The US Dollar has continued to eke out small gains amid ongoing speculation over Fed Chair nomination, US equities are flat (DJ briefly traded above 23k for the first time) and commodities are mixed. The market has recently been focussed on John Taylor who apparently made a good impression on President Trump. The Stanford economist is considered to be on the hawkish side of the spectrum and therefore the speculation has supported the US Dollar and bumped US Interest Rates higher.
To mark my 1450th 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. This offer is open to both new and existing members and if anyone is interested can you please contact me on bryan@tradernoble.com for details.
For anyone following my Platinum Service it made 35 points yesterday and is now ahead by 369 points for October, having made 447 points in September, 1560 in August, 1096 in July, 1023 in June, 1076 in May, 1375 in April, 1335 in March, 1481 in February and 1734 in January. Since I started my New Platinum Service in June 2015 it has averaged a monthly gain of over 1600 points.
So the US Dollar is again a little bit stronger across the board (DXY +0.198%, BBDXY +0.4%), but in addition to the Fed story (more below), the USD to some extent is also winning the least ugly person contest at the barn dance. Sterling (-0.48%) has been one of the big underperformers yesterday, despite the fact that headline inflation reached 3%, its highest reading in 5 years. Core inflation was unchanged at 2.7% and the Retail Price Index was a tenth lower at 3.9% (4.0%e, 3.9%e). This suggests the market was looking for higher numbers to cement expectations of a November Bank of England hike. Speaking to lawmakers, BoE Carney reiterated that the Bank is ready to raise interest rates, although he avoided committing to a hike next month. Carney’s comments weighted on the pound and triggered a rally in UK Interest Rates.
The Spanish-Catalonia stand- off is still weighing on the Euro ( -0.22%) and the hard US line on NAFTA negotiations remains a negative for the CAD (-0.18%). That said, oil prices have had a volatile past 24 hours and could be an additional factor weighing on the CAD and NOK (- 0.54%).
Meanwhile antipodean currencies are little changed (NZD -0.03% and AUD -0.06%). Yesterday NZD jumped about 30pips as the Q3 CPI data came in slightly higher than market expectations, but then the pair lost ground after the RBNZ released its favoured core inflation series, which showed annual inflation static at 1.4%, going against the grain of the official core measures that nudged higher. The overnight low of 0.7148 came soon after the latest GDT dairy auction showed an average 1% drop in prices. NZD now trades at 0.7169.
The Australian Dollar on the other hand has traded in a 0.7818- 0.7861 range over the past 24hrs and currently trades at 0.7844. Yesterday the RBA Minutes did not reveal much new on the monetary policy front, but there was a slight de-emphasis on the AUD. The minutes noted that “The appreciation of the Australian dollar since mid-2017, partly reflecting a lower US Dollar, was expected to contribute to ongoing subdued price pressures. A material further appreciation of the exchange rate would be expected to result in a slower pick-up in economic activity and inflation than currently forecast”. The word ‘material’ has been added to the above sentence on the currency, suggesting less concern about slight/modest AUD appreciation from current levels.
Looking at the betting odds on the next Fed Chair it is interesting to note that the emergence of John Taylor (19%, +11%) has come largely at the expense of Warsh (18%, -7%), Yellen prospects have also risen (21%,+6%), Cohn remains in the running but Powel is still the man to beat ( 36%).
In other news, Reuters reports that Senate Rep. are gaining support to pass a budget resolution, if so that would be a positive for the prospect on tax reform.
This morning on the Economic Front we have UK Employment Change and Average Earnings at 9.30 am and this is followed at 10.00 am by Euro-Zone Construction Output. At 1.30 pm we have US Housing Starts and Building Permits. Finally at 7.00 pm the Fed releases its Beige Book.
This morning the ECB’s Draghi, Praet and Coeure speak in Frankfurt. Ahead of the ECB meeting on October 26, it will be interesting to see if any of them offer any comments on the potential quantity and length of QE tapering. Moving on to the US, Fed’s Dudley and Kaplan discuss economic development in a panel.
December S&P 500
As I am already short the Dow I will now raise my sell level higher in the S&P to 2563/2569 with a higher 2574 stop. The CNN Fear & Greed Index closed with a 78 print which is still well down on last week’s 95 print. However the Dow continues to make new all-time highs against this background. I still believe that a sell-off is coming but a break and close over 2570 will change this view temporarily. Meanwhile I will continue to be a buyer on any dip lower to 2538/2544 with a 2533 stop. Interestingly just before I go to print the McClellan Oscillator close was just released and it fell hard yesterday to close with a negative -27 print which is incredible when you consider the Dow closed at a new all-time high.
EUR/USD
The Euro finally traded lower to my 1.1755 buy level before bouncing small and I used this rally to exit my long position for a small gain at 1.1763 and I am now flat. The Euro has strong resistance at 1.1830 and today I will now lower my sell level slightly to 1.1825/1.1860 with a 1.1890 stop. My only interest in buying the Euro is on a further dip lower to 1.1675/1.1710 with a 1.1645 stop.
December Dollar Index
I am still flat the Dollar which again rallied as expected yesterday. Today I will now go ahead and raise my buy level to 92.65/92.95 with a 92.35 stop. I still do not want to be short the Dollar at this time.
December DAX
I am still flat the DAX which continues to struggle to make further gains despite the weakness of the Euro. With the market finally closing over 13000 I will now raise my buy level slightly to 12875/12925 with a 12835 stop. The path of least resistance is still to the upside and for this reason I still do not want to be short the market.
December FTSE
Shortly after the European markets opened the FTSE had a small sell-off but unfortunately this move lower just missed my 7460 buy level before trading higher and I am still flat. I am not going to chase this overbought market and will leave my buy level unchanged from 7425/7460 with the same 7395 stop.
Dow Rolling Contract
My Dow plan worked well with the Dow finally trading higher to my initial 23000 sell level before having a small 40 point sell-off and I used this weakness to email my Platinum Members to cover this position at 22973. Subsequently the Dow gaped higher on the re-open and I went short again in small size at 23016. I will only add to this position on any further move higher to 23085 with a 23135 stop. Meanwhile I will use any weakness to 22980 to cover this short position and go flat.
December NASDAQ
I am still flat and today I will leave my sell level unchanged from 6160/6200 with a 6235 stop. Meanwhile given how overbought the NASDAQ is trading I am not going to chase this market higher and will leave my buy level unchanged from 5985/6025 with a 5950 stop.
December BUND
No change as I am still a buyer on any dip lower to 161.75/162.10 with a 161.45 stop as we wait for Dragi to speak at 9.10, followed by Praet at 12.45 pm. I still do not want to be short the Bund at this time.
Gold Rolling Contract
Gold was weak for most of yesterday as my fears that this sell-off is not over. Today I will leave my buy level unchanged from 1266/1274 with a 1260 stop.
Silver Rolling Contract
Silver traded lower to my 16.98 buy level with a 16.95 low print. I am still long and I will leave my stop unchanged at 17.10. If I manage to cover this long position at 17.10 I will again use any weakness in Silver to re-buy the market from 16.55/16.85 with a 16.25 stop.
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