Fundamentals for the Week Ahead – 30 May 2015

Posted On 30 May 2015
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In last week’s report we wrote that the three day G7 meetings would result in volatility. In fact very little in the way of any substance came out of the meetings and the markets behaved as if they were not taking place at all.
This week however will be different as it is the first week of the month and therefore on Friday we have the US Non Farm Employment number and the Unemployment Rate.
The week is a busy one with PMI data and an OPEC meeting on Friday.
From now on the report will include COT data for the currencies. COT is important as it shows how the large commercials who use the currencies in their day to day operations anticipate near term future movements. A full description of COT can be read in our comprehensive glossary here.
USD: Monday sees the release of Manufacturing PMI thought to come in at 51.9.
On Wednesday we have the ADP Non-Farm Employment Change figure. This figure differs from Friday’s number as it excludes both farm and government workers. the figure is anticipated at 200,000. We also have the Trade balance number at -44.2Bn and Non-Manufacturing PMI estimated at 57.2.
On Thursday we have the customary Unemplyment Claims figure which is guesstimated to show that 277,000 joined the ranks of claimants.
On Friday Non-Farm Employment Change is thought to be 226,000 and the Unemployment Rate 5.4%.
COT for the $ as measured by the $ Index shows a small increase in large Commercials shorts who are now approximately 70,000 contracts short which is close to the 52 rolling week low of 100,000. This is $ bearish.
EURO: Two items for the Euro both on Wednesday. Firstly we have the Minimum Bid rate. This is the rate on the main refinancing operations that provide the bulk of liquidity to the banking system. It is expected to remain unchanged at 0.05%. More importantly we have the ECB Press Conference. Greek news will dominate as per usual.
COT data shows that large commercials slightly increased their net long position from last week to just under 210,000. This is EURO bullish.
GBP: On Monday we have Manufacturing PMI estimated at 52.7.
On Tuesday we have Construction PMI estimated at 55.1.
On Wednesday we have Services PMI estimated at 59.2.
Thursday is the most important day as we have both the Official Bank Rate thought to remain unchanged at 0.5% and the MPC Rate Statement.
COT data for GBP shows that large commercials slightly increased their net long position from last week to just under 27,000. Whilst this is slightly bullish it is some distance from the 52 rolling week high of nearly 70,000.
YEN: Unlike last week data for the YEN is very light this week with only one item of interest.
On Monday we have Average Cash Earnings which is thought to show growth of 0.4%.
COT data for the YEN is interesting. Large commercials greatly increased their net long position from 70,583 to 117,958 contracts. last week 65% of large commercials were bullish. This week the figure is 74%. This is a significant increase.
AUD: A busy week for the AUD.
On Monday we have Building Approvals expected to show a decline of 1.7%.
On Tuesday we have both the Cash rate and the important RBA Rate Statement. The Cash Rate is expected at 2%.
On Wednesday we have Retail sales anticipated to be 0.3% and the Trade Balance expected at -2.11Bn.
COT data for the AUD shows that large commercials slightly increased their small net long position to approximately 10,000 contracts.
CNY: There are only two data points for the CNY both on Monday. Firstly we have manufacturing PMI estimated at 50.2 and the HSBC Manufacturing PMI which is anticipated to be lower at 49.2.
there is no COT data for the CNY.
OUR VIEW: This week will be volatile in light of the fact that we have the Unemplyment numbers on Friday.
Everything continues to hinge on whether the USD, after its recent fall has re-commenced its ascent and that therefore the recent fall was merely a correction to wipe out as many stops as possible or the beginning of a series of lower highs. Fundamentally we favour both scenarios. Longs established at/above the 100 level have been taken out, the subsequent bounce has sucked in a few more longs in time for a resumption of the move lower.
Remember the market benefits the small minority at the expense of the vast majority.

Stay nimble. Good luck trading.



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