US President Trump’s interview with CNBC, which aired early afternoon New York time enlivened markets in which he opined to not being happy about recent Fed rate rises, has brought the US dollar to heal after having just posted a new one year high above 95.50 in DXY terms, as well as seeing stock prices and bond yields slightly lower. Commodity prices remain under the pump, which together with the earlier weakening in the Chinese Yuan – partially reversed on Trump’s comments that the Yuan was ‘’dropping like a rock’’- has served to undermine all of the gains in the AUD generated by Wednesday’s good Employment Report.
To mark my 1625th 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 65 points yesterday and is now ahead by 662 points for July, having made 994 points in June, 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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To be fair to the President, he qualified his Fed rate rise comments by saying that he respected the Fed’s independence, but this does not diminish the fact that historical political protocol continues to be disregarded in just about everything Mr Trump says. The irony is his remarks is of course that back in 2016, he was criticising the Yellen Fed for keeping rates too low, which he saw as an attempt to maintain stock market strength in order to help then Democrats retain control of the White House later that year. The shoe is of course now on the other foot.
No matter, we can remain confident the Fed will do what it thinks it should do. More telling to my mind was his criticism of the EU for the $5bn fine imposed on Google this week and his remark that that the Chinese Yuan was ‘’dropping like a rock’’. So the President’s distaste for a stronger Dollar is back on show, despite his (current) chief economic adviser Larry Kudlow’s previously espoused view that ‘’king dollar’’ should be in the ascendancy this year. What I take away from this is that there is as yet no reason to think Trump is ready to back off his threats to go ahead with the tariffs on an additional $200bn of Chinese goods come September, or that he will as yet withdraw the threat of 20 or 25% tariffs on auto imports.
Stocks
US stocks have closed with losses of 0.4-0.5%, all sectors bar real estate and utilities posting losses (telecoms faring worse). Stocks fell away in the last couple of hours of trade, seemingly aggravated somewhat by the Trump remarks, which if nothing else keep the risk of escalating trade tensions very much to the fore. Microsoft reported after the close and beat both its EPS and revenue estimates, despite which the stock initially fell in after-hours trade but is now about 0.5% up on its NY closing level.
Bonds
Treasury yields continue to leak lower, 2s by another 2bps and 10d by 3ps to 2.84% – still inside the prevailing range but meaning the curve is maintaining flattening pressure
Currencies and Commodities
Having earlier made a new one year high of 95.65 in DXY terms on fairly broad based USD buying but with Sterling weakness post weak UK Retail Sales one of the drivers, the reversal post Trump’s comments has been led by USD/JPY, symptomatic of the mild risk-off tone in late-day equity market and lower US Treasury yields. Also adding a bit of pressure on Sterling, since reversed by USD slippage, has been the reports of an EU ‘’Doomsday Scenario’’ document prepared for the event of a UK crash out from the EU. The report highlights the legal consequences of Britain becoming a ‘’third country’’ with airline licenses, certain citizens rights and medicine certificates ending yesterday. In total, the FT notes the commission has issued 68 such ‘’preparedness’’ or doomsday notes.
The Euro is little changed over the past 24 hours while commodity and other export dependent currencies all lower by between 0.5% and 0.8% (NZD, CAD and NOK faring worse even though all prices haven’t suffered as much as hard commodity currencies). The LMEX index of industrial metals prices is off another 1.5% to now be 16% down on its early June highs. Zinc, nickel and lead are all off more than 2%, aluminium and copper by 1.3% and 1.4% respectively.
AUD’s rally post the Employment data was undone first by the fresh weakening in the CNY as soon as Chinese market opened with USD/CNH poking its head above 6.80 (back to 6.76 on Trump but since back to 6.84 as I write) and then falling commodities. Wednesday’s news that the PBoC was marshalling its MLF in an effort to persuade banks to lend more to the SME sector, seen as a sign of concern that the economy is softening too much on the back of tightening credit conditions, was one of the factors that drove the earlier CNY weakness.
Economics
Sterling spent time below $1.30 against the US dollar yesterday after June Retail Sales data came in well below expectations. Sales fell by 0.5% against expectations for a 0.2% increase, with the core measures similarly weak.
