There has been quite a lot of event and data risk over the past 24 hours both in the Asian session and throughout yesterday. When all is said and done, the AUD/USD sits higher on net this morning, likely aided as much as anything by some press reporting that US-China trade talks are back on. In an interview with CNBC last week, US Treasury Secretary Steve Mnuchin said there were some ‘’quiet conversations’’ in train, Bloomberg reporting that the US and China are trying to restart talks to avoid a full-blown trade war, with US Treasury Secretary Mnuchin and China’s Vice Premier Liu are having such communications.
To mark my 1625th 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 27 points yesterday to close July with a gain of 1074 points, having made 994 points in June, 1927 points in May, 1657 points in April, 1760 points in March, 2256 points in February, 879 points in January and 946 points in December. Since I started this New Platinum Service in June 2015 it has averaged a monthly gain of over 1600 points
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Wire services are reporting the US is trying to secure certain concessions and if China agrees, it is possible the US would back off from additional tariffs. While unsourced and perhaps a little bit of smooth track in what has been and may continue as a long and winding road, it seems to have been enough to support commodity/China exposed currencies. The NZD and the CAD appear to have also benefitted in the backwash, the Kiwi after the soft activity and confidence readings from yesterday’s ANZ Business Survey. For the CAD, it has had some headwinds from Canada ostensibly having been locked out of the current US-Mexico NAFTA negotiations and weaker oil prices. Canada’s monthly GDP for May though was stronger than expected, supporting the CAD and Canadian yields.
The data flow yesterday was mixed for the AUD, AU Building Approvals bouncing in June, Credit in line, China’s PMIs softer than expected but its Manufacturing component Steel PMI bouncing (big for iron ore and met coal especially), up from 51.6 to 54.8, indicative of a lift in momentum and suggesting the early year sag was more seasonal than enduring. The bulks commodities were higher yesterday.
The BoJ supports Bonds and USD/JPY
It was yesterday’s downgrade of the BoJ’s inflation outlook and persistence with broadly similar policy settings that on the day that was something of a catalyst supporting global bond markets over the past 24 hours.
The BoJ downgraded their inflation forecasts for the current and next two Japanese fiscal years by 0.2-0.3%, the BoJ now expecting the CPI ex fresh food (core CPI) to be 1.1% this year (-0.2% downgrade from 1.3%), up to 2.0% in F19 (-0.3%) and 2.1% for FY20 (-0.2%). That superficially is inflation at 2%, but take out the forecast impact of next year’s hike in the consumption tax and core CPI is forecast to be 1.5% in FY19 and 1.6% in FY20, still below 2%. No surprise then that BoJ Governor acknowledged that achievement of the target will be ‘’beyond our [three-year] forecast timeframe’’. The tax is scheduled to rise from 8% to 10% next October and its effect on the consumption and the economy is something the BoJ will also be watching closely (as a Japanese Government task force has been examining), also a point of emphasis in yesterday’s BoJ statements. Also for the JGB market, the BoJ stated they will be more tolerant of movements in the 10 year yield around the 0% guidance.
Economics; no ugly inflation surprise; growth continues
Speaking of inflation, the flash Eurozone CPI for July surprised on the higher side for both headline and core by a tenth, headline at 2.1% against an unchanged 2.0% expected, while core CPI rose from 0.9% to 1.1% higher than the 1.0% tipped. The first estimate of EZ GDP for Q2 showed yet another quarter of GDP growth (the 21st) if a tenth less than expected at 0.3%/2.1% after 0.4%/2.5% in Q1.
The US Personal Income, Spending and PCE deflators report revealed a one tenth miss in annual growth of the core PCE deflator at 1.9%, the same as in June and even though monthly growth was as expected at 0.1%, down from 0.2% in June. The Employment Cost Index for Q2 also missed market expectations, up 0.6% after 0.8% in Q1 and 0.7% expected. So no killer blows to bonds from those releases. US real consumption grew another 0.3% in July and the Atlanta Fed has pegged its very early estimate of US GDP for Q3 at a tidy 4.7%. There will be another update today after the ISM Manufacturing report.
