Article / 07 August 2017 at 3:27 GMT

Macro Monday: US dollar reversal? — #SaxoStrats

Global Macro Strategist / Saxo Bank Group - Singapore Hub

  • US data nonfarm jobs data released on Friday beat expectations
  • Equities have hit fresh highs on Wall St
  • Iron ore spot prices have made gains, giving the ASX a lift

By Kay Van-Petersen

Summary of the past week
  • Strong US data on Friday. Beat in Headline and Average hourly earnings.
  • China Caixin leading indicators beat strongly, global outlook off to a strong start.
  • BoE turns dovish, cuts growth but keeps options open for rate hikes.
  • Equities: new highs in US, Eurozone up and Asia mixed.
  • Forex: DXY reversal on Friday off US data, NZD lagging. USD basing.
  • FI: US slightly wider, bunds close below key 48-50 basis point level.
  • Commodities: Mixed, iron ore continues to fly. Silver hurt on US data.
The COT report
  • There was no report; this will resume next week, when Ole Hansen returns from leave.'
The week ahead
  • Key Focus:  Friday US Inflation, Thursday RBNZ
  • Central Banks: RBNZ 1.75% e/p (August 10) PH 3.0% e/p (10) MX 7.00% e/p (August 10)
  • Fed Speakers: James Bullard (August 7), Neel Kashkari (August 7/August 11), Dudley (August 10) Kaplan (August 11)
  • Other: Hols AU & CA (August 7), JP (August 11), RBA Lowes (August 11)
Economic data
  • US: JOLTS, Inv., PPI, CPI 1.8%e 1.6%p CORE 1.7% e/p (out on Friday) .
  • China: FX Reserves, TB, CPI +1.5% e/p, PPI +5.6%e +5.5%p, New Loans .
  • Eurozone: Regional IP & CPI JP: Tertiary Data UK: House Prices, Manufacturing Prod, TB
  • Australia: Home Loans .
  • New Zealand: 2 year CPI Exp., Manf. PMI, Food Prices.
Positioning and sentiment
My main thoughts remain unchanged from the previous week
  • QE: going in inflationary; going out deflationary? This has not been the case
  • North Korea: saying “the time for talk is over”. Huge risks.
  • Forex and FI divergence cometh: Unlikely to stabilize at the current levels, have added FI to this divergence idea.
  • Jackson Hole meeting: Potential for Mario Draghi disappointment, strategies that KVP would be skewed would favour euro downside, Eurozone rates lower (higher bunds) & Eurozone equities higher (due to lower Euro, potential delay in QT).
  • Remember ECB started quantitative easing three year after the Fed, much bigger risk to them getting out of it sooner rather than later. Draghi does not want to repeat a Trichet.
  • Tactical Long Call baskets: USD bottom picking trades, USDSGD and USDCHF ATM 4 month expiries. AUDUSD calls (Med-Long term Commodities bull play, can also look at long AUDNZD expression), 10yr Bond Future puts (more long-term & titled towards the US), XLE energy ETF calls (Continues to lag and ignores big run up in oil over last few weeks, as well as Venezuela getting past boiling point.)


 There are huge risks in the US declaring that the time for talking is over regarding North Korea and its provocative missile tests: Photo: Shutterstock

Technical Picture: James Kim
  • Dollar Index: Weakness in DXY yet bounces off 200 week moving average. USD at triple bottom formation. Expect gains this week. Resistance at 95.00 level, support at 92.5
  • EURUSD: Closed below 200 week moving average; sell rallies towards at 11797, then  1.1818; 1.1840 and 1.1866. Long term view unchanged major bull market.
  • USDCAD: Buying momentum, 1st weekly gain in 5 weeks. Upside target at 1.1237.
  • AUDUSD: AUD finds difficulties at 200 weekly, 2 weekly failures. Support found at 0.7890 and then 0.7783. buying level around this key level
  • USDJPY: Closed below 200 week moving average; important this week to get above ¥111.33 for USDJPY to gain further.
  • S&P/ASX200: Choppy sideways trading, unlikely to change, a break above 5800 or below 200 DMA. Would set the trend.
  • S&P500: pendant triangle formation, currently breaking out. Setting up a move to 2495 target. Expect S&P higher this week.
  • XAU: breaking above long term 2011 downtrend previous week. Now retesting that line. Must hold or a move to $1230/oz expected. Buying zone at that level.

Global macro books

  • Tactical: Close AU Bond Futures and Nikkei Shorts. Open: Short Nasdaq; Long USDCHF; USDSGD longs. (See additional comments in deck)


Global macro books (continued)

  • Strategic: Close: Long GBPUSD. Open: Long Swiss equities; USDCHF; Long USDSGD. (See additional comments in the table)


Here is this morning's recording of this week's Macro Monday call.

 – Edited by Robert Ryan

Kay Van Petersen is Global Macro Strategist at Saxo Bank. You can follow him on Twitter: @SaxoStrats or @KVP_Macro. Please join us live for next Monday's Macro Call at 0830 [Singapore/Hong Kong], 0930 [Tokyo], 1030 [Sydney]. 

07 August
Madjid Madjid
Good call on the cotton, I thought it’s going to be a losing position.


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