The stabilisation in the Turkish lira has helped risk sentiment over the past 24 hours with the S&P500 recording its first positive day in five, but European equities have remained under pressure with the Bloomberg EU Banks Index closing at a new 18 month low. The USD is broadly stronger with EUR, AUD and GBP still under pressure while CAD is the outperformer. Higher UST yields have supported the USD while softer commodities have not helped the AUD.
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For anyone following my Platinum Service it made 75 points yesterday and is now ahead by 495 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
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TRY is up over 7% in the past 24 hours providing a bit of a breather to EM markets and easing concerns of contagion risk. News that the Turkish central bank had been making liquidity available to banks at 19.25% over the past two days, higher than the benchmark 17.75% repo rate supported the recovery in the lira, but President Erdogan on the other hand has kept up the antagonism against the US calling for a consumer boycott of iPhones and other US consumer electronics and blaming what he called an ‘’explicit economic attack’’ for the lira currency crisis. Meanwhile the White House said “At the Turkish ambassador’s request, Ambassador John Bolton met with Ambassador Serdar Kilic of Turkey in the White House, feedback from the meeting has been that that there will be no negotiations or ease in pressure from the US, until Pastor Brunson is released.
So overall I still see the TRY price action as a temporary reprieve and it is hard not to see the lira remaining under pressure until we see a material fiscal restraint to cool down the economy , along with a measurable lift in Interest Rates by the central bank and a diplomatic resolution to US tensions.
Currencies
It has been a solid trading session for the USD with major USD indices edging higher over the past 24 hours. The narrower DXY index has been the stand out, up 0.32%, the Index currently trades at 96.682, a level not seen since late June last year. Looking at the main Index component, the Euro, Sterling and JPY have all come under pressure for difference reasons with CAD the only pair that has been able to outperform the USD.
The Euro initially rose from 1.14 to 1.1420 after German Q2 GDP beat expectations and the Turkish lira rallied, but with EU banks under pressure amid concerns over some banks exposure to Turkey, the Euro traded to an intra-day low of 1.1330, before settling at 1.3444.Techincals have also not helped the Euro, with the break below the 1.15 opening the door for a move below 1.13 before any material support can be found.
Sterling is down 0.45% and now trades at 1.2723. The GBP reacted negatively to a mixed UK labour market report that showed a surprise fall in the Unemployment Rate but lower than expected job growth. Wage growth excluding bonuses was in line with expectations. Meanwhile Brexit news remain a thorn on the side for the pound, British Foreign Minister Jeremy Hunt saying on Tuesday that Risk of no-deal Brexit rising, ‘everyone needs to prepare’. British politicians have increased the scare tactic, but for now this strategy has had little effect on the EU negotiation stand.
The improvement in sentiment and move higher in UST yields has seen JPY climb back above the 111 mark with CHF also easing a little bit, down 0.10% over the past 24hrs. The lift in risk appetite however did not help the AUD, yesterday’s soft Chinese activity data did not really elicit a negative reaction, however the softness in commodities along with lingering EM concerns, in spite of a temporary TRY reprieve, has seemingly been the overriding negative force. AUD now trades at 0.7242, after trading to an intra-day low of 0.7225 ( a level not seen since January 2017). Similar to the Euro, technicals are not helping the AUD either, the break below the support area of 0.7320/50 now means the Aussie has a fair bit of room to move sub 72c before some material support is found.
Equities
The S&P 500 Index rose for the first time in five days, closing the day up 0.69%, financial and consumer discretionary shares where the winners in the session. Asia closed broadly higher, although Chinese Indices ended the day flat and European Indices were flat to lower with bank shares still under pressure.
Bonds
Core bond yields drifted a bit higher and the UST curve flattened a smidgen with the 2y rate leading the rise in the UST curve. The 10y UST yield now trades at 2.8985% and the 2y rate is at 2.631%
Commodities
Despite improvement in risk appetite, commodities have come under pressure against a stronger USD environment and global growth concerns amid a slowdown in Chinese economic activity. Copper is one of the big movers down 1.61% and is threatening to make a break below the year to date lows of $266.95.