Meanwhile in a further sign of positive economic conditions, the US Consumer Confidence report was another strong reading (127.4), consumers seeing the best jobs opportunities since 2001, a further rise in the net Jobs Plentiful index. Ahead of the ISM that is expected to print at 59.3, the Chicago PMI came in at 65.5, up from 64.1. This inflation and activity report add more to the case of the Fed moving ahead with the gradual rate lifting strategy, no change in rates expected from the Fed this evening. The Statement though will be examined for further indications on the ‘’for now’’ addition to gradual policy tightening, indications the Fed is well on the road toward a neutral Fed funds rate and likely acknowledging tariff/trade war possible disturbances.
This morning on the Economic Front we have Euro-Zone, UK and US Manufacturing PMI at 9.00 am, 9.30 am and 2.45 pm respectively. At 12.00 pm we have US MBA Mortgage Applications and this is followed by the ADP Employment Change at 1.15 pm. Next we have Construction Output and ISM Manufacturing at 3.00 pm. Finally at 7.00 pm we have the FOMC Rate announcement and latest Statement. There is no press conference tomorrow with Fed Chair Powell.
September S&P 500
Unfortunately the S&P just missed my 2796 buy level before rallying over 25 Handles as we wait for the FOMC Statement and Rate Announcement at 7.00 pm. I am still flat the S&P and today I will now raise my buy level to 2800/2808 with a 2794 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 2782/2789 with a 2776 stop. I still do not want to be short the market at this time.
EUR/USD
I am still flat the Euro and today I will now lower my buy level to 1.1590/1.1630 with a 1.1555 stop. As long as the Euro can hold the key Double Bottom at 1.1510 then the Euro will continue to be a buy on dips.
September Dollar Index
Yesterday the Dollar traded higher to my 94.25 T/P level on my latest long 94.10 position and I am now flat. Today I will again look to buy the Dollar on any dip lower to 93.50/93.90 with a 93.10 stop.
September DAX
The DAX traded sideways in a narrow range yesterday and I am still flat. Today I will lower my buy level slightly to 12560/12630 with a 12510 stop. I still do not want to be short the DAX at this time.
September FTSE
Thankfully we had no sell level in the FTSE yesterday as the market exploded to the upside right from the London opening. I am still flat and today I will now raise my buy level to 7595/7635 with a 7560 stop.
Dow Rolling Contract
The Dow bottomed again at the 25300 area yesterday and I am still flat as the market never came close to my buy level. Today I will now raise my buy level to 25140/25290 with a 25075 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 24750/24920 with a 24680 stop. I still do not want to be short the market at this time especially ahead of the FOMC Meeting and beginning of a new month.
September NASDAQ
Apart from yesterday the previous three trading sessions saw the NASDAQ close more than 1% lower each day. This is the first time that we have had this sequence in over three years. I am still flat the market and today I will now raise my sell level to 7340/7380 with a 7420 stop. I will also raise my buy level to 7140/7185 with a 7095 stop.
September BUND
I am still flat the Bund and today I am not going to chase this market lower especially ahead of an FOMC Meeting later. Another reason not to chase the Bund lower is the fact that the large speculators have their largest short position in the 10 year Treasury Note in over eight years. The Bund has good support from 160.80/161.20 and today I will be a buyer on any dip to this area with a 160.45 stop. I no longer want to be short the Bund at this time.
Gold Rolling Contract
No change as I am still a buyer on any dip lower to 1205/1213 with the same 1198 stop.
Silver Rolling Contract
Finally Silver rallied to my 15.60 T/P level on my latest long 15.48 position. Subsequently I emailed my Platinum Members to re-buy Silver which I did at 15.49. I will leave a 14.95 stop on this position while my T/P level will be unchanged at 15.70. If any of the above levels are hit I will be back with a new update for my Platinum Members.
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