The Australian Dollar has been by far the weakest G10 currency since the release of the soft Q1 inflation data a little under two weeks ago. Adding to the downward pressure – that has now seen AUD/USD lose 4.5% from pre – CPI levels – was last Thursday’s RBA Rate cut, and then on Friday the slashing of the RBA’s inflation projections in the latest Statement on Monetary Policy. The RBA now only sees the Trimmed Mean underlying measure returning to above 2% until 2018, albeit the new forecasts are choked in uncertainty. Markets have been quick to price in a high probability of another 25 basis point cut to the Cash Rate by August and roughly a 50% chance of Interest Rates hitting 1.25% later this year. The AUD/USD is now trading at 0.7360 from over 0.78 three weeks ago despite the weaker Dollar across the board.
To mark my 1050th issue of Tradernoble Daily Commentary I am offering a special 2 year rate for my Platinum Service which includes 1/4 updated emails throughout the trading day. This offer is open to both new and existing members and if anyone is interested please email me on bryan@tradernoble.com for details.
For anyone following my Platinum Service it made 150 points on Friday and is now ahead by 195 points for May, having made 2175 points in April. The previous three months saw gains of 2265 points for both February and March after a record 3365 point gain in January. Since I started this service last June it has made over 24,000 points.
Although the Australian Dollar is opening weaker this morning, though not as much as the Canadian Dollar where the Alberta wildfires are reported to have doubled in size over the weekend. The AUD slippage follows the release yesterday of China’s Trade Figures. These show a larger than expected surplus at $45.6bn, above the $40.0bn expected but driven largely by deterioration in import growth. Imports are up 10% y/y from -7.6% in March while Exports expanded by 4.1% which was close to expectations. China’s April Reserves were also reported over the weekend, revealing a $6.4bn rise.
Last Friday’s US Employment Report came and went without a huge amount of market reaction beyond the usual ‘bungee jump’ knee jerk reaction. The US Dollar initially weakened on the softer than expected headline NFP , then came back up on stronger than expected annual hourly earnings growth. US April Non-Farm Payrolls printed a weak 160K versus 200K expected with March revised down to 208K from 215K and February to 235K from 247K. The shortfall was roughly split between public and private employment with a large 12K drop in postal sector workers accounting for most of the drop in public sector employment.
The Unemployment Rate held steady at 5.0% against expectations for a drop to 4.9% and despite a fall in the participation rate to 62.8% from 63.0%. Annual earnings growth ticked up to 2.5% from 2.3% on the back of a small upward revision to both February and March. Post the data, New York Fed President Bill Dudley said two rate hikes this year is still a reasonable expectation.
After initially selling off on NFP release US stock ground higher for the rest of the trading session and closed on their highs while US Treasury Yields ended the week slightly firmer. Gold close much higher at $1294 but is well off these highs at $1280 this morning.
This morning on the economic front we already had the release of German Factory Orders which came in better than expected at +1.9% which in turn is helping European stock markets at the open. At 9.30 am we have the Euro-Zone Sentix Investor Confidence while at 10.10 am the Chicago Fed’s Charles Evans will speak on the US Economy and Monetary Policy on a panel in London. Finally at 3.00 pm we have US Labour Market Conditions Index Change.
June S&P 500
My S&P plan worked perfectly on Friday as shortly after the NFP was released the S&P traded lower to my 2031 buy level before having a huge 23 Handle rally into the close which enabled me to cover this position too early at 2037 and I am now flat. When I was lecturing in the IG offices last Thursday I pointed out that both the Daily Bollinger Band and Williams Index were saying not to be short the market despite the weakening economic data. As I keep saying these are the two best indicators especially when look to set up a long or buy position. Early this morning the S&P just missed my 2058 sell level with a 2057.50 high with the market now selling off again as I write this commentary. Last Thursday/Friday’s price action was another great example of why you can only be short these markets for no more than a few hours before we see buying return. Today I will again look to buy the S&P on any dip lower to 2044/2050 with a 2038 stop. I do not want to be short the market at this time especially as we are still so close to the bottom of the Bollinger Band.
EUR/USD
No change as I am still a buyer on any further dip lower to 1.1310/1.1350 with the same 1.1275 stop. Despite the Euro having a nice reversal off last Monday’s 1.1620 high print I still do not want to be short the Euro at this time.
June Dollar Index
The Dollar has had a nice rally off the 91.80 low print from last Monday and today I will now look to sell the Dollar on any further rally higher to 94.40/94.70 with a 95.10 stop. My only interest in buying the Dollar is on a dip lower to 92.90/93.30 with a 92.55 stop.
June DAX
My DAX plan worked well on Friday as shortly after I posted the DAX traded lower to my 9770 buy level before having a nice rally which enabled me to cover this position way too early at my 9820 T/P level as outlined earlier to my Platinum Members and I am now flat. Today I will continue with my strategy of buying dips and I will use any further mover lower to 9810/9860 to buy the DAX with a 9755 stop. So far the 9750/9800 is holding the market. The price action is still telling me not to short the market.
June FTSE
The FTSE came close on Friday to hitting my 6010 stop with a 6017 low print on my 6070 long position before the market turned around and traded as high as 6130 overnight. This dramatic move higher again proves how difficult it is to be short. Unfortunately I covered my long position for a small gain at 6075 and I am now flat. Today I will again look to buy the FTSE on any dip lower to 6060/6090 with a 6030 tight stop.
Dow Rolling Contract
My Dow plan also worked well on Friday with the Dow trading below my initial 17560 buy level with a 17540 low print before rallying over 230 points off this low print. As I was already long both the FTSE and S&P I did not buy the Dow and thus missed this huge move higher which hopefully you were able to benefit and I am still flat. Today I will move my buy level higher to 17590/17650 with a 17535 stop which is just below Friday’s low print.
June BUND
I am still flat the Bund which has again build value over the crucial 163.50 pivot point. Today I will move my buy level higher to 163.20/163.50 with a 162.90 tight stop.
Gold Rolling Contract
The rollercoaster in Gold continues with me still flat as I continue to find it difficult to get a good risk/reward trade on board especially after the $250 rally in Gold since mid-January. Today I will move my buy level slightly higher to 1256/1263 with a 1249 stop.
Silver Rolling Contract
No change as I am still a buyer on any dip lower to 16.70/17.10 with the same 16.35 stop.
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