It seems that there is still plenty of life in the good old greenback. Despite concerns over the US housing sector, volatile equity markets, tighter financial conditions and a potential blink by the Fed, the US continues to win the least ugly contest with other major economies showing a greater degree of sensitivity to trade tensions and economic growth slowdown. Softer EU preliminary November PMI’s on Friday have confirmed that the current slowdown is more than just a temporary auto driven story. In November EZ Business activity grew at its weakest rate in nearly four years and worryingly leading sub-indices suggest the slowdown still has some legs. The Markit EZ report revealed a slower order book growth and falling exports were accompanied by deteriorating optimism about the outlook, as well as rising costs and prices. Speculation on whether ECB guidance could turn dovish in December is now on the rise. Meanwhile the oil slide continues with prices falling between 6% and 8%, prospects of an OPEC and friends production cuts have been overwhelmed by increasing global growth anxieties.
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For anyone following my Platinum Service it made 47 points on Friday and is now ahead by 1383 points for November, having made 2094 points in October,1276 points in September, 599 points in August, 1074 points in July, 994 points in June, 1927 points in May, 1657 points in April, 1760 points in March and 2256 points in February. Since I started this New Platinum Service in June 2015 it has averaged a monthly gain of over 1600 points
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Currencies
Amid softer European activity readings and sharp declines in oil prices, the USD was the outperformer on Friday erasing some of the losses incurred earlier in the week. A Brexit resolution boosting Sterling and EUR is one potential negative near term USD driver and after resolving the Gibraltar objections with Spain late Saturday, yesterday Prime Minister May secured EU leaders approval for the deal, now the major obstacle remains UK Parliament approval. Weekend news suggests this remains either very difficult or not possible at this stage.
The narrow DXY Index gained 0.21% and ended the week just below the 97 mark at 96.94. The broader BBDX Index climbed 0.39%, closing the week at 1207.5 while ADXY (-0.12%) and EM FX (0.42%) also gave back some of their recent gains. European currencies were the big losers on the day with EUR (-0.58%) closing the week at 1.1337.
Unsurprisingly amid a softer commodity backdrop, wobbly equity market and disappointing EU activity readings, the AUD (-0.29%) and NZD (0.48%) traded with a softer tone on Friday. On the week both currencies lost ground against the USD, AUD ended the week at 0.7232, leaving the pair around the middle of its 0.7164-0.7338 range held since early November.
Commodities
Oil remains the focus in commodities. News of a potential OPEC and Friends production cut (see below for more) did little to stem the decline in prices ( Brent -6.07%, WTI -7.71%) with demand concerns dominating amid disappointing (EU) economic activity readings. WTI prices closed at $50.47, comfortably through the 50% retracement level of $51.47, now technical resistance for prices to trade into the high 40s looks pretty flimsy and once through, many will start pondering a move into the low $40s.
On the week oil prices are down between 10%-12%, iron ore closed 1.1% lower, but at $74.2 prices remain elevated.
Interest Rates
UST Yields drifted lower on Friday with the 5 and 10y tenors leading the decline, flattening the curve. 10Y UST traded down to an intraday low of 3.03%, following the move lower in oil prices, before recovering somewhat to close the week at 3.04%. On the week 10y BTPS are the outperformers (-8.5bps to 3.40%) while all core yields drifted lower a few bps.
Equities
The Shanghai Comp was the big loser on Friday (-2.49%) with IT and communication sectors suffering the most. US equities closed mixed with minor gains (NASDAQ)/losses (S&P 500) amid light volumes suggesting a Thanksgiving hangover or a Friday holiday for many. On the week, US equities were the distinct underperformers with DJ (-4.4%), NASDAQ (-4.26%) and S&P500 (-3.79%) at the bottom of the pile. However overnight US Futures are trading 1.00% higher and it will be interesting to see if these gains are sustained when the Cash Markets open this afternoon.
Central Bank/Political Speak
– The Wall Street Journal reports that President Trump has expressed dissatisfaction with Treasury Secretary Steven Mnuchin, blaming him for the appointment of a Federal Reserve chairman who has been raising interest rates, a move Mr. Trump worries will jeopardize economic gains as his 2020 re-election campaign approaches.
– In a media brief in Beijing, China’s Vice Minister of Commerce Wang Shouwen said China ‘’hopes the Xi-Trump meeting goes smoothly,’’ adding that ‘’Chinese and U.S. trade teams have been in close touch’’.
