Last week the US Dollar regained its mojo largely thanks to President Trump’s hint of a phenomenal tax policy announcement and on Friday the US Dollar waivered, particularly against the Japanese Yen when at a joint press conference with Japan’s PM Abe, President Trump responded to a question about currency devaluation saying that “we will all eventually…be at a level playing field.” and then added “That’s the only way you can fairly compete in trade”. The Dollar fell immediately after the comments but quickly recovered, suggesting that, at least for now, the prospect of tax policy changes is the dominant driver for the USD. So although the joint Trump-Abe conference didn’t offer much new in terms of policy or fireworks, it did strike a friendly and constructive note between the two countries. This follows early news on Friday that president Trump told Chinese President Xi that he will respect the “One China” policy, both actions suggest an easing in tension between the White House and Asia.
To mark my 1250th issue of Tradernoble Daily Commentary I am offering a special 2 year rate of Euro 2750 for my Platinum Service which includes 1/4 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 137 points on Friday and is now ahead by 702 points for February having made 1734 points in January, 1351 in December, 1971 in November and 1582 in October. The previous four months saw gains of 1142, 1782, 1682 and 2550 points respectively. Since I started this Platinum Service in June 2015 it has averaged a monthly gain of over 1800 points.
Notably too, after North Korea launched a test missile in the weekend, Trump was alongside Abe and said that “…the USA stands behind Japan, its great ally, 100%”. These are still early days of course, but recent events suggest that not only Trump policies will take longer to implement, they are also potentially likely to be a lighter version of the pre-election rhetoric. For now, the Trump reflation trade remains alive and kicking and on the positive side an all-out trade war looks less likely, however there are increasing doubts over the pro-growth policies too. Trump has set the stage for a phenomenal tax announcement, now he needs to deliver.
After being up nearly 0.4% on the day, DXY ended the week 0.15% with softer than expected consumer sentiment data (U of Michigan Consumer Sentiment index fell to 95.7 in Feb from 98.previously.) and Trump’s remarks later in the day weighing on the USD index. The AUD is still benefiting from the RBA’s optimistic outlook on the economy and a solid rise in iron ore (+5.39% on the week). The currency was the best G10 performer on Friday, up 0.64% on the day and 1.58% month to date. The Canadian Dollar was the other G10 outperformer, (+0.47%) boosted by a better than expected January Employment report (+48k vs -10k exp.). In what has been a volatile week, JPY ended Friday unchanged at ¥113.2 and the EUR leaked another 0.11% with Scandinavian currencies down between 0.13% and 0.32%.
On Friday, US equities continued to climb amid expectations of tax cuts and fiscal spending from the Trump administration (S&P + 0.36%,DJ +0.48% and the NASDAQ was 0.33%). Financial shares were also boosted by news that the Fed’s Tarullo, the sector’s top regulator, announced his resignation. Tarullo’s departure means Trump will soon get to fill three of the Fed’s seven board positions (currently there are two existing vacancies), giving him the the opportunity to significantly shape the Fed thinking ahead.
US Treasury yields were little changed on Friday (10y closed the week at 2.4073%) and in commodities, gold closed at $1234.4( -0.06%). Oil had a better trading session on Friday with both (WTI +1.62%, Brent 1.92%) and iron ore closed the week at $86.62, up 3.32% on the day and 5.39% on the week. Copper also had a god day, +4.69% as BHP signals the strike in Escondida mine in Chile may last a long time.
CFTC data from the week ending February 7 shows US Dollar speculative longs against G10 currencies were paired by 16.4k to 152k. Speculators reduced net JPY short positions by 3.4k to -55k. Longs in CAD and AUD rose by 5k and 4k respectively to 8.5k and 16.7k and Sterling shorts were extended by 2.7k to -64.5k. Meanwhile in rates, 5y and 10y UST shorts were reduced by 34k and 49k respectively, and longs in 2y were reduced by 18k to 13k.
