The US Dollar got off to a cracking start this week, gaining against all the majors, and taking EUR/USD below 1.06 for the first time since April. Some oil-supportive comments helped to steady Commodity prices and proxy currencies later in the session. AUD bore the initial brunt of the USD move, but has recovered back to 0.72. In what was expected to be a relatively quiet day, the USD suddenly gained fresh legs shortly after the European Markets opened. Market chatter focused on a surprise Fed meeting on Monday night, but it was much ado about nothing. The meeting in question is a routine affair focusing on fortnightly recommendations made by the regional Fed banks about the Discount Rate.
For anybody following my New Platinum Service it made 119 points yesterday and is now a head by 1246 points for November. The previous five months saw gains of 1600, 2833, 2195, 1810 and 3045 points respectively.
Count me sceptical that investors were, hand on heart, expecting a surprise FOMC rate hike. At best, that would have made a mockery of the Fed’s well-intentioned (though rather tortuous) communications strategy. Nevertheless, the move quickly snowballed, nowhere as clearly as in AUD, which quickly surrendered the heights near 0.7250 that it took on Friday night. By mid-afternoon, AUD/USD was at 0.7160, and EUR/USD barely survived with a 1.06 handle (which it relinquished later).
A firmer US Dollar saw Commodity prices under the cudgel once again, with metals in particular focus. Copper traded below $4500, to its lowest level since May 2009. The London Metals Exchange Index and Gold both closed down 0.8% for the day, adding to their losses into the close last week. One might be tempted to ascribe this as the reason for AUD’s underperformance, but in truth, metals have provided a poor steer in recent weeks. Indeed, AUD’s bounce up to 0.72 early this morning comes despite metals prices wallowing near their session lows.
Instead, Oil prices provided a surprise support, after Saudi Arabia issued a statement pledging to work with Oil producers to stabilise Oil prices. Similar comments have been made before, including within the last week. But the market chose to run with it, with Brent crude up 1.3% for the day. This is likely reflective of substantial short positioning in the Oil market. The investors are looking toward OPEC’s 4 December meeting, but an agreement on curtailing production is not expected.
Data delivery contributed little to broader market moves. The Euro-Zone composite PMI rose to 54.4, beating expectations to hit its highest level since May 2011. The upside surprise was evenly spread across Manufacturing and Services. On the other hand, the US Markit PMI undershot expectations, printing at 52.6 in November, which is its lowest since October 2013. However, this simply brings the Index closer in line with the more widely-followed ISM, which sits at 50.1.
Clearly, the rapid build-up in long US Dollar positions in the past month has the market vulnerable to sharp squeezes, especially with US Stock markets back near record highs. The DXY touched 100.10 after I posted yesterday, but that proved a near-term cap.
This morning on the economic front we have already had the release of German final GDP which printed as expected at +0.3%. At 9.00 am we have the German IFO Business Climate/Current Assessment. This is followed at 1.30 pm by US GDP and the Trade Balance. Finally at 3.00 pm we have US Consumer Confidence and The Richmond Fed Index.
December S&P 500
I am not having much look with getting filled in my S&P calls lately with the S&P trading as low as 2078.25 yesterday thus missing my 2078 buy level before having a nice 9 Handle rally overnight and I am still flat. It is hard to see the S&P doing much this week ahead of the Thanksgiving Holiday on Thursday in which the US Markets are closed and only open for a half day on Friday. Today I will lower my buy level slightly to 2070/2075 with a 2065 stop. Despite my fears for this market going forward given the fact that this is a shortened trading week I do not want to be short the S&P at this time.
EUR/USD
The Euro briefly broke the 1.06 level yesterday afternoon before bouncing into the close. Today I am still flat and I will raise my buy level slightly to 1.0585/1.0615 with a 1.0545 stop.I still believe the Euro will have difficulty in sustaining a break of the major support at 1.0550. For this reason I still do not want to be short the Euro at this time as the strategy of buying the dip throughout all this year has worked very well.
December Dollar Index
My short 100.00 Dollar position worked well as thankfully after I posted the Dollar made a new high first at 100.10 before having a nice sell-off which enabled me to T/P at 99.70 as emailed to my Platinum Members and I am now flat. Today I will again be a seller on any rally higher to 100.10/100/40 with a 100.60 stop. Remember the 100.39 high print from last April is the key resistance level to watch at this time. The Dollar has now rallied over 23% in the last 18 months and in my opinion is due a decent correction but we will probably have to wait for the ECB Meeting and Dragi press conference next week to see if the ECB are going to do more QE as promised. To me this latest QE is now well priced into the market.
December DAX
After a couple of near misses the DAX finally hit my 10995 buy level earlier this morning and as I am disappointed with the price action in this market especially when you consider how weak the Euro is trading I have decided to cut this position here at 11025 and go flat. Given my comments above my only interest in buying the DAX today is on a dip lower 10880/10930 with a 10840 stop. I will also look to sell the DAX on any rally higher to 11090/11140 with a 11180 stop.
December FTSE
The FTSE plan worked well yesterday as shortly after I posted the FTSE traded higher to my 6325 sell level before selling off after the US Markets opened which enabled me to cover this position at my 6300 T/P level as outlined earlier to my Platinum Members and I am now flat. Today I will lower my sell level to 6295/6325 with a 6350 stop. I still do not want to be short the FTSE at this time.
Dow Rolling Contract
The Dow traded as high as 17968 after lunch yesterday and many of you may have sold the market at my 17860 initial sell level. Unfortunately I had my sell level at 17870 which the market missed before going on to fall 100 points and I am still flat. Today I will lower my sell level slightly to 17850/17910 with a 17960 stop. I still do not want to be long the Dow at this time.
December BUND
My BUND plan also worked well yesterday as the market traded lower to my 157.22 buy level before having a nice 50 point rally which enabled me to cover this position too early at 157.37 and I am now flat. Today I will again be a buyer on any dip lower to 157.00/157.30 with the same 156.80 stop. My only interest in selling the BUND is still on a rally higher to 158.20/158.50 with a 158.85 stop.
Gold Rolling Contract
My Gold plan also worked well yesterday as thankfully after I posted Gold traded lower to 1066.50 before spiking higher which enabled me to cover my long 1069 position at my 1075 T/P level as again outlined earlier to my Platinum Members and I am now flat. Despite the negative vibes and price action towards both Gold and Silver and indeed even Crude I still believe that we are close to a bottom in all of these markets and this is what makes the next two/three weeks so important. Today I will again be a buyer of Gold from 1064/1069 with a 1058 stop.
Silver Rolling Contract
Unfortunately just before I posted yesterday morning I was stopped out of my long 14.36 Silver position at 13.95. Subsequently as I feel naked in not having a long Silver position on board I bought Silver again at 14.03 with a 13.65 stop.
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