Ignoring the October 7 ‘flash crash’, Sterling has fallen to its lowest level against the US Dollar in over 30 years this morning (since 28 June 1985 to be precise). A two cent drop at the Wellington market open which has continued this morning in London with USD/GBP now trading below 1.20, follows weekend press reports in the UK Sunday Telegraph and Times newspapers that UK PM Theresa May will say in a speech on Tuesday that Britain must:
- Be prepared to leave the customs union to secure free trade deals across the world.
- Regain full control of its borders even if that means ending single market membership.
- No longer be bound by European Court of Justice rulings after Brexit.The latter is seen as likely to be particularly problematic for the rest of the EU in terms of agreeing any sort of post-Brexit transitional arrangement.
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 65 points on Friday and is now ahead by 810 points for January having made 1351 points in December, 1971 in November and 1582 in October. The previous four months saw gains of 1142, 1782, 1682 and 2550 respectively. Since I started this Platinum Service in June 2015 it has averaged a monthly gain of over 1900 points.
Government spin doctors are busy trying to substitute ‘clean’ for ‘hard’ as the appropriate adjective to stick in front of ‘Brexit’. The Foreign Exchange market isn’t having a bar of it.
The other big event since markets left off on Friday is an interview with US President-elect Donald Trump in the Wall street Journal published on Friday evening. In it, Trump says he won’t now be labeling China a currency manipulator on day one even though he repeats his claim they are a manipulators. Yet he also laments the strength of the US Dollar as ‘killing us’. Expect the US Treasury’s ‘strong dollar policy’ to soon be swapped out for plenty of ‘weak dollar’ Trump tweets.
Trump also touched on infrastructure spending (the lack of reference to which is last week’s press conference was one of the triggers for the subsequent move lower in Bond Yields and the US Dollar. In the interview, he described a special council, made up of 15 to 20 builders and engineers, who would monitor spending on his $1 trillion plan to improve the nation’s roads, bridges and other public works. “Some of the projects they’ll throw out, some of the projects they’ll expand, but all of the projects they’ll make sure we get a tremendous bang for the buck,” Mr Trump said.
We’re none the wiser on whether he plans to use public money here or merely incentivise private companies via the tax system, but markets are likely to take some hart from this ahead of this Friday’s inauguration and subsequent commencement of a more detailed ‘first 100 days’ policy agenda.
It was a fairly subdued Friday in front of a three-day U.S. weekend for the MLK day holiday. US Retail Sales, the day’s main economic event, underwhelmed versus expectations particularly ex-autos (0.2% against 0.5% expected). Aided by a slightly stronger than expected PPI reading, the data nevertheless appears to have been responsible for driving Bond Yields and – initially at least – the US Dollar higher in its aftermath having been weaker into the release, before pulling back on a slightly weaker than expected preliminary January consumer confidence reading (98.1 from 98.2 and 98.5 expected).
The S&P ended 0.18% higher Friday for a loss of 0.1% on the week. No big move in bank stocks following results from JP Morgan, BAML and Wells Fargo. All met or beat their street estimates for EPS, but revenue numbers for both BAML and Wells Fargo fell shy of expectations. The Dow ended 0.03% lower Friday and 0.4% down on the week. The NASDAQ was +0.48% for a 1% weekly gain and a new record closing high.
In Bonds, US Treasury yields were modestly firmer across the curve (2-3bps). In FX, The narrow DXY dollar index lost 0.17% to be 1.0% down on the week. The NZD was the biggest G10 winner Friday, +0.51% to 0.7131 and 2.5% up on the week. The AUD was the week’s biggest gainer however, up only 0.24% Friday to 0.7502 but 2.8% or two cents up on the week. It is this morning trading at 0.7170
With the US Markets closed for the Martin Luther King Bank Holiday the only economic data of note due is Euro-Zone Trade Balance at 10.00 am and the Canadian Bloomberg Nanos Consumer Confidence Index at 3.00 pm
March S&P 500
The S&P has continued its 2017 theme with the market up one day, down the next, in a volatile fashion but going nowhere as we await the Trump inauguration on Friday. The market keeps spiking lower but then makes a full recovery as we closed on Friday just a few handles short of all-time highs. As I have mentioned countless times I think the market will hold in until next week until we see what Trump has to say as he outlines his policy for the first 100 days of his Presidency. We got a hint of this in his interview with the Wall Street Journal last Friday evening. With the US cash markets closed for the MLK Bank Holiday, the Futures market will remain open until 4.30 pm before closing and will then re-open as normal at 11.00 pm for tomorrow’s trading session. I am still flat the S&P and today I will now move my buy level higher to 2257/2263 with a 2252 stop. Again if I am taken long and subsequently stopped out of this position I will be a more aggressive buyer on any dip lower to 2239/2245 with a 2234 stop. My only interest in selling the S&P is still on a rally higher to 2285/2291 with the same 2296 stop.
