The market has been rightly besotted with trade tension news with July 6 looming for the imposition of those additional tariffs from the US and China. There is also Non-Farm Payrolls on Friday, so it is going to be interesting to see how it pans out. But in the past 24 hours, the USD has been on the defensive in the wake of Monday’s comments from PBoC Governor Yi Gang that the market has taken as a halt/slowing to CNY deprecation that has been evident over recent weeks and weighing on Emerging Market FX, the AUD and the NZD.
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@tradernoble.com for details
For anyone following my Platinum Service it made 35 points yesterday and is now ahead by 65 points for July, 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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PBoC Governor Yi Gang said late Monday that China will keep the yuan exchange rate basically stable at a reasonable and balanced level, in equilibrium and with monetary policy prudent and neutral. The comments came after USD/CNY breached 6.70, so there was speculation this level might represent a line in the sand for the PBoC. CNY saw a swing of about 1% after the comments. After trading as high as 6.72 earlier in the day, USD/CNY finished at 6.6425. The comments followed three weeks of unusually significant CNY weakness which the PBoC attributed to a stronger USD and external uncertainties. There were also reports from traders of state banks aggressively buying the Yuan. Another PBoC official stated that China will not use the Yuan as a tool in trade conflicts.
And so now barely more than 24 hours on from when the AUD was testing 73 cents and the intervention of the PBoC Governor lifted the AUD back toward 0.74, trading this morning at 0.7410, the currency not damaged at all by the RBA rates on hold announcement, one more month stretching that to two years.
The NZD hit a fresh 2-year low of 0.6688 near the nadir in CNY weakness, with Monday’s Quarterly survey of business opinion offering no support, the survey showing business confidence falling to a 7-year low, with the market putting more weight on the soft activity indicators than the survey’s evidence of rising inflationary pressure. The Kiwi also reversed course after the PBoC comments, with the currency trading near its highs for the day despite a weak GDT world dairy auction overnight. The GDT price index fell by 5.0%, with whole milk powder down 7.3%, larger falls than expected.
Adding to the reversal of the USD was an out-performing Swedish Krona after the Swedish Riksbank delivered a more hawkish than expected policy statement, with two out of the six voters calling for an earlier tightening. Sterling was supported after Saunders, a known hawk and one of the three that voted for a rate hike at the last BoE meeting, said that the Central Bank needed to raise rates faster than the market expects. Also helping the Pound was ITV’s Peston, a veteran British political reporter, who cited government insiders in saying that PM May’s Brexit plan is the ‘’softest possible exit’’. He outlined some of May’s plans to support his case. May is presenting her plan to her Cabinet colleagues at Chequers on Friday.
Meanwhile, further news from the Chinese side and in the US suggest that the trade issue remains unresolved with the atmospherics remaining testy. A Chinese court has temporarily banned chip sales of US tech company Micron Technology, ruling in favour of a Taiwanese competitor. While the case was part of a broader dispute between the two companies, the announcement came soon after the US moved to block China Mobile from entering the US market on national security grounds, fuelling speculation the decisions were part of the tit-for-tat trade war. Adding to the negative trade tension mood music, China’s customs agency unexpectedly issued trade data that showed growth in exports to the US slowing.
If it had not been for the Chinese Governor’s comments on Monday, the AUD could have easily been testing even lower levels. And with July 6 looming and beyond, it is not hard to envisage further AUD and NZD trade tensions headwinds picking up in pace .
This morning on the Economic Front we have Euro-Zone and UK Composite PMI at 9.00 am and 9.30 am respectively. With the US Markets closed today for the July4th Holiday the only US Data release is MBA Mortgage Applications at 12.00 pm.
September S&P 500
Another huge reversal in the S&P late in yesterday’s shortened trading session with the S&P falling from an intra-day high of 2741.50 to a low of 2711 with the last 20 Handles of this fall happening in just 20 minutes. This move lower saw the S&P hit my average buy level at 2717 before the market rallied to my revised 2720 T/P level overnight as emailed earlier to my Platinum Members and I am now flat. With the 6th of July deadline for the US/China Tariffs only two days away I would expect markets to remain nervous. Not helping today is the fact that the US Markets are closed with most traders not back at their desks until next Monday. Today I will again look to buy the S&P on any dip lower to 2696/2706 with a 2689 stop. Despite the negative price action I do not want to be short the S&P ahead of the NFP data on Friday.
EUR/USD
I am still flat the Euro and today I will again raise my buy level to 1.1590/1.1630 with a 1.1545 stop as the Euro continues to build value off last week’s 1.1510 Double Bottom. I still do not want to be short the Euro at this time.
September Dollar Index
No change as I am still a seller on any rally higher to 94.70/95.10 with a 95.45 lower stop. The Dollar has good support from 93.00/93.40 and I will be a buyer on any dip to this area with a 92.70 stop.
September DAX
The DAX did not follow the US Indices lower yesterday which was a surprise when you see the strength of the Euro. I am reluctant to chase this market higher despite the positive price action and today I will leave my buy level unchanged from 12110/12190 with the same 12055 stop.
September FTSE
Overnight the FTSE just missed my 7480 buy level and I am still flat. With Sterling stronger I am now going to lower my buy level to 7420/7460 with a 7390 stop. The Bank of England’s Deputy Governor Woods speaks this morning at 9.05 am which may add to the volatility depending on what he says about inflation and Brexit.
Dow Rolling Contract
Even though the Dow fell over 300 points from yesterday’s intra-day high the internals of the market were positive with the McClellan Oscillator improving to close with just a -10 reading. It was only last week that the MO was near -150. Advancers exceeded Decliners while New Highs were greater than New Lows which is strange when you have such a late aggressive reversal. As I was long the S&P at two different levels I did not buy the Dow yesterday and I am still flat. If you did buy the market, the Dow had a nice rally off its 24140 low print by rallying to an overnight high at 24238. Today I will only be a buyer of the Dow on any further dip lower to 23960/24090 with a 23850 stop. For me to turn bearish of the Dow I need to see the market break initial support at 24000 and close below the real support level at 23700. For these reasons I still do not want to be short the market at this time.
September NASDAQ
Having already bought the S&P I waited to buy the NASDAQ which I did near the close at 7028. I am still long and will only add to this position on any subsequent move lower to 6980 with a 6945 stop. Meanwhile I will now lower my T/P level on this position to 7060. If any of these levels are hit I will be back with a new update for my Platinum Members.
September BUND
There is no stopping the rally in the Bund with the market trading higher to my 162.70 sell level in the last few minutes. Given the price action in the Bund I have decided to cover this short position here at 162.65 and I am now flat. Today my only interest in selling the Bund is on a rally higher to 163.10/163.50 with a 163.80 stop.
Gold Rolling Contract
It has taken a few days but finally the Daily Sentiment Index has again proved what a fantastic trading signal it is with Gold rallying over $20 from yesterday morning. I am not long Gold myself as I have a large long Silver position which thankfully has followed Gold higher. Today I will now raise my buy level in Gold to 1242/1250 with a 1234 stop which is just below Monday’s low print.
Silver Rolling Contract
No change as I am still long Silver at 15.95 with the same 16.20 T/P level and 15.55 stop. If any of these levels are filled I will be back with a new update for my Platinum Members.
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