Economics
The US NFIB Small Business Optimism Index rose 0.7 to 107.9 for July, just 0.1 short of the July 1983’s highest reading in the survey’s 45-year history. The report included record highs in percentages of owners reporting job creation plans (23%) and job openings (37%), but 52% cited few or no qualified applicants for their positions. The availability of workers was cited by 37% as their number one business problem, one point under the record high.
– Germany: GDP (q/q%), Q2: 0.5% vs. 0.4% exp.
– UK: Unemployment Rate, Jun: 4% vs. 4.2% exp.
– UK: Employment Chg. (3m/3m%), Jun: 42k vs. 93k exp.
– UK: Weekly Earnings ex-Bonuses (3m/3m%), Jun: 2.7& vs. 2.7% exp.
This morning on the Economic Front we have UK CPI and PPI at 9.30 am. This is followed at 12.00 pm by US MBA Mortgage Applications. Next we have Retail Sales, Unit Labour Costs and the New York Empire Manufacturing Index at 1.30 pm. At 2.15 pm we have Industrial Production, followed by the NAHB Housing Market Index at 3.00 pm. Finally at 9.00 pm we have the Total Net TIC Flows.
September S&P 500
Late afternoon the S&P finally traded higher to my 2843 sell level before having a small sell-off. As I am still bullish the market while at the same time wanting to bank some points for yesterday’s trading session I covered my short S&P position at 2840 and I am now flat. The next resistance area in the S&P is from 2854/2862 and today I will be a seller on any rally to this area with a 2868 tight stop. Meanwhile the key 2800/2810 support level continues to hold and as a result I will now raise my buy level to 2818/2826 with a 2811 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 2796/2806 with a 2789 stop.
EUR/USD
The Euro just missed my 1.1320 buy level with a 1.1330 low print before having a small rally into the New York close and I am still flat. Just like the metals the Euro is in the capitulation phase of this aggressive move lower from the 1.25 high last April to the 1.1330 low late yesterday. Today I will now lower my buy level slightly to 1.1210/1.1270 with a 1.1165 stop. I still do not want to be short the market at this time.
September Dollar Index
I am still flat the Dollar and today I will raise my sell level slightly to 96.95/97.35 with a 97.75 stop. Given the extreme DSI reading I still do not want to be long the Dollar at this time.
September DAX
Unfortunately the DAX missed my buy level before rallying as expected and I am still flat. Today I will now raise my buy level to 12180/12250 with a 12125 stop. Meanwhile I will leave my sell level unchanged from 12550/12620 with the same 12685 stop.
September FTSE
No change as I am still a buyer on any dip lower to 7490/7535 with a 7455 tight stop. I will also leave my sell level unchanged from 7715/7755 with the same 7785 stop.
Dow Rolling Contract
The Dow again struggled yesterday in comparison to both the S&P and NASDAQ. The stronger US Dollar is certainly weighing on Dow stocks at this time. I am still long at a price of 25335 from last Friday and as I have had this position for three days now I will now lower my T/P level on this position to 25350. Meanwhile my only interest in adding to this trade is on a dip lower to 25140 with the same 25070 stop. If any of the above levels are hit I will be back with a new update for my Platinum Members.
September NASDAQ
The NASDAQ rallied again yesterday as the market again eyes a new all-time high print. I am still flat and today I will again raise my buy level to 7330/7370 with a7290 stop. I will also raise my sell level to 7530/7580 with a 7625 stop.
September BUND
No change as my only interest in selling the Bund is still on a rally higher to 164.15/164.65 with the same 165.05 stop. Meanwhile I will again leave my buy level unchanged from 162.10/162.50 with a 161.70 stop. The Bund has strong support at 162.00 and it will take a break and close below here for me to turn bearish.
Gold Rolling Contract
Early yesterday Gold traded higher to my 1196 T/P level on my latest long 1192 position with a 1198 rebound high and I am now flat. I still believe that the 1175 support level will be hard for Gold to break and today I will again look to buy the market on any dip lower to 1175/1183 with a 1167 stop.
Silver Rolling Contract
No change as I am still long at 15.30 with the same 15.45 T/P level and 14.70 lower stop. If any of the above levels are hit I will be back with a new update for my Platinum Members.
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