The big news yesterday was the announcement by the EU’s Barnier who suggested an offer to the UK of a deal that has never been seen before.Sterling jumped nearly two big figures on the Barnier headline, from around 1.285 to over 1.3040 this morning, EUR/GBP down from 0.9075 to 0.8973 on the move, Meanwhile the Australian Dollar faded yesterday after Westpac announced a rise in its mortgage rate of 14bps. The bounce in Sterling came after comments from EU Chief Brexit negotiator Michel Barnier that “we are prepared to offer a partnership with Britain such as has never been with any other third country”. Conciliatory headlines for sure, an olive branch, hopes of some give and take. Without wanting to be too gloomy, the extent of the jump in the GBP/USD likely reflected a response to already evident short positioning. This news should not imply something significant is actually on offer or something even remotely close to what May proposed in her July 6 Chequers proposal. Note also that November is now seen to be the month for an agreement between the UK and the EU (previously October when the European Council is scheduled. The clock is ticking to 29 March 2019; only 211 days to go.
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For anyone following my Platinum Service it was flat yesterday and is still ahead by 413 points for August, having made 1074 points in July, 994 points in June, 1927 points in May, 1657 points in April, 1760 points in March, 2256 points in February, and 879 points in January. Since I started this New Platinum Service in June 2015 it has averaged a monthly gain of over 1600 points
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Barnier also went on to say that “the single market means the single market; this is not negotiable”. Hosing down hopes or expectations that the EU was about to break its own red lines, the German Foreign Ministry in a Twitter post said that there would be no special rules for a post-Brexit UK, EU cohesion is a top priority, and that the EU won’t diminish the single market. Likewise, French Economy and Finance Minister Le Maire said that the UK cannot be outside and in the EU at the same time.
As something of a counter, German Finance Minister Olaf Scholz said in a speech in Paris that he hopes ‘’we can proceed fast’’ in negotiating a ‘’manageable Brexit’’. ‘’We must find a way to maintain a close, trusting and balanced relationship with the U.K. in the future. Everyone should be aware that ‘’no deal is no solution”. Economies, societies have grown too close together.
For now at least, Sterling’s bounce on the give and take Barnier headline has been sustained. At the minimum, the Europeans appear to be cutting PM May some slack to ease her political pressures.
Elsewhere in the currency space, the Argentinian peso tumbled to a record low after President Mauricio Macri asked the IMF to speed up disbursements from its $50 billion credit line to ease the country’s finances. This spilled over into some selling for a time of the Turkish Lira, the Mexican Peso and the South African Rand, not to mention some background headwinds for the AUD.
US-Mexico-Canada trade news was also getting a run with Canadian Foreign Minister Freeland saying that she is optimistic on progress this week, PM Trudeau chiming in, saying that there is a possibility of a NAFTA deal by Friday.
Commodities
The big mover in the commodity space, WTI and Brent up 1% on the back of another larger than expected weekly drawdown of US crude inventories. Elsewhere, the LMEX base metals index declined 0.31% (copper was down 0.99%), Gold was little changed while the bulks were softer.
Economics, Bonds and Equities
It was a quiet day for economic news, the US revising up slightly Q2 GDP from 4.1% to 4.2%, ahead of expectations it would be shaved to 4.0%. US Pending Home Sales declined 0.7% against expectations it would rise 0.3%. With another positive day for equities on both sides of the Atlantic (in the main; more records in the US), bond yields generally inched a little higher, in well-worn ranges. The exception was the FTSE which fell over 1% on the Barnier headlines.
This morning on the Economic Front we have German Unemployment at 8.55 am. This is followed at 9.30 am by UK Consumer Credit, Mortgage Approvals, Net Lending to Individuals and M4 Money Supply. Next we have Euro-Zone Consumer Confidence, Business Climate and Economic Sentiment which will all be released at 10.00 am. Finally at 1.30 pm we have US Weekly Jobless Claims, Personal Income/Spending and Canadian GDP.
September S&P 500
The S&P again closed at a new record high yesterday as the blow of phase gathers pace after a 80 Handle rally over the past two weeks. As I am short both the Dow and NASDAQ I waited to sell the S&P which I did just before the Chicago close at 2915. This morning the S&P is thankfully trading lower and I used the overnight small sell-off to cover this position at my revised 2910.50 T/P level as emailed earlier to my Platinum Members and I am now flat. My own view as we approach the notoriously difficult September/October timeframe is we will get a sell-off over the coming weeks before the market re-groups and rallies strongly into year-end and the first Quarter of 2019 before we finally may see an end to this longest bull market in history. Today I will again look to sell the S&P on any further move higher to 2919/2929 with a 2936 stop. I will also raise my buy level to 2890/2897 with a 2883 stop.
EUR/USD
I am still flat the Euro which again traded in a narrow range as we wait for the US traders to return from their summer vacation next Tuesday. Today I will continue to be a seller on any rally higher to 1.1750/1.1790 with a higher 1.1830 stop. I am not going to chase the market higher and I will also leave my 1.1570/1.1610 buy level unchanged with a 1.1535 stop.
September Dollar Index
The Dollar also traded in a narrow range and I am still flat. I will continue to be an aggressive buyer on any further move lower to 93.20/93.60 with a 92.80 stop. I am not going to chase this move lower and today my sell level will also remain unchanged from 95.20/95.60 with a 96.05 stop.
September DAX
The DAX continues to find the 12600 resistance level difficult to break as the market consolidates its gain over the past week. I am still flat and today I will now lower my buy level to 12320/12395 with a 12260 stop. Ahead of month-end tomorrow I still do not want to be short the DAX at this time.
September FTSE
It was obvious that the FTSE market knew something was happening yesterday as the market had been selling off from just after I posted yesterday morning before accelerating lower on the Barnier headlines. Initially after the market traded lower to my 7570 buy level we had a 30 point rally and I used this move to exit my long position at my revised 7585 T/P level and I am now flat. The FTSE has strong support from 7410/7460 and today I will again be a buyer on any dip to this area with a 7375 stop.
Dow Rolling Contract
No change as I am still short in very small size at 26000 from last Monday with the same 25980 T/P level. I will continue to look to add to this position at 26200 and if this second sell level is filled I will then raise my T/P level to 26070.
September NASDAQ
Unfortunately the NASDAQ just missed my 7565 exit level on my 7550 short position with a 7578 low print shortly after the US Markets opened before stopping me out of this position at 7610. Subsequently the market rallied to my second sell level at 7660. I am still short and I will now raise my T/P level on this position to 7625 with a now lower 7720 stop.
September BUND
The sell-off in the Bund gathered pace over the past 24 hours with the market trading at 162.20 as I go to press. I am still flat and I will now lower my sell level to 162.80/163.25 with a 163.60 stop. The Bund has good support at 161.50 and today I will be a buyer on any further dip lower to 161.30/161.70 with a 160.95 stop.
Gold Rolling Contract
Gold remains heavy and today I will continue to be a buyer on any dip lower to 1182/1190 with a 1175 stop.
Silver Rolling Contract
No change as Silver continues to remain heavy and I am still flat. My only interest in buying this market is still on a dip lower to 14.00/14.40 with a 13.70 stop.
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