It has been a reversal back to US Dollar strength – including a late session kick along from the Fed Chair, more on that below – the Bloomberg Spot Dollar index closing up 0.35% before she stepped up to the plate, and another ½% since. Most major crosses are bearing losses from the re-rising USD. The mantle has gone to the Canadian Dollar that was down 1.05% earlier in the session, USD/CAD up from less than 1.31 to over 1.32 (and since Yellen seeing more buying to sit at 1.3275 this morning) as the press conference from BoC Governor Poloz kept the prospect of another rate cut alive. Canadian short term Bond Yields rallied against what has been a heavy US Treasury market, 2y Treasuries up 5.7bps and 10s up a chunky+8.8bps, at 2.41%.After touching 0.7565 a little earlier in the NY session, the AUD/USD pulled back down to 0.7535 and has given back another 10-20 points since Yellen’s speech, now at 0.7520.
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 email me on bryan@tradernoble.com for details.
For anyone following my Platinum Service it made 128 points yesterday and is now ahead by 1111 points for January having made 1351 points in December, 1971 in November and 1582 points 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 1900 points.
Having rocketed back to hit 1.24 after PM May’s speech, Sterling spent yesterday retracing some of those gains. That retracement was interrupted in the wake of a better than expected UK labour market report for December revealing somewhat stronger earnings growth and less employment attrition than expected. Later in the session, Cable has also succumbed to the stronger US Dollar.
The US data set of the December CPI and Industrial Production and January NAHB Home Builders index were not too far at all from expectations, least not reasons to drive any new dollar enthusiasm. The CPI headline and core were bang on expectations(0.3%/2.1% for headline and 0.2%/2.2% for core CPI), Industrial Production was two tenths better in December but came with a negative revision, while the Home Builders’ Optimism Index missed slightly, though at 67 (69 expected) remains very upbeat. While not shooting the lights out, it didn’t dislodge the recovering US economy story either, from what was seen.
We also had the release of the Fed’s Beige Book regional review of the US ahead of the February 1 FOMC Meeting. It very much played to the positive continued growth story, one of a tightening labour market and signs of rising wages and inflation story, adding some US Dollar support and weakening Treasuries. Businesses and contacts reported signs of rising price pressure, firms were optimistic about the outlook this year and even in areas reporting some layoffs, most businesses were adding to employment, on balance.
Fed Presidents Kaplan (Dallas) and Kashkari (Minneapolis), both voters this year have been speaking. Kaplan said the Fed should be raising rates in a gradual, patient manner and that it would be healthy to have a balance sheet debate sometime in 2017 (discussion of winding back QE/the Fed’s balance sheet). He also said more balance will be needed between monetary and fiscal policy. (We are going to hear a whole lot more about that this year.) Kaplan is tilted to the more hawkish end of the policy spectrum. Kashkari said we don’t know enough about Trump policies to alter forecasts, but made no monetary policy comments in his speech.
Just before the New York close, Fed Chair Yellen spoke in San Francisco on “The Goals of Monetary Policy and How We Pursue Them”. Wire service headlines are carrying such quotes as US near maximum employment and inflation is moving toward its goal, Interest Rates will creep higher, not rise dramatically, it makes sense to gradually reduce monetary policy support, that the Fed is close to its dual goals but can’t give the timing of the next hike, and a warning that rates delay risks a “nasty surprise”. That last one sounds about as hawkish as we’re likely to see from the Fed Chair. In the immediate aftermath of those grabs hitting the wires, the US Dollar has been bought further. The EUR/USD pulled back to 1.0620 from over 1.07 earlier in the New York session and is currently trading at 1.0640 this morning. In the commodity space,Iiron ore was back up, as were base metals in London, but oil and gold were back down.
Today is all about the ECB Meeting with the latest Rate announcement and Asset Purchase at 12.45 pm. This is followed at 1.30 pm by Dragi’s press conference. Expect a lot of volatility surrounding the press conference as at the last one in early December the EUR/USD ended up trading in a 300 point range. Also at 1.30 pm we have the US Weekly Jobless Claims, Housing Starts, Building Permits and the Philly Fed Business Outlook. Finally at 2.50 pm we have the Bloomberg Consumer Confidence Index.
