The Australian Dollar was the best performing G10 currency on Friday, and Sterling the worse, the latter initially suffering on some dismal UK Trade Figures and which contrast starkly with the Eurozone’s current account surplus status. Currencies were more lively that equities or bonds, with further strong gains for some of the most beaten up Emerging Market currencies of the past few months. The Indonesian rupiah added another 3.37% to be 9% higher on the week, and Malaysia 2.6% to be 6.9% up on the week. In index terms the narrow DXY dollar index ended -0.53% at 94.81 and the broader BBDXY -0.35%. AUD/USD added 1.05% over the 24 hours through to the NY close to 0.7336 and closed very close to the highs (0.7344). “4pm-fix” and other real money demand was evident.
For anybody following my new Platinum Service it made 95 points on Friday and is now ahead by 270 points for October. The previous three months saw gains of 2833, 2195, 1810 and 3045 points respectively.
US equities managed small gains Friday, the S&P500 finishing +0.07%, the Dow +0.2% with the VIX slipping down by 0.34 to 17.08. Earlier the Eurostoxx 50 finished +0.79% and the DAX +1.04%. No sign here of investors shorting the Euro alongside renewed buying of equities (EUR +0.74%). Treasuries were mixed, 10s losing 1.6bps to 2.0881% but 2s finishing in NY 0.4bp up at 0.6370%. In commodities Gold added $17 to $1156, so maintaining the current strong negative correlation with overall US Dollar performance.
Oil prices were narrowly mixed with no strong reaction to news that the US House of Representatives had voted 261-159 to repeal the 40-year ban on oil exports. Even if the Bill clears the Senate (it may well not) it remains under threat of Presidential veto, and the House vote does not command the two-thirds majority necessary to override. Iron ore was up just 4 cents to $56.01 but the LMEX index leapt by 3.87%.
Economic news of note was limited to Canadian Employment and UK Trade. Canada’s September labour market figures showed a 12k rise in employment (10.0kE, 12.0kP) but all driven by part time (full time -61.9k, part-time +74.0k). The Unemployment Rate rose to 7.1% from 7.0% and 7.0% expected. Very poor UK Trade Figures saw the overall (goods and services) deficit at £3.27bn (-£2.15bn E) with July revised to – £4.4bn from -£3.4bn). This was led by visible trade where the deficit came in at £11.15bn not the £9.9bn expected and with July revised to -£12.2bn from -£11.1bn originally reported.
Plenty of Fed-speak on Friday and over the weekend where the IMF’s Autumn meetings were taking place in Lima. Fed Vice-Chair Stan Fischer told CNN the Fed will raise rates this year providing slower global growth doesn’t undermine forecasts for higher inflation. NY Fed president Bill Dudley told CNBC he still forecasts a rate hike this year, but stressed “it’s a forecast and we’re going to get a lot of data between now and December, so it’s not a commitment”. Richmond Fed president Lacker (September’s FOMC meeting dissenter) told Bloomberg that “we’re there” (full employment) and that “pushing on to wring more slack out – there are some risks associated with that” FOMC dove Charles Evans said a Fed Funds Rate “below 1%” could be appropriate by end-2016, while Atlanta Fed president Dennis Lockhart says he still sees ‘lift-off’ in either October or December despite a touch more ‘downside risk’ to the economy given the international slowdown and recent employment data.
On Saturday ECB President Draghi further dampened hope for a step up in the intensity of QE, saying “we are satisfied with QE, as it has met and even surpassed our initial expectations”. He said it will take longer to get inflation up to 2% but “that is largely because of a drop in Oil prices”.
European Markets are opening flat this morning despite the Chinese market up 3.25% as I write this commentary. Today we have no data due on either side of the Atlantic with the US Government Offices closed for the Columbus Day Holiday. However the US Stock markets have a normal trading day, but not all traders will be in attendance.
December S&P 500
The S&P plan worked well on Friday as shortly after the US Markets opened the S&P traded higher to my 2012 sell level. The market subsequently traded as low as 2001 but as I was already short the Dow I emailed all my Platinum Members to cut this position at 2006 and I am now flat. Despite the S&P rallying on Friday the McClellan Oscillator fell 22 points from its 2015 high at +303 to close at a still overbought level at +281. Today I will again look to go short on any move higher to 2013/2019 with a 2024 stop. Again if I am taken short and subsequently stopped out of this position I will be a more aggressive seller in front of 2030 with a 2036 stop. I still do not want to be long the S&P at this time.
EUR/USD
The Euro had another strong close on Friday as the market finally starts to believe there will not be the series of rate hikes that the Fed of Fed Officials have been saying. As I mentioned on Friday it is only a matter of time before the Euro rallies to at least the 1.18/1.20 major resistance area before we will see some more aggressive selling of the Euro. As mentioned in my commentary above, ECB President Dragi said on Saturday that the ECB are happy with the level of QE currently been implemented. For these reasons I will raise my buy level in the Euro today to 1.1290/1.1340 with a 1.1260 stop.
December Dollar Index
I am still flat the Dollar and today I will lower my sell level to 95.30/95.60 with a 95.90 stop.
December DAX
I am still flat the DAX and today I will raise my sell level slightly to 10200/10260 with a 10295 stop. I still do not want to be long the DAX at this time.
December FTSE
Despite the horrific Trade Data on Friday the FTSE traded in a very narrow range and I am still flat. Today I will be a small seller on any rally higher to 6400/6440 with a 6460 stop. I will also lower my buy level to 6280/6320 with a 6265 stop.
Dow Rolling Contract
No change as I am still short the Dow from early Friday morning at 17080 with the same wider 17210 stop. Despite the Dow closing higher on Friday The McClellan Oscillator closed lower but at a still extremely high reading of +281. This market is overbought on a Daily and Weekly Basis after its 1100 point rally last week and for these reasons I do not want to be long the market at this time.
December BUND
My long 155.90 BUND position worked well on Friday as the market was trading at my T/P level at 156.25 when I posted and I am now flat. Today I will again be a small buyer on any dip lower to 155.10/155.50 with a 154.80 stop. I will also look to go short on any spike higher to 156.40/156.70 with a 156.95 stop.
Gold Rolling Contract
With Gold finally breaking the key 1150/1160 major resistance level that has held the market for the past few months I have decided to buy Gold this morning in small size at 1161 with a tight 1149 stop.
Silver Rolling Contract
No change as I am still long from last week at 15.88 with the same 15.40 stop.
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