The Week Ahead – Fundamentally

In last week’s report we concluded that post the FOMC meeting the recent order of things would resume, i.e. the USD would continue its path of least resistance which in our opinon is lower and that commodities would benefit as a result. We also believed that this week’s COT data would show that.

We were hasty in that prediction. Whilst COT data is beginning to improve, it has yet to do so for commodities. We continue to anticipate that it will in the near future.

This week is very data heavy particularly for the GBP and the USD and as usual as this week includes the first Friday of the month we have the volatility inspiring NonFarm Payroll figure to look forward to.
We also have a number of central bank announcements to look forward to.
USD: Data for the USD starts on Tuesday when we have Manufacturing PMI which is expected to come in slightly lower than last month’s reading of 50.2 at 50.0 showing neither expansion nor contraction.
On Wednesday we have a number of data points. We start with the ADP NonFarm Employment Change which excludes government hiring. This is expected to be 183,000 from last month’s 200,000. Next is the Trade Balance number which is expected to show a reduction in the deficit of 48.3B at 42.7B. We also have the Non Manufacturing PMI at 56.6 only slightly lower than last month’s 56.9.
Most importantly we hear Fed Chair Yellen Testifying to the House Financial Services Committee.
Thursday sees the usual Unemployment Claims number which is expected to show a slight increase of 3,000 new claimants at 263,000.
Friday is the all important day when we have Average Hourly Earnings which is expected to rise for 0.0% to 0.2%, the NonFarm Employment number at 179,000 from last month’s very weak 142,000 and the Employment rate figure which is expected to remain unchanged at 5.1%.

COT data shows that large commercials slightly increased their net short position in the US$ Index from 34,750 to 42,663. We therefore alter our position from SLIGHTLY BULLISH to NEUTRAL.

EURO: Data for the Euro is light but nevertheless highly important.
We only have one item on Wednesday when the ECB President speaks.COT data for the Euro shows that large commercials substantially increased their net long position from 79,329 to 134,450. We therefore amend our position from SLIGHTLY BULLISH to BULLISH.
GBP: A raft of data this week for the GBP.
On Monday we have Manufacturing PMI which is expected at 51.3 from last reading of 51.5.
On Tuesday we have Construction PMI which is expected to show a slight fall to 58.9 from 59.9.
Wednesday sees Services PMI anticipated to increase from 53.3 to 54.6.
A great deal of data on Thursday.
We have the BOE Inflation Report.
The MPC Official Bank Rate Votes expected to remain unchanged at 1-0-8 meaning that one member voted for an increase, zero members for a reduction and eight to leave rates unchanged.
The BOE Monetary Policy Summary.
Finally we have the Official bank Rate which is virtually guaranteed to remain at 0.5%.
Finally on Friday we have Manufacturing Production number estimated to show a slight reduction from 0.5% to 0.4%.
There has been a reasonable shift in large commercials expectations for the GBP. They have moved from last week’s net small short position of 345 to a small net long of 7,695. This is a step in the right direction but not enough for us to change our view greatly. We therefore alter our view slightly from VERY BEARISH to BEARISH. YEN: Unlike last week which was a busy one for the YEN this week is very light with only one data point of note which is on Wednesday when we have the Monetary Policy Meeting Minutes.
COT data shows that large commercials increased their net long position from 13,067 to 55,204. We therefore alter our view from NEUTRAL to SLIGHTLY BULLISH.AUD: Sunday night is the start of AUD data when we have Building Approvals forecasted at 1.8%.
On Monday we have the Cash Rate expected to remain unchanged at 2%. This is the rate charged on overnight loans between financial intermediaries. More importantly we have the RBA Rate Statement.
On Tuesday we see Retail Sales anticipated to remain at 0.4% and the Trade balance number expected to decline from -3.10B to -2.85B.
On Wednesday we hear from the RBA Governor.
Lastly on Thursday we have the RBA Monetary Policy Statement.
COT data shows that large commercials very slightly decreased their net long position from 50,636 to 49,145. We therefore maintain our position of NEUTRAL.

CNY: Only one item for the CNY this week.

On Sunday we have Manufacturing PMI thought to show a small increase from 47.2 to 47.7. Whilst it may be an increase it is still below the 50 level hence indicating contraction.There is no COT data for the CNY.
S&P500: Last week large commercials slightly increased their net long position 185,049 187,506. This is at a 52 week rolling high, however the pace at which large commercials have grown their net long position is beginning to abate. We therefore continue to be BULLISH.GOLD: Large commercials very slightly increased their net short position from 163,300 to 165,848. Whilst the rate at which large commercials have over the last few weeks been growing their net short position abated this week, any large commercial short position greater than 100,000 is negative. We therefore maintain our stance of BEARISH.SILVER:  Similar to the Gold picture, whilst we continue to witness growth in large commercials net short position the pace has significantly reduced. Last week saw large commercials increase their net short position from 66,800 to 69,373. This is now the largest 52 week net short achieved. We therefore remain BEARISH.THOUGHTS FOR NEXT WEEK

This week everything hinges on the Friday NonFarm Payroll data. Add other Central bank activity, FED Chair testimony and a large number of key data points and we have the makings of heightened volatility.
We were hasty to predict that COT data for the week would show an improvement for commodity bulls, However the first signs are most certainly visible in the currencies as we witness reasonable shifts in large commercial positions away from the USD.
Fundamentally we continue to favour the commodity currencies and commodities, for timely, accurate trade signals it is advisable to follow our STTS service.

For those who want to join the lucky ones receiving real time, accurate and 100% honest trade signals please visit and subscribe here.Stay nimble. Good luck trading.


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