US Stock Indices closed in negative territory on Friday, but are trading higher this morning after Hurricane Irma largely spared Miami after the hurricane was downgraded to a Category 3 storm. US Treasury Yields rose while the Canadian Dollar was soft after a mixed employment report. US equities had a mixed Friday, but ended lower on the week and commodities were mostly softer with oil and Doctor copper the big losers. Iron ore was also down and while the initial focus this week is likely to be on the impact from Hurricane Irma, for the AUD the softness in commodities is a theme to watch.
To mark my 1400th 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. This offer is open to both new and existing members and if anyone is interested can you please contact me on bryan@tradernoble.com for details.
For anyone following my Platinum Service it made 45 points on Friday and is now ahead by 253 points for September, having made 1560 points in August, 1096 in July, 1023 in June, 1076 in May, 1375 in April, 1335 in March, 1481 in February and 1734 in January. Since I started this New Platinum Service in June 2015 it has averaged a monthly gain of over 1700 points.
On Friday the Australian Dollar traded to an intraday high of 0.8125 and closed the week at 0.8060, its highest daily close since mid-May 2015. Meanwhile NZD, closed Friday at 0.7265, up 1.5% on the week, after trading to an intraday high of 0.7337.Despite some risk aversion over North Korea (thankfully there was no missile over the weekend), the strength in both the AUD and NZD can be largely attributed to USD weakness. Hurricane Irma is currently working its way through Florida and so damages from hurricanes have been added to the list of concerns currently weighing on the USD. The economic impact from hurricanes places further question marks on the Fed’s likelihood of hiking again this year, amid uncertainty over Fed personnel and a debt ceiling showdown postponed untill December.
Speaking to CNBC on Friday, NY Fed President Dudley said that he didn’t think the near-term economic damage from Hurricane Harvey and Irma would have much effect on Fed policy, noting that in the long run, economies tend to snap back from such major events. He still believes the central bank will begin unwinding its $4.5 trillion balance sheet “relatively soon”, but he also acknowledged that the timing of the next rate hike remains unclear. Pressed on the hurricane subject, given Irma’s potential to be the most damaging hurricane in US history, Dudley then acknowledged that back-to-back hurricanes in Q3 could temporarily influence the timing of the next interest-rate increase, although above-trend growth does warrant continued gradual rate hikes.
On Friday the USD came under pressure initially by a gap lower in USD/CNH just before I posted on Friday. AUD and NZD recorded their intraday highs in the afternoon and then USD/JPY added further misery to the USD dropping to a low of ¥107.32 before mid-morning.
In the end the USD pared losses helped by the move higher in UST yields and CAD underperformance, which showed a decline in the unemployment rate, but the market focused on the soft mix between a rise in part time jobs and decline in full time jobs. Softer oil prices also weighed on the CAD (see more below) So in index terms the USD closed Friday down between 0.2% and 0.34% with both DXY (91.35) and BBDXY (1135.9) ending the week below key support levels.
Sterling was the top performer on Friday completing its third week of weekly gains against the USD. The pair closed at 1.32 and remains on an upward trend. From a technical perspective, a move above 1.3232 today would suggest the pound could make further gains in the new week, but the broad picture remains bleak, Brexit negotiations are going nowhere in a hurry and the domestic data is still not showing material benefits from a weaker currency. I still think GBP will end the year below 1.30.
The Euro ended the week above the 1.2036, following an intraday high of 1.2092. Meanwhile USD/ JPY closed the week at ¥107.84, well below its key support level (¥108.13.). That said this morning USD/JPY has opened at ¥108.40.
Looking at equities, US Indices ended up lower on the week after two positive weeks, technology and energy sectors weighed on indices on Friday and although financials had a positive Friday, it was only a small consolation after the declines in the previous days. The DJ closed Friday +0.1%, the S&P 500 slipped 3.67 points, or 0.1%, to 2461.43 and the NASDAQ fell 0.6%, to 6360.19. The Stoxx Europe 600 rose 0.1% Friday, but finished the week down 0.2%.
A Reuters report apparently had an influence on the rise in core global yields. The report noted that ECB policymakers were in broad agreement that their next step will be to reduce their QE programme options discussed included buying €40bn or €20bn of assets per month (down from the current €60bn) and extension options included 6 or 9 months.
