Article / 05 June 2017 at 3:10 GMT

Macro Monday: UK elections and terrorism in spotlight — #SaxoStrats

Global Macro Strategist / Saxo Bank Group - Singapore Hub
Singapore
  • US 10-year sets new lows following weak nonfarm payroll numbers
  • USD is in retreat after the NFP miss
  • Key focus this week includes UK election, ECB and flash PMIs

By Kay Van-Petersen

A replay of the global macro weekly call for week 23 is available here.

Summary of last week

  • US 10-year sets new lows after the weak nonfarm payroll numbers
  • Equities continue to melt up on low volatility
  • Commodities on the back foot outside of the precious metals
  • USD in retreat after the NFP miss
  • Divergence between soft and hard data continues
  • Trump vs G7 continues. Defence securities worth looking into
  • Another terrorist attack in the UK

COT report

  • 13-week lows on net long USD positions
  • EUR turning close to a long bias EUR
  • GBP starting to see shorts building
  • MXN remains at 52-week highs in long positioning
  • 13% reduction in commodity bullish bets
  • Big increases in silver and gold
  • Coffee shows new one-year lows on shorts

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 The UK Conservatives are losing momentum ahead of this week's election,
driven by Theresa May's performance. Photo: Shutterstock

The week ahead

  • Key focus: UK elections, European Central Bank, Flash PMIs
  • Central banks: RBA; RBI; ECB; BoC Financial System Review
  • Fed Speakers: none
  • Economy: CH: TB, CPI +1.5%e PPI US: ISM Serv. 57.3e 57.5p JOLTS EZ: TB, Final Serv. PMIs, 1QF GDP +1.7% JP: 1Q Final GDP +2.4%e +2.2%p UK: PMI Ser. 55.1e 55.8p Manf. pro AU:1Q GDP +1.6%e +2.4%p TB NZ:Milk auction (6)

Key events

  • UK elections: Conservatives losing momentum, driven by prime minister Theresa May's poor performance as a candidate. Uncertainty is the ultimate result meaning Brexit becomes more unclear. But probably just at the margin.
  • UK terror attack is a horrendous event, but low grade. It’s not religion, it’s the haves vs the have nots. Solution to prevention may come from private companies.
  • Top of mind: Federal Reserve 14 June hike:
  • Since March: gold higher, yields lower, equities higher and volatility even lower.
  • Global PMIs continue to hold up. But inflation is not bouncing back with the oil input removed now. It will need to come from the wage price increases.
  • Need to see an increase in 2018 outlook to drive USD higher.
  • New administration, not getting anything done soon, but don’t fully discount them.
  • Still like: short duration, EM carry, equities, credit and sovereigns.

Technical picture: James Kim

  • Dollar index: Fresh 2017 low. Hovers above key levels at 96.4 and 96.11. 95.9 is Trump election lows. If these hold, USD may be turning.
  • EURUSD: 1.13 handle may indicate the end of this current up price near term. Indicating a pull back towards the 1.10 levels. Tactical short at 1.1310 with stop 60 pips above.
  • USDCHF: hovering above 2016 support levels. 0.9530 areas to look for a bounce. 200-weekly moving average at these levels.
  • USDJPY: Closes last week on 200 DMA. However, closes below the 200 weekly MA. Immediate downside is 109.40
  • AUDUSD: Snaps back to end week unchanged. Resistance at 0.7465 and then 0.7514.
  • Nikkei: new 2017 and 2016 highs, however RSI diverges however, so exercise caution.
  • EMinis: Also demonstrating A class divergence. RSI turning lower while price sets new highs. Exercise caution.
  • ASX200: 5880 top side target as supported below 5700.
  • XAU: Trades in make or break moment this week. Weekly trend line from 2011 being broken. This would be a very bullish break. Targets 1323, with a final target at 1481.
  • EVN: Evolution Mining: Top gold pick. Breaking out for a look at $2.70 with ultimate target at $3.42.

The world on a page
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Source: Bloomberg

Please see our Q2 Outlook here.

  – Edited by Gayle Bryant

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
OKSUZ OKSUZ
Hey Kay it is not about the subject above but I know what you think about Bitcoin. I was wondering what are your thoughts about altcoins and which one looks promising to you with bitcoin?

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