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31 July 2017 at 2:19 GMT
Macro Monday: Heavy week ahead — #SaxoStrats
- Key focus this week includes US economic data, RBA and BoE meetings
- Long FX volatilities strategies favoured as potential for retracements continue
- Euro is primed for Jackson Hole meeting with a lot of expectation being built in
By Kay Van-Petersen
A replay of the call is available here
Summary of the past week
- The USD is weaker, yields higher, equities mixed. Jackson Hole key
- Dovish RBA Philip Lowe and AUD CPI miss, AUD still trades above 0.80
- The Federal Reserve signalled that September could be the start of its BS normalisation with “relatively soon” being put into statement. USD liquidation post the statement incredible. Again the market finds what it's looking for and right now its has a USD bearish bias … until that sentiment changes positive data could be marginal
- US data continued to be positive for much of the week, from PMI manufacturing beats 53.2a 52.3e, to durable goods +6.5%a 3.5%e and Q2 GDP 2.6%a 2.5%e
- Still despite German PMIs miss, flash GDP comes in at 0.4% vs 0.2%
- Equities: Down in US; Up in EU (mostly) and Asia
- FX: Big moves continue, USD weak. EUR and AUD new multiyear highs. Finally starting to see some signs of near-term exhaustion
- CMD: Strong weak across the board.
- Volatilities: VIX spike of c. +10% for the wk to 10.29 (after intra-week low of 8.84)
Heavy load ... US economic data, central bank meetings and PMIs across the board characterise
the coming week. Photo: Shutterstock
the coming week. Photo: Shutterstock
The week ahead
- Key focus : US economic data (ISM, NFP, Hourly Earnings), RBA and BoE, US Dollar weakness/strength
- Central banks: RBA 1.50% e/p (1) RBI 6.0%e 6.25%p (2) BoE 0.25% e/p (3) UA 12.50% e/p (3)
- Fed Speakers: Mester (2) Williams (3)
- Other: SNB FX Allocation (31) TU Inflation Report (1) BoE Inflation Report (3) RBA Monetary Policy Report (4)
- Economy: US: Personal Spending/Income, Final PMIs & ISM manufacturing. 56.2e 57.8p Serv. 56.8e 57.4p, ADP, NFP +183k e 222k p CH: PMIs EZ: EZ Flash CPI, PMIs, PPI, German Factory Orders JP: PMIs, Cons. Conf. UK: PMIs, House Data AU: TB, RS, House data NZ: Milk auction, Jobs data
Positioning and sentiment
- FX divergence cometh: potential for big retracements continue. Unlikely to stay around these levels, either higher or lower, just not here
- Therefore long FX volatilities strategies favoured: Long straddles, strangles. Key dates Jackson Hole and ECB and Fed meetings
- Euro baked: Primed for Jackson Hole, a lot of expectation being built. Likely to disappoint
- Big picture thought: QE: QE was in theory supposed to be inflationary and cause companies to invest. It did the opposite. QT is in theory supposed to be deflationary and cause companies not to invest – KVP feels that in practice, it will be the opposite
- Strategic Book update trades: RUB longs being added; Adding Commodities via BCom. Stopped out of our Long USDTWD
- Tactical Book update trades: Long RUB; Long Au10 yrs; Long cotton; Short Nikkei; Short EURJPY, Short EURRUB
Technical Picture: James Kim
- Dollar index: Another week of declines, no evidence of turnaround. Trades at 2016/15 base. Close below 92.50 200 weekly
- EUR: Bullish EUR however ahead of 200 weekly at 1.1785 as resistance. Extremely overbought. Sell between 1.1785-1.18 with stop 1.1830
- AUDUSD: Pull-back was very shallow, confirms buyers in control. Briefly above 200 WMA, however fails at 123.6% Fibonacci extension of the Q42016 to Q1 2017 range applied to the Q2 2017 low. Claiming the 200WMA is weekly test
- AUDJPY: failed on two attempts at 200WMA. Currently trades above neckline of inverse head and shoulder on weekly chart. Support offered at this neckline: between 87.90 down to 87.50 and another weekly print above neckline confirms further upside
- USDJPY: closed below 200 DMA and and 200 WMA: This week must claim at least 200WMA otherwise further losses ahead
- US 10-years: Topside target unchanged, 126.21. 200DMA is weekly support
- ASX200: Very choppy and a base being formed at 5650 level. 5800 topside level it needs to break
- Nikkei: consolidates at 2015 highs. Price action, shows downside risks developing, currently caught in a distribution phase
- S&P E-mini: Support at 2459; risks building to the downside through negative range days
- Dow transport ETF (IYT): recent weakness in Dow transports to persist given recent top was 100% extension of inverse head and shoulder range
- IYW: A Class divergence, points to downside risks
- Gold: Weekly break above long-term 2011 downtrend. This week’s settlement key as we need 2 sets of weekly settlement to confirm a true and valid break
Macro Monday portfolios
Here is this morning's recording of this week's Macro Monday call.
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].
2y
Free for now Madjid! :-) Many thx.
By the way, not sure if you saw my super late reply to your other comment. I owe you call. Reach out to your Saxo relationship mnger & ping me a few slots & tel. & we can chat if you'd like. Apols again on us not setting anything up when I was rocking through London.
Have a great wk Ahead & great start to the new month.
By the way, not sure if you saw my super late reply to your other comment. I owe you call. Reach out to your Saxo relationship mnger & ping me a few slots & tel. & we can chat if you'd like. Apols again on us not setting anything up when I was rocking through London.
Have a great wk Ahead & great start to the new month.
2y
''Free for now''....interesting comment to make/imply. Saxo Tradingfloor I assume are changing their website to subscription ?
2y
Thanks KVP,
I did ask Mike and he confirmed that you aren’t presenting just meeting clients.
I’m a small retail customer managing £20k portfolio nothing to justify a one to one client meeting ….but thank you.
I did ask Mike and he confirmed that you aren’t presenting just meeting clients.
I’m a small retail customer managing £20k portfolio nothing to justify a one to one client meeting ….but thank you.
2y
Sorry, just read the full comment,
I will send you an email with few questions and also I would like to challenge your view on bitcoin (though my hat off to you on the January call) but I believe we peaked for now.
I will send you an email with few questions and also I would like to challenge your view on bitcoin (though my hat off to you on the January call) but I believe we peaked for now.