With the US market closed for the Independence Day holiday, the focus has been elsewhere and for the markets in both Asia and Europe. It has not been a big 24 hours as far as price action was concerned, the Eurostoxx 600 index off 0.29%, European bond markets with a modest bid tone, yields off fractionally. The German 10 year bond was almost unchanged/ lower on net by less than one basis point. Gold was little changed, up $3.80/oz. The largest currency move has been the Australian Dollar over the past 24 hours, the yen and KRW little changed after the Korean missile test. It was the AUD’s swift reaction to yesterday’s only-incremental change in the RBA’s post-Board statement, a materially larger reaction than for the Won after the launch of an Intercontinental Ballistic Missile from North Korea, a launch that’s also drawn the ire of a statement from the Chinese and the Russians.
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For anyone following my Platinum Service it was flat yesterday as apart from my existing long Silver position none of my calls got executed and is still ahead by 187 points for July, having made 1023 points 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.
While no one expected a change in the cash rate, the market was clearly priming itself for more, something that could be inferred as at least having a partly hawkish tilt. An expectation of a half move away from the RBA’s neutral monetary policy bias and/or a more upbeat statement on the economy’s progress and outlook was sought after recent comments from the Bank of Canada and others over the past fortnight. Instead, the RBA was not drawn in to the prospect of even half hinting removing some monetary accommodation and adding fuel to local and global yields and the AUD. The Bank played a very straight blocking bat indeed. The AUD having traded below 0.76 is back at 0.7630 as I write my commentary.
The Won, by contrast, was little moved after news on the missile test filtered through, USD/KRW trading at 1152, actually strengthening marginally to 1150/51 and also a little against the Japanese yen. The KOSPI was down by 0.58% in otherwise also soft Asia markets. It’ll be interesting to see whether the broader market in the US reacts at all to this latest North Korean episode to deflect any of its attention at all from Friday’s Non – Farm Payrolls. Unlikely if post-missile launch market price action is any guide.
In Europe, the Swedish Riksbank met and only partly joined the central bank party hinting at policy removal, staying on the periphery with the RBA. They left their repo rate unchanged at -0.5%. They did point to less chance of further easing being required, noting that the risk of setbacks were thought to have decreased. But they also cited the importance that the SEK not appreciate too rapidly and did not rule out the possibility that the Repo Rate could still be cut, if unlikely now.
Elsewhere in Europe, ECB Chief Economist Peter Praet and Governing Council member Nowotny (Austria) were both speaking. There were no great surprises from either, Praet saying that their inflation forecast scenarios are “crucially contingent” on very easy financing conditions. Nowotny referred to the long lags of monetary policy and that policy should be normalised as soon as the economy allows, more hawkish but not overly so.
NZ’s overnight dairy auction saw only marginally lower dairy prices, off 0.4%; iron ore, by contrast, was also lower, down $1.06/t after last week’s big gains.
Meanwhile the USD/CAD has risen by 0.4%, aided by more positive commentary from BoC Governor Poloz, hinting further in the rate hike direction. Canadian rate markets are now pricing in an 87% chance of a hike next week, up from 84%. Poloz said in a German newspaper interview that inflation should be well into an uptrend in 1H 2018 as the output gap closes.
This morning on the Economic Front we have German, Euro-Zone and UK Services/Composite PMI at 8.55 am, 9.00 am and 9.30 am respectively. The UK will also release New Car Registrations and Official Reserve Changes at the same time. At 10.00 am we have Euro-Zone Retail Sales and this is followed at 3.00 pm by US Factory Orders. Finally at 7.00 pm we have the FOMC Minutes from the June 14 Meeting.
September S&P 500
Unfortunately the S&P just missed my 2434 sell level before falling to an overnight low at 2422.25 and I am still flat. It will be interesting to see how the NASDAQ reacts after the US Markets re-open having been closed for the past 1 ½ trading sessions. If the FANG stocks sell-off then we will see the S&P trade lower. Today ahead of the FOMC Minutes I will leave my buy level unchanged from 2409/2416 with the same 2404 stop. If the market for whatever reason has an aggressive move lower I will be a buyer from 2387/2393 with a 2382 stop. I will also leave my sell level unchanged from 2434/2440 with the same 2446 stop.
The Euro traded in a narrow range as it tries to correct the severe overbought condition that exits at this time given the 93% bullish percentage in the latest Daily Sentiment Index reading. Today I will still be a seller on any rally higher to 1.1410/1.1450 with a 1.1480 stop. Given the extent of the DSI reading I still do not want to be long the Euro at this time.
September Dollar Index
No change as I am still a small buyer on any dip lower to 95.30/95.65 with the same 94.95 stop.
The DAX continues to trade in a narrow range as the market is now back within its Daily Bollinger Band having traded well outside it last Friday when we hit a 12303 low print. I am still flat the DAX and today I will now lower my buy level slightly to 12270/12325 with a 12230 tight stop. Despite the bearish price action I do not want to be short the DAX ahead of the NFP data on Friday.
Unfortunately the FTSE just missed my 7325 sell level with a 7320 high print before having a late day sell-off and I am still flat. With Sterling again weakening, this has helped the recovery in the FTSE and you really need to keep an eye on both Cable and EUR/GBP as the movements in these two currencies are certainly affecting the FTSE price at this time. Given the weakness in Sterling I will now raise my sell level slightly to 7345/7375 with a 7405 stop which is just above the key 7380 resistance level. My only interest in buying the FTSE is on a dip lower to 7200/7230 with a 7170 stop.
Dow Rolling Contract
No change as I am still a buyer on any dip lower to 21290/21360 with the same 21235 stop. As long as the Dow can stay over its previous March 1, all time high at 21169 it is very difficult to be short the market at this time as the price action continues to be positive.
I am still flat the Bund which continues to trade heavy in a severely oversold market. The Bund is now trading nearly 400 points lower since Dragi’s speech last Tuesday. Today I will now lower my buy range slightly to 161.05/161.45 with a 160.70 stop. Despite the extreme negative price action I still do not want to be short the market ahead of Friday’s NFP data.
Gold Rolling Contract
No change as I am still a buyer of Gold on any dip lower to 1209/1216 with the same 1203 tight stop. The 1210 is now key support for Gold as I look for the market to break back above 1225 given how oversold the precious metal is at this time.
Silver Rolling Contract.
No change as I am still long at 16.16 with the same 15.80 stop. The 15.70/16.00 level is now key support for Silver and a break and close below here could well see Silver accelerate lower to a 14 Handle. My position is large thus my tight stop. My T/P level remains unchanged at 16.35. If I manage to cover this position at my T/P level I will be back with a new update.