There wasn’t much not to like about Friday’s July US payrolls report, the 255k rise in headline Payrolls enhanced by 18k worth of upward revision to May and June and meaning that well over half a million more Americans are in work compared to just two months ago. The Unemployment Rate only held steady at 4.9% because of a surge in the labour force and 0.1% rise in the participation rate, while average hourly earnings rose by 0.3% but held steady at 2.6% in annual terms.
To mark my 1100th issue of Tradernoble Daily Commentary I am offering a special 2 year rate of Euro 2500 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 please email me on bryan@tradernoble.com for details.
For anyone following my Platinum Service it made 107 points on Friday and is now ahead by 317 points for August having made 1682 points in July. The previous three months saw gains of 2550, 1532 and 2175 points respectively. Since I started my Platinum Service in June 2015 it has averaged a monthly gain of over 2100 points.
Unlike the perverse reaction to many recent global economic events, we had a predictable response across all asset classes to the report, albeit in FX the US Dollar witnessed a rather spluttering reaction (knee jerk gains across the board but quickly given back, before a renewed advance later into the New York session). DXY ended 0.46% higher, the broader BBDXY +0.34% and the ADXY -0.15%.
In individual currencies, USD/CAD was the standout, +1.2% to 1.3073, so CAD giving back its mid-week oil-related outperformance, thanks to another poor Canadian labour Force Report (employment -31.2k with full time -71.4k) as well as an unexpectedly large trade deficit. EUR/USD closed -0.4% lower at 1.1086 which was ell off the initial post Payroll low at 1.1045, USD/JPY +0.6% to Y101.82 and GBP -0.3% to 1.3073.
In stocks the S&P jumped at the open then proceeded to grind out small additional gains with no setbacks along the NY day, ending +0.9% at a new record high of 2182.9. Earlier the Eurostoxx 50 ended 1.4% higher with Spain the biggest gainer in Europe (+2.4%) and the UK FTSE the smallest (+0.8%).
In bonds, Treasury Yields jumped out of the gate and did not look back, the biggest rise evident in the 5yr, +10.8bps to 1.1363%. 2s +7.9bps to 0.7221% and 10s +8.8bps to 1.5885%. OIS pricing sees odds on a September 25-point Fed rate rise lift to 22% from 18%, and for December to 46% from 37%. 10yr Bunds added 2.0bps to -0.07% and the 10yr gilt +02.8bps to 0.669%.
Commodities saw Gold lose $25 to $1336 while oil was little changed, WTI +$0.13 to $41.80 and Brent +$0.02 to $44.27. The LMEX index ended 0.11% higher while iron ore jumped $1.24 to $60.74 – off its recent high of $62.27 (last Tuesday) but still 10.1% up on a month ago. Other data of note since we went home Friday was latest China’s FX reserves, published Sunday. These fell by $4.1bn in July to $3,201bn. We estimate valuation effects as likely to have boosted the Dollar value of reserves by around $12bn last month, and assuming that July’s Trade Balance is similar to June’s $48bn, then this suggest capital outflows in July were in the order of $64bn+/-. This is down on nearer $100bn per month for some months last year but still relatively chunky and implying ongoing CNY deprecation pressures being resisted by the PBoC.
On Friday night, Donald Trump publicly endorsed House speaker Paul Ryan as well as Senators John McCain and Kelly Ayotte, after a week that has seen his poll standing slip further behind Hillary Clinton. The RealClear Politics website has the latest poll average at 47.3/40.4 in favour of Clinton, while on Sunday, a CBS News poll showed Clinton with a 12- point lead over Mr Trump in Virginia, a key swing state. Trump is reported as seeking to reorient his campaign this week with a new economic plan which includes claims he can double US economic growth by imposing fresh tariffs on China and renegotiating global trade rules.
This morning on the economic front we have German Industrial Production at 7.00 am. This is followed by Chinese Trade Balance and the latest Export/Import data. There is no specific time allocated as I go to print for these releases. At 9.30 am we have the Euro-Zone Sentix Business Confidence. Finally at 3.00 pm we have the US Labour Market Conditions Index Change.
