One of the big news from a relatively volatile trading session has come from the JOLTS report showing the gap between job openings and actual hiring’s in the US is now the widest ever. The Fed would argue that this is a signal of a tightening labour market and eventually higher wages pressures should help bridge or narrow this gap. Reaction to the data pushed the US Dollar and US Treasury Yields higher. But then late in the New York session President Trump warned that threats from North Korea “will be met with fire and fury like the world has never seen”. US Treasury yields and US equities moved lower on the news, but reaction in currency markets has been fairly muted so far.
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For anyone following my Platinum Service it made 43 points yesterday and is now ahead by 284 points for August, having made 1096 points in July, 1023 in June, 1071 in May, 1376 in April, 1335 in March, 1481 in February and 1734 in January. Since I started this New Platinum Service in June 2015 it has averaged a monthly gain of over 1700 points.
The US JOLTS report revealed Job Openings surged to a record 6.2m in June and showed fewer people quitting their jobs and now unfilled jobs are 28% higher than the previous peak in 2007. So the US labour market tightened again in June and in theory this suggests higher wages pressures should eventually emerge as companies are forced to increase their wages in order to attract workers. Thus the data keeps the Fed on track for another hike latter this year, but with wages pressures not yet showing in higher average hourly earning the market remains sceptical. Earlier, the NFIB small business survey rose to 105.2 from 103.6. The first rise so far this year.
Reaction to the JOLTS report triggered a decent jump in the USD (DXY +0.60) with the Euro the biggest mover in G10 currencies. Ahead of the data release, the Euro was trading around 1.1820, dropping just over one big figure on the news to then settle around 1.1750. In contrast the AUD and NZD fell about 0.50% on the news. After trading to a high of 0.7943, the AUD fell to a low of 0.7887 following the JOLTS report, but later in the session it recovered a bit of ground and now trades at 0.7915. Meanwhile the downward trend on the NZD established late in July remains in place with the JOLTS report adding further downward pressure on the Kiwi. NZD currently trades at 0.7330 and it is the biggest G10 loser, down 0.46% on the day.
In terms of the recent NZD weakness one analyst that I respect notes that we are effectively seeing a reversal of what we saw in the lead-up to the May MPS. Back then, the market was convinced that the Bank would adopt a more hawkish tone and yet it didn’t. The Bank held the line and maintained a neutral stance. Now the market is convinced that the Bank will adopt a more dovish tone and pricing has moved such that there now might be room for some disappointment on that score. So now, even a more dovish tone runs the risk of leading to some profit-taking on the day, seeing a modest reversal of recent trends in the NZD and rates, while the Bank holding its ground would see an even larger reaction.
The Japanese Yen is the only G10 currency that has outperformed the US Dollar. Notably, however, much of the outperformance came before the JOLTS report. JPY lost a bit of ground on the job news, but as UST yields retraced the initial move higher, JPY regained all its lost ground and now trades at ¥110.34, up 0.39% on the day.
So although JPY is stronger, its strength has not come from a typical safe haven bid. Reaction to Trump’s warnings to North Korea has so far elicited very little reaction in currencies. In contrast US equities have ended the day down between -0.15% and -0.24% with most of the losses recorded after President Trump’s press conference.
10y UST yields started yesterday’s trading session very steady around 2.255% with the JOLTS report triggering a move to 2.28875%. Some of the move was retraced shortly after the report and then President Trump’s comments exerted additional downward pressure. In the end 10y UST closed at 2.2619%, little changed on the day.
This morning on the Economic Front we have no data from either the Euro-Zone or the UK. At 1.30 pm we have US Non-Farm Productivity/Unit Labour Costs. Finally at 3.00 pm we have Wholesale Trade Sales/Inventories.
September S&P 500
It has taken two months but finally the S&P had its first sizeable Downside Key Day Reversal since June 9th with the S&P breaking above its previous all-time high at 2480.50 to hit a new record at 2488.50 before spending the rest of the session trading lower as the market gave up over 20 Handles. This was a classic key day reversal and may be the start of something meaningful. For this to happen we need to break and close below 2450. Yesterday’s late sell-off saw the S&P trade lower to my 2468 buy level before bouncing into the close and I used this small rally to cover my long position at my revised 2471.50 T/P level and I am now flat. Today I will now look to sell the S&P on any rally higher to 2477/2483 with a 2489 wider stop. My only interest in buying the market is on a dip lower to 2452/2458 with a 2457 stop.
There is no doubt that the record number of job openings as reported in yesterday’s JOLTS data gave the US Dollar a boost with the Euro having come close to my 1.1860 sell level before again testing last Friday’s 1.1728 low print. With sentiment at extreme levels and equity markets finally seeing some selling after a record 10 consecutive trading sessions of new record highs in the Dow, the Euro may be about to see some profit taking. I am still flat the Euro and today I will now lower my sell level to 1.1790/1.1830 with a 1.1865 tight stop. The Euro has good support at 1.1685 and today I will be a small buyer on any dip lower to 1.1650/1.1680 with a 1.1625 tight stop.
September Dollar Index
Frustratingly the Dollar just missed my 93.05 buy level with a 93.12 low print before rallying 60 points. Subsequently I emailed my Platinum Members to buy the Dollar on any move lower to 93.50 and this was later filled just before the New York close. I am still long and will only add to this position on any further move lower to 93.15 with a 92.90 stop.
Yesterday was a frustrating session with the DAX just missing my 12160 buy level before having a nice rally and I am still flat. With the Euro weaker I was disappointed to see how easily the DAX rejected the now major resistance level at 12295/12325 as it eventually followed the US Indices lower into the close. Today I will now lower my buy level slightly to 12060/12120 with a 12010 stop. I still do not want to be short the DAX at this time.
With Sterling continuing to weaken it is very difficult to be short the FTSE especially with the large difference between the Cash price and the September Contract. However in light of the KDR in the S&P, I will now lower my buy level in the FTSE to 7360/7390 with a 7330 stop.
Dow Rolling Contract
After 10 consecutive up days for the Dow we finally saw the Dow close lower having earlier made yet another all-time high. I am still short in very small size at 21885 and I will continue to hold this position. Despite yesterday’s reversal I am not going to add to this position and just watch the market from here to see if we can build some downside momentum. It is extremely difficult to justify what has happened in the Dow over the past two months especially with the McClellan Oscillator trading in negative territory Last night the MO closed with a -92 print.
I am still flat the Bund and today I will now lower my sell level slightly to 163.70/164.00 with a 164.20 stop. I still do not want to be long the Bund at this time.
Gold Rolling Contract
Gold also came close to my 1246 buy level before eventually rallying after the US equity markets came under pressure and I am still flat. I am still nervous about Gold especially given its sideways trading action which has persisted for most of this year. Today I will therefore leave my buy level unchanged from 1238/1246 with the same 1232 stop.
Silver Rolling Contract
So far Silver is holding above its 16.00/16.25 support level. Yesterday after Silver rallied I cover my long 16.30 position at my revised 16.38 T/P level and I am now flat. Today I will again look to buy Silver on any dip lower to 16.00/16.25 with a 15.75 stop.