Germany’s efficiency is back, which is a big part of the story vis-à-vis the largely Euro-led weakness in the US dollar in the last week or so and which gathered momentum on Friday. It came alongside a resurgence in risk sentiment, exemplified by the VIX trading back below 10 (it closed at 9.36 on Friday having been as high as 14.5 at mid-month. Ignore the intra-day print of 8.56 – a record low – that looks to be dirty data). On Friday, the German IFO business survey surged to a new record high of 117.5 from 116.8 (well above the 116.7 expected) hot on the heels of Thursday’s Manufacturing PMI which also printed a record high of 62.5 up sharply from 60.6 in October. Thanks to the largesse of the ECB’s one-size-must-fit all monetary policy, its country’s 10 year bond yield is trading at 0.36% and its 5-year bond at -0.33%. That is a story I think will have to change next year, but not this.
To mark my 1475th issue of Tradernoble Daily Commentary I am offering 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 in this offer can you please email me on bryan@tradernoble.com for details.
For anyone following my Platinum Service it made 30 points on Friday and is now ahead by 881 points for November, having made 657 points in October, 447 in September, 1560 in August, 1096 in July, 1023 in June, 1076 in May, 1335 in April, 1375 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 1600 points.
The strong German data, alongside evidence that Angela Merkel’s CDU and the SPD were inclined towards forming another grand-coalition government, meant that the EUR led the 0.47% drop in the DXY dollar index on Friday, albeit most of the gain came well after this news flow had hit the screens. As well as strength in the Euro and EUR-linked currencies (SEK, CHF), the British pound also fared well with optimism towards progress on Brexit negotiations ahead of the December EU Summit remaining evident. The EU has set a 4th Dec. deadline for progress on the divorce bill and the even thornier subject of the post-Brexit status of the Irish border.
AUD and NZD remained the laggards Friday, both down intra-day, while the JPY ended Friday as the weakest G10 currency thanks to higher US Bond Yields across the maturity spectrum. Emerging market FX Indices took a small hit late Friday from the fall in the Rand on S&P downgrading South Africa’s credit standing to junk. Weak GDP growth and related deterioration in public finances was the pretext. Moody’s has held its (lowest) investment grade rating but shifted the outlook to negative. USD/ZAR jumped from 13.9 to 14.2.
This is relevant to Australia insofar as the AUD has been tracking closely with the likes of JPM’s global EM FX index in recent weeks (down from mid-September through mid-November, but up since) while ignoring the strong showing by Asian EM currencies. The index took a small hit on Friday post the SA news, but still ended 0.3% higher on the week. Weakness in EM FX will need to broaden out again to come back and bite the Aussie. While the USD is back on the skids, this isn’t likely to happen.
US Treasury yields by and large held the gains witnessed during the London time zone on Friday, averaging 2bps. On the week though, the curve flattening theme remained very much in evidence, 10s lower and 2s higher, the latter notwithstanding the impact of the Yellen comments and FOMC minutes, both revealing concerns that the factors that have supressed inflation this year may be more than transitory.
In commodities everything was up bar gold (-$5) with oil benefiting further on optimistic noises regarding chances of OPEC and non-OPC producers (dubbed OPEC 2.0) agreeing to preserve current production cuts through 2018. They meet on Thursday.
Iron ore can do no wrong at the moment, up another 30 cents to $67.94 and +8.5% on the week, but with limited impact on the AUD compared to other drivers.
This morning on the Economic Front the date releases are extremely light. We have no UK or Euro-Zone data while the only US releases is the Dallas Fed Manufacturing Activity Index at 3.30 pm.
December S&P 500
On Friday the S&P closed at yet another new all-time high, helped by reports of a strong ‘’Black Friday’’ coupled with the fact that the VIX closed at 9.36. However despite the positive close I am reluctant to chase the market higher from here given how overbought we are trading and I will leave my buy level basically unchanged from 2585/2591 with a 2579 stop. The S&P has strong resistance from 2620/2640 and today I will continue to be a seller on any further rally higher to 2634/2645 with a 2651 stop.
EUR/USD
Unfortunately the Euro just took off to the upside shortly after I posted on Friday as yet again anyone shorting this market got slammed. It is only a matter of time before we make new highs for the year above 1.22 with the prospect of a return to 1.30 over the coming months a distinct possibility. Today I will now raise my buy level to 1.1840/1.1875 with a 1.1795 stop.
December Dollar Index
Late on Friday the Dollar traded lower to my 92.70 buy level. Today I will only add to this position on any subsequent move lower to 92.30 with a 92.05 tight stop. Meanwhile I will now lower my T/P level on this position to 92.90. If any of these scenarios play out I will be back with a new update for my Platinum Members.
December DAX
I am still flat the DAX at this time which rallied strongly after I posted on Friday before again selling off into the close. This sell-off has continued this morning which is surprising given the strength of the German economy. This implies how much good news is now priced into the DAX market at this time. However I am reluctant to go short especially as we have month-end on Thursday and today I will continue to be a buyer on any dip lower to 12860/12920 with a 12810 stop.
December FTSE
My FTSE plan worked well with the market trading lower to my 7390 buy level shortly after I posted on Friday before rallying to my 7420 T/P level and I am now flat. The FTSE is trying to hold its 7385 100 Day Moving Average and today I will again be a buyer on any dip lower to 7330/7365 with a 7300 stop. There is no doubt the strength of Sterling is hampering the FTSE from trading higher, but with month-end on Thursday I am reluctant to go short the FTSE at this time.
Dow Rolling Contract
Frustratingly the Dow missed my buy level a couple of times on Friday and again overnight before rallying and I am still flat. The Dow looks tired after its massive move higher since early August. For this reason I will now lower my buy level slightly to 23380/23440 with a 23325 stop. I will also be a seller of the market on any move higher to 23640/23700 with a 23760 stop.
December NASDAQ
The NASDAQ also closed at a new all-time high on Friday as this Index continues to be the strongest of the three Indices that I cover on a daily basis. I am still flat and today I will leave my buy level unchanged from 6310/6350 with a 6280 stop.
December BUND
No change as I am still a seller on any rally higher to 163.30/163.65 with the same 163.95 stop.
Gold Rolling Contract
I am still flat Gold and as I am still long Silver I am hesitant in chasing this market higher. This will change if Gold can break and close above the strong 1300/1310 resistance level. Thus today my buy level will remain unchanged from 1269/1276 with a 1262 stop.
Silver Rolling Contract
I am still long Silver from last week at 17.10 with the same 17.20 T/P level which is close as I post this commentary. If I manage to exit at 17.20 I will again look to buy the market on any dip lower to 16.75/17.05 with a 16.40 stop and a 17.30 T/P level if executed.
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