Macro Monday: It's a bull by any other name — #SaxoStrats
- Structural risks are to the upside - big reduction in USD shorts
- Spanish government looks to be liqudating Catalonia leader
- China GDP coming in pretty strong at close to 7%
- China’s PPI continues to surprise to the upside
We just saw our biggest reduction in USD shorts this year, a Warsh Fed Chair Confirmation could spur a USD squeeze.
- Structurally risks are to the upside on US monetary policy regardless of the Fed Chair and initial knee-jerk reaction
- All about Draghi on Thursday, how much is priced in? Will he disappoint in his pivot towards QT/ less QE? Hard to say yet we see a H&S formation in EURUSD
- We like USD longs, Euro shorts (1.181 stop, 1.17/1.1670 is key level to break with end of H&S extension being 1.1250), DXY breaking 94 should see 97 extension
- ASX key levels with 6,000 in sight, breaking that would take us to levels not seen since 2007/2008. Gold tactically short, potential to sub 1250 from these 1275
- US10 years at circa 2.40% is very key, a break on this could see blood in the US bond market, as well as USDJPY getting to 115/116 levels from these 114 levels
- Spanish government liquidating Catalonia leader
- Inflation beat in NZ 1.9%a 1.8%e & whilst the UK saw in-line 3.0% e/p CORE 2.7%e/p
- NAFTA talks continue, push timeline into 2018.
- China GDP came in at +6.8%e/p, that’s around 60% of Australia’s total GDP being created every year
- EQ: US EQ Bull market dude, Nas100 now +26% YTD with S&P with trailing at +15%
- FI: Coming back for 2.40%, will it break?
- Commodities: Apart from oil, copper predominantly on back foot
- Forex: Early days yet solid week on USD, driven JPY weakness -1.50% against EUR -0.31%. Key remains 1.17 on EURUSD
- Volatility: touch higher, watch MOVE (bond vol), if US10s break 2.40%, this could rip
- FX: First sizable pullback in USD shorts in weeks, -16% Pullback in USD shorts to around $15bn
- EUR and CAD net longs a touch softer at 91K (98k) & 75K (76K)
- Big pullback of around -70% in GBP Net Longs, still Net long by c. 5K (16K)
- Commodities: No significant change in Gold and Silver net positioning
- Energy contracts cont. to be positioned on extremes, key delta is still on NatGas & WTI Crude (CME)
- Coffee making new 1 year record net short positioning
- Key Focus: ECB Thu, 3Q US GDP, Flash PMIs, Fed Chair Final Countdown
- Central Banks: BoC 1.00%e/p (25) Selic 7.50%e 8.25%p (26) NO 0.50%e/p (26) TU 8.00%e/p (26) ECB -0.40%e/p (26) RU 8.25%e/p (27)
- Fed Speakers: None scheduled
- Other: Poloz/Wilkins (25, 23:15) ECB Press Conference (26, 20:30) Bundesbank’s Weidmann (27, 19:00)
- Eco: US: Mnf. 53.5e 53.1p, Serv. 55.2e 55.3p, Durable Goods, New Home Sales, 3Q GDP 2.5%e 3.1%p, UoM CH: Property Prices, IP EZ: Consumer Conf., Money Supply, Mnf. 57.8e 58.1p, Serv. 55.6e 55.8p JP: PMI 52.9p CPI +1.7%e/p UK: GDP +1.5%e/p, House Prices NZ: Trade Data AU: CPI 2.0%e 1.9%p
Don’t feel this market is ready for US10s to spike to say 3.0% by year end , 2.4% very key level to watch.
ECB: So it should be a consensus that Draghi is expected to outline pivot towards QT/ less QE. Question is, how much of this is priced in, does he disappoint or over deliver?
Positioning: Not much changed over last two to three weeks in regards to USD, gold/silver, commodities – need that DXY to get over 94 or breakdown sub 92.70ish. Earnings likely to keep US EQ lifted
EURUSD: Formed its final right shoulder in H&S pattern. Neckline at 1.1670 with 1.1250 the end target on break of this neckline. Negative unless 1.1881 breaks.
USDCHF: Closed above 200 DMA. Reaffirms bullish view. Long at market price, support at 0.9771 target 0.9880 initially then 1.0080 final.
AUDUSD: Consolidating. Still positive on AUD but cautious. Needs 0.7730 to hold. 0.7845 the topside resistance.
US 10 years: failed at 200 DMA, now fourth attempt at the base at 1242-26. Expect it to break this time.
USDJPY: gaps higher on election. Focus on challenging 114.36 double top. 200 WMA support.
Nikkei 225: approaching 2007-2015 trend line. Is in overbought territory but supported by weak JPY story.
ASX: outperforms global indices. Targets 5950, then 6000. Looking at levels not seen since 2008.
XAU: breaking base looking to retest gold to its 200 DMA at 1258.