Macro Monday: The binary BoC, mute ECB and Fed flock — #SaxoStrats
- The 35% chance of Fed hike in December equals a low probability
- North Korea noise flares up early but seems to be easily discounted
- Lot of focus on Hurricane Harvey and its damage in Texas
- Traders reducing longs in WTI and increase them in gasoline
By Kay Van-Petersen
Summary of the past week
- A lot of focus on Hurricane Harvey and the damage it is causing across Texas and other states. Also could be having another hurricane on the horizon.
- Net-Net US data is solid and improving, not bothered by nonfarm payroll miss.
- North Korea noise flared up early in the week, before once again being discounted.
- Equities: Up across the regions, especially the US which saw +2.7% across the Nasdaq and Russell index. +1.4% on S&P.
- FX: EUR lower on the week, having made a new 1.2070 H.
- FI: US unchanged, Japan much tighter back to zero basis points.
- Commodities are generally up, with strong moves in natural gas and cotton.
- Volatilities: volatility degradation is back.
The COT report
- USD: More short on USD; AUD record highs again on 52 week basis.
- You are seeing Hurricane Harvey effects in the CoT positioning as people reduce longs in WTI and increase them in gasoline and NY Harbour.
- Copper new highs, silver still off positional highs,
- Key focus: BoC, ECB, Flock of Fed speakers, Q2 GDPs
- Central banks: RBA 1.50%e/p (September 6) BoC 0.75%e/p (September 6) Selic 8.25%e 9.25%p (7) BNM +3.00% e/p (7) ECB -0.40%e/p (7)
- Fed Speakers: Brainard (September 5), Kashkari (September 5,) Kaplan (September 5), Mester (September 7), Dudley (September 6), George (September 6), and Harker (September 6).
- Other: US and Canada out for Monday Labor Holiday, RBA’s Lowe (September 5/8)
- US: Factory Orders, TB, ISM Non-Manufacturing 55.5e 53.9p, Final Services 56.8e 56.9, Beige Book
- CH: Caixin Services 51.8e 51.5p, TB, CPI +1.6%e 1.4%p, PPI 5.4%e 5.5%p
- Eurozone: Services PMI 54.9e/p Final 2QGDP 2.2% e/p
- Germany TB
- Japan: PMI Services, 2QF GDP +2.9%e +4.0%p, TB
- UK: C-PMI 52.1e 51.9p Services PMI 53.6e 53.8p Manufacturing Production, IP
- Australia: CA, Q2 GDP +1.8%e 1.7%p, RS, TB
- New Zealand: Global dairy auction, Manufacturing Sales, Economic data.
Thoughts and positioning
- Central banks: RBA: No real delta on this event. AUDNZD continues to march higher, remarkably it all been on kiwi weakness.
- ECB: market will be looking for an update on QT/less accommodation from Mario Draghi, could be in for disappointment as October 27 seems to be the date.
- Fed Speak: Will there be a co-ordinated message pre-Fed black out? Likely not. 35% chance of a hike in December 2017 is low, as is the 73% chance of ONE HIKE between now and the end of January 2019 – that’s more than 12 Fed meetings.
- North Korea: So US/South Korea annual drills are complete. Note the US travel ban came into effect on September 1. Also note they seemed to have conducted nuclear tests over the weekend judging from artificial earthquakes and their conformation. This coming sat September 9 is a holiday in North Korea – Day of the Foundation of the Republic – which last year saw a missile launch. Likely to see.
The Technical Picture: James Kim
- Dollar index: new 2017 lows, squeezes settlement above 200 WMA. Again RSI divergence points to upside risks.
- EURUSD: Rejection at 2012 support level. Technical picture looks bullish, but reversal sets tone for pullback. This week, capped at 1.1975 with support at 1.173-1.17 as targets. 200 WMA at 1.1750, close below opens retest of 1.15,
- AUDUSD: remains supported on trend line from May. Fails to settle there. Twoattempts at 80 handle. Needs to take this level and ascending triangle pointing to gains.NZDUSD: head and shoulders pattern with 200 day moving average support, looks likely to break. AUDNZD to new 2017 highs. Path clear to 1.1250.
- USDJPY: Base continues to build at ¥108.73 the 50% from 2016 low to 2017 high. USDJPY gaps lower this am, with support at ¥109.20.
- US 10 Years: closes below the break out level. July-August trend line as support.
- Nikkei: Supported on the 200 day moving average at 19,436. DMA vital to keeping it supported given last weeks attempted break.
- S&P/ASX200: breaks below 200 day moving average but closes above on Friday. Tests new multi month lower, retest of 5632 highly likely this week.
- E-mini S&P: Strong gains of the week, fails to break all-time highs at 2488.
- Gold: gaps higher this am. Trades at peak of US election day. Can it extend beyond here? $1300 the key support level.
Tactical Book: KVP
- Short USDRUB 1st target hit; Short NASDAQ 2nd bit stopped out
- Silver miners break out. Long 35.14
- Dax: technical bounce off 200 day moving average: long at 12,143
- Gold long hits target
- Silver added here too
- Short Bunds
- Jan 2019 Fed Fund Futures short.
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– 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].