EUR/USD
One of the main reasons that I have been bullish the Euro and bearish the US Dollar is my belief that at some stage we will see Trump make reference to the US Dollar which is too strong and needs to weaken in order to help manufacturing and indeed we saw the first glimpses of this in last Friday’s interview with the Wall Street Journal as he said the strength of the Dollar is ”killing us”. This is significant and to me following on from the series of Key Day Reversals in the Dollar since the beginning of the year that it is only a matter of time before we see the Dollar weakens Of course Dragi and the ECB will have their say when they meet this Thursday which could be one of the most important ECB Meetings in a very long time especially with inflation finally beginning to rise in Germany and the Euro-Zone. Today I will lower my buy level slightly to 1.0540/1.0575 with the same 1.0515 stop.
March Dollar Index
My Dollar plan worked well with the Dollar hitting my 101.65 sell level shortly after the US markets opened on Friday. As I had a close buy level in Euro I emailed my Platinum Members to exit this position for a small gain at 101.40 and I am now flat. Following on from last week’s Key Day Reversal and the previous week’s significant Key Week Reversal the Dollar will continue to be a sell on rallies unless we break and close above the January 3 high at 103.85. Today I will again look to sell the Dollar on any rally higher to 102.00/102.40 with a 102.75 stop.
March DAX
Unfortunately the DAX just missed my 11650 sell level on Friday with a 11637 high print before selling off and I am still flat. With Trump speaking publicly for the first time about how the strength of the Dollar is ”killing us” the DAX will find it more difficult to outperform the US Indices going forward. Today I will now lower my sell level slightly to 11635/11685 with a 11725 tight stop. My only interest in buying the DAX is still on a dip lower to 11410/11465 with the same 11370 stop.
March FTSE
The continued weakness of Sterling to a new 30 year low again the US Dollar has led to another rally in the FTSE which finally hit my next sell level at 7295. I am still short and today I will now lower my stop on this position to 7330. The FTSE is severely overbought and the fact that Cable is trading well below its Bollinger Band and at the bottom of the Williams Index we may finally see some recovery in Sterling which should filter through to a softer FTSE. My only interest in buying the FTSE is on a dip lower to 7190/7225 with a 7160 stop.
Dow Rolling Contract
I am still flat the Dow and this morning I will now lower my buy level to 19730/19790 with a 19680 tight stop.
March BUND
My Bund plan also worked well on Friday with the Bund trading the whole of my buy rang which put me long at an average rate of 163.30. The Bund is trading higher at 163.80 this morning but as I wanted to be flat over the weekend I covered my long position at my revised 163.45 T/P level and I am now flat. Today I will again look to buy the market on any dip lower to 163.20/163.50 with a 162.90 stop. I still do not want to be short the Bund at this time.
Gold Rolling Contract
Following Trump’s remarks about a weaker US Dollar. Gold is trading higher this morning having just missed my 1183 buy level on Friday afternoon and I am still flat. Today I will raise my buy level slightly to 1182/1189 with a 1175 stop.
Silver Rolling Contract
Silver continues to struggle as the market pushes towards the top of its Daily Bollinger Band and Williams Index after its 7% rally so far in 2017. On Friday I covered my latest long 16.65 position at 16.78 before emailing my Platinum Members to re-buy the market again at 16.60. As I wanted to be flat over the weekend I covered this position for another small gain at 16.72 and I am now flat. Silver has again tried to rally overnight but continues to find tough resistance at the 16.90/17.10 area. Today I will again look to buy Silver on any dip lower to 16.40/16.75 with a 16.05 stop.
Recent Comments