The PBoC announced on Friday the effective removal of reserve requirement for financial institutions trading in FX forwards for clients by cutting it to 0% from 20% currently. The change becomes operational as of today and it will make it cheaper for companies and investors to buy dollars while selling the yuan. The PBoC also announced the removal of reserve requirement on foreign banks’ yuan deposits.
Incredibly we have no Economic Data of note due from either the Euro-Zone or the US. However there is UK Commons Vote on Brexit and the outcome of this vote will affect both the Pound and FTSE.
September S&P 500
After a very quiet trading session on Friday, the S&P re-opened at my 2472 sell level last night. I am still short and will only add to this position on any further move higher to 2480 with a tight 2483 stop. This move higher has closed the small ‘’Open Gap’’ at 2473. As I have said countless time until we break the key 2385/2430 support zone it is very difficult to be short the S&P for more than a few hours to a day as the market continues to buy the dip. The Central Banks continue to control these markets as shown by the Swiss Central Bank who allegedly holds over $80bn in US Stocks. The S&P has good support from 2456/2462 and today I will be a buyer in this area with a 2451 stop.
EUR/USD
Shortly after I posted on Friday we saw some profit taking in the Euro after its huge run higher since early May when we were trading at 1.06. The Euro is trying to break lower as I post this commentary and today I will now lower my buy level to 1.1900/1.1940 with a 1.1860 stop. I will also lower my sell level to 1.2065/1.2105 with a 1.2135 stop.
December Dollar Index
I am still flat the Dollar and today I will now raise my buy level to 90.75/91.05 with a 90.45 stop. Given how oversold the Dollar is trading I still do not want to be short the market at this time.
September DAX
The 12300 level in the DAX has offered strong resistance over the past few weeks. This morning we opened well above this key pivot point and this 12280/12320 area should now act as strong support from any attempted sell-off. Today I will now raise my buy level to this area with a 12235 tight stop. The 100 Day Moving Average comes in at 12445 which may pause the rally but despite this resistance level I still do not want to be short the DAX at this time.
September FTSE
I am still flat the FTSE which continues to trade in a sideways condition that has prevailed for most of the past three months which makes it frustrating to trade. The FTSE has strong resistance at 7455 which is an important three month trendline and today I will be a seller on any rally higher to 7445/7480 with a 7505 tight stop. Given the renewed strength in Sterling I do not want to be long the market at this time.
Dow Rolling Contract
Friday was such a quiet trading session across all markets as the world watched the potential affect from Hurricane Irma. With so many Hedge Funds and Trading Firms located in Florida, Friday turned out to be one of the quietest trading sessions of the year. On Friday the Dow did trade higher to my 21820 sell level with a 21848 high print before selling off to a 21779 low print. As it was late on a Friday where I had no desire to have a short position over the weekend I emailed my Platinum Members to cancel my sell range. For those members who did short the Dow you had plenty of opportunity to close this short position with a gain before the New York close. The Dow still has an ‘’open Gap’’ from a few weeks ago at 21975 ahead of key resistance at 22020/22070 where I will be a seller with a tight 21020 stop. If the Dow sells off later today to close this huge ‘’Open Gap’’ from Friday’s close I will be a buyer from 21750/21810 with a 21695 stop.
December BUND
With the Daily Sentiment Index reading at over 80% bulls for the US Bond market it is no wonder that we are finally seeing some profit taking on long positions in both the US T-Bond and German Bund. The Bund has strong support at 162.35 and today I will now lower my buy level slightly to 162.05/162.40 with a 161.75 stop.
Gold Rolling Contract
My Gold plan worked well as last night when the US Markets re-opened Gold opened near the bottom of my buy range at 1333 before rallying to 1339.50. As I am already long Silver I emailed my Platinum Members to exit any long position at 1337.50 and I am still flat. Worrying for Gold bulls the Market Vane’s bullish consensus has now risen to 64% which is the highest reading since the 1375 high print on July 6, 2016 before the market subsequently fell to a 1042 low print last December. I am not saying we are going to get the same reaction but with the DSI reading at 79% most of this Gold rally is at or near at least a temporary end. Gold has strong support from 1310/1318 and today I will be a buyer on any dip to here with a 1304 stop.
Silver Rolling Contract
On Friday Silver traded lower to my 18.05 buy level. I am still long and will only add to this position on ay move lower to 17.70 with a higher 17.45 stop.
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