March S&P 500
For the second consecutive trading session the S&P missed my buy level by 0.25 of a point before rallying strongly and I am still flat. The S&P while volatile has gone nowhere over the past two weeks as we await the ECB this afternoon and the Trump Inauguration tomorrow which will be followed by Trump’s very important speech as it will set his agenda for the first 100 days in office. The McClellan Oscillator closed unchanged last night at +18 thus showing what a narrow trading session we had again. Today I will move my buy level higher to 2254/2260 with a 2249 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 2237/2243 with the same 2232 stop. The S&P needs to break and close below the December 30 low at 2227.75 for me to turn bearish. My only interest in selling the S&P at this time is still on a rally higher to 2285/2291 with the same 2296 stop. I would expect after Trump assumes the Presidency tomorrow we will then see a pick up in volatility.
EUR/USD
My Euro plan worked well with the Euro trading lower to my 1.0660 buy level before rallying to an afternoon high at 1.0704. As I wanted to be flat ahead of Yellen last night I emailed my Platinum Members to exit this long position at 1.0672 and I am still flat. As is my norm I will stay flat until we see what Dragi has to say in his press conference. I am expecting a lot of two-way volatility as in my opinion the Bundesbank will not want to see anymore QE given the pick up in German Inflation last month. The Euro has very strong resistance at the December high from 1.0830/1.0875 and I will be a seller in this area with a 1.0920 stop. My only interest in buying the Euro today is on a dip lower to 1.0540/1.0580 with a 1.0495 stop. Whatever happens this afternoon following the ECB press conference we still have Trump’s speech to look forward tomorrow where he is bound to mention that a strong Dollar is hurting America.
March Dollar Index
Late last night the Dollar traded higher to my 101.30 sell level. As I want to be flat ahead of the ECB Meeting and Dragi press conference I have just cut this position here for a small gain at 101.15 and I am now flat. Today I will leave my buy level unchanged at 99.40/99.80 with a 99.05 stop. My only interest in selling the Dollar today is on a rally higher to 101.75/102.10 with a 102.40 stop.
March DAX
I am still flat the DAX and I will stay that way until we get the Drai press conference out of the way. WE have had a very good month so far and I do not want to take undue risk especially after what has happened at the last few ECB Meetings. Today my only interest in selling the DAX is on a rally higher to 11725/11775 with a 11820 stop. The 11800 is major resistance and should find it difficult to break on the first test. I will leave my buy level unchanged at 11425/11475 with the same 11360 wider stop. 11403 is the January low so far and if the market does test this level over the coming days we should see a decent bounce first.
March FTSE
I am still flat the FTSE which came close to my 7140 buy level with a 7147 low print before rallying. Today I will leave my buy level unchanged at 7105/7140 with the same 7070 stop. I still do not want to be short the FTSE at this time as the trend is bullish as long as we stay over 7000 and this sell-off over the past two days is correcting this severely overbought market.
Dow Rolling Contract
The Dow has been weaker than the S&P over the past week and this weakness worked well yesterday with the Dow trading lower to my average buy level at 19758 before rallying to an afternoon high at 19834. This rally enabled me to cover this position at my revised 19800 T/P level and I am now flat. The Dow has strong support at the December 30 low at 19718 and today I will again look to buy the market on any dip lower to 19690/19750 with a 19640 stop. I still do not want to be short the Dow ahead of the Trump Inauguration tomorrow.
March BUND
The price action in the Bund over the past 48 hours has been very negative since we hit a high at 164.40 on Tuesday morning. Yesterday after the Bund hit my average buy level at 163.38 the market rallied to a subsequent high at 163.60 and I emailed my Platinum Members to exit this position at 163.50 and I am now flat. This morning the Bund has already traded to a 162.67 low print. The next support for the Bund is from 162.35/162.70 and today I will be a small buyer in this area with a 161.95 wider stop. I still do not want to be short the Bund ahead of the ECB Meeting this afternoon.
Gold Rolling Contract
Gold has got hit hard since I posted yesterday afternoon with the market hitting my 1202 buy level very late in the New York session. In what turned out to be my sixth updated email to my Platinum Members at 10.00 pm last night I told them to cut their Gold position at 1204.20 and I am now flat. I am surprised that Gold broke the 1200 level overnight. 1180/1185 is strong support and today I will look to buy the market on any dip lower to 1178/1186 with a 1172 stop.
Silver Rolling Contract
My latest long 17.05 Silver position worked well with the market hitting my 17.30 T/P level. Unfortunately I re-bought Silver again at 17.20 in small size and in the last few minutes I have bought some more at 16.88 which puts me long at an average rate of 17.04. I will leave a tight 16.60 stop on this position and I will look to cover this trade on any rally to 17.25.
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