During the US Dollar’s recent revival associated with deteriorating global risk sentiment and steepening yield curves, the commodity currencies – in particular the AUD and NZD – have been the hardest hit. Thus it’s no surprise to see the antipodean currencies topping the G10 FX leader board yesterday in association with a bounce in US stocks and modest weakening in the US Dollar. AUD/USD trades back above 0.75 and the NZD above 0.73, for gains of 0.6% and 0.5% respectively over the past 24 hours.
Due to the number of members taking up my 2 year Euro 2500 rate for my Platinum Service in recent months, this will be the last month that I am offering this special price which will now rise to Euro 2750 on October 1. If anyone is still interested in this original deal which has been in situ since January, you can email me on bryan@tradernoble.com for details.
For anyone following my Platinum Service it made 40 points yesterday and is now ahead by 64 points for September having made 1792 points in August and 1682 point in July. The previous three months saw gains of 2550, 1532 and 2175 points respectively. Since I started this Platinum Service in June 2015 it has averaged a monthly gain of over 2000 points.
The revival in stocks owes something to a resurgence in Apple’s share price, in turn linked to positive reports of early sales of the iPhone7 (or is it Samsung’s current travails with exploding Galaxy batteries, the U.S. Consumer Product Safety Commission last night issuing a formal product recall?).
As relevant to the rise in stocks, the fall in the VIX and the softer US Dollar, has been a raft of generally disappointing US data and which have further boosted confidence that the Fed will not be moving on rates next week. Retail sales fell by 0.3% in headline term and by 0.1% ex-autos and also the core ‘control’ measure. To be fair, Retail Sales represents less than 50% of overall US consumer spending (it doesn’t capture the bulk of service sector activity). So we may still get overall personal consumption expenditure growing at a near-3% clip in Q3, but the hard evidence for that is currently lacking.
As well, Industrial Production fell by 0.4% (-0.2% expected after the strong 0.7% July rise, though even that was revised down, to 0.6%). Producer Prices meanwhile were flat on the month and in core terms rose by just 0.1% on the month and +1% on a year ago. On the plus side, the Philly Fed and Empire manufacturing surveys showed bigger than expected bounce, but the details beneath the headlines weren’t that flash. Weekly jobless claims remain low, indicating ongoing labour market strength.
Despite the soft data and slightly lower short term US rates, longer dated bond yields are little changed. So the curve steepening theme of late is uninterrupted.
The Bank of England left policy as it was yesterday, through the minutes made clear that the majority still expect to vote to take rates lower (from the current 0.25%) before the end of the year. Sterling was an underperformer in currency land as a result.
As for yesterday’s Australian Employment data, employment falling by 3.9k was offset by the good news of a drop in the unemployment rate to its lowest since July 2013 (5.6%). The latter however was aided by the fall in the labour participation rate by 2/10%. Furthermore, the rise in the underemployment rate (those in work but working fewer hours than they’d like) rose by 0.3% to 8.7% – the highest since records began in 1978.
Overall, my sense is that the improvement in the labour market evident earlier this year has at a minimum slowed. The RBA won’t be panicking, with this year’s two rate cuts still to work their way through the economy. But it plays to my view that further cuts may be needed next year to prevent the unemployment rate trending back higher, in the context of headwinds to growth from an expected slowdown in housing construction and a slowdown in the growth rate of LNG production.
This morning on the economic front we have Euro-Zone Labour Costs at 10.00 am. We have no UK data this morning and at 1.30 pm we have US CPI. This is followed at 3.00 pm by the University of Michigan Consumer Sentiment. Finally just before the New York close at 9.00 pm we have the Total Net TIC Flows.
December S&P 500
As expected the S&P rallied hard after I posted yesterday morning with the market unfortunately just missing my 2109 buy level in the process and I am still flat. The day of a Quarterly Expiration can be the most difficult to read as the September Futures Contract will expire in Chicago at 2.35 pm while the Options Contracts do not expire until 9.00 pm. As a result the final 15 minutes of Futures trading into the 9.15 pm close can be very volatile. Today I will now move my buy level higher to 2118/2124 with a 2112 tight stop. If I am taken long or subsequently stopped out I will be a more aggressive buyer on any further dip lower to 2090/2100 with a 2083 stop. Yesterday’s move higher in the late afternoon saw the market close 5 handles of the Cash Market’s 2146/2156 Open Gap from last Monday. Currently we now have two ‘Open Gap’s above the market at 2151/2156 and 2163.50/2176 and I expect the market to at least take out the first one ahead of the FOMC Meeting next Wednesday. I still do not want to be short the S&P at this time.
EUR/USD
Another quiet trading session for the Euro. I am still flat and today I will leave my buy level unchanged at 1.1170/1.1200 with the same 1.1135 stop. I still do not want to be short the Euro especially as I do not expect the Fed to hike Interest Rates next week following another poor set of economic releases yesterday.
December Dollar Index
No change as I am still a seller on any rally higher to 95.75/96.15 with the same 96.50 stop.
December DAX
For once I was lucky with my DAX call with the market hitting my 10325 buy level yesterday afternoon before having a nice 100 point rally which enabled me to cover this long position at my too early T/P level at 10365 and I am now flat. Incredibly despite the large intraday volatility over the past six months, in net terms the DAX has gone nowhere. Today I will again look to buy the market on any dip lower to 10280/10335 with a 10245 stop. With the September Contract expiring later this morning I do not want to be short the DAX at this time.
December FTSE
Unfortunately after I posted yesterday morning the FTSE just missed my 6610 buy level before rallying hard and I am still flat. Today I will now raise my buy level to 6620/6650 with a 6585 stop. Just like the other equity Indices I do not want to be short the FTSE at this time.
Dow Rolling Contract
I am still flat the Dow and today I will now raise my buy level to 18010/18080 with a 17950 stop. If I am taken long and subsequently stopped out of this position I will still be an aggressive buyer on any further dip lower to 17850/17920 with a 17775 stop.
December BUND
The Bund traded in a very narrow range yesterday as the market is trying to recover some of its losses from the previous week’s aggressive move lower. Today I will now move my buy level higher to 162.90/163.20 with a 162.55 stop. I will leave my sell level unchanged at 64.60/165.00 with a 165.50 stop.
Gold Rolling Contract
Unfortunately Gold just missed my 1308 initial buy level with a 1308.70 low print before having a nice rally and I am still flat. Today I will lower my buy level slightly to 1298/1305 with a 1291 stop, especially as I am now long Silver.
Silver Rolling Contract
As mentioned above I have bought Silver again overnight at 18.90. I will have a higher 18.45 stop on this position and if I am stopped out of this trade I will be a more aggressive buyer in front of 18.10 with a 17.65 stop.
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