It has been an eventful past 24 hours with a few macro themes at play. The USD is stronger across the board largely aided by a softer Euro courtesy of a dovish ECB and softer CNH amid heightened US-China trade tensions. European equities had a good day following the Juncker-Trump trade truce, but wobbles in the IT sector led by a 19% collapse in Facebook have led the declines in US equities. Front end US Treasury yields have edged a little bit higher in spite of softer US data releases ahead of the 2Q GDP print this afternoon and the AUD is the underperformer in G10 caught in the US-China crosshairs.
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For anyone following my Platinum Service it was flat yesterday and is still ahead by 1075 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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Currencies
While still comfortably confined within recent ranges, relatives to yesterday’s levels the USD is up around 0.50% in Index terms against major currencies and a little bit more (ADXY +0.61%) against Asian pairs. Looking at the majors a softer Euro has been the key driver for USD strength following an unchanged ECB policy guidance with ECB President Draghi reaffirming the Bank’s commitment to keeping keep rates on hold through the summer of 2019 ( i.e. after September 2019), effectively dismissing earlier news reports suggesting the wording back in June had been purposely left vague enough to allow for a hike as early as the July 2019 meeting. Draghi also noted that Inflation uncertainty is ‘’receding’’, however trade tensions remain a concern adding that the outcome from the Trump/Juncker meeting was a ‘’good sign’’ but ‘’too early to assess’’.
So after trading to an intra-day high of 1.1744 ahead of the ECB meeting, the Euro now trades at 1.1638 (-0.71%) close of the midpoint of its 1.15-1.1850 range held since mid-May. Other European currencies followed the Euro lower and Sterling was not far behind, down 0.59% and currently trading at 1.3108. On Brexit news, EU’s chief negotiator Michel Barnier confirmed market speculation officially ruling out allowing the UK to collect customs duties on its behalf.
The other driver of USD strength and also the cause for AUD’s underperformance over the past 24 hours has been the collapse of the Qualcomm/NXP deal. CNH is the big underperforming Asian currency over the past 24 hours, down 0.94% and to some extent China’s failure to approve the deal has been interpreted by some as a signal of qualitative measures that China has now decided to implement in the escalating trade tensions with the US. So in a background where the US appears to be making some progress on its trade negotiations with Europe and NAFTA, the collapse of the Qualcomm/NXP deal suggest China is aiming for a more hawkish strategy against the US.
So after trading to 0.7463 high following positive sound bites from the Juncker-Trump meeting, the AUD now finds itself as the biggest G10 underperformer, down 1.03%. That said, at 0.7377, the AUD remains yet again comfortably within its 0.7311-0.7484 range held since mid-June.
Equities
The positive sentiment from the Trump-Juncker agreement was almost immediately dented by Facebook’s earnings results, which were released after the market close. While earnings beat expectations, Facebook said it expected revenue growth to slow and reported disappointing global daily active user numbers. Facebook shares promptly fell 20%, which has dragged down the NASDAQ (-1%) and the S&P500 (-0.2%).
Amazon reported after the bell, beating EPS expectations, but underwhelmed on revenues and revenue guidance. Still in after hours trading the shares are up just under 4%.
Bonds
The US treasury curve bear flattened with the 2y tenor climbing 1.7bps to 2.688%, in spite of the soft US data releases. The 10y rate trades at 2.974%, a smidgen higher than yesterday’s levels and in Europe 10y bunds close 0.8bps higher at 0.404%.
Commodities
It has been uneventful and mixed session. Oil prices are a bit higher +0.46%/+0.76%, iron ore is essentially unchanged and gold is down 0.80%
Economics
US economic data was mixed, with the Monthly Trade Balance and (volatile) headline Durable Goods Orders weaker than expected, but capital goods orders and shipments stronger. The Atlanta Fed GDPNow estimate for (quarterly annualized) Q2 growth was subsequently revised down to 3.8% from 4.5%. Q2 US GDP is released today ( see more below)
EZ: ECB deposit facility rate: -0.4% vs -0.4% exp.
US: Trade balance, Jun: -$68.3b vs -$67b exp.
US: Durable goods orders (m/m%), Jun: 1% vs 3% exp.
US: Capital goods orders – non-defence ex air (m/m%), Jun: 0.6% vs 0.5% exp.
This morning on the Economic Front we have German Import Prices at 7.00 am. Next we have US GDP at 1.30 pm. Looking at the Bloomberg’s survey, the expected median for the advance US 2Q GDP print is at 4.2% with the top 10 forecasters median at 4.4%, suggesting there risk is that we might still get a print above 4%, even after the soft data yesterday. Also at 1.30 pm we have Personal Consumption/Spending. Finally at 3.00 pm we have Michigan Consumer Sentiment.
Meanwhile the Fed’s Bullard is speaking at 1.20 pm.
September S&P 500
After Wednesday’s huge move higher the S&P traded in a narrow range yesterday and I am still flat. The VIX closed lower by 1.25% to sit just above its recent floor at 12.14. All eyes will be on the US GDP data release at 1.30 pm and markets should stay quiet until we get this release. Today I will raise my buy level slightly to 2821/2829 with a 2815 stop. I still do not want to be short the S&P at this time.
EUR/USD
Just ahead of the New York close the Euro traded lower to my 1.1640 buy level. I am still long and today I will now lower my T/P level on this position to 1.1655. I will still look to add to this position on any further move lower to 1.1600 with the same 1.1565 stop. If any of the above levels are hit I will be back with a new update for my Platinum Members.
September Dollar Index
The Dollar just missed my 93.60 buy level before trading higher and I am still flat. Today I will now raise my buy level to 93.70/94.10 with a 93.35 stop.
September DAX
The dovish press conference from ECB President Dragi helped the Euro to sell-off and this move lower was the main catalyst for the DAX to build on Wednesday’s gains as the market approaches its all-time high. I am still flat as thankfully we have had no sell levels in this market over the past number of weeks. Today I will now raise my buy level to 12600/12670 with a 12530 stop.
September FTSE
Unfortunately the FTSE just missed my initial 7570 buy level with a 7580 low print before spending the rest of the session trading sideways. Given the underperformance of this market over the past number of weeks I am reluctant to chase the FTSE higher and today I will leave my buy level unchanged from 7530/7570 with the same 7495 stop.
Dow Rolling Contract
I am still short the Dow in small size from late Wednesday at 25430. Yesterday the Dow just missed my second sell level at 25600 with a 25590 high print. Today I will continue to be a seller at 25600 with the same 25670 stop. I will now raise my T/P level on this position to 25410 and if my second sell level is executed I will then raise my T/P level to 25500. If any of the above levels are hit I will be back with a new update for my Platinum Members.
September NASDAQ
The NASDAQ opened lower yesterday and traded sideways for most of the session before a late rally ensued on the back of the 4% rally in Amazon shares after they reported their latest earnings results. I am still flat and today I will now raise my buy level to 7320/7360 with a 7280 stop. Meanwhile I will leave my sell level unchanged from 7500/7540 with a 7570 stop.
September BUND
No change as I am still a seller on any rally higher to 162.70/163.10 with the same 162.45 stop. I still do not want to be long the market at this time.
Gold Rolling Contract
As I am back long Silver I will now lower my Gold buy level to 1205/1213 with a 1198 stop.
Silver Rolling Contract
Silver traded lower to my 15.48 buy level. I am still long and today I will still look to add to this position on any further move lower to 15.10 with the same 14.90 stop.
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