While emerging equity markets and currencies remain under pressure amid further CNY depreciation and buoyant oil prices, US equities have shrugged off the negative lead from Asia and Europe with gains in the IT sector providing a Bridge over Trouble Waters. After a soft start, the USD is little changed, UST yields are higher with the sell-off led by the 5 year part of the curve and in G10, The Canadian Dollar is the outperformer amid buoyant oil prices while NZD has remained under pressure as market entertains a small chance of a near-term RBNZ rate cut.
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 155 points yesterday and is now ahead by 994 points for June, having made 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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After a USD/CNY fix just shy of 6.60 at 6.5960 and below market expectations for a fix just above the figure, USD/CNY continued its recent ascendency closing the overnight session at 6.6270, up another 0.3% on the day and +3.7% since mid-June. Meanwhile Chinese equities led the declines in Asia with the Shanghai Composite index down for a fourth consecutive day (-0.93% yesterday and -3.6% cumulatively).
The meltdown in CNY and Chinese equities is keeping EM markets under pressure with the rise in oil prices not helping the cause either. IDR fell 1.47% yesterday and the Argentine Peso dropped 2.33%.The negative lead from Asia infected sentiment in Europe, but later on gains in the US IT equity sector lifted the mood and help US equities end the day in positive territory.
So on the one hand lack of PBoC intervention is keeping market weary of a CNY led equity meltdown with EM markets under pressure while buoyancy in US shares suggest there are no major signs of contagion in developed markets yet. The rise in US stocks has helped UST yields edge a little bit higher overnight (10y +1.3bos to 2.836% while 5y +2.2bps to 2.718%), again suggesting no major risk aversion in the US. However back in September 2015, the sharp 3.8% CNY decline triggered a wide sell off in risk assets and a spike in the VIX index above the 40 mark. I do think USD/CNY and Chinese equities deserve close attention at the moment, further declines will undoubtedly increase the risk of contagion.
Moving on to currencies, after a soft start to yesterday’s trading session, the USD has regained its mojo helped along by the performance in US equities and move higher in UST yields. However overnight on the back of the strong equity markets the Dollar has sold off with the DXY now trading at 94.80. CAD has been the strongest of the majors (+0.7% and now at 1.3230), supported by higher oil prices (WTI hitting a fresh high of $74) and the OIS market prices in a greater chance of a BoC rate hike next month (75%), following Wednesday’s comments by BoC Governor Poloz, who reaffirmed the Bank’s tightening bias.
Meanwhile on the other end of the spectrum NZD has been the G10 underperformer down 0.47%. The NZD has pushed lower overnight to a fresh 2-year low of 0.6746 and currently sits 20 pips above that level. Yesterday the market interpreted the RBNZ as slightly more dovish than the May MPS, with a deliberate change in wording in the first paragraph. The Bank commented that that the OCR will remain at 1.75% ‘’for now’’, previously ‘’for some time’’. The market saw this as the Bank becoming more open to the idea that the OCR might need to be cut, should the recent trend of bad news continues.
AUD on the other had has been a bystander over the past 24hrs, range trading in a 30 pips range and at 0.7380 the currency is pretty much at the same level it was this time yesterday. That said, I remain wary of a sizeable move lower on the Aussie and other risk sensitive currencies amid the ongoing turbulence in EM markets and uncertainty over the next US trade move. In theory, US trade tariffs on China should start on July 6th and an immediate retaliation from China is expected. If so and unless something changes between now and then, stronger sanction from the US should be expected.
In other news, EU leaders have gathered in Brussels for their latest summit. EC President Juncker said that the EU is working on preparations for a no-deal Brexit in parallel with an ordinary and proper withdrawal agreement. He expressed frustration at the lack of progress, laying the blame at the UK government which has yet to agree on its future relationship with the EU. Given the lack of a UK consensus, no progress on a deal is expected to be made at the summit. EUR is higher this morning at 1.1640, after trading to an intra-day low of 1.1527, the 1.15 level remains a key support for the currency.
The Bank of England’s Haldane, who dissented and voted for a rate hike at the last meeting, outlined his case for tighter policy. He saw the economy at full employment and developments that will add to cost and inflationary pressures, indicating that a rate increase now would ‘’lower the risk of needing to tighten policy less gradually in future and cause a sharper adjustment in the economy’’. Sterling fell to a fresh low of 1.3050 and now trades at 1.3120.
