DXY, the US Dollar Index, recorded its fourth consecutive daily decline against a backdrop of improved risk appetite, lower UST yields and news that President Trump had expressed disappointment with recent Fed hikes. According to a Bloomberg story, speaking at a fundraiser in the Hamptons on Friday, Trump said he expected Powell to be a cheap-money Fed chairman and lamented the Fed instead had raised interest rates. Whether jokingly or not, the remarks follow the President CNBC interview last month where he said was ‘’not thrilled’’ with rate increases, breaking with the tradition of Presidents avoiding direct comments on monetary policy that put into question the Fed’s independence.
To mark my 1650th 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 To demonstrate this value, a monthly subscription over the same period would cost 4440 euro in total This offer represents a 38% discount and is open to both new and existing members. If anyone is interested in this offer can you please email me on bryan@tradernoblecom for details
For anyone following my Platinum Service it made 13 points yesterday and is now ahead by 293 points for August, having made 1074 points in July, 994 points in June, 1927 points in May, 1657 points in April, 1760 points in March, 2256 points in February, and 879 points in January. Since I started this New Platinum Service in June 2015 it has averaged a monthly gain of over 1600 points
I have a YouTube Channel which contains recent interviews I have given. This can be viewed by clicking HERE Please subscribe to this for new interview notifications
Currencies
Although the USD was already trading with a soft tone, the President’s remarks weighted on the USD and also contributed to the move lower in UST yields. The USD ended the day marginally lower with DXY down 0.21% and BBDXY down 0.26%.
Looking at G10 currencies the USD was weaker across the board with SEK the only pair unable to make any inroads against the greenback. The South African Rand led the gains within EM, but notably the Turkish Lira and Brazilian real were the big EM losers with both pairs down over 1%.
Following Friday’s news of a US China plan to settle their trade dispute, the AUD has been on a steady rise and currently trades at 0.7340, after trading to a low of 0.7203 last week. The improvement in risk appetite evident by gains in EM equity markets as well as a rise in most commodity prices have helped the AUD. The fate of Sino-US trade talks, scheduled to restart this week, is pivotal to whether AUD/USD can recover back above 0.75 or revisits the 0.68-0.69 2015-2016 lows. I do not expect any major outcomes from this week’s talks, but come September focus will turn on whether the US decides to go ahead with additional tariffs on $200bn China imports or whether a truce is agreed and the decision to impose new tariffs is deferred. If the latter is agreed, that would be a positive outcome for risk sentiment and it would open the door for the AUD to trade back above 75c. For now the market seems to be travelling with guarded optimism.
A rally in Italian sovereign yields has contributed to the Euro outperformance with the pair now trading at 1.1490, after initially trading down to an intra-day low of 1.1398. 10y BTPs are now at 3.00% after trading to a high of 3.15% last week. The move lower in Italian sovereign bond yields has come about despite media reports Italy is drawing up plans for an EUR80bn infrastructure spending following the Genoa bridge tragedy. If no other savings were found this suggests the budget deficit could rise to above 6% of GDP from 2.3%.
Bonds
US Treasuries rallied up to 4bp across the curve, taking 10yrs to 2.82% – the lowest level since July and the bottom the 20bp range that has defined price action since July. The 2s10s curve flattened to 23bp – yet another low since 2007. Amid limited news flow, most Interest Rate strategists note that positioning has played a part with the latest CFTC positioning data showing speculative shorts in Treasuries are at historically stretched levels
Equities
US and European equities followed the positive lead from Asia and have started the week with gains across the board. Yesterday the Shanghai index climbed 1.11%, almost fully reversing the 1.34% loss recorded on Friday, prospects of a US-Sino trade resolution appears to have been the catalyst for the recovery.
The S&P 500 Index closed higher for a third day in a row, although gains were pared in the final hour of trading after President Donald Trump said China and Europe manipulate their currencies, according to a Reuters report. The President also noted that when U.S. puts tariffs on China, China artificially lowers price of the yuan.
