Week ahead – fundamentally

Posted On 21 Nov 2015
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In last week’s piece we wrote that the week would be driven by events in France, its affect on the Euro, flight to perceived quality, USD strength and potential precious metal strength if they could overcome USD strength.
On the whole we were correct. The USD did receive a bid but not to the extent it could have, precious metals fell but not as hard as they potentially could have and risk as measured by the S&P500 rallied convincingly. The Euro fell marginally.
This week is light in terms of key data points. The FED has called for an unexpected closed door meeting on Monday for some reason, ECB president has called for inflation at all costs and the world seems to stumble from one terrorist attack to the next.
The week is shortened due to the Thanksgiving Day holiday in America on Thursday. many traders will take an extended weekend break. Of most importance to us fundamentally is COT data.

USD: The unexpected FED closed door meeting should result in a communication from it on Monday.

On Tuesday we have the GDP number which is expected to rise from last month’s 1.5% to 2.0%. We also have the Consumer Confidence number expected to rise from 97.6 to 99.3.
On Wednesday we have Core Durable Goods Orders which is expected to rise from last month’s negative 0.3% to a positive 0.5%. This measures the change in the total value of new purchase orders placed with manufacturers for durable goods, excluding transportation items.
Due to the Thanksgiving public holiday on Thursday Unemployment Claims is brought forward to Wednesday and is expected to be 273,000.
COT data shows that large commercials continued to increase their net short position slightly in the US$ Index from 53,316 to 57,966. We therefore marginally change our stance from NEUTRAL to SLIGHTLY BEARISH.
EURO: A light week for the Euro in terms of data but nonetheless volatility will be high as Europe lurches from one rumour, arrest, bombing scare to the next.
On Monday we have both the French and German Manufacturing PMI numbers. The former is anticipated at 50.7 and the latter at 52.2. Both numbers therefore indicate growth.
On Tuesday we have the German IFO Business Climate figure which is expected to grow marginally from 108.2 to 108.3.COT data for the Euro shows that large commercials again increased their net long position from 184,555 to 204,152. We therefore continue to remain BULLISH.

GBP: Only one item of news for the GBP this week which is on Friday when we have the GDP number thought to be unchanged from last month’s 0.5%.
Large commercials continued to increase their net long position from 36,901 to 45,232. We therefore remain BULLISH

YEN: On Tuesday we have the Monetary Policy Meeting Minutes.

On Thursday we have the Household Spending data which is expected to come in at 0.0% from the previous -0.4% and Tokyo Core CPI which is thought to be -0.1% from last month’s -0.2%.
COT data shows that large commercials again substantially increased their net long position from 97,686 to 111,224. We therefore remain BULLISH.AUD: Two items for the AUD.

On Tuesday the RBA Governor speaks.
On Wednesday we have the Private Capital Expenditure number which is expected to be a negative 2.8%, an improvement from last month’s -4.0%
COT data shows that large commercials continue to increase their net long position from 80,186 to 88,864. We therefore turn from SLIGHTLY BULLISH to BULLISH.
CNY: There are no data points for the CNY this week.There is no COT data for the CNY.

S&P500: Last week large commercials reduced their net long position from 137,487 to 100,317. As long as large commercials remain net long to have to err on the side of being bullish. We slightly alter our view from BULLISH to SLIGHTLY BULLISH.GOLD: Large commercials substantially reduced their net short position from 71,894 to 28,473. This is the third week running that large commercials reduce their net short position. We therefore alter our view from NEUTRAL to BULLISH.

SILVER: Last week saw large commercials continue to decrease their net short position from 50,129to 35,524. This is another move in the right direction but not quite enough for us to alter our view. We therefore remain NEUTRAL.THOUGHTS FOR NEXT WEEK

The week will be driven by the unexpected FED announcement after their closed door meeting on Monday, continued ongoing European government announcements/ statements regarding real and imagined terrorist plots, the shortened trading week in the USA and a general thinning of liquidity as we start the countdown to the Christmas and New Year holiday break.
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