Macro Monday: After the polls, the Fed cometh — #SaxoStrats
- Comey's testimony had little effect on financial markets
- All eyes will shift to the Fed this week, now the UK election is done
- New long Cable position in the strategic book
By Kay Van-Petersen
A replay of the global macro weekly call for week 24 is available here.
Summary of prior week
- European Central Bank forecasts lowered, EURUSD however only retreated 75 pips - surprisingly.
- Testimony of FBI's Comey was pretty much a non-event – just don’t tell the press that.
- UK election results in hung parliament.
- Qatar being cut off its diplomatic and trade ties in the middle east by a Saudi-led alliance.
- China CPI did well while PPI saw a slight beat. Could this signal a turn in the two months of pullback that we’ve seen in global inflation?
- Equities were mixed with a pullback in the US but Asia was up. US Friday equity price action is very alarming.
- USD positioning cut 5% to 9.6bn – cannot help that think, consensus view is for a weak USD.
- EUR shorts was immaterial but Mario Draghi’s comments last week could dampen the bull party.
- Big reversal in Kiwi shorts to a neutral position. RBNZ next week.
- GBP saw more shorts added as we went into the UK election.
- Sugar created a new 1 year low on positioning with massive shorts added.
- Gold and Silver positioning increases 33% and 19% respectively.
- Key Focus : Fed, UK election digestions and inflation data
- Central Banks: Fed 1.25%e 1.25%p (14) BoE 0.25% e/p (15) ID 4.75% e/p (15) RU 9.0%e 9.25%p (16) BoJ -0.10% e/p (16)
- Fed speakers: (post Fed decision) Kaplan (17) Other : Australian bank holiday today (12) Weidman (13/14) Carney (15)
- Economics: US: PPI, CPI +2.0%e +2.2%p Core +1.9%e/p RS, UoM, House Data CH: RS +10.7%e FAI +8.8%e IP +6.6%e New Loans EZ: IP, TB, CPI +1.4%e 1.9%p Core +0.9%e/p JP: PPI, IP UK: CPI 2.7% Core e/p 2.3% e 2.4%p, PPI, RS AU: Jobs data NZ: 1QGDP +2.7%e/p, Manf. PMI
- Fed to hike on Wednesday and will do so again in the second half before their balance sheet reduction.
- UK election results – fragmented parliament and the conservatives will have a majority in conjunction with the DUP (Democratic Unionist Party). This means that May will not be able to go down a hard Brexit breakaway. However, it's in the EU’s interest to make it difficult to deter other EU countries from going down the same pathway. Plus a controversial view on the situation, what if the UK simply left today? Pros/cons on that…
Global macro book: The Infamous KVP
- New long Cable position in the strategic book on the assumption the consensus view is so critical and negative on sterling and 'so sure that Brexit and the new government is going to be a disaster’, that the other side is appealing.
- Two new positions in the tactical book: Long Cable and short US 10 year bond futures.
Technical picture: Edmund Liu
- Dollar index: Found support last week at 96.50. H&S extension at 94.5. Broke 100 days DMA on the weekly indicating bearishness.
- GBPUSD: Friday’s dropped found support at the H&S neckline and also the SMA 100. Still bullish the as long as it stays above SMA 100, as well as the H&S neckline support at 1.27
- EURUSD: Rising wedge and broke lower on Friday. MACD has a bearish crossover since the beginning of June 2017, suggesting momentum to the downside this week with 1.11 as first support.
- EURGBP: Broke above symmetrical triangle in the weekly chart and could be a potential buy on dips for longer term traders.
- XAUUSD:. Daily has a symmetrical triangle and we will be looking for a break of the lower support line of the triangle to confirm the multi year resistance shown on the weekly chart
- Crude Oil: Found support at the trendline and Stochastics indicator pointing at support. A potential buy candidate looking at historical bounce.
- USDCHF: Trend line support and stochastic oversold. Similar setup to Crude.
- NZDUSD : Attempt to break the trendline resistance with stochastic now overbought. Awaiting for shorts opportunities.
- S&P 500 : Forming Elliot wave5 and that could mean the S&P 500 may still has some legs towards 2500.
- Dax: Using the same Elliot wave analysis, Dax may have fully extended.
Please see our Q2 Outlook here.
– Edited by Adam Courtenay
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].