September S&P 500
With nearly all my calls getting hit at some stage after I posted on Friday, the S&P was my last market to get hit when the S&P traded higher to my 2176 sell level. As we were having good trading day on top of a profitable week, I emailed my Platinum Members to cut this position for a small loss or better at 2176.50 and I am still flat. Friday’s large move higher to new all-time record highs following the NFP data has left a large ‘Open Gap’ from Thursday’s close at 2161 to Chicago’s Friday afternoon low at 2173. Following this ‘Gap up’ the market traded in a very narrow range for the rest of the session before going out near its high. The Dow has so far not confirmed the latest S&P high with the Dow still 100 points shy of its July 18622 high print. So until the Dow breaks this July level we still have the possibility of negative divergence. The next resistance for the S&P comes in at 2184/2190 and today I will again try to sell the market with a 2195 stop. I will also raise my buy level to 2159/2165 with a 2153 stop.
EUR/USD
My Euro plan worked very well on Friday as the market rallied ahead of the NFP release which enabled me to cover my long 1.1150 position at 1.1157 as instructed. Subsequently the Euro traded lower to my second buy level following the NFP release at 1.1050 before having a nice rally over 1.1100 which enabled me to again T/P at 1.1085 as emailed earlier to my Platinum Members and I am now flat. Given the strength of the Payroll Report I was surprised the Dollar did not strengthen further and today I will again look to buy the Euro on any dip lower to 1.1015/1.1045 with a 1.0980 stop. Until the Euro breaks and closes below its June 1.0910 post Brexit low print I do not want to be short the Euro at this time.
September Dollar Index
The Dollar also traded higher to my 96.40 sell level before having a nice sell-off to 96.05 which enabled me to cover this position at my revised 96.25 T/P level as outlined earlier to my Platinum Members and I am now flat. Today I will again look to sell the Dollar on any rally higher to 96.60/97.00 with a 97.30 stop.
September DAX
Despite the US Indices making new highs the DAX struggled to gain any momentum to the upside. Following the NFP Report the DAX eventually hit my 10360 sell level before having a small sell-off. Just like the S&P above I did not want to be short the market over the weekend especially as we have the highly volatile Euro-Zone Business Sentix Survey at 9.30 am and I emailed my Platinum Members to exit this position at 10350 and I am now flat. Today I will again look to sell the DAX on any rally higher to 10450/10500 with a 10560 stop which is just above the 10522 April high. This level should act as strong resistance. I still do not want to be long the DAX at this time as to me this market is an accident waiting to happen to the downside especially after the European Bank stress test results last week.
September FTSE
I am still flat the FTSE which despite the much weaker Sterling struggled to rally following its 1.6% rally on Thursday after the Bank of England cut its main Bank Rate by 25 bps. The FTSE has large resistance from 6800/6830 and today I will be a small seller in this area with a 6870 stop. My only interest in buying the FTSE is only on a dip lower to 6660/6690 with a 6635 stop.
Dow Rolling Contract
Thankfully we had no sell level in the Dow on Friday which rallied smartly after the strong Payrolls Report. As mentioned above the Dow has strong resistance at the July 18622 high and today I will be a small seller on any rally higher to 18630/18680 with an 18725 stop. I do not want to be long the Dow at this time.
September BUND
No change as I am still a small buyer on any dip lower to 166.35/166.70 with a 165.95 tight stop. As long as the Bund can continue to trade above its key 166.50 support level I do not want to be short the Bund at this time.
Gold Rolling Contract
Gold got slammed on the back of the stronger NFP release with the market trading lower to my 1337 buy level. As I was not comfortable in been long Gold I emailed my Platinum Members to exit this position at 1339.50 and I am now flat. Today I will again look to buy Gold on any further dip lower to 1318/1326 with a 1311 tight stop.
Silver Rolling Contract
My Silver plan worked well on Friday but you had to be quick as shortly after the NFP was released Silver traded lower to my 19.80 buy level before having a rally to 20.05 which enabled me to cover this position at my revised 20.00 T/P level and I am now flat. There is no doubt the DSI reading is having a huge impact on the prospects of Silver rallying further without first correcting lower. Silver has very strong support at 19.20 and key support at the 18.00/18.30 area and it will take a break and close below 17.90 for me to give up my bullish stance on Silver which has persisted for over 14 months now. Today I will again look to buy Silver on any dip lower to 19.10/19.40 with a 18.75 stop.
For any of my UK members who may be interested I am doing a special all-day trading seminar over the Non-Farm Payrolls in London on September 2nd 2016. I will be assisted by Paul Wallace who is a trader that I have done a lot of joint presentations in both Dublin and London over the past 12 months. Paul is a very engaging and interesting speaker and together we will try and take you through how to trade markets live over an important economic indicator. If anyone is interested in this not to be missed event in my opinion you can check the details out on the following link:
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