Oil (and gas) has been the big mover since I posted yesterday morning, with crude oil prices off between 4% and 5% (WTI – $2.40 and Brent off $1.93). This is all the result of an unexpected large build in oil and gas inventories reported by the Energy Information Administration (EIA). Crude oil inventories rose by 3.3 million barrels against an expected draw of 3.25 million and gas inventories by 3.32 million against an expected 50k run-down. This breaks the nine week streak of falling inventories and so prior evidence that OPEC and selected non-OPEC production cuts were having some impact in reducing excess stockpiles. In markets, the biggest impact has been seen via a jump in the USD/CAD exchange rate, with CAD and JPY vying for bottom spot in the G10 scorecard, both currently about 0.3% lower.
To mark my 1350th issue of Tradernoble Daily Commentary I am offering a 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 can you please contact me on bryan@tradernoble.com for details.
For anyone following my New Platinum Service it made 60 points yesterday and is now ahead by 102 points for June, having made 1071 points in May, 1376 in April, 1335 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 1750 points.
Elsewhere in FX, the AUD is still atop the 24-hour leader board, building slightly on yesterday’s post-GDP gains to a high of 0.7566 (but back to around 0.7550 currently). Sterling has also done well with the bookmakers (and latest polls of polls) suggesting that the Conservatives will be returned in today’s General Election with an increased majority (of perhaps 50-60 seats versus 12 in the outgoing parliament).
The EUR0 saw some intra-day volatility following a Bloomberg report that the ECB’s draft projections now show CPI inflation at roughly 1.5% in 2017, 2018 and 2019, down from the previous projections near 1.6-1.7%. This saw EURO fall 60 pips to 1.1203, before a recovery, aided by a Reuters report that predictions for economic growth were likely to be revised up by about 0.1 percentage point and that forecast changes were likely to be small. EURO is back up to around 1.1260 as I post this commentary.
Meanwhile US Treasury Yields are a bit firmer despite sharply lower oil (10s +2.5bps to 2.175% ), US equities have closed slightly higher, precious metals have given back a small amount of recent strong gains while industrial metal prices and softs are mostly higher.
This morning on the Economic Front we have German Industrial Production at 7.00 am. This is followed at 12.45 pm by the ECB Rate Announcement and Asset Purchase Target and Dragi Press Conference at 1.30 pm. As for the ECB, there is a widespread consensus it will tweak its language to suggest that risks to the growth outlook are balanced. But there doesn’t appear to be a consensus that the Council will remove reference to or lower in the sentence that currently reads, “The Governing Council continues to expect the key ECB interest rates to remain at present or lower levels for an extended period of time, and well past the horizon of the net asset purchases”. So if reference to or lower is removed I would expect the Euro to get at least a small lift, though confirmation of lower inflation forecast over the 2-3 year forecast horizon will temper expectations for a rapid retreat from current policy settings next year.
Also at 1.30 pm we have the US Weekly Jobless Claims. Finally at 3.00 pm former FBI Director Comey testifies to the Senate Intelligence Committee. Comey’s inquisition may now turn out to be the least interesting event for markets. The pre-release of his prepared testimony late yesterday suggests that while he will confirm that the President leaned on him to end the inquiry into National Security Advisor Michael Flynn he stops short of suggesting the President may have obstructed justice (the impeachable offence). The broader Russian probe will run and run however and this particular millstone around the neck of the Trump administration looks unlikely to be lifted anytime soon.
For the UK election, exit polls are likely to flash up from 10.00 pm as soon as the polls close, but a clear idea of the result will probably not be available at least until (3am UK time) and quite possibly not until much later if the result is not clear cut. The rule of thumb seems to be that if the Conservatives retain power, the bigger the majority the better for Sterling, but with anything close to the current slender 12 seat majority viewed as negative given how far the pound rallied after the election was called, in anticipation of a bigger Conservative majority (i.e. enough to silence the extreme anti-EU faction of the party that are viewed as tying PM May’s negotiating hands). A much improved majority (say 50+ seats) will likely see at least a temporary boost for the pound.
June S&P 500
My S&P plan worked well yesterday with the market trading lower to my 2424.50 buy level before rallying back above 2430 on the Comey pre-release Testimony. Again in keeping with my strategy of banking points for the least amount of risk I covered this position at my revised 2428 T/P level and I am now flat. Today I will again look to buy the S&P on any dip lower to 2416/2422 with a 2411 stop. If I am taken long and subsequently stopped out of this position I will be a more aggressive buyer on any further dip lower to 2400/2406 with a 2395 stop. My only interest in selling the S&P is still on a rally higher to 2460/2472 with the same 2480 stop.
EUR/USD
My Euro plan also worked well yesterday with the Euro trading to a low of 1.1203 before rallying 70 points on the various new and rumours that abounded ahead of today’s key ECB Meeting. As I want to be flat ahead of Dragi, suspecting that he will try and cap the Euro’s rally from here coupled with a high Daily Sentiment Index Reading I covered my average 1.1217 long position too early at 1.1232 and I am now flat. If the circumstances change then I will also change and was why I went to the sidelines. I would expect a lot of volatility surrounding Dragi’s press conference as mentioned at length in my economic commentary above. Today I will again look to buy the Euro on any dip lower to 1.1180/1.1225 with a 1.1150 tight stop. I still do not want to be short the Euro at this time despite the DSI closing at 81% bulls last night.
June Dollar Index
No change as I am still a buyer of the Dollar on any dip lower to 96.00/96.40 with the same 95.70 tight stop. The Dollar is severely oversold ad due a bounce from this strong support area where my buy level is today.
June DAX
Unfortunately the DAX just missed my 12620 buy level with a 12635 low print before rallying 100 points and I am still flat. With the ECB Meeting later I will stay flat as just like the Euro above I expect to see a lot of volatility. Today I will lower my buy range slightly to 12540/12600 with a wider 12490 stop. If the DAX dips into my buy range I will only be a small buyer. I still do not want to be short the market at this time.
June FTSE
Late yesterday the FTSE traded lower to my 7470 buy level with a 7460 low print. As I want to be flat overnight I emailed my Platinum Members to exit this position just before the close at 7480. Given the strength of Sterling which I expect to continue I will now lower my buy level in the FTSE to 7400/7430 with a 7365 stop. I still do not want to be short the FTSE at this time especially as mentioned yesterday it has been a one way trade since Brexit with the FTSE up 33% in that period.
Dow Rolling Contract
Unfortunately the Dow missed my 21095 buy level with a 21108 low print before rallying strongly into the close on Comey’s pre-release Testimony and I am still flat. Today I will now move my buy level higher to 21060/21120 with a 21010 tight stop. The price action is still bullish so there is no point in trying to sell the Dow at this time.
September BUND
I am still flat the Bund which just missed my 165.30 sell level. Today I will lower my sell level slightly to 165.20/165.50 with a 165.80 stop. As we have the ECB Meeting later this afternoon I still do not want to be long the Bund at this time especially given the insane Yield on the Bund.
Gold Rolling Contract
In a day of near misses, Gold missed my 1282 buy level with a 1282.70 low print before rallying into the close. Today I will now lower my buy level to 1270/1276 with a 1263 stop.
Silver Rolling Contract
I am happy that we exited the last of our long Silver position at 17.69 on Tuesday. Today I will leave my sell level unchanged at 18.10/18.40 with the same 18.60 tight stop. I am now going to lower my buy level as I do not like the price action given the huge move off last month’s 16.09 low print to 16.90/17.20 with a lower 16.60 stop.
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