The Fed’s Bullard is usually ignored as he is an uber-dove but his comments to reporters after a speech were interesting. In talking about the escalating trade tensions he commented that ‘’I would say I am hearing full-throated angst all aspects of the economy are affected, but agriculture is certainly being hit’’. He also noted that some suppliers were using the threat of new tariffs as a reason to raise prices, even when new tariffs would not directly target their business.
This morning on the Economic Front we have German Unemployment at 8.55 am and this is followed at 9.30 am by UK GDP. Next we have Euro-Zone CPI at 10.00 am. At 1.30 pm we have US PCE Deflator and Canadian GDP. Finally we have Chicago Purchasing Managers Survey and the University of Michigan Consumer Sentiment at 2.45 pm and 3.00 pm respectively.
September S&P 500
Just when it looked like the S&P was finally going to crack the 100 Day Moving Average and even test the 200 Day MA, buyers returned with a vengeance as the S&P managed to rally strongly off its 2693 low print and close over the 50 Day MA which comes in this morning at 2719 as we currently traded at 2732. All three of my US Indices hit at more or less the same time yesterday. No matter which Index you bought you would have had a nice gain as none of my stops were threatened as yet again the buy the dip wins the day following another false break of the key MA’s. After I bought the S&P at 2695 I covered this position too early at 2698 as I was still long the Dow and NASDAQ and I am now flat. Today is Month, Quarter and Half-year end which is historically an up-day as we head into another weekend. Today I will again look to buy the S&P on any dip lower to 2710/2718 with a 2704 stop. I will now raise my sell level to 2747/2755 with a 2761 stop.
EUR/USD
It is frustrating to see the Euro trade over 100 points higher from where I was stopped out of my latest long Euro position yesterday morning near the low of the day at 1.1535. I will have to start widening my stops as this has been a big problem in June as a number of my stops have been hit before the market subsequently trades higher. I am still convinced that the US needs a weaker Dollar and while there is scope for the Euro to test the 1.1200 area I still believe we will see a much higher Euro by the end of the year. Today I will now raise my buy level to 1.1535/1.1575 with a 1.1495 stop.
September Dollar Index
I am still flat the Dollar and today I will be a seller on any rally higher to 95.15/95.55 with a 95.85 stop.
September DAX
My DAX plan worked well yesterday only because I was not greedy with my T/P level. After In posted yesterday morning the DAX traded lower to my initial 12230 buy level before rallying to my 12270 T/P level and I am now flat. Subsequently the DAX sold off to test the key 12100 support level before again having a strong rally off this level with a 200 point rally so far. Today I will again look to buy the market on any dip lower to 12140/12210 with a 12080 stop. I still do not want to be short the DAX at this time.
September FTSE
For the second consecutive trading session the FTSE just missed my buy level before the market rallied and I am still flat. Today I will raise my buy level to 7500/7550 with a 7460 stop.
Dow Rolling Contract
My Dow plan worked well with the Dow trading lower to my 24000 buy level before rallying over 350 points. Unfortunately I covered my long position at my revised 24060 T/P level and I am now flat. Just when it looked like the Dow was going to get smashed following Wednesday’s huge Downside Key Day Reversal the buyers returned with the Dow now comfortably trading above its 200 Day Moving Average which comes in at 24216 this morning. The Dow is still trading below its 50 Day MA at 24615 and the market really needs to break and close over 24700 for the bulls to regain control. Today I will be a buyer on any dip lower to 24070/24220 with a 23980 stop which is just below yesterday’s low print. I still do not want to be short the Dow at this time.
September NASDAQ
My NASDAQ plan also worked well with the market trading lower to my 6960 buy level before rallying to my revised 6985 T/P level and I am still flat. Today I will again look to buy the market on any dip lower to 6960/7020 with a 6920 stop. Remember for this market to turn bearish we need to break and close below 6850.
September BUND
I am still flat the Bund which has traded in a narrow range all week. Today I will lower my buy level slightly to 161.20/161.60 with a 160.90 stop.
Gold Rolling Contract
Gold just missed my 1244 buy level with a low so far of 1245.50 and I am still flat. As I am still long silver I am reluctant to chase this market higher and today I will leave my buy level unchanged from 1236/1244 with the same 1229 stop.
Silver Rolling Contract
No change as I am still long Silver at 16.10 with the same 16.30 T/P level. I will look to add to this position on any move lower to 15.80 with a 15.55 higher stop. If any of the above levels are hit I will be back with a new update for my Platinum Members.
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