Fundamentals – Week ahead 01 August 2015

Posted On 01 Aug 2015
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Last week was punctuated by extreme bouts of intra-day volatility in thin, volume less markets.

Main focus continued to be the gyrations in the Chinese equity markets, the $ strength and the commodity sector debacle.

Thin markets accentuate movements. Accentuated movements results in stops being taken out. the more stops that are hit, the more volatile markets become. It is a vicious circle that feeds on itself.
This week is a big one in terns of data for all of the products we cover with the exception of the Euro where there is none.
As the week incorporates the first Friday of the month we have the much anticipated NonFarm Payroll number. A figure that is associated with volatility in a thin market. Will be interesting.
The first week of the month also means lots of PMI data.
USD: $ news starts on Monday when we have Manufacturing PMI anticipated at 53.6.
On Wednesday we have a raft of news starting with ADP NonFarm Employment estimated at 211,000. This figure differs from NonFarm at the end of the week as it also excludes government workers. This is followed by the Trade balance expected at -42.2Bn and Non-Manufacturing PMI thought to be 56.4.
on Thursday we have the customary Unemployment Claims figure which is estimated to show that 269,000 joined the ranks of claimants.
On Friday the much waited for NonFarm Payroll and the Unemployment Rate expected at 224,000 and 5.3%.
COT data shows that large commercials very slightly decreased their net short position in the US$ Index from 76,359 to 74,563. BEARISH.
EURO: There is not data for the Euro this week.

COT data for the Euro shows that large commercials slightly decreased their net long position from 153,115 to 140,919. BULLISH.

GBP:  Plenty of news for the GBP.
On Monday we have Manufacturing PMI thought to be 51.6.
On Tuesday we have Construction PMI expected at 58.6.
Wednesday sees Services PMI at 58.1.
Thursday is a big day. We start of with Manufacturing Production expected to show a small rise of 0.2%. This is followed by the BOE Inflation Report, the MPC Official Bank rate Votes thought to show 2-0-7. This will be the first time that two members may vote for a rate increase. Then the Official Bank Rate expected to remain unchanged at 0.5% and lastly the BOE Governor speaks.
COT data for GDP shows that large commercials substantially decreased their net long position from 19,635 to 4,622. We are therefore changing our stance from SLIGHTLY BULLISH to NEUTRAL.
YEN: Two items for the Yen.
On Thursday we have the Monetary Policy Statement.
Friday we have the BOJ Press Conference.

COT data shows that  large commercials very slightly decreased their net long position from 99,635 to 99,232. We therefore remain SLIGHTLY BULLISH.

AUD: Retail Sales and the Trade Balance start the week for the AUD on Monday. The former is expected to be 0.4% and the latter -3.02Bn.
On Tuesday we have the Cash rate at 2.00%. This is the rate that financial institutions charge each other for overnight borrowings.
Wednesday sees both the Employment Change number and the Unemployment Rate. The former is thought to be 10,100 and the latter 6.1%.
Lastly on Thursday we have the RBA Monetary Policy Statement.

COT data shows that large commercials increased their net long position from 70,911 to 81,970. This is now approaching their largest net long in March which stood at 107,717. We therefore move from SLIGHTLY BULLISH to BULLISH.

CNY: On Sunday evening we have the Final Manufacturing PMI expected to be 48.3.
On Saturday 8/8 we have the Trade balance number thought to be 53.4Bn and CPI at 1.5%.
There is no COT data for the CNY.
OTHER COT DATA OF NOTE: Going forward we are adding COT data for products that stand out.
GOLD: Large commercials reduced their net short position from 21,584 to 15,266 They are essentially flat which is more than SIGNIFICANTLY BULLISH.
Interestingly Hedge Funds are now net short by 14,633 contracts which is the first time they have done so since 2006.
SILVER: Large commercials slightly increased their net short position from  -11,167 to -12,073. Like gold this is very, very close to their lowest net short position over the last 52 weeks and therefore continues to be SIGNIFICANTLY BULLISH.
CAN$: Large commercials net long position sits at an all time high of 81,035. SIGNIFICANTLY BULLISH.

OUR VIEW A lot of data in thin markets. Much volatility and potentially surprises.

A week in which the markets will potentially again ensure the weak majority fall by the wayside and the small minority benefit.
A big week with lots of data. In the UK we may witness the MPC becoming more hawkish on rates.
PMI data all over the world. Most attention will focus on the Chinese numbers which will affect the commodity currencies.
As an aside the global financial picture is precarious and one might assume that weakness in the precious metals is more a generation of liquidity needs as opposed to a fundamental negativity.

Stay nimble. Good luck trading.



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