Macro Monday: New quarter, new divergence — #SaxoStrats
- Dollar index set another new low this week with only support seen at 94.7
- Next real Fed meeting will be on September 20 - nothing happens in summer
- Coffee, cotton, soybeans all making one-year low with wheat the exception
By Kay Van-Petersen
A replay of the global macro weekly call for week 27 is available here.
Summary of prior week
- Built around the ECB forum from Draghi’s “Hawkishness”. ECB view it as rate normalisation and not hawkishness.
- BoE’s Carney flip flopping sent sterling to newer highs. Other ‘get out the way’ currencies last wk were: EUR, CAD, SEK, AUD
- Big move in yields, 15 basis points on 10-year T-notes, +20 bps in bunds and French 10s, +25bps in Italy, etc..
- Also big news in US banks, passing the stress test means that dividends can be paid out… similar theme to Nestle .
- Also importantly, we are seeing beats in inflation coming out of the likes of Germany and the Eurozone as a whole
- Whilst US PCE disappointed last week, final GDP came in better at 1.4% versus 1.2% expected.
- Vol up 11.6% on the week but still off the 15.16 high.
COT report from June 27
- Long USD continues to get liquidated. Lowest in May 2016 at only 3bn.
- Interestingly, market is not even long EUR and we already saw EUR at high. A 1.15 break could lead to 1.20.
- Big reduction in CAD which saw a 2/5 reduction in shorts.
- Big reversal in MXN as well, similar to CAD with shorts massively reduced too.
- Precious metals come under pressure with silver hitting one-year low in positioning.
- Soft agriculturals with coffee, cotton, soybeans all making one-year low with wheat the exception on favourable fundamentals with one year high on positioning
Thoughts on market positioning
- Key Focus : Final PMIs and US ISM + NFP, G20 Meeting, Fed Minutes
- Central Banks: RBA 1.50% e/p (4) Fed Minutes (5) ECB Minutes (July 6)
- Fed Speakers: Light on Federal Reserve Speakers with only James Bullard (July 3) Jerome Powell (July 6)
- Other: It's July 4 in the US on Tuesday - liquidity down, G20 meetings kick off on Friday
- US: Final Durable goods, Factory Orders, ISM & PMIs, ADP & NFP 180k e 138,000 p
- China: PMI 51.0e 51.2p Services. 54.5p .
- Eurozone: Final PMIs, PPI, RS JP: RS, CPI
- UK: Final PMIs, TB AU: RS, TB, Building Approvals .
- New Zealand: Dairy trade auction.
- Next “real” Federal Reserve meeting is on September 20 as July’s Fed meeting is unlikely to have any impact. Inflation data prior to September 20 will dictate if that month's Fed meeting will be live.
Global Macro Book: KVP
- Tactical Book: Profitable close of first leg of GBPUSD long. Was 8 pips shy of second leg.
- Strategic Book: The long cable from 1.275 was 8 pips shy of the first target level at 1.3038. Second target is at 1.3388.
- Dollar index: Set another new low this week with only support seen at 94.7. RSI now indicates oversold which could likely see a retracement to 96.44 which could cap further USD gains.
- EURUSD: Decisive break above the 1.130 confirms the EURUSD bull. Weekly chart indicates 1.15 as a key resistance level in the 2015. 1.1285 should see support and chance to build long positions.
- GBPUSD: Closed at high in the week with strong momentum
- EURGBP: Made a new high last week. Divergence between EUR and GBP calls for a EURGBP shorts with stops at 0.8820 and targeting 0.870.
- AUDUSD: Formed a spinning top formation with market seem to be nervous at RBA. Retracement to 0.7630 could be a short term buy opportunity.
- AUS200: Connected the short term trend line
- S&P 500: 2,400 needs to hold for further upside gains.
- WTI: Rebounded from the triple bottom formation as mentioned last week. Should see short term resistance $47.09 which coincide with the Fib3 retracement.
- XAUUSD : Formed a shorter term descending triangle but uptrend line from 2017 Jan + the Fib7 retracement from May’s low may offer some support at $1238.50
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].