– Arlene Foster, the DUP leader, said the DUP’s agreement of confidence and supply with the UK Conservative party would have to be revisited if Theresa May’s Brexit deal passes through parliament. “If this is not going to deliver on Brexit then of course that brings us to the situation of looking again at the confidence and supply deal. “But we are not there yet,” she said.
– According to a WSJ report, Saudi Arabia and OPEC are considering ‘’A production cut that does not look like a production cut’’. The idea would be to announce plans to retain current output targets, first set in 2016 meaning Saudi Arabia is overproducing by nearly 1m b/.
Economics/Data
– French Manufacturing PMI at 50.7 against expectations of 51.2. Goods producers reported weakness in auto demand, while there were also mentions of competitive pressures and lower client investment.
– German Manufacturing PMI weaker at 51.6 against expectations of 52.2. The report notes that weakness in external markets are acting as a restraining factor with reports of falling sales to China, Italy and Turkey. So a bit of EM weakness spillover and also Italy specific dragging on Germany.
– EZ Manufacturing PMI softer than expected at 51.5 against 52 expected. The slowdown in new business inflows is a big driver, which is now the lowest since the start of 2015. Manufacturers are citing subdued global demand, rising political and economic uncertainty, trade wars and especially sluggish car sales. Services PMI also softer falling to 53.1 from 53.7 against expectations for a 53.6 outcome (Markit
– US November Markit prelim services PMI 54.4 vs 55.0 expected, 55.7 prev.. Details revealed services sector employment index at 52.8 vs 53.4 prior – lowest since June 2017
This morning on the Economic Front the only data of note on either side of the Atlantic is the German IFO Survey at 9.00 am.
The ECB’s Praet and Dragi are speaking at 9.00 am and 2.00 pm respectively in Frankfurt and Brussels.
Finally at 6.30 pm we have the Bank of England Governor and former Fed Chairman Greenspan speaking at a conference.
December S&P 500
The S&P just missed my 2618 buy level on Friday as the market closed weak not helped by the 7% fall in Oil prices. This morning the S&P Futures market is trading 1.00% higher which is no surprise given the weak Daily Sentiment Reading of just 8% bulls last week. Today I will now raise my buy level to 2621/2633 with a higher 2614 stop. I will continue to be an aggressive buyer on any plunge lower to 2565/2590 with a wider 2548 stop. My only interest in selling the S&P is still on a rally higher to 2680/2694 with the same 2702 stop.
EUR/USD
The Euro traded lower on Friday to my 1.1345 buy level before finally rallying this morning to my revised 1.1360 T/P level and I am now flat. Today I will again look to buy the Euro on any dip lower to 1.1290/1.1330 with the same 1.1265 tight stop.
December Dollar Index
On Friday afternoon the Dollar traded higher to my 96.80 sell level. As I was already long the Euro I covered this short Dollar position at my revised 96.70 T/P level and I am now flat. Today I will again look to sell the Dollar on any rally higher to 97.00/97.40 with a 97.75 stop.
December DAX
I am still flat the DAX and today I will now raise my buy level to 11080/11150 with a 11025 stop. I still do not want to be short the market at this time.
December FTSE
My FTSE plan worked well with the market trading lower to my 6915 buy level before rallying 70 points this morning. Unfortunately I covered this long position on Friday at my revised 6930 T/P level and I am now flat. Today I will again look to buy the market on any dip lower to 6915/6950 with a 6875 stop.
Dow Rolling Contract
I am still flat the Dow which continues to trade heavy despite the large sell-off this month. Today I will continue to be a seller on any rally higher to 24780/24950 with the same 25120 stop. My only interest in buying the Dow is still on a further plunge lower to 23900/24100 with the same 23750 wider stop.
December NASDAQ
I am still flat the market and today I will now raise my buy level to 6470/6530 with a higher 6420 stop.
December BUND
Late on Friday the Bund traded higher to my 161.10 sell level. As I did not want to hold a short position over the weekend I covered this position at my revised 161.03 T/P level and I am now flat. This morning the Bund is opening weaker and I will now look to sell the market on any rally higher to 161.25/161.55 with a 161.85 stop. I still do not want to be long the market at this time.
Gold Rolling Contract
I am still flat Gold and today I will now raise my buy level to 1208/1215 with a 1201 stop.
Silver Rolling Contract
No change as I am still long Silver at 14.30 with the same 14.50 T/P level and 13.75 stop. If any of the above levels are hit I will be back with a new update for my Platinum Members.
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