Apparently the Brits were sat in front of the TV watching the World Cup, not wanting to venture out. So higher food and drink sales, but little else. This said and despite a -0.5% m/m fall, the strong rises in April and May means Q2 sales were +2.1% on Q1, the biggest quarterly gain since 2004. The ONS reckons this will add 0.1% to Q2 GDP
The main US release was the Philadelphia Fed survey where the headline current activity index rose to 25.7 in Jul from 19.9 in Jun, above the 21.5 consensus. Less positively, the 6-mth outlook index fell to 29.0 from 34.8. Details were mixed, with current new orders up, shipments down, employment down, delivery times up. The prices paid index rose to 62.9 from an already high 51.8, another sign of building inflation pressures. We also had Weekly Jobless Claims data which at 207k is the lowest since 1969.
This morning on the Economic Front we already had the release of German PPI which came in as expected with a +0.3% print. At 9.30 am we have UK PSBNR. This is followed at 1.30 pm by Canadian Retail Sales and CPI. We have no US data of note today. Finally at 9.30 pm we have the CFTC net Foreign Exchange Positioning against the US Dollar.
September S&P 500
My S&P plan worked well with the market trading lower to my 2802 buy level before having a nice 10 Handle rally. As so many of my calls hit near the same time yesterday I covered my long S&P position at my revised 2805 T/P level and I am now flat. Overnight the S&P has been volatile, trading to a low of 2793.50 on the back of a combination of Trump’s comments on interest rates and a much weaker Chines Yuan. Subsequently the S&P rallied and is now trading at 2803. Today I will again look to buy the S&P on any dip lower to 2785/2793 with a 2780 stop. If I am taken long and subsequently stopped out of this position I will again be a buyer on any further sip lower to 2765/2775 with a 2758 stop. Remember as long as the S&P can hold the key 2760/2770 support level then the S&P will continue to be a buy on dips.
EUR/USD
My Euro plan also worked well with the market trading lower to my 1.1600 buy level before rallying 60 points. This move higher enabled me to cover my long position at my 1.1625 T/P level and I am now flat. Today I will again look to buy the Euro on any dip lower to 1.1575/1.1615 with a 1.1545 stop. I no longer want to be a seller of the Euro at this time.
September Dollar Index
I am still flat the Dollar and today I will now lower my buy level to 93.90/94.30 with a 93.60 stop.
September DAX
Overnight the DAX traded lower to my 12630 buy level before rallying to my revised 12655 T/P level as emailed earlier to my Platinum Members and I am now flat. Today I will again look to buy the market on any dip lower to 12500/12570 with a 12445 stop. Despite the stronger Euro I still do not want to be short the DAX at this time.
September FTSE
I am still flat the market and today I will raise my buy level to 7535/7575 with a 7495 wider stop. Ahead of the weekend I still do not want to be short the market at this time.
Dow Rolling Contract
My Dow plan also worked well with the market trading lower to my initial 25050 buy level before rallying 100 points. As I mentioned in my S&P commentary above with so many of my positions hitting at the same time I covered my long Dow position at 25070 and I am still flat. The good part of yesterday was no matter where you bought the Dow or S&P you should have made a nice gain. Today I will again look to buy the Dow on any dip lower to 25790/24930 with a 24720 stop. My only interest in selling the Dow is still from 25350/25500 with a 25580 stop.
September NASDAQ
Unfortunately the sell-off in the US Indices saw the NASDAQ just miss my initial 7340 buy level before rallying 40 points and I am still flat. Today I will leave my buy level unchanged from 7290/7340 with the same 7235 stop.
September BUND
With so many of my positions hitting at or near the same time yesterday afternoon I emailed my Platinum Members to raise their sell level in the Bund to 163.45/163.85 with a 164.10 stop. I am still flat and today I will leave my sell level in this above range. If I am taken short I will have a T/P level at 163.20.
Gold Rolling Contract
Gold had a wide trading range yesterday with the market selling off to my 1215 second buy level with a 1210.50 low print. This move lower had me long at an average rate of 1221 before the market rallied to a rebound high of 1230. I used this rally higher to cover my long position at 1224 and I am still flat. With sentiment at such negative extremes I still believe that a rally in both Gold and Silver is close. For this reason I will again look to buy Gold on any dip lower to 1205/1214 with a 1199 stop.
Silver Rolling Contract
Unfortunately I was stopped out of my long 15.90 Silver position at 15.25. Subsequently I emailed my Platinum Members that I re-bought the market at 15.39 with a 14.95 stop. I will have a 15.75 T/P level on this position. If any of the above levels are hit I will be back with a new update for my Platinum Members.
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