This morning on the economic front we already had the release of German Wholesale Price Index which came in at 0.8% versus 1.2% previously. This is followed at 9.00 am by Euro-Zone Economic Forecasts. Unfortunately that is it for the day with no US releases due. Tomorrow we have Fed Chair Janet Yellen’s Testimony on Monetary Policy to the Senate Banking Panel.
March S&P 500
It took a while but finally overnight the S&P hit my 2317 sell level with a 2318 high print before trading lower. In keeping with my theme of banking points when available for the least amount of risk I emailed my Platinum Members to exit this position for a small gain at 2314 and I am now flat. The S&P had previous resistance at 2307/2308 which was a 2 month trend-line and this level should act as good support on any test initially despite the severely overbought condition of the market. Today I will raise my my buy level to 2303/2309 with a 2298 stop. As mentioned countless times you can only be short this market for a few hours and this trend will continue until we get a sell extreme that lasts for more than a few days. Yes the market is extremely overbought as mentioned at length in last Thursday’s Daily Commentary and today my only interest in selling the S&P is on a rally higher to 2325/2331 with a 2336 stop.
EUR/USD
My Euro plan worked well on Friday with the Euro hitting my 1.0612 buy level before rallying back above 1.0640. As I wanted to be flat ahead of the weekend I emailed my Platinum Members to exit this position for a small gain at 1.0632 and I am now flat. Today I will again look to buy the Euro on any dip lower to 1.0580/1.0620 with a tight 1.0555 stop. I still do not want to be short the Euro at this time.
March Dollar Index
The Dollar continues to trade higher as the market has made a series of higher lows since January’s Downside Key Month Reversal. Remember the Dollar fell 5% in January and was due a rebound to correct the oversold nature of the market. Today I will again look to buy the Dollar on any dip lower to 99.90/100.20 with a 99.60 stop. Until we break this sequence of higher lows I still do not want to be short the Dollar at this time.
March DAX
The DAX just missed my buy level on Friday before trading higher in what turned out to be another very quiet trading session for this market. Today I will raise my buy level slightly to 11560/11620 with the same 11520 stop. My only interest in setting up a short DAX position is if the market breaks and closes below the January low at 11400. Incredibly the DAX has now traded in a 400 point range for nearly two months.
March FTSE
Unfortunately the FTSE just missed my 7170 buy level with a 7176 low print on Friday and I am stil flat. Today I will leave my buy level unchanged at 7130/7170 with the same 7095 wider stop. With Sterling trying to rally this morning the FTSE may well trade lower to my buy range.
Dow Rolling Contract
My Dow plan worked well as just like the S&P above the Dow hit my 20320 sell level with a 20333 high print overnight before selling off and this enabled me to cover my short position at my revised 20290 T/P level as emailed to my Platinum Members and I am now flat. The Dow is now closing in on my long term target level at 20450/20550 as this unstoppable bull market shows no sign of having a meaningful sell-off. However with the VIX near multi-year lows and Sentiment at the highest level since just before the 1987 crash I am on the look out for a sell extreme that lasts for more than a few hours. Today I will again look to sell the Dow on any further rally to 20370/20430 with a 20490 stop. If I am taken long and subsequently stopped out of this position I will be a more aggressive seller in front of 20550 with a 20650 stop.
March BUND
No change as I am still a seller on any rally higher to 164.30/164.70 with a 165.05 stop.
Gold Rolling Contract
My long 1224 Gold position worked well on Friday with the market trading higher to 1235. This rally enabled me to cover my long position at my revised 1227.25 T/P level and I am now flat. Today I will again look to buy Gold on any dip lower to 1214/1222 with a 1207 stop. The 1210 level is good support for Gold and should lead to a decent rally on any initial test.
Silver Rolling Contract
My latest long 17.60 Silver position also worked well on Friday with the market trading to a 18.03 high and this rally enabled me to cover my long position at 17.75 and I am now flat. Today I will again look to buy Silver on any dip lower to 17.55/17.85 with a 17.25 stop.
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