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The Week Ahead – Fundamentally
THE WEEK AHEAD FUNDAMENTALLY – KEY DATA TO WATCH OUT FOR
Following on from last week’s very weak NonFarm Payroll data market participants spent this week re-aligning their views on FED interest rate policy going forward and what this would mean for the US$.
The view is now that there will not be a rate hike at this month’s FED meeting and that there is only a 35% chance of a hike anytime in the next quarter.
The effect on the US$ was obvious, it fell. It fell the most against the commodity backed currencies including the AUD, NZD and CAD.
Asset classes which benefitted were commodities, and risk as measured by the S&P500.
China was closed for most of the week so there was little in the way of direction from the East.
This week we have a scattering of economic data, none of which on their own should make for increased volatility.
USD: Week begins on Wednesday for the USD when we have PPI and Retail Sales.
PPI is expected to fall by 0.2% from last month and Retail Sales is expected to remain static at last month’s 0.2%.
On Thursday we have four items. CPI is expected to fall fby 0.2% following last month’s fall of 0.1%.
Core CPI which excludes food and energy is thought to remain static at 0.1%.
Unemployment Claims is estimated at 269,000 and the Philly FED Manufacturing Index is anticipated to fall by 1.8.
On Friday we have the Consumer Sentiment number thought to rise to 88.8 from last month’s 87.2.
COT data shows that large commercials slightly increased their net short position in the US$ Index from 52,426 to 53,248. We maintain our position of SLIGHTLY BEARISH.
EURO: There is only one item of note for the Euro this week.
On Tuesday we the German ZEW Economic Sentiment figure which is expected to come in at 6.8 from last month’s figure of 12.1.
COT data for the Euro shows that large commercials very slightly increased their net long position from 102,410 to 108,507. We maintain our position of SLIGHTLY BULLISH.GBP: We start the week of on Tuesday with the release of CPI which like last month is anticipated to come in at 0.0%.
On Wednesday we have Average Earnings which expects to rise to 3.1% from last month’s 2.9% as well as the Claimant Count Change which is expected to drop by 2,300 from last month’s rise of 1,200.
COT data for GDP shows that large commercials increased their net long position from 11,414 to 18,888. We move from NEUTRAL to SLIGHTLY BULLISH. YEN: There is little in the way of any newsworthy items this week for the YEN bar the Monday release of the Monetary Policy Meeting Minutes.
COT data shows that large commercials reduced their net long position from 32,538 to 30,758. We maintain our NEUTRAL stance.AUD: We start on Monday with the NAB Business Confidence figure.
On Wednesday we have the Employment Change figure thought to be 7,200 from last month’s 17,400 rise and the Unemployment Rate number expected to remain unchanged at 6.2%.
COT data shows that large commercials slightly decreased their net long position from 69,579 to 62,785. We therefore maintain our SLIGHTLY BULLISH view.
CNY: Only one item of note for the CNY this week which takes place on Tuesday when we see the Trade Balance figure which is expected to fall from last month’s 60.2Bn to 47.8.
There is no COT data for the CNY.
COT DATA OF NOTE:
S&P500: The recent fall in the S&P has seen large commercials move their positions dramatically over the last three weeks. Last week large commercials increased their net long position substantially from 66,131 to 156,749. This is a 52 week high. We therefore have to continue to be BULLISH.
GOLD: Large commercials slightly increased their net short position slightly from 73,143 88,469. This is not a material move and we therefore maintain our stance of SLIGHTLY BULLISH.
SILVER: Large commercials have substantially increased their net short position from 30,106 to 49,502 which is fast approaching the largest 52 week net short achieved in the third week of May at 62,485. We therefore amend our stance from SLIGHTLY BEARISH to BEARISH in the short term.THOUGHTS FOR NEXT WEEK
It all hinges on the USD.
If this week’s USD weakness persists we can expect the rally in commodity backed currencies and commodities to continue their ascent.
It would seem that market participants are finally beginning to switch from recent gainers to laggards.
Our subscribers have been fortunate enough to have been made aware of this opportunity as we have gone long in a timely fashion on this week’s best performers and are currently sitting on healthy returns.
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