On Friday the US dollar failed to sustain the gains seen in the immediate aftermath of a US Employment Report best described as solid but not spectacular. This meant that the AUD finished the week up at 0.7420 having been as low as 0.7260 earlier in the week. US interest rate markets also failed to sustain their post-data sell-off (with the exception of the very front end of the curve). The latest slide in oil prices was seen partly to blame. US equities recouped a good chunk of their early US day losses. Saturday’s China trade data, showing unexpectedly weak export numbers and a slightly deeper than expected contraction in imports, has put the AUD back on the defensive Monday morning, though AUD/USD still sits comfortably back on a 0.74 handle as we write.
For anybody following my New Platinum Service it made 80 points on Friday and is now ahead 330 points for August. The previous two months showed a gain of 1810 and 3045 points respectively. If anybody is interested in this new service, please email me on bryan@tradernoble.com for details.
DXY ended the NY session -0.28%, the broader BBDXY – 0.27% and ADXY -0.05% (so no love for Asia EM currencies despite the generally weaker USD). EUR/USD finished +0.38% at 1.0967, USD/JPY -0.4% at 124.24 and GBP/USD -0.14% at 1.5491. NZD resumed the uptrend in place ahead of payrolls, after a two hour post-payrolls interlude, ending up the best performing major on the night, +1.05% at 0.6622. . CAD still lost ground, -0.16% to 1.3131, with Oil again unhelpful to its cause. Canada’s own Employment Report on Friday was much of a muchness, headline employment +6.6k and the Unemployment Rate steady at 6.8%.
In rates, US 2s ended the NY session +1.6bps at 0.7169% (having traded as high as 0.7409% from a pre-payrolls low of 0.6929%). 10s ended -5.9bps to 2.1623%. In stocks, the S&P500 finished -0.29%, the Dow -0.27% and NASDAQ -0.26%. Indices all rallied in afternoon NY trade having been lower post-payrolls. Earlier Friday the Shanghai Composite added 2.26% to be 2.2% up on the week. In Commodities, with the exception of Gold (+$4.60 to $1,094) it was another sea of red. The LMEX index finished -0.23% and Iron Ore lost $0.38 to $56.40 (but $3 up on the week and now +$5 in the last fortnight). WTI crude lost another $0.79 to $43.87 (-$3.25 on the week) and Brent -$0.91 to $48.61 (- $3.50) on the week).
As for the details of the US and China data, Saturday’s China July Trade figures disappointed mostly on weaker than expected export numbers, annual growth (in USD terms) contracting by 8.3% after being +2.8% in June and expected to drop to just -1.5%. Imports were slightly weaker than expected at -8.1% y/y from -8.0% and the -6.1% expected. This put the overall Trade Surplus at $43.0bn down from $54.7bn and $46.5bn expected. Sunday saw China July CPI lifting to 1.6% from 1.4% (1.5% expected) but PPI deflation deepening, -5.4% from -4.8% (- 5.0% E). No inflation constraints here to further PBoC policy easing – and potentially a somewhat weaker currency.
US July Non-Farm Payrolls at 215k were 10k under consensus but June was revised up by 8k to 231k and May by 4k, so net of revisions, bang on expectations. The Unemployment Rate held steady at 5.3% as expected, through the broader U-6 unemployment measure that includes part-timers seeking longer hours, dropped to 10.4% from 10.5%. The labour participation rate was unchanged at 62.6% as expected. Average Hourly Earnings rose 0.2% on the month as expected and after flat-lining in June, to push year-on-year growth up to 2.1% from 2.0% (though this was depressed vs. the 2.3% consensus by other back revisions). Encouragingly, the average weekly work week increased to 34.6 hours from 34.5 hours.
This morning on the economic front we have Euro-Zone Sentix Investor Confidence at 9.30 am. The only US data of note is the Labour Market Conditions Index Change at 3.00 pm. However this afternoon the Fed’s Lockhart will speak at the Atlanta Press club at 5.25 pm.
September S&P 500
The S&P had a nice bounce off its 2062 low on Friday and this bounce is continuing this morning. With the Dow having closed lower for the previous seven trading sessions the market is due a bounce. For this reason I will be a small buyer on any dip lower to 2068/2073 with a wider 2061 stop which is just below last Friday’s low. My only interest in selling the S&P today is on a further rally higher to 2093/2098 with a 2103 stop.
EUR/USD
My Euro plan worked very well on Friday as shortly after the Payroll Numbers were released the Euro traded lower to my 1.0870 buy level before having a nice rally which enabled me to cover this position at 1.0915 as outlined earlier to my Platinum Members and I am now flat. With the Euro trading higher at 1.0960 this morning, I will again be a small buyer on any dip lower to 1.0890/1.0920 with a 1.0855 stop which is just below last Friday’s post-payroll low print.
September Dollar Index
My Dollar plan also worked well on Friday as the Dollar had a nice rally after the Payrolls were released which enabled me to go short at 98.45 before having a nice sell-off. I covered this position at 98.10 and I am now flat. There is no doubt the Dollar is having a lot of trouble in trying to break and close over the key 98.00/98.40 major resistance level at this time. Today I will again be a small seller on any rally higher to 98.00/98.30 with a 98.70 stop.
September DAX
No matter what negative news is thrown at the DAX the market will not trade lower and even with the Dow down over 1000 points since its mid-May high the DAX still refuses to go down. When we see a situation like this there is no point in trying to short the DAX as the price action is very positive. For this reason I will be a small buyer on any dip lower to 11460/11510 with an 11420 stop.
September FTSE
Just like the DAX above the price action in the FTSE has been positive over the past few days. I am still flat this market and today given how positive the price action has been I will be a small buyer on any dip lower to 6660/6690 with a tight 6630 stop.
Dow Rolling Contract
As I mentioned in my S&P commentary above the Dow has now closed down for seven straight trading sessions which itself is an unusual occurrence and for this reason is due a bounce either today or tomorrow. With the market down over 1000 points since its mid-May high the Dow is oversold on a Daily basis especially with the Williams Index pointing higher after last Friday’s mid-session low. For this reason I will look to buy the market on any dip lower to 17320/17370 with a 17260 stop. Given how oversold the Dow is trading I do not want to be short the market at this time.
September BUND
The BUND just missed my 153.30 buy level with a 153.58 low print on Friday before rallying on the weaker than expected US Non-Farm Payrolls and I am still flat. Today I will raise my buy level slightly to 153.40/153.75 with a tight 153.15 stop. I still do not want to be short the BUND at this time.
Gold Rolling Contract
Gold is opening higher this morning as the market wants to believe that the recent 1070 low print could be the start of at least a corrective bounce higher. I am still flat Gold and today I will raise my buy level slightly to 1080/1088 with a 1069 stop.
Silver Rolling Contract
As I am also flat Silver and the fact that Silver has held its recent 14.49 January low print I am not comfortable with this scenario. For this reason I have bought Silver this morning at 14.90. I will leave a wider 14.40 stop on this position.
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