Currencies, for the most part, took a back seat in a largely so-so session for broader financial markets yesterday. Positive European and UK manufacturing data helped support sentiment. But investors appear to be in a holding pattern ahead of bigger event risks later in the week. However both the DAX and S&P had Key Day Upside Reversals yesterday having opened lower in Globex Trading before having substantial rallies by the end of the day.
For anybody following my new Platinum Service it closed October with a 1600 point gain. The previous four months saw gains of 2833, 2195, 1810 and 3045 points respectively.
China’s Caixin reading kicked off the round of global PMIs at 48.3 vs 47.6 expected. While continues to signal contraction, the details of the report are improving, with Output and New Orders on the up. That, along with a strong CNY fix from the PBoC, should have been more supportive of the AUD that it actually was. The broader emerging markets complex benefitted from a sharply stronger Turkish Lira, which was at one point up 5.4% for the day, after AKP won a surprisingly decisive victory. The failure of AUD/USD to break above 0.7150 adds to the evidence that speculation around today’s RBA meeting has been a key contributor to its recent underperformance, especially against NZD.
Elsewhere, the UK manufacturing PMI jumped to a 16-month high at 55.5 (vs 51.8 exp), while final European PMIs slightly improved on their preliminary readings. The US ISM was virtually flat on the previously month at 50.1.
Equity markets keyed off the improvement in global manufacturing, with the Euro Stoxx 50 up 0.5%. US equity markets benefitted further from a bout of deal-making, focussed on healthcare. Shire added to its portfolio by snapping up Dyax for up to $6.5b, its biggest acquisition yet. Pfizer is also rumoured to be closing in on Allergan.
Major currencies are generally very close to levels prevailing at the open yesterday. Commodity currencies sit at the tail end, as oil prices drifted lower after Russian output hit another post-Soviet high, worsening the global supply glut.
NZD stands out as the clear underperformer, with NZD/USD off by 0.7% to 0.6730. Some of that weakness comes courtesy of drop in NZX dairy futures ahead of the GlobalDairyTrade auction later this morning.
This morning on the economic front we have the RBA Meeting and Rate Decision where the Australian Central Bank is expected to leave Rates unchanged. We have no data due from either the UK or the Euro-Zone while at 2.45 pm we have the New York ISM. Finally at 3.00 pm we have US Factory Orders.
December S&P 500
An extremely frustrating trading session to say the least as the S&P just missed my 2064 buy level with a 2064.25 low before going on to have a significant Key Day Reversal by rallying over 35 Handles and I am still flat. Thankfully I had no sell level as I do not like to be short at the end of a trading month or the beginning of a new month as this is when most new monies are put to work in the stock market. We have now entered the seasonally strong six months from November to April. I still believe that the stock market his in its last stages of this near seven year rally and it is still possible for the market to trade as high as 2200 especially if we can close over 2130 in the coming days/weeks. Today I will be a buyer on any dip lower to 2082/2087 with a 2077 stop. I will also look to go short on any further rally to 2113/2120 with a 2125 stop.
EUR/USD
I am still flat the Euro on what was a very quiet trading session as we await next Friday’s key Non-Farm Payrolls as this data will set the tone in most asset classes for the rest of the month. As I mentioned in yesterday’s commentary the number of Euro shorts against the US Dollar has increased substantially following Dragi and the ECB last week. Today I will lower my buy level slightly to 1.0920/1.0950 with a 1.0885 stop which is just below last week’s 1.0897 low print. I will also look to go short in small size on any further rally to 1.1090/1.1120 with a 1.1145 stop.
December Dollar Index
No change as I am still a seller on any rally higher to 97.50/97.80 with the same 98.10 stop. Remember a break and close over 98.30 will be short term bullish.
December DAX
Just like the S&P above the DAX just missed my 10720 buy level with a 10730 low before going on to have an upside Key Day Reversal by rallying over 240 points. Hopefully you guys did better than me in this regard. Thankfully we had no sell levels in the DAX yesterday and I am still flat. Today I will raise my buy level to 10830/10880 with a 10780 stop. I still do not want to be short the DAX at this time.
December FTSE
I am still flat the FTSE which is trying to rally but again is struggling vis a v the gains in the other major Indices. I am still flat the FTSE and today I will raise my buy level to 6310/6335 with a 6285 stop which is just below yesterday morning’s low print. My only interest in selling the FTSE is still on a rally higher to 6410/6440 with a tight 6460 stop.
Dow Rolling Contract
Unfortunately my Dow plan did not work out yesterday as the market having opened lower spent the rest of the day trading higher before eventually hitting my 17750 sell level. The market stayed closed to my sell level for most of the day before having a nice rally into the close which stopped me out of this position at 17820 and I am now flat. I really believe the upside for the Dow is limited especially if the US Dollar remains strong, as the strong Dollar really effects the Earnings of the major Dow Stocks. Today I will again try to go short on any rally higher to 17930/17990 with an 18040 stop. Naturally I still do not want to be long the Dow at this time despite the positive price action.
December BUND
The BUND followed the US Treasury Market lower after I posted yesterday with the BUND eventually hitting my 156.68 buy level. I am still long and today I will leave my stop the same at 156.25 on this position.
Gold Rolling Contract
The sell-off in Gold since the post FOMC 1185 high print last week continued yesterday with the market now over 5% lower since last week. I am still flat Gold and today I will leave my sell level unchanged at 1149/1155 with the same 1159 stop. I will also be a small buyer on any dip lower to 1117/1125 with an 1111 stop.
Silver Rolling Contract
No change as I am still long at 15.60 with the same 15.20 stop. Again if I am stopped out of this position I will be a more aggressive buyer in front of 14.90 with the same 14.50 stop.
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