After Monday’s Bloomberg headlines of Trump complaining that Fed Chairman Powell has not been ‘’cheap money Fed chair’’, late in the NY session Reuters published an interview with Trump which served to maintain negative US Dollar momentum. The acceleration in the USD decline over the past 24 hours has contributed to an improvement in risk sentiment across both Emerging and Developed risk markets. China led the gains in equities while US equities flirted with new record highs. Soothing words from EU chief Brexit negotiator have pushed Sterling to the top of the leader board and although NZD and AUD have also outperformed, both lagged other majors. Core Bond yields are higher with UK gilts leading the way and commodities have also joined the party with Zinc and Lead the big winners on the day.
To mark my 1650th 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 lost 70 points yesterday and is now ahead by 223 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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The Trump Reuters interview reinforced the message that President Trump is not happy with the Fed lifting rates. Speaking about Fed Chair Powel, the president said “I’m not thrilled with his raising of interest rates. No, I’m not thrilled. We’re at a – we’re negotiating very strongly – I don’t call it a trade war – we’re negotiating very powerfully and strongly with other nations. We’re going to win. But during this period of time, I should be given some help by the Fed.” After this interview was posted we had the news that former personal lawyer Michael Cohen had appeared in court saying that Trump had ordered him to break campaign finance laws.
Currencies
Prospect of a potential truce between the US and China trade quarrel and President Trump public dislike for higher rates have contributed to a sharp change in the USD fortunes in the past few days with USD weakness accelerating in the past 24 hours. In Index terms the USD is down about 0.5% against the majors ( DXY -0.66% , BBDXY -0.44%) whilst against Asia FX the USD is down 0.17%.
Looking at the DXY Index in more detail, after peaking just under the 97 mark last week, the Index now trades at 95.237 and although there is a little bit of a base around the 95 mark, the Index looks like it is heading back towards its previous range of 93.5-to 95.5. The break higher in the Euro above the 115.20 area is a crucial driver for the recent USD decline, the Euro now trades at 1.1571, after briefly trading above 1.16 intra-day. The improvement in the prospect for a truce in the US led trade tensions alongside an ease in concern over Turkey (temporary?) and Italy have also contributed the rebound in the Euro. So, higher looks to be the path of least resistance for the Euro with a move back to the 1.15-1.18 broad range the likely outcome.
Sterling has also been heading higher, up 0.84% over the past 24 hours and now trades just above the 1.29 mark for the first time since the 9th of August. The pound was boosted by soothing words from EU Chief Brexit Negotiator Barnier noting that negotiations were entering their final stage and discussions would occur ‘’continuously’’ from now on, with talks wrapped by roughly October or several weeks later. So on the day GBP is stronger however is worth noting that as much as Barnier believes negotiations will be reached later this year, he also emphasised that the principles and rules on which the EU is based will not change. Essentially this means to me that the only way a deal will be reached is by a shift in the UK position, I still expect GBP to remain volatile.
Equities
Yesterday the Shanghai composite closed 1.31% higher and the positive lead from Asia was embraced by Europe and later by the US with all major developed equity Indices posting gains for the day. The UK FTSE100 was the one exception, down 0.34% mired by the strong Sterling performance.
The S&P 500 Index recorded a fourth day of gains, briefly rising to an intraday record high. S&P 500 is up more than 7% this year with consumer discretionary and IT leading the gains, both up just over 15% while health-care companies have posted gains close to 11%.
Bonds
The better risk backdrop initially weighed on bonds, sending US Treasury yields 2-3bp higher across the curve, but the market has since recovered. Moves are limited in the wake of the short squeeze seen yesterday. That said as I am about to press the send button, 10y UST yields have declined a couple bps and now trade at 2.829%.
Commodities
Zinc (2.04%) and Lead (1.83%) rebound have led the gains in commodities with copper (0.69%) and metals (0.78%) also having a good day.
Economics/Politics
Dallas Fed President Kaplan wrote an essay indicating that he would favour a pause in the rate-hike cycle once a neutral rate is hit, which is about 3-4 hikes away. He would also be ‘’carefully watching the US Treasury yield curve’’, echoing the sentiments expressed by Bostic yesterday.
US Commerce Secretary Ross indicated that the White House had pushed out the timetable for auto tariffs, saying that the delay was ‘’in view of the negotiations’’ ongoing with the European Commission, Mexico and Canada. He declined to set a new timetable, but noted that the law used to justify the report into potential security threats posed by the auto sector does not require any findings until next year.
