The Australian Dollar is the best performing G10 currency over the past 24 hours in the wake of President Trump announcing a tariff rate of 10% on an additional $200b of Chinese imports, to come into effect on September 24. That 10% rate is to rise to 25% from the start of next year, i.e. after the US mid-terms. Trump is also threatening that if there is ‘’retaliatory action against our farmers or other industries, we will immediately pursue phase three, which is tariffs on approximately $267 billion of additional imports’’. China has responded by announcing additional tariffs at mixed rates of 5 and 10% on additional $60b of US imports. Following up with more words, Trump has tweeted that “…..China has been taking advantage of the United States on Trade for many years. They also know that I am the one that knows how to stop it. There will be great and fast economic retaliation against China if our farmers, ranchers and/or industrial workers are targeted!” We note that among the exclusions from the tariffs were certain chemical inputs to textiles and agriculture, as nod to his farming political support.
To mark my 1675th 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 10 points yesterday and is now ahead by 882 points for September, having made 599 points in August, 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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Currencies
Risk markets have not only taken these announcements in their stride, but it has been a risk-on mood permeating markets with stocks, commodities, bond yields, and risk-sensitive currencies all performing. While the AUD is playing to the risk-on mood in markets, it is a little surprising that markets have taken the news in its stride. All priced in? Perhaps. There is also the realisation that the US economy has continued to perform despite what will likely be some uptick in inflation from the tariffs and signs that the Chinese authorities are taking steps to buttress their economy with more policy support.
For the AUD, I would also note that while not at record shorts, positioning in the AUD has been very short and the absence of more bad new news has likely contributed to its mini bounce. The short term ‘’fair value’’ model of the AUD/USD has also recently been around four cents above spot, another sign of the market having already priced in as deal of ‘’negative’’ AUD news.
The AUD/USD sits at 0.7250 this morning, holding the ground it made through the London session yesterday. The CAD has also been an out-performer over the past 24 hours, getting some tailwinds from the further rise in oil prices, Brent crude up 1.04% to $78.85.
Meanwhile The EUR/USD again traded sideways with the market so far holding below the key 1.1720 resistance level. Sterling is unchanged against the US Dollar at 1.3160.
Bonds, Equities and Commodities
Both Asian and US equities have had good sessions since the tariff announcements. The Shanghai rose 1.82%, while the US main board indexes have all closed higher. US Consumer staples underperformed, but it was not from the likes of Costco and Walmart that saw their shares up 1.19% and 0.75% respectively, stocks at the cutting edge of consumer import price rises.
The LMEX base metals index rose 1.44% (all base metals rose), as did oil, while the bulks were mixed in Asia yesterday, iron ore and steel rebar higher, but steaming coal down in smalls. With risk back on, US Treasuries were playing to script, the 10 year up solidly through 3% to 3.0551%, the curve steepening from little change in the 2y but 10s up 6.84bps.
Economics
It was a quiet past 24 hours for scheduled data with only the US NAHB Housing Index for September at a still high 67, housing activity set to get some boost from the Florence rebuild. Even so, rising bond yields and mortgage rates are expected to restrain demand once such effects wash through. Draghi has been speaking, but only about European banking issues.
This morning on the Economic Front we already had the Japanese Monetary Policy Meeting where they left Interest Rates unchanged at -0.10%. There was nothing of interest in their post-meeting press conference. At 9.30 am we have UK Retail Price Index, CPI and PPI. This is followed at 12.00 pm by US Mortgage Applications. Finally we have Housing Starts and the Current Account at 1.30 pm.
At 2.00 pm we have another speech from ECB President Dragi.
September S&P 500
This is my last day to trade the September Contract as tomorrow I will roll to the December Contract for all my Indices. As I mentioned in an email last night to my Platinum Members the number of emails that I received from analysts saying the US stock was going to crash and that we had topped last week. I just do not understand their thinking as I have been consistent all-year until we break and close below the 50 Day Moving Average it is a waste of time and capital in trying to pick a top in the market as the charts will tell us when it is safe to go short. We only have 4/6 weeks left in what is traditionally the weakest time-frame of the year. If we can get through until the mid-end of October we could well see a melt-up in the market into the first Quarter of 2019 before this over extended stock markets finally runs into trouble. Yesterday after the S&P traded higher to my 2908.50 sell level I covered this position at 2907.50 as I did want to hold a short position overnight. The S&P made a high of 2913 before slipping to an overnight low so far at 2903.75. I am still flat after yesterday’s impressive reversal off the earlier 2879 low print. Today I will move my buy level higher to 2890/2898 with a 2883 stop. I no longer want to be short the market at this time.
EUR/USD
Unfortunately the Euro just missed my 1.1640 buy level with a low of 1.1655 and I am still flat. Today I will now raise my buy level slightly to 1.1610/1.1650 with a 1.1575 stop. Remember a break and close over the key 1.1720 strong resistance level is a buy signal for at least a rally to 1.1850.
December Dollar Index
No change as I am still a buyer on any dip lower to 93.30/93.70 with the same 92.95 stop.
September DAX
The DAX has now rallied enough off the key 11750/11850 support level to encourage me to still be a buyer on dips. The DAX had to hold this key support level and join in the Hang Seng which last week had fallen 20% from its January high. The Hang Seng has left a buy extreme off its 26500 support level over the past few days which is encouraging for the rest of the Global Markets to finally find some support and follow the US Markets higher. The DAX must now hold the 12000 support level to give further credibility for a low to be put in. Today I will now raise my buy level to 11995/12065 with a 11940 stop.
September FTSE
The FTSE is trying to break its key 7300 resistance level. So far we have stalled at this area and it would really add to the bullish case if this resistance level was to be taken out with more conviction. Today I will now raise my buy level to 7235/7275 with a 7195 stop.
Dow Rolling Contract
At yesterday’s high the Dow was only just under 300 points shy of its January 26, high at 26613. So far the Dow is holding the key 25800 support level. If we break this support level we have strong support at 25570 which is the 50 Day Moving Average. I am still flat the Dow and today I will now raise my buy level higher to 25950/26110 with a 25870 tight stop. If I am taken long and subsequently stopped out of this position I will be a more aggressive buyer from 25600/25780 with a 25480 stop. I still do not want to be short the market at this time.
September NASDAQ
Yesterday the NASDAQ again bounced off the key 7400 support level. I am still flat with the market now trading at 7500. There is no doubt that the NASDAQ is over extended and due a pull-back but as long as we do not break and close below 7365 I will continue to be a buyer on dips. Today I will move my buy level higher to 7380/7425 with a 7340 tight stop.
December BUND
Yesterday’s sell-off in US Treasuries pulled the Bund lower to my 158.75 buy level. I am still long with a now higher 158.30 stop. Even though the Bund is oversold I will now lower my T/P level on this position to 158.95. If any of the above levels are hit I will be back with a new update for my Platinum Members.
Gold Rolling Contract
Gold is trying to build support off its initial 1190 support level. I am still flat and today I will now raise my buy level slightly to 1184/1192 with a 1177 stop.
Silver Rolling Contract
Even though Silver is struggling to move higher I am still looking for higher prices especially given the number of record short position in the Silver Futures Contracts. With this in mind I will now raise my buy level to 13.85/14.15 with a 13.50 stop which is just below the December 2015 low of 13.62.
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