Commodities
Copper and Aluminium have led the gains in commodities, up 1.45% and 1.23% respectively and Gold was not too far behind up 0.88%. Oil prices climbed around 0.80%, iron ore was unchanged, but Zinc and lead were unable to join the party, dropping 0.5% and 0.78% respectively.
Economics
In a speech, Atlanta Fed President Bostic outlined the case for further gradual Fed Funds hikes to a neutral level. He said ‘’we worry about the flatness of yield curve’’ and he would not vote for anything that knowingly inverts the curve. In a later Interview, he indicated he still favoured three rate hikes for all of 2018. That puts him at the dovish end of the spectrum of FOMC members. Current market pricing shows a near-80% chance of two further hikes this year, taking the number of hikes to four for 2018.
This morning on the Economic Front we have UK Public Sector Net Borrowing. We have no data of note again from either the Euro-Zone or the US. Finally at 12.30 pm we have Canadian Wholesale Trade.
September S&P
Yesterday was one of the quietest trading sessions of the year with low volume. The market was not helped by the lack of economic news or the continued absence of traders from their desks as summer vacation continues. I am still flat the market and today I will now raise my buy level slightly to 2837/2845 with a 2831 stop. Meanwhile the VIX fell 1.2% to sit just below 12.50 after last week’s spike above 17.
EUR/USD
The Euro rallied yesterday with the market now trading over 200 points higher from from last Wednesday’s 1.1301 low print. In the last few minutes the Euro has spiked to a high of 1.1543 which enabled me to go short the market at 1.1525. As I want to be flat I have now cut this position here at 1.1512 and I am now flat.I will now look to sell the Euro again on any further spike higher to 1.1570/1.1610 with a 1.1650 higher stop. Meanwhile I will now raise my buy level to 1.1395/1.1445 with a 1.1355 stop.
September Dollar Index
Unfortunately the Dollar just missed my 96.45 sell level with a 96.31 high print before falling for the fourth consecutive trading session and I am still flat. Today I will again move my sell level lower to 96.20/96.65 with a 97.05 stop. I still do not want to be long the Dollar at this time.
September DAX
As expected the DAX rallied strongly yesterday as the market play some catchup with the gains in the US Indices over the past few trading sessions. Thankfully we had no sell levels in the market and I am still flat. Today I will now raise my buy level to 12110/12185 with a 12045 stop. I still do not want to be short the market at this time.
September FTSE
The FTSE has been frustrating to trade over the past week especially having got stopped out of my latest long position last week at 7455, especially with the market trading 150 points higher. Today I will now raise my buy level to 7470/7510 with a 7430 tight stop.
Dow Rolling Contract
The Dow broke and closed over its previous 25693 August high as yet again one short position after another gets slammed. A combination of a weaker US Dollar and falling Bond Yields has certainly helped the Dow which is now trading some 800 points higher than last week’s low. I am still flat and today I will be a small seller on any further rally higher to 25940/26100 with a 26180 stop. I will also raise my buy level to 25400/25560 with a 25310 tight stop.
September NASDAQ
Unfortunately the NASDAQ just missed my 7340 buy level with a 7352 low print before rallying into the close and I am still flat. Today I will now raise my buy level slightly to 7310/7350 with a 7275 stop. Despite the NASDAQ underperforming the other main US Indices over the past week I still do not want to be short the market at this time.
September BUND
The boring sideways action for the Bund continues and I am still flat. Surprisingly the Bund failed to follow the US Bond market higher yesterday. Today I will now raise my sell level slightly to 164.35/164.75 with a 165.10 higher stop. I no longer want to be a buyer of the Bund at this time.
Gold Rolling Contract
Gold had a nice rally yesterday and is now trading $30 above last week’s 1160 low print. Worryingly, Silver is so far lagging the rally in Gold which for now makes me cautious despite the extreme negative sentiment reading towards both metals. I am still flat Gold and today I will now raise my buy level to 1171/1181 with a wider 1159 stop.
Silver Rolling Contract
Given the underperformance in Silver I am going to leave my 14.20/14.60 buy level unchanged with the same 13.80 stop and 14.95 T/P level if executed.
Recent Comments