on Friday with the Euro trading lower to my 1.1630 buy level before rallying to my 1.1660 T/P level and I am now flat. Yesterday the Euro rallied continued to hit a high at 1.1745 before a late sell-off took the Euro below 1.17. Today I will again look to buy the market on any dip lower to 1.1610/1.1650 with a 1.1570 stop. I will still be a small seller on any rally higher to 1.1780/1.1825 with the same 1.1855 tight stop.
June Dollar Index
No change as I am still a seller on any rally higher to 94.55/95.05 with a 95.35 stop. Given how overbought the Dollar is trading I still do not want to be long the market at this time.
June DAX
Thankfully we had no sell levels in the DAX which closed above the key 12800 resistance level last night. I am still flat and today I will now raise my buy level to 12600/12670 with a 12530 stop.
June FTSE
My FTSE plan worked well with the market trading higher to my 7735 sell level before falling over 50 points following Friday’s NFP release. As I wanted to be flat ahead of the Payrolls I covered this position at my revised 7716 T/P level and I am now flat. Yesterday the renewed weakness of Sterling saw the FTSE firm into the close having traded weak for most of the session. Today I will move my buy level higher to 7610/7650 with a 7585 stop. I do not want to be short the market at this time.
Dow Rolling Contract
The Dow has now rallied over 550 points off last Tuesday’s low as the market eyes its next major resistance at 25086 from the May 21 high. The fact that we closed over 24725 last night is bullish and today I will now raise my buy level to 24490/24655 with a 24425 tight stop. I will also be a small seller on any further rally higher to 25080/25120 with a 25200 stop.
June NASDAQ
Unfortunately my NASDAQ plan did not work well with the market closing at new all-time highs last night. On Friday after the NASDAQ traded higher to my 7050 sell level I emailed my Platinum Members to add to this position on any move higher to 7110 which happened yesterday morning (average 7080 short) before stopping me out of this position at 7135 and I am now flat. I am going to stay flat the NASDAQ as I want to see how the market reacts to new highs.
June BUND
My BUND plan also worked well with the market trading lower to my 161.10 buy level before rallying 50 points and I used this move higher to exit my long position at my revised 161.27 T/P level and I am now flat. Having opened higher yesterday morning the Bund quickly sold off to close some 350 points lower than last Tuesday’s 164.15 insane high print following the Italian political crisis. The Bund has good support from 159.70/160.10 and today I will be a buyer on any dip to this area with a 159.40 stop.
Gold Rolling Contract
Last Friday the Daily Sentiment Index reading for Gold declined to 10% which is the second time since May 15. It is only a matter of time before Gold rallies and today as I am still long Silver I will now lower my Gold buy level slightly to 1276/1284 with a 1269 stop.
Silver Rolling Contract
No change as I am still long Silver at 16.50 with the same 16.70 T/P level and 15.90 stop. On Friday the DSI closed at 12% which is slightly higher than the last reading of 10% two weeks ago.
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