Trump’s lawyer said that he violated campaign laws at direction of unammed candidate. In acknowledging the charges against him, Cohen said he was directed to violate campaign law at the direction of a candidate for federal office. At the same candidate’s direction, he said he paid $130,000 to somebody to keep them quiet, which was later repaid by the candidate. He did not identify the candidate or the person who was paid, but those facts match Cohen’s payment to Clifford and Trump’s repayment.
This morning on the Economic Front we have no data of note from either the Euro-Zone or the UK. At 12.00 pm we have the latest US MBA Mortgage Applications. Finally we have the FOMC Minutes at 7.00 pm. I do not expect any surprises. The Fed is likely to highlight the strength of recent economic activity while the case for further gradual tightening remains solid. Meanwhile trade tensions is an emerging concern that needs monitoring and importantly the meeting occurred prior to the Turkey induced EM turmoil, so comments on international developments are likely to be mostly out-of-date.
September S&P 500
The Cash S&P made a new all-time high as expected before selling off on the news that former Trump Lawyer said in court that Trump had asked him to break campaign finance laws. This saw the S&P gap lower on the re-open of the Futures Market which enabled me to buy the market at my revised 2854 before unfortunately getting stopped out of this position at 2847. As it looked like the market went for my stop I bought the S&P here again at 2849 with a 2841 stop and a 2857 T/P level. I will leave. As I said to my Platinum Members as long as the S&P can hold the key 2790/2810 support level then I see a measured target of 3050 for the market. Of course this move will not be in a straight line but as long as we can negotiate the key September/October weaker months then we should see the market higher into year- end as the melt up phase for the market that I anticipate gathers pace. I still do not want to be short the market at this time. If I am stopped out of this trade I will be a more aggressive buyer on any further dip lower to 2827/2835 with a 2821 stop.
EUR/USD
Thankfully by the time you got to read yesterday’s commentary the Euro was trading close to 1.15 which gave anyone who did short the market a chance to get flat for at least a small gain. Subsequently the Euro rallied to my second sell level at 1.1590 before the market sold off. I am still short and I will leave my stop level unchanged at 1.1565. If I manage to cover this position here at 1.1165 I will again look to sell the Euro on any further rally to 1.1640/1.1680 with a 1.1725 stop. Meanwhile I will again raise my buy level to 1.1445/1.1485 with a 1.1405 stop.
September Dollar Index
I am still flat the Dollar which fell for the fifth consecutive trading session. Today I will now lower my sell level to 95.70/96.15 with a 96.45 tight stop. Yet again the 96% reading in the DSI showed what a fantastic technical indicator this reading is with the Dollar now 200 points lower than last week’s high print.
September DAX
I am still flat the DAX which again rallied above 12400 yesterday as thankfully we had no sell levels in the market. I am reluctant to chase this market higher and today I will leave my buy level unchanged from 12110/12185 with the same 12045 stop.
September FTSE
The FTSE was the weakest of the main Indices yesterday with the renewed strength in Sterling proving to be an obstacle to higher prices. Today I will lower my buy level slightly to 7430/7470 with a 7395 stop. Despite the weak market yesterday I still do not want to be short the market at this time especially ahead of the FOMC Minutes this evening.
Dow Rolling Contract
The Dow came within 50 points of my initial 25940 sell level before getting hit hard on the Cohen news. I am still flat and today I will leave my buy level unchanged from 25400/25560 with the same 25310 stop. I will also leave my sell level unchanged from 25940/26100 with a 26180 stop.
September NASDAQ
I am still flat the NASDAQ which was again the weakest of the US Indices. Today I will lower my buy level slightly to 7280/7320 with a 7240 lower stop.
September BUND
Yet again the Bund traded with a 163 Handle which it has now done for most of August and I am still flat. Today I will now lower my sell level to 164.05/164.45 with a lower 164.75 stop. I still do not want to be long the market at this time.
Gold Rolling Contract
I am still flat Gold which made a new recovery high above 1197. Today I will again raise my buy level to 1174/1184 with a 1165 tight stop.
Silver Rolling Contract
Late in yesterday’s trading session Silver traded lower to my revised 14.75 Buy level I am still long with a now higher 14.35 stop and a 15.05 T/P level. If any of the above levels are hit I will be back with a new update for my Platinum Members.
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