Unsurprisingly, not a big trading session in global markets with the US out for Independence Day. It has been a narrowly mixed Wednesday as far as European stocks go, US stock Index Futures have traded up by about 0.3%, European bond yields are a touch lower and in currencies, the only notable movers have been the Swedish Krone (up over 0.5% against the US dollar) and the British Pound (+0.3%), while overnight the Euro has firmed to sit at 1.1700 this morning.
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Moves up in both currencies are due to shortening odds on central bank policy tightening this year. In Sweden, this is after Riksbank governor Skinsley reinforced the case for a rate hike towards the end of the year, and in the UK on a stronger than expected June services PMI (55.1 up from 54.0 in May). For all the Brexit uncertainty, business services have been going gangbusters it seems, while the apparently wonderful early summer weather has boosted consumer spending. And this before the effects of England’s easy cruise to victory against Columbia on Tuesday and the now not so long odds that the Word Cup may soon be ‘’Coming Home’’. What could possibly go wrong? (Um, perhaps the British Cabinet showdown commencing at Chequers tomorrow?)
The Euro has recovered from an early European day dip to trade higher this morning, after a Bloomberg source report suggesting that some ECB Council members were unhappy about market speculation that the first ECB rate rise would not come until as late as December 2019. This is after what is generally seen as a beautifully choreographed ECB Council Meeting last month in which President Draghi managed to placate both the hawks, with a commitment to ending QE this year, and the doves by suggesting no first rate rise before the end of summer 2019 (the precise definition of which was left suitably vague).
In other news, the sound of the clock ticking down to the 6th July deadline for the imposition of tariffs by both the US and China on $34bn of each country’s imports from one another gets louder, with not the merest hint anywhere that there could be a stay of execution from the White House. Speculation that China could actually move 12 hours ahead of the US, given the time difference between Beijing and Washington, have been scotched by Chinese authorities’s overnight, saying that China will only ever retaliate against US tariff actions, not move in front of them.
Conflicting reports about China’s intentions with regard to the currency have circulated in the last 36 hours. After Tuesday’s comments directly sourced to PBoC Governor Yi Gang that the currency would henceforth be maintained at a ‘’stable and balanced level’’ a reference presumed to refer to the CNY basket but which created the strong impression that 6.70 on USD/CNY was now something of a line in the sand, a Reuters report, based on talks with insiders, says that ‘’China is comfortable with a weakening yuan, intervening only to prevent any rapid and destabilising declines or to restore market confidence, as the economy loses momentum and faces further risks from a heated trade dispute with the United States’’.
For now, USD/CNY sits where it was shortly after yesterday’s fix – and reported selling of USD/CNY by state-owned banks – near 6.64.
This morning on the Economic Front we already had the release of German Factory Orders printing +2.6% versus 1.1% expected. Next we have the US ADP Employment Change at 1.15 pm. At 1.30 pm we have the US Weekly Jobless Claims and this is followed at 2.45 pm by ISM Non-Manufacturing at 3.00 pm. Finally we have the FOMC Minutes from the June 13 Meeting.
September S&P 500
With the US Cash Markets closed the Futures Market trading in a narrow range as the market goes on hold ahead of the Chinese Tariffs tomorrow and of course the Non-Farm Payrolls. Not helping matters is the under staffed dealing rooms with most traders still on holidays until next Monday. I am still flat the S&P and today I will leave my buy level unchanged from 2696/2706 with the same 2689 stop. Despite the late sell-off in the US Indices on Tuesday I still do not want to be short the S&P at this time.
The Euro has been frustrating to trade over the past few weeks with the market again juts missing my buy level with a low of 1.1631 before rallying 70 points overnight. The longer that the Euro can hold the Double Bottom of 1.1510 the greater the chances of a Euro break higher. However for this to happen we need to take out strong resistance at 1.1775. Today I will be a small seller from 1.1770/1.1810 with a 1.1840 stop. Meanwhile I will now raise my buy level again to 1.1600/1.1640 with a 1.1565 stop.
September Dollar Index
No change as I am still a buyer on any dip lower to 93.10/93.50 with a 92.75 stop. I no longer want to be short the Dollar at this time.
Despite the Euro trading higher this morning the DAX is unchanged which is surprising when you see the US Indices trading lower. I am still flat the DAX and despite the positive price action I am reluctant to chase this market higher and I will again leave my buy level unchanged from 12110/12190 with the same 12055 stop. I still do not want to be short the DAX at this time.
No change as I am still flat the FTSE as we wait for Bank of England Governor Carney who is speaking in Newcastle this morning at 11.00 am. I will now raise my buy level to 7440/7480 with a 7405 stop. I still do not want to be short the FTSE at this time.
Dow Rolling Contract
The Dow traded to a low of 24126 overnight which just missed my initial 24090 buy level and I am still flat. Today will be an interesting session following the close of the markets yesterday especially as the internals closed positive on Tuesday despite the late 300 point sell-off. Today I will leave my buy level unchanged from 23960/24090 with the same 23850 stop. As mentioned yesterday the Dow needs to break initial support at 24000 followed by stronger support at 23700 before I will look to setup a more long-term short position.
As I wanted to bank some points for yesterday’s session I lowered my T/P level on my 7028 long NASDAQ position to 7043 and I am now flat. Today I will again look to buy the market on any dip lower to 6950/6990 with a 6910 stop. Remember the key support level for the market is at 6850, a break and close below will be a sell signal for next week.
I am still flat the Bund which continues to trade near a record low yield of just 30 bps. Today I will lower my sell level slightly to 162.70/163.15 with a 163.45 stop.
Gold Rolling Contract
Gold traded in a narrow range yesterday and I am still flat. Today I will lower my buy level slightly to 1239/1247 with a 1232 stop as I still do not trust this market to move higher despite the near record low DSI reading at this time.
Silver Rolling Contract
With Silver failing at the 16.15 resistance level I lowered my T/P level on my aggressively long 15.95 position to 16.10 as emailed to my Platinum Members and I am still flat. Today I will again look to buy Silver on any dip lower to 15.65/15.95 with a 15.35 stop.