Weekly Fundamentals 20 Sept 2015

Last week was wholly about the FED. Would it raise the Fed Fund Rate for the first time in 111 months? The answer is no.
The reason the Fed did not raise is because had they done so they would not have been able to do so in the near future. Rates will only rise when there is a clear, sustained upward trajectory in inflation. In that scenario the FED will be able to raise consecutively if required. Had they done so last Thursday, their ability to make additional increases would have been curtailed.
Risk assets initially rallied then swooned as fears grow that values are far too elevated respective to their underlying economies.
A clear case of ‘buy the rumour, sell the fact’.

This week has little in the way of data with all focus in Euroland and the US.

USD: Four items this week for the USD, all at the end of the week.
On Thursday we have Core Durable Goods Orders expected at 0.2%. This figure excludes transportation items.
Unemployment Claims which is expected to that 268,000 filled for benefits and FED Chair Yellen speaks.

On Friday we have GDP number which is expected to show a growth of 3.7%.

COT data shows that large commercials decreased their net short position in the US$ Index from 59,722 to 46,316. We therefore maintain our position of SLIGHTLY BEARISH.

EURO:  Today we have the continuation of the Greek tragedy when Greeks are once again asked to vote. It is expected that SYRIZA will cling to power with a reduced majority.

On Wednesday we have both French and German Manufacturing PMI numbers. The former is expected at 49.2 which is an increase from 48.3 but still indicates contraction whilst the latter is expected to fall from 53.3 to 52.8.
Also on Wednesday ECB President Draghi speaks.

On Thursday we have German IFO Business Climate which is expected to fall from 108.3 to 107.8 and Targeted LTRO which is the total value of money the ECB will create and use to loan to Eurozone banks.

COT data for the Euro shows that large commercials slightly decreased their net long position from 108,445 to 102,410. We therefore maintain our position of SLIGHTLY BULLISH.GBP: There is no data for the GBP this week.

COT data for GDP shows that large commercials halved their net long position from 30,908 to13,699. We therefore amend our stance from BULLISH to SLIGHTLY BEARISH.

YEN: Only one item for the Yen this week which is Tokyo Core CPI on Thursday expected to come in at -0.2%.

COT data shows that large commercials substantially increased their net long position from 21,102 to 39,559. We therefore amend our stance from BEARISH to SLIGHTLY BULLISH.

AUD: There is no data for the AUD this week.

COT data shows that large commercials decreased their net long position from 84,684 to 66,468. We therefore continue to remain BULLISH.

CNY: Only one item for the CNY which is the Manufacturing PMI number on Tuesday expected to show a small rise from 47.3 to 47.6.

There is no COT data for the CNY.


GOLD: This week we see that large commercials decreased their net short position slightly from 55,979 to 32,979. We therefore change our stance fromSLIGHTLY BULLISH to BULLISH.

SILVER: This week we see that large commercials have reduced their net short position from 25,560 to 21,357. We therefore amend our stance from SLIGHTLY BEARISH in the very short term to NEUTRAL.


Not much in the way of data to drive markets either way so participants will continue to try and position themselves in light of last week’s FED inactivity.
What we may begin to finally witness is a re-allocation of resources away from the recent winners into those sectors which have been deeply sold off.
If the market views FED inactivity as ineptitude meaning they are reactive to the yield curve as opposed to pre-emptive then hard assets in the shape of commodities will